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Some great stuff and comments from Brian De Lore again


Partnering the TAB is the best way forward


by Brian de Lore
Published 20th June 2020

Here is racing’s biggest ever certainty: That TAB NZ is not a sustainable business for the long-term benefit of New Zealand racing and finding an overseas betting operator with which it can enter into a partnering arrangement is an inevitability more for the immediate future than the long-term.

Events of the past three months have underlined the urgent need for New Zealand racing to think globally rather than nationalistically about how it can manage this business sustainably as it enters the third decade of the 21st Century. Narrow-minded detractors have resisted the basic concept of entering into a mutually beneficial arrangement with the belief they are giving something away for nothing.

COVID-19 hasn’t held racing back as much as this ‘old boys neurosis’ about partnering the TAB, which might be a better description than the word ‘outsourcing’ as stated in the Messara Review. The difference is only subtle; semantics, as one is obtaining services from an outside supplier while the latter might be defined better as a strategic relationship to achieve a sustainable, competitive advantage. In both cases Kiwis retain full ownership of the TAB.

Resistance to partnering comes from people scared of the dark; the anti-entrepreneurial who imagines the bogeyman is hiding under the bed when they switch the light out at night. How can anyone be against a partnering arrangement before negotiations even commence? – but the flat-earthers are definitely out there alive and well.

…the gambling world has consolidated with mergers…

In a short space of time, the gambling world has consolidated with mergers and takeovers rife in 2019 and this year. Scale is everything and the May completion of the merger of Flutter and the Stars Group to form a Dublin based company with a market cap of £10 billion is proof enough.

The Stars Group released this statement on April 30, 2020: “With the overwhelming approval of our shareholders last week and receipt of all remaining regulatory approvals, we look forward to completing our combination with Flutter next week. We are very excited about the potential of this combination, which will create a global leader in online betting and gaming with a portfolio of trusted brands, complementary best-in-class products, diversified revenues, stand-out technology and, most importantly, outstanding teams of exceptional people around the world.”

The point is, such mergers are based on the pooling of resources and synergies to save the group hundreds of millions of dollars, particularly in the areas of IT development and marketing. Recognition of the advantages comes with shareholder approval who only ever vote with their pockets.

Australian based betting operators, including Tabcorp, are still showing an interest in a partnering (partnering, not a merger) arrangement with our TAB. I say still because in the two years since John Messara in his review strongly advised the New Zealand industry to start negotiating, betting revenue in New Zealand has been stalled or declining, and the deal in 2020 might not be as good as the one that was possible in 2018. Nevertheless, partnering is a better option than seeing a further reduction in prizemoney distributions and the inevitable depletion of racehorse ownership and defections to Australia.

Even the smaller Australian corporate bookmakers will struggle to survive long-term and trends world-wide suggest more mergers or thinning by natural attrition. Long-term, New Zealand wagering can neither afford to market itself against the corporates or go it alone.

Marketing costs are increasing faster than betting revenue

Marketing costs are increasing faster than betting revenue, making smaller operators less competitive – between all Australian betting operators the spend annually has risen from very little to in excess of $300 million. The movement away from the tote to fixed-odds has also reduced margins.

The advantages of partnering go something like this: Instead of TAB NZ funding its own FOB platform with commitments for ongoing payments for the next 10 years – total cost in the vicinity of $200 million, they do what RWWA in Western Australia did and pay a flat fee of $7 million annually to plug into Tabcorp’s FOB and benefit from their ongoing IT developments.

Or, New Zealand negotiates a larger package and includes all of its betting services and 100 percent comingling of the pools, and achieves massive cost savings on salaries and wages, IT development, turnover related expenses, advertising and promotions, comingling, rent, repairs and maintenance, accountancy, consultancy, travel and accommodation and a $14 million cost shown as other expenses.

Three years ago, Deloitte prepared a report to assess the potential from a partnering arrangement and concluded $70 million in cost-saving synergies were available. But cost saving is only one-half of the potential benefits of partnering because a good agreement will provide an avenue for saving future capital investment and opening up several new revenue streams.

Using the most advanced technology by plugging into Australia might bring back a sizeable proportion of the 35 percent loss in the TAB customer base. The service from the TAB would go from woeful to wonderful. The failure of the FOB and its dodgy website may see it written off and red carded into history, and yields would likely improve with a competitive FOB coupled with better risk management and hedging processes. As well, customers would have available a full range of betting options that our TAB only dreamed of introducing but could never afford.

