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Joint Select Committee on Gambling Reform
Prevention and treatment of problem gambling
- Parl No.
- Committee Name
Joint Select Committee on Gambling Reform
Crossin, Sen Trish
Brodtmann, Gai, MP
Madigan, Sen John
Back, Sen Chris
Xenophon, Sen Nick
- System Id
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Joint Select Committee on Gambling Reform
(Joint-Wednesday, 2 May 2012)
CHAIR (Mr Wilkie)
ACTING CHAIR (Ms Brodtmann)
Mr P Symond
Mr D Symond
- Senator XENOPHON
Content WindowJoint Select Committee on Gambling Reform - 02/05/2012 - Prevention and treatment of problem gambling
FERRAR, Mr Ross Edward, Chief Executive Officer, Gaming Technologies Association Limited
CHAIR: Welcome. I invite you to make a brief opening statement before the committee proceeds to questions.
Mr Ferrar : On behalf of the Gaming Technologies Association, thank you to the committee and its members for the opportunity to provide input to this inquiry. As I have previously advised the committee, our members supply all new poker machines in Australia and have supplied a large proportion of the 2.6 million so-called casino style gaming machines around the world.
Our submission sought to explore several areas, based on our members' collective experience and technical expertise amassed over 55 years supplying poker machines in Australia. In particular, we sought to explore the means of providing effective messages to poker machine players. In our view, a strict set of requirements must be present for messages to provide any meaningful information to poker machine players. Such messages must be delivered in the right place at the right time and must contain information that is relevant to the player. The right place is on the 'game play' screen and not on some display device located away from the player's direct line of sight. The right time is between reel spins, not on an ad hoc basis determined by factors outside the player's frame of reference. The right information is about the player's current activity; it is not about patronising phrases. Without these preconditions efforts to provide effective responsible gambling messages will, in our opinion, fail. Our submission also sought to explore data collection and evaluation issues. Poker machines can be construed as automatic data collection devices. The current use of this data is to provide players with information and also to provide financial and related information to monitoring and other systems. The specification of the data that is provided to monitoring systems varies dramatically between jurisdictions. One of the advancements that we think this committee could achieve would be to recommend that a single national set of requirements for the collection of information from poker machines via monitoring systems is determined. This would involve consideration and review by researchers and then dialogue with suppliers of poker machines and monitoring systems, then directing each jurisdiction to implement the agreed specification.
This raises a related point: red tape. Over a year ago I advised the committee that the lack of harmony between jurisdictions is an impediment to change. This is still the case today. A supplier seeking to sell a new game or machine throughout Australia must negotiate 14 different submission and approval processes and each of these processes requires very costly independent testing and accreditation before it can be approved. This applies equally to changes to existing games or machines. In December last year, we briefed officers from the Department of Families, Housing, Community Services and Indigenous Affairs in detail about this process. We presented a flowchart, which I have tabled for committee members' information. The people that provided that briefing were members of our technical committee and I will mention them because I have a very important point to make about them. They were Dieter Polaczek, Peter Chick and Phil Osborne, from Aristocrat, Konami and IGT respectively and who with me have more than 30 years experience each of working in the gaming industry, and the chairman of our technical committee, Arthur Rotziokos, who has more than 20 years experience. I regard these people as experts in the supply of gaming machines and I regard them as the only experts in the supply of gaming machines in Australia. We also presented the same information to the coalition's working group on gambling.
In short, and as noted in our submission, the cost of making substantive changes to poker machines in Australia is at least $5,000 per machine and more than that if the machine is older than three years. That flowchart tells you why. It is a complex process. Our submission also sought to explore gambling policy research and evaluation. As we discussed, funding for gambling research could and should be better directed into a national fund to enable research oversight. This would provide a starting point toward the establishment of objective, independent and arguable background facts which would provide a robust framework for addressing issues effectively. Thank you, and I am pleased to answer any questions.
CHAIR: Thank you, Mr Ferrar. We will kick off questions.
Senator CROSSIN: In the Northern Territory I have some clubs that tell me they take in about $1 million in revenue. Why should I feel any sense of empathy if a machine is going to cost anywhere between $5,000 and $25,000 to modify?
