TABCORP HOLDINGS LIMITED ABN ( The Company ) AMERICAN CHAMBER OF COMMERCE BUSINESS BRIEFING 29 AUGUST 2013

Transcription

1 TABCORP HOLDINGS LIMITED ABN ( The Company ) AMERICAN CHAMBER OF COMMERCE BUSINESS BRIEFING 29 AUGUST 2013 DAVID ATTENBOROUGH, MANAGING DIRECTOR AND CEO ADDRESS A new ball game: Tabcorp s response to the changing Australian wagering market Good afternoon and thank you for the opportunity to speak to you today. I d firstly like to extend my thanks to the American Chamber of Commerce for inviting me to address this lunch and to you, the audience, for supporting this forum. Today, I propose to give you an insight into the Australian wagering industry, looking back at the way it has evolved and how it operates today. I will also outline how Tabcorp, as market leader, has evolved its business model and continues to lead the market. Wagering is a great industry and one I ve been involved in for some time. I spent 12 years in various positions with the UK wagering operator Ladbrokes, before joining South Africa s listed wagering company Phumelela. I joined Tabcorp in 2010 and it s a privilege to lead one of the world s largest commercial wagering organisations that operates truly iconic Australian brands. Wagering is complex. But at its very core it is entertainment and as our advertisements say it s about legendary moments for customers, be it at their local TAB, at the track or on the move. Before I delve into this more however, it s fitting that I recognise AMCHAM s role in promoting trade and investment between the USA and Australia. I am pleased to say that Tabcorp does its share of business with the USA. Firstly, as an exporter of Australian racing, Tabcorp takes Australian racing to the USA every single day. So if you re a punter in the States, you can wager on about 6,000 Australian races a year through wagering theatres and off-track betting shops. Our US agent even converts Australian metric form into imperial so that when US punters are looking at picking the winner in the next at Randwick, they re talking furlongs, miles and stones, rather than metres and kilograms. In fact, this very hour punters in US betting shops, racetracks and casinos are watching and betting on race meetings from Newcastle and Mornington. And we reciprocate. In FY13, the NSW and Victorian TABs, which we operate, wagered on 1,500 US races. These were mainly harness races from the famous Yonkers Raceway in New York, as well as Meadowlands and Balmoral Park. We also bet on the big thoroughbred races such as the Breeders Cup and Triple Crown. US sport is very appealing to our customers and in particular the NBA, NFL and Major League Baseball. US sport makes up about 19% of our total sports betting turnover, compared with 15% three years ago. Page 1 of 5

2 So racing and wagering these days is very much a global industry. In many countries, racing is in decline but not in Australia. That s because the Australian racing industry is well operated, well-funded and has strong engagement and support from state governments, the TABs and the public. Let s spend a minute taking a brief look back at the history of the TAB. Racing has long been part of Australian life. In 2010, we marked the bicentenary of Australian racing, which had its origins not that far from here actually, in Hyde Park. The nation pauses as one for three-and-a-bit minutes in November for the Melbourne Cup. How many other countries in the world can boast that? And of course, racing is associated with having a bet. That brings with it a responsibility for the highest standards of integrity. State-based TABs were created in the 1960s to curb illegal betting and to ensure that the proceeds from betting were channelled back into the community and the racing industry. The Victorian TAB was created in Three years later the NSW TAB was formed. Next year marks the 50 th year of the NSW TAB. In the mid 1990 s the Victorian and NSW TABs were privatised, marking the next phase of their evolution. This raised proceeds for the government, supported racing industry funding and ensured stronger integrity and responsible gambling outcomes. The state-based TABs are integral to the funding of the racing industry here in Australia. Since 1994, Tabcorp has returned almost $5 billion to racing in Victoria and $4 billion to racing in NSW. It s a substantial source of funding that allows our racing industries to flourish and be regarded, without question, as among the world s best. As an employer of thousands of Australians and a driver of tourism, regional development and recreation it is important that racing continues to be well funded. So where are we today? Australian wagering is a $26 billion turnover industry. Betting on thoroughbred, harness and greyhound racing makes up 85% of this and the remainder is betting on other sports. It s a highly competitive environment. But to put it in context, wagering only makes up about 16% of total Australian gambling. Gaming machines and casinos have the lion s share. Tabcorp, which operates the NSW and Victorian TABs, is the market leader, with a 44% share of Australia s wagering market. The other TABs, largely operated by Tatts, have about a quarter of the market. The remainder is now made up by corporate bookmakers based in the Northern Territory and Betfair, which is licensed in Tasmania. In recent years, the online corporate bookmakers have increased their presence in the market with a discounted offering that exploits the benefits of a low tax regime in the Northern Territory, where tax is capped at $250,000, and reflects their significantly lower payments to the racing industry. To put this into perspective, corporate bookmakers generate 25% of the turnover in the Australian wagering market but contribute less than 5% of the returns from wagering to racing. This is clearly unsustainable if the racing industry in Australia is to continue to flourish. The growth of corporate bookmakers has been facilitated by their successful challenge to advertising laws in 2008.This enabled wagering operators to advertise outside the state or territory they re licensed in. And it is this, coupled with the entry of some large overseas online Page 2 of 5

