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De Lore's latest piece 

Racing needs its own ‘Magna Carta’

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Prioritising the problems with the Minister’s legislation and delivering a united racing industry rebuttal

by Brian de Lore
Published 17 January 2020

The racing industry currently faces the biggest challenge of its existence because it has only until February 11th (25 days from the day I write this blog) to unite in every sense of the word and issue the strongest possible objection to the most draconian aspects of the Racing Reform Bill No.2.

The keyword is ‘unite’ because, without an agreed and united approach, it’s unlikely a fragmented ‘herding cats’ response to the issues will produce the desired effect and prevent racing from sinking further into the mire from its already ignominious position of frailty – to an irreversible decline.

Club committees proposing to write submissions that defend only their district, club or racecourse, will be hindering the possibility of change rather than helping it. Self-interest above the national interest will do nothing more than squander this small window of opportunity to change or snuff out the legislation because only the weight of a united document with an unequivocal rejection of the main injustices will achieve a positive result.

The codes together must unite unilaterally and lead a charge to rebut this legislation and demand that racing is allowed to control its own destiny

The codes together must unite unilaterally and lead a charge to rebut this legislation and demand that racing is allowed to control its own destiny rather than have it forever in the dubious and possibly nepotistic hands of an unknown incumbent Minister of the future and his unknown government. Why would anyone even consider this outcome for racing?

The Magna Carta (Great Charter) was famously introduced in the Middle Ages with 63 grievances against the then rule of King John of England, which challenged his autocracy and was seen as a cornerstone document for a practical solution to the crisis. Racing is in crisis and needs its own Magna Carta to challenge the proposed 64 instances of Ministerial domination in the second Racing Bill.  

Can you believe the autocracy proposed by Winston Peters is outdoing King John’s autocracy of 800 years ago? The core principles of the Magna Carta are now echoed in documents such as the US Bill of Rights and the Universal Declaration of Human Rights – racing is entitled to its basic right of self-determination and ownership of its intellectual property (IP).  

The document contains so many issues unacceptable to all racing’s stakeholders

The legislation is long and complicated and to read all of it, and absorb all of it, will bring side-effects remedied only with Panadol x 2, a cup of tea, and a lie-down. The document contains so many issues unacceptable to all racing’s stakeholders, it’s hard to know where to begin but, nevertheless, here’s how The Optimist views the most critical issues:

  1. Clause 46  gives the Minister the sole right to appoint the seven members of the TAB board and appoint the Chairperson. That edict is completely unacceptable as it leaves the codes in the worst-case scenario with zero representation and opens the door for Sport to infiltrate and take a bigger share of the pie. It’s contrary to the recommendation in the Messara Review, which said automatic code appointees and a panel for appointing remaining members.
     
  2. Clause 81 gives the TAB NZ exclusive rights to the IP (Intellectual Property) associated with racing betting information, racing betting systems, and any audio or visual content derived from a NZ race. These items are the rightful property of the clubs and codes and should be managed by them and not the possibility of seven non-racing people appointed by the Minister. Clause 81 is straight-out theft.
     
  3. Clause 63 replaces Section 16 of the old Racing Act 2003 which, provided a formula for the distribution of funds for prizemoney and the running of the three codes. Contrary to the Messara recommendation, no formula now exists in this legislation, but it allows for the writing of a regulation that can be changed by the Minister at any time (just as the Minister may be changed at any time) – no guarantees, and it provides the Minister with an easy path to water down money the racing codes receive in favour of sport. Total Ministerial control of the distribution of money to the codes is not acceptable.
     
  4. Clauses 8, 45, 46, 47 and 48 of the new Bill all give TAB NZ too much power which conflicts with the Messara Review recommendation of devolving the power to the codes to run themselves. Under this arrangement and taking into account Clause 46 mentioned above, racing is exposed to the possibility of coming under the control of seven non-racing, political or nepotistic appointees to run racing’s business.
     
