King of the Hill: Can William Hill's model succeed across the US?

Nine years ago, former William Hill CEO Ralph Topping sat down with online chief Henry Birch and director of strategy and corporate development Robin Chhabra to map out the strategy for a largely retail-focused US business arm.

The three were operating on “a hunch” that the US market would at some point open to widespread sports betting and they had set themselves the mammoth task of convincing the board of their suspicions.

“You never knew then what the States was going to do,” Topping says, reflecting back on his time at the helm. “All we were doing was covering a hunch that the US would open up and we ended up with a business that was contributing profits.”

Since then, Topping has gone on to sit on the boards of the Scottish Professional Football League and Power 50 betting brand Superbet. Birch steered UK bingo and casino operator Rank Group through a transformative restructuring of its digital business, and Chhabra returned to the headlines recently on the announcement that The Stars Group was partnering with Fox Sports to produce the Fox Bet brand in the US.

Needless to say, a significant period of time in the gaming world has passed since then and Hills’ US business continues to thrive, at least in Nevada where Topping says it had set its sights early on. “We had a good strategic focus at William Hill at that point.

Unusually for a business, we didn’t bring in any consultants and went for it ourselves and it paid off,” he adds. “I looked at William Hill as a skillset in the landbased business and a pretty strong skillset in digital in Europe, so it depended on how America opened up.”

Joe Asher has been at the helm since the US business’ inception in 2012

Similarly, William Hill US CEO Joe Asher, who has been in the role since the business’ inception in 2012, applauds his team’s capabilities and outlines the business’ continued ethos for hiring local American talent.

A trend that has continued since Topping’s tenure. “It’s a really deep team and some have been involved in the business for a long time. Some are relatively new but have made a big impact in a short period of time,” says Asher. “It’s like a top football team adding a few new all-star players.”

Dream team

Asher attributes a great deal of the firm’s success to his carefully crafted teams in Nevada and New Jersey. Among the recent hires is former Madison Square Garden CMO Sharon Otterman, who has been with Hills since July last year, and freshly promoted president of retail operations Dave Grolman.

The latest of the senior hires is CTO and CPO for the New Jersey product, Martin Logan, who joined the firm in February from digital mortgage lender Guaranteed Rate. Prior to that, he spent time at Amazon working on AWS. Logan’s role is to oversee the new betting platform, which is in the final stages of construction and is primed for launch ahead of the next NFL season in September.

Asher remains shtum on current platform developments and any of the technology’s intricate details, after all competition in the space is hot and only growing more so.

Operators are scrambling to launch before their counterparts in newly opened states like Pennsylvania and perfect their betting products ahead of September when novice and seasoned bettors alike will make the pivotal decision of which brands to dedicate their loyalty to. And at that point, product will be king.

“The core strategic decision is to own and control our own technology as opposed to using third-party technology,” Asher says. “We’re looking forward to getting [the platform] up and going in various jurisdictions and having people ready to use it in advance for the football season.

It’s about trying to position the company for growth in the bigger market.” On the B2B front, Hills has been prolific in building itself a relative empire across the states where betting has been legalized, including Delaware, Mississippi, Rhode Island, Pennsylvania and West Virginia, while also securing several licensing deals with partnering casinos and racetracks.

In its latest earnings update, US net revenue for the 17 weeks to April 30, 2019 was up 39% in local currency on continued growth in Las Vegas. However, margin dropped 9% year-on-year during the period, which group CEO Philip Bowcock said was offset by “excellent wagering growth” with amounts waged up 65%, including a 27% increase in the existing business.

Losses were attributed to investments in new markets and products. In 2018, US revenues broke even as expansion costs were offset by profits from its existing business. Handle for the year was up 99% when considering its consumer-facing and B2B operations and Hills made an automatic entry into the freshly-regulated states of Iowa and Indiana via its partnership with Eldorado.

Asher proudly highlights the business’ 35% market share in Nevada, a percentage that has grown 23% since 2012. “We’re the number one operator in Nevada, Mississippi and West Virginia and now we’re very much focused on Iowa and getting off to a good start there,” he says.

Scoping out the competition

But is the firm moving quickly enough to reap all the benefits of the swiftly evolving US field of vision? Asher is confident it is but some industry stakeholders have questioned whether the direct-to- consumer offering is being given enough attention.

In Topping’s eyes, the firm is very much still a retail business in the US, and its transition to a more digital approach will be a test to the larger group. “If you look at what Paddy Power Betfair [PPB] has done in the States, it has got a great digital model,” he says.

Hills’ wider online impact remains to be seen but the new betting platform will offer some key insight once it is sufficiently tested in open states. After all, an online gambling business is only as good as its product.

Managing partner for gambling consultancy Partis Solutions, Gideon Bierer, believes the upcoming platform will have a major impact on the firm’s future performance outside Nevada. He says its current offering won’t cut it if Hills is to maintain a tier-one position across the country.

“They will be the first to admit that,” he notes. “They have to find a way to enhance their offering.” Bierer also cites PPB’s bullish movement in the US as a possible threat to Hills, particularly as a fellow European brand that has sought an early entry into the market.

“PPB has gone further by buying FanDuel and strengthening that positioning. Hills’ business was very strong in Nevada but not really nationwide. You could argue they have been cautious about expanding but the two of them have been historically more aggressive than the other European operators and have had a head start.”

