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Friday, November 18, 2005

Betfair decision

Stateline Tasmania

AIRLIE WARD: Tonight on 'Stateline' - the Betfair decision - the supporters and the doomsayers and just how does it work.

MARK HEFFERNAN, PROFESSIONAL GAMBLER: Betfair is a betting exchange like a stock exchange where you buy and sell shares. A betting exchange is where you buy and sell a horse's chance of winning or a football team's chance of winning a particular event.

AIRLIE WARD: And the quest to protect an endangered native flower.

EVE LAZARUS: So this situation her is perfect for it where it gets to flourish underneath all the spiky bits so the animals don't tend to come in and try and get into it.

AIRLIE WARD: Hello, I'm Airlie Ward. Tasmania's love affair with gambling started when George Adams was driven out of Victoria and New South Wales by anti-gambling forces. He got a friendly reception in Tasmania, where the impoverished State Government was looking for every additional penny. Now a latter-day Adams in the form of Betfair co-owner Edward Wray and media proprietor James Packer have pooled resources to persuade Tasmania to give them what no other State would - an Internet betting exchange licence. Just as Tattersalls thrived in Hobart 100 years ago by selling its chance of a fortune to gamblers interstate, Betfair aims to use the Tasmanian licence to create new business opportunities and profits. Soon we'll speak with the Premier, Paul Lennon, but first Angela Cameron found out just how Betfair works and why social welfare groups don't like it.

ANGELA CAMERON: So, Mark, firstly can you tell me what Betfair is?

MARK HEFFERNAN, PROFESSIONAL GAMBLER: Betfair is a betting exchange, like a stock exchange where you buy and sell shares, a betting exchange is where you buy a horse's chance of winning or a football team's chance of winning a particular event.

ANGELA CAMERON: Mark Heffernan has been a bookmaker for 24 years. He started using Betfair about two and a half years ago and has never looked back. He reckons it's the top choice of the betting exchanges on the Internet because it's the only one listing Australian races. In his opinion, it's also superior to other types of betting. How's betfair different to other types of betting?

MARK HEFFERNAN: It's different in the horse racing scene where with the normal Tabcorp all you can do is back a horse to win. Here you can pick a horse that you think won't win and make money out of it by laying it on Betfair.

ANGELA CAMERON: And why do you think this type of betting is better for punters compared to, say, the TAB or other types of betting?

MARK HEFFERNAN: Because Betfair only take 5% out of your winning bet, it's better for punters because you get a better price than with the TAB. And it also offers you the opportunity if you don't know which horse will win you can still get interested in the race by laying the horses you don't think will win.

ANGELA CAMERON: So can you show me how you would place a bet?

MARK HEFFERNAN: Well if you'd laid Serenade Rose in this race at $2.54, you click on the price which has now gone out to 2.56, you put in how much you want to lay on the horse. The minimum bet is $6 and then you submit the bet and then it tells you what you've got. So we've matched a bet of 6 dollars on Serenade Rose at 2.56. And then it comes up on the left-hand side, that if every other horse wins, I win $6 dollars, and with Serenade Rose, I lose $9.36.

ANGELA CAMERON: The betting to lose aspect of Betfair seems to be the controversial side of it. There are claims that it opens it to corruption. Why do you think that can't happen with Betfair?

MARK HEFFERNAN: Because if someone wanted to pull up Serenade Rose in the Oaks, it's something like $500,000 to the winner. Who's going to go to the owner of Serenade Rose and say pull your horse up for $100 or $200 what you'd lay on Betfair. It's just not logistically possible.

ANGELA CAMERON: Punters placing a bet with Betfair have to set up an account using an identity check, which pleases welfare groups. But they're still convinced problem gambling will increase once Betfair starts advertising in Australia.

MAT ROWELL, TasCOSS: There is a direct link between advertising and problem gamblers - prevalence of gambling. So we know that people are likely to gamble more if there's a lot of advertising about gambling.

ANGELA CAMERON: A customer can restrict the number of bets they make in a specified period. And there's also a cooling-off period if you want to increase your limit, so isn't that enough to try and reduce problem gambling?

MAT ROWELL: Certainly a cooling-off period about raising your betting limit is a safeguard, but the site also contains an active loyalty program which Access Economics in particular raised some real concerns about in relation to, I guess, hooking problem gamblers in to gambling more frequently and to actually penalising people's accounts if they don't gamble frequently enough.

ANGELA CAMERON: Then, of course, Betfair argues there's another positive that it's giving 4% of the 15% tax rate applied to all Australian events to the community support levy. Won't this help?

