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Banned: VIP Lounge signs gone if Labor wins, as more than $700,000 a week lost on pokies in Orange

January 19, 2023

VIP Lounge signs at the Canobolas Hotel. Copyright: Orange News Examiner.




OPINION


By Peter Holmes


Pubs including the Royal, Canobolas and Ophir would be forced to remove large signage outside venues promoting so-called "VIP Lounges" if Labor wins power at the March state election.


Labor leader Chris Minns has announced a suite of measures related to poker machines, including capping the amount of money that can be fed into a machine at one time, trialling a cashless gaming card, banning donations to political parties from venues with gaming machines and slowly reducing the number of machines.


These reforms might have an impact on money laundering, but when it comes to addressing people who can’t control their outlay on the pokies, they are little more than window dressing - the work of a political party wanting to appear to be doing something while remaining cosy with its old pals at the Australian Hotels Association and ClubsNSW.


The Liberals, meanwhile, have finally shown a bit of spine by proposing a cashless gaming card across the board in NSW.


With this proposed reform, which would make it far more difficult for criminal enterprises to clean money via slots, premier Dominic Perrottet stared down the poker machine lobbyists. Curiously, within days of Perrottet making his move, he was informed by controversial colleague David Elliott - who has railed against a cashless gaming card - that gossip was spreading about Perrottet wearing a Nazi uniform at his own 21st birthday party.


But, as with Labor, the Liberals' proposed reform is nowhere near enough.



When asked on TV’s The Project on Tuesday night if a comparison could be drawn between the National Rifle Association in the US and the poker machine lobby in Australia, anti-pokie campaigner Tim Costello said: “The [US] second amendment should only give Americans the right to a ball and musket rifle, not a semi-automatic. Pokies, when they were introduced, were coin operated, you didn't do much damage. Then in the '90s they moved to digital, load up $10,000 cash in one go.”


Costello swatted away criticism from Minns, who said he wanted to see more evidence before committing to a cashless gaming card: “The evidence is the four trials we've already had in Australia. All Chris Minns is saying is yet another trial to kick it into the long grass."


Costello - the brother of former treasurer Peter Costello - described NSW clubs as "mini casinos".


"I’ve done funerals for six people who took their lives because of the shame of pokies, having lost their homes and their businesses," he said.


"The machines are built for addiction. I’ve seen so many lives addicted, captured and destroyed. This is our gun issue and that’s why I’m so passionate.”



So what exactly is a “VIP Lounge”?


And why do pubs everywhere have street-facing signage inviting people into these lounges?


A VIP Lounge is a room full of poker machines. That is it.

They are money-printing ventures on steroids. There are no rare whiskeys, or delicate amuse-bouche being served on silver trays, or notable artworks, or puffy leather Chesterfields in these absurdly-named VIP Lounges.


VIP Lounge signs at the Royal Hotel. Copyright: Orange News Examiner.

To the casual observer these VIP Lounges may appear to be “inside”, yet look closely and you'll note they have sufficient ventilation to be classified as being “outside”.



This is so people can smoke. Because if there is one thing many poker machine players need to do while they play, it is smoke. Well trained, they light up on cue when a “feature” - with its bells and loud music - is awarded on a machine.

Some VIP Lounges offer gamblers free tea, coffee and soft drinks. A few will have staff wander around with trays of mass-produced spring rolls or chicken nuggets around meal times.


These freebies keep players at the machines. This is crucial, as the law of averages means that even if a player has an initial win, the longer they play, the greater the chance they will lose the lot.


Other venues offer their gamblers nothing by way of free food and drinks.



You wonder how someone who slides their twenty and fifty dollar notes into the machines at any of these venues is being treated as a “Very Important Person” until you realise “important” may not relate to how they are treated, rather their value as a source of easy profit for the owners.


The VIP Lounge signage is little more than a way for gambling venues to promote gambling without promoting gambling. A way of skirting the ban on the promotion of pokies, otherwise known as Electronic Gaming Machines (EGMs).



This is important, as it goes to the heart of how much the AHA NSW and ClubsNSW truly care about the helpless saps who tip tens of billions of dollars into the machines in NSW each year.

Consider this: gaming venues are banned from having ATM machines inside pokie rooms. This is a sensible mitigation strategy, as it means people have to at least leave the pokie room to withdraw more cash. In that small window of time is the opportunity for the problem gambler to clear their head, see sunlight and the world carrying on outside the pub, and walk away.