Mr Ferrar : That is probably a question for the club, rather than the supplier. What I am seeking to do here is give you a very accurate picture of what is involved in making the changes and venues would have to pay for services and goods supplied to them. How they fund that need is really a matter for them. So I understand your question but I am not sure I am the right person to answer it.
Senator CROSSIN: So in your submission, when you talk about the cost of changes, you are saying that is provided for us as factual information?
Mr Ferrar : Yes.
Senator CROSSIN: You make no comment about whether it is doable for every individual club?
Mr Ferrar : I do not think we can. Our members are the people who supply poker machines. Once poker machines are supplied anywhere in Australia there is no further financial interest from the suppliers in the operation of the poker machines.
Senator CROSSIN: You are the people who would make those modifications, though, or make those changes.
Mr Ferrar : We are the only people who can. It is proprietary software and hardware. So it is completely the responsibility of the people whose names I mentioned and their colleagues—
Senator CROSSIN: So essentially it would be a business decision of those clubs to do that.
Mr Ferrar : Absolutely. The way we see it, those business decisions will have a range of different drivers. They will make their decisions about expenditure based on a whole range of things and I am probably not adequately qualified to go down that path.
Senator CROSSIN: Given the pressure that is mounting and the policy changes that are happening in the country, are all new machines now being made with a precommitment ability?
Mr Ferrar : No, because there are no requirements for precommitment at this point.
Senator CROSSIN: There is no sense of responsibility to do it?
Mr Ferrar : There absolutely is, but software cannot be developed until somebody has specified exactly what it has to do. We have no idea what is required in the way of precommitment at this point and any slight change in the functional specifications and subsequently the technical specifications that software engineers work from will result in duplication of that effort. Our members are very keen to ensure that their products comply—not only keen but it is an imperative that their products comply completely with all requirements. If they do not, the equipment is not approved for use in the Northern Territory or elsewhere. So for our members to develop any business model, the products that they supply to the marketplace must by definition comply completely.
Senator CROSSIN: And draft legislation is not enough for you to start taking that action; you need to see legislation through a parliament to be satisfied that—
Mr Ferrar : Legislation does not provide a functional specification.
Senator CROSSIN: But it is a start, isn't it? It is an outline of what is expected.
Mr Ferrar : We had a board meeting two days ago and spent most of the time discussing this. Each of our members is developing how they would manage this process. As I hope the flow chart depicts, it is an incredibly complex thing to achieve. Our members are addressing it as best they can and each of them is making their best effort to prepare for whatever might come.
Ms BRODTMANN: Thank you very much for your presentation, Mr Ferrar. I am interested in the gambling messages. Have you done research on that to back up the remarks made in your submission in terms of the frequency and what works best?
Mr Ferrar : As I said in my introductory remarks, part of the process of providing a game is communicating with the player, providing information to the player. The comments I made in my introductory remarks are essentially those of our technical committee in relation to how they develop their games and how they communicate with the player. No, we have not done research along the lines you have suggested. Our job is to provide equipment that complies comprehensively with all of the things that are required of it. There is no point in us developing something that may in some jurisdictions not be acceptable.
Ms BRODTMANN: Okay, but you have made some assumptions here in terms of the fact that messages are far more likely to be noticed at a time when the player is most receptive to such input, as in in between spins. How do you know that?
Mr Ferrar : To us that is self-evident. While the reel spin is occurring the player is preoccupied, the player is waiting for the outcome of the reel spins. Then the player is looking at if they have won and what they have won. Then there is a pause while they make their decision to play again. So to us the optimum time to deliver a message is in that pause. The reverse side of that coin is to us we do not see much point in delivering messages while the player is preoccupied with the reel spin, hence our statement.
Ms BRODTMANN: I am thinking about other mechanisms on the poker machine, a distracting device or something. Obviously you have developed very clever machines that maximise the player input. I am wondering what sort of research you have done in terms of where their eyes are going or what works best in terms of messaging.
Mr Ferrar : These are machines. They don't get happy; they don't get sad; they just run programs. Our members in the last 55 years have delivered equipment, some of which has been highly unsuccessful and no-one has wanted to buy any more, and others of which have been okay and people have bought more. Others have been satisfactory and there has been demand for them. The people who make that decision are the people that work in casinos, clubs and hotels, and have the authority to make purchase decisions. There is a disconnect between the player and the supplier, and the venues are in the middle.
