Stakes are high in sport's great gamble
Sporting codes and betting operators are on notice as an inquiry into gambling advertising and promotion kicks off, writes Colin Kruger.
When the bombshell allegations of banned drug drug use and criminal links hit Australia's major sporting codes last week it was only a matter of time before attention turned to a more pervasive performance-enhancing drug - sports betting.
While legal - and not implicated in the Australian Crime Commission's allegations - the rapid growth of the local sports betting industry, and tight grip it now has on Australia's premier professional codes, has been causing disquiet for some time.
While the highly regulated industry can comfortably answer questions of probity, the problem has more to do with the same challenges that faced industries such as tobacco and alcohol, which previously spent a small fortune marketing their wares to the sporting public.
Should you be allowed to market an adult product at what is essentially a family event with so many passionate and impressionable children in attendance?
The same day as the ACC announcement, the Senate passed a motion by the Greens Senator Richard di Natale for the joint select committee on gambling reform to launch an inquiry into the advertising and promotion of gambling services in Australian sport.
"You can't watch a sporting event with your kids without being bombarded by betting odds and gambling ads," di Natale says. "Not only do we risk undermining the integrity of sport, we risk creating another generation of problem gamblers."
Senator Nick Xenophon, who has called for a suspension of sports betting, said "the government needs to understand the enormous level of community disquiet".
If you have had anything to do with the AFL or rugby league in recent years, the extent to which our most popular sporting codes have been harnessed to the cause of sports betting has been impossible to avoid. It may start as soon as you pull the team jersey on. If you supported St Kilda last year the logo of betting sponsor Centrebet is in plain sight.
The same applies if you support 2011 NRL premiers Manly. If you support the Penrith Panthers, the home stadium you enter is named after the same sponsor that also supports the North Queensland Cowboys and St George. At many stadiums around the country, signage and goal posts are prominently sponsored by a range of sports betting operators.
The same applies to the clubs' governing bodies. This includes the Australian Rugby Union and the Football Federation Australia, which each count 13 official betting partners.
These relationships ensure the clubs and governing bodies get a clip of the revenue generated by their fans' gambling losses.
AFL clubs Essendon, Melbourne and the Adelaide Crows featured betting shops on their websites under their own brands for an extra clip of betting losses their members generate on a wider range of sports.
Club membership databases have also been mined as marketing tools for agencies that directly sponsor the teams.
In 2011 Collingwood ran a promotion with sponsor TAB Sportsbet giving Magpies fans who bet a minimum of $5 through the agency a chance to sit in the coach's box for one of the big rounds of the season against Carlton.
Last year the Tom Waterhouse juggernaut kicked into gear with sponsorship of the Sydney Swans. One of his consultants on the deal said a key factor was access to the Swans' club membership database.
This year it was rugby union members who were receiving invitations to take a punt with Waterhouse. This season NRL viewers will see Waterhouse replace Keno replays as a feature during games after he managed to kick out the $2.3 billion heavyweight Tabcorp as an official NRL partner.
The eye-watering $50 million Waterhouse reportedly paid to become the official NRL partner over the next five years gives some indication of the money involved, even if insiders say the figure is overinflated.
AFL and NRL game broadcasts became so heavily saturated with commentary on sport odds, and sponsored commentary, that even some of the sports betting operators admitted that it had gone too far.
The 2010 Brownlow medal ceremony was marred by saturation betting promotion and the AFL was forced to act.
"We agreed generally [Ten's gambling promotions during the 2010 Brownlow ceremony] was overdone," the then AFL chief operating officer, Gillon McLachlan, told Fairfax Media the following year in the lead-up to Seven's broadcast of the Brownlow.
Its agreement with Seven ensured the game won back some control over the promotion of sports betting.
The federal government also felt pressured to act around that time. In May 2011 the Communications Minister, Stephen Conroy, and the then assistant treasurer Bill Shorten fronted the press to announce the federal government's intention to work with the sport and betting industries to "reduce and control" the promotion of live odds during sports broadcasts.
The voluntary codes being developed are designed to ensure there is no live odds during a game, or by commentators at any time during the broadcast of a match. It will be allowed during breaks in play and must be clearly identified as a gambling promotion.
"The three free-to-air commercial broadcasters are already implementing these principles," a spokesman for Senator Conroy said this week.
The representative body for the major sporting codes, the Coalition of Major Professional and Participation Sports, has also indicated that live odds promotions on big screens at sporting venues should be prohibited during play.
The AFL has already reached agreement with the MCG and Etihad stadium to prohibit in-ground live odds promotion during matches and is working with other venues to put in place similar arrangements.
"The government will evaluate the effectiveness of these measures before considering any further action," the spokesman said.
There is a lot at stake for the professional sporting codes and betting operators - especially the online operators that do not have any other avenue for reaching such a mass of potential punters other than through advertising and sponsorships.
In 2011, it was Centrebet - not Tom Waterhouse - which played the role of market aggressor.
In a market presentation that year the company stated its intention to become one of the top two operators in the Australian corporate bookmaking market.
To get there it was spending $30 million on marketing, most of it targeted at the NRL and AFL. Some of this money was spent with the Sydney Cricket Ground.
As part of its deal with the SCG Centrebet said it would be given access to the Sydney Swans' team database to "understand how the club works and how to convert fans to punters".
The following year Centrebet was sold to British-based Sportingbet for $183 million.
Sportingbet is currently being taken over by another British rival, William Hill, in a trend which has seen British operators spend a fortune buying into Australia's lucrative betting market.
And they are bringing deep pockets and aggressive plans with them.
"Sportingbet's vast customer base, combined with William Hill's expertise, could further drive increased competition in the region," said a Merrill Lynch gaming analyst, Mark Bryan.
