At the Backing The Punt wagering conference in September 2023, as the total licensed corporate bookmakers in Australia approached 100, the overwhelming feeling in the room was that number was simply not sustainable into the future.
That assumption was based on perfectly sound logic. The post-pandemic wagering boom was at an end, turnover was on the decline, the federal government was likely to introduce advertising restrictions and compliance costs were getting to a point where the small operators could not compete.
The final nail in the coffin of the small bookies was supposed to be by BetStop, the national self-exclusion register which was set to end the practice of problematic but profitable customers, bookie-hopping in order to continue betting.
But nearly 18 months after BetStop’s wider introduction and that meeting of wagering minds in Melbourne, the volume of corporate bookies remain largely the same. While a handful have been acquired or disappeared, plenty of others have jumped up to take their place.
The only major merger action of the past 18 months has been BlueBet and betr, which came together in the middle of last year. With around 5 per cent market share, they are the only one of the medium-to-larger players with a stated ambition for inorganic growth (in other words acquisition).
Put simply, the predicted “great consolidation” has not materialised. So, what happened?
There are a host of factors at play, but key to all of them is the structure of the Australian corporate bookmaker ecosystem.
At the top end, we have the big three, Sportsbet, Entain (Ladbrokes/Neds), and Tabcorp, who between them have over three-quarters of the wagering market.
In a market focused on yield rather than growth, none of them currently have the appetite for acquisition. Neither does Bet365, which is privately owned overseas, and whose ongoing presence in a highly regulated and taxed Australian has been the source of speculation for some time.
Sportsbet built its pole position in the Australia market on its aggressive marketing and strong product but has now seemingly moved into a mindset where it is engaging more with its current customer base rather than growing its footprint.
Entain’s aggressive play into the New Zealand market in mid-2023 was its most recent major shot at inorganic growth in Australasia. Soon after, global challenges emerged at the company and a change of management ended the era of acquisition.
Part of that strategic change was due to historic compliance challenges which led to massive fines in the UK.
Its Australian business now faces similar headaches with an AUSTRAC enforcement in place regarding anti-money laundering and counter terrorism-funding provisions. Until that issue is dealt with, we are unlikely to see Entain shopping for acquisition targets in Australia.
Then we have Tabcorp, which is firmly in transition a few months into Gillon McLachlan’s tenure as CEO.
A disastrous 2023/24 annual report result saw the share price crash to a low of 37 cents in September, but things have been on the improve (now 66 cents) after a string of cost-cutting and other strategic moves under the new management.
McLachlan will set out his strategic reset for Tabcorp in the coming weeks. It is unlikely to involve an acquisition aspect, although some of the smaller and medium players do believe Tabcorp, which purchased a 20 per cent share in emerging bookie Dabble in 2022, could benefit from some ‘inorganic’ input should the share price continue its rebound over the next 12 months.
A prime example of how averse these big players have become to investment in acquisition is the fact that WA TAB is still sitting there on the shelf as a target, but none of them are willing to stump up the $1 billion that the WA government wants for it.
Bren O’Brien
It is worth pointing out that all three of the big players above have had AUSTRAC scrutiny of their operations over the years, highlighting the importance of compliance, especially for publicly listed companies.
That is acting as one of the biggest barriers to acquisition.
In assessing the potential value of an acquisition target’s business, these highly scrutinised companies must also assess risk. It is not only a case of working out the crossover of customers, something which is likely to be substantial in a mature market like Australia, but also the desirability of customers they are acquiring.
Anecdotally, a lot of the smaller bookies’ most valuable accounts are those who are unlikely to be prepared to meet the “Know Your Customer” requirements of the bigger bookmakers.
Another key challenge is that a lot of smaller bookies’ businesses make commercial sense in a lower turnover, less taxed environment, but enveloped into one of the bigger operators, that advantage is lost.
The proliferation of turnover-based taxation and product fee models was also cited to The Straight as one of the main barriers to acquisition plays in the wagering landscape.
Meanwhile, the barriers to setting up as a corporate bookmaker in the first place have been lowered due the proliferation of solutions such as Punterstech, OpenBet, BetMakers, BetCloud and GenerationWeb.
Bren O’Brien
As we covered last year, these all offer different products, but the basic concept of that of an out-of-the-box solution for all aspects of the bookmaking game has driven much of the growth in bookie numbers.
Punterstech general manager Chris Griggs said last year that he felt these types of solutions can help innovate in an industry which has become somewhat stagnant in its product offering over recent years.
Whether change in the industry can be driven from the bottom up is yet to be seen, but in the near future it is in the middle where we are likely to see the major moves going forward.
PointsBet and betr sit in that spot between 5 and 10 per cent of market share, where they will either have to “eat or be eaten” in coming years.
As mentioned, betr has a stated intention to inorganic growth, looking to build to 10 per cent share, having exited the US market last year. With Matthew Tripp now installed as chairman and Andrew Menz at the helm as CEO, you get the feeling they will give that a major shake.
Bren O’Brien
Born in giddy post-pandemic times with an extraordinary and controversial customer acquisition strategy, betr survived a chaotic first 12 months and has now settled down with a corporate partner in BlueBet to give it the bona fides needed to swim with the big fish.
Since the merger, BlueBet’s share price has nearly doubled from 19 cents to 36 cents.
PointsBet exited from its US ambition 12 months earlier than BlueBet, and it has posted some promising numbers as it moves into profitability. Its share price has grown from under 50 cents in September and reached over $1.07 in December. It now sits at 95 cents.
At their quarterly updates, the next of which come later this week, they both speak of the products they have developed. In PointsBet’s case, it is usually its odds factory capability, while for Betr/Bluebet it is its personalised promotions engine.
Put simply, what they offer to a potential suitor is more than just customers, it is product improvement. Similarly, there would be upside in them incorporating a smaller operators’ business into their product suite.
Regardless of intent or desire, the same barriers still exist. The big boys don’t have the hunger for it, while the small fish aren’t as sweet as it would seem.
