The government insists it just saved the TAB by handing over operations to an overseas gambling company. But the deal is shortsighted and potentially dangerous, writes Terry Leisman.
So what just happened?
Racing minister Kieran McAnulty has just approved a 25-year deal transferring our own TAB NZ betting operations to British gambling giant Entain, a deal that sees Entain fronting up $900m for our racing industry in the first five years. That is a hefty cash injection for the racing industry, but at the cost of privatising our betting industry to make way for a global gambling organisation. It’s a potentially seismic shift in gambling culture for our society that we might all be paying the price for in years to come.
What is Entain?
You may not have heard of Entain prior to the coverage of this new arrangement with the TAB. Entain operates under a number of different brand names in different gambling areas, from sports betting to online casinos. It’s best known for its brand Ladbrokes, which you’ve probably had the misfortune of seeing in ad after ad if you’ve dipped into viewing Australian or UK-based sports.
Entain comes to us with a dismal reputation for meeting regulatory obligations to mitigate harmful gambling activities. Just last year the UK Gambling Commission ordered Entain to pay a record penalty of £17m for a laundry list of failures to comply with its safer gambling obligations and anti-money laundering laws. Its licence to operate in the UK was in jeopardy as this was its second time falling foul of regulations in three years.
What does the government get in the sale?
In exchange for selling off the betting operations of the TAB, which is a statutory entity, McAnulty has signed off for an upfront payment from Entain of $150m with a continuing 50/50 split of gross revenue, which Entain has guaranteed to be no less than $150m for the first five years of the arrangement. Entain has proposed an extra $100m to sweeten the deal if the government passes legislation to geo-block NZ punters from using other overseas gambling operators online.
And this is… bad?
The harms from gambling cannot be understated. Gambling is gambling, whether you use our TAB or the numerous overseas gambling platforms. We can’t eliminate the damage done to individuals and families by problem gambling, but at least while the TAB remained a statutory business, it answered to our own government, not the often loose morals of profit-driven shareholders. The profits and costs of TAB currently go right back into our economy, supporting and uplifting social services and local enterprises. The individual harms of gambling are balanced against social good.
That balance is about to be disrupted. With Entain taking over the betting operations, the estimated $350m annual net revenue the TAB currently extracts from its punters now goes to Entain to pay its operational costs, with New Zealand getting its 50% from whatever is left from the remaining gross revenue. It’s all well and good for the first five years with Entain’s $150m guarantee, but what will we be left with for the remaining 20 years of this agreement? Hundreds of millions being extracted from New Zealand punters year on year – money no longer in our economy, but instead filling up the pockets of Entain and their shareholders.
But I’ve read that it’s a good thing?
McAnulty tells us the TAB would have fallen over within the next three years had Entain not stepped in to take this operation over, due to revenue dropping as the TAB fails to remain competitive with overseas platforms. Undoubtedly the TAB profit turnover suffered, as did many businesses, through Covid. But is the TAB really not profitable enough to sustain itself without Entain? This report is in stark contrast to the most recent annual report from the TAB, which boasts more customers than ever before – up to 250,000 under the leadership of now ex-CEO Mike Tod. In fact, things seemed to be going quite well in the second half of 2022, with the TAB managing to gain a net profit of $350m for the year. Recovery looked to be on the way.
What does this geo-blocking thing mean?
The TAB is the only sports betting provider allowed to operate in New Zealand. This means it has a monopoly on sports betting within New Zealand. However, local punters are currently free to use online platforms from overseas providers. McAnulty has confirmed that cabinet has agreed in principle to introduce legislation that would allow the government to block NZ punters from being able to access online platforms provided by overseas companies not owned by Entain. This will hand Entain a complete monopoly over sports betting for New Zealand punters. Which begs the question: why is this legislation only now being agreed to off the back of a $100m offer from Entain? What a sorry state we appear to be in, allowing an overseas company to purchase legislation that will provide them with total monopoly of an industry.
But at least everyone keeps their jobs, right?
As part of this agreement, Entain has agreed to retain the 460 TAB employees for two years – which will go pretty quickly, when you consider it’s a 25-year outsourcing deal. It seems on the surface to be little more than a grace period for the existing TAB employees to arrange other options, given the breakneck speed at which this deal has been agreed to, which is expected to commence as soon as June (ie next week).
This all sounds bleak. Does anyone win?
There are some clear winners here. First and foremost Entain, as you’ve likely gathered. It stands to extract upwards of $4bn from our economy over the next 25 years. There are some short-term winners here too. By signing off on this agreement, McAnulty has provided the racing codes with an unprecedented $150m payout, cash in hand, on top of guaranteed distributions for five years. Not bad for a pastime that’s been declining in public interest for some time.
But why is all that money going to racing?
That really is the million dollar question. McAnulty has signed off for the guaranteed $900 million in the first 5 years for NZ racing. But what about NZ sports? A mere $15 million has been allocated for distribution to non-animal racing sports. This isn’t a huge surprise as NZ sports have been getting shafted like this by the TAB distribution practices for years. But it’s becoming increasingly harder to justify the massive funding discrepancy between NZ racing and NZ sports from the TAB.
The writing has been on the wall for the racing codes since 2018. The TAB’s annual report found its horse racing punters are aging out of the game (to put it nicely). The report said millenials just aren’t interested in racing and prefer to spend their money on sports. The sports betting book, of course, is booming. More Kiwi punters than ever are using the TAB but they just aren’t using it for racing. That’s a problem when you look at the TAB’s distribution and see numbers like $100m distributed to the three racing codes and $5m to share between the 20+ sporting codes (if they’re lucky).
It makes you wonder if it’s really the TAB that can’t support itself or is it NZ racing that aren’t getting the funding numbers it used to get from TAB that’s become unsustainable. From that perspective it looks like NZ racing could be trying to get one last squeeze from the lemon as it comes to terms with a new world that seems to be leaving the racing industry behind.
Did the public win anything of note here?
Unfortunately not a lot. With Entain aiming to massively ramp up the number of active gamblers in our country, what thought was given to harm minimisation? McAnulty proudly reports he negotiated $5m (from the initial $150m payout) to go towards introducing facial recognition software and “research” towards harm minimisation, whatever that may mean. He reminds us gambling is not the problem, it’s the problem gambling. Given Entain’s track record with harm minimisation, that might be a problem we see a lot more of in our society in the future.