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Federal

Dec 12, 2016

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When it was announced last week that former minister Stephen Conroy had taken a major position with gambling industry lobbyist, ahaha, Responsible Wagering Australia, the reaction was resigned, rather than angry. Coming on top of everything that has happened to the left and progressives in 2016, it was just a kiss of the whip.

Conroy had resigned abruptly some months earlier; doubtless this was motivated by no more than the sudden realisation that he had nothing further to give to the Australian people. That it created a time gap between his resignation and his acceptance of the new job surely had nothing to do with it — though it has worked out exceedingly well in that regard.

Watching another Labor/union heavy cross over to lobbying for business has lost its power to shock. There was merely a sense of something further deflating. Doubtless Conroy will gain some camouflage from the name of the group, which brings to mind an NGO. But of course RWA represents CrownBet, Betfair, Unibet, and Bet365, among others — all companies that have a duty to their owners to maximise their profits, which means maximising the presence and spread of gambling, in most circumstances. Labor heavies clearly assume they can all do this, and that opposition, or even awareness of it, will be minimal in places where it matters most, and that it can simply go on indefinitely, the political caste conveyor belt, from student politics to Parliament to Richo’s Chinese Restaurant.

They may be right. But these things are cumulative and times are changing. The Labor/business conveyor belt isn’t new — “Red” Ted Theodore was perhaps the first consequential Big Labor figure to make his fortune in the media, from, among other things, founding the Australian Women’s Weekly — but there were long decades in which most Labor figures were content to retire on their pension, as was, or even go back to their goddamn jobs (that’s right, Labor pols were once people who had had jobs).

[What will Conroy’s departure mean for Shorten’s leadership?]

That began to shift in the Hawke/Keating years and because of the politics of those years — Hawke’s endorsement of the idea of “consensus” followed by Keating’s giving it content as a business-friendly move. As the creation of consolidated unions and large super funds bridged the union-business gap, and most unions became, de facto, labour management organisations, delivering their members to the employers, the line between labour and capital dissolved. What difference did it make which side you were on, the union or the merchant bank, if you were simply managing the expectations of workers-members? The structural shift means that it is not merely the obvious rats — the Mal Colstons — willing to slip across. It is the people who never had much of a conflict model of politics in the first place, who simply find that there is no barrier, internal or external to the passage across.

Indeed, such is the spirit of the time that one has to note why it’s so undermining that Conroy slid across so easily. It’s not simply going from being a politician to being a lobbyist. It would be irritating even if Conroy were becoming a flack for the Australian Humidifier Manufacturer’s Association or some such. But his crossover involves far more. He’s taking the specific knowledge gained and applying it for profit back against structures he put in place. He’s doing it for an industry that relies on an addiction/dependency model in order to generate revenue, and sell the consumer to the product.

Labour as a movement relies on going in the opposite direction — to encourage people caught in the constraining circumstances of wage-labour to free themselves by becoming as fully understanding of their circumstances as possible, and change them through collective action. This involves a journey to fuller reflexive autonomy. Thus, the much maligned 19th-century temperance movement was essential to the creation of the labour movement — because without self-possession, en masse, there can be no collective action. You have to regain a continent selfhood in order to give part of it back to collective action.

The relentless spread of gambling works against that sort of subjectivity, that sort of citizenship. That it should be legal is as without doubt as that its spread should be limited. That’s especially the mechanised gambling of the pokies, which are simply “weaponised” Skinner boxes — conditioned-response tools, their design refined ceaselessly to bypass reflective decision-making. You couldn’t make up a better example of the manner in which atomised “choice” — hundreds per hour — defeats any possibility of real freedom, for hundreds of thousands of people in Australia, and the millions who are close to them.

Conversely, genuine and hard restrictions on their availability is, for many, the path to freedom, by removing the need to repeatedly make a decision not to gamble. The gambling industry adopted “responsible gambling” only after it realised that the social cost of its industry was so high that something would happen if it didn’t. Since then, it has offered a main course dolmades serve of fig leaves to put on the central fact of gambling: its relentless availability online and offline.

[Fake Stephen Conroy says goodbye]

So Conroy’s new commitment is not just to a quick-bucks payout. It’s to an industry that actively demoralises and disempowers, and forwards the sort of society in which Labor cannot prosper, because you cannot base a party of collective advancement on an individualised and atomised social life. Would Stephen Conroy care about this? Who knows?

