This time last year on this blog, I made a few predictions about what 2015 would hold for the sports betting industry. Some were fairly close to being on the money, others less so, but there is no doubt that the impact of taxation and regulation and the knock-on effect of that has seen operators look to scale up quickly via consolidation. M&A was the big take-away from 2015.
Looking ahead to 2016, there are at least 4 major mergers that will all impact the UK industry to varying degrees.
5 years ago it would have been bizarre to suggest that the merger of Betfair and Paddy Power would cast a huge shadow over the merger of high-street giants Ladbrokes and Coral but today it is the first named duo that hold the aces in the division. BF/PP sees a combination of two of the most vital ingredients to success in this industry – cutting-edge proprietary technology and access to differentiation via product on one side and world class marketing and risk management capability on the other. It also offers shareholders a diversified business geographically, with PP pulling up trees in Australia and BF quietly building a strong business in the USA through a series of deals with established racing and betting business like TVG and Stronarch.
The magic dust is also supplied via the current BF management team, chiefly Breon Corcoran, who has done a stellar job of rebuilding the business he inherited a little over 2 years ago. It will be fascinating to watch these two businesses combine and I expect we will see interesting moves quite quickly, including some much needed innovation in retail.
Ladbrokes/Coral faces some regulatory hurdles as well as a rather large Dermot Desmond- shaped fence to get over, and again this will be interesting to watch. I can’t help but feel that early January will see some further salvos between Desmond and Ladbrokes; it would, after all, be most un-Desmond like to simply fold his hand post flop. The “turn” could be a teaming up with a major third party to propose a new deal to management, and the “river” could be an all out takeover bid fronted by the man himself of via another bookmaker looking to muscle in on the deal.
A successful merger of the two firms will likely see them need to dispose of up to 1000 shops and this could play into the hands of PP/BF, Betfred or perhaps a smaller operator like Boylesports.
The big worry for a Ladbrokes/Coral merger is probably the fact that it places a huge importance on the revenues generated by FOBTs and any further taxation or regulation there would impact them heavily, as well as the fact that Ladbrokes are still lagging behind in the digital space quite badly, whilst Coral have seemingly made good progress in that area. A merger makes it much harder to keep that pace of progress going, as roadmaps converge or simply get torn up. Falling further behind would be a disaster for the combined entity.
Unibet will likely become a more prominent player in the uk now that the Stan James deal is done and we should get an idea of the route the brand will go. I suspect we will see the SJ brand vanish but perhaps not this year. Both BWIN and GVC are small players in the UK and their merger is unlikely to see that change significantly as they focus on Germany and some “other” territories!
2015 was, I feel, a mixed bag for William Hill. They stayed out of the M&A race and focused on their own technology, delivering Project Trafalgar which is a core piece of work designed to give them more control of their front ends and platform scalability. The proof of its success will be seen over the coming years. An interesting aside is that the company appears to be still on their “old” desktop site and not the new one, though their new app has at least stemmed the tide of negativity its launch brought forward. They need a big year I feel and may look to acquire.
Two other big topics for the wider industry in 2016 are likely to be horse racing levy and fantasy sports.
The British Horseracing Authority have recently introduced “approved betting partner” status and this status will be required for any betting company wishing to sponsor uk horse races. Currently, only 3 companies pay levy on their uk racing business in a manner seen as fitting the criteria to be “approved”. Many high-profile bookmakers who currently pay levy on a voluntary basis on their digital business (or many more who do not pay any levy at all on that business) will have a decision to make very soon; go into the levy fold or stay out and risk the consequences. Quite what the full range of consequences are likely to be is still unclear, though it is likely in my view that the ability to stream racing online from certain tracks in the UK will be the restriction that makes the bookmakers swallow hard.
This battle could get quite ugly for all concerned with bookmakers seemingly prepared to sponsor races elsewhere or take that sponsorship money to other sports like Football, whilst the BHA and Jockey Club stick to their hand, and maintain that racing sponsorship has more value than simply that which the levy figures imply.
Fantasy Sports is quite an interesting topic and one which I am by no means an expert but to my untrained eye I do believe that some sort of fantasy/soft sports betting product will emerge over the next 5 years in the UK market that connects with a hitherto undeveloped set of potential customers. Gambling is still a rather difficult product for the masses to understand, and a simplified version that tapped into social media, a fantasy football style points system and a small stake – big win proposition could emerge. We’ve already seen companies like Colossus Bets do quite well and generate very large pools and rollovers, while Draft Kings and Fanduel have become enormously popular “Daily Fantasy Sports” sites in the US (and have run into enormous legal issues lately).
However, as yet the fantasy sports betting sector in the UK market has not yet developed. The question remains as to whether this product can actually succeed in the UK, where regulated sports betting is allowed. Draftkings intends to launch in the UK this year and we will all be watching closely to see how that goes.
Finally, add in the arrival of the mighty Rational Group (via BetStars) and the continued consolidation that’s likely to happen amongst several tier two and three operators and the fireworks should continue to fly.
One thing is certain, it certainly won’t be dull!
Happy New Year!!