Gambling related articles
Mark Read's opinion on the issue of betting exchanges
January 2005
Our view - Australia's Wagering Future Needs Critical
Revamp, says Read
(Article reprinted by kind permission of Mark
Read's ozeform.com)
Australia's unique wagering model, which served the
racing industry, government, betting operators and
punters well for 25 years has been under considerable
stress in the past decade and may not be sustainable
in the future. In a hard-hitting commentary on the
future viability of Australian wagering, Australia's
biggest corporate bookmaker Mark Read said:
Totalisator betting is becoming too expensive for
the average punter because of the massive deductions
taken out by TABs. Market share of racing, which is
already in decline overseas at the expense of sports
betting, will diminish dramatically in Australia unless
urgent steps are implemented to give the consumer
a better return.
Read, who has 30 years' experience as a rails and
corporate bookmaker, made the comments as debate increases
in the lead-up to the Betting Exchange Task Force
report being delivered at the Australian Racing Ministers'
Conference.
He said that while racing had a virtual monopoly
for decades as a gambling medium, the proliferation
of gaming machines in Australia in the 1990s, resulted
in stagnant race wagering growth despite a high growth
gambling market. This was brought about by factors
including high TAB commissions, limited introduction
of appealing betting products; lack of initiatives
to attract younger players and an explosion in head-to-head
sports betting which attracted miniscule deduction
rates compared with that of race betting.
Read said that while Australian TABs posted increases
in turnover and revenue last year after a long period
of stagnation, if Governments and racing authorities
placed unreasonable constraints on a particular type
of betting product or betting provider, this would
simply drive the betting offshore and diminish the
opportunities for Australian racing. "With globalisation
and the rapidly expanding Internet wagering medium
any punter is able to access service providers worldwide.
It is necessary for the whole industry (racing and
wagering) to address its approach to the new technologies,
new market conditions, new forms of competition to
position itself as a growth industry for the future,"
he said. "The industry needs to be internationally
competitive and be prepared for the incursion of offshore-based
wagering providers. The world has changed from the
80's and even the 90's. The Australian wagering model
is redundant," he added.
Read said Britain had recognized the global opportunity.
It began restructuring the industry in October 2001
by dropping a 35-year-old taxation regime imposed
on consumers. In its place a negotiated 15% tax was
introduced and applied to bookmakers' gross revenue.
Part of this negotiation was an undertaking by major
English bookmaking companies to repatriate their operations
from offshore jurisdictions like Gibraltar, Malta,
the Channel Islands and the Caribbean. The outcome
was an increase in turnover and income of 50% across
the board and a net increase for government revenue.
"Instead of putting their heads in the sand and
signalling alarm as is the current situation within
certain quarters of this country's racing industry,
Australian racing and government regulators should
embrace and become a host to the fastest growing global
commodity market – sports wagering," Read said. "Like
Britain, Australia has a heritage of legal wagering
best practice with the world's biggest market place
in our time zone. The question must be asked -why
would State and Territory Governments turn their back
on such a great export and development opportunity?".
Read said this lack of foresight did not ensure the
long-term viability of the racing and wagering industries
in this country. He said the solution was to licence
Australian service providers and expand the market
through competition…. and do it immediately! He said
competition was good for the industry. "As the number
of industry players grow, the number of operators
grow, the racing industry benefits and importantly
the needs and wants of the consumer, the forgotten
stakeholder in these matters are satisfied."
Read said that betting exchanges, which are now turning
over billions of dollars worldwide, attract a different
customer profile to that of other users of gambling
web sites. Attracted by the low commissions associated
with betting exchanges, characteristics of these users
are:-
They invest larger amounts per transaction
An interest in trading including the taking of opposing
positions in relation to the outcome of betting events
– to guarantee themselves a small marginal profit,
regardless of the outcome of the betting event
They are not concerned by the object they are betting
on
Read said that in effect, these traders were arbitrageurs
who mopped up excess liquidity in a global marketplace
in exactly the same manner as their counterparts in
the financial, stock market and futures exchanges.
