Fancy a Flutter?

By Bennett, Oliver | Management Today, June 1, 2013 | Go to article overview

Fancy a Flutter?


Bennett, Oliver, Management Today


The days of gambling being all gee-gees and betting shops are long gone. Lured by wall-to-wall TV advertising and online innovations, hordes of punters are transforming the business. Oliver Bennett reports.

The aeroplanes landing in Gibraltar's airport bank around that famous rock. Negotiating strong cross winds, they glide onto a runway that intersects with a road - an infamously tough landing that's an exercise in managed risk. And in an enclave of heat-baked, low-rise offices in this UK territory, there has been a boom that has lasted 13 years, as 'Gib' has become one of the most concentrated online gambling industries in the world, employing 2,400 people in a territory with a population of 29,000.

Online gambling companies went to Gibraltar, Malta, the Isle of Man and Alderney in the early 2000s, lured by advantageous tax regimes of under 1% per bet, as opposed to the UK's 15%. Now Britain wants that revenue back. The Government's Place of Consumption (POC) Tax, due to take effect next year, requires online gambling operators to secure a UK licence, so tax will be paid where the customer is, not where the server is. Thus has British gambling joined the conversation started by Facebook and Amazon about offshoring tax - hence the POC tax.

'The Treasury reckons it will raise pounds 300m in the first year,' says Warwick Bartlett, CEO of Isle of Man-based gambling consultants GBGC and a seasoned industry observer. Certainly, the gains are plain to see, as in an otherwise flat economic scenario, gambling looks extremely strong, and is ever more visible. In April, the Coates family, who run bet365 - one of the world's largest online sport betting sites - were mooted to be the UK's first gambling billionaires, with a business worth about pounds 800m just 13 years after they launched the firm. Betfair, the influential betting exchange set up in 2000, recently rejected a pounds 920m bid from private equity firm CVC Capital Partners as not good enough. And in the latest Sunday Times Rich List, Britain's top 10 internet betting tycoons are each valued at more than pounds 100m. Why wouldn't the Treasury want some of the action?

The gambling industry has enjoyed an impressive counter-recessionary trend, particularly online. In 2008, the UK online sector was worth pounds 1.27bn. By 2012, this was pounds 2bn. The key factor is smartphones and tablets. Juniper Research estimates that betting on mobile devices alone will be a dollars 100bn worldwide industry by 2017 and you'll be able to gamble on the bus or train, even on planes. As gambling consultant Steve Donoughue says: 'The buzzword is 'ubiquity'.'

Donoughue, who is doing a PhD in betting, thinks we're in the second great phase of online gambling. 'Five years ago, I was doing a mobile gambling conference,' he says. 'They were going on about WAP. I said: 'This is bollocks. It's going to change out of all proportion.' And it has. On a normal Saturday William Hill posts six million bets. That's more activity than Nasdaq.'

The tipping point became apparent last year, he says. 'It's now all down to the 'second screen' - the TV and smartphone/tablet combination - and you access betting in your living room.' All those advertisements wrapped around televised sports are part of what the industry calls 'bet-in-play' - real-time betting as you watch - which is growing fast As a spokesman for bookmakers Ladbrokes puts it: 'The fundamental thing in gambling is to add excitement and with bet-in-play the odds flex as the action unfolds. It's major.'

And we're nowhere near the peak yet, adds Donoughue. 'Next we'll have the cheap 4G phase, possibly within the next few years.' After pornography, gambling is driving internet technology and usage, and the next great gambling shift will herald 'very cheap, very big televisions', as Donoughue puts it. 'So this is the scenario. I'm in my flat with a 100-inch TV on a terabyte connection and lovely Svetlana is enticing me into a betting shop. …

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