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Sentiment

I had an e-mail from someone today asking me why I am so dull.

Well, it didn’t literally ask that question, word for word. But that is sort of what it said: why hadn’t I written for so long, when there was so much to write about; and more importantly, why hadn’t I written anything interesting?

Like, commenting on the rather curious description of Lord Derby (he of the race) by Andy Stewart (he of the race for the Tote) as ‘an awful person’ in the Daily Mail (mis-quoted, surely? As far as I can work out, the two have no previous knowledge of each other).  Or perhaps about AP’s quest for the Sports Personality title. Or maybe the under-reported victory for the bookmaking industry in the Court of Appeal last week, when Football Data Co’s case relating to Yahoo, Stan James and Littlewoods pools was booted back to the ECJ on the grounds that the EU’s Database Directive makes the decision on copyright law more complicated than one on which the UK’s High Court can opine alone. All interesting topics, it’s true.

But the two things that have exercised me most over the last ten days or so, cerebrally and in conversation, have been two topics I have sought to avoid: the Tote, and Betfair’s share price. On the former, there is a great deal to say, but my company is involved advising one of the interested parties, and I am not about to queer their pitch by giving personal views about comments that have been made since the first declarations of intent. And on the latter, it isn’t my job any more, and so I thought I’d keep well out.

But now, in the context of my current job – which is all about long-term reputation management – I thought I would turn to it briefly; because it is interesting to see how people in the wider world have responded to the last few months. And I do so specifically now, because a trawl through old memorabilia today, as I tried to clear some space in a cupboard ahead of Christmas, raised a smile in the context of all the recent press reporting pessimistic notes from analysts. For current shareholders of Betfair, though, it should do more than that: it should give them great heart.

Here’s why.

With Betfair suddenly being lumped in with failures like Promethean almost by default, I was beginning to worry that I was deluding myself. Maybe Betfair’s story is much more difficult than I thought, I was beginning to wonder, given that everyone now talks about them in the same breath as companies which have about as much in common with them as I do with Lady Gaga. Maybe Betfair really is suddenly, as one analyst put it ‘on the cutting edge of regulatory risk’. Maybe we’re in a different world today: maybe the ten years that produced such excitement and change were a mirage; and the future is doom and gloom.

Or maybe, as I confirmed today, the position today isn’t actually a lot different from what it was two, four, six, or even eight years ago, except inasmuch as Betfair has a track record of overcoming any perceived unfavourable odds which is two, four, six or eight years longer.

All the same risks suddenly being discussed as if they were news have been around not just since the publication of the IPO prospectus (so they’re certainly not news to anyone who was a buyer then), but since the very start, when all my former City colleagues were offering to buy the Big Issue off me providing I sold it close enough to the office. And if (a moot point, at best) the regulatory risks have got any worse since France decided to legislate, then that fact was well-known long before I left the company, which means for about nine months. The only difference today is that people are whipping themselves into a frenzy about these issues. It’s undeniable that they have been around for yonks.

For example, take this, from Thoroughbred Owner and Breeder, October 2004: “That’s not to say that controversy over exchanges will disappear… A fierce argument is brewing about whether they contribute enough to the levy. The BHB [sic] believes that racing is due more money from this revolutionary enterprise, but it is unlikely to finalise its pursuit of that until Customs and Excise has completely a hugely significant review of how exchanges – and their clients – are taxed.”

Or this, from a subsidiary magazine of the Financial Times, in October 2008, when ‘registered customers’ were listed as 1million – a third of what I last saw published; and employees at 1200 (so the company has doubled in size in terms of personnel): “Everything depends on how regulation develops…. Regulation restricts marketing, and regulatory questions are particularly pertinent to Betfair. Many issues around global expansion are open to interpretation.”

These are two quotes among many I could have chosen which illustrate a pretty obvious point: you could have taken the same pessimistic view which appears to have become the norm in the last few weeks at any point in the last eight years, and guess what? You’d have missed out. You can take that same pessimistic view now; but who is to say you wouldn’t miss out again?

Doubtless, people will counter that what regulation has been clarified since has gone against the company, but I think they’d be wrong. France might not be ideal for Betfair, but the reality is, it’s not ideal for anyone, and in my view it is as likely to change for the better in the next 18 months as it has ever been; and other countries are now less likely, not more, to follow their lead.

After all, Betfair didn’t think it worth even applying for a licence; Ladbrokes pulled out, having done so, on the basis that they couldn’t make any money; and I gather one of the other major European online operators is considering its position. Can any jurisdiction really consider itself viable without three of the biggest operators in the world under its umbrella?

Maybe, (or so at least you might argue) without domestic pressure – particularly given that many countries have for years been looking at ways they can legislate in favour of domestic operations. But now even one of France’s own, Betclic’s Chief Executive, is saying that, “The French law favours fraud. The players know that it is in their interest to continue playing on non-licensed websites (…). By our analysis, the legal market is only doing 30% of the overall business. ARJEL does what it can, but with 20 controllers, it is impossible to stop the illegal websites. To give a comparison, China recently announced it had closed 2500 illegal gaming websites over the past few months. But there are 40 000 Chinese employees permanently controlling the Internet (…) We cannot afford to wait for the end of 2011 to see the law evolve. The MPs must be made aware of that. That is in the interest of the sports sector, in the interest of the fight against the illegal offer, and in the interest of the State.”

I am conscious, in writing any of this, of falling into the William Hill trap of their final HBLB submission, in which they rather comically pronounce that, “the exchange model is not widely understood by the general public, the media, or even by some charged with the responsibility of regulating and taxing exchanges” – implying, as it does, that others who have looked at the financials in far more detail than anyone in Wood Green cannot possibly see the world as clearly as they, even if they might be accused of talking their own book.

As such, I am at pains to point out that I don’t dispute for a second that you can be a buyer or a seller at any price: as we said when we launched Betfair in June 2000, ‘make your own market’. So the reason for the post is not to question levels, or even individual views expressed (although it is quite amusing when banks which pitch for IPOs at higher levels than they end up coming then produce research notes saying that the business they missed is over-valued); rather, it is to point out what for me is the most striking part, which is how quickly sentiment can change – on the basis of no new information – in any industry.

And if that sounds like it’s a pitch for Camberton that’s probably because it is.

Posted in Betfair, Betting industry, Regulation, Stories, Uncategorized.

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Continuing the Discussion

  1. Yesterday’s Telegraph | Mark Davies linked to this post on December 14, 2010

    […] Indeed, can we not take any model predicated on prohibition and limitation as a model, since, as I mentioned Stephane Courbit pointing out in my post yesterday, this is a recipe for fraud.  Personally, I agree with Courbit, and doubt very much that you can […]

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