The current generation of Labor Right have always been something of a mystery to me. The old Labor Right were aligned against socialism and communism, understandable enough. The new Labor Right are such a mix of genuine centrists, venal schemers and delusional narcissists that it’s hard to draw a bead on them. They suffer from a want of ethical desire — there is nothing they want very much to happen, nothing they want greatly to change. It’s difficult to know whether someone like Stephen Conroy always aspired to be a flack for Big Destitution, or whether he’s someone who started with modest aims, and has had his ambitions up-sized by being around all that money. He could take his lifelong super and head up an NGO, and he’d still pull in $300k+ a year — and do decent things for the country. He wants to be where the big boys are, with their big incomes, as a toady and factotum for James Packer. Pathetic.

Well, keep at it. Individually these things make no difference. Cumulatively, they become too big to be ignored. Despite Brexit, despite Trump, despite the fact that labour parties are actually starting to die — witness Scottish Labour, now essentially a ghost party, a distant third behind the SNP and the Tories — they think they can get away with this forever. Yet when the populist impulse hits Australia it will, because so long delayed, hit hard.

Keep joining the banks, the global corporations, the industry bodies, Labor. Keep being not the faceless men, but the manless faces. You are taking a big gamble on the continued inattention of the Australian public. The party will deserve what happens, we won’t deserve the consequences of the party doubling down on its decades of elitism, complacency and self-satisfaction. Cue further gambling metaphors here. Note that they’re all about loss.

Companies

Oct 11, 2016

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In a world of declining ad sales, media outlets have grabbed for a share of the only real growth area in advertiser spending: gambling.

Last night’s Media Watch noted the massive growth in gambling ads in recent years in the Australian media. Gambling companies have gone from spending $96 million in 2011 to $236 million in 2015. That money is fuelling the revenues of media companies, which are in turn upping their exposure to the industry through investments in all types of betting directly. But the societal cost is that the more money consumers lose on gambling, the less they spend in other areas. That is in turn hitting media companies through lower ad sales elsewhere. Australians lose $23 billion a year on gambling, with much of that coming from poker machines. Media companies all wash their hands of poker machines and say they have the situation under control. They don’t; they are desperate, revenue-poor companies chasing a greater share of the only real growth area in advertising.

Media Watch could have noted the expansion of gambling at News Corp — Crikey yesterday pointing out News Corp’s undeclared financial interest in greyhound racing, amid a vehement campaign against the greyhound racing ban imposed (and this morning dropped) by the Baird Liberal government in New South Wales.

News Corp’s exposure to gambling is global — The Sun in the UK has an online gambling operation in partnership with Australia’s Tabcorp. All News Corp papers run fantasy football competitions, such as The New York Post. The tabloids in Australia, led by the Herald Sun in Melbourne and Sydney’s Daily Telegraph, also run fantasy football competitions, which are a form of gambling.

It’s not News Corp’s only investment in the sector. Among the AFL grand final ads on Seven was one for a new fantasy football business in which the supposedly family-friendly Seven Network will get into bed with CrownBet and the News Corp-owned Fox Sports in the existing fantasy football competition called Draftstars, currently owned by CrownBet and Fox Sports. An announcement from Seven last month said:

“Seven West Media … today announced its investment in Draftstars, Australia’s leading daily fantasy start-up. Draftstars is a joint venture between Seven West Media, CrownBet and Fox Sports, and is the official daily fantasy sports partner of the Australian Football League. Seven West Media has secured a 33 per cent shareholding and will provide media support, product development and investment to further drive brand awareness and usage in an integrated media campaign across all Seven’s leading content brands.”

That release quoted Tim Worner, the CEO of Seven West Media, saying:

“We are delighted to partner with CrownBet and FoxSports in Draftstars. Our investment builds on our strategy of leveraging the power of our media assets to scale early stage businesses. Draftstars is an exciting investment for our company and we look forward to working with them and our investment partners in driving brand awareness and engagement.”

Which can be contrasted with Worner’s comments reported last night by Media Watch on the issue of gambling ads:

”I have children myself and I am not blind to the concerns … We already have extensive restrictions in place to ensure community standards are met.”

Restrictions are in place for ads from the likes of CrownBet, Sportsbet and William Hill. But Seven says it will be offering to  “provide media support” through “an integrated media campaign across all Seven’s leading content brands”. That sounds like flogging Draftstars to as big an audience as possible, including children through every channel and brand.

Australia

Sep 7, 2016

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It looks like the class action bandwagon leader Maurice Blackburn will shortly be launching a long-threatened court case claiming that the manufacturers and providers of poker machines have broken the law and are liable for the punters’ losses. The first targets are Aristocrat and Crown Casino. If Maurice Blackburn is right, floodgates. Australians misplaced $11.6 billion of their money in pokies in 2014-15, and that figure is rising. If it turns out their losses are somebody else’s fault … well …

Before we wet our legal pants with excitement, let’s have a look at the case. Nothing’s been filed yet, but Maurice Blackburn has been laying down hints since last year about the legal basis of its claim.

