The Death of the Bookmaker -Betfair arrives in Australia

The bookmaker is dead, again
As the arrival of the online betting exchange threatens the TAB monopoly, will it also bring about the end of the bookmaker?

‘I’m living the dream’ says Nathan Snow, revelling in the manic tension of his first Melbourne cup as a bookmaker. The sleaves of his blue shirt are folded up neatly to reveal his slight elbows. The blend of adrenalin and anxiety beams from his wide blue eyes.

He is on his mobile phone, scribbling numbers on a paper, punching keys onto a small pad, scratching the back of his head, climbing up onto the podium and climbing back down again. He darts into the crowd, and hastily returns, followed reluctantly by his stiff red necktie.

Across the Randwick pavilion, veteran bookie Bill Waterhouse stands calmly by his board, hands behind his back, surveying his kingdom. Between them are a swelling mass of eager punters, and a full two generations.

The dream of 24 year old Snow and the legacy of 83 year old Waterhouse is under threat. The Tasmanian government has broken ranks with its mainland counterparts by granting the online betting exchange - Betfair, a license to legally operate in the state. Freedom of trade across state borders dictates that punters across nation will then be free to use Betfair.

It is a move that will dismantle a state established ‘tote’ monopoly and alter the Australian racing industry forever.

‘There’s a lot of scaremongering going on, I suspect the Tasmanian government has been worked on quite a bit’ says Greg Fraser a market analyst at SHAW stockbroking that has been following the fortunes of Betfair.

During its brief history, the online betting exchange has turned the betting world on its head, garnered the praise of her majesty the queen, and the infuriated Australian racing authorities. It’s a name the bet-crazy Australian public will be hearing more often.

The UK based Betfair can justly claim that it has revolutionised wagering. On Betfair.com punters bet against each other and not the bookmaker. Betfair’s complex systems match up buyers and sellers in an online marketplace with all gains and loses distributed between punters.

It makes its cut by charging a small commission for its service. The online innovation, that eliminates the bookmaker, and discounts the totes attracts hundreds of thousands of clients and turns over 50 million dollars a week.

Betfair and its sleek new market friendly wagering platform openly threatened the status quo. Its first marketing exercise, in 2000, was to march an actor placed in a coffin though the streets of London. ‘The death of the traditional bookmaker’ – proclaimed the accompanying banner.

Since then Betfair has done untold damage to UK bookies, slashing the takings of the established trinity of corporate bookmaking houses.

Last year Betfair turned its attention to Australia, and local versions of the bookmaker obituary were being redrafted.

“There were always fears for the future of bookmakers. Indeed, when my father started he felt it was just a short stint, as there was a new invention, the Totalisator, which was feared to be the death knell of bookmaking.” wrote Bill Waterhouse earlier this year.

The totalisator was in its original form a bizarre contraption invented almost 100 years ago by the son of a minister, who wanted to use science to give punters a fairer shot. His system, which tallied up bets, adjusted prices and paid out the winners was gradually modernized. In the 1960’s it was adopted by State governments in the form of the TABs to bring wagering under control.

The racing industry flourished as The TABs poured a sizeable percentage of their massive revenues back into the racing industry. When off-site betting was legalised in the mid 1980’s the TABs boomed, and the bookies began to feel the pinch.

The ‘dedicated’ punter now no longer needed to go to track and run the gauntlet of bookmakers. A good deal were culled. In 1985 NSW had 1500 registered bookmakers. Twenty years later only 300 exist in the state.

In 1992 the state governments set about privatising the TABs. As part of the process, competition was restricted but TABs now had to feed a new mouth – that of the shareholder. The state imposed dominance facilitated an increase in ‘takes’ – the commission charged by the TABs for facilitating the bet.

‘These agreements were essentially put in place to deal with the free rider problem’ explains Robert Raeher, the economist that was comissioned by the Australian Racing Board to investigate the effects of betting exchanges on the racing agency and government revenue. He explains that they ensure the racing industry is sustained from the revenue gained by the TABs from bets placed on its events.

‘The arrangement is an unholy alliance of racing bodies set up to pick the pocket of punters” says Bill Saunders, a veteran horse breeder and editor of the Virtual Form guide, a popular racing website. ‘They feel- We’re entitled to be paid a lot of money from people that lose on our sport’.

