I was interested to read Alex Mitchell’s take on the woes of the pokie industry (Crikey, Friday item 14, “Blow up the pokies… but not at the expense of the pub“). It is common for the industry (especially in NSW) to present itself as a folksy, struggling community level business, providing mostly harmless fun to the suburban working class. Unfortunately the reality is vastly different. Alex concedes that the harm done by pokies is significant, and should be curbed. But how do we do this?

First, a couple of facts: Australian style pokies are amongst the most intense in the world, permitting the insertion of up to thousands of dollars at a sitting, and permitting bets of up to $10 per spin, which can be repeated at intervals of less than five seconds or so. Few jurisdictions in the world permit such high impact devices in such numbers in suburban social space.

Secondly, the amount of money that goes into the pokies from problem gamblers is extremely high — the Productivity Commission estimated it at 42% in 1999, and more recently my colleague Richard Woolley and I estimated it as about 53%. Whatever the exact proportion, it is clearly very high, and presents a major ethical dilemma for the states who both regulate and industry and cream off profits ($1 billion a year for both NSW and Victoria from pokies alone, less but significant amounts for other states).

How much harm can be tolerated in return for that sort of revenue? And this money mostly comes from the less well off — repeated analyses of the distribution of pokies shows them to be overwhelmingly concentrated in areas of socio-economic disadvantage. The problems arising from harmful pokie use are far from trivial, and include depression, relationship and marriage breakdown, the abuse of children, bankruptcy and financial ruin, crime, imprisonment and in some cases suicide.

At any one time perhaps 300,000 Australians are in trouble with gambling, for each one of them perhaps five to ten others are affected — family members, employers, colleagues, friends. It’s little wonder that the furore which accompanied the widespread legalisation of suburban pokie venues across Australia in the 1990s (and saw them spread from clubs to pubs in NSW) hasn’t gone away. If anything, as the evidence of harm accumulates, the indignation grows stronger and more vocal. Hence Xenophon’s remarkably easy election to the Senate last year, more or less as a single issue, no-pokies candidate.

Nonetheless, Alex’s piece does hone in on one important issue — the pokies are so inextricably woven into the social fabric of most Australian states, particularly NSW, that simply banning them (as some, understandably, advocate) is probably not an option. They provide such a river of gold to clubs, pubs and governments that they have become very addictive — not just to those who end up in trouble with them, but for their operators as well.

NSW clubs on average generate nearly two-thirds of their revenue from pokie gambling, some relying on pokies for as much as 85% of their income. The very articulate Registered Clubs Association in NSW concedes that this is a problem, and told the SBS Insight program in April that it wants this dependency reduced by diversification of revenue generating activity. Perhaps they could start making other parts of their business profit generating, and get their pokie dependency down to, say, 25% of revenue.

The pokies, in fact, are not so much a folksy cottage industry as very big business indeed. It’s not just the NSW Leagues clubs, or Tattersall’s and Tabcorp, with their Victorian duopoly, who are making hundreds of millions every year from ubiquitous suburban pokie venues; joint venture partners Woolworths and the Mathieson group of companies have done very well indeed out of their substantial interests in hotels.

The break up of the Victorian duopoly in 2012 seems poised to reward these partners even more, as they eye up ownership of 35% of the pokies in Victoria’s pubs. At $2.6 billion a year statewide pokie revenue, and perhaps $20 million pokie revenue for a pub in suburban Melbourne, you can see why the pokie industry is quite interested in the bills that Senators Xenophon and Fielding have proposed.

Regardless of what one thinks of the political motivations of the Senators, it is in fact highly likely that technical solutions can stop most problem gamblers from experiencing much harm.

Pokies are conditioning machines, using principles of classical and operant conditioning, honed over many years of effective operation, to habituate people to their use. Using an understanding of these principles we can wind back poker machines’ voracity, and we can also adopt the approach currently being rolled out in some Canadian provinces, where players will be required to use a smart card to track their expenditure, and to set limits of time and money to be spent.

In a further development, Canadian researchers have developed software to analyse patterns of play and identify, with good accuracy, players whose pattern has developed into that of a problem gambler. Solutions like this are completely feasible and would certainly massively reduce harm.

Of course, they would also substantially reduce revenue, by perhaps half. I guess it boils down to the ethics of the business or the government in question. Half of $10 billion is still a hell of a lot, and if we can help the hopelessly addicted gambling industry (and their government partners) use pokies responsibly, perhaps everyone can be a winner.

Peter Fray

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