too early to call victoria’s atm ban a success

The Victorian Government has been making something of a big deal about the latest poker machine spending figures, and it’s not hard to see why. In the first 4 months of this financial year, spending on poker machines in Victoria has dropped by 6.7 per cent, or $62.6 million.

The government, and gambling minister Michael O’Brien in particular, has attributed this drop to the ban on ATMs in venues which came into effect in July 2012. Yet while the ATM ban has undoubtedly had an impact, there’s far more to this situation than meets the eye… and it’s far too early for the government to be claiming success.

EFTPOS

For starters, the ban on ATMs in poker machine venues does not apply to EFTPOS. The industry has taken advantage of this, installing EFTPOS machines that look very similar to ATMs and telling their customers that they can still withdraw money if they want to. It’s true that many gamblers don’t want to speak to a staff member in order to withdraw money, but let me assure you, that’s an inconvenience that many will put up with if it means they can access their cash to keep playing. And the fact that EFTPOS doesn’t have the same withdrawal limits as ATMs means that gamblers are now able to withdraw more money, not less.

As more and more people get used to using EFTPOS machines, the savings derived from removing ATMs will shrink. Time is the only thing that will tell if this move has been successful or not; 4 months is nowhere near long enough.

But there’s something else that has happened since the start of July, which has also had an impact on poker machine spending; something that has nothing to do with ATMs in venues.

New Gambling Arrangements

On 16 August 2012, Victoria’s new poker machine arrangements came into effect. The Tatts/Tabcorp duopoly, which had been in place for 20 years, was replaced by a venue operator model where venue owners had to purchase “gaming machine entitlements” in order to operate poker machines.

Remember the gaming machine auction a couple of years ago? Thousands of entitlements were purchased by hotels and clubs around the state, most at rock-bottom prices, in readiness for the changeover.

Most venues/operators bought the same number of entitlements as they had poker machines. In other words, if they had regulator approval for 60 machines (for example), and were operating 60 machines, then they bought 60 entitlements.

But one operator couldn’t do that. ALH, the Woolworths poker machine consortium, had approximately 5,600 poker machines in over 80 hotels across the state, but according to the new rules they weren’t allowed to own more than 4,812 entitlements (35% of all hotel poker machine entitlements). They ended up purchasing just over 4,600 entitlements. No, they didn’t sell or close any venues; they simply reduced the machine numbers at most of their hotels.

In the days leading up to the changeover, 61 of Victoria’s 83 ALH hotels quietly packed up the excess poker machines that they were no longer allowed to operate. Some used the empty space for promotional purposes, others set up Keno lounges, while some just left gaps in between the remaining poker machines. I visited a number of venues after the changeover, and I saw examples of all three.

But the real impact on ALH is that when their venues opened for business on August 16, more than 900 poker machines had been removed from circulation. ALH still owned them, but were no longer allowed to operate them.

This has had a significant impact on poker machine spending in the months since the changeover; arguably a greater impact than the ATM bans.

Consider the following:

Whittlesea has 3 ALH poker machine venues. As a result of the new regulations, 65 of Whittlesea’s poker machines were removed from circulation.

In July-August 2012, poker machine spending dropped by 3.79%.
In September-October 2012, poker machine spending dropped by 10.25%.

Darebin has 5 ALH poker machine venues. As a result of the new regulations, 96 of Darebin’s poker machines were removed from circulation.

In July-August 2012, poker machine spending dropped by 3.20%.
In September-October 2012, poker machine spending dropped by 8.87%.

Whitehorse has 3 ALH poker machine venues. As a result of the new regulations, 104 of Whitehorse’s poker machines were removed from circulation.

In July-August 2012, poker machine spending dropped by 5.58%.
In September-October 2012, poker machine spending dropped by 11.05%.

Brimbank has 3 ALH poker machine venues. As a result of the new regulations, 20 of Brimbank’s poker machines were removed from circulation.

In July-August 2012, poker machine spending dropped by 1.75%.
In September-October 2012, poker machine spending dropped by 6.29%.