Then along came Betfair, who saw Australia as the perfect location to replicate its operational hub in London, and gain better access to a market of eager punters. The online exchange also made an alliance of its own when Kerry Packer’s PBL corporation took a 50% stake in the Australian operation. Its next step was to convince the state governments to grant them a license to operate.

The bookmakers may have been concerned but the TABs, and the racing industry heads who had flourished from TAB revenues, were terrified. They could not prevent Australians from logging on to Betfair to place their bets but they could hamper their progress by lobbying state governments not to grant them the license they needed to legitimately operate and promote their presence.

Their case against Betfair centred on the ability of the punter to essentially bet for a horse to lose by accepting a bet from another party who believes the horse will win. A privilege previously only given to bookmakers, who were licensed to accept bets.

"Betting exchanges ... will almost certainly invite corruption, conspiracy and in the extreme, criminal behaviour," says the NSW TAB. "Insiders can manipulate the odds, mislead the market and deceive punters. This could totally devastate the wagering industry."

James Packer the PBL chairman, not surprisingly saw things differently. He would ‘back the integrity of the Australian public over the bookmaker any day’.

One by one the state governments rejected Betfair, siding with the powerful racing industry lobby.

It seemed that they had seen off the Betfair invasion.

Tasmania was the only state that had yet to turn Betfair away. The battle moved across the Tasman, and the intensity was turned up. The premier -Paul Lennon would now determine the future of Australian wagering.
Victorian premier Steve Bracks was ‘not happy’ and openly opposed ‘the internet system’. Tasmania was accused of exploiting the racing industry.

"Tasmania is bludging off the rest of Australia by allowing Betfair to make money out of racing in other states while returning nothing to the racing industry," says Robert Schwatren, Queenslands racing minister.

Lennon remained defiant. Two days after the Melbourne Cup, he announced that his cabinet would approve Betfair’s request for a wagering license. Betfair would invest $50 million in building a second global headquarters in Hobart and would and distribute 15% of its racing revenues from back into Tasmanian racing.

"This is providing choice and opportunity for the people who keep racing alive in the country – punters. This is the best deal that punters could have - more competition in the marketplace.” he said after the announcement.

The bookmakers scuffle with shrewd punters and champion horses takes place on a daily basis. The threat of technological innovation always looms in the background.

Saunders thinks the bookies may finally be beaten.

‘They’ve got to get with it. They’re a great curiosity, but in terms of matching bets, they can’t afford to do what they do. Standing on their little stands by their boards with bags of money, it’s about the most inefficient way to run a book’

The rookie bookmaker is feeling the pinch -‘Betfair is grossly unfair for us, I have to pay stand fees, for the board, and wages – they don’t have any of these costs” says Nathan Snow.

‘But we’re not going anywhere, All the information that’s traded on Betfair comes from the course, we’ll always be a part of racing’

In all the madness, greed and fear of the Betfair saga, few seem to have asked why it is that Australia loves a punt.

‘It’s fundamental to the Australian psyche’ says Fraser.

Snow agrees, ‘It’s such a part of our culture’.

‘Betfair is not for everyone’ says Saunders. An avid computer programmer, who developed software to monitor horse breeding, he admits that he initially found the complexity of Betfair baffling.

‘I heard most of the users are actually stockbrokers’ says Snow.

The Betfair experience is hardly enthralling. ‘It’s tedious to spend your Saturday arvo in front of the screen watching price changes. ‘The process is pretty anti-social, its the exact opposite of going down to the pub with your mates, having a few beers and a bet’ says Saunders

And nothing beats the track - The hats, the champagne, the majestic horses, and of course the curious bookmakers. On Melbourne Cup day the glamour, revel and enchantment of victory reaches fever pitch. Snow loves it -‘It’s the best office in the world’. He ain’t going anywhere.

Clubbing Seals - Star City's thriving poker community

CLUBBING SEALS
Star City's thriving poker community

Tiny is anything but. His bar stool is a fair distance back yet his large belly still engulfs the small bar table at the Star City TAB.Modestly dressed in a green polo shirt and khaki trousers, he is a gentle giant with thinning brown hair and a loose double chin. An affable public servant from rural NSW, You would never pick him as a ruthless poker fiend.