Class actions generally come in one of two forms: negligence or deception. Negligence cases, such as those over medical devices gone bad, chemical spills or gas explosions, assert that whoever caused the harm owed the victims a duty of care and failed in that duty. It’s generally accepted that that won’t fly in a gambling losses case, because poker machines do exactly what their makers design them to do: take your money and give a bit of it back to someone else. Gamblers voluntarily assume the risk (or, if you like, the statistical near-certainty) that they won’t come out a winner. Sitting at a pokie is a lawful activity, all of the risks of which are well known, publicised and accepted. If you lose, yeah, that’s actually the idea.

The pokies case is going to be one of the other category, frequently seen in consumer product cases (the current VW class action, for example) and shareholder claims (the inevitable and wildly ironic case against the directors of the other class action law firm giant, Slater & Gordon): a claim that pokie players are being lied to.

This case will be filed under the Australian Consumer Law and its famously brief prohibition on corporations from engaging in misleading or deceptive conduct. Relevantly, the assertion will be that the machines are designed to deceive consumers into believing that their chances of winning are much higher than the reality. This, it will be said, is achieved by a combination of deviously clever techniques that play on the user’s emotions to hook them in and keep them seated until they’ve been bled dry.

In terms of detail, what’s been said so far is that university researchers have broken down all the design features of a poker machine called Dolphin Treasure. They’ve allegedly identified that there is an uneven spread of symbols across the five “reels” in the game, so that winning is harder than the machine represents.

Another complaint is that the sounds and lights the machine produces are designed to make the player think they’ve won when they’re actually suffering losses. Neuroscience will be called in to argue that this process, repeated over time, gives players a drug-like “hit” that keeps them at a high level of excitement and anticipation of further wins, causing them (I guess) to irrationally believe that they’re always on the cusp of a major comeback.

Fair enough. When you consider that there are about 200,000 poker machines in Australia (20% of the world’s total), one for every 108 of us, and that they don’t do anything but sit in unpleasant rooms whirring and flashing in symbiosis with the ATMs at the other end of those rooms, it’s not a stretch to conclude that an irrational but powerful process is in play.

Add the fact that the people who lose the most money to poker machines are generally speaking those least able to bear the losses, and I think it’s fair to say that poker machine players are acting on impulses they didn’t design themselves.

I’m not arguing the social utility case here. What does the law say?

It’s an interesting proposition, legally speaking. Misleading or deceptive conduct cases do not require proof of intention, nor does there have to be any relationship between deceiver and victim. The essential elements are that the company in question says or does something misleading; the victim, relying on that misleading act and unaware of the truth, makes a choice based on the lie and suffers loss or damage as a result.

In the pokies context, this will mean establishing that Aristocrat has designed its machine in such a way that it actually communicates misrepresentations to the player. Presumably, this will be described as a combination of the settings, lights, sounds and words the machine generates as the play proceeds, right from when the player sits down and pulls out their first gold coin. Maurice Blackburn will have to prove that this colour and light show conveys actual untruths, that it creates understandings in the player’s mind as to their chances of winning and whether they are in fact winning that are false or at least materially exaggerated.

Assuming that hurdle can be jumped, the hard part remains. Let’s say the machine does stretch the truth too far, by shouting “Win!” every time you lose. You’ll still have to prove that you didn’t know you were being led up the garden path and that, had you known the truth, you’d have walked away.

I think that’ll be quite tough. The science around gambling certainly establishes how easily addictive it is, and poker machines, like all gambling attractions, are designed specifically to exploit that. But it’s also universally known that the house always wins. Logic and facts dictate with no shadow of doubt that gambling is proof of the triumph of hope over experience as an essentially human characteristic, but good luck to anyone trying to convince a judge that they thought they were a chance of actually winning.

The problem as I see it is that gambling is, in the first instance, a choice consciously made — a choice to spend money on an activity that is designed to, and with almost absolute certainty will, leave you out of pocket. If the machine you select for that process of wealth redistribution uses psychological techniques to hold you in place for longer and drain you faster and deeper than would otherwise have most likely happened anyway, how will you prove that it’s left you worse off?

If this case runs, one thing is for sure: the plaintiff punters are going to be in for a deeply unpleasant experience in the witness box, entirely likely to revisit their trauma upon them in spades. I get that the real game here is to deal a serious blow to the poker machine industry and make the governments that live off the proceeds take the social cost of problem gambling seriously. Unfortunately, this particular tactical path will do no favours to some of society’s least fortunate members. Even a win isn’t going to deliver a significant payout.

