IN-DEPTH 19 September 2016
Sky Bet CEO Richard Flint interview
Everything is looking up for the aptly named Sky Bet. CEO Richard Flint sits down with Tom Lewis to discuss the company’s separation from Sky, expanding into new markets, and successfully navigating the effects of PoC
By Tom Lewis
Take us through your history with Sky Betting and Gaming. What brought you to the company, and what changes have occurred during your 16-year association?
When I joined the company, Sky had just bought a company called the Sports Internet Group, which was a Yorkshire based technology company, paying over £300m for it in 2000. At that point I’d just joined Sky, working on interactive TV for a joint venture ultimately called Sky Interactive. I was working with betting companies offering services in interactive TV, and at the same time as that Sky bought the Sports Internet Group, which included a bookmaker called Surrey Sports. My time there began working on the Sky side with this company to develop an interactive TV betting proposition. It started to grow reasonably well, but ultimately we found over a number of years that technology wasn’t particularly competitive.
So, we rebranded the business to Sky Bet, and in 2007/08 we shifted the focus to compete with the other online, and latterly mobile bookmakers. We turned the company to focus on being a tech business based in the north, using Sky’s brand and assets, but competing in the same space as these bookmakers. It was that path that we set out in 2007/08 that has led us to where we are today. We’ve grown really strongly – we’re certainly top four in the UK, and are trying to expand internationally.
We have also now come partly out of Sky, in a deal where they kept 20%, while we kept the brand and are 80% owned by a private equity company.
What changes have occurred in the months since the acquisition of 80% of Sky Bet by CVC Capital Partners?
Much has stayed the same – we’re still fundamentally a similar business, still have the same relationship with the Sky brand, and are still focused on mass market betting and gaming online and on mobile in the UK. We’ve still got that tech focus that we’ve always had.
In terms of what’s changed, we’ve invested more, and have doubled the size of the team since the acquisition. We always felt that within Sky, such a great business with so many potential areas for investment, that we were always competing for investment with perhaps more strategic or core areas of the business. But now, being a separate company, that investment plan has opened up. So we have now invested substantially and have embarked on expansion, firstly in Italy. We’re also slightly less concerned with the volatility that comes from sporting results – there’s a longer term view and a greater understanding of that. It’s always challenging in a big corporate company to have a smaller part that’s somewhat volatile, our new owners are more comfortable with that aspect.
Sky Bet has created over 200 jobs and taken on new staff in recent months. How much of a challenge has Sky Bet found recruiting the right people, and how important is that for you as an operator?
It’s very important. Probably the number one job of a senior leadership team and myself is to create an outstanding team, which we have certainly done. There are times when it has been challenging here in Leeds – we set a high bar for recruitment, and the people here have a lot of job opportunities available to them. Sky itself is expanding in Leeds, and there are other digital businesses expanding here, so it is a competitive marketplace for talent. However, I think in the last nine months we’ve really done a great job with recruitment. We’ve invested in our employer brand and told people what a great place it is to work here. Some of the challenges and opportunities you get here are like none elsewhere in the world. Some of our volumes on a Saturday afternoon are pretty spectacular, and so we’ve done a better job talking up the benefits of attracting people into the region from elsewhere in the UK, and some from Europe as well, building our relationships with graduates. We’ve managed to fill the jobs and are very happy with the quality of people. We have also expanded in Sheffield, so we have another avenue for talent there.
What are your short and long term targets for Sky Bet?
We have a budget this year and longer term plans, but we don’t have specific corporate targets like being number one this market or that market. We’re more focused on improving our offer for customers, and growing the business in terms of customers, revenue and profit.
How would you say the industry has coped with the introduction of the Point-of-Consumption (PoC) tax?
I remember when it was first talked about, people said that companies would market less as a consequence, perhaps growth would be slower and perhaps consolidation would be an outcome. Of those three I think only one of them has come to pass. Consolidation looks like it’s starting to happen for various reasons, but the industry has not cut back on its marketing, and I certainly don’t think we’ve seen a slowdown in market growth. I think it’s got ever more competitive, certainly in terms of what we’re spending on marketing.
Importantly for us, we’ve always paid PoC tax on sports betting, so the change affected us less than others. Given that, I think we always felt we were in a good position to compete, because we weren’t having to take on a load of costs that we didn’t have on the sports betting side, and I think that’s one of the reasons why we’ve been able to grow successfully, continuing to expand and invest without taking the same tax hit as our competitors.
Sky Bet added £143m to the Yorkshire and The Humber economy in 2014/15. How important is it to contribute to the local area and community?
