A safe bet: Conor Grant on how Flutter is at the forefront of RG

Sustainability has become the hot topic in the gambling sector of late. So much so that the words ‘sustainable’ and ‘sustainability’ appeared almost a dozen times on multiple slides in Flutter Entertainment’s 43-page preliminary 2021 results presentation published on 1 March. Sustainability efforts also feature prominently on the Dublin-headquartered online giant’s flashy new corporate website. Part of the reason for this focus is Flutter is adamant that putting all its chips on a recreational-centric business model and ensuring players gamble safely is crucial to its long-term – and sustainable – future.

“The reality is the industry has to change,” states Conor Grant, CEO of Flutter UK and Ireland (which includes Paddy Power, Sky Betting & Gaming, Betfair and Tombola), regarding safer gambling. “The industry has not got it right. Let’s be completely frank about this, there have been just one too many cases where the devastation of that and the impact has caused a lot of scrutiny on our sector. And we deserve it, there’s no getting away from that.”

However, Grant, who has led Flutter UK&I since July 2020 after 10 years working his way up the ranks at Sky Betting & Gaming (SBG), takes umbrage with those who accuse the major operators of paying lip service to responsible gambling (RG) and putting profits before protecting vulnerable players.

Or cynically making changes around advertising and affordability to deflect from the ongoing opprobrium and stave off increased regulation amid the Gambling Act 2005 review. “What I find frustrating is this notion that the industry is self-regulating – that it is making these changes just to self-regulate,” Grant says.

“That’s not true. That’s the bit I find frustrating because the reality is the industry calls for regulation. Effective, evidence-based regulation provides a level-playing field and that’s what we want as a business. But, yes, we are making radical strides and changes.”

Conor Grant

Step into action

One change around affordability Flutter announced last year garnered mainstream media coverage. As part of its Triple Step approach to affordability – a risk-based framework using real-time data to monitor player behaviours to ensure safe play – the firm revealed it would impose an automatic £500 per month net deposit limit for all UK and Irish customers under the age of 25. It’s a measure that impacts less than 5% of the FTSE 100 operator’s younger customers.

“We recognised that early adulthood leads to a range of significant life changes. Data also shows that young adults are at an elevated risk of potential harm,” Grant explains. Flutter believes £500 per month “strikes the right balance” and ensures young customers “can learn to spend sensibly”.

New customers are now subject to “tailored monitoring” in the initial period post-registration, with thresholds dependent on age. On top of this, Flutter has set the goal at a global level that 75% of active customers will be using its safer gambling tools by 2030, up from just over a third (34.7%) today. By 2026, the target is more than half of customers making use of the tools available across the various brands’ sites and apps. These aims are part of the company’s Play Well strategy that will also tie 10% of its workforce’s annual bonuses to initiatives to prevent gambling addiction.

“There is no single metric that is ever going to be a true indicator that you are nailing safer gambling,” Grant explains. “We have got to be clear about that because if there was a silver bullet, we’d all solve this.”

He goes on to say: “The tools create sustainability in players’ behaviours, they create that security blanket [but] there is no one-size-fits-all blanket here. We want customers to apply limits that are sensible to them, and we will give them the support they need.”

Besides setting self-imposed cooling-off periods for up to 30 days or having access to Sky Bet’s interactive graph displaying your profit and losses over time, one of the most popular tools among users is setting a deposit limit. Over half a million Sky Bet customers have set a cap to date. In fact, there was a 10% uplift in customers opting to place a limit on their deposits after Sky Bet ambassador and sports presenter Jeff Stelling fronted a TV campaign to promote the brand’s safer gambling controls.

In addition, there was a 69% increase in the use of cooling-off periods, while the number of clients using the ‘profit and loss’ tool surged 83%. “What we have done with all our products is make them [the tools] much more accessible. For too long they were hidden – they were hard to find in all the applications across our sector. I think consumers are increasingly aware that operators have a responsibility to go to greater lengths to protect them.”

The UK&I CEO adds: “With the benefit of hindsight, if we had all proactively pushed tools harder 10 years ago, five years ago, would that have helped the industry? We fundamentally believe that for the vast majority of people, gambling is a perfectly safe and reasonable leisure activity, but we have to make sure we are giving people the tools so they don’t get to the harm-end of the spectrum.”

The inside track

Grant has previously addressed Irish politicians, where he outlined the differences between the approach to safer gambling in the digital sphere compared to the retail side where Paddy Power operates a network of 600 shops across Ireland and the UK. “With online we have the ability to do effective interactions,” he says, referencing a key point he made at the time. Indeed, 5.3 million automated communications were undertaken with Flutter UK&I customers in 2021 to encourage safer gambling awareness, backed up by in-person interactions.