I’d want much better odds for this gamble than it seems to me are on offer. Pass.

United States

Nov 11, 2013

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Compared to Australian coverage, there is an instantly discernible difference in watching live sport on television in the US: Tom Waterhouse and the lack thereof. Taking in the American telecast of Wimbledon is almost a nostalgic viewing experience for an Australian sports fan. There are no live odds or advertorial from bookmakers, and certainly no need to mournfully ponder why Samuel L Jackson chose to trade the final vestige of his integrity.

One of the most common observations of visitors to Australia, particularly those hailing from the US, is how much gambling has seeped into Australian cultural life.

The contrast in gambling between Australia and the US is stark. Poker machines here are not yet rampant. Sports gambling ads are banned in most states. And the concept of a mainstream news outlet quoting the odds of any sort of bet, be it the name of the coming royal baby or the party most likely to win an election, is almost outlandish.

Up until recently, aside from state lotto, gambling was mostly confined to fiefdoms of hedonism such as Las Vegas, Atlantic City or Biloxi, Mississippi. This is no longer the case. Seduced by deep-pocketed gambling industry lobbyists, and facing crumbling revenues and the political inability to raise taxes, local and state governments are suddenly contemplating loosening gambling restrictions.

Amid the mayoral elections in New York this week, voters approved a contentious constitutional amendment that will allow seven new full-scale casinos to be built. The result was backed by Governor Andrew Cuomo.

It’s telling that according to a government watchdog, $59 million has been spent on lobbying and political contributions in New York by gambling interests in the last decade. Some $34 million has been spent on Washington lobbying in the past year.

The positive vote allows for the casinos to be built in upstate New York. Manhattan is the logical next step. So far there is only one casino in NYC, Resorts World Casino, located in Queens; a “slot-machine parlour”. Reflecting on the potential the industry sees in the area, it has the most profitable pokies in the US. They average a remarkable $432 per machine per day. There are 4235 machines.

New Jersey Governor Chris Christie is fighting a ruling from the federal court system to allow legalised sports betting in the state. Tellingly, most of the country’s big sporting leagues are vehemently opposed to New Jersey’s push.

“Of the problem gamblers studied in the report, 62% gambled until their last dollar was gone.”

As Australia has learned, it’s a slippery slope. The various leagues have filed a lawsuit in Jersey claiming that “allowing and promoting sports wagering would irreparably harm amateur and professional sports in America”.

When the struggling daily paper The Miami Herald recently downsized from its prime location overlooking Biscayne Bay, locals mostly shrugged. The decision to sell its physical home for $236 million was viewed as disheartening but inevitable. The reception received by the deep-pocketed new owners though was hardly sanguine. The Genting Group, a Malaysian hotel and casino operator, had purchased the site and 30 acres of neighbouring properties with the intent of building a billion-dollar casino, the biggest in the world.

The site appears unchanged for now. But as news of the casino development percolated around the city, opposition has increased. When a bill was put to Florida state legislature last year, it did not pass. “It was one of these ideas that the longer it sits around and the more it is scrutinized, the smellier it becomes,” Dan Gelber, a chairman of an anti-casino advocacy group, told The New York Times.

For now, Genting is attempting to woo Miami residents to its Resorts World Bimini site in the nearby Bahamas, just 48 nautical miles from Miami (seaplanes and cruise ships go there). Yet there is little doubt that Genting will continue to warehouse the Miami site and try again next year. The feeling here is that they will succeed.

Not that long ago, gambling in Florida was far from mainstream; comparable in some ways to the pre-pokies Melbourne to Moama bus run. With very few exceptions, it was illegal across the state. Crafty operators would woo tourists on to overnight cruises departing Miami in the late afternoon that headed to the geographical line where they were considered to be in “international waters”. The ships then suddenly became floating casinos.

These floating gambling dens became passe when local American Indian tribes expanded their legal right to operate gaming on tribal lands. Most notably, the Seminole Tribe of Florida, which has five big reservations through the state, began opening bingo halls in 1975. It purchased the Hard Rock Café chain in 2007 and, with it, the group’s burgeoning army of Hard Rock Casinos.

They now operate casinos in sites as varied as Panama, Dominican Republic, Macau, Singapore, Vancouver as well as Tampa and Tulsa, Oklahoma. In 2008, they opened a Hard Rock Casino on their Hollywood, Florida reservation. Because Vegas-style gaming tables were illegal in Florida, the tribe agreed to pay the state $1 billion over five years. (For its money, it gets exclusive state rights to blackjack and baccarat.)

