Clubs’ card marked? Racing NSW turns up heat on the ATC

The brutal way in which Racing NSW chair Saranne Cooke exposed the failing business model of the Australian Turf Club poses broader questions about the future role of race clubs in Australian racing, writes Bren O’Brien.

Comment: The Australian Turf Club has spent much of the past two years with its dirty laundry on display to the world, but on Monday night it was Racing NSW chair Saranne Cooke putting the ATC’s unmentionables in the public domain.

Under the cover of addressing what Cooke said was “much misinformation” regarding Racing NSW’s decision to issue a show-cause notice to the ATC as to why it shouldn’t be put into administration, the chair set out a litany of concerns as to the future viability of the club.

It was an extraordinary attack, front-running Racing NSW’s own prosecution case for an administrator to be installed, while leaving the ATC board and executive on the back foot as it bids to run its own affairs.

However, while the escalation was swift, the action itself should come as no surprise. Ever since Racing NSW won the race fields legal case, which delivered it an increasing and now dominant share of the proceeds of wagering in 2012, the club model, as it stands in NSW, has been doomed.

Why now, arguably at the most important time of year for Sydney racing?

Racing NSW says it is because of a week of turmoil, which saw two directors resign and a chief executive depart that called into question the four-person board’s ability to fulfil their duties. It also raised “governance issues”, including accusations that board members had made unspecified breaches of its own code of conduct.

Other industry figures believe this is an inevitable reaction to the ATC members’ decision not to sell Rosehill racecourse. A less compliant board has been installed and three directors who supported a Rosehill sale are now gone. Intriguingly, the greatest proponent in the executive team, Steve McMahon, has now been promoted to interim chief executive.

There is a view among Racing NSW critics that this move towards possible administration is an attempt to achieve the Rosehill sale by stealth, that is, without the consent of members.

 Racing NSW has never raised this as a prospect, and it did not feature in Cooke’s explosive 1480-word ‘Notice to Participants’, but given the divisive nature of the Rosehill debate, this view is understandable.

‘Significant doubts about its ability to survive’ – Cooke turns blowtorch on ATC’s financial future

Racing NSW chair Dr Saranne Cooke has laid bare what she claims is a bleak financial outlook for the Australian Turf Club in justifying why the regulator issued a show cause notice as to why the ATC shouldn’t be placed into the hands of an administrator.

The StraightTim Rowe

On the other side of the Rosehill argument, the details laid bare by Cooke are being used to support the case that the $5 billion deal should have been accepted at the time.

The politics are certainly complex, but what can not be argued is that the future business model of running a race club, particularly in NSW, is deeply flawed. We have been aware of this for many years.

There may be more wagering money flowing through the thoroughbred racing ecosystem, but the ATC has not seen the upside of this. In fact, its returns from wagering, solely derived from the declining parimutuel model, have slumped by $12.1 million a year over the past decade.

This decline has led to calls for the ATC to receive funding directly from all the wagering it generates, including the dominant corporate bookmaking revenue stream. Cooke has claimed that it would only amount to $80.1 million a year.

That amount, only $11.5 million more than current TAB revenues, appears surprisingly light on when you consider that Racing NSW banked $315.8 million in non-TABcorp-related wagering revenue in the 2023/24 financial year.

It would be interesting to see the calculations behind this projection, but creating our own is all but impossible, as Racing NSW’s wagering data is more opaque than that of other states. It also has Point of Consumption Tax revenue baked into it.

What we do know is that while the ATC’s cash reserves have dropped from $51 million to $21 million since 2015, Racing NSW has increased its banked provisions across race fields, capital expenditure, club and prizemoney sustainability from $98 million to $236 million.

That’s also not accounting for a substantial real estate investment of at least $125 million by Racing NSW across that period.

Clubbed! – How wagering’s corporate revolution has robbed racing clubs and enriched PRAs

How did Australia’s racing clubs end up in such a perilous financial state? Bren O’Brien analyses how the change in the wagering landscape has eroded their bank balances and put the state-based regulators into a mighty position of power.

The StraightBren O’Brien

While Cooke’s argument that the ATC is clearly worse off than it was a decade ago holds water, it should be seen in the context that Racing NSW is manifestly much better off. The lion’s share of that is due to wagering.

Cooke also pointed to figures which showed that while total ATC revenue had grown by $146.7 million in those 10 years, “nearly all revenue growth is from Racing NSW contributions and negotiations and not from ATC’s own activities”.

That is laying the blame for the ATC’s financial failings at the feet of the club itself.

Leaving aside the wagering data above, it assumes the club has been fully free to pursue its own media and sponsorship rights and revenue.

Racing NSW has led the media and broadcast rights negotiations, leaving the ATC little amenity to seek a better deal, especially in negotiations with the broadcasters such as the Seven Network, of which ATC meetings make up the vast majority.

In contrast, clubs are free to do this in Victoria. The Victoria Racing Club’s strategy of pursuing rival partners to Seven has caused its share of headaches, but it has been good for the club’s bottom line.

The other advantage Victorian metropolitan clubs have over the ATC is the ability to partner with a wagering provider of their choice. These deals are worth anything up to $15 million in total to the three Victorian city clubs.

Tabcorp has a monopoly on the ATC, and while that has its revenue advantages, the lack of competition among potential sponsors inhibits the club’s ability to realise the funds it may be able to, especially across four different venues.

Increasingly, Racing NSW is looking to leverage its own deals in a space traditionally occupied by the ATC, whether in wagering, such as the Sportsbet Sydney Sprint Series sponsorship, or in aspects like raceday hospitality.  

The future wagering funding model of NSW racing is currently a key point of discussion. It has been characterised by several insiders as a negotiation between Racing NSW boss Peter V’landys and Tabcorp chief executive Gillon McLachlan.

Given that $70 million of the current TAB deal still feeds into the ATC, and the brutal way in which Racing NSW has exposed their commercial challenges, you would think it is in the ATC’s interest to be in the room when the finer details of any new deal are being hammered out.

‘Asset-rich, resilient and strong’ – ATC directors promise to meet Racing NSW’s show cause notice head on

The Australian Turf Club faces a fight for its independence with Racing NSW issuing a show cause notice on Friday in the wake of two directors resigning and the sacking of its chief executive.

The StraightTim Rowe

What Cooke’s message clearly highlights is that ATC no longer controls its own financial destiny.

It poses a broader question: will there be race clubs in Australia in 10 years or 20 years?

The NSW model, with Racing NSW now holding so much control, appears to be further along the line of clubs being there to simply open the gates, turn on the lights and bain marie and serve the beers and wine.

If only there were a scheduled government review to determine the optimum structure of New South Wales racing should be … oh wait.

Former NSW Health Minister Brad Hazzard is currently working through his approach on this but has been told by Racing Minister David Harris that the scope of the review does not include any aspects concerning thoroughbred racing industry funding arrangements.

But Racing NSW’s own arguments, as put forward by Cooke, point to funding being the crux of the industry’s most significant issue. Unless that is dealt with, anything else Hazzard does will have little or no impact.