Latest from the Optimist

[Doomed]

This may be of interest to some.

http://www.theoptimist.co.nz/

[Joe Bloggs]

Well without doubt this is Brians finest work. If I had to be critical at all, I'd say Brian was a tad too kind......

[Freda]

Yes, it has better focus than some of BdL's former work.  He does get a wee bit off target sometimes and his obsession with the breeders' lobby is a tad annoying, although understandable given his background.

But good on him for bringing comment out of the wardrobe, so to speak.  I imagine it reaches a different audience than the one we air our opinions on, and he has a passion for the industry as a whole.

[Doomed]

The main bit I disagree with is that "few in the industry seem aware or bothered about it". Most of us on here have been aware and bothered about the decline for quite some time.

[Chief Stipe]

CEO Tod begins investigating partnering TAB NZ as profits decline

 

by Brian de Lore

 Published 11th October 2022

 

Two sets of figures recently released by TAB NZ can only leave you thinking that its diminishing turnover/profit trend is not sustainable for New Zealand Racing as we currently know it.

 

Examining the numbers leaves one in no doubt racing is financially contracting at an alarming rate. Few in the industry seem even aware or bothered about it except for Mike Tod, who has outlined plans in a memo to staff and how he will combat the strengthening headwinds at the TAB.

 

TAB NZ posted its July and end-of-year result three weeks before a memo from CEO Mike Tod came to staff talking of significant future changes. July revealed a betting profit of only $7.3 million, a massive $4.9 million below budget. A year earlier, the betting profit for July came in at $13.4 million, so this year’s July downturn is substantial.

 

The July year-on-year downturn calculated out at a contraction of 45.2%. Even when the figure is adjusted for an extra Saturday in July 2021, it still falls by 32%.

 

$28.9 million downturn off bottom line from previous year

 

For the full year ended July 31st, 2022, the profit came in at $23.5 million below the previous year. But operating expenses blew out to $119.0 million or $5.4 million above the previous year.

 

The bottom line differential between year-end 2021 and year-end 2022 resulted in a shortfall of $28.9 million. Last week TAB NZ posted its August profit which brought in $8.6 million, a 28% contraction in two years from the $11.9 million 2020 result.

 

Rising interest rates, mortgage payment hikes, and a recent sharp rise in the cost of living at the supermarket and other places must affect TAB turnover in the immediate future.  

 

The Optimist has highlighted this industry’s woes ad nauseam for years, and I have always believed that the reluctance of the majority of New Zealand racing administrators to partner/outsource TAB NZ with a global betting operator would one day result in having to do by necessity rather than choice.

 

That day has apparently arrived.

 

Memo informs staff of an investigation into TAB partnering

 

In the memo to TAB staff on September 22nd, written by the relatively new CEO, Mike Tod (who started in March), the first two paragraphs read as follows:

 

“A key pillar in our TAB Gameplan growth strategy is leveraging global capabilities to build a world-class betting experience for our customers, and cementing a strategic partnership with a wagering operator at the cutting edge of the industry could be a key factor in us achieving that target.

 

“With that in mind, we have commenced discussions with a small number of international operators to understand how they may help us rapidly enhance our products, services and customer experience while building on the more than $200 million that was passed on to New Zealand racing, sport and communities in the 2021/22 financial year.”

 

Mike Tod’s claim that they passed on $200 million (true figure $140m) is both mischievous and misleading. He’s including the Betting Information User Charges (BIUC) ($23M), Gaming ($14m), and the reduction in the betting levy ($13m), which had nothing to do with what TAB NZ collected.

 

What a shock! The Tod statement contradicts everything NZRB, RITA, and TAB NZ (all the same mob) have previously said for years about the future direction of the TAB. John Allen only thought about building a FOB platform to justify his $680,000pa, and Dean McKenzie had a jealous-driven romantic affair with the TAB and had no intention of letting the Aussies near it.

 

Messara: …partnering will provide significantly increased prizemoney

 

The Messara Review highlighted it as its most vital recommendation of the 17 put forward, and John Messara AM openly stated that without the partnering of the TAB, the door would not open for the opportunity of doubling prizemoney to revive New Zealand racing.

 

CEO Mike Tod has breathed half a breath of fresh air into racing with his memo that a serious, proactive, and positive approach to investigating the partnering of the TAB is happening. Whether or not the reason comes back to simple financial commonsense or the TAB has no option as it faces stiff headwinds is uncertain.

