Racing’s revival hampered by resistance to change

by Brian de Lore
Published 09 August 2019

Comparisons with Racing Industry Western Australian (RWWA) have often surfaced in these pages due to the western state being of a similar-sized industry to New Zealand.

Another shared feature is the geographical isolation of the two jurisdictions when juxtaposed against racing’s two super-power states of New South Wales and Victoria.

The Sandgropers as they are known are well to the west, and we Kiwis reside well to the east. Geographically Western Australia covers a far greater landmass at 2.65 million square kilometres against New Zealand’s 268,000 square kilometres – our land area would fit in WA’s almost ten times. But on the population score, we well exceed WA – 2.59 million for them while Kiwis are now up to 4.79 million (85 percent more).

Despite this seemingly distinct advantage, WA is very comparable to NZ in numbers of race clubs, racecourses, race meetings, races run but they offer higher prizemoney over the three codes – $30 million* higher due to the lower-cost administrative model under which they operate (one board against our five) and despite the high taxes they pay which we have now had removed.

All Three Codes	Western Australia	New Zealand
Attendances	823,000	614,678
Stakes Funding	$142 million*	$108 million*
Wagering Revenue	$322 million	$349.9 million
No. Administrative bodies	One	Five
Employee Costs	$41 million	$65m + codes
Senior Management	8	27
Population comparison	2.59 million	4.79 million
Thoroughbreds only	Western Australia	New Zealand
Race Clubs	54	62
Courses	38	48
Racemeetings	295	308
Races	2,212	2,568
Starts	20,942	26,666
Prizemoney Paid out	$61.2m	$59.3m
Racefields income	$58 m (WA race bets)	Nil
Economic Impact	$821m	$813.4

The NZ model is potentially superior, but they run racing efficiently, and we plod on with a clumsy, costly administrative structure.  RWWA make up for their lack of population with a more intense racing industry per capita than ours, which results in the economic impact of the two jurisdictions being virtually the same.

Why? Because Australians bet more per capita, so in the end, the population has nothing to do with the size of the industry. What’s important is the revenue from betting, the administrative structure, and the quality of the people in charge – NZ has fallen off the pace in all of those three very critical issues.

The NZ TAB failed to recognise the importance of the small punter and is now paying the price for its concentration on mostly its VIP and Elite customers – many of which have also now gone to greener pastures. It ignored the idea of customer service for the average Kiwi investor in the misconceived belief that the multitude of small and aging punters were no longer needed to make the TAB fire – how wrong they have been!

Peter V’landys as CEO of Racing NSW was confronted with a similar attitude a few years ago when the NSW TAB attempted to increase the minimum bet from 50 cents to $5.00. He stayed loyal to thousands upon thousands of small punters and fought against the increase and won. Racing, in his jurisdiction, has thrived under his leadership.

Our TAB did the opposite and thumbed its nose to the small punter, closing TAB stores, sacking 70 telephonist betting operators and expecting those punters to embrace touchtone telephone betting which they had never before used. The NZ TAB has, over the years, developed an appalling customer service reputation.

It has cost the New Zealand racing dearly in both turnover and defections to Australian corporates due to its failure to know the needs of the bulk of its customers and an attitudinal problem from the top down. The anecdotal evidence is everywhere you find racegoers – it’s a far cry from the organisation for which the race clubs raised the money and inaugurated for its launch in 1951.

The TAB completely lost its way with incompetent decision making by people appointed for all the wrong reasons. Former NZRB CEO and now RITA CEO John Allen was clueless two years ago when arguing the Fixed-Odds-Betting (FOB) that he was planning was not aimed at global customers but instead for the New Zealand domestic market alone.

Nothing has changed except he will now realise the concept of building something superior with a smaller budget than overseas betting operators was always pipedream doomed to fail. The scale of IT development, the scale of the customer base, weight of money and a global mindset was always going to see any number of overseas betting operators outperform the NZ TAB

As well, sports betting is what the NZ TAB FOB platform is all about (not racing, although racing has paid for it) and the net margin on fixed-odds-betting is low at around five percent because the NZRB at the sign-up time agreed to pay $17 million per annum in fees to Paddy Power and Openbet.

