As Canberra mulls a gambling advertising ban, the capital has been full of heavyweight gambling lobbying this week. Big media companies have been working on the politicians, and both Prime Minister Anthony Albanese and Opposition Leader Peter Dutton set time aside for meetings with Tim Costello — chief advocate for the Alliance for Gambling Reform — on the question of how far the government should go with restricting gambling advertising.
The answer was partially provided by Sportsbet’s Dublin-based parent company Flutter Entertainment, which released its first-half result late yesterday and disclosed it had cranked up its Australian advertising in the six months to June 30 through an “additional marketing spend of £10 million [A$19.5 million] to defend our leadership position”.
The results show that Sportsbet’s average monthly players in Australia had increased by 7% in the first half of 2023 to a record 1.066 million people — who collectively lost A$1.17 billion in just six months. In annualised terms, that means 1.066 million Australians are losing $2.34 billion, or some $2200 each, each year to Sportsbet.
More eyeballs
How does this happen? Well, advertising certainly helps, as reflected by Flutter’s stockmarket release talking up Sportbet’s “Same Game Multi” and “Bet With Mates” offerings. If you’re sick of your kids hearing about these, here’s why, as per Flutter’s interim results:
Sales and marketing increased by 23% [to $124.6 million in six months] to defend our leadership position in the market and form key strategic partnerships with a number of local sports and racing organisations.
The market was mildly unimpressed with Flutter’s results, with its stock falling 3% overnight to give it a market capitalisation of $50 billion, making it the world’s second-most valuable gambling company after Vegas and Macau casino giant Las Vegas Sands, which is worth $66.4 billion. Our own homegrown champion Aristocrat Leisure is now in third place on $26.76 billion after the stock closed at a record high last night of $41.29. Go Australia!
Interestingly, Flutter noted a relative decline in Australian racing revenue before gloating about its growing sports dominance:
The sports segment of the market has shown continued growth, with Sportsbet’s performance particularly strong helped in part by the evolution of our product, e.g. Same Game Multi. Sportsbet has a strong heritage in leveraging its scale and superior product expertise to win in the market. This continued with expansion of our Same Game Multi Tracker product to the NRL and further evolution of social betting product, Bet With Mates, by adding player statistics and chat functionality. Sportsbet’s significant scale advantage (clear #1 with a 48% market share in FY 2022), and superior product provides us with confidence around the future.
There was no mention of a potential advertising ban, although Flutter complained about a $64 million increase in state-based point of consumption taxes (POCTs) in the half-year, which caused profits to fall. It also warned that Victoria’s proposed increase in its POCTs from 10% to 15% on July 1 will cost it another $52.5 million annually.
Look at tobacco
As for whether Albanese and Dutton should get behind a full tobacco-style ban on gambling — as unanimously recommended by the Standing Committee on Social Policy and Legal Affairs, chaired by Peta Murphy — here are a few thoughts to consider.
The full ban on tobacco advertising has helped deliver Australia one of the world’s lowest smoking rates, which has saved the federal government billions through Medicare and the states enormous sums through reduced tobacco-related admissions at their public hospitals.
Much of the $25 billion a year in gambling losses comes from individuals and families, but as after-tax losses push a lot of people into the arms of Centrelink and welfare, the federal government picks up the biggest share of this cost.
Gambling is one of the few revenue options the states have, so the federal government barely sees any of the gambling tax revenue. As Alan Kohler recently noted, the Victorian government is budgeting for $2.6 billion from gambling taxes this financial year, NSW is expecting $3.5 billion and Queensland $2 billion.
However, the majority of this $8 billion is from pokies, so a ban on gambling advertising won’t materially hurt state budgets. It would also be welcomed by the 5000 pokies pubs and clubs that compete with foreign online bookmakers but that largely don’t advertise.
In terms of lobbying power and impacted parties, that leaves the sporting codes, media companies and big tech, which together currently pocket at least an estimated $400 million a year in advertising revenue from gambling companies licensed in the Northern Territory.
A drop in the ocean
But will the sky really fall if gambling advertising is banned in Australia? Google’s and Facebook’s parent companies, Alphabet and Meta, respectively, certainly won’t notice with their combined US$2.46 trillion market capitalisation.
The Murdoch family is worth an estimated A$30 billion, so it’ll survive without gambling ads on Foxtel or in its newspapers. Heck, News Corp’s 61% stake in REA (realestate.com.au) alone is currently worth $12.4 billion. It could replace all the lost gambling ads with real estate ads promoting one of its most lucrative investments ever.
A lot of politicians are careful to avoid offending Seven proprietor Kerry Stokes, but gambling ads do not actually matter for his net worth.
The AFR’s 2023 Rich List valued Stokes at $7.45 billion. Sure, he controls Seven West Media courtesy of owning 61% of Seven Group Holdings, which in turn owns 39% of Seven West Media. But that effective 22.8% stake is only worth $140 million, which is just 1.8% of his net wealth. For Stokes, it’s all about mining — Caterpillar, Boral, Coates Hire and the like. Gambling ads are not material to his billionaire status.
The current owner of Network Ten is US multinational Paramount, which has a market capitalisation of A$16 billion. It picked up Ten on the cheap for just $200 million in 2017 after it went broke. Do Australian voters care about its bottom line?
As for Nine Entertainment, it is nicely diversified with a market cap of $3.6 billion and debt of less than $1 billion. Its most valuable asset is a 60% stake in property portal Domain, which is currently worth $1.51 billion. Similarly, Domain would be completely unaffected by ending gambling ads.