  5. Clause 45 (4) requires the Minister to approve any partnering arrangement made by the TAB. Because a partnering/outsourcing arrangement could provide the single biggest financial windfall for NZ racing, you cannot have the power of veto available to a Minister that does not understand the business of wagering. Commercial business decisions such as this are not the domain of politicians and bureaucrats.

The five points above and much of the rest of the proposed legislation is not about reform; it’s about total control by the Minister with Marxist-type bureaucratic regulatory conditions for an industry that simply needs to get government out of its life, as the now Minister Winston Peters promised would happen.

the base-power for industry decision-making is not devolving down to the codes as the Messara Review recommended

Points one and four above are a double-edged sword. You don’t have to go as far as playing the devil’s advocate in analysing those clauses to realise that the result will be that racing will be run by people fundamentally unacceptable to the stakeholders of the industry. And because the power-base for industry decision-making is not devolving down to the codes as Messara recommended in his review, points one and four together place the codes in a very weak position.

Point Two above addresses Clause 81, which concerns the Intellectual Property rights (IP). Placing the IP in the hands of TAB NZ is straight out theft. No question it belongs to the clubs, and you could make a case for the owners, and nothing but full control by each of the codes should be acceptable.

How this has come about is interesting. The Messara Review said the IP should be assigned to the clubs and the codes, but in the Final Report by MAC (Ministerial Advisory Committee) which went to the Minister at the end of June last year, it said the following:

Legislation required

  • If agreement can’t be reached between the domestic betting operator and the three racing codes for the assignment of IP, the Minister may be required to approve the drafting of legislation (Bill No. 2) to allow for the domestic betting operator to have the exclusive right to use all intellectual property generated domestically, to maximise revenue for the racing industry

The agreement wasn’t reached because it was never negotiated

The agreement wasn’t reached because it was never negotiated, and DIA has just written this MAC/RITA recommendation into the legislation. When I questioned RITA Chair Dean McKenzie weeks ago about the reasons for assigning the IP to TAB NZ he said it was because the betting operators wanted to deal with only one NZ body and not three codes. How can you accept that as a reason?

The clubs in particular should be ropable about the IP, and it may be a good point to raise at the coming series of industry conversation meetings with Dean McKenzie starting next week.

Point three is Clause 63 which in the old Act is Section 16. The Messara Review presented a formula to deal with the old Section 16 and although in MAC’s Final Report to the Minister, they say they supported the recommendation principle, the legislation says otherwise. In fact, the legislation sits on the fence in failing to determine any formula and leaves the serious matter of distribution of funds for stakes money completely open-ended and subject of a regulation not yet written. 

How could that arrangement be satisfactory to any of the codes? Stake money is for what every owner races to pay the training bill, and with no guarantee of a formula to divide it, and Sport NZ lurking in the shadows, the lack of certainty is yet another worrying aspect of this very flaw-ridden document.

outsourcing or partnering the TAB to provide the industry with a substantial up-front payment and save the industry somewhere between $50 million and $70 million a year in costs

Point five on the prospect of outsourcing or partnering the TAB to provide the industry with a substantial up-front payment and save the industry somewhere between $50 million and $70 million a year in costs, has never seriously been contemplated. Current and previous ministers, opposition shadow ministers, and MAC/RITA appear conjoined at the hip in their lack of enthusiasm to outsource.

The following quote from MAC’s Final Report contains more written enthusiasm that can be found elsewhere:  “The committee considers that the potential to outsource, or not, all or some of the commercial activities of TAB NZ needs more analysis. We have set up a sub-committee, the Racing Industry Outsourcing Evaluation Committee (RIOEC), to do this. 

“…outsourcing is not a foregone conclusion. Our terms of reference for the RIOEC included considering the option of retaining these services in New Zealand, as well as considering any joint venture opportunities.”

