Betfair Australia Partners with National Rugby League
Last week the National Rugby League in Australia reached an agreement with sports betting conglomerate, Betfair. But the lucrative new deal wasn’t happily received by all and has been drawing criticism from across the sport’s management body. Under the terms of the deal, the betting exchange will have exclusive rights to offer odds as matches are due to begin imminently without fans in the stadium.
As part of the new deal that Betfair and the National Rugby League have formed together, punters will be able to place bets against each other just in time for the new season. The announcement came just as an earnings warning was submitted by Betfair, and considering the commission rates for the NRL are four times higher than the AFL, financial difficulties may be difficult to avoid in the coming months.
It was reported last week by the Sydney Herald that the National Rugby League had come to an agreement with Betfair Austrlalia, a subsidiary of Crown Resorts to officially facilitate betting and wagers on NRL matches.
A swathe of other betting operators has also signed deals with the National Rugby League for them to also offer betting on the matches via their own sportsbooks and exchanges. The problem underlying these transactions is the exuberant commission costs that the National Rugby League is insisting on. Despite this, operators are clamoring to get these deals over the line in time for the new season.
Fear that Punters Will Turn to Offshore Providers
Whilst the decision for the National Rugby League to sign deals with leading Australian bookmakers has been hailed as a success by many, there is serious implications that have yet to be understood with regards to the financial impact on players. The market base-rate that bookmakers apply on sports betting markets is going to nearly double from 6% to 10% due to the National Rugby League demands.
Such an aggressive business model is undoubtedly damaging for smaller operators around the country that work to vanishingly thin margins. Betting exchanges are incredibly high-volume platforms, and they rely on this massive volume of bets to offset the small profits they make on each bet. The raising of commission fees with have disastrous impact on cash-flow and betting volume across the exchange, and could put significant pressure on the long-term viability of betting exchange options in Australia.
Betfair Australia chief executive Tim Moore-Barton had words of praise for the National Rugby League in their effort to re-capture the popularity of their sport, and had this to say,
We applaud the NRL for the incredible work that has gone on during lockdown to secure the NRL’s future and to bring the season back to its fans at the earliest moment possible. Unfortunately, their product fee model singles out high volume, low margin operators such as a betting exchange.–Tim Moore-Barton, Chief Executive, Betfair Australia
There is clearly a cause for concern, looking at the balance sheet of operators working under this new regime we can clearly identify the problems. Keeping commission flat is not a viable option for Betfair Exchange as they are now being asked by the NRL to pay nearly double the amount in commissions. This accounts for nearly two-thirds of the company’s operating revenue that would be used to pay product fees – and that’s before deductions for tax, amortization, and depreciation.
As with the majority of betting companies around the world, Betfair Exchange appeals to customers that want better odds on their bets, want to trade positions and don’t enjoy the inflexibility of the fixed-odds betting terminals. Unfortunately, in the era of heightened commission rates, turnover from these customers will inevitably drop and perhaps stop altogether. This scenario is not good for players, Betfair or the National Rugby League.
Online bookmakers across the country have expressed anguish at the hefty price tag National Rugby League betting markets have placed on themselves. Compare to racing and soccer, the NRL will be over four times pricier for punters due to the influx of new commission fees. This will undoubtedly force punters to look elsewhere for good deals on bets, and offshore gambling operators seems like the most likely destination for them.
COVID-19 is Highlighting the Importance of Gambling Revenue for the NRL
The coronavirus interrupted season of the National Rugby League is highlighting the importance of gambling revenue for the sustainability and longevity of the league. With broadcasting deals falling short of their expected income generation targets, and crowds absent from the stadiums, sporting franchises are in desperate need of cash.
The return of crowds to the stadiums is the top priority for those sitting at the top of the sporting bodies management committee. They need the customers in the stadiums to balance their huge liability commitments. The Australian Rugby League Commission chairman Peter V’landys has been particularly vocal about crowds returning and has set July 1st as the ambitious target to fill the stadiums.
But given the infection rate of COVID-19 in Australia is still relatively high, it seems unlikely that any government action will be taken to allow for huge crowds of people to congregate in the tightly packed stadiums across the country. For now, they will have to make peace and create a harmonious and efficient relationship with Betfair and other associated betting operators.