Sport, Gambling, Media and Government: An Unholy Alliance

 

As a problem gambler who no longer bets (one day at a time) it was easy to get frothing about the Jaidyn Stephenson affair.  I mentally composed the hypocrisy rant; the consequences parable and the remedies strategy.  They can save for another day.  

 

It is easy to dismiss gambling as “a bit of a problem for a few people” with a lament that “people should be more responsible” or “government should fund more counselling/education”.  

 

The reality is far more sinister and pervasive with the gambling lobby now Australia’s NRA using its money to control politicians, journalists, sporting governance bodies and health researchers.  I knew it was big and powerful but its size, reach and growth rates staggered me.

 

Hard to expect “someone to do something about the problem” when the industry already holds all the levers and guarantees the Mutually Assured Destruction of any that would bite the hand that feeds them.  Here are some facts I put together about gambling in Australia:

 

Australians are the world’s biggest (worst?) gamblers.  International gambling analysts put our gambling losses at A$1324 per adult in 2017 or 1.6% of adult (pre-tax) full time earnings.  That is 25% more per head than our nearest rivals the “gambling mad” Chinese in Hong Kong.  More than double the Irish and the US.  The UK bets/loses 36% of the amount we do (per head).  (Sources are acknowledged below. See footnote 1)

 

Australians grow up with the understanding that we are a punting culture.  The Cup.  Two Up.  It all seemed pretty innocent.  The TAB (before it was privatised) was run by State Governments and they took around 20% of the turnover to plough back into hospitals and public services.  Bookies were local blokes who paid turnover tax and spent their money as local business entrepreneurs.  Part of what I want to show is how the rise of the internet; sports betting (NBA; EPL; AFL; NRL etc); and foreign owned corporate bookies has changed that landscape.  The comparatively benign local predilection for the punt has been ruthlessly exploited by sophisticated international and Australian corporations.

 

Using Victoria as an example (most States except WA are similar – WA has no pokies outside Crown Casino) the State generates 8% of its own tax revenue from gambling (just under $2 billion out of $24B State own tax revenue in 18/19).  State taxes are 35% of their total revenue.  The rest of the Victoria’s money comes from Commonwealth Grants (from its Income and Company tax revenue) of $34B; and Victoria’s share of GST revenue ($8B). (2)

 

The Victorian gambling tax revenue (2) is made up of:

$1,100 M   – Pokies

$   237 M   – Crown Casino

 $  426 M   – Lotto

 $    70 M   – Horse Racing 

 

The big picture in all of this is that 80% of what we bet/lose is in pokies; casinos and lotto which are in one way or another taxed.  Horse racing is a declining share of the rest as we bet increasingly more on sports (local and overseas).  The highly taxed TAB pools are declining rapidly with the growth of corporate bookies and fixed odds betting.  Sports betting is the highest growth sector – increasing by 15% pa. States are scrambling to reclaim some of their declining horse racing taxes with new “point of consumption” taxes on betting with online/corporate bookies. 

 

Corporate on-line bookies are big business.  The biggest in Australia is Sportsbet (the one with the loud ads on TV).  They are owned by Paddy Power/Betfair in the UK and Australia is 25% of their worldwide profit.  Sportsbet made $150M in profit in 2017 after paying $100M in marketing costs (from annual betting turnover of $5,600M in Australia for one company).  That $100M is spread across Fox, Channels 7 and 9, Google, Facebook and other marketing like “introduced affiliates” that allows tipping sites and individuals to get a share of the money lost by the “mates” they introduce.  Corporate bookies use sophisticated algorithms to quickly separate the winners from the “mugs”.  Winners often get their accounts closed or bets/odds reduced after they have been placed.  “Mugs” get bonuses and inducements like free tickets and travel to encourage them to lose more. It is a ruthlessly selective business with regular winners excluded. (3)

 

What do sports like AFL; NRL and Cricket Australia get out of all this?  Firstly product licensing fees from betting companies that are 5-10% of the profit they make from betting on their sport.  The NRL takes 1.3% of turnover rather than a share of profit, which is a more lucrative deal for the NRL.  On top of this the AFL has an “Official Betting Partner” in Bet Easy (formerly Crown Bet) that pays a $10M annual fee for the marketing link.  The NRL has Sportsbet as its official partner for $12M a year. (4)

