Tuesday, January 27, 2009

Betfair & TVG - A Big Opportunity for Racing

Betfair finally expands its market to the US, by acquiring TVG, as was announced today. TVG has one of the biggest reaches as a television network, and is also an advance deposit wagering company, offering players avenues to bet their tracks over the phone and internet. Currently TVG is only offered to US citizens.

This deal is extremely interesting from a number of perspectives. Here are a few thoughts to chew on. My opinion only, off the top of my head at this early stage.

I expect some in racing and possibly TVG’s competitors to raise hell. They still have to pass muster in North America regulatorily (I believe), so there is time to try and discredit them. In any other business if a successful franchise wanted into your market, trumpets would blare and people will jump for joy, but this is racing. A new player in the space, especially one who has proven time and time again that their main focus lies not in the status quo, but in growing their customer base, will be met with resistance. We noted this when Betfair moved into Australia in a post about a year ago. Although this is somewhat different (Betfair’s exchange was entering the Aussie market, and it is not in North America).

I expect that Betfair will begin to work the US product on their betting exchanges for their 2 million world wide customers. The tracks they cover will be highlighted for exchange bettors. As well I predict that they will act as an ADW, just like they have in Australia with the TOTE. Betfair players will be able to login and bet via TVG right into the pools, with their Betfair bankrolls. The result of which is fairly obvious: It will increase handles almost immediately.

I believe that sometime within the next 12 to 24 months, TVG harness tracks will be offered for trade at Betfair. This means a track like the Meadowlands will be able to be exchange bet for their customer base overseas.

Next, I think the status quo is over. Protectionist laws that racing has lived by will be challenged, and challenged hard. In the US, state after state we see laws against internet betting which has handcuffed this business for a generation. Betfair is a 21st century company and they do not live by old-time racing laws without a fight. This might be the catalyst we’ve been waiting for - no matter what state you live in, you can bet racing.

Most obviously, behind the scenes lobbying for a US betting exchange will be initiated. I know myself and others have said that we should have done this long ago ourselves. But if all goes to Betfair’s grand plan, racing owning their own betting exchange will be a virtual impossibility. No doubt it will be a long road, but opening up betting markets is essential to our business and we should encourage it.

I think we will see cash spent on marketing, perhaps unprecedented amounts. Betfair puts their money where their mouth is in this regard. They are sponsoring the Royal Ascot meet and juicing up the purses. In addition, they advertise racing in all parts of the world via TV commercials and otherwise. Also, in Australia, they have bought a racetrack.

For Canada, we hear plenty about HPI and their virtual monopoly of wagering in Canada. Can companies like Youbet and TVG come to Canada and offer competition? I guarantee we will find out. Betfair challenged TOTE’s dominance in Australia and took that to the high court. If there is a crack open for them to enter Canada rest assured they will find it, come here through TVG, and offer choice to bettors for the first time.

For customers of TVG, I would fully expect that Betfair will offer rebates to their players. They have built their company from having no customers to two million customers in only eight years, and they have done so by offering low takeouts. In fact, one could argue it is the cornerstone of their business. Expect to receive a price break if you are a TVG customer, although perhaps this may be a ways off.

I believe that we will see Betfair continue to offer free handicapping tools to customers. In addition I would expect to see new acquisitions, possibly a data provider. Betfair has proven that they believe customers call the shots, no one else, and giving them the tools they need to play the game is paramount to their survival in a tough gambling world.

If you are a customer, I predict you will like this deal. If you are someone who wants to see handles grow and new ways to bet be offered, you will like this deal. If you are a protector of the status quo, and like things exactly as they are, then it is a completely different story.

14 comments:

Scott Ferguson said...

Not sure if they'd offer rebates per se - my tip is they'll slash the takeout percentages instead so everyone benefits from it. The other thing they'll most likely do is stream their vision abroad to stir up up the pools. This is a landmark event for the North American racing industry.

Pull the Pocket said...

Hey Scott,

If you check back, and since you worked for Betfair in the education dept, can you let us know what they might plan on doing to educate international players about US racing? Can you see evening racing being a hit at betfair there with TV coverage a la TVG in the UK?

Thanks.

Sure is an exciting time for racing. It is a very insular sport over here. Nice to see some intl expansion.

PTP

Scott Ferguson said...

US racing has been shown on the UK racing networks for a while now, but the coverage is very inconsistent. The east coast meets overlap with the later races in the UK, and then when there is evening racing in the UK (throughout the summer plus Wed-Sat over winter), that takes priority.

Also, the better tracks used to be on a subscription channel, meaning less viewers. I'd imagine Betfair would go down the line of live streaming rather than heavily supporting a network in the UK, but you never know.

