If you take the figures in the Victorian Auditor-General’s report on the auction of pokie licenses as gospel, it’s arguably the most single most financially costly mistake the Bracks-Brumby government made.
The report estimates that a fair market value for the pokie licenses – based on expected returns from having a machine – was around $4 billion. The auction receipts were just under $1 billion. So – what happened?
When poker machines were initially introduced in Victoria, all the machines were owned by two operators – TABCorp and Tattersalls – unlike in NSW where they can be owned by individual clubs. When the government decided to switch to allow individual ownership, they then had to figure out some mechanism to sell the rights to operate a pokie. Two methods ended up being used, after the intervention of the Victorian National Party (whose votes were needed to get the legislation through the Upper House) and its leader Peter Ryan (now the Police Minister) ostensibly on behalf of smaller rural clubs. The first was a pre-sale of pokies at fixed prices to clubs; the rest were auctioned off.
This process had a number of problems, according to the auditor-general’s report:
- The pre-sale of so many machines took too many participants out of the auction market.
- The restrictions placed by the government on the entry of new participants in the pokie business, and the restrictions placed on moving licenses from venue to venue, reduced demand.
- The “uniform price” auction format saw bidders pay less than what they were actually prepared to offer – while $841 million of bids were made, the actual revenue was only $655 million.
- auctions stopped while additional, higher bids were still being made.
- Insufficient information was made available to bidders.
- Too many licenses were made available
- The reserve price was too low
The criticisms of the auction process, and the way the rules were decided, appear to be plausible. But I’m skeptical of the notion that such flaws could have really resulted in pokie licenses going for a quarter of their “fair value”.
While new entrants to the pokie market might have found the barriers to auction participation prohibitive, the existing hotel owners – who presumably understand the pokie business as well as anyone – had to participate to retain the rights to operate machines. If the prices were really so far below what they thought a license was worth, surely at least some of them would have been able to rustle up additional capital in a hurry to buy more machines? Indeed, wouldn’t many of them have had additional readily available capital to buy more licenses, given that they expected to need it just to hang on to the machines they currently operate? Even if you weren’t sure whether you’d be able to pass the additional regulatory barriers to actually install the machines, at such a discount wouldn’t you take – well – a punt on it? Bruce Mathieson did, but why didn’t others?
As such, I wonder whether the bigger factor here was that the restrictions on what the license provide – even if you’ve got one, you still need to pass a planning approval process and fit under regional pokie number caps – made them less attractive to investors. That’s certainly what Labor claims, as noted in this editorial in The Age.
While I agree with The Age’s call for further inquiries, given the huge amount of revenue potentially foregone, I for one would like to see more evidence that the actual losses were a) as high as claimed, and b) largely due to bad auction design rather than social policy choices.
But, in any case, curse the Kirner and Kennett governments for permitting the spread of pokies into every corner of Victoria in the first place.
But, in any case, curse the Kirner and Kennett governments for permitting the spread of pokies into every corner of Victoria in the first place.
Indeed.
I’m not going to start to get outraged at revenue foregone from the pokies auctions, it’s woeful for sure, and another reason the Vic ALP had to go, but I maintain my outrage and disgust for a system where pokies are everywhere in Victoria, sapping our most disadvantaged communities. Crikey has done a stirling job keeping this issue alight.
I’m with Wilful on this one.
Indirectly, state governments are levying largely the poorest in the community so as to underpin revenues, through the mechanism of gaming machines. This policy does grave offence to equity, amounting in practice to regressive income transfer payments.
Robust measures need to be taken to cap the losses from people below AFTWE on these machines — not merely those fitting the rather arbitrary description “problem gambler”.
Side benefit: We also know that the Registered Clubs sector, along with the AHA are a major part of the debauchery that is state politics. They are a truly ugly lot. It’s nice when doing the right thing also delivers a swift kick where it really hurts to such nasty characters.
“Robust measures need to be taken to cap the losses from people below AFTWE on these machines — not merely those fitting the rather arbitrary description “problem gambler”.”
But, what if those people don’t want their losses capped? I also really dislike pokies. But, something that makes me uncomfortable, and this relates to the “banning” thread”, is the notion of withdrawing pleasures from the poorest and most marginalised, because we’ve decided those pleasures are bad for them.
People play pokies, with all their comcomitant badness, for reasons. I’d prefer to see those reasons addressed. We should start looking at lack of amenity in poor suburbs, loneliness, isolation, the cost of other sorts of entertainment etc. I remember hearing a radio documentary in which an old woman spoke citing safety, warmth, courtesy of the staff and cheap food as the reasons why she went to pubs where there were pokies and lost money on them. These are the sorts of things which could be supplied in other facilities, yet often they’re not.
