Outsourcing

[curious]

12 hours ago, hesi said:

So track reduction to 28, is not to save money, because they never had this money(104 mil) to spend on upgrading in the first place.  It is about generating 190 mil to upgrade the remaining 28 tracks.  Most of this coming from Avondale.

Okay, if that happens(??), that generates the cash needed to bring facilities into the modern world.

That in itself is required, but won't on it's own generate sustainability and the doubling of stakemoney to 100 mil.

So I presume the key event that must happen in tandem is the outsourcing of the TAB, which along with devolving racing responsibilities to the 3 codes, negates the need for NZRB(Wagering NZ), in anything more than avery slimmed down version.

So the deal negotiated with the outsourcing is also key, as it generates the ongoing sustainable funding ie stakes at 100 mil

Is this correct?

I've been mulling this over Hesi and thought it deserved a separate thread. While the generation of the 190m capital by stealing community assets is one (questionable??) question, the question of the value of outsourcing is another.

That seems to be about the only significant suggestion in the report that can significantly raise net revenue (in the short term) other than the taxpayer gratuitously dropping the betting levy.

The problem with this is it seems to rely on a single report that NZTR commissioned from Deloitte. The further problem is that the report doesn't seem to be available to stakeholders, other than the executive summary, so it's impossible to evaluate its validity and reliability other than that Messara seems to have bought it.

If you believe it, then as a strategy it could deliver about 20-30m a year for TR in the short term if implemented.

“Our preliminary analysis suggests the combined benefits from an appropriately structured transaction could increase distributions to the codes by $38 million to $63 million annually. The difference between the mid-point of our downside scenarios under the NZRB initiatives and the mid-point of our assessed benefits under an outsourced arrangement is in the vicinity of $280 million over the FY18 to FY21 period. "

" Accordingly, we would advocate that it is in the best interests of the racing industry and NZRB to commit to spending a small amount of time and money to conduct further investigations on the opportunity. "

I'm afraid stakeholders are again left with guess work though. If Peters/Messara and NZTR want stakeholder buy in, why not release the underlying information so we can assess it, discuss it and draw our own conclusions?

 

 

 

[hesi]

Definitely deserves another thread, if generating of 190 mil for upgrades to 28 tracks is the first foundation block of reform, then outsourcing is the second.

I note that Messara recommends a sub Board be set up, whose only role is to progress the outsourcing

I have purely looked at it in broad terms, from the viewpoint that  NZRB generate 350 mil net betting revenue per year, but because their costs are over 200 mil, less than 150 mil is distributed to the 3 codes.  There is a lot of cash sloshing around there, that had things been run more efficiently, it would have been available for grassroots racing

So if you are looking at outsourcing then the bottom lines, whoever gets the contract, NZ racing wants a lot more than 150 mil.  You would have to assume with a bigger more competitive operator, that they could easily beat NZRB's efforts, and achieve this

I'm assuming of course, that with outsourcing of the TAB and devolving of racing responsibilities, the NZRB will be a very much smaller operation with a lot lower costs

[hesi]

The other question to ask about sustainability is, once/if the recommendations are in place, will there be a budgetary allocation for ongoing maintenance.

15 years of 20 mil put aside for upgrades etc, instead of going on excessive costs, would have seen the facilities side of racing in a lot better shape

[mardigras]

9 hours ago, hesi said:

I have purely looked at it in broad terms, from the viewpoint that  NZRB generate 350 mil net betting revenue per year, but because their costs are over 200 mil, less than 150 mil is distributed to the 3 codes.  There is a lot of cash sloshing around there, that had things been run more efficiently, it would have been available for grassroots racing

So if you are looking at outsourcing then the bottom lines, whoever gets the contract, NZ racing wants a lot more than 150 mil.  You would have to assume with a bigger more competitive operator, that they could easily beat NZRB's efforts, and achieve this

They may easily beat NZRB's efforts. But let's not forget, if the outsourced partner is say Tabcorp, then they are a commercial enterprise and they simply won't do it for nothing. And they also have income tax to pay. So you will still have costs (even if they are a reasonable amount less than NZRB costs). And they will want to actually make money. So they will have to be able to deliver costs savings AND profit for less than NZRB costs - for there to be any extra for the industry (based on equal betting revenues).

