Andy McIver podcast transcript

Interview with Andy McIver of Sportingbet

RT: Ronan Tighe
AI: Andy McIver

RT: Hi, I’m Ronan Tighe, and welcome to podcast 12 in our Innovations series. This week I’m joined by Andy McIver, Chief Executive at Sportingbet. Andy, thank you very much for agreeing to join me today.

AI: My pleasure.

RT: Let’s start off by telling us a little bit about your background in Sportingbet.

AI: OK, I joined Sportingbet in December 2001, and Sportingbet will be 11 years old this October, it was one of the earliest online gaming companies. I had been in a mixture of finance roles up until that point, I’d been an accountant, an investment banker, if that’s not an insult these days, I’d worked for Ratners chain, I’d worked for House of Fraser, British Telecom, and Ladbrokes, and this opportunity arose at Sportingbet to be the Finance Director, and I was very excited about it and have enjoyed every minute since then.

RT: You took over as Chief Executive in October 2006, which was a really difficult time for the industry – what goals did you set yourself then, and are you happy with the position Sportingbet is in today?

AI: Well, October 2006 was difficult maybe, but interesting – there have been many interesting times in this industry, the United States have just passed legislation which effectively stopped us taking bets from America as a plc, and at that point America was 80% of our business, and so the first goal that I set myself was for the company to survive, not only was it 80% of the business, it was over 100% of the cashflow. And that year, we had to retrench, regroup ourselves and restructure, which we successfully did, and we made a profit, we came out of it making £7 million. I then set us a target of achieving £21 million for the following year, £29 for this year and £35 for the coming year. We made £22.5, so we beat the £21, we’re on line to make the £29 this year, and hopefully we’ll do the £35 next year.

RT: And what has been the factor for the success in the last couple of years?

AI: I think one of the things we’ve always stuck to is that sports betting is very much our heritage, it’s what we’re good at, it’s over 60% of our business, and I think we have seen that the poker market is quite competitive, with those sites that still take US bets, and it did have an element of fad about it, and I think the casino market has had an element of recession about it, so I think we’ve been lucky in that sports betting was our heritage. I think also that the other thing that makes us perhaps slightly different to some of our competitors is that most of our marketing is very localised in the country, so instead of having the same brand across Europe, or the same adverts across Europe, we do in Spain what is right for Spain, in Greece what is right for Greece, etc, etc, and I think that’s been very helpful.

RT: How did that come about? – the fact that Sportingbet have localised so successfully, whereas other operators that are based in the UK haven’t?

AI: I think part of it is historical, because we acquired an American business and we acquired an Australian business, they did their own marketing, which was very different to what we did in Europe and what they did there, and it worked, and we learnt from that, and within each country we put in a regional or territory manager, and said that you do the marketing for your region or territory. And finally, on the history bit, we also had a couple of localised marketing partners, whereby we said, “You do the marketing, and we’ll provide the logistics and the back end”. Firstly we tried that in Asia, and we just didn’t make any money, and subsequently we have done that in some European markets, most successfully in Greece.

RT: And what are the key challenges in operating in as many markets as you do?

AI: It’s important to always try and think localised, now it’s difficult, because I’m in the UK and I’m a British person, I tend to think with a British hat on, but every so often I have to take it off and try and think as a Spaniard or a Greek or a German or French, etc. Also it invariably means your cost base is bigger, because you are going to have people in each country rather than one person in the centre dictating across all these other countries, and also it means that each website is slightly different, so there’s more of an IT burden as well.

RT: So no easy task, then?

AI: No, but not insurmountable, I mean we’re not inventing the cure for cancer here!

RT: And what markets are you currently focused on?

AI: Well, Spain and Greece are our two biggest markets, so we focus very strongly on those; we’re starting to focus a bit more on the UK recently, we’ve just started sponsoring Wolverhampton Wanderers, well we shook hands on it last year, so we were very pleased that they got promoted; and the reason we’re starting to focus on the UK a bit more is, it’s only 6% of our business, it is our home market, but it historically has been very competitive, and marketing’s been very expensive. Unfortunately, or fortunately, the recession means that the marketing costs have reduced, so it is easier to compete; and looking forward, I think Europe is going to become – each individual country is going to have its own regulations, and people will look at the UK’s regulatory environment, and realise that this is one of the most liberal and friendly environments there is, and therefore it’s important for us to get a foothold in the UK before all those other European operators start to realise quite how good it is here.