The law states that "ATMs must not be located in a part of a hotel or club in which gaming machines are located. This means that ATMs must be located in an area completely separate to gaming rooms or any other room containing gaming machines ... This requirement is a fundamental harm minimisation measure".


So what did many venues do in response? They positioned their ATMs literally right outside the pokie room. A cynical mind might have seen this as an almighty f*** you to - well, who exactly? The regulators? The public?


In August 2022 NSW Liquor & Gaming sent an alert to all venues with gaming machines.


"Recent inspections have identified four separate hotels with automatic teller machine (ATMs) located in their gaming rooms, in contravention of the gaming legislation," it read.


 

IF the state government took every poker machine in the state and crushed them into scrap, how many would shed a tear?



Well, there’d be the Australian Hotels Association. It’d be screaming like a baby with wind. ClubsNSW would need a box or 50 of Kleenex, as would some of the club CEOs on their fat multi-hundred-thousand-dollar annual packages.



Publicans? Oh yes, many of them would be getting a little misty-eyed. As would the Endeavour Group, which owns 12,400 poker machines in 344 hotels in Australia, according to the Australian Financial Review. Some form of compensation would be due.

Thousands of pub and club staff could lose their jobs, or have their hours cut back, as the gambling revenue dried up.


Outdated poker machines. Stock image.

At one club in the Central West, which made $33,000 a day net profit from poker machines in the last financial year ($12 million overall), 80 cents in each dollar of staff wages were funded by poker machine net profits.


Crushing the state’s 90,000-plus poker machines would impact hugely on these workers and their families, and plans would need to be made for how to redeploy and retrain as many of these employees as possible.



Who else? There’d be those folks who enjoy the occasional dabble - they might slide in $20, get it up to $30 and leave. Or they may lose the $20 and walk away. These people might be a little cheesed off for a while having to pay a price for the betterment of all, but it’s doubtful there’d be too much crying involved.



There might also be tears from the problem gamblers, and those who gamble too much, but maybe these would be tears of joy. And relief.


Some politicians might cry. In the last six-month reporting period for NSW, pubs coughed up $589 million in pokie taxes, and clubs - with greater profit but lower tax rates - $447 million. Money for nothing. Money in the bank.


Anyone else? Well, those who wash their dirty money through the slots wouldn’t be happy. A NSW Crime Commission (NSWCC) report in October 2022 said that criminals were washing billions of dollars of dirty cash through NSW poker machines each year.


The report stated: “It was not possible to precisely quantify the proceeds of crime being laundered via EGMs in NSW, however the inquiry’s assessment of this figure is that billions of the $95 billion EGM turnover for the 2020‐21 financial year was likely the proceeds of crime.”

You can add to that the proceeds of crime that are fed through the machines by problem gamblers.


The AHA NSW CEO John Whelan responded to the NSWCC report by stating: “The Crime Commission has found using EGMs to clean dirty money is not widespread, so there is no reason why the use of cash should be banned.”



This is an interesting interpretation of the NSWCC’s estimates. Even if the amount being laundered in pubs and clubs was at the bottom end of the commission’s estimates, it still meant about $42 million a week was being cleaned at gaming rooms in the state.



Laundering cash through a club or a pub is easy: Step 1: Slide $1,000 in cash into a machine. Step 2: Print a “Collect” ticket. Step 3: Slide the ticket into the cash dispenser. Step 4: Collect $1,000 in freshly cleaned notes. Step 5: Rinse and repeat.


[Note: Step 2 can be expanded to try and “trick” the system by - for example - playing five spins at $10 and collecting, if there are no winning spins, $950 instead of $1,000.]


Who else would be welling up at the removal of pokies?

There’d be a few hardcore libertarians who don't like to be told what to do, I suppose.



And Aristocrat, an Australian poker machine manufacturer with a market capitalisation of $28 billion, would be pretty sore. [It’s worth noting that following Chris Minns’ announcement about Labor’s promised reforms, the Aristocrat share price held firm.]



Anyone else?


Anybody?

 

IN 2007, former Liberal state opposition leader Peter Collins told The Sydney Morning Herald: "It's said that to win and retain government in NSW, you need three groups on side - nurses, teachers and police. Since the '90s, I would add the pubs."



Graphics from modern pokies made by Aristocrat.


Poker machines were made legal in Australian clubs in 1956.


Labor premier Neville Wran first allowed gaming machines into pubs in the mid-1980s. They were known as “approved amusement devices”.


