Not surprising, really. Last year the TAB sold around 150 million bets. A billion dollar business with over 500 retail outlets, the TAB annually offers betting on more than 2000 race meetings and sports events in both New Zealand and overseas.
“Ironically, for a gambling business, we tend to be very risk averse,” says Wright. But both Wright and transition general manager and acting chief executive of the TAB and the Racing Industry Board, Jim Leach, are willing to take a risk and throw open the organisation’s doors to MIS readers.
A day at the races
On Thursday 26 June, in Wellington, Wright hosts a behind-the-scenes tour for a dozen MIS New Zealand readers, including unprecedented access to all areas of its business. After warm words of welcome from Leach, our guests split into groups to view Raceday Control, Skybet, Sports Betting, Phonebet and, later, broadcasting from its TV channel, Trackside.
Ian Walls at raceday control explains the use of the internet to provide racing information for Australian race meetings. A teletext system is maintained on TV One, TV2 and TV3, on UHF and on Sky Digital, and also on TAB’s own racing channel.
“Christmas Day and Good Friday are the only two days we don’t operate and we go through to midnight on Fridays and Saturdays. We can take control of any race in New Zealand. Normally, on the racetrack they have a control van.
If they lose power at the track, we can just take control of the meeting. If we don’t take control, the race will close at the scheduled start time.”
“We have a PC system backing it all,” Wright explains. “It’s essentially an information gateway between us and the outside world.
Everything we send out to the Press Association and the TV stations all goes through that system.”
The armchair punter
At the Skybet desk, Peter Elder explains the TAB’s inroads into interactive TV betting and gives our guests a live demonstration. “This is basically a new channel for our account betting customers. At the moment it’s quite limited in the bet types we actually offer. We only take the options we know are most popular with our customers.”
Trackside uses Sky Digital’s interactive channel, where punters can select the Skybet option using their Sky remote. “Skybet loads the application via the satellite. The set-top box is about the equivalent of a 286 or 386 PC, so it’s pretty low-end. That’s one of the reasons we had to streamline the application.”
Wright elaborates on the technology restrictions. “The set-top box just doesn’t have the memory or the processing power for us to load heaps of options. It’s not that we couldn’t develop them, but Sky would have to replace around 400,000 set-top boxes, and that’s a huge cost.”
Once the application is loaded, you can watch the race as well as see all the runners and the odds on the opposite side of the screen. “I enter my account number, the modem dials up and, by the time I’ve put in my PIN and posted my bet, it has probably made the connection,” Elder says. “At the bottom it says, ‘Processing bet’, and there’s a confirmation screen with a receipt number.”
A hell of a job
Kevin Gutschlag at the sports desk is one of the team of bookmakers responsible for the fixed odds side of the TAB’s business. “We set the odds and we stand or fall on how well we do that.”
It is not only the money being bet that causes these odds to move. Gutschlag and his team have to make judgements based on knowledge of the respective sport – including player injuries. “That’s something a computer would never be able to work out,” he adds confidently.
But Gutschlag concedes his team cannot be authorities on all sport types. “We’re not experts on American sports, or tennis. We sub-contract outside of our business, get a line feed from somewhere and we put the odds in. Something like baseball, we get that from a live television feed. But we are the experts on things like rugby, rugby league and New Zealand cricket. We try to set our own odds on those and revise the fixed odds when there’s a need.”
As well as setting the odds, the sports desk authorises big bets. “We’ve got a rogue’s gallery – there’s probably about 40 people’s names on it. So, out of about 100,000 betting accounts, there aren’t that many rogues.”
The sports desk tracks its wins and losses as it goes – it has a target of a certain percentage of profits; on the day of our visit, the whiteboard is showing 11 per cent profit margin on sales.
Gutschlag obviously cannot afford to be risk-averse, but he seems like a man with a knowledge of sports about which most Kiwi blokes can only dream. “According to a lot of the people in the business, all we do is sit here reading the paper all day and watching the television. It’s a hell of a job,” he adds, with some irony.
