Bet365 hopes to buck the trend despite losses in U.S.

Bet365 is expanding operations in the U.S.

Bet365 recently announced it was opening a headquarters in Denver and will be employing 300 people within the next year and 800 by the year 2032. The news was a bit surprising considering the company lost about USD$78 million in its last full fiscal year, almost exclusively due to its foray into the U.S., and also because other UK companies have been running for the exits in the U.S. Unibet and Betway left the United States saying it can’t be profitable and Betfred left Maryland, Ohio, Colorado, and most recently Virginia leaving it only operating online in Pennsylvania and Iowa. The company is also still operating in Arizona, but stopped taking deposits there as well. It’s almost a certainty they’ll pull out of the online market completely in the United States within a few months, although they may decide to keep the retail sportsbooks in Louisiana, Nevada and Washington State, where they seem to be doing well.

Despite the loss, Bet365’s handle has increased substantially from the prior year and the company sees a bright future for the U.S. market. Bet365 just started in Pennsylvania after inking a partnership deal with Presque Isle Downs Casino in Erie to get the license, making it active in 11 states including New Jersey, Colorado, Ohio, Virginia, Iowa, Kentucky, Louisiana, Indiana, Arizona, North Carolina and Pennsylvania. They also operate in the Canadian province of Ontario where they have been one of the top performing gambling companies since the province opened the market in 2022. But, they had a big head start, having operated as a grey market operator in Canada after buying  out Bowman’s International in the early 2000s. At one point, Bet365 was even the official sponsor of the Canadian Football League.

Bet365’s history is one of adaptation and willingness to take chances, turning it from a relatively small operation in the early 2000s, when it first opened, to one of the biggest online betting companies in the world today. In 2020-2021, prior to expanding in the U.S., the company had worldwide revenues of over USD$3billion and a profit of over USD$500million. In the latest financial statements, they showed revenues of USD$4.3 billion, but a net loss of USD$78 million – almost all attributed to the U.S. expansion. But according to an employee of the company who asked I not quote them directly, since all media comments are supposed to be made from the London head office, so I’ll refer to him in this article as “my source”, said it won’t be the first time that Bet365 has waved off concerns from naysayers and it won’t be the last.

HIstory of Bet365

Bet365 started as a betting shop in London in the 1970s by the Coates Family and in 2000 started operating online. In its early days, Bet365 followed the usual UK strategies of cutting off winners and catering to the smaller public players, believing that taking small wins from a lot of bettors was a better strategy than hoping to beat professionals. Some sharper customers used to jokingly call the company Bet3.65 indicating that when they won too much from Bet365, their limits were effectively cut to an amount that made it a waste of time to continue betting with them. But around 2005 their philosophy changed.

The company sold its retail betting shops to Coral in 2004 and focused solely on the online gambling business. They hired on better traders, a technology team which was able to move lines more quickly, and according to the source decided that volume was most important and used some of the sharper players help to set the lines rather than telling them to go elsewhere. The company also became one of the first in the UK to offer a plethora of props and was also the first, excluding betting exchanges, to offer in-play wagering on almost every televised event. Consequently, revenue and profits grew dramatically.

In its first year of online operations, Bet365 netted less than USD$100 million, but by fiscal year 2006 it had over USD$1 billion in revenue and profits of around $75 million USD. It has only grown since and has entered every market where sports betting was legalized. Bet365 also chose not to move to the Isle of Man, Gibraltar or Malta for tax breaks when the UK raised the tax on UK betting companies and instead decided to just pay the tax and stay loyal to the country and government.

Foray into North America

As for the North America, Bet365’s first move into the United States was in 2019 in New Jersey when they teamed up with Hard Rock to get an online presence and later moved into Louisiana and Colorado. Bet365 attempted to get a New York license, but was unsuccessful. All operators except Bet365, FoxBet and TheScoreBet were given a license by New York, but only after several teamed together to make a compelling bid.  Bet365 was by all accounts not interested in teaming up with other operators to try and secure a mega license and just missed out as a result.

It probably was a blessing in disguise since no company has been able to be profitable in New York due to its 51% tax rate, plus the overwhelming dominance by DraftKings and FanDuel.

Since online sports betting began in January 2022, New York has exceeded $48 billion in handle and has had 13 consecutive months of handle over $1 billion. Yet despite those figures, almost $20 billion of the handle has gone to FanDuel, over $16 billion to DraftKings, $6 billion to Caesars and $3.5 billion to BetMGM.  That means less than $4 billion has been doled out to the remaining books like BetRivers and BetFanatics (which took over PointsBet) and have netted just over $1 billion each in handle, as well as Resorts World, BallyBet and WynnBet, which shut down in July, all three of which failed to yield $1 billion in total handle over the nearly two and half years operating. And all companies, including FanDuel and DraftKings, have yet to be profitable in the state.

“Bet365 has not given up hope of getting a license in New York . . .”

