Cost of living pressures hitting punters, Tabcorp warns

Gambling is usually a resilient sector during economic downturns, but consumers are betting less often and placing smaller wagers as inflation starts to hit discretionary spending, according to Tabcorp.

Tabcorp CEO Adam Rytenskild wants his business to keep winning market share.

Cost of living pressures have hit punters, who are placing smaller bets and gambling in lower volumes as inflation rises.

Wagering usually proves resilient in economic downturns, but market giant Tabcorp revealed customers across its sector were starting to tighten their belts.

“I think it is because of uncertainty about the economic outlook,” Tabcorp chief executive Adam Rytenskild told The Australian when asked about the company’s fall in digital betting income for the six months to December – a trend being experienced across all wagering companies.

“Things like rising interest rates tend to have a bit of a lag effect on discretionary spending. We are definitely seeing an increase in caution [from consumers] and their average spend is off a bit. The digital market is a bit softer. The market overall is a bit softer.”

Tabcorp was able to point to its digital betting market share holding steady at 25.1 per cent when it announced its interim financial results on Tuesday – the first time in 2019 it had arrested a long-running trend of losing online customers to its competitors.

That result came despite new entrant Betr, part-owned by News Corp, which publishes The Australian, aggressively winning new customers during racing’s most recent Spring Carnival.

“It is known that the market has been a bit softer … but we are focused on growing [market] share no matter what the market does,” Mr Rytenskild said.

“Tabcorp is doing what we say we will do – we have unshackled ourselves post the demerger [from The Lotteries Corporation last year] with a new energy, capability and offers for our customers. We will continue to build on that.”

Tabcorp also said it is aiming for 30 per cent digital betting market share within two years, and that group revenue was up almost 11 per cent to $1.27bn for the half and earnings before interest and tax, depreciation and amortisation increased 24 per cent to $196.6m compared to the previous corresponding period.

While Tabcorp’s leadership under Mr Rytenskild has said it is focusing more on its digital strategy, it did attribute its improved financial performance to a 58 per cent growth in cash wagering revenue following a strong rebound from a Covid-lockdown hit 2022.

While active digital wagering users grew by about 17,000 to 797,000, Tabcorp’s digital betting turnover fell from $5.26bn a year ago to $4.92bn. Digital wagering revenue fell 15 per cent, though overall wagering increased 8.6 per cent thanks to more cash bets.

Tabcorp shares rose 6 per cent in early trading on Tuesday morning before falling back.

Mr Rytenskild said that as state-based point consumption taxes increased, it would get harder for smaller rivals to make money.

“If I was an operator with a smaller turnover share and was loss making, I would be scratching my head wondering what to do. It will only get harder from here.”

He predicted that there would be more mergers and acquisition activity in the industry at lower levels in order to achieve scale, but said Tabcorp would not seek to achieve its 30 per cent market share goal by acquiring another company.

“I’m interested in those types of investments that will help us transform Tabcorp. I would only be after technology or product and capability that we don’t already have.”

Tabcorp last October spent $33m to acquire a stake in online social betting company Dabble, which has 80 per cent of its customers aged between 18 to 35.

Mr Rytenskild also reiterated that Tabcorp would not overpay for an extension to its joint venture wagering licence in Victoria, which expires in August next year.

The Victorian racing industry is increasingly worried that a low Tabcorp offer would have dire implications for the funding it receives from its joint venture with the licence holder (Tabcorp has held the licence since 1994) as doubts emerge about the bidding process due to question marks about customer data ownership.

Tabcorp has claimed it owns customer data in Victoria. Without access to a customer database, Tabcorp’s rivals are increasingly unlikely to join in a competitive bidding process to take over the licence.

Mr Rytenskild would not be drawn on the bidding process, other than to say: “The only certainty is the [expiry] date of August 2024. We will not extend on the same terms as the current joint venture arrangement.”

Tabcorp will pay an interim 1.3c per share fully franked dividend on March 21.