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									Review of the Electronic Gaming
Machine, Club Keno and Wagering
Licences and Funding Arrangements
for the Racing Industry Post-2012
Wagering Licence Arrangements
Post-2012 Issues Paper


Gambling Licences Review
Office of Gaming and Racing
March 2006
Wagering Licence Arrangements Post-2012




Overview

As part of the Review of Electronic Gaming Machine, Club Keno and Wagering
Licences and Funding Arrangements for the Racing Industry Post-2012, the
Government is inviting submissions from all interested parties to a series of Issues
Papers.

This Issues Paper covers the wagering licence arrangements post-2012 and is intended
to facilitate submissions from interested parties.

The introductory section outlines:
•     the scope, timetable and process for the overall Review of Electronic Gaming
      Machine, Club Keno and Wagering Licences and Funding Arrangements for the
      Racing Industry Post-2012;
•     the process and timetable for making submissions; and
•     the approach to making submissions publicly available.

This Issues Paper then presents a range of information on the current wagering licence
arrangements and lists a number of issues and questions to guide the preparation of
submissions.

Interested parties should read this Issues Paper in full before preparing and forwarding
submissions.

Any queries regarding the Review, this Issues Paper or the submission process should
be directed to:

Director
Gambling Licences Review
Office of Gaming and Racing
Department of Justice
PO Box 18055 Collins Street East
Melbourne Vic 8033
Australia
(03) 9651 4926

or send them by email to glr@justice.vic.gov.au.

This document is not an invitation to apply for a wagering licence or any right to
provide wagering in Victoria.

The State and the Minister give no warranty (whether express or implied) as to
the accuracy, completeness or otherwise of any information or opinion (including
any opinion on the Gambling Regulation Act 2003) whether provided in this
document or any documents relating to the Gambling Licences Review.




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Wagering Licence Arrangements Post-2012




The Review of the Electronic Gaming Machine, Club Keno and
Wagering Licences and Funding Arrangements for the Racing
Industry Post-2012.

The Minister for Gaming announced in July 2004 the broad scope, approach and
timetable for the Review of Victoria’s electronic gaming machine, club keno, wagering
and lotteries licences. The Minister indicated that all stakeholders, including the
community, would be provided with the opportunity to contribute to the Review.

Details of the overall approach to the Review of gambling licences can be found on the
Department of Justice website at
http://www.justice.vic.gov.au/CA2569020010922A/page/Gaming+and+Racing-
Gambling+Licences+Review?OpenDocument&1=0-Gaming+and+Racing~&2=0-
Gambling+Licences+Review~&3=~.

The Review is being conducted in two phases. The review of the public lotteries
licence commenced in July 2004 and, in November 2005, the Minister for Gaming
invited a short-list of interested parties to apply for a ten-year public lotteries licence
from July 2007. Information on the review of the public lotteries licence and the public
lotteries licensing process can also be found on the Department of Justice website.

On 4 January 2006, the Minister for Gaming announced the commencement of the
second phase which covers the Review of Victoria’s electronic gaming machine, club
keno and wagering licences and racing industry funding arrangements post-2012. The
Minister also released an Information Paper setting out the broad scope of the review,
the process for submissions and consultations, the broad timetable and the range of
issues the review will be considering. The Information Paper can be found at
http://www.justice.vic.gov.au/CA2569020010922A/page/Gaming+and+Racing-
Gambling+Licences+Review-
Review+of+EGM+Keno+and+Wagering+Licences?OpenDocument&1=0-
Gaming+and+Racing~&2=0-Gambling+Licences+Review~&3=0-
Review+of+EGM+Keno+and+Wagering+Licences~

The Review will be directed by a Steering Committee, chaired by the Secretary of the
Department of Justice, Penny Armytage. A Gambling Licences Review project team
has been established in the Office of Gaming and Racing, Department of Justice.

The Review, having regard to the:

•    Government’s statement of principles to guide future gambling policy and
     legislative development;
•    Trends and developments in the gambling sector;
•    The economic, social and community benefits and costs of the current and
     alternative licensing arrangements;
•    The transition and other issues involved in the implementation of new or revised
     licensing arrangements; and


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Wagering Licence Arrangements Post-2012



•    Government’s commitment to a viable and growing racing industry;

is requested to review and provide advice on:

•    The electronic gaming machine and wagering licensing arrangements post-2012
     and the broad approach and timing to implementing these arrangements;
•    The arrangements for the provision of Club Keno;
•    The funding of the racing industry post-2012; and
•    The broad financial and regulatory arrangements for the proposed licensing
     arrangements.

In assessing the benefits and cost of the current and alternative licensing arrangements,
and associated regulatory framework, the Review will give foremost consideration to
the Government’s principles for guiding policy and legislative development. The
Government’s principles to guide future gambling policy and legislation are:

•    developing and reinforcing the Government’s commitment to responsible
     gambling through measures that assist and protect problem gamblers and those at
     risk of becoming problem gamblers, their families and the wider community;
•    developing and maintaining the State’s commitment to the highest standards of
     probity for gambling service providers;
•    accepting gambling is a valid activity for many Victorians who are entitled to
     expect ongoing high standards of service, transparency, and accountability from
     the gambling sector;
•    ensure that the legitimate financial benefits of gambling (both private and public)
     are transparent, appropriately recognisable and fairly distributed to the Victorian
     community;
•    that to the extent possible consistent with the other principles, gaming service
     providers operate in a competitive environment; and
•    establishing proper consultative processes to ensure that appropriate information is
     given to, and input is received from, the wide variety of persons interested in
     gambling including stakeholders, affected parties and, to the widest extent
     possible, the broader Victorian community.

     (Source: Minister for Gaming, Second Reading Speech, Gambling Regulation Bill,
     Legislative Assembly, 6 November 2003)

The Review will advise how these principles can be translated into the future licence
structures and associated arrangements.

While the Review will not consider specific problem gambling measures, which are
under constant review by the Government, it will report on the post-2012 licensing
structures and associated arrangements that best address the Government’s objectives of
responsible gambling, accountability and transparency.




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Wagering Licence Arrangements Post-2012



In undertaking the review of electronic gaming machine licence arrangements, the
Minister for Gaming has requested that the Review have regard to the:

•       Government’s position of 27,500 electronic gaming machines outside the casino;
        and

•       Government’s in principle support for a minimum of 50 per cent of electronic
        gaming machines within clubs.

Key Review Dates
The following are the key dates and provisional key dates in the timetable for the
Review of Victoria’s electronic gaming machine, club keno and wagering licences and
racing industry funding arrangements post-2012:

    Release of Information Paper                                       4 January 2006

    Release of Issues Papers                                        Early March 2006

    Submissions Due                                                       4 May 2006

    Public Consultations: Gaming Machine
                                                       May – July 2006 (Provisional)
    Licence Structure Arrangements

    Public Report on Gaming Machine
    Public Consultations and Release of                 September 2006 (Provisional)
    Submissions

    Announcement of Post-2012 Licence
    Structures and Funding Arrangements
                                                                    2007 (Provisional)
    and the Timing and Approach to
    Awarding of Licences



Issues Papers
To assist public submissions to the Review, a number of Issues Papers have been
prepared. This Issues Paper covers the review of the wagering arrangements post-
2012.

Separate Issues Papers have been released on:

•         Gaming Machine Licence Arrangements Post-2012;

•         Club Keno Arrangements Post-2012; and

•         Funding Arrangements for the Racing Industry Post-2012.


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Wagering Licence Arrangements Post-2012



All the Issues Papers are available on
http://www.justice.vic.gov.au/CA2569020010922A/page/Gaming+and+Racing-
Gambling+Licences+Review-
Review+of+EGM+Keno+and+Wagering+Licences?OpenDocument&1=0-
Gaming+and+Racing~&2=0-Gambling+Licences+Review~&3=0-
Review+of+EGM+Keno+and+Wagering+Licences~,

or via email to glr@justice.vic.gov.au,

or by writing to the Office of Gaming and Racing at:

Gambling Licences Review
Office of Gaming and Racing
Department of Justice
PO Box 18055 Collins St East
Melbourne Victoria 8003
Australia

This paper provides an overview of, and presents information on:
•      the current Victorian wagering licence;
•      wagering and the racing industry;
•      regulation of wagering and racing;
•      sports betting;
•      wagering products and wagering providers;
•      expenditure on wagering and sports betting;
•      wagering licence and financial arrangements;
•      wagering products, their approval and distribution;
•      wagering participation by Victorians; and
•      responsible gambling.

