Exclusive Interview: Bet365 One Year On (Part 3)

eGaming Review (eGR): You’ve invested more than ever before in technology ““ where has this money been invested specifically and what are the best investments you’ve ever made and why?

Denise Coates (DC): The majority of our IT expenditure over the last decade has been focused on ensuring our systems are scaled sufficiently to deal with the continual growth that we have been experiencing since we first went live. Major spending decisions would include the move from a managed hosting solution to an infrastructure that is designed, built and maintained by ourselves and the recent commissioning of a new data centre for business continuity. Clearly added to this is the recent investment in preparing and implementing the move into newly regulated markets.

eGR: The majority of the large operators believe there will be a maximum of three to four operators in each territory once each country matures. Where do you see Bet365 in five or 10 years time?

DC: Scale has always been important in the industry. To have a competitive Sports product the investment is huge and as such I agree that in each region, the majority of business will be split between a small number of key players. The challenge for us is to make sure that bet365 is one of those players in all our key markets.

eGR: What are the biggest threats to the existing model? Do you fear an ‘Apple effect’ happening within the online gambling industry?

DC: The main challenge facing the industry remains regulation and I think this will remain the case for some time to come. The key question is do we see commercially viable frameworks both in terms of regulation and taxation across our key markets. We believe that the Danish, UK and Spanish systems broadly fulfil this and the hope is of course that these become the models that other countries follow as they see them producing good tax revenues along with player protection.

eGR: DCMS and the Treasury are looking to change the rules on UK egaming, effectively ending the White List and potentially forcing every company that serves UK customers to apply for a licence and pay a tax. How much of a threat is this to your revenues considering around 70% of your customers are from the UK ““ what sort of hit would you take and would you ever think about relocating considering your commitment to Stoke?

DC: There are consultations going on at the moment, but, in respect of the UK our position is different to most as we currently have our entire sports operation licensed and taxed here. As such we are in the untenable position where we are paying 15% gross profits tax (GPT) on for example our Spanish customers while at the same time being liable to pay a further 25% to the Spanish authorities in respect of the same player. Clearly, such a position is unsustainable. Our position is that where there is sensible regulation and taxation we will take a licence.

So if we follow this, we feel that as long as regulation remains sensible if there is a move to a place of consumption tax at a sensible rate (where we pay GPT on UK customers but not non-UK customers) we can remain based in the UK. Unless such a change is made, it would be impossible for businesses to base themselves in the UK which would be a crazy situation. If you take just us as an example, we employ more than 1,700 people in Stoke which is hugely important to the local economy. We must be able to achieve a system where this is possible going forward.

eGR: What is the latest on new licences in newly regulating markets and what exactly is it taking to prepare for each one (Denmark, Spain, Australia)? Where do you see growth, and what it will mean for the business to switch from a dot.com to dot.country model?

DC: The preparation for new licences is a huge task made even more difficult when you have several on the go at the same time. We have been running our Danish, Spanish and Australian applications largely concurrently and it has been a challenge to say the least! If we drill down as to the main components of the process, firstly there is the huge lobbying effort to get sensible regulation and taxation then there is the actual application which involves a colossal amount of documentation, followed by the fundamental IT task of making the changes to comply with the regulations. This would be hard enough when done in order with decent lead times. Unfortunately, we are all in the position where not only do we have a number of these running concurrently, but we have the situation in Spain where we are still receiving new versions of the technical standards just weeks before the market is meant to open. Having said all of the above, if we can get other countries to follow models such as Denmark and Spain, it will be good for the industry in the long term.

eGR: What are your views regarding the US? How much involvement have you had in lobbying there? If sports betting (a long way off federally) was regulated state-wide would you ever consider entering the market, or perhaps entering if the market went state-by-state?

DC: We are not currently involved in any US lobbying, but, we are watching developments with interest. I still feel that sports betting is some way off and as such we are focusing our efforts elsewhere. If a large state were to regulate we would of course look at it and we would take a view. It would be good if something were to move, if only on say poker as I feel it would improve the overall sentiment towards the industry.