Racing Board faces changing betting market

10:05 AM 08 Jan 2014 NZDT
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Chris Bayliss
This job kills any enjoyment that you used to have of sport," says Chris Bayliss
CAMERON BURNELL/Fairfax NZ Photo

Chris Bayliss has no idea how to price a horse at the races but held betting slips totalling nearly $2 billion across every sporting event last year.

Arguably the former banker turned New Zealand Racing Board head is the country's biggest punter, but running the institution charged with operating the TAB in New Zealand has killed sport for him.

"Because now I always know our position, so I can watch sport with my heart, or I can watch it with my brain," Bayliss said.

"It is terrible watching the All Blacks, wanting them to lose."

Spending at the TAB ran away to a record $1.957b for the year ended July 31, 2013 - roughly 1 per cent of New Zealand's gross domestic product.

In October the board, which was established under the Racing Act to run the TAB in New Zealand, announced a net profit of $144.1 million.

For Bayliss, who is 17 months into his role as chief executive of the New Zealand Racing Board, this basically means he held a $1.957b betting slip last year.

"I've always got a massive bet on every sporting event, a lot more than most Kiwis have got.

"This job kills any enjoyment that you used to have of sport."

Bayliss is British but has lived in New Zealand for ten years, and said he never imagined he would be in charge of the 62-year-old New Zealand Racing Board.

He said he cheers for the All Blacks against England and enjoys watching the Ashes test series, but has no more of an interest in sport than most.

The challenge for Bayliss, however, was upgrading and improving an industry which had lost half its active punters in the past decade and is riding on systems that are like "a 20-year-old car".

All this despite a year of record spending at the TAB.

Bayliss said the board's challenges first sprung about a decade ago, when its turnover first nosed over the $1b line.

The organisation failed to understand it had then become a large, rather than medium-sized, company, and its frameworks and procedures had struggled to adapt since.

This is why Bayliss believed his 29 years of banking experience, which started when he was just 16, would provide a good return on the industry's wager.

"At the end of the day, businesses of this size, agnostic of industry, are about distribution, they're about product, they're about customers.

"I would have no idea how to price a horse tomorrow, but I know how a trading book in a bank works.

"I know, therefore, when you trade in currencies and you're trading interest rates, it's no different to trading sport, so I know what procedures and frameworks you'd expect to have in place."

The 900-person, 690-outlet organisation, which Bayliss said was the biggest retailer in the country, would "easily" rank on the NZX 20, the largest and most liquid companies on the stock exchange, if it listed tomorrow.

Furthermore, it was the largest broadcaster in the country, yet somehow flew under the radar.

"Everyone knows who the TAB is and everyone knows they've got one in their town.

"Somehow they never think about it more than that."

Bayliss's more difficult challenge is the fact that the number of active customers has dropped from more than 200,000 in 2003 to about 100,000 today.

At the board's annual meeting in Wellington earlier this year, the organisation's systems were compared to a 20-year-old car.

The 62-year-old NZRB took the opportunity to outline which elephants would be replaced by runaway horses.

The outdated technology, a need for high-definition broadcasting and the lack of a mobile app were identified as the "elephants" at the Racing Board.

About 29 per cent of its turnover was generated online, but Bayliss said poor technology had saddled it with about $300m in "leakage"; betting lost to the TAB through offshore providers.

It was not illegal for New Zealanders to use overseas bookmakers but it was illegal for them to advertise here.

"Our customers are ageing and we haven't been able to attract the new breed of customer, because we haven't had the infrastructure to do that."

A mobile app was planned for launch ahead of the Football World Cup in Brazil, an event Bayliss expected would turn over $30m at the TAB - the same as the Rugby World Cup in 2011.

Live streaming also become available last month, allowing punters to watch events from their laptop or tablet.

As well as people using overseas bookmakers to bet on New Zealand sport, the "leakage" figure included betting on events the TAB did not have an offering for.

People were betting on the winner of New Zealand's Got Talent and who the next prime minister would be using overseas agencies.

