"We want to create the Nikes and Red Bulls of this industry"
When eGaming Review received a phone call from Bwin's press office saying co-chief executive Manfred Bodner was in London and was available for a face-to-face interview, it jumped at the chance to meet the head of continental Europe's largest online be...
When eGaming Review received a phone call from Bwin’s press office saying co-chief executive Manfred Bodner was in London and was available for a face-to-face interview, it jumped at the chance to meet the head of continental Europe’s largest online betting and gaming operator. Bwin has been at the forefront of the European online gaming industry for the past seven to eight years and the opportunity to meet the head of the company could not be passed up.
The milestones and high profile events that have affected the firm in the past two and a half years have also been well documented. The acquisition of Ongame for E530m in late 2005/early 2006 marked the start of a series of events that no one could have predicted. Some nine months later Bodner, and Bwin’s other chief executive Norbert Teufelberger, were arrested and detained by French authorities as the pair travelled to a press conference to announce Bwin’s shirt sponsorship of Monaco football club. The Unlawful Internet Gambling Enforcement Act (UIGEA) followed soon after and Bwin was forced to pull out of the US market. This led to the company having to write off the Ongame deal and spend most of 2007 making up the shortfall.
Such hits may have fatally wounded lesser companies, but Bwin has managed to overcome them and in April this year announced E13.2m EBITDA for the full year 2007 and after tax profits of E50.4m, compared with the E539m it was forced to write down for 2006.
Bodner pulls no punches when discussing those events. “The US internet gaming ban was totally unexpected, we wouldn’t have done the Ongame deal if we thought it was going to happen. But it went wrong and the US market was gone in very dubious circumstances. They are still dubious but we have to live with the reality,” he says.
Bodner adds that the timing was tough, “because it ripped us at a moment when we were really making a global effort. We had been waiting six years to move into the US and poker was safer (than sports bets) from a legal point of view. Our closest competitors at the time, Sportingbet and PartyGaming, were constantly growing in the US and we had to do something. So we acquired Ongame, the largest transaction in the industry at the time, were firing on all cylinders, integrating the two companies; and a few months later, the UIGEA happens. It was a shock, a big shock, and it was painful”.
Bodner has harsh words for the post-UIGEA US online gaming environment that has been created by the legislation. “Some 18 months later, the US government and Department of Justice (DoJ) are rewarding the villains. All the public companies stopped doing business in the US yet are still fighting for their future and reputation. At the same time, these privately-held businesses, with well-known ownership structures, enjoy some special status within the US legal system just because they are not listed. I don’t get it. Those companies are making incredible amounts of money, don’t really have to advertise their products because everyone knows where to go to play on their sites and they then come to Europe to compete against us. It’s a complete distortion of competition.”
An uneven playing field
For Bodner, this dichotomy is replicated in other markets that introduced legislation against online gaming such as Turkey, from where the likes of Sportingbet and Betsson have continued to take bets, while Bwin has pulled out.
“It creates an uneven playing field on the marketing front where we are operating. But I also know we are in a transition phase, it’s just that sometimes we feel like the good kid who gets beaten up all the time. You know what they say, good girls go nowhere, and bad girls go everywhere. I don’t want to be too good, but you know…,” he jokes.
Moving onto the European markets that make up the bulk of Bwin’s revenues, Bodner, like the rest of his counterparts in the European Gaming and Betting Association, agrees in principle with the concept of operators paying taxes to fund sports bodies and grass roots organisations. However, he is also clear that it is up to individual governments to decide how to redistribute the funds.
“The EU governments have to set the frameworks for an entertainment industry that is out there and working. People should have the right to have a flutter and private operators have used their right to exploit this opportunity through their business models, but it is up to governments to work out what to do with the taxes,” he says.
As for European monopolies’ protectionist stance and delaying tactics, Bodner says they will be the ones who will dominate the space whenever EU member states open up their online-betting and -gaming markets. “The monopolies have established brands with massive distribution networks and leverage among the public and are the toughest competitors of tomorrow. It will also be interesting to see if many of them try to expand internationally.”
With European Commissioner for internal markets and services Charlie McCreevy retiring next year, does Bodner worry his replacement may not be as open-minded to betting and gaming as McCreevy? “That would be sad,” Bodner replies, “because this is a once-in-a-century opportunity to compete worldwide in a sector where European firms lead the field. Our biggest obstacles in Europe are our own governments when we should be directing our energies towards competing outside the EU and conquering the world, just like the US music industry did in the 50s and the Silicon Valley companies did in the 80s, providing great consumer entertainment brands. That’s what we want to do for online betting and gaming. We should be using our technical know-how to strengthen this leading position, and the people most opposed to it are our own politicians.”