Fine said:
There is something to what your say but the matter is complex. It is clear that in most cases where people gamble beyond their means, they often feel regretful after the fact. In most cases where we consent to something that we later regret, this regret reflects some misapprehension about the nature of the risks and rewards we thought we were accepting. Sometimes of course, people get drawn into things somewhat against their better judgement, and the speed at which we must make decisions, corrupts our judgement, adduces cognitive dissonance, angst and much else and by degrees, we find ourselves in circumstances which though not entirely unforeseeable, are not at all what we’d have accepted if we’d insisted on thinking things through.
So the question of consent is not at all the hard frontier one might normally suppose in matters where consent is salient at law. We have in NSW a “cold calling” rule which allows people who buy things from vendors at the door to change their minds within a 10-day “cooling off period”. This recognises that consent is not merely a formal act but must take the contextual capacity to make good judgements about one’s needs into account. The environment of a gaming machine is not such a setting, particularly for those in the bottom parts of the income distribution.
When I speak of “robust measures to cap losses” I’m very much thinking of measures that underpin the possibility of truly informed consent by disrupting those parts of the context that subvert their active and considered judgement.
In addition to the Wilkie-Xenophon measures one might require that
a) machines have a slower cycle. Slowing the rate at which each iteration completes makes it harder to lose money quickly
b) machines randomly shut down and stay shut down at intervals between (and from) 20 minutes and one hour, forcing the patron to get up and go to another machine. Approximately 1/3 of the machines at a venue could be in standby mode at any one time. People can become unreasonably attached to the idea that a machine is “due to pay out” and this can encourage them to keep playing rather than finding other diversion or simply leaving.
c) People ought not to be allowed to lose more than 10% of the salary of someone on AFTWE in any seven day period without special exemption where they can show greater income and in that case, then only 10% of their income. There have been a number of tragic cases of people embezzling the funds of their employers to gamble and ending up in gaol. If you can’t have “fun” on that, perhaps you’re not so much having fun as salving pain. There are better options than gambling to deal with pain.
I readily agree that there needs to be greater focus on addressing the needs of marginalised people. Pokie-driven businesses are not it however.
But, what if those people don’t want their losses capped? I also really dislike pokies. But, something that makes me uncomfortable, and this relates to the “banning” thread”, is the notion of withdrawing pleasures from the poorest and most marginalised, because we’ve decided those pleasures are bad for them.
I get what you’re saying. But there’s incontrovertible evidence that pokies are psychologically addictive. We ban all sorts of addictive substances for little reason other than the fact that they are addictive. Certainly pot doesn’t appear to cause anything like the harm pokies do, and for many people is a pleasure.
Not that two wrongs equal a right.
I agree it’s complex. I think that if we’re going to make gambling with pokies harder for people, then we have to ask what they get out of their gambling and we need to look at replacing whatever that is with something enjoyable. We can’t just make life less pleasurable.
Just so. I enjoy the occasional flutter. I’m in a pool with my faculty in the Lotto. I buy the occasional Boystown Lottery ticket — (I do like looking at the brochures). Occasionally I’ll buy a “scratchie”. I never quite got the poker machine thing.
I don’t think it’s fun for most people unless you count as “fun” compulsively scratching an itch. If it is fun, it ought to be fun at a fraction of the pace and cost however.
I am always amazed when a problem gambler faces court for fraud that the gambling establishment had identified the individual as a regular player, knew their occupation and provided membership to the high stakes area.
For example a former bank clerk was jailed for embezzling $2 million that went through the pokies at Crown Casino. Crown Casino knew she was a bank clerk, gave her membership to the Oaks Room. In this case I don’t know why Crown wasn’t punished for taking the woman’s money because they must have known it was stolen.
Crown Casino operates 24 hours a day.
The casino at Monte Carlo opens from 2pm until whenever.
Pokies reformers have asked for slower machine cycle times
Fine,
“an old woman spoke citing safety, warmth, courtesy of the staff and cheap food as the reasons why she went to pubs where there were pokies and lost money on them.”
Wouldn’t it be even better if she went to the pub and didn’t play the pokies?
How much is the pub, in effect, charging her for a bit of warmth, safety and food?
I’d go beyond that. In my eyes the pub or club is merely providing a comfortable environment in which to mug the old woman in slow motion. Pokies are essentially an automated long con designed to remove money from the poor the the well off. That the government taks a cut make them complicit.