3 wagering operators which has driven the increased volume of betting advertising, particularly around live sporting events. This level of advertising activity has recently been the subject of much valid public debate. It s resulted in a new advertising code of conduct which has reduced advertising around live sporting events. This is a positive outcome, strongly supported by Tabcorp. In the context of increasing competition, Tabcorp has continued to perform strongly. In 2012, and based on the latest publicly available data, we grew our Wagering market share to 44%. In terms of revenues, we estimate Tabcorp s Wagering business revenues are at least four times larger than the total combined revenues of the Northern Territory based competition. We grew revenues by 6% last financial year. As the incumbent, how have we done this? Essentially by investing in and leveraging our four unique competitive strengths, which are: the strongest brands in the market; unmatched distribution channels; large tote pools; and a deep customer base. These are underpinned by our strong stakeholder relationships and long licences in the key states of NSW and Victoria. It s a unique and highly desirable set of competitive strengths. Over the last few years we committed ourselves to developing better capability than our competitors and a better and more relevant customer offer. And we believe we have largely done that. Last year we refreshed and focused on the relaunch of the TAB brand, giving us real momentum into the Spring Racing Carnival. The TAB brand is a powerful differentiator. It s the most trusted wagering brand with Australians and has by far the highest levels of brand awareness in the market. We know that customers choose to bet with brands they know and trust. The strength of the TAB brand is complemented by our unique multi-channel distribution model. We encourage our customers to engage with us across multiple channels, from enjoying some social interaction with mates in one of our almost 3,000 TABs, hotels and clubs to having a quick bet on the move on their mobile. Our retail TABs continue to make up over 60 per cent of our sales, and over 70 per cent of our account deposits and withdrawals as a result of integration with our account business. Our physical network is a key competitive advantage and an important differentiator versus our online-only peers. As an example, we can deliver cost effective and high return marketing campaigns direct to our customers. Our engagement with customers through digital channels has been particularly successful on the back of our innovation in mobile delivery of wagering and vision. Our mobile apps were the first in the world to offer tote betting. Last year we introduced another first with watch and bet integrated vision and betting simultaneously on the one tablet screen. Our TAB apps have been downloaded almost 1 million times. Our ipad app is the number one ranked betting app in the Apple store. The iphone app is ranked number two and our team has a clear direction to get to number one. Page 3 of 5

