I am often asked how the industry funding model works and what we can do to improve it.
The largest source of revenue comes from our Joint Venture (JV) with Tabcorp and the other two racing codes as established in 2012. Each year, the three codes share the funds received from the JV, but this has been progressively falling due to the growth of corporate bookmakers.
In 2012, the three codes also executed an agreement that splits JV revenues on the basis of each code’s market share for the full year as at June 30. The code share calculation is based on which code Victorian punters wager on with Tabcorp, irrespective of jurisdiction, which is important as the Victorian punter wagers less than 50 per cent on Victorian racing product, with the balance on interstate and international product. As a result, there are a large number of factors that influence the code split of JV revenue.
One aspect impacting HRV’s market share is the substantial change in the mix of international races offered to Victorian punters for each code. Races offered to Victorian punters are determined by Tabcorp/Sky, based on the best interests of the whole JV, even if that means a reduced market share split for one code. The quantum of international thoroughbred races being offered is increasing. The same is occurring for international greyhounds with four times as many races this year as three years ago. By comparison, international harness races being offered to Victorian punters are being reduced. Current estimates are that, despite our desire to halt this substitution of international harness product, it will reduce our JV market share and revenue in 2019/20.
A frustration I often hear from trots fans is the bumping of our races to Sky 2. Agreements between Sky and various thoroughbred jurisdictions have guaranteed a large quantity of their product will remain on Sky 1 regardless of lateness and that many thoroughbred races have a 90-second protected window (lead-in time) prior to each race. As people are seeing, if a harness race is going to end within that 90-second window, the harness race will be bumped to Sky 2.
Existing arrangements also mean that Sky determines which codes run in various timeslots (e.g. only thoroughbred racing on Sky 1 for Saturday daytime) and individual race times for each meeting.
If HRV chose not to run races on Sky 1 it would result in approximately 40 per cent less turnover, making those meetings unviable. The only Victorian harness races guaranteed to be on Sky 1 are Group 1 races. These factors mean that harness racing is sometimes not scheduled where we would like it, which impacts participants and our market share of wagering.
Whilst that’s a lot to take in, it is important that everyone understands the challenges we face. Frustratingly, since January 2017, we have made a number of changes to Victorian programming that have clearly improved wagering turnover on our product (as evident in the chart below), but the positive impact of that is being offset by factors outside our control, reducing our share of revenue from the JV and in turn our ability to increase prizemoney, invest in breeding, clubs, industry training et cetera.
In 2018, the Victorian Government commenced the process of exploring which wagering licence arrangements would be put in place at the expiry of the current licence in 2024. Like other stakeholders, HRV and the racing industry are being consulted regarding outcomes we would like from arrangements beyond 2024. In the interim, we will continue to maximise HRV’s share of the existing JV within the constraints detailed above.
Importantly, the Victorian government is aware of our situation and has provided vital support in a number of ways, including the recently announced $3 million per annum injection (for two years) of funding for a prizemoney increase. That was on top of the $1 million in the 2018/19 Victorian State budget for marketing, foal registration cost reduction and club infrastructure.
Rolling turnover trend
In January 2019, the State Government introduced a Point of Consumption Tax (POCT) on all wagering, with a share of the tax provided to the racing codes based on a commitment that we secured from the Government that the racing codes would not be worse off, individually or collectively.
Wagering results for HRV in January 2019 suggest that the POCT had a negative impact on wagering for HRV races, with wagering down 4 per cent compared to January 2018. If that trend continues, we will need to evaluate if the loss of revenue is being offset by HRV’s share of the POCT to ensure we are no worse off since the POCT’s introduction.
National Handicapping System
Thanks to everyone who joined us for consultation forums to explain the proposed National Handicapping System.
It was clear that there is strong support for this approach, which is intended to provide a more even playing field for participants.
For those unable to attend, HRV worked with HRA to produce a podcast and a document explaining the system, which can be found in the news section on our website, thetrots.com.au.
Another topic people are keen to know about is the potential for development of land at Melton. We are close to finalising a review of the buffer zone around the former landfill that occupies a portion of our land, and concurrently Melton City Council is progressing an Urban Design Framework, which overlays our land.
We will provide further updates on this during 2019.