What will Betfair mean for Hong Kong racing?
The day that Betfair's first crack at Hong Kong closed its portal seems lost in time but the best guess would be in 2003, after the exchange operator had been savaged publicly by Hong Kong Jockey Club officials, particularly chief steward John Schreck, at the Auckland Asian Racing Conference early that year.
Described in terms that ran the gamut from pirate to parasite to (the really hyperbolic) rapist, Betfair's threat to racing's turnover-based funding models was seen as an existential one.
It operated on a basis that could not produce revenues sufficient to offset racing's cost levels if, as many feared, Betfair sliced through traditional betting modes like totalisator or bookmaking to become the foremost place for wagering - given its better returns to punters, that seemed likely or at least imaginable.
Along with that came the integrity fears, a dip back into the bad only days of Hong Kong racing, with the prospect of bettors being able to make money from finding a horse to lose.
There were various skirmishes along the way but other jurisdictions ultimately licensed Betfair, found ways to charge it fees, and it became part of the wagering landscape around the world.
Hong Kong was different - Betfair shut up shop fairly quickly.
Why? Well, first of all, it was not popular on Hong Kong racing. It was the early days of exchanges generally, also a time when global interest in Hong Kong racing existed only in the margins of local racing in each jurisdiction, and then there was culture.
The smartest bettors in the world of racing have long had strong operations on Hong Kong, and they all immediately bought into the concept of exchange betting as the way of the future, but, when it came to Betfair's offerings, the sharks found themselves in a sea of...other sharks.
The retail punters were unfamiliar with exchanges - certainly the Chinese punters who are an overwhelming proportion of Hong Kong's punting population, then and now, did not have the access or understanding to adopt Betfair - and the big players were playing each other.
More often than not, they found the same horses to back or lay and so there was little money in play, with the odd exception. One late, great player took a position opposing a favourite called Citizen Kane on international day 2002 and managed to get a rare flood of action, since the other professionals all wanted to be on him before he won by a just over four lengths.
But that was not the rule. Betfair's Hong Kong operation was small beer, a shot glass rather than a pint. Thus, the decision to shut down and curry favour with the Hong Kong Jockey Club was an easy decision to make and the catalyst may have been government approval for the club to commence football betting in late 2003.
I have no proof of this, but the talk was persistent for many years - right until recent times - that Betfair's shut down of Hong Kong an easy trade for the hope of some kind of business co-operation with the Jockey Club on football betting or, some years later, as a potential commingling partner. At any time, Betfair could have offered a Hong Kong operation - as long as the exchange abides by the laws of the countries where it is registered, there isn't a thing the Jockey Club can do about it - that did not happen, even as Betfair soared in stature and acceptance.
Clearly, Betfair has now abandoned all hope of co-operative business with HKJC, if that was the motivation, and an operation on Hong Kong can work for a company finding itself under pressure in some jurisdictions.
Onerous operating fees and new taxes in Australia are cutting into its racing business there - it will operate fee-free on Hong Kong. And, surely, Betfair has been eyeing Hong Kong again just because of the numbers going through other offshore exchanges or through commingling as Hong Kong racing's popularity continues to rise globally.
And commingling is where Betfair can hurt Hong Kong Jockey Club when it recommences operations on Sha Tin and Happy Valley from the start of the new season, September 1.
In the past 2 seasons, bets from overseas jurisdictions, channelled back to the home tote in Hong Kong as commingling, have been THE story in HKJC turnover, without which the club would be looking at turnover falls in three of the last four years. Notwithstanding a sharp commingling drop between the start of April and the end of June this year, it was still a contributor of well over $US 2 billion in the most recent completed season. So, even assuming that the vast majority of the local Hong Kong betting population won't be thinking about Betfair, the move hits at the club's growth zone.
Some of that will swing to Betfair looking for better prices with a lower house take and the exchange company will also be hoping to snare a part of the handle from the likes of CITIbet, based in the Philippines, whose Hong Kong looks very healthy even alongside the official, legal channels.
With up to 24 per cent price discounts available at CITIbet, that's not a walk in the park for Betfair in a mathematical sense but a customer in Australia, for example, might prefer Betfair as the legal avenue.
In terms of integrity, the Jockey Club will continue to wring its hands over the ability of punters to lay a horse to lose. It's possible there will be more scrutiny of runners unwanted on Betfair, but there won't be the open co-operation between Betfair and the Jockey Club that there is in jurisdictions where the exchange is licensed but will it be that different in practical terms?
The sophisticated stewards/security aparatus in Hong Kong has been closely monitoring CITIbet and other unfriendly betting avenues for years and Betfair will become one more.
"The 'fair" doubtless will do for Hong Kong races what it has done everywhere else and inform the public more keenly than traditional markets, although that too has long been in play with the illegal operators and offshore exchanges. It's already commonplace for betting moves, perhaps intended to take place out of sight or at least quietly, to find their way back into Hong Kong's pools in the final minutes of wagering and some prices get viciously slashed and others balloon out.
The effect of Betfair may be to even soften those fluctuations as the alternative market on CITIbet remains shadowy an relatively inaccessible until the late moves, Betfair will be there for all to see and shaping the betting earlier.
Betfair might also bring an uncounted extra - betting on the exhibition race days at Conghua Racecourse, the club's state of the art training centre outside Guangzhou. Without the Jockey Club itself offering betting when Conghua raced for the first timelast March, neither did any of the multitude of bookmakers who work in part off the club's tote odds, and neither did CITIbet. We'll see if that plays out differently when Hong Kong races at Conghua again on October 26.
The argument will be made that some level of arbitrage, more readily available with Betfair, might stimulate some new tote turnover. How much remains to be seen.
The high visibility of Betfair nowadays may have a positive effect of further boosting Hong Kong's worldwide customer base, but the HKJC will fear that comes at a bottom line cost.