Betting On Sports Conference 2019
The 4th edition of the Betting on Sports Conference ran in the London Olympia from the 17th to the 20th September. In total, 3500 delegates attended seminars, presentations and panel discussions from over 300 industry experts. There were also 120 industry exhibitors with stands across the event. Given the growth of the conference and growing audience internationally, the next European edition will be run out of Barcelona. The conference presents a great opportunity for us to reflect on some of the major trends ongoing in the industry right now. We have covered some of the major talking points from the 3 day event below.
The Repeal of PASPA and the US Opportunity
With the US now deregulating gambling on a state-by-state basis, opportunity is presenting itself to international operators who are heading towards the new market. Europe is very much a red ocean – intense competition, increasing taxes and growing regulation is affecting bottom lines of incumbents in the market and making it difficult for newcomers to take market share. The conference comprised of a lot of technical sessions giving insight into the considerations for smaller operators trying to enter the US market. As a result of this, it is estimated that 90,000 new jobs will be created in the market. Everyone is looking for talent – regulators and operators are looking for technical compliance roles which are in huge demand. The response to this is people being shipped in from EU for half-year durations as only 6-month visas are being issued in many cases. This is a tactical not a strategic solution.
The overall view from CEO panel is that unless you are big and have capital, stay out of US right now. The are several challenges to overcome in working through state-by-state regulation and in certain states, particularly high entry costs and subsequent taxes. While to date the US customer is proving to be far more brand loyal than in EU or Australia, they come with a much greater cost of acquisition than in both territories. Acquisition costs can be greater than $500 circumstantially.
As far as the shape of the market, there are some interesting differences in sports followed. While the major league sports were all to be expected, tennis is likely to be the 4th highest revenue stream in the near-term overtaking NHL. Early on retail is prominent for a number of reasons – approximately 50% of payments are failing in the US right now and retail in the US is more of an entertainment location relative to retail in the UK as transactional. Into the medium term, In-Play will start to become more prominent in the sports betting landscape, something which isn’t available over the counter.
Other Markets of Interest
Latin American countries are opening for sports betting and the approaches adopted by operators vary to enter these emerging markets. Many are opting to partner with existing companies and supplementing offerings with a land-based presence for visibility.
Columbia is the only fully regulated online gambling market in LATAM at the moment but other countries such as Brazil and Mexico are following suit. The existing regulations in place in Brazil and Mexico are outdated and, in most cases, it does not cover online betting. The common opinion was that these markets are high potential and expected to grow at a faster rate. Panellists suggested that LATAM markets would be a natural extension for European operators. There are 19 licensed operators in Columbia currently.
Africa is an emerging market in the gambling space. Logistically, many parts of the continent have a well-established mobile payments and online banking options. That mobile ecosystem will make payments for an online presence significantly more convenient.
India presents an interesting opportunity as a nation with a fanatical cricket population and heavy mobile penetration – more than 100 million mobile users tuned in to Hotstar, an on-demand streaming service owned by Disney, on June 16, the day India and Pakistan played against each other. The question of monestising that demographic remains the most pressing question but access to them through mobile channels is certainly there.
M&A and Market Complexion
The main reasons for mergers and acquisitions from the large players to date are as follows:
- Market Access/Localization
- Need to be local enough be accepted
- Need to overcome language and cultural barriers
- Cost efficiency
- Adding different expertise/products to the portfolio
- Faster time to market
Increasing regulation accelerated mergers and acquisitions in gambling as firms seek critical mass to offset the rising operational costs and erosion of margin. Mid-tier players continue to vanish as they can’t handle the regulatory pressure.
The US market is underpinned by equity investors – there are a number of equity investor looking to grab investment opportunities in betting. Currency devaluation also helped M&A’s as it brought down the valuation of assets in weaker currency states. They are also looking out at cheaper assets in Europe due to currency devaluation and tighter regulation impinging on market value of operators.
Data is an Opportunity
Data is a significant enabler for the next wave of insights and products in this industry. The way which we procure data can change into the future with the likes of computer vision automating swathes of what is currently manual.
It can give richer insights and more data points makes for better pricing accuracy and the ability to run more markets fed with dynamic datapoints. Machine learning will underpin a huge amount of discovery within these newly available datasets.
As part of the merger landscape, there is a growing concern about implications of monopolies amongst data providers. There is ongoing litigation regarding exclusivity of access to data for football in England currently. While these data providers are improving their suite of products and the depth of their offerings, competition is of the utmost importance to the industry for keeping pricing and access reasonable for operators.
As always, we have an interest in speaking with companies with capabilities or technology in any of these spaces. At Alpha Hub, part of our mission is to accelerate the adoption of emerging technologies across Flutter Entertainment. If you’re working with innovative technologies that you think could support our global brands such as Paddy Power, Betfair, Sportsbet or FanDuel, we’d love to hear from you.