NEWS ANALYSIS
N E W S A N A LYS I S / G R O W I N G PA I N S
at least that at Sportsbet and one which
squeezes margins across the board.
And while CIMB gaming analyst
Killian Murphy told eGR he doesn’t think
corporate operators have adjusted their
pricing models to offset the fee hike – to
the contrary of other industry sources –
there is a serious balancing act underway.
Remaining competitive and keeping
punters from heading to offshore bookies
is one thing, but maintaining a profitable
margin is quite another.
Indeed, the impact is likely be felt
far beyond the obvious hit to bookies’
balance sheets. One renowned racing
punter wrote an open letter to RV in July
claiming the new tax model would see an
immediate decline in fixed odds turnover
due to less competitive markets being
offered by bookmakers. Many others
voiced concerns that this would lead to
the already significant sportsbook black
market, thought to be worth in excess of
AU$340m a year, growing further still.
One industry insider suggested that
as many as 40 offshore sportsbooks,
a handful of which accepted payment
in Australian dollars, were offering
markets on most major sporting events
in the country. The government-led
national working group to crackdown
on unlicensed betting activity formed
in November might have come too late
to save what it described as “serious
integrity and revenue risks” to the
Australian industry.
LACK OF VARIETY
Another unforeseen by-product from
the racing fee hike could see operators
switch attention away from racing in
favour of higher-margin sports. However,
the heavy bias towards racing is in itself a
barrier to growth.
Sports – primarily AFL and NRL – make
up less than a third of overall turnover,
with betting on Aussie Rules or rugby
league yet to catch the imagination of
the Australian public as, for example,
football has done in Europe. In fact,
Tabcorp has admitted that American
sports such as basketball produce a
higher turnover than domestic Australian
sports, despite their widespread
popularity and TV coverage.
The fact sports betting is growing at all
– and has grown much faster than racing
in recent years – should amount to an
exciting growth opportunity for Australiafacing bookies. The reality, however, is
that the AFL and NRL might not live up
to their full potential for some time. Each
has just one major professional league
with 18 and 16 teams respectively, and the
seasons are relatively short.
24
Should online in-play wagering,
currently only permitted via telephone,
arrive, then these sports, as well as cricket
and tennis, will receive a much needed
boost. However, it is widely agreed that a
government led by the conservative and
gambling-wary Tony Abbott is unlikely
to give it the go-ahead anytime soon.
And in the absence of a critical mass of
casual punters and accumulator bets,
sportsbook margins will remain tighter
than most bookies would like.
NUMBERS
$320m
The estimated value of
Australia’s offshore
wagering market
MARKETING CONUNDRUM
Spiralling marketing costs were
undoubtedly a major factor in the
consolidation the Australian market has
seen in recent years. But they are by no
means now under control. The relatively
small number of major sponsorship
opportunities, combined with increased
regulation around TV advertising, means
that CPAs and driving brand awareness
are just as expensive as ever. William Hill
predicts its CPA will fall to $400 (£214)
this year, down from the £724 when it
acquired its Australian companies but still
high compared to the firm’s European
sportsbook average of around £70.
It was Tom Waterhouse who arguably
accelerated the rise in marketing costs
when he blew his rivals out of the
water with a $50m deal to become the
gambling partner of the NRL in 2013. The
agreement, which eventually fell through,
was worth several times more than
Tabcorp’s previous deal and set a new
benchmark for these prized media assets.
This was emphasised in December
when Tabcorp’s contract to be the
AFL’s official betting partner expired.
It was – naturally, given its financial
clout – tipped to win this year’s bid and
retain the partnershi p for a further five
years. However, BetEasy, the upstart
“100% Australian-owned” bookie founded
by former Sportsbet boss Matt Tripp,
fought off its larger rivals and agreed
to part with almost $10m a year in the
process. “We beat out some of the big
European wagering firms and I think that
is important to note,” Tripp said.
Pressure to spend big on media assets
has been compounded by regulatory
changes. Prior to August 2013, bookies
would regularly feature on sports TV
coverage and commentators would
discuss the odds of various bookies
during matches. And while promotion of
odds is allowed, it must be half an hour
before and half an hour after the game,
and only by someone clearly identified as
a bookmaker. According to advertising
monitoring firm Ebiquity, gambling
advertising has increased 251% since the
$50m
The amount BetEasy is
investing in a five-year
AFL betting partnership
agreement
50%+
The percentage of online
sportsbook turnover derived
from horseracing in Australia
ban came into force, or an additional
$19m in real terms.
Whether these rising costs are
sustainable is up for debate. Tabcorp,
with its retail monopoly and the instant
brand recognition that brings, will not be
too concerned about losing media deals.
Sportsbet’s large share of the crucial NRLcrazy New South Wales market is secure
due to an expensive TV coverage deal and
the sponsorship of the Sydney Roosters,
while William Hill’s Australian brands have
the financial might to fight on many fronts.
Smaller firms on tighter budgets, however,
will have to be shrewd with their marketing
spend or will simply be left behind.
Australia remains a hugely attractive
and profitable market, but for it to remain
the bookies’ Lucky Country for a while
longer, some serious marketing investment
is required. Betfred’s short stay in the
country is testament to the cut-throat
environment it has become. And for that
reason, Australia looks set to play into the
big boys’ hands well into the future.
W W W. E G R M A G A Z I N E . C O M