Breaking news from Racing Victoria Limited (RVL), the premier racing body in Australia.
In light of the recent Federal Court ruling in favour of Racing NSW and the right to charge a turnover fee for offering wagering on their racing, RVL has swiftly elected to switch from their fee model based on gross profits (possibly from the start of the new racing season on August 1). This is in stark contrast to their previous statements saying that the difference in figures wasn't a great deal, it was far better to have the corporate betting houses on side to encourage innovation and sponsorship investment etc. As mentioned in the previous post re Racing NSW - the model doesn't make that much difference to corporate bookmakers, it's a bit more than the current system but they can live with it. However, it does completely screw Betfair and the exchange model. Recently appointed Betfair Australia CEO Giles Thompson was quoted as saying the 1.5% fee in NSW made racing in that state six times more expensive than racing in Victoria, to an extent where it was worth considering dropping NSW racing completely. Soon it will mean all Australian racing unless they switch to being just another corporate bookmaker - margins which can afford the fees model but they would lose all their unique selling points and send out mixed messages to customers who would want to do the same thing on racing as they could on footy. And with the majority of Australian sports betting based on two-way markets, exchange betting offers little more than what bookies can offer, so long as there is a little competition around.
At the same time, the restrictions on betting in-running in Australia have severely hampered their inroads into sports betting. Betfair is an online business, trading over the phone on in-play events as required by the stupid Federal Interactive Gaming Act is difficult for punters (placing a bet is easy if the liquidity is there, but few want to post offers without being able to control them) and a heavy burden on operating costs, having to provide telephone operators.
It's a crucial time for Betfair in Australia, and for that matter around the world. If racing authorities manage to kick Betfair out of Australia, then the rest of the world will do their best to follow suit. The legal challenges coming up may be at least as big (and expensive) as those involved in establishing the business so far.
Curiously, the share market has reacted positively to the announcement in Australia, perhaps believing that this allows Betfair the perfect opportunity to cut their losses and abandon a portion of the company which has been very expensive to operate. However, this cuts a lot deeper than that. Authorities (sporting and government) around the globe may believe they can stick the knife even deeper into Betfair - let's face it, almost without exception, they have all despised Betfair and how it disrupts their cosy little regimes.
This story has a lot of legs yet....