The Australian tote is dying, but does anybody care?

It tells you a lot about Australia’s historic obsession with horse racing and betting that the man who invented the totalisator, George Julius, was knighted for his work.

The complex machine, initially designed to count votes, found flight as an on-course method of calculating dividends for horse racing and having started out in New Zealand became a ubiquitous fixture at racetracks around the world, but was especially loved in Australia.

The ‘tote’ in Australia evolved from an on-course fixture to a retail powerhouse, from a machine to a method of bringing betting on horse racing to the masses. The TAB brand, established state by state as a government agency in the 1960s, brought wagering on racing from the bookies’ rings, racetracks and back alleys out into the main streets, pubs and clubs of cities and towns.

It was a retail phenomenon in democratising the Sport Of Kings in Australia, effectively pitting punter against punter in a pooled parimutuel system, with the government agencies acting as middlemen and readily taking the 18 to 20 per cent commission. A good deal of that was passed on to power the growth of the three racing codes.

The punters of Australian racing still had the choice of on-track bookies, or even the shadowy yet ubiquitous SP bookies, but mum and dad were off down the TAB for their fix of win, each way and exotic bets, with a promise of a ‘run for your money’.

But what was once a retail monopoly has now become a pariah. Privatisation in the 1990s saw shareholders given priority over returns to industry and innovation stagnated, leaving the incumbent ripe for the picking when corporate bookmakers rose off the back of regulatory and technology changes in the 2000s.

In 2008, just before the landmark Betfair v Western Australia High Court case opened the door for Australia’s corporate bookmaker revolution, the average combined win pool on an individual Saturday race in Melbourne or Sydney comfortably exceeded $1 million.

On the first Saturday of February this year, the comparative tote win pool for those was little more than $250,000.

Wagering turnover on Australian racing may have never been higher but the tote’s role in this is close to non-existent.

The numbers tell us the end is nigh for the tote as we know it.

A comparison between pools on the first Saturday of February this year and last year shows us that total win investment on Sydney racing across the three totes dropped an eye-popping 61.7 per cent, while on Melbourne’s major meeting it fell 52.4 per cent.

To put it in the context of raw dollars, in the space of a year the total hold in win pools on Sydney’s Randwick meeting dropped from $5.86 million to $2.24 million (down $3.62 million), while the fall from last year’s Caulfield meeting to the comparative Sandown meeting was a total of $2.6 million ($4.96m to $2.36m).

Place pools are also down, as are the majority of the exotic pools, although interestingly the ‘quaddie’, that Australian betting institution, remains strong.

The numbers suggest that some of the larger betting syndicates who used to bet into these win pools have moved on, but they also suggest a large public movement away from parimutuel betting.   

So does it matter if an outdated model dies out?

For racing bodies, it means less and less to their bottom line, while the corporate bookmaker model ploughs increasing amounts of money back into the industry through race fields fees and point of consumption tax, driving the lion’s share of wagering revenue.

There is not a lot of regard for the tote in the rest of the industry either. Prizemoney has never been better, so jockeys, trainers and owners are all bathing in a waterfall of funds. Meanwhile state governments are successfully back on the teat of the racing wagering machine thanks to point of consumption taxes which have targeted those who bet through corporate bookmakers.  

Within Tabcorp, the publicly listed company which controls the tote in all but one state in Australia, the parimutuel returns, and the retail exclusivity it enjoys off the back of that are of much-less importance than the yield it gets from its fixed odds betting business. There is little incentive to resurrect the tote, with the Victorian agreement set to expire in 2024.

So who does that leave? The customer. The punter whose investment is what is fuelling this boom, and who has used the power of choice to turn their back on the tote model.

One of the first to publicly note the drop in Australian tote pools, and also the substantial drop in the hold of betting exchange Betfair, was professional punter Kingsley Bartholomew.

Bartholomew doesn’t have a horse in the race when it comes to the tote. He has not bet through an Australian parimutuel for many years and sees it as an anachronism in the modern fixed odds landscape.

But Bartholomew feels what the massive decline of the tote does, in concert with the drop in Betfair pools and the decimation of on-course bookies, is leave recreational Australian punters in the future bereft of choice.

“It leaves you with the (corporate) bookies putting up 135 per cent (markets) and getting that down slowly to 120, maybe 115 per cent, everybody is left to bet into that pool,” he said.

“For the recreational punter, who is losing at a rate of 20 per cent plus, it will impact the amount they can turnover.

“They may be recreational punters, but these aren’t stupid people, they are not silly. They might not be smart punters, but that doesn’t mean they aren’t smart people. I feel like that group of people will lose interest in racing (if they don’t have market choice).”

What follows from that is a drop in engagement with racing as a whole, and a reduction of the power of racing’s much-discussed social licence.

“If we don’t have a competitive marketplace and we are losing both recreational and professional punters because they can’t turn over the money they used to, I just think it’s a real risk in the future,” he said.

Richard Irvine, another professional punter who is involved in the Wolfden social betting business with Bartholomew, said the death knell for the tote in Australia was signed when corporate bookmakers were able to offer ‘best tote’ products to customers.

But Irvine also points out that if a tote-free future means better returns to the industry then it is in racing administrators’ interest to let this happen. 

“When I look at it from a broader perspective, everyone is airborne, everyone is doing well,” he said. “I don’t anticipate turnover dropping and I would be happy for them to play on.

“For racing to be flying and making all this money, punters need to be stripped and stripped hard. You need that 18-25 per cent of pools to make that work.”

Indeed those that ‘put on the show’ have never had it better in terms of returns, but for those who provide much of the funding for that show, it is harder and harder to get mileage out of your punting dollar.

“If someone walks into a TAB with $200 they lose it, if someone walks into a casino with $200 they lose it. They stay in the TAB for an hour, but the casino for four hours, which one is giving them better value?” Bartholomew asked.

“The casino guy turned over more and lost the same amount, whereas the racing guy turned over less but still lost the same amount.

“I think the racing product is fantastic in Australia, but I’m looking to the future and asking what do we want the future to look like?”

It’s a discussion held in the context of the greatest cost of living crisis in Australia in a generation, rising interest rates and wagering coming off a COVID sugar-hit which most experts have acknowledged is not sustainable. Turnover has even softened in the bullish corporate bookmaker sector.

The corporate wagering environment is also in a state of flux, with Tabcorp, who lost its status as market-share leader to Sportsbet, having recently undergone a demerger of its wagering and media business, having to pitch for the continuation of its exclusive Victorian licence while fending off the rising ambitions and prominence of the two major challengers in the space, Entain and BetR.

It is also a contrast to what is happening in the major Asian racing jurisdictions of Hong Kong and Japan, where parimutuel, protected by a state-mandated monopolies, still rules supreme. There are significant differences in the racing and gambling culture of those places and Australia, but what it shows is that a tote model can still thrive under the right regulatory environment.

In an ‘open’ wagering market like Australia, the ideal is that many different forms of wagering can thrive. But the reality is much different and the Australian racing industry, for better or for worse, is welded on to the corporate bookmaker train for the foreseeable future.

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