Surprise doubters on Australia’s secondary lottery ban

The proposal to shut down lottery betting firms Down Under has unsurprisingly been slammed by Lottoland. But it turns out it has some unexpected allies, reports Joanne Christie

As news broke on Tuesday about the Australian federal government’s plan to bring in an outright ban on secondary lotteries, one major Australian news site ran with the headline, “Newsagents declare victory as Turnbull government moves to ban ‘fake’ lotto websites”.

The sentiment was certainly true of the Australian Lottery and Newsagents Association (ALNA), the main representative body of the country’s newsagents, which promptly issued a statement that said the news of the country’s communications minister Mitch Fifield introducing legislation to amend Australia’s already restrictive Interactive Gambling Amendment Act came as a “relief”.

But it turns out not all newsagents are quite so excited about the prospect of the ban, aimed primarily at driving Lottoland out of business in Australia. The chief executive of the Newsagents Association of NSW and ACT, Ian Booth, was featured on radio station 4BC’s Morning Show presenting a very different opinion.

Booth told host Ray Hadley that: “Our concern is if the bill is passed that it will create a virtual monopoly in respect to lottery products and the incumbent, the Tatts Group, and here in NSW and ACT the NSW Lotteries Corporation, will have an unfettered ability to extend their own online operations at the expense of small businesses such as newsagents.”

Although the ANLA claims that secondary lottery sites are “hurting newsagents and other lottery retailers across Australia who are mostly mum and dad operators and have their houses on the line as collateral for their businesses”, and that “they are open to having their customers hijacked”, Booth said the real danger to small newsagents is Tatts itself.

Tatts, which operates state lotteries in all of Australia’s states apart from Western Australia, has been investing heavily in its digital operations and Booth told Hadley that this has a much more direct impact on newsagents than secondary lottery sites.

Booth pointed out that in its last financial results, Tatts reported that online sales had increased to around 16%. In fact, a look at Tatts’ half-year report for the period ending 31 December, 2017, released earlier this month, paints a rather worrying picture for newsagents.

Although overall its lotteries business was up 6.2% over the period, Tatts also reported a whopping 29.8% rise in digital sales, which now represent 15.6% of total lottery sales.

With digital sales growing faster than sales overall, this suggests players are increasingly buying their tickets online rather than in-store, and as Booth pointed out: “In respect to Tatts Group’s online activities, none of the income from those transactions, which are lost to newsagents, goes back to newsagents.”

Indeed, this is a similar argument to that which has been made repeatedly by Lottoland itself. In response to the government announcement this week, Lottoland Australia’s CEO Luke Brill said: “If the proposed legislation is passed, we fear it will have a serious impact on the future viability of many newsagents, as it will create a lotteries monopoly across Australia — Tatts.

“This has been highlighted recently by the Newsagents Association of NSW and ACT, whose members are concerned about the market power that will be placed in the hands of one group at the likely expense of individual newsagents.

“While we understand the concerns expressed by some newsagents, the proposed legislation is both misguided and unnecessary,” he added. “The fact is that Lottoland does not offer betting opportunities on any Australian lottery, so our offering does not have a direct impact on newsagents.”

Lottoland versus newsagents
Unfortunately, however, the facts seem to be largely irrelevant when it comes to anti-Lottoland sentiment in Australia, which has been fuelled not just by newsagents, but also by prominent politicians such as One Nation’s Pauline Hanson.

The company has also proven an easy scapegoat for state lottery operators looking for a way to explain away their falling revenues.

Lottoland has certainly brought some of the criticism upon itself — it got newsagents, in particular, offside early in its Australian journey by using marketing campaigns depicting them as primitive and behind the times. In an interview with iGaming Business last year, Lottoland’s CEO Nigel Birrell conceded that it had perhaps been a “bit aggressive” with its entry into the market.

“I think actually riling up one constituent body, in this case the newsagents, probably wasn’t the best course of action in hindsight. Perhaps we were a bit sort of insensitive with some of our advertising when we first went in,” he told iGB.

The company’s feud with newsagents escalated to the point that in September Tatts rolled out a campaign called “Lottoland’s Gotta Go” in newsagents across the country.

The campaign, which claimed that more than 4,000 small business lottery retailers around Australia stood to lose more than 50% of their revenue, resulted in the Northern Territory banning its licensees – of which Lottoland is one – from offering bets on Australian lotteries.

Tatts’ recent half-year results revealed that it had spent almost AU$5m on the campaign, a somewhat staggering sum for a monopoly operator to spend driving a competitor out of business.

But it was perhaps considered a worthwhile investment when the result was that it basically cemented Tatts’ position as the dominant seller of online lottery tickets, not just for now but also for the future.

Indeed, an analyst report by Macquarie Research in December on the Tabcorp Holdings outlook following the merger with Tatts noted that Lottoland had quickly built scale in Australia, establishing in a short time frame a local customer base of about 600,000 compared with the two million of Jumbo Interactive, the digital reseller of Tatts tickets in Australia.

However, Macquarie noted that following the campaign against Lottoland, domestic disruptions from secondary lottery operators were “dissipating” and “these recent development[s] may impact Lottoland’s Australia business (dependent on sales mix) and may also deter entry from other secondary lottery operators or products (like Lotto24 listed Germany)”.

Certainly Lottoland’s travails did already seem to be impacting new entrants to the Australian market. A rival site launched by CrownBet was closed just weeks after launching last year and a planned lottery site from Neds, the new Australian bookmaker set up by former Ladbrokes Australia CEO Dean Shannon, has thus far failed to materialise. 

But while the ban on Australian ticket sales was certainly a blow to Lottoland, the bulk of its business in Australia has always come from those betting on overseas lotteries, such as the giant US$1.5bn American Powerball that helped it launch its Australian business back in January 2016.

The end for secondary lotteries in Aus?
This week’s news is a much bigger issue as if passed, it would bring the company’s business in Australia to an end. The Interactive Gambling Amendment (Lottery Betting) Bill 2018 was introduced to the House of Representatives yesterday and seeks to “prohibit the provision of lottery and keno betting services to Australians”.

It is also bad news for other secondary lottery operators that have been eyeing the Australian market with interest for some time.

In an interview with iGaming Business last week, Zeal Group’s chief financial officer Jonas Mattsson said Zeal was planning to launch in Australia later this year. Asked about its plan following this week’s ban proposal, a Zeal Group spokesperson said only: “We are aware of the proposal and are reviewing the detail.”

It may also impact lottery messenger services operating in Australia. TheLotter.com, for example, sells tickets to Australian players – indeed an Australian player won almost AU$1m on the US Powerball in October 2016.

Although a spokesperson told iGB yesterday that it does not believe it is in direct competition with licensed lotteries due to its messenger model, Lottoland has argued the same thing about selling bets on overseas draws and this hasn’t held much water with Australian politicians.

Although the proposed bill will have to go through both the House of Representatives and the Senate before coming into effect, at this point it’s hard to see any politician being willing to stick their head above the parapet to defend a company ultimately headquartered in Gibraltar against claims it is hurting local businesses.

The bill was not debated at its first reading this week and with parliament now shut down until early May, there will be some delay before it becomes clear whether the proposal has any opponents capable of stopping it in its tracks, or at least watering it down. But as things stand, the future of Lottoland’s Australian business looks very much in doubt.

Tatts was contacted for comment but had not responded by the time of publication

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