Can Best Odds Guaranteed survive?

BetVictor made headlines in October with some quickfire flip-flopping that would have made any politician proud. The Gibraltar-based operator removed Lucky bets – for 24 hours – claiming the bet type had become “unsustainable” for the firm. Specifically, sportsbook director Matt Scarrott said concessions like ‘best odds guaranteed’ (BOG), combined with other concessions, meant the bet type had become broadly unprofitable. While Luckies were ultimately reinstated, another UK operator noted it was losing 3% on the bet type over the long term. Recreational customers with BOG applied to their account, and picking prices that were close to Betfair, were broadly negative expected value for the firm.

The switcheroo probably caused more of a stir than it really deserved, but it was also reflective of the growing strain on the industry from racing concessions – and BOG in particular. “BOG is the root cause of a lot of the current issues in racing,” says one trading source at a UK bookmaker. “Even a guesser struggles to lose more than 5%, so it puts pressure on margins, and if you don’t have BOG, you won’t get any recreational business.”
If you don’t have recreational players in racing, then you aren’t going to make much money, which is why just about every UK bookmaker now offers BOG. But given the growing costs associated with taking bets on racing, might the industry be better off without the offer? And is that even a feasible option?

The cost of doing business

As reported by EGR in recent weeks, operators are currently involved in negotiations with UK race tracks which are seeking to fill a hole in their finances created by shop closures in the UK in a post-FOBT world. The likes of the Arena Racing Company (ARC) and Racecourse Media Group are asking operators for video streaming and data fees based on turnover rather than existing fixed costs. One source with knowledge of the negotiations said the tracks had decent leverage in asking for increased fees for data, which was integral to the racing product. The race day data includes things like results, non-runners, jockey changes, off-messages and Rule 4s. “You can’t really be without it,” one UK bookmaker exec told EGR.

These negotiations are ongoing but it seems inevitable there will be a material increase in costs. As was proven with UK official football data, operators are backed into something of a corner without good data. “It’s a very messy situation right now but if the costs of offering racing keep going up, then it has to impact on the pricing and concession model,” one UK bookmaker said, declining to be named due to the ongoing negotiations.

When asked whether that bookie would drop BOG if they could be assured the rest of the industry would, the exec says: “I think probably everyone would.” He adds: “If the product starts becoming uncompetitive because you did have to remove BOG and bet to higher margins, then it will be counterproductive for the people demanding these increases.”

Part of the issue with the offer is the restrictions it puts on trading rooms when trying to manage liabilities. There’s plenty of criticism out there that ‘bookmakers are no longer bookmakers’ but it’s quite hard to manage liabilities when you don’t know what price you’ve laid a horse at.
“BOG has made it extremely difficult and almost pointless to take a view against a horse,” says the UK bookmaker. “If you are right, the market typically goes that way and you end up paying bigger anyway. And if you are wrong, you have just given away a load of value.”

The counter argument

That’s not a universal view, however. Paddy Power Betfair racing director Paddy Desmond says the firm has embraced BOG as it provides a welcome safety net for customers and encourages multiples early in the day. Desmond says the offer has forced his traders to become sharper and compile the prices more accurately in the first place, thus limiting the impact of BOG.

“I put the challenge back on the bookmakers,” he says. “It sharpens us. It’s our job to get the price as close as possible to the SP and if we do that, then BOG doesn’t matter as much.” Some of the very biggest firms are also not incentivised to move away from BOG, with racing seen as more of an acquisition and retention tool with players cross-sold into higher-margin products.

Into this mix of competing views and interests, you can add racing itself, which of course relies on a cut of bookmaker revenues for funding via the Levy. In recent years, the sport has spoken out against the more aggressive bookmaker offers on racing that acquire customers into the business but cuts racing profits and thus levy. The British Horseracing Authority (BHA) is currently negotiating with politicians and bookmakers about a move towards Levy payments based on turnover than gross gaming revenue to avoid this.

When asked for a view on BOG, a BHA spokesperson told EGR: “We are concerned about the pressure on margins, including from a number of now commonly available offers, which are having adverse consequences for the sport’s central funding. This is why we believe that the recent wave of reform to the Levy needs to be completed to better reflect rising betting activity levels on the sport, ensure our international competitiveness, and provide a mutually sustainable funding relationship between racing and betting in the medium to long term.”

Under pressure

Whether the pressure from racing might prompt a change in BOG remains to be seen, but there could be a middle ground that keeps racing, punters and operators happy, in the form of selective BOG. William Hill took a step toward that this week, moving the BOG start time to 10am, rather than midnight on the day of the race. One industry source suggested that overnight or early morning BOG was being taken advantage of by the ‘wrong’ customers, using bots to lock in profits.

Elsewhere, Paddy Power offers ‘happy hours’ in its shops – at lunchtime, for example – where BOG applies, to give recreational customers a chance at the offer, without giving away too much value.

Offering BOG from 12pm on the day of the race, for example, or online for a happy hour could be a way forward for operators rather than ditching the offer completely and losing customers to rivals who don’t step into line. As ever,  it seems with racing there’s no definitive consensus, but there does seem to be a growing view that BOG and similar offers are in need of a change.

As one off-the-record source at a leading UK operator told EGR recently: “For almost 10 years, bookies have been giving more and more generous offers and more and more money back guarantees and it has got to a critical mass. Everybody will be reviewing what they give and what offers they are prepared to do because they have to – we have no choice.”