World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming

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World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
Hospitality and Leisure
Betting & Gaming

World Cup betting:
what do the odds look like for bookmakers?

May 2010                   pwc
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
Bookmakers have had a tough time of
                                 late. The chief executive of William Hill
                                 went as far as describing 2009 as “hellish
                                 for bookmakers”. The recession has
                                 had a major impact on overall business.
                                 Those economic problems have been
                                 compounded by volatile sporting results
                                 that have also hit bookmakers’ margins.
                                 Even the unexpectedly severe winter
                                 weather in the UK has played its part, with
                                 many events cancelled. With revenues and
                                 profits down in 2009 and a tough 2010
                                 expected, the World Cup in South Africa
                                 may be a singularly bright light at the end
                                 of a dark tunnel.

2   PricewaterhouseCoopers LLP
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
This World Cup will arguably have               landscape in those countries. In
more far reaching impacts than the              addition, the growth of live betting is a
tournaments in 2006 and 2002. That’s            phenomenon that is new for the World
because the betting landscape has               Cup, having been in its infancy in 2006,
changed dramatically since then. While          and one that might drive significant
the UK may have had established                 growth ahead of what was seen last time.
licensed bookmakers, both offline and
online, for many years, this time round
will see the emergence of a new online          History repeats itself
market in France, following the recent
regulatory changes which have led to            Historical betting patterns show that the
the opening up of this market, and the          World Cup traditionally provides a major
first World Cup tournament Italy’s still        boost to all bookmakers in the order
developing sports betting industry has          of between one and two per cent of
seen. The World Cup 2010 will be a              annual gross win (worth c.£17-18m for
key event in shaping the competitive            Ladbrokes or William Hill) [See Chart 1].

Chart 1: Boost from World Cup 2006

Impact of World Cup 2006 in Germany

                          20
                          20
Bookmaker gross win due

                          15
                          15
   to World Cup, £m

                          10
                          10

                          55

                          00
                               Ladbrokes    William Hill          Ladbrokes e-gaming

Source: Ladbrokes 2006 Annual Report; William Hill interim management statement August 2006

                                                                                        World Cup betting: what do the odds look like for bookmakers?   1
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
Research by PwC suggests that this                                 Perhaps even more importantly,
                                   time will be no exception. Our consumer                            the one-off influx of new customers
                                   survey of over 2,000 UK consumers                                  represents an opportunity for
                                   reveals that 7% of the population who                              bookmakers to attract a new type of
                                   don’t normally bet are likely to do                                punter, who could develop into a regular
                                   so during the World Cup [See Chart                                 punter in the future. The majority of
                                   2a]. Although this may not sound like                              regular punters are male and slightly
                                   much, this compares to only 8% of the                              skewed towards an older demographic.
                                                                                                      However, as the chart below shows,
                                   population who say they bet regularly,
                                                                                                      a higher proportion of new customers
                                   and of these, 3% are people who don’t
                                                                                                      betting on the World Cup will be female
                                   expect to bet on the World Cup – so the
                                                                                                      and younger than regular betting
                                   7% figure could double the number of                               customers.
                                   customers for the bookmakers during
                                   the World Cup.
                                   Chart 2a: Consumer attitudes to betting?

                                   New betting customers for the World Cup 2010

                                     25
                                   0.25
                                     20
                                   0.20
                                 % of respondents

                                     15
                                   0.15
                                     10
                                   0.10

                                   0.055

                                   0.000
                                                               I bet regularly          I don't bet regularly but      Consumers betting
                                                                                       will do so on the World Cup    at least once per year

                                   Source: PwC consumer research March 2010; UK Gambling prevalence survey 2007,
                                   National Centre for Social Research

                                   Chart 2b: World Cup Betting – demographics of new punters

                                                          10                                                                       16
                                                                                                           18
                                                                                      30
                                                                                                                                               55+
                                 % of respondents

                                                                                                                                   27
                                                                                                           35
                                                                                                                                               35-54
                                                          90
                                                                                                                                               18-34
                                                                                      70
                                                                                                                                   57
                                                                                                           47                                  Female

                                                                                                                                               Male
                                                       Regular                   New punters           Regular              New punters
                                                    punters betting               betting on        punters betting          betting on
                                                     on World Cup                 World Cup          on World Cup            World Cup

                                   Source: PwC consumer research March 2010; UK Gambling prevalence survey 2007,
                                   National Centre for Social Research

2   PricewaterhouseCoopers LLP
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
The venues for placing those bets are                           available to bookmakers in 2010 that
likely to show a strong shift to online                         were only developing or non-existent for
channels. More than half (55%) of those                         previous competitions. France and Italy,
consumers saying that they will place                           in particular, will be key new markets to
a bet on the World Cup will do so via                           address. Another major change this time
a website.                                                      around is the change in the nature of
That high propensity to bet online is                           the bets placed. ‘In-play’ or live betting
one of several trends that will present                         is a rapidly growing element of betting,
the betting industry with a number of                           and creates potentially new markets
new opportunities during the World                              for bookmakers – particularly targeting
Cup that could help lift the gloom of                           customers watching the game at home
the recent difficult trading environment.                       on television where they are also likely
There will be new European markets                              to have easy access to the web.

