Betting Market

Niall O'Connor argues that cultural and regulatory barriers remain within the "more liberalised" European betting market. "For years, the UK's leading bookmakers have campaigned for the liberalisation of the European betting market. Over the past ten years, many betting industry executives have attended conference after conference, where they were told that the European Court of Justice's rulings in Gambelli and Placanica were going to throw open the doors to a free European betting market. As always, when it comes to tackling international markets, the reality on the ground has proved to be somewhat different to the spin. Cultural, legal and historical barriers cannot be brushed aside over night. Incumbent operators, with a long track record in their home markets, enjoy a signifciant competitive advantage that can not be erased at the drop of a hat. The notion of a European betting market free for all always was nothing more than wishful thinking, in that each of the individual European states was always going to move to protect its domestic industry. No where is this more in evidence than in France, where new gambling industry legislation backed by the French budget minister Eric Woerth is currently working its way through parliament. The French are going out of their way to resurrect barriers to entry, whilst at the same times appearing to liberalise their market. They have stated that companies that currently break French law, will not be looked on kindly when it comes to the granting of betting licences. They are also seeking to introduce a law whereby the organiser of sporting events will be recognised as the rights owner; thus ensuring that they will have the final say as to whether there can be betting on their event. Moreover, it now also seems that the propoased levy payable to France's sporting bodies will be similar to that that is currently paid by Francaise des Jeux. For both Ladbrokes and William Hill, the headlong rush into the European betting market has backfired. It is to be hoped that the lesson will not be lost on other operators."

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.