Q&A: Cian Murphy, head of B2B services at Paddy Power
Murphy talks to eGR about partnering with operators which have a "right to win" in their domestic markets
Paddy Power announced its fourth major B2B client this week and claims there is much more to come.
eGaming Review spoke to its head of B2B services Cian Murphy to find out what else the firm has in store and why having an alternative market entry strategy to B2C has become ever more vital.
eGaming Review (eGR): How significant is the deal with the RETA Group in Spain for Paddy Power?
Cian Murphy (CM): RETA is one of the largest sportsbook operators in Spain, probably the largest retail player in the country. It has made fantastic strides to get to a scale position in a very competitive market and it is very well placed for future growth.
Spain is quite a geographically segmented market. There are even separate licences for different regions. RETA is dominant in some regions, for example the Basque region where it originated, and is just beginning to expand into others. It took a nationwide Spanish online licence in June so I would expect that to become a more important part of its business going forward.
eGR: How is the B2B pipeline looking for the next 12-18 months? Has it been a tough sell or is there a big demand for the type of sportsbook services you offer?
CM: Our B2B pipeline is the healthiest it’s ever been. We have made some investments over the last few years which are starting to pay off.
About two years ago we made a significant investment in technology and that project is now largely delivered. It means our internal businesses – PaddyPower.com, Paddy Power Retail, Paddy Power Italy and Sportsbet and our B2B partners – are on the same technology platform for delivery of pricing. This means everyone benefits from the greater scale, and makes it very straightforward for us to add new partners.
Last year we made an investment in people, recruiting dedicated resources to go out and proactively engage with potential partners. We also took a stand at ICE this year.
eGR: And is this investment paying off?
CM: The first evidence of this investment paying off is this deal with RETA, but there is a very healthy pipeline sitting behind that deal, and for the first time that pipeline is truly global.
People are very enthusiastic about the idea of a partnership with Paddy Power and everyone understands very quickly the value we can bring. Our system has almost 1m in bets every hour so it’s not difficult to explain to people the type of price accuracy that brings, and obviously our own growth story sells itself.
However, the process of doing deals is a very long one. In a best case scenario it’s six months, and that can stretch to years! This tends to be because of the magnitude of the decision a potential partner is taking. In many cases they are considering outsourcing their trading room – it’s not something you jump into lightly.
eGR: Which other markets are of particular interest from a B2B perspective? And what makes them attractive?
CM: Our criteria for markets to enter in B2B is, at its core, an assessment of the potential partner and what we can bring. We need to find someone who has a “right to win” in the market which we don’t have. We need them to have the potential to achieve a certain scale. Finally we need to be able to add enough value to the partner that a deal can be hammered out.
There are various reasons why someone might have a “right to win”. It might be legal (a monopoly or licence) or brand. They could have a retail network or already have built up a market position. Lottery organisations often fulfil the criteria (sometimes in multiple ways) and that was the thinking behind applying for and receiving associate membership of the World Lottery Association earlier this year.
In terms of specific geographies, countries that are going through regulatory processes often present B2B opportunities. We are watching some of the European regulation processes at the moment.
eGR: What do make of the shift of B2C operators getting into the B2B space, and what does that mean for the market more broadly?
In a world where regulations are country specific and taxation methods and rates vary widely I think it’s absolutely inevitable that B2B opportunities will exist because of the “right to win” concept I spoke about earlier. Regional specific players will have strengths in their core markets that others can’t replicate. I also think it’s inevitable that the truly successful global B2C operators will be best placed to capitalise on these B2B opportunities. This is a trend I think we will see increasing in the coming years.
Essentially everyone competes with bet365, which creates a large product gap in terms of number of events and market that many operators can offer. These product gaps are increasing and generate B2B opportunities.
eGR: How does Paddy Power intend to stand out?
CM: Globally there are only a handful of companies that can offer this service. This is because the gap between global trading rooms and sub-scale trading rooms grows every year. For example, Paddy Power has about 250 people in its trading room and this year we will invest well over 5m into model R&D and trading automation. That will take our five-year investment to over 20m. That is the type of investment needed to create and maintain an internationally competitive trading room.
I think we will see this handful of companies continue to do more and more B2B deals. The only way to compete both legally and effectively in many of these markets is fast becoming a partnership between a local brand, retail network and management team and a global sports product.