Q&A: PointsBet on its bid to crack New Jersey

The nascent US sports betting market has been dominated to date by exactly the big European beasts you would expect, with the William Hills and Paddy Power Betfairs of the world seemingly making all the big moves. However, one relatively unheralded Australian firm broke this news cycle monopoly in July by announcing two licensing deals with Jeff Gural-owned properties in New Jersey and New York. The deals will see PointsBet launch its online and mobile sportsbook in New Jersey in Q4, with a New York launch also planned should the legislative chips fall favorable.

The Australian business – founded in 2015 by two former TomWaterhouse.com employees – has had its sights set on the US market from its inception, and makes US sports its core product focus. The firm also brings a point of differentiation to the market with its spread betting concept, where amounts won and lost vary with the margin of victory. “We were impressed by the PointsBet team from our first meeting,” said Jeff Gural, chairman of the Meadowlands and Tioga Downs properties, whose license PointsBet will operate on.

“They have a creative approach, with their highly differentiated points betting product and aggressive go-to-market plan. I believe they are the ideal complement to our other partners and am confident they will quickly become a meaningful player in the US market.” Below, PointsBet CEO Sam Swannell tells EGR North America why American bettors will take to spread betting, and why media partnerships could be critical.

EGR North America (EGR NA): Is it fair to say PointsBet was established with the US market in mind, despite going live in Australia first with an Australian management team?

Sam Swannell (SS): That’s right. We didn’t know exactly when it would happen but US sports are very big in Australia. Basketball is huge and so is NFL, so we saw Australia as our proof-of-concept market. We deliberately set up with a US sports focus, with the younger punters as a priority, both things which are well suited to the US.

We only launched in March 2017, and the Supreme Court handed down the PASPA decision in May 2018 which was almost perfect from a timing perspective. We had just the right amount of time to impress people with our results and establish the business and our concept. If it had taken another year or two that would have been fine, but we always thought America would find a route to legal sports betting given the size of the black market and the amount of money going offshore. Even when we were forming our shareholder group and putting together a strategic plan, it was always about America.

EGR NA: What did you and your co-founder learn from your experience as senior management at Australian bookmaker TomWaterhouse.com?

SS: I set up the online business there from scratch. Tom was the biggest on-course bookmaker in Australia by a fair margin and wanted to go online, so I came in as COO to do that. Australia is very competitive, all the big international players are there, and you’ve got to spend to get heard. It was a dry run for this I guess. We made mistakes; we did a lot of things very well. In terms of the bookmaking, the Waterhouses have managed books for decades and they’re very astute, so we learned a lot about managing a book and risk.

The guys that have come across to PointsBet have that experience too. We are very fortunate because that business went from a start-up to a big presence in the market in a short space of time, so you learn so much and we crammed so much experience into these four years that it stands us in good stead to do it again in the US.

EGR NA: Are you confident you can tap into a mainstream market with a spread betting offering?

SS: We do offer spread betting, but traditional sportsbook is still our bread and butter. We see spread betting as a point of difference in a crowded marketplace, and if someone wants even one spread bet a month they’re going to maintain an account with you. We always believed there would be greater appetite for spread betting in Australia than in the UK because the main sports in Australia have higher scoring. You think about rugby league, Aussie rules, NFL – they’re far better suited for spread betting than soccer. There’s huge engagement and there’s not a large education piece because people already understand lines and totals, and it’s easier to explain the difference between fixed odds and spread betting.

In the UK, you have to come up with convoluted markets to make spread betting work on soccer. Conversely, imagine a spread bet on Tom Brady yards for the Super Bowl. The line was at 295 and he went over 500. Every time he throws a pass, people are going mad. We’ve also tweaked the product slightly. We’ve made it less like a financial market tool, which it is in the UK, and more like a traditional bet. There’s also a lot of educating going on via advertising, and then a lot of cross-selling, and as I say, it is not our main offering, but a point of differentiation.

EGR NA: What else can you use the spread betting mechanic for?

SS: We’ve used it to innovate and introduce spreads on these player props and it’s a massively growing area of sports betting, as players knows more and more about individual players and want to use that information. Offering all these different bet types let us create lots of interesting new markets.

EGR NA: We’ve seen brands like Sky Bet use media partnerships to propel themselves to prominence in the UK. Can you do similar with the likes of the Wall Street Journal, New York Post and Fox?

SS: We’re talking to a lot of media companies. We are very fortunate to have a relationship with News Corp and some other media companies in Australia who are equity holders and it’s perhaps opened some doors which may not have been open otherwise. That said, most bookmakers in America are thinking about media partnerships and that’s a key element of success. It’s definitely helpful having a relationship with News Corp and we’ll continue to talk to them as the market develops, but not exclusively.

EGR NA: We understand you own your own technology. Is this quite rare for a young sportsbook?

SS: The spread betting platform has its roots in a spread betting platform used in the UK a few years back. We did a deal for that source code a couple of years back and developed it to where we are now. For sports betting, it’s actually the same platform used by CrownBet in Australia. We were licensing it from one company and had the option to buy the source code and develop it ourselves, which we’ve done.

EGR NA: What benefits does having that technology give you?

SS: We built that spread betting product from scratch. We have our internal quant team and put a lot of effort into coming up with proprietary markets and pricing. We plan on using our tech teams to continue coming up with new products on the sportsbook side, but when we talk about differentiation, we mainly mean we’re going to bring our version of spread betting to the US market.

EGR NA: William Hill and Paddy Power Betfair have so far dominated the US market. What enabled you to get these licensing deals with a fraction of the business development budgets of these firms?

SS: First we have that proprietary technology. We consider ourselves a tech company in that respect because a large proportion of our staff are in tech, so we can choose our own path. Second, we are also really focused on US sports compared to European operators, who maybe think US sports aren’t a focus and don’t have a track record of trading profitably on those.

Third, it was always the key focus of the business. I’m the CEO, and I’ve been coming back and forth for 12 months. I’ve been attending pitch meetings all around the globe, and our investors understand it’s our primary focus and the reason we were set up. We’re sending over our best staff as well; we’re not saving them for Australia. Another thing is that in the short time we’ve been in Australia, we’ve made huge progress. Starting from scratch is really relevant experience.

EGR NA: One of your potential deals is a partnership with Tioga Downs in New York should it be permitted. Do you have any insight on the likelihood of that legislation passing next year?

SS: We hear what’s happening there from lobbyists and so on. My view is that most states are legalizing betting because they want to capture that tax revenue. Logically, that means you want competition, you want lots of jobs created and the market grown to its full potential, so I think the New Jersey model is pretty sound. Our expectation is that there will be multiple skins in New York because there is a lot of lobbying going on behind the scenes from companies with bigger wallets than us to make sure they get a seat at the table. At the moment you’re talking about four upstate casinos, which is only eight skins.