Nov 16 / 2018
Latest News / Editorial

Enhancing margins with proven solutions

Ed Peace, Head of Commercial, Sporting Solutions writes about solutions for sportsbooks looking to survive the squeeze

There is no denying the pressures that are bearing down upon operators in the global betting and gaming market are becoming more extreme. Licensing issues, expensive data rights and the cost of operations are chipping away at bottom lines in a maturing digital landscape.

Aggressive marketing strategies – largely with a focus on free bets and sign-up bonus offers – are experiencing a case of diminishing returns, and are rightly attracting the closer attention of regulators. Driven by short-termism, we have experienced something of a race to the bottom in acquisition methods – priceboosts and bonusing have been prevalent ways of attracting new customers, but they offer little benefit when it comes to building the distinct style and brand tone of voice that will drive long-term retention.

Larger, legacy operators have turned to their size as the ultimate solution, leading to a wave of M&A activity in the hope of maintaining their market position. In turn, some smaller operators have looked to compete with their larger counterparts on cost, outsourcing traditional sportsbook functions to suppliers who have little or no sports-betting experience but can offer cheaply scraped market data and prices. Ultimately, this has only resulted in lower customer satisfaction and a reduced market share.

Similarly, “white-label” (or turnkey) suppliers offer a business model based on increasing speed to market, especially for operators that do not have experience in how to run a sportsbook.  That may find success in black or grey markets (where there is little or no concept of social responsibility and you don’t have to pay any tax), but doesn’t work in regulated environments.  It is a “one-size, take it or leave it” model that offers nothing for brand or price differentiation, borne out by the weaker trading margins this solution generates.

Outsourcing services can overcome higher cost pressure, but just reducing cost is not a solution for the situation many operators now find themselves in.  Pricing quality, and extracting more profit from your customers’ sports betting turnover, is becoming increasingly key again.  Operators now need to find a solution to improving sportsbook contribution through expertise, rather than putting pricing and risk management into the hands of suppliers who have never taken a bet on their own book before, have never put their own capital at risk or don’t understand the importance of running a highly compliant and socially responsible sports betting function.

In a saturated marketplace, expert “risk adjusted” pricing and trading – based on the attitude to risk the operator has and the specific type of business that the operator sees (rather than copying a general market move)–must be at the core of an operator’s growth strategy.  Making a conscious shift to upgrade to Risk Adjusted Pricing will mean an operator can lay a sustainable foundation for a differentiated pricing strategy (to improve profitability) and clearly define a recognisable brand tone of voice to endure outside of marketing “noise”.

Sporting Solutions supplies a unique product range to operators that leverages our decades of experience of trading in highly sophisticated, volatile sports betting products and instruments.  Our truly unique proposition enables operators to outsource a combination of specialist functions –  pricing, trading, automated risk adjustment and analytics – as well as a full suite of operational services and back-office operations.

Quality, flexibility and scalability is what sets our services apart, giving all our partners access to a best of breed sportsbook solution. Costs are reduced and pricing quality (leading to improved trading margins) are delivered. In addition, valuable in-house resources can be re-positioned to trade sports and competitions where their local expertise allows them to deliver the greatest differentiated value using our “self-trade” algorithms.

Our trading function is the most sophisticated in the market, based on a world-first “Trading School of Excellence” training scheme that we launched over 5 years ago.  The risk management techniques that we deploy are bespoke, highly automated, objective and based on the methods most closely associated with portfolio management in financial markets – not the generic, manual solutions being offered by suppliers elsewhere.

Put simply, the expertly-modelled components that make up our services reduce cost while driving increased margins.  They are capable of slotting seamlessly into any pre-existing technological framework, or replacing parts of legacy platforms that no longer perform as required, meaning all our partners quickly improve performance without having to swap out expensive technology first.

For those sportsbooks aiming to launch, survive or thrive in a tightening market landscape, the solution is now available to them to drive margins back to a position sustainable for long-term grow thin regulated markets, whilst at the same time reducing cost and staying in control of their own future.

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