1978Reggie,

Do you not think Ladbrokes will use **** as a lower cost route to hedging their positions than using Betfair?

Also, what do you think was behind their decision to acquire just 10% of TBHG, the technology provider to ****?

I don't expect a huge advertising campaign but I do think we'll see a significant increase in liquidity and markets covered.

Reggie, I agree that lads have many higher priorities in buying an exchange than taking bf on in the exchange space.

In order, these might be 1) to buy something or anything, after their abortive purchase of sportingbet, so that the mgmt. cd point to some use being put to a rising (or perhaps bottoming-out) market capitalisation and revenue-based warchest;

2) as you say, to buy a technology provider to catch up with Hills, P*wer & 3.65. They will have seen the rising price of the portion of WHO that the bookie don't own and have considered that the costs of doing a deal with Playtech are steep. Or perhaps they want a negotiating chip in any deal they strike with Playtech--none of the big three bookmaker chains has anything like the sportsbook and casino game expertise of the Israeli operator, yet in partnership they are left with an unsatisfactory profit share.

It looks like the quarterly earnings for Mountains online were something like 50 million EUR, of which Playtech get 29% for preventing the company from being arbed. There seems to be some sort of implicit admission that Mountains cannot run a sportsbook any more efficiently through liabilities management or knowing the correct price. They are rather dependent on excluding winners, cracking down on the activities of known price-takers and adjusting so that they sit under the exchange price;

3) to hedge more cheaply than they can with bf, though this will be dependent on their purchase acquiring liquidity. They're in a bit of a chicken and egg situation as the other exchange won't make any sort of inroads on bf w/out new seed money, and without seeding they don't gain a hedging facility / information of any monetisable value;

4) over a longer time period, in having an exchange they gain extraordinarily valuable information on who is backing what for their sportsbook;

5) Again over the long term they can have the price proposition of their bricks and mortar rivals, especially the sp mechanism for horses, in their sights. With a liquid exchange behind them, they should be able to beat this and advertise the fact. The primary problem is migrating custom from bf to their exchange, something that is not poss. with commission/transaction pricing alone without a stable platform and usable interface. This should be their primary focus for investment.

My own sense is that this is a moment of change and convergence for the industry, where none of the management teams of the established firms, w/ the possible exception of Hills and 3.65 (if you count them as established), quite know what they're doing or where they're going.

Lads and bf both have to sight down a sense of internal malaise, the idea that they've lost ground or have lost their way, with the internal conflict that brings. Bf, in particular, no longer feels like a single company--the people that out the arcade games on the front page of the new sportsbook have nothing in common with the management of Timeform.

If I managed bf, the share price trajectories I wd worry about, in ascending order, would be 1) laddies; 2) P8wer's, and 3) Playtech's, which is up over 110% in 13 months, largely on the back of existing operations. But I wd not draw a hasty inference from this. There is a natural limit to the savings that can be made through excluding winning punters, and less of a natural limit to the people worldwide that can be attracted to betting at the market-efficient price.

Bf need to understand that 'the good will out'--that they will always win w/ the exchange--but that the last thing they can afford is a repeat of the endlessly painful scenario in Victoria, where they contracted out their negotiations with authorities to someone one, and had, slice by slice, to give up every key feature of their customer proposition in order to stay in the marketplace at all.

Bf now offer Singapore horse markets. As a first step I would make sure I had a Chinese/Thai speaking go-to guy for every kind of liaison w/ the Hong Kong and Singaporean regulators, making sure that in a controlled market, I was w/ the govt., and in a liberalised market, not losing to some local 3.65 like sbo.

*lads and bf have to FIGHT down a sense of internal malaise

Just been thinking how the Betfair Sportsbook could hit the ground running and just come up with a brilliant promotional idea.

Thanks for your reply, Reggie.  What you say makes sense.

Reggie, if you work in the industry and know that books do very little exchange hedging, what happens to my 200 ew on a 25-1 in an 18 runner sprint hcap (put on by me and two placers)?

