Fundamentals, fundamentals, fundamentals.

Risk, in any  form, is not ‘good’ for business plans, strategies and board room meetings. Combine this with the obvious need for several sportsbook operators and solution providers to address the new markets opening up in Europe, and you have a good enough explanation as to why more of them are ‘tempted’ to focus on marketing and reselling sportsbook content at a small profit rather than investing in the fundamentals of the business. Without intending to reduce the importance of all other business activities, our view is that a true long-term strategy for organic growth and healthy business margins remains centred around the core bookmaking activities and, more importantly, their control. Key market players undoubtedly understand this and adopt a strategy of maintaining high internal investment levels in all core business areas; others will need to choose the partners and B2B providers that share the same approach.

While sportsbook maintains its leading role among all gaming verticals worldwide, the rules of the game are changing. It - has become apparent that those sportsbook operators and solution providers that successfully adapt to the European dot.country model will also be ideally positioned to address the rest of the world’s locally regulated markets. Operators are tempted to reduce business risk by adapting their offers to each new market, this may include: varying tax levels according to the regulatory framework of each country, lower payouts compared to the dot.com environment, different local compliance requirements, the importance of the retail channel and the popularity of sports other than football, just to name a few.

It is our view that once the the dot.country dust settles, the winning strategy will prove to be a combination of focusing and investing on fundamentals: accepting calculated risk and maintaining control of core business areas. Some key choices aligned with this strategy are the following:

Reduce reliance on automated solutions: Automated solutions are now a prevalent cost-effective means to extending one’s portfolio of offered markets and events. An extensive portfolio of sports, events and markets is vital in order to acquire and retain customers, as well as generating higher turnover, through increased time spent on the website or app. Automated solutions may mean that an extensive portfolio can be made readily available with a significantly reduced risk (or even at no risk), they do however come at a price; the margin is rather static and low. This is definitely not suitable for a book’s core sports and markets, especially in cases where regulation-mandated payout is relatively low and performance optimisation is important. Despite the trend to treat sportsbook content as a commodity, operators investing in sportsbook management and trading will be in a better position to secure return on investment (ROI) in each market they enter.

Adopt a decentralised operational and technological model: Replicating a centralised blueprint in several countries will only work for some operators and in few markets. Operators and service providers need to combine central and local teams and technologies and strike a balance between the two. Even if an operator has no B2B strategy, its central team and technology need to be managed as a B2B hub serving the needs of the local B2C operations of each country. This is the necessary transformation which will allow for effective localisation of the product and optimisation of individual country performance.

Invest in technology: The decentralised model needs to be enabled by the technological infrastructure. The goal is to ensure high performance, flexibility and responsiveness towards the end customer. Operators counting on a long-term growth strategy associated with several dot-country operations need to seriously consider adopting the cloud paradigm for platforms and data centres to ensure flexibility and responsiveness while also investing on platforms and solutions that can ensure long-term adaptability and growth. New business models arise as well as solution attributes like: ability to integrate and scale while maintaining the highest security, compliance to international best practices and standards, and business continuity levels become even more important.

The mobile channel: Its future growth is well-documented: the mobile internet, new demographics, evolving consumer trends etc. There is however one extra reason why we chose to include it in the ‘fundamentals’ of the business, and it has to do with an important fact that is seldom communicated; there is a strong correlation between high-value sportsbook customers and users of the mobile channel. Sportsbooks that refuse to work as ‘content resellers’ will also know the importance of high-value punters and how to attract, retain and manage them. We expect that these sportsbooks will also treat the mobile channel as a personalised, VIP customer instrument.    

Reduce the cultural or regional bias for important secondary sports: Developing new games and adapting existing sports to satisfy local market demand is an imperative for a global sportsbook aiming at maximising returns from each local market. Operators would need to build or acquire the expertise needed for managing several additional sports. Even though the main sporting events are now global and a sportsbook can ‘perform by focusing on the main European football leagues and the mainstream sports , true performance optimisation comes through focus on local content. There are several very large markets with high growth potential that require a betting product that goes beyond the established sports mix and fully addresses local favourites, like sports, events and “local hero” athletes.

Innovate on secondary markets and combinations: Even though the core live betting markets, like home/away/draw, are the ones that draw the attention of the majority of players, there is still a lot of untapped potential for secondary and exotic betting markets, which can help in better managing the margin. For example, in live betting, the operator could encourage more combination betting through various creative ideas, like proposing ready-made combinations in the live offering.

Successfully address the “brick and mortar”:  Even if several countries have recently opted for deregulating interactive channels, a very significant portion of global sportsbook turnover is still generated ‘offline’. As some dot-countries also issue retail licenses, physical presence on the high street can be a longer-term strategy towards securing significant market share in the countries allowing for it. Successfully adopting and managing the betting product for the retail channel as well, is a significant differentiator and can be appealing to several large-scale traditional sportsbook operators worldwide.  

Pooled liquidity and multi-level trading: ‘.com’ sportsbook operators have been for many years able to pool liquidity from several countries, exploiting local ‘deviations’ in terms of punters’ preferred markets and behaviours and resulting risk and liabilities. Even under the dot-country model which introduces new local differentiators it is expected that global operators will continue reaping the benefits of pooled liquidity. This creates a strong requirement for local-only operators (for example lotteries): to be able to gain access to such a global liquidity facility to exploit local deviations and compete on equal ground. This need has been addressed to some extent by B2B betting exchanges or other automated hedge mechanisms; however, service and solution providers that can effectively deploy multi-layered (central & local level) solutions pooling liquidity distinct local operators and balancing risk among them, will stand to attract several new businesses.

Fundamentals, fundamentals,  fundamentals

While money and effort will often continue to be invested towards ensuring local regulation and other differences among the various dot-countries can be minimised, allowing current centralised models to be easily replicated, it is evident that operators, service and solution providers that invest in an adaptable organisation and technology will stand to gain more in the long term.

Intralot is a leading sportsbook B2B services provider and operator in the regulated (dot-country and dot-less) gaming industry worldwide and also a technology company, providing our platforms, solutions and services to more than 50 jurisdictions worldwide. We have established our global success in the ability to become ‘local’ in every different jurisdiction; it is a key imperative behind our continuous investment in innovation and our own technology, and an important element in our business and operational models. ‘Local’ success in every different market will naturally depend a lot on the ‘fancy’ stuff; make sure you first get the fundamentals down though.

Evaggelos Litos of Intralot Interactive explains why as the sector becomes more competitive the industry should focus on the fundamentals

Evaggelos Litos is Intralot Interactive’s head of business development and since 2005 has been directly involved in the coordination of several distinct dot-less and dot.country sportsbook operations worldwide. Evaggelos’ prior experience has been in the mobile telecoms and banking sectors, in senior technical and business roles.