[curious]

You are right there Hesi, but it appears to me from the report that it will all be wasted on stakes as per usual.

[curious]

2 minutes ago, mardigras said:

They may easily beat NZRB's efforts. But let's not forget, if the outsourced partner is say Tabcorp, then they are a commercial enterprise and they simply won't do it for nothing. And they also have income tax to pay. So you will still have costs (even if they are a reasonable amount less than NZRB costs). And they will want to actually make money. So they will have to be able to deliver costs savings AND profit for less than NZRB costs - for there to be any extra for the industry (based on equal betting revenues).

Yes, that's the problem. I'd love to see how Deloitte actually arrived at those numbers.

[hesi]

20 minutes ago, curious said:

You are right there Hesi, but it appears to me from the report that it will all be wasted on stakes as per usual.

The problem with the NZRB, was they were suckling so much money out with costs, there wasn't enough to go around even for stakes.  One would hope that under any new regime, after the 100 mil for stakes there is also a substantial budget for R&M.

Also one would hope, that Racing NZ, have a substantial budget for marketing and promotion, as this has been one of the things that has got Racing into the doldrums, not marketing to the new generations coming through

Edited September 1, 2018 by hesi

[Justamugpunter]

15 minutes ago, curious said:

You are right there Hesi, but it appears to me from the report that it will all be wasted on stakes as per usual.

And like the  last time Winnie/Lab came to the party  when the Stakes "are going up' The Breeders will be championing Sunrise while the reality of course is the sun is still going to be going down!

Tiz rather important to be on the right side of history! which racing is very much Not!

[Chief Stipe]

Just now, Justamugpunter said:

And like the  last time Winnie/Lab came to the party  when the Stakes "are going up' The Breeders will be championing Sunrise while the reality of course is the sun is still going to be going down!

Tiz rather important to be on the right side of history! which racing is very much Not!

You sound like you are resigned to no hope.  

[Justamugpunter]

On ‎2‎/‎09‎/‎2018 at 8:54 AM, Chief Stipe said:

You sound like you are resigned to no hope.  

a 100% certain on that...   the real challenge for the last 25 years is  imo  has been around  'how to manage a declining industry',  normally any industry is dominated by Large Capital ( which of course most are, if not then the State rules) then they will just liquidate and move the remaining capital to a more modern profitable industry, if they don't then the capital is destroyed...  Lots of examples could be stated here! 

Racing is one Industry that has always had a  large State footprint all over it!!!  And as in all politics those that hold the purse strings holds Hegemony! they control whom the Key Bureaucrats to be put in place! they will allow a bit of pretend democracies regarding key placements! But Always those put in place will 'do as they are told' by the ruling class...

So, re 'managing a declining industry'  and of course  modern capitalism can only abide Bigger, More etc... Sadly most of the growth has been of 'the dead cat sort, if you throw the cat  on the ground it will bounce up! but its still actually dead!'  Hence as the industry has continued to decline the use of propaganda has grown!  Going down this road of course is very much a double edged sword! 

Propaganda is great while you believe it! but as so many have brutally found out economically!!! If you have been a coalface worker with any decent skills then the likes of AU, Hk, Sing. have called! If you were are trainer and urban sprawl has come out to meet you then you have been able to cash up with most probably a nice capital gains!  Otherwise you have to relocate 'to the core' and battle it out with the best of the trade!  I'm talking about the trainers here now! 

What I have always been fascinated about is the massive amount of good will that the industry has had to call on!  As more and more decisions within the industry  have  supported 'the core' slowly but surely the good will  that  has come from the rural parts of the industry (in the periphery)  continues to be negated!  The M report I'm sure will deliver a massive fall off of this historically important free labour! 

Regarding the needed fight back for anyone contemplating Track closes, Rural NZ and most  players in the racing industry are very much of the conservative type, I don't think they have the political nous to attempt to run any sort of 'mass action' fight.    Fair Tax was a mass action approach,  which had support from most across the industry, this needed fight is very different! The real Leaders of the  industry are very much made up of key economic players in the core and the big metro tracks!  For anyone that attempts to fight they will quickly become a 'untouchable', I so know this from personal experience!

 

To finish, I think the only success for saving any track will be fought out in the courts and in the legislator!  It will most probably get nasty! It will just speed up the sunsetting...