Call centre from Hell
Kirsty Comrie of Wellington Phonebet seems curiously calm for a person who works in an office where the phone literally never stops ringing – the call centre takes bets in infinite succession; as soon as a caller hangs up, another call is automatically put through.
“We have a relatively large customer-base, but 400 of our top customers are considered VIPs, and they account for 80 per cent of our turnover. Our five Phonebet centres take 24 million calls on average in a year, and it’s increasing. Everything’s recorded. You have to be very good at handling complaints – especially if they can’t remember what bet they put on.”
Many of Phonebet’s agents are students; although, surprisingly, says Comrie, turnover is not particularly high and there is an unusual degree of worker loyalty. “Most of the students stay with us until they finish college, but then they go out into the workforce and they still come in at weekends.”
This supports our research that students are masochists.
Our guests gather in the TAB lobby before boarding the Axon bus to the Trackside television facility at Avalon Studios, a division of Television New Zealand.
Lights, camera, action
Much of what is seen on Trackside is live to air, Wright explains. In fact, the channel does more live broadcasts than either TV2 or TV3. “We have live presenters who are under a lot of pressure. We also have a studio-based facility, which is what we’re going to see. Scott Paton, one of our TV people, will tell you how it all works.”
Paton escorts us up to the production control room. Trackside is effectively a marketing arm of the TAB, driving turnover through sports betting and racing. Signals are sent to Auckland, through Sky TV, and it broadcasts seven days a week on the digital network and five days a week on UHF, where it has a contract with Sky TV to share transmission times with Discovery Channel.
Outside broadcast pictures are microwaved back from racecourses around the country via BCL (Broadcast Communications Limited), then into the Avalon Studios, where they are assigned in master control. The primary circuit is a direct circuit via fibre optic from the Southern Cross connection.
Back at the TAB boardroom, Warwick Wright presents our guests with a TAB pack – including a range of $5 bets on the All Blacks/France game. During the course of his presentation over lunch, he refreshingly does not talk about the technology at a bits and bytes level – and says he doesn’t want to. “The broad strategy is that we’ve built a lot of our own components – most of the software’s custom-built, apart from corporate applications, but the JetBet stuff’s all our own. It’s nice to feel we’re masters of our own destiny with our software.”
Commercially perverse though it may seem, on some big sporting events, the TAB actually wants the punter to win: “With the David Tua fight, we had a huge number of people betting who’d never bet on anything before and most of them lost their money, because the bulk of it was on David Tua. In some ways, we felt it might have been better if they’d had a win, because it might have encouraged them to bet on something else in future!”
Some of the regulatory challenges the TAB faces have come into being with the realisation internet betting is not just a passing fad; governments are only just beginning to tally-up the potential ‘lost opportunities’ in taxation and duties.
“There’s some discussion in Australia at the moment about banning Australians from betting on overseas websites, and we’ll just have to wait and see what comes out of it,” says Wright. “Governments are struggling to restrict betting, and the main reason they want to do that is that we and TABs and betting agencies in other countries typically pay duties and taxes to the government. Last year, we paid them about $60 million by way of duties and GST.”
At transaction level
The TAB is beginning to make inroads into analysing betting at transaction level – no small task, given that we are talking about 150 million transactions a year. For management recording purposes, these have traditionally been summarised by race and bet type. “But if we want to look at what the introduction of a new bet type does to individual betting patterns, then we obviously need it down at the transaction level,” Wright points out. “So we’re building a data warehouse for that.”
He believes the TAB is fortunate its main online application feeds back into a single back office application. “The back office system was one of the first to be built on what was to be a new technology platform.”
This system runs on Oracle, and although Wright says the platform software now needs to be upgraded, essentially there is one set of databases where customer information – as well as that on agencies and employees – is stored, providing a high degree of data consistency. “It doesn’t stop people keeping their own little spreadsheets and mailing lists but, by and large, I think our data integrity is better than in most organisations.”
