Has the sun set on Sun Bets?

Last month marked the one year anniversary of the high-profile launch of Sun Bets by Tabcorp in partnership with News UK. The intention was to take the UK sports betting market by storm by capitalising on the power of The Sun brand, disrupting established brands and stealing market share. However, recent figures revealed things haven’t exactly gone according to plan.

One year down the line and the online sportsbook has clearly failed to gain significant traction in the competitive UK market, with the Australian gambling giant revealing its joint venture with News UK recorded turnover of $203.6m (£123.4m) and revenue of just $4.6m (£2.8m) in FY17. The business also reported an operating loss of £28m.

Melbourne-based Tabcorp, which has payment obligations of £11.1m to News UK in FY18 and £16.5m in FY19, said it could terminate the agreement in 2019 if Sun Bets does not achieve revenue equivalent to the minimum fees payable. “The initial performance of Sun Bets has reminded us of the challenges of start-ups,” Tabcorp’s chairman, Paula Dwyer, said in the company’s annual report, while CEO David Attenborough labelled the opening year’s performance as “disappointing”.

Taking stock

So where did it all go wrong? Cracks started to appear publicly when the firm announced a £13m EBITDA loss in February 2017 as managing director Jamie Hart also quit to join Romanian operator Superbet. “There was a certain amount of arrogance from Tabcorp,” Hart says of his departure. “They thought a betting site is the same in the UK as it is in Australia, a one-size fits all.”

Hart claims that while in a UK-facing sportsbook 50% of profit is from gaming and the other 50% from sports, it’s a very different story in Australia. Down Under, where both online gaming and in-play sports betting are illegal, the only real overlap comes from pre-match sports betting, with horseracing dominating in Australia but football king in the UK.

“You are turning up with a sportsbook that doesn’t really translate, thinking you can enter the most competitive market in the world with an inferior product,” Hart concludes.

Sun Bets made its debut in the UK market last August

One analyst, alarmed at the amount of departing staff, tells EGR: “If it were me, I’d just find a way to pack it in as cheaply as possible and send everyone home.”

But despite monetary losses, staff setbacks and poor press coverage, Sun Bets doesn’t necessarily see its first year in business as a failure. “We don’t actually see anything as going wrong,” says Sun Bets executive director Bernadette McLoughlin.

“We had two objectives in the first year: one was for Tabcorp Australia to expand beyond its domestic borders and get a betting operation up and running. The other objective from a News UK point of view was to enter into the gambling sector.”

While the company has put on a brave face in front of the media, there is some admittance that costly mistakes were made early on in the sportsbook’s development. In June, Tabcorp confirmed the company was to close its customer contact centre and bring all operations into the Shard headquarters – a decision that led to heavy job losses.

“One of the disappointing parts was that we probably front-loaded the business too quickly. That added costs to the business that we couldn’t justify,” says McLoughlin.

As a result, Tabcorp resized the company in order to cut down operating costs. “We took a step back to recognise that eight months into trading, but you still have to be brave in taking the right decisions and News UK also saw the sense in it,” McLoughlin adds.

We reacted quickly and obviously while nobody was happy about it, it was a business decision that needed to be taken.”

Tough competition

Betting industry consultant Liam Casey wonders whether that decision would ever have been necessary had Tabcorp not severely “underestimated