Chart 3: the move online

Betting online during the World Cup

                                %
                                60
                                60
 Proportion of betting online

                                50
                                40
                                40
                                30
                                30
                                20
                                20
                                10
                                10
                                00
                                     Share of overall betting       Proportion betting on World Cup
                                         market online                  planning to do so online

Source: GBGC, PwC consumer survey March 2010

A higher proportion of new customers betting
on the World Cup will be female and younger
than regular betting customers.

                                                                                                      World Cup betting: what do the odds look like for bookmakers?   3
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
New markets emerging:                                     See Table 1 adjacent for a summary.

                                                                                            Given the market presence and profile
                                  France                                                    of the state incumbents, it seems likely
                                                                                            that they will garner a major share of
                                  The French market is at the point of
                                                                                            the revenues that are available from the
                                  being liberalised – and just in time
                                                                                            World Cup. But other players have a
                                  for the World Cup. How effective
                                                                                            chance to establish themselves quickly
                                  bookmakers are at acquiring customers
                                                                                            as the World Cup focuses attention on
                                  during the competition will be a key
                                                                                            their services. One thing is for sure,
                                  determinant of their future success.
                                                                                            the World Cup will be important in
                                  All eyes will be on how the new entrants
                                                                                            determining who comes out on top in
                                  perform relative to the old state
                                                                                            the end.
                                  monopolies, PMU and Française
                                  des Jeux.
                                                                                            Italy
                                  Rather than individual businesses trying
                                                                                            The Italian market is relatively immature
                                  to take those established players on
                                                                                            with liberalisation of the high street
                                  head-to-head, recent months have seen
                                                                                            and online betting market only taking
                                  numerous partnerships announced
                                                                                            place over the last couple of years.
                                  between media, telecoms and gaming
                                                                                            And after initial explosive growth, the
                                  companies as each struggles to plug
                                                                                            betting market has recently started to
                                  the gaps in the capabilities needed
                                                                                            show signs of slowing down. The World
                                  to be ready for the market ahead of
                                                                                            Cup therefore provides an opportunity
                                  liberalisation. Gaming companies have
                                                                                            for bookmakers to re-energise their
                                  sought partnerships with telecoms
                                                                                            markets and kick start growth. Again,
                                  service providers or media companies
                                                                                            they need to attract new types of
                                  in order to access their large customer
                                                                                            non-traditional consumers and grow
                                  bases. The state gambling monopolies
                                                                                            their consumer pool beyond their core
                                  have sought both media partnerships
                                                                                            market of enthusiastic early adopters.
                                  and access to more advanced
                                  technology from gaming companies.

                                  Diagram 1: Alliances to plug capabilities in France

                                                                        Media/Telecoms
                                                                         companies
                                                            Orange
                                 Customer reach in France

                                                              SFR
                                                                                             State lottery and
                                                            Canal+                          betting monopolies

                                                            L’Equipe                              PMU
                                                                                                    FdJ

                                                                                                                                 Of f shore online
                                                                                                                                 gaming operators
                                                               Casinos Tranchant
                                                                  JOA Casino                                         Bwin Sportingbet

                                                               Of f line gaming companies
                                                                                                                  Ladbrokes PartyGaming
                                                                                                                 Betfair Partouche 888.com

                                                                                                                       Online gaming experience

                                  Source: PwC Analysis

4   PricewaterhouseCoopers LLP
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
Table 1: Alliances announced in France

Company 1       Company 2        Comment
PMU             Party Gaming,    Announced in March 2010, PartyGaming will
                Paddy Power      provide PMU with access to its poker platform
                                 and network. Irish bookmaker, Paddypower, will
                                 provide PMU’s sports betting platform
bwin            L’Equipe         Bwin has formed a joint venture with the French
                                 sports magazine to offer online gaming products
FdJ             RTL, Orange,     FdJ has signed an agreement with the sports
                Yahoo!           broadcasters RTL, Orange and Yahoo! to offer
                                 its bets to customers of the three large media/
                                 telecoms companies
Ladbrokes       Canal+           Canal+ is one of France’s largest sports
                                 broadcasters while Ladbrokes brings extensive
                                 online gaming expertise from the UK market
Iliad           Chiligaming/     Chiligaming, which licences its technology
                Playtech         from B2B giant Playtech, has an agreement to
                                 distribute online gaming products through Free
                                 (owned by Iliad)- one of France’s largest internet
                                 service providers

In play betting, now!                        80% of consumers planning to watch
                                             World Cup games at home, live betting
At the last World Cup in 2006 live           may be a key driver of growth during
betting was in its infancy. Since 2007       the tournament. Figures from FIFA
it has grown rapidly to the extent that      show that the cumulative European TV
it now accounts for up to 40 to 50%          audience for the tournament in 2006
of bets for some online players. In-         reached more than 5.3 billion viewers
play or live betting offers customers a      and in Asia cumulative viewing figures
whole range of bets based around their       topped 8 billion. Both represent a major
predictions for what will happen next.       increase on the previous tournament.
These can be as varied as, for example,      With Europe and Asia both well
which player will score the most goals,      represented in the 2010 competition,
the next player to score or the total        there is no reason to doubt that
number of yellow cards handed out by         viewing figures are likely to climb again.
the referee.                                 Competition for prime slots during TV
                                             coverage – particularly at the start and
Making customers aware of the                middle of each game – and sponsorship
opportunity to bet once a game is            opportunities is likely to be intense.
underway will largely be driven by           Effective media planning to pick exactly
effective television advertising. And with   the right spots will therefore be critical.

