UK Bookmakers Bet on the US

Gambling app screen against cropped image of woman using tablet

With prospects in the UK not looking good, its bookmakers are looking west to the US for future growth, now that sports betting has been legalized there.

The outlook for bookmakers and sports betting companies in the UK doesn’t look good. The government has just slashed the maximum stake on Fixed Odds Betting Terminals, prompting dire warnings of bookmakers’ shops closing, widespread job losses, and a steep cut in the bookmaker’s sponsorship of sport. Throw in an increasing groundswell of opinion against gambling ads and the rumblings of several prominent members of the Labour party, and the long-term future looks dim.

Small wonder then, that UK firms are turning their eyes – and their wallets – towards what, in betting terms at least, is the New World.

As regular readers will know, the US Supreme Court has now given the go-ahead for legalized sports betting in the country, with Delaware and New Jersey already on the starting blocks and plenty of other states set to follow.

How big are the respective markets?

The UK Gambling Commission has recently released figures for the period ending September 30, 2017, putting the total gross gambling yield (GGY) of the UK gambling industry at £13.9bn ($18.6bn). The online sector accounts for 35% of this, with a GGY of £4.9bn ($6.6bn).

That represents a year-on-year increase of 3.9%, which is a reasonable performance for the sector, given that it came at a time when wages in the UK were falling behind inflation. But there are also worrying trends in the numbers from the Gambling Commission: Overall numbers employed in the sector were down, as was the total number of betting shops, even before the reduction in the maximum stake on FOBTs.

Early estimates suggest that the online gambling market in the US might be worth around $20bn (£14.9bn) although, as many commentators have pointed out, that is not going to happen overnight and there will be differences in approach between individual states.

UK companies have already placed bets

UK bookmaker William Hill has been investing in the US market since 2011, when it bought three firms to establish a presence in Nevada, but Joe Asher, chief executive at William Hill US is realistic about the possibilities. “The US is going to be the biggest sports betting market in the world,” he said. “But obviously that is not going to happen on day one.”

Hill, which now employs 450 people in the US, appears ready to embark on a gradual process of expansion. However, UK firm Paddy Power Betfair, the company formed by the merger of the chain of bookmakers and the world’s biggest betting exchange,  has already taken a decisive step, announcing last month that talks have begun to merge with US Daily Fantasy Sports firm, FanDuel.

Partnerships likely to be the way ahead

Given the potential size of the market, Hill and Paddy Power Betfair will not be the only UK companies looking to expand into the US, but it seems likely that the expansion will come via partnerships, rather than the straightforward setting up of US-based sports betting operations.

Given the complexity of the state-by-state process of legalization, what we are likely to see is British operators partnering their expertise and existing operating systems with the local knowledge of US companies. This will be true not just for “client-facing” companies, but also for the UK companies that supply the back-office systems that make the betting sites work.

“It will be a win/win situation for everyone,” said Will Hawkley, head of leisure for consultants KPMG, “But it will be about partnerships and it will be driven by technology.”

Does that mean that UK gamblers will become as used to betting on Major League Baseball and the NFL as they are on horseracing and the Premier League? That may take some time: With the World Cup starting next week and Royal Ascot and Wimbledon just around the corner, they probably have enough action for now.

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