Sunshine Coast
We reluctantly inform you, our valued clients, of a number of impending changes to our product offerings and pricing on Victorian thoroughbred, and Western Australian thoroughbred, greyhound and harness, racing, on and from 1 July 2019.
These changes have been forced upon us by the continuation of what can only be termed ruthless race fields levies for the 2019/2020 financial year by the abovementioned racing control bodies. Unfortunately, despite numerous discussions, comprehensive submissions and the presentation of reasonable suggestions of compromise, the authorities in question have, in our view, chosen avarice and short-sightedness over acting for the mutual benefit of the racing and wagering industries and, most pertinently, you the punter.
We should make clear that not all racing control bodies have been so obstinate and myopic. Racing Queensland have astutely introduced a ceiling on the race fields levy of 2.5% on annual turnover. This significantly relieves the pressure on TopSport with respect to its product fee obligations in Queensland and, consequently, enables us to maintain our full suite of products and betting limits on Queensland racing products for the 2019/2020 financial year. A sincere Bravo! to Geoff Quinlan and team!
We are proud of the reputation and standing within the industry that TopSport has acquired in recent years. We have consistently offered, and continue to offer, low-margin products (such as "Best of the Best") to all members without discriminating on the basis of a punter's 'profitability'. We have bet significantly higher minimum bet limits for many years now - a policy which has been widely embraced by professional punters in particular.
Needless to say, our willingness to offer low-margin products and serve the professional and shrewd punter means that our operating/profit margins are significantly lower than those of our competitors in the marketplace. Notwithstanding this, we have always strived to uphold policies that reflect our view of how a wagering business should be operated, and that honour the bedrock philosophy of Australian wagering: a battle of wits between bookie and punter where all-comers are welcome and every punter has a genuine opportunity to take home the spoils.
Unfortunately, in recent years, the wagering industry has borne witness to a rapid and rampant escalation in the fees and taxes payable by wagering operators to racing and licensing authorities. To compound the burden, the Governments of each State and Territory have now also chimed in with their quite heavy-handed Point of Consumption taxes. The result is a taxation burden that can no longer be viably absorbed within our retained earnings under our current business model. We have no option but to make unwanted changes to this model if we wish to continue providing the high-quality service for which we have become known.
Make no mistake - we are not crying poor or fishing for sympathy. We could have simply elevated our margins stealthily and hidden products from, and dealt with, selected clients based upon conveniently crafted "commercial decisions". But we do not consider such actions fair. And, as participants in the industry ourselves, we know full-well how frustrating it is to receive this sort of treatment.
Our intention here is purely to raise awareness of the onerous and deepening regulatory and taxational impost we are currently confronting so that you may better understand the motivations and necessity behind our imminent withdrawal of certain products and compression of wagering limits.
To be clear, we are not seeking to roundly condemn the racing control bodies. We recognise that those bodies are acting in, what they perceive to be, the best interests of racing within their jurisdiction. Our concern is with the vibrance and sustainability of the wagering industry and, to that end, with the most neglected segment of the wagering industry: the punter, and in particular, the low-margin, price sensitive or professional punter. We want the racing control bodies to acknowledge the significant revenue that this group contributes to the coffers of state racing authorities and, therefore, their fundamental importance. We want to encourage them to consider the impact that the ratcheting-up of fees, and the consequent decline in the competitiveness of the marketplace, has on the vitality of the industry. We feel the best way to achieve this is to be fully transparent in dealing with our members in the hope that they too will see the flaws in the current regulatory and taxational attitudes, and perhaps express their discontent with how the current trends affect them.
In most jurisdictions, bookmakers are obliged to pay a percentage of their revenue when they win, and a comparatively smaller percentage of their turnover when they lose. The fundamental distinction between the Victorian and Western Australian taxation regimes and those that operate in other jurisdictions, and the reason the Victorian and Western Australian models are significantly more burdensome, is the basis on which they calculate a bookmaker's revenue. The fiscal consequences of this distinction are dramatic.
Victoria and Western Australia determine whether a bookmaker has won or lost on a meeting-by-meeting basis, while the other jurisdictions make this determination on the basis of aggregated monthly figures. Under the monthly regime, bookmakers are encouraged to take more risk and offer better margins for punters as the longer assessment period offsets and makes it easier to manage the potential variance in day-to-day results. The meeting-by-meeting basis is far less hospitable.