Ms BRODTMANN: Sorry, I do not want to labour this point, but you would essentially be making a machine that maximises the output for the club. You want a successful machine; you want to create a successful machine.
Mr Ferrar : You want to produce equipment that people want to buy.
Ms BRODTMANN: Well, that is 'create a successful machine'. What I am trying to get to is: the messaging and what makes for a successful machine.
Mr Ferrar : If our members had a comprehensive answer to that question they would not make any that were unsuccessful—and they do.
CHAIR: Tell it straight, Mr Ferrar: what is the measure of success?
Mr Ferrar : Demand for a product.
CHAIR: What sort of machines do venues favour?
Mr Ferrar : The answer to that question is: it varies enormously.
CHAIR: What do they want in a machine?
Mr Ferrar : They want entertainment value for their clients, in my opinion.
CHAIR: They want entertainment value for their clients?
Mr Ferrar : Absolutely. The purpose of a gaming machine is to entertain the clients in clubs.
CHAIR: So they are not interested in the revenue from that machine?
Mr Ferrar : I would have thought that they are absolutely interested in the revenue from that machine. That is part of the entertainment.
CHAIR: Isn't the revenue from the machine the principal consideration for the venue?
Mr Ferrar : I do not feel completely qualified to answer that question.
CHAIR: Hang on. You are in the job of producing successful machines.
Mr Ferrar : Yes.
CHAIR: So what are you trying to build into that machine? What do you want that machine to do?
Mr Ferrar : We want it to entertain the clients in casinos, clubs and hotels.
CHAIR: Do you want it to maximise the revenue from the people who play the machine?
Mr Ferrar : Frankly, compared to providing a desirable entertainment activity in clubs, hotels and casinos, everything else comes a distant second.
CHAIR: Really? Revenue is a distant second to the entertainment value of a poker machine?
Mr Ferrar : In our view, clubs, hotels and casinos are entertainment venues.
CHAIR: That is a remarkable assertion.
Mr Ferrar : After more than 30 years working in the industry, I am quite comfortable with that assertion.
CHAIR: We could go around in circles on that point for the rest of the afternoon if we were not careful.
Senator MADIGAN: When you spoke about designing a machine to get the best result and you have a computer programmer working out the program for a game, do you conduct psychological research?
Mr Ferrar : As I have said a number of times, I have worked in this industry for more than 30 years; I have worked in my current job for almost 11 years. I have never met a psychologist working for any of our members. I am not aware of any psychologists working for any of our members. There are approximately 2,000 employees in Australia of our members, and I have never even considered it possible that a psychologist would be employed by any one of our members.
Senator MADIGAN: Do you conduct market research on games?
Mr Ferrar : Typically, no. I know that is difficult for some people to accept, but what makes a successful machine, in terms of demand for people to purchase it, is spoken of by people, such as our technical committee that I have mentioned, as more an art than a science. Some machines that are not expected to be all that successful will be, and some machines that are expected to be successful will not be. As I said earlier, if our members had a magic formula they would not produce unsuccessful machines.
Senator MADIGAN: I would imagine that a manufacturer of any product after, say, 30 years of involvement in the industry, would not be having a random shot. They would be attempting to get bang for their buck and not be putting money out unless they had a fairly good idea. You have alluded to the cost here in this sheet. It does not seem to me that, if I were in that business, I would want to punt my money on a product that I did not think would be successful. After 30 years, I would want to hit the bullseye and get a machine that people wanted to buy and that was going to deliver a financial outcome for the purchaser.
Mr Ferrar : I think it is perfectly reasonable what you are saying. In other words, I do not disagree. From a business sense, I think you are absolutely right. But, as I said, it is considered to be more of an art than a science. There are two categories of new games, if you like. There are newly developed games and what we know as cloned games, where there is an existing game which is reclothed, if you like. You would expect the cloned game to be as successful as the original game, but many times they are far less successful than the original game, even though they are virtually a carbon copy. So what makes a game successful—which I define as one where there is demand from clubs, hotels and casinos to buy it—is not a science; it is not a known statistical exercise.
Senator MADIGAN: You term 'successful' as the demand for that machine, and the demand for that machine is driven by its profitability—would you agree?