The online system isn’t required to store large quantities of historic data, meaning there are no complex data recovery requirements in the event of an outage. “We don’t have to roll back the database and a whole lot of transactions, so we can be up quickly with the minimum of interruptions.”
Seeing past the mythology
The persistent idea of a stereotypical punter mentioned at the outset makes the TAB’s an industry with its own folklore about why people bet and the events on which they put their money.
Wright sees it as part of his mission to strive for the facts, rather than perpetuate legends.
“To give you an example of that, there’s this myth in the New Zealand racing industry that taking betting on races from Australia is robbing the New Zealand industry of turnover. And we were able recently, when we had a race meeting abandoned in Australia, to do a comparison of race day this year with the same day last year.
The New Zealand turnover was virtually unchanged.”
Like many businesses, the TAB wins quite a high proportion of its revenue from a relatively small number of customers and, for obvious reasons, takes the utmost care of them.
“Understanding our customers is still a journey of discovery, but I don’t think in the foreseeable future we’ll really be into the CRM space – it just doesn’t do much for us. We just want to understand more about our customers’ patterns of behaviour.”
Seeing beyond the image of the traditional punter is not as ephemeral as CRM in the sense most vendors use the initialisation – Wright is far more pragmatic about its meaning. “If you say, ‘The next race isn’t for 30 minutes,’ punters either go away or they’ll go and have a drink or something and wait for 30 minutes. But if you’ve got something every five or 10 minutes they’ll they’ll hopefully keep re-investing. So racing, in particular, is very much a churn business.”
A dotcom success story
The TAB’s website is hosted by TelstraClear, with a back portal for betting transaction maintenance. Currently, eBet does development, validation and security and carries the risk. However, Wright says, at some stage this outsourced function may be brought back inhouse.
“I like to say the internet channel is a dotcom success, because it actually generates real revenue. A couple of years back we turned over $39 million on the internet, last year we turned over slightly more than $60 million, and we’re having weeks now where we’re hitting $2 million a week. So it’s not out of the question that we’ll have $100 million turnover for the year.”
To some extent, this growth has been complementary, although it has taken away some business from existing channels, causing a few hiccups, Wright acknowledges. “At first, a couple of the big punting syndicates went from telephone betting to internet betting and we wondered what had happened to our phone betting productivity, because the revenue was down but the labour cost was virtually unchanged.”
The impact of the TAB’s imminent transition to the New Zealand Racing Board, Wright believes, will not be significant on IT, but it does have implications for the business. “On becoming the New Zealand Racing Board we will have a responsibility for the health of the racing industry in New Zealand. We could do some very good business taking totally overseas racing feeds into New Zealand – forget about having Trackside, forget about broadcasting New Zealand racing – we could make quite a good profit. It wouldn’t do a hell of a lot of good for the New Zealand racing industry, and would therefore be counter to what we’re there for. So, we’ll have to trade off what’s good for betting and what’s good for the ongoing face of the industry.”
Potentially more significant, he thinks, will be the Gambling Bill, before Parliament as we go to press.
“There’s huge lobbying from all sides of the gambling industry. It could potentially provide an extra revenue stream, but it will require a lot of capital investment.”
As a member of the TAB executive team, Wright exerts a great deal of influence, listening to the business then narrowing the available technology options to suit its needs. “We’re very fortunate, in that we are a small organisation in terms of full-time, salaried people. There is a big dependence on technology but the strategy is a business strategy. And it’s all about products, customers, channels and challenges in the industry itself.”
<span class="authorfooter">MIS New Zealand acknowledges Axon for its logistical support and co-sponsorship of this live case study.
RATE YOUR CHALLENGES
When interviewing IT directors, MIS asks them to rate the most challenging elements of managing a project. Here, the TAB’s general manager technical services, Warwick Wright, ranks his general challenges.
