NSW and Victoria stage turf war in Australian racing

Australian racing is in the midst of one of the biggest changes in its long history as the nation's two biggest states – New South Wales and Victoria – wage what the media have dubbed a "turf war" and behind which lies two different approaches to the business of betting.

In one corner is Racing NSW, led by its single-minded chief executive Peter V'Landys, riding high on advantageous funding and determined to steer the country's best horses to Sydney and away from Melbourne with a series of brand new, big-money races.

In the other corner, Victoria, boasting history and the spring carnival, an enormous money-spinner where the attention of the country's betting public turns to Melbourne.

Most mainstream media attention has been on V'Landys' new race creations like the A$14 million Everest and A$7.5 million Golden Eagle – among a raft of new events worth more than A$45 million that stretch across six weeks, all launched with the express purpose of attracting attention and horses to Sydney in the spring.

Overall prize money in both states has spiralled – Racing NSW and Racing Victoria will have paid out more than A$500 million combined in the season when it is completed on July 31 – but driving it all is betting revenue, and that is where the race is on for the biggest slice of the pie.

Perhaps the key difference between the states is their relationship with Australia's biggest wagering operator Tabcorp, whose primary racing product is pari-mutuel betting, but which also offers fixed-odds products.

"New South Wales have basically gone all in on Tabcorp and Victoria is in a joint venture with Tabcorp and they allow corporate bookmaker sponsorship, the bookmakers can promote their product on television and sponsor racetracks and races in Victoria," said Jason Cornell, an ex-Hong Kong Jockey Club and now Australian-based racing administration expert.

"New South Wales were behind, but they have had some big increases in funding and improvements and they have put Victoria on the back foot. The relationship with tote and bookmakers is definitely one of the main factors that differentiates the two jurisdictions."

It isn't the only difference though, but the biggest change in the two-state dynamic was in 2010 and the landmark "racefields legislation" court case.

When V'Landys squared off with corporate bookmaking giant Sportsbet and Betfair in 2010, the ruling over how racing could charge for its product went all the way to the High Court.

When V'Landys scored what many felt was going to be an unlikely victory it opened up more than A$80million that had been paid in lieu of the ruling and gave New South Wales a funding head start on its southern rival.

Although the high court ruling was over-arching, arrangements on how the sport charges operators is made on a state-by-state basis and Victoria was essentially hamstrung, having already made far less lucrative deals with bookmakers.

Since then New South Wales have continued to go "all-in" with Tabcorp – continuing to hit bookmakers hard with charges based on turnover – and Victoria has essentially doubled down, preferring the joint venture arrangement with Tabcorp and negotiating a deal based on revenue with bookmakers.

Another key difference is television and streaming rights, with Racing NSW selling the rights to the Tabcorp-owned SKY Television and Victoria creating its own broadcasting arm called Racing.com. Racing.com was dealt a blow when Tabcorp merged with Tatts Group in 2017.

While New South Wales race clubs are little more than two decades into a 99-year pari-mutuel wagering license with Tabcorp, the Victorian wagering licenses are up for grabs in 2024 – the trouble is, there might be only one realistic bidder.

"It isn't as competitive a landscape anymore," Cornell said. 

V'Landys success in brokering advantageous deals for his state has given him even more leverage with government and in 2016 he negotiated for what he called a "tax parity", a system where Racing NSW was ensured a better tax break on betting than Victoria.

This "tax parity" will be rolled out progressively, with the biggest returns yet to come – meaning the two-state competition, which has also included big investments in training centers and infrastructure, is far from over. 

"The tax parity delivered its returns in stages – first in 2016 and then more in 2017 and a big hit in 2018, and an even bigger chunk in 2020. So V'Landys has even more ammunition in the future," Cornell said.

Another game changer for racing in Australia was the implementation of the controversial Point Of Consumption Tax (POCT) at the start of 2019, which allows state governments to charge bookmakers on revenue on top of what they already pay to the sport via racefields legislation.

It is up to state governments to decide how much is charged and how much of the POCT collected is given back to racing and in some cases, most notably South Australia, none was given back at all.

That meant disaster for South Australian racing and in some ways Racing.com, which paid for non-exclusive rights to broadcast racing from its neighbouring state in 2017.

South Australia is a product that has lost its lustre after POCT created a funding shortfall, with drops in prize money and many of the state's top trainers and jockeys flocking to where the strength is.

That strength is in New South Wales and Victoria.

"The two big states negotiated a lower tax rate, but the smaller states, with less leverage, were whacked with the full 15 percent," Cornell said.

The battle for racing supremacy is far from over but in the meantime the biggest player remains V'Landys, who has helped create a "vertically integrated" jurisdiction, where individual race clubs – including the once-powerful Australian Turf Club in Sydney – are essentially under his control.

 That means that new ideas – something that V'Landys has had a lot of over the last decade ­­– come to fruition quickly, in Victoria new initiatives can become mired in a disaggregated system involving three metropolitan raceclubs, Country Racing Victoria and the overarching "governing body" Racing Victoria.

The criticism leveled at both states, but mostly Racing NSW, has been that the funding battle has come at a cost, with fixed-odds betting markets becoming less appealing.

Professional punter and industry expert Richard Irvine says the POCT tax has created a situation where it is hard for bettors both big and small.

Irvine believes treating exchange Betfair less harshly with charges based on revenue, not turnover, would be a great start.

"Peter V’Landys and Racing NSW talk proudly about how they have captured and engaged the next generation of racegoers via the introduction of The Everest," Irvine said in a statement on his Fair Wagering Australia website. "It was a contrarian move by Peter and it has paid off well. But he needs to realize that others in the industry, like Betfair can be contrarian as well. Betfair is here to stay – it’s a great driver of turnover, is hugely popular with younger punters who RNSW so desperately want. The rest of the country’s PRA’s have embraced it – made it pay its fair share but also allowed it to prosper. It’s time for RNSW to do the same and charge Betfair on revenue."