Why are there so many pokies in Australia?

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. Pokies, poker machines, slot machines, whatever you call them. They have been front of mind in Australia recently. 

Audio Clip: [00:00:15] In a tough new state, the Premier is promising action on the state's worsening addiction to poker machines, with shock figures showing gamblers are losing more than $1,000,000 every hour. 

Sascha: [00:00:25] Australia is home to less than half a percent of the world's population, but we're home to 20% of its pokies and 80% of those are located outside of casinos. The result is a nation with the world's worst average gambling losses well over $1,000 per adult each year. But this is no mistake. There have been some powerful forces behind the rise of pokies. It's Monday, the 27th of February, and today I want to know why there are so many pokies in Australia? To do this I'm joined by my colleague here at Equity Mates. It's Darcy Cordell. Darcy, welcome to The Dive. 

Darcy: [00:01:06] Thanks, Sascha. 

Sascha: [00:01:06] From the outset, we want to acknowledge that this is a tough issue and with the New South Wales state election coming up, it's front of mind for a lot of voters. We are going to try and avoid stepping into the politics of this issue and we're not going to talk about where we should go from here, but rather we want to unpack how we did get here, how Australia became the land of the pokies. If you're having trouble with gambling, there are services to assist you. The Gambling Helpline one 800 858858 is a free confidential telephone help service which operates 24 hours a day, seven days a week, and I'll put those details in the show notes below. And if hearing an episode about gambling is triggering for you, just don't listen today. We'll see you on Wednesday. So, Darcy, let's turn to the story. Nearly half of Australia's $25 billion annual losses in gambling goes into poker machines and the issue appears to be getting worse. According to one study, the share of Australians with a gambling problem has doubled over the past decade to more than 1%. Why do we have such a big problem in Australia? 

Darcy: [00:02:13] A big part of Australia's gambling problem is simply the ability to legally gamble in so many places. It's just so accessible. 

Audio Clip: [00:02:21] The role poker machines are playing with problem gambling. The Premier didn't mince words today. Problem gambling is a scourge on our state. People's lives are being destroyed. Families are being broken. We're taxing on the misery of others. [00:02:36][15.1]

Darcy: [00:02:37] In most of the world, electronic slot machines or pokies are confined mainly to casinos, but not in most parts of Australia. They're littered through pubs, clubs even marketed as VIP lounges around the country. Our story of pokies goes back almost 100 years. Illegal mechanised pokies, dubbed one armed Bandits, began appearing in Australia in the 1930s. By 1956 they were so widespread that authorities in New South Wales decided to legalise them in the hundreds of social clubs that had opened during the post-war boom. But at this stage no other state legalised them. The non-profit clubs in New South Wales, they ploughed their earnings into restaurants, sport facilities, entertainment centres and more pokies. But it was really the 1990s when pokies use exploded in Australia. New South Wales legalised in 1956. I say in 1976, but it wasn't until the 1990s that we saw a huge wave of legalisation. Victoria and Queensland in 1991. South Australia one year later, Tasmania in 1997 and then the Northern Territory in 1998. And this also coincided with pokies going electronic, which allowed players to play far more games faster with more flashing lights and music more addictive. And you could lose money far quicker than back to New South Wales. In the 1990s, pokies were bringing in so much money that clubs were seen to have a competitive advantage over pubs. So to even the playing field, the New South Wales Government allowed casinos, pubs and hotels to install pokies in the mid-nineties, and from that decade. Sascha, pokies use has just continued to grow. Today we are at a point where Australia has 200,000 pokie machines and nearly half of them belong to New South Wales, which has more poker machines than the whole of Las Vegas.

Sascha: [00:04:28] As we look at the landscape today, many of Australia's clubs and pubs rely on revenue from poker machines.

Darcy: [00:04:36] They do, and IBISWorld looked at the average revenue mix for Australian social clubs. This is pretty shocking. 13% comes from food and meals, 17% from other services, 22% from alcohol sales, but 48% from gambling. Now that's the average. Not every club is the same, but for that to be the average is a really worrying look at the. The revenue mix and the reliance on poker machines. 

Sascha: [00:05:02] And throughout history, Australia hasn't just become the land of the slot machine player. It's also become the land of the slot machine maker. 

Darcy: [00:05:11] That's right. Some of the biggest gaming machine companies are based here in Australia and globally. There's no one person more associated with the rise of the slot machine than Len Ainsworth. He founded Aristocrat in 1953 and he was right at the forefront of legalisation in New South Wales and the growth of poker machines all around the world. Aristocrat began exporting machines to the US in the sixties and it was one of the first companies to make electronic pokies. And now it's the world's largest slot machine manufacturer. Neck and neck with the UK's international gaming technology. In 2021, Sacha Aristocrat filed more patent applications than any other Australian based applicant. They filed 157 patents compared to CSIRO in second with 45. 

