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Brian De Lore - Article

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Governance of New Zealand racing still in the 20th Century   

Brian de Lore

"We are quite happy to allow planning processes to go on forever. It's not the big that eats the little, it's the fast that eats the slow."

Those are the frustrated words of Employers and Manufacturers’ Association chief executive Kim Campbell uttered a few years back when asked what it was that impeded the Kiwi psyche in business.

Campbell’s statement could be applied to the psyche we have in New Zealand racing industry governance today – “happy to allow planning processes to go on forever,” followed by a racing industry that continues to contract and disillusion the bulk of its participants.

The brief history goes like this: racing was doing fine until the late 1980s. The economic crash of 1987 followed by the internet and technology revolutions of the 1990s brought globalisation and since then we have been gradually losing ground.

Racing clubs started the TAB in 1951 but before long the Australians came, looked and copied the model before opening the Victoria TAB in 1961. Their prolific betting, larger population (they bet A$2.10 per head for every NZ$1 we bet) soon produced higher revenues, superior betting services and consistent, sustainable profits for a healthy racing industry.

Then the big game-changer occurred in 1993 when the Northern Territory state government licenced Sportsbet, the first non-government organisation allowed to provide betting services in Australia. Three years later Centrebet became the first company to offer on-line betting – the tide had turned forever.

With dwindling race crowds and on-course betting in the late 1990s coinciding with a burgeoning on-line betting industry, the Australian government stepped in with the Interactive Gambling Act of 2001.

The Act served to rein in the on-line bookmakers’ free-for-all that had been tolerated till then with a strict rules and guidelines, but then further game-changers appeared in 2007 and again in 2010 with the respective introduction of smart-phones and iPads/tablets.

As technology advanced more on-line bookmakers joined the game, necessitating the drafting of race fields legislation to force them to give something back to racing. They were hurting the tote and paying nothing for the use of race fields and other relevant data.

Sportsbet and Betfair contested the race fields legislation in the High Court and after dragging it through the legal mire for four years, a landmark ruling was delivered in March, 2012 in favour of Racing NSW. The 1.5 per cent of turnover amounting to over A$100 million that had been held in trust for those four years was freed-up to allow Racing NSW CEO Peter V’landys to announce massive prize-money increases for the state.

The door was now open for New Zealand to follow but, more than five years on, we are still working through the legislation for our own race fields. That Kiwi psyche kicked-in; we were slow leaving the barrier and have continued to fall further behind our counterparts across the Tasman.

My reasoning for regurgitating this 25-year history is to emphasise how much the game has changed and then to contemplate the doubling of that amount of change over the next 10 years. That’s where technology is taking us – to a place unknown.

Meanwhile, it may be this time next year or even further down the track before race fields legislation is introduced to Parliament, undergoes three readings and is then passed into law. Presently it’s in draft form only, still requiring fine tuning, and from what the writer has learned is ‘low priority’ from a government viewpoint.

The racing industry viewpoint is race fields is ‘high priority’ because for each year that flows by without it being passed into law it’s costing the thoroughbred code alone $10 million that could go straight into stakes.

And that $10 million is potentially $20 million annually, because at present Australian betting on New Zealand racing represents only 3.2 per cent of their turnover. Unlike harness (6.7 per cent) and greyhounds (6.5 per cent), the gallops have been poorly marketed across the ditch and so the potential to double the percentage, given its exclusive time zone, is a very real one.

Aside from race fields legislation, which NZRB CEO John Allen promised us in this session of Parliament in his February ‘talking to the industry tour,’ the fixed-odds betting platform which is part of the $60-75 million NZRB spend and was promised for early next year, is unlikely to arrive before the start of the 2018-19 season.

Late last week in a call to NZRB Head of Communications Kate Richards, The Informant was told: “The FOB platform has been agreed to in the partnership with Open Bet and Paddy Power but it’s impossible to say how long it will take to implement – current estimation is that it will start in 2018-19 season. The Board has approved the partnership to start the process.”

Does the time-frame blow-out also mean a budget blow-out? Cynicism for that comes from a perusal of annual reports, statements of intent, and budgets released by the NZRB over the past six years that show a series of under-estimated costs and over-stated returns.

For example, in the NZRB Annual Report for year ended July 2012, the budget for employee expenses was $43,660,000 following the previous year’s actual of $41,149,000. But the actual for 2012 blew out to $47,155,000 – an additional $3.5 million over budget.

