The big four - What does another major wagering player do for the Australian market?

The potential acquisition of PointsBet by BlueBet would create a fourth competitor at the top end of Australia’s wagering landscape. Bren O’Brien explores what that might mean, and the likelihood of BlueBet winning the support of PointsBet investors.

Since September 2020, three companies have been the dominant forces in the Australian wagering landscape.

The merger of Sportsbet and BetEasy at that time enshrined the former, owned by the world’s largest betting company Flutter, as the clear market leader. Within months it held a 50 per cent share.

Since then, the only other two companies with a greater than 10 per cent share have been Tabcorp and Entain. While a wagering boom and bust has occurred in those four-and-half years, perhaps surprisingly, things at the top have stayed the same.

Sportsbet holds around 45 per cent of the market, depending on what metric you use, while Tabcorp’s share of digital turnover was around 20 per cent at last count and Entain’s market share sits in the high teens.

There are a host of reasons behind this market share stasis.

Firstly, additional taxation, product fees and regulations have made it almost impossible for any of the contenders to make considerable ground.

Secondly, those contenders who could have made ground in Australia, such as PointsBet and BlueBet, spent several years chasing the dream of conquering the American market. In both instances, they were forced to beat a hasty retreat.

Meanwhile, betr, under the stewardship of the old BetEasy crew of Matt Tripp and Andrew Menz, emerged in the spring of 2022 with marketing largesse and the desire to shake things up. For a few months its acquisition blitz created a major ripple, but it was apparent that betr’s ownership partner, Newscorp, didn’t quite have the same risk appetite as the bookmaker.

Tripp’s exploits in the Australian corporate wagering landscape are legendary but, on this occasion, his team had to demonstrate some strategic gymnastics to realise their ambition.

The merger with publicly listed BlueBet in mid-2024 followed by BlueBet/betr’s acquisition of much-respected minnow TopSport inched that ambition forward. If this is to be an empire, then it will be built in stages.

“When we launched betr, we knew that we’d get one go at organic growth, which we got by acquiring a mass customer base really quickly,” betr CEO Menz told The Straight.

“But from our experience in this industry over a long time, we know how tough it is to grow organically and to take share, particularly when you’ve got significant marketing budgets, advertising restrictions coming in, etc.”

“It’s really, really difficult to gain share organically. So, we knew that we had to get on the path of M&A. And a roll-up of these smaller to mid-tier operators made the most sense.”

Menz has talked often about the market sweet spot his company is aiming for, between 10 and 15 per cent, but as things stand, it needs a shot in the arm to get to that double-figure target.

Enter the opportunity, and battle for PointsBet.

When PointsBet’s board announced a couple of weeks back it was recommending an offer from Japanese-owned MIXI of $1.06 a share, it lit a fire under Tripp, Menz and their team.

BlueBet was in early-stage discussions with PointsBet at the time, but MIXI had got it to the altar first.

Uncowed by the competition, BlueBet has spent the past two weeks pressing the case, strongly, among PointsBet shareholders and the media that its offer is a better deal.

“We’re really strong in our conviction that (should they accept the MIXI offer), the shareholders are leaving some value on the table,” Menz said.

“We’d love to put the businesses together and create that next big challenger and take it up to the overseas operators at the top of the chain.”

On the surface, at $1.15 value for a cash offer and $1.28 for cash and scrip, with extra for the execution of synergies, looks superior, but PointsBet remains unconvinced, rejecting the offer on the basis of a lack of detail and certainty.

Last Thursday, BlueBet put its full proposal up for scrutiny, as it builds its support from the PointsBet shareholders, some of which also have a piece of BlueBet. It remains confident it can win the argument before the MIXI deal goes to a vote in May.

The potential for $40 million on synergies is the clincher, according to Menz, who said both betr and PointsBet operate off the same code base.

BlueBet’s detailed proposal for the PointsBet deal was entitled ‘Creating a leading Australian-owned wagering operator’, playing off the uncertainty of an offer from MIXI, a Japanese-backed operator with a small Australian presence through its BetM brand.

BlueBet team — *BlueBet’s Andrew Menz, Bill Richmond, Matthew Tripp and Michael Sullivan (Photo: Bluebet PLC)*

“It does make a lot of sense to have a number of Australian-owned operators here and not be pushing everything offshore. And PointBet could be the next example of that,” Menz said.

That line has created resonance among some key sports and racing executives, who in a difficult market see the advantage of a locally owned competitor to publicly listed Tabcorp and overseas-owned Sportsbet and Entain, all of whom are pulling back their marketing and sponsorship to some extent.

But what does a fourth major player do for the consumer?

“It has to help, right? It’s more competition,” Menz said.

“It’s not just generosity and odds. It’s really product innovation and trying to continue to uplift what we’re offering to customers. How they engage with racing is really important and to keep the racing industry strong.”

Menz also said it would shake up an Australian wagering industry, which has been criticised elsewhere for a lack of innovation in recent times, especially as racing’s share of market has been eroded by sport.

“Innovation will be at the forefront of what we do this year. We’ve got a couple of cool products to roll out. They’re not game-changing, but they’re starting to think about what the future of wagering on racing is and also sport look like,” he said.

Should it acquire PointsBet, and that is far from certain, BlueBet would inherit a customer base with a slant towards sports over racing. Menz doesn’t see that as a bad thing for the future of betting on racing.

“In our experience, we acquire them through sport, but we see them really stick and really enjoying their betting on racing,” he said.

“It’s a great thing for the racing industry if we can bring more of these punters in through sport, through the front door, and then migrate them to what is the best betting product in the world.”

If BlueBet/betr was to become that fourth major player, there is a good chance that state of play would not last for long.

While Sportsbet’s dominant position means any mergers on its behalf would likely attract the scrutiny and opposition of the ACCC, the current challenges for Tabcorp and Entain could result in further consolidation at the top end.

As Menz points out, historically, every time previously a fourth player has hit that double-figure share in Australia, it has been acquired.

Given Tripp and Menz’s previous experience, a repeat of that would not surprise.

But what if BlueBet doesn’t convince the PointsBet shareholders that its offer is better. There is an alternative avenue to that sweet spot, according to Menz.

“Without PointsBet, there’s a path to 10,” he said. “That involves a couple of the mid-tier players.

“I think the TopSport experience will be a really interesting one to watch play out. And it’ll be a great test case for us in really looking at the quality of these databases of the slightly smaller players. But there is a bunch out there that could help us get to 10.”