A cursory glance at the results recently posted by a number of the leading online betting companies, reveals a picture of intense competition; reflected in increased operating costs and marketing budgets, high customer acquisition costs; reduced yields per player and reduced revenues and profitability. Online Poker, in particular, is coming under increased pressure, as the trend of more and more players migrating to the big money sites continues. However, some of the fixed odds online betting sportsbooks are also starting to feel the pinch, as the battle to acquire new customers hots up.
Looking ahead, there is however, a strong case to be made, that any future liberalization of the European betting market, rather than providing the likes of Bwin and Unibet with further growth opportunities, will actually serve to usher in more competition, with the likes of Betfair, Ladbrokes Paddy power and William Hill entering their core markets. (A clear case of rising more on expectation than hope.). In the case of France, incumbent operators such as Groupe Partouche, FDJ and Groupe Lucien Barriere, all of whom boast strong brand awareness and customer loyalty, are very well positioned to benefit from any future liberalisation of the betting market, at the expense of non-French operators. When it comes to the liberalisation of the European betting markets, the message for non-incumbent operators may just be, be careful what you wish for.
Looking at the results for H1 2007, we can see that William Hill's turnover in the retail division was significantly greater than that achieved by Ladbrokes. William Hill stated that within the retail estate gross win from over the counter (OTC) increased by 4% while FOBT/AWP (machines) gross win was up 16%. Ladbrokes reported a decline in OTC gross win, partly due, it said, to a substitution effect with its new FOBTs. Ladbrokes said that FOBT gross win had increased by 19% to £651 for the period. In relation to gross win, we see the continuation of a trend, begun in H1 2006, with Ladbrokes achieving better gross win figures in each of the three key divisions; retail, telephone and online. William Hill, however, once more converted a higher proportion of its retail gross win into EBIT. For the first time since our analysis began, Ladbrokes outperformed Hills in the online division, with significantly better Gross Win and EBIT figures, and a higher conversion rate of online gross win into EBIT.
Asked about the decline in horse racing gross win, Chris Bell of Ladbrokes recently said; "UK horse racing is not as relevant to our customer base as it used to be. Customers are much more interested in machines and virtual horse racing. They bet on demand now rather than spending ages studying form in the Sun in the morning." The UK retail market is in the process of structural change, at the heart of which, we are seeing significant substitution taking place between the over the counter business and FOBTs. The government has blindly allowed bookmakers to turn their betting shops into mini-casinos. This, by the bookmakers' own admission, has killed off much interest in the horse racing product. This of course, provided the bookmakers with wriggle room when it came to negotiations over the bookmaking levy. The old arguments regarding Betfair and the over-round simply do not wash. The UK's bookmakers, in pursuit of a fast buck, are single handedly responsible for cannibalising their own high margin products.
