A national perspective on Thoroughbred Racing -

1. A national perspective on Thoroughbred Racing - Where to next?

2. Overview • The challenges facing racing • The need for national industry building initiatives • Funding

3. Changes within the market for wagering on racing • Wagering landscape in Australia virtually unrecognizable compared to pre-2000. • Corporate bookmakers: • 1999 turnover on racing of $75M • 2009/10 turnover on racing of $3.2B • 22.5% of the market for wagering on thoroughbred racing. • Oncourse bookmakers: • 1999 turnover on racing of $1.3B • 2009/10 turnover of market share has halved from 15% to 7.5%. • Attempts by wagering operators to encroach on TAB retail exclusivity via internet-based betting terminals in pubs and clubs; • Third party criticism of TAB retail exclusivity e.g. 2010 Productivity Commission Report (recommendation 16.4); • Potential for wagering operators to mimic operators on UK racing and relocate offshore to avoid product fee payments to the industry; and • Increasing market share of multinational wagering operators e.g. Paddy Power and Betfair.

4. Changes within the wagering market as a whole Sports betting is rapidly encroaching on racing’s market share

5. Changes within the gambling market Racing’s share of the total gambling market has declined markedly. Growth in turnover has not matched growth in household disposable value.

6. Pressure on tradition business model of race clubs • For one metropolitan race club: average cost of attracting and catering each customer = $23.00. Average spend per customer = $22.00. • Attendances on carnival days and non racing-related revenues (principally events and catering) underwrite the majority of their racing fixtures. • In one State clubs collectively lost $13.9M in 2009.

7. Erosion of racing’s public profile Attendance at race meetings • Newspapers have been a highly important medium for racing to connect with the public. Circulation figures are under pressure, diluting general public exposure to racing. • Free-to-air television: Victorian Spring Carnival and Sydney Autumn Carnival. TVN and Sky are existing fans. • ABC exposure to racing has been cut back dramatically. E.g. 1999 axing of its regional radio service broadcasting Saturday and public holiday metropolitan racing.

8. Conclusion Racing will find it increasingly difficult to maintain its current scale, and its status as a mainstream sport.

9. National Industry building initiatives • National campaign to market racing; • Optimal use of the internet & new media; • Identifying national synergies; and • National wagering issues.

10. (i) National campaign to market racing

11. Applying the AFL and NRL marketing model to racing: • 11% of people aged 15 or more attend at least one race meeting a year; • For 70% of the people who attend one or more race meetings a year their attendance is an annual or biannual event. Just 8% of attendees attend six or more times a year. (AFL: 34% of attendees attend Australian Rules football matches six or more times a year.) • If 11% of the population attend at least one race meeting a year but over 20% say they have an interest in racing then the industry could significantly increase its attendances by attracting some of that 7% to convert their interest in racing to going to a race meeting. • Challenge here is competition for presence of mind.

12. A common advertising approach would also provide the following advantages: • Strong message to all customers; • National exposure maximized; and • Costs reduced. • Additionally, a common media purchasing plan could establish an industry rate based on throughput of the entire Australian racing industry. This would have the following benefits: • Reduced costs • Strength in collective bargaining – added media incentives

13. (ii) Optimal use of the internet & new media Australian racing does not havea portal comparable with www.afl.com.au or www.nrl.com.au. Racing industry websites serve the industry. Not sell it.

14. (iii) Identifying national synergies Australian racing consists of: • 374 race clubs • Eight State and Territory controlling bodies • Four analytical laboratories • One national peak body • National agencies (the ASB, RISA, the Australian Prices Network). • Analysis of both the industry’s structures and its processes may identify synergies that if realized could reduce the industry’s costs and/ or enhance its efficiency.

15. (iv) National Funding Model Changes brought about by the Australian racing industry Race fields legislation: means all wagering operators must contribute to Australian racing. Two important principles: • Race fields legislation – High Court appeals June 2011 • IGA – offshore operators (1) Legally enforceable right Industry’s future cannot be ensured unless it has a robust, legally enforceable means of ensuring that appropriate returns are made by all wagering operators who are using fixtures staged by the Australia racing industry. (2) Separating extraneous matters Wagering operators argued sponsorship should be treated as a substitute for product fees. Never accepted by the racing industry. Sponsorship of racing, including via naming of racecourses, continues to grow but it is separate from and additional to product fee payments. Future Efforts

16. Funding national initiatives • Wagering already provides 80% of the revenues by racing authorities fund the industry’s activities (prizemoney, tracks, integrity, training, marketing, OH&S and administration). • The changes within the market for wagering on racing have the potential to place pressure on the industry’s revenues from wagering; • Race fields legislation continues to be challenged by some wagering operators; and • To some extent the fees collected under race fields legislation will not be additional i.e. to some extent they will capture revenues which would previously have been received by the industry from TABs.