Interesting read

[BitofaLegend]

Found this a very interesting read posted up over on racecafe by AC Roberts (not my post)

"The Letter the Informant will not publish.

 

Long time greyhound breeder owner who runs a successful accounting practice , Tom Rodewald , has sent me thru a letter he has tried to get the Informant to publish. They I gather are showing no interest and this is not surprising in view of the facts contained within the letter. It seems the horse codes are not providing a subsidy to the greyhound codes rather it is the other way round. !

 

Tom letter reads

Over recent months there have been a number of articles and letters to the editor dealing with racing industry distributions in The Informant.

One claim made by your columnist Brian de Lore was that greyhound racing, he understood, was being subsidized by the thoroughbred code to the tune of $5m per annum.

It has been a common thread in letters to the editor that thoroughbred racing does not receive the full benefit of earnings from the export of its product. Further it is being stated that Section 16 of the Racing Act is unfair on the thoroughbred code as it focuses industry distributions on domestic turnover share.

Fact or Fallacy?

Over the past few weeks I have trawled through publicly available information and also made the odd enquiry to try and ascertain the true position.

From the publicly available information we can establish in the 2017 season that:

1. Section 16(3) of the Racing Act that requires racing industry funds to be distributed based on NZ domestic code turnover has not applied since 2011 and did not apply in 2017.

2. it appears that betting on greyhound racing via the NZ TAB was 20% of total racing turnover.

3. it appears the gross betting margin the NZ Racing Board earned on greyhound turnover exceeded that of harness racing.

4. the export turnover commission received by the NZ Racing Board on greyhound racing was approximately 31% of its total export income.

5. the greyhound code received only 16.1% of the distribution made under Section 16.

6. a quick calculation indicates if the racing industry distributed its turnover based on each code receiving its share of gross betting revenue and its actual export commission earnt the greyhound racing share of the pie would have grown by approximately $8.8m.

It seems to me on figures published the thoroughbred export turnover percentage was well under 50% of the total racing turnover in the 2017 year. Allocating export turnover by each code on an actual basis would have disadvantaged the thoroughbred code.

Anybody interested can download my full analysis and some pertinent comments via my website http://rodewaldconsulting.co.nz/blog/racingindustrydistribution/

 

T L Rodewald Chartered Accountant

Accredited Insolvency Practitioner"

 

[Basil]

Very interesting. I've checked his calculations and there doesn't appear to be any problem there. The point he's making reflects the very different code shares for NZ vs overseas racing turnover. For example, harness provides 28% of NZ turnover, but only 14% of overseas turnover; whereas for greyhounds the corresponding figures are 19% and 23% respectively.

I must live a very sheltered existence — I don't know a single person who bets on the Aussie dogs! Who are they all??

The other interesting point is that the harness gross revenue share is lower than its turnover share while the reverse is true for gallops. The Brodies of the harness world must be taking the TAB bookies to the cleaners more often than their galloping counterparts!  

[Brodie]

6 hours ago, Basil said:

Very interesting. I've checked his calculations and there doesn't appear to be any problem there. The point he's making reflects the very different code shares for NZ vs overseas racing turnover. For example, harness provides 28% of NZ turnover, but only 14% of overseas turnover; whereas for greyhounds the corresponding figures are 19% and 23% respectively.

I must live a very sheltered existence — I don't know a single person who bets on the Aussie dogs! Who are they all??

The other interesting point is that the harness gross revenue share is lower than its turnover share while the reverse is true for gallops. The Brodies of the harness world must be taking the TAB bookies to the cleaners more often than their galloping counterparts!  

Basil, I am sure you are an intelligent man.

The returns to the TAB used to be Gallops about 13% dogs about 14% and harness around 6% profit roughly a couple of years ago.

Then the whizz kids in Wellington thought gee our profit on harness is half of the other 2 codes, so how do we fix this?

We will limit the winning punters and give even shitier odds on harness so that will put the good punters off and will leave the others to take the poor odds and that will get out percentage up, and I think it did increase to about 10%.

As I have said on many occasions this is false economy because what it does do is puts many punters off having a go!

The thing is that it is all about turnover and getting punters new and old to offload and remain in the punting game.

Put enough off and they don’t bother again.

The reality is that the bigger the turnover the bigger the profit as it is a no.s game.

Yes there will be winners but there will be more losers and if you have got bugger all turnover, you have bugger all profit.

The NZ TAB are not the worst Bookies in the world by a long shot, but they need to remain competitive as it is pretty easy to get offshore nowadays with the many betting agencies.

I don’t bother really now as I have been closed down by several so there is no real challenge for Brodie!

 

[Basil]

On 17/08/2018 at 3:46 PM, Brodie said:

Basil, I am sure you are an intelligent man.

The returns to the TAB used to be Gallops about 13% dogs about 14% and harness around 6% profit roughly a couple of years ago.

Then the whizz kids in Wellington thought gee our profit on harness is half of the other 2 codes, so how do we fix this?

We will limit the winning punters and give even shitier odds on harness so that will put the good punters off and will leave the others to take the poor odds and that will get out percentage up, and I think it did increase to about 10%.

As I have said on many occasions this is false economy because what it does do is puts many punters off having a go!

The thing is that it is all about turnover and getting punters new and old to offload and remain in the punting game.

Put enough off and they don’t bother again.

The reality is that the bigger the turnover the bigger the profit as it is a no.s game.

Here are the facts.

Between 2014 and 2017, harness turnover rose by approximately 0.5%, i.e., it fell in real terms. During the same period, gallops and greyhounds turnover rose by 7% and 32% respectively. So harness has unquestionably been losing market share.

Also between 2014 and 2017, gross margin (gross revenue/turnover) fell in all codes, coinciding with a big shift from tote to fixed-odds betting (78:22 in 2014 to 60:40 in 2017), but the falls were similar across all codes and the harness margin was the lowest throughout (17.1% falling to 16.2%, compared with 18.3-17.6 in gallops and 18.0-17.2 in dogs).

These facts are partly consistent with your story: faced with a greater proportion of losing bets on harness, the TAB tightened up its offerings on that code, which in turn saw more turnover diverted to the other codes (although one would also then have expected the fall in gross margin to have been less pronounced in harness). 

But they're also consistent with another story: due to a perception that harness punting was "less fair" (as reflected in the lower gross margin), the TAB tightened up its harness offerings and punters switched to other codes. That is, rather than TAB actions causing the relative fall in harness turnover, both were simultaneous reactions to a single underlying cause.

This is a classic endogeneity problem. Without additional data, there's no way to determine which story is correct.

One thing is obvious though — whatever the cause, a loss of market share of this magnitude is definitely not good news for harness!