A new frontier as Betfred charges into the US

Anyone who knows the UK market will consider the Betfred brand a stalwart of retail betting. Brothers Fred and Peter Done – now both septuagenarians – opened their first betting shop in Salford, Greater Manchester in 1967 from modest beginnings after both left school at 15 to work for their father’s illegal bookmaking business.

In the intervening 50 years, the bold but down-to-earth brand has become a household name with over 1,500 betting parlors dotted up and down the UK today.

As an illustration of their success and wealth, the bookmaking duo secured the 117th spot on the Sunday Times Rich List 2019 with an amassed fortune of £1.25bn ($1.62bn), though this was a fall of £100m ($130m) on the previous year.

But unlike other longstanding high street bookies such as William Hill and Ladbrokes Coral, Betfred’s business has barely grown beyond brick-and-mortar.

In 2018, the firm recorded revenues of $950m (£727.6m), with only around 13% of turnover coming from its online business. Meanwhile, Betfred sold the UK’s 90-year-old pari-mutuel racing operator, the Tote, last year after acquiring the business in 2011 for £265m ($344m today), securing an exclusive seven-year license to operate pools betting on UK racecourses and take over the Tote’s 517 shops and online businesses.

Although the company’s founders have taken a spanking from the UK’s national media over their investment in a firm supplying gambling addiction services to the UK’s health care provider, little is known of Betfred’s inner workings.

And as others have scrambled to conquer multiple European markets to grow and diversify revenue streams, Betfred has remained predominantly UK-facing. Its first expansion efforts saw the firm shift its sights to Spain where it was granted an online betting license

in 2019. And to take full advantage of the country’s betting tax benefits, it swiftly established an operational hub on the Spanish enclave of Ceuta on the north coast of Africa.

The operator’s move into the US comes as the wider gambling industry diverts its eyes from the UK amid shrinking profits and tougher restrictions. Betfred US represents a new frontier (in keeping with JFK’s campaign to bring America into the future), serving up a modern version of its outdated branding, a sharper focus on online betting, and an open-door approach to industry media.

Betfred Sports US COO Bryan Bennett

US momentum began in October 2018 when Betfred hired Las Vegas consultant Stephen Crystal of SCCG Management to help it gain a footing in a rapidly growing sector rife with hungry competition.

To gain as big a slice of the American pie as possible, Betfred extended its services to include B2B and B2C, with the aim of building Betfred-branded sportsbooks as well as providing its platform to casino partners.

“We’re not super vain,” Betfred US chief operating officer Bryan Bennett tells EGR North America. “If a casino partner has a pretty powerful brand, we’re completely happy to let that brand take the lead. It’s something we kind of look at on a case-by-case basis, and we work with a partner to decide the best way to do business.”

It’s been said many times that as states implement differing regulations, the deals between operators, suppliers and license holders shall not be uniform either.

A detailed look at Betfred’s current deals reflect these differences. “We don’t have a very specific model that we have to adhere to,” Bennett comments. “Pennsylvania is going to be a little different [to the Iowa sportsbook] and then Colorado may look a little different as well.

We know that very few people outside of the sports betting industry know who Betfred is. We don’t have very much brand recognition among bettors themselves.”

It’s certainly a new approach for the firm and a significant investment as it taps into its trading and risk management strengths in the UK to bring traditional Betfred lines to US bettors.

“[The UK business] feels pretty confident that the way they trade and manage risk and their bookmaking operations is applicable here to the US, and they know that decades of experience can allow them to be successful over here,” says Bennett.

“[Fred Done] wants to be known for providing great value to sports bettors in the UK and we want to do the same here [in the US]. We want the US bettor when they see the Betfred Sports brand to know they’re getting good value.

“We’re not going to turn them away if they have a couple of weekends of success and we want to cater to hardcore bettors by providing superior value and a superior product.”

At its core

Leading the charge is former head of in-play and sports product development Andrew McLauchlan who joins the Las Vegas-based team as head of trading. It’s the age-old question being faced by all European companies shifting their sights to the US, should they hire locally or relocate talent from other facets of the business?

McLauchlan’s move is part of a wider strategy to merge the old and the new, to ensure it can keep up with nuanced betting conditions and player behaviors in the States. “We’re layering in three guys from the UK market to create a sort of combined trade team that brings a lot of that Betfred DNA over,” Bennett reveals.

“But also having Las Vegas guys who are used to managing trade and risk from a US perspective with the US bettor in mind. I think it’s important to have both.” Other major hires within the dozen-strong team include VP Lou Damico, who earned his trading chops managing multiple Vegas sportsbooks, and compliance chief Cynthia Hays, whose experience spans top-tier casino businesses and suppliers.

Marketing and customer support roles will be filled locally in Las Vegas, and Bennett says there are no immediate plans to increase the core teams, so as to give the business room to grow. “As we launch and start scaling the business, then we will scale the teams to match that. We’re trying not to overbuild,” he notes.

With market-access deals already in place in Iowa, Pennsylvania and Colorado, Bennett dismisses any interest in entering New Jersey. “It’s a bloodbath in New Jersey, and there is so much other opportunity for us as we launch with new states,” he adds.

However, Nevada’s strong retail betting culture piques Bennett’s interest as a state that would allow Betfred to play to its strengths. “Retail is still an important part of it as well and in Iowa [and Nevada] you have to have in-person registration.