As Crikey discovered on a visit to the Hollywood Hard Rock this week, the casino also allows punters to smoke as they gamble, an extraordinary rarity in the US, let alone anywhere else in 2013.

Noted in pop culture as the site where Anna Nicole Smith passed away, it is a gaming behemoth with 13,500 square metres of gaming, 10 bars and clubs plus a 5500-capacity theatre where acts such as Jerry Seinfeld and Eric Clapton play regularly.

Prior to this week’s election, the Catholic Church of New York asked residents to vote “no” to more gambling in the state. It pointed to a 2009 study commissioned by the Connecticut Division of Special Revenue on the impact of casinos, which found, along with job and revenue growth, numerous negative consequences in the areas near casinos. Of the problem gamblers studied in the report, 62% gambled until their last dollar was gone.

It’s a familiar refrain for Australians.

Meantime Genting also happens to own the Queens, New York Casino and its $432-a-day pokies. So far it has spent $3.8 million lobbying New York state politicians. As the jockeying continues now that the expansion of gambling has been approved, expect that figure to increase.

Companies

Aug 13, 2013

5 comments

Tom Waterhouse

Tom Waterhouse apparently netted more than $100 million from his eponymous gambling firm — but only a small sliver of that price will make it into the ubiquitous bookie’s bank account.

Waterhouse conducted a lengthy sale process, with some of the world’s largest gambling businesses — including Ladbrokes and BWin.Party.Digital (the owner of Party Poker) — kicking the tyres in a data room. Waterhouse was reported as seeking a valuation of $200 million for the business; in March the figure was as high as $500 million. In the end, he got $34 million cash from British giant William Hill and a potential “earn-out” of up to $70 million.

Earn-outs are a convenient way for acquirers to pick up an asset with minimal risk — the earn-out is only paid if certain (usually lofty) profit targets are met. In Waterhouse’s case, the business will need to generate $30 million in profit by 2015. Given Waterhouse is rumoured to have lost around $15 million last year, there is more chance of Fine Cotton winning the 2013 Melbourne Cup than Tom Waterhouse collecting the $70 million. That said, as advertising spending is wound back and synergies achieved, profitability should improve markedly.

What about the $34 million in cash that most media outlets have reported Waterhouse will collect? Waterhouse isn’t the only shareholder in the business — according to BRW, Tom owns around 25% of TomWaterhouse.com (ASIC searches provide little detail on the actual ownership levels). And there’s the issue of the equity already invested by shareholders (which reduced the $34 million windfall).

How do we work out how much cash the shareholders have stumped up? It’s hard to know specifics, as unlike a public company (or large private company), Waterhouse hasn’t disclosed any financial information to ASIC. However, The Wall Street Journal reports Waterhouse generated revenue of $28 million in 2013 and around $12 million in 2012. However, Waterhouse employs around 80 staff and is understood to be spending a very significant amount on advertising annually (speculation has ranged between $20-45 million in 2013). While the specifics aren’t known, investment by the Waterhouse family and other shareholders would appear to be upwards of $20 million.

Crikey asked Waterhouse for specific financial information but a spokesperson was unable to disclose any confidential data.

But if that’s the case, the $34 million cash price and $6 million debt assumption will leave shareholders with somewhere between zero and $20 million. Waterhouse’s personal windfall could be around $5 million — or possibly less.

So why sell? A Waterhouse spokesman claimed in March that the business received takeover offers on a weekly basis. The most logical explanation is that Waterhouse sold not because he was offered a fortune, but because the cash was running out. As Waterhouse himself noted earlier this year:

“What do I need to sell it for? I wouldn’t want to change my lifestyle. If I had the choice of lying on the beach or being a bookie, I’d be a bookie.”

Being a bookie, in a terribly competitive online market, has made Waterhouse a very famous and moderately rich man. But he’s a long way from unlocking all that potential market value.

Companies

Jul 15, 2013

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“Where Kerry liked to play in casinos, James likes to own them.” — BRW Rich List editor, 2006

The chips keep falling into place for James Packer, Australia’s third richest person. His casino and gambling juggernaut, Crown Limited, recently had its $1.5 billion Barangaroo proposal in Sydney approved by the O’Farrell government in controversial circumstances, but it is only the latest in a long line of gambling operations around the world.

Packer’s personal stake in Crown is 49.9%, just short of an absolute majority in order to avoid consolidating it into his private company. Following the rise in the price of Crown shares thanks to the Barangaroo deal, Packer’s $6 billion fortune reportedly received a healthy boost of $250 million.

Crown has existing or planned facilities on four continents — operating in Australia, Macau, Sri Lanka, the United Kingdom, the United States and the Philippines. In 2011-12, the ever-expanding empire recorded a net profit of $513.3 million, with 11,300 employees on the books. World domination is evidently no mean feat, however, as Packer has seen other ambitions in Canada, Russia, Singapore and the US fall flat.


