Exclusive Interview: Bet365 One Year On (Part 1)
eGaming Review editor James Bennett speaks to Bet365 co-CEO Denise Coates one year on from our exclusive interview to see how the Power 50's leading operator has fared in the last 12 months.
The same office, the same senior management, the same unique sports product, the same number one spot in this year’s Power 50. Walk into Bet365’s Stoke offices and you would think nothing has changed since December 2010 when eGaming Review last met with founder Denise Coates in her first ever interview.
Look a little deeper, however and you will soon discover that more has changed and is changing than ever before.
“¢ Three billion pounds more may have been wagered on the site, however more investment has had to be signed off by Denise and her brother John to cater for customer and market growth
“¢ More territories including Denmark and Spain have chosen to regulate, but as a result more resources have had to be allocated and outsourced to deal with the ensuing regulatory minefield
“¢ More discussions between the operator, lobby group the Remote Gambling Association (RGA), the Department for Media, Culture and Sport as well as the British Treasury has taken place to ensure that when UK egaming rules do change the company does not end up paying unsustainable duplicate amounts of gross profits tax.
Investing in growth
The company has had a great financial year and continues to outperform its rivals, recently retaining the Power 50 crown, but it has also arguably spent some of the largest sums of cash its 11 year history to ensure this can continue across its 17 language websites that serve six million customers worldwide.
In order to scale for the next 10 years and to improve efficiency and speed, as well as cut infrastructure costs, around £60m alone was spent on new server technology with the operator moving from a managed hosting solution to one that is designed, built and maintained in-house.
There are not many internet businesses in this industry “ or any others for that matter “ that can say they have their own newly commissioned data centre, let alone their own connection to the National Grid.
It is also investing in hiring a new research and development team whose sole purpose will be to develop a platform strong and scalable enough to see it through into the next decade. The investment maybe large but, as Denise says, rather than acquire growth via M&A this investment will continue to ensure it meets customers’ demands and expectations for years to come.
To be number one you have to continually re-invest. As she says: “You can’t stand still in anything, because everybody else is looking to move on.” And in an industry such as ours, as many large operators have recently found out to their cost, standing still in tech-terms can mean the difference between success and failure.
Refocusing the model
Until now 365″ with the exception of the UK and Gibraltar where its sports and gaming operations are respectively based and it pays 15% GPT “ has never applied for and been granted a licence.
That is until the two co-CEOs decided Australia was a lucrative market enough market in which to invest. Its licence application is currently in the hands of the Northern Territory regulator awaiting approval.
Its fourth licence is likely to be in Denmark with the market opening up the first phase of its licensing plans in October this year with a view to announcing approved private operators sports and casino licences in December, while its fifth should be in Spain, whose inexperienced regulatory body will soon reveal which companies have and have not been accepted for licences.
Either way, Denise has taken the decision that it is worth the time, effort and additional funds. Bet365 has and is currently preparing itself for a change in mindset and structure as well as additional licensing, taxation, staff, outsourcing and equipment costs and will, it expects, have several regulated licences in those countries in 2012.
Denise herself sees regulation as the “main challenge” facing the industry suggesting this “will remain the case for some time to come”. The key for her, as it should be for any sensible operator, is does each market offer a commercially viable framework both in terms of regulation and taxation?
Equally, and in Bet365’s case, should the DCMS and Treasury impose changes to UK licensing and taxation rules in the coming years, how will this affect online gambling companies based here that already pay 15% GPT? Lobbying and being involved in the debate is essential with John Coates chairing a number of Remote Gambling Association (RGA) meetings and also assisting at DCMS hearings. This could prove crucial when details finally emerge of the government’s plans.
As Denise explains the business would be put in an “untenable position” if legislation stated it had to pay 15% GPT on, for example, its Spanish customers while at the same time paying a further 25% to the Spanish authorities for the same player.
Her wish, in a similar vein to that of other operators based here, is a move to a point of consumption tax at, what she calls “a sensible rate” where the business is able to pay GPT on UK customers but not non-UK customers, and remain in the UK. With so many local jobs at stake in an uncomfortable economic climate it could well happen, but as she concludes, unless such a change is made, it would be “impossible for businesses to base themselves in the UK which would be a crazy situation”. The next year should be even more fascinating.
This article features in the latest issue of eGaming Review. Parts two and three will follow later this week.