The Australian gambling market was once the hottest market in the world, and why wouldn’t it be?
24 million people.
The highest gambling losses per capita of any country in the world at circa US$1000 per annum.[1]
A deregulated gambling marketplace open to private domestic and foreign operators and supported by both state and federal Governments cashing in on the tax bonanza.
An investment and buying spree of Australian wagering and sports gambling businesses ensued. Predominantly led by the big international bookmakers who were attracted to the high betting turnover and potential for growth outside of their home markets in the UK and Ireland.
Between 2009 and 2013, well in excess of A$1bn was outlaid to acquire or start-up Australian gambling businesses:
- Paddy Power acquired Sportsbet in 2009/2010 for ~A$200m
- Sportingbet acquired Centrebet in 2011 for ~A$180m
- Bet365 undertook a marketing campaign of over A$35m in its first year alone in 2012 to win customers;
- William Hill acquired Sportingbet (including Centrebet) and TomWaterhouse in 2013 for ~A$700m; and
- Ladbrokes Coral acquired Bookmaker.com.au in 2013 for A$22m (and subsequently BetStar).
These were the halcyon days for the Australian industry. Lots of new jobs and in many cases, above market salaries.
Fast forward 5-10 years and the landscape has changed dramatically for operators and their employees. Outlined below are a number of issues which have contributed to the Australian industry’s position of declining profitability and reduced career opportunities.
At BettingRecruitment we believe these factors should act as key motivators for those with experience to consider a role in the US, the world’s most exciting and fastest growing sports gambling market.
Issue 1: The Australian wagering market is hardly growing.
This is no secret.
In 2013, Ladbrokes Head of Strategy, Damian Cope, announced that they would be acquiring Bookmaker.com.au. At the time, he outlined that future growth would not come from expansion of the overall market but instead from displacement of existing Australian gamblers:
“We definitely expect that we will be taking customers from our competitors rather than acquiring new customers. If you’re an Australian and you’re interested in gambling online you probably have already opened an account.”[2]
While stealing customers from your competitors is a veritable strategy in many industries, it has proven difficult in Australia where there is now limited differentiation between products and customer experiences and the clientele view the operators as fully substitutable.
Generally speaking, the Australian gambling marketplace has become a merry-go-round of the same punters and client lists that have limited loyalty to the betting companies other than to the free bets, and marketing promotions that are typical of new entrants.
Perversely, it is important to note that sports gambling is the key growth area of Australian wagering. Of gaming, racing and sports gambling, it is the only market which has grown (in real terms) in the last 10 years. While gaming and racing have stagnated, sports gambling has increased from a relatively non-existent level of turnover in the mid-1990s to ~A$10bn in in 2016.[3] Despite this growth however, it has not been sufficient to arrest the overall slide in operator profitability.
Issue 2: There are no barriers to entry in the Australian wagering market
As outlined above, the Australian wagering market is a merry-go-round.
Out of every bit of corporate activity in the sector more start-ups and competitors have emerged.
Whether it has been Matthew Tripp and the Sportsbet team exiting to acquire BetEzy and turn it into CrownBet, Michael Sullivan departing Sportingbet to establish BlueBet, Dean Shannon leaving Bookmaker.com.au to start-up NEDS or the former Tom Waterhouse / William Hill Australia team founding Pointsbet, there are a litany of examples.
The trend may enable the initial founders to cash-in again on a proven formula, but it is highly unlikely to provide meaningful career opportunities for the teams of employees that will be impacted by the inevitable industry consolidation that follows.
Issue 3: Australian regulatory and legislation changes have significantly reduced operator profitability
High turnover, low margin is a strategy that is proven to work. High turnover, negative margin is not.
In recent years, consistent regulatory and legislation change in Australia have caused profit margin compression for operators and made it simply unprofitable for a large piece of the market to be serviced.
What has happened?
- Racing field and sports product fees have continued to increase dramatically as the regulators (eg. Racing NSW) and the leagues (eg. NRL / AFL) have sought to increase their share of the gambling revenue pie.
- State Governments have introduced point of consumption taxes. As of 1 July 2017, South Australia introduced a 15% tax on net revenue generated from all bets placed in the state – including racing and sports. NSW (10%) and Queensland (15%) have announced that they will follow in 2018/19 and Victoria and WA are expected to do the same. These taxes come on top of existing license-linked turnover taxes and corporate taxes.
- The Commonwealth Government of Australia reaffirmed that there would be no legalisation of in-play betting and amended the Interactive Gambling Act 2001 to:
- Prohibit credit being extended to customers; and
- Restrict the broadcasting of gambling advertisements during televised sporting events and particular time slots.
The above factors have all contributed to a decline in profitability of the Australian wagering industry. They are not temporary factors but have permanently changed the landscape and been a key driver of recent corporate consolidation.
Issue 4: Industry consolidation is required to arrest declining profitability
At the beginning of the article we discussed the halcyon days of foreign investment in the Australian wagering industry.
2017 and 2018 have not been as positive.
The Australian market has recently undergone corporate consolidation in an attempt by the larger players – with the exception of Sportsbet – to arrest declining profitability. Tabcorp and Tatts merged (the Tabcorp’s Luxbet brand was also closed) and Crownbet (post its own acquisition by the Stars Group who acquired a majority shareholding in early 2018) acquired William Hill Australia. The Crownbet acquisition enabled a full exit by William Hill from Australia at a loss of more than 50% on its original investment.
The transaction rationale for these deals has been predominantly to unlock synergies. Put simply, this means reducing costs by de-duplication of roles and overheads within the combined businesses (eg. reducing headcount, merging back-end systems and moving into a single office). Not usually a good indicator of career prospects for employees in the industry.
Conclusion
The issues outlined above have been driving factors in changing the landscape of the Australian wagering market. The recent trends of headcount reductions, offshoring of roles which can be performed in low labour cost jurisdictions and corporate consolidation are likely to continue unless there is a material change to regulation and legislation which provides a respite to industry profitability.
At BettingRecruitment, we believe now is the time to seriously consider a move to the US to be part of what will be the fastest growing and largest sports gambling market in the world.
Establishment of ‘new’ sports gambling operations within each US state will require a full suite of experienced employees across multiple operators to fill roles largely consistent with those under the Australian operating model. Coupled with Australian’s unique access to the E-3 visa, candidates with wagering experience therefore represent a highly attractive labour pool from which to recruit employees.
Fast growing markets have always proven to be most conducive to interesting jobs and learning opportunities, consistent promotions and attractive salary packages with achievable bonus targets.
If this is what you are looking for in a sports gambling career then please get in touch with the team at BettingRecruitment now at info@bettingrecruitment.com.
[1] https://www.economist.com/graphic-detail/2017/02/09/the-worlds-biggest-gamblers
[2] https://www.afr.com/business/latecomer-ladbrokes-bets-it-can-steal-market-share-20130913-j0ei0
[3] http://www.qgso.qld.gov.au/products/reports/aus-gambling-stats/index.php