It’s crucial, we are proud of the fact we are contributing to the local community. I think every business need to have a base and a soul, and this is it for us. It’s been a great place for recruiting talent, and we are able to give people a good combination of a stimulating work environment and a nice place to live. Leeds is a fun place to live, you don’t have to go that far to see beautiful scenery, and you don’t have to make quite the same compromises in terms of work and the rest of your life as you do in London, where you might have a long commute or find it harder to get access to nice places to live. In Sheffield, we are doing the same again.
How does joining the Senet Group fit in with your overall corporate responsibility strategy?
Because of the fact that we’ve come from Sky, we’ve always had a particular focus on corporate responsibility. I think we’ve always been mindful that we were guardians of the Sky brand in our sector, and if we were not responsible that would not only damage the betting and gaming side of the business, but could also have a knock-on effect to the wider Sky business. We have always played it very safe there.
Now, as an independent company, we think the industry could do a better job at presenting itself, and also could do a better job at regulating ourselves to make sure we are above and beyond what’s required by the Gambling Commission. We have joined and are quite active in the Senet Group with those two aims: To make sure the industry presents itself in a better way, but also to make sure we are doing more than the minimum required by regulators.
Originally the focus of the Senet Group was on fixed-odds betting terminals, we’re trying to shift it towards online and simply making sure that if we know there are things that are the right to do, that we aren’t waiting for regulators to point them out before we do them.
What are the benefits of being an online-only operator?
I think it’s no coincidence that three of the top four businesses in online are predominantly online. Bet365, Paddy Power Betfair, and Skybet are three of the four biggest digital gaming operators in the UK. William Hill with its significant shop presence, is the fourth. I think having an exclusive online focus means you can build a culture and team that really gets online. I think running a retail business, not that I’ve ever done it, carries a different set of challenges with a big workforce, there is more of a command and control approach to running a big retail estate. In online, you have a highly skilled workforce where the ideas come from all around the company, you need a very modern workplace and in my opinion a non-hierarchical workplace so that information and knowledge flows around the business very quickly.
How do you see the industry evolving in terms of product offerings over the next few years?
For mobile, I think we’re almost through that story now. We’re now 70-80% mobile and it’s clearly a predominant channel. The areas that interest me most now are personalisation, being able to give people a better experience based on their previous behaviour and use of data, and meeting the online games that aren’t gambling with gambling services. To explain, if you’re placing a bet on football, it’s the same experience now as it would have been five or so years ago. The desktop experience has been translated into mobile, but it’s still quite different from playing a game on your mobile like Candy Crush. I think there will be elements from social gaming and mobile gaming brought into gambling, particularly in-play betting.
I think another area in the process of changing is cash outs. They have made the process of interacting with your bookmaker more of an ongoing thing throughout the game, and I think there will be more to come on that front. The process of interacting with your betting company during a football match has changed a lot due to cash out features and betting in-play, and I think there will be more interesting developments there.
You’ve mentioned in the past that you don’t think the betting industry always gets a fair judgement politically. What more do you think could be done to change this, and what changes would you like to see in the approach of government and the mainstream media towards betting?
To give a bit more context to those comments about the industry, we have about two million customers a year, and across the space in the UK most say there are around four million customers. There’s a vast number of people that bet day in, day out in a way that they can afford and is a nice part of their life, like having a pie at half time or a couple of pints before the game. These things in excess are bad for you, but most people do it in moderation and it adds to their life, like any other leisure activity.
I think that point is often lost in the debate. The focus is very much on people, who certainly exist, that do have problems with being addicted to gambling, and many of those people have issues with addiction in general.
The problem that I have with the way in which the industry is talked about is that the focus is all on the issue areas, rather than the mass market that doesn’t have any issues. Often the finger of blame for those issue areas is pointed at the gambling company, but it’s not the gambling companies that cause these issues most of the time. It’s an issue that society has to deal with, and these people have issues that they and society have to deal with.
In terms of what we should do differently because of that, I think we have to make more noise about the fact that this is a mass market leisure activity. I think we also need to not shy away from having a presence in public. In the same way that the alcohol industry has done a good job of having a balanced media profile, I feel we need to do the same.
That also includes how we’d like to be seen by government. I go to bed at night comfortable with what we do as a company, pleased about the excitement that we bring to millions of people, and confident that we do what we can to minimise the harm that is caused by gambling to some. I think that we need to portray that better to media and government, and I think the government should recognise that balance, as well as the value that we add, for example as Sky Bet in Leeds and Bet365 in Stoke, in terms of local employment and money we put into the local area. The benefits that we bring in employment and taxation need to be properly recognised.
Sky Bet made the move into eSports with Betgenius last year. What is Sky Bet’s thinking behind this move, and broader strategy for appealing to the rapidly growing audience for eSports?
