Ladbrokes unusual TV ads for its online casino had a ‘hide & seek’ theme
Unibet profit up
Swedish operator Unibet has reported an almost 70 per cent rise in profit after tax to £9.1m for the second quarter of 2010, despite closing its Maltese site to residents of France. The firm said: “Unibet has applied for a French licence but considers that, under the restrictive terms of the licence, it will be hard for any operator to make a reasonable return. ”
LADBROKES’ ONLINE PERFORMANCE OVER TEN YEARS YEAR
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
GAMING REVENUE* (£M) LOSS (£M) 68.6
188.2 390.3 462.3 89.3
123.1 134.1 143.5 172.2 160.7
*net gaming revenue from 2004
ONLINE GAMBLING OPERATORS BY SIZE FIRM
Ladbrokes plans to galvanise e-gaming performance
ew Ladbrokes chief executive Richard Glynn inherits a diversi- fied multinational gaming company that has experienced significant growth in its online operations in the last 10 years. In 2000, Lad- brokes had turnover of £2.632bn and operat- ing profits of £114.9m, which included casino turnover of £126.4m and casino profits of £14.1m. The company no longer has any casinos and no longer states turnover, having replaced it with gross win or net gaming revenue. This followed the abolition of the stakes tax and its replacement by gross profit tax and discounts churned turnover when customers simply re-invest winnings. In 2009, net gaming revenues were £656.7m and operating profits of £134.5m. In nine years then, Ladbrokes has experi- enced growth in operating profits of 17.06 per cent, which isn’t particularly spectacu- lar. However, there is a very different mix to the company’s business these days; the casinos have gone but the internet has arrived to stay and in 2009 Ladbrokes’ e- gaming operation earned 17 per cent of the group’s net revenues with £160.7m, and con- tributed 27.35 per cent of group operating profits with £46.1m.
Ladbrokes launched its online gaming operation in February 2000 when it was part of the Hilton Group. At the time, the company said it was exiting its land based gaming businesses in North and South America and South Africa and instead: “The group recog- nised the potential for growing the brand
faster by being prominently represented in each of the new technology driven distribu- tion platforms.” For Ladbrokes, those tech- nology driven platforms were the internet and interactive TV.
Ladbrokes then forecast that the global online gaming market would be worth £1.2bn by 2002 out of an estimated global betting and gaming market of £520bn.
In the first year of operations, Ladbrokes online had turnover of 68.6m and made an operating loss of £10m. However, the divi- sion moved into profit the following year with operating profits of £2m on turnover of £188.2m.
From 2001, growth was spectacular with turnover more than doubling in 2002 and a concomitant rise in operating profits. Growth continued through the following few years as Ladbrokes decoupled from the Hilton group to become a stand alone busi- ness in 2005.
The growth trend continued until 2008 when the company reported that while gross win had grown, operating profits only increased marginally. At the time, increased investment in customer acquisition and tough economic conditions were given for the slowdown in growth, but perhaps there were other factors at work.
2009 saw Ladbrokes report a fall in both gross win and operating profits from its online division for the first time since its launch. Reasons given by the division’s man- aging director John O’Reilly were the tough economic conditions in the UK, where 72
GOOD WORLD CUP FOR SPORTINGBET
UK-based Sportingbet has revealed that the firm has continued to perform in line with management expectations for the fourth quarter ending 31 July 2010. The firm said World Cup per- formance was strong, thanks to losing favourites and low scoring matches. Over £50m was staked on World Cup markets of which 65 per cent was bet in:play at an aggregate margin in excess of 17 per cent.
