The past decade has seen a major decline in the importance of the old parimutuel wagering model which sustained Australian racing for much of the second half of the 20th century.

The value of the joint ventures which Tabcorp entered into with Principal Racing Authorities (PRAs) has diminished significantly as the corporate bookmaking sector has boomed.

The landmark 2012 race fields High Court case – in which Racing NSW was essentially granted the right to charge corporate bookmakers what it wanted for its product – ensured that revenue has continued to flow to the likes of Racing NSW and Racing Victoria, who have not only just been able to ‘keep the lights on’ but have also been able increase returns to owners significantly off greater ‘engagement’ through an energised and expanded wagering industry.

This week’s Racing Victoria annual report detailed exactly how much the landscape has changed. In 2012/2013, the Joint Venture returned $209 million to the Victorian industry, representing 72 per cent of the total wagering revenue. In the 2021/2022 financial year, that amount dropped to $129 million, just 33 per cent of the overall wagering pie.

Through the race fields ruling, Racing Victoria and the other PRAs have been able to supplement a dying revenue model with a more vibrant one, which has grown to replace it.
It would seem the perfect solution, except for one aspect.

The Victorian Government’s Joint Venture agreement with Tabcorp ends in August 2024.

While the value of the agreement has diminished significantly to both parties, there is still the matter of the $129 million it spits annually into the coffers of the industry. That amount may be less in a couple of years’ time, but it is still a significant chunk of change to find under the couch.

RV addressed this in the annual report, indicating, in language typical of such corporate publications, the uncertainty that exists on what it says is a ‘material’ aspect of the funding landscape after August 2024.

“In connection with the review of licence terms beyond 2024, the Victorian Government has indicated that the historic joint venture industry funding arrangements between industry and licensee are likely to be discontinued at the conclusion of the current licence and will need to be replaced with an as-yet unknown alternative industry funding framework,” it read.

“The industry is engaging with the Victorian Government regarding these matters and will be seeking to protect the industry’s historical funding and a range of other important access and coverage rights and benefits going forward.”

In other words, the industry doesn’t know what the solution might be and if the government does know, they aren’t telling, not until after the upcoming state election on November 26 anyway.

The ‘exclusivity’ model which powered the current joint venture agreement appears to be dead and it is possible Victoria may end up pushing out into uncharted waters for an Australian jurisdiction.

The shock abandonment of the WA TAB sale recently speaks to the volatility of the wagering market. New player BetR, run by Matt Tripp and part-owned by Newscorp, was set to swoop in and claim the retail monopoly in Western Australia, but something about the deal didn’t stack up for the McGowan government and they pulled the pin.

That’s not to say BetR may not be able to strike a deal with the Victorian government in the future, or for that matter any of Sportsbet or Entain or anyone else, but it does speak to just how uncertain things have become.

Racing Victoria’s own report states that its overall wagering revenue actually dropped in 2021/22, the first time that has happened in recent memory. It attributed that to the lingering impacts of COVID lockdowns, however it is another note of caution in uncertain times.

New Racing Victoria CEO Andrew Jones sounded further notes of concern in his introduction to the annual report.

“With COVID behind us, turnover is moderating in the first half of FY23. We are returning to a more normal operating environment and facing macro-economic headwinds including increasing interest rates and inflation,” he said.

RV has today released its results for the 2021-22 financial year, in conjunction with its 2022 Annual Report, which demonstrate the Victorian Thoroughbred Racing Industry remains in a healthy position

Full story here: https://t.co/QtrG1ZbIiE pic.twitter.com/LkIyjITJQ0

— Racing Victoria (@RacingVictoria) November 14, 2022

Added into this is the greater costs of operations, especially with a media-led strategy through the integrated media business, which Racing.com sits at the centre of.

It is notable that media services expenditure for Racing Victoria in 2021/22 was $61.2 million and for the first time surpassed the operational expenditure of ‘running the show’, with marketing, racing, integrity and veterinary and administration adding up to a combined $61.1 million.

A raw comparison to 2012/13 shows that combined operational/media expenditure has increased by $43 million in nine years, while returns to owners through prizemoney have jumped $98 million.

That $140 million jump in those costs has been more than offset by additional annual revenue, over $250 million, and a significant chunk of that, $63.8 million to be exact, is through Point of Consumption Tax (POCT).

POCT was anticipated to be one of the bulwarks against the end of the joint venture and it is helping ease the transition, however, it is still well short of making up the difference.

It may be part of the solution but is far from the whole solution and in the very unlikely event that the entire joint venture revenue was to just disappear it would leave the Victorian industry in a very dark hole.

The concern for Racing Victoria is that it is reliant on the state government to engineer the ‘post-joint venture reality’.

We are living in more chastened times, where the funding decisions of governments are more closely scrutinised and politicised. It’s also a fact that there are political parties of influence in the Victorian parliament who aim to end racing and they could exercise that influence to stymie additional investment or new agreements.

That politics could play such a major role for finding a solution to replacing that joint venture funding should be of concern to everyone involved in the Victorian racing industry, not just Racing Victoria.

And the fact that they are less than two years away from that date and are still none-the-wiser should also ring an alarm bell.

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