‘Rational’ bookies ahead of the curve as incentive crackdown looms

A more ‘rational’ approach to marketing spend is putting Australia’s biggest wagering operators in a better position to weather a pending federal government crackdown on promotions and advertising, according to PointsBet Group CEO Sam Swanell.

The looming Albanese government response to the ‘You Win Some, You Lose More’ report is anxiously anticipated by the wagering sector, with bans on advertising and inducements among the 31 recommendations.

However, speaking after the latest quarterly earnings announcement, which revealed PointsBet experienced its best-ever quarter when it came to net-win margin, Swanell said the change in approach to promotion by the industry’s major players has put it in a strong position ahead of any regulatory change.

“We think that the market overall is pretty rational. We are already marketing and promoting in a way that we think is responsible. With the government inquiry outcomes, we don’t think it will inhibit our business the way we market going forward,” Swanell said.

Swanell’s comments stand in contrast to private projections in lobbying by the racing and wagering industry which puts the annual impact of a blanket ban on inducements at anything between $500 million to $1 billion.

Swanell said PointsBet’s own results are an example of how wagering companies have already adapted to the current environment and economic circumstances.   

“I think it’s very rational. From a macro perspective, you have some cost-of-living pressures, not just in Australia, but globally, and I think the major competitors here in Australia, Sportsbet and Entain, are part of global groups and need to operate within the bounds of their global strategies,” he said.

PointsBet’s own strategy has seen it eschew a focus on turnover and focus on customer profitability, even if it means the number of active account holders has dropped seven per cent in the past three months.

“It is pretty clear from the last few quarters that we have seen actives pretty much be flat or softening, but that hasn’t stopped us growing net win,” he said.

“The softening of actives has been a deliberate strategy, we have grown net win by growing the number of positive value clients, and improving our net win from these clients through efficiency.

“Just as important has been reducing the number of negative value clients and reducing the negative leakage to them. There are a bunch of clients out there who are bonus chasers and part of what we have cleaned out over the last 12 months is leaking value to those clients unnecessarily.”

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Alister Lui will replace Andrew Mellor as PointsBet group chief financial offer, effective from March.

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The numbers in PointsBet’s Q2 report back that up. While turnover has fallen four per cent on the same period last year and gross win margin has followed suit, a significant cut on marketing spend of 33 per cent has seen net win reach a record $59.9 million, a three per cent jump on where it was 12 months ago.

“We think the market is in reasonable shape. I think Sportsbet for the half are down five per cent, from a revenue perspective. They represent nearly half the market, so it’s a good representation of where the market is at,” Swanell said.

“I think for the half, in Australia, we are up seven per cent, so we are clearly outperforming the market in Australia, even with a bit of bad luck, when it came to results, later in the quarter.”

Swanell did, however, predict tougher times for the smaller wagering service providers, which relied heavily on incentives to establish themselves and grow during the post-pandemic boom.

“There is still a long tail of operators. I think in the marketplace that perhaps this is not overly helpful, but I think the economic realities of operating businesses that can’t yield at the appropriate levels and can’t invest in responsible gambling. will probably help a natural rationalisation of the market in time,” he said.

It is believed the rollout of national self-exclusion register BetStop has had a significant impact on the smaller players.

“We are already marketing and promoting in a way that we think is responsible” – PointsBet CEO Sam Swanell  

PointsBet, which has around a five per cent market share in Australia’s wagering environment, is in the process of exiting from its American business, which has been sold to Fanatics.

While the prohibitive costs of competing in the US market forced a change of plans there, it still has a burgeoning Canadian arm which grew its net win by 109 per cent to $10.5 million in Q2.

PointsBet’s share price has rallied from 80 cents in mid-January to 94 cents on the close of the market on Wednesday.