Wagering reforms point to Tabcorp as a safe bet

Australia’s wagering landscape could pivot “materially” in Tabcorp’s favour over the next two years.

The list of regulatory reforms expected to be introduced by the Turnbull government would be backed by Tabcorp.

Australia’s wagering landscape could pivot “materially” in Tabcorp’s favour over the next two years but the extent of the gains it enjoys will depend on it stopping CrownBet’s retail ambitions.

CLSA’s Sacha Krien, in an ­extensive report on Australia’s wagering sector, said a national point of consumption tax, advertising restrictions and credit card bans could all tip the competitive ­balance Tabcorp’s way, with corporate bookmakers to be significantly hit.

The list of regulatory reforms expected to be introduced by the Turnbull government would be backed by Tabcorp given the level of competition it has faced from corporate bookmakers.

Mr Krien, outlining that he ­expected Tabcorp’s takeover of Tatts to clear regulatory hurdles, said Tabcorp had enjoyed a monopoly before the effective deregulation of the Australian wagering market in 2008.

“The market share gains of the corporate bookmakers relative to the incumbent retail TABs suggests those operators have over the last 10 years disproportionately benefited from what has been a largely deregulated wagering market with ad hoc legislation across different states,” he said.

The experienced gaming analyst highlighted that the recent digital deal between the James Packer-backed CrownBet and ClubsNSW was a risk for Tabcorp. NSW clubs generated about $700 million of Tabcorp’s wagering turnover, which was about 5 per cent of group revenue.

But Mr Krien added he did not include any impact from CrownBet in his forecasts for Tabcorp, given uncertainty around ­whether the CrownBet deal would proceed.

“However, if the CrownBet ­initiative proceeds in NSW, and ultimately proves successful, the risks to Tabcorp and Tatts are ­material in our view,” he said.

He also said he expected Tabcorp to fight hard to retain retail exclusivity, both through the courts and government lobbying, to stop CrownBet’s deal with clubs in NSW.

“It is not just retail turnover at risk,” the analyst said. “To the extent that CrownBet can successfully sign up club members that are existing customers of Tabcorp digital there might also be an impact on digital revenues.

“At the very least you might expect Tabcorp digital customer acquisition, and therefore digital turnover growth, to slow in the event this deal went ahead.”

The competitive threat from CrownBet appeared to have spurred Tabcorp into action, Mr Krien said, as he pointed to the fact that Tabcorp had advised clubs its own digital wagering model would launch by December 2017.

“Tabcorp may sign exclusive deals with other retail groups as it has done with Community Clubs in Victoria and the Australian ­Hotels Association in NSW,” he said.

“This is a defensive step against further progress from CrownBet rather than a solution to CrownBet’s ­existing ClubsNSW deal.”

The in-depth note on Aust­ralian wagering also calculated that if the same amount of turnover was subject to CrownBet and Tabcorp digital models being ­offered to clubs in NSW, then CLSA estimated that venues received about 16 per cent less under the CrownBet model.

That figure more than doubles to 42 per cent less if a 15 per cent point of ­consumption tax is introduced in NSW.

The corporate bookmakers have lobbied hard against the point of consumption tax that is being introduced in South Australia on concerns it could spread to other states.

Mr Krien said he thought a ­national tax on wagering revenues had a good chance of becoming a reality, which he estimated would increase corporate bookmaker government taxes from about $10m to about $200m.