Mr Ferrar : As I said earlier, to me, it is all about entertainment. Sure, profitability is going—
Senator MADIGAN: That is what you say your thing is, but you are not the bloke buying the machines.
Mr Ferrar : Correct.
Senator MADIGAN: There is what you think the machines do and then there is what the person who is looking to buy a machine wants it to do. They want turnover. They want to make a bob. So they are looking at what is the most successful machine to bring in money, aren't they? Ultimately, it is the punter who pays for it.
Mr Ferrar : Until a couple of years ago, I was a member of a small club's board of directors near where I live, and so I was directly involved in those discussions. Certainly, revenue comes into decision making. With every purchase that we made while I was a director of that club, revenue came into the decision. But if, after having looked at a game running on a machine in a showroom or at a trade show, you really wholeheartedly believe that it will fit into your club and provide the type of activity that you believe your club members want, then you will consider purchasing it. For us, it was all about what the club members wanted.
Senator MADIGAN: Thank you.
CHAIR: Senator Back.
Senator BACK: Thanks, Mr Chairman.
CHAIR: I think it is best that I keep you away from Senator Xenophon as long as I can, but we are getting there!
Mr Ferrar : I think I appreciate that! I always welcome questions from Senator Xenophon or anyone else.
Senator BACK: I want to take you to a supplementary submission provided to the committee by Mr Tom Cummings, which we received on 2 April. In the submission he largely disputes most of the points about the actual costs of implementation et cetera that you made in your submission. He disagrees with your reference to high intensity right through to your estimate of the costs being $3.25 billion. He says that, because of the wastage over time and the replacement over time, his estimate is $1.25 billion. Did you have an opportunity to look at it?
Mr Ferrar : I did.
Senator BACK: Would you be kind enough to give the committee your response to his critique of your submission.
Mr Ferrar : Certainly. Thank you. We felt that the inquiry process was not the appropriate forum for that type of discussion. Essentially it is an argument. I stand behind every word in our submission. I could go and isolate the points. We have considered them. The submissions that we provide to any government body are carefully considered—in the first instance by a technical committee that I keep referring to, and in the second instance by a board of directors who are all more experienced than our technical committee. Frankly, we were initially a little dismissive of some of the arguments. I think a lot of what we said in the submission was taken way out of context; some of it was just interpreted wrongly. We purposely tried to keep our submission grammatically and presentation-wise so that people could understand it. We found the response from that gentleman highly disappointing. We do not see the need to be having a spat with that gentleman, talking about the details. I am completely confident of everything in our submission.
Senator BACK: Let us go to the flow chart you were kind enough to supply to us. Am I to understand that this flowchart is the national process, or, particularly now in terms of the compliance assessment, would it be one compliance process nationally? Once compliance is proved, is it then the case that this technology can be rolled out in each state and territory, or is it a state-and-territory by state-and-territory activity?
Mr Ferrar : This flowchart is for one game. There are currently 25,000 game versions running in Australia.
Senator BACK: So this is for one game?
Mr Ferrar : Yes.
Senator BACK: In one jurisdiction?
Mr Ferrar : Yes. As I said in my opening remarks, if you are to provide one game nationally there are 14 different submissions that have to be done—and not only for each state, because in most cases each state has more than one set of requirements. Typically there is one for casinos and one for clubs and hotels. So there are 25,000 games running on the almost 200,000 machines, and each one of those games would have to go through this process. Currently, there are less than 2,000 of these processes conducted annually nationally. It is of great concern to us.
Senator BACK: So there are 2,000 nationally.
Mr Ferrar : Yes.
Senator BACK: There are 25,000 out there?
Mr Ferrar : To be done, yes.
Senator BACK: So, without any repeat testing, that would be a ten-year exercise unless there were more resources added to the testing and approval process.
Mr Ferrar : One would anticipate that that would occur, particularly if there were a date mandated. We have had so many conversations around the table about this process. In fact Senator Xenophon once asked me a question about seat belts in motor vehicles, and it so happens that South Australia was one of the first acts in Australia to legislate for seatbelts—it was in 1964, as I understand it—when they legislated for motor vehicles to have seatbelts by 1970. That is typically, in my observations and my own experience, what happens with a modification. So, rather than recall all the motor vehicles and fit them with seatbelts, there was a requirement that at an agreed date in the future all new equipment—in this case, motor vehicles—would include seatbelts.