“We feel that we can come over to the US and be successful both in retail and online. We have a history of being successful in both,” says the COO.

Similarly, Penn National Gaming said in January that it would be investing in its retail estate and that it expected to make sizable retail gains after rebranding its venues to Barstool Sportsbook and hosting live events for followers of the Barstool Sports media platform.

The Betfred sportsbook at the Grand Fall’s Casino in Iowa

Retail boom

Despite the industry’s general acceptance that mobile is driving betting growth across the country (nine out of every 10 bets in New Jersey are placed via mobile), retail profit margins are significantly higher and result in better bottom-line returns.

Bennett says Betfred’s first retail launch at Grand Falls Casino in Iowa has set the precedence for any future deals, as a 3,500-square foot Betfred Sports-branded retail book was unveiled in January. Bennett considers it the first Vegas-style sportsbook outside of Nevada.

Betfred has yet to prove its worth online but the company has lofty ambitions for the channel. The operator will continue to use Optima as its platform partner across betting and igaming. And having failed to make a significant dent in the UK online market, Betfred’s competitive pricing will have to be paired with a clean and US bettor-friendly interface.

The bookie is Optima’s first launch in the US, however, it is expected the supplier will have a good grasp of the market as its parent company, Sportradar, beefed up its US armory last year with the appointment of managing director Werner Becher and a host of new trading talent.

“We were already planning on using some of Sportradar’s feeds so [its acquisition of Optima] makes that integration a little easier,” Bennett comments. “But I don’t think anything has changed too much. We were well down the path with Optima when the deal went through [last year].”

In 2019, Betfred updated its desktop and mobile offerings in the UK, working with app developer Degree 53 to shift the product onto a single codebase and make it much easier to post updates and fix bugs.

The operator’s underlying tech will largely mirror its UK and Spanish products, with a customized interface and pricing fit for the US consumer. “The plan is to always manage trading risk inhouse but we’re also building marketing and customer support. You know, we’re going to be a fully self-contained business unit here in the US with all of those important functions,” the COO says.

Bennett is also considering integrating igaming into its US product suite in states like Michigan and Pennsylvania, which regulate multiple verticals. “The OptimaMGS platform has a full casino capability. We would probably attack that on a case-by-case basis, but the platform we’ve chosen could do both,” Bennett says.

Betfred will not extend its betting kiosk contract with Playtech to the US as it has chosen to work with Scientific Games (SG), at least in Pennsylvania. “We are interested in having kiosks, although we don’t have kiosks in the Iowa casino.

“Our chosen provider is still working on some development,” Bennett initially said, before the operator announced it would use SG’s OpenSports platform at the Wind Creek Casino in Bethlehem.

The contract includes data feeds provided by Don Best and SG’s online betting technology. At the time of the announcement, Mark Stebbings, group COO at Betfred, said: “Scientific Games was the clear choice to provide our sports betting platform in Pennsylvania. OpenSports provides best-in-class, reliable technology and services that will help us reach more players and grow our sportsbook presence at speed.”

SG’s Keith O’Loughlin added: “Together, Scientific Games and Betfred can make a massive impact in the sports betting arena by driving player engagement and putting their digital and retail sportsbooks at the forefront of this expanding landscape.

“Betfred is synonymous with giving UK customers a great value proposition, and we are confident that they will get great traction here in the US.”

SG’s Keith O’Loughlin

Go big or go home

Considering the scale of its investment in the US, Betfred expects to operate in the top tier among the DraftKings and FanDuels of the betting world. The firm notably sat at number 40 (up from 46 in 2018) in the EGR Power Rankings last year, with DraftKings coming in at 26th.

“When [Fred Done and the board] decided to go into the US, the decision was that we’re going to go big, and that’s sort of the strategy. You’ve got to build a team here. The licensing is not cheap and it’s on a market-by-market basis.

So just by those issues alone, we are going to be aggressive and we have the resources to compete, which is why we plan on competing aggressively,” Bennett notes.

In the nine months since its entry into the States, Betfred has secured three omnichannel betting deals, established a Las Vegas headquarters and grown its team to almost 15. It has opened the doors to its first retail sportsbook in Iowa and maintained a presence at the majority of industry conferences and meetings across the country.

Bennett anticipates that Betfred will be in four states by the end of the year, with multiple operator partners signed and an aggressive business development roadmap in place.

Few operators have managed to secure deals in multiple states without first having cut their teeth in New Jersey. Betfred’s brand recognition within the industry has given it an advantage when seeking partners to work with and Bennett acknowledges it has also helped move potential media partnership conversations along.

“While the average bettor may not know who we are, certainly large media companies and sports teams who can help us build audiences certainly know who Betfred is. So those conversations are a little easier to have and there are no shortage of them out there.”

Back in June 2019, UK analyst firm Regulus Partners praised Betfred’s FY 2018 revenue growth of 15%, claiming it had made “impressive operational progress”, particularly in the face of a regulatory clampdown in the UK.

“The group is facing the multiple headwinds of B2 impact (UK slashing maximum stakes of fixed-odds betting terminals to £2), broader fiscal-regulatory pressures (especially online) and high street challenges, in a stronger place than many (including us) thought likely,” Regulus said in a note.

These results left the operator in a strong position to extend its reach beyond the UK and Spain, without having to wind down operations in these two European markets. And as a handful of new US states launch betting in 2020, Betfred will undoubtedly gain traction in the retail space as it takes time to perfect its online offering.