TABCORP’S CANNY LEAP

THE raw Tabcorp numbers show precisely why it took over Tatts; why it HAD to take it over; and why it was so critical that nobody else did.

Very simply, without Tatts and its lotto, Tabcorp would have locked itself into a – at best – zero growth future and an awful lot of competitive heartache.

While Tatts – and its Queensland TAB offshoot Ubet – in the hands of somebody else would have just made that future all the bleaker and indeed more rapidly bleaker.

In short, wagering – betting, mostly, on live horses – is in long-term competitive decline and arguably in more fundamental structural decline as well.

The first means there is much, much greater competition for both dollars and eyeballs. The statebased TAB monopolies are long gone; the TABs still enjoy a significant advantage over the online bookies, but it’s continually eroding.

There are now also not only multi-alternatives to bet through and on – most obviously the pokies and lotto; but also just to watch. Netflix is not only a direct threat to FTA and Pay TV but indeed to TABs (and going to continue; indeed, to gallop. This raises some huge issues for the racing industry, as the TABs and racing have of course an entrenched symbiotic relationship. Last year the TABs pumped nearly $1 billion into racing.

If the TABs continue to decline, that will be continually negative for racing. Equally, if racing continues to retreat – where the dogs are heading can thoroughbreds really be that far behind? – that will accelerate the decline of the TABs.

A relatively modest but irresistible structural decline could all-too easily turn into a rapidly accelerating one, with two negative feed-back loops feeding off each other.

The new Tabcorp has a foot in the pokies future and so the current debate, even though it’s lost the direct ownership profit stream that had previously proved so lucrative.

But it’s replaced that with a handy but relatively small – 13 per cent of group gross profit – business providing services to the industry.

I’m confident which of the three will be Tabcorp’s biggest business in, say, 10 years time. There are a host of delicious questions – and answers – in which turns out to be number two.