Business Session 1 : The Wagering Landscape Industry Trends and Strategies Winfried Engelbrecht-Bresges Chairman, Asian Racing Federation Vice Chairman, IFHA CEO, The Hong Kong Jockey Club 1
Wagering is the lifeblood of racing Presented in 2014 2
Global racing betting volume is flat Source : IFHA Annual Report 3
MILLION Turnover from 2009 to 2014 4,000.0 2014 Turnover: Change from 2009 (at Constant Currency) 3,000.0 2,000.0 1,000.0 - -1,000.0 Japan Great Britain Australia Hong Kong USA France -2,000.0 Source: IFHA, Racing Australia(RA), UK Gambling Commission(UKGC) Statistics 4
Turnover in 2015 Country % change in 2015 turnover over 2014 Japan +3.6% Australia +2.8% Hong Kong * +1.5% US +1.18% UK # +11.4% France -1.8% 5
I. Economic conditions Markets 2016 Real GDP Growth Forecast Hong Kong 2.2% Japan 1.0% South Korea 3.2% Singapore 2.9% Australia 2.9% New Zealand 2.4% South Africa 1.3% Source of Forecast : International Monetary Fund World Economic Outlook, Oct 2015 6
IIa. Competition from casino gaming Casino Yield (USD $ Mil) 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 2017F CAGR from CAGR from 2009 to 2015 2015 to 2017 Global 71,824 74,829 71,714 83,976 101,659 106,805 114,473 113,446 103,448 107,417 111,718 6.3% 3.9% Asia-Pacific 16,332 19,878 21,084 33,887 46,564 51,777 59,074 58,537 47,615 50,149 52,518 14.5% 5.0% 7 Source: GBGC
Casino gaming by market in 2014 8
Casino income streams VIP MASS Macau Casinos 80% VIP 20% MASS 9
Gross gaming revenue plunged in Macau Macau Casino gaming revenue end 2015 MOP (billion) Gross gaming revenue % drop Total 230.84 34.3% VIP market 127.82 39.9% Mass market 103.02 25.9% 10
IIb.Competition from Sports Betting Presented in 2014 11
Sports betting turnover exceeded Horse Racing betting turnover in 2014 Turnover (USD $ Mil) 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 2016F 2017F CAGR from 2009 to 2015 CAGR from 2015 to 2017 Race Betting 132,201 136,998 126,888 126,679 132,305 132,241 124,101 123,161 125,762 127,301 129,446-0.1% 1.5% Sports Betting 108,363 109,584 102,969 107,456 102,936 112,667 123,037 129,655 114,520 128,339 132,748 1.8% 7.7% Lotteries 208,762 224,216 222,166 226,463 256,439 260,717 273,677 289,744 305,026 324,581 339,563 5.4% 5.5% Other Activities (excl. Casinos) 42,172 43,013 43,587 45,120 47,053 47,534 49,112 51,179 52,695 54,135 55,381 3.2% 2.5% 12 Source: GBGC
In-play Sports Betting 13
IIc. Fantasy Sports Betting - derivative product of Sports Betting 14
Fantasy Sports may have global appeal 15
IId. The biggest competition comes from Unregulated and Illegal Betting 16
The global illegal betting market is likely to be as big as USD500 billion in transactions with Asia the driver Market Offshore and illegal betting in Asia Illegal Turnover Global racing + other sports USD500 billion ++ Asian racing + other sports Hong Kong racing + other sports USD350 billion USD64 billion (Football $40b, Racing $12.78b, other $12b) (Source : HKJC analysis) 17
Industry Trend Betting operations becoming more global New Market Entrants c 18
Betting operations becoming more global New Market Entrants Global Expansion by acquisition c 19
Betting operations becoming more global New Market Entrants Global Expansion by acquisition c Local Merger and Acquisition 20
Industry Trend migration to Fixed Odds betting 21
A$M Migration to Fixed Odds betting 12,000 10,000 Australian Race Wagering Turnover to 2014 8,000 6,000 4,000 2,000-2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Parimutuel Total Fixed Odds (TAB and Bookmaker) Source: Australian Gambling Statistics, Qld Treasury 22
A$M Migration to Fixed Odds betting 12,000 10,000 Australian Race Wagering Turnover to 2014 8,000 6,000 4,000 2,000 1. Racing Right 2. Parimutuel Betting - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Parimutuel Total Fixed Odds (TAB and Bookmaker) Source: Australian Gambling Statistics, Qld Treasury 23
140 Industry Trend Shift to digital technology Wireless Mobile Broadband Subscriptions (per 100 persons) 120 100 80 60 40 20 0 Japan Great Britain Australia USA France OECD 2009 2010 2011 2012 2013 2014 Source:OECD 24
Rising share of mobile betting HKJC Racing wagering HKJC football betting 25
Apps offer integrated and seamless experience 26
Industry Trend Commingling 27
Current state of Commingling 28
Next generation tote system to stimulate further growth 29
Commingling needs a next generation ITSP to unlock its full potential 30
Summary of competition and industry trends Competition from other forms of wagering Opportunities Casino for Growth gaming Sports and Fantasy Sports Betting Illegal and unregulated betting Economic Conditions Racing wagering industry trends Changes for the Supply of Wagering on Racing Betting operations becoming more global Migration to fixed odds betting Digital connectivity Commingling 31
What we have to do as an industry 1. Embrace technology to connect directly with customers and create Economic relevant offerings. Conditions Opportunities for Growth Changes for the Supply of Wagering on Racing 2. Develop new tote technology which supports a better customer experience. 3. Advance development of new Tote Protocol for commingling to leverage our strength in exotic bet types. 4. Concerted efforts to create and protect our IP rights nationally and internationally 5. A concerted effort by ARF and IFHA to fight illegal and unregulated betting. 32
Business Session 1 - Speakers Mr Bernard Saundry CEO, Racing Victoria Limited Mr Tom Ascher CEO, Longitude LLC Mr Patrick Jay Independent Consultant 33