Internet Betting Takes Off In The UK

by Gail Robinson

Online gambling looks set to be one of the huge growth areas of the next two years. Research company Datamonitor estimates that online betting and gaming revenues will reach a staggering $10 billion by 2002. The interactive betting services are looking to attract a new audience - they want the kind of people who don't frequent betting shops but are nevertheless keen on sport to have a flutter online. Gambling online is a whole different kettle of fish - it's anonymous, you're not made to feel stupid because you don't understand how an each way bet works and it's convenient. The two biggest potential growth markets are the middle classes and women.
March 13, 2000

Recent research suggest that women are at the forefront of the Internet gaming revolution with one in five being tempted by online betting. Alistair Assheton, the General Manager of the online gambling business VIP explains, "we believe that people put off by the atmosphere of bricks and mortar bookmakers, such as women, will come to us for an enjoyable and straightforward experience."

The UK certainly seems to have got the gambling bug - 70 per cent of the population plays the National Lottery. The gambling web sites are desperately hoping they can persuade these occasional gamblers to place a few bets online. Currently only around 11 per cent of British adults place bets, so you can see the potential growth in the market is huge. A recent survey revealed that one in seven British adults would find the Internet the most appealing way to make a bet, largely because it's private, it's more convenient and it's less embarrassing.

The Internet also opens up huge international markets. Ladbrokes already offers betting in Cantonese, Italian and Spanish as well as English and sees Western Europe, the Far East and Australasia as the key international markets to develop. Meanwhile, William Hill offers betting in 19 currencies and is catering for the North American market with its ice hockey and basketball betting services.

Back-End Technology

If you're thinking of entering this market, be warned there's not a huge range of back-end solutions available for high volume Internet betting operations. OpenBet from Orbis is one of the most popular systems and is used by both Blue Square and Ladbrokes. OpenBet is an end-to-end solution for maintaining high traffic gambling and gaming web sites that allows you to create multiple sites using the same system.

The system works on two-tiers, the Gambling Engine and the Gambling Framework. The Gambling Engine covers the customer accounts, registration and identity validation, electro payment, event management, liability management and monitoring, administration and reports. This engine is capable of handling millions of plays each day and hundreds of thousands of account holders. On top of this is the Game Framework, which supports games developed in most web browser technologies including HTML, Java, JavaScript and Shockwave.

The system is currently being used to handle sports betting, casinos, pools betting, lottery games, fantasy competitions and finance games. Blue Square has been impressed by the system, MD Damian Cope commented, "OpenBet gives us a real-time clear view of the activity on the site and our liability. By using it were able to launch the site within the timescales we had set and it has been very reliable - no unscheduled downtime."

Another popular solution is ITSS supplied by Interactive Gaming & Wagering. This software is currently being used by the VIP sites as well as casinos GameDay and Fair Deal. This solution offers 128-bit SSL encryption and totally secure credit card processing, while the ITSS common wallet solution allows players to hold just one account whilst playing casino games, football games and many other sports.

In The UK

The promise of tax-free online betting is a powerful driver for the UK market. When you place a bet in your high street bookmakers you're charged an extra 9 per cent - 6.75 per cent of this is tax and then the traditional bookmaker's charge on top brings it up to a total of 9 per cent. Most online gambling sites charge no tax or levy at all. They get around the tax problem by basing their business offshore; for example Ladbrokes International is based in Gibraltar, VIP in the Dutch Antilles and William Hill International in Antigua. John O'Reilly, managing director of Ladbrokes International succinctly sums up the situation, "you wouldn't locate the hub of your e-commerce business in an environment as fiscally unfriendly to online gambling as the UK."

Offshore has its problems though; under UK law any online gambling business that doesn't charge tax is only allowed to advertise its services online. Ladbrokes has got round this problem by choosing to pay the tax bill on its Bet.co.uk site itself for a limited period rather than charging its customers. This means Ladbrokes has been able to promote the service with a big launch campaign and ads in the daily newspapers. Cunningly, once you're at the Bet.co.uk home page you'll find a prominent link to the international Ladbrokes site at www.ladbrokes.com. William Hill is offering a similar deal at www.williamhill.co.uk, and as soon as you hit the home page an audio message directs you to the international site at www.willhill.com for permanent tax-free betting.

The British Chancellor Gordon Brown is expected to crack down on any tax-free betting advertising loopholes in April's budget. It seems he's worried by the Ladbrokes and William Hill approach. And he's every right to be a bit upset; the Government stands to lose a huge source of revenue. The market is pushing for a reduction in gaming duties. The Irish Government has already cut its gaming duty from 10 to 5 per cent in an effort to keep betting onshore. Ian Barlow, the Chairman of the British Horseracing Board Tax Committee supports this view, "the thing to do to counter offshore betting would be to lower the gaming duty."

The situation is even trickier in the US where gambling legislation varies from state to state. At one end of the scale you've got Nevada where pretty much anything goes and then you've got Massachusetts at the other end, where any company that allows a citizen of Massachusetts to gamble could have their assets frozen. In November 1999 the Kyle Bill was passed through the US Senate and this aims to prevent Internet gambling. However any law is going to prove tricky to enforce when most of the online betting companies are based outside of the US.

Big Rollers

Ladbrokes and William Hill are the two biggest names in the UK bookmaking business and both have staked a claim on the international market.