I am recreational but an addicted horse bettor. This wd be about the maximum bet I wd stand w/out feeling the need to trade. Let's suppose that there is no more than 100 pounds of morning liquidity above 26 at average odds of about 27.4.

Will it get hedged or not? Every shop where I am a regular phones up my own bets but this does not happen w/ my placers--and the turnover in shop staff is so great that I can sometimes get on myself.

It has to be bad for the exchange because the money never gets there.  BF said people were winning too fast, were taking money out of the system and people were losing too quickly - hence the PC.  Now BF stop the money getting there in the first place via the sports book, plus worse odds and lack of trading/cash-out options mean people lose more quickly.  So now BF themselves are doing exactly what they said they were trying to combat when the PC was brought in.

The Vis
My basic question is whether this money was ever going to get the the exchange in the first place.
Due to the nature of the fixed odds product, namely it is restrictive on the amount you can wager, it is only ever going to attract the many small time, unsophisticated type recreational punters.
That is the sort of punters that BF is currently losing out hand over fist to its " bookie" competitors.
That is they must have profiled these punters as being neither existing nor even potential exchange users.
Thus they have everything to gain and nothing to lose by now offering a product that appeals to these masses of ordinary punters.
Also they have probably profiled them as the sort of " idiots" who are more likely to play the Xgames and casino side products.

FAFH, the sportsbook doesn't really have anything going for it though. At least with Betfair poker, and arcade etc. it's on a par with the competition.

The Betfair sportsbook wouldn't be very good even if there was no exchange. The prices are generally terrible; worse than ALL the major British bookies (and their prices are bad already).

I still expect Betfair will make decent money from the product for a few reasons:
1) Betfair is a big firm, and inevitably some customers that aren't price sensitive and don't understand the exchange will bet there rather than with the competition.
2) Some existing Betfair customers (losing ones) might want to have a large bet in an obscure market that the exchange liquidity can't accommodate, and they can go to fixed odds instead of to a competitor. Many of them won't though, because they'll see how terrible the prices are and go elsewhere anyway. My guess is they'd get about half of these customers (who can't be bothered to have money deposited in multiple places if they don't need to, or to compare prices).

The damage it does will be largely invisible though. Betfair want to capture a larger share of customer gambling spend, but they risk capturing mainly their exchange spend and not taking much from the competition.

One of the really puzzling things is that fixed odds actually offers far FEWER market than the exchange. It kind of defeats the point. I thought they wanted to compete on markets like

'first assist'
'race to 3 goals'
and the hundreds of other obscure markets that the exchange doesn't cover for football matches.

I thought the whole idea was to allow betting on very quiet markets, but they seem to have abandoned that.

"they will either stand the bet and hold the price, stand the bet and move the price, deny the bet and move the price, give you some of the bet and move the price for the rest"

Reggie, you missed out the classic:  deny the bet and hold the price

Reggie
You actually sound as if you might have been behind enemy lines.
Are you in fact a knowledgable ex-insider ?

TheInvestor, a lot of their motivation has to be to compete on promotion i.e. cashback on losing first goalscorer bets if Gerrard scores the last goal.

The CS, FG & LG prices on these promotions from Pads & Laddy are thoroughly rank, beyond the point where they are designed to be resistant to getting arbed off on the derivative and main market. Yet people still bet on them.

All the twitter promotions are of this type, and the market is usually so esoteric (but so easily imaginable) that bf are going to find it hard to respond.

IR exchange liquidity on the football submarkets (scorer, next to score etc.) is also so bad that firms like 3.65 can offer standout prices that suit their book as twitter specials.

For football, I think they need to put up accessible 'anytime scorer' markets soon. I don't know where they are (if there at all) on the sidebar.

Thank you Reggie. The most I can get on personally in a shop is 25ew on a horse of that kind. This will sometimes be phoned up, depending on who takes the bet. I will be restricted but only denied when the arb is too blatant.

My strategy is dependent on placers putting bets on, especially as the second leg of multiples.