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Poker machines, the money, and Labor

By Skidbladnir - 26 August 2009 55

[First Filed August 24, 2009]

Poker machines are a strange game. In the long term, the only way to win is to not play. And yet, Canberra still gambled $56 every second last financial year, just on the pokies.

Canberrans love sport, and Canberrans their Clubs, and Clubs help make the ACT better by supporting the local sports that Canberrans love. I know this because ClubsACT tells me.

So if we all just chip in and churn part of our pay packet through the pokies every week, Clubs can do their part and support the Community through sport.

If the faces of people you see hanging around Clubs on their ads are to be believed, this is a bargain struck in heaven, and it is perfect in every way.

Personally, I’m so cynical that I find it hard to see the smiling happy people on the advertising as anything other than a marketing ploy put out by an industry body, and like most marketing messages, it doesn’t resemble the reality.

If you set foot in a Club for most of the time the machines are running, chances are about half of the people playing pokies will look like your grandmother, and they will be churning through $20 notes and making maximum bets like there was no tomorrow.

If the people actually playing the pokies when I walked into a Club were deliriously happy and all looked like attractive blondes, I probably wouldn’t care what they did, so long as I could join in.

Here in the ACT we have our Gaming Machines Act 2004 which requires Clubs to contribute 7% of Net Gaming Machine Revenue at a minimum, in order to help the Government justify to the taxpayers why we have poker machines within the ACT.

The claim is made that 7% of Net Gaming Machine Revenue (NGMR) is good for the community as a whole.

If Clubs contributing 7% of Net Revenue is a good thing, all of the Clubs voluntarily contributing a bit over 14% back into the community must be a great thing, surely?

On the other hand, when it comes to seeing beyond the happy marketing push:

  • If people really wanted to support sport with their money, shouldn’t it be in their pocket or bank account, so they can spend it however they like, instead of being filtered through Megaclubs to apportion as they see fit?
    1. (A Megaclub is classed throughout this article as an individual entity receiving more than $2,500,000/year from gaming activities, a Megaclub Group is one which receives more than 85% of total gaming income from Megaclub-class operations)
  • The ACT has the highest poker machine participation rate in the country.
    1. (38%. Source: Australiasian Gaming Council, Australian Gaming Database 2008, Pg60, Figure 5-1 ACT Gambling Participation (2005-06), copies available here)

  • The ACT has the second-highest per-capita poker machine turnover in the country.
      ($7640 per capita, only NSW is higher. Source: Australiasian Gaming Council, Australian Gaming Database 2008, Pg20, Table 3-1 Summary: Aggregate and per capita gambling expenditure in Australia by state/territory (2005-06), copies available here. I get about $6749 per capita for FY07-08 using GGMR/10% losses/ABS stated adult population for the period)
  • The ACT has the highest concentrations of poker machines per capita of any State or Territory.
    1. (20.4 machines per thousand adults versus a national average of 12.6. Source: Australiasian Gaming Council, Australian Gaming Database 2008, Pg9, Figure 2-1 Gaming machines per 1,000 adults in Australia by state/territory, copies available here. Personally I get 19.66 machines per thousand using ABS stats for the period, but this is still higher than NSW at 19.0 per thousand)
  • Less than a third of the Clubs in Canberra received more than 75% of all gaming revenue.
    1. (Source: ACT Gaming and Racing Commission, Community Contributions made by Gaming Machine Licensees 1 July 2007 to 30 June 2008, Attachment C: Required and Actual Community Contributions – Licensed Clubs , Pg 20 &21)
  • The Labor Club Group and the Tradesmen’s Union Club Group made up almost 25% of our gaming market by revenue.
    1. (Source: ACT ACT Gaming and Racing Commission, Community Contributions made by Gaming Machine Licensees 1 July 2007 to 30 June 2008, Attachment C: Required and Actual Community Contributions – Licensed Clubs , Pg 20 &21)
  • Our governing ACT Labor Party was the largest recipient of direct donations from the poker machine sector. The ACT Labor Party received donations from the Club sector into Party coffers at a rate of about a dollar every minute.
    1. (Source: ACT Gaming and Racing Commission, Community Contributions made by Gaming Machine Licensees 1 July 2007 to 30 June 2008, pg26, and Elections ACT, Australian Labor Party (ACT Branch) 07-08 Financial Disclosures)
  • Most of the Megaclubs don’t even contribute 14% of NGMR back into the community, and those who do already own sporting facilities, so can improve their own assets and get a free ride, relative to their peers.
    1. (Source: ACT Gaming and Racing Commission, Community Contributions made by Gaming Machine Licensees 1 July 2007 to 30 June 2008, Attachment C: Required and Actual Community Contributions – Licensed Clubs , Pg 20 &21.
      Those Megaclubs contributing 14% NGMR or greater were: Belconnen Magpies Sports Club, Eastlake Football Club, Lanyon Vikings Sports Club, Vikings Town Centre Sports Club, Vikings Erindale Sports Club, Ainslie Football & Social Club, and Gungahlin Lakes & Golf Community Club)

