Q&A: LiveScore Group CEO on why entering the US would have “killed” the company

With its LiveScore Bet brand’s footprint covering four markets – Ireland, Nigeria, the Netherlands and the UK (together with Virgin Bet) – LiveScore Group offers a unique ‘ecosystem’ underpinned by its long-established sports media brand, LiveScore. But rather than using the media platform primarily as means to convert sports fans into bettors, CEO Sam Sadi says it’s about being able to “deliver extra value” for users.  

Backed by a strategic partnership with Zurich-based media and technology company Ringier, LiveScore Group has plans to launch its eponymous betting offering in Eastern Europe and South Affrica in the not-too-distant future. Besides international expansion, Sadi discusses regulatory challenges in the UK, the untapped potential of Nigeria, and the strength of the group’s business model.

EGR: The back-ends of LiveScore Bet and Virgin Bet have now been fully migrated to sports betting supplier Kambi’s solution. Why Kambi, and did you consider doing it in-house or were the costs too prohibitive? 

Sam Sadi (SS): We did seriously consider it. Most of my team come from bwin and know very well how to build a sportsbook back-end. We weighed up the costs of building and maintaining one versus getting an immediate tier-one solution and the maths made more sense to go with Kambi. We made the best selection based on what we need in the territories that we currently operate. There aren’t many tier-one B2B vendors left – large operators have their sportsbook in-house. But we think Kambi is the best fit for us.

EGR: How are your brands standing out in the UK despite the competitiveness of the market?

SS: We own the entire customer experience. Even though we are working with external providers to get our sportsbook, it’s treated as a pricing feed. All the end-user products are built in-house. We excel at building very high-performance, fully native apps both for our media and betting businesses, so we are able to differentiate from other operators who just take white-label solutions from their vendor. And, of course, our convergence business model gives us a strategic edge where we can focus on delivering value for existing customers rather than spending millions on traditional user acquisition strategies.

EGR: How are you being impacted by increased UK regulation?

SS: Negatively, like everyone else, but probably not as much. We came to the market late, so we are more agile in implementing measures. We never had high-value customer VIP programmes that we had to shut down, which means it was easier for us to make those adjustments rather quickly. Our technology is newer, so we don’t have a lot of legacy platforms that make it difficult to implement these measures. We are in a better place but that doesn’t mean that it doesn’t hurt our margins and long-term profitability. We had had to make serious adjustments to our economic models and growth models.

EGR: What’s been your progress to date with LiveScore Bet in Nigeria?

SS: We have been in Nigeria longer than any other market, but Nigeria is still primarily a retail market. We haven’t started investing heavily in that market yet as we wait for the transition from retail to mobile. It is happening right now, so we are getting ready to deploy more capital to Nigeria.

Smartphone penetration is high [in Nigeria] but lower than in western countries. Stakes are smaller but it is still a market that is probably close to half a billion [dollars] in size. There is enough demand for betting products and while data is more expensive it’s not expensive to the level where it is preventing the customer from engaging with products – millions of them do. The market is different, so you may need 10 million customers as opposed to one million customers [elsewhere] to achieve the same result. That’s the same with other industries selling products in the market.

EGR: How about the Netherlands?

SS: We’ve been there since day one of the regulations. We have been growing steadily, as planned, but the growth that we calculated and planned for is no longer sufficient to get [us] to profitability. That’s because of the new regulations. We are struggling with the change in regulations and uncertainty with new potential taxes and advertising bans coming in. We are waiting to see a little bit more clarity in the market so that we can plan our investments accordingly. The worst scenario for us and every other operator is not knowing what is permissible and which operating model we can implement.

EGR: What would be the impact of a GGR tax hike from 30.5% to 37.8%, which is the right-wing coalition government’s intentions?

SS: It depends on the scale you have; obviously if you command 30% to 40% market share you are able to absorb a lot more of these incremental costs. Legislators and regulators usually focus on channelisation and whether these increases will lead the market towards offshore operators, but an unintended consequence is that it consolidates the market because there are fewer operators able to absorb these costs.

If they do implement a new tax rate it is going to be almost impossible for a single-digit market share operator to be sustainable and profitable. And it will certainly eliminate any new market entrants unless they deploy an enormous amount of capital. This is a detriment to the customer; it eliminates choice and eliminates any innovative startups coming into the market. It also consolidates the top of the market to one or two operators.

EGR: Would you consider exiting the Dutch market? 

SS: It would be our job to re-evaluate. We look at the long term and are not trying to be profitable immediately but there needs to a model that tells us we are going to be profitable at some point. If that point becomes that we need to go from the single-digit market share that we have today to 15% market share and would require hundreds of millions in capital – and that deployment is becoming difficult because of the advertising ban – then it’s a battle that we can’t win. So, therefore, we will be forced to consider and exit, unfortunately.

EGR: What other markets are you planning to enter?

SS: We are looking at markets where we have a strategic edge, rather than following the hype like the US or Brazil. We have a partnership with Ringier that presents us opportunities in Eastern Europe, and we look at where we have a strong user base with LiveScore Media, which is primarily sub-Saharan Africa. So, we will probably look to invest more, probably in Nigeria, and we are looking to enter South Africa. We will enter Bulgaria very soon and possibly other Eastern European countries in the next two to three years.

EGR: I understand you contemplated going into the US, yet the numbers didn’t add up. Is that correct?

SS: You have access costs, operating costs, taxes […] the models we ran basically portrayed the US as it is today. So, we would probably have spent half a billion dollars until today and we would be exiting right now with 1% market share, similar to other operators who have exited the market. It just did not make sense.

It was one of the best decisions we could have taken because it would have killed our business as we would have stopped growing in Europe. Our technology teams would have focused on tech investments that need to be done on a state-by-state basis. We would have probably had plans to create a liquidity event, an IPO but we would not have been able to show that we can be profitable in any given time. Market valuations have crashed during that period so, yes, it would have been a disaster if we had chosen to enter the US market.

EGR: How advantageous is it to have the LiveScore sports media platform when it comes to brand awareness and player conversion?

SS: It’s our business model but we don’t look at it as an audience to convert; we look at it as audience to deliver extra value. LiveScore and LiveScore Bet, our technology teams look at it as a single ecosystem product. And depending on the territory and our licences, we will look at that audience and whether we can deliver incremental value for them. If you are able, with an integrated user journey, tailor the products to their specific needs you get more loyalty, whether that is the media side with more engagement or they give you their betting wallet and, therefore, your monetisation increases.