In Defence of Gambling (Part 3): NRL, AFL and the Pokies
To have what looks like a footy tax being imposed is going to hit football clubs right between the eyes ~ Eddie McGuire
Well, Eddie Maguire is a tool box; let’s get that right out there to start with. But I guess I’m just stating the obvious here. Aside from being a confirmed tool box, he also happens to be wrong about the so-called ‘footy tax’. Think about it: if problem gambling revenue is reduced, the state governments lose some of their tax revenue. In turn, punters – often those who can little afford anything extra in the way of taxes – will have some extra dollars in their pockets. The pokies reforms are in fact an almighty anti-tax. It’s keeping money in the community and in family budgets.
What Eddie Maguire is really talking about is the loss of revenue from problem gamblers if the reforms work. Everything else you hear in the debate is largely bullshit. Last year, AFL Clubs received income from poker machines of approximately 30 million. Measured up against the 1.3 billion dollars in TV rights the AFL just won, that number is insignificant. In addition, next year the laws around poker machines ownership will change in Victoria, allowing clubs to directly own the machines. This will increase revenue and ensure AFL clubs will be even more profitable than they were in the past.
The AFL Clubs and everyone else in the business of poker machines also need to remember that the reforms will not be 100 per cent effective. Experts who have studied problem gambling estimate that the new reforms will reduce overall poker machine revenue by about ten percent. Internal research commissioned by Clubs Australia (accidently revealed to the media) puts the figure between 10 and 20 per cent. Let’s split the difference and say that poker revenue will be reduced by 15 per cent. As 40 percent of pokie revenue comes from problem gamblers, and this 15 percent reduction will come primarily from halting addictive play, this means it will cut into problem gambling by approximately 37 per cent, or by around one third.
If Eddie did the math, he’d figure that the hit to revenue will be around 4.5 million spread across all of the AFL Clubs. That’s chicken feed. With the money coming in from TV rights (4.5 million is 0.03 of a percent of the total 1.3 billion dollar deal), coupled with the sporting culture of Victoria, there’s no bloody excuse for AFL Clubs to be crying poor over pokie reforms. I thought it was impossible to hate the Pies any more Eddie, but cheers for giving me another reason. I’d suggest the tool box to go have a listen to new Geelong president Colin Carter, who was quoted as saying: “We are not at all opposed to this (poker machine reform).The abundant evidence is that we have a national problem in this area.” What we have in Victoria is a situation where reform to poker machines laws have never been more timely, and where the AFL clubs have a golden opportunity to introduce the new laws painlessly.
The primary obstacle to these reforms (aside from the cashed up campaign of the gaming industry) are four main arguments: 1) clubs will go bust if it is introduced, 2) it’s too expensive to implement, 3) it won’t work, and 4) clubs provide invaluable support to the community, Let’s take these arguments one at a time.
Firstly, while the real reduction in poker machines revenue will be approximately be 15%, the pro-pokies lobby uses the often quoted figure of 40%. You know where this number comes from? Well, as 40% of poker machines revenue comes from problem gamblers, we can assume the clubs are talking about losing this revenue. But on the other hand they say it won’t work, that it won’t stop problem gambling. Wait, what? Let’s reason this out – it’ll work so well that it will cure problem gambling and therefore reduce revenue by exactly that amount, but on the other hand it won’t work at all? Dickheads. Seems even more disingenuous when you consider the internal research provided to Clubs Australia (research that they paid for themselves), that argued that all levels of the industry would remain profitable under the strictest version of poker machine reforms. That’s right, their own research says that clubs – from giant to small – will remain profitable.
Secondly, the other costs to clubs and pubs (and casinos) you will hear people talking about are implementation costs. That is the cost of altering a machine, for example, to reduce its maximum betting limit or ‘linking’ poker machines to a network so an individual cannot blow his limit on one machine then simply move to the next. This is one of the few arguments you will hear from the pro-poker machine groups that actually has some basis in fact. Some costs are inexpensive, some less so. Capping withdrawal limits on ATMs near clubs (already done in some states) is easy; limiting how much you can stuff into any machine at once is also easy, and has already been done painlessly in Qld. Reducing the maximum one can bet is also straightforward – Victoria recently reduced the maximum bet from 10 dollars per spin to 5 per spin. But, in truth, some things will be expensive and will need a little longer to get right. Linking all the machines in each State to a network is a more difficult measure to implement and will take time, and harder to do with older machines. Of the 200,000 poker machines in Australia, about 50,000 are of the older variety and will be expensive to either replace or convert. But overall, given time, the consensus from non-partisan groups is that the new laws are all doable.