View The many jewels of Packer’s Crown: A visual guide in a larger map

Packer copped an $80 million loss as a result of abandoning a stake in Echo Entertainment, owner of Sydney’s Star casino, but in the next few years he will add to his already sizeable international portfolio. Sydneysiders can relate to the recent and divisive approval by the Sri Lankan government for a $400 million project in downtown Colombo, due in 2016. Despite significant local opposition to the proposal, Packer and his business partner were also gifted with 10 years of tax breaks, worth hundreds of millions of dollars.

A facility under construction in Manila is due to be completed in 2014, and Crown is expanding its operations in the UK and Macau with new casinos to be opened in the next few years.

Crown’s diminutive presence in Las Vegas has been troubled. Packer made a series of investments in large and ultimately unsuccessful projects when the global financial crisis was in its early stages. Crown Las Vegas was a proposal for the tallest building on the famed strip and was to be constructed at a cost of $5 billion. Crown, with a 37.5% holding, and its partners ended the project after it faced regulatory barriers and deemed it wasn’t a”commercially viable contract”, suffering a loss of $44 million. The company also poured $333 million into the $2.9 billion Fontainebleau Las Vegas, just down the road, an investment completely written off when the plans were scrapped in the face of debilitating financial pressures. Packer is also facing legal proceedings in the Nevada Supreme Court over his involvement.

Back at home, the Barangaroo facility is slated for a 2019 launch. The deal is a windfall for the NSW government, worth $1 billion in the first 15 years, and a lot more for the son who has well and truly stepped out of his father’s shadow.

Federal

Mar 21, 2013

5 comments

Overshadowed by the debate about the government’s media legislation, the final report of the review of the Interactive Gambling Act 2001, published last week, received comparatively little attention.

Like the government’s response to the report, the sparse media coverage focused on measures to prevent problem gambling — undoubtedly an important issue — but failed to discuss the fact Australian gamblers, recreational or otherwise, continue to get a raw deal. The report seems likely to perpetuate a culture of high-margin, low-risk bookmaking, cutting Australians off from the global market under the guise of consumer protection.

Also missing from the debate are two other questions: are Australian gamblers getting value for money, and where do the growing number of social games fit into the regulatory landscape?

The review’s suggestions for expanding the industry are predicated on the adoption of a proposed “national minimum standard for harm minimisation”, which seeks to iron out differences between states by focusing on responsible gambling messages, credit, pre-commitment, age verification, spend-tracking and self-exclusion, as well as measures to ensure companies hold sufficient funds to pay out winnings. Among the review’s recommendations are measures to encourage unlicensed operators to agree on Australian regulations, along with further limits on advertising.

Underlying the recommendations is the review team’s belief that Australian consumers who uses overseas-based online gambling services “run the risk that their funds will not be afforded an appropriate level of access and protection” and “are not covered by Australian consumer laws if they wish to make a complaint about the actions of a service”. The reality, however, is that the level of consumer protection in the Australian gambling industry doesn’t always live up to the rhetoric. It seems strange, for example, the report, which runs to some 183 pages, makes no mention of Australian bookmaker Sports Alive, which collapsed in 2011 owing about $3.9 million, having allegedly traded while insolvent.

Earlier this month, Victoria Supreme Court Justice Ross Robson found Sports Alive had failed to keep customer funds segregated from operating expenses, and so had insufficient funds to pay customers at the point of liquidation. His ruling notes that the evidence suggests “a wholesale failure by Sports Alive to comply with its statutory obligations”, which led punters’ representative Dennis Tuan-Mu to complain the ACT Gambling and Racing Commission had failed to act for “more than eight years” and “that even rudimentary checks … would have uncovered these issues … and would have prevented the loss of $3.9 million from over 18,000 account holders”.

Australia excels in some areas of gambling regulation — the NT Racing Commission’s transparency regarding betting disputes is a good example — but the core objective of all regulators must be to keep customers’ funds safe. Before we ask internationally licensed operators to subscribe to Australian regulation, protection is needed to ensure there is no repeat of the Sports Alive fiasco.

Licensing and regulating is an expensive process, so it would seem logical for there to be some cross-recognition of best practice regulation. For example, would it not be feasible to allow UK-licensed operators access to the Australian market (and vice-versa) rather than requiring operators to apply for licenses in each jurisdiction? Doing so would promote competition, reduce margins, and encourage gambling operators to agree to some form of governmental oversight.

