Entain Cuts TAB New Zealand Worth by $422 Million

Entain has written down £142.5 million ($422 million) from its New Zealand operations with delays in changing laws that would extend TAB NZ’s monopoly to online betting caused this major financial adjustment.

The company made this adjustment just months after forming a 25-year mutually beneficial alliance with TAB NZ that started on June 1, 2023. The partnership showed early promise and delivered quick financial gains, including a $15 million boost for sports organizations and $500,000 for women’s sport.

TAB NZ’s direct funding to racing was expected to exceed $225 million for the 2023/24 season, up from $150 million in FY23. The funding to sport also grew by 44% over two years and reached $22.60 million for FY23.

The partnership has faced some hurdles in spite of that. Entain paid $150 million upfront and agreed to split gross revenue 50/50. The company guaranteed this revenue share would stay above $150 million for the first five years.

TAB NZ missed its betting revenue and profit targets because of race cancelations and pressure from unregulated offshore operators. The organization cut distributions to racing codes by 9% for the financial year that ended July 2023.

Entain’s challenges extend beyond New Zealand. The company’s new Capital Allocation Committee has started reviewing markets, brands, and verticals to improve competitive positions and boost shareholder value. Expected regulatory changes in key markets could affect EBITDA by about £40 million in FY24.

Regulatory Delays Force Market Reassessment

Racing Minister Winston Peters has introduced major changes to the Racing Industry Act to extend TAB NZ’s monopoly into online betting. These changes come at a crucial time as TAB NZ struggles with revenue in today’s market.

Recent numbers paint a concerning picture. TAB NZ missed its betting profits target by $2.04 million each month from May to November 2022. New Zealanders spend about $180 million yearly on offshore betting sites, which makes the situation even more worrying.

The new legislation serves as a direct response to these challenges. TAB NZ currently holds a monopoly on land-based betting, but the online space remains mostly unregulated. New Zealand stands out from other OECD countries because it lacks proper online gambling regulations.

Racing plays a vital role in New Zealand’s economy. The industry contributed nearly $1.90 billion in the 2022/23 racing year. Racing codes rely heavily on TAB NZ, which provides over 90% of their income. TAB NZ gave these codes about $139 million from betting revenue in the 2022/23 fiscal year.

TAB NZ faces tough competition with offshore operators offering better odds and attractive bonuses to sign up. Between 2021 and 2022, around 60,000 New Zealanders placed bets with these offshore operators.

The new regulations want to create a “legislative net” around online betting. This legislation would stop offshore operators from taking bets from New Zealanders. Some people worry about black market betting through cryptocurrencies. However, the law has rules for age verification and address checks that would make it hard for major betting platforms to break these rules.