An the ACT TAB become the mouse that roared. With the end of the arrangement with pooling arrangement with Victoria looming, the ACT appears it will have to grovel to NSW to get a pooling arrangement. But the ACT is not without some ammunition, albeit highly risky stuff.
Without a pooling arrangement ACTTAB, according to Professor Dennis Pearce’s report, will not be viable under present circumstances.
First to background.
TABs in Australia turn over nearly $9 billion a year (a little under the defence budget). State Governments take about $900 million or 10 per cent, handing some of that to the racing industry. About $450 million (5 per cent) goes in overheads. The remaining 85 per cent goes back to punters. The betting pool on each race is divided this way and the return to punters is calculated (italic) after (end italic) each race is run (unlike bookies).
The ACTTAB has only 1 per cent of the Australian total.
For the whole thing to work the states have to agree to a cartel. They have to agree not to poach each others’ customers by offering a greater return to punters.
The big betting syndicates can beat the 15 per cent government-overheads grab with superior knowledge of horses’ form and so on. They might earn one or two per cent. The mass of mugs pay for this by getting much lower than 85 per cent return on average.
Until July 31, the ACT will remain linked to the Victorian pool (which includes South Australia, Western Australia and Tasmania). The dividend it pays on any particular race is worked out by dividing 85 per cent of the money bet on that race (in all those states) among the winning tickets.
After that Victoria cuts us adrift, the ACT pool will comprise only the money placed on the ACT TAB. On some races that can be a quite small amount, say $1000. If a big punter then puts on a further $1000, the pool goes to only $2000. The big punter at most can win 85 per cent of $2000 (which is $1700 which is odds of less than 2-1). So the big punters will desert the ACT unless it is linked into a bigger pool.
That’s the background.
What if the ACT were to say, we will reduce the government-overheads take from 15 per cent to say, 10 per cent.
That would make things more attractive for big and medium punters, especially if they were poached gradually. They would see ACT dividends being posted higher than elsewhere and move their 008 telephone accounts to the ACT.
The ACT is in a position to do this because it only has to poach 1 per cent of the Australian turnover to double its turnover. The bigger states cannot increase their market share so dramatically.
Moreover, the other states may be inclined to let the ACT get away with it because a loss of 1 per cent may be hurtful for the other states, but it would be preferable to them being forced to reduce their take to match the ACT reduction, which could be as high as 3 per cent.
From the ACT’s point of view it is a gamble: the gamble being that you get enough medium or large telephone bettors to come on board to make up for the lower percentage take. Instead of taking 15 per cent of $100 million, it would take 12 per cent of per cent of $140 million.
It cannot go much below 12 per cent without eating into money it gives the racing industry or overheads.
The other gamble is in the sort of punters the ACT attracts to get the extra overheads. If they are the smart punters who pick more winners than the Australian average, then the ACT dividend (even at an 88 per cent return) might be lower than the dividend elsewhere (even though they have an 85 per cent return). If that happens these punters will desert the ship and the ACT will be worse off.
The VITAB fiasco shows that the big states are very concerned about a leakage of revenue from the cartel. VITAB was why Victoria cut us adrift in the first place. NSW is also insisting the ACT ends its VITAB deal before it will allow the ACT to link with the NSW pool.
The fear over VITAB can be exploited by the ACT. The ACT itself can become a VITAB-style operation on the Australian mainland.
In short, the ACT can blackmail NSW into letting us into their pool or face an undercutting VITAB-style operation on its doorstep.
There is some irony in the ACT Government doing that, but these are desperate times.
My guess is that after a week or two of the NSW Liberal Sports Minister, Chris Downy, holding out to make the ACT Labor Government look silly, NSW and the ACT will come to some sensible pooling arrangement. They will do this because their powerful racing constituents will make life hell if they don’t.
None the less, the whole episode illustrates how fragile the government-run cartel is in these fast-moving times of 008 numbers, computers, electronic transfers of money. The cartel is made more fragile by the awesome amounts of money at stake. There is $9 billion a year slopping about in the TAB pool. Yesterday it was VITAB seeking some leakage. Today it is a desperate ACT Government. Tomorrow it will be a privatised Victorian TAB or someone else. Eventually, the cartel will crack.