Bierer says: “On the consumer side, [Hills isn’t moving] as quickly as FanDuel and DraftKings but faster than Stars, 888, bet365 and others. I don’t think they’re necessarily behind their peers. Although it remains to be seen whether they make any major consumer-facing play like The Stars Group has done. I would trade their position for FanDuel but I wouldn’t for most of the other European operators.”

At present, Hills sits at number three in the New Jersey market behind FanDuel and DraftKings which Asher says were always going to be “quick out the box” in being able to convert their fantasy databases.

Boutique research firm Eilers & Krejcik Gaming estimates the firm had an 11% share of the New Jersey online betting market and 18% of the retail outlook in Q1. “We’re probably in the first inning of a nine-inning baseball game. It’s very early days and I think the competitive landscape will continue to evolve over the next couple of years,” Asher assures.

He is now shifting his sights onto Iowa and believes the firm’s partnership with Prairie Meadows racetrack (in addition to Eldorado) is ideal in leveraging its entry into the state, as the venue sits in a densely populated area.

“If you know and understand the dynamics of having a partner in the population center, it’s a good partnership to have,” Asher says. “It’s all about getting customers using our product and when you have good partners with a brand presence and trust within the state, that can be very helpful.”

William Hill’s sportsbook at The STRAT

Taking over

Asher argues in favor of Hills’ widespread approach, with it having already secured entry into nine states. “Will all the folks who’ve decided to test their lot on New Jersey test the waters in other states?” he asks.

“We will be in pretty much every state over time. There’s a limit as to what people can do and do well in a short period of time. It’s all about prioritization and where you think you can make the biggest impact and get the best returns and create the most value.”

On distribution, Hills is also at an advantage with its lesser-discussed lottery partnership with IGT, which has and will continue to grant it access to further states and an entirely separate gaming vertical.

Bierer predicts that the deal will enable the company to find its way into almost every state that is currently regulated. Both Bierer and Asher nod towards William Hill’s flourishing partnerships with NHL teams – the Las Vegas Knights and the New Jersey Devils – as a crucial facet of growing its brand awareness outside Nevada and across the consumer network.

As it stands, Hills’ name is largely hidden behind the brands that operate its technology. “[Hills] has some institutional advantages, those play out in a few ways, in media deals and [relationships with] sports leagues.

A number of the other players don’t have senior US leadership and that’s an advantage for William Hill,” Bierer nods. Asher rightfully acknowledges the leagues have a crucial role to play in growing and advancing the betting industry in North America but he says it is important that benefits for both parties are established in a fair and commercially reasonable way.

He alludes to the ongoing debate between operators and leagues on integrity fees and monopolizing sports data. The firm contributed to a recent public meeting in New York organized by the Senate to better inform them of the issues surrounding the industry’s biggest stakeholders, and affirmed it was against leagues having a monopoly on sports data.

“That’s a problem. It should be left to commercial negotiations [and is] not something that should be legislatively mandated,” Asher maintains. “Cooperation from the leagues is so important [in supporting the legal sports sector].”

Hills’ Tropicana sportsbook

Trouble ahead?

Despite a seemingly harmonious outlook for William Hill in the US, rumors of a potential sale continue to swirl, particularly as retail revenues in the UK suffer at the hand of tightening regulations.

According to one banker, speaking off the record, it is only a matter of time before someone approaches Hills with its retail, European and US businesses likely to be separated and potentially sold off separately. “Hills has been a target and will remain so until it gets taken out. It’s trading at a 10-year low,” says the source.

Times reporter Dominic Walsh this month branded Hills at risk of becoming a “perennial bridesmaid” as reports of a merger with US casino giant Caesars fell through on slowing revenues in Las Vegas. In the past, Hills has also been tied to GVC, The Stars Group anda possible takeover by Rank Group and 888, but all potential deals were rebuffed.

Asher shrugs off any discussion of a potential sale and whether the US arm might find itself detached from the wider group. That’s a decision, he says, for the board and is nothing to do with him.

Historically, the business has operated mostly separately from the UK/ European arms, except on certain areas of mutual interest like strategy, sports trading models and information security. “We’ve always worked with our UK on various different avenues, particularly on trading,” Asher adds.

“The in-play prices come from something we call GTP (Trading Platform). There has also always been a fair bit of collaboration in best practices,” Asher adds. “IT and the areas around it like information security.”

It’s fair to say Hills is primed for widespread penetration in the US having had an early foot in the door and, as Bierer highlights, establishing a hardy team of sports and casino industry veterans in Nevada is a huge advantage against its European counterparts, which are only now in the process of building local operations and straddling with a very small pool of American talent.

It’s also worth considering how far Hills US has come. Back in 2012, Topping tells us he was considering alternative revenue streams in the country in the case that PASPA did not get repealed and betting didn’t become widespread.

One such avenue Chhabra had been exploring was the possibility of operating gambling machines at  various roadside locations dotted along the open road in middle America. It’s a far cry from today’s outlook.

Yet, more than a year since PASPA was repealed, Asher is as uncertain of the future as the rest of us and for him that prioritization takes precedence. In his words: “If you try to do too much you get nothing done.” If William Hill’s relative measured pace in comparison to others appears to be a red flag, consider Asher is in it for the long game.