Section 13(1) of the Thoroughbred Racing Act (NSW) 1996 sets out the functions of the Board or Racing NSW.

Sub-section (c) says :-

to initiate, develop and implement policies considered conducive to the promotion, strategic development and welfare of the horse racing industry in the State and the protection of the public interest as it relates to the horse racing industry.

According to last year's Racing NSW Annual Report about 6,000 people are employed as licensed persons. However many hundreds of thousands of NSW residents, if not millions, are interested in horse racing as punters.

So to hear Racing NSW CEO Peter V'Landys invoking the plight of the stablehand on $33,000 a year as justification for its draconian race fields regulations makes one wonder if he actually understands the legislation his body operates under.

Clearly the public interest relates to all of the public, not just a few thousand trainers, jockeys and stablehands.

A very significant part of the public interest is ensuring that they are not subject to retail price maintenance in the context of having to pay more for their wagers on NSW racing than they should.

The entire flavour of Racing NSW's regulations is to force a high takeout wagering regime on the NSW punter, to the benefit of one company, TabCorp.

It is obvious that Racing NSW has consulted extensively with TabCorp on every aspect of the new regulations. They clearly suit TabCorp because it has been quick to point out to financial analysts that it expects to be $40 million a year better off because of the changes.

However Racing NSW has failed yet again in one of its most important duties, which is to consult widely with all interested parties in the process of making its strategic decisions.

In her scathing judgement of Racing NSW's actions in relation to trying to prevent the AJC and STC signing a vision rights agreement with TVN, Judge Patricia Bergin observed:

"The plaintiff has placed much emphasis on its alleged motivation to act in the public interest of protecting wagering revenue. It has been suggested by the Chief Executive that the plaintiff was acting to ensure that the revenue distributed to the racing industry was maximised. I have little doubt that there was an aim akin to that buried somewhere in all of this. What is troubling is that in exercising its powers the plaintiff seemed to forget that it had to be fair to interested parties whose rights may be affected by its conduct and decisions ..."

Well here we go again.

One would have thought that with that judgement ringing in his ears, V'Landys and his Board would be more careful in future to consult widely and well before using Racing NSW's powers to favour TabCorp against it's competitors.

But in framing the NSW race fields legislation and its accompanying regulations Racing NSW has definitely not consulted any of those parties adversely affected - a clear breach of its obligations under the Act.

In spite of repeated requests over the past few years, Betfair and the corporate bookmakers affected by Racing NSW's decision have never had a proposal put to them which was capable of consideration, let alone acceptance.

Instead they have been treated to a public display of invective and insult led by V'Landys, coloured by more than a few statements which are downright untrue.

For instance V'Landys continually obscures the fact that TabCorp pays the NSW racing industry a percentage of gross profits, not a percentage of turnover.

He makes out that the whole of the amount which is paid is for "the product" when in fact the product fee element is only $12 million a year.

In his latest display of petulance, V'Landys when interviewed on 2KY by Greg Radley and Mark Lambourne, accused bookmakers of driving around in Mercedes and Porsches, while simultaneously suggesting that they were incompetent if they did not make a 6% margin.

If they do so well perhaps V'Landys would like to explain the reduction in bookmaker numbers while he was running Harold Park?

In any event, by his obvious antipathy to any wagering operator which is not TabCorp combined with his frequent references to "we" as in Racing NSW and TabCorp as some sort of combined operation, V'Landys has exposed a bias in decision making which sits very badly with his responsibility to "be fair to interested parties" as Bergin put it.

Its not as if Racing NSW is incapable of negotiating with other wagering operators when the mood takes it.

For instance, not having enough racing of its own that anyone is interested in betting on, Racing NSW is a party to agreements with Hong Kong and New Zealand which actually see it contributing to a product fee paid to those countries.

More than half of the product fee 3% of turnover paid to Hong Kong and New Zealand is actually paid by Racing NSW, rather than TabCorp. Contrast this to the situation with Victoria which accounts for 38% of the racing bet on by NSW punters and for which Victoria does not receive a cent.

Similarly, Racing NSW has re-negotiated its product fee agreement with TabCorp 4 times in the past 8 years, showing that when it suits the body is perfectly capable of sitting down around the table and cutting a deal.