As for employees that clearly aren’t able to stump up the money on their own…why aren’t the casinos charged with reciept of theft?
I’m still reminded of that great scene in Love is a Four Letter Word where the pub owner rips the pokie out of his pub smashing it with a bat after recognising it as the cancer it is.
Well, maybe similar to the cigarettes legislation, politicians could … take away the jingle, the flashing lights and the rest. I’m thinking just a kind of grey box about the size of a hand held calculator with a single button, and you play for meat pies. You don’t even know if you’ve won until the meat pie is brought over by the bar staff.
Or maybe something similar to those side show games with the droppable claw, where you have to try and pick out a fluffy semi-flammable toy. Now, you don’t see too many people getting addicted to those!
But would the frustration make punders angry and violent?
And as Frank Zappa said: “politics is the entertainment section of industry,” in which case it must be depressing for politicians to think that they can’t compete with a poker machine for most people’s time. Entertainment… Do we have an entertainment compulsion problem?
I agree I&U. I’m not in any way praising the pub for supplying these services. I’m saying there’s reasons why people play pokies and we need to look at that and supply those needs in other ways.
Get those old folk playing Peggle or Tetris!
The gambling area of pubs and clubs could become internet cafes. The punters could play scrabble and Farmville. Hell, you could even put some flashing lights around the LCD’s if it got the customers in.
I’d go beyond that. In my eyes the pub or club is merely providing a comfortable environment in which to mug the old woman in slow motion
Amen.
That’s exactly what it is tssk.
If I were producing Lateline, I’d get the Chicago behaviouralist economist Richard Thaler on to talk about the pokies issue in the context of his theory about libertarian paternalism.
It’s about providing an architecture of choice that nudges people towards making decisions that don’t cause them excessive harm.
In QLD, Joh Bjelke-Peterson(Nat) vowed “Pokies” would not enter QLD while he was in charge.
He lost to Wayne Goss.
“”"”Mr(Kevin) Rudd(ALP), who as chief of staff to former premier Wayne Goss (ALP) oversaw the introduction of poker machines in Queensland clubs.”"”
Later…
“”"”Wayne Goss (ALP), Queensland premier from December 1989 until February 1996, said although it was long-standing Labor policy, it was a mistake to bring in gaming machines in February 1992.“”"”
“”"”I wish I’d never brought in poker machines, I think they’re a scourge,” he said.”"”
Fine,
“we need to look at that and supply those needs in other ways”
Ironically, it was the traditional role of pubs and clubs to provide exactly these needs. And there is no reason why they cannot return to that role when the pokie cancer has been excised.
I must be getting old, Mr Denmore’s suggestion could only raise a cynical cackle, particularly in light of the disgusting, complex behaviours of the various politicians and corporates involving the latest ransack.
The resulting situation ensures the continuance of the pokie culture that reinforces behaviours in people lacking the sort of wherewithall to work that out quickly enough and deal with it.
Fran 7,
your “faculty”? Aren’t you a school teacher?
Back OT, no one is OT. This thread is about the botched auction of Victoria pokie licences, not about the evils of pokies.
Jumpncar, Joh Bjelke Peterson did not lose to Wayne Goss. Joh was long gone by the time Goss won the 1989 election. The National Party premier he defeated was Russell Cooper, who succeeded Mike Ahearn, who succeeded Joh.
Sam
Yes … I’m placed in the TAS at my high school.
That people aren’t interested for the most part in discussing the question on pokies initially posed probably reflects the fact that we know that the “value” of pokie licences lies principally in the extent to which they can fleece people with varying degrees of psychological compulsion of moeny that could be making a positive difference to their lives. The sale of pokie licences in a regime where only frivolous and relatively trivial engagement with pokies was the overwhelming practice would almost certainly yield a good deal less that the figure above.
Do we really want the state to be more reliant on such revenue for the provision of service or to reduce taxes, charges or debt service? I’d say not. If licence were only worth, in commercial terms, about $100 per machine per year because people saw them as not much more interesting than those “skill testers” one sees in games parlours, I’d be pretty happy with that.
oops: that’s TAS faculty
Sam@23.
Quite right, sorry.
Joe@12, we can go further. Lets make the market efficient by making it informed.
They can have all their flashing lights, bells etc for a win, but every time the punter presses the button and loses the machine should have to call out in an equally loud voice “Loser! Loser!”.
I reckon that would create a quite different ambience in the pokie barns.
dd, that’s brilliant!
Unfortunately, I don’t see it getting up, although perhaps you should write to Andrew Wilkie and suggest it.