Underpinning this is Flutter’s powerful proprietary AI technology which monitors more than 250 behaviours to identify markers of harm, such as suddenly chasing losses, logging in and betting more frequently than before, or declined deposits due to insufficient funds.

Paddy Power Betfair’s Customer Activity Awareness Programme (CAAP) tracks slightly more variables, some 276 (up from a previous 114), to determine a player’s risk rating. Flutter’s teams are “continually evaluating and comparing” their predictive models, Grant says. Furthermore, tailored affordability backstops are being implemented for when systems and controls haven’t yet triggered an interaction.

“Gambling addiction is really complex,” he explains. “Our job, using the data, is to make sure we can identify signs of harm more easily. I think that’s what is at the heart of our effective interactions with our customers. We are investing huge amounts into the relationship [with customers] and training our staff. This is complex and a huge departure in terms of interactions because no matter what time of the day or night it is, it is important that we interact with the consumer. Having that driven by the data is hugely important.”

When Grant references the significant sums being invested in safer gambling, he isn’t exaggerating; a total of £45m so far has been ploughed into supporting, promoting and educating safe play across the whole group. Yet the impact of these costs on the UK&I division due to all its measures – including in 2021 a £10 staking limit on slots and removing auto-spin – was laid bare in the company’s results presentation where a chart on page 26 showed the minimum estimated revenue cost of safer gambling was £93m last year.

This equates to 5% of UK&I’s online revenue. In fact, costs grew exponentially throughout last year, from £7m in Q1 to £19m in Q2, then £30m for Q3 and, finally, £37m in the final quarter.

Responding to a question posed by Ed Young of Morgan Stanley on the rising costs, Flutter’s CFO, Jonathan Hill, said Flutter is “building sustainability now rather than building it a little bit later” and that it is “the right thing to do for the business”.

While Sky Bet and Paddy Power are two of the largest recreational betting brands in the UK (Flutter’s UK&I market share is an estimated 29%), the business has made a concerted effort to broaden its casual-focused player base even further as part of this sustainability effort. Therefore, it has reduced its reliance upon higher-value customers, or what the sector previously called VIPs. Indeed, the proportion of revenue from what Flutter described as the “top value tier” in the latest financial results fell by 55% in two years, from 15.7% in H2 2019 to 6.7% in the second half of 2021.

The knock-on effect is it has reduced the ARPU across all value bands. However, average monthly players (AMPs) rose by a quarter year-on-year in 2021 to reach almost 3.2 million, with the reduction in top value tiers offset by growth in the lower-value cohorts. It all means Flutter UK&I’s recreational base is “significantly bigger” than 2019, the company said.

“From a long-term shareholder-value perspective, growing that recreational base is absolutely critical [and] it reduces volatility,” Grant says. “The reality is there were people – those high-value cohorts – who were spending money that they couldn’t sustain over a longer period of time. And we have taken action on that because we believe it is fundamentally the right thing to do.”

This focus on growing the casual player base was bolstered by the £402m acquisition of Tombola in November 2021 (deal completed on 10 January). Based out of Sunderland and employing 700 people at its HQ and in Gibraltar, the privately owned, bingo-led gaming operator’s modus operandi where marketing is concerned has long been about the community aspect of bingo and encouraging people to “come join the fun”.

As well as offering games with stakes from just 1p to its 400,000 AMPs, Tombola was the first major UK-centric firm to roll out mandatory staking and deposit limits, while its gaming proposition, Tombola Arcade, is a distinctly soft product with low-stakes play. It is partly why the firm scooped the coveted socially responsible operator category at the EGR Operator Awards in 2013, 2015, 2017, 2019 and 2021. Flutter hailed the way in which Tombola aligns with its own safer gambling strategy and with “building a highly sustainable player base”.

“Tombola is a really interesting business,” Grant remarks. “It’s fascinating because it’s just a completely different dynamic than any other gaming business that I have certainly ever seen. What Tombola does for us is it allows us to diversify our portfolio as we are a sports-led proposition in the UK and Ireland compared with a business like Entain who are probably stronger in gaming than we are.”

He continues: “What it does is it allows us to engage with the pure-play gaming customer, which Tombola has so far done incredibly well.”

Changing times

It has now been 24 years since Grant, who hails from Newry in Northern Ireland, first entered the industry when he joined Paddy Power as part of a graduate scheme. This was in 1998, two years before the Irish bookmaker even had an online betting website.

