Online bookies pick up the pace without sport

The lockdown has been a breakthrough for the sector.

In Australia, Flutter owns Sportsbet and The Stars Group owns Bet Easy, which was formed from the acquisition of William Hill’s Australian operation and Crown Resorts’ Crown Bet.

Sport is coming back but the online gaming groups never went away — in fact they have been gaining momentum.

Undeterred by the lack of football, tennis and cricket, gamblers have discovered the joy of offshore table tennis tournaments and obscure European second-tier soccer leagues still kicking the ball around.

Others have resorted to punting on extreme wrestling, MasterChef, Survivor or even who will star as Joe Exotic in the upcoming movie version of Tiger King.

“There’s not much else for people to do,” admits Pointsbet (PBH) founder and CEO Sam Swanell. “As an entertainment option, we have benefited from the TABs, pubs, casinos and pokies being closed.”

But Australian punters are still enjoying what their overseas counterparts can’t: the nags.

Somewhat miraculously, horse racing has continued as planned (sans spectators).

The force behind Tomwaterhouse.com.au, Swanell founded Pointsbet with more than a weather eye on the US, where sports betting was illegal in most states. At least it was until May 2018, when the state of New Jersey successfully challenged the validity of federal statutes in the Supreme Court.

At last count, 18 states allowed sports betting and six have passed laws to do so. A further 25 have introduced enabling legislation which would pretty much leave Utah — which bans gambling in its constitution — as the holdout state.

Pointsbet operates in New Jersey, Indiana and Iowa and in the next six months expects to expand to Illinois, Colorado and Michigan. The company is already the fourth-biggest operator in New Jersey.

“Americans are as sports-mad as us and they like to have a bet as much as us,” Swanell says.

Pointsbet’s closest US rival is fantasy sports and sports betting outfit Draft Kings, which listed on the Nasdaq last month by way of a reverse takeover.

Draft Kings lost $US130m last year but is valued at $US15bn ($24.3bn).

Pointsbet’s secret weapon for building a casino platform is Manjit Gombra Singh, the former chief technology officer for Aristocrat Leisure.

Even without online casinos, the company cites the US as a $US17bn-a-year revenue opportunity, presuming most states legalise sports betting.

Given the looming budgetary void in the wake of COVID-19, they will feel compelled to do so.

But entering the US is an expensive grind and, as with here, extensive marketing is required. But Swanell says Pointsbet has the benefit of owning its own technology, which few operators do.

In the March quarter Pointsbet reported a $10.5m operating cash deficit on receipts of $18.7m. In earnings before interest, tax, depreciation and amortisation, the Australian operations were slightly in the black.

Pointsbet reported an EBITDA loss of $28.4m in the first half, on net revenue of $27.4m and just over half a billion dollars of turnover.

In an update last week, the company said the propitious conditions had continued so far in the current quarter: the “group net win” in April and May stood at $18.5m, exceeding the total for the whole of the previous two quarters.

The company is also the “last man standing” local operator following a wave of consolidation.

In April, Flutter Entertainment and The Stars Group agreed to merge to create the world’s biggest online gambling company.

In Australia, Flutter owns Sportsbet and The Stars Group owns Bet Easy, which was formed from the acquisition of William Hill’s Australian operation and Crown Resorts’ Crown Bet.

Betmakers (BET)

The business-to-business operator flies under the radar in an ASX-listed wagering sector that has become limited since the Tabcorp-Tatt’s Group merger in 2010.

Betmakers provides back-office services to all of the main corporate bookies locally, as well as the main racing clubs.

“We are an essential service to the racing industry and bookmakers,” CEO Todd Buckingham says.

Betmakers packages data provided from the racing bodies and other rights holders, which allows the bookmakers to operate a full online service and keep costs low. As well as collating stats such as jump times and results, Betmakers also frames the prices.

Buckingham notes that in normal times there are about 5000 official races per week globally, covering thoroughbreds, harness racing and the dogs.

Locally, Betmakers signed a deal with Tom Waterhouse to develop a betting app that enabled punters to access prices from other bookies. “Think of it as the race wagering version of Expedia or Trivago,” says broker Cannacord.

Betmakers recorded $5.1m of revenue in the nine months to the end of the March quarter, for a loss of $642,000. Cannacord plugs in a $1.9m current year loss, but with underlying earnings of $100,000.

But the bottom line swells to $10.2m in 2021-22 when the new products are off and racing.

Tim Boreham edits The New Criterion

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