Yesterday we saw the historic announcement of the first sponsorship deal between one of Australia's top 5 racing club and a non-TAB wagering organisation.

The deal between the Melbourne Racing Club and Betfair injects millions into the MRC over 3 years. Most importantly it signals the possibility and the price for other non-TAB's to directly support racing via sponsorship as well as the fees paid for race field levies or product fees.

The problem with the levy or taxation approach is that historically when paid by TAB's as 20-30% of gross profits, it was always made up a combination of a usage fee for the racing product and an "exclusive marketing fee".

The exclusive marketing fee component has never been spelled out but it is implicit given the lack of marketing (and even marketing expertise) displayed by all the TAB's. In other words they didn't have to allocate a marketing budget because they had no competition.

The biggest problem with not calling the marketing fee what it is and not using for that purpose is that it just gets passively handed over to the racing industry to do with it what they will.

When the wagering operator views his payment as a marketing expense he wants to get some value for it. In other words he wants to get more customers.

So he can now go to a body like the MRC and say, "I've got xyz dollars to spend on marketing. How can I use it to get more clients?"

The MRC can say, "well we want more clients too and it looks like the one's we want and the ones you want are very similar. Have we got a deal for you!"

This ability to dynamically leverage the marketing component of what the racing industry wants to receive as income means that the game has all changed.

The unfortunate aspect for the TAB's and those racing industry executives who live in a time warp, is that the TAB product is overpriced and its clients under serviced, meaning that there is plenty of scope for competitors to steal market share.

While they bleat about TabCorp's competitors not paying their way, it was not until the removal of the anti-constitutional restrictions on advertising that race clubs themselves could entertain such alternative remuneration.

The predictable "end of the world as we know it" reactions of certain pro-TabCorp racing identities such as Rod Fitzroy and David Moodie need to be exposed for the hypocrisy they are.

For instance, in the Herald-Sun today Fitzroy parrotted the line of Robert Nason from TabCorp.

"Fitzroy pointed out the most successful racing jurisdictions in the world -- Japan and Hong Kong -- were exclusively tote."

"Or do you want the United Kingdom model where bookmakers are dominant and as a consequence prizemoney is down?" Fitzroy said.

Well here is an extract from the International Federation of Horseracing Authorities web site, dated 25th April this year.

UK Prize money up for next three years

The Horserace Betting Levy Board confirmed an increase in its 2008 Prize Money fund of approximately £6.7m effective from 1st July this year. As a result, the Board's original 2008 allocation of £49.5m will increase to approximately £56.2m (+13.5%).

The revised Prize Money allocation for the period 1st July - 31st December 2008 equates to a calendar year provision of £62.5m, equalling the best year on record (2006).

It is worth pointing out that 2006 is when the British Horseracing Board's outrageous charges for use of race fields were struck down by the High Court after it had spent the best part of $50 million fighting the case.

For a respected industry leader such as Fitzroy to spout such nonsense illustrates how little independent scrutiny is being given to TabCorp's pronouncements.

Similarly Moodie was quoted yesterday in the Herald-Sun on the "tote odds furphy".

Moodie said corporate bookmakers, offering tote odds in direct opposition to Tabcorp, needed to "pay their way". 

Well last time I looked, the bookmakers offering tote odds are quoting best of all totes and not just copying TabCorp's prices. There is another major tote in this country called UniTAB which is noticeably silent on the tote odds issue.

In any case, the odds on offer are not the property of any given wagering organisation. If they are owned by anyone it is Australia's punters who back and lay in any of a dozen different markets to achieve the best value.

If the racing industry wants to get all protective about prices and the ownership thereof, maybe it should look at its practice of stealing the prices of leading bookmakers (without their permission) and using them as its "official" price fluctuations?

The fact is that legislatively bookmakers are banned from operating a totalisator without the appropriate license. They are not and cannot be banned by legislation from offering to match or beat the price of a competitor.

Any rule which attempts to do so is in breach of the Trade Practices Act, which prohibits retail price maintenance.

Racing industry leaders' ignorance of the provisions of the TPA and the Constitution has already cost them millions in legal fees as well as untold lost time for the industry in making up ground in terms of restoring year round popularity.

The Betfair deal with MRC is the shape of things to come. Propping up a less than competent TabCorp with a failing business model is a folly.

© Cyberhorse 2010 Bill Saunders Published 14/11/08