High stakes on gambling net
Take Paddy With You is the slogan with which the highly successful bookmaker markets its mobile betting operation.
Paddy Power was one of the first companies to sniff the wind and deduce that the future lay online.
Now, its profits have gone through the roof and its cyberspace operation has traversed the globe to scoop up huge business as far afield as Australia.
In fact, over the past five years Paddy Power has actually changed the focus of its core operation from gambling to technology, and therein lies the secret of its success.
Online gambling is now a huge business, estimated to be worth €44bn globally this year. While figures for Ireland are not available, economic consultants have extrapolated that the Irish market is worth about 5% of that, or €2bn.
It’s not just the traditional bookie that is under attack from cyberspace. Online gambling includes card games such as poker, and casino gambling, the latter of which, in its land-based incarnation, was somewhat the exclusive preserve of members only clubs.
In this regard, the two elements of gambling and gaming have converged online. All the major bookmakers, such as Paddy Power, Boylesport, and Ladbrokes offer online gaming along with the traditional fare of gambling on sports events.
You can bet on anything from the gender of a celebrity’s next baby to a minor league baseball game in Nowheresville USA — and it’s all at your fingertips. Where once placing a bet involved entering darkened bookies’ shops, now it’s just a few clicks away, and, of late, even a few thumb rubs away on phone apps or iPads.
The nature of the beast means it is difficult to unearth figures for how many Irish punters gamble online.
“We’ve had little or no research on gambling here so we have to rely on international statistics,” according to David Hickson of the Leisure and Gaming Association of Ireland.
The profile and frequency of betting of the Irish gambler might best be compared to that of our kindred spirits across the Irish Sea. In 2010, a major report, British Gambling Prevalence Survey, was conducted for Britain’s gambling commission. It found that 10.7% of the population had gambled online in 2010, which compared with 6.5% in 2007.
The online market was estimated to be worth €712m. However, the gambling commission noted that the “majority of remote gambling sites accessible to British citizens are regulated overseas”, which would infer that the total turnover is much larger.
The figures for Britain would correspond to about 440,000 in the Republic of Ireland if a similar profile is applied. This would cover all gambling activity, including those who might have an annual flutter on the Grand National, or those who merely stray onto a cyberspace site.
The European Parliament has drawn up a green paper in an attempt to regulate online gambling within the union, but it has had little success in garnering solid statistics. “Currently the level of reliable, verifiable, official data across the EU is quite limited and fragmented,” the paper noted.
One reason why solid statistics are difficult to come by is that online gambling is borderless. The other main problem pertaining to Ireland in particular is that legally, online gambling is a grey area. To avoid straying from grey into black, Irish operators base their server sites offshore. Two of the most popular locations for these sites are the Isle of Man and Malta.
By far the biggest online bookies’ on this island is Paddy Power. Its total online operation attracted 900,000 active customers last year, according to its annual results. Of those, 700,000 are British-based, and the remainder from Ireland and the rest of the world. A company spokesman, the appropriately named Paddy Power, estimates that by far the largest cohort of those customers are from Ireland.
However, despite the high profile that online activity now acquires, the company’s Irish turnover still owes much more to traditional forms of gambling.
“Out Irish retail market is five times bigger than our online market,” says Power.
Boylesport is equally cagey about the specifics of its Irish online market. “Online business has significantly more than doubled in the past 12 months,” says a spokesman.
The concept of online gambling was first stumbled upon when the internet was a pup. In 1994, the Caribbean island of Antigua Barbuda passed a law allowing online casinos to operate from within its jurisdiction.
Over the few next years online gambling took off and by 1998 the market was worth $835m. Crucially, most of the business was then coming from the US.
In the US, a process was undertaken in lawmaking circles to have the activity banned. Eventually, in 2006, the US Congress passed the Unlawful Internet Gambling Enforcement Act. As with much lawmaking in that decade, those who were pushing it said it was necessary to defeat global terrorism. The logic in this case was that terrorists would use online gambling to garner and launder funds.
Online gambling remains illegal in the States, although there are moves afoot to have it reversed, as it is becoming increasingly difficult to enforce. As the US began to settle down to a form of prohibition that harks back to the 1920s, the rest of the world was embracing the new technology.
