Is the UK’s Sports Betting Market in Decline?

Posted by Harry Kane on Tuesday, June 11, 2024

At first glance, the UK’s iGaming industry appeared to be in rude health ahead of 2024. However, an increase of close to 10% in gross gaming yield (GGY) was largely attributed to online casino growth and expansion, while sports betting struggled to in comparison.

So, despite being home to the world’s most famous and renowned sports betting industry, this particular vertical appears to be in a spot of difficulty. But is it really in decline, and what impact is the recent online gambling whitepaper having on the marketplace? Let’s find out!

Earnings vs Profit – What do the Numbers Say?

According to UK bookmaker industry expert David Brown, there’s a significant cloud hanging over the UK’s sports betting industry. “I’ve been in the industry for 47 years and this is the most pessimistic I have ever been over the health of the UK sports betting market,” he said, highlighting a potential discrepancy between the earnings and profit being reported by betting brands.

Worryingly, earnings reports through 2023 have been largely negative, despite the hugely popular 2022 FIFA World Cup in Qatar. In the case of Bet365, which is the UK’s largest online operator by market share, it was reported that the brand’s operating profit was down 88% despite relatively steady earnings.

This trend was evident among other brands, who were seemingly incapable of translating their revenues into profitability. Another warning shot was fired by William Hill, who refrained from publishing like-for-like gross win performance numbers when compared to the 2018 World Cup in Russia. This was despite publishing Christmas and World Cup earnings at the beginning of 2023.

The UK-listed Entain, which remains one of the biggest players in the marketplace, has also seen its own outlook worsen. Growth slowed throughout 2023, during which time financial services behemoth Goldman Sachs downgraded Entain’s stock from ‘buy’ to ‘sell’. This trend continued into Q1 2024, while forecasts for the first half from this year have been far from encouraging.

Why is the Market in Apparent Decline?

The gap between earnings and profit is providing cause for concern, especially as the number of active iGaming accounts in the UK remains steady. But what’s behind the declining profit, and what impact is the recent UK white paper on online gambling likely to have in the upcoming financial periods?

When William Hill published their recent profit figures, they highlighted ‘customer-friendly’ sports results and increased payouts as being key to their reduced returns. However, this alone doesn’t explain the extent to the brand’s lower profitability, with William Hill also citing the “ongoing impact” of safer gambling changes within the UK marketplace.

Certainly, the cost of implementing responsible gambling measures (and paying sanctions related to breaches charged by the UKGC) have impacted brands significantly in recent times. Initial affordability checks may have also cost money and reduced the average spend of customers, although this hasn’t been borne out by official figures to date.

This is something that brands will also have to factor in going forward though. After all, more stringent and regulated affordability checks will be rolled out at the end of August, as part of a six-month pilot scheme that will end in February 2025. This will initially run ‘frictionless’ checks on players who lose £500 or more per month through gambling, although this threshold will subsequently be reduced to £150.

More intrusive checks will be carried out on so-called “high rollers”, who incur regular losses of £1000 in a 24-hour period (or less) or £2000 in a period of 90 days. Such affordability checks will incur greater costs and a much higher administrative burden for brands, while the impact on customer engagement and total spending could be even more impactful over time.

According to the aforementioned David Brown, one of the biggest issues here may also be the gap in perception between the UKGC, the UK government and the sports betting industry. Currently, the regulator estimates that just 3% of online accounts will be subject to affordability checks, based on previous investigations into the average spend per bettor and the amounts wagered regularly by high rollers.

Some betting brands estimate that the number of players requiring frictionless tests will be much higher, especially once the threshold for loss is reduced to £150. This may also be reduced further over time (to around £100), while it has been argued that ‘frictionless’ tests may involve open banking and could be more intrusive than initially thought.

The Bottom Line – What Does This Mean for Brands and the Betting Industry?

In addition to ramping up operating costs and impacting subsequent profits, the impact of affordability checks may also adversely affect revenue directly. The reason for this is simple: as players become mistrustful or resistant to increasingly intrusive affordability checks (even those that are described as being frictionless), they may choose to wager less or potentially seek out a black-market operator.

The black-market has already enjoyed a boom in recent years, with operators increasingly effective at targeting vulnerable bettors and high rollers with unintrusive registration process, generous bonuses and an absence of affordability checks. According to the intelligence platform Yield Sec, the number of illegal operators in the UK increased fourfold between 2021 and 2022 alone.

Even for players resist the lure of the black-market, there are plenty of other options outside of the UK’s trusted sportsbooks. Take offshore sites, for example, which are able to access the UK market without complying fully with the rules and regulations laid out by the UKGC. What’s more, some of these sites are integrated with Telegram and rely heavily on cryptocurrency, so they enable players to signup simply by providing a verifiable email.

Regardless, affordability checks could exacerbate the financial challenges facing betting brands in 2024, while there may be a need for some compromise between operators and the regulator in the UK.