    In return, ACT Labor lets the Club sector operate its machines under one of the most favourable gaming tax regimes in the country, and everybody involved claims it’s for the public good.

    Tax rates are so low that politicians can say that Canberra’s poker machine problem is nothing to worry about, since it only makes up 3.5% of the Canberra tax revenues. Stanhope can even stand up at annual Clubs conferences and sing high praise of the sector his party receives the largest donations from.

    Heck, it’s apparently so good that there is a discussion paper from ACT Treasury (early version here, without submissions) which, if the policy is adopted, may let Clubs redistribute some of their underperforming poker machines from one location and put them into more intensive (as in profitable) usage, or even buy the less competitive operators out of the market, so the Megaclubs can rake in even more revenue from more mortgage-offsetting workers and elderly suburban grandmothers who are now cashed-up widows since the estate cleared.

    Since the ACT Treasury would get a 21% share of larger revenues from fewer operators, and a sane Treasury will never say no to more money, it could be a viable option to help support whatever uncosted but taxpayer-funded program the ACT Labor Party dreams up in future, or just pay for the next Fringe Festival.

    If a policy helps derive greater tax income from a single sector, couldn’t that make the ACT more dependent on poker machines?

    Are we meant to believe that if a policy helps the single sector which contributed the largest sums to the governing ACT Labor Party, then there’s no potential for conflicts of interest?

    But since some of that funding is going on sport through Community Contributions, it must be good for the public, so we should just sit back and accept it, right?

    Wiser people than me have said it before, but here goes:
    When you have doubts about what you’re being told, follow the money and see for yourself.

    Luckily, when it comes to following the money, every Club is required by law to file a notice of Community Contributions by July each year, and the Treasurer is required to report the Community Contributions to the Legislative Assembly by October, at which point the records get made public, so everyone can have a look.
    These reports indicate both the minimum contribution required from each Club, and any discretionary contributions a Club may want to make on top of their mandatory seven percent.

    Since FY2006-07 the ACT Gaming Commission has included in the reports the Gross Gaming Revenues for each Club; and with that key piece of information you can league table an industry.

    You can see who are the major players and their market share; work out how much an average poker machine will take in a given Club, how much cash Canberrans will put into poker machines on an annual basis, and also, how intensively the machines are used.

    If you only look at aggregate data for Community Contributions, or the nice bolded figures which total up an entire sector instead of specifics, everything seems peachy.

    Clubs in the ACT contributed 14.57% of their net gaming revenues (NGMR) to community causes throughout the year, instead of the minimum seven percent. Great.

    The Big Four Club groups in Canberra contributed 38.54% of the total contribution. Nice.

    Those Big Four Club groups make up 51.72% of all poker machine income in the ACT. Not so nice.