That said, my source told me that Bet365 has not given up hope of getting a license in New York. They still believe due to the size of the state it will pay off sometime in the future, especially if the state is willing to adjust their tax matrix or if they can somehow entice five more operators to join New York and get legislators to agree which would drop the tax rate to 35%, the rate for 13 or more operators. Right now, it’s hard to envision who the other four besides Bet365 could be.

Bet365 also became the official Online Sports Betting partner with Woodbine Entertainment Group in Ontario, receiving exclusive branding opportunities in the sports betting category on-site at Woodbine Racetrack, in network television and simulcast broadcasts, across digital properties and virtual signage. They also sponsor many races and provide seamless betting into Woodbine’s parimutuel pools. When Jim Lawson, the CEO of Woodbine Entertainment Group, floated the idea of websites betting into the parimutuel system, I was told that only Bet365 indicated interest, believing that it provided a unique opportunity, plus the company figured at some point they might convince Woodbine to allow them to offer some fixed odds betting on horse racing. Other companies have since expressed interest in tapping into the pools too, but Woodbine and Bet365 inked a four-year deal giving Bet365 exclusivity, which could pay off significantly. What is most interesting about the deal is that Flutter, the owners of FanDuel TV and the TVG wagering Network in the United States, were beaten to the punch for a partnership that could have helped them expand that operation in North America.

The source also said it’s important to realize that Bet365 can take chances since it is not hindered by the same types of constraints that publicly listed companies like SGHC, which owns Betway, or Kindred Group which owns Unibet are, since the only real shareholder Bet365’s management has to answer to is Denise Coates and her extended family. But even then, the question is just how far companies that are not public are willing to go before saying enough is enough.

After Betfred recently pulled out of Virginia, Kresimir Spajcik, the CEO of Betfred USA said in an interview with EGR:  “the question is can you make a business profitable enough to make sense to continue operating in the U.S. versus putting this effort and investment elsewhere that might yield a bigger return?” The suggestion was that there is no path to profitability in the U.S., so what’s the point? But the source said that Bet365 has always had the belief that slow and steady wins the race and they have the resources, personnel and product to ensure that they will come out on top, at least of the second tier of sportsbooks. He said that the company realizes it will never be able to compete for revenue with DraftKings or FanDuel, but they would be more than happy competing for the remaining revenue against the likes of BetMGM, Caesars, ESPNBet and BetFanatics, which will still likely be quite lucrative.

I recently spoke to a friend from Ontario as well as a colleague in New Jersey who both said that for their money Bet365 is the best sportsbook in business today. When asked why they feel that way they both pointed to three criteria which they say separates the company from the rest – variety of lines, including in-play betting, promotions and customer service. Ben, who lives in an eastern suburb of Toronto said that he’s been playing with Bet365 for over two decades but they’ve actually improved since entering the Ontario market.

“I was making in-play bets with them long before it became the norm and even today you’ll see in-game betting on pretty much every sport, whether its an NFL Monday night football game, a tennis match in Singapore or even a cricket match in Pakistan. You can bet with them pretty much 24/7 and the lines are always fair. I also love the advanced payout promotions and if there’s any issues you can just load the chat and you will be answered right away. Often, I will have to wait days to get a response to a question or concern from MGM or DraftKings and I never seem to get a response from FanDuel. But 99% of the time I get a response within 5 minutes to a question from Bet365. I’ve also inadvertently placed a bet by mistake on Bet365 and when I contact them they happily void the bet provided the event hasn’t started or the lines haven’t changed much. But with FanDuel or Caesars I’m always told to use the cash out option (which is always much lower than the bet was worth at the time of placement) and if there is no cash out option, I’m shit out of luck. That is not good customer service. Bet365 was always a good book but they’ve become even better since the open market launch since they realize they have to do better to keep the customer.”

With respect to the early payout offer at Bet365 that Ben referred to, Bet365 will grade a moneyline bet an automatic winner if any NFL and NCAA football team goes up by 17 points, if any NBA or NCAA basketball team goes up by 20 points, if a MLB team goes up by 5 runs, if an NHL team leads by 3 goals, or if a soccer team takes a 2 goal lead. And they have the same offer for every market they operate. Comments on the sportsbook forum in Reddit and in posting forums have said that to bettors this is a more significant promotion than a bet boost or no-sweat parlay, although Bet365 offers those too.

So, while many UK books and even some smaller European books like Tipico decided enough is enough and moved on from the United States, Bet365 is moving ahead with U.S. expansion. Whether or not that’s a wise decision is yet to be seen, but considering that almost every business decision Bet365 has made has been successful, it’s hard to say their strategy may be wrong. And as the source said, Bet365 will likely never compete with the customer base or volume that FanDuel or DraftKings has but in a market with over 350 million people, third or fourth place can still be quite lucrative.

Read articles on sports betting and the North American gambling industry from Hartley Henderson here at GamblersWORLD.