Pub Charity Chief Executive Martin Cheer talks about the key events that have impacted the industry in 2018, and the outlook for the year ahead.
The change in government
The change of government was the most significant event for us this financial year. The current coalition is such a mixture of differing opinions and ideals that realistically each position needs to be looked at separately to see how we’re going to be affected.
We have the Greens who believe community gaming machines should be abolished, Labour who hold the view that there is a place for them under a strictly controlled regime and with concerns about machines in high deprivation areas, and NZ First who have long supported the racing industry, and but take a more libertarian approach to issues like gambling.
The result for us is that Class 4 gambling sits with the Minister of Internal Affairs Tracey Martin who is a NZ First MP. Luckily the Minister has a very good understanding of our sector having been involved with community groups who have benefited from Class 4, as well as being aware of the machines in the communities where she has lived.
The threat from online gambling
The Minister has made it clear that her main concern is online gambling rather than class 4 – firstly because of the potential risk to the New Zealand community due to the lack of regulation, and also because of the inability to impose duties and levies, and the lack of benefit to New Zealand organisations.
There’s a lot of debate about the amount of money leaking offshore through online gambling, which is understandable since it’s definitely a growing trend. The Government’s response has been to try to impose duties and levies onto offshore operators, although I understand there’s serious consideration being given to allow other gambling operators to compete in the online space. That’s not great news for the class 4 sector.
Leveraging our point of difference
The class 4 sector has limited options to respond so our challenge is to make sure our product is contemporary and we tell a good story about the benefits of this type of gambling. Our main point of difference is that we offer a controlled and supervised space where people can bet with cash only. This is a unique advantage since all of the growth is occurring in areas that are uncontrolled, unsupervised and involve betting using credit facilities – all of which means increased risk and reduced community benefit.
As an industry, to compete in the changing landscape we have to be constantly improving in both the products and services we offer and how we look after our customers. The move to commission based payments definitely pushed us in the right direction.
Operators are waking up to the fact that people have a choice and that their potential income is going to be based on how attractive their venues are. The flip side is we’re going to see more targeted operations by the Department of Internal Affairs to try and catch out those operators who are allowing people to gamble in a harmful way on their premises.
The reality is that operators need to ensure they fulfill their responsibilities – and the DIA is will come down hard on anybody who isn’t (and that’s not really anything new).
The arrival of Lightning Cash
The other story of 2018 has been the full force arrival of Aristocrat’s Lightning Cash which has been nothing short of a gaming phenomenon. It’s become so popular that it’s starting to disrupt the older, more popular games that players preferred because they operated under a different set of maths. Lightning Cash is doing very well both here and overseas – Aristocrat’s goal is to maintain that momentum while other suppliers try to match it. This means a lot of development work is going into exploring how the new machines can provide a better player experience while still using the maths they’re licensed under.
We need to keep pace with the arrival of new products and the changes in player preferences – one of Pub Charity’s strengths as an organisation is that we have always re-invested regularly in our equipment and continue to do so. The financial fundamentals of this organisation were set some time ago and allow us to provide the best product and continually upgrade it to meet market expectations.
Has it been a good year?
There’s a lot of talk about the growth in Class 4 spending against a decline in overall venue and machine numbers. However, if you compare our 3% increase in revenue against New Zealand’s growing population (at almost 2% the fastest growing in the OECD), combined with the increase in inflation, we’re really just standing still.
It’s also ironic that so much has been made of this 3% increase given spending on Lotto has increased by an extraordinary 32% or $126 million in the last 2 years. The combined expenditure on Lotto and TAB products now exceeds that spent on community-based gaming machines, which the regulators and anti-gambling people seem to have missed.
With your help we have had a good year here at Pub Charity – we distributed over $33 million to community organisations in the last financial year and we should be very proud of that. Highlights included large investments in youth development, hospice facilities and medical services – including another large donation to Starship Hospital Foundation for the upgrade of their Day Stay Unit.
I think our spread of funding is something to be very proud of and our commitment to local communities holds us in good stead. Our staff and particularly our operators should be proud of what they’ve achieved.
Just as important we were a part of a business model that saw us pay out $12.8M in venue payments to you supporting hundreds of jobs and the sustainability of small to medium businesses across the country. Literally without you and your venues this whole thing does not exist. Thank you for that business in 2018.
On behalf of all of the staff here at Pub Charity – and our Board – I’d like to wish our operators a very Merry Christmas and a safe holiday season and we look forward to working with you in 2019.