The squeeze – is racing funding about to reach its pain point?

Analysis: The commercial departments of principal racing authorities (PRA) around Australia are crunching their numbers and working through spreadsheets, plotting their way forward as to who gets what slice of the pie for the 2026/27 season.

These discussions, which weigh up the cost of putting on the show alongside infrastructure requirements and the return to participants, are crucial to the industry’s confidence.

Cuts to prize money, even at a time where wagering has softened significantly over the past three years, would be viewed by breeders, owners and trainers as a lack of faith in the industry’s future direction and a threat to further investment.

But red ink budgets can only be tolerated for so long, as every PRA battles to balance its books.

Former Racing Victoria (RV) chief executive Andrew Jones summed it up best during his short-lived tenure at the top of the PRA.

“We wake up every single day trying to work out how to grow racing. If we grow racing, then we can accommodate the reasonable desires and expectations of stakeholders,” he told The Straight in 2024.

“If it shrinks, it can quickly become Mad Max, you are fighting over what is effectively a diminishing supply of petrol.”

We are not quite at the dystopic stage yet, but there are signs that, as costs continue to rise and revenues contract, the competition for resources will intensify.

From a supply perspective, the wagering rivers of gold that flowed freely over the past years are drying up. Turnover has fallen around 25 per cent from its post-pandemic peak.

Meanwhile, increased regulation, compliance, taxation, and fees are forcing a change in strategy in the wagering industry, which is impacting racing more than any other form of gambling.

AUSTRAC’s investigation into Tabcorp may prove the tipping point.

Not only has it resulted in a 36 per cent fall in Tabcorp’s share price over two weeks, but it has also shed light on the cash-rich betting environment among its customers.

Cash, once king at Australian racetracks, is now a dirty word, condemned by financial regulators as untraceable.

It is punters who, so far, have worn the wrong end of this one, with several told by Tabcorp their custom is no longer desirable as it is deemed too “high risk”.

While the wagering giant insists this is about its anti-money laundering and “know-your-customer” requirements, the broader perception, rightly or wrongly, is that the cohort of punters was instead banned because they were winning.

Recently, PointsBet, which has around 5 per cent of the market and doesn’t deal in cash, conceded it too had turned away high-volume racing punters, again using that ambiguous term ‘risk’ to explain a drop in turnover.

It says it is accelerating toward a 50-50 turnover split between racing and sports, with the cost of operating on racing as a further incentive to transition.

Elsewhere, the term “racing market softness” has become de rigueur in the corporate statements of Australia’s largest bookmakers. Racing has been dragging on the profitability of Australia’s corporate bookmakers for some time.

Bookies being disincentivised from taking on racing punters cannot be seen as a good thing. Neither can any suggestion that turnover is being suppressed due to declining profitability, ie bookmakers using increasing focus on anti-money laundering, etcetera, as a trigger to shut down winning punters.

RV issued a warning notice on this practice to its licensed bookmakers in 2024 and 2025, although that doesn’t include the vast majority of bookies registered in the Northern Territory. It described the response to its requests as a modest success.

Stronger enforcement of minimum bet limits is another lever the PRAs can pull in this instance, while action on concerns such as consistency around deductions, a recent bugbear of the 10 per cent of punters who bet before 9am on raceday, may help restore some customer faith.

It is not just the feeling of bookies towards punters that is the concern here; it is also the attitude of punters towards bookies.

While a strong rivalry has always existed on either side of the bookies’ stand, there is a growing sense among those who bet on racing, that it is becoming less of a fair fight.

This is exacerbated by rising margins, which bookmakers rightly attribute to additional taxes and fees but which affect punters most. Much like the $50 of fuel you put in your car, the $50 you put aside for a Saturday punt is getting you nowhere near as far as it used to.

In a market dominated by fixed-odds providers, there is little consumer choice other than to switch off or shift attention elsewhere.

The growing migration to sports betting suits the bookies, who pay much lower fees on sport than racing.

In most states, the impact of racing ceding market share to sport is mitigated somewhat by the structure of the Point Of Consumption Tax. In Queensland and Tasmania, the racing industry gets 80 per cent of POCT generated, regardless of whether it is racing or sport, while in Victoria, the split is 50-50.

But, again, like the Mad Max dystopia Jones spoke of, it is a competition for resources.

With sporting codes unable to reap revenue from sports betting advertising from the start of 2027, surely it is only a matter of time before they seek what they can rightly claim as their proper share of government-based taxation on its events.

Even if that POCT claw-back doesn’t happen immediately, the likely drop in sports betting turnover from an advertising ban – the federal government estimates that to be 0.8 per cent, but the bookmakers as much as five times that amount – will also impact POCT receipts, which then flow back to racing.

The pain points, when it comes to revenue, are plenty.

There are those who don’t believe the sky is falling narrative, pointing to surges in racing turnover during the spring and recent feature days in Adelaide and Brisbane,

For those who operate in a long-term context, while turnover on racing may have fallen roughly a quarter on its 2022 heights, some insiders have simply seen this as returning to its natural levels.

For much of this century, turnover on racing had hovered in the band of 8 per cent of overall legal gambling spend. During the pandemic and immediate aftermath, it surged to over 12 per cent, and while recent data is not complete, it would appear that it has been restored to that 8 per cent level once again.

It is data like this that allows the financial and commercial teams at the major racing bodies to sleep at night, knowing their projections of future revenue are based on 20 years of racing returns rather than three years of decline.

They back these ideas up with suggestions that the decline in racing and the rise in its expense as a product are also easy excuses to paper over broader compliance and commercial cracks within some betting businesses.   

However, it is fair to ask how solid is the ground that racing funding currently sits on?

In the past three years, costs have risen, revenue has fallen and returns to owners have largely remained the same. Something has got to give.