With Betfair and the corporate bookmakers the major target of the race fields legislation, its not as if Racing NSW has operators who are not prepared to contribute to racing.

Betfair for instance still has more than $1 million sitting in a trust account representing product fees set aside when it operated on NSW racing before setting up in Australia.

V'Landys has never gone looking for that money, even though it could be used to set up a fund to support strappers injured in the course of their hazardous work, even if he couldn't stomach the thought of using it to fund prizemoney.

All of the major corporate bookmakers are currently headed by men who cut their teeth on race wagering and who love the sport and want to see it prosper. In ten years time, younger executives will have taken over and there is every probability that they will focus their firm on other wagering markets.

Horse race betting is messy and complicated to administer, both in terms of systems and staff knowledge. The racing industry is doing an appalling job of educating new racing fans. All the growth in betting is in sports and online.

As has been seen in Victoria, where the race fields legislation was conceived with the misguided idea of banning Betfair, the corporates are prepared to negotiate when reasonable terms are on the table.

In the latest round of agreements, the 4 largest corporate bookmakers and Betfair have negotiated gross profit based deals, in marked contrast to Racing NSW's assertion that only turnover based arrangements exist in the racing industry.

TabCorp CEO Robert Nason's insistence that TabCorp will move its profit based deal in NSW to a turnover based one so as to support Racing NSW's stance is looking more stupid by the minute.

He also supports the idea of TabCorp's new aNTi-TAB operation in the Northern Territory paying a fee based on turnover. I'm sure Racing Victoria will be happy to take that.

I'm not so sure that paying a turnover based fee in NSW is going to work well when TabCorp is paying rebates up to 4% of turnover to Australia's largest punters.

In a gross profit regime, if TabCorp pays a 4% rebate all of this amount is deducted from the profit before the racing industry is paid its share. In a turnover based payment system, the 4% is paid first, leaving TabCorp seriously out of pocket.

All of which raises the most compelling issue for consideration by the Racing NSW Board, even if its CEO has the blinkers on.

In a world where the big punters go where the price is best, how is Racing NSW going to force them to bet on NSW racing with TabCorp in NSW?

Victoria's new gross profit product fee regime is a direct incentive for the corporates to focus on getting their clients to bet on Victorian racing. Markets on Victorian races will become ever more competitive and liquid while higher cost markets like those on NSW racing will wither on the vine.

Racing in NSW is so badly run these days that the trend for NSW punters to bet on Victorian racing in preference is already evident. On the basis that a dollar for Victorian racing is a dollar less for NSW, it actually becomes 2 dollars worse off every time a punter bets down south.

Given that there is considerable activity in the TabCorp NSW pools generated by market movements on course, this phenomenon can only have a negative affect on TabCorp turnover.

Combined with that is the looming demolition of cross border advertising restrictions now being challenged in the NSW courts on constitutional grounds.

The impact of this will be that the corporates and Betfair with combined annual turnover of $4 billion and growing at 40% a year, will suddenly be able to advertise for the first time.

Considering Racing NSW's antipathy to these operators, it is not hard to imagine that they will be keen to sponsor races in Victoria rather than in NSW. In return the Victorian industry will happily promote the corporates.

With its management problems hopefully sorted out by the appointment of high calibre candidate Rob Hines, Victoria is poised to go from strength to strength. Even with the recent difficulties, the recent announcement of $23.6 million prizemoney increases shows the underlying strength of the Victorian industry.

Much of the loss of momentum in Victoria over the past few years has in my opinion been caused by the reign of Robert Nason at Racing Victoria. It was characterised by empire building and a single minded campaign to crush Betfair and the corporates.

The demolition of Nason's Taj Mahal and working out ways to work co-operatively with TabCorp's competitors has taken years to complete but has now turned full circle.

Nason's discredited strategy has now moved north of the border, still with him in the centre of the web.

The new Board of Racing NSW will by all accounts not be very new at all. It is to be hoped that they can take a leaf out of Victoria's book and consider the futility of the antagonistic path they have embarked on with bookmakers.

© Cyberhorse 2010 Bill Saunders Published 23/07/08