Between 2012 and the year ended 2016, total revenue for the NZRB increased by more than $50 million ($301,881,000 to $351,923,000), yet the thoroughbred industry stayed ‘flat-lining’ in terms of its returns. Why? Simply because costs at NZRB were and still are spiralling.

Is this the reason – or one of them – that prompted NZTR Chairman Alan Jackson to write the following in the Chairman’s Annual Report published in the November, 2016, edition of the Thoroughbred Monthly:

“Looking forward, there is only so much more running to stand still the Code can sustain. We cannot have another financial result like the current one, and we cannot simply continue to reduce the number of meetings and races to raise stakes.”

As stated previously in this publication, the NZRB wages bill has now soared to $66,824,000 as per the P&L of the NZRB Financial Statements for year ended 2016. Unacceptable in a public company environment, the difference here is that the NZRB came into being as a result of a now completely outdated Racing Act of 2003.

The Act and especially Clause 16 is probably some of the dumbest legislation ever passed. It gives the NZRB carte blanche on how much they return to the codes with no accountability on their costs. It was written by bureaucrats for bureaucrats and has placed us where we are today.

Back to the governance of racing, it’s not the fault of the NZRB but the government of the day and the legislation they passed that has put us in this hole. The NZRB comprises a group of people that don’t have their livelihoods at stake in racing because they are mainly corporates, marketing and IT people, whereas NZTR and fellow code governing bodies comprise in the main people with a vested interest.

Ironically, the people at NZTR didn’t want to talk to me for this rant but the NZRB obliged.

But it’s the NZRB that’s setting off down the path to its own FOB platform and an app for smart-phones, all at massive costs in world that will continue to leave them behind in technology.

With at least 12 major bookmaking companies operating on Australian racing, some of which spend $120 million annually on IT to retain or gain market share, how could we believe our TAB could be competitive long term?

Tabcorp recognised some time ago that scale was required to compete against the bookmakers. It’s now a massive, integrated betting organisation that supports all forms of wagering and is the rock that provides revenue for racing.

Tabcorp is currently in the process of taking over Tatts (Ubet), which is the Queensland equivalent of our TAB. They have signed a deal which now only requires ACCC approval for the corporate merger. The deal will strengthen Tabcorp and save Queensland racing hugely in annual expenses.

Tabcorp services also include retail, digital and sky media platforms – their strength provides stability for a strong Australian industry. Scale gives them competitiveness in today’s globalised wagering business which gives better service to punters and more back to racing.

So why is the NZRB going it alone and risking massive capital to develop its own technology to compete against Tabcorp and the bookmakers who possess far bigger scale and budgets?

The reason New Zealand doesn’t own its own banks is simply a consequence of scale. We are not large enough to go it alone when the market is global.

Why wouldn’t our TAB instead outsource all betting services to Tabcorp and became part of the scale that would provide more certainty for our racing future? The answer may be in the DNA of the NZ psyche previously mentioned.

Outsourcing to Tabcorp would provide $50 million to $70 million of savings over the three codes in annual expenses. Those savings would transform racing in New Zealand as we know it. But the catch-22 is that most at the NZRB would lose their jobs because that’s where the savings lie.

Instead, the racing business is all-aboard the Titanic and heading into the North Atlantic knowing there are icebergs to negotiate. And is the NZRB the band that continues to play while rearranging the deck chairs?

But just maybe it’s not too late to head back to port and replot a safer course?

 

 

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2 hours ago, rdytdy said:

Does the time-frame blow-out also mean a budget blow-out?

My mole on the inside says that this is exactly what is already starting to happen...

This article is spot on in many aspects. The other thing is as punters head to new partners they will find it hard to come home regardless of what the ex promises.....

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23 minutes ago, Insider said:

The best essay that I have seen by anyone in on 'where we have got to'.

Leggy, I can't find fault with any of the facts, 'as they are written' and I have lived through the whole of that time and been involved in all aspects of the game throughout it. 

Yes, so have I Insider and I don't dispute any of the historic facts. Just this:

The racing industry viewpoint is race fields is ‘high priority’ because for each year that flows by without it being passed into law it’s costing the thoroughbred code alone $10 million that could go straight into stakes.

And that $10 million is potentially $20 million annually, because at present Australian betting on New Zealand racing represents only 3.2 per cent of their turnover.

I think you can divide that by 10 and the author didn't challenge it. There's probably a good reason why NZ racing represents such a small percentage of Oz turnover and I don't think it has anything to do with marketing. Shit is hard to market and that needs addressing.

