uro 2020 qualifiers, the Oxford-Cambridge Boat Race and golf’s WGC Match Play championship were some of the headline events this week set to contribute to a steady stream of bets placed online and in the UK’s 9,000 betting shops. Instead, bookmakers are scrambling to fill the void left by the effective shutdown of global sport by offering odds on alternative fixtures, such as Nicaraguan under-20s football, Belarussian ice hockey, Tajikistani basketball, and Russian table tennis, among others.
The Covid-19 pandemic has seen the three main London-listed players – Paddy Power Betfair owner Flutter, William Hill and Ladbrokes parent GVC – almost lose a combined £7 billion (USD 8.5 billion) in market value in the last month alone, The Telegraph reports. All three companies issued massive profit warnings last week, saying the pandemic could, in certain scenarios, slash full-year earnings in half compared to 2019 if shops remain shut and horse racing is suspended for a prolonged period.
But as firms attempt to move customers online and into more niche markets, there is speculation that the industry could look quite different once it comes out the other side of the crisis, depending on how companies weather the storm. Gavin Kelleher, a leisure analyst at Goodbody, says 2020 will not be about profitability for bookmakers, but rather about what a company’s monthly cash burn is and how many months it can survive without core revenues.
Global sports betting generates the largest chunk of sales for most firms. Last year, it accounted for four-fifths of Flutter’s total revenues and just over half of William Hill’s. The companies estimate restrictions on sporting events will remain in place until the end of August – just in time for the return of the Premier League and NFL seasons.
Bookies are trying to fill some of this gap by promoting trades on alternative markets such as so-called “secondary sports”, eSports and online casinos.
Kelleher says the problem with trying to boost revenues through obscure sports is that companies don’t have a knowledge of trading these events, so won’t allow punters to place large bets on them. “If I’m a betting company and I see a big bet come in on Myanmar under-23s football, I’m not going to take it because I’m going to be worried that I’m missing something here,” he says.
Esports has similar limitations. While Paddy Power Betfair is offering odds on its novel “Fifa Quaranteam” tournament, Kelleher says operators will be careful because they don’t want to “risk the wrath of the government” by pushing people into things they shouldn’t be betting on. “If operators are caught breaking the rules, they risk big fines, and they can’t afford big fines at the moment.”
Online casino games offer a better source of mitigation. Already, 888 and Playtech – two online-focused firms that do not rely heavily on sports fixtures – have reported an uptick in activity in their casino and poker products in recent weeks.
Ivor Jones, an analyst at Peel Hunt, says 888’s current trading demonstrates the resilience of its business model during an uncertain period. Traditional bookmakers are also looking to encourage customers to play similar online games in an attempt to shore up lost revenues.
Meanwhile, as revenues slump and liquidity dries up, one consequence for the industry could be further tie-ups, according to Kelleher. “When you see a market dislocation like this, where liquidity and balance sheets become an issue, it’s likely to lead to another round of consolidation,” he says.
Before the crisis, Flutter had agreed to acquire Sky Betting parent Stars Group for £10 billion, though the deal is still being investigated by the competition watchdog. Betfred owner Fred Done has also recently built up a 4pc stake in William Hill – the big-three firm with the weakest cash position – prompting speculation about a potential takeover.