While gambling online brings huge advantages to those disposed towards a flutter, it can also herald danger. Convenience and accessibility means the gambler with a potential problem quickly loses the potential element of his problem.
For the operators, however, it’s gravy all the way. Initial investment in technology is required, but thereafter the costs of running a cash-rich business are cut to the bone. In this country, Paddy Power and Boylesport are the two major native bookies’ that have made a serious fist of the transition.
Paddy Power first began to carve out an online element to its operations in 2001. Gradually, the potential became apparent, particularly in the latter years of the property bubble in this country.
“We spotted the trend,” says Paddy Power. “So we went at it with all guns blazing... It has been a real success and a lot of that is down to the fact that we adapted early to it.”
Others were not so lucky. Broadcaster and former minister Ivan Yates saw his hitherto successful operation Celtic Bookmakers go into receivership in Jan 2011 with debts of €6m.
At the time, Yates said the collapse in disposable income had seen his turnover fall by 50% since 2007. But what exacerbated his woes was the absence of any online element to the business which would have ensured a huge turnover-to-cost ratio. He looked at the possibility of going online in 2005, but the investment required was prohibitive.
By then, Boylesport and Paddy Power were on their way.
Once an online presence has been established, the next move by the bookies was to take a slice of the gaming sector, such as casino, poker, and bingo.
“Gaming was our biggest growth area last year,” says Power. So it has gone with all online operators. While poker may well be on a downward slope, casino gambling online is growing all the time. And then there is the market that has attracted the latent impulses of another demographic — women. Online bingo is now taking off, and drawing in a huge cohort of gamblers who traditionally wouldn’t be seen dead in your average bookies’ shop.
The latest moves in the sector have seen the leap to handheld devices. Again, Paddy Power has been to the fore.
“We got into the mobile betting around the time of the last World Cup,” says Power. “Again we were quick out of the blocks. We were the first company to have an app in the app store and we were early adapters to the iPhone and iPad.”
The results are plain to see. The company’s share price has surged by 280% since 2008. At a time of falling spending, Paddy Power is still powering ahead. Last year, 62% of its €120m operating profit was attributable to its online operation.
While the business is lucrative, it’s also operating in a legal grey market, certainly as far as the Irish element is concerned. Online gambling remains a legally untamed world.
Countries such as Britain have moved to regularise the activity, but the Irish authorities have been slow to react. Last September, Justice Minister Alan Shatter resolved to catch up with the technology, and ensure that the exchequer benefited from what is a ballooning market.
“The Government agreed with me that it was long past time for a full and comprehensive revision of our gambling laws,” he said.
“The absence of any regulation of online gambling is exposing young people and other vulnerable persons to unacceptable risks.
“The exchequer is also being short changed because of the absence of a taxation regime for online and other forms of remote gambling.”
The current gambling legislation is based on the Betting Act 1931, which caters for taxation on gambling, and the Gaming and Lotteries Act of 1956.
The only adjustment of note came in 2001 when the Horse and Greyhound Racing Act abolished the prohibition on the placing of bets by people within the jurisdiction with bookmakers outside.
This facilitates the operation of online gambling through companies locating the online server offshore, although it has never been tested.
Shatter’s bill is expected to be published later this year, and it will be co-ordinated with an amended betting bill from the Department of Finance. Together, these bills are expected to point the way towards a proper regulatory framework in the state for online gambling.
Áine Matthews, a solicitor with LK Shields, which specialises in technology, says it’s going to be a difficult proposition.
“There is no tax take from online gambling at the moment.
“And there is going to have to be some EU-wide approach to the issue. At the moment, most member states are looking after their own betting legislation. It will be interesting to see what the minister comes up with.”
Gamblers Anonymous
Dublin — 01 8721133
Cork — 087 2859552
Galway — 086 3494450
Waterford — 086 2683538 or 086 3973317
021 4887110
Cahir — 052/ 744 1166
Wexford — 053/ 914 1818
Cork — 021 7335994
Limerick — 063 90555
Kildare — 059 8631090
Galway — 091 797102
046 9242009
089 4458721
056 8833777
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