Eric on the other hand exudes mischief. A scruffy former finance trader in his late forties, he is decked out in full golfing gear, including the windbreaker to deal with the adverse conditions expected for later in the day. It won't be needed though as he no intention of heading to the course, his wife just regards golf as a less squanderous activity than cards.

Eric and Tiny are both seasoned gamblers that have been sucked into the world of poker by the games phenomenal rebirth. They also form part of a tight knit yet sizeable band of regulars at Star City's poker tables; a fairly new service from the house of sin, provided to meet the overwhelming demand for public poker in Sydney. Its Saturday morning and I've joined them for a coffee while they wait for the poker desk to find them an available seat.

"I had a look at Poker. It's actually a game of skill, in the long term the better player will prevail" says Tiny. Therein lies the games mass appeal.

Millions believe that they are the 'better player' and they are all enthusiastically engaging in the endless process of prevailing.

This process transcends both culture and age. Men of all creeds; aged anywhere between eighteen and eighty are happily clustered around the low padded tables in the far corner of the casino. "A lot of the players are multicultural, Asians, Europeans, Indians, Pakistanis, they all show up" says Tiny, Star City's informal ambassador of Poker.

"My eight year old nephews are playing 'hold 'em, bloody raising and re-raising me" says Scott, the slightly disturbed poker addict that runs the Sydney Australian Poker Association tournaments. He reckons they picked this all up watching World Poker Tour on Fox cable, but they could very well have picked it up from World Series Poker on ESPN or Late Night Poker on SBS.

They may have even picked it up from a 'Texas Hold 'Em starter kit', stocked by global toy retailer Toy's R Us.

We've now been joined by Joe. He's got a flat white in his hand, a pen between his teeth and a folded racing digest tucked under the sleeve of his trendy pinstriped jacket. His stool has swivelled towards the screen to observe the fortunes of the horses he has backed but he's still listening to the poker talk. He adds a salient point on poker demographics. Poker doesn't seem to transcend the gender barrier.

There is clear evidence of this; only one woman is seated at the half dozen or so tables. 'It's an ego thing, the competition of poker' he says. It's the hunter versus the hunted, a game that men apparently like to play more than women.

Joe's horse race is over. He turns towards the table to give me the full run down. There players and there are gamblers. Gamblers may occasionally beat the players but as Joe explains, "In the long run you'll end up with their money". Poor gamblers are referred to as 'fish that the player will slowly reel in. Then there are 'sheep' - 'that's a guy with heaps of money that can't play'.

'You always take your time shearing a sheep' says Tiny apologetically.

"Its more like clubbing seals" says Eric, less apologetically.

There are some patrons of the tables that are not so much seeking a manly contest as they are a stable tax free income. Tiny was told by a dealer that there are only a couple of players that have been able to earn a solid crust from playing at Star City. One of them is 'Arthur', a man in his '60's of Eastern European descent and a well known figure in poker circles. "He's lived his whole life in the casino" says Eric.

The table roundly confirms with each other that he's a surly old bastard and even worse; a 'tight' player.

"There are a lot more professionals in Melbourne" says Tiny. Crown casino is regarded by many as having one of the highest standards of poker in the world and attracts a number of American poker tourists. The Crown casino is after all the home of world poker champ Joe Hachem. The chiropractor from Preston who recently beat off 5,600 players to win the US$10 million World Series of Poker prize, is a regular fixture at the Crown tables.

Thirty-nine year old Hachem is made for life, but there are other young whizzes who are learning how to grind out a living at the poker tables.

"Some boys are paying their way through university" says Tiny singling out one particular talent, a computer engineering student at UNSW. "He's making good money; if he wanted he could forget about uni". But this boy is hedging his bets; he did not accompany his brother Tanner to the weekly APA tournament because he had an assignment due.

"The day he turned 18, we carted him off to Star City and he's never looked back" says Tanner who shows up at APA headquarters in Alexandria every Sunday to play. Much to his irk, Tanner's little brother brings home up to 800 dollars a week from the Star City tables while Tanner earns a similar amount slaving away as an accountant in North Sydney.

Tanner has faired well in his own right. In the three months since he began playing internet poker, he has turned a US$100 account into $1000.

Online poker is immense. Partypoker.com one of the larger online poker providers, launched with an astonishing market capitalization of USD9 billion: that's 60% of the value of American telecommunications giant AT&T.