In the same report it also says:

“The legislation required

  • Make legislative provision for outsourcing the NZRB’s commercial activities, or providing for variations on this proposal (Bill No. 2)
  • Allow for TAB NZ to have the exclusive right to use all intellectual property generated domestically by the racing industry to maximise revenue for the racing industry (Bill No. 2)”

And further on in the document, it says: “What the RIEOC has to protect against, at all costs, is some future ‘shock’ or ‘event’ not clearly covered in the outsourcing agreement, or the non-performance of the outsourcing partner, which would result in the New Zealand racing industry being left with little control over its destiny and a declining revenue base for both racing and sports.”

Excuse me, RIEOC; can you please wake-up to yourself! It’s us that’s going down the drain, not them!

Excuse me, RIEOC; can you please wake-up to yourself! It’s us that’s going down the drain, not them!

Reading this document on and on, as one learned person told me, has the effect of making you lose the will to live. RIEOC is clearly made up of nerds who have no conception of the racing industry, and their input in this process of reviewing the reviewer is an exercise in time-wasting futility.

If you are having trouble sleeping at night, try reading this:file:///C:/Users/User/OneDrive/Documents/NZRB-RITA/Final-Report-of-MAC-on-the-Review-of-the-New-Zealand-Racing-Industry.pdf

Finally, look at the example of the New Zealand Rugby Union, who have no Minister to govern them, despite the level of betting, and self-ownership of all their own IP property, and deal with it themselves commercially.

NZ Rugby board has a sensible means of appointing its board members

They appoint rugby people as directors using a similar mechanism that John Messara has recommended for racing. Cricket does the same.

The point to be made here is that rugby and cricket appoint rugby and cricket people to make good decisions on rugby and cricket. If racing went back to geographical representation and appointed racing people to make good racing decisions, we would all be far better off than having the bureaucrats making incompetent decisions on racing’s behalf and thinking they know best.

The legislation is not acceptable. Rise up against it, and sign the Racing Magna Carta – someone has to start this decree and get everyone to sign it. Who is it?

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I'm not 'political' enough to comment on the general gist of the article, but what I did note, was this paragraph below

If De Lore's figures are indicative of the monies that can be generated, then I would have thought outsourcing was business critical, and the single most important thing that needs to happen to NZ racing in many years.

It makes racing sustainable, allows for increases in stakes, track and facility upgrading, marketing and welfare.

For too long now, the NZRB have been sucking too much out of the industry with excessive and increasing costs.

If Peters is serious about saving the racing industry, then he should have this outsourcing as his number one priority, if the figures do in fact stack up

Point five on the prospect of outsourcing or partnering the TAB to provide the industry with a substantial up-front payment and save the industry somewhere between $50 million and $70 million a year in costs, has never seriously been contemplated. Current and previous ministers, opposition shadow ministers, and MAC/RITA appear conjoined at the hip in their lack of enthusiasm to outsource.

 

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Yeah.

Brian and I used to chat at the crossing on gallop mornings, leading up to Cup meetings when he came to do some timing.

Obviously, we had plenty of discussion about NZTR as well as everything else. 

One of the thrusts of the M report was about devolving control to the codes.

I told Brian that that scared the shit out of me.  If the same people are left to manage the codes - ours anyway - we are stuffed anyway, irrespective of how the TAB is modified.  And it doesn't look like much modification is happening there either.

What a disaster.

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OK. Can't see them there, nor in the Messara report but that refers to a Deloitte Options analysis as below. They may be from there but not sure if that is available.

Estimated Benefits of a Full Outsource Model
In May 2017 Deloitte conducted an ‘Options Analysis’ for NZTR which
indicated that an outsourcing agreement would generate significant potential
benefits to ensure its funding can grow significantly and the business’ future
is sound and competitive.
These include:
• Minimum guarantee payment to the Racing Industry that exceeds the
FY18 level
• Cost synergies
• Revenue synergies
• Up-front payment
• Transfer of transaction and performance risk
• Leverage of capital expenditure from outsource operator of
international scale
• Future regulatory compliance costs
• Service level agreements with outsource provider to realise timely
product and customer outcomes.

