Iqbal Johal provides an update on the European sports betting scene since the return of major sport in May, and how the industry is now making up for months of inactivity in the vertical.
What had begun as a thriving start of the year for sports betting industry, with a summer sporting festival including the UEFA European Championships and the Olympics to look forward to, excitement soon turned to panic when all major live sport was suspended in mid-March due to the coronavirus pandemic.
Soon after, it was announced that Euro 2020 and the summer Olympics were both postponed for a year, causing operators worldwide to rethink their strategies and focus on the more minor offerings. Luckily for them though, the industry is an adaptable and digital sphere, and turning to other verticals such as esports, virtual sports and minor football leagues managed to negate major losses on the whole. For example, operator GVC Holdings saw online revenue increasing by 19% year-on-year for H1 2020 up to £1.21bn ($1.58bn), with online sports net gaming revenue (NGR) growing by 5% to £484.5m, despite the suspension.
While the move to alternative offerings such as esports betting, which saw a 40-times growth in activity in the two months from mid-March according to OddsMatrix statistics, provided some relief, there’s no denying that several months of live sport inactivity was going to be unsustainable. The sporting suspension, which caused betting shops to temporarily shut, saw data specialists H2 Gambling Capital reassess its betting GGR 2020 forecasts. With GGR for the betting industry, which includes horse and forecasted at $75bn for 2020 at the start of the year, the new figure is now $60bn, a 21% downgrade as a result of suspensions and cancelations of the big leagues.
That reinforced the need for operators to offer major sport again, and prayers were answered when the German Bundesliga became the first major football league to return on 16 May, followed by the English Premier League on 17 June.
Virtually all the other leagues got back to action soon after, as well as a lot of the bookmakers most reliable sports, such as horse racing, golf, tennis, cricket and sports in the US.
As a result, Gambling Commission figures from the largest online operators showed a 115% increase in gross gambling yield (GGY) for online real event betting between May and June rising to £217.5m, higher than at average pre-lockdown levels.
That demonstrates the pent-up demand of punters betting on their favourite leagues with familiar teams and players, as well as the online shift pattern where consumers are less willing to visit retail locations. The frequency of fixtures, plenty of free-to-air coverage and a spread of games in the day and evening over the weekends certainly helped figures recover from a 62% drop from March to April. The fact that GGR for virtual betting, esports and poker fell by 15%, 25% and 36% respectively from May to June suggests that other verticals can only replace live sports betting for a temporary period of time.
An operator that relies on sports betting perhaps more than most is Interwetten. Sports betting has been at the heart of its business since it was founded in Austria back in 1990. It’s not a surprise then that its revenues and stakes were reduced by two thirds, compared to pre-lockdown numbers.
“Remaining a third of your revenues despite no major sport going on is still ok, and it was mainly on the more minor leagues such as the Belarus or Nicaraguan Premier League, or some exotic sports and other sports such as table tennis, that kept us going,” said Interwetten speaker of the board Dominic Beier. “The good thing is we’re very flexible and we have different data and service providers integrated that made it possible for us to still deliver a very good offering for our customers.”
Putting a positive spin on such a decline in revenues is expected of Beier, who, after becoming the youngest speaker of the board (or CEO equivalent) in the operator’s history in 2019, oversaw Interwetten’s most successful financial year, with GGR rising by 25% from 2018, up to €99.5m ($117.4m).
The German Bundesliga is the most important league for the German speaking and focused operator and its return in May had a “very big boost for business”, albeit as a slightly different offering.
Beier adds: “When Bundesliga returned, in terms of numbers, luckily we’re at a stage where we’re either on or a little above our previous revenue numbers for sports betting, which is good. What we also see is the risk for us as a bookmaker is higher, because you have fewer matches so the offering is not as big. That means people usually bet on the main football matches per day, and anyone following the recent Champions League and Europa League matches, would have noticed the majority of favourites have won their games, which is a very big risk for us. We’re also missing out on the big volumes of matches, and missing out on tennis and basketball, although the NBA has now returned. It’s definitely different from the offering we’ve had before but it’s good to see that the interest is firmly back from the customers.”
The pent-up demand mentioned earlier helped Interwetten post a higher turnover in June and July than pre-coronavirus levels. Three months without betting on major leagues helped, but more so was the operator’s marketing strategy, focused on new and existing customers.
“I think the reason for that is because we were probably the first operator to go out and market to new and existing customers with a lot of campaigns and reactivation messages,” Beier explains. “We took a little risk by being very active with campaigns and advertising when the Bundesliga restarted, and it definitely helped us to be ahead of the competition, with the comeback of major sport.”
Sport might have returned, but in a very different way. Matches are still played behind closed doors, though some European leagues, such as French Ligue 1, are starting to trial the return of fans at a reduced capacity. That has led to some thought of an enhancement in activity levels for the away win market, with home advantage heavily negated by a lack of home support. However, the Interwetten speaker of the board hasn’t witnessed any changes in behaviour, with betting on football more popular than ever.
He said: “Football probably makes up around 85-90% of our revenue at the moment, whereas before the pandemic, it was more like 75%, but that gap definitely comes from tennis.
“We still see a very similar betting behaviour to what we saw before the pandemic, and to be honest, we don’t see a big impact with no fans being allowed in stadiums, or if they are betting on different markets.”
In terms of 2021, it now promises to be the year 2020 was meant to be, providing the Euros and Summer Games take place as scheduled, on top of the normal offering of sport.
It’s hard to look too far into the future during the current climate, which is why Beier is more cautious than you’d expect the CEO of a major operator to be.
“Purely from a sports point of view, it’s going to be a very interesting year,” he says. “I’m really curious to see how the whole economies of each country will develop, because obviously there’s less money to spend on entertainment with more people out of work. We don’t just rely on sports events to take place, we rely on if people feel well and have work and money to spend on consumption and entertainment products such as ourselves. We don’t know what will happen on the customer side, and people having less money to spend on entertainment products might be a potential threat to our industry.”
Those comments reinforce the uncertain times we still live in, despite on the face of it, the worst of the pandemic is behind us. It’s great that major live sport is back and the immediate interest levels are there, but just like fans at sports matches, paying betting customers are the most important part to any operator’s business, and how the financial landscape shapes up next year will be crucial to the industry.
“It has shown everyone that with entrepreneurship, innovation and a good approach to the business that even the worst case scenario can bring opportunities and make you better,” says Beier with resounding optimism.