During the past two years, TopSport has paid Racing Victoria 150% of its gross revenue from Victorian racing in the form of product fees. Since Racing & Wagering Western Australia elected to emulate the Racing Victoria model in August 2018, we have had to pay similar freight to them. This already challenging impost has since been further exacerbated by the imposition of the Point of Consumption tax throughout Australia.
What this all means in practice is that, when the fees outlined above are combined with the burden of the day-to-day expenses typically associated with the operation of any business such as wages, rental, internet, telephony etc., TopSport has (for some time) been offering betting on Victorian and Western Australian racing at a significant, and inescapable, loss. In a numerical sense, after the payment of all directly attributable expenses and taxes, we have been paying approximately $200.00 in expenses for every $100.00 in revenue generated on Victorian and Western Australian racing.
To further illustrate, we have set out below our actual figures from last year's Spring Carnival:
| Date | Gross Revenue | Turnover | Product Fees Paid | Result (Revenue less Prod. Fees) | |
|---|---|---|---|---|---|
| Derby Day | 03/11/2018 | $207,139.68 | $1,199,582.13 | $54,271.43 | |
| Cup Day | 06/11/2018 | -$53,767.79 | $1,159,401.13 | $33,106.33 | |
| Oaks Day | 08/11/2018 | -$86,038.96 | $702,134.34 | $20,016.94 | |
| Stakes Day | 10/11/2018 | $20,698.48 | $1,486,181.97 | $41,384.12 | |
| TOTALS | $88,031.41 | $4,547,299.57 | $148,778.82 | -$60,747.41 |
We're sure you will agree - operating under such an exorbitant taxation regime is clearly not sustainable.
For the reasons outlined above, we have been forced to implement certain changes to our business model which will come into effect on 1 July 2019. The measures set out below are intended to bring about a reduction in our turnover on, and our tax burden in respect of, Victorian thoroughbred, and Western Australian thoroughbred, greyhound and harness, racing events. We believe that these measures will allow us to maintain our wagering limits and product offerings in all other jurisdictions, and generally to maintain our high standard of service and competitive product and event offerings.
This product, and its associated wagering limits, are not available to most punters elsewhere in the marketplace. Racing Victoria tax this product at a higher rate than Top Fluctuation wagers. Offering it seriously erodes our overall racing margins. We will, however, continue to offer this product on Saturday and Public Holiday thoroughbred meetings in New South Wales, Queensland and South Australia.
This product has already been abandoned by almost all others in the marketplace owing to the escalating product fees. We have no alternative other than to follow their lead in respect of this particularly low-margin product. We will, however, continue to offer this product on Saturday and Public Holiday thoroughbred meetings in New South Wales, Queensland and South Australia.
Unfortunately, the methodology that Racing Victoria apply when calculating product fees in respect of Bonus Bets is grossly unfair and inconsistent with other racing controlling bodies. Bonus Bets will continue to be available for use on all events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA.
Market percentages in the abovementioned events will increase during the course of betting. Market percentages on all events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA will be maintained in accordance with TopSport's normal, aggressive raceday percentages.
In addition to observing the legislated Minimum Bet Limit, TopSport has historically offered its members heightened minimum bet limits on a number of meetings. While we will continue to comply with our Minimum Bet Limits under our racing approval, this additional benefit will be reduced on thoroughbred racing events in Victoria. The Minimum Bet Limits currently offered by TopSport on all events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA will remain unchanged.
As we have limited confidence in the integrity of early doors pricing on provincial thoroughbred meetings, and due to the excessive fees involved, we are forced to delay the release of our fixed odds pricing on these events. In our opinion, offering fixed prices online for some clients but not others at any time is not a good look for the industry when there are no MBL's protecting said prices. Consequently, TopSport will not offer early markets to any client on provincial thoroughbred racing in Victoria. Our current procedures in respect of the release of fixed odds markets on all events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA will remain unchanged.
This product, and its associated wagering limits, are not available to most punters elsewhere in the marketplace. We will, however, continue to offer this product on Saturday and Public Holiday thoroughbred meetings in New South Wales, Queensland and South Australia.
This product has already been abandoned by almost all others in the marketplace owing to the escalating product fees. We have no alternative other than to follow their lead in respect of this particularly low-margin product. We will, however, continue to offer this product on Saturday and Public Holiday thoroughbred meetings in New South Wales, Queensland and South Australia.
Market percentages in the abovementioned events will increase during the course of betting. Market percentages on all other events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA will be maintained in accordance with TopSport's normal, aggressive raceday percentages.
