The Conundrum of Sports Gambling

When I was a kid growing up and playing sport in the 70’s, smoking and sport were the closest of bedfellows.  Our cricket stars proudly puffed their way into bat, amid a dazzling backdrop of glamorous cigarette advertising.  Even children’s sporting carnivals were sponsored by tobacco companies.  Prior to that, the tobacco industry has cleverly used movie stars and even the medical profession to position their products as desirable.  My teenage children are incredulous that smoking was allowed in aeroplanes, and one wonders what all the risk accountants were doing whilst all that was happening!

Whilst ‘direct’ advertising of tobacco products was phased out by federal legislation between 1973 and 1976, ‘accidental or incidental’ advertising was still permitted for many years.   As soon as the legislation was passed, the tobacco companies rapidly bought out most major Australian sport.  In 1980 the three major tobacco companies then operating in Australia were also the three largest sports sponsors in the country.  One has to admire the single-mindedness of these companies and their ability to develop new and innovative strategies to deal with the obstacles that were being put in their way.

Rothmans_'HDT'_Holden_VL_Commodore_Group_A_SS

Alan Moffat’s Rothmans Holden VL Commodore SS Group A that campaigned in the 1987 World Touring Car Championship – on display at Sandown Raceway in November 2009

Despite intense pressure from betting agencies and major sporting codes, the Federal Government has recently announced that it is maintaining its ban on ‘in-play’ wagering online.  There are many facets to this, not least of which is the ability to offshore firms to bleed gambling revenue without tax parity.  There is also plenty said about the social effects of in-play betting, an issue that came to the fore during the controversy around the William Hill sponsorship of the 2016 Australian Open.

I wonder whether gambling might be the new smoking when it comes to sports sponsorship, should we be worried about this, or is all the hype just another case of the nanny state syndrome?

Whereas the implications of increased smoking are relatively easy to understand today, the issues around sports gambling seem pretty complex and far from clear-cut.  Not a big gambler myself, I thought it best that I first consider the changing gambling landscape, the incentive structures, and why the sudden attention on online gambling.

Gambling has been around forever, with the first recorded instances of gambling dating back to China in 2,300BC. Probably more a good story than fact, the Great Wall of China was purportedly funded by Keno and gambling has been used by governments to shore up their balance sheets for centuries.

The internet gambling industry was born in 1994 with the release on the first online software package and the legalisation of online gambling in Antigua and Barmuda.  Threatening revenue streams and some pretty influential stakeholders, governments quickly moved to outlaw online gambling – which in turn sent the practice underground and completely failed to stem growth.  Once governments woke up to how much revenue they were missing out on, and that they were never going to be able to stop the industry without outlawing gambling entirely, the massive online gambling businesses joined their bricks and mortar cousins as respectable corporate citizens.

When you look at modern-day gambling, the rise of the ubiquitous smartphone is changing the landscape at an incredible rate.  It has been estimated that by 2020, over 80% of people on the planet will own a smartphone.  Able to jump borders, jurisdictions and tax arrangements, there are innumerable unregulated and illegal operators and it is a perfect business venture for organised crime.

Australians love to gamble and it is a part of our cultural landscape.  Inexorably linked with our other great love of sports, it is not hard to fathom how in-play betting could find a comfy home in this country.  Heck, we even start most of our games and matches with a flip of a coin.

The experts tell us that there are three main reasons we gamble.  Unsurprisingly, the number one reason for gambling among seasoned gamblers is to make money.  What is surprising is that the number two reason is for the social interaction that comes with the gambling experience, and the third is the excitement and adrenaline rush of gambling and winning.  We know that new generations are permanently connected, are quick adopters of new technology and are happy to be active members of virtual communities.  They are also not drawn to casinos and race-tracks, yet are entirely comfortable in an online interactive environment where instantaneous feedback and results are expected.