Betting on the tote on horses returns 14 to 15 percent which is good for racing, but the thoroughbred turnover has been cannibalised in favour of sports betting, which is the main thrust of the TAB’s promotions.

And while Allen was building the FOB platform for $25 million which turned into $50 million-plus $17 million per year in fees, RWWA was busy negotiating the outsourcing of its FOB platform to Tabcorp for an annual fee of $A7 million (no building costs) and collecting its Racefield levies which last season returned that jurisdiction $A58 million.

Which jurisdiction is being well run and which isn’t? Imagine that; instead of building your own, simply outsource to an organisation that is technologically well-advanced, has the software in place, and then plug-in for a fraction of the cost. Did it make too much basic common sense for Kiwis?

RWWA has only one board and eight executives but gets its stuff down with committees compared to New Zealand’s five boards and 27 executives – NZRB (RITA), the three codes and the RIU. It’s blatantly over-structured, over-complicated and an overly-expensive form of administration.

Now we are into a new season, and the status quo is not an option. The industry needs some action, but you get the feeling as one-week rolls into another that the pace of change isn’t happening fast enough for most participants

New Zealanders appear to suffer from a resistance to any dramatic change, and it’s recidivous. The unconscious resistance to adopting radical change is the biggest single issue holding back New Zealand’s so far tentative move to resurrect the racing industry.

This misguided thing about sovereignty has always held us back – nothing has changed. We need to think of ourselves in racing terms as just another state of Australia from which we would benefit markedly on the score of the scale of operation.

Some stakeholders seem to believe outsourcing is akin to selling your soul, but the NZ TAB outsourcing would be more about negotiating a joint venture which might be a ten-year deal but would provide the industry with much needed up-front cash and a lower expense account for the future and much-improved bottom-line – resulting in higher stakes money.

Messara outlined a very doable plan in his review. The Minister reacted favourably last September by saying, “we haven’t engaged an Australian expert to write a comprehensive review and then disregard his recommendations,” and less than a month later he also said Messara would have an ongoing involvement which has never officially happened.

It was at that point that the Department of Internal Affairs (DIA) butted-in with too much influence and racing is now paying the price for its snail-pace, bureaucratic involvement.

The DIA was responsible for the terms of reference for MAC which stated, “…will involve the Committee gathering and analysing a wide range of inputs and carrying out engagement, investigation, and analysis about the effects of specific proposals under core areas of the Messara Report, including:

• the governance and structure of racing;
• finance and distribution to the codes;
• new legislation to support the various dimensions of racing reform;
• wagering and the TAB;
• club consolidation, racecourses and prizemoney; and
• any other matters that the Committee considers relevant to its work, including establishing the Racing Industry Transitional Authority (RITA).”

It was the gathering and analysing part that didn’t ring true enough – reeking of a bureaucratic takeover whereby the DIA assumed the role of scriptwriter and pacemaker. Historically the DIA knows nothing of racing and is inherently strong in its anti-gambling stance. Its wording displayed a distrust of the reviewer, so they wrote a script to review the reviewer in lieu of the Minister telling RITA to do it urgently.

As a result, we now have about 10 committees and sub-committees reviewing various aspects of the Messara Report to decide whether or not the 17 recommendations will work.  It’s a hypochondriacal assessment of the expert by non-experts – the DIA.   

It’s no different to going to the doctor, getting diagnosed, picking up the prescription but then developing some misguided suspicion and over-evaluation of what the side-effects could be.

The New Zealand Racing Industry has a similar mindset – it’s not generally a pill-taking industry. Kiwis have a penchant for the status quo. It’s in the DNA and has shown-up again in this reluctance or lack of speed in taking medicine which in this instance might rectify the problem.

The medicine came in the form of the Messara Report. The doctor said you must take these pills and take them quickly. What did we do; we brought home the pills, placed them on the kitchen table, and are still looking at them. Now we are looking for a second opinion.

A year ago when we received the pills our condition was dire.  Now it’s chronic.

It could be psychological – a fear of change, or progress or adaption. Seemingly, we are yet to develop a level of tolerance to change that will allow us to deal with transformations without compromising too much of our psychological imbalance.

Are we doing it again- more paralysis by over-analysis? The model’s been set out before us; now let’s just do it!