Please see Sports-Betting-Report-FINAL

Chapter 1:

EXECUTIVE SUMMARY

1.1          This report aims to identify and examine the core commercial and integrity matters surrounding the availability of betting on sporting events. It updates the topics covered in a similar report published in 2010 and explores a number of new issues that have since gained attention.

1.2          Regulated betting accounted for $58 billion (or around 14%) of $430 billion in total global gross gambling yield in 2012 and is forecast to reach $70 billion in 2016. It has seen 5.4% compound average growth rates in the period 2001-13, driven by new technologies and product platforms.

1.3          However, the unregulated global betting sector, notably in Asia, is understood to be many times larger than the regulated sector, although no verifiable or precise financial reporting is available. It is believed that, excluding horse racing, 70-85% of the bets placed are on football.

1.4          Europe, in particular, continues to see the creation of an increasing number of new regimes that permit licensed and regulated betting, notably through interactive platforms, and which is gradually removing the once dominant monopolistic approach favouring the lottery sector.

1.5          There is no substantive evidence to show that this activity has led to a meaningful reduction in lottery revenues and thereby money allocated to good causes, including sport. Indeed, the global lottery sector has continued to show steady growth in otherwise difficult economic circumstances.

1.6          This is expected to continue as the sector increasingly cultivates interactive gambling platforms – where it has been relatively slow to innovate – and where lotteries will grow at the fastest rate increasing their share of interactive gross win growing from 2.3% in 2013 to 4% by 2018.

1.7          The global sports sector has also continued to show significant growth and was estimated to be worth around $130 billion in 2012 with forecasts that it will reach over $146 billion in 2014, driven by growth in broadcast rights. However, large-scale debt is also becoming an increasing issue.

1.8          The sports sector has long argued that it should receive a specific payment for the use of basic data, such as fixture lists, used by betting operators. However, EU court judgments have stated that fixtures lists do not attract database protection and associated payments cannot be enforced.

1.9          Sports bodies are nevertheless achieving payments from licensing specialised data companies which are then selling real-time data, sports information and statistics to regulated betting operators to inform and drive the growing market in live (in-play) betting on sporting events.

1.10       Regulated betting operators also continue to invest significantly in sports broadcasts both in land-based facilities and through new interactive streaming channels as a means to support new betting product innovations and to create greater interaction and engagement with their customers.

1.11       The mutually beneficial commercial association between betting and sporting events has continued to grow with sponsorship and advertising revenues from regulated gambling companies, particularly in Europe, reported to have become a significant source of funding for sports bodies.

1.12       However, the scale of the impact on the integrity of sport continues to be a key focus of the debate surrounding the availability of betting on sporting events, heightened in recent times by a perceived increase in incidents of match-fixing relating to enhanced access to new betting products.

1.13       Whilst match-fixing involves both betting and non-betting (or sporting) related incidents, it is the issue of betting that appears to dominate deliberations with a payment to sport from regulated betting companies and/or control of regulated betting markets principal matters of debate.

1.14       Many sports bodies and other stakeholders, such as the lottery sector and the European Parliament, have pressed for many of the new types of bets being offered, in particular by regulated European private betting operators, to be universally prohibited on sporting integrity grounds.

1.15       An increasing amount of independent research has stated that corrupters primarily seek to defraud unregulated operators (notably in Asia) and utilise mainstream betting products with high levels of market liquidity to try and mask their illicit activities, rather than new betting products.

1.16       Whereas defrauding European regulated betting operators is fraught with significant difficulties; sophisticated detection and consumer identification systems, restricted stakes, markets closed and bets voided in suspicious cases, mean that there is limited scope for large-scale profit.

1.17       The proposal that new markets, such as in-play (or live) betting, offered by regulated betting operators should be restricted or prohibited on sporting integrity grounds does not, given the weight of independent data, appear to be a policy generated from any firm evidence base at this time.

1.18       As such, placing restrictions on the new betting markets offered by regulated operators, albeit not immune from the focus of corrupt activity, does not appear to represent a proportionate or effective policy response with potentially significant adverse trade and consumer impacts.

1.19       Entwined with the issue of restrictions on betting markets is the assertion that sports bodies should have control over the availability of betting markets offered by regulated operators and which would involve a payment to those sports for their agreement to allow betting on their events.

1.20       A report by the Asser Institute for the European Commission has widely criticised this “right to consent to bets” approach, detailing numerous clear practical and operational flaws in the effectiveness of this system, along with a number of important legal obstacles within the EU.

