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The gambling industry in Australia is valued at A$18 billion and is estimated to be growing at a rate of 9% annually. Australian adults on average spend about A$1,100 a year on gambling, with slot machines accounting for 61% of total spend, horse racing around 14% and lotteries 10%.
On a state by state basis, the average amount spent per adult each year on gambling in New South Wales is $1 200; South Australia, $800; Victoria, about $1 100; and in Western Australia between $300 and $400.
The ending of Tabcorp's domination
As things stand, protectionist state legislation, designed to protect government owned TABs from competition, prevents Australia's bookmakers from directly competing against the privately owned Tabcorp. Moreover, Tabcorp continues to exercise an outright monopoly on betting agency outlets in the states of Victoria and New South Wales, alongside tight control of Sky Channel, a national horse racing television network and radio outlets.
Nonetheless, change is afoot, and the stranglehold which Tabcorp has long had on the Australian betting market is under threat. Two events in particular, are acting as catalysts for change; firstly, the granting of an Australian betting licence to the world's largest online betting exchange Betfair by the state of Tasmania, and secondly, the completion of the merger between Unitab and Tattersalls.
In November 2005 the Tasmanian government announced a deal to licence Betfair in the state. The deal will see Tasmania receive AU$5 million up front and is projected to pay Tasmania about $40 million per year. On July 6 in a ground breaking move Racing Victoria approved the use of Victorian race fields by the world's largest betting exchange Betfair.
Research into betting exchanges operating in the UK, supports the notion that the longshot bias ( where longshots are consistently overbet relative to favorites) is positively related to the transaction costs faced by bettors in acquiring information concerning the true probabilities of runners in a horse race. Betting exchange markets are characterised by lower transactions and information costs, and have a tendency to be more informative, thus providing the punters that trade on them with a more realistic assessment as to the chance of longshots. Accordingly, the favourite longshot bias is typically diminished, if not eroded. Such transparency facilitates arbitrage, through ensuring that different prices do not obtain on different markets.
The proposed merger between Australia's largest lottery operator Tattersalls and Unitab was approved by Unitab shareholders on September 15 2006. It is believed that the new entity, which will have operations in every state, will aggresively target Victorian betting markets that are currently dominated by Tabcorp. The new company will also compete with Tabcorp when the Victorian wagering licences come up for renewal after 2012.
The anti-betting exchange brigade
The anti-betting exchange brigade have not gone away, but their cause is looking more forlorn. Some Australian states, such as Queensland, have sought to outlaw betting exchanges, even though it is most unlikely that they will succeed in preventing punters from using the exchanges. The Western Australian Racing MInister Mark McGowan recently introduced a Bill seeking to impose a $10,000 fine on punters who use Betfair in that state. In his second reading speech he said: "Betting exchanges present a danger to the success of the racing industry and this government will not stand by and let this threat go unchallenged." Strong words, but tell that to a punter who is looking to get the best price on the favourite for the Melbourne Cup!
Bookmakers embrace technology
In order to compete with Tabcorp the traditional bookmakers have moved to embrace internet and mobile technology. Most recently, Centrebet announced plans to launch a mobile betting service, whilst the Victorian Bookmakers Association have launched an internet platform, through which bookmakers licenced in the state can advertise their services.
On 6 August 2004 International All Sports Limited merged with fellow Australian bookmaker Canbet Limited, under the terms of which, Canbet shareholders received 1 IAS share for every 25 Canbet shares they held. The Northern Territory Racing Commission subsequently awarded a sports bookmaking licence to Canbet, allowing the company to operate a 24/7 internet and telephone race and sports betting service.
In 2005, IAS also entered into a Heads of Agreement to acquire 76% of Austote Pty Ltd ("Austote"), a company authorized by the Norfolk Island Gaming Authority to accept bets as a bookmaker or on a pari-mutuel basis, in respect of race meetings and sports betting.
Under the terms of the agreement, signed with PH Holdings Ltd and Austote Pty Ltd, IAS will provide an initial sum of $250,000 and a further amount of $250,000 after twelve (12) months in exchange for 76% of the shares of Austote Pty Ltd. Further IAS will have an option to acquire the balance of the shares in Austote within three years, at a valuation to be determined at the date of acquisition.
Interestingly, the Norfolk Island based company operates to a commission rate of between 2 and 5% and allows its customers to lay favourites in particular races. As a "totalisators licensed by a state or territory government", it is also permitted to operate on races run in other states, without paying taxes or product fees outside of its own state and is free from the advertising restrictions placed on bookmakers and other wagering operators in Australia.
Betchoice.com. fully licensed and regulated by the NSW Department Of Gaming and Racing and the NSW Thoroughbred Racing Board is the online betting site of legendary bookmaker Colin Tidy; who has been licensed by the Australian Jockey Club (AJC) and Sydney Turf Club (STC) for over 30 years.
Sportsbook.Com is the online betting site of Bill Hurley Bookmaking Pty Ltd, the first Corporate Bookmaking firm to be licensed by the New South Wales Government and Racing New South Wales. Bill Hurley, Managing Director, was a successful Interstate Rails bookmaker at Australian Jockey Club and Sydney Turf Club racecourses for over 30 years.
In February 2001 Sportingbet entered the Australian betting market through the acquisition of The Number One Betting Shop of Australia, for an initial sum of £11.6 min. They subsequently renamed the site Sportingbet Australia; it is estimated that it is currently achieving turnover in the region of $200m.
Domebet Sports & Racing is the registered trading name of Domebet Pty Ltd & Peter Coster's Doublebet. Domebet Sports & Racing was established to offer clients a full range of Sports & Racing betting products.
Centrebet based in Alice Springs, Northern Territory was the first bookmaker to go online in the Southern Hemisphere. The company was acquired by the SportOdds Group in 2003 for the sum of AUD$46.55 million and merged with SportOdds.com and SuperOdds.co.uk. It debuted on the Australian Stock Exchange in July 2006 at a slight premium to its issue price, hitting the boards at $2.03 at 1100 AEST - up three cents on the $2.00 issue price. The company, which recently announced that it had an active 60,000 customers in the 12 months to June 30 2006 plans to launch mobile phone gaming and wagering products by the third quarter of fiscal 2007.
The Western Australia based Best Bookies internet platform offers punters prices and odds from a range of licensed WA bookmakers, although a spokesperson for the site has been quoted as saying; "We're also open to participating by bookmakers from other states."
More recently the Victorian Bookmakers Association have launched a "BookiesOnline" internet platform, through which Victorian Bookmakers can offer fixed odds, best fluctuation, starting price, starting price insurance and tote odds to their online clients.
The walls are coming down
The notion that Australian punters only ever bet within their state boundaries is laughable; somewhat akin to the notion that punters in European states that operate gambling monopolies do not bet with the likes of Ladbrokes and William Hill in the UK. Inter-state gambling is a reality and over the next couple of years is likely to grow considerably, driven by the arrival on the Australian shore of more transparent betting markets, alongside low cost trading systems that will ensure that transacation costs are kept to a minimum. The big loser, unless it is prepared to embrace change, is Tabcorp.
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