4 Speed and simplicity is key. We ve improved the speed and simplicity of tab.com.au and we ve simplified the tab.mobi site. Prior to this year s Spring Racing Carnival we ll launch a racing-only HTML version of the TAB website for those punters who don t want a lot of information and want to focus on transacting. Within digital, we are seeing the benefits of our focus on mobile leadership with mobile s share of digital rapidly rising. Only 11 per cent of Tabcorp s digital turnover was by mobile devices such as iphones and ipads in FY12. This grew to 43% in the second half of FY13 a massive shift in such a short space of time. The appeal of our tote pools have been enhanced by our leadership in international co-mingling. We have grown our totalisator pools through co-mingling them with foreign pools such as New Zealand, Singapore, South Africa and our PGI business in the Isle of Man. This strengthens the customer offer because it creates deeper pools and therefore pool movements that better reflect the knowledge in the specific host market. We also have a vast customer base. Our Wagering business has 1.8 million customers. But we also have customers who connect and transact with Tabcorp across our other brands such as Keno and Sky Racing. Within the last two years we have significantly ramped up our capacity to connect with this customer base. This has been through the use of CRM tools, loyalty and digital marketing programs. Finally, we have close working partnerships with our key stakeholders, the leading racing bodies, hotels, clubs and our agents. This ensures alignment in our approach to our shared customers and the strategic investment priorities. So, although there is a lot of noise about competition in the market, I m pleased to say that our Wagering business is well positioned, and continues to perform well. While we have delivered against our growth agenda, it has all occurred within the envelope of delivering gambling responsibly. For some, that statement may sound something like a contradiction in terms, but I can tell you it isn t. We re committed to running a business that reflects best practice in the management of responsible gambling. I m proud that we have been rated the global gambling industry leader by the Dow Jones Sustainability Index in seven of the past eight years. To be here for the long haul, we have to operate sustainably. Our long term future has become even more certain now that we have reached an in-principle agreement to extend the retail exclusivity period of our NSW wagering licence to 2033 and the extension of our Queensland Keno licence to It s also important that we collectively ensure the sustainability of the racing industry, clubs and hotels given what they contribute to employment, economic activity and recreation in Australia. It is this principle which should underscore the next evolution in wagering regulation in Australia. Wagering in Australia is subject to complex, state-based regulations. But the reality is we have a competitive online environment that circumvents state borders. And the States are not in a position to effectively intervene. We have different rates of wagering tax across the country, including a low-tax regime in Northern Territory. We have different rules and regulations by state and territory. In the Northern Territory wagering operators can offer credit to their clients wherever that client may reside but wagering operators licensed in the other states can t. Page 4 of 5

5 In NSW, wagering operators are not allowed to offer betting on elections but, of course, NSW residents can use their mobile phones to place an election bet with a bookie in the Northern Territory or interstate. And the responsible gambling messages that accompany advertising differ by state. It s a patchwork approach. We need a national and consistent approach with Federal oversight to bring the following into line: the fees to racing, product availability, state taxes, consumer protection and advertising laws. We have seen some appetite to act on sports betting advertising controls. And we have also seen the Federal Coalition s policy around new credit betting restrictions. These are good first steps, but we also know that offshore operators are targeting Australian customers, often with reduced responsible gambling protection measures. Estimates vary on the size of the offshore flow of betting but certainly the numbers will be large given the popularity of online poker and gaming that is prohibited in Australia. It s a global problem but we are seeing countries overseas take control of their gambling taxes and consumer protection measures. France is a good example. Despite the complexity of European market restrictions, France has introduced successful and strong legislation to ensure its racing and wagering industry remains sustainable and its consumers are protected from unlicensed operators. The laws mean that only operators licensed by EU authorities can offer betting to the French public and that uniform duties are paid by wagering operators. If we don t address these areas, then consumer protection remains compromised, and the sustainability of racing and community clubs funding will be eroded. If not for Tabcorp s outperformance of the market and the introduction of race fields, racing funding in NSW and Victoria would already have declined. We know that some racing jurisdictions outside NSW and Victoria are under pressure. We re committed to working with the Government, regulators and our stakeholder partners to ensure a long-term sustainable wagering model is implemented in Australia. So, in conclusion, the wagering market in Australia is growing and supports one the most vibrant and well-funded racing industries in the world. Tabcorp is the wagering market leader with 44% market share by turnover and more if you measure it on revenues. Tabcorp provides more than 60 per cent of racing industry funding in Australia with some $730 million flowing from us to the racing industry in FY13. But in today s competitive and national environment, the time is right for the next phase in the evolution of Wagering regulation. Tabcorp supports a program of change. This would ensure a national, sustainable and consistent approach to gambling taxation, regulation and integrity. If we get these settings right, racing and wagering can continue to grow in a sustainable way. Tabcorp has successfully grown its revenues and market share in the face of ongoing market evolution and competition. We re strongly positioned to continue to compete and grow into the future. Once again, thank you for the opportunity to address you today and I d be very happy to take any questions. Page 5 of 5