What we are contemplating with dates such as 2014 is the equivalent of a recall, but for any changes to the software or hardware on any of the poker machines operating in Australia this process will have to be followed unless it is varied by government. So, yes, there is—
Senator BACK: When you say 'by government', are you referring to the federal government, or are you talking about the jurisdiction that has responsibility—in other words, state and territory governments?
Mr Ferrar : This process operates under state and territory government legislation and regulation, but I would imagine that at any practical level they would have to be encouraged by the Commonwealth government.
Senator BACK: I am looking at your time lines of two months and two months. Having run a company that produced both hardware and software for high-level asset evaluation in the fuel industry, I would have thought that development and internal testing—let alone external testing—of software in an eight-week period is a very ambitious target.
Mr Ferrar : These figures are regarded as best case—the line along the bottom—and the numbers in them were a source of great contention among the oft repeated technical committee members. Essentially, what it adds up to is at least 11 months to go through this process, assuming all goes exceedingly well.
Senator BACK: Without having to go back and retest and work out bugs.
Mr Ferrar : Yes. If the software engineers do their job perfectly and the testers encounter no problems, and the dialogue between the external test laboratories and the regulatory authorities goes swimmingly well, and the venues want to buy them immediately, then this is the best case.
Senator BACK: Your members would not develop this software—part of the other question by Senator Crossin and your response earlier—without having firm contracts in place. The cost is very significant.
Mr Ferrar : All our members are either listed companies or part of listed companies. They do not waste resources but they do their best to prepare for future events.
CHAIR: The first five months seem to be company licence, executive licence and premises approved, but surely for existing companies, premises and venues that is already done. So the first five months is perhaps a bit misleading.
Mr Ferrar : The second line from the bottom is intended to be, if you like, the ingredients that have to be in place before the process above the line can take place.
CHAIR: Okay, I have got it thank you. This is game development but if you want to be, say, retrofitting a machine for precommitment or with $1 bets, you do not necessarily need to develop a whole new game, do you?
Mr Ferrar : Below the word 'configuration' in the second lighter blue section are limits and denominations and above the line is services—I have there PIDs, player information displays. That is where they are created. So yes, you would have to go back to that configuration phase.
CHAIR: Can Australian operators of poker machines purchase machines from overseas sources?
Mr Ferrar : No.
CHAIR: Because they are licensed to—
Mr Ferrar : It varies by state and territory but any purveyor of poker machines in Australia must be licensed in the jurisdiction in which those machines are to operate. Furthermore, as I say here, their executives have to be personally licensed, which is quite a comprehensive process in itself, and their premises have to be approved before they can even start.
CHAIR: Are any overseas manufacturers currently licensed?
Mr Ferrar : What is the best way to answer this, Senator Xenophon? Two of our eight members are listed on the Australian Stock Exchange but operate internationally on all continents. The other six of our members are headquartered overseas but have Australian divisions—that is probably the easiest way to portray it. So you could consider that the six companies which are headquartered overseas are not Australian companies. For example, the largest gaming machine manufacturer in the world is IGT. It has a company set up in Australia called IGT (Australia) Pty Ltd and a sizeable premises at Rosebery between here and the airport.
CHAIR: Is it the case that business often will find a way and that if you had a lucrative contract to supply new machines or games to a tighter deadline, you could surge and meet that contract?
Mr Ferrar : Our members are used to complying with all sorts of requirements. Without going into too lengthy an explanation, my answer to your question is yes, business does find a way. As I have tried to portray, it is a complex process to deliver change but that does not mean that our members do not want to deliver it. I wanted specifically to draw the committee's attention to the fact that it is a complex process.
CHAIR: I understand. Would it be true to say that changes to poker machine regulations requiring changes to machines and games would be quite a lucrative prospect of the industry?
Mr Ferrar : It varies. I can give you an example. In New Zealand seven years ago, player information displays that I mentioned earlier were mandated by legislation. It was a very difficult thing for the industry to achieve, but it was achieved. It was not a lucrative exercise for our members because it was far more complicated than everybody thought it was. Mind you, there were complicating issues at the time—for example, New Zealand installed a monitoring system for all its clubs and hotels at the same time, so the requirements were more complex than everyone had anticipated. That process cost upwards of $60 million, so I am told, for less than 20,000 machines. I would have to check the facts but a number of years lead time was given; I think it was four years.