The_International_2014

eSports tournament attracts massive crowds, 2014.  Photo by Jakob Wells, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=34125895

When the online gambling companies set about developing their platforms, they wisely looked towards the computer gaming industry for some insights into how to make their products engaging.  It is estimated that, in countries with a strong online gaming culture, the average gamer will spend 10,000 hours playing by the time they turn 21, or about the same amount of time they spend at school from year 5 to graduation in year 12.  I am sure any non-gamer will wonder how this is possible however, video and online games very successfully use five main techniques to keep players engaged – immersion, fascination, progression, reward and mastery.

Indeed flow or in-play betting through your smartphone whilst watching the game is certainly immersive & exciting and follows the progression of the game at hand.  The user is provided with immediate reward and feedback, which can perhaps imbue a dangerous sensation of mastery.  Humans are very good at discerning patterns and this is a key survival trait of our species.  The problem is that we are so good at this, we often see patterns were there aren’t any.  Gambling games promote an illusion of minute control that can instil a mistaken and addictive belief that the gambler has superior knowledge and information in order to ‘beat the odds’.  We should rightly be concerned about the future effects of online gambling on connected generations.

Of course, there is a flip side to all of this.  Sports administrators know all too well that to gain sponsorship and revenue from media rights, they need fans and viewers.  Betting from a smart-phone, when presumably the punter is watching the event live or on a media feed of some sort, is a marriage made in heaven and very clever – wouldn’t you say?

And there are risks for sports who take a moral high ground against sports betting.  Luckily history has an uncanny way of providing us some free lessons if we care to look.  In the late 1800’s and early 1900’s, professional sculling was a major spectator sport with up to 100,000 Australians lining the river banks to watch major races.  Fuelled by heavy unregulated gambling, the sport became the subject of a race-fixing scandal, and in 1906 the Betting and Gaming Act was introduced that effectively moved gambling onto racetracks and within government control.  Some say that demise of the sport came due to the loss of public faith due to the match-fixing scandal; others say the new gambling regulations were the cause; and others cite persisting internal squabbling and governance failures.  There were undoubtedly multiple interlinked and contributing forces at play, but the fact remains that the immense popularity and success of professional sculling during that period of history had much to do with its symbiotic relationship with gambling, and the inability of the sport to cope with the changing landscape spelt disaster.

Rush_versus_Trickett_sculling_match_1877

Major professional sculling race on the Parramatta River, 1877.  Note the packed shores, the spectator flotilla, and the carrier pigeons being released so as to swiftly take news of the race result back to Sydney.  By Unknown newspaper artist – Illustrated Sydney News 21 July 1877, Public Domain

In my opinion, rather than erect the battlements, sports administrators need to deeply understand the linkages of their respective sports to the new world of gambling.  In doing so, they can hopefully develop strategies that maximise the good, minimise the bad and deal with the ugly.

Currently in Australia, around 10% of state revenue comes from gambling taxes, and it is easy to forget that the vast majority of ‘profits’ from gambling ends up in consolidated government revenue and not in the hands of legitimate gambling companies.  Nonetheless, amidst persisting concerns about the social effects of more accessible gambling, gambling houses would also do well to be proactive and consider direct support of those sports on which they depend and prosper.  Providing some kick-start funding to help bridge the infrastructure gap at grass-roots level would be one initiative that springs to mind.  Another would be to use the proactive and predictive data matching algorithms that are ubiquitous in our search engines and social media feeds to identify and help problem gamblers.

In the course of the past 35 odd years, the prospect of a ‘Sports Lottery’ has been abandoned by successive governments, where a custody battle of state revenues is a consistent concern.  Joined at the hip with cash strapped state governments, I don’t see any change in policy on the horizon to limit gambling or deliver a national approach to sports funding via a national lottery scheme.

