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As some of you will know there is a new book an the market. By Colin Cameron the book takes an in-depth look at the story of the people and events that shaped Betfair and thus transformed betting, and some would say racing, forever.
It is a fascinating subject and Colin has kindly offered to do a question and answer session on the forum.
So… if you would like to pose a question to Colin please post on this thread. We’ll give it until next Sunday and then I’ll send Colin the questions and publish the answers when I have them.
I had a question to start things off –
<i>Q: How did You Bet – The Betfair Story: How two men changed the world of gambling, come about?</i>
<b>A: I wrote an article on Betfair for Esquire magazine. That was back in 2003. The story caught my imagination. This might well have legs, I thought. Perhaps there is even a book in it. The company’s progress from then on took the subject into the mainstream and Harper Collins accepted my book proposal and agreed terms with my agent in the summer of 2007. I began work on what I thought would be a compelling tale shortly after that. On finishing the manuscript, I was even more gripped having, I hope, drilled down far enough into what is a true story of our times. Dealing with Betfair had its moments. The Daily Telegraph this week reminded me that Andrew Black’s dog and I had some “issues”. Overall, Betfair is an open company so most of my requests were granted. That said, Betfair is also a commercial entity and was always intent on preserving its “brand”. For example, I asked for contact details of a founder investor but nothing was forthcoming. Eventually, I unearthed the individual myself. He is the tricky customer who asks the awkward questions at Betfair’s AGMs. That said, how critical of management can you be when your original investment of £25,000 is today worth the guts of £3 million? Traditional bookmakers who feature in You Bet – the Betfair Story were largely the equal of Betfair in having the generosity to answer my questions and give time to matters I wished to explore. I owe them a big thank you for being made of stuff strong enough to face a grilling on subjects which explore their weaknesses (as well as their strengths such as the ability to respond to competition). Indeed, I owe a thank you to everyone who gave me time towards the book.</b>
Was it true that when Andrew Black was seeking start up funds he put a business plan to The Racing Post but was turned down?
Yes, the Racing Post did turn down Betfair, which with hindsight was racing’s equivalent of turning down The Beatles. But the Racing Post wasn’t the only organisation to pass on the concept (Andrew Black cannot remember whether he actually showed editorial staff the prototype he had at that stage which ultimately he developed into the Betfair site which went live in 2000). In my book, Andrew Black recalls that he also went to William Hill and Ladbrokes. Of these, he was given a token audience by the latter and didn’t even get through the door with the former. "I began to tell everyone about the idea," You Bet quotes Black. "I wasn’t secretive at all. At the start I began by saying, I have this nice little niche idea. Still, no one was interested. Over time I began to say, this will be big, huge; this is not going to make a little bit of money but hundreds of million." No one was the least bit interested. Of course, they are now.
1 Does the author have a view on the introduction of premium charges a) in terms of a business strategy b) in terms of rewarding loyal customers, some of whom lobbied on the company’s behalf against the government introducing similarly punitive measures?
Ah, premium charges. Surprised it took even a couple of questions before we touched on the subject. Betfair’s line to me about them as a strategy is that they are aimed at "customers that take out more than they pay their way for". Not especially eloquent. Nevertheless, as a business strategy that sounds copper bottomed. And yet, the fall out from premium charges was such that you would struggle to argue that this was their effect. So, a good strategy poorly executed would seem a reasonable summary. Are you, Prufrock, yourself "a loyal customer who (to borrow your phrase) lobbied on the company’s behalf against the government introducing similarly punitive measures?" There is a strong sense of injustice in these words. But what to do? Take your business elsewhere (to where there is inadequate liquidity)? Betfair’s success is based on providing the customer what he or she wants. With respect to Premium Charges they would have appeared to have failed (and also fallen short in communicating the corporate thinking behind the move). Those who find this insurmountable can either go to other exchanges or back to the traditional bookmakers (while being aware of perhaps cutting of noses to spite faces).