*Read the rest of this article at Inside Story

Federal

Nov 10, 2011

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Federal

Jun 28, 2011

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This winter, the federal government rushed to regulate sports betting, with a live odds ban followed up by the AFL and NRL promising to impose their own vetoes on “exotic” bets and on-field cheats.

Stephen Conroy’s edict — which will stop Tony Greig droning on about Betfair during the cricket — received strong backing from state governments. But a crunch of the latest gambling numbers reveals outlays on footy and the cricket are the lowest of low-hanging fruit — by backing the crackdown provincial leaders have precious little to lose.

Take Victorian gaming minister Michael O’Brien’s presser bragging that he had “consistently expressed concern about the blurring of the line between advertising and editorial when it comes to sports betting advertising during the broadcast of live sporting events. ”

Particularly “insidious”, O’Brien reckoned, was the promotion of sporting odds targeted at children.

Buried further down the press release was the kicker. The Baillieu government was opposed to the federal government’s mandatory pre-commitment technology for poker machines, preferring a voluntary system that put the onus on individuals, not governments.

Pokies regulation is one area in which the states are at one, with South Australia, Queensland and Western Australia joining a chorus of opposition to Andrew Wilkie’s and Julia Gillard’s proposed laws. Victoria is the most virulent, threatening to take the federal government to the High Court if it proceeds with the mandatory measures.

A quick look at fresh Australian Gambling Statistics data released quietly earlier this month reveals why. Sports betting almost completely fails to register on Australia’s gambling radar — a reduction in revenue from the likes of Betfair, Sportsbet and Sportingbet would have next to no impact on state government balance sheets.

As a proportion of 2008-09’s total government gambling tax take of $5.2 billion, sports betting makes up a pitiful 0.34% or just $17 million across the country. Even the declining pastime of racing rakes in 22-times more cash than heavily-promoted wagers on the cricket and the footy.

Sports betting’s minnow status is reflected the actual amount punters spend. Real per-capita expenditure on sport was just $13.32 or 1.2% in 2008-09, compared to a whopping $975.23 or 85.1% for “gaming”, which includes poker machines and casino expenditure.

And according to the new AGS data, considered the bible among serious researchers, the dominance of the one-armed bandits is even greater when you include machines in casinos, echoing last year’s Productivity Commission report that showed electronic gaming’s total share had risen from 40 per cent to 75 per cent over the past 20 years.

It’s true that sports betting has undergone rapid expansion — 16% in real terms in 2006-07, 18% in 2007-08 and 5.6% in 2008-09. Next year’s 2009-10 data is expected to show another spike. In Tasmania sports betting grew 183% between 2007-8 and 2008-09, thanks mostly to Betfair’s 2008 High Court victory against the Western Australian government and in the other hotspot, the Northern Territory, $390 or 16% of an annual per capita spend of about $3,000 was spent.

The NT is the currently the only state government that issues licences for online gaming with the vast majority of betting websites filtered through the Top End.

Online betting is still dangerous, in the words of Tim Costello, because you can “lose your home without leaving it”. But in real terms the vast majority of Australia’s $19 billion gambling market continues to operate through pokies owned by conglomerates like Woolworths at clubs in poorer suburbs.

Pokies expert Charles Livingstone from Monash University’s medicine faculty told Crikey that “state governments are Australia’s biggest pokie addicts. Their total revenue — $5 billion — shows how deeply conflicted they are on gambling regulation.”

“‘It’s easy for Australia’s state governments to crack down on sports betting; their tax take is minuscule from that source compared to the pokies. And much of it goes to the Northern Territory, or Tasmania, anyway. Of course, there are five billion reasons why regulating pokie gambling to make it less harmful is an entirely different matter.”

Livingstone said pokies were still the biggest game in town as far as gambling in Australia is concerned, especially the $5 billion lost each year through the souls of the pathologically addicted.

“Despite recent hoopla, sports betting is still a small player. Even casinos are a long way behind the pokies; and NSW continues to be the country’s most pokie riddled state.”

Livingstone’s view is born out by the hard data, as the graph below shows.

Real poker machine expenditure, excluding casinos, was $10.5 billion in 2008-09, a small decline of $34 million on the previous year thanks to the Global Financial Crisis. NSW sits atop of the shame table, accounting for $4.8 billion or 46% of the damage with its 97,067 machines, followed by Victoria (25% with 29,272), Queensland (18% with 45,571) and South Australia (7% with 13,720).

The total number of machines paints a sorry picture.

South Australian Senator Nick Xenophon, a strong supporter of Wilkie’s legislation, was scathing when contacted by Crikey, and called for the states to get out of the way.

“State governments are the biggest pokies junkies in the country. The rivers of gold they rake in from gambling taxes come from rivers of tears.

