Punters need a better deal: bookmaker

 

Winning Edge recently caught up with Tristan Merlehan, director of online bookmaker TopSport, to get the latest on Australia's wagering landscape and what the future holds for operators, punters and the wider industry.

Top Sport is an Australian-owned and operated bookmaker, catering for the low-margin and more sharper punting demographic.

You can listen to the full podcast interview here or read a summary of the key points below.

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Australia’s wagering landscape is at a critical juncture with changes needed to arrest the slide back in the punters' favour, according to the director of online bookmaker TopSport.

With prohibitive fee structures strangling low-margin businesses such as TopSport, the reverberation hits punters' back pockets.

It is why TopSport has become increasingly vocal in its opposition of the current models in place, detailing the strain it is putting on the business and how it circles back to affect punters.

For context, the current state-of-play in Victoria and Western Australia imposts wagering providers with onerous fee structures, making it near-impossible for a bookmaker to offer punters competitively-priced markets, or the ability to get a decent bet on.

Many punters are seemingly all too unaware of this imposition and how it affects their betting, or even how it means they have to accept lesser odds and lower limits.

“In the last 6-12 months all of these taxes have come into play and most of the other operators have lifted margins or changed strategies, and I can understand that, but the punters are the ones who are worse off,” TopSport director Tristan Merlehan said.

Instead of stealthily limiting punters and offering higher percentage markets like other bigger, more well-known bookmakers, TopSport has been on the assertive with its transparency of the problem.

Mr Merlehan freely admits TopSport will be less competitive on racing products in Victoria and Western Australia – and he hopes this openness will help bring awareness and clarity to the situation.

Knowledge is power – and he says punters deserve to know the full extent of the changes are why they are getting a raw deal.

“The balance has shifted and hopefully over time it can be dragged back a little bit so low-margin bookmakers like ourselves, and the low-margin punters who are so important to the industry, are looked after somewhere down the line,” he said.

“We’re very passionate about the industry.. and have seen many evolutions of the wagering industry, but you can start to see now there is a shift.

“There are prizemoney increases and a lot of things on the surface that look really positive but there’s a lot of things that look detrimental to the long term sustainability of the industry.”

TopSport is at the coalface of the industry and handles the business of many low-margin, more professional punters that the bigger operators aren’t prepared to take on.

But the ongoing issue of costs imposed on TopSport by racing bodies such as Victoria and Western Australia has demanded change, with the company forced to remove its very popular premium products to ensure the business remains viable.

Unless there is "real change" in the next 18 months, Mr Merlehan concedes there will continue to be serious ramifications for punters.

“We’re conscious the punters are the ones that are potentially the worse off out of everyone - we’re also worried that sports turnover is growing and even though turnover for racing is high at the moment, in 18-24 months down the line, this may not be the case,” he said.

“And once it starts to go over the edge it goes very, very quickly. We’re trying to address the problem before it becomes even worse than what it is now and while there’s a chance to address it.”

So why is the Victoria and WA fee structure unsustainable for low-margin operators?

“Low margin operators such as TopSport pay on a meeting-by-meeting basis and there’s no opportunity to take any variance,” Mr Merlehan said.

It means that if TopSport has a winning day it pays on revenue, but on a losing day, it pays pay on turnover.

While the other states have the same model, the fees can be paid over the course of the month or year.

“It gives you the ability to flatten out bad days - we can flatten out any variance in other states, but not in Western Australia and Victoria," Mr Merlehan said.

“We pay 200% of revenue on Victoria and WA products, so we had to make a number of changes on 1 July by taking away a few of premium products, which we didn’t want to do, but we want to continue offering a very strong product on all sport and other racing codes.”

“In order to do that, we have to remain profitable, so we had to really make some tough decisions and they seem to have worked reasonably well, but we would much prefer to be offering premium products everywhere - and the moment there’s a change for the better, they’ll be re-introduced.

In total, four taxes are paid by wagering operators to work on racing in Australia – Point of Consumption tax, company tax, GST and income tax – and that’s before factoring in all of the other costs of running a day-to-day business.

Mr Merlehan knows bookmarkers need to pay money to the government and racing bodies, and welcomes the opportunity to contribute to the industry, but he says it’s now at the point where it’s unfair and unsustainable.

For more on TopSport’s position in Victoria and Wa, read the full statement here.

The curious case study of South Australia

While previously maligned in recent times, Mr Merlehan has praised South Australia for its forward-thinking and innovative approach.

The state’s industry has been a constant point of discussion since the South Australian Government introduced a 15% POC on net wagering revenue on 1 July 2017.

But at the start of August, Thoroughbred Racing South Australia (TRSA) showed foresight by implementing a radical change to their product fee model to entice bookmakers to grow wagering on South Australian racing products.