2 Does the author have a view on where the betting industry and Betfair itself will be in 5 to 10 years’ time?
Where will the betting industry and Betfair itself be in five to ten years’ time? Imagine, if you can, that you asked me that question a decade ago. Who would have thought! Regarding Betfair, in the time frame you suggest I would expect the company to be a truly global operation, servicing the American market and large chunks, if not all, of Asia. I’d expect a breakthrough in America sooner rather than later. The political landscape is encouraging (as my book explains). Some of Asia may be more resistant (and Betfair was heavy footed here to begin with, also in the book) but illegal gambling throughout the region is so vast I’d expect most governments to embrace Betfair as a means of curtailing this. Better odds than much of the official pool betting, without the punitive government takeout, would bring much illegal trade in from the cold. Governments would then benefit through corporation tax Betfair would be liable to pay if licensed domestically.
Enjoyed the book.
Does the author see the emergence of any serious competition to Betfair in the medium term?
With Tony Blair it was education, education, education. With Betfair it is liquidity, liquidity, liquidity. So commanding is the advantage the company has today it is hard to imagine how a rival outfit could make inroads. The greatest liquidity means the most thriving markets, which means the greatest competition, which means the best odds, which means more liquidity. Many of the industry specialists I interviewed for the book – over 50 – repeated the notion that with exchanges once one operation broke from the field that would be that. I put it to Andrew Black that an IT innovation could spawn a market rival. Other industries – video for example – have had situations where a single entity dominates then a technological breakthrough brings such ascendancy to an immediate end, in a very short space of time. I put this to Black. He thought for a minute, then concluded, no, there wasn’t an innovation that could bring Betfair down. If this sounds arrogant, it is more a reflection of how Andrew Black’s mind functions. On being asked, in less than a minute, Black just worked through the various options and methodically discarded them. Clever guy, remember. For me, the paradox of Black is that he can make assertions with such confidence, being fully in command of his brief, then confess that he feels something of a buffoon, a view he believes is widely shared, even today. He’s wrong, by the way. All that said, even the best boxers will tell you that the punch that knocks you out is the one you don’t see.
Does the author think the advent of the premium charge was Betfair taking advantage of winning customers who have nowhere else to go?
Premium Charges Part II. To be continued…..The notion of Betfair exploiting market advantage is an interesting one. Greg Wood in the Guardian has taken a strong line about this and I have quoted him in the book on this subject. In the mainstream press, Wood is master of this brief (and most other matters relating to the punter. He deserves more credit for this than he ever seems to receive.) What is certain about the premium charges is that their introduction was a rare public relations blunder for Betfair. The company line for their introduction didn’t seem to stack up. Then the forum discussion Betfair hosted didn’t address matters. Instead, the Racing Post proved the outlet of choice for punters wishing to express their dismay. Was Betfair simply trying to take advantage of winning customers with nowhere else to go? It is a dark thought. Certainly at odds with the ethos on which the company was founded. For those affected it might well have seemed that way. Maybe the best analogy is when your football team increases season ticket prices. Which, of course, they do, almost universally. Most fans still turn up at the weekend.
The Sunday Times reported last year that the company could well look for a stock market listing and that was one of the reasons the Premium charges were introduced as it was any easy way to maximise profits.
The purchase of Harlow Greyhound track and of Timeform could well be seen as widening the base of the company so it looked liked they did not have to solely rely on gambling much the same way as Ladbrokes started buying hotels a while back.
This could be seen by some as widening the appeal for future shareholders.
Whilst future plans are very confidential your views on this please?
Personally without the recent banking crisis I think they would have got a stock market launch by now.
p.s.