    The Labor Club Group as a whole, fountainhead of ACT Labor Party finance, contributed only 0.77% NGMR above minimum back to the community. Three of the Labor Clubs scrape in barely above minimum, contributing back in total only $4698.50 above that required by the law.

    Ginninderra Labor Club contributed only $631.44 (0.03%) above minimum, or about an hour’s takings.
    Also, the formula used to calculate these contributions is skewed in favour of letting the large operators contribute back relatively less than the smaller operators. (More on that one down below.)

    These Contribution Reports are visible over at the ACT Gaming and Racing Commission website here, if you really want to go and have a look.

    Clubs ACT tell you on their website that under ACT law Clubs can never be owned or operated by a Corporation and so none of the profits on gaming are able to return to private hands, somehow rendering their entire enterprise a noble one.

    Conversely, if none of the return can be accrued into private hands, and Clubs are raking in millions of dollars every year, once wages and costs have been deducted, they have little choice but to continue gilding their lilies by redecorating and refurbish the buildings, or otherwise invest in their own operations.

    They can either operate at a loss, break even, or return the profits to themselves and keep increasing in size, gradually becoming Pacman-like behemoth, consuming all smaller operators who fail to keep up, in the name of “building a community asset for their members”.

      Gaming Tax is Effectively Flat, Community Contributions are Regressive

    Unfortunately, when you read the Gaming Machine Act 2004, Community Contributions are defined by a rather regressive formula.

    In practice our Gaming Taxation might as well be a flat tax formula, in that almost everyone who pays gaming tax falls into the one margin.

    54% of the ACT’s operators, and 99% of ACT Gaming Tax Revenue comes from the highest tax margin.

    The remaining operators only contribute in 1% of the gaming tax revenue each year.

    Once they fall into that magic 21% tax margin, there are no further margins to worry about falling into, which would diminish their own return through tax penalties like every other state in the country.

    (Click on the image for an indication of the relative value of Clubs in terms of tax contributions.)

    Also a result of including after-tax Gaming Revenue in the formula for Required Contributions, the larger the operator, the smaller the percentage contribution to the Community they are required to make.

    This is what “7% of NGMR” means, in theory:

    The first $180,000 annual income must return 5.32% of losses directly to the Community, since they pay no tax.

    The next $120,000 will be returned at 4.27% directly to the Community, and 15% to the ACT Government as tax.

    The next $300,000 will be returned at 4.13% directly to the Community, and 17% to the ACT Government as tax.

    Each dollar above $600,000 annual income will be returned at 3.85% directly to the community, and 21% to the ACT Government.

    As example:

    Federal Golf Club, has only $41,018 in gaming income, but pays no tax on it.

    It has a required contribution back to the community of $2,182.18, or 5.32%.

    Canberra Labor Club, has $15,051,667 in gaming revenue, but pays an average tax rate of 20.62% on each dollar it earns due to margining.

    It has a required contribution back to the community of $583,478.98, or 3.88% of GGMR.

    So in effect, the Government can put up as many golden statues as the tax income will allow regardless of Club size, but the actual percentage returned directly to the Community gets smaller and smaller as the Clubs get larger. Thanks to some extra provisions in the law, you can actually only contribute three-quarters of the required amount, so long as it gets spent either on women’s sport or programs which control problem gambling.

    Snapshot of the basic data:

    By the population numbers available from the Bureau of Statistics, with 5087 poker machines operating through the entire financial year, the ACT had 19.66 machines per thousand adults in FY 2007/08, against a national average of 12.6 according to the Australasian Gaming Council.

    While that number is gradually falling as population increases (since the number of machines in the ACT are capped at 5200), it just means we will be using the existing machines more intensively as time goes on, and so income per machine will increase also.

    Canberran poker machine players put somewhere in the range of $1.36 billion and $1.77 billion[1] into poker machines during FY 07-08.