This Issues Paper poses a series of issues and questions as a guide for submissions from
interested individuals and organisations. Interested parties can also raise other issues or
provide information which they consider relevant to the scope of the Review.

Given the links between the current wagering licence, one of the gaming operator’s
licences and the funding arrangements for the Victorian racing industry, it is
recommended that interested parties, in preparing submissions to this Issues Paper,
familiarise themselves with the Issues Papers on the racing industry funding
arrangements post-2012 and the gaming machine licence arrangements post-2012. In
particular, interested parties may wish to consider making submissions which combine
their responses to all or selected Issues Papers.

In any event, it is important that submissions contain, where possible, relevant facts,
figures and data and other documents to support the views expressed.



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Wagering Licence Arrangements Post-2012



Lodgement of Submissions
The Review will accept submissions from all interested parties on the issues relevant to
the review of post-2012 wagering licence arrangements as outlined by the Review’s
terms of reference. Submissions will be accepted via email at glr@justice.vic.gov.au or
can be posted to:

Gambling Licences Review
Office of Gaming and Racing
Department of Justice
PO Box 18055 Collins Street East
Melbourne Victoria 8003
Australia

Submissions are due by 4 May 2006.

All responses to this Issues Paper will be regarded as formal submissions and treated
accordingly. The Review will publish all written submissions received on the
Department of Justice website unless it considers the publication of all or part of the
submission is not in the public interest because of the inclusion of commercial-in-
confidence material or for some other reason. Anyone wishing to make a submission in
whole or part in confidence should contact the Gambling Licences Review before doing
so.

Each submission from an individual will be published with the individual’s name unless
the author has clearly indicated they do not give permission for their name to be
published. Submissions containing private information or content which may be
regarded as defamatory or vilifying will not be published.

Queries
Any queries regarding the Review, this Issues Paper or the submission process should
be directed to the Director, Gambling Licences Review at the above address, telephone
number (03) 9651 4926 or forwarded by email to glr@justice.vic.gov.au.

Where the responses to these queries are considered to be of assistance or relevance to
other interested parties, the Gambling Licences Review will, after relevant
consideration, publish its response on the Department of Justice website.

Consultations
Following the receipt and consideration of the submissions in response to this Issues
Paper, the Steering Committee and Gambling Licences Review project team may
schedule discussions with interested parties who have lodged submissions.

A list of the organisations and individuals who are consulted on their submissions will
be posted on the Department of Justice website.

As outlined earlier, a separate public consultation process will be conducted in relation
to submissions on the Issues Paper on gaming machine licence arrangements post-2012.



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Wagering Licence Arrangements Post-2012



The Current Victorian Wagering Licence
The current Victorian wagering licence is held by Tabcorp Holdings Limited (Tabcorp)
and expires on 15 August 2012.

The granting of this licence in 1994 coincided with the privatisation of the former
Totalisator Agency Board (TAB), the public float of Tabcorp and the issuing of a
wagering and gaming licence by the Victorian Government under the Gaming and
Betting Act 1994. A condition of this licence was that Tabcorp and the Victorian racing
industry establish an agreement concerning the financial support of Victoria’s racing
industry and the formation of an unincorporated joint venture. In 1994 the Victorian
Racing Industry (VRI) and Tabcorp formed an unincorporated joint venture for the
operation of a wagering and gaming business in Victoria. The joint venture agreement
is in place until August 2012.

In 2003, the Gaming and Betting Act 1994 was repealed and its provisions subsumed
into a new act, the Gambling Regulation Act 2003 (the GRA). Section 4.3.1 of the
GRA authorises the holder of the wagering licence to conduct wagering and approved
betting competitions. “Wagering” permits the holder to conduct parimutuel betting on a
horse race, harness race or grey hound race. Parimutuel betting pools all bets on certain
outcomes and, after the deduction of commissions, distributes winnings proportionally
to the amount of money wagered on a particular successful outcome. Approved betting
competitions allow the licence holder to accept fixed odds or parimutuel wagers on any
event or contingency relating to a horse race, harness race or greyhound race, any other
race, fight, game, sport or exercise or any other event or contingency of any kind. Each
approved betting competition requires Ministerial approval and may not be conducted
on a totalisator on a wagering event, played on a gaming machine, a club keno game, if
it is offensive or contrary to the public interest, or an interactive game.

The current wagering licence structure in Victoria is unique in that the GRA specifies
that the wagering licence and the Chapter 4 gaming licence (one of the two current
gaming operator licences in Victoria) are to be held by the same person. The GRA also
gives the Chapter 4 gaming licence holder the authority to operate and promote club
keno games in Victoria.

Continuing a commitment made under the original legislation (the Gaming Machine
Control Act 1991), the GRA outlines the entitlement of the former licensee on the grant
of new gaming and wagering licences. Section 4.3.12(1) of the GRA states that on the
grant of new licences, the person who was the holder of the licences last in force (the
“former licences”) is entitled to be paid an amount equal to the licence value of the
former licences or the premium payment paid by the new licensee, whichever is the
lesser. Section 4.3.12(2) states that the person who was the holder of the former
licences is entitled to the payment under sub-section (1) whether or not the person was,
or was entitled to be, an applicant for the new licences. Section 4.3.12(3) states that
sub-section (1) does not apply if the holder of the former licences has been wound up.

In 1994, Tabcorp paid $597 million to the State for the wagering and the gaming
licences.




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Wagering Licence Arrangements Post-2012



The GRA also specifies that the Governor in Council must not issue a new licence until
he is satisfied that the applicant has entered into, or made a binding offer to enter into,
arrangements with VicRacing Pty Ltd (VicRacing) and arrangements with Racing
Products Victoria Pty Ltd (Racing Products) that, in the opinion of the Minister, after
consultation with the Commission, are no less favourable to VicRacing and Racing
Products than those last in force between a licensee and VicRacing or Racing Products.
Further details on the racing industry arrangements are outlined in the separate Issues
Paper on racing industry funding arrangements post-2012.

Restrictions on shareholding interests in the wagering licence and cross-
ownership of gambling licences
The GRA restricts the extent to which any one person can have a shareholding interest
in the holder of the joint wagering and gaming licence by prohibiting any person from
having a voting power of more than 10 per cent in the licensee (section 4.3.20).

Sections 4.3.28 and 4.3.29 of the GRA also place restrictions on cross-ownership,
control and influence between the joint wagering/gaming licence and other gambling
industry licences and approvals. For example, the wagering licensee is in contravention
of the GRA if a director of the licensee or an operator is a director of, or has a voting
power of 5 per cent or more in the holder of a casino licence, a person that holds another
gaming operator’s licence or another person (other than a subsidiary of the licensee) that
holds a public lottery licence. This provision essentially prevents the holder of any
other major gambling licence from holding or having a significant interest in or
influence over the wagering/gaming licence.

There are similar restrictions on associates, subsidiaries and related bodies corporate of
the wagering/gaming licensee from holding other gambling licences or being listed on
the Roll of approved Manufacturers (see section 4.3.29).

Wagering and the Racing Industry
The current wagering licence arrangements in Victoria reflect the historical
development of the racing industry and wagering in Victoria and the inherent nexus
between racing and wagering.

Racing in Victoria has been conducted since the founding of the original settlement in
the 1835. Wagering on these races has evolved from simple wagers between watchers
of the race, to a multi billion dollar industry. Some of the key developments in the
wagering industry have been:

•      The Government licensed on-course bookmakers in 1906 in a largely
       unsuccessful effort to stamp out illegal bookmaking, particularly off-course SP
       (Starting Price) bookmakers who operated out of houses or shops.

•      The automated totalisator, a machine for automatically calculating parimutuel
       pool sizes and odds from the various wagers taken by separate operators, was
       invented in Australia and first introduced on to race courses in Victoria in the
       1920s.