Personally, I don’t feel that sporting bodies should feel at all backward in demanding funding from their state governments when in fact, it is sports that are at the source of a significant portion of their revenue streams.  The quid pro quo is that sports also need to play their part to ensure we see a sustained, systematic and even-handed approach to sports gambling and the opportunities and challenges that exist.

In my next article, I will try to untangle some parts of the complex sport funding waterfall – I hope!

About Peter Robertson

Born and bred in Eumundi and Nambour, in strong company indeed. After studying Maths and Physics at uni in Brisbane, I pursued a business career that I sometimes worry is best described as ‘Jack of all trades – master of none’. Having safely made it to my mid 50’s, I am still yet to have a real job – but I expect to grow up someday. My love of sport has never waned and I regularly play tennis, golf and surf. Other pursuits include fly fishing and trekking. I have been serving on a few private and NFP boards in sports and other areas to keep me out of mischief.

Comments

  1. Tony Robb says:

    Robbo
    Sports gaming has become pervasive at so many levels. I hear kids speak in terms of odds rather than margins unless the margin related to line betting. The psychology of gambling his quite sophisticated. I remember hearing a poker machine rep talking about in house testing on players in relation to the appearance of the machines. One designed was scrapped as the female character made them feel as though their wife was looking at them. It is no secret that machines that are hidden from sight are the biggest revenue maker. Therefore online gaming using phones has that same ability to hide a gambling habit or how much you are losing. Good piece Robbo
    Cheers
    TR

  2. Some interesting points there Robbo. Gambling and sport are not a new phenomena, rather the extent and forms of it. It goes back a long way. To get some good examples have a look at Malcolm Knox’s book,
    “Never a Gentlemans game.’ to see the power and influence of gambling on sporting events back in late 19th century Australia.

    I do despair when I see terms like Nanny State, to describe any societal action which tries to reduce harm.
    Similarly i’d like some more detail of the vast majority of gambling profits ending up in consolidated government revenue. If the government can get some gambling corporations to pay a bit of tx to help our society i’m all for it. I really have not a whit of concern if Betfair, Ladbrokes, William Hill, etc want even more $$. The gambling related damage runs in many , many millions.

    Glen!

  3. Hi Glen,
    Thanks for your comment. When I get it all together into an article, I plan to map out some of the questions you ask in detail. I think you will be surprised (as I was when I really looked into it). In the course of this, I am also looking at some of the other funding factors.

    I don’t disagree with your comment about the damage, it is just interesting to look at the current incentive structures and who should be responsible for providing a quid pro quo. My own conclusion is that the incentive structures do not indicate that prohibition is at all likely.

    I once fought a court case against a ‘community organisation’, and was appalled to find that pokies alone bled over $100m from a smallish town. They argued (unsuccessfully) that they provided a community benefit and should gain special protection (on top of their tax free status) with respect to zoning restriction from their neighbours. In the course of the this, the extent of the bleed was revealed, much to the surprise of everyone involved..

    So, rather than being another article on the merits of gambling, my article was more about the need for a balanced discussion, why this might seem a harder discussion to have than it currently is, and why sports need to be considering a lot of factors to ensure they keep a balanced perspective on their individual situation.

    Robbo

  4. Malby Dangles says:

    An excellent topic, Robbo. I’m looking forward to reading the next article.

  5. The Wrap says:

    There is no conundrum. Gambling is evil. It goes hand in hand with corruption & greed. Sports gambling has the potential to destroy the very meaning of Our Great Game. It’s already destroyed cricket and cast a long shadow over tennis & soccer. (maybe even darts & live pigeon shooting as swell – Ed) But if that’s the way the modern world wants to go …………