    According to Bureau of Statistics population data for the period there were 262,742 adults in the ACT.
    This means that on average, every adult in the ACT gambled between $5191 and $6749 [1] in FY 07/08 just on the pokies.
    [1]: I can only be this accurate because I am working off Gaming Commission returns and Gross Gaming Machine Revenues of $177,311,623 in the reporting period.
    ClubsACT claim the typical Club returns 90% of turnover to players

    Bear in mind that Clubs can actually set the rate of return at whatever they like; the legislated minimum return to player (RTP) in the ACT is $0.87 for $1 turnover (ie: Club takings of 13 cents per dollar), or turnover of about $1,363,935,562. ClubsACT (the industry body) asserts that a typical RTP of its members is $0.90, so would represent $1,773,116,230 of turnover.
    Also keep in mind that ClubsACT has stated that its mission is to “present a good public image of clubs”. They also claim that the ACT Government only makes a 15% after-tax concession for operating the machines, when the law states it is a 24% after tax concession, and the Gaming Commission acts according to the law, so 24% is conceded.
    (I will be using the Clubs ACT 90% return figure, because it both portrays the industry as the size they claim, and it also just makes the sums easier )

    Operators:

    Canberra had 62 Clubs operating gaming machines for the entirety of the FY 07-08.

    The Largest Individual Megalubs:

  • Canberra Labor Club, with gaming revenue of $15,051,667;
  • Canberra Tradesmen’s Union Club with gaming revenue of $13,700,436;
  • Canberra Southern Cross Club (Woden) with gaming revenue of $13,190,205;
  • Hellenic Club of Canberra, with gaming revenue of $11,977,298;
  • Gungahlin Lakes & Golf Community Club, with gaming revenue of $9,653,234.
  • The Largest Megaclub groups:

  • Tuggeranong Vikings Clubs (Vikings Erindale, Town Centre Sports Club, Chisholm Sports Club, Vikings Lanyon, Vikings Capital Golf Club);
  • Tradesmen’s Clubs (Canberra Tradesmen’s Union Club, Woden Tradesmen’s Union Club);
  • Canberra Southern Cross Clubs (Southern Cross Club Woden, Southern Cross Club Tuggeranong, Yamba Sports Club, Southern Cross Yacht Club);
  • Labor Clubs (Canberra Labor Club, Ginninderra Labor Club, Weston Creek Labor Club, City Labor Club);
  • From here on in, I will be referring to these Clubs as The Big Four, since these 15 Clubs (less than 25% of the registered licensed Clubs in the ACT) command more than half of the ACT gaming revenue.

    Machines

    For the number of machines, Canberra had 5087 poker machines operating for the entire financial year.

    2284 (44.90%) machines in total were owned by the Big Four being:

  • 734 (14.43%) by the Tuggeranong Vikings Clubs;
  • 540 (10.62%) by the Tradesmen’s Union Clubs;
  • 522 (10.26%) by the Canberra Southern Cross Clubs;
  • 488 (9.59%) by the Labor Clubs;
  • 2803 (55.10%) of these were owned by other Clubs.

    Losses

    In Gross Gaming Machine Revenue (GGMR) terms, in the FY07-08 Clubs in Canberra received $177,311,623 from gaming losses.

    Total figures

    Of this, $91,710,562 (51.72% revenue share) was received by the Big Four Megaclub Groups, being:

  • $26,927,370 (15.19% revenue share) by the Tuggeranong Vikings Clubs with 734 machines ($517,834 lost each week);
  • $18,732,469 (10.56% revenue share) by the Tradesmen’s Union Clubs with 540 machines ($360,240 lost each week);
  • $22,329,496 (12.59% revenue share) by the Canberra Southern Cross Clubs with 522 machines ($429,413 lost each week);
  • $23,721,227 (13.38% revenue share) by the Labor Clubs with 488 machines ($456,177 lost each week);
  • $85,601,061 (48.28% revenue share) was received by other Clubs.