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Wagering Licence Arrangements Post-2012



•       Following the findings of a Royal Commission into off-course betting, the
        Victorian Government established the Totalisator Agency Board (or TAB) as a
        statutory body in 1960 to provide off-course betting venues as a measure to
        combat illegal bookmaking.

•       The establishment of the off-course totalisator in Victoria was soon followed in
        other States; Queensland in 1962 and New South Wales in 1964 with the
        Northern Territory being the last jurisdiction to establish an off-course TAB in
        1985 (linked to the New South Wales TAB).

•       In 1985 the TAB was authorised to conduct sports betting.

•       In 1994 the Victoria TAB was privatised via a public float and a licence to
        operate a parimutuel wagering system and approved betting competitions was
        granted to the new public company, Tabcorp, for 18 years.

•       Other States and Territories also privatised or sold off their TABs which has
        subsequently led to a consolidation in the wagering sector. New South Wales
        privatised its TAB in 1998 (TAB Limited), as did Queensland in 1999 (UniTAB
        Limited). In 2004 Tabcorp acquired TAB Limited, while UniTAB Limited
        (UniTAB) acquired the South Australian TAB in 2002 and the Northern
        Territory TAB in 2000.

Payments for racing product and wagering revenues have been, and continue to be, the
principal source of racing industry revenue. Prior to the establishment of the TAB in
1960, a proportion of the revenues from on-course book makers and totalisators was
paid to the racing clubs in order to fund prize money and infrastructure developments.
With the inception of State and Territory TABs, the returns to the industry increased
and these have led to a larger and more stable industry. In Victoria, the racing industry
has supported, and has been an active participant in, a number of these developments.

Regulation of Wagering and Racing
The historical nexus between the racing industry and wagering is also reflected in the
legislative and regulatory environment.

The overall structure of wagering and the racing industry is governed by two pieces of
legislation – the Gambling Regulation Act 2003 and the Racing Act 1958 – with the day
to day operation and oversight of the racing industry undertaken by the authorised
controlling bodies which licence and supervise industry participants and provide
support and direction for the racing clubs.

Gambling Regulation Act 2003
The GRA allows for the issuing of a wagering (and gaming) licence, establishes the
Victorian Commission for Gambling Regulation (VCGR) as the regulator of the
wagering licence, generally regulates the operation of totalisator and fixed odds betting
by the holder of the wagering licence, prescribes the taxation regime for totalisator and
fixed odds betting by the holder of the wagering licence, contains enforcement
provisions against illegal betting, restricts certain related activities (such as advertising),


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Wagering Licence Arrangements Post-2012



provides extensive enforcement provisions against unlawful betting and allows for
calcutta sweepstakes and other forms of minor gambling.

Racing Act 1958
The Racing Act 1958 (the Racing Act) legalises the conduct of race meetings and
related betting activities, provides for the licensing of racing clubs and racecourses,
provides for the regulation of bookmaking, establishes statutory controlling bodies for
harness and greyhound racing, authorises the incorporation of Racing Victoria Limited
(RVL) as the thoroughbred racing controlling body, and provides the right of appeal to
the Racing Appeals Tribunal against certain penalty decisions.

Racing Industry Bodies
The Racing Act restricts, under section 6, the authority to conduct race meetings in
Victoria to clubs registered by RVL (thoroughbred racing), Harness Racing Victoria
(HRV) and Greyhound Racing Victoria (GRV) and on a race course licensed under
section 24. Each of the three bodies is charged with controlling, developing and
promoting its respective racing code.

The HRV and GRV are established by the Racing Act and have their boards appointed
by the Governor in Council on the recommendation of the Minister. RVL is a
Corporations Act company and authorised by the Racing Act. Its shareholders are the
major racing clubs.

The Racing Act also establishes the Bookmakers and Bookmakers’ Clerks Registration
Committee, whose function is to register bookmakers and bookmakers’ clerks and to
generally regulate their activities. It has the power to suspend, deregister and fine
bookmakers and their clerks. The Board members are appointed by the Governor in
Council on the recommendation of the Minister.

The Racing Act also establishes the Racing Appeals Tribunal, whose function it is to
hear appeals against certain penalty decisions imposed by any of the controlling bodies
or their respective stewards. The Tribunal members are appointed by the Governor in
Council on the recommendation of the Minister.

The registered racing clubs licensed under section 24A(1) of the Racing Act are the
only clubs permitted to operate horse, harness or greyhound races in Victoria. Section 3
of the Racing Act defines a horse race as “a race in which horses compete but does not
include a harness race”. Section 1.3 of the GRA mirrors this definition. The impact of
this nexus is that the wagering licence is restricted to offering parimutuel wagering
products on races conducted by the authorised racing clubs. This prevents the wagering
licence holder expanding the scope of the parimutuel system to other forms of racing,
such as Arabian horses or quarter-horses.

The Minister can approve a betting competition to be conducted on a race meeting that
is not a horse race, harness race or greyhound race either at fixed odds or as a
totalisator, under section 4.5.1 of the GRA. It is also possible for permits to be issued
under the Racing Act (see description in Sports Betting below), which enable bets to be
placed with a bookmaker operating at the event offering fixed odds.


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Wagering Licence Arrangements Post-2012



Sports Betting
Wagering on sporting competitions is relatively new. In Victoria, the state-owned TAB
was authorised to begin conducting sports betting in 1985. Tabcorp was given an
authorisation to accept wagers on approved sporting competitions when it was granted
the wagering licence in 1994.

Section 4.3.1 of the GRA allows Tabcorp, as the wagering licensee, to operate approved
betting competitions. These primarily consist of bets on a range of sporting events, both
at fixed odds and parimutuelly. Betting competitions must be approved by the Minister.
To date, sports such as tennis, Australian rules football, soccer and basketball have been
approved for sports betting by the Minister under section 4.5.1 of the GRA1. Section
4.5.1(2) states that the approval must specify whether the betting competition is to have
fixed odds or be conducted on a totalisator. There is no limit on the number of events
the Minister can approve, but may be subject to conditions.

Sports betting is predominately conducted at fixed odds, as the approved sports are
often competitions between two contestants (whether they are teams or individual
players). However, parimutuel products are offered on some of the larger sports which
have a number of games in a weekend, such as the various football codes. The latest
available statistics2 on sports betting with Victorian providers indicates 60 per cent is
with bookmakers and around 40 per cent with Tabcorp.

In contrast to the legislated arrangements that are in place between Tabcorp and the
Victorian racing industry, there is currently no requirement for Tabcorp to require the
agreement of sporting bodies regarding the use of their sporting product as the basis for
wagering. At this point in time, only the AFL is known to have negotiated an
agreement with Tabcorp for revenue return and control over the use of its intellectual
property. It has also negotiated for control over the types of products offered and for
access to betting records for integrity purposes.

On 15 November 2005, the heads of Cricket Australia, the National Rugby League,
Australian Rugby Union, the Football Federation of Australia, Tennis Australia and the
PGA Tour of Australia announced the formation of the Coalition of Major Professional
Sports. The Coalition is seeking a regulatory regime in all states and territories to give
access to betting records, determine who is granted authorisation to accept bets on their
sports and requiring that product fees are payable to the relevant sports bodies.

The Victorian Government has indicated it supports the request by the Coalition of
Major Professional Sports for legislation to protect the integrity of sports and will seek a
national approach to this issue.




1
  Tabcorp’s website (www.tab.com.au/sportsbet/index.asp), advises it accepts wagers on Australian rules
  football, rugby league, rugby union, soccer, tennis, cricket, golf, basketball, motor sport, American
  football, baseball, yachting, boxing, athletics and special events such as the Commonwealth and
  Olympic games.
2
  Office of Economic and Statistical Research, Queensland Treasury ‘Australian Gambling Statistics
  2005’

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Sports Betting and Authorisations under the Racing Act 1958
Under section 4(1)(ii) of the Racing Act, bookmakers may accept bets on ‘betting
contingencies’ as approved by the Minister. Betting contingencies are defined in
section 3 as including ‘any event or contingency’. Under this authorisation, an
approved bookmaker can accept wagers on sporting competitions as long as the
bookmaker is at a race course (outside of meetings, a room is provided at Flemington
racecourse for approved bookmakers to accept wagers, with similar facilities planned
for Moonee Valley and Caulfield racecourses). The list of events that can be wagered
on is the same as those approved by the Minister under section 4.5.1 of the GRA for
approved betting competitions. Although it is not a requirement of either Act, a
consequential amendment of either list is undertaken as a matter of course when a new
sport is added to ensure that the lists are kept consistent.