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“Our preliminary analysis suggests the combined benefits from an appropriately structured transaction could increase distributions to the codes by $38 million to $63 million annually. The difference between the mid-point of our downside scenarios under the NZRB initiatives and the mid-point of our assessed benefits under an outsourced arrangement is in the vicinity of $280m over the FY18 to FY21 period.

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23 minutes ago, curious said:

“Our preliminary analysis suggests the combined benefits from an appropriately structured transaction could increase distributions to the codes by $38 million to $63 million annually. The difference between the mid-point of our downside scenarios under the NZRB initiatives and the mid-point of our assessed benefits under an outsourced arrangement is in the vicinity of $280m over the FY18 to FY21 period.

That's 70 mil per annum.

Seems like a lot of turkeys do not want to vote for an early Xmas, that's human nature I guess.  But why has Peters not seized on this, instead, trying to bring in draconian legislation that will divide the industry

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1 hour ago, Hesi said:

That's 70 mil per annum.

Seems like a lot of turkeys do not want to vote for an early Xmas, that's human nature I guess.  But why has Peters not seized on this, instead, trying to bring in draconian legislation that will divide the industry

The proposed legislation is supposed to allow for this possibility. The Deloitte report unfortunately is not available for scrutny of the analysis (only a 3 page executive summary was released) and it was hammered by the NZRB at the time which is presumably why RITA have initiated a further examination, I'd say. They don't trust the numbers either.

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25 minutes ago, curious said:

The proposed legislation is supposed to allow for this possibility. The Deloitte report unfortunately is not available for scrutny of the analysis (only a 3 page executive summary was released) and it was hammered by the NZRB at the time which is presumably why RITA have initiated a further examination, I'd say. They don't trust the numbers either.

Smacks to me of wanting to maintain empires, even with RITA!

Classic technique, keep getting reports, until you get one you agree with.

In the meantime, is anyone actually getting something on paper with regard to the sorts of figures that might be achievable, by approaching various agencies, rather than expensive consultants reports....or is it more complicated than that

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12 minutes ago, Hesi said:

Smacks to me of wanting to maintain empires, even with RITA!

Classic technique, keep getting reports, until you get one you agree with.

In the meantime, is anyone actually getting something on paper with regard to the sorts of figures that might be achievable, by approaching various agencies, rather than expensive consultants reports....or is it more complicated than that

That's presumably what RIOEC are doing?

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i don't really understand the de Lore/NZTR position here. The IP rights transfer is essential for the outsourcing to occur (at least according to MAC). They seem to be for one and against the other? Don't think they can have it both ways.

From the MAC final report:

The committee considers that the potential to outsource,or not,all or some of the commercial activities of TAB NZ needs more analysis. We have set up a sub-committee, the Racing Industry Outsourcing Evaluation Committee (RIOEC), to do this.

Legislation required

Make legislative provision for outsourcing the NZRB’s commercial activities, or providing for variations on this proposal (Bill No. 2)

Allow for TAB NZ to have the exclusive right to use all intellectual property generated domestically by the racing industry to maximise revenue for the racing industry(Bill No. 2)

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I think Brian has missed the key principle of the Magna Carta which is that everyone is subject to the law, including the king. He arrogantly writes " The document contains so many issues unacceptable to all racing’s stakeholders". Sorry Brian, not this stakeholder. NZTR and those who influence it may think they are the King. Maybe and maybe not but they've had their own ineffective way for their own benefit for way too long, primarily at the expense of customers/punters, racing industry workers and services and particularly the real king perhaps, the taxpayers.

A few brief comments on what you see as the key issues, about which I completely disagree with you in all cases.

1. Clause 46  gives the Minister the sole right to appoint the seven members of the TAB board and appoint the Chairperson. That edict is completely unacceptable as it leaves the codes in the worst-case scenario with zero representation and opens the door for Sport to infiltrate and take a bigger share of the pie. It’s contrary to the recommendation in the Messara Review, which said automatic code appointees and a panel for appointing remaining members.

