35th ARC Session 1 - Breon Corcoran

Ladies and gentlemen, it's an honor to be here on behalf of Betfair, speaking to such an international and prestigious audience. Betfair, as Vinford says, is a company that has been much talked about over the last 15 years, and I think our journey can perhaps shed some light and some insight into the relationship between betting, wagering, and the racing industry. Personally, I'm Irish. My journey with racing started some 30 years ago when my grandfather brought me to a small track called Kilbeg. But I'm here today representing a British business, originally a British business founded almost 15 years ago. The business was founded by a derivative trader and a technologist—the technologist also being a professional gambler—and the innovation was about introducing more competition to the then somewhat staid fixed odds betting industry in the UK. We took our first bet on the British Oaks in June of 2000, and from the very start there was an intrinsic link with racing. In the early years, some 70% of our revenues came from horse racing. That number has decreased a little, but that has been in the time of enormous growth for the business. And the screenshot is from the 1000 Guineas last weekend, and that's the core part of the business that hasn't changed over the last 15 years. Our core product is fundamentally a trading product, where customers are able to bet on a win event—a horse to win or a horse not to win—or interestingly, on the odds to change if they feel that the probability of a horse winning or not winning will change before the event. About three-quarters of our customers bet in this non-traditional way. They trade—so they open and close positions—they bet in-running, or they lay horses, so bet on horses not to win. And with the two Grade One races, the 2000 Guineas and the 1000 Guineas last weekend, about 16% of our volume, 16% of our stakes, is bet in-running, so after the race starts. And I think that in some way illustrates that this continues to be a slightly different product from traditional wagering. So Betfair today is a bigger business, a slightly different business, but one that retains a link with its past. We've been listed on the stock market in London for just over three years, with a current market capitalisation of about 1 billion pounds. Our revenues are running at just south of 400 million, and the exchange matches more than 1 billion bets every year with a trading value of close to 60 billion pounds. On a daily basis, we transact about 5 million transactions, and that's more than the top five stock exchanges in Europe do combined, and this is with a customer base of just more than 1 million customers. So the sports betting landscape has shifted, as was spoken to by the two previous speakers. Now horse racing is just under 45% of our revenues, with soccer being an ever-growing part of the mix. And last year we changed our business strategy by taking ourselves out of the niche that was the exchange and addressing a broader customer base. And we did that for a couple of reasons: we believe that the customer is ever more demanding, not always just value-focused, and that different betting models, different wagering models, can complement each other and allow us to grow our business. And today the sportsbook, or what most people would look at as a traditional fixed odds business, and the exchange are being integrated, and we're using our technology to offer customers a better proposition than they've seen in the past, and in many ways to offer them everything they want under one roof. So be it our product such as Cash Out, where a customer who places a bet on a soccer match can cash out before the end of the event based on prices that are updated in real time as the market unfolds, or be it our most recent product, which is Price Rush, where we offer a traditional simple bet to the horse racing customer but then check to see if the betting exchange will offer more value than our fixed odds bookmakers will. And Price Rush will give them, after the point of consumption—so after they place their bet—incremental value. We do that to combine simplicity and a consistent fast wagering experience with better value as available through the exchange. And this constant innovation is, we believe, helping us to better compete today than we have in recent years. So betting and racing—Betfair needs racing, and I believe that racing needs Betfair, or betting exchanges. We believe we have a unique relationship with British racing. It wasn't always so, and there was a degree of confrontation or antagonism in years gone by, as indeed there was with other parts of the wagering industry. But we were the first online operator to voluntarily, as Jennifer said, voluntarily sign up to a commercial deal with British racing. And we did that because our customers and indeed our shareholders needed certainty—certainty in terms of quality product. So we made a commitment to a minimum of 40 million pounds over five years, all based on horse race wagering. And this is not just a commercial commitment but also a strong, real partnership. We use our betting data to help inform the British Horse Racing Authority—to help inform them on how they should think about fixture lists. We have ongoing discussions with them about field sizes, where we show real transactional data to inform the debate as to optimal field size and optimal timing of races over the course of the day. And we also share data, including customer data, to address any integrity concerns. I think questions about integrity in racing and the need for a high-integrity product have been discussed a lot over the years. But I think that our relationship with British horse racing in particular shows the role that betting exchanges can play in this. But as Jennifer said earlier, this isn't just a British business. We're now available in different shapes and sizes on pretty much every continent, and I'm particularly proud of the progress we've made in our American business over the last few years. TVG was acquired five years ago. It's now the largest online horse race betting operator in the United States. Our TV channel, our high-definition TV channel that we've recently invested almost 10 million dollars in, is available in 30 million American homes, and we've shown that we can grow handle in a declining market. A particular note is our relationship with the New Jersey Sports and Exposition Authority, where we won, in a competitive tender, the right to operate online wagering for five years. That deal started in March of last year, and I'm delighted to be able to say that we grew handle more than 55% in the last 12 months in a market that you will all know is seen as being completely ex-growth. We were also delighted in our US business to start a co-mingling agreement with the Hong Kong Jockey Club earlier this year, and we believe that the depth of the pools in Hong Kong and how it fits into the time of day for American racing will lead to a strong symbiotic relationship with both firms. We also have businesses in Australia, where we have a JV with the James Packer Crown Resorts group, and businesses in other countries—Ireland and others—where racing is strong. And the customer has changed, as said earlier. The customer has changed over the last 15 years. We realise today that some customers are more value-aware than others, and not all customers are as monetarily motivated as Betfair once might have thought. We once believed that Betfair was a superior wagering product. I think now we have a greater realisation that Betfair is the right product for some customers some of the time, but that it complements the traditional wagering product—be that the higher-margin fixed odds business or indeed pari-mutuel. Exchange customers do tend to be younger and are more digitally savvy. Particularly for our recreational days, up to 70% of our customer base transacts, both by volume and by value, on mobile, and we see that trend growing. We see this as not so much a cannibalisation of the traditional businesses but rather an increment to them. Most of our business, as I said, is on win wagering, not on exotics, and we trade at a lower margin than the traditional products. And we believe that this complementarity is advantageous not just for the customer but also potentially for racing, as it allows them to segment into different customer types. So when we think of the future, we look back and realise that this business is born from innovation, and we believe that competition continues to lead to innovation. Betfair is obsessed with competing to serve today's customer, the modern racing customer, by using our own technology but also by using our marketing experience and scale. Most of our wagering technology, in particular our mobile technology, is built in-house, and we've developed in recent years considerable expertise at marketing on social channels and all of the traditional channels, TV included. And we use our scale to reinvest to bring a competitive product to our customer. As a partner, Betfair believes in paying its way for quality product, and we believe that in time there will be a growing awareness that wagering and racing together—particularly onshore licensed wagering and racing together—have a strong relationship and that each side of that relationship makes the other side stronger. Thank you for your time.