• Wed
  • Sep 3, 2014
  • Updated: 4:00am

On the Rails

PUBLISHED : Wednesday, 27 April, 2011, 12:00am
UPDATED : Wednesday, 27 April, 2011, 12:00am

It was hard to miss the undertones to Jockey Club chief executive Winfried Engelbrecht-Bresges' comments on commingling in the aftermath of Monday's BMW Champions Mile meeting.

He made the point that the club's strategy regarding overseas simulcasts of top-grade racing had lifted the staging of international events locally from a quality show that most horseplayers were prepared to bypass to a turnover growth area.

'I think it shows our strategy is correct. Our simulcasts from overseas have made our customers more familiar with the horses. The turnover on those simulcasts is rising and now we see people are better able to assess our international races as a result,' he observed. 'We have been able to develop our international races to the point where they are no longer turnover losers.

'Unfortunately, the step in our strategy that is missing is to participate in commingling, but we are unable to do that as the government has been very slow to respond.'

A 17 per cent rise year on year on the Champions Mile betting was encouraging and those simulcasts have been showing a 27 per cent rise this term as they become a more familiar part of the landscape to punters, who bet almost HK$109 million on the Dubai World Cup simulcast in March.

Significant advances continue in globalisation of cross-border simulcasts and just a fortnight ago came the significant announcement of a joint venture between South Africa's betting operator, Phumelela, and Australia's Tabcorp.

The agreement aims to establish a hub for commingling on the Isle Of Man, which will not only ensure that Hong Kong will be a follower rather than a leader in commingling but will be at a serious disadvantage at the bargaining table if and when the government approves it to take part.

The joint venture hub will aim to overcome technological issues in transferring bets between different systems in different countries, acting as a conduit so participants in commingling need only have the ability to run bets through the hub to the 'mother pool', rather than needing a different facility to deal with each and every other jurisdiction's operating system.

Phumelela has already acted in this capacity for the Dubai World Cup, where it handled bets from South Africa and 15 other countries on the meeting. Altogether, those bets totalled HK$46.1 million on eight races - significantly less than Hong Kong's domestic handle on six events, yes, but it is early days still and is going to be an expanding business with growing awareness and the new hub creation.

But the hub is not merely a technological solution to a technological problem. There is no accident to its establishment in the tax haven of the Isle Of Man.

The underlying concept is that the hub will become a world super pool that will have a cheaper cost structure due to its location and will grow to have serious purchasing power. That would make it a very strong competitor to Hong Kong, which will be paying a higher tax rate, when it comes to the price-sensitive betting of serious professional money.

Jockey Club officials fear a certain percentage of money bet through Hong Kong's tote system will be diverted to the new hub operation, as it builds liquidity, and have a negative impact on pool sizes here.

The hub operation will also take the lead in setting the agenda and price for other jurisdictions wanting to become involved in commingling of bets across borders.

Whatever leverage Hong Kong might have had, as a world leader in commingling, to give itself the best part of deals will be lost and it will ultimately be subject to a framework and prices set by others.

After four years of discussions and the odd false dawn, the Jockey Club mood becomes ever more pessimistic that the world may already have passed it by while the government fiddles.

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