Because Tiny lives two hours from the casino it's often more convenient for him to go online for his poker fix. Tanner works a day job and does not have the time or energy for marathon sessions at the casino. He is also more successful on the screen than at the table.

Tiny prefers to be at the table with a mortal cast before him. Poker is a contest that cuts to the core of human nature and assessing ones opponent through physical 'tells' is where much of the romance lies.

Besides, the casino is where his friends hang out. "You have a joke, it's a bit of a social, we meet up and go for breakfast'.

Sell Me a Story -DANOZ Direct's James Cheney

Sell Me a Story
James Cheney - salesman extraordinaire

Dawn is breaking over Sydney. Inside the Channel Ten studios, the lights >are on and the cameras are rolling. The production crew are under pressure. They have precious little time to film the new infomercial for' The Magic Bullet'- DANOZ Direct's hottest product.

The presenter has fluffed his lines, again. Cut. He's clearly struggling. But no one seems to mind -his bumbling antics have the production team in hysterics. Just who is this lovable novice of telesales?

He is James Cheney, a seller of dreams; and just about everything else. From coolrooms, to ABswings, steambrushes to slicers, and ribbon decorating kits to his favourite product; joy; James will make you want it and feel good wanting it. 

James Cheney is not of the polished breed we are used to seeing on our screens. He's short with ginger hair and beady eyes. He wears a Sex Pistols T-shirt. His voice is sharp and his speech frantic. 

Yet DANOZ Direct, old hats in the television marketing game, have done away with their slick stable of television pros and anointed James as their sole presenter.

'Which puts me under a lot of pressure' - he says, looking slightly overwhelmed.

The company's faith in James is not blind. 'We tested James. His sales exceeded our current presenters. Because of the good results, we stopped airing the other presenters' says Alan Meyerson, a producer at DANOZ. 'He has a real relationship with his customer. He relates to them and suggests that he enjoys it, If he likes it, I can like it too. He's very natural.'

He's also an entertainer. Business analysts from the Television Shopping Network, who also run adverts featuring James, have commented that James brings entertainment to their channel- something they have felt has always been lacking.

'My focus has been to develop the more entertaining side of myself', he says. 

James spent the weekend at a comedy course run by NIDA. 'Funny school'- he calls it. 'It's quite serious'- he says blankly, before releasing a cheeky smile.

James' charm and ability to sell are the reasons he has found himself on television.

'Selling is such a negative word, it's the changing of emotion -that's a better word for it' he says without sounding the least bit like a salesman.

James grew up in Adelaide and left home when he was 18. He spent his entire adult life peddling anything he felt he could sell, in any possible way. He's been all over Australia, Canada and South Africa. He also served a sales apprenticeship under the infamous Shanghai Charlie- the gadget man' -whose fortunes were documented on '60 minutes. That was sixteen years ago when he had an epiphany - 'I thought, if he can do this, I can do this' he says.

He met his wife in 1993 at the Canada Exhibition, while he was flogging a ribbon decorating kit to a stagnant craft industry. She now assists him in raising three and a half year old Molly and two year old George, and in running a sales and promotion business - which boasts food giants Nestle as a client. 

Less than a year ago James was busted by the wholesale director of DANOZ, selling their fitness products directly to the public in a local shopping centre. James did such a good job fending off the threat of legal action that DANOZ offered him a guest spot as a presenter on their 'Good Morning Australia' Summer Series adverts.

He did have television experience, but not much. James once had the lead role in an AGL advert, where he reverses a trailer into a bathtub, and made cameo appearance in a KFC Christmas promotion. He has plenty of experience in direct selling though , and DANOZ were happy to give him a shot. 'He had a measurable impact, 'It boosted sales by enough to know that he has effected sales' says Myerson of James' debut on the 'Summer Series'. His performance would eventually lead the DANOZ directors to rewrite their presenter roster.

One thing James doesn't like to sell is himself. 'I'm very humble; it's taken me a long time to believe in myself '.According to Myerson, James never watches himself on the screen. "I'm very uncomfortable with it' James says, 'I don't feel that I've done the best I can, I don't have that audience to get that instant response'

Despite his aversion for the screen, James appears on television at some stage every day, either on Channel 9 or 10.

Does he have any fans?

'No. It's hot in here'

Most of his jokes are this bad, but that might be why we like to listen to him