Nine bookmakers have been issued with licences by the controlling bodies of racing to
conduct sports betting in Victoria. However, only four of these are currently active in
accepting wagers on sports.

Wagering Products and Wagering Providers
All States and Territories have a single wagering licence. This can be linked to the
historical development of racing and wagering in Australia and the attractiveness of
larger pools under parimutuel systems to gamblers as these provide a greater stability in
the expected returns.

As outlined previously, the privatisation of a number of State TABs led to the
consolidation of the wagering sector, with Tabcorp and UniTAB holding more than one
State or Territory wagering licence. Tabcorp currently has the Victorian and New
South Wales wagering licences and UniTAB, the publicly listed former Queensland
TAB, has the licences in Queensland, South Australia and the Northern Territory.
Three TABs are still owned by their governments, Tasmania, Western Australia and the
ACT.

Further, the inherent advantages for parimutuel betting of larger pools have seen the
emergence of totalisator pooling arrangements between states and territories. Tabcorp
has formed the SuperTAB pool, comprising the Victorian, Western Australian, ACT
and Tasmanian totalisator pools. UniTAB has combined the Queensland pool with the
South Australian and Northern Territory pools. Following the acquisition of NSW TAB
Ltd, Tabcorp proposed the merging of the NSW and SuperTAB totalisator pools. On 23
December 2005, the New South Wales Government announced its decision not to agree
to the merging of the two pools, stating that there was no guarantee of benefit to the
New South Wales taxpayers.

Tabcorp and Victorian bookmakers are the only providers authorised to conduct betting
in Victoria. However the nature of wagering is such that it is not confined by State and
Territory borders. Internet and phone betting allows Victorians to place wagers on
racing and sporting events with providers other than Tabcorp. Although it is not
permitted to advertise or have any outlets in Victoria, UniTAB offers both internet and
phone gambling to punters Australia-wide on races in Victoria.



                                           12
Wagering Licence Arrangements Post-2012



Interstate corporate bookmakers, predominately based in the Northern Territory, also
offer a range of wagering products accessible by Victorians. On-line bookmakers such
as Sportingbet and Centrebet have expanded rapidly into the sports betting market and
increasingly the wagering market. The Tasmanian Government’s decision to licence
Betfair, an on-line betting exchange, which is opposed by all other State and Territory
Governments, represents a further development in the wagering market.

International bookmakers, such as William Hill, also offer odds on Australian races.
Although Victorians can bet through these agencies, the expenses incurred through the
conversion of Australian dollars into foreign currencies can reduce the potential return.

In 2005, the Victorian Government introduced legislation requiring any wagering
provider to obtain the authorisation of the relevant controlling body for the use of
Victorian race fields for the purposes of wagering. This requirement gives the
controlling bodies greater ability to gain access to betting records for integrity assurance
purposes and to negotiate a revenue return to Victorian racing where previously none
existed.

In summary, individuals in Victoria wanting to place a wager have a choice of wagering
providers. These are summarised in the table below

Table 1: Wagering Services and Providers

                         Parimutuel wagering                  Fixed odds wagering
Betting products
                       On-course        Off-course         On-course         Off-course
Victorian racing    Tabcorp            Tabcorp,        Victorian            Tabcorp,
                                       interstate      bookmakers           Victorian
                                       TAB's                                interstate and
                                                                            international
                                                                            bookmakers
Sports betting      Tabcorp            Tabcorp         Tabcorp, Victorian   Tabcorp,
                                                       bookmakers           Victorian
                                                                            interstate and
                                                                            international
                                                                            bookmakers
Interstate racing   Tabcorp            Tabcorp,        Tabcorp, Victorian   Tabcorp,
                                       interstate      and interstate       Victorian
                                       TAB's           bookmakers           interstate and
                                                                            international
                                                                            bookmakers
(Source: Based on table in Australia’s Gambling Industries, Productivity Commission
Inquiry Report (1999) Volume 2: Report (Part D), Table 13.6)




                                            13
Wagering Licence Arrangements Post-2012



Expenditure on Wagering and Sports Betting
In 2003-04, the total amount spent on thoroughbred, harness and greyhound racing with
Victorian racecourse bookmakers and with the TAB and on-course totalisator was
$575.8 million. Figure 1 presents the total amount spent (i.e. outlays less winnings) in
Victoria over the period 1990-91 to 2003-04 and the distribution between parimutuel
wagering and bookmakers. Parimutuel wagering comprised around 95 per cent of total
spend in 2003-04 compared with 92 per cent in 1990-91. Over the period presented, the
total amount spent increased by $178 million, or 30 per cent.

Figure 1: Total Wagering Expenditure in Victoria from 1990-1991 to 2003-2004


        600
        500
        400
                                                                        Bookmakers
   $m




        300
                                                                        Totalisators
        200
        100
          0
        19 -91

           92 2
        19 -93

           94 4
        19 -95

           9 6
           97 7
           98 8
        19 -99

           00 0
        20 -01

           02 2
        20 -03

                4
        19 -9


        19 -9


        19 -9
        19 6-9
        19 -9


        20 -0


        20 -0


             -0
           93




           99


           01
           90




           95




           03
           91
        19




                                Financial year



 (Source: Australian Gambling Statistics 2005, Office of Economic and Statistical
 Research, Queensland Treasury, 2005)

This expenditure represents the amount wagered with Victorian providers, not the total
amount wagered on Victorian thoroughbred, harness and greyhound races. We
understand that Victoria is a net exporter of racing products, with a substantial amount
of wagers on racing in other states and territories being placed on Victorian races.

Figure 2 presents real expenditure (that is, expenditure adjusted for inflation) on
parimutuel wagering in Victoria and other State and Territories over the period from
1990-91 to 2003-04. Expenditure in Victoria has increased over this period by 12.7 per
cent, in contrast to the other jurisdictions, where expenditures have generally recorded
little to no growth.




                                           14
Wagering Licence Arrangements Post-2012



Figure 2: Total Real Wagering Expenditure on Totalisators from 1990-1991 to
          2003-2004

           900
           800                                                                                    Vic
           700                                                                                    NSW
           600                                                                                    Qld
           500                                                                                    SA
      $m




           400                                                                                    WA
           300                                                                                    Tas
           200                                                                                    ACT
           100                                                                                    NT
            0
           19 1

           19 2

           19 3

           19 4

           19 5

           19 6

           19 7

           19 8

           19 9

           20 0

           20 1

           20 2

           20 3

                   4
                -9

                -9

                -9

                -9

                -9

                -9

                -9

                -9

                -9

                -0

                -0

                -0

                -0

                -0
              90

              91

              92

              93

              94

              95

              96

              97

              98

              99

              00

              01

              02

              03
           19




                                            Financial year



(Source: Australian Gambling Statistics 2005, Office of Economic and Statistical
Research, Queensland Treasury, 2005)

The trends in overall wagering expenditure have occurred within the context of the
significant expansion in the gambling market in Victoria since the early 1990s. Real
per capita gambling expenditure and the distribution between casino, lotteries,
wagering3 and gaming machines is shown in Figure 3. While real per capita gambling
expenditure overall has increased since 1990-91, the growth has occurred in gaming
machines and casino gaming, with wagering and lotteries declining in real per capita
terms.




3
    Defined as the aggregate of expenditure on parimutuel wagering and wagering with bookmakers, on
    both racing and sports betting.

