Update to Victorian Owners - Outcome of the Victorian Wagering Review. Why this is important to you as a Victorian owner?

As you might be aware, the report for the recent Wagering Review in Victoria conducted by PricewaterhouseCoopers (PwC) was released last week. I would like to briefly update you on what it means for Victorian wagering and hopefully future increases to Victorian prizemoney.

Firstly, this review was specifically in relation to Racefields legislation, which is what RVL can charge Corporate Bookmakers and interstate totes to take bets on Victorian racing. This is not linked to the Victorian Wagering License (which is currently held by Tabcorp) which is also due for renewal in 2012.

In summary, the report found that the product fee should be a combination of both turnover and gross revenue. This “blended” model had two variations which they referred to as the “plus plus” variation and the “floor” variation.

The recommendation in the report, based on PwC’s economic modelling and a range of broad assumptions regarding the wagering market including price elasticity, found that the optimum product fee was the “floor” variation and proposed a base fee of 13% gross revenue, 18% gross revenue during the Spring Carnival and a .5% floor based on turnover (this is the minimum a bookmaker must pay if they have a losing month). It is projected that in 2012 this product fee will deliver $63m per annum in revenue to the Victorian industry (as opposed to the current $45m being collected under the current product fee as outlined in the Green Paper).

Given the outcomes of the report, the focus of the industry should no longer be on whether the turnover model or gross revenue model is the right one - the report has found that neither model on its own is optimum for the industry and that a blended model has the potential to deliver the greatest return.

The main issue now is that we need to get the price right for the product fee both in the short term and long term. We need to ensure we have both the ability and the mechanisms in place to adjust our pricing model as circumstances change so that racing in Victoria will not be disadvantaged.

Specifically in relation to “circumstances changing”, while I understand and appreciate we need a starting point which the report has proposed, we must take into consideration that if NSW Racing wins their High Court case and therefore the right to levy a fee based on turnover for Corporate Bookmakers, rather than only using this economic modelling and broad assumptions to determine Victoria’s product fee, we will be in a very good position to have actual data based on the NSW product fee under both gross revenue and turnover models. This will enable RVL to set the optimum fee in 2012 using the report’s blended model. This has the potential to raise millions more for our industry above the $63m.

What we must avoid is Victoria setting a fee in 2012 which is potentially too low, only to watch our NSW colleagues raise tens of millions more in revenue from Racefields legislation despite Victoria having a better product.

We hope to work with RVL in the coming months to ensure the best possible outcome for the industry and to also ensure that increases to prizemoney, especially for country races, is well and truly “on the agenda” as a result of this outcome.

The link to the full report has also been provided here.