Nearly a quarter of a century later and Grant, 45, heads up Flutter UK&I based out of its Dublin HQ, a flexible workspace across seven floors, complete with three beehives on the roof, at Belfield Office Park in Clonskeagh. He also spends a couple of days each week at the 136,000 sq ft tech and innovation hub in Leeds that houses 1,700 staff, including 800 tech professionals. Covering eight floors, the £15m space, opened last October, also features vending machines stocked with IT equipment, as well as electric car charging points and furniture made from recycled Coca-Cola bottles.

For Grant, the professionalism of this multi-brand, London-listed business worth £15bn and its whole approach to promoting RG and preventing gambling harm is worlds apart from when he first joined Paddy Power. Or even compared with a decade ago and his early years at Sky Bet. “The change is so stark, night and day doesn’t do it justice,” he tells EGR Intel. “While safer gambling was part of the vernacular of all the businesses, I think it’s really in the last three or four years that we’ve really seen a step change. One, you can’t get away from the political, media, regulatory and societal scrutiny the sector’s had. That’s definitely had an influence.”

Secondly, he believes the influx of people from outside the gambling space has influenced mindsets. “I look at our own [global] CEO [Peter Jackson], who was in the financial sector, and he’s seen radical change in regulation. I think the people coming in have helped drive the mentality change required.

“And there’s a broader societal piece to this as well, where particularly more and more of the millennial generation want to do good. They demand that of the business, that we do the right thing. Yes, we are in a business where customers can lose money, but the most important thing is we keep our customers safe. So that’s a sea change we have seen over the past 10 years.”

Despite all this, mistakes do happen. Flutter found itself in hot water with the UK Gambling Commission (UKGC) recently after Sky Vegas emailed an offer of “Bet £5 get 100 free spins” to 41,395 self-excluded customers. Another 249,159 customers who had unsubscribed from the operator’s marketing emails also received the promotion. The fact it happened on 2 November during Safer Gambling Week was awful timing too.

The upshot is that Sky Betting & Gaming was fined £1.17m for marketing to vulnerable consumers, although the regulator said the fine would have been “a lot higher” if any self-excluded players had been allowed to gamble. Or if SBG failed to cooperate or didn’t take decisive action aimed at preventing a repeat failure.

“There is no getting away from [the fact] we got it wrong,” insists an apologetic Grant. “It was human error. At the end of the day, that’s not good enough and we are not going to hide behind that. Customers got communications from us that categorically should not have got to them, and we are taking the learnings from it. No matter which way you cut it, it’s very disappointing. It’s disappointing for the people involved who work really hard to make sure this type of thing doesn’t happen. In broader society and business, mistakes happen, and this is one I very much regret.”

Flutter UK&I’s focus on growing its recreational player base meant the proportion of revenue from its highest value customers fell 55% between H2 2019 and H2 2021

Smart casual

Looking ahead, and with the UK market becoming a more and more challenging arena for online operators, recreational betting and gaming will be “an area that is going to become increasingly competitive”, Grant suggests.

And with many of the public operators no longer rolling out the welcome mat for VIPs and plying these losing high rollers with corporate hospitality and other freebies, everyone is fighting over the low-staking players. A lake stuffed full of fish rather than a lake occupied by a handful of whales is a far more sustainable business model in the current climate and the regulatory headwinds.

“Over the next few years, I think we’ll see a shift in the dynamic where to win the hearts and minds of the recreational market, you’re going to need to have really slick, fantastic user experiences. We are going to have to look at the UX and really hone in on the engagement because the vast majority of our users are buying entertainment and leisure.”

Flutter’s UK&I boss adds: “I think what we give back to them is going to be a huge part of that; how content plays into the overall experience and having a frictionless capability, whether it is logging in and being able to deposit or withdraw money. Paddy Power and Sky Bet are really set up to take market share.”

In the more immediate future, Flutter and rival operators await to discover the outcome of the review into the gambling act – the white paper outlining the government’s plans for updating the laws is due very soon. Such has been the length of government probe into the way in which the sector operates, Jackson told investors and analysts during Flutter’s earnings presentation that the industry was “crying out for clarity”. This view is echoed by Grant: “Peter is 100% spot on in that assessment. We have been waiting a long time.”

Grant again underlined the importance of the review being “evidence-based” and that any new regulation balances protecting players at risk of harm with not interfering with those customers who gamble perfectly safely and within their limits. “I think the Gambling Commission gets a lot of criticism, but they’ve got a difficult job. I’m under no illusions of the size and the challenge of what the Gambling Commission has to do, so we’ve got to make sure that as part of this regulation, it is effective in what it needs to achieve. But that it’s a level-playing field for all, I think that’s absolutely critical,” he concludes.