 

More significant is the broadcasting rights agreements that are largely underwritten by the advertising revenue (more than subscriber fees).  The gambling industry spent $253M on media advertising (largely TV) in 2017 – up from $90M in 2011.  The AFL has a five year Foxtel/Ch7 broadcasting rights deal of $2,500M from 2017-22.  Basic maths suggests gambling advertising is a significant share of the price that the TV networks were prepared to bid.  Same for NRL, cricket etc.  The golden rule is he that makes the gold makes the rules. Gambling corporations are in a marketing arms race to find as many “mugs” before there are restrictions on their business model (like advertising bans or offering the same odds/bet amounts to all punters). (5)

 

The biggest owner of pokies (Electronic Gaming Machines is the official name for these now sophisticated computers that their developer called a “mouse trap”) is Woolworths via their subsidiary ALH with over 12,000 machines.  Each machine generating about $100,000 a year in profits or $1200M a year to “Woolies”.  Interestingly the now AFL Chairman Richard Goyder expressed a distaste for pokies when he was Wesfarmers CEO (which owns competitor Coles) in 2016, and unsuccessfully sought a $1 maximum bet limit on all Australian EGM’s. (6)

 

11 of the 18 AFL clubs are significant poker machine operators.  Their revenue in 2017/18 was:

 

Hawthorn $24 M
Carlton $18 M
Collingwood $13 M
Essendon $11 M
Melbourne $10 M
Geelong $ 6 M
Bulldogs  $ 6 M
Richmond $ 5 M
St Kilda  $ 2 M
Brisbane – estimate based on machines owned $12 M
Port Adelaide – estimate based on machines $ 6 M
TOTAL $113 M

 

There has been progress as Collingwood have now sold its two venues and Melbourne has sold one of theirs.  As a result current revenue (members and patrons losses) is estimated to be reduced by $15M.  Geelong and the Bulldogs have announced an intention to get out of pokies. (7)

 

After I had compiled these different dimensions of the gambling industry’s size and power I was reminded of President Dwight D Eisenhower’s farewell address warning of a Military Industrial Complex (he had been General in Command of Allied Forces in Europe in WW2 so was both well informed and no shrinking violet):

 

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes.” (8)

 

The power of gambling lobby over government and sporting bodies is illustrated by Gillon sending out his senior lawyer to announce the Stephenson suspension because his presence would have invited uncomfortable questions about the AFL’s complicity in promoting gambling and turning a blind eye to the massive gambling problems of current players (so long as they bet on horses and other sports). 

 

Round up the usual suspects.

 

 

Sources:

 

  1. Figures from H2 Gambling Capital the world’s largest gambling analytics consultancy.  As quoted in https://www.nytimes.com/2018/04/04/world/australia/australians-gambling-betting-machines.html and https://www.abc.net.au/news/2018-11-20/australians-worlds-biggest-gambling-losers/10495566
  2. Figures from the Victorian Parliament Public Accounts and Estimates Committee Report on the 2018/19 Budget Estimates. https://www.parliament.vic.gov.au/images/stories/committees/paec/2018-19_Budget_Estimates/PAEC_58-15_Report_on_the_2018-19_Budget_Estimates.pdf
  3. Figures on Sportsbet’s revenue and profit come from the published accounts of its UK parent company Paddy Power Betfair.  Sources include https://www.afr.com/business/gambling/sportsbets-australian-profits-surge-20170808-gxrgbc and https://www.abc.net.au/news/2019-03-05/sportsbet-documents-reveal-millions-spent-on-marketing/10833196.  The ABC report is essential reading to understand the size and range of the gambling industry’s marketing activities and their web of influence buying.
  4. https://www.smh.com.au/sport/nrl/nrl-in-10-million-bookies-battle-20180314-p4z49q.html; https://www.smh.com.au/sport/nrl/v-landys-takes-aim-at-betfair-over-nrl-commission-spike-20190308-p512ur.html; Journal of Business Research: Sports Bettors etc https://www.sciencedirect.com/science/article/pii/S0148296315001174
  5. https://www.abc.net.au/news/2015-08-18/afl-announces-record-breaking-242.5-billion-television-deal/6706738; https://responsiblegambling.vic.gov.au/resources/gambling-victoria/gambling-advertising/; http://www.adnews.com.au/banks-energy-increase-ad-spend-2018https://www.financialcounsellingaustralia.org.au/docs/duds-mugs-and-the-a-list-the-impact-of-uncontrolled-sportsbetting/
  6. https://www.smh.com.au/national/fresh-food-jackpot-how-woolies-became-the-biggest-pokie-owner-in-the-country-20180216-h0w7v5.html; https://theconversation.com/coles-wants-1-maximum-bets-for-pokies-so-why-wont-the-pokie-makers-play-ball-70574
  7. http://www.pokiesplayyou.org.au/afl_action
  8. Another dimension of the role of the gambling industry is in its collaboration with government to only fund misleading research on problem gambling prevalence.  The current edition of The Monthly magazine has an excellent article by James Boyce https://www.themonthly.com.au/issue/2019/june/1559397600/james-boyce/lie-responsible-gambling. Boyce shows how research uses grossly understated phone surveys to measure the extent of problem gambling – even though it is a discredited methodology.  Universities can only do research they are funded for – by government and industry. Foxes demonstrating the reliability of chicken coop fencing.