 

Here’s a list of bullet points in the memo to TAB staff that provides testimony to Tod’s thinking on the matter:

 

Tod recognises the benefits of partnering

 

“The objectives of a strategic partnership would be to:

 

“Achieve a customer experience that is on par with leading Australian and global operators.“Partner with an innovative operator that will help TAB NZ extract the biggest benefits and opportunities from its unique assets (in-play, gaming, retail and broadcast).“Balance benefiting from a global product roadmap and having the ability to develop bespoke products that cater to the New Zealand environment.“Have a partner who understands the importance of strong relationships with Government, racing and sport and is prepared to act in the interests of these stakeholders.“Leverage the resources of a well-respected, global operator.

 

“For clarity, the process that has commenced is not about a sale of all or part of TAB NZ. It is about trying to identify a world-class strategic long-term partner.”

 

Tod stresses that it’s not a sale of the TAB but a long-term strategic partnership; what John Messara said should happen in his review four and a half years ago.

 

Substandard options and odds offered by TAB NZ

 

In the above five bullet points, the first suggests an admission that TAB NZ offers its customers substandard options and odds compared to other betting agencies – and punters already know that.

 

The second point mentions broadcast, which might put ‘the wind up’ everyone at Trackside as one of the benefits of partnering is the chance to substantially reduce TAB NZ’s costs which currently amount to a staggering $119 million annually.   

 

The fourth bullet point mentions the strong relationship with the Government, which is another way of saying the Government has assumed ownership/control because Winton Peters bailed the TAB out of receivership with a $50 million gift in the 2020 May budget.

 

Bullet point four also describes ‘sport’ as a stakeholder, which is entirely incorrect. Sport supplies the TAB with a product on which to bet, for which they receive a fair fee and fair commission on the profit derived. Sport is simply a supplier.

 

When the NZ Racing Conference and NZ Trotting Conference sought a legal opinion on the ownership of the TAB in 1995, George Barton QC prepared a 24-page report stating that NZ racing clubs “have an irrefutable claim as beneficial owners of the TAB.”

 

Excerpt from the original document called “Off-Course Betting Scheme” approved by the Minister of Internal Affairs and dated 20 September 1950

 

The racing and trotting clubs had to put up £50,000 in September 1950 to start the TAB in 1951. Sport has contributed nothing in either set-up and running costs over the past 71 years and suddenly can’t claim to be stakeholders, but the clubs of New Zealand have proven themselves very weak in defending their rightful position of ownership of the TAB.

 

The fifth bullet point talks about leveraging the resources of a well-respected global operator. Well, is that comment present because the TAB has bankrupted its own resources?

 

About five years ago, RWWA (Racing and Wagering Western Australia) plugged into Tabcorp’s betting platform for an annual fee of $7 million. Our TAB built its own platform for $50 million, with $17 million annually committed in ongoing costs to Openbet and Paddy Power.

 

NZRB, in their day, seemed to have a mindset of doing a ‘number eight wire fix’ on the TAB to keep intact its misguided nationalistic safeguarding of a betting business it knew zero about – crazy!

 

$150 million upfront for partnering turned down 5 years ago

 

Our FOB platform is already out of date. Some global betting agencies spend as much as $120 million annually on IT development. How did Glenda Hughes, John Allen, and company ever think we could keep the pace up? Five years ago, they concealed a partnering offer from a big corporate betting agency with the upfront payment now acknowledged by insiders as $150 million.

 

On scale,  the TAB in NZ never rated a chance to exist alone in a global market, let alone compete with the product. No one with authority at the TAB through all those years and name changes seems to have ever grasped that fact, and most have walked away without an ounce of accountability.

 

In post-World War II New Zealand, we saw four decades of growth and prosperity because the people that administered racing all had skin in the game; they had acquired knowledge through experience, had common visions and a passion for horses, and gave their time at no cost to the industry. They were successful.

 

Then the first minister of racing arrived in 1991, and the retardation began and 14 ministers later, we are still retarding. Most of our administrators today lack horse knowledge and a feel for the industry but, nevertheless, turn up to collect their massive salaries or directors’ fees for attending once a month.

 

Members’ Council has failed

 

The so-called Members Council that selects directors for NZTR has an appalling record – proven by the inability of their appointments to make a meaningful contribution. When the system fails, why continue with it?

