It’s not the first time we’ve had cause to write about the impact of politics on Asia’s gaming industry and it’s unlikely to be the last.
Over the past two years the gaming news headlines have been dominated by the fallout from Beijing’s decision to crackdown on corruption, triggering a collapse in Macau’s VIP industry which was mostly divorced from the laws of supply and demand.
This time the shadow of political change is hanging over the gaming sector of Australia.
At the time of writing, the ultimate conclusion to Australia’s election is still unclear, but what looks certain is that committed anti-gambling campaigner Nick Xenophon will have a strong influence, possibly in both the Senate and the House of Representatives.
He made his name crusading against gambling and this still forms a significant part of his policy platform. He has been particularly harsh on corporate bookmakers, who he claims are getting away with not paying enough tax.
Xenophon’s election comes at a time sentiment towards gambling already appeared to be hardening, with a review into online gambling released at the beginning of the year clamping down on the sector rather than liberalizing rules as many had hoped. South Australia also recently introduced a point of consumption tax of 15 percent on net revenue of all companies offering services in the state.
It is the first time an Australian jurisdiction will target betting companies based upon where bets are placed, as opposed to where the betting provider is located and was widely condemned by the industry.
Sportsbet chief financial officer Ben Sleep was cited as saying the move was a “money grab,” which was introduced without consultation and will lead to many bookmakers leaving the state.
According to a research note from CLSA, Xenophon’s policies on wagering are the least controversial and therefore mostly likely to be passed. Those most hit would be bookmakers who have been seeking the liberalization of the online gaming market to include in-play betting.
Some of the reforms outlined by Xenophon were already in the works following the recommendations of the O’Farrell report earlier this year which, in the eyes of many in the industry, marked a major failure for Australia to take the lead in online regulation and bring its industry in line with standards in Europe.
In his manifesto, Xenophon says he wants an overhaul of outdated online gambling laws to take into account emerging technologies; an end to sports betting ads during games and an end to micro-betting on sports events, which he says can lead to corruption and match fixing in sports.
“We see this as a positive for Tabcorp and Tatts given it’s likely to slow down corporate bookie customer acquisition and therefore market share gains by the competition,” CLSA said.
However, the brokerage said Xenophon may find it harder to push through his hardline on pokies. He wants the immediate implementation of the Productivity Commission’s recommendation for $1 maximum bets per spin and $120 in hourly losses, compared to $10 per spin and $1200 an hour. He also wants to remove all ATMs from pokies venues.
“If successful (that’s still a big if in our view), there could conceivably be a material impact on EGM revenues for both the local market and casinos, with the biggest impact likely to come from a ban on addictive features, such as near misses and free spins,” CLSA said.
However, on the upside, suppliers such as Aristocrat and Ainsworth may get a boost in the medium-term from replacements to meet new requirements. Longer term they will be hit by lower revenue.
Sydney-based Edward Beesley, a strategy consultant of TSoK Consultancy who recently joined forces with Toby Odd to manage a new business venture, Digital Fuel Innovations, said there is growing anti-gambling sentiment in Australia. But he warned that a piecemeal or heavy-handed approach will force Australians to find other places and means to bet.
“With the election over it provides ample of opportunity to take stock, stand back and take a broader look at online betting, animal welfare, pokies and what is needed to minimize the number of people who fall into compulsive gambling, these decisions should not be taken in isolation and require drawn out discussions,” he said.
“Gambling is part of the Australian life it seems a fashionable agenda to try and destroy it instead of responsibly lead by example.”
Another blow to the industry came from New South Wales, where the government blindsided the territory’s greyhound racing industry in July by imposing a total ban. The move followed an inquiry which found overwhelming evidence of animal cruelty. The move was later followed by ACT, the capital territory.
“The greyhound ban in NSW along with the Point of Consumption tax in South Australia were bolts out of the blue, regardless as to whether you agree or disagree with the politics, the impact on revenues, jobs and communities needs managing and discussing properly, not random announcements made in apparent isolation,” Beesley said.
Greyhound Racing NSW said it was devastated by the decision, and emphasized its work over the last year to improve the industry.
CLSA said the impact on both Tabcorp and Tatts is likely to be minimal as long as other states don’t choose to follow, which at present looks unlikely given Queensland and Victoria said they had no plans to shutter the industry.
However, if others were to follow, Tabcorp could see about 8 percent trimmed from its earnings per share, and Tatts 3 percent, it said.
As far as the online sphere is concerned, Beesley says the government’s current tack is likely to drive punters offshore and will do nothing to stop growth in sports betting.
“The need to innovate and offer a digital betting proposal to customers than works within the framework of a socially responsible set of laws is crucial for operators, this is a movable feast and the demands from e-customers will not let up.”
Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.
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