1.21       The establishment and proper enforcement of rules and regulations by sports governing bodies with their participants regarding betting is a key match-fixing deterrent and one which has been highlighted in a number of national and transnational communications and policy documents.

1.22       However, significant governance issues remain concerning the enforcement of sporting rules and sanctions, corruption within sport itself, along with a widespread lack of player salary payments in some areas which is allowing organised crime to exploit the financial vulnerabilities of players.

1.23       Player education programmes along with the establishment of anti-corruption units, early warning systems and information sharing arrangements between sporting bodies, regulated betting companies and gambling regulatory authorities remain important integrity protection measures.

Chapter 2:

INTRODUCTION

2.1          The continuing growth of professional sport and associated betting markets on a global scale, as a direct result of consumer demand driven by technological advances, has provided both business sectors with clear fiscal benefits and further strengthened their symbiotic relationship.

2.2          This has manifested itself in a range of mutually beneficial commercial ventures through direct sponsorship of sporting events, sportspeople and clubs, along with numerous indirect benefits to both products from media advertising deals around sport (where legislative frameworks permit).

2.3.        However, it has also been attributed by some parties to a rise in a number of negative impacts on the integrity of sporting events. Those parties have pressed for the recognition of a sports organisers’ right on both commercial and integrity grounds, restrictions on regulated betting products and limitations on market access for private operators to safeguard sport and its income.

2.4          As such, policymakers within national and transnational institutions have been increasingly drawn into this debate, along with law enforcement bodies and other stakeholders, seeking solutions to these global commercial betting and sporting integrity issues.

2.5          This report has therefore been produced using an evidence-based and analytical approach to assess the validity of, and reasoning behind, the various arguments surrounding the key commercial and integrity issues facing sporting bodies, regulated betting operators and others.

2.6          It has been completed for the Remote Gambling Association (RGA), European Gaming and Betting Association (EGBA), Association of British Bookmakers (ABB) and the European Sports Security Association (ESSA) to assist them in their associated on-going policy considerations.

2.7          It is also designed to act as a practical and informative text for policymakers with a view to providing a constructive and verifiable commentary on, and analysis of, important transnational and cross-sector matters surrounding the availability of betting products on sporting events.

2.8          The report covers many of the key issues considered in an earlier report entitled “Sports Betting: Legal, Commercial and Integrity issues” completed for the RGA and published in January 2010 (see http://www.rga.eu.com/data/files/Pressrelease/sports_betting_web.pdf) and has been produced to act both as an update to that document and as a standalone evidence-based text.

2.9          Throughout this document references to forms of “regulated” gambling refer to products regulated in any jurisdiction and not necessarily in every national instance where those operators offer gambling products, noting that many states do not license remote gambling.

2.10       References to “unregulated” gambling relate to instances where no licence has been attained to operate in any market for that form of gambling.

2.11       All figures are in US Dollars ($) unless otherwise stated. In the various charts and tables within this document, e = estimated and f = forecast figures.

Chapter 3:

COMMERCIAL ISSUES

3.1          Commercial issues relating to betting on sporting events have been increasingly evident since the turn of the century and have become a significant part of the lobbying activities of elements of the global professional sports sector, and European football bodies in particular.

3.2          In essence, those sporting bodies are seeking both commercial controls over any sports-related products offered by regulated betting operators and to derive direct payments for the use of any sports-related data utilised by those regulated betting companies in the course of their business.

3.3          As part of the examination of the commercial issues surrounding betting on sport events in more detail, some relevant statistical data on both sectors and the issues of most importance in this debate have been provided to highlight and inform that associated analysis and discussion.

The global sports betting market

  1.          i.            Regulated global betting market

 

3.4          The gross gambling yield (GGY) of the licensed and regulated global betting market was $58 billion in 2012, an increase of 19% from the 2007 market level of $48.7 billion. The regulated betting market is forecast to reach $70 billion in 2016, representing a 20% increase from the 2012 figure.[1]

3.5          Betting accounted for nearly 14% of $430 billion in total global gross gambling yield in 2012, with the latter forecast to reach over $470 billion in 2014. Betting similarly accounted for 14% of the $337.1 billion global market in 2007; the latter has grown by 27.5% to reach the 2012 figure.[2]

3.6          The global licensed and regulated gambling market (all products including: betting, poker, casino, bingo, gaming machines and lotteries) is forecast to reach $533 billion in 2017. That would represent a 47% increase from the $363 billion market figure a decade earlier in 2007.[3]

Source: Global Betting and Gaming Consultants (GBGC) and Morss Analysis[4]

3.7          Since 2007, betting has remained relatively static in terms of its global gambling product share (14% to 13.9%), with most other sectors performing similarly or falling slightly to 2013 levels – lotteries (29% to 28.4%), gaming machines (21% to 20%), and other gambling e.g. bingo (3% to 2.7%). Only casinos have shown a rise, significantly up from 32% in 2007 to 35.1% in 2013.[5]

3.8          It should be remembered that the global gambling market has increased since 2007 and so all main product revenues have increased. In addition, there has been an increasing diversity of product platform being offered by operators and in particular through remote services. For example, some lottery bodies are now offering online casino games and fixed odds betting (see later sections).

