New Tax Rates Are Affecting The AU Sports Betting Scene

There have been a lot of new things happening with gambling laws and regulations in Australia which we have been discussing in our news blog. Just a few weeks ago, we discussed the gambling reform coming to various AU states.

The Australian sports betting scene is undergoing significant changes, thanks to new Point of Consumption (POC) tax rates imposed by various states. These changes have had a notable effect on Sportsbet, the country's leading sports betting operator, despite a growth in its player base.

Sportsbet's Slipping Profitability Amidst Higher Taxation

Despite retaining its commanding position atop the Australian sportsbooks list in terms of revenue and bettors, Sportsbet has experienced a slip in its revenue. According to Flutter Entertainment's recent financial health report, Sportsbet's revenue for the first half of the year dropped by 2% to £601 million (US$765 million).

More worryingly, the company’s adjusted operating profit plummeted by 31%, finishing at a disheartening £142 million (US$181 million). The Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also witnessed a drop, coming in at £158 million (US$201 million), marking a 28% decrease from the previous year.

Growing Player Base but Shrinking Revenue

Interestingly, Sportsbet has been drawing more players to its platform. Their average number of monthly players stood at a commendable 1.06 million, marking a 7% increase year-on-year. However, these numbers didn’t translate to increased revenue, which might be attributed to the increased marketing expenses and the new tax burdens.

Flutter Entertainment highlighted the role of the increased POC tax, especially the one introduced in Victoria, as a significant factor in the slowed growth. The cost of sales as a percentage of revenue skyrocketed to 52.8%. Victoria's decision to hike the POC tax rate for the second time in three years will further strain Sportsbet’s finances, costing an additional $34.4 million annually.

The Broadening Spectrum of Challenges

While tax burdens loom large, they aren't the only challenge. The Australian betting scene seems to be experiencing a softening in consumer demand, especially post-COVID and in the racing sector. Sportsbet also decided to amp up its marketing spend by $12.82 million compared to the previous year. Although this move succeeded in attracting more players, these players aren’t spending big, leading to a further dip in revenues.

Regulatory Reforms and The Debate Over Advertising

As Australia relooks its gambling and betting regulations, anti-gambling advocates, led by Tim Costello, are making significant strides. Costello has been vocal about the harmful impacts of gambling advertisements, asserting that they are "grooming kids" into future bettors. His views are resonating with some media outlets.

However, not everyone agrees. Free TV Australia, representing over-the-air broadcasters, warns against a complete ban on gambling advertisements. They argue that such a ban could reduce the sports coverage on free channels.

Moreover, studies, including one by Jon Nelson, have indicated that bans on such advertisements might not be as effective as anticipated. Instead, there's a growing consensus that educating the youth might be a more balanced and effective approach.

Flutter's Optimism Amidst the Storm

Despite these challenges, Flutter remains optimistic about its Australian venture. Sportsbet held a whopping 48% of Australia’s online sports betting share in 2022. With its robust heritage and superior product expertise, the company is confident about navigating these rough waters.

Globally, Flutter saw a significant boost in its 1H23 revenue, growing by 42% year-on-year to £4.81 billion (US$6.13 billion).

In conclusion, the Australian sports betting scene is amidst a whirlwind of changes. While new tax rates and regulations pose challenges, they also offer the industry an opportunity to innovate, adapt, and grow stronger. Only time will tell how Sportsbet and other leading brands navigate this evolving landscape.