Although Racing & Wagering WA do not yet enforce minimum bet limits on events that they administer, TopSport have always offered generous minimum bet limits regardless. However, given the heightened fee structure and concerns about the integrity of the pricing on Western Australian events, we will be reducing our existing minimum bet limits on these events such that they are aligned with our competitors in the marketplace. The Minimum Bet Limits currently offered by TopSport on all events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA will remain unchanged.
Owing to the absence of minimum bet limits on Western Australian racing, we do not have confidence in the integrity of the early doors pricing on said events. In our opinion, offering fixed prices online for some clients but not others at any time is not a good look for the industry when there are no MBL's protecting said prices. Consequently, TopSport will not offer early markets to any client on provincial thoroughbred racing in Western Australia due to the excessive fees involved in West Australia. Our current procedures in respect of the release of fixed odds markets on all events under the jurisdiction of racing controlling bodies other than Racing Victoria and Racing & Wagering WA will remain unchanged.
We have been reluctant to introduce the changes outlined above. We have relented for some time as we fully appreciate the impact our actions - that is, deliberately instigating a reduction in turnover - will have on all industry participants. Racing controlling bodies will receive less fees. TopSport will have less opportunity to turn a profit. And punters will either not be able to 'get on', or will have to do their best to "gamble responsibly" on products and into markets with higher margins and significantly less chance of a reward. This is a regrettable outcome for all concerned, however, the reality of the situation is that we simply have no alternative. We cannot continue to offer products on which we are guaranteed to suffer a loss.
The current methodology for calculating race fields fees on a meeting-by-meeting basis (employed by Racing Victoria and Racing & Wagering WA ) is grossly unfair and - in simple terms - untenable. It discourages - and almost precludes - bookmakers from taking risk which, as discussed above, is to the great detriment of all industry participants and, in time will be to the peril of the industry itself. Should Racing Victoria and/or Racing & Wagering WA adopt a more realistic, even-handed and sustainable approach to taxation, we will gladly revisit our policies.
TopSport will not consider adopting a policy - similar to that employed by a number of our competitors - whereby different punters are offered different products based on their respective wagering records. This is not true bookmaking, and we have too much respect for this industry that we have been part of for over 30 years as well as for punters (of all levels) that have been loyal to us.
We fully appreciate the risk associated with this stance. It is likely that a number of our higher-margin members, particularly those who can get on elsewhere and who may not understand the subtle nuances behind our grievances and decisions, will jump ship. Regardless, we believe it is time to take a stand and start a conversation in order to ensure that betting on all Australian racing remains viable for years to come - for bookmakers and punters alike.
We are happy, and have attempted, to engage in discussions with all racing authorities regarding equitable, sustainable and sensible ways to increase turnover. We have submitted proposals to a number of racing controlling bodies. Some have flatly declared that there will be "no change" for the next annual reporting period (and it appears the foreseeable future).
We are conscious of the fact that the changes we are making to our operating model will result in many punters, particularly the price-sensitive and professional punters, not being able to wager at their current levels on racing within Victoria and Western Australia. These racing controlling bodies are hoping that punters will simply accept the higher margin products, continue to wager as normal and, of course, accept the lower returns now on offer. This will undoubtedly be the case for some punters but, we believe that this is unlikely to be the reaction of the bulk of the shrewder, more price-sensitive (and often heavier) punters.
We fear that the inevitable consequence of the ongoing escalation in the taxes payable within the racing industry is either or both of the following:
Our intensifying concern is that, whilst the lustre of the racing industry at its peak in the Sydney autumn or Melbourne spring may still glisten and gleam, many sectors and members of the industry are suffering under the pressures of excessive and misguided regulation and taxation. We fear that the industry may be atop a precarious precipice which, should it tumble over, would see the sport of kings in this country suffer irreparable damage.
For more than a decade - firstly under the auspices of intellectual property, and more latterly under the guise of racing integrity, consumer protection and harm minimisation - racing wagering operators have been beset by an unyielding cash-grab which only continues to grow more feverish and gluttonous. The true motivation appears to be the ongoing rivalry between racing administrators in New South Wales and Victoria, and their common desire to elevate the status of racing in their respective jurisdictions by continuously hoisting prizemoney on their premier, oft newly conceived, races.
We don't doubt that the primary objective of each of the racing controlling bodies is the betterment of the racing industry in their respective jurisdictions. And in some respects they are well and truly succeeding at their job. But, from our perspective, it seems obvious that the regulators are constantly ignorant of, and dramatically undervaluing, the most important element of the racing industry: the punter.