                                                   15
Wagering Licence Arrangements Post-2012



Figure 3: Total Real Per Capita Expenditure by Gambling Category from
          1990-1991 to 2004-2005


                           1,400
    A$ (2004-05 dollars)




                           1,200
                           1,000                                                     Casino
                            800                                                      Gaming
                            600                                                      Lotteries
                            400                                                      Wagering
                            200
                              0
                           19 -91
                           19 -92
                           19 -93
                           19 -94
                           19 -95
                           19 -96
                           19 -97
                           19 -98
                           19 -99
                           20 -00
                           20 -01
                           20 -02
                           20 -03
                           20 -04

                                   5
                                -0
                              90
                              91
                              92
                              93
                              94
                              95
                              96
                              97
                              98
                              99
                              00
                              01
                              02
                              03
                              04
                           19




                                       Financial year



(Source: Australian Gambling Statistics 2005, Office of Economic and Statistical
Research, Queensland Treasury, 2005; Australian Bureau of Statistics)

This trend in real per capita wagering expenditure is evident when nominal expenditure
is shown as a proportion of household disposal income (HDI). Figure 4 shows a general
downward trend in wagering for all States and Territories as a percentage of HDI. In
Victoria, spending on wagering4 as a percentage of HDI has declined from 0.55 per cent
in 1990-91 to 0.45 per cent in 2003-04. The declines in the other major States have
been greater, with the New South Wales’ proportion declining from 0.65 per cent in
1990-91 to 0.44 per cent and the Queensland proportion declining from 0.53 per cent to
0.33 per cent. The Northern Territory, reflecting the online and telephone betting with
corporate bookmakers, has increased from 0.41 per cent in 1990-91 to 2.04 per cent in
2003-04.




4
  Defined as the aggregate of expenditure on parimutuel wagering and wagering with bookmakers on
racing.

                                                 16
Wagering Licence Arrangements Post-2012



Figure 4: Wagering as a Percentage of Household Disposable Income from
          1990-1991 to 2003-2004


              2.5

              2.0                                                                          Vic
                                                                                           NSW
   % of HDI




              1.5
                                                                                           Qld
              1.0                                                                          SA
                                                                                           WA
              0.5                                                                          Tas
                                                                                           ACT
              0.0
                                                                                           NT
                19 -9 0
                19 -9 1
                19 -9 2
                19 -9 3
                19 -9 4
                19 -9 5
                19 -9 6
                19 -9 7
                19 -9 8
                19 -9 9
                20 -0 0
                20 -0 1
                20 -0 2
                20 -0 3

                       4
                    -0
                                                                                           Aust
                   9
                  90
                  91
                  92
                  93
                  94
                  95
                  96
                  97
                  98
                  99
                  00
                  01
                  02
                  03
                 8
              19




                                       Financial year


(Source: Australian Gambling Statistics 2005, Office of Economic and Statistical
Research, Queensland Treasury, 2005)

Sports Betting
From a small base, sports betting has grown strongly in recent years. In comparison
with wagering on racing, a significant amount of wagers are placed with bookmakers,
as the advantage of fixed odds and a significant range of bets that can be placed online
somewhat reduces the competitive advantage that parimutuel systems offer in racing.
In 2003-04, fixed odds betting accounted for 91 per cent of total expenditure on sports
betting in Victoria. Of this, around 40 per cent was wagered with Tabcorp and 60 per
cent with bookmakers.

In Victoria, real expenditure on sports betting increased from $2.8 million in 1994-95 to
$36.2 million in 2003-04. This appears to have been driven by a growing awareness of
sports betting in the market and the increasing range of betting options available. The
growth in sports betting has formed part of the expansion of gambling products and
gambling expenditure.




                                           17
Wagering Licence Arrangements Post-2012



Figure 5: Total Real Expenditure on Sports Betting in Victoria from 1994-1995
          to 2003-2004


                            40
     $m (2004-05 dollars)




                            35
                            30
                            25
                            20
                            15
                            10
                             5
                             0
                                    5


                                    6


                                    7


                                    8


                                    9


                                    0


                                    1


                                    2


                                    3


                                    4
                                 -9


                                 -9


                                 -9


                                 -9


                                 -9


                                 -0


                                 -0


                                 -0


                                 -0


                                 -0
                               94


                               95


                               96


                               97


                               98


                               99


                               00


                               01


                               02


                               03
                            19


                            19


                            19


                            19


                            19


                            19


                            20


                            20


                            20


                            20
                                      Financial year



(Source: Australian Gambling Statistics 2005, Office of Economic and Statistical
Research, Queensland Treasury, 2005)

Real expenditure on sports betting has also been increasing in the other states and
territories, with the Northern Territory recording the highest expenditure figures. Real
expenditure in the Northern Territory has grown from $3.4 million in 1994-95 to $62.7
million in 2003-04, with the residency of several large corporate bookmakers that have
pioneered sports betting in both national and international markets.

Figure 6: Total Real Expenditure in Australian States and Territories on Sports
          Betting from 1994-1995 to 2003-2004


                            70
                            60
   $m (2004-05 dollars)




                            50                                                    Vic

                            40
                                                                                  NSW
                                                                                  Qld
                            30
                                                                                  SA
                            20
                                                                                  WA
                            10
                                                                                  Tas
                            0
                                                                                  ACT
                                    5


                                    6


                                    7


                                    8


                                    9


                                    0


                                    1


                                    2


                                    3


                                    4




                                                                                  NT
                                 -9


                                 -9


                                 -9


                                 -9


                                 -9


                                 -0


                                 -0


                                 -0


                                 -0


                                 -0
                               94


                               95


                               96


                               97


                               98


                               99


                               00


                               01


                               02


                               03
                            19


                            19


                            19


                            19


                            19


                            19


                            20


                            20


                            20


                            20




                                   Financial year



(NB. Data for New South Wales for the three years 2000-01 to 2002-03 does not
include TAB sports betting.)


                                           18
Wagering Licence Arrangements Post-2012



(Source: Australian Gambling Statistics 2005, Office of Economic and Statistical
Research, Queensland Treasury, 2005)

However, in real per capita terms, sports betting is a minor proportion of overall
gambling expenditure. In 2003-04, real per capita expenditure was $9.56 or less than 1
per cent of per capita expenditure on gambling.

Issues for Consideration:

Based on this outline of the current wagering licence including sports betting, the
historical nexus between wagering developments and the racing industry, the
broader wagering market considerations and expenditure, the following issues
are listed to guide submissions from interested parties.

Are the factors that influenced the structure for the wagering industry in the
early 1990s still relevant for the post-2012 environment?

Should there continue to be a single wagering licence after 2012? If so, what are
the net benefits of the current single licence?

Should the wagering and gaming licences be linked post-2012? What are the net
benefits of the current linked licensing arrangements?

What are the alternatives to a single, linked licence? What would be the net
benefits of alternative licensing structures?

Should the wagering licence(s) after 2012 cover both racing and sports betting
or should they be separately licensed?

If sports betting is to be the subject of a separate licence(s), should it offer
parimutuel and fixed odds betting?

What would be the net benefits of any alternative arrangements for sports
betting?

What should be the length of a wagering licence(s) and sports betting licence(s)?
How and when should the licence(s) be awarded?

How would any transition from the current arrangements to a new system for
wagering or sports betting be managed?

Should there be restrictions on who can hold the wagering and/or sports betting
licence(s)?




                                          19
Wagering Licence Arrangements Post-2012



What should be the broad relationship after 2012 between the wagering
licence(s), the Victorian racing industry and the stewardship of the racing
industry, including regulation of bookmakers?

For sports betting, what should be the broad relationship after 2012 between the
licence(s) to conduct sports betting, the sporting bodies and other relevant
regulatory arrangements?

What are likely to be the future trends in wagering on racing and sports betting
expenditure?

What are the implications of new technologies, the convergence of the
parimutuel wagering market and consumer preferences on the wagering licence
post-2012?




The Wagering Licence and Financial Arrangements
This section sets out a number of the financial arrangements associated with the current
wagering licence.

Racing Payout Ratios and State Taxation
In relation to racing, section 4.6.1 of the GRA allows the licence holder to deduct a
commission from the totalisator pool. Section 4.6.1(1) states that the licensee may not
deduct any more than 25 per cent from any one totalisator and section 4.6.1(2) states
that these amounts may not exceed more than 16 per cent of total pool amounts over the
year.