Re the education dept, they've made cutbacks so I can't see that happening anytime soon, but I'm always available for hire...

Byron said...

The question that has to be asked is how much of the turnover are they going to give back to horsemen/owners? Based on what they have done in Europe and now Australia, it is not enough to sustain the cost of racing / prizemoney.

Also, if a European punter bets on the Kentucky Derby does the money go into the American pool and some of the money returned to the horsemen/owners in America or does it stay in Europe?

Scott Ferguson said...

Past history isn't that relevant - they've never had contol of the monopoly, they've just been one of the competing firms. Takeout has to go lower, any fool can work out turnover goes up with lower taxation. The Australian betting landscape is now far healthier because Betfair stirred it up and forced the monopoly totes to face up to competition. Now there's more interest in betting than there has ever been. They're not stupid, they won't slash the returns and kill off the golden goose at the same time.

US race betting from the UK has been split between firms betting into tote pools and the betting exchange. Betfair have never linked into the pools (it's a totally different format they operate), however they now bet into UK and Australian tote pools (customers have the choice of tote or exchange) as well bringing two million potential customers to the table.

UK punters will use the tote pool, but not exclusively. Where they will really get involved is the exotics, where you can't take fixed prices.

G. Rarick said...

This is a great day for gamblers and a sad day for horse people. Byron, it's nice of you to ask the touching question of what pool the money will to into, but you are under the mistaken impression that Betfair actually supports the industry. In the U.K., they put back 1 percent. That's right, 1 percent. And THAT's not nearly enough to keep the horse industry going. But hat's off to the gamblers - enjoy it while there are still real horses around to be on, because it won't last long.

Pull the Pocket said...

Mme R,

1% is placed into purses in the UK overall as per the Jockey Club Fact Book. But they bet more. We put in 6% but bet less. If BF drove 800% more wagering and placed in 1% instead of 6% of what we do, we'd have more money for purses.

Regardless, this is not exchange betting in the US; so it is a moot point. It is someone who knows how to run a gambling business buying an ADW. That's a good thing for us all, imo. We need to expand our fan base and grow handles. What is good for the customer is good for the business, because the customers fund the business.

PTP

Wind Gatherer said...

OK. I am an idiot and it is seriously pissing me off.

What percent of what are we talking about? If $100 is bet and takeout is 20%, who gets what from what?

Is the 6% taken from the 20% or is it 6% of the original $100?

How is the takeout split? I really have no idea.

Pull the Pocket said...

Try this:

http://cristblog.drf.com/crist/2008/02/global-perspect.html

It shows in all parts of the world what percentage of take goes to purses. Notice the rest of the world takes between 1 and 2%, while we take 6%.

Check average handle per resident. We are at $48, Great Britain well over $300, as other places. Handles in Australia, which is about 15X smaller than here are $10B versus $14B here.

Racing must learn that the rest of the world are not the ones doing things wrong, we are.

Pull the Pocket said...

PS: Yes, that means that $6 out of every $100 bet goes to purses. In teh UK, Australia etc it is more like $1 or $2.

Of course, they bet much more and compared to us they have a popular industry there, where people watch and enjoy racing. We can not have it both ways. We cant expect to take all the bettors money and have a popular industry. Why we think so is beyond me. Bettors have proven over the last dozen years that racing will not simply be a receptacle for their wallets and hard earned money.

Scott Ferguson said...

The most important thing is to understand that only having a local audience will not grow your business. Betfair customers have added something like 30% to TasTote pools - http://www.themercury.com.au/article/2008/10/31/35645_tasmania-news.html

A wider audience means more punters. More punters (bettors) mean more money in the pools. More money in the pools brings in more punters again as then the pools will stand up to a decent bet, and so the cycle continues.

US racing is popular on Betfair but it is severely affected by the inconsistency of pictures. Live stream it, link to the pools, bring the takeout down to say 12%, innovate with a few new bet types and you will see one heck of a kickstart to a business previously in decline.

Wind Gatherer said...

Thank you sir.

Pull the Pocket said...

I hope everyone in racing reads that link. I will post it later.

A 30% increase in handles in 2008, resulting in an increase in purses, whereas we are getting our asses kicked in the same year, proves beyond any reasonable doubt that lowering prices to punters and offering them choice is long overdue.

Scott Ferguson said...

One other thing - Betfair is one of the biggest racing sponsors in the UK and Australia, pumping in money on top of the 'low' purse provision.

Recent article re their deal with Ascot - http://www.telegraph.co.uk/sport/horseracing/3546281/Betfair-in-five-year-deal-to-sponsor-King-George-Horse-Racing.html