CHAIR: Thank you. Senator Xenophon, please take the time you need for questions; we can run over time.
Senator XENOPHON: Mr Ferrar, please take this as a compliment of sorts, a grudging compliment: I am always astounded by your chutzpah.
Mr Ferrar : Should I respond?
Senator XENOPHON: No, it is just a comment, not a question. And I will say on the record that you are always willing to engage, even at a private level, about issues and I am grateful for that. Again, that is a comment, and I say it respectfully.
Mr Ferrar : Thank you.
Senator XENOPHON: Having said that, I ask: why do you have to put what seems to be incredibly misleading material in your submission? I do not know whether you think we are mugs on this committee. For instance, let us go to the question of the intensity of Australian poker machines. You say:
The … average hourly revenue of gaming machines in Australia is around $10.91 or less than 1% of the $1,200 "hourly loss" which some have suggested.
Do you concede that you are misleading the committee with that comment?
Mr Ferrar : No, I do not, Senator Xenophon. And, as I have said before, I stand by everything in this submission.
Senator XENOPHON: Okay. Let us deconstruct that comment.
Mr Ferrar : May I add a point? I brought it to the committee's attention because that is what we told the Productivity Commission in its inquiry several years ago and I thought it was very important to point that out.
Senator XENOPHON: All right. Let us deconstruct that. $10.91 per hour: that includes a machine that no-one plays for 90 per cent of the time—is that right?
Mr Ferrar : Yes.
Senator XENOPHON: But, when somebody actually does play a machine, a player can lose $1,200 an hour or more. That is the case, isn't it?
Mr Ferrar : We find that arguable, but I am not going to argue it with you.
Senator XENOPHON: I see people in my office who break down and tell me that they have lost $10,000 or $12,000 in a playing session. They show me how much they have taken out of the ATM and they show me their playing records.
Mr Ferrar : Senator Xenophon, as I think you know, 15 years ago I was assistant casino manager at Jupiters casino and I dealt with all problem gambling issues at that casino for quite some time.
Senator XENOPHON: You do not think people can lose $1,200 an hour?
Mr Ferrar : I am familiar with what is involved in dealing with problem gamblers.
Senator XENOPHON: We are short of time. Can we please answer my question. Are you denying that people can lose $1,200 an hour or more on current poker machines?
Mr Ferrar : I have just said that we find that arguable.
Senator XENOPHON: That is incredible.
Mr Ferrar : I am here representing our association and its members. Our submission, as I said, was signed off by our technical committee and our board of directors.
Senator XENOPHON: I am asking you a direct question. Please answer it. Are you denying that people that play poker machines can lose $1,200 an hour or more if they are playing a poker machine at their maximum intensity?
Mr Ferrar : We find that very difficult to accept because—
Senator XENOPHON: What do you accept? How much can someone lose on a machine, Mr Ferrar?
Mr Ferrar : The answer to that question is: it varies enormously. We believe—
Senator XENOPHON: Okay, it varies enormously.
Mr Ferrar : Please let me answer.
Senator XENOPHON: You are not answering the question.
CHAIR: Please go on, Mr Ferrar.
Mr Ferrar : Thank you. To us, the $1,200 figure is taken off a spreadsheet. To us, the $1,200 figure is a $10 maximum bet every three seconds and a 90 per cent return to player. We are not sure if that is correct or not. In our experience, no-one can play a gaming machine every three seconds for an hour and no-one is likely to spend $10 every spin.
Senator XENOPHON: You say it varies. You must have some idea of the variability. At the upper end of the variability, to what extent do you say someone could lose on a machine playing at maximum intensity?
Mr Ferrar : As I think you know, when a gaming machine leaves the factory our members lose touch with that machine. Apart from knowing that it has gone to a customer who will pay an invoice, we do not know what happens to it after that point. So we are not familiar with the revenue per machine.
Senator XENOPHON: You are familiar with the design of the machines.
Mr Ferrar : We are responsible for—
Senator XENOPHON: You are responsible for the design of the machines. Can the machines, given the design for which your members are responsible, lead to losses of $1,200 or more per hour?
Mr Ferrar : Theoretically? Possibly.
Senator XENOPHON: So you do not think it happens.