"Many traders are price and margin motivated and trade
successfully without knowledge of the sport, financial
market, race or whatever the subject of the bet exchange
might be," Read said. "It is especially this last
factor that makes them a new class of player on the
betting scene and one that has the capacity to radically
grow the global betting market in volume - without
cannibalizing the revenues generated by the better
known and currently more popular forms of online gaming
and wagering. "This will invariably increase the interest
in Australian racing on a global scale. Customers
of Bet Exchanges are not in the main recreational
punters."
An example of how people are attracted to such exchanges
can be gauged by the phenomenal growth of UK licensed
company betfair.com, which although only three years
old has a projected turnover this year of 7 billion
pounds. "The Betfair model obviously satisfies consumer
needs," Read said. "Every professional punter, if
not already, will be a player. "Betfair are not only
operating on Australian racing but are also offering
markets on every AFL match this season. Australian
companies have lost first mover advantage and Betfair
are reaping the rewards of what is driven by consumer
demand. Betfair are taking the proceeds back to the
United Kingdom. "
It is illustrative to see the reaction to the Australian
racing industry, as seen through the eyes of the consumer.
The following quotes are taken from P Lawrence, of
Byron Bay, in a recent letter to the Sydney Morning
Herald. When referring to the bet exchange industry
forum held at Randwick in early April, Mr. Lawrence
had the following to say:
"The most extraordinary comment came from TAB Chief
Executive (wagering) Peter Kadar."
'What is critically needed is for the industry as
a whole to immediately launch a consolidated campaign
against betting exchanges.'
"Does Peter expect punters to join in this
consolidated campaign? The problem for punters is
that over the past 10 years an unlikely alliance has
been struck between race clubs, the media, bookmakers
and the TABs. The aim of this alliance is to maintain
the status quo and in the process screw the punter
as fast as they can. Now an even medium for betting
has emerged that God forbid may give the punter an
even break ….. "….The media almost never mentions
that the TAB takes millions off punters each year
by rounding down not just to the nearest five cents
but to the nearest ten. If the right dividend is $1.99
the punter gets $1.90."
"How is it that no one cares less about the punter
when he makes up 95 per cent of people involved in
racing? Punters keep racing going. Without the punter
there would be no TAB. Now, after years of being ripped
off, the punter is about to fight back through a new
way to bet," Mr Lawrence wrote.
Read said the internet audience was skewed towards
the under 35's, the majority of whom hailed from the
high socio-economic groups and were most likely to
be receptive to innovative forms of betting such as
those found on the betting exchanges. The experience
of the stock market and E-trade was evidence of this
trend.
Read said that while critics of betting exchanges
argued that by allowing users to both back and lay
bets encouraged fraud, the fact that they allowed
for completely transparent markets, and sure-fire
audit trails, mean they were actually helping to highlight
and prevent fraud. In the case of Betfair, they are
on record as saying:
"We conduct tests on a daily basis, not just to
look at possibilities such as a trainer laying his
own horse, but also to counteract credit card fraud,
money-laundering and all the other issues, which are
inherent risks within the site unless they are being
monitored. We know who has won every bet, how that
bet has been placed and exactly when that bet has
been placed, arguably in a way which makes us more
secure than the conventional cash bookmaker."
Read said the time had come for State and Territory
Governments to level the playing field. His company,
IASbet, and others, had the ability to operate betting
exchanges with all the necessary checks and balances
in place to ensure the outcomes claimed by English
operators are achieved here. "Failure to recognize
this opportunity will invariably mean that bookmakers
will move offshore, where this type of highly regulated,
profitable and customer centric activity is allowed
to flourish for the benefit of all concerned," Read
said. He cited the words of British Racecourse Association
Chairman Keith Brown when speaking of the British
Horseracing Board‘s decision to allow on-course bookmakers
to use betting exchanges:
"We have to accept reality in life, we can't be
dinosaurs. There may be a lot of things we don't like,
but that's not necessarily a reason for fighting change.
We have got to embrace change and work with it."
Read said the bottom line was that it would be the
consumer who would determine what initiatives failed
or succeeded in Australia, and provided service levels
were equitable, the operator providing the biggest
returns to players would always be the most popular.
"The punters will vote with their feet – and unless
something is done to ensure they get a better return
- the Australian wagering industry will be the losers,
to the detriment of the massive industry and tens
of thousands of people that rely on it," he added.
Note: If you are interested in opening an online
betting account with Mark Read's IASbet, click
here
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