42 BettingBusinessInteractive • SEPTEMBER 2010 ANALYSIS
RICHARD GLYNN HAS UNVEILED ‘PROJECT: GALVANISE’ WHICH IS DESIGNED TO REINVIGORATE THE WHOLE GROUP. HE HAS IDENTIFIED WEAKNESSES IN E-GAMING, WHICH HE CALLS A LACK OF ‘E-EXCELLENCE’, AND IS LOOKING TO WIDEN DISTRIBUTION AND REFINE PRODUCTS. GLYNN’S
CHALLENGE IS TO ARREST THE DECLINE IN LADBROKES E-PERFORMANCE SINCE 2008 AND GAIN GROUND ON ITS RIVALS. THE GOOD NEWS FOR LADBROKES IS THAT IT IS UNLIKELY THAT THERE WILL BE ANY NEW MAJOR PLAYERS TO COMPETE WITH, THE BAD NEWS IS THAT MANY OF THOSE ALREADY IN THE MARKET HAVE DEMONSTRATED FASTER GROWTH AND LADBROKES WILL HAVE TO BE TRULY ‘GALVANISED’ TO KEEP UP.
The firm has also renewed its ‘Sportingbet Wolves Accumulator’ where customers can compete against Wolverhampton Wanderers legend Steve Bull to predict the Sport- ingbet-sponsored team’s results.
JAXX TAPERS LOSSES
Online gambling and betting provider Jaxx has reported a shrinking of losses to 593,000 euro (£495,000) in the second-quarter of 2010, from 2.8m euro (£2.3m) in the same period last year, as the company’s core sports betting division benefitted
per cent of Ladbrokes e-gaming customers are based, and increased competition which led to a reduction in sports book margins. O’Reilly also pointed to the absence of a major international football tournament. It is the amount of competition that Lad- brokes now faces that is perhaps the biggest change that has occurred since the company first launched its online operations. As well as traditional bricks and mortar competitors like William Hill and Coral, who have also developed online operations, pure online players such as Bwin, Unibet and Sporting- bet have emerged. Betfair and other exchanges are challenging on online sports betting, while PartyGaming and Full Tilt Poker compete for poker and casino busi- ness. With the exception of Full Tilt, which was launched in 2004, the other operators all launched around the same time as Lad- brokes, but as recent research by Morgan Stanley has shown, the pure online opera- tors have grown much faster.
Measured by 2009 net gaming revenue, Ladbrokes is the eighth largest online gaming operator. That is not particularly surprising as the largest operators are the US facing Poker Stars and Full Tilt and Ladbrokes has never sought business there. What is sur- prising is that Ladbrokes is behind William Hill, with net gaming revenues of £239m compared to Ladbrokes £177m. Also sur- prising is that Bet365, with no real brand history and launched in 1999 like Ladbrokes’ online operation, is larger by the net gaming revenue measure with £236m.
from the World Cup results. The Germany-headquartered group, which supplies a range of online betting, lottery and casino products to clients around the world, said that while revenues continue to grow, business prospects are still being impaired by the ‘persistently desolate’ regulatory environment in Germany.
US REGULATION WILL SEE UPTURN
Astaire Securities analyst David Johnson believes that US deregulation will see a jump in Media Corporation’s share price. He commented: “There
has been further progress in the regu- lation of online gaming in the US with last month’s vote in favour of Con- gressman Barney Frank’s pro-gaming proposed legislation by the Financial Services Committee. Our current fore- casts do not assume the opening of the US but regulation would create a substantial opportunity for both Purple Lounge and Media Corp’s
portal. Online gaming in the US has not gone away but govern- ment is missing out on tax revenues and US off-line gambling companies are lobbying hard for change.”
PokerStars 2001 Full Tilt Bwin
2004 2000 1997 2000 1999
YEAR LAUNCHED 2009 REVENUE (£M) 1199 505 412 330 304 239
Bet365 1999 236 Ladbrokes 1999 177 888 1997 171 Sportingbet 1998
Unibet 1997 162 Playtech
With a new chief at the helm much more comfortable with online operations, Simon Banks looks over Ladbrokes’ 10 year history of online gambling.
(10.00) 2.00 11.3 14.2 21.3 41.4 44.3
55.00 55.1 46.1
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