The Victorian Thoroughbred Racehorse Owners Association (TROA) has come out strongly against the recent decision by Racing Victoria (RVL) to charge a low product fee that heavily favours corporate bookmakers and which according to TROA may result in a shortfall of as much as $50 Million a year below what RVL should be charging corporate bookmakers and TABs.

The RVL decision follows heavy criticism of RVL late last year, including by Owners, Trainers and the current Racing Minister, Denis Napthine. RVL was criticised then for seeking to charge a much lower product fee to corporate bookmakers than that charged by Racing NSW. Allegations of poor decision making and inadequate corporate governance were levelled at the time.

RVL’s response was to commission a study by PWC and Peter Yates to review the product fee model. At the time TROA criticised this proposed review as an unnecessary delay to the setting of a proper higher product fee. TROA also pointed out the poor corporate governance and potential conflict of interest involved in RVL setting the terms of reference, choosing which consultants did the review and supervising the process.

The Yates/PWC report has been released to a sceptical Racing Industry and has been criticised by TROA Chairman Jonathan Munz as “fundamentally flawed”.

Munz said:

“The report gave RVL what it wanted but not what the Racing Industry needed. It is based on academic pricing theories that are overly simplistic and some assumptions that are clearly wrong. This is a big concern.”

“I want to emphasise that we are not attacking corporate bookmakers…we just want them to pay their fair share. However, the current product fee structure set at a low gross revenue rate favours corporate bookmakers by allowing them to pay a much lower level of fees than they would under an appropriate fee based on turnover or a hybrid of turnover and gross revenue. Conversely charging based on gross revenue rather than turnover works the opposite way against the TAB which is forced to do pay the bulk of the product fee and effectively subsidise the bookmakers. Corporate bookmakers contribute only about $5 million per annum in fees to the Victorian Racing Industry while the Victorian TAB provides funding to Victorian racing in excess of $200 million per annum. The product fee structure proposed by RVL will encourage this imbalance to continue and for turnover to migrate away from the TAB as it is cannibalised by the bookmakers, jeopardising the Industry’s revenue and sustainability.

“TROA sees RVL’s product fee policy as inadequate and believes that it will have a negative impact on the livelihoods of thousands of Racing Industry participants. We call on the Racing Minister, Denis Napthine, to intervene to protect the Industry’s revenue base.”

2 June 2011