Totally agree with the Minister appointing the board. It's a government run and licensed enterprise and the codes do not necessarily have the expertise to run it as has been well demonstrated for decades. The taxpayer should be in control of the board, not the beneficiaries of the government largesse, the codes.

2. Clause 81 gives the TAB NZ exclusive rights to the IP (Intellectual Property) associated with racing betting information, racing betting systems, and any audio or visual content derived from a NZ race. These items are the rightful property of the clubs and codes and should be managed by them and not the possibility of seven non-racing people appointed by the Minister. Clause 81 is straight-out theft.

Maybe they are but the TAB must have control of them in order to generate the maximum benefit for stakeholders. It's possible that outsourcing some or all TAB activities may be an option here for example. Can't imagine other wagering operators wanting to engage with 3 racing codes and multiple sporting bodies. Illogical, impractical and very expensive when we are trying to constrain costs.

3. Clause 63 replaces Section 16 of the old Racing Act 2003 which, provided a formula for the distribution of funds for prizemoney and the running of the three codes. Contrary to the Messara recommendation, no formula now exists in this legislation, but it allows for the writing of a regulation that can be changed by the Minister at any time (just as the Minister may be changed at any time) – no guarantees, and it provides the Minister with an easy path to water down money the racing codes receive in favour of sport. Total Ministerial control of the distribution of money to the codes is not acceptable.

Don't agree. The distribution should be evenhandedly based on revenue produced by racing codes and sport codes dependent on the revenue they generate on their domestic events so the incentive is there for each to focus on providing attractive and competitive wagering events. If the codes, especially NZTR have anything to do with it that won't happen. They'll waste time fighting for a bigger share of a shrinking pie instead of on fixing their own product which is why we are in the predicament we now are. Has to be controlled by the taxpayer.

4. Clauses 8, 45, 46, 47 and 48 of the new Bill all give TAB NZ too much power which conflicts with the Messara Review recommendation of devolving the power to the codes to run themselves. Under this arrangement and taking into account Clause 46 mentioned above, racing is exposed to the possibility of coming under the control of seven non-racing, political or nepotistic appointees to run racing’s business.

As above, the power to the codes should be devolved to the extent of them developing their own products and events as best as possible without interference including integrity They should not be devolved the matters relating to the TAB's role which is to maximise the wagering revenue from those events.

5.Clause 45 (4) requires the Minister to approve any partnering arrangement made by the TAB. Because a partnering/outsourcing arrangement could provide the single biggest financial windfall for NZ racing, you cannot have the power of veto available to a Minister that does not understand the business of wagering. Commercial business decisions such as this are not the domain of politicians and bureaucrats.

Wrong again. The government and taxpayer license the operation of the TAB. Of course they should have oversight of a major business decision such as outsourcing. Think about it. If I lease you a horse the standard lease agreement will likely have a clause that you can't take it overseas without my express written consent. Same thing ain't it?

 

Edited by curious
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Notwithstanding Curious' observations - which are fundamentally reasonable -  I think I get the gist of Brian's concern...namely,  that the political appointees won't be knowledgeable or fair.

That ignores the fact that up to date the RB hasn't been either.

As for devolving to codes ;  if the structure of code management and personnel is unchanged we're stuffed regardless.

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7 hours ago, Freda said:

Notwithstanding Curious' observations - which are fundamentally reasonable -  I think I get the gist of Brian's concern...namely,  that the political appointees won't be knowledgeable or fair.

That ignores the fact that up to date the RB hasn't been either.

As for devolving to codes ;  if the structure of code management and personnel is unchanged we're stuffed regardless.

On your first point, I appreciate the concern Freda and of course how the  legislation is operationalised is another question. However, I still think the idea that the codes and Sport NZ nominate potential board members but the Minister selects the appointees from that pool based on ensuring that the 4 areas of expertise specified in the proposed legislation are covered is a far better appointment system than the current automatic representation from each code.