 

The faceless TAB board gained their appointments politically through the previous racing Minister Grant Robertson, who also appointed the Chair and CEO of the Racing Integrity Board (RIB)  – a retired judge and a retired deputy chief of police.

 

The cost to racing for the RIB now works out at $40,000 a day – every single day of the year. How’s that for value?

 

Cronyism, nepotism, partisanship, self-interest, jobs for the boys, call it what you like, but don’t say that any of these people landed their positions through a fair and democratic process to serve the best interests of racing.

 

Racing’s crooked all right – no doubt about it. But it’s not the people at the coalface.

 

Government interference is killing the racing goose, which bears no resemblance to its once golden colour. It’s gone a dull grey.

 

Hire a QC and contest ownership of the TAB

 

So, why don’t the clubs reunite, employ a fresh QC to do a new appraisal of the ownership of the TAB, and afterwards offer the Government its $50 million back, and reclaim the TAB under the same arrangement as when formed?

 

Under the directive of the DIA, TAB NZ has instructions to hold a reserve fund of $100 million in case it goes insolvent again. My information says they already have $60 million on deposit right now, but what good is that to the codes and participants?  

 

Even if Mike Tod succeeds with his partnering plan, it will take one to two years to finalise a deal. In the meantime, racing needs the Government out of its life, and if an agreement fails, the clubs should take them to court based on a favourable review completed by the QC.

 

The marriage is incompatible and the sooner we see an annulment, the better.

 

Doing nothing remains the worst option

 

 

[curious]

I wasn't going to read this, let alone bother commenting. These pieces just seem to be a waste of time. There's not a single piece of information in there that I haven't known for days or weeks at least. So what purpose does it serve? The figures all say that the TAB has continuing falling revenue and increasing OPEX. It's only a matter of time before they have to reduce the stakes distribution funding so they don't end up back cap in hand to the taxpayer and government. If they do, I'm pretty sure I know what the answer will be.

Sometimes I think BdeL operates in a different era and probably a different planet. The only suggestion is that the codes reclaim their ownership of the TAB citing events from the 50s. That really would be mad even if it had a chance of success which it doesn't. Why would the codes want it? Why would anyone want it? It's a steadily failing business and the codes least of all have the financial resources or skills to run it for however much longer it may last.

[Freda]

Yeah...I have to admit I  was struggling to see what benefits were likely if the ownership of the TAB was returned to the codes....but thought I'd say nothing in case it was seen to be a good idea and I was left with egg on my face,  and JJ Flash or Tasman Man came out of hiding to berate me. 

[Huey]

45 minutes ago, curious said:

I wasn't going to read this, let alone bother commenting. These pieces just seem to be a waste of time. There's not a single piece of information in there that I haven't known for days or weeks at least. So what purpose does it serve? The figures all say that the TAB has continuing falling revenue and increasing OPEX. It's only a matter of time before they have to reduce the stakes distribution funding so they don't end up back cap in hand to the taxpayer and government. If they do, I'm pretty sure I know what the answer will be.

 

I think you doth overestimate the IQ of the racing industry herd Curious,  you will find many in the industry are utterly oblivious to such info. Especially with stud masters, the odd trainer and racing administrator filling their head's with nonsense. 

Never underestimate the power of the " green shoots" movement!

[The Centaur]

Its NZTR that should be partnering with other racing jurisdictions and sharing the costs of running a betting platform.

Quite frankly the TAB (taking things to an extreme) is just at piece of software. Surely Kiwi's aren't that stupid they need an outside outfit to scoop up all the gambling cash.

[curious]

2 hours ago, Huey said:

I think you doth overestimate the IQ of the racing industry herd Curious,  you will find many in the industry are utterly oblivious to such info. Especially with stud masters, the odd trainer and racing administrator filling their head's with nonsense. 

Never underestimate the power of the " green shoots" movement!

Maybe, but this sort of stuff just further perpetrates that nonsense. I'm not going to pick it apart. Can't be bothered reading it again but this comment struck me.

Bullet point four also describes ‘sport’ as a stakeholder, which is entirely incorrect. Sport supplies the TAB with a product on which to bet, for which they receive a fair fee and fair commission on the profit derived. Sport is simply a supplier.

Now, I can't say I've ever heard of a business that doesn't consider their suppliers as key stakeholders. As a supplier, if I thought my customers didn't consider me a key stakeholder in their business, I'd be looking for someone else to supply to. NZSport could do that too.