An announcement of a full gambling ad ban commencing on January 1 next year might push Nine’s share price down 10%. That’s how much pubs giant Endeavour Group shares fell on the Monday after Victorian Premier Dan Andrews announced his recent pokies reform package. But so what?
Federally licensed radio stations would also lose some revenue, but Nine’s talk stations like 3AW and 2GB are big enough to absorb it. Lachlan Murdoch personally owns the NOVA radio network, so who cares if the bloke who paid the equivalent of A$230 million for his LA mansion in 2019 — and who is reportedly awaiting delivery of his new $150 million super yacht — drops a few bob not broadcasting gambling ads?
That leaves Southern Cross Media (which owns Triple M, Fox, etc, and is currently worth $225 million) and ARN Media (which owns Kiss FM, Kyle & Jackie O, etc, and is currently worth $312 million and has News Corp as its second-biggest shareholder with 13%). Again, they might drop in value by 10-15%.
Who will actually be hurt?
The only media company that might need some support after a complete gambling ad ban would be SEN’s parent company, the ASX-listed Sports Entertainment Ltd, which is currently worth $47 million and has $25 million in debt. Gambling ads would be a fair chunk of its $60 million in annual revenue.
If the federal government wanted to soften the blow, it could provide a waiver on the $40 million a year in spectrum fees that the television industry is expected to pay going forward. A $100-million-a-year advertising budget for two years focused on anti-gambling messages would also help replace some of the lost revenue.
Direct compensation packages for sporting codes might be warranted, but the AFL in particular is wealthy by world standards. The AFL owns Docklands Stadium, and its 2022 annual report reported net equity of $313 million. It had revenue of $944 million last year and reported a profit of $113 million — as a not-for-profit, it also doesn’t pay corporate tax.
The AFL annual report disclosed that player payments were $659 million in 2022 and have been above $700 million annually in nine years since 2010. The average AFL player is paid $400,000 — perhaps with a full gambling ad ban this would need to be reduced to $350,000. Is that too big an ask?
Go on Albo, roll the dice on this one.
And nobody bats an eye at the access to politicians adforded these gambling lobbyists, yet God forbid we afford a similar privilege to our First Nation’s people. Might it have something to do with the Voice not making donations, or holding out high paying jobs, to ex pollies?
Yes, indeedy. All those wise folk requiring ‘more detail’ should take a gander round the corridors of power on any average day to see the numbers of leeches, sorry, lobbyists, who infest parliament doing cosy deals with politicians to get their pet projects, business deals or clients onto the political agenda. Do we ever hear of these meetings, deals, arrangements and agreements, the detail of which invariably requires a lot of taxpayer bucks heading into the bank accounts of these nameless individuals and their buddies?
Of course not. And yet no-one bats an eyelid. Hardly anyone out in Voterland even has an inkling of how much deal-making goes on behind closed doors and yet these ‘projects’ spring fully-formed into the public conscienceness with the help of a compliant media telling us all about these great new initiatives.
Bollocks.
Thanks for this cogent explanation & overview. If only Albanese took the time to read it.
Donations are a matter for the administrative wing of the party. (nudge nudge wink wink)
Blanket ban is best. Ban the advertising, wholesale. And sure, turn to the material effects that that will have on some media corporations. The real effect, which is argument enough, is that individuals’ and families’ lives will improve. Clearly, the gambling market is saturated and it’s operators would want this to only become more so. Yet, as Australia is arguably too ensconced with sporting prowess, its Middle Classes have over recent years and decades become decadent through gambling, its easy availability and its massive promotion. Cut the snake at the source – I’m not arguing for a Nanny State – and our lives and culture will commensurately improve.
A quick look at those numbers. One million people are prepared to lose (on average) $183 per month, every month, with on-line gambling.
I’ll bear those figures in mind the next time I hear complaints about mortgage stress and rising interest rates.
I have no interest nor sympathy for gamblers and consider it a fee for stupidity but $183pm is barely a daily cup of overpriced caffeine.
Alas, that is just one, foreign based, company.
The tax on gambling profits should be much higher – even better, nationalise the outlets and stop making them so attractive with all the flashing lights, whistles & bells.
Plain packaging for pokies? Great idea.
Sweden and Oregon do it for state owned liquor stores – minimal opening hours and look like latrines.
Need I mention, there is NO ADVERTISING?
This sounds a touch like blaming the victim. There’s some very advanced behavioral science going into on-line gambling (as with all gambling), not to mention the attempts to catch a ‘punter’ when they’re too young to understand what’s happening. Sure, folks should know better, but they don’t, and every taxpayer wears the consequences.
Riddle me this, the Federal Labor Government, and with the Catholic Church are both major players in the Pokies Industry in Canberra and NSW. this may be legally OK, but tell me about the morality of it.
It is even more insidious. Microsoft games that are free with Windows have simulated gambling adds between games. (Slots in the US vernacular) This is simply preconditioning and normalizing,
I also find it intriguing that one may gamble whilst being intoxicated but cannot drive a vehicle home. Is that a contradiction? Perhaps we should have breathalyzers on Pokey machines.
On a recent visit to Canberra I did visit the Labor Club out of curiosity and had a meal. No I did not gamble. I will note that the new Kiwi owner of the food area lease is a character and extremely personable – worth a visit.