On your second point, I completely agree. The two main issues here for me are not the structural and legislative ones that Brian and NZTR are moaning about but ...

i) how do you get NZTR ontrack with their responsibilities with respect to providing a way better wagering product i.e., tracks, programming, stakes structure, handicapping, integrity, information to stakeholders/punters etc.? The only way I see from the legislative level is to ensure that funding distributions are more directly performance based thus incentivising that.

ii) the strategies for increasing revenue are not well founded and as I said elsewhere rely on a fallacy that collecting the revenue in different ways from the same pool of punter losses will magically increase revenue when likely it is only going to add costs.

 

 

Edited by curious
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Your preference for Ministerial selection makes sense in a logical and impartial world....and you seem a very logical and rational person, so entirely understandable.

I have less faith in the ability of most to be impartial, so very many in positions who should be, are clearly not.  Many are also very poorly advised.

Agree entirely with your point ii)

Point i)  still alarms me, given that NZTR seems ( to me)  to be hell-bent on self preservation rather than any in-depth changes in its own modus operandi.

            That body has had any amount of advice/opinion from all sources,  but just ploughs on pursuing its own agenda.   

Edited by Freda
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Somewhat flimsy report from the Awapuni meeting with Dean McKenzie

BY LLOYD JACKSON

Strong opposition to proposed legislation affecting the racing industry was aired at a feisty meeting held at Awapuni Racecourse yesterday evening. Staged by the Racing Industry Transition Agency’s (RITA) Dean McKenzie, the meeting attracted more than 120 industry-associated people from the Wellington, Taranaki, Wanganui, Manawatu and Wairarapa districts. Prior to the start of the meeting the writer spoke with owner-breeders Mark Verran and Charlie Rose. When asked if they thought there might be some fireworks, both replied “We certainly hope so!” Among those in attendance were Alasdair Robertson (chief executive of Race Group, which oversees six racing clubs in the area), Bernard Hickey (NZ Thoroughbred Owners Association), trainers Jeff Lynds and Kevin Gray plus Jim Wallace (trainer and studmaster of Ardsley Stud) and Gary Thomas of Seaton Park. McKenzie skipped any explanation of proposed Racing Bill #2 and went straight to a Q&A session which brought about a number of questions and concerns, many of which will very likely be raised at similar meetings this week as well as at next week’s yearling sales. Submissions to the select committee are open until February 11th. Early questioning surrounded the proposed bill’s centralization of power with the Racing Minister and his total control of re-appointment of chairman, as well as the seven-member board. The industry codes (thoroughbred racing, harness racing and greyhounds) are displeased that none will be represented in the manner proposed and recommended in the Messara Report, which is/was supposedly the foundation of the legislation. McKenzie’s response, that coderepresented appointees had not been successful in the past, was countered with the belief that those with “skin in the game” need to be on the board rather than bureaucrat appointees. A further question asked exactly who McKenzie was working for: “The Minister or the industry?” Revenue, expenditure, profits, turnover and the much hoped for increase in stakes monies were other topics discussed. Also discussed was intellectual property, who owned it and what was it worth? From young Oliver Bau (17) was: “Why is the Racing Bill going to the Transport Committee and not the Primary Production Committee, which handles racing?” Oliver‘s parents are ex-jockey Trevor Bau and past Trackside presenter Donna Beck. Often under the gun, McKenzie held his ground with his apparent support for the proposed legislation as written. Given his stance, he was understandably combative. The writer also sensed a dismissive tone. McKenzie promised to take the concerns to the Minister but the dismissiveness prompted one comment along the lines of: “Given your support for the legislation as written compared to our virtually 100 per cent negative response to the legislation, how can we be sure that you will transmit our concerns back to the Minister?” While conducted is a respectful manner, the meeting should have given McKenzie and the RITA a clear indication that submissions will be many and are opposed to what is a departure from the Minister’s own comments at the release of the Messara Report.

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The Mustelid says push comes to shove this year. Time's up. Legislation has to be through by July, I understand, and was introduced before Xmas...so, all eyes at Karaka will be focused this Sunday on the ancient gelding Winnie The Poo. Will our saviour (?) have wise words for the people who really matter in this industry?

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