BetFair Australias spin doctor tells all about their payments to the horse race industry.

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Andrew Twaits, director of corporate and business affairs at Betfair [Australia], writes:

Re. &#8220-High Court shock for the racing industry&#8221- (28 March, item 20). I wanted to drop you a note to clarify some important facts following your article in the Crikey newsletter.

Towards the end of your article you said, &#8220-&#8230-Betfair have offered to pay a fee of 27 cents out of every $100 bet. The TAB currently pays a fee of $5 in every $100 wagered!&#8221- Both those statements are false.

First, Betfair offered Racing NSW a product fee based on a percentage of gross profits- not turnover. We have never offered to pay Racing NSW (or any other racing body in Australia) a percentage of our turnover.

Second, the TAB does not pay NSW Racing or the NSW Government as a percentage of its turnover. It makes its payments as a percentage of its revenue – just like Betfair has proposed. See the Betting Tax Act (NSW) 2001 to see exactly how the TAB is taxed. The requirement to pay product fees to racing based on revenue is found in the Racing Distribution Agreement between the TAB and the industry – not surprisingly, we don’t have a copy but the payment model is referred to in Figure 20 of the Wagering Industry Review Issues Paper published last week by Alan Cameron AM. You can read a copy here.

To understand the practical difference between the TAB paying a percentage of turnover vs. a percentage of gross profits, you need only consider how much money goes to the racing industry or government when the TAB runs a zero take-out promotion such as &#8220-Fat Quaddies&#8221-. The result is that it doesn’t matter whether they &#8220-turn over&#8221- $100,000 or $10 million&#8221-, the industry and government receives nothing – because the TAB makes no revenue. That’s not a criticism of the TAB, they do it to get their aggregate takeout rates below the statutory threshold, and the promotions are great for racing, but it does highlight the false nature of the conventional wisdom that the TAB pays on turnover.

In relation to our offer to Racing NSW, its worth pointing out that Racing NSW has declined to tell anyone what they believe we or any other interstate wagering operator – including bookmakers and TABs – should be paying for the &#8220-right&#8221- to cover NSW racing. Nor will they say publicly whether they think that any interstate wagering operators who do pay a fee should be able to advertise, as the local operators can do.

As a final point, before we were licensed in Australia, we offered to pay every State racing body 20% of our gross revenue (from our global customer-base related to betting on their races. That offer was rejected and discussions were cut off. We accrued product fees for the racing bodies at that rate the entire time we were licensed and we still hold them in trust. To date, only Tasmanian Racing and RVL have accepted the accrued product fees.

UPDATE: Deeper analysis by Bill Saunders&#8230-