    Turnover per machine:

    Player losses across the whole ACT averaged $34,856/machine (or turnover of about $6703 each week on every machine in the Territory).

    For machines owned by the Big Four, across the 07-08 financial year the average earning was $40,153 per machine, or up to $7720 in turnover each week.

    To achieve this, the average machine owned by the Big Four had an average turnover of up to $401,535 [1] for the financial year.

  • The Labor Clubs’ average machine earned $48,609 (turnover of $9,347.90 each week) with 488 machines;
  • The Canberra Southern Cross Clubs’ average machine earned $42,777 (turnover of $8,226.30 each week) with 522 machines;
  • The Tuggeranong Vikings Clubs’ average machine earned $36,685 (turnover of $7,055 each week) with 734 machines;
  • The Tradesmen’s Union Clubs’ average machine earned $34,690 (turnover of $6,671.10 each week) with 488 machines.
  • For machines owned by anyone else, the average was $30,540 per machine (turnover $5872.90/week).
    The average poker machine owned by anyone else had up to $305,390 [1] churned through it.

    The best performing Clubs in the ACT for 07/08 per-machine earnings and my estimates for turnover were:

  • Canberra Labor Club: earning an average of $55,337 (turnover of $10,640/week) across 272 machines
  • Canberra Southern Cross Club Tuggeranong: earning an average of $52,060 (turnover of $10,012/week) across 155 machines;
  • Gungahlin Lakes & Golf Community Club: earning an average of $49,504 (turnover of $9,520/week) across 195 machines;
  • Canberra Southern Cross Club Woden: earning an average of $48,853 (turnover of $9,395/week) across 270 machines;
  • Hellenic Club of Canberra: earning an average of $47,154 (turnover of $9,068/week) across 254 machines.
  • If you are affected by problem gambling or would like more information about problem gambling, call Lifeline – their Gambling Care service can provide free financial counselling.

    Ph: 02 6247 0655.

    Link to Lifeline – Gambling Care’s website

    (Disclosure: The author is a member of the Canberra Southern Cross Clubs (There is free parking at Woden), the Canberra Irish Club (They serve Guinness by the pint, it tastes better and is cheaper than in Civic), and the Tuggeranong Vikings Clubs (The steaks are good on Saturdays, but the service can be slow))

    What’s Your opinion?


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    55 Responses to
    Poker machines, the money, and Labor
    GB 9:02 am 25 Aug 09

    Thanks Skid for an excellent article, raising the stanbdard of debate with some actual content!

    c9 said :

    What’s the point of this post? I read the first few lines , realised how long it was

    Oh noes! All the wordz! Thinking is difcult!

    VYBerlinaV8_the_one_ 8:59 am 25 Aug 09

    I really disagree with having pokies, because the people who use them are often those who really can’t afford to, and really don’t know any better. Then there are those who are addicted to gambling and lose everything over and over.

    As a society, I think we’d be better off without them.

    Jim Jones 8:59 am 25 Aug 09

    Absolutely outstanding post Skid. Thanks so much for that – it’s great to see the actual stats alongside some thoughtful asides.

    I’d be interested in some more clarification about the hazy definition of ‘contributing NGMR back into the community’. I understand that upgrade and maintenance of club sporting facilities is viewed in this category, but what other activities/facilities/building/etc. comes under this umbrella?

    harvyk1 8:48 am 25 Aug 09

    Pretty graphs…

    What’s the point of the article??? If someone could rewrite itin 50 words or less please, I have no desire to read through all of it…

    OK lets get down to what I think the point might have been

    Yes, we all know that your probably going to lose if you gamble. Yes we all know that pokies are a big revenue stream for clubs and gov’t. Yes we all know that pokies are annoying loud and detract from the place. (Seriously the lack of pokies in bars \ clubs is one of the really nice thing about WA)

    You’ve also thrown in some big numbers, good for you… We like numbers… It shows exactly how much pokies are contributing to the bottom line of clubs \ gov’ts….

