Bookies finding it hard to make a buck as taxes and inflation bite

The betting market is soft, and the racing industry is finding it tougher amid a slowdown in consumer spending as it heads into its biggest day of the year with the Melbourne Cup.

The 2023 financial report for state governing body Racing Victoria shows its total wagering revenue fell 7.3 per cent compared to the previous year.

It is getting harder to make a buck in racing.

Betting volume is down at least 10 per cent this Spring Racing Carnival compared to last year, and about 15 per cent for some bookies.

Racing clubs are losing money and state racing bodies are heading for financial losses too, as rising prize money and other costs take a chunk out of earnings that have already been hit by diminishing returns from the betting industry.

It all means there are tougher times ahead for the bookies and the sport of racing itself as it heads into its biggest day of the year on Tuesday with the Melbourne Cup.

The 2023 financial report for state governing body Racing Victoria, lodged last week with the corporate regulator, shows its total wagering revenue fell 7.3 per cent compared to the previous year.

Racing Victoria is also waiting on the state government to announce who has won the next exclusive wagering licence, a race that has narrowed to incumbent Tabcorp and rival Sportsbet – the biggest digital bookie in Australia with about 48 per cent market share.

The Australian has been told Tabcorp is nudging ahead, with some sources saying Sportsbet had lobbed a bigger cash bid but the government may prefer the certainty of the incumbent. A decision is due later this month.

Racing Victoria’s share from its current joint venture with Tabcorp, which has exclusive rights to open retail betting shops, has been falling in recent years as punters prefer to bet digitally on their phones. Joint venture distributions to Victorian racing declined 5.1 per cent in 2023.

The terms of the new licence will change though, with Racing Victoria saying in its annual report that whatever the new arrangements are it will still “deliver industry funding at least equivalent to current funding received from the lapsing joint venture, ensuring the industry is no less worse off”.

Tabcorp chief executive Adam Rytenskild. Picture: Matrix News

But with wagering levels still falling, Racing Victoria – which made a surplus of only $163,000 from $553m revenue in 2023, could be headed for a loss of $10m or more in 2024.

Sources have told The Australian that wagering is off another 10-11 per cent so far for this year’s Spring Racing Carnival in Victoria, with one source saying thoroughbred racing betting has fallen 15 per cent since July.

Tabcorp chief executive Adam Rytenskild told his company’s recent annual general meeting that “it’s true the wagering market is soft”, but said he was pleased that his TAB brand was at least staying competitive with corporate bookmakers.

Tabcorp’s digital betting turnover was up in the September quarter – at a time when many of its rivals were losing market share – but it is having to work harder and spend more to keep its customers.

Digital wagering turnover was up 1 per cent in the quarter, Tabcorp said on Thursday, but group revenue was down 6.1 per cent compared to the same period last year and digital wagering revenue fell 3.9 per cent.

Tabcorp shares are down about 26 per cent since January 1 and 13 per cent in the past month.

Mr Rytenskild has long advocated for a “level playing field” of even and increased point-of-consumption betting taxes (bookies also have to pay “race fields fees” to state governing bodies in order to be able to take bets) across the states.

Victoria is set to increase its point-of-consumption tax from 10 per cent to 15 per cent in July next year and NSW could follow.

In a recent NSW state parliament committee expenditure meeting, Gaming and Racing Minister David Harris said he agreed broadly with the premise that there should be an even playing field for all bookies and that it was time for the NSW Totalizator Act to be reviewed.

More taxes would cut into the corporate or mostly digital-only bookies’ profits.

In mid-August, Entain Group – the owner of the Neds and Ladbrokes brands in Australia – said its net wagering revenue in Australia was down about 2 per cent for the six months to June 30 compared with the previous corresponding period. London-listed Flutter Entertainment, Sportsbet’s parent company, said the Victorian point-of-consumption increase would add an incremental £27m ($52m) to its costs.

Sportsbet’s adjusted operating profit fell 30 per cent in the six months to June.

The bookies had started to pass on their rising costs to punters for the first time, BlueBet executive chairman Michael Sullivan said.

Betting exchange Betfair said it had been receiving more customers on its betting exchange who had been cut off from betting with the big bookmakers if they were too successful.