  6. Peter_B says:

    Working on a volunteer gambling helpline I hear hundreds of distressed stories each year (and that is in a state without pokies). More from family and friends than from gamblers themselves (we are the last to admit our problem). One of the more distressing was from a high school teacher that half the boys in his Year 12 class were betting on social media apps during class.
    So its not the impact of gambling on sports that worries me. Big sport is wealthy and corrupt enough to look after itself. Think Olympics, F1, FIFA etc etc. Corporate bookmakers are smart and risk averse, so any corruption “scandal” is small money in the minor leagues of tennis or soccer.
    Now I had bets in Y12 as did most of my mates, but my concern is the normalising of gambling as it creeps into lives at ever younger ages in subtle ways. On-line games becomes on-line games of chance becomes on-line lose your house becomes on-line lose your life. All in a virtual world where you never handle real money and it is largely hidden from all but your own angst-ridden soul.
    Gambling companies using their algorithms “for good” in detecting and helping problem gamblers? Fat chance. These are amoral corporate leeches. The algorithms detect “profit opportunities” who can be showered in bonuses and trips, while the corporation holds it nose and doesn’t ask where the hundreds of thousands a mug is gambling are being stolen from.
    William Hill made A$750million world wide in 2014, but profits were down to A$580million in 2015 after the UK increased gambling taxes. “The Australian arm of the brand performed well at the end of 2015, and that has continued into the new year. The betting app is one of the highest-rated in the country, and during the William Hill-backed Australian Open, around 1,000 new customers were acquired each day, leading to a 680 per cent increase on tennis in-play betting.”
    http://www.racingpost.com/news/horse-racing/profits-down-but-william-hill-optimistic-for-2016/2038139/#newsArchiveTabs=last7DaysNews
    This is not $10 punters doing $100 while having a day out with their mates. This is clever manipulative corporate theft from the vulnerable.
    I have no wish to live in a nanny state or to see gambling prohibited. My dad and my brother enjoy a bet with no problems. For whatever reason I can’t. In every Gamblers Anonymous meeting we say we aren’t here to change the world just ourselves.
    But I would like the see the growth in gambling and future misery limited by the same advertising ban that has long existed for other harm producing products like alcohol and tobacco.
    It’s about stopping the current problem morphing into the coming epidemic.
    Having worked in Health politics in the 80’s when the advertising ban was progressively introduced I have seen the corrupting influence of donations on the big parties.
    Alcohol and tobacco reaps big tax revenues but it also has big direct costs for government in hospital and health costs. Their costs are socialised so government realised it was a zero sum game. Doctors are effective social advocates who tire of treating preventable illnesses.
    Gambling’s direct financial costs are much more concentrated and privatised – limited to the person and their families – and sometimes the families they steal from. Of course there are huge indirect non-financial costs in lost focus at work and emotional hurt.
    Government’s are similarly amoral and don’t care about gambling damage because they are not particularly harmed. Vote Xenophon or Green – I will be. The other mobs are as corrupt as one another.
    Thanks for raising the issue Robbo.

  7. The Wrap says:

    Well put Mr B. And thanks Robbo. But never mind the Nanny State. Isn’t the “state” supposed to protect the community? Everyone saw The Deer Hunter, didn’t they? In it they were betting on Russian roulette. Slipping back a couple of millennium we were betting on gladiators fighting to the death. Now we bet on cage fights. Gambling is just a way of transferring wealth from the wider community to a very small privileged section of the community. At transfer that takes no special skill that can’t be programmed in a computer, and contributes absolutely nothing to the community from which they take it. The government collects protection money to allow them to do it. The advertising community clicks the ticket along the way, as do the sporting bodies providing the two flies crawling up the wall. The more distracted the punters are by the actual event the easier it is to pick their pockets. I
    Fair dinkum, it’s money for old rope.

    And don’t give me that, “Everyone loves a punt” crap. So, what if we bet amongst ourselves? It would keep the wealth in house, and the pieces would be easier to pick up and put back together. It’s a win win win all round. The kiddies could be sheltered from the vice until they’re mature enough to be able to make their own decision on it. It would cut out the middle man, and we wouldn’t have to put up with those incessant gambling advertisements. If I hear one more money back claim I’m going to get my gun and shoot someone.

