Just as the Tabcorp-NSW TAB takeover battle draws to a close, there’s
an interesting development in gambling that holds the prospect of a
significant expansion for the soon to merge company. It could be the
very thing that helps Tabcorp pay for the takeover, and it could grow
the gambling market.

TAB Ltd has granted an agency licence to a newsagent in the Hunter
Street Mall in Newcastle.The new agency replaces one that was in a
hotel in the Mall. So in that respect there’s some symbolism.

Hotels and clubs have been the only idea TAB has had for years to grow
its distribution, but that has been a rough relationship, made harder
by the way TAB levied fees and charges for the Sky Television racing
service.

According to a punting mate of Crikey’s this new agency, if it works,
could enable Tabcorp to push its distribution deeper into the retail
market in NSW, and elsewhere, and away from the pubs and clubs which do
not provide good coverage of the market. It was a surprise when the TAB
issued the new agency licence several months ago. It was a belated sign
from the old management of TAB that the company needed to be more
proactive in pushing its products.

Up to the Tabcorp bid the NSW TAB thought that market expansion meant
licensing another club or pub, or inventing a new product like the
underwhelming “Spinner” which took pennies when it should have been
raking in the money. Depending on hotels and clubs for product delivery
in addition to its existing network of TAB agencies, was not a
formula for growing a market.

The bright sparks at the TAB failed to realise that clubs and pubs had
a conflict of interest in handling its products. They competed with the
best business of all, gaming machines. Poker machines have boosted the
value of many of these pubs and clubs to the point where they are the
major source of profits, and goodwill.

Most pubs and clubs make more money from beer, food and associated
entertainment than they do from selling the TAB’s products. They have to
pay the TAB a fee each week or month that’s partly based on their
alcohol and food revenue. For many pubs and clubs, it’s the equivalent of
a loss-leader to drag through the door.

This approach from the TAB has slowly built up resentment in the pubs
and clubs as the TAB arrogantly ignored their complaints. The SKY
Channel racing broadcasting operation ended up as a major
profit centre for the TAB, based on these fees extracted on non-betting
revenues.

So when the broadcasting rights brouhaha erupted earlier this year with
the NSW racing contract, it was no wonder publicans and many clubs
sought a new service that charged lower fees. Like all businessmen, the
pubs and clubs wanted to get something for nothing, or as close to it
as possible.

And the TAB, obsessed with maximising revenue and earnings through the
SKY Channel service to clubs and pubs ignored the other great marketing
opportunity. The thousands of newsagents and other retailers of
products from the NSW Lotteries: from Lotto, to scratchies to
ordinary lotteries. They are everywhere and such is the revenues that
for some newsagencies for example, they effectively underwrite their
viability.

They are machine-based, cheap in terms of labour with the NSW Lotteries
providing training courses. There’s minimal stock, little overheads.
Run properly they are a small gold mine. Consumers actually go into
newsagents and other outlets to buy the gambling products, and other
items, or they go to buy a paper, and then a Lotto or a Jackpot Lottery
as an afterthought.And the Lotteries handles the marketing.

A Sydney newsagency says the commission income from the NSW Lotteries
covers his rent each week, and all other revenue, from selling papers,
magazines, cards, stationery, cigarettes,confectionery, milk and bus
and ferry tickets is gross profit that goes to covering other fixed
overheads, variables, such as staff and profit.

So the bright spark who had the idea of licensing the Newcastle
newsagency finally had a good idea, something that was absent from the
business plans for former TAB CEO, Warren Wilson.Someone obviously
understood that consumers are used to buying gambling products from
newsagencies. So sometime in the not too distant future you could go
into a newsagency and ask for a paper, a chocolate bar and a couple of
daily doubles, or a punt on the Swans-Brisbane match that night, or the
Easts-St George game.

According to Crikey’s punting mate, the old TAB board and management
never understood that the company was in the entertainment game. Like
casinos, gambling is part of the competition for the discretionary
consumer dollar (although it has a greater capacity to consume all the
dollars of consumers, which makes it such an insidious activity to
some).

The NSW TAB never bothered policing the various pubs and clubs to make
sure that the service they were offering was standardised, of even
quality and met customer expectations.Staff training levels was also
uneven and some could not understand how the various systems worked, or
closed betting before the ‘off’ which was illegal!

Some pubs in the trendier parts of Sydney would not put up timely race
or dividend results, would show the broadcasts in competition to sport
and piped music. While they may have resented paying money to TAB for
the SKY Channel Service and the punting systems, some pubs and clubs
did little to make sure they earned enough money to meet the cost.

But the big deal in punting is sports betting. The betting exchanges,
like BetFair from the UK will be arriving soon and will be looking for
distribution. Its a slightly more complicated product and suitable for
knowledgeable punters. But these exchanges will cover as many meetings,
games or events as they can. Its mostly software and internet.

So the TAB’s in each state, but especially Tabcorp and the NSW TAB,
when its safely tucked under the Victorian company’s wing, should be
looking to turn sports betting into something that can be easily
accessed by small punters, like buying a lottery, scratchie or Tatts or
a Golden Casket.

Some education may be needed at first, but simplifying sports betting
into a number of easily understood and easy to sell products, and then
distributing them through newsagencies in particular(and other outlets
lottery-type products) will help repel the BetFairs of the world, and
grow the market.

This sort of market expansion will be opposed by the Clubs and Pubs,
who will belatedly discover that being a TAB agency has its advantages.
But they have been underselling the product, whingeing about it through
the Australian Hotels Association and the Registered Clubs Association,
so their criticisms will be more crocodile tears.

But the strongest opposition will come from retailers and anti-gambling
people who will fear (in some cases quite rightly) that people who
can’t afford to lose any more money to gambling, will do just that.

Retailers like Coles and Woolies won’t like it because of the
competition for the consumer dollar. But seeing Woolworths in
particular is heading deeper into the sin business in the bid for
Australian Leisure and Hospitality, with its 6,000 gaming machines, any
complaints about newsagencies getting a TAB agency, should also be
treated as crocodile tears.

So for Tabcorp CEO, Matthew Slatter, it’s time to take a punt!.

Peter Fray

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