Ladbrokes has two sites; the UK focussed Bet.co.uk and the international site, www.ladbrokes.com. Ladbrokes is currently paying the deductions for its punters on the Bet.co.uk site, but that generosity won't last forever. Bet.co.uk is seen as a soft introduction to the world of betting and currently focuses on football. It's designed to appeal to the gambling novice and is full of background stats, facts, news and tips on how to fill out your online betting slip.

The international Ladbrokes site offers tax-free betting for the UK and international market in many languages and currencies. Football, horseracing, greyhound racing, golf, tennis and American football are all featured and casino games should appear later this year. John O'Reilly, managing director of Ladbrokes International, sees the sites as playing two different roles, "Bet.co.uk is a very soft introduction to betting, it makes betting easy. We're trying to attract an audience who are mad keen on sport but don't want to go into a betting shop."

William Hill takes a similar two web site approach. The UK site (www.williamhill.co.uk) offers tax-free betting for a limited period and allows you to gamble on boxing, cricket, golf, greyhounds, horse racing, motor racing, rugby and football. The international site, at www.willhill.com, is the full tax-free offshore business and it caters for the UK and international gambler offering betting in a whopping 19 currencies. The online casino is also popular and runs 25 games including poker and blackjack. The offshore business is based in Antigua, while the .co.uk side is run from Athlone in Ireland.

Coral is another well-known name in the UK gambling market and it handles tax-free betting from its Eurobet site at www.eurobet.co.uk. The site has been running since 1995 from its offices in Gibraltar, however Eurobet only became part of the Coral Group in December 1999. The site can handle five currencies and is available in five languages. A wide range of sports is covered including football, Formula 1, tennis and rugby. There's also an online lottery game that's linked to the Irish Lottery draws.

Alongside the famous high street names a whole batch of new online only gambling businesses have sprung up. VIP is one the longest standing and has been in business since 1996. VIP runs several sites including its new football site, www.vipsoccer.com, a general sports site at www.vipsports.com and an online casino at www.vipcasinos.com. Football is the most popular section for UK gamblers, although VIP is currently seeing the bulk of its business coming from North America. Alistair Assheton, VIP's General Manager, recognises that VIP has some way to go to establish its brand name however he's bullish about the new launch, "we're going to be throwing plenty of resources at growing the VIP Soccer brand in the UK."

Blue Square (www.bluesq.com) claims to be the largest betting site in the UK and until the Budget on March 21st it's offering tax-free bets. The site is impressive but we await eagerly to see what the company does after the budget - will it have to move offshore to continue operating? The future seems relatively rosy for the company though - deals are afoot for an interactive TV-based service and for a WAP phone based betting product.

In October '98 Sporting Bet (www.sportingbet.com) became the first British-based tax free Internet betting service to launch. The head office is in Alderney in the Channel Islands so the service is fully regulated under British law but remains tax-free. The site currently offers a choice of international currencies and caters for popular US sports such as baseball, basketball and NFL Football as well as good old British favourites including horse racing, cricket and soccer.

However the gambling site that enjoys the best online promotion has to be Galaxy World Casinos (www.galaxiworld.com). There's a link from the Playboy home page (www.playboy.com) direct to Galaxy World. Bunny girls lead you round this Antigua-based site, which includes slot machines as well as card and roulette games.

Regulatory Bodies

In theory these gambling sites are regulated by the countries they're based in, however there's also a global trade association for the interactive gaming industry - the Interactive Gaming Council at www.igcouncil.org. Members of the organisation are obliged to follow the IGC's code of conduct. The code covers areas such as privacy, data protection and the protection of minors. The IGC also has a dispute resolution service for customers that get into any kind of disagreement with an online gambling site. Vice Chairman of the council Albert Angel explains, "we believe that the best way to ensure that consumers are protected, children are kept from accessing online gaming sites and those with gambling problems get the help they need is to craft a comprehensive regulatory framework." Look out for the IGC's Seal of Approval on member's sites.

Where's The Market Heading?

If you think online gambling is big on the Internet, watch out because the market is going to go mad once digital TV hits its stride. Some analysts are predicting a 50 per cent digital penetration by 2003 and in a recent survey 12 per cent of British adults said they would be more likely to bet if they could do so using interactive TV, so you can see why it's such an important area for these companies.

Ladbrokes has already got several fingers in the digital TV pie. The company has a stake in Two Way TV and has signed agreements with Telewest and Cable & Wireless to offer betting services to their digital customers. Ladbrokes plans to launch its Open Betting service to coincide with the start of the next football season and will quickly follow that launch with an array of sports betting services and a Vernons Pools product. Ladbrokes' big development is its 'betting at the speed of thought' services which promises to offer live on-screen betting during TV programmes which relates to the action you're viewing on-screen (for example you could but a live bet on whether or not Beckham is going to score from the penalty spot).

The other key area for online betting services is Internet-enabled mobile phones. As Ladbrokes' John O'Reilly explains, "betting is always time sensitive, people always want to bet just before the match or race begins. That's why betting over mobile phones is a killer application." We can expect the first WAP-enabled betting services to hit mobile phones by the end of the year.

So does this all mean the end of the high street bookie or bar room betting? It certainly looks like they're on the way out; some experts are predicting that half of Britain's betting shops will shut within five years. It's certainly true that betting shops attract an ageing audience and that audience is not growing. But those diehard gamblers that like to deal in cash will still want to spend their Saturday afternoons in the smoky atmosphere of a real bricks and mortar bookmaker.

Gail Robinson is a freelance Internet writer based in the UK.