It's like Brian writes this stuff then has a mini-brain explosion every now and then. Can't see how that could make sense to anyone.

From Investopedia:

What Is a Stakeholder?

A stakeholder is a party that has an interest in a company and can either affect or be affected by the business. The primary stakeholders in a typical corporation are its investors, employees, customers, and suppliers.

Edited October 11, 2022 by curious

[Chief Stipe]

3 hours ago, curious said:

wasn't going to read this, let alone bother commenting. These pieces just seem to be a waste of time. There's not a single piece of information in there that I haven't known for days or weeks at least. So what purpose does it serve? The figures all say that the TAB has continuing falling revenue and increasing OPEX. It's only a matter of time before they have to reduce the stakes distribution funding so they don't end up back cap in hand to the taxpayer and government. If they do, I'm pretty sure I know what the answer will be.

Yep I've regularly posted the turnover data from the TAB and pointed out what was happening.

No reserves now and where the hell the next handout comes from is anyone's guess.

Come in @JJ Flash!

[Joe Bloggs]

He's at the creative accountants convention after his lessons at the ''book cooking'' course.......at the Taj Mahal, Petone style.

[Doomed]

8 hours ago, Chief Stipe said:

Yep I've regularly posted the turnover data from the TAB and pointed out what was happening.

No reserves now and where the hell the next handout comes from is anyone's guess.

Come in @JJ Flash!

They will keep selling off tracks, and parts of tracks, and any other assets, until only one or two tracks remain, and then they will admit defeat.

[Doomed]

8 hours ago, Chief Stipe said:

Yep I've regularly posted the turnover data from the TAB and pointed out what was happening.

No reserves now and where the hell the next handout comes from is anyone's guess.

Come in @JJ Flash!

I don't actually mind Flash. He often holds slightly different views to many on here, but he sounds intelligent and knowledgeable about the industry, and doesn't attack others for their views, so I usually welcome his input. We should embrace alternative viewpoints and constructive comments. After all we are mostly operating with very little information so have to make assumptions based on what little information we can glean. 

[Chief Stipe]

8 hours ago, Doomed said:

I don't actually mind Flash. He often holds slightly different views to many on here, but he sounds intelligent and knowledgeable about the industry, and doesn't attack others for their views, so I usually welcome his input. We should embrace alternative viewpoints and constructive comments. After all we are mostly operating with very little information so have to make assumptions based on what little information we can glean. 

@JJ Flash is representative of where the industry has gone wrong.  It believes its own propaganda time and time again.

The facts and the information has always been available although it has been harder to obtain under more recent regimes.

The likes of @JJ Flash just listen to and repeat  the corporate nonsense while ignoring the fundamentals hence the industry being in the state it is in.

The sad thing is he isn't alone where all the major trainer stakeholders buy into the BS as well.

Reap what you sow and the chickens have come home to roost.

[Chief Stipe]

Anyone who could read a balance sheet and set of financial accounts could see what MacKenzie was doing was all smoke and mirrors.  St no stage did he address the fundamental issues.  However he very deftly pushed costs off the TAB balance sheet and onto the codes to make the TAB accounts look good.  

[Assange]

$40,000 a day for the RIB - is that for real. Where is it all going? What salarys are they on? How much has INCA cost them? 

[The Centaur]

Please people incl the Opto. Do a bit more thinking.

TAB partnering means racing is beholden to the TAB who also promote  competition to racing i.e sports.

NZTR partnering with similar overseas jurisdictions then sharing the betting platform costs means racing is in charge of its own destiny.

 

[Joe Bloggs]

1 hour ago, Assange said:

$40,000 a day for the RIB - is that for real. Where is it all going? What salarys are they on? How much has INCA cost them? 

You can ask all the questions you like, they wont answer them, some they can't as it's beyond them, some they'll deflect and some they will downright ignore, when you have zero transparency, zero good governance and SFA integrity, that's what you do.......sadly.

[Doomed]

1 hour ago, Joe Bloggs said:

You can ask all the questions you like, they wont answer them, some they can't as it's beyond them, some they'll deflect and some they will downright ignore, when you have zero transparency, zero good governance and SFA integrity, that's what you do.......sadly.

The sad thing is they probably don't really think they are doing anything wrong. Racing is just something that happens, a diversion, the real work is done by the RIB, they are the important ones.

I am quite out of touch these days, but does anyone know if the chairman and CEO of the RIB have an extensive racing background? I'm not even really sure why they need a chair.