Thirdly, the argument that the new regulations simply will not work. The pro-poker machine lobby argues for a range of alternative solutions – basically things that already exist, like counseling, self-exclusion schemes and so forth (by the way, if they already exist, it means they aren’t working well enough). Those opposed to the reforms argue that as an alternative to mandatory pre-commitment (which won’t work), voluntary pre-commitment should be trialed. Huh? A voluntary version of the same scheme? That’s right, a compulsory system won’t work, but a voluntary one will. You’re fucking kidding me right? The pro-poker machine lobby is taking us for a bunch of mugs. As political commentator Paul Kelly wrote recently, “The more the clubs argue, the more they concede their business model is built on problem gambling”.
The next and final argument is the ‘community benefits’ of clubs – the money they are legally required to put back into the community. To hear the rhetoric of the clubs (and Steve Mortimer) you’d think clubs were out there washing lepers, handing out loaves and fishes, suffering the little children and helping old pensioners across the road. Perhaps if the pensioner needed to get to a teller machine so she could play some more, they’d be there, but for the rest I’m skeptical. The operating costs of clubs are defined as ‘community benefits’ and investigations by the media into these claims have found that someclubs have claimed the cost of darts, beer gas, Sky Racing subscriptions and staff drinks as community benefits.
The fact is in terms of net revenues, nearly all the money clubs get from poker machines goes in state and territory taxes, administration, running costs and subsidies for club members' meals and the like. A small amount (not enough) goes to furthering the promotion of their own sport. In Victoria, about 1 per cent of pokies revenue was directed to external charitable causes, and almost no club ever gives back more than they are legally required to do (remember clubs don’t pay tax as they are not-for-profit, but in return for this status are required to put a small return back into the community). NSW clubs received the equivalent of $518 million in tax concessions in 08/09, spent more than $183 million on advertising and yet only contributed $91 million dollars directly to the community. $25 million of that was spent on professional sport, including the NRL. $500 million on tax cuts, $25 million on professional sport. And the clubs lobby has said they are going to spend 40 million dollars just on fighting the new regulations. Looking at the numbers, you’d be forgiven for wondering if ‘community benefit’ was really foremost on their minds.
While Phil 'The Evil Albino' Gould is entitled to prate all he likes about the reforms (and given the number of poker machines at Penrith leagues club, I can see why), he’s been consistently incorrect on his claims the reforms won’t work. He is, however, on the right track on one point and one point alone: the NRL is, unlike the AFL, a different story when it comes to the pokies. The revenue from poker machines for NRL clubs is far higher than their counterparts in Victoria, meaning as a rule their activities are far more dependent on problem gamblers. For the AFL, approximately 6 – 9 per cent of total revenue comes from poker machines; for some NRL clubs, proportion of revenue can get up to 60% or higher. This reflects a broader problem in NSW, which has more poker machines than any other state, and some of the most lax restrictions on problem gambling.
Nonetheless, it is not clear if the NRL clubs are dependent on poker machines revenue, though they all certainly have been claiming that of late. St George, for example, have been crying poor, but as Stephen Mayne revealed in a recent article for Crikey, their finances are very strong. The Rabbitohs, as another example, have decided to do without any poker machines whatsoever. The club focused on increasing membership, chasing sponsors, and getting more people through the gate at each game. And, to their credit, they have been quite successful at developing a business model not dependent on poker machines.
On the other hand, league insiders have told me they believe the claims are genuine, and some of the NRL clubs in NSW will struggle financially if the proposed reforms become law. Well, if the books are opened up and NRL clubs can show that a 10 to 15% cut to poker machine revenue could see them go under, then the league administration needs to step in and offer support. Just a few dollops of the TV rights can go into this transition fund. They need to wean themselves off the dollar of the problem gambler, attract more members and leverage some better sponsorship deals. The Raiders, for example, should stop complaining about the reforms and start sacking their coach and winning some games. If they can do that, the massive potential fan-base in Canberra will return to the game.
