Exclusive interview with bet365 co-CEO Denise Coates

In the end bet365’s record sixth year at the top of our Power 50 list was never in doubt. Thanks to a strong set of full-year results, bet365 fought off strong competition from the impressive Amaya and William Hill, while the combination of Paddy Power and Betfair was yet to be rubber-stamped.

But make no mistake, the chasing pack has its eyes set on top spot and bet365 will have to be on its best form to stay ahead.

In this exclusive interview, co-CEO Denise Coates tells eGR why growing levels of regulation suit bet365, and warns its rivals that it will take more than mega-mergers to knock it off top spot.

The full interview can be found in the latest issue of eGR.

eGaming Review (eGR): Can you keep growing profits at such a rate or will increased tax burdens, for example, mean profit growth will always be slower than in the past?
Denise Coates (DC): There are a lot of factors that determine the answer to that question and certainly some negatives as well as positives. For example, during 2014/15 we withdrew from the Singapore market due to legislative changes there and following the end of the reporting period we have had to close in Portugal. As you’d expect, there have also been significant issues in Greece as a result of the banking crisis.

On the positive side, we are generally seeing good growth in countries where we have licences and/or pay tax on a dot.country or PoC basis. These dynamics will continue to evolve and I don’t really want to make any profit predictions for the future.

eGR: What is driving the success of in-play for bet365 and why is it a higher proportion of sportsbook revenues than at your competition?

DC: The proportion of in-play betting has actually been fairly consistent over the past few years and I would suggest we may have found its level at around the 75% mark. In terms of why it’s a higher proportion than most of our competitors, I think there are a few factors: first, unlike some of them we started with in-play very early back in 2001 and it has been a huge focus for us.

We also have a larger non-UK business than some of our competitors which means we have a lower overall percentage of business based on UK horse racing and, hence, a higher in-play proportion.

eGR: Where do you believe bet365 is in terms of UK market share of online sportsbook, and is that share growing?

DC: The latest market research would indicate that we’ve now been UK market leader for online sports betting for the past three years and we are very proud of that. Market share goes up and down a little depending on a number of circumstances. This year we are seeing strong growth in the UK and it is our biggest single country market at 25% plus of our total revenue.

eGR: Can you update us on Australia and how the business is going there. Other than the lack of in-play, what has been the biggest barrier to success so far? When do you expect to break even there?

DC: We are continuing to grow our revenues in Australia and they are significantly up so far this year. In terms of the numbers, unlike others, we decided at the outset to enter the market organically rather than through acquisition. Inevitably, this takes time and results in losses being made in the early years.

Don’t forget, we lost money in the UK in the first three or four years so this is not something new for us. We are in the Australian market for the long term and we’re confident we will be successful. One of the key reasons the bet365 Group remains privately owned is to ensure it continues to be able to make these long-term decisions.

eGR: How frustrating is it for you to have to leave Portugal following the unfavourable tax model there? Is it a concern that others might follow that model in Europe and what, if anything, can be done to stop that happening?

DC: Portugal was, of course, disappointing for us and others. It really doesn’t seem to make sense to close the market six months ahead of the licensing window opening and for there to be such differential tax rates across the land-based and various online products.
Countries in Europe can generally go one of two ways when they look to enact new legislation. They can genuinely look to open the market with the huge benefits this brings to consumer protection and the raising of tax revenues for the state or they can look to protect an existing monopoly operator and particular narrow interests.

Our view is that, over time, the former, fully liberalised and open system will come to dominate the European landscape. In the meantime however, there will inevitably be countries along the way that still follow the latter route.

Despite our withdrawal, we remain convinced that there are fundamental issues with the Portuguese legislation and taxation arrangements from a legal perspective, which we understand may be under scrutiny and we will wait with interest to see how those challenges play out.

eGR: What are your thoughts on how the current wave of consolidation will affect the egaming sector? Have you been involved in any M&A activity?

DC: If we look at the biggest deal, which would be the Betfair/Paddy Power tie-up, two strong competitors would become one under a CEO who has a proven track record. So absolutely, they will become a larger and probably stronger rival.

Bet365 would remain larger in terms of worldwide revenues and I do not see why we should not be able to compete and continue to succeed. As regards M&A, we do get approached from time to time but have not looked at anything seriously and I don’t see that changing.

eGR: Following some attention on your Chinese business and the Chinese government taking an interest in gambling regulation, have you done anything to lower your profile in the region and indeed others where regulation is not entirely clear?

DC: Perhaps I can start with some general comments on legislation and regulation. As you’re of course aware, the majority of countries have not yet moved to regulate online gambling. However, it is our policy to be acutely aware and legally very well informed of the regulatory position on a country by country basis which we assess and closely monitor on an ongoing basis.

In short, having done such analysis, where we believe there is a legal basis for offering our services, we will continue to serve customers in those countries under the group’s Gibraltar or Maltese licences and in line with their strong and well developed regulatory requirements. China is one of a number of territories that fall into that category.

In line with this rationale, where we do not believe on the basis of legal advice that there is a coherent basis for offering our product to customers in a particular jurisdiction, we will close. As such, there are currently over 40 countries which we do not accept customers from.

That being said, a very significant percentage of our total revenues is derived from countries where we have licences and/or pay tax. This figure will almost certainly continue to increase as more countries across the world move to regulate on this basis.

I believe our regulated market revenues, although perhaps slightly lower than some of the UK/Australian-focused companies, is at least equal and in many cases significantly higher than the other more internationally focused listed egaming companies.

We currently hold local licences in 11 countries and I think I’m right in saying that is more than any other company in our sector. It is fair to say that our marketing efforts are focused on these countries.

eGR: Have you toned down your in-play adverts featuring Ray Winstone this season? They seem more contextual and less ‘in your face’ – should we read anything into that?

DC: We have certainly tried to take them in a new direction and, yes, it would be fair to say they are maybe more understated and perhaps have a bit more gravitas. We just felt that we needed to make a change to keep our adverts fresh and relevant. Personally, I really like the new ads.