When the European Gaming and Betting Association held its second annual “Responsible Gaming Day: Integrity & Sport” event in Brussels in February, the message of the day could be summed up in the words of Christofer Fjellner, a Conservative member of the European Parliament from Sweden, who said, “Today’s experts showed that the internet offers more possibilities rather than less in terms of preventing fraud and match fixing.”
Fjellner was referring in part to online betting industry tools that can help spot suspicious betting patterns, which could tip off sports regulators to malicious manipulation of an event-just one example of how technology is transforming sports betting in Europe and the world over.
Starting with the Horses
The story of technology in sports betting is incontrovertibly tied to the story of online gaming. The revolution began in the 1990s when online operators began to offer betting on horse racing. As the customer base began to grow, more betting opportunities were gradually added-popular sports like soccer and such. Today, betting sites offer action on every sport imaginable, from handball to hurling, with some political and pop cultural opportunities thrown in for good measure.
The same software that was developed for online betting was easily adapted to telephone betting, according to David Loveday, CEO of Orbis Technology. Using a single account, players could choose between betting by computer or by phone.
“In essence, telephone betting uses the same software as the online betting, other than it’s a telephone operative with a screen,” says Loveday, speaking of the software development process. “We then made sure it could run across multiple platforms-on the internet, on the telephone, on the television, the various channels run by Sky that are exclusive to betting, and PDA devices and mobile phones as well.”
Orbis was one of the pioneers of the online betting industry and today supplies the technology for some of the better-known operators like Paddy Power, Ladbrokes and William Hill, among others. Orbis belongs to the NDS Group Ltd., a private company which is owned by Permira Funds and News Corporation and deals with delivering digital content to various devices.
Advances in technology always seem to produce a number of unanticipated benefits. For sports betting, the development of online software has allowed the commercial introduction of new products, such as in-running betting, which is basically watching a live event and betting on what happens next.
“In-running is more sophisticated technically, because you’re predicting an outcome such as which guy will score next,” says Loveday. “To calculate the odds you have to have some complex algorithms in place. That’s very different from fixing a price at the start of an event. The algorithms, the Monte Carlo calculations, all these very scientific processes go on and are at the traders’ fingertips, so they can keep on offering prices for the in-running betting. Without the technology you wouldn’t have in-running betting, and that whole market never would have gotten off the ground.”
Although interest in the product is increasing-in some markets, bookmakers are said to be reporting up to 80 percent of their business as coming from in-running betting-the future growth of the product is tied to the owners of the transmission rights to the various sports. Currently, a player will be watching a match on television while placing bets on a computer. But the real explosion will come when live events are being streamed right onto the same screen that is displaying the player’s betting account.
Some bookmakers have developed models that employ historical data to come up with a price for in-running bets. But according to Brian O’Sullivan, CEO of Global Betting Exchange, a lot of the work still relies on manual processes. That can cause problems, especially if there are multiple events simultaneously offering in-running action. The solution, says O’Sullivan, is to get the price from another creation of technology: the betting exchange market.
Pricing the Games
One big difference between the traditional bookmaking product and the betting exchange is a matter of who sets the price. A bookmaker has odds compilers who determine a value, and that translates into the price offered the punter. A betting exchange allows punters to come into contact with one another and then agree on a price between them.
Another big difference is in how the operator makes a profit. Or doesn’t. A bookmaker is counting on the odds compilers’ ability to price an event being good enough to guarantee a positive return over time. The exchange operator is just going to take a broker commission on the winning bets, regardless of the outcome.
“The technology we’re developing allows the sports book operator to actually price his market directly from the underlying exchange market, with a fixed margin on each bet, as chosen by the operator,” says O’Sullivan. “It’s for the operator who doesn’t have the resource to price up the product on a second-to-second basis, or who doesn’t want the risk management resource associated with being able to implement price changes quickly enough to respond to what’s actually going on in the game.”
The product GBE has developed, the GBE iBroker, follows the action on GBE’s exchange. The tool allows the bookmaker to reduce exposure by making selective use of the betting exchange model.
“From the risk management point of view, we believe that the exchange-backed product is a safer choice for the operator who does not want to invest heavily in risk management or does not want the volatility of returns that sports betting can provide,” says O’Sullivan. “The operator can take a risk-free fixed margin on every bet or can gradually begin taking risk on a customer-by-customer basis over a long period of time, almost as a sort of CRM risk management-based system.”
Basically, the operator can push the bets of historically winning customers through to the exchange, while accepting the risk-and implied profit-from the less-skilled customers.
The advent of online betting is not similar to the online poker phenomenon in the sense that it has not produced an increase in people visiting traditional bricks-and-mortar shops. Players who bet online do so because they’ve grown up with the internet.
“You have to look at the whole growth of the internet,” says Loveday. “People started booking their airline tickets online, Amazon came along and people started buying their books online, every traditional business was looking to see if they had a valid online business.”
Betting shops, with their more traditional product, are generally associated with an older, more traditional crowd. But one U.K. shop operator is combining the betting exchange product with High Street presence.
The Better chain of about 50 shops incorporates touch-screen kiosks that link to the Betdaq online betting exchange. Betdaq is the online betting company originally created to showcase GBE technology, and is now second in size only to Betfair.
The Betterex kiosks give bettors the opportunity to access betting exchange prices and products while in a shop environment. The machines only offer sports betting and take only cash in the Better shops, but O’Sullivan sees more potential given the right legal environment.
“The kiosk was developed to offer the opportunity for people to trade the exchange in a shop or in a café or in a licensed betting office,” says O’Sullivan. “The power of that really depends on the extent of regulation in a particular country. In some countries you can have a machine that can offer casino-type table or slot games alongside a sports betting opportunity. That’s where our i-kiosk product will work best and will be very attractive to some operators.”
Some Time Off Line
Meanwhile, the traditional bookmaker betting shop is still a vital part of the sports betting market.
Paddy Power, which operates about 200 shops in Ireland and 70 in the U.K., recently announced the opening of its first retail business in Scotland, with plans to establish another 80 shops around the U.K. in the next three years. The technology in the shops “completely revolutionizes the customer betting shop experience,” says Paddy Power Head of Technology John O’Donnell.
Customers get their information from a 24-screen system that lists the various products offered. There is also a large number of television screens that show the live events. Each shop has two satellite feeds from horse racing providers and one from Paddy Power’s in-house studio, broadcasting content tailored to each region.
“Compared directly to the off-course bookmaking shops in the States, it’s a lot more sophisticated; there is a lot more content and a lot more product,” says O’Donnell, who spent a number of years in the U.S. working in the financial world, including time spent on a project to deliver a new trading system to Nasdaq.
Each shop has an ePower system from Finsoft, a server-based custom application connected to as many as nine cashier tills. Bet slips are filled out by the customer, scanned with a bar code reader, and the bar code and image of the slip are recorded into the shop database and transmitted automatically to the head office, where the information goes into the central risk system.
Paddy Power’s online business, started in 2001, accounted for over 50 percent of group profit in 2008.
The bottom line is that developments in technology and legislation will continue to transform the sports betting industry-everywhere, it seems, but in the U.S.