Tabcorp has successfully secured exclusive rights to manage retail betting in Victoria. After an extensive bidding war, they will pay around NZD 1.4 billion. The agreement is for the next twenty years. Tabcorp has held the equivalent of this license since 1994. Shares in Australia’s Tabcorp spiked almost 25% at the announcement of the news.
New Fee Deal
Tabcorp is predicted to earn much higher profits under this new deal with the Victorian state government. Previously, their agreement was a joint venture with the government body Victorian Racing Industry (VRI). Tabcorp shared profit from every dollar with VRI on top of taxes. Under the new deal, Tabcorp will only pay upfront fees.
In June of this year (2024) Tabcorp will pay around NZ$650 million, and then over 30 million each year following, for the duration of the agreement. The annual payments are not linked to inflation, making the total for the deal to be around NZ$1.3 billion. Even with the payment of this staggering sum, Tabcorp believes the new deal will now make them competitive with betting giants, Ladbrokes and others.
Since 1994, Tabcorp has been the sole retailer outside of racetracks for betting and wagering in Victoria. They operate out of pubs and clubs and their license allows:
- pari-mutuel and fixed odds betting
- operating the only off-course wagering and betting retail network in Victoria
- establishing and operating a betting exchange
The new Wagering and Betting License will begin in August 2024.
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Investor Certainty
Despite its high-profile races, Victoria is in fifth place (of eight) in terms of gambling turnover by State and Territory in Australia. However, due to the prolific publicity of Victorian events like the Melbourne Cup, as well as the likely profit, competition was fierce for this new license round. Media outlets reported that international competitors were vying to share control of the state’s betting and wagering, rather than having one sole entity in charge.
“An industry spokesman stated that sharing the license with multiple major corporations would have been too messy”
Due to the heavy competition for the license, Tabcorp investors were scared that their license would not be renewed. There were also fears that the competing offers would allow the Victorian government to lower profit for Tabcorp and hike fees. However, once the terms of the agreement became public, confidence soared and stock prices spiked almost 25%.
Instead, lower fees and taxes will be paid by Tabcorp under the new deal. In exchange, a higher point of consumption tax will be paid by bookies, from 10% to 15%. Higher profits are now a certainty. Tabcorp has stated that it now believes it can operate on more of a level playing field with the other big gambling companies operating in Australia and online.
Tabcorp has licenses for wagering and betting in three other states and territories of Australia, Queensland, Tasmania, and the ACT. Tabcorp CEO, Adam Rytenskild said, “Victoria is the best licence in the country, and it is the prototype for the rest of the country”. Though the lucrative Northern Territory license is out of their grasp, it is operated by a subsidiary in the larger Tabcorp group. It is, however, not under the Tabcorp name.
This new Victorian deal will increase profits by an estimated NZ$150 million a year. Together with last year’s new Queensland deal upping takings by over $30 million, Tabcorp is in a confident place. Tabcorp’s CEO stated that they had “stabilised market share, digital share, and we want to grow it”. The sky seems to be the limit for Tabcorp.