                                                                                   World Cup betting: what do the odds look like for bookmakers?   5
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
Smart phone, smart                                    Lining up for kick off
                                   betting?                                              The key issue for bookmakers is
                                                                                         how they will go about capturing the
                                   Other channels too may well come to                   opportunities presented by the World
                                   the fore for the first time in this World             Cup, both in terms of acquiring new
                                   Cup. The explosion in popularity of                   customers and then retaining them after
                                   Apple’s iPhone (and other similar                     the excitement (or disappointment) of
                                   devices) and the myriad applications it               the World Cup evaporates. They need to
                                   makes available mean that consumers                   balance the requirement to make their
                                   are willing to do far more with their                 services easily accessible to novice
                                   mobile devices than before. Some                      gamblers with the provision of more
                                   bookmakers have already created                       sophisticated services to established
                                   apps to address this burgeoning                       customers.
                                   market and our survey suggests that
                                   while a relatively low proportion (4%)                That means successful bookmakers will
                                   of those intending to bet say that they               need to develop marketing strategies
                                   will use their mobiles, the growth of                 that can be effective on more than
                                   other consumer and entertainment                      one front. They will need to develop
                                   services on mobile should encourage                   the right campaigns and choose the
                                   bookmakers to investigate the                         best channels for communicating with
                                   possibilities.                                        both new and existing customers.

                                   Chart 4: live betting on the up

                                   Live betting – a growing trend

                                                                      50
                                 % sportsbetting stakes (PartyBets)

                                                                      40
                                                                      40
                                                                      30
                                                                      30
                                                                      20
                                                                      20
                                                                      10
                                                                      10

                                                                      00
                                                                           2007   2008               2009

                                   Source: Annual Reports, Investor Presentations

6   PricewaterhouseCoopers LLP
World Cup betting: what do the odds look like for bookmakers? - Hospitality and Leisure Betting & Gaming
Existing strategies that are predicated
on pay per click web channels may
                                             Keeping the ball in
need to be rethought or augmented to         the air
appeal to a wider market, potentially
switching focus from the web to              Having attracted new customers to bet
more mass market advertising                 for the first time, or persuaded those
bookending TV coverage, or even press        who bet very infrequently to do so
advertisements, to appeal to their non-      more, bookmakers need to develop the
traditional consumers.                       strategies that can retain customers
                                             once the World Cup finishes in July.
                                             Plans to persuade them to increase
Keeping it simple                            the frequency of their activity or to take
                                             a look at other gaming experiences
Online betting sites will also need to
                                             online such as casinos, poker or other
adapt to capture new customers at the
                                             sports betting, should be in place and
same time as offering core customers
                                             clear before the World Cup kicks off.
the richness of content and options that
                                             Just as is the case in the tournament
they expect. It may be that dedicated
sites for the World Cup with simplified      itself, those who prepare best are likely
options and an easy sign up process          to emerge at or near the top of the
will help acquire new customers quickly      competition.
while customers who are already
registered are able to navigate directly
to their preferred environment.              Praying for the right
Signing up to bet needs to be as simple      results
as possible, at the same time ensuring
that new customers feel reassured            Of course, all the preparation in the
that their personal and payment              world can’t influence what happens on
details are held securely. And to cope       the pitch. While bookmakers should be
with a potential sudden influx of new        planning for the range of possibilities
customers – for example on the date          and opportunities that this summer’s
that a national team is playing in a         World Cup will create, some things
particular country – systems will need       are beyond their control. Strong
to be sufficiently robust to handle much     performances by outsiders will be
higher traffic and levels of transactions    gratefully received by the bookmakers,
than normal without stalling, falling over   and as history shows are not beyond
or slowing down to an unacceptably           the realms of possibilities. But victory
slow pace. Novice punters are unlikely       for Brazil or Spain, the pre-tournament
to have any loyalty to a particular          favourites, will not be the result the
service – and will not persevere with        betting industry is looking for.
one provider when there are many other
options available.

                                                                                   World Cup betting: what do the odds look like for bookmakers?   7
Contacts
To discuss any of the issues in this article, please contact:

               David Trunkfield
               UK Head of Betting and Gaming

               +44 (0) 20 7804 6397
               david.trunkfield@uk.pwc.com

For further hospitality & leisure research and news visit:
www.pwc.co.uk/hospitalitydirections
www.pwc.co.uk/hospitalitydirections
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