Source: Global Betting and Gaming Consultants (GBGC) and Morss Analysis[6]

3.9          Whilst betting has seen 5.4% compound average growth rates in the period 2001-13 (just behind lotteries with 5.8%), the casino sector has registered 8% globally, principally driven by Macau which has shown a growth rate of 28.4% as opposed to the US casino sector with 4.1%.

 

Source: Global Betting and Gaming Consultants (GBGC)[7]

3.10       Europe had the largest betting GGY with 41% of global market share, just ahead of Asia with 39%. Japan had the largest national betting market – twice the size of the UK in second place – as a result of betting permitted on horse racing, cycling, motorbike and boat racing.[8]

3.11       Land-based retail betting continues to be the most common form of betting medium used by consumers with alternative online betting platforms presently representing just over 30% of the total global position, a situation which is forecast to remain relatively stable to 2016.[9]

3.12       Asia is expected to lead the way when it comes to growth in overall land-based gambling, with Macau’s casino market seeing a near 19% year-on-year increase to $45 billion in 2013 and mainland China’s state lotteries’ sales rising 18.3% to a record $51.1 billion in that year from 2012.[10]

3.13       The Chinese Sports Lottery took around 42% of national licensed lottery sales in 2013, equating to nearly $18 billion, with online facilitating around 6% of all lottery sales in the country.[11]

3.14       From a global perspective, experts state that “while land-based lottery and casinos still dominate the gambling scene, online real-money gambling and betting are growing rapidly.”[12]

3.15       Global online gambling equated to $40 billion in GGY in 2013 (up 4.4% from $38.32 billion in 2012) and is forecast to reach $50 billion in 2017. Online sports betting accounted for nearly 50% of the overall global online gambling market figure for 2013, equating to around $19.3 billion.[13]

 

Source: Global Betting and Gaming Consultants (GBGC)[14]

3.16       Gross win from the global mobile device gambling market is expected to generate an increasing share of all interactive gambling reaching nearly 44% by 2018 (up from 18% in 2012) and representing around 5% of total gambling.[15]

3.17       This trend is driven by growth in smartphone and tablet penetration, increased device capability and the confidence of users. Average mobile gambling spend per adult in the European Union (EU) is expected to grow from just over €1 in 2010 to over €17 by 2018.[16]

3.18       Betting still accounts for the vast majority of mobile gambling gross win at over 75%, although this is expected to change as both gaming and lottery products are increasingly developed specifically for new remote devices with enhanced capabilities during the period to 2018.[17]

3.19       It is believed that, excluding betting on horse racing, around 70-85% of the bets placed either through land-based or interactive platforms worldwide are on football.[18]

  1.        ii.            Regulated European betting market

 

3.20       The regulated European gambling market’s revenues were forecast to have grown by 1.7% in 2013 to €90.0 billion ($120.3 billion) in GGY having fallen by around 3.5% in 2012. Betting was estimated to have grown by nearly 7% during 2013 with the World Cup boosting revenues in 2014.[19]

 

Source: Global Betting and Gaming Consultants (GBGC)[20]

3.21       The region’s betting market is estimated at around 20% of the overall figure (higher than the 14% global market share for betting products), thereby equating to around €18 billion GGY in 2012.[21]

 

Source: Global Betting and Gaming Consultants (GBGC)[22]

3.22       The European interactive gambling market’s GGY was estimated to be worth €10 billion in 2012 (up 23.5% from €8.1 billion in 2010) and is forecast to rise by 15% to €11.5 billion in 2014.[23]

3.23       Some European countries do not currently have regulated online gambling regimes in place and also restrict retail and/or online betting to monopoly operations and national markets.

3.24       As with each global region, the size and consumer product focus of retail and remote betting markets can therefore vary greatly between European countries depending on legislative positions and because, unlike the retail market, remote operations may have an international consumer base.

3.25       Nevertheless, as the later section on regional product differentiation states, there remains a focus by operators on their local regional market and in this case the core European betting market.

