In October 2007 it looked as though the rivers of profit and taxes from poker machines would keep flowing at an ever-increasing rate.
Around $792 million was taken from the punter’s pockets that year with $295 million going to the State Government, around $72 million in GST to the Commonwealth (and back to the State) and the rest to the hotels and the gaming machine industry.
On 1 November 2007 smoking in poker machine venues was banned – a change the industry expected to have a short-term impact.
“Smoking was the catalyst and we never recovered,” said Ian Horne, the Australian Hotels Association spokesman in South Australia.
“It hit the industry and was followed up by lower level impacts from the Global Financial Crisis, a fall in consumer confidence and increased competition from other forms of betting.”
Horne’s comments come as the SA Centre for Economic Studies releases its latest electronic gaming machine (EGM) data.
It shows that gaming machine activity in hotels and clubs remained flat in 2013/14 with total net EGM gambling revenue for South Australia rising by only 0.1 per cent to $731 million, still some $60 million short of the high water mark of late 2007.
While overall pokies activity was stable in 2013/14 there has been a sustained decline in expenditure activity over the past seven years, the data shows.
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Total net gaming machine revenue in 2013/14 was down 7.8 per cent compared to its peak in 2006/07.
The decline in real terms has been much more significant – applying the consumer price index (CPI) the 2007 revenue figure of $792 million would by $939 million in June 2014 dollars.
Instead, its more than $200 million shy of that; a drop of around 30 per cent.
The hit to revenue has been felt in government coffers.
In the 2007-08 State Budget, Treasury estimated gaming tax revenue would drop in the first year of no-smoking rules, but would recover in 2010 and bring in $332million in 2011.
It came in $104 million short at $228 million.
So, was it just smoking that ended the pokies’ dream run?
Economists at the SA Centre for Economic Studies point to a number of factors and Ian Horne agrees with most of them:
- Familiarity – the venues lack a “newness” and many machines have been around for years.
- Reduction in problem gambling – the industry has become more aware of them and some gamblers have realised they have a problem.
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- Consumer confidence – ongoing subdued economic conditions over recent years.
- Shifts in consumer preferences to other forms of entertainment and gambling such as phone-based sports betting.
There have been variations from region to region, but the overall South Australian trend shows a continued real-term decline in pokies revenue.
It’s a challenge that governments can meet by finding other ways to raise taxes.
The hotel industry has a bigger challenge, says Horne.
“It’s a challenging time. If they’re getting bored with old machines and venues then we have to ask what it is that the next generation of punters want.
“I expect we’re in the same boat as horse racing when pokies came along and took some of their revenue.
“The reality for our industry at the moment, though, is that there are fewer renovations and rebuilds.
“The most recent big build was The Warradale.
“That day in November 2007 when smoking was banned – that was definitely the turning point.”
In the debate leading up to the total smoking bans, many opponents said the link between the smoking addiction and keeping players at a machine was unproven.
The SACES database (split into regions) can be found here.
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