In essence, this means that the licence holder can deduct different amounts up to 25 per
cent from each totalisator (win/place, trifecta, quinella, etc) as long as those total
amounts are no more than 16 per cent of the total of all bets for the year.

The licensee, under section 4.6.3(1), must then pay the Government 19.11 per cent of
the commission taken out as per section 4.6.1(1).

Sports Betting Payout Ratios and State Taxation
The commission or payout ratio for sports betting is similar to racing. In the case of
parimutuel sports betting, section 4.6.4 of the GRA allows the licensee to deduct up to
25 per cent of the pool for each totalisator in commission. However, for sports betting,
there is no average amount over the year. As with racing, the licensee pays State
taxation of 19.11 per cent of the commission.

For fixed-odds sports betting, the licensee pays State taxation based on 10.91 per cent of
player loss. Trackside, Tabcorp’s fixed odds horse racing simulator, conducted as an
approved betting competition, is taxed at 10.91 per cent of revenue.

                                           20
Wagering Licence Arrangements Post-2012



Unclaimed Dividends
In Victoria, all dividends or winnings unclaimed after 6 months are paid by Tabcorp to
Consolidate Revenue and are retained by the Government unless a later claim for
payment is made. In 2004-05, this amounted to around $9.3 million.

State Taxation and Arrangements in other States and Territories
Taxation from wagering on racing contributed $113 million to the State in 2004-05.5
This has increased from $93 million in 2000-01. As is evident from Figure 7, with the
introduction of gaming machines in 1992 and the establishment of the Melbourne
casino, taxation from wagering on racing has represented a declining proportion of the
growth in gambling taxation revenue. In 2004-05, taxation from wagering on racing
accounted for around one per cent of state taxation revenue.

Figure 7:                           State Gambling Taxes as a Proportion of States Taxation Revenue:
                                    1991-1992 to 2004-2005

                               18
      % of State tax revenue




                               16
                               14
                                                                                  Casino
                               12
                               10                                                 Gaming & Keno
                                8                                                 Racing
                                6
                                                                                  Lotteries
                                4
                                2
                                0
                                  9 2
                                  9 3
                                  9 4
                                  95 5
                               19 -96

                                  9 7
                                  9 8
                                  99 9
                               20 -00

                                  0 1
                                  0 2
                                  0 3
                                  04 4
                                       5
                               19 1-9
                               19 2-9
                               19 3-9
                               19 4-9


                               19 6-9
                               19 7-9
                               19 8-9


                               20 0-0
                               20 1-0
                               20 2-0
                               20 3-0
                                    -0
                                  9




                                  9




                                  0
                               19




                                                 Financial year



(Sources: Australian Gambling Statistics 2005, Office of Economic and Statistical
Research, Queensland Treasury, 2005; Victorian Annual Financial Report 2004-05)

Table 2 below extracted from a recent New South Wales Department of Treasury
Research and Information publication provides a summary of the payout and taxation
arrangements in New South Wales, Victoria and Queensland Treasury.6




5
    Since 2000-01 there has been no direct taxation of bookmakers wagering revenues.
6
    New South Wales Treasury, ‘Interstate Comparison of Taxes 2005-06’. Pgs 34-37.

                                                             21
    Wagering Licence Arrangements Post-2012



    Table 2: Wagering Payout and State Taxation Arrangements.

        TAX                     VIC                            NSW                          QLD

Totalisator tax (on
and off course)        Maximum of 16% over            Maximum, including        Maximum of 16% over
                       the year                       FootyTAB, of 16%          the year
Gross deduction by
                                                      over the year
provider from player   (Max commission from                                     The percentage is limited
loss                   any one pool of 25%)           (Max commission from      to a maximum of 25% on
                                                      any one pool of 25%)      any one event, but out of
                                                                                the total amount invested
                                                                                in a financial year in
                                                                                totalisators, the percentage
                                                                                will not exceed 16%




                       Parimutuel                                               Parimutuel

                       Tax rate: 19.11% of            Parimutuel                20% of commission (gross
Net percentage                                                                  deduction) of which 8.5%
                       player loss (i.e. gross
received by                                           Tax rate: 19.11% of       is allocated to the
                       deduction by provider)
Government                                            player loss (i.e. gross   Community Investment
                       (Minimum 84%                   deduction by provider)    Fund.
                       returned to players)
                                                      Subject to approval by    Tax is collected monthly
                       Payment of taxation is         the Treasurer, tax on     in arrears.
                       required within 14 days        ‘domestic’ non-TAB
                       after the event.               totalisator investments   GST credit provided.
                                                      returned to clubs.
                                                                                Quarterly licence fee of
                                                      Fixed odds (futures)      $159,200. Increase on 1
                                                      racing betting            October each year based
                                                                                on CPI.
                                                      Tax rate: 10.91% of
                                                      player loss

Bookmakers             Abolished                      Abolished                 Abolished

                       Replaced by a one
                       percent levy on
                       turnover which is
                       provided to the racing
                       industry.




                                                 22
    Wagering Licence Arrangements Post-2012




       TAX                        VIC                         NSW                        QLD

Sports Betting          Totalisator Sports           Totalisator Sports        From investments:
                        Betting                      Betting
                                                                               Totalisator
                        Maximum deduction:           Maximum deduction:
                        25%                          25%                       As for on and of course
                                                                               race totalisator
                        Note: included in max        Tax rate: 19.11% of
                        commission average of        deduction                 Gross deductions
                        16% across pools.


                                                     Payment of taxation is    Net percentage received
                        Tax rate: 19.11% of          required within 14 days   by Government:
                        player loss.                 after the event.
                                                                               Totalisator
                        Fixed odds sports            Fixed odds sports
                        betting                      betting              20% of commission (gross
                                                                          deduction) of which 8.5%
                        Tax rate: 10.91 per cent Tax rate: 10.91 per cent is allocated to the
                        of player loss.          of player loss.          Community Investment
                                                                          Fund.
                        Payment of taxation is   Bookmakers: abolished
                        required monthly                                  Tax is collected monthly
                        within 7 days of the                              in arrears.
                        end of the month
                                                                          GST credit provided.



    The uniformity in these arrangements in the major States reflects the nature of the
    wagering product, the ability of individuals to undertake wagering by telephone and the
    internet and the consolidation of the totalisator pools.

    Joint Venture Agreement between Tabcorp and the Victorian Racing
    Industry
    As outlined, in 1994 as part of the privatisation of the TAB and the granting of a
    wagering and gaming licence, Tabcorp and the VRI entered into a Joint Venture
    Agreement (JVA). The joint venture agreement and gaming and wagering licences are
    in place until 15 August 2012.

    The VRI’s participation in the joint venture is conducted under the auspices of
    VicRacing Pty Ltd (VicRacing) and Racing Products Victoria Pty Ltd (Racing
    Products). VicRacing holds the VRI’s equity interest in the joint venture and is entitled
    to a 25 per cent share of the joint venture’s total profit (incorporating the net profit
    arising from Tabcorp’s Victorian wagering and gaming businesses).


                                                23
Wagering Licence Arrangements Post-2012



VicRacing and Racing Products distribute this income to the three codes based on the
following formula:
•        joint venture profit, marketing fee and 25 per cent of the product supply fee are
         allocated to the codes based on off-course wagering market share; and
•        racing program fee and 75 per cent of the product supply fee are allocated on a
         fixed basis of 73 per cent thoroughbred code, 18 per cent harness code and 9 per
         cent greyhound code.

The principal obligations and associated fees receivable by Racing Products in respect
of the supply of racing information are:
•        to provide the agreed racing program of Victorian racing for each racing year in
         return for the program fee of $50 million per year (indexed from 1998 in
         accordance with changes in off-course net wagering revenue);
•        to provide racing information to the Joint Venture necessary for wagering on
         Victorian, interstate and overseas races, in return for the product fee of 18.8 per
         cent of net wagering revenue; and
•        to prepare and implement a marketing program for Victorian racing, in return
         for a marketing fee of $2.5 million per year (indexed from 1998 in accordance
         with changes in off-course net wagering revenue).