MAT ROWELL: It's actually hard to quantify what is a reasonable amount of money to provide to a family who've been destroyed by someone's problem gambling. So we believe strongly that until we see some solid figures about how much money's actually going to be flowing into the community support levy, that it's not going to support the need.

ANGELA CAMERON: Why such a big campaign against Betfair when poker machines still represent the biggest problem?

MAT ROWELL: By granting a licence, without thinking about the future implications, then it's always very difficult to roll it back. So we know that the poker machines have gone out and because they've become such a cash flow for business and for government, then it's very difficult for us to try to bring back those things. So we think that granting a licence before having done any solid research is irresponsible in that way. Access Economics again also recommended that all State and Territory governments conduct a full socio-economic impact study before granting any licence because they raised concerns about a potential explosion of this type of gambling.

AIRLIE WARD: So can the Premier, Paul Lennon, turn his back on his Labor colleagues interstate because he can afford to? Betfair is tipped to pump $40 million into the State racing industry by 2010 and $10 million a year into the Government coffers. I spoke to him earlier today. Premier, thanks for your time. You're a gambling man. Have you used Betfair?

PAUL LENNON, PREMIER: No, I haven't. I tend to use the TAB and I probably still will. I doubt very much whether the amounts which I bet are sufficient for me to worry about a Betfair account. Of course that's the point, isn't it? Betfair is not a service that is likely to be accessed by the everyday punter in Tasmania or elsewhere for that matter. It is more for the bigger players.

AIRLIE WARD: Can you guarantee it won't lead to an increase in problem gambling?

PAUL LENNON: Look I'm almost absolutely certain that that won't occur but in any event we're going to apply our harm minimisation rules to this licence should the legislation pass both houses of parliament. As we do to other gambling activity licensed by Tasmania. That will allow for self-exclusion, for third party exclusions and for the setting of limits. But in the main I expect that this service will be accessed by larger players.

AIRLIE WARD: Why not do a social and economic impact study though?

PAUL LENNON: This service already operates. It already operates in the United Kingdom. It operates in Australia. It's not regulated, it needs to be regulated. There's been considerable study done on horse racing and sports betting. I don't think it needs another study. What needs to happen here is this service needs to be licensed to protect the probity and the integrity of the sports and events that are being bet on by this particular type of gambling.

AIRLIE WARD: Seven out of eight Australian States and Territories concluded that betting exchanges were not in the interests of the racing industry. Are they all wrong?

PAUL LENNON: The other States and Territories have decided that they wouldn't move to licence Betfair. You know, once the Australian Football League, the AFL, reached an agreement recently with Betfair I think that started to change many minds in the community and people are saying well, this is the biggest sport in Australia. If they think this service passes their probity and integrity then why not have it? Of course, we've done our own investigation about it. It is being used extensively already. On Melbourne Cup day for example about $3 million, I understand, was wagered on this service, none of it regulated under Australian law. What I'd like to see is this service regulated under Australian law to make sure that it goes through the same stringent regulation that existing betting services do.

AIRLIE WARD: Nevertheless, the wider Australian racing industry has - is against it. You've ignored them. What consequences do you expect could flow?

PAUL LENNON: It's not true that the wider Australian racing community is against the service at all. What's true is that some racing administrators have expressed a public opinion against it. I've spoken to many, many racing administrators and punters over the past eight months and overwhelmingly they support what we're trying to do. They recognise that this service is already operating and they want to see it regulated.

AIRLIE WARD: Other States have threatened to exclude Tasmania from interstate betting pool and also to legislate, like Victoria, to legislate to stop Betfair being used in their races. What can you do about that?

PAUL LENNON: Tasmania has a commercial agreement with Tabcorp to allow us to pool with them. I expect that commercial agreement to be honoured. There are laws to to protect us in the event that they seek not to honour it. In the event that somebody tries to change that arrangement then of course our public interest would be affected. There are mechanisms to protect us from that event too through the Trade Practices Act and the ACCC.

AIRLIE WARD: So are you talking about that if other States do try to do this there could be legal challenges?

PAUL LENNON: We're talking about two big private companies merging into one, creating a big monopoly. There are laws in this country to protect large organisations like this from using market power to disadvantage somebody else. Tasmania has not done anything wrong here. We are entitled, as a sovereign state of this nation, to regulate betting activity should we desire to.

AIRLIE WARD: So if they do try to freeze Tassie out could there possibly be legal challenges?

PAUL LENNON: These sorts of threats aren't coming from governments. They're coming from racing administrators who don't have the responsibility for regulating licensing arrangements for betting activity in this country.