The NRL has claimed it hates problem gambling and I for one believe them. No one involved with the game wants to think about star players being funded from problem gambling, no wants a game like league to be associated with something as toxic as poker machine addition. I think the NRL Clubs are sincere when they say they want to be part of the solution. An important issue, which has not been discussed in the context of poker machine reforms, is the claim that the NRL is not getting a fair shake from News Limited and the ARL. Should the clubs get a fair deal from a TV deal, and gain some financial independence, then all this nonsense about poker machines revenue will become increasingly irrelevant.
You will have read recently that the NRL clubs have demanded their annual grant increase from $3.85 million to $6 million next year from the administration – pointing out that they are responsible for 95% of the $140 million the game makes every year, but receive less than half that. The merits of this particular argument have been hotly debated in the press and I won't go into the pros and cons here. What you may not have heard is that there already is an agreement to raise the annual grant to $7.2 million by the 2013 season when the new TV deal (predicted to go for $1.4 billion) is finalized. I’d suggest that with this, plus a little extra from that $500 million dollar tax break given to the clubs every year, that the NRL shouldn’t have too much of a problem staying afloat. The point is, with so many different sources of potential revenue for league, there is no reason to believe the game needs to find those extra dollars in the pockets of problem gamblers.
However, if there are some smaller clubs and pubs out there on the borderline of profitability, why not have a pokie license buy-back scheme? With the exception of Northern Territory, the number of poker machines is capped in all states and territories. Enact legislation across Australia so they can’t rise beyond the approximately 200,000 that already exist. Then allow the clubs to sell their licenses back to state governments. Some of the older machines in clubs are more difficult to link up to the new technological requirements of the legislation, so these would be good candidates for selling back. Every buy-back reduces the cap by one. Clubs that genuinely want to change to a business model that is less dependent on problem gambling can use the funds to ‘transition’ over time. The anti-pokies lobby will be happy, and the clubs will be given the resources to help change their business model.
Then we can have spectacle, such as you would see in Mexico, where the police set fire to a tonne of cocaine for the TV camera – except we pile up the pokies out front of Parliament House, and have the Salvos or Andrew Wilkie or reformed gamblers burn the lot. Or blow them up, as the song goes.
Buy-backs aside, on the balance of probability, if you believe the Productivity Commission – the premier, non-partisan economic agency in Australia – and if you believe non-partisan academics who have studied the issue of problem gambling for years, then this will work. Mandatory pre-commitment, along with maximum loss limits of 120 dollars an hour, and more choice for consumers in terms of ‘low intensity’ machines, will help to reduce problem gambling.
We’re the biggest punting nation on earth. That’s not about to change. Even with these reforms, it won’t change. Our capacity to have a punt on just about everything at anytime will not be hindered, with the exception of these high intensity machines. We’ll retain our position as number one gambling losers in the world and while we may get some competition from Singaporeans, the rest of the world will not come within cooee of knocking us off the gold medal spot. And there’s nothing wrong with that, by the way. If having a punt is the way we choose to entertain ourselves, then is just as legitimate as any other national pastime (more so even– given Mongolians love drinking vodka and wrestling each other topless; the French going on strike and having affairs; the Laplanders live for an expressive ice-dance; the Scots enjoy a good Haggis and heat-butting; the North Koreans marching up and down the square and feeding their people dust; and the Spanish getting trampled by a horde of angry bulls). All things considered, having a punt isn’t so bad at all. In the words of Charles Lamb (Essays of Elia, 1832) “A number of moralists condemn lotteries and refuse to see anything noble in the passion of the ordinary gambler. They judge gambling as some atheists judge religion, by its excesses.
This isn’t about our right to gamble. Or even about our right to gamble and lose. It’s about putting some sensible upper limits up the crack cocaine of gambling. It’s about using public policy to reduce the devastating impact poker machines have on the community. These reforms make sense and they will work. It’s a logical, measured approach that needs to be given a shot because the alternative – the status quo – is unacceptable.