Mr Ferrar : In practice and I have tried to do it personally in a showroom without money I could not achieve anywhere near that figure.
Senator XENOPHON: So when people tell me that they have lost $5,000 or $10,000 in a playing session in the course of a morning or an afternoon do I call them liars?
Mr Ferrar : That is a matter for you. But a session typically might not be exactly one hour. I am not disputing that some people spend more than they should on gambling.
Senator XENOPHON: But you cannot tell me what the upper range of the variability would be?
Mr Ferrar : No, because I do not have access to the figures from every venue.
Senator XENOPHON: Let us move on then. The Productivity Commission, back in 1999, came to the conclusion — and this is at box 2.4 about the world gaming machine market — that 20.4 per cent the world's high-intensity machines were in Australia at that time. You have disputed that but the Productivity Commission qualified the definition of high intensity to talk about where spending per game and the speed of play is high relative to other gaming machines and they talk about amusement or prize machines and also the Japanese pinball style pachinko machines and other machines such as the UK crane grab. Do your members dispute that we have a significant proportion of high-intensity machines in this country?
Mr Ferrar : Absolutely.
Senator XENOPHON: Can you tell me what you define as a high-intensity machine?
Mr Ferrar : Unlimited maximum bet, unlimited speed of play.
Senator XENOPHON: So $10 per spin every two or three seconds is not high intensity in your view?
Mr Ferrar : In most jurisdictions maximum bets are unlimited. In most jurisdictions you can interrupt the reel spin so that you can have a new game every tenth of a second or thereabouts.
Senator XENOPHON: It would be helpful to me, and I hope to the committee, if you would provide, perhaps on notice, details of those jurisdictions where they are unlimited. That would be so you would have adequate time to provide that.
Mr Ferrar : We have commenced that survey. We have provided, ever since 1999, a world count of gaming machines survey report. The most recent of those was conducted in January this year.
Senator XENOPHON: But could you provide that to the committee? Would that be okay?
Mr Ferrar : It is on our website and it includes maximum bet information — as much as we could obtain. For many jurisdictions they have no limits on maximum bets.
Senator XENOPHON: So if we go to your website that will inform the committee?
Mr Ferrar : I will provide it. And, of course, it is publicly available.
Senator XENOPHON: Can we move on to the issue of research and development, further to the questions that I think Senator Madigan asked. You might be able to refresh my memory on this but, having looked at the Aristocrat annual reports, I think one year, several years ago, they spent about $120 million on R&D. They spend a significant amount on R&D. You do not see any proportion of that being spent on determining which machines are most effective in parting players from their money?
Mr Ferrar : That is really a question for Aristocrat, which is an Australian-listed company. But in my opinion a sizeable proportion of that type of expenditure is conducted in compliance, as is outlined on this flowchart.
Senator XENOPHON: Let us go to the issue of compliance.
Mr Ferrar : Before you go on, there is something I want to say about the 20 per cent. What has been said by a number of people since 1999 is that Australia has 20 per cent of the world's gaming machines. It does not. It never did. It has 2.7 per cent, which is one of the figures that have been provided in the world count of gaming machines survey report since 1999, every two years.
Senator XENOPHON: And the Productivity Commission said 20.4 per cent of high-intensity machines as qualified in those terms.
Mr Ferrar : That was their interpretation of a certain prospectus at the time so I was advised by the Productivity Commission.
Senator XENOPHON: If we can go to the issue of the approval process, we might even find some basis of agreement, Mr Ferrar. One of the issues that your industry faces, and it seems to be a reasonable concern, is the number of jurisdictions that you have to deal with in Australia, the amount of red tape, the differing machine standards. That is a fair summary of your concern?
Mr Ferrar : I think that is fair.
Senator XENOPHON: It is quite a reasonable concern from a compliance-regulatory point of view.
Mr Ferrar : I agree with you.
Senator XENOPHON: So do you support—do your members support—uniform technical standards and approval processes for electronic gaming machines?
Mr Ferrar : Yes.
Senator XENOPHON: If there were a standard to require mandatory precommitment—for instance, for a machine to be mandatory precommitment capable—and making an assumption that the technical standard is set out there so your software engineers of the various companies can comply with it, once there is some certainty as to what is required, that could be done on new machines with a relatively small cost.
