E-gaming: the ultra competitive market
By Warwick Bartlett
I recall making a speech at Paul Jason’s Smart Tech conference (New York) in April 2013 where I was informing the delegates how competitive the UK and European markets were for internet gambling.
First of all I said the margins were much tighter than anywhere else in the world. I showed a slide of the Oddschecker site that displayed the latest odds of most bookmakers. Then above those odds were the bonuses available to new sign ups. The expression amongst the audience was outstanding. Their jaws dropped to the floor in disbelief.
It is perhaps expected that in a market so competitive there will be winners and losers. We are seeing this in the UK with supermarkets. Tesco – the largest by market share – has announced the closure of 43 stores and a promise to join the price war.
Gambling is no different but one where operators cannot now afford to make an investment that goes wrong.
This was highlighted a few weeks ago when Bwin informed the market that it was to sell its social gaming site WIN. The business was acquired for US$50 million in June 2012 and after only two years the social business is losing US$8.4 million.
Ladbrokes acquired Betdaq for EUR 30 million. I have no idea whether it has been a success but I do know it has not dented Betfair’s performance and Ladbrokes’ e-gaming division over the corresponding period has been a poor performer.
Poor acquisitions in such a competitive market place inevitable drag on the rest of the business. It is much more difficult and more time consuming for management to run a failing business than a successful one.
Point of Consumption Tax is now with us in the UK and companies are struggling to mitigate its influence on margins. January 2015 has already seen William Hill announce that it would no longer be sponsoring the Lincoln Handicap at Doncaster, ending an association with the race that first started in the 1990s and has been an annual sponsorship since 2006.
It is unlikely to be the last of such announcements by the UK betting firms.