I purchased your book and it is interesting to see how the early ethos they had seems to have gone out of the window by recent changesThanks for your kind words about the book. I take it that in your "ps" you are referring to the final chapter? In this, I consider the philosophy of Betfair today and the company’s original aspirations. One of the most interesting aspects of this to me is whether Black and his co-founder Ed Wray would, all things being equal, embark on a similar challenge again. Leaving aside, in as much as you can, the hundreds of millions they have made. What do you think they each said? It is in the book (and, like a good murder mystery, I cannot give away the ending). Suffice to say their answers say a lot about the world of business today and the challenge they took on – partly unbeknown – in seeking to, as my book suggests, change the world of gambling.
There is no doubt that Betfair will float, ultimately. Investors in the company want to cash in their chips and no one should begrudging them a payout having backed a winner when odds at the start were to say the least long. As to when, on top of projects like my Betfair book, I also write for the Financial Times. Word in the City of London is that Betfair might surprise us all by floating sooner rather than later. We may be in the midst of an economic crisis but not all are labouring under this. A look at the sporting calendar might give some clues when precisely Betfair might float. The 2012 London Olympics, anyone? The diversification in Betfair holdings has been both logical and creative. By far the most significant is the purchase of TVG in America. This is the broadcaster of racing from a host of tracks there, coast to coast, also taking wagers. There are also signs of a break through in Hong Kong. Consolidation of markets in these outposts – Asia and America would dwarf little old Blighty – are what will trigger the plan to float. So, overall, I would say, when not if, and perhaps sooner than you think.
Does the author have any view if any of the big bookmakers would indeed start a rival exchange now that the business is established and the prospect of the premium charges would make longstanding loyal customers less so
thanks
Ricky
In my book’s chapter on the impact Betfair has had on bookmakers, I relay the awkwardness they convey in addressing the exchange concept and the notion that they missed a beat or might yet copy Betfair. The body language was very revealing. Of course, Coral was actually ahead of Betfair in developing an exchange. My book outlines the beginnings of the exchange market and how traditional bookmakers were influenced by their experiences of spread betting in addressing the threat of a new potential competitor. As you will, I am sure, know, Ladbrokes and William Hill both burned their fingers in the spread betting market, having entered the world on the basis that the new concept was a threat to business only to suffer – for reasons I explain in the book – a kicking. That this ultimately didn’t matter – save a few million and the odd slump in share price – meant bookmakers were almost preconditioned to underestimate exchanges. Ultimately a big mistake as today I would maintain that there is simply too much ground for new ventures to make up in the exchange world where first-to-market advantage is key. Logical would be for Ladbrokes to buy Betfair then shut it down. Except this should have happened right at the company’s beginning. Too late now. Genie out the bottle.
What is Colin’s response to the argument that betting exchanges have made corruption in the sport worse, in that opening up the ability to lay to all comers, has created more opportunities to make an illicit profit by nefarious means?
Following on from that, exchanges are the worse thing to have ever happen to racing.
Are exchanges the worst thing ever happen to racing? At very least, everyone would have to put the BBC’s cut backs of racing coverage ahead of them. Other than that, there is the list of usual suspects in the media (me?!) who represent a greater evil depending on your own tastes. I think even out and out opponents of exchanges would have a pretty long list of other aspects which merit your description "worst thing ever to happen to racing". My book has a chapter on how exchanges have influenced the way corruption in sport is today addressed by bodies such as the British Horseracing Authority and tennis’ ATP. There is definitely an argument that Betfair has provided opportunities for corruption in these areas and plenty of other disciplines. Equally, the chapter conveys that via the audit trail that Internet business leaves Betfair has been at the forefront of shining a light on well established corrupt practices and delivering the evidence needed for convictions. Stances adopted in this "good or evil?" debate usually reflect commercial positions (which my book makes clear). In other words, Betfair and other exchanges believe themselves to be a force for good, traditional bookmakers accuse Betfair of nurturing corruption (while omitting to mention that exchanges are competing businesses). The Jockey Club’s Christopher Foster, once at the forefront of policing racing – and underpraised for efforts when he had the equivalent of one hand tied behind his back – is adamant that Betfair and exchanges are a force for good. Bruce Millington, editor of the Racing Post, has a imaginative analogy, which I quote in the book: "Betfair is like a bank with unlocked doors and no security. The safe door is open. But steal the money and valuables and they will trace what you take all the way home. Getting into the safe is easy. But after that?"