AIRLIE WARD: Victoria is legislating though, to try and stop Betfair...

PAUL LENNON: Victoria is not intending to legislate at all to impact in any way, shape or form existing betting operations in Tasmania that TOTE Tasmania provides. The threat that's being issued from time to time relates to their involvement and to TV coverage of Tasmanian racing. While we have legal contracts in place, I expect those legal contracts will be honoured. I don't have any advice that's been provided to me that leads me to believe that anything other than the honouring of those contracts will occur. Whilst the threats are being made by some racing administrators, I believe if they could withdraw the threats they would now.

AIRLIE WARD: Thanks for your time.

PAUL LENNON: Thank you.

AIRLIE WARD: But first the Government has to get the legislation through Parliament. Two Independent members of the legislative council are warning that unless they see a business case they'll move for a parliamentary inquiry which would delay the bill by up to eight months. Betfair says it won't release the business case to anyone except the Government. The Government says it's up to Betfair. Tasmania's Thoroughbred Racing Council is also sceptical about the mooted financial returns. I spoke to the council's Geoff Harper this afternoon.

AIRLIE WARD: Geoff Harper, welcome to Stateline. Is the racing council softening its stance on Betfair?

GEOFF HARPER, TASMANIAN RACING COUNCIL: No, the racing council hasn't softened its stance on Betfair. Exactly what it's done is ask for more information. We were promised three to four months ago that we would be consulted on the process on the way through. We've received no consultation whatsoever. I mean, it's difficult to criticise and difficult to compliment what's happening at the moment until we see the physical detail of what's being proposed. We've currently asked for the legislation, we've been refused the legislation and now we're writing to the Premier who will introduce that legislation into Parliament so the industry can at least have some idea what is going to Parliament. It is something which will affect its livelihood and long-term viability.

AIRLIE WARD: Just weeks ago the council was vehemently opposed. Yesterday and this morning your deputy, Rod Thirkell-Johnston, certainly sounded to be giving almost qualified support.

GEOFF HARPER: I think you need to look behind the detail of what's been said and the issues that arise, in fact, of what is Betfair going to return to Tasmania in the long term. If Betfair is to turn over $300 million in turnover by 2010 and then you extrapolate the numbers back to Tasmania, it gives Tasmania a profit of $8 million from Betfair in 2010. That's not what we're being told by the Premier. But also too if you take into account the Victorian legislation and that legislation is based on the premise it will charge Betfair for the use of its product provided Betfair's probity conforms to what the Victorian standard is - take a $4 million fee out of that and Tasmania finishes up with $4 million. What we're clearly saying is we've consistently asked for a business case. We haven't been given a business case and we'll be asking the Legislative Council to proceed carefully with this matter because we don't want it to finish up like another ferry whereby we're paying additional money out on a ferry of which we were told the business case would work. We think clearly, up front, the business case still does not work here.

AIRLIE WARD: Betfair has promised a 150% rise in stake money. I mean trainers and owners certainly appeared happy yesterday. What is not to smile at? If it doesn't go ahead then you're still back in the situation you're in now. Any which way you win, don't you?

GEOFF HARPER: The Premier and I have no disagreement that Tasmania needs greater revenue in the racing industry. What has not been done here is revenue being given back at the grassroots level. For the first time, Tasmanian racing is to receive a $5 million windfall. The vast majority of the $5 million has been allocated into races where it will go to mainland trainers and interstate owners. It will not go back to service the grassroots of the industry and I've consistently said I'm very disappointed with that. I would have believed that Mr Cox should have understood the perilous plight that some of the Tasmanian racing is in and the bottom line the State money receives - it needs to be improved from the bottom, not from the top. The top will service for one day of the year. We need something that services for the other 52 weeks a year.

AIRLIE WARD: There is more money coming in though, that will eventually filter down, isn't it?

GEOFF HARPER: Well, is there more money coming in? We've been given a 2-year promise. And as I said, I could quite easily demonstrate by the year 2010 the gross profits received from Betfair would not be worth the effort that's being currently applied to it. And, I mean, this is the problem, let's get the information out on the table so we can understand what we're talking about. If Victoria, I mean, there is no reason for any State to give Tasmania a free ride on its betting product. If Tasmania intends to make money out of another State or jurisdiction product, there is no reason why we shouldn't pay for it. And therefore, if Betfair pays for it, the returns to Tasmania under the definition of gross profit, and again that's something we've consistently asked for, what is Betfair's definition of gross profit? That return to the Tasmanian industry may evaporate.

AIRLIE WARD: I dare say we'll hear more once it fronts the Legislative Council. Thanks for your time.



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