    So in conclusion I haven’t really understood what the point the OP was trying to make, because it is long winded and confusing for the 5 second skim reader… Maybe they should make one or two clear concise points and then link to further evidence supporting their particular view for people who don’t want to take it at face value…

    just my 2c rounded up to $10 after my pokie win…

    hjholden 8:25 am 25 Aug 09

    I’m sure if the libs had got their asses into gear years ago they’d have their own club(/s) too, not sure what this has to do with Labor directly, laws are passed by GOVERNMENT

    One 8:09 am 25 Aug 09

    gr8 news article – I thank you for having the guts to say something (unline the old media).

    I was wondering if there are any studies on how much the average Canberran spends on Grog while playing pokies/betting?

    Also there is a missing bit of data – that of assult/police call outs that occur after a big win or becuase of a big loss? 40k a year claimed as a profit (I think the cost to the public of 40k is BS – Instead; I would of liked to see how many lives each machine is worth).

    The statement of “If you are affected by problem gambling or would like more information about problem gambling, call Lifeline – their Gambling Care service can provide free financial counselling” provides little confort when you have your life shortened by drunks that are permitted to assult people who could only legaly defend them selves after being attacked.

    dr phil 8:09 am 25 Aug 09

    John Hargreaves should ban them!

    DarkLadyWolfMother 7:59 am 25 Aug 09

    As hard as it may be to believe, ghughes, some people like spending money on entertainment that doesn’t give them money back. As long as they’re gambling with eyes open, realising that they will probably never see that money again, then why insult them?

    Problem gamblers, like any kind of addict, don’t fall into this category and probably need help to stop. That’s a different issue, however.

    cranky 7:45 am 25 Aug 09

    So ACT Labor were the recipients of huge ‘donations’ from the Labor Clubs.

    How are we to know that the Club managements were not ‘directed’ to appropriate this money to the Party?

    An enquiry/investigation, coming years down the track from when this practise probably originated, could well uncover some evidence of a paper trail of this ‘direction’, as the probability of detection waned.

    Joshua 7:37 am 25 Aug 09

    c9 said :

    In my view, pokies are a voluntary form of taxation and if we got rid of them we’d all be paying more compulsory taxation to make up the shortfall. You choose to play, you’ll probably lose, but that’s your choice. There are plenty of services out there for problem gamblers to seek help. I enjoy playing them somtimes and consider the pokies reasoanble value for money as far as entertainment value goes.

    The problem as I see it c9 is that the majority of the revenue from pokies comes from a small minority of problem gamblers. It is therefore more a tax on people with mental health problems.

    ghughes 9:47 pm 24 Aug 09

    Gambling is a tax on people who failed math.

    the post has too much google research to be anyone from the Canberra Liberals – they are not up to it

    So well done Skidblainer. Just quit gambling and quit the ALP – both prove you failed math.

    I-filed 9:45 pm 24 Aug 09

    Katie? Any response?

    TAD 9:37 pm 24 Aug 09

    I think it’s a great article and believe that it’s an abomination that the Labor party benefit so directly from it.

    I personally know of at least two local suicides directly related to pokie gambling.

    c9 9:19 pm 24 Aug 09

    What’s the point of this post? I read the first few lines , realised how long it was an that it was an interest group piece and didn’t waste my time reading it.

    In my view, pokies are a voluntary form of taxation and if we got rid of them we’d all be paying more compulsory taxation to make up the shortfall. You choose to play, you’ll probably lose, but that’s your choice. There are plenty of services out there for problem gamblers to seek help. I enjoy playing them somtimes and consider the pokies reasoanble value for money as far as entertainment value goes.

    georgesgenitals 8:40 pm 24 Aug 09

    A couple of weeks ago I put a dollar into a poker machine and won seven! I quit, a winner.

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