In addition, from time to time, VicRacing and Racing Products enter into arrangements
with Tabcorp for the benefit of the joint venture that have different cost sharing basis as
agreed between the parties. These have included the PubTAB support scheme, special
joint management fees, Sky Channel and pay TV contributions

Figure 8: Payments to the Victorian Racing Industry under the Joint Venture
          Agreement and Other Income from 1994-1995 to 2004-2005


         500
         450
         400                                                       Other income
         350
         300                                                       Marketing Fee
    $m




         250                                                       Product Fee
         200
                                                                   Program Fee
         150
         100                                                       Joint Venture profits
          50
           0
          19 -95


          19 -97




          20 -00

          20 -01
          20 -02


          20 -04
          19 -96


          19 -98
          19 -99




          20 -03



                  5
               -0
            94
            95
            96
            97

            98
            99
            00

            01
            02
            03
            04
         19




                              Financial year


(Source: Racing Victoria, Harness Racing Victoria, Greyhound Racing Victoria)




                                              24
Wagering Licence Arrangements Post-2012




Returns to the Licence Holder
Figure 9 below provides Tabcorp’s earnings7 from the provision of wagering products.
Since Tabcorp was floated in 1994, earnings from wagering have increased from $311
million in 1994-95 to $446 million in 2003-04. (As a consequence of the acquisition of
TAB Limited in early 2005, Tabcorp’s 2004-05 Annual Report consolidates the
revenues from wagering from both Victoria and New South Wales).

There has been consistent year-on-year growth in the wagering earnings since 1994,
with the exception of 1996-97, when revenue remained virtually unchanged compared
with 1995-96.

Figure 9: Tabcorp Wagering Earnings from 1994-95 to 2003-04


           500
           400
           300
      $m




           200
           100
             0
                     5


                                 6


                                             7


                                                         8


                                                                     9


                                                                                  0


                                                                                              1


                                                                                                          2


                                                                                                                      3


                                                                                                                                  4
                  -9


                              -9


                                          -9


                                                      -9


                                                                  -9


                                                                               -0


                                                                                           -0


                                                                                                       -0


                                                                                                                   -0


                                                                                                                               -0
                 94


                          95


                                      96


                                                  97


                                                              98


                                                                              99


                                                                                       00


                                                                                                   01


                                                                                                               02


                                                                                                                           03
            19


                         19


                                     19


                                                 19


                                                             19


                                                                          19


                                                                                      20


                                                                                                  20


                                                                                                              20


                                                                   Financial year                                         20



(Source: Tabcorp Annual Reports, 1994-95 to 2003-04. Note that these figures are
drawn from each financial year’s Annual Report and may not take into account changes
in accounting practices or later variations to the amounts.)

From the perspective of the post-2012 licence arrangements and recognising the
uniformity in the taxation arrangements in relation to parimutuel wagering
across States and Territories, should the Government consider any changes in
the financial arrangements in relation to wagering on racing?

What should be the financial arrangements in relation to sports betting,
including financial arrangements between the licence(s) holders and the sporting
bodies? Should these arrangements be different for bookmakers as opposed to
the holder of the wagering licence?

What is the net benefit of the current taxation arrangements? What are the
potential benefits of other taxation arrangements?



7
    Earnings data relates to “Earnings Before Interest, Taxation and Amortisation”.

                                                                         25
Wagering Licence Arrangements Post-2012



Wagering Products, their Approval and Distribution
The GRA does not specify or preclude any particular type of wagering product, as long
as the product is based on horse, harness or greyhound racing. If Tabcorp wishes to
introduce a new wagering product or game, the rules of the game must be submitted to
the VCGR for consent under section 4.2.6 of the GRA. The VCGR may disallow any
betting rules if it is satisfied that the rule is unfair to punters, or unreasonable, or
contrary to the public interest.

The VCGR approved Tabcorp’s introduction of Trackside on 25 August 1998 (then to
be known as TABRACE) and Mystery 6 on 24 February 2004, under the old Gaming
and Betting Act 1994. Trackside was granted approval as an approved betting
competition and is therefore considered a sports betting product.

The distribution of access to the wagering products including sports betting is also a
matter for the licensee, subject to technical approval by the VCGR under section 4.2.3
of the GRA. Distribution channels for wagering on racing now include:

•        on-course TAB;

•        TAB stand alone outlets;

•        PubTABs;

•        telephone betting;

•        internet via mobile phones, and;

•        internet access via computer.

In 2005, there were 101 TAB agencies/outlets, 465 PubTABs (that is a TAB outlet in a
hotel or club), approximately 302,000 phone accounts and 106 on-course TAB outlets
in Victoria.8

The primary means of distributing wagering products has and continues to be via TAB
agencies and PubTABs. In 2004-05, around 74 per cent of all totalisator bets on
thoroughbred racing were placed over the counter. Phone betting accounted for around
21 per cent of off course totalisator wagering, while internet betting accounted for
around 5 per cent. 9

The distribution of sports betting products is similar to racing, in that the products are
sold in agencies, PubTABs and via phone and internet accounts. However, Tabcorp
makes a much greater use of self service kiosks located in agencies and PubTABs for
sports betting than with wagering products.

TAB agencies and on-course facilities allow all products to be displayed to the punter in
real time and a variety of bets can be placed with a minimum of complexity. PubTABs

8
    Australian Racing Board, ‘Australian Racing Fact Book 2004-05’. Pg 64.
9
    South Australian Centre for Economic Studies & Swinburne Institute for Social Research, University of
    Western Sydney, Changes in Wagering within the Racing Industry, May 2005. Table 2.18, pg 33.

                                                    26
Wagering Licence Arrangements Post-2012



were introduced in 1985. This increased the availability of the products and enabled
casual gamblers to wager on racing plus access other entertainment and gambling
activities.

The use of phone betting was introduced shortly after the introduction of the off-course
TAB in 1960. Internet betting became available in the late 1990s and allows a greater
interaction for punters as they can be given the same level of information about races
and odds as a person who is in a TAB agency or PubTAB. An important complement
to phone or internet betting has been the introduction of Pay TV and the availability of
race viewing in the home or elsewhere.

The introduction of, and improvements in, mobile phone technology can allow for the
checking of odds and results in any location with service. This expands upon normal
phone betting by merging some of the benefits of internet betting and can also allow for
the introduction of further wagering products or methods specific to mobile phones.
Interactive TV potentially represents the next step in betting from home, with customers
being able to place bets through their digital tuners, with real time information and the
race broadcast live into their home.

Wagering Participation by Victorians
A range of information is available on the proportion of the Victorian population who
wager on racing and the frequency of their wagering. The latest State-funded research10
conducted in 2003, found that 28.2 per cent of Victorian adult residents had bet on
horse or greyhound races during the 12 months to May 2003. Of this 28.2 percent of
Victorian adult residents, 77 per cent had bet less than once a month; 11.8 per cent had
bet 1 to 3 times a month; 8.3 per cent 1 to 3 times a week; and 2 per cent more than
3 times a week. However, as noted in the report of the survey, the overall participation
rate of 28.2 per cent was higher than the participation rate of 24.3 per cent recorded in
the 1999 Productivity Commission survey.11

The State funded research in 2003 also indicated around 5.6 per cent of Victorian adult
residents had bet on a sporting event during the previous twelve months. Of this 5.6 per
cent of Victorian adult residents, 67.7 per cent has bet less than once a month, 20.5 per
cent had bet 1to 3 times a month, 11.54 per cent 1 to 3 times a week and 0.4 per cent
more than 3 times a week12.

Earlier work commissioned by the former Victorian Casino and Gaming Authority
pointed to a decline over time in betting on racing activities. These surveys indicated
that the proportion of Victorians over the age of 18 participating in horse racing
gambling activities declined from 19 per cent in 1992 to 17 per cent in 1996 and to 14
per cent by 1999. These surveys also reported a decline in the proportion of people




10
   Victorian Government, 2003 Victorian Longitudinal Community Attitudes Survey, Table 3, page 53
11
   Productivity Commission, Australia’s Gambling Industries, 1999. Table 3.3.
12
   Victorian Government, op. cit.

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Wagering Licence Arrangements Post-2012



betting on harness racing, which climbed during the early to mid 1990s to 6 per cent,
then fell to 3 per cent by the end of the decade13.