For us, eSports is another thing for people to bet on, it’s not really a new avenue of business – as with football, it’s a competition, so why wouldn’t we let people bet on it in the same way? There is certainly a group of people that are our customers that enjoy eSports, and a group of eSports enthusiasts that will enrich their eSports experience by having a bet on it. It’s not a major focus, but it would become one if we felt we could see growth, either through
our existing customers or through a new group. I think it’s a bit poorly understood as a space, and there has been recent controversy around certain companies that have offered gambling without being properly licensed and regulated, which has tarnished that part of the industry initially. But I’m sure it will change and develop, and we might learn things from eSports that we apply to the rest of sport.
How does Sky Bet hope to gain from the renewal of the agreement to be title sponsor of the Football League?
The relationship with the Football League has been great for us in terms of our profile, as is the fact that we can associate ourselves with such an exciting and high profile league, followed by so many people. Looking forward, in the short term the clubs’ fans may not be delighted, but we are happy to see two more clubs of the size of Newcastle and Aston Villa in the Football League, building a relationship with their fans through the Football League is something we’ll have the opportunity to do.
Another interesting area is that increasingly all of football has a social media presence and an app presence, and we are planning integration there. Integrating with clubs’ websites and apps, as well as Wi-Fi in grounds is an opportunity for us that we’re looking to focus on. It’s also just a fantastic branding opportunity – the games are on Sky TV, and that gives us a benefit throughout conversations with Sky. We can provide information to make their programming better, and their programming gives us a presence as well. That tripartite relationship between broadcaster, sponsor and league is made easier because of that common heritage and shareholding between us and Sky.
How important is the link with the Sky Sports name in customer acquisition for Sky Bet?
It’s important across all sorts of things. It’s important for acquisition in that we acquire a lot of customers through fantasy games and our integration with the Sky website. It’s important for credibility, because people love the Sky brand. That integration with apps is important for customer retention, in that week in, week out people are using the Sky Sports app, and the only bookmaker you can bet with directly from that is Sky Bet.
It’s also important culturally in that Sky is a fantastic company that has changed the way football is consumed, and the way cycling is perceived in the UK. It is a business that has changed many areas of media and sport, we’ve learnt a lot and enjoyed being a part of that when we were a part of Sky, and we are still benefitting from the connection we have.
Does it present a challenge for aspects of the business like Sky Vegas and Sky Poker that Sky is so heavily associated with sport?
I wouldn’t say it creates a challenge, as the Sky brand does lend credibility and a sense of good user interface and technological advancement to those sites. With Sky Vegas and Sky Poker, we have to define our positioning in the same way as any other gaming company has to define their positioning. With Sky Bet, that positioning is obvious, as the betting arm of Sky Sports. It doesn’t hinder Vegas and Poker, but it doesn’t give us the same obvious direction as with Sky Bet. All the same, this is no more of a challenge than our competitors would face.
How big is the cross-sell between Sky Bet and Sky Fantasy Six-a-Side? Is that a good route for customer acquisition?
It’s early on that. Over 100,000 people play each week, but we haven’t really focused on customer acquisition. We are using it as a way of engaging the Sky Sports player base, and engaging some other bettors and players within our portfolio. We haven’t focused on it as a customer acquisition tool, so it’s not particularly significant at the moment.
The other benefit is that it gives us an opportunity to experiment with Daily Fantasy Sports (DFS) products, so that if that ever became a growth area, we could quite quickly bring our knowledge and player base from the free games into DFS.
What was Sky Bet’s role in NYX’s acquisition of OpenBet, and what will Sky Bet get out of £20m it has put into the deal?
We don’t get any control of the business, and that was never the aim. OpenBet has been an important partner for a long time, and we wanted to ensure that they went to a good home and had a solid parent going forward – they certainly have that in NYX. We also thought it was a really good investment, they are very well positioned in a growing part of the market. I would say the majority of the top sports-betting companies worldwide use OpenBet’s technology.
We were brought in relatively late. I think the group of NYX, OpenBet and William Hill wanted a broader set of investors than just William Hill. We are very pleased with the investment, and think OpenBet will have good success in the future.
What do you make of all the recent M&A activity in the industry? Do you see Sky Bet becoming involved in the future?
People have talked about it for some time and it is finally now happening. There are different reasons in different companies for why it’s happening, but there is this perception there are benefits of scale through cost or revenue synergies. Personally, I think the case is a bit unproven, and for us you have to trade off with doing so well and growing so quickly on our own. Any M&A would potentially bring some benefits of scale, but it would also bring a distraction, and at the moment we are focused on driving our business forward and growing really strongly. I can’t categorically rule out any role in M&A in the future, but nothing is being talked about at the moment, and like I say we feel we’ve got everything we need to grow the business successfully in the UK, Italy and Germany, and that’s our focus.