3.26       The British remote gambling framework is one of the larger and more established regulated sectors both in Europe and worldwide; its national regulatory authority stated in 2013 that “remote GGY for operators licensed in Great Britain accounts for approximately 4% of the global total.”[24]

3.27       A sizeable part of remote betting has been relocated outside of the British licensing system, but where such operations have been able to continue to offer services to British consumers if they either have a licence from another EEA country or their licensing jurisdiction fulfils certain regulatory measures leading it to be deemed comparable to the UK framework and placed on a White List.[25]

3.28       This has reduced the British licensed remote figure which will rise accordingly if a planned new licensing approach is adopted; legislation was passed in May 2014 to amend the framework to a wholly national licensing regime to be implemented from October 2014 (subject to legal action).[26]

3.29       However, turnover figures for the British licensed betting environment remain a useful barometer of consumer activity involving an established retail market, notably through some 9,000 betting shops (albeit increasingly driven by gaming machines) and remote betting operations.

3.30       Within that legislative framework, horse racing continues to be the dominant retail (including track-based) betting product, whilst football is some way ahead for remote operations.[27]

3.31       It should be noted however that football has shown the largest relative increase in retail fixed odds betting turnover, up from around £0.94 billion in 2009/10 to £1.16 billion in 2012/13, equating to a 23% increase, whilst horse racing has seen an 11.5% fall in turnover to £5.1 billion.[28]

3.32       GGY has similarly been impacted during 2009/10 to 2012/13, with retail betting showing a 30% increase for football to £293 million and horse racing showing a 17% fall to £697 million.[29]

3.33       Football pool betting has also fallen significantly during the same period, with turnover down more than 29% to £42.1 million and GGY down 24.5% to £37.2 million in 2012/13, with consumers appearing to migrate to alternative fixed odds betting products (retail and remote).[30]

3.34       For the British remote betting market, overall turnover (excluding betting exchanges) has increased considerably from £10.3 billion in 2008/9 to £19.6 billion in 2012/13, a rise of 90%.[31]

3.35       The British licensed remote market is dominated by football which, as with its retail betting outlets, has shown the greatest relative increase in turnover up from around £4.1 billion in 2009/10 to £7.8 billion in 2012/13 (+90%), whilst horse racing has fallen by over 20% to £1.9 billion.[32]

3.36       As a result, the GGY from remote football betting platforms has more than doubled reaching £377 million (+119%) during the period 2008/09 to 2012/13, whilst horse racing has fallen significantly to £112.8 million in 2011/13 from £201.3 million in 2008/09, a near 45% reduction.[33]

3.37       Remote betting on tennis via British licensed operators has also shown a significant rise in consumer interest with turnover displaying an annual increase of 90% to £3.95 billion in 2012/13 (from 2011/12), with GGY likewise reaching a high of £121.6 million, representing a 77% rise.[34]

3.38       That sport accounted for around 20% of the British licensed remote betting market turnover in 2012/13, with football (40%), horse racing (10%) and other sports and financials the remainder.

3.39       Monopolies still control land-based betting and horse racing in France, where operator PMU saw gross gaming revenues (GGR) in 2013 rise by 0.6 per cent to €2.5bn, from turnover of €10.4bn.[35]

3.40       Outside of horse racing, France’s relatively new online betting market (operational since 2010) was also dominated by football (60% of wagers), followed by tennis (15%), basketball (12%), rugby and hockey (3% each), volleyball and handball (2% each) and other sports (3%) during 2013.[36]

3.41       Betting represents an important share of many European markets, notably the UK (39.1%) and France (30%) and where it is also import to note that compound average growth rates during 2001-13 are notably above the 5.4% global average for betting at 18% (France) and 10.4% (UK).[37]

3.42       It is also important to note national differences in the betting product split. In France, betting’s 30% share of the overall gambling market is broken down as 25.4% horse racing and 4.6% other sports. Whilst the UK, betting’s 39.1% market share is 10.7% racing and 28.4% other sports.[38]

3.43       Compound average growth rates in 2001-13 for betting have however been significant in both of these countries and where betting on sports, excluding horse racing, shows 29.2% (France) and 16.1% (UK). Whilst in comparison horse racing represents only 6.8% (France) and 4.8% (UK).[39]

3.44       The Italian online gambling market also shows betting as a significant product representing 23.9% of the overall national market’s gross gambling revenues (GGR) in 2012 and where horse racing accounts for only 1.6% of this figure as opposed to other sports betting at 22.3%.[40]

  1.      iii.            Unregulated global betting market

 

3.45       The global unregulated betting sector is believed to be many times larger than the regulated sector, although without clear and verifiable financial reporting or official oversight it is of course difficult to provide any precise or directly comparable data with the regulated market.