RT: Do you think it’s going to be easier for Sportingbet to take a share from the likes of William Hill in the UK, than William Hill trying to take market share in Spain and Greece now off Sportingbet that you’ve gained?

AI: Well, we’re still on a semi-equal footing in those countries, the advantage they have is they’ve got a much bigger budget; the advantage we have is that we’re much more nimble, or I hope we’re much more nimble, we’re much more localised than them, and our brand name in Spain, which is Miapuesta, works much better in Spanish than either Ladbrokes or William Hill, which really don’t say anything to anyone unless you’ve grown up with them.

In terms of the UK, we’ve got such a small market share, I think if we took anything off them they wouldn’t notice, but for them to get much bigger than they are in the UK, because it’s very easy, if you’ve got nought, to get one; it’s much harder if you’ve got 60 to get 61, so history gives us a slight advantage.

RT: And do you think it’s easier for Sportingbet to innovate when you don’t have any bricks and mortar stores?

AI: I think it means we can be more focused, but I would imagine, I don’t know, that they have separate divisions and the separate divisions focus, although the shops and the online invariably compete for resources amongst the group, whereas we’ve just got an online bit, what they have got though is more resources.

RT: And sometimes they compete for customers, which isn’t ideal.

AI: Yeah, absolutely.

RT: You talked earlier about regulation, and that has been a big subject this year with France and also Party settling in the US – how do you think that’s going to play out?

AI: I think regulation has continually been a big topic for the industry, it’s unpredictable, everybody knows what the logic is, and the logic is the UK model whereby you have a reasonable tax rate that works for the operators, the governments and the customers, and you have a secure, regulated environment. What you tend to sometimes see in some of these countries is that, when they do bring in regulation, they invariably either try to get as much tax as they can, which means all the customers then carry on going offshore if they can, because it’s a bad deal for the customers; or they try to protect some sort of local monopoly, which again doesn’t really work, because the customers can vote with their feet. These days customers can go, because of the internet, anywhere in the world, and to try and control that is destined for failure.

RT: So then, if they can go anywhere, will regulation work at all?

AI: Well, it does if it’s fair, and everybody accepts that, OK, I’ll pay a bit of tax, but what I get is I know I operate with an approved, regulated supplier, and I think the UK do that fantastically well, I don’t know what the French model will look like, because they haven’t yet finalised it. I think it works very well in Australia as well, where they’ve brought in such regulations, it hasn’t worked very well in Italy, where in Italy the maximum payout has been limited, you have to have software nominated by the Italian government, which is invariably not the same software you’ve got in the rest of your operation, and there’s a limit on what bets you can offer the customer, so it just hasn’t quite worked, whereas who knows what’ll happen in other countries? But I think, because of recession, governments will be more interested in looking for potential sources of tax revenue, and you might see, during this economic environment, perhaps more regulation than would otherwise have occurred.

RT: So do you think the recession will actually be a good thing?

AI: Yes, well for the gambling industry, I think what it will mean is you will get some of these countries opening up their markets, taxing, liberalising, and regulating, rather than just protecting their local monopoly. If you look at gambling legislation over the course of history, recession has proved to be a bit of a catalyst whenever you see things changing.

RT: Do you think regulation to this point has actually stifled the innovation companies could have been doing?

AI: I think what has been – it hasn’t stifled it, it’s definitely slowed it down, because too much time and effort has been spent on that topic, rather than pushing forward from a framework that everyone understands, a level playing field that doesn’t change, so it hasn’t stifled it, but I think it has slowed it.

RT: And in terms of the products that you’re offering at the moment, is there any particular focus?

AI: At the moment, well sports is our focus, and in particular one of the things that’s grown incredibly over the period – well, it wasn’t even there when we started, is in-running betting, and we offer more and more in-running betting, it’s now just over 50% of the bets we take, and I think it could get up to nearer 75% over the next couple of years, and part of that is the ever-increasing instant gratification mentality of the customer, and everything moves so much faster, and PC technology has got so much more advanced whereby you can now have the pictures in terms of streaming, and everything happens so much quicker, so I do think we’ll see that growing, and we spend a lot of time and effort on that currently, trying to enhance the product range we offer. The other thing we’re trying to focus on is, we would like to get to a stage where we can offer the customer something to bet on every minute of every hour of every day, because again that’s what they want.