Ps. the one area that I find interesting is very much around 'tax right downs', are they included in the 22% return to owners figures?

 

 

[Huey]

8 hours ago, Justamugpunter said:

a 100% certain on that...   the real challenge for the last 25 years is  imo  has been around  'how to manage a declining industry',  normally any industry is dominated by Large Capital ( which of course most are, if not then the State rules) then they will just liquidate and move the remaining capital to a more modern profitable industry, if they don't then the capital is destroyed...  Lots of examples could be stated here! 

Racing is one Industry that has always had a  large State footprint all over it!!!  And as in all politics those that hold the purse strings holds Hegemony! they control whom the Key Bureaucrats to be put in place! they will allow a bit of pretend democracies regarding key placements! But Always those put in place will 'do as they are told' by the ruling class...

So, re 'managing a declining industry'  and of course  modern capitalism can only abide Bigger, More etc... Sadly most of the growth has been of 'the dead cat sort, if you throw the cat  on the ground it will bounce up! but its still actually dead!'  Hence as the industry has continued to decline the use of propaganda has grown!  Going down this road of course is very much a double edged sword! 

Propaganda is great while you believe it! but as so many have brutally found out economically!!! If you have been a coalface worker with any decent skills then the likes of AU, Hk, Sing. have called! If you were are trainer and urban sprawl has come out to meet you then you have been able to cash up with most probably a nice capital gains!  Otherwise you have to relocate 'to the core' and battle it out with the best of the trade!  I'm talking about the trainers here now! 

What I have always been fascinated about is the massive amount of good will that the industry has had to call on!  As more and more decisions within the industry  have  supported 'the core' slowly but surely the good will  that  has come from the rural parts of the industry (in the periphery)  continues to be negated!  The M report I'm sure will deliver a massive fall off of this historically important free labour! 

Regarding the needed fight back for anyone contemplating Track closes, Rural NZ and most  players in the racing industry are very much of the conservative type, I don't think they have the political nous to attempt to run any sort of 'mass action' fight.    Fair Tax was a mass action approach,  which had support from most across the industry, this needed fight is very different! The real Leaders of the  industry are very much made up of key economic players in the core and the big metro tracks!  For anyone that attempts to fight they will quickly become a 'untouchable', I so know this from personal experience!

 

To finish, I think the only success for saving any track will be fought out in the courts and in the legislator!  It will most probably get nasty! It will just speed up the sunsetting...

Ps. the one area that I find interesting is very much around 'tax right downs', are they included in the 22% return to owners figures?

 

 

Great post I think you're bang on!

[curious]

While I agree with Messara that "the racing industry and NZRB should commit to spending a small amount of time and money to conduct further investigations on the opportunity" of outsourcing, it seems to me that other options, including one that I've previously proposed, should be looked at simultaneously. 

That is the idea that the RB (or whatever new entity replaces it) continues to operate the tote business and control racefields and media rights on NZ racing and sports, and that we openly license other operators to conduct FOB business in New Zealand, with those licences restricting the offering of any tote related products.

[mardigras]

7 minutes ago, curious said:

While I agree with Messara that "the racing industry and NZRB should commit to spending a small amount of time and money to conduct further investigations on the opportunity" of outsourcing, it seems to me that other options, including one that I've previously proposed, should be looked at simultaneously. 

That is the idea that the RB (or whatever new entity replaces it) continues to operate the tote business and control racefields and media rights on NZ racing and sports, and that we openly license other operators to conduct FOB business in New Zealand, with those licences restricting the offering of any tote related products.

I wrote a longish post on this when I first joined racechat. And have also done so since. This is how it should have happened. A tote only based business with licensed operators external to that for FOB, no tote derivatives. Allowing also the ability to have very few costs and also allowing for the take-out rate to be easily changed and competitive to entice punters.

[curious]

Yes, I remember your posting and the ensuing conversation on that. I'm not sure why Messara has not also proposed that option. It would be good (maybe) to get that in front of the DIA via the call for submissions on the report. Then it seems logical that as part of the ToR for the upcoming P&E review, that both possibilities get extensive analysis by the reviewer/s.

[gee]

with the way that  winnie   is in cahoots with  jacidanatior   it may never happen