Entain Cuts TAB New Zealand Worth by $422 Million – iGaming Post

Entain, a leading player in the global gambling sector, has recently made a significant financial adjustment, recording a write-down of £142.5 million ($422 million) related to its operations in New Zealand. This substantial reevaluation stems from unforeseen delays in legislative changes aimed at extending TAB NZ’s monopoly to cover online betting, a crucial development that could reshape the competitive landscape in this emerging market.

Strategic Alliance and Initial Gains

This financial setback comes just months after Entain established a promising 25-year partnership with TAB NZ, which commenced on June 1, 2023. Early indications of success were evident through rapid financial returns, including a $15 million contribution to local sports organizations and an additional $500,000 dedicated to boosting women’s sports programs.

Expectations were high regarding TAB NZ’s funding for the racing industry, projected to eclipse $225 million for the 2023/24 season—up from $150 million in FY23. Additionally, funding allocated to sports achieved a remarkable 44% increase over two years, reaching $22.60 million for FY23.

Financial Challenges Amidst a Promising Partnership

Despite early successes, Entain has encountered substantial challenges. The company initially invested $150 million upfront in the agreement and has committed to a 50/50 split of gross revenues, ensuring a minimum revenue share of $150 million for the first five years. Unfortunately, TAB NZ has struggled with revenue generation, failing to meet betting revenue and profit targets due to race cancellations and increased competition from unregulated offshore betting operators. Consequently, distributions to racing codes were trimmed by 9% for the financial year ending in July 2023.

Broader Implications for Entain

Entain’s challenges are not confined to its New Zealand operations. The establishment of a new Capital Allocation Committee indicates the company’s proactive approach to reassessing its market presence, brands, and overall strategy. Anticipated regulatory changes in key markets could further strain the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA), with estimates indicating a potential impact of around £40 million for FY24.

Regulatory Delays and Market Reassessment

In response to these pressing concerns, Racing Minister Winston Peters has introduced significant amendments to the Racing Industry Act aimed at extending TAB NZ’s current monopoly over land-based betting into the online realm. This legislative overhaul is timely, considering TAB NZ’s struggles in a market that increasingly favors offshore betting due to better odds and promotional offers.

Recent statistics highlight the urgency of these changes: TAB NZ missed its betting profit targets by an alarming $2.04 million each month between May and November 2022. Furthermore, New Zealanders are estimated to spend approximately $180 million annually on offshore betting platforms, exacerbating the competitive pressure on TAB NZ.

The proposed legislation seeks to create a comprehensive regulatory framework that addresses the challenges posed by unregulated online gambling. Unlike many OECD countries, New Zealand lacks stringent online gambling regulations, a gap that has fueled the rise of offshore betting operators. TAB NZ currently provides over 90% of the revenue for various racing codes, contributing about $139 million in betting revenue for the 2022/23 fiscal year. As the local industry plays a critical role in the national economy—contributing nearly $1.90 billion in the 2022/23 racing year—the need for regulation is pressing.

Conclusion: The Future of Online Gambling in New Zealand

The anticipated regulatory framework aims to close the gap that has allowed offshore operators to flourish at TAB NZ’s expense. While there are concerns regarding potential black market betting through cryptocurrencies, the proposed legislation includes provisions for strict age verification and address checks, making it challenging for non-compliant platforms to operate within the New Zealand market.

As the gambling landscape evolves, Entain and other stakeholders in the industry must navigate these regulatory headwinds while capitalizing on emerging opportunities. The successful implementation of these regulatory changes could usher in a new era for online gambling in New Zealand, reinforcing the importance of a balanced, fair, and profitable market for all involved entities.