    Don’t get me started on speed cameras whatever you do.

  8. The Wrap says:

    BTW, Robbo, loved your side bar on the “$100m Community Bleed” from a small country town. The Bendigo & Adelaide Community Bank franchises have filled the banking gap left by there “Big Four” in rural & suburban regions. They provide a service, pay their taxes & dividends, and pour money into community projects without hurting a single soul. Now that’s a what you’d call a community benefit, eh?

  9. PS. A mate sent me this quote by Winston Churchill. Quite apt.

    Sir Winston Churchill was once asked about his position on whisky. Here’s how he answered:
    “If you mean whisky, the devil’s brew, the poison scourge, the bloody monster that defiles innocence, dethrones reason, destroys the home, creates misery and poverty, yea, literally takes the bread from the mouths of little children;
    if you mean that evil drink that topples men and women from the pinnacles of righteous and gracious living into the bottomless pit of degradation, shame, despair, helplessness and hopelessness, then, my friend, I am opposed to it with every fibre of my being.”
    “However, if by whisky you mean the oil of conversation, the philosophic wine, the elixir of life, the ale that is consumed when good fellows get together, that puts a song in their hearts and the warm glow of contentment in their eyes; if you mean good cheer, the stimulating sip that puts a little spring in the step of an elderly gentleman on a frosty morning; if you mean that drink that enables man to magnify his joy, and to forget life’s great tragedies and heartbreaks and sorrow;
    if you mean that drink the sale of which pours into our treasuries untold millions of pounds each year, that provides tender care for our little crippled children, our blind, our deaf, our dumb, our pitifully aged and infirm, to build the finest highways, hospitals, universities, and community colleges in this nation… then my friend, I am absolutely, unequivocally in favour of it..!!!”

    “This is my position, and as always, I refuse to compromise on matters of principle.!!!”

  10. The Wrap says:

    Why can’t we have politicians like that Robbo?

  11. Thanks for the reply Robbo. I’d like to know more about this ‘Community Organisation ; you locked horns with; a well funded mob it sounds like.

    I like abet, have since my teenage years. But i’m concerned at how big gambling, in its myriad of forms, has developed. I like the Tab (PubTAB), the on course bookies, i knew some SP’s in the day,but the growth of the corporate bookmakers is a serous concern. Combine this with the power of the licenced clubs; we saw how they kyboshed the proposals of the Gillard Government, and there are serious problems.

    THe proliferation of the pokies, phone apps, on line betting, some people are making big money at te expense of others. Now that the genie is well out of the bottle, what do we do ?

    Glen!

  12. Hi,
    I’d be really interested to understand the role alcohol plays in professional sports sponsorships. Fosters (or whatever they’re called these days) appear prominently in AFL and likewise XXXX in NRL. I’d love to see data that shows (and compares) the economic & societal impact caused by alcohol, pokies and sports wagering. I think you may be surprised by who the real villains are. My guess is that booze is by far and away much worse on society than sports wagering will ever be. Pokies are another level again. Get fair dinkum about where the real blight on society is emanating from. Report balance and facts across the major categories I have listed above. Show the comparisons. Educate us.
    Thanks.
    Nerdy.

  13. G’day Robbo just off on a different tangent. You wrote some articles about sporting facilities, their development, their uses late last year.

    Did you ever get a chance to see my posting on 20/1/2016 re the future of leisure. i’m curious if it had any resonance to some of your thoughts.

    Glen!

  14. Thnaks for all the great comments and feedback as it really adds to the discussion. It is interesting the breadth of this topic, and how we are all drawn to our own perspective based on our personal experiences. Nonetheless, this is a massive topic and not one that I profess to be an expert in, but want to understand. I will be certainly picking up on some of the ideas put forward here and I hope I can do a good job of them in my spare time!!
    Cheers,
    Robbo

  15. Thanks Robbo, enjoyed the article.

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