Liberal premier Nick Greiner expanded the number of these basic machines - which offered one game, five-card poker at 20 cents a spin, with a top prize of $100 for a royal flush - that each pub could have in the late 1980s. Then Labor premier Bob Carr allowed pubs to have the same pokies used in the state’s clubs.


When the AHA finally convinced Carr to let pokies into pubs in 1997, hundreds of venues were at risk of going into receivership, as they simply couldn’t compete with clubs and their rivers of pokie cash.


So it is understandable, to an extent, that politicians wanted to level the playing field.


But the cost to the community has been immense. Neville Wran is dead, but Nick Greiner and Bob Carr should reflect with no satisfaction whatsoever on their hand in these “reforms”.



Such is the power of the club and pub lobbies. They do not, and will not, and cannot give up their rivers of gold. Can you blame them? The very foundations on which many pubs and clubs are built in NSW are made of poker machine money. It’s a dreadful indictment on governments of all stripes, who have also become hooked on the easy flow of pokie tax cash into the state’s coffers.


 

POKER machines are not a fair fight. Everything is stacked against the gambler.


The machines of today bear no resemblance to the one-armed bandits of yesteryear, with their spinning reels and comparatively basic design elements.


Today the machines utilise lights, music and slick video graphics to create a mesmerising experience. The manufacturers employ greater minds than yours or mine to dangle carrots in front of the players in order to keep them playing. These “features” or “jackpots” or “near-wins” supply the little dopamine hits that keep the players playing.


The machines also lie to the players. The anti-pokie lobby is onto this, but nobody with any power seems to care.

How so?


Let’s say you pressed a $1 bet on a machine, and the return for that press was 32 cents.


Instead of telling you that you’d just lost 68 cents, which would be the truth, the machine does the opposite, telling you that you had just won 32 cents. The constant flashing of the “WIN” sign is attacking your brain with a story that simply isn't true. Over and over and over and over and over and over.


A statistic that's open to misinterpretation is that pokies return around 90 percent of money gambled back to players.


You could be forgiven for thinking that this meant that for every $1 fed into a machine over its playing cycle (e.g., one million spins), 90 cents was withdrawn by the player.


But this is not true. The ABC outlined in 2011 how the maths actually works, giving the example of a person who spent five hours at a machine betting $1 a spin. Over the five hours the person fed $300 into the machine, playing $1 a bet. Ultimately, they lost the lot.

Over those five hours, as they pressed the $1 bet 3,000 times (10 times a minute), their credits went up and down as the non-paying bets were interspersed with winning bets.


Having wagered a total of $3,000 across the five hours, the machine was required to return on average $2,700 (or 90 percent) back to the gambler.


But the gambler, who had $300 to gamble with, didn't lose just 10 percent of that money ($30), they lost the lot. All while allowing the pokie lobby to claim that 90 percent went back to the player. Which it did. And didn't.

 

LIBERALS, Labor and The Nationals are terrified of the pokie lobbyists, and have been for decades.



It is embarrassing. And pitiful. But the fact is they’re terrified of how pubs and particularly clubs can mobilise support by creating slick, blanket-coverage campaigns that portray reforms as unfair or unworkable or un-Australian; and worse, reforms that would stop little Jimmy’s footy team from ever being able to play again, because, you know, who would pay for the jerseys?



Former prime minister Julia Gillard, in concert with independent Andrew Wilkie, tried to take on the pokie palaces in 2012.

They wanted to introduce a card that would allow gamblers to set a limit before they commenced a gambling session, as it had been shown that people playing the pokies often lost track of how much money they’d lost.




The campaign run by the clubs crushed Gillard. It was the usual stuff about how reform wouldn’t work and would only damage clubs’ ability to assist community and sporting groups. Gillard got the yips and dumped the policy, much to Wilkie's disgust.



A screenshot from a promotional Aristocrat video.


The lesson? Those who use pokies to keep their bottom lines in order simply do not like to be trifled with.


I have a friend in Sydney who owns a pub. His parents owned pubs. He grew up in pubs. For more than 35 years he has promoted live entertainment at his pub. Bands, comedians, theatrical productions, dance parties. Thousands of singers, musicians and DJs - some unknown, some very well-known, and plenty in-between - have been given paid work. So too graphic designers, sound and lighting engineers, roadies, bar staff, people putting up posters, booking agents.

This is hard yakka.


Booking the artist. Promoting the show. Selling the tickets. Organising security. Dealing with the egos and the unknown. But if it sells out and the band plays an awesome show and the punters are drinking, it can be hugely profitable. And memorable, concluding with hundreds of people pouring out into the cold night air, ears ringing, high on music.