He points out there will soon be an increased challenge in getting the support of the board and CEO, because both are about to be newly appointed.
Keeping projects on time and under budget
Getting support of board and CEO
Strategy and planning
Getting support of other company stakeholders
Finding and motivating the right staff
Top management tips:
Wright says, in selecting vendors, the TAB looks for organisations with which it can build long-term and trusted partnerships. “Axon, who co-sponsored this visit, is one of our long-established partners, with which we enjoy a strong and positive relationship.”
Guest: “Has there been a drop-off in turnover since the introduction of Skybet and Phonebet?”
Warwick Wright: “Yes, it has had an impact, but it’s not massive yet. To put it into perspective, last year we turned over $60 million on the internet. Our total turnover was over $1.1 billion, so the internet was only about 5 per cent. It’s probably going to be closer to 7 per cent by the end of this year. About 60 per cent is through retail outlets. In Skybet, turnover is growing, but in the overall context it’s not huge. I think, over time, the number of dedicated retailers will probably shrink.”
“How do you monitor betting activity?”
“Our internal audit department has a lot of technology to monitor problem gamblers, and so on. The audit department has a sort of ‘hit list’ of our big losers. We don’t mind if people are big winners, it’s when we get someone who’s losing significant amounts of money. One of the things we’re very strong on is responsible gambling. We’re not in the business of getting people into trouble.”
“Do you run 24x7?”
“Yes, certainly on the computer side. The sports desk and race day control are seven-day operations. The only days they don’t operate are Good Friday and Christmas Day. Boxing Day, New Year’s Day and Melbourne Cup day are our biggest days of the year.”
“How do you manage system outages?”
“It has become more of a challenge, with only two days of the year out. They used to have a day, like a Monday or a Tuesday, when they wouldn’t take any betting because they were doing computer changes.
Essentially, we just have to test everything thoroughly before we go live. Our systems are designed so that if the online system fails we typically have it up again in about five minutes. Obviously, unless it’s some problem that just keeps repeating, we aren’t down very long. On the old system, it would take us half an hour to reboot. On the new system it takes no more than five minutes.”
“So you’re not running a replicated, fault-tolerant architecture?”
“We spread the risk, but the JetBet host servers are just Compaq servers running Windows NT. They’ve got RAID and dual-path switching. We run the betting system over multiple hosts – it’s sort of a distributed host system, so even if we lost the host we’ve got a spare.
We’re most vulnerable, probably, to a major Telecom outage – the Telecom links in our building go out to the whole country. But our prime time, frontline availability at the host end (not at the terminals) most months is between 99.98 and 100 per cent.
Most of the software problems we have are when we do our end-of-day batch processing, which is usually around midnight or one in the morning. Nearly all our revenue comes from selling bets. If the system’s not up, we’re not making any money. It’s in the nature of the punters that they don’t say ‘Oh, I missed betting on that race, so I’ll put twice as much on the next race.’”
“How many regular customers do you have?”
“About 300,000 account holders. There’s a big chunk that are casuals and there’s a hard core of very large customers. One of the things we’ve been doing over the last 12 months is customer segmentation, trying to break down the profiles of the top 300, top 3000. From a customer point of view, we have historically been a cash business.
When you make a transaction in a TAB and pay cash, you’re totally anonymous; we don’t have any customer loyalty card that we’re tracking. As we move more into account betting, phone betting, the internet and interactive TV, we’re able to get a better handle on what sort of people are betting, but we’re still in the infancy of that.
* “Good, very streamlined.”
* “This is my first event and I thought the day was phased very well.”“A very interesting case study in an area that has a significant reliance on technology.”
* “Excellent degree of openness – fascinating insight into an industry that most of us don’t know much about.”
* “Good, and demonstrated how the business case is now more important than how to do it.”
* “Good idea to avoid PowerPoint.”“Catering great. Good opportunities to talk. Good format of seating to encourage communication.”
* “I would have liked to have invited our CFO.”
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