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Betfair’s Mythical Argument

Racing NSW refutes Betfair’s claim that NSW racing should charge race fields fees that suits Betfair’s business model.

On every $1 bet placed by a punter on a NSW thoroughbred standard race meeting with corporate bookmakers and Betfair, they currently pay 1.5 cents to the NSW racing industry. The NSW TAB pays up to 7 cents to the NSW racing industry on every $1 bet on a NSW thoroughbred standard race meeting. Accordingly, the NSW TAB pays over four times as much as the other wagering operators.

Betfair seeks more favourable treatment than all other wagering operators and to pay only 1 cent to the NSW thoroughbred racing industry on every $1 bet. It uses a flawed argument that the 1 cent return to the NSW thoroughbred racing industry is what Betfair allowed in its business model and racing should charge it less so that it can make a larger profit.

That's like an Uber driver allowing 50 cents a litre for petrol in his business model then expecting the petrol station owner who is selling the petrol for a $1.10 a litre to drop his price to the 50 cents a litre in order to accommodate the Uber driver’s business model. Naturally, the petrol station owner is not going to sell it for less than what it costs him.

Both the Full Bench of the Federal Court and the Full Bench of the High Court of Australia unanimously rejected this ridiculous notion.

As mentioned above, the fee for standard race meetings, being the vast majority of meetings in NSW, is currently 1.5 cents in every $1 bet. This has not increased since 2008. In 2008 when the 1.5 cents charge was initially introduced, corporate bookmakers who have sustainable business models were generating a profit of 6 cents in every $1 bet on NSW thoroughbred race meetings. They are now generating on average12 cents profit on every $1 bet on NSW thoroughbred meetings.

The half of one cent increase from 1 July 2017 has absolutely no effect on the recreational punter who are responsible for over 90% of total betting turnover on all wagering operators’ turnover. If Betfair passes the charge on because of its flawed business model, it will only affect the large scale punters who work on taking a percentage of recreational punters’ losses. Recreational punters as a group on Betfair lose on average 20% of their investments, a percentage of which goes to the large scales punters. Racing NSW has always had a proud record of looking after the punters and believes that this increase has no effect on the majority of punters.

Racing NSW will distribute record prizemoney of $230 million in the 2018 financial year. However, when you take out the trainers, jockeys, strappers and animal welfare percentages of 18%, owners will receive approximately $189 million. Owners as a group in NSW pay in excess of $350 million annually in costs just to sustain the horse to compete costs. Accordingly, those owners still sustain losses of over $161 million per annum.

This continual subsidisation by owners has had an effect with horse registrations nationally dropping alarmingly by 14.4% since 2008. Without owners, there are no horses and we would not be having this debate. Racing NSW needs to ensure that the NSW thoroughbred racing industry stays viable and that the income levels of participants, which in the vast majority are modest, are not reduced by giving wagering operators unduly favourable treatment.

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