You Bet: The Betfair Story and How Two Men Changed the World of Gambling. Colin Cameron
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full of potential for innovation, and as the company that would become the completely dominant market force in what quickly became substantively more than simply a ‘niche’.
Hindsight is, of course, a wonderful thing. No one who bets needs to be told that. Nonetheless, there was enough evidence in the many theories of why we bet, or are drawn to gambling, to suggest that person-to-person betting might indeed catch on with those already entrenched in the habit-forming world of gambling. Then there are those with a predisposition for what Betfair was offering – of a certain age and affluence, comfortable with technology and in circumstances that meant speculation was harmless. They may have begun the new millennium with little interest in high street outlets offering a product that had changed little, if at all, in forty years since betting shops were legalised. Yet, when offered the chance to try their luck through a different medium, drawn to something new and contemporary, they joined die-hard gamblers to ensure the success of Betfair.
The numbers tell the basic story. For the newly-born Betfair, revenue in 2001 was £480,000, profitability in the negative to the tune of almost £2 million. The first part of this book explains how technology that drew on the IT system of New York’s Stock Exchange and brilliant marketing – on relative shoestring budgets – established a company that was robust enough to absorb these early losses and Flutter, seemingly the only genuine rival in this newly-created market. In the space of under three years Betfair registered revenue figures topping £32 million and a profit of £1.76 million, carrying the company into the black where it has firmly remained. Then in part two of this book, we consider the reach of Betfair beyond its own dedicated world. How the company has been both part of the growth in betting and the revolution that gambling – from basic bookmaking to high-ranking casinos – has undergone, and the reason for changes in what was for decades a business which showed little or no appetite for change. Also considered is how Betfair has changed government thinking on betting, how Betfair has been cause for sport to reassess its ‘at arm’s length’ relationship with betting and how Betfair has proved an inspiration to other start-ups and the potential that exists for growth both domestically and internationally.
How did this all come to pass? Spread betting, the innovation in gambling of the 1990s, never managed to establish a foothold the like of which Betfair can boast today or induce wholesale changes to the betting and gambling industries both in Britain and beyond. How then did the world of sport, historically suspicious of betting, end up working together with a betting company? What compelled the International Olympic Committee to set up a network in Beijing for the 2008 Games with a brief to monitor betting on events over the two weeks of sport? For the answers to that and the rest, first, we have to go back to the start of the new millennium.
MILLENNIUM
Imagine a world without widespread broadband. Where your greatest immediate concern relates to whether a millennium bug will ravage your hard disc at the stroke of midnight on 31 December 1999. Having survived that, on top of the shortcomings of your browser and the painfully slow speed at which your computer downloads anything of volume, a similarly substantial source of frustration is the growing number of automated call responses you encounter. These defy every effort actually to speak with someone, rather than to a machine, which seeks to engage you or, worse still, steer you in the direction of an extended earful of elevator music. Alternatively, the bane of your life is the increasingly prevalent call centre. Sure, you can reach someone. But a person actually capable of helping with your problem? That’s another matter entirely.
Back in 2000, betting in Britain did at least retain the personal touch. A punt on sports such as horseracing and football was predominately through the 8,000-plus licensed high street betting shops. The means? Good, old-fashioned cash. If you preferred to use the phone, then, once your credit account details had been confirmed, the voice at the end of the line would, by and large, endeavour to accommodate your wishes. The warmest welcome was reserved for your debit card. In any business, cash up front is always preferred to the extension of credit.
In the likes of Australia, the Far East – Japan, Hong Kong, Singapore, Malaysia – and continental Europe, gambling, over and above the established casino world, was largely with state-owned and state-run – or licensed – totalisator ‘pool betting’ monopoly systems, which often rate customers as a lesser priority behind government revenues. Or, of course, as a consequence of this type of operation taking a hefty share out the winning pool to cover tax and allow for profit, with illegal bookmakers, not least in Asia. Needless to say, with no duty to pay the odds offered were much better. Meanwhile, online betting on sports such as racing and football struggled with technology that made it debatable whether logging on and placing a bet took less time than strolling along to a local bookmaker if one was reasonably adjacent, or in France or Australia respectively, your nearest parimutuel café or TAB-licensed bar. Online casinos and poker sites, commonplace today and popular enough to sustain multimillion pound stock market flotations in the new millennium – in 2005 Partygaming hit the Stock Exchange peaking that year at a market capitalisation of £6 billion – were relatively modest operations at the turn of the century. They struggled to generate enough business to boast of ‘banks’ – the liquidity necessary to enable serious, high-stakes players to strike substantial bets – that made signing up for them of interest to the more seriouslyminded speculator.
As for sport, administrators’ overall relationship with betting was being sorely tested by a spate of scandals that suggested the two didn’t really mix. In 1999, a plot to disable floodlights at The Valley, home to Charlton Athletic who were playing Liverpool in a Premier League match, was thwarted by police. The conspirators behind this, who sought to profit from the suspension of betting in Asia on the match – in such circumstances bets could be settled on the score when the plug was pulled – were eventually traced to Malaysia. There had been two previous instances of floodlight failure in the previous fifteen months. Plots to halt a further eight games were also uncovered, which, according to estimates, could have netted the conspirators £30 million.
Cricket, certainly perceived as a gentlemanly game – whose players have for years often taken a keen interest in horseracing to kill time waiting to bat or during rain delays – faced an even greater violation. In the early months of 2000, the game became embroiled in the biggest corruption scandal in the sport’s history when Hansie Cronje confessed to a string of payments received in return for attempted match fixing.
At the same time in Britain, horseracing’s administrators struggled to establish relationships with the betting industry’s main operators that would constitute a substantial united partnership against corruption. The two parties were engaged in an elaborate dance. Against a backdrop of apparently cordial and cooperative relations, requests for information – when wrongdoing was suspected – were largely rejected by bookmakers on the grounds of client privilege. Leave it to us, the Jockey Club would perennially be told. At least there was widespread acceptance that there might actually be an issue.
Sport in America had its own troubles with rumours of organised and extensive illegal betting on college sports. Much of this was deep underground. The authorities largely turned a blind eye, concerned more with preserving the reputation of academic institutions and national pastimes. Attitudes mirrored national sentiment about steroid use in baseball. At seemingly any cost, the game’s reputation had to be maintained.
By the start of 2000, ahead of Betfair’s launch, some rudimentary betting exchanges were already in existence – Betmart and Betswap. Indeed, Coral, the third biggest British bookmaker, was developing a site under its Eurobet banner called play2match.com. These enterprises represented an effort to formalise what had up to this point been informal person-to-person betting – individuals would fax through to small groups details of any bets that there was an interest in making and taking.
Joe Saumarez-Smith, a specialist online gaming consultant whose London offices are next to a vinyl record shop illustrating that some products can survive the most dramatic of innovations, recalls an operation based out of Luxembourg. ‘You would ring in the morning with what you were prepared to trade