Bryan says these online agencies have triggered a battle for market share fed by takeovers of local operators by big European operators - including the Unibet acquisition of Betchoice last year - as well as the direct entrance of overseas competitors such as Bet 365.
"Recently, we have had contact with these players and see their reinvigorated competitive threat as serious," says Bryan.
According to Merrill Lynch, sport betting turnover is expected to exceed $4.5 billion in the current financial year, generating revenue of $410 million for the industry.
This is almost double what the industry generated just five years ago when the floodgates were opened in 2008 by a High Court decision that allowed bookmakers to advertise in states they were not licensed to operate.
For the first time, bookmakers licensed in the relatively lax regulatory environment of the Northern Territory had access to advertising and sponsorship as a customer acquisition tool.
Strong double-digit growth is expected to see revenue reach $513 million in another two years.
Importantly for the sports betting industry, the current plans to curb the promotion of live odds at matches and on broadcasts will do little to affect the substance of this profitable relationship between the sporting codes and betting providers.
But for some, the planned restrictions do not go far enough.
The new inquiry by the joint select committee on gambling reform is expected to report on May 16 and will cover in-ground and broadcast advertising, sponsorship and "exposure to, and influence on, children".
The inquiry's findings are not expected to provide too many surprises. They covered much of the same ground in 2011 as part of a related inquiry.
Senator Xenophon says the fresh inquiry is timely.
"We can actually dig deeper into the links between the sport codes and the gambling entities and determine whether it is healthy or not for sport," he says.
The report handed down not much more than a year ago was damning on many fronts. The recommendations from the committee included a total ban on the promotion of live odds both at venues and during game broadcasts.
More ominously it called for "nationally consistent standards to restrict certain forms of sports betting advertising, which at a minimum, should include a ban on the display of gambling companies' logos on sporting players' uniforms and merchandise [such as children's replica sports shirts], as well as restrictions on the giveaways of free merchandise which depict betting companies' logos".
Many submissions to the previous inquiry attributed the rapid pace of growth in sports betting in recent years to the "proliferation of marketing campaigns to promote online sports betting services".
Dr Sally Gainsbury and Professor Alex Blaszczynski, academics with a strong background in gambling research, reported: "Partnerships between internet gambling corporations and sporting associations appear to be quite symbiotic as costs associated with sports increase and sports fans represent an ideal market for online gambling."
They noted that sports betting is Australia's fastest growing form of gambling, a fact attributed to the increased popularity of interactive wagering complemented by aggressive advertising on television.
The Australian Internet Bookmakers Association spoke of how "sponsorship is a valuable source of funding for sporting organisations". But the relationship is just as valuable for the betting shops. Even Clubs Australia - the peak representative body for Australia's pubs, clubs and their pokies interests - felt the need to make a submission protesting about the conduct of its sports betting rivals.
Clubs Australia said excessive sports betting advertising "glamorises participation in gambling" and noted that land-based venues did not operate on a level playing field in relation to advertising.
More seriously, Gainsbury and Blaszczynski made a connection that few in the industry would want to hear. "Although mandated and self-regulated codes of conduct restrict the involvement of other 'non-healthy' products including tobacco, alcohol and junk food, little attention has been paid to the potential harm caused by sports sponsorship from internet gambling corporations," they said in the joint submission.
They made the observation that the trend is apparent in the way that "lucrative gambling contracts and sponsorship of sporting clubs and television broadcasts is now replacing alcohol and tobacco sponsorship".
It was a point the committee did not ignore, saying it notes with concern the information provided to it indicating "children are vulnerable to the gambling advertising messages and that we do not know the long-term effect of this level of exposure".
Despite calls by Senator Xenophon for all sports betting to be temporarily banned while the ACC allegations are clarified, no one is suggesting there is any serious corruption associated with Australia's highly regulated gambling industry. While betting scandals have dogged the AFL and NRL in recent years, this was actually a result of the way that betting operators now have the analytic tools, and the obligation, to investigate suspicious bets and unusual betting patterns. While a complete ban can never be ruled out it seems unlikely given all the concerns about corruption mentioned by the ACC originated overseas.
"The ACC didn't talk to us," says the Sportsbet chief executive, Cormac Barry, who spoke of the "speculative" link that was made between drugs and match fixing.
The betting operators also make the point that you can't ban betting, you can only ban legalised betting.
"As soon as you've got a live broadcast of a sporting event you've got someone betting on it," says the Tabcorp chief executive, David Attenborough.
According to Attenborough, the best way to preserve the integrity of sport is to make sure it is in a properly regulated environment.
"You can never guarantee it, but Australia has some of the most sophisticated gaming regulations in the world," he says.
Tabcorp's very existence is testimony to this philosophy.
Like the other state Totalisator Agency Boards, Tabcorp was set up in Victoria in the 1960s to take race betting out of the hands of illegal SP bookmakers and into the hands of a government-run agency that ensured the government and racing industries, rather than organised crime, profited from gambling.
The Australian Wagering Council - the representative body for many online betting operators - said the ACC revelations clearly identified the need to ensure Australian gamblers and sports bodies are protected from unregulated offshore illegal gambling operators and local illegal SP bookmakers.
Of course, a ban on sports betting advertising and promotion would not entirely remove the tentacles of gambling from Australia's most prominent sporting clubs.
NRL clubs have relied heavily on revenue from poker machines to help fill their coffers for decades and the restructure of the poker-machine market in Victoria last year ensures many AFL clubs will follow suit.
In the NRL, the Canterbury Bulldogs are reported to draw about $4 million a year from their associated licensed club.
Carlton was generating about the same amount from poker machines in 2011.
Former Victorian premier Jeff Kennett may be vocal in his call to ban sports betting advertising, but as the president of Hawthorn he cemented the club's financial future through poker machines, which help provide the club with a steady income stream.