“This is why federal action is essential when it comes to poker machines. The states just can’t be trusted to do the right thing.”

It’s no wonder premiers would prefer to gag the likes of Richie Benaud than do anything that might disrupt the stream of misery that ring-fences their credit ratings. Unlike the battlers that vote for them, they’ve been hitting the jackpot for years.

Federal

Jun 22, 2011

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Much of Australia’s $22 billion gambling addiction has been well documented, poker machines, table games and wagering are all hugely popular with the punters. But what about online casinos? Untaxed, unregulated and under the radar, this so-called “unofficial” sector of gambling is increasing in popularity.

According to the Productivity Commission, the wild west of unregulated online gambling could be worth as much as $800 million annually. Industry experts recently pegged the number as high as $968 million — with a third of that funneling into online poker.

Dr Sally Gainsbury, a lecturer at the Centre for Gambling Education & Research, Southern Cross University, is currently undertaking a survey into online gambling, with the results set to be presented later this year.

As part of her research, Gainsbury has studied the growth of online casinos and their popularity with Australian gamblers.

“At the moment participation compared with other forms of gambling seems low, but it appears to be growing,” she told Crikey. “The thing about these offshore sites is that many are easily accessible to younger people and problem gamblers. There is also a lack of consumer protection.”

Under the Interactive Gambling Act passed in 2001, it is illegal for online casinos to accept bets from or advertise to Australian players.

But that does not seem to have to have stopped the growth of casinos. According to Gainsbury’s calculations, there were 2319 virtual casinos open for business in May this year — “although that changes all the time” — with 90% of operators offering play to Australian players.

One of the big operators is 888.com, who commanded revenues of $US221.7 million last year and profits of $US12.4 million (down from $US31.9 in 2009). Listed on the London Stock Exchange, its headquarters are based in the small English colony of Gibraltar — a popular location for online casinos.

At the time of her count, Gainsbury found Gibraltar had 291 online casinos operating in its jurisdiction. Gainsbury says the reasons for Gibraltar’s popularity could be due to its proximity to Europe and also its stringent regulatory body (a must for the legitimate operators).

There is also the small matter of tax, which at 1% of gambling income in Gibraltar is far more attractive than the 15% taken from the pot of operators in the UK.

Unsurprisingly, low taxes are a common theme among countries with the highest number of online casinos. English channel island Alderney charges 0% tax (only a license fee is required) and has 104 operators.

Tiny island republic Malta leads the way with 460 casinos and has an attractive tax rate of 0.5% gross amounts of bets. In Costa Rica — a country Gainsbury says doesn’t command many legitimate operators because of its lax regulation — online casinos are treated as call centres and face attractive offers also.

As well as an attractive tax rate, Gainsbury says suitable online casino locations need a good legal framework, an availability of workers that speak the required language and a decent telecommunications set up.

Aside from all that, the country also needs to sit in a compatible time zone.

But despite an explosion in the number of casinos competing for gambler’s dollars, the sector is not impervious to the odd economic shock.

According to figures recently released by gambling industry market research consultants H2 Gambling Capital, online gambling forecasts will amount to 23.66 billion euros this year, which amounts to a downgrade of year-on-year growth rates to 4.4%.

H2 attributes the recent FBI crackdown on online poker giants, PokerStars, Full Tilt Poker and Absolute Poker (which the industry dubbed “Black Friday”) as one of the reasons for the drop in revenue.

Other key factors include slower than expected regulation, the Japanese earthquake and the economic slowdown in the US and Europe.

North America is still the major market for online casinos, however the Black Friday crackdown may see its importance dip. Gainsbury says Asia is being eyed off as a potential online casino goldmine, but only if they liberalise gambling laws.

With so many casinos on the market, things can get competitive. Online casinos offer myriad of bonuses to get punters to sign up. Inducements include “welcome bonuses”, which are usually the doubling (or sometimes tripling) of a player’s deposit.

Gainsbury says there are 200 different forms of payment at the online casinos she looked at. These options ranged from traditional credit car billing to PayPal to specialised casino deposit services.

But despite the illegality of offering play to Australians, there has yet to be a prosecution of a single operator. Gainsbury says she is surprised no action has been taken.

“Despite the Interactive Gambling Act strictly prohibiting these casinos offering play to Australians, there have been no prosecutions,” she said. “To me it seems odd. I know there have been complaints, but no action has been taken.”

Perhaps, with so many potential tax dollars flowing out of the country to overseas operators, the regulators will look to act. Presumably letting our gambling revenue go offshore may not sit well with the states. After all, in 2009-10, they took in $5.2 billion of tax dollars from gambling.