As the bulk of the wagering revenue of corporate bookmakers is remitted to racing controlling bodies in the form of fees and taxes, the punter is already indirectly financing much of the additional and copious prizemoney being foisted on World racing's elite during the major carnivals - and what does the punter receive in return?
As a direct consequence of the continuous growth in fees and taxes, the punter is being presented with ever-rising market percentages and, as operators are squeezed out of the market, diminished competition. This can only lead to reducing returns. This is not to mention how disingenuous it is for authorities to promote and demand "responsible gambling" while fostering and instigating such a wagering landscape. Are we approaching the moment that it is more "responsible" to put your money into a poker machine (or set it alight!) than bet in the formerly iconic Australian racing betting rings? Hardly an enticing proposition for the discerning punter looking to invest!
With the above in mind, it is inevitable that punters will shift their focus and redirect their 'hard-earned' to other gambling mediums and other wagering marketplaces. This trend is already apparent if you observe the rapid growth in sports betting during the past decade. This should be alarming for racing authorities. We cannot afford to lose the support of our long-term racing punting fraternity. Continuing to stumble up the garden path with your hand out is clearly not working. Remember, once the horse has bolted it is very hard to shut the gate.
TopSport is a relatively minor player in the grand scheme of things. But, given that we cannot sustain our operations on Victorian thoroughbred or Western Australian racing, we are sure that our fears and concerns expressed above are reasonable and well-held. This is further evidenced by the actions of other, more illustrious wagering operators who have started to follow suit by elevating market percentages, curtailing product offerings and restricting the activities of lower-margin punters.
Simple - we want a solution which will give all participants in this industry a fair go, and which will ensure that we can all enjoy this great sport for generations to come.
We have placed detailed and reasoned proposals and suggestions before a number of racing control bodies which we believe will sustainably escalate wagering turnover on racing and greatly benefit the racing industry.
One such proposal was for regulators to give those wagering operators prepared to trade with the low-margin, 'professional' punters the opportunity to opt-in to a separate, more relaxed, product fee model provided that they operate in accordance with certain trading rules. Such trading rules would include elevated minimum bet limits and the maintenance of specified minimum market percentages. We firmly believe that giving bookmakers an incentive to service the low-margin sector of the marketplace can be of great benefit to the racing industry. Not only would it assist in ensuring that this cash is not dispatched to the unregulated offshore wagering markets, we think that wagering turnover would increase even on current levels.
To date, this proposal and others like it have not been seriously considered, let alone adopted. It is true that proposals such as this will require a 'leap of faith' by racing administrators as they represent a significant deviation from past and current thinking. But, if you follow like sheep, the wolves will eat you. We have to halt the progressing demise of the Australian racing wagering industry, lest we end up with the sort of lacklustre marketplace now existing in the UK. We are confident that, with the correct implementation, proposals such as the one set out above will ensure the viability and vitality of racing wagering industry for many years to come.
Greyhound Racing NSW in our opinion have a structure we feel is the pinnacle of models in the country. We will be making efforts over the coming reporting period to ensure we support their fair, long term approach and actively look to grow our brand in this area.
As mentioned at the outset - this statement is not intended to be a cry for help. We simply see no point in sitting idly and hoping for change. We are not waging war on any racing authority, however, we feel that a message needs to be sent that change is required in order to keep racing wagering, and concurrently the racing industry, healthy and vibrant for years to come.
Change is not always easy to implement. But, for something as culturally and economically important as our industry, all industry participants need to make the effort. In this regard, we fully support Richard Irvine's recent submission appealing for all the major players in the industry to get together and work out a plan-of-attack which is acceptable for all industry participants so as to ensure the sustainability of our industry.
We constantly field complaints from punters in respect of all manner of issues with betting on racing. We hope that you now better understand the struggles faced by bookmakers in the current economic and regulatory climate.
If the racing wagering marketplace is to improve and thrive, it is important that racing control bodies come to realise the volume of turnover on their product that is already dissipating, and how that volume will dramatically expand if current regulatory and taxation trends continue. To this end, we urge you to express your individual concerns to regulators who possess the ability to bring about change. It is important that we all draw a line in the sand and demonstrate to racing authorities that punters will not continue to fund the racing industry if they are presented with inferior products and soaring market percentages. The collective cries of many are more likely to be heard by the powers that be than our lone voice in the wilderness!
Should you consider that the changes outlined above will affect you personally and force you to change your betting patterns in Victorian or Western Australian racing, we encourage you to comment on our Twitter feed or email us on [email protected]. We will be using feedback we receive to compile further submissions to racing control bodies in due course.