Sascha: [00:05:59] Wow. 

Darcy: [00:05:59] But Len Ainsworth actually left Aristocrat in 1984 after he was diagnosed with prostate cancer. After recovering from that cancer scare, he founded Ainsworth Gaming Technologies in 1995, and now Ainsworth gaming technology supplies up to 35% of Australia's poker machines. 

Sascha: [00:06:17] Darcy, tell me, how did Aristocrat react to that? Their founder goes and starts a company with direct rivalry with them. 

Darcy: [00:06:25] Yeah, they were not very happy and Ainsworth and his family still have a large stake in Aristocrat, but it got a little bit sour in July 2019 when Aristocrat actually sued Ainsworth, alleging that they used proprietary code and media assets leaked by a former Aristocrat employee to produce a clone of its popular lightning linked games. But, you know, I don't think Len Ainsworth is too worried. As of May 20, 21. He was listed 16th on the AFR Rich list with an estimated net worth of over $5 billion. 

Sascha: [00:06:56] And as the gaming industry evolves, the two companies Len Ainsworth founded have been on the forefront of many of the trends in the gambling industry.

Darcy: [00:07:06] Yeah, Aristocrat have been on the forefront of the shift to online gaming. Aristocrat now has a booming online computer game business, which accounts for over 40% of its revenue. One of those games is called Anak Sie, which is a real money online gaming platform, but they've also developed a number of free to play mobile games applications, some of which are identical to the slot machines. But you just don't win or lose any money and they make money through in-app purchases. 

Sascha: [00:07:34] So Darcy is a quick timeline of how Australia became the land of the slot machine. We're going to take a break right now. And when we come back, we're going to talk about how Australia remains the land of the slot machines. We'll be back in a moment. Welcome back to the Dive. I'm your host, Sascha Kelley. Quick favour to ask. It'll take 10 minutes. We've got our community survey. It closes tomorrow. So this is your last chance to tell us what we should be doing here at Equity Mates Media. It will take you less than 10 minutes, less than the second half of this podcast to fill out. And then you'll go in the running to either win $500 or tickets to Finn Fest, which this year is on the 11th of November, or just the feel good vibes to know that you've helped your favourite podcasters make some smart decisions this year. Our sincere thanks to everyone who has taken the time to fill this out. We really, really appreciate it. But back to the subject at hand today. Gambling away billions of dollars every year, New South Wales has again recorded the highest poker machine losses of anywhere in the world. As the damage bill keeps rising, industry reform is shaping up to become a hot topic at next year's state election. Darcy We've been speaking about how Australia became the land of the slot machine, but I want to turn to why Australia remains the land of the slot machine now. And to unpack this part of the story, we need to look to the business of gambling in Australia. Where does that money go? [00:09:10][96.5]

Darcy: [00:09:11] The profits of pokies first and most obviously flow to the casinos, pubs and clubs that own the licences to run them. I mentioned earlier that on average 48% of profits for social clubs comes from gambling. But then there is a big tax collected. Governments collect over $7 billion in taxes per year across all gambling sectors. And to put that in perspective, the Federal Government collects about $15 billion a year from cigarette taxes. So after that, some of the profits are then put back into local communities, typically in the form of support for junior sport, and that gives clubs a pretty strong argument against attempts to rein in the number of pokies, But studies into the amount of money that flows back into communities do give us pause. Reporting from The Guardian from December last year found that Victoria's RSL has made $163 million from gambling in the 2122 financial year, but they only gave back $8.4 million in direct community funding. 

Sascha: [00:10:09] But Darcy, I read that Victorian poker machines had legislation that meant that they had to return 87% of the total amount. That's BET every year.

Darcy: [00:10:19] Sascha That's where the return to player setting comes in and that's the average amount won by players as a share of the cumulative amount staked. It takes millions of games for a machine to tend towards its return to player setting, so there's no individual requirement for an individual machine to return its winnings. And the total value of prizes paid to all players will always be less than the total amount of money gambled on any machine.

Sascha: [00:10:43] So crucially, Darcy, 87, it still represents that 13% that is always being lost. 

Darcy: [00:10:51] Or to make it clear how hard it is to win. Sascha, can you guess the chances of landing a jackpot on a poker machine? 

Sascha: [00:10:58] I have no idea. I know that the lotto, it's in the millions. So 100000 to 1. 

Darcy: [00:11:04] A lot higher than that. So to win the jackpot, it's literally a one in 35,640,000 chance. So the real jackpot here is holding the licence to collect people's losses.

Sascha: [00:11:17] And speaking of these licence holders and the profits they make, a fair chunk of their profits are reinvested into political lobbying efforts to ensure that Australia remains the land of the slot machine. 