While Bwin spends time and money on lobbying European regulators, Bodner estimates Bwin’s legal and regulatory annual spend at around E15m to E20m, the company is busy promoting its name through high profile sponsorship deals with the world’s leading sports clubs and leagues. The deals with Real Madrid and AC Milan are the most visible and Bwin also sponsors a number of the Moto GP events, handball, ski and the Portuguese football league.
Marketing chess masters
The merit and cost of the sponsorship deals with the Italian and Spanish football giants have been debated at length by just about everyone in the industry. Some have said Bwin should make sure the basics are in place before undertaking such costly marketing ventures.
“That’s what opportunities are about,” Bodner counters, “they present themselves and you have to grab them. But in retrospect, there are not many things I would do differently on the marketing side. And in many ways, it is also an evolution that is driven by many of the obstacles around us. You think you have visibility but actually the environment changes quickly. In addition, for us to convince the media to work with us, we have to do these deals, to get that leverage when faced with the mainstream press, all the while facing up to governments. It is like playing a game of chess through this minefield of EU idiosyncrasies. At the end of the day, we are in a highly political environment, and a lot of the moves are tactical and necessary. Overall though we are doing a good job, if you look at the CPAs we have produced on average in the past two years, they have been in line with the industry and all the while we have invested a lot in our brand.”
But rather than spend millions of Euros and expand the marketing department’s energies on activities that don’t have a tangible effect on the bottom line, why not concentrate on monetising the customer base and generating maximum revenue?
“This is a brand building exercise. At the end of the day you get recognised by the public as an entertainment brand,” Bodner says. “Everything we have done from day one has been geared towards creating the best, most attractive gaming lifestyle brand on the planet. We are in the middle of the process, we are not there yet, but we want to create the Nikes and Red Bulls of this industry. Few people seem to realise this, they think the product is interchangeable and some think they will be out of the industry in a year or two. We are not interested in that, we understand that there is a global brand leader missing in this industry and this is an historic opportunity to build and create that global brand. Everything we do is aligned with this global strategy and if you look at it with this perspective, everything makes sense, perfect sense.”
To say that the past two years have been eventful would be an understatement and a sense of perspective is one of the attributes the online gaming industry is most in need of. And while all of the leading operators are involved in legal battles and a fight for their very existence with European authorities, Bodner says these obstacles are being faced by “all the companies in the business. It will not be achieved just like that, but we have to do it because it is the only way to reach our goal”.
Looking at new markets
Looking beyond its core European markets, Bwin has been developing its business in South America with operating licences in Mexico and Argentina, and Bodner is confident Brazil will open up gradually to online gaming in the next three to four years. “In South America, invisible networks are very powerful in the decision-making process and you have to be aware of that. It’s a process we are going through, it is looking promising and media companies don’t have interest in the space like we do, so it looks good even if the learning curve is steep, but that was also the case in Europe eight years ago,” Bodner adds.
Bwin has also opened an office in Beijing to look at the possibilities offered by the Chinese market and Bodner says that for all these new markets to be exploited, “years of years of business development and liaison with a local partner are necessary”.
Returning to Europe, does Bodner believe that being based on the continent gives Bwin an advantage over UK operators? “I don’t think we have more of an advantage over the UK bookies because we are continental European, the UK companies have shown great expertise in plundering the riches of the world over the years (laughs). The UK firms have such strong experience and expertise and their own market is so strong that it has focused much of their energies and concentration on growth in the homeland. They were so busy with their own markets, growing and shaping the UK legislation in readiness for the Gambling Act, and in that regard it helped us to grow our own European market share, it was an advantage. But that is why we are coming to the UK now.”
Never mind the highly competitive marketplace, a UK launch would be a major statement of intent from Bwin. And just to be sure eGaming Review had not misunderstood what Bodner had just said, it asked him to confirm that Bwin was going to launch in the UK in the not too distant future.
“We have postponed the decision to come to the UK for some time because we didn’t have the management and the products. But we plan to enter the UK market and will decide where we start from, through acquisition or organically. There are opportunities in the UK that have not yet been exploited and the timing also has to be decided on, but it will happen,” Bodner explains. And with that mild bombshell, Bodner denies that Bwin will be the shirt sponsor of any of the “big four’ clubs in the English Premier League.
As the interview draws to a close, Bodner says Bwin is a work in progress, but has reached the stage where it can see where it is going. The struggle against the European monopolists will most likely continue until the end of 2009, while in Asia and South America, licensed operators will have to compete with the underground operators. A choice between a monopoly or an underground working environment is not an alternative and Bodner is confident a regulated industry will happen across the markets that Bwin operates in. But beyond all those issues, the driving force behind all of Bwin’s ventures is the brand. As Bodner says: “It’s all about the brand. The key is the brand.”