Tue, Jun 18, 10:09pm by Kevin Pitstock
According to a report released in a freedom of information disclosure, Price Waterhouse Coopers calculates James Packer‘s proposed new casino in Sydney’s Darling Harbour would cost the NSW state government about $14 million per year by 2025. The PwC report is being reported in the Australian Financial Review and the Fairfax Media, who state the information was provided to the government of New South Wales in Echo Entertainment’s report back in December.
According to Crown Limited’s proposal, the $1.5 billion complex proposed by James Packer would generate an additional $114 million in gambling taxes per year. This appears to be contradicted by PricewaterhouseCoopers Australia.
According to PwC, having two casinos so close to one another would lead to “substantial cannibalisation” from revenues by high rollers, presumably through competitive rates to these high stakes players. This would more than offset the revenues gained by high dollar Asian players making a visit to the city, according to PricewaterhouseCoopers.
No mention is made about how it would effect revenues to have Echo Entertainment own two casinos in such close proximity, but the presumption is the lack of competition would be an asset to the people of New South Wales. If the reported data from PwC proves to be correct, then it would make it much more likely the New South Wales government would choose the Echo Entertainment proposal.PricewaterhouseCoopers is a name with a lot of gravitas in the accounting world.
PricewaterhouseCoopers is the largest of the “Big Four” accountancy firms. PwC has been around in one form or another since 1849 and today has revenues in excess of $31 billion per year. The multinational corporation is based out of London, England, but it has offices in 158 countries and 776 cities worldwide. This includes 10 offices in Australia: Adelaide, Brisbane, Canberra, Gold Coast, Greater Western Sydney, Melbourne, Newcastle, Perth, Sydney, and Townsville.
PricewaterhouseCoopers is among the most trusted accounting firms in the finance industry. Statistics provides by PwC have tremendous weight, so this revelation could have an impact on the decision making process of the NSW committee which chooses between Crown Ltd and Echo Entertainment.
As the time for the final decision nears, all gloves are off in the competition between the owners of Australia’s top two casino. James Packer’s Crown Limited owns the Crown Melbourne and Crown Perth, while Echo Entertainment is a subsidiary of TABCORP and the owner of the Star Sydney Casino, which has long held the casino monopoly in New South Wales. Packer’s challenge of that monopoly has created a fierce competition.
James Packer bought 10% of the shares in Echo Entertainment to hedge bets in case Echo won, while also suggesting Echo needed Crown’s money to finish such a project. Echo’s chief executive John Redmond contested those claims, saying a line of investors would be happy to buy Packer’s shares of the company and take a chance on the windfall winning the NSW bidding process would bring. Then reports surfaced on TV of a drinking scandal for Redmond, which Redmond and Echo quickly investigated and refuted, later implying their business rivals may have floated such a rumour.
Then the Star Sydney ejected Joel Madden, star of 9 Network’s The Voice. Nine Network CEO David Gyngell was James Packer’s flat mate and also the best man at Packer’s wedding. Madden was reported to have been carrying a small amount of cannabis, but some interpreted the fiasco as a kind of gamesmanship between business rivals.
Now a freedom of information investigation by Fairfax Media shows the Redmond’s company had submitted this data in a December 2012 submission to the government of New South Wales, suggesting PwC did not believe Packer’s casino project was sound. In their report, the Crown Sydney Resort & Casino would cost the New South Wales government about $14 million per year (from current revenues) by the year 2025.
All of this is speculation at this point. Seemingly important information can later turn out to be misinformation, as rumour and innuendo is like the fog of war in corporate competition. Only when we learn about the winner of the casino wars will we know which data was correct and pivotal.
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