Knox has 5 ALH poker machine venues. As a result of the new regulations, 88 of Knox’s poker machines were removed from circulation.

In July-August 2012, poker machine spending dropped by 9.42%.
In September-October 2012, poker machine spending dropped by 13.86%.

Hume, Casey, Wyndham, Maribyrnong… the list goes on. Areas with multiple ALH venues that all experienced significant decreases after August 2012, as a direct result of being forced to reduce the number of machines they had.

The reality is that the reduction in poker machine numbers at ALH venues accounts for at least 27% of the overall decrease in expenditure, possibly more. That’s $17 million (at least) that had nothing to do with the ATM ban, and that the government has no right to claim credit for.

What’s the big deal?

“So what?” I hear some of you say. “Any drop in spending on the pokies is a good thing. What’s the big deal?”

The big deal is that this is, sadly, a temporary situation. The poker machines that ALH have packed up aren’t gone for good; other venues snapped up the extra entitlements and are sniffing around for spare machines. The past year or so has seen an explosion in the number of applications to the VCGLR (Victoria’s gambling regulator) for venue approval, or increases in poker machine numbers… what we’re seeing is a redistribution of poker machines across the state. More new venues have been approved in 2012 than in any other year over the past decade, and applications for more machines are being lodged with the VCGLR at an unprecedented rate.

When the dust settles, there’ll be just as many machines as there were before August 2012. Maybe more; if every Victorian gaming machine entitlement is utilised, then there’ll definitely be a jump in overall machine numbers. There’ll certainly be more venues, meaning more convenient access to gambling in our suburbs than ever before.

And spending will inevitably rebound. I wonder if the government will take credit for that too?

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4 Responses

  1. Chris says:

    I do not understand the connection between the rules commenced Aug 16 and the action of ALH to reduce machine numbers.

    Can you explain this please?

  2. cyenne says:

    Chris,

    Prior to 16/8/12, ALH hotels in Victoria operated 5,600 poker machines. That’s how many machines the 83 individual hotels were collectively approved for by the VCGLR over several years.

    But effective as of 16/8/12, ALL venues (hotels and clubs) needed gaming machine entitlements as well; one entitlement per machine. That’s what was sold in the gaming entitlement auction a couple of years ago.

    So venue operators purchased entitlements.

    There was a further restriction: no single entity could own more than 4,812 hotel entitlements. Because of this, ALH were forced to purchase fewer entitlements than they had machines.

    And as of 16/8/12, they could only operate as many machines as they had entitlements. Operating machines without entitlements is illegal.

    So ALH were forced to reduce the number of poker machines in their venues, to match the number of entitlements they had.

    Take the three ALH pubs around the corner from me in Knox, for example.

    For years, The Club Hotel has had 45 poker machines, the Ferntree Gully Hotel has had 70 poker machines and the Royal Hotel has had 90 poker machines. They still have approval for this many machines, as far as the VCGLR is concerned.

    But when ALH was buying entitlements, they only bought 40 for The Club Hotel, 50 for the Ferntree Gully Hotel and 70 for the Royal Hotel.

    As a result, as of 16/8/12, these 3 pubs packed away a total of 45 poker machines. They could not legally operate more machines than they had entitlements.

  3. Libby Mitchell says:

    Wow Tom…fabulous information and explanantion. So that might be why in my Latrobe Valley area I saw a venue that now has less machines? I was surprised as other local venues had been asking for [and getting] more machines! I must see if it is a Woolies-owned pub. Thanks so much Tom…great article. I am putting it on Gambling Action Group Facebook site now!

    I wonder if this point was raised to shareholders in the Woolies EGM or AGM in Adelaide on the 22nd November?It would have been irresponsible not to have raised it wouldn’t it?…yet I saw no media reference to it…Surely a bit odd not to mention such a likely drop in takings, to shareholders? Or did I miss that bit lol?

  4. Chris says:

    thanks Tom – well done.

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