The TAB was not legally able to offer odds on such events, because of the provisions of the Gambling Act.

"Brits are interested in it and Aussies are interested in it, so why would Kiwis not be interested in it?" Bayliss said.

"They're betting on it, we're just not capturing any tax."

One of the board's long-term objectives is to maximise returns to the racing industry, comprising thoroughbred, harness, and greyhound racing.

For the year ended July, New Zealand's racing industry gained about $142m in dividends over the year.

About $5.7m was also distributed to national sports and other bodies from sports betting and gaming takings.

But for the $300m leakage, everybody misses out.

Most Kiwis did not appreciate the NZRB had no commercial shareholders, and every single dollar made went back into sport, he said.

"They're robbing New Zealand of GST, betting duty, problem gambling levy, and most importantly, any revenue back to the industry.

"It's an online world now, customers can find it, and they do."

Bayliss said it would target growth in racing stakes of about 50 per cent by 2018, up to $120m.

This would be harnessed by a growth in profits as well, which he hoped would hit between $160m and $180m.

To do this, the Racing Board also needed to adapt the racing calendar.

Bayliss said the calendar was "steeped in history".

November through to the end of January was the busiest period of racing in New Zealand, but Kiwis now bet more on Australian horse, harness and greyhound racing than on domestic races.

Last year's financial result had been hit by the worst rate of cancellations in a decade, as 12 race meetings were abandoned because of the drought.

"It's a concern for the domestic industry; it's a concern for the gate money and the money the clubs get.

"Economically I can just switch, because punters will just switch to what's on, but it's the poor clubs here that lose out."

As such, the local industry should look to opportunities to capitalise on "exporting" race meetings offshore, Bayliss said.

The Auckland Cup was always in March, but the Hong Kong Jockey Club, which runs betting agencies there, had told him it would be interested in the Cup if it was run in January.

He expected an exported broadcast of the Auckland Cup during January would be worth about $30m in turnover, the same as the Melbourne Cup - by far the TAB's largest trading day.

Sydney bookies were also desperate for content at 10am, when no other sport was on.

"That would only mean moving races forward an hour.

"It's getting the constituency to understand there's a big world out there, we've got a great product and we've got a time zone we don't think about strategically."

Bayliss said it would also look to gain more access to the world's VIP punters to further add to the growth of the betting industry.

It was reputed about a dozen customers around the world spent more than $100m a year on betting, of which every betting agency courted a couple.

The NZRB did not want them all, Bayliss said, because then half its turnover would be exposed to just 12 customers.

But it had a prudential limit in place which included "an appetite to grow these by a couple".

For the six months to January 31, 2012, nearly $800m was spent on racing bets alone, compared with sports betting of about $120m.

But Bayliss said the sport pool was growing at about 30 per cent a year. Overall tipping would "certainly" be above $2b next year, he said.

The 2013 financial year had been the first in many without a marquee sporting event, such as a world cup.

He said the America's Cup had received over $1m in bets, and represented the sort of sport the TAB could garner more growth from.

"Generally if there's a sport, there are customers that want to bet on it."

He expected the growth would come from a younger audience, sitting around a TV watching the All Blacks, having a bet on who was going to score the first try.

"Let's just put $10 on it, I'm not going to fall out with my wife, I haven't spent the grocery bill, put $10 on and four or five of your mates all decide we're going to put a different person.

"Your enjoyment and excitement in that game, believe me, has exponentially increased."

That is, unless you've got $2b riding on it.

FAVOURITE FLUTTERS

Sport

1. Basketball

2. Rugby Union

3. Rugby League

4. Football

5. Tennis

6. Cricket

7. Baseball

8. American Football

9. Golf

10. Ice Hockey

Events

Rugby World Cup, 2011 – $30m

Melbourne Cup – $30m

America's Cup – $1m 

by Hamish McNichol reprinted with permission by www.stuff.co.nz and Fairfax NZ News

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