Australian
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The recent high court ruling has me concerned our beloved exchange maybe on the way out. While I'm sure the smarties behind the betfair scenes have things under control, I'm in the dark, and rather than sweat it out, I thought I'd try and figure out how the smarties may solve this problem. I did bimbo maths at school and failed economics miserably so please be patient.
Betfair claims the ruling makes it 6 times more expensive for them to offer NSW racing. Presently 99% of customers pay between 2-5% commission on winning markets. Let's assume an average of 3.5%. For Betfair to retain its current profit level, the average commission on winning markets would need to be 3.5 x 6 = 21%. We'll round it at 20%. As shown in the following example, we still get better than TAB odds:
Samaready has approximately 50% chance of winning.
On Betfair we back it for $100 at odds of $2. On the TAB it is $1.70 ($2 less 15% of pool)
Samaready wins.
On Betfair we profit $80 ($100 less 20% commission). On the TAB we make $70.
$1.80 is not nearly as enticing as $1.965 ($2 less 3.5% com), but still much better than $1.70. Traders can still trade, backers can back and layers lay. Winners still welcome. I doubt Betfair would increase the com to 20%, perhaps 10% like the California Exchange, but after what they've done with the Premium Charge, I wouldn't rule it out.
Betfair claims the ruling makes it 6 times more expensive for them to offer NSW racing. Presently 99% of customers pay between 2-5% commission on winning markets. Let's assume an average of 3.5%. For Betfair to retain its current profit level, the average commission on winning markets would need to be 3.5 x 6 = 21%. We'll round it at 20%. As shown in the following example, we still get better than TAB odds:
Samaready has approximately 50% chance of winning.
On Betfair we back it for $100 at odds of $2. On the TAB it is $1.70 ($2 less 15% of pool)
Samaready wins.
On Betfair we profit $80 ($100 less 20% commission). On the TAB we make $70.
$1.80 is not nearly as enticing as $1.965 ($2 less 3.5% com), but still much better than $1.70. Traders can still trade, backers can back and layers lay. Winners still welcome. I doubt Betfair would increase the com to 20%, perhaps 10% like the California Exchange, but after what they've done with the Premium Charge, I wouldn't rule it out.
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Betfair and the Corps first need to change their advertising to take advantage of a clause in the legislation.
For owners and trainers their best return is by having a bet with either Betfair or the Corps, not because of the odds, but because all monies collected under racefields MUST be paid as prizemoney, it cannot be used by racingNSW etc to fund either themselves or their pet projects. Racefields cuts out the middle-man, RacingNSW. The next thing they need to do is ensure that greyhounds stays with the gross profits model. To date it has returned more than the turnover tax would, so there is every chance that they will stay, but if they continue to prosper under gross profits it is the best long term chance of winning the debate. |
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if plan b doesnt work,there are 24 more plans..
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there should only be one plan B - plan B for Blackout NSW Racing
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or no plan B???
3 April 2012 Announcement to customers on recent High Court decision Many of you would be aware of Friday’s verdict by the High Court of Australia which rejected Betfair’s appeal against the decision by Racing New South Wales and Harness Racing NSW to impose a fee of 1.5% of wagering turnover for the right to publish NSW race fields. Betfair had claimed that a turnover fee was unconstitutional on the grounds that it is discriminatory and protectionist in its nature. Betfair customers understand that our product differs significantly from that of a traditional bookmaker and the totes, providing innovative ways of engaging with wagering and racing and a new value proposition that provides an incremental benefit to the punter and therefore to racing. A turnover tax reduces competition, and therefore marginalises punters, as it equates to a much larger percentage of Betfair’s overall revenue than our competitors. The High Court’s ruling means that it is now six‐times more expensive for Betfair to offer New South Wales racing than any other state in Australia. While we are obviously disappointed with the decision, it is crucial our customers understand that it is very much ‘business as usual’ at Betfair and that we remain committed to Australia and our customers. Of course, we will be reviewing the commercial options available to us in order to best respond to the judgment and we will keep you informed of any action that we take. Contrary to many reports, Betfair pays product fees to all racing and sports codes in Australia, including Racing NSW, and we work closely with governing bodies to maintain a high level of integrity. Much of the media coverage of this matter has been one‐sided and largely suggests that this verdict is a huge win for racing. This is not our view as what is bad for the punter is also ultimately bad for racing. We remain firmly of the belief that the racing industry will suffer in the long term as a result of a turnover based system, which significantly affects racing’s ability to compete with other forms of gambling. There is a funding option available to racing, as recommended by the Productivity Commission, based on a wagering operator’s revenue that will provide sustainable product fees to racing. In fact at certain levels a revenue fee will return more to the racing industry than a turnover based system. A revenue fee will also ensure revenue streams through sponsorship and advertising whilst still fostering competition among all wagering operators. Competition is paramount in any industry and a highly competitive wagering landscape is good for you, the punter, as well as the racing industry. Betfair values its customers immeasurably and believes that the punter is racing’s most important asset. We will continue to ensure we offer the best product selection in the marketplace and will strive to provide you with a quality customer experience. Giles Thompson Chief Executive Officer, Betfair Australasia. |
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Listening to Rob Hines on 927 i'd say there's a good chance RacingVic will fall in line with NSW and charge the 1.5% turnover fee.
That's what the main players want, Napthine, the head of TROA, Peter Moody and others. Hines also makes the error in thinking that current turnover levels will stay the same regardless of whether he charges on revenue or turnover, the idea that all that junk turnover on Betfair will mysteriously migrate to other products in Betfair ceases to operate the exchange is laughable. It's quite mind-boggling that the CEO's of the two biggest racing states can still be so ignorant about the nature of exchange wagering when Betfair has been operating on Australian racing for approaching a decade now. If RacingVic does go with a turnover fee and in the first 12 months it brings in well below what is currently being projected than Hines and his board should be shown the door for incompetence. |
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A turnover tax on an exchange is clearly inappropriate, and anyone with half a brain knows it. I credit the aforementioned gentlemen with half a brain (and perhaps not more) so I must assume that they have another agenda.
We could begin to consider what that agenda might be... |
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It was a strange interview with Hines Back High. At the end I was more confused. At the start of the interview he affirmed that Racing Vic believes the Gross Revenue method is best. He then said a national approach would be best. He then said Betfair provides great value to the punter (and pretty much killed of speculation that the TAB would create one due to liquidity concerns). But said they would need to look at their model.
I would hope, and surely this is happening... that RVL are talking to Betfair and have always done so. But you can't really tell! Giles Thompson will be on the Punters Show in a special edition in the next week or so. He's softly spoken the times I've heard him, but alongside Dallas etc hopefully we'll see some fight! |
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will be very interesting to watch - thanks Josh
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When you consider when this saga began, they have had long time to develop a plan B. My guess there is no plan B.
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