…potential for a much-improved phone app and website

Plugging into Tabcorp’s or a Sportsbet computer also has the potential for a much-improved phone app and website. The TAB website was launched only 18 months ago with the FOB, but from day one it has never been satisfactory and is not fixable, or the funds aren’t available to fix it – the latter the more likely of the two as not all the Openbet updates have been done due to lack of money.

Below budget turnover and the onset of COVID-19 has surely dampened-down the negotiating limits on a partnering deal, but such an arrangement could also include a worthwhile upfront fee and an agreement that provides a guaranteed level of income annually and a profit share of the additional profit generated by the partnership over and above the benchmark.

A sophisticated betting partner will also utilise the value of New Zealand’s unique global time-slot – an opportunity that won’t materialise under the present regime. That would mean a consolidation of New Zealand venues to produce better racing surfaces and aesthetically improved visuals of New Zealand racing on which the Asian market can bet at 9.00 AM in Hong Kong. The potential for New Zealand racing to develop that Asian market is massive.

The business of betting in New Zealand would be better served under the control of a good commercial operator and run separately to the organisation associated with running racing – the Australian system proves it works. New Zealand is infested with government control which is still visible on every page of the wording put forward for the second reading of the Racing Bill.

In a letter written to Minister Peters recently, I asked five questions of which he answered two. One of the Minister’s answers said: “The Government does not accept the success of all recommendations rests solely on the recommendation of seven (meaning Recommendation 7 of 17 in the Messara Review). Having said that, the Bill will allow the industry greater commercial freedom to explore options such as outsourcing and partnerships.”

The opposition to partnering is gradually disintegrating. The IP (Intellectual Property) is coming back to the codes, and the landscape is changing, and the passing of the Racing Bill will hopefully lead the industry closer to a TAB run commercially and profitably for the stakeholders of racing and a brighter future.

13 thoughts on “Partnering the TAB is the best way forward”

  1. e57911b10002c6bd47920ed061839ddb?s=42&d=Henrietta Tavistocksays:

    So glad you continue to try.
    I have just about given up .
    The Thoroughbred and Racing and it’s history and the passion for breeding a Champion had been amazing for so many and so challenging for some of the brightest and most powerful people, and also for the simplest and purists,
    However I have come very sadly to the conclusion that in today’s dumbed down World run by greed and power it probably does not fit in. The people who run it now acuallydo not deserve it. They certainly do not understand it, they will prob,y not even realise that they have lost it. H

  2. f935e2fca5c2bfa995df42aea33d72d6?s=42&d=Robt Dawesays:

    Anything, just anything would be far better than the current industry status quo. The TAB has the industry in their hands, unfortunately they’re murdering the system. Jo Public needs the supply of weekly form guides, we need trackside radio. Promotion of the sport is vital if not it will continue to slide into oblivion. We need more participants to expose their personal industry bitch, somewhere someone has to take notice !! Buck up TAB !!!

    1. I am in strong agreeance with Roberts remarks, how can people bet without any information on fields and no trackside radio no results published. I know we have info on TAB website but unfortunately not everyone has access to that, so don’t we worry and Not offer any solutions to them. Someone needs to step up this needs urgent attention.

  3. fde64be718239e2dc6b63d89c76fe9d6?s=42&d=Berrisays:

    Those who are currently running the industry have now been provided with the ideal blue print on how not to run the industry. We must now do things that have never been done before, for that surely must be the only path forward. A little bit of ingenuity, courage and intelligence, with a sprinkling of common sense must be the hallmarks of any future initiatives.

    Obviously success is the desired option, but to fail not trying would be the biggest travesty of them all.

  4. 8c1b3b9dc4207d43d1c2b1ab8d64da8a?s=42&d=Diane Stampalia (née Kettlewell)says:

    There does not seem to be any urgency in Minister Peters regard to the sustainability of the racing industry. Overpaid and under performing government appointed RITA/TAB executives continue to hold racing participants and indeed the Racing Minister with contempt by still not producing their record of accountability which is now more than four months overdue. The fact that Peters says the revision of the Racing Bill “will provide greater commercial freedom to explore options such as outsourcing and partnerships” provides proof to those with skin in the game that his inaction has continued to cost the industry dearly. In fact his inaction is a complete oxymoron to what he promised racing people that he would deliver as exploring those options should have been among the first things the RITA executives should have done. If Minister Peters thinks he and RITA can continue to pull the wool over racing people’s eyes without firm action he will not get back into parliament again running on a racing platform.