RT: And is that within sports specifically?

AI: Within sports specifically, and that invariably means finding new sports or new geographies to cover up or to fill those parts of the day where things aren’t happening in Europe, so obviously early morning and late night, we need to find something else.

RT: And that would be South America, Asia?

AI: South America, Asia, etc.

RT: What about the other products? – is there a focus on them?

AI: Casino and poker are more secondary products for us, we use the Boss network for poker, and they provide our casino product, so to some extent we can only move as fast as they do. I think we could probably do better with the marketing, and in terms of the more interactive games, the Flash games, which Boss haven’t got exclusivity over, we are bringing on more suppliers there as well, and I think that’s positive as well. We don’t offer bingo, it’s something we’ve been looking at, we certainly haven’t ruled it out, and we probably will do it in the future, but I don’t know where and I don’t know when.

RT: Since you started out in the industry, what do you think the biggest innovations have been?

AI: There’s been a few, in-running betting has been a major one, particularly for us; Betfair and the betting exchanges weren’t there 11 years ago, and I think they’ve revolutionised the UK racing model; and I think coming up will be the whole movement towards mobile telephony, I think mobile telephony’s now got to the stage where it can offer a reasonable channel for the product, I think up till now it’s been pretty – it just hasn’t been good enough, and I think us, like a lot of our competitors, thank our stars that we didn’t get heavily involved in mobile telephony, say seven or eight years ago, because it just wasn’t ready.

RT: Would you be looking to take that in house, in terms of the product that you’ll offer?

AI: At the moment, we would probably outsource that part of it, because it’s quite a specialised field.

RT: At the moment, do you think the gaming sites are competing in terms of the innovation that they’re offering, or the experience they’re offering customers, or is it more down to bonuses and marketing?

AI: I think there’s too much bonusing, and too much rake back, I don’t think that’s effective for the industry, I think it’s quite effective for the customer, but I don’t think the industry’s doing itself any favours, and I also think it’s getting a bit too “me too”, and it looks a bit blunt and ugly. I’ve always thought that, given that this is an internet business that grew up in the internet age, it doesn’t look particularly internet-friendly, and some of the websites look like they’ve almost been put up as a retailer, as an afterthought, rather than actually starting on the internet, and perhaps that reflects the fact that us and a lot of other companies were start ups, and we had a limited budget. But I do think we will enter a phase where innovation and a much more professional internet offering will start to happen, it’s starting, it’s got some way to go.

RT: And finally, where do you think the industry will be in a year’s time, or five years’ time?

AI: Well, five years’ time is just the biggest crystal ball of all time, because I don’t think anyone knew where it would be in 11 years’ time, and I don’t think today anyone can honestly say beyond a year. I think in a year’s time, I think you’ll see for us, because we are Europe and Australia-focused; more regulation, more markets becoming regulated, whether in a good or bad way; I think you’ll see the technical ability of the companies having advanced and the products looking slicker, and much improved; I think we all in the industry learn as we go along on the marketing, and I think that will improve, I still think it’s fairly blunt; and I do think that the industry will still be a high-growth industry within a year’s time.

RT: Will there be consolidation?

AI: I think there’s a certain logic for consolidation and that logic’s always been there. I think for consolidation to happen, it needs a lot of the companies within the industry to grow up, and I think some management egos or shareholder egos need to be put aside, and these things are often barriers, and I think once that happens, then it will definitely happen.

RT: There’s also been talk about threats from media companies into operator space – do you believe those? Are you fearful of those?

AI: I certainly believe them, over the years we’ve spoken with some significant US media providers, both in the traditional media space and in the new media space of internet search engines and software providers, and I think what they require is to have a well-defined, regulated market space, and until you get that well-defined, regulated market space, I think they will just find it hard for their brands to transport into the industry.

RT: Very good, we’ll leave it there. Andy, thank you very much for the interview.

AI: My pleasure.

RT: I found it really interesting, and I’m sure our audience will too.

AI: I hope so, thank you.

RT: Thank you very much.

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