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I agree, shit is hard to market. Sadly the longer we race for peanuts, the longer we will be trying to market shit. 

However, so long as Kiwi's continue to bet with overseas betting agencies/bookmakers who don't pay us a penny for the intellectual property, then the longer we will race for peanuts. 

Whether we stand to gain $1million, $5million, $10million or $20million per year I don't know and neither do you. In fact no one knows, so unless every single overseas betting agency was forced to collectively tell us what Kiwi's bet,we are all stabbing in the dark.

However just with the what the contributors to this site are saying there are plenty of defectors from the NZ TAB. 

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Yep, grand article.

Well written and easily followed.

My only query was as stated by Leggy. ..viz the 'marketing of NZ racing ' observation...tbe product is crap and cannot be easy to promote.

We must remember too. that visually , our racing was not. generally, subject to much competition from overseas product. I'm not referring to the technological side. just what the ordinary racing enthusiast might be able to watch on a consistent basis.

Now of course we are flooded with racing from all over the world, and we don't look good in comparison.

Chances are we never did - but we didn't know and neither did punters!

Edited by Pam Robson

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Great article and about time.

Having been at the coal face, this is very accurate in its assumptions and interpretations. It was suggested long ago to outsource to Australia, and were told , " that will never happen!". They, NZRB, operate like a big lazy monopoly. It's a big slow wheel in Petone and beyond and it takes a lot of feeding($). 

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16 minutes ago, CosmicBlackie said:

Great article and about time.

Having been at the coal face, this is very accurate in its assumptions and interpretations. It was suggested long ago to outsource to Australia, and were told , " that will never happen!". They, NZRB, operate like a big lazy monopoly. It's a big slow wheel in Petone and beyond and it takes a lot of feeding($). 

What I've learned in my life is, with a problem, list the 4 or so main factors that will improve the situation. Sort possible solutions, check out the worst case scenario if they don't work but at least make a decision. In any dodgy situation the worst thing you can do is NOT make a decision. How can these so 'learned' people carry on an industry this way?

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Just relax everyone, the pie warmer is working, overseas junkets are still a regular affair, the Lion's matches will be just grand from the $45,000 tables, everyone in Petone is safe after that little tremble, the Members Council is still working like a Nigerian bank, the Trainers Assn is working like a well oiled Lada, and the nine to five Monday to Friday set are doing just fine so racing must be good.

You're getting what you deserve because you deserve what you get.

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Good article...NZ needs higher stakes and renewed ownership interest to rebuild the Industry from the bottom up !

If a global sale / joint venture is the best option at the Petone Fat Cats expense...so be it , be good for the racing Industry.

They,ll find another over-paid job somewhere with savories and Latte,s supplied...will look good on the signatory of the deals CV also !

Hey, what does Nathan Guy get paid for ? sorry for my Ignorance !  

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13 hours ago, Leggy said:

Yes, so have I Insider and I don't dispute any of the historic facts. Just this:

The racing industry viewpoint is race fields is ‘high priority’ because for each year that flows by without it being passed into law it’s costing the thoroughbred code alone $10 million that could go straight into stakes.

And that $10 million is potentially $20 million annually, because at present Australian betting on New Zealand racing represents only 3.2 per cent of their turnover.

I think you can divide that by 10 and the author didn't challenge it. There's probably a good reason why NZ racing represents such a small percentage of Oz turnover and I don't think it has anything to do with marketing. Shit is hard to market and that needs addressing.

True Leggy, however in marketing jargon it becomes about "cut through"... having your voice heard in a noisy environment. With the amount of racing on offer domestically over there every day of the week, we would equate to a whisper very few hear. Apart from major Carnivals where they might make more of an effort, the average Aussie punter wouldn't give us a second thought.

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1 hour ago, rdytdy said:

Well he did nothing for racing and now has nothing to do with racing Porky.

David Bennett is now the current Minister For Racing. 

 

On 4/24/2017 at 3:29 PM, We're Doomed said:

It would be hard to imagine he would be any worse than the incumbent.

Can't see that he will have much time for racing:)

Trans-Tasman relations: Long-distance love for Hamilton East MP David Bennett, who confirms he is in a relationship with Australian senator

6:48 PM Saturday Dec 24, 2016
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Victoria senator Bridget McKenzie, left, and Hamilton East MP David Bennett pictured at a Taupo running event. Photo / Supplied.Victoria senator Bridget McKenzie, left, and Hamilton East MP David Bennett pictured at a Taupo running event. Photo / Supplied.