  5. 3800c653a251018071473d5a9189103d?s=42&d=johncsays:

    The inept performance of rita is beyond belief.The only way to make money out of racing is to be on the board or an employee of same.I think Winston has done his best.His failure is to be captured (if he is)by bureaucrats in govt departments and the allocation of responsibility to the board who have let everybody down.If the tab (rita) was trading while insolvent does personal liability attach to the board members and are they insured??Could someone
    kindly confirm that the auditors have passed the accounts without any questions or reservation s being recorded??
    How many of board have registered colours how many have a share in a recing or breeding horse?Do they know where the nearest track is and when did they visit to see what happens at the coal face.\??
    A tired breeder since 1971.

  6. 905583825ca022e362bfef9bb6e754ce?s=42&d=stephen richardsonsays:

    10 years ago I wouldn’t have agreed that NZ should be looking to outsource but today on paper they have no other option. Sadly those who are looking to make the changes are not reading the current situation and the future as well as you have which is a major concern given you are not privy to as much information as they are. The bottom line is they are outsourcing sports trading to Sportsbet so by adding tote no real big deal. I would be going with TABCORP to take over sports and racing as obviously offer both tote and fixed odds. Paddy Power getting involved with the new Betting Platform and getting their Aussie Company Sportsbet involved have fleeced the Industry for millions mainly due to incompetent and clueless TAB management getting spun the bullshit selling lines.

    If you know anyone overseas involved in sports or racing wagering inform them what the NZ TAB paid for the new betting platform and how much they are paying annually for it, their reply will stagger you.

    My advice is throw the supposed legislation changes in the bin and start talking today to TABCORP as time and correctly as stated above money have both run out.

    1. I phoned someone in Sydney who works for a company that supplies services to Australian betting operators, and others. He told me that only 10 percent on course bookmakers have an online presence with their own websites but one or two of the bigger ones are now building their own FOB platforms for between $5 million and $10 million, and will be getting something vastly superior to what our TAB paid $50 million to build with years of bank-breaking ongoing commitments. And yet the person who negotiated our TAB deal is still working there on a massive salary which only says that RITA is condoning that decision – none of this makes any sense.

  7. dadefd8cf2be6364afdcd50edaac6b69?s=42&d=Ross Simpsonsays:

    In the 80’s Victoria TAB was sold by the Victorian govt to a new public entity called Tabcorp. As a stakeholder in the Victoria Harness Racing Industry I was allocated shares in Tabcorp. Over the years my shareholding increased. In the 90’s Tabcorp split into two company’s, one for casinos etc. the other for racing. They allocated shares in both companies to shareholders.
    Mainly because of this decision by the Vic. govt. racing in Victoria and other eastern states has gone from strength to strength. I still hold shares in these companies and thank the day that Vic. Aus. made this decision. A partnership with Tabcorp would be a smart move, but as the TAB is not known for being run by smart people, I doubt it will happen under the present Govt.

    1. f8286621ca8a27a6de6e94999fb51c40?s=42&d=Brian Hallsays:

      Peter Miskimmin ,Sport NZ Boss quoted in todays Sunday Star Times , has read your blog Brian and is saying the same thing as you are :
      “In NZ we are a very small market ….so what opportunities are there around merging, sharing and collaboration .”
      The new Directors of TABNZ need to be carefully selected to ensure they include the skills required to negotiate the type of partnering ,merging, sharing and collaboration arrangements that TABNZ will require firstly to survive and then prosper.

  8. 7e4729c8b21c915c2153605ce7ea4d65?s=42&d=Gil Dymocksays:

    I play small-stakes poker on-line most days at PokerStars, an Isle of Man-registered site. My preferred game is five-card draw, these days a poor cousin to the world’s number one version, Texas hold ’em. This morning’s $3.30-entry tourney attracted a field of 209 triers, chasing a prize pool of $614. Three of the entrants were Kiwis.
    A typical hold ’em game would be one that started at 10am today, entry fee $4.40, prize pool $5k, with five of the 1282 starters from New Zealand. An added-stakes version, starting at 4.15am a week or so back, had 14,216 players paying $11 to chase $139k in prize money, 24 Kiwis braving the ungodly starting time to take part. The most recent big-entry-fee game was last week’s “Thursday Thriller” for the High Roller Club, in which 76 people paid $1050 to enter a tourney with an $80k guaranteed prize pool. No Kiwis took part. (If my maths is correct, PokerStars ran that event at a loss.)
    The point of this information is to pose the question: Could a stand-alone poker site, exclusively for New Zealand players, be a viable proposition.
    The answer, of course, is a resounding No.
    The personnel required to staff the site would come close to outnumbering the players. On top of that, New Zealand’s pool of big-money punters is too small (or doesn’t exist) to risk attracting them with costly promotions.
    And from what I can tell, the New Zealand TAB is, by a reverse process, manoeuvring itself into the position in global horse and sport gambling that a Kiwi-based poker site would hold in the world of cards.
    Why are they doing it? Do they even know they’re doing it?
    The only way to rationalise it is to acknowledge that an executive drawing a salary in the high end of six figures is unlikely to approach his boss and say, “The jig is up; you should merge with an overseas outfit and shut down my part in the operation.”
    Apart from that, there’s no explanation.

  9. b850ae24f6318d90a39ff66945abd7fe?s=42&d=Graham Brutonsays:

    Very good comments above and as per usual Brian and Stephen are both on the ball re outsourcing…..but unfortunately the constructive comments will ultimately fall on deaf ears as Ross Simpson pointed out in the last line of his comment ….’The NZ TAB is not known for being run by smart people’ ……and isn’t that a fact.

    Iv’e been a punter all my life and (like Gil Dymock above) now find myself playing on-line Poker to quench my thirst for a gambling ‘hit’ as the ‘dummies’ at the TAB have taken away all the promotion of racing I used to love and left me as flat as a pancake and no interest at all in having a wager.

    Talk about shooting yourself in the foot …..take away the form in every publication ……the oncourse presenters ….. the radio …..sack all the workers ….whilst leaving the ‘fat cats’ in their chairs and what do you get ?…. Irripairable damage.

    Sad but true.
    Graham B Petone.

  10. 40071f8ef76abc04d1ffdbfdcfcf3ca6?s=42&d=Clive McCallsays:

    We have many of intelligence & experience ‘in house’ who have supported Brian’s
    points of view & the message therein. Most of us have come to the same conclusion:
    Change is required to remedy the huge errors of the recent past. I support the Partnership idea as the best (& quickest) way to do this. But finding the pathway to this result is the challenge. We must employ the caliber of people who can develop and implement a focused strategy, for RITA & The TAB.
    As long as Government (& government sycophants) are responsible for the Management selection process, then we remain stymied. How do we get control of the employment process to improve the quality of our administration? I think a return to the well, and a strategy discussion with Messara as the best option, even if there is a cost. The present options are not the answer. We need seats at the Top Table with an informed hand on the rudder.
    Clive McCall.

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Some fair points that have been made by a few for some time now. 

This issue with a partnership is in regards minimum funding levels. Which 'partner' is going to agree to a funding level that is even close to the recent levels given the status of what customers/betting the NZ TAB currently has on its books. Why would a partnering organisation opt for $150m of funding + share of profits beyond that (as an example), when the value of the business in NZ has become so small, the partner would be unlikely to make that. 

For me, I'm not convinced partnering is the best way forward given the dramatic loss of customers. From what limited info is available, I'd be looking at legislative change to allow betting operators to operate in NZ (and advertise/pay taxes etc).

If that was able to happen, then I'd switch NZ TAB to a tote operation as previously stated. 

I haven't seen anything that delivers the scenario of NZ racing being the recipient of NZ based interest, so as to support itself The article above is still premised on NZ racing receiving the rewards of pokies, offshore racing and sports betting.

Things like marketing done through a shared service/partner, won't necessarily provide for any additional marketing on NZ racing. The 'partner' may simply see NZ racing as having no value, and spend its marketing budget on the promotion of sport and off-shore racing - further reducing interest in NZ racing. They will run the operation from the point of meeting their financial obligations to NZ racing funding, however they can best achieve that. Which will make growing NZ racing as a valued jurisdiction difficult, and therefore the growth available to NZ racing will be limited to whatever is defined in a 'partnering' agreement. So just more of the same.

I think the way forward is to operate with a focus heavily on the promotion and value available on NZ racing coupled with an effort to bring NZ racing to a level where punters can have confidence in what they get. i.e. focus on bringing customers to NZ racing so that the growth is available by attracting new customers to it.

By opening up the marketplace to other operators, NZ TAB would not be going it alone or trying to work completely against the corporates. Each would offer something for the various types of punters, and each would be contributing to the revenues of NZ racing.




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