As all companies offering a service,
ie. estate agents, dating agencies, solicitors, gas, electricity and many more that match people together, have to pay VAT on their commission,or charges.
is there a reason that exchanges are exempt?Barry, Barry, Barry – the war is over. I am not expert on tax but the Treasury usually has a few to hand. The deliberations on the tax status of exchanges now some time ago were lengthy and detailed. In my book, I carry the thoughts of John Healey, the Treasury official in charge of this who is now, incidentally, housing minister (and young enough to expect in time even higher office even if Labour lose the next election). He relates that Betfair and exchanges required a new approach to tax. The one ultimately devised satisfied Customs. So that is that. Of all the traditional bookmakers I interviewed for my book, Victor Chandler seemed most grounded on this matter. He, too, is puzzled by Betfair’s tax status. But he also acknowledges that he wishes he had thought of the concept of betting exchanges first.
Are betting exchanges the worst thing ever to have happened to opinion based horse racing punters?
The provide a free tissue to all and sundry, alert everyone to potentially overpriced horses with the bookies and have consequently made it much harder to get a decent bet on a horse that was initially overpriced on the tissue.
100% books aren’t any good to anyone if the prices are correct – successful gamblers need overpriced horses, not necessarily low overrounds.Betfair makes it easier to get on a lumpy bet, so that is a good thing. Equally, Betfair does, as you point out, also mean there are fewer occasions when a tissue overprices a runner. I suppose you have to ask yourself, in the past when you spotted an overpriced runner then were kicked back by your bookmaker, was life any better? The most optimistic answer? Sure, dramatically overpriced runners are less common but when you see one you should be able to get on a lumpy bet, meaning that overall you make the same kind of money. Or more, I hope.
Having long been an advocate of a Tote Exchange with a universal and non-variable 3% commission ‘wholly for the benefit of racing’ do you believe this is feasible now Betfair are in danger of killing their golden goose through disaffection; and do you agree that such a move would help revitalise what I regard as a ‘tired Tote’?
And given the general distaste exchange-users have for ‘big bookmakers’ do you think it likely that the only viable ‘bookmaker’s exchange’ would be one run by the dear old Nanny?
There is much theoretical debate involving what the Tote might or might not be free to do, or should be free to do . But there are practicalities, too. Namely, what is the guarantee that any Tote endeavour including an exchange would be well run? Based on the Tote’s history, who can be sure? A Tote exchange run by Betfair? Might work?A Tote exchange run by Woodrow Wyatt? Mmmm. I suppose the subtext to this question is Betfair’s contribution to racing. The Levy Board declarations last week about exchanges’ contributions to the game were at best spun. And at worst? You decide how misrepresentative they were. Betfair’s counter claim seemed to me to have more solid foundations. The story behind Betfair establishing an Australian arm to the company – which I cover in a chapter on Betfair’s impact, worldwide – is compelling on racing contributions. In short, Betfair guaranteed to make up any financial short fall that occurred as a result of the company receiving a licence to trade in Tasmania, with any exceeding of expectations to racing’s benefit. I think in business this is known as win-win.
Is it fair that industry insiders – some journalists included – can trade horses on the ante-post markets knowing that they are not going to race and could possibly be injured?
Wouldn’t invalidating any trades done on the day that a horse is withdrawn be a fairer scheme?
This has been the easiest question to answer. No, Adrian, it is not fair. Indeed, it is corrupt. Yes, invalidating trades would be fairer if an accurate time line of events could always be established – quite a big if. I think the first matter is the most simple to address. From Betfair’s point of view, it threatens the integrity of their markets. So there should be a huge incentive on the company’s part to address the matter as and when it is possible to prove that duplicity has occured. Racing authorities worldwide might be interested, too, in who transgresses. Inside information is inside information, be it used by a jockey, trainer, black smith or penny-a-line hack from Grub Street.