 

 

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Comments

  1. Mark 'Swish' Schwerdt says

    Thanks PB

    I’m probably a one-out here, but I squirm uncomfortably when I take in my weekly dose of The Front Bar, which very very prominently normalises sports betting (and alcohol) as being inextricably linked with footy.

  2. DBalassone says

    I’m with ya PB. It’s gone too far. No one summed up this scourge of society better than Tim Freedman…

    They’re taking the food off your table /
    so they can say that the trains run on time

  3. Peter, over here in good old South Oz, way back in ’53 John Ceruto senior was the coach of the Norwood Redsox night baseball team. After the controversial Grand Final between Sturt Tigers and the Sox., Ceruto was unceremoniously sacked. Strong rumour had it he had placed a big bet on his side to win the Flag. Apparently he was convinced he had the players to go all the way, he was wrong for Tigers triumphed.

    Redsox had a star studded team that included Shipway Medalist Peter Box, baseballer / cricketer Les Favell (who collected 3 hits in the game), Bruce Harris (starting pitcher) and the Roberts brothers, Peter, Dave and Gerry. No wonder Ceruto was confident.

    Half way through the next night season, an now forgiven, Ceruto took over as coach of the Woodville Magpies. Back at the helm of Redsox in night season of ’55 / ’56, the Sox smashed North Adelaide in the Grand Final. Norwood hit 4 home runs from Les Favell,, Dave Roberts, Bruce Harris and Graham Fenwick. Fenwick’s hit cleared the Regina Washing machine sign and he received a washing machine for this feat.

  4. Thanks PB. Your argument, supported by the well-sourced evidence you provide, is strong.

    I do not shy away from the reality that uncontrolled gambling causes great harm. And addiction can be exploited.

    I love a punt. I love a day on the punt. I have chronicled that – and the meaning it holds for me – in Memoirs of a Mug Punter. This book may romanticise the punt; it also chronicles the desperation of the out of control punter.

    I find pokies the most insidious – a slow drain of people’s funds.

    Whether it’s convenient for my argument or whatever, I find punting on the races and sports betting very different from the pokies. The punting I enjoy requires a combination of thinking and good luck.

    I think most Australian racing/sports punters are ‘players’ and ‘dabblers’ and not gamblers. I know very few people who have actually ever risked anything substantial. Indeed, of my long-term friends, I don’t think there is one.

    Hang on, though, I do know some farmers. And I do know some business people. And I do know those who take financial (and in some cases professional) risks every day.

    We are in an interesting position at the Almanac – in that we are very thankful to Ladbrokes for the support they give us (a contribution towards printing the annual publication). And to our sponsors generally. You will notice that Ladbrokes don’t expect home page space. They are offered a significant ad in our printed publications – which they take up. Every year that ad generates an email or two – especially from parents of younger kids who love reading The Almanac. This has led to some very polite, respectful conversations about the whole issue – one, in particular I remember, with a GP, who has young kids and who sees the effects of gambling first hand.

