News

Why Prizemoney is Under Threat

28th May 2009

Breednet - Tara Madgwick - Wednesday, 27 May 2009

Racing NSW CEO Peter V'Landys was a studio guest on TVN's Thoroughbreds program on Tuesday night highlighting the plight of NSW racing if the corporate bookmakers cannot be made to pay their fair share and to find out more in very simple terms on what is the biggest issue facing our industry read on.

From the Racings NSW Industry Participants Bulletin - Given the recent publicity, here are the facts regarding Corporate Bookmakers and Betting Exchanges and how they affect the industry’s funding and employment.

HOW IS RACING FUNDED?

1. NSW TAB is paying the NSW racing industry an amount equivalent to $6.20 for every $100 bet on NSW racing events. This pays for 100% of prize money in NSW and 50,000+ jobs. (before September 2008, the NSW TAB was paying the equivalent of $4.70 per $100 wagered);

2. Up until September 2008, the interstate Corporate Bookmakers and Betting Exchanges paid ZERO contribution for the use of our racing. They grew their business to $4 billion turnover & reaped huge financial gains at the expense of racing in NSW; and

3. The Tasmanian & Northern Territory totalisators, with the benefit of minimal State wagering taxes, have grown their turnover on NSW racing events at a rapid rate by offering financial inducements to punters from NSW to bet with them rather than through NSW TAB or local bookmakers. Up until September 2008, these totes paid ZERO to racing in NSW for the use of our racing.

WHAT HAPPENED IN SEPTEMBER 2008?

The NSW Government commenced its Race Field Legislation to enable the industry to levy a fee on those wagering operators who were utilizing and profiting on NSW race fields for their wagering businesses. The fee was 1.5% of each operator’s turnover

This fee was levied on all operators, irrespective of their location and irrespective of the form of their operation, viz. totalizator, fixed odds or betting exchange.

So now the contribution to racing in NSW is:

1. NSW TAB pays an equivalent of $6.20 per $100 wagered;

2. Interstate Corporate Bookmakers & Betting Exchanges pay $1.50 for every $100 wagered; and

3. Interstate Totalizators pay $1.50 for every $100 wagered on a NSW race.

SO WHAT IS THE PROBLEM?

The interstate Corporate Bookmakers & Betting Exchanges are paying their$1.50under protest and some have legally challenged the Race Field Legislation.

These operators only want to pay an equivalent of 50 cents in every $100 bet .

They also tell us that if they are successful in their legal appeal, they want back the money they have paid.

They say “we’re prepared to pay a fair fee, but the price Racing NSW is asking is too much”. Our argument is that, the 1.5% of turnover is half the rate wagering operators generally pay to the racing industry internationally and less than one quarter of the rate that the NSW racing industry receives from the NSW TAB.

The other argument Corporate Bookmakers and Betting Exchanges continue to spin is that the 1.5% would put them out of business.We say, their business model was always based on not paying for the product and accordingly it was flawed from the beginning. They now need to correct their business model to make allowance for the payment to the NSW racing industry from which they profit. The current 5% margin of these operators was always going to be unsustainable. For example Corporate Bookmakers in England work on a margin of 10 to 15%.

KEEPING PRIZE MONEY AT THE SAME LEVEL AND PROTECTING JOBS

As at 30 April 2009 an amount of $30 million had been collected as race field fees and under normal circumstances this money would have been distributed to race clubs to allow them to meet their prizemoney commitments.However, two wagering operators, Betfair and Sportsbet have instigated legal proceedings challenging the validity of the Race Field Legislation.Although Racing NSW is confident of successfully defending these challenges, it has to date been reluctant to release funds because if,in the unlikely event that Racing NSW were to lose the case, all race field funds collected would need to be refunded.

Racing NSW is currently examining avenues available which will enable it to distribute funds to the State’s race clubs to allow them to maintain their prizemoney payments thereby ensuring the current income level of industry participants.

The long term future of the industry is however dependant on Racing NSW being able to obtain a fair and equitable fee from all wagering operators who use NSW race fields for their wagering activities.For this reason Racing NSW will continue to vigorously defend challenges to the NSW Race Fields Legislation.

Racing NSW Bulletin