Betfair recently announced its results for the year to 30 April 2013 and it revealed a number of elements that encapsulate the changing nature of the e-gaming sector.
Not least of these was the fact that Betfair’s ‘effective underlying tax rate’ had risen from 10.5% in 2012 to 16.4% last year. The company states that “we continue to expect the long-term sustainable tax rate to remain around 16%.”

E-gaming tax bills have been rising as the shift to local licences takes place. Gaming and corporate taxes are higher in the local markets than they were in the purely offshore corporate set up.
Perhaps as a way of mitigating these increasing costs Betfair stated that in May 2013 “we changed the base level of commission from the standard 5% to between 4% and 7.5% in five countries and have recently extended these trials to a further 18 countries.” 

Increasing the base level of commission in certain markets is the equivalent of passing on the increased costs to the consumer by reducing the value they get in a winning bet.
Betfair has also increased the percentage of marketing spend that is focused on the UK from less than 50% to more than 75%. The nature of the UK e-gaming market is due to change in 2014 when the point of consumption tax (at an assumed rate of 15%) is introduced. Again, this will increase underlying costs for companies like Betfair. 
The increased attention on UK marketing activities at this stage could be an attempt to gather as many customers as possible now, so that marketing costs can be lowered in two years’ time to offset increased gaming tax costs. Looking around e-gaming markets in Europe, the current situation in the UK, although competitive, does still look one of the most attractive from a regulatory and taxation standpoint. 
Betfair reported a slight fall in revenues from its betting exchange service and it seems to be focusing increasingly on what it calls ‘sophisticated’ customers to try and boost commission from exchange bets:
“Betfair has a number of high value customers using third party applications and automatic trading programs, which utilise our Application Program Interface (API) to directly access the Exchange. We have recently launched a new API to allow these vendors to build out more sophisticated trading tools to provide an improved user experience for this important customer segment.” 
If you are a ‘less sophisticated’ user of the betting exchange it would suggest you are increasingly going to be behind the game by comparison when it comes to getting rapidly changing in-play prices if you are not using these ‘sophisticated trading tools’. The exchange is becoming simply a trading platform rather than a P2P betting exchange where you bet against one another, as Betfair’s previous marketing has sought to claim. Casual customers will probably be pushed more towards the fixed-odds traditional sports book.
Betfair posted an operating loss of GB£ 69 million in 2013, a large part of which was caused by GB£ 120 million in impairment of goodwill and depreciation. But there was also a sum of GB£ 19 million in restructuring costs and “professional services fees of £2.7m resulting from the rejected takeover approach by CVC and partners.” 
Betfair says the full benefit of the cost savings and restructuring will be seen in 2014 and it will be focused on “mitigating upcoming tax impact” as it seeks to restore profitability. Shareholders will be sincerely hoping that the promised benefits materialise.