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  1. ONLINE GAMBLING An Australian perspective

  2. Overview • The development of online gambling in Australia 2. The legal framework governing online gambling in Australia 3. Market specifics 4. What it means for racing • Increased competition for gambling dollar generally • Increased competition for wagering dollar • Facilitation of free riding • Challenge to retail exclusivity of pari-mutuel • Stress to race club ‘bricks & mortar’ business model • What racing has done to improve its market share • Protecting racing’s intellectual property rights

  3. 1. The development of online gambling in Australia • Online gambling in Australia commenced in approx 1995 • Two types - • Virtual online gambling • Gambling on separate physical event • First attempts at virtual online gambling were slow casino-type games with simple graphics. By late 1990s full online casinos were being developed e.g. Lasseters Online – year 1 - 12,000 registered players (82% overseas residents), player registrations doubled every month • Gambling on a separate physical event. Centrebet – American Football – 20% of customers sourced from Scandinavia • 0-6% of Australians gambled on the Internet in 1998-99

  4. 2. The legal framework governing online gambling in Australia • Interactive Gambling Act (IGA) 2001 - prohibition on anybody offering online gambling to Australians. - prohibition on anybody advertising online gambling services to Australians. • IGA was a response to community concerns about levels of problem gambling - 1990s State Governments hungry for revenue. - Australia has the eighth highest per capita number of slot machines in world: one machine per 110 people (UK has one machine per 300 people) - online gambling seen as taking this one step further – “CLICK THE MOUSE AND LOSE THE HOUSE”. - 1999 Productivity Commission report. - online wagering exempted from ban – online gaming = shift from bricks and mortar to living room. Online wagering equivalent to telephone account wagering.

  5. The IGA ban has had limited effectiveness. To be more effective it requires: - Technological blocks impeding access to offshore gaming websites. - Financial transactions controls. - Resources allocated to prosecuting offenders. • The 2010 Productivity Commission report recommended that online poker be exempted from the ban as a trial of a regulation versus prohibition. The Australian Government rejected this recommendation. • The current political environment in which anti-gambling has suddenly emerged as a highly important issue means that no liberalisation of the IGA will occur in the foreseeable future.

  6. 3. Market Specifics

  7. 4. What it means for racing (i): Increased Competition for Gambling Dollar Generally

  8. (ii) Increased Competition for Wagering Dollar

  9. (iii) Facilitation of Free Riding • Symbiotic relationship between racing & wagering • TAB privatisation did not effect this relationship. In 2009 TAB paid some $500m to the Australian thoroughbred racing industry. • Internet has enabled new market entrants. These have achieved phenomenal growth: corporate bookmakers alone have gone from turnover on racing of $75m in 1999 to turnover of $3.5b in 2008/09. • In 2009, they now represent 21% of the market for wagering on thoroughbred racing. • Dilemma. racing produces 20,000 races a year which the wagering industry: tabs, on oncourse bookmakers, corporate and the betting exchange, all use to take bets. • But now we had some 1/5th of the wagering market paying nothing meaningful back to racing. • This is obviously unsustainable.

  10. Challenge to retail exclusivity of pari-mutuel • TABs currently have retail exclusivity • 2009 Rising Sun Hotel (Melbourne) makes available internet betting terminals to customers • June 2010 Victorian Commission for Gambling Regulation issues 12 charges – possession of an unauthorised instrument of betting, running a betting house.

  11. Stress to Race Club Business Model • The business model of race clubs based on attendances has come under considerable strain. One metropolitan club estimated a $23.00 cost to attract and cater for each customer attending a race meeting. The average spend per customer was $22.00. • In 2009 NSW race clubs collectively lost $13.9 million.

  12. 5. What has racing done to improve its market share • Development of the Free TAB Sportsbet I-Phone Application • Development of Sky Active, which allows users to bet and access information over the TV • Creation of Star Stable (fantasy horse racing game) • Agreements with phone companies to screen races on mobile phones.

  13. 6. Protecting racing’s intellectual property right • Classic case of free riding • ARB makes case for legislative reform to Australian Conference of Racing Ministers • Race fields legislation: irrespective of where they are based every wagering operator is compelled to – • Pay an appropriate commercial fee to racing • Provide the Stewards with access to betting records • Constitutional challenges • Productivity Commission