A survey undertaken by Roy Morgan Research in 2003 suggested around 16 per cent of
Victorians 18 years and over participated in wagering in the previous three months.
This comprised of 13 per cent who bet via the TAB (in agencies or PubTABs), 2 per
cent through a bookmaker and 1 per cent who used the internet to access the TAB and
bookmakers.14

The State funded research referred to earlier described the typical profile of a person
who wagers as:

•       predominately male;

•       aged between 20-35 years if they are recreational punters and between 45-64
        years if they are professional punters;

•       often have a prior association with the racing industry and are likely to attend
        race meetings; and

•       maintain an account with either a licensed bookmaker or the TAB.

Of those who use the internet to gamble, the research indicated that they were
overwhelmingly male, were employed and generally earned high incomes. Sports
betting tended to attract a younger clientele.

Responsible Gambling
Research undertaken by the Productivity Commission in the late 1990s reported that
while electronic gaming machines and casino games are the forms of gambling most
prone to problem gambling behaviour, racing on key measures was ranked third,
reflecting a core of punters who are heavy gamblers. In summary, the Productivity
Commission estimates of problem gambling arising from wagering varied from as high
as 6 per cent of the population to as low as 3 per cent (for weekly racing gamblers who
scored 10 + on the SOGS (Southern Oaks Gambling Screen)) measure of problem
gambling. However the Report acknowledged that these estimates do not discount for
those who engage in ‘corporate wagering’ for a living (often in syndicates) who are
‘acknowledged or committed heavy’ gamblers.15

At its May 2001 meeting, the Australian Racing Ministers Conference endorsed seven
objectives under the National Guidelines for Responsible Wagering Practices to
promote the adoption of responsible wagering practices throughout Australia and
establish uniform standards for such practices. The seven objectives were:



13
   Sixth and Seventh Survey of Community Gambling Patterns and Perceptions,
http://www.vcgr.vic.gov.au/CA256F800017E8D4/Statistics/36AB81950861EF0BCA25701C004FF69C?
Open
14
   South Australian Centre for Economic Studies & Swinburne Institute for Social Research, University
   of Western Sydney, Changes in Wagering within the Racing Industry, May 2005. Pg 57.
15
   Productivity Commission, Australia’s Gambling Industries, 1999. Table 6.15.

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Wagering Licence Arrangements Post-2012



•     to provide customers with the information required to make considered and
      informed decisions in relation to wagering products. This objective ensures
      consumers are fully aware of how each betting product operates and of their
      realistic prospects of winning;

•     to provide consumers with the information likely to prevent the development of
      wagering-related problems or to assist consumers at risk of, or experiencing, such
      problems. This objective ensures that consumers are fully aware of services and
      procedures available to consumers experiencing wagering-related problems;

•     to provide wagering services in a manner that encourages responsible wagering
      patterns and behaviour. This objective ensures that wagering services provided to
      consumers are conducive to responsible wagering patterns and behaviours on the
      part of the bettor;

•     to ensure all appropriate personnel are capable of delivering the responsible
      provision of wagering. This objective ensures that totalisator and bookmaker staff
      are conversant with the responsible provision of wagering;

•     to require that service providers act in an ethical manner. This objective ensures
      that service providers offer products that are, to the best of their knowledge,
      ethically conducted and do not have an adverse impact on the image of the
      relevant racing code or sport or is in any way offensive or contrary to the public
      interest;

•     to provide that advertising and promotion is conducted in a responsible manner.
      This objective ensures that the advertising of wagering products is conducive to
      responsible wagering patterns and behaviours on the part of the individual bettor;
      and

•     to require that the performance of responsible wagering practices are evaluated.
      This objective ensures that service providers are effectively implementing the best
      practice responsible wagering.16

There are no explicit responsible gambling requirements related to wagering contained
in the GRA or in the wagering licence. In 2001, Tabcorp initiated a Responsible
Gambling Code across its gaming, wagering and casino operations, based upon a
framework established by the Australian Gaming Council. Following a comprehensive
review of their existing responsible gambling practices, policies and requirements,
Tabcorp introduced a substantially revised Code in January 2006. This Code requires
common standards in responsible delivery of gambling products across Tabcorp’s
operations and facilities throughout Australia.

As outlined by Tabcorp the key planks of the Tabcorp Responsible Gambling Code of
Practice include:




16
 Drawn from South Australian Centre for Economic Studies & Swinburne Institute for Social Research,
University of Western Sydney, Changes in Wagering within the Racing Industry, May 2005. Pg 7 and 8.

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Wagering Licence Arrangements Post-2012



•     providing information on Tabcorp's gambling products so customers can make
      informed decisions about their gambling practices;
•     facilitating consistency of customer care;
•     providing information on help available from support services and access to self-
      exclusion programs (where available), so individuals can seek assistance where
      they demonstrate a problem with gambling;
•     supporting and monitoring developments both locally and abroad in
      responsible/problem gambling research, programs and initiatives; and
•     maintaining meaningful relationships with Tabcorp's stakeholders in order to
      enhance Tabcorp's understanding of problem gambling - through ongoing
      consultation and liaison with community groups, governments, problem
      gambling counsellors, expert researchers, employees and industry groups.

Tabcorp’s Responsible Gambling Code sets out a framework for responsible gambling
and a voluntary code of conduct for all its sectors and can be found on
http://www.tabcorp.com.au/responsible_code.aspx. It provides a framework for
training of employees, self-exclusion, support services, provision of relevant data on
chances of winning, the exclusion of ATM’s from TAB agencies and a prohibition on
wagering inducements.

In 2003, RVL adopted a Responsible Wagering Code of Practice. The Code contains
nine objectives to encourage race clubs, Tabcorp and bookmakers to conduct
responsible wagering in relation to racing. This Code can be found on RVL’s website
at
http://www.racingvictoria.net.au/index.php?option=com_content&task=view&id=51&I
temid=136.

For the purposes of the post-2012 licence arrangements, should any changes be
made to the current arrangements in relation to the approval of and access to
wagering products and sports betting?

Should regulatory processes be introduced in relation to the distribution of and
access to wagering and sports betting products?

What should be the regulatory approach to the wagering and/or sports betting
licence(s) and responsible gambling objectives?

What obligations, if any, should be placed on the post-2012 licence holder(s) in
providing public information, for example, on their responsible gambling
practices or the profile of the Victorian population who wager regularly?




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Wagering Licence Arrangements Post-2012



Glossary
Expenditure (gross       Expenditure is the net amount lost, or, in other
profit)                  words, the amount wagered less the amount
                         won, by people who gamble. Conversely, by
                         definition, it is the gross profit (or gross
                         winnings) due to the providers and operators of
                         each particular form of gambling.
Gaming operator’s        A licence to obtain gaming machines from
licence                  approved suppliers, to operate gaming
                         machines and to supply gaming machines to
                         venues, currently held by Tabcorp and
                         Tattersall’s.
GRA                      Gambling Regulation Act 2003 (Vic.)
Household disposable     Household disposable income is defined as the
income (HDI):            total net income (whether in cash or kind),
                         after deduction of direct taxes, that is available
                         to households.
Nominal expenditure      Expenditure that has not been adjusted for
                         inflation.
Parimutuel wagering      Pools all bets on certain outcomes and, after
                         the deduction of commissions, distributes
                         winnings proportionally to the amount of
                         money wagered on a particular successful
                         outcome.
Racing                   The three racing codes, thoroughbreds, harness
                         and greyhounds.
Racing Act               Racing Act 1928 (Vic)
Real expenditure         Expenditure that has been adjusted for inflation
                         so that all spending figures shown are in June
                         2004-05 dollars.
Sports betting           All betting on approved betting competitions
                         or betting contingencies with a bookmaker or
                         the TAB.
TAB                      Totalisator Agency Board.
Tabcorp                  Tabcorp Holdings Limited
Tattersall’s             Tattersall’s Limited
Totalisator              An automated machine for the calculation of
                         parimutuel odds and pay out to player.
Wagering                 All betting on the three racing codes and
                         sports, whether with the TAB or a bookmaker.
VCGR                     Victorian Commission for Gambling
                         Regulation



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