The original article here was first published in November 2014
As you know I’m in la la land at the moment and it’s not the first time I’ve been here. Having worked for a couple of US companies in my time and thanks to my interest in Warren Buffet et al, I’ve often popped over here to do something or another most years since the early 90’s.
When Betfair started taking off in the UK I was quite interested in seeing how the legislation would play out over here. To give you a short answer, very slowly. But I thought I would start looking around back then to see who were the key players and get an understanding of how the market could play out. The potential was huge, so looking at it and keeping in touch with progress seemed a pretty sensible idea.
Betfair US – TVG
In 2009 Betfair acquired TVG to get a foothold in the US market. TVG is based in Los Angeles. I have been staying in Manhattan Beach, which is my favourite place to stay in LA. It’s right on beach and going for a walk along the beach is the perfect way to start or end the day. I’ve been staying with a friend of mine who is a hedge fund manager who I met in Omaha Nebraska, when neither of us were doing our current jobs. One, amongst many, famous residents of this area is Jordan Belfort, who I actually met. However, I seriously doubt he is out there blogging about our brief encounter.
So, back to TVG. When Stephen Burn was appointed as CEO I felt a visit was in order. Stephen was previously working for Betfair in the UK and took on the task of doing something interesting with the US business. After plugging away for a few years he resigned and was temporarily replaced by Martin Cruddace, in the middle of last year. Martin was also from the UK . Then they recently appointed a new CEO, Kip Levin.
Betfair’s are not far from where I tend to stay so it’s only a short drive across to their offices. As you approach the building it looks impressive from the kerbside, but what doesn’t in the US? It’s a towering building overlooking the Howard Hughes center.
Betfair is not in the entire building they are only on one floor, but it’s quite a big floor. On that floor, it’s split between the very public facing broadcasting, ops and customer service with the administration on the other side. It’s very different set up from Betfair elsewhere in the world. This is mainly a legacy of TVG and a lack of traction on the exchange side of things. The best way to describe TVG is a bit like ‘At the races’, but where you interact with the channel to place bets. So while it’s a sports book, it’s a content-driven broadcaster with a sportsbook.
What chance of a US exchange?
I’ve tried over the years to do my best to promote the concept of a sports exchange in the US. But obviously, I hold little weight in the scheme of things. So I’ve settled on a role as an influencer across as many interested parties as I can find. That’s primarily how I ended up at Santa Anita this last week.
All I can really do is sing the virtues of the exchange mechanism and its many benefits, but it’s a tough sell. People who haven’t been exposed to it, like the concept, but the lack of visibility of it in the US hinders its adoption. The same battle is fought here as was in the early days in the UK. Focusing on the harm an exchange could do, rather than they benefit it brings, especially to punters. Things happened so fast in the UK there was little that traditional bookmakers could do, over here they have had a bit more practice. But also, in a land where money talks, existing interests appear to dominate the agenda.
The industry is also very fragmented here. There are a number of bodies that represent racing’s interests. Trying to get agreement across all parties is almost impossible. Tracks are owned independently of the legislation and then you have the bookmakers, the jockeys and a multitude of other issues standing in the way of change. That’s on a regional level, then you have the state legislation and the federal legislation. It’s a really complex situation. I’ve got to know a lobbyist in Washington and it’s really interesting to see how that works. Go and watch House of cards on Netflix for a theatrical assessment of this.
Reading between the lines it looks like, if legislation for an exchange eventually makes it to the implementation phase, it could end up like it has in Italy. Restricted sports, restricted participants and a mere shadow of the full-blown exchange mechanism in the UK. In Italy certain sports don’t exist on the exchange, only Italian residents are allowed to use it under a set of rules and even them conditions apply. It’s very messy and has produced a weak exchange. Even then the shift in emphasis in the UK means that we may never get to see what would be a game changer in the US a fully blown pure exchange. But if legislation does change it will probably only be on a state by state basis as first. There are anomalies which I will show you next week.
But of course anything can happen, but the lack of progress to date it’s obviously disappointing. But while there is a case to be made, I’ll do my bit to make it. The US is a big market, but it’s very fragmented. There are wildly differing views across all the states and while there is some token progress in the East and West there is still a great deal of work to be done. But the size of the market may still present an opportunity, eventually.
I meandered into Los Angeles bay the other evening up to my waist in water, to watch the sunset. I held my iPhone aloft. But not to take a picture, I did it to test the 4G connection. The speedtest returned a value of about 18Mbps down and 12Mbps up. So there is a reason to remain optimistic and hope that something happens here eventually.
Trading from the beach is a definite possibility!