Probably a good time to reset my password and post here…

 

PP/BF – quite a shock eh?

This news caught everyone by surprise but seems to be a pretty good fit. I think there’s an interesting question around who initiated the conversation and why, and who is the real leader in it. The deal structure suggest Paddy Power is in the driving seat, but the new exec is led by Betfair. Breon Corcoran clearly has a long history at PP and knows as much about that business as anyone. Could he have been plotting this audacious swoop since taking the reigns at BF? Perhaps not as far fetched as it may sound.

My tuppence – and it really is just that – is that one of the main reasons Breon left PP in the first place was Product and Technology. More specifically, the lack of wiggle room in that regard at Paddy Power. Yes, Paddy Power is a very fine business generating large scale profitability. Yes, they have marketing and PR capabilities beyond the reach of every other betting firm in the world and yes they are the punters pal through and through (we hear you!) – but anyone who uses their products a lot will tell you that they are pretty ordinary in that regard and by no means pace-setters, and, crucially they are one of many big companies in the space reliant on Openbet & Mobenga to deliver them major customer-facing product improvements. Corcoran knew this, and I’d wager that the prospect of getting his hands on the cutting-edge proprietary software BF have developed, and the unique if somewhat under-performing exchange (and the possibilities that business offers) was a massive determining factor in him handing in his swipe card at Airton Rd.

Since taking the BF job he has plundered his old employers of some of their stand out talent – several key PP people have departed for Betfair, including senior respected personnel in Product, Mobile, Trading/Risk and Marketing. Perhaps a series of HR bodyblows have taken a toll on Paddy and the fact that BF have set up a Head Office in Dublin now will certainly have meant the brain drain was likely to continue at a pace.

One thing that PP do have that Betfair evidently lack is Risk and Trading expertise. I think PP are probably a class apart in that regard, particularly in racing, and for the largest part of BF’s life they haven’t needed trading and risk management teams at all. The birth of their fixed-odds Sportsbook has meant they now need these skills, and again it would have been PP’s talent pool they’d have turned to. Indeed, some senior PP risk people have already swapped sides.

Technology, or the lack of in-house proprietary Platform and Front Ends ownership must be a big factor in this decision by PP though. They know that having the flexibility to build and develop in-house product quickly will be the must have weapon in this industry going forward. Getting on the punters side through slick marketing campaigns and having 2m social media fans just isn’t going to be enough. Betfair are positioned to deliver killer products and PP are best placed to continue delivering great marketing campaigns. A quick look at PP’s casino numbers also highlights how successful they have been at cross selling sports customers to gaming, something BF continue to struggle to achieve in similar scale, although they are certainly no back number.

Longer term questions remain around the dual brand strategy, as 2 fixed-odds sportsbooks would not seem to make much sense then; so I’d expect to see PP migrate onto BF’s technology  and consume the fledgling BF sportsbook, with the Exchange now being supercharged by a behemoth fixed-odds player. Think of all those ”Power Rushes”….lovely!

As for the rest of the industry, this deal must have sent tremors through many boardroom water coolers. Chief among these, likely William Hill, who have now seen 6 of their nearest competitors strike deals to scale their businesses up dramatically and fast. A host of Tier 2 and 3 operators must be waiting in the wings for the next round of consolidation action to start or be thinking about getting busy making deals themselves – and my guess is that we will see some fireworks in this division over the next few months.

If 888/Bwin and Coral/Lads was the klaxon, BF/Paddy Power just set off a giant vuvuzela…