For the remainder of 2019 in SA, TopSport will incentivise punters, including offering a number of premium products.

For more, read TopSport’s statement here.

Mr Merlehan described TRSA’s new product few structure as “real positive change” noting the state’s issues with the government-imposed POC tax in play at the highest rates of the country.

“It has given us an incentive to grow wagering on their product – it’s win-win for them and great for us, as we can promote the product in their state.

"It's also great for punters with low margins and higher limits."

And there is now also data to prove the effectiveness of the innovative new model by TRSA, with TopSport holding more money on Morphettville than the feature race day at Rosehill (admittedly on a rain-affected track) on August 31.

Mr Merlehan said an SA meeting over-taking a Sydney meeting (in terms of money held) with punters has never done that in the company’s 15 years – and was achieved without any advertising.

In fact, TopSport's only promotion of the better offerings in SA was through only three tweets sent on social media.

“We elevated limits, lowered margins and gave punters an incentive to bet,” Mr Merlehan said.

“It just shows how simple and effective those things are in marketplace, still in in this day and age, when the industry has shifted to more of a marketing type brand.”

“If you go back to the fundamentals and give punters a reason to bet, give them aggressive prices and higher limits, then the turnover comes.”

“Thats the evidence of what we’ve been saying for the last 2-3 months - now we know it works and our whole figures on SA all month (August) have been very, very strong on the back of it.”

“It’s a positive and hopefully a few other states clue into it and understand that what we’re saying will work long-term, and it will be for the betterment of the industry.”

RV: Change your business model

While the response by the SA racing body was positive for TopSport, it was in stark contrast to Racing Victoria's reply.

With TopSport vocal in criticising Racing Victoria for its onerous fee structure as the reason behind the bookmaker's less attractive offering, with lower limits and higher market percentages, the racing body responded by essentially telling the company to fix its business model.

“Our race fields framework is applicable to all operators who accept wagers on Victorian thoroughbred racing on the same terms,” Racing Victoria said in a statement.

"This may present challenges for some wagering operators with specific business models and it is unfortunate that this has resulted in the need for some changes to TopSport’s product offering.”

The response suggested TopSport’s low-margin focussed business is not at the top of the racing body’s concerns.

Mr Merlehan conceded the response was “frustrating” and showed the company’s model was not being enocuraged, notwithstanding that he understood their challenges to deliver to the industry.

The way forward has been identified by Mr Merlehan as by introducing different fee structures to suit different operating models.

His proposal is for all bookies to have the opportunity to opt-in to a low margin model, which means they have to bet to certain parameters and limits which would be advantageous to punter.

It includes a minimum bet limit at all times (not only the current 9am raceday scenario), increased limits in the last 25 minutes before a race, and a maximum market percentage to ensure the bookmaker's offering is reflective of a genuine low-margin operator.

“The operators would still pay a significant amount of fee, but it just gives us the opportunity to run our model which we think is so important to keeping the industry ticking along,” Mr Merlehan said.

He said the differences between states had been palpable on a day-to-day basis, with TopSport guaranteeing it won’t be betting over 115% (market percentage) in Adelaide at the jump, ranging from 110-115%.

However, in Victoria market percentages sit over 120% on every race, with “punters 5-10% worse off on literally every race”.

TopSport has received a groundswell of support for its vocal stance in boosting the understanding and awareness from the industry about the issue.

Mr Merlehan said what began as a negative statement has generated so much positivity, and he expects racing bodies to be unable to ignore the growing cries of industry for it to wake up and take notice.

“On the back of really positive results from our SA offering, it shows what we’re saying adds up and a lot of people agree with it,” he said.

“If one of the bigger states has the courage to implement what we’re trying to do it’s going to be massively positive for the industry as a whole.

“We’ve got the runs on board with SA that when there’s a positive change, we throw it back to punters to give them a better crack, and this results in higher turnover on the state’s product, and in turn, we feel racing bodies will receive more race field fees at the end of the day.

“Its win-win-win.”

Punters funding prizemoney increases

The impost of operating in Victoria and Western Australia under the current fee structure is stifling the turnover that funds the industry and prizemoney increases and fancy multi-million dollar races, Mr Merlehan said.

“If bookmakers can no longer continue to hold the money their holding, and if bookmakers need to make changes, at the end of the day it’s going to result in less fees for the racing bodies,” he said.

“We’ve seen these massive prizemoney increases, which are great, but they’re all funded by punters.

“The punters need to get something back for their dollar.

"At the moment, all the punter is getting back for funding these prizemoney increases is lesser odds, lower limits and it’s just not sustainable.”