    Ladbrokes invites the Almanac to encourage Almanac readers to take up an account. In four years or so, a total of twelve Almanac people have opened Ladbrokes accounts. I only know the number of new account holders – there are no personal details involved. I know some of them because I invited them personally to join up.

    The almanac website reaches a large number of unique email addresses each year – around 200,000. Yet we have only 140 members – members are people who are happy to pay $100 to support the almanac like they would their own footy club. We hoped for 300+ members in 2019. We also invite people to make an occasional or even regular contribution. We have less than 20 readers who have made a payment over the last 6 months.

    So how much do people want the almanac?

    The path of independent media is rocky.

    And what support is it appropriate to court, and receive?

  5. Interesting argument PB and interesting thread. Am I my brother’s keeper?

    The gambling ads before the footy annoy me I must say. Not because I have a thing against gambling (everyone should make up their own mind) but because it trivialises the game. Like, who’ll kick the first goal? I could not care less. Banal consumerism.

    I must say I also rally against the all pervasive crusaders who continually tell us how to live our lives – don’t drink, don’t smoke, don’t gamble, don’t yell at the footy, don’t challenge the muddled intolerance of sameness. Don’t, don’t, don’t. Drives me to, errr, drink.

    But we need to balance that against the need to help those who fall. Therein lies the conundrum.

    With democracy comes responsibility. Individuals cannot abdicate this and neither can businesses.

  6. Dave Brown says

    Good work, PB. I’ve had one or two rants over the years in this general vicinity. There was an Australian Crime Commission (I think) report going back a few years that chronicled the rise of sports betting in Australia from almost nothing in 2000 to the megalith we have now. Remember when the only gambling you could legally do on the footy was the KG (I think) fronted TAB adds for the SANFL games with 12 point (I think) margin ranges? But back to the report, it suggested that Australia’s booming sports betting industry combined with the comparatively small reach of the sports involved made for the perfect breeding ground for match fixing. We have seen it in challenger tennis and Victorian soccer but you do wonder what we haven’t seen. Other than that my goal is to ensure my kids understand the maths of the sports betting that is thrust in their faces.

    My personal beef is the pokies, they are pure poison. Pokies would not be viable without the profits from problem gamblers and the industries/sporting clubs involved know this. It is no surprise for me that the clubs with the greatest disciplinary problems in Adelaide local footy are the ones that run pokies. Easy money extracts a high price from communities.

  7. Phillip Dimitriadis says

    Comprehensive and sober analysis and stats PB.
    Glad Easton Wood is taking a stand. Maybe if more players step up, it will be good for young fans tempted to part with their hard-earned. In the end, it is always our choice, but it wouldn’t hurt to be bombarded less.
    Terrific piece. (One day at a time and easy does it) Cheers

  8. Rulebook says

    Sobering and thoughtful analysis,PB it scares me kids no the odds for a game inside out and it trivializes gambling well done,Easton Wood hope other players follow his lead

  9. Back in the sixties, Peter Darley, the champion SOUTH ADELAIDE RUCKMAN AND ORIGINAL JUMBO PRINCE (ask Neil Kerley) was approached just before a game by a leading umpire and offered money to play poorly, ensuring South lost. Darley duly reported the incident.

    I can only assume some form of gambling was in place for that particular match. As you can imagine it caused uite a storm.

  10. E.regnans says

    Thank you, Peter_B.

    I hear the nanny-state arguments.
    I also see people harming themselves & others.

    Is there a role for societal protection?
    e.g. tobacco advertising ban, compulsory seatbelts, drink-driving laws – all introduced as a way to help people. And to help reduce the strain on hospitals/ medical providers/ government service provision. Seems related.

  11. Do you know what your kids are doing on their devices? And what it could lead to? Scary evidence coming out of UK about how teenage gaming and sports is a gateway drug for young adult compulsive gambling. https://www.bbc.com/news/stories-49941610
    I see it weekly. Corporate bookies – your children are their future victims.

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