You Bet: The Betfair Story and How Two Men Changed the World of Gambling. Colin Cameron
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other changes, Sunday opening, windows were allowed to be clear. What’s more, today there is more on offer. In addition to the staples of horseracing and greyhounds, sport is now a huge feature. Furthermore, betting shops are now home to one-armed bandits – known in the trade as Fixed Odds Betting Terminals, or FOBTs. There is also virtual racing, computer-generated events at cyber racecourses such as Lucksin Downs, Sprint Valley, or Steepledowns. Something for everyone and any weather, then. Nonetheless, the central premise holds true. Betting has largely been a trade comfortable with the status quo.
In the end it was thirty-one years after the birth of betting shops before a shake up. If 1961 was a milestone and 1986 another legislative landmark of sorts ahead of 1995, then 1992 should be added to the timeline in bold. That year, Compton Hellyer attempted to take a grip of the profession that had up to then largely remained in a state of paralysis for the previous three decades.
Hellyer, an effervescent presence with the qualities of a rebounding rubber ball that have served him well through the many business cycles that he has experienced, championed a concept called spread betting. This was well established as a means for gambling on the fluctuations of the money markets. Hellyer attempted to adapt this into an alternative to traditional, fixed-odds betting.
Hellyer’s company was called Sporting Index. His main objective, in partnership with Lindsay McNeile, who took Ed Wray’s role to Compton’s own interpretation of an Andrew Black-style figure, was to form spread betting markets primarily on sport. Ultimately, he went after horseracing, too, simply unable to ignore the demand. The operation continues today – indeed thrives, from a solid basis established in the Nineties. Soon after launching, with Hellyer to the fore in a public relations operation that was a masterclass to any corporation seeking profile wildly in excess of market share, you might have expected it to be the principal form of bookmaking into the millennium and beyond. In 1992, spread betting was, or at least seemed to be seen by some, as the future.
As Hellyer readily concedes, Sporting Index’s business was an offshoot of an established spread betting market, which was, itself, a derivative of the financial world’s futures trading. In the futures’ market, traders buy and sell options on shares, commodities, and foreign exchange, in the process speculating on price fluctuations. The goods, themselves, need not change hands. Deals are struck with settlement at some agreed point in the future. Depending on the path of the price of the share, the goods, or the currency, traders either end up in profit or out of pocket and settle accordingly.
Financial spread betting was also speculation on market fluctuations. Similarly, shares, commodities, and foreign currency of sorts didn’t change hands. Wagers were settled on prices rising and falling around upper and lower parameters, known as ‘the spread’. You just had to guess in which direction the market would move.
Sporting Index’s version of spread betting involved taking events, such as the Open Golf Championship and offering spreads – high and low marks – on what, in the case of golf, individual players would score. For example, Tiger Woods to take between 268 to 272 shots. Gamblers would then be free either to buy or sell – with those buying of the belief that Woods would take more strokes than predicted and those selling of the view that he would out perform expectations. With sports like horseracing there would be a points system – for example, seventy-five points for a win, fifty points for finishing second – and the spread would be on the basis of expectations of points won by a particular horse, or indeed jockey or trainer. For example, Red Rum to win the Grand National, a spread of 18-20 points. If he wins, you collect fifty-five (the seventy-five points for a win minus twenty, the top of the spread) times your stake. If he fails to finish even second, losses are eighteen (the bottom of the spread, eighteen, minus zero, the points you have won) times your stake.
For sports like cricket, American football, and baseball, markets would be made for number of runs or wickets, points and touchdowns, and home runs respectively. The most innovative spread betting bookmakers would offer the widest range of spread bets including, for example, the time, during a ninety-minute game of football of the first corner, or throw in. In due course, the arrival of new fads in sport such as football squad numbers – beyond the traditional one to eleven on the back of shirts – inspired the creation of further markets. In this case, betting was, and flourishes today, on the sum of goalscorers’ shirt numbers in a match.
At the time of Sporting Index’s emergence, John Brown was on his way to assuming the chief executive’s chair and chairman’s office at William Hill. Ultimately, his company took the threat to market share of Britain’s second biggest fixed-odds bookmakers (behind only Ladbrokes) sufficiently to launch William Hill’s own spread betting service. Looking back, Brown, who can be both charming and menacing in the same sentence, rarely referencing the benefits of hindsight, maintains that William Hill Index – not the most imaginative of names – was an initiative simply to take some of the ‘easy money’ the new market offered. His success in rising from the shop floor at William Hill all the way to the boardroom means that today he can ponder the past from a most comfortable Florida outpost. Spread betting’s potential? ‘A real niche market,’ Brown insists. ‘I always felt that, right from the start. With spread betting you had to be live and on the market all the time. In other words, it was for only a sophisticated type of punter. Not the regulars at the betting shop.’
So, small, but nonetheless welcome, relatively straightforward pickings? In fact, William Hill’s own spread betting efforts were a huge flop. The money was far from easy and Hellyer maintains that traditional bookmakers cut corners in not paying market makers to reflect their specialist gifts, failing to recruit from the most obvious source; traders from the City’s Life Floor wanting a change. Brown prefers to blame William Hill’s late entry into the sports spread betting market fray – 1995 – for the subsequent failure of the company. ‘When you are late in you don’t get in’, maintains Brown, repeating a well-worn business mantra. (Ladbrokes, which set up the following year, also ultimately floundered, having failed at financial spreads, too, the previous decade). William Hill, Brown adds, never got a critical mass of turnover, which is essential for an operation to thrive within a spread betting market, or pretty much all gambling endeavours (as Betfair knew, too, well ahead of its own launch). Like Peter Jones, the former chairman of the Tote, Brown places some of the blame on journalists for the seriousness with which spread betting – at its peak, according to Jones, perhaps no more than 10 per cent of domestic telephone betting, itself just a slice of total take through 8,000-plus betting shops – was taken. The Media’s fault again, then.
Be all that as it may, what is the significance of spread betting to the emergence of Betfair? When Brown, one of Betfair’s greatest adversaries, looks back to recall spread betting’s early days he could as easily be speaking about the first few months of betting exchanges and Betfair’s ascent to market domination. Indeed, in conversation about Betfair, you can end up asking yourself whether he actually means predecessors like Sporting Index. He confides today in response to a question on these related subjects: ‘I didn’t think they would take off.’ Spread betting or betting exchanges? In this case he is talking about the former, namely firms such as Sporting Index, and not in fact Betfair. Many of Brown’s observations about spread betting could be transposed, almost verbatim, to be included in his overall views of betting exchanges; back in 2000, with Sporting Index the grand old age of eight, he at least at first didn’t expect the exchanges to take off.
An established industry figure rubbishing newcomers in an effort to preserve market share? What is new about that? Indeed, it is almost as old as bookmaking. The precise importance to Betfair of spread betting’s struggle with fixed-odds bookmakers was that this gave Black and Wray a clear and relevant case history of what its main adversary’s reaction would be when a newcomer emerged. Even with their respective years in business, both benefited from insight over and above what one might expect from applying a basic understanding of market behaviour.
Andrew Black refers to the ‘three Cs’ when considering the arc of bookmaker reaction to the emergence of betting exchanges in general and Betfair in particular. That is: ‘Contempt, Confrontation, and Capitulation’. The history of spread betting features all three appearing to varying degrees. The path of spread betting in the 1990s – which rose to a peak that decade, after which point the concept largely hit a plateau