At the start of the 2000s, totalisator betting made up 85 per cent of turnover on thoroughbred racing. Now it is 16 per cent and falling fast. So what happened? Run The Numbers explores the decline.
In its heyday, totalisator betting was an on-course and retail phenomenon. A New Zealand invention which proved widely popular in Australia, the tote and the TAB brand, established state by state as a government agency in the 1960s, changed betting on horse racing forever.
It did more for the commercial success of sport than anything else in the 20th century, driving up prize money and professionalism. The golden goose proved too good an asset for the states not to sell, and bit by bit, these monopolies were privatised, with the exception of Western Australia.
At the turn of the century, $8.1 billion of the $9.5 billion wagered on horse racing every year went through the tote, either through on-course, retail such as TABs, pubs and clubs, or phone betting.
Eight years later, as the High Court made the historic Betfair v Western Australia decision which paved the way for widespread corporatisation of Australian bookmaking, tote betting in Australia was still riding high, generating $9.7 billion in thoroughbred turnover annually, or 67 per cent of the market.
The most recent figures, from 2022/23, shows how dramatically this landscape has changed. In that year, TAB on-course, retail and phone/internet betting contributed $4.3 billion of the $26.4 billion turned over on thoroughbred racing. That is just 16.4 per cent of the market.
Put simply, while overall turnover on racing has nearly doubled in the past 15 years, tote turnover has more than halved.
In 2008, the average combined win pool hold for a major Sydney or Melbourne race would frequently exceed $1 million. On Saturday, the best combined hold at Flemington was $388,000, while it was around $350,000 at Rosehill.
It is also worth noting that the decline of the tote pools continues. A quick survey of home tote win pools from on Saturday reveals overall TAB turnover down 33 per cent at Flemington (albeit with one fewer race) and 11 per cent at Rosehill compared to the same meeting last year.
We can break the decline of the parimutuel betting into several pieces, each of which are significant in their own right.
The first is on-course TAB turnover, which in 2009/10 reached just short of $1 billion Australia-wide, up from $572 million in 2000/01. This growth had come at the expense of on-course bookmaking, whose turnover had fallen from a height of $1.2 billion in 2001/02 to $613 million by 2009/10.
But the upward trend in the on-course tote hold proved temporary. By 2015/16 it had collapsed to $391 million and by 2018/19 it was down to $277 million.
The pandemic then took a huge toll as on-course attendances plummeted. In 2020/21, on course TAB turnover dropped to $65 million (6 per cent of what it was 11 years earlier). It recovered slightly to be $90 million as pandemic restrictions were fully eased in 2022/23, but is expected to decline again in the just completed 2023/24 season.
It’s hardly a surprising trend when you consider the amenity offered by mobile technology and the tote derivative products offered by competitors, as well as declining attendances. This has also led to a decline in the number of on-course tote operators.
The pandemic also proved brutal for retail betting through pubs, clubs and agencies. At the turn of the century, close to $7 billion a year was turned over on thoroughbred racing through retail. That represented close to 77 per cent of all turnover on racing.
In 2022/23, the contribution of betting on racing through a retail setting was 6.5 per cent, or $1.7 billion of $26.3 billion.
It had been a relatively slow decline for retail betting for the decade before the pandemic hit. In 2009/10, retail turnover was $6.1 billion, but the burst in corporate bookmaking saw that reduced to $4.5 billion by 2013/14. By 2018/19, that had fallen to $2.8 billion, as the corporate bookmaker sector grew to $11.1 billion, having been $6 billion five years prior.
It was the outbreak of COVID-19 restriction that changed the landscape forever. By 2021/22, the turnover on racing through corporate bookmakers and betting exchanges, with no retail dependency, had ballooned to $19.7 billion. In contrast, retail, beset by the consequences of lockdowns, had slumped to $1.4 billion.
The third aspect of parimutuel betting is online and phone betting.
In 2000/01, this was already worth $1.1 billion to racing turnover a year, or 11.3 per cent of the total. A decade later, as internet betting grew, parimutuel pools benefited to the tune of $2.47 billion, meaning 17.2 per cent of racing turnover was through TAB-based online and phone parimutuel betting.
However, the TABs were getting in on the fixed odds game and that meant driving more punters to a different market. Fixed odds betting turnover through TABs grew from less than $100 million to $2.6 billion in five years from 2007, most of it done online.
As a result, parimutuel online turnover pretty much stayed steady through the 2010s. It took off during the midst of the pandemic, getting to $3.3 billion, but has quickly reverted to the $2-$2.5 billion range it has occupied since 2007/08.
The Tote is dying in Australia, eaten away by both competition from tote derivative markets and the Australian betting public’s willingness to embrace fixed odds.
It is a reminder of how dramatically the wagering landscape can change in the space of 15-20 years. Those regulators and governments making long-term calls on the funding structure of the racing industry need to be aware that what is accepted logic now is unlikely to apply a decade or so down the line.
Parimutuel turnover on Australian racing by year (inmillions)
*Source: Racing Australia Fact Book
