The US is the land of sports betting opportunities, but the biggest single-brand online gambling operator in the world, bet365, did little to elucidate on its US strategy when it released its annual results this week.
Yet clues as to how this industry bellwether might crack the US sports betting market, arguably an opportunity to match its global ambitions, are becoming more apparent.
Privately-owned bet365’s results always generate attention, and this year was no different. Headlines on the BBC and in the Financial Times loudly proclaimed founder Denise Coates as one of the best-paid executives in the world with a base salary of £277 million or $362 million. With dividends of £46.3 million, her total remuneration jumps to £323m — a decent return for a year’s work.
A Look Inside bet365’s Annual Revenue Report
The news on Coates’ pay came after the Stoke-on-Trent firm released its results to Companies House this week. The report shows total net gaming revenue rising 9.7% to £2.98bn on sports wagering turnover that rose 23% to £64.5bn. Operating profit from betting and gaming rose 12% to £767m.
The total revenue figure places it only behind the proposed Flutter-Stars combination, which has combined pro-forma revenues of over £3.5bn.
A Couple of US Mentions
The recent bet365 New Jersey launch gets a mention in the results document, saying it is in line with its policy of “pursuing licenses in regulated markets” where it backs itself to prosper.
The Empire Resorts deal for a foothold in New York also gets a nod, though with nothing further said about the strategy in a state where, for now, online and mobile will have to wait.
Hitting the Phones
Yet, there are reasons why bet365 can be confident of success in any US state where mobile betting is allowed. The company pointed out that in-play now represents 79% of all sports revenues and that mobile revenue rose 18% to an unspecified percentage of total revenues, “consolidating its position as the most popular medium for sports betting.”
Another reason for confidence comes from the moves made recently by leading affiliate Better Collective to establish a presence in the US market. According to the 2018 prospectus, Bet365 is Better Collective’s largest client, responsible for another unspecified percentage of total revenues.
As such, bet365 will likely be happy with the bridgehead established by Better Collective in the US, which, as it stands, represents circa 10% of Better Collective’s revenues, a percentage which is sure to rise with its largest client now active in New Jersey.
Playing Catchup in the US Market
While other operators in the US are relying on existing databases – whether derived from previous DFS operations or land-based casino loyalty systems – bet365 is starting from scratch.
Affiliate marketing, however, is a route where bet365 excels in other jurisdictions and it will be working with many familiar names.
To counter such optimism, the experience of bet365 in Australia shows the company is far from infallible. The business only turned a (very small) profit in 2017, five years after launch, and it still struggles to match the market leaders, Flutter-owned Sportsbet and GVC-owned Ladbrokes.
But there are reasons for why Australia might be different, particularly around the in-play betting ban. Given where bet365’s strengths lay, this is a serious handicap that won’t exist in most US markets.
A History of Rolling With the Punches
Yet the US opportunity should be seen against the backdrop of continued operational excellence with, as Paul Leyland, an analyst at gambling specialist consultancy Regulus Partners, said, staking and active player growth “materially ahead of most large competitors.”
Moreover, bet365 has proved it can roll with the regulatory punches. Leyland points out that in the UK – still estimated to be worth around 20% of total revenues – it is up against a number of headwinds including a potential ban on credit card gambling, an upcoming legislative review, and further responsible gambling measures.
The picture is equally clouded in other key markets in Europe such as Sweden, Denmark, Italy, and the Netherlands. Bet365 may be “uniquely global,” but it doesn’t mean that it can escape the inevitable crunch on revenue and profits caused by regulatory turbulence. “The world is becoming a tougher place for online gambling companies to do business in, even for the clear sports-betting leader,” Leyland says.
Part of the response from bet365 in this annual report has been to give much more publicity to its responsible gambling efforts. As it stands, the impact of these efforts has largely been in the UK, but it shows how if these efforts are taken seriously, “it can have serious revenue headwinds.”
The impact of such moves is yet to be felt in the US; responsible gambling efforts appear to be taking a back seat to the drive towards growth in states such as New Jersey. But as Leyland concludes, “the UK may be a ‘one-off’ in terms of the scale and timing of impact within these results, but tightening regulation is a recurring and international theme.” Bet365 has proved it might be better placed when such a crunch comes than most of its competitors.