Mr Ferrar : Broadly speaking, I agree with that.
Senator XENOPHON: Further to that, suppose there is a requirement for a machine to be mandatory precommitment ready—to use the Prime Minister's words on 21 January of this year, 'at the flick of a switch'; I think that is right—and suppose there were also a requirement to say, 'Let's have machines that are $1 bet capable with a smaller jackpot,' for instance, so that the volatility of the machines would be reduced—and you, more than most people, would be familiar with volatility.
Mr Ferrar : We have had many happy conversations about that.
Senator XENOPHON: If there were a requirement to do that as well, that really would not add much to the costs if at the same time you are saying, 'Make them compliant with mandatory precommitment and capable of mandatory precommitment.' To be capable of mandatory precommitment and also to be capable of being $1 bet ready, there would not really be much of a huge leap in costs to do both from a software point of view, would there?
Mr Ferrar : Essentially I agree with that. If you look at the far left-hand side of the flow chart I have provided there are factual, unambiguous specifications, such that software engineers know what they have to create and such that testing can be done against agreed specifications and no-one has any ambiguity about those specifications. It is not a problem. I am sure any technology-conversant person would agree.
Senator XENOPHON: Could I go to the issue of what the costs would be to make existing machines either $1 bet ready or mandatory precommitment ready. I think I have recently forwarded a cheque for some $438 to the department to get some documents via FOI, because I have to pay for it, but I am very happy to share that information.
Mr Ferrar : I am familiar with that process.
Senator XENOPHON: I will get that soon enough. On notice, could you explain on what basis you make these assertions as to actual costs and provide a breakdown of those costs. I do not want it now, but you have made certain assertions in your submission about what the costs would be: $5,000 for three years old or younger, $9,000 or more per machine that is between three and five years old and $25,000. Could you please in due course provide a breakdown of how you got to that figure.
Mr Ferrar : Absolutely, but in summary that is the estimate of our technical committee collectively. They each have their different environments, their different approaches and their different technologies.
Senator XENOPHON: Sure, but if they could provide a breakdown, even if they separately say this is what it is going to cost, that is another issue. Professor Blaszczynski raised in his evidence that there was some frustration in research that he has carried out. I do not think anyone could accuse Professor Blaszczynski of being against the industry; he has done work for the industry over the years.
Mr Ferrar : I think Professor Blaszczynski is fiercely independent.
Senator XENOPHON: I am saying that over the years he has done commissioned work for the industry—there is no law against that. He said there is a difficulty—and other researchers have put this to me—in getting access to data, information, and venues as well. Would you have a difficulty if there were a legislative requirement through an accredited research body or, for instance, under the auspices of the Australian Research Council and if it said, 'These researchers want access to your data, how the machines work, the par sheets and the probability counting reports'? Do you think your members would have a difficulty with that if it were mandated?
Mr Ferrar : Our members compete with each other fiercely for sales, as in any other industry, I guess. Provided that their commercial confidentiality is protected, absolutely not—they would have no problem with providing access to any part of their premises. In fact, as I mentioned here earlier, a company licensed by jurisdiction—in some cases our members are licensed in over 300 jurisdictions—must provide access to appropriate regulatory and investigatory authorities for each of those jurisdictions. They have no difficulty with providing access provided their commercial confidentiality is protected.
CHAIR: Senator, are you interested in—
Senator XENOPHON: No. I am happy with that. I think Mr Ferrar will provide some details on how he arrived at that breakdown of costs. And I invite him to consider again the question of what his members say can be lost on the machines. It seems that I cannot get a direct response in terms of the $1,200 average hourly loss that the Productivity Commission refers to.
Mr Ferrar : My only comment there is that, after the exchange that I mentioned, one of the Productivity Commissioners remarked that their figures were probably as rubbery as ours.
Senator XENOPHON: If you could give us some more detail on that, it would be useful as well.
Mr Ferrar : Sure.
Senator XENOPHON: Thank you, Chair.
CHAIR: Mr Ferrar, it has been a very helpful session. So, on behalf of the whole committee, thank you for your time and the frankness with which you have answered those questions.
Mr Ferrar : Thank you.
CHAIR: That concludes today's formal proceedings. I thank all witnesses for their evidence and all observers for their interest in the committee's work.
Committee adjourned at 14:45