Is deal sheep’s clothing on a wolf?
Anyone could be forgiven for being confused by the deal that will see the TAB outsource its operations to London-listed gambling multinational Entain.
The contract between TAB and Entain has yet to be made public, so there is some guesswork as to its exact terms.
But it appears a New Zealand subsidiary of Entain will take over the TAB’s betting business for 25 years from tomorrow in return for being able to keep 50% of that businesses’ net betting revenues, from which it will need to cover its costs and earn itself a profit.
It will pay the other half to a small surviving part of the TAB, which will distribute that to subsidise the racing industry and other sporting bodies, as has always been its remit.
The only potential spanner in the works appears to have been removed after the Overseas Investment Office reached a view yesterday, after consulting with Entain’s lawyers, that approval under the Overseas Investment Act was not required.
Entain has guaranteed its payouts to the TAB will total $900 million over the first five years of the agreement (down from an originally mooted $1b), so if the half-share of betting revenues over that period doesn’t equal that, it appears it will need to make up the difference from its own half-share.
After the five years is up, the TAB will continue to be entitled to 50% of Entain NZ’s net betting revenues, but with no specific guarantee as to what that would amount to.
‘‘Net betting revenues’’ represent the money that punters lose through gambling each year, less GST and other levies.
In the year to June last year, the TAB booked net betting revenues of $312m and distributed $140m from its betting business to the racing industry. It is understood the additional revenue the TAB gets from its 500 pokies is not part of the revenue-sharing deal.
So while the agreement has been presented in some quarters as a huge bonanza, on the face of it, it might be better described as a fairly balanced one that offers the prospect of a moderate uplift in funding for racing and sport, at least in its first five years, after inflation.
Minister for Racing Kieran McAnulty says he is also confident the agreement will ‘‘see ongoing increases in funding to both racing and sports moving forward’’.
There are only two main ways that could be achieved, given that Entain would seem to be the sole beneficiary of any cost savings it is able to squeeze out of running the former TAB betting business.
The Government has agreed in principle to try to block access to overseas gambling sites, which would increase domestic betting revenues whether or not the partnership existed.
Additionally, both Entain and the TAB will, of course, benefit if Entain can find other ways to grow the total amount of money that gamblers lose when betting with it each year.
It is the latter possibility that has the Problem Gambling Foundation (PGF) on edge.
TAB chairman Mark Stewart has described Entain as a ‘‘reputable business’’ and it is fair to say it is not a cowboy outfit.
Entain, which is domiciled in the tax haven of the Isle of Man, is valued at £8.3 billion (NZ$17b) on the London stock market and employs 24,000 people in 30 countries.
But it has been fined more than £17m for breaches of laws designed to prevent problem gambling and money laundering rules in the past year or two.
Two of the most troubling incidents occurred in Australia after an Entain employee encouraged two heavy gamblers to start betting with its Ladbrokes business by offering them incentives to open betting accounts.
The employee went as far as setting up an account and selecting a username and password for one of the gamblers without their knowledge or permission.
That gambler went on to lose A$1.5m (NZ$1.6m).
The other gambler, Gavin Fineff, was also an addict and embezzled huge sums to fund his habit.
Entain advises that the employee who encouraged those two people to open Ladbrokes accounts is no longer with the business, so those incidents could perhaps be put down to the actions of a rogue staffer within a very large company.
But Entain’s internal policies and controls didn’t prevent the breaches.
PGF spokesperson Andree Froude has forecast Entain’s deal with the TAB will expose Kiwis to ‘‘aggressive marketing and advertising, both online and through sponsorship’’.
McAnulty’s remark is reminiscent of the cringeworthy assurance Air New Zealand gave in 2002 ...
One problem gambler who contacted Stuff with doubts about the transaction said he experienced ‘‘constant harassment’’ from one of the company’s business development managers.
‘‘It wasn’t until after the fact that I found out that he was compensated based on my losses – no wonder they pushed so hard to keep me betting,’’ he said.
McAnulty, whose links to the racing industry – including as a former TAB bookie – run deep, has appeared to take a remarkably relaxed view of Entain’s overseas fines, even approving the deal before a planned meeting at which the PGF had expected to lay out its concerns.
‘‘I don’t think businesses should be restricted from being able to enter into service agreements with New Zealand businesses just because they’ve been fined in the past. It’s their current operation at the moment that I’m concerned about,’’ was his take.
That seems very forgiving given that Ladbrokes can trace its roots back as far as 1886, so that part of Entain’s business at least has had more than 130 years to iron out any kinks in its corporate culture.
If there was one aspect of McAnulty’s announcement that appeared obviously naive, it was the pat on the back he gave himself that Entain would still be operating the betting business in New Zealand under the TAB brand.
‘‘I was determined to prevent this deal being a backdoor entry for an overseas brand to enter the New Zealand market,’’ he boasted.
Entain operates under 27 brands in its different markets, including Coral, Sportingbet, Eurobet, partypoker, partycasino and Foxy Bingo, as well as Ladbrokes, so there is little reason to think it would give a hoot about the name on the door, as opposed to the ‘‘dollars’’ in the deal.
McAnulty’s remark is reminiscent of the cringeworthy assurance Air New Zealand gave in 2002 – at a time when the airline was promoting a proposal that Qantas should be allowed to buy a strategic stake in the airline – that keeping the koru on the tail of its aircraft was ‘‘non-negotiable’’.
Then ACT Party leader Richard Prebble acidly responded that that was all that would remain.
Touch wood, Entain will prove a professional and relatively benign manager of the TAB’s betting business.
The worry remains, though, that McAnulty may just have put a wolf in sheep’s clothing.