City Bet Club, the expert tipster service founded by industry veterans, predicts that the UK operator’s Q4 2022 earnings reports are likely to make for disappointing reading.
In a ‘triple punch’ for operator brands, the problems compounded by a sharp drop in World Cup revenue from Russia 2018, an overhaul of the winter sports calendar to accommodate the Qatar tournament and “intrusive” accessibility controls are expected to have a significant impact on revenue and therefore on reported results.
Analyzing financial performance, the World Cup should have earned operators a high margin due to shocking results, making it one of the most bookies-friendly in history.
However, the bettors’ losses at the start of the group stage, which continued throughout the tournament, will have strongly affected the overall turnover.
In particular, City Bet Club’s analysis of the January 2023 business and financial updates released so far by major UK brands testifies to this, noting that Bet365’s announcement this month is a key indicator of the market health.
With Bet365’s operating profit down 88% for the year due to heavy investment in overseas jurisdictions, this is seen as a strong indication that major operators no longer see the UK as a hot market. growth.
This view is reinforced by the business update from Kindred, owner of flagship UK brand Unibet. It highlights a surprisingly low sporting margin in the last quarter – despite the ‘bookmaker-friendly’ World Cup results. This likely refers to excessive marketing and promotional spending, eroding gross earnings and margin.
The third major indicator that World Cup revenue fell short of expectations is the 888/William Hill business update; especially with comparable gross earnings performance compared to Russia 2018.
By choosing to highlight the “user players” metric, comparing customer engagement performance of the delayed Euro 2020 with Qatar 2022, City Bet Club believes the data does not bode well.
This is partly due to the fact that the World Cup has 25% more matches as well as the lack of a busy summer horse racing schedule, suggesting that the identical comparison indicates that an increase of only 22% is disappointing.
The third punch, that of affordability controls, further compounds the overall problem for UK bookmakers, highlighting a much wider structural problem in the industry.
As noted by leading Racing Post commentators, major betting exchanges and top professional gamblers, the issue of “intrusive” accessibility controls is a major factor in reducing betting activity for UK operators.
The effect on horse racing revenue of the tax is directly related to bookmakers’ profits. Not only is this considered by City Bet Club to be a serious problem for bookmakers, but also for racing in the UK.
As further confirmation of this view, Arena Racing Company estimated that digital racing betting revenue in the UK fell by £800 million in 2022, with an estimated revenue loss of £40 million. pounds for bookmakers.
Commenting on the situation, David Brown, co-founder of the City Bet Club and one of the UK’s most experienced business managers, believes it has created a bleak outlook for the UK. He added:
“I have been in the industry since 1976, and with 47 years in the game, this is by far the most pessimistic outlook for the health of the UK betting market that I have seen.
“While the World Cup may have had record margins, turnover is rumored to be down significantly from Russia 2018. Given that punters suffered numerous setbacks at the start of the group stage, the industry saw a reduction in the recycling of customer money as favorable to the bookmakers, the results continued throughout the tournament.
“Traditionally, a major football tournament and a robust Christmas period, with a full racing schedule, would normally put the big brands in very positive territory. Currently, the silence says it all, and we have yet to see comparable revenue comparisons with the 2018 World Cup, which may infer that all is not well.
“Last but not least is the uncertainty surrounding the government’s gambling white paper, which has yet to be made public. This has the potential to add even more challenges to the functioning of the UK market. This will no doubt be a key part of deciding the industry from here.