Darcy: [00:11:30] Yeah, and there have been efforts to lessen the number of pokies or the size of Australia's gambling losses, most notably with Julia Gillard's government in 2010. But these are always met with an immense, well-funded lobbying effort. Former South Australian Senator Nick Xenophon was a big proponent of gambling reform and he was a vocal opponent to the gambling lobby. He compared the power of the gambling lobby in Australia to that of the gun lobby in the United States. Pretty powerful comparison.

Audio Clip: [00:11:59] I'm not happy about pokies being in South Australia, but this is the best plan to reduce the harm, to reduce the misery and devastation. 

Darcy: [00:12:07] And Tasmanian Member of Parliament Andrew Wilkie has commented that the gambling lobby have tentacles deep into the political system here. 

Audio Clip: [00:12:14] In 2010 the Prime Minister and I reached an agreement on meaningful poker machine reform. We put it in writing and we both signed our names to it. 

Darcy: [00:12:26] In 2020, the ABC reported that the gambling industry had donated at least $60 million to the three major political parties over the past 20 years. 

Sascha: [00:12:36] Despite this lobbying effort, though, Darcy, we have seen different states push back on poker machines. 

Darcy: [00:12:43] Yeah, and we're talking about it today because New South Wales Premier Dominic Perrottet is taking his pokies policy to the election. Hayes introduced a plan for mandatory cashless gaming in pubs and clubs throughout the state. 

Audio Clip: [00:12:56] For generations to come. We will not have money laundering and will not have family breakdown due to problem gambling in this state. That's what we solved today. 

Darcy: [00:13:04] If implemented by the end of 2024, people will no longer be able to use cash. They'll have to have a pre-loaded card that they use at the pokies and that allows you to put a limit on the amount that can be gambled each day. Players will need to set daily loss limits of up to $100 or monthly limits of up to $500 or annual limits of $5,000. And these can only be set highest should the person have a proven capacity to afford it. 

Sascha: [00:13:30] Tasmania have also acted, announcing plans to bring in a mandatory card based scheme for all players by the end of 2024. And I know that Western Australia is arguably ahead of all other states with their poker policy as well. Poker machines are a common sight in pubs and clubs across the eastern states, but they are banned in Western Australia. Instead, there are electronic gaming machines or AGM. And you'll only find them in Perth's Crown Casino. 

Darcy: [00:14:02] In Western Australia, poker machines are actually only allowed in the casino. And there are just over 2400 machines in the state, compared to more than 91,000 in New South Wales. So per capita, that's less than one per 1000 residents in WA. And in New South Wales it's more than 11 per 1000 residents. And it looks to be working with Sascha as a result. WA has the lowest rates of gambling losses per capita in the country, $655 per capita a year compared to 1600 in New South Wales. 

Sascha: [00:14:37] And the Western Australian experience is instructive when it comes to one of the big arguments you'll hear against poker machine reform, which is that problem gamblers will just turn to other gambling options like sports betting. 

Darcy: [00:14:51] That's right. And Dr. Francis Markham, a research fellow at the ANU, estimates that the rest of Australia reports 1.6 times more problem gambling symptoms than Western Australia. And he says it appears that the money would have been gambled if poker machines were more common in the state. But that money is not going to other forms of gambling. Research suggests that there is a far from a 1 to 1 substitution effect, if any, between different forms of gambling. 

Sascha: [00:15:18] And that really brings us to the broader context of this story. Pokies or no pokies? Australians just love a punt, especially with sports. 

Audio Clip: [00:15:29] How about this filly in the fifth fella's put a 50 on it and.

Audio Clip: [00:15:31] I'll give you my girl. Go easy with Sportsbet. Same game, multiple markets.

Darcy: [00:15:37] It all adds up. Australians collectively lose $25 billion a year on gambling and half of that is from pokies. The average Australian adult drops about 1200 dollars on gambling every year. And to put that in perspective, Singapore is second at just over $1,000. Ireland is third there only at $600 per person and Americans are only at 400. So if WA was its own country, even with these tighter poker machine laws, it would still be third in the world. Better, but still not great. 

Sascha: [00:16:10] Again, if this episode has triggered anything for you, do reach out to the gambling helpline. One 808 58858. Those links again in the show notes below. But I think that's all we'll have time for in today's episode. A reminder that FinFest is returning on the 11th of November. Register your details to keep up to date and Access Early Bird ticket prices. Go to equitymates.com. If you want to keep this conversation going, then hit us up by email way of the dive@equitymates.com or hit follower and subscribe wherever you're listening right now and then you're never going to miss another episode. Darcy, pleasure to have your company this morning. 

Darcy: [00:16:51] Thanks, Sascha. You too.