3.46       What can be stated is that INTERPOL, using data from its various operational activities, estimates that the unregulated Asia betting market alone is worth round $500 billion per annum with the worldwide unregulated market at upwards of $1 trillion (turnover shouldn’t be taken as an indicator of profitability, better demonstrated by GGY, but which is unavailable for this sector).[41]

3.47       These unregulated betting operators, as with regulated businesses in other parts of the world, offer products to in-country consumers through land-based facilities and internationally through interactive channels, most notably online platforms, on sporting events around the globe.

3.48       The Chinese, Indian and Southeast Asian markets, where betting is largely illegal, have been identified as the principal operational jurisdictions for unregulated bookmakers. In China, “the ratio of legal bets (i.e. sports betting operated by the state lottery organisations) to illegal bets is 1:10.”[42]

3.49       With the Chinese Sports Lottery having sales of nearly $18 billion in 2013, that would equate to an unregulated sports betting market of around $180 billion per annum in China alone. Whilst unregulated betting in India is estimated at around $60 billion annually, predominantly on cricket.[43]

3.50       In Hong Kong, unregulated sports betting account for an estimated $64 billion in turnover in 2013, which represents more than four times the legal turnover at the Hong Kong Jockey Club and exceeds nearby Macau’s world leading regulated casino gaming revenues of $45 billion that year.[44]

3.51       The proper regulation and enforcement of betting within those jurisdictions would clearly place the Asian region as the preeminent licensed betting market in the world.

3.52       Outside of Asia, the unregulated sports betting market in America (sports betting is only currently permitted in four states, but in practice is principally limited to Nevada) is believed to be somewhere in the region of $380 billion per annum; Nevada’s regulated betting is $3.45 billion.[45]

3.53       Whilst over $9 billion (C$10 billion) is wagered through unregulated bookmaking operations within Canada each year with another $3.5 billion (C$4 billion) through offshore online operators; it is unclear to what extent the latter are unregulated or regulated in other jurisdictions.[46]

  1.      iv.            Regional product differentiation

 

3.54       Whilst betting is a global activity, it should nevertheless be noted that there are important regional, cultural and historical market factors that determine the exact kind of betting products, be it provided by regulated or unregulated operators, which best meet regional consumer demands.

3.55       Product platforms and the types of bets offered therefore vary depending on regional identities and the products offered by Asia-based operators (regulated or unregulated) may not always fully meet the demands and expectations of European consumers, for example.


[1] Gross gambling yield (GGY) equates to stakes minus prizes and is also commonly referred to a gross gambling revenue (GGR)  http://www.gbgc.com/2013/06/global-sports-betting-the-state-of-play/ & http://www.morssglobalfinance.com/the-global-economics-of-gambling/

[9] Ibid

[13] http://www.gbgc.com/2013/04/rise-of-regulated-egaming-markets-rolls-on/ & http://www.gbgc.com/GBGCdownloads/GBGC_whitepaper.pdf?utm_medium=email&utm_campaign=GBGC%20%202014%20White%20Paper&utm_content=GBGC%20%202014%20White%20Paper+&utm_source=Email%20marketing%20software&utm_term=CLICK%20HERE

[16] Ibid.

[17] Ibid.

[21] Ibid.

[25] Section 331 Gambling Act 2005.

[27] British Gambling Commission industry statistics – figures use April to March periods. http://www.gamblingcommission.gov.uk/gh-press/2014/latest_industry_statistics_pub.aspx

[28] Ibid.

[29] Ibid.

[30] Ibid.

[31] Ibid.

[32] Ibid.

[33] Ibid.

[34] Ibid.

[38] Ibid.

[39] Ibid.

[40] Page 7  The regulated internet gambling industry in Italy: business models compared European Scientific Journal August 2013 edition vol.9, No.22

[41] There is no clear financial reporting for the unregulated sector to verify these figures, levels of profitability within the sector, or what these figures exactly constitute, but it is more likely that these figures equate to turnover rather than GGY. Page 4 – Ronald K. Noble, INTERPOL Secretary General speech to the 1st MEETING ON COMBATING IRREGULAR & ILLEGAL SPORTS BETTING 1 March 2011, http://declanhill.com/blog/item/the-fix-is-in & http://www.bbc.co.uk/sport/0/football/24354124