MoneyNovember 6, 2018

So you’re about to lose money on the Melbourne Cup – where does it go?


Hundreds of millions of dollars are lost by punters at the TAB every year. Where does it go, asks Don Rowe.

It’s the biggest day of the racing year and all around the country hopeful punters are throwing fistfuls of cash at the TAB. Here, the Melbourne Cup and New Zealand’s state-controlled gambling operator are almost synonymous, with TAB ads plastered all over our news websites, and its ceaselessly chipper human mascot Mark Stafford cropping up everywhere with the tips, including on RNZ’s Morning Report.

Last year the TAB topped $10 million turnover on the Melbourne Cup. Then, like today, the only certain bet is that a laughable majority of flutters will lose. The house always wins after all; this particular whare pulled in more than $300m last year. But where does the money go?

The New Zealand Racing Board holds a statutory monopoly on sports betting in New Zealand, and in return is obliged to promote, regulate and improve the racing industry. It is also required under the Racing Act 2003 to adhere to harm minimisation regulations: training staff and developing systems to identify problem gamblers and ostensibly cut them off.

Bet matching, instant deposits and direct marketing materials – all used as justifications to prohibit online gambling under the Gambling Act – are tactics regularly employed by the TAB. Problem gambling levies and betting and gaming machine duties are considered sales taxes by the organisation. 

Some $338m was collected from sports punters by the TAB in the last financial year, and the net profit was $144m. Almost all of that was returned directly to the three racing codes: gallops, trots and greyhounds. TAB gaming operations delivered a further $11.5m in applied funding for the racing industry. A total of $3.2m was paid out in grants to community sporting organisations, funding projects like a $10,000 investment in equipment for the Christchurch School of Gymnastics. By comparison, the Lottery Grants Board received $225m from Lotto NZ.  

In short, this means that 80% of the net proceeds from punters are funnelled directly back into racing. (Other sports see a modest commission paid for every bet in their code, totalling $9.3m in the last financial year.) Your average gambler, then, is essentially subsidising more of the same, with a maximum of 20% of net proceeds distributed back into communities – an amount spread out over 434 grants in the last financial year. 

And 2017 was a huge year for sports betting in New Zealand. In conjunction with the British and Irish Lions tour, the TAB rebranded under the slogan “Now you’re in the game”, seeking to distance themselves from a public impression of “impenetrable, blokey, tired and old fashioned”.

“We felt it was the right time to reposition the TAB brand to broaden our mainstream appeal for a modern Kiwi audience and to set ourselves up for future growth,” said Simon Jarvis, Head of Strategic Marketing.

The rebrand prompted concerns from the Problem Gambling Foundation, with CEO Paula Snowden saying it was inappropriate to associate participation in sports with gambling for money.

The campaign was a huge success, however, delivering almost 17,000 first time bettors and an $11.6 million turnover – up 29% on the TAB’s target.

That growth has continued into the new year. Underlying operating profit for the first half of 2018 was up $2.8m, or 3.4%, driven by a sustained growth in bettor numbers. In January alone there were 112,250 active customers betting, up 19.5% on the previous year.

John Allen, CEO of the New Zealand Racing Board, said the organisation is on-track to hit an operating profit of $153.9m this year, and with the 2017 Racing Amendment Act working its way through a friendly parliament, the continued expansion of the industry looks secure.

But the one prerequisite for exponential growth in racing is for average punters to continue to lose much, much more than they win. Good luck!

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Mad Chapman, Editor
The Spinoff has covered the news that matters in 2021, most recently the delta outbreak. Help us continue this coverage, and so much more, by supporting The Spinoff Members.Madeleine Chapman, EditorJoin Members

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