Contrast with a back room full of set-and-forget pokies. Less hassle, less smiley faces.


 

BACK to Orange. The figures here are mind-boggling. In this Local Government Area (LGA) there are 10 hotels and six clubs, and between them they have 457 electronic gaming machines, more than one for every 100 people living here.


You can bet up to $10 a spin, and fast players can easily squeeze 20 spins into a minute, or 1,200 per hour.


In the most recent six-monthly reporting period (first half of 2022) those 16 pokie rooms made a combined after tax profit of $18.5 million. This meant that, on average, they made $102,000 a day, seven days a week, in pure profit (there was no individual breakdown for venues).


The majority of after tax profit ($10.8 million) in the six months was made by clubs, which had 299 machines in Orange. Hotels, with 158 pokies, raked in $7.68 million profit.


The club that sucked up by far the most pokie revenue from the community was Orange Ex-Services, which had 219 machines.


It was the 55th most profitable club, out of 1,028, in NSW. It also owned nine machines at the Country Club and seven at the Wentworth Golf Club. It controlled 51 percent of the machines in Orange during the six-month reporting period.


The Ophir Hotel (also known as the Ophir Tavern), with its 29 machines, was the most profitable pub in Orange, and ranked 209th in the state. The top five was rounded out by the Royal (25 machines, 298th), the Robin Hood (26 machines, 394th), the Canobolas (14 machines, 638th) and the Parkview (12 machines, 773rd).


It used to be that pubs were valued on how many kegs of beer they went through each week. Those days are long gone.


Food and beverage sales are important, but the key figure for many buyers today is poker machine turnover, profit and number of machine licences held.



The Orange News Examiner is obviously not advocating for all 90,000-plus pokies in NSW to be crushed. However - as with the out-of-control torrent of TV ads and promotions for gambling apps - there are several things that could be done to mitigate the damage. They include:


  1. Reduce the highest bet

  2. Slow machines down

  3. Ensure a clock is on the screen and on walls within eyesight of all players

  4. Introduce cashless gaming cards with set limits

  5. Inform players of the percentage return on the machine they are playing

  6. Ensure ATMs are placed as far from the pokie room as possible

  7. Shut down play for 10 minutes every hour

  8. Ban inducements such as free drinks and food

  9. Stop describing a losing bet as a “win”


These are not new ideas. And they will not entirely fix the problem. But they will at least give the problem gambler a chance.


Yet at every turn it's only the Greens and some independents and minor parties that are interested in proper reform. The major parties just don’t need the grief, fail to comprehend the scale of the problem, or are too fond of all those lovely pokie taxes.

 

PROBLEM gamblers have been able to “self-exclude” from gaming rooms for some time, but the process is arduous and requires documents to be signed by the venue and the patron.


Venues should “give participants an opportunity to get independent legal or other professional advice about what the agreement means before they start”, according to NSW Liquor & Gaming.


What is the likelihood of a desperate punter jumping through these hoops on the way into a gambling session, when they are on a high, or on the way out, when they’ve done their dough and are dejected?



Facial recognition technology, which allows problems gamblers to “self-exclude”, has been trialled in a handful of NSW gaming rooms, with the backing of the AHA and ClubsNSW.

The rollout will be extended in 2023.


A VIP Lounge sign. Copyright: Orange News Examiner.

ClubsNSW CEO Josh Landis was quoted on industry website Drinks Trade in October 2022: “If you self-exclude from your local suburban club or pub, you will still be detected and prevented from gambling in any pub or club in the CBD or country and regional NSW.


“This is a practical and effective measure backed by self-excluded gamblers and we look forward to seeing its speedy implementation in all hotels and clubs in NSW.”





The devil, however, is in the detail.


If you assumed facial recognition technology would lead a machine to simply lock up when a self-excluded gambler sat in front of it, you would be wrong.


According to the AHA’s John Whelan in the same article, when a patron’s face was scanned and shown to be on the self-exclusion list, an alert would be “sent to the venue within seconds, allowing staff to intervene and prevent gambling”.

On the surface, this is hugely problematic, as at many venues it would not be feasible for staff to drop what they’re doing (pulling beers, serving meals, answering phones) to go and enter into discussions with a problem gambler who wanted to break their own self-exclusion.


Nor should it be part of their duties.


The time to start weaning ourselves off the slots is now. Don't hold your breath.


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