Many politicians struggle to find enough time to spend with their other halves - but David Bennett has taken long-distance love to the extreme, dating an Australian senator.

In a boost for transtasman relations, romance between the fourth-term Hamilton East MP and The Nationals Senator for Victoria, Bridget McKenzie, blossomed after the pair met at a parliamentary sports weekend.

Bennett, elevated by Prime Minister Bill English to a ministerial role outside Cabinet last week, confirmed the relationship when contacted by the New Zealand Herald today, but said both were private people who did not want publicity over the romance.

"We are trying to keep it quite private."

However, he confirmed the pair met when a group of Australian politicians travelled to Auckland early last year for a sporting exchange.

They played each other in netball, cricket and football, first meeting on the netball court - although it was more memorable for him, Bennett said.

"She can't remember that we actually played against each other ... [I remember], she was the captain of her netball team, she was very competitive."

 

They had been a couple for about 18 months, and saw each other during work trips or weekend hops across the Tasman, he said.

Both were career-driven and sharing the same vocation helped.

"Definitely ... in politics it's a bit easier to have a partner that can understand."

Neither had plans to move permanently to either Hamilton or Melbourne at this stage, he said.

Cheers Hesi... Didnt see this Post...Have found it just now!... after Ted enlightening me of the new minister.

...in Bed with an Aussie...could be hope yet Ted! 

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I keep repeating myself but again I say, If the Board is serious, it just has to give the order to the Executive, " find 15% reduction in costs and present your planned reduction by end of month." There's a saving of about $7m for starters. They should start the ball rolling by declaring an immediate reduction in Board fees of 15%.

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9 minutes ago, hesi said:

And a 1% levy on all wagering to go directly into a Marketing and Promotion fund and double up on that to go to  an Infrastructure Fund

The article glosses over the lack of what was ever done by Racing as an industry to compete 

You can't expect to keep market share if you don't promote to each new generation

We already have some of the highest take outs on the punting dollar in the world leading people to bet offshore, so taking even more take out will only lead to the TAB becoming even more uncompetitive meaning a further decline of punters in NZ.

They should have been able to manage M & P and Infrastructure on what they have been getting by being management proactive, not reactive as you suggest meaning further customer decline .  

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up until about 5 years ago nz tab were able to keep the majority of there customers now those people have been using sportsbet, bet 365 etc like myself with promotions and better odds

if we started using promotions better odds etc 5 years ago we would be doing a lot better now its way to late the horse has bolted. Only the loyal and computer  illiterate

will continue to use the tab because there is no other sensible reason to do so.

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On 6/15/2017 at 7:38 AM, rdytdy said:

The Act and especially Clause 16 is probably some of the dumbest legislation ever passed. It gives the NZRB carte blanche on how much they return to the codes with no accountability on their costs. It was written by bureaucrats for bureaucrats and has placed us where we are today.

It will only be the dumbest legislation ever passed until they pass the Race Fields Legislation if they do. As I think I may have mentioned previously....

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43 minutes ago, Phantom said:

It will only be the dumbest legislation ever passed until they pass the Race Fields Legislation if they do. As I think I may have mentioned previously....

Why will it be?

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Because it's too little too late. Yes it will bring in some much needed revenue in the form of fees which overseas firms will happily pay for the right to offer betting on NZ racing, if only for the timezone. But the idea of trying to stop New zealand punters betting with overseas agencies is neither sensible nor practical, just a desperate ploy by the likes of Hughes and Allen to justify their salaries when it is obvious both are completely out of their depth in their current positions. Unfortunately it will not bring in anything like the pie in the sky numbers (I have heard $20 million) being touted by many of the current executives. They had the perfect model to copy in the Northern Territory, who were way ahead of the rest of Australia in licensing and taxing online racing and sports betting as Mr de Lore mentions in his article, The TAB even interviewed the head bookmaker of Centrebet for the role of setting up Sports Betting in New Zealand. Unfortunately, and crucially, they instead opted for two failed greyhound bookmakers in Gary Gray and .. I forgot the other bloke's name but he was last seen working for Moonee Valley JC (always on the mic). These guys milked the teet for all they could (and I will PM you a story Neil Sorensen told me personally) but basically knew nothing about sports betting. Sports betting could have saved the TAB but instead it destroyed New Zealand racing because they didn't understand the golden goose they had been given. It's too late now.

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