100% books aren’t any good to anyone if the prices are correct – successful gamblers need overpriced horses, not necessarily low overrounds.
So true, something that occurred to me back in the year 2000. But not a strong selling point for the exchange concept so best to keep schtum about it, I felt.
The internet has increased efficiency and communications across the globe and in this sphere it has resulted in the betting exchange and the efficient, stable, market. Ultimately, all outcomes should be at their correct price hence there is so edge for anyone and the only long-term winner is the operator via the commission.
However, there are still market fluctuations and winners and losers on exchanges so that day has not yet been reached.
Dear Throwback, at first I thought you had given up on the game – "the only long-term winner is the operator via the commission" – then I read on and realised that you are still a hopeful romantic. Keep exploiting the market fluctuations when they come. As they always will.
…and I am sure it never will be reached, Thethrowback.
The treatment of winners by Betfair is changing, however – and I recall a betting exchange operator predicting this "endgame" many years ago.
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What is Colin’s response to the argument that betting exchanges have made corruption in the sport worse, in that opening up the ability to lay to all comers, has created more opportunities to make an illicit profit by nefarious means?
Following on from that, exchanges are the worse thing to have ever happen to racing.
Paul
There have always been non-triers; all the betting exchanges have done is change the group that profit from them; probably the only real reason for the ‘integrity’ purge we have seen since their advent.
To this, I would add that exchanges have also resulted in the successful prosecution of a number of those in the group Reet Hard mentions seeking to profit from non-triers. This is different to a situation in which ill-gotten gains simply switch to other pockets. In my book, Christopher Foster remarks that "before Betfair came along we had not had a successful conviction for years despite anxieties about betting and certain individuals". Consider the number of successful prosecutions since 2000.Hi Colin .. I have a copy of your book here but I haven’t read it yet, it’s on the things to do list.
I have a couple of questions,
1 – I understand that BF seed all of the casino games and quite a few other markets, markets who’s outcomes you could say are based on chance. If they wanted to seed all racing markets they would have to remove or restrict the top feeders in the same way that the bookies do .. do you think we will see punters getting banned or restricted by BF in the future?
2 – Sometime ago BF re-structure the way they calculated commission rates for everybody and then introduced the hated Premium Charge. Both moves damaged the losing punter. In the case of the commission fiddle it took money out of his pocket and the Premium Charge outrage, dashed his hopes and dreams of becoming a long-term winner. Anyway you look at it the racing markets are becoming less efficient for punters and bot users to follow .. do you think this is the start of an inevitable long term decline in the exchange model for racing, or do you think the more efficient model was unrealistic in the first place?
Thanks for offering to answer our questions.
Regards and GL.
I cannot say with your conviction whether Betfair seeds all "casino games and quite a few other markets". Regarding the banning of punters, Betfair does not have a stake in the outcome of an event. If punters are banned or restricted it will be for reasons other than establishing markets on which they profit. As Andrew Black says in my book Betfair takes care of winners rather than close accounts although they can squeeze those winners for added commission.
This leads me onto your second point. The Dark Knight has been involved in this debate and we are probably talking about the struggle between good and evil here; a pure business idea ultimately corrupted by the forces of capitalism. Andrew Black is very candid – to his great credit – about this in my book. But Black is also a pure markets man. In other words, he believes if Betfair doesn’t look after punters then the company will not blossom and, bearing in mind the nature of exchanges, would regress pretty quickly as liquidity drained away. Identifying the starting point of – to borrow your phrase – an inevitable long term decline in the exchange model for racing is more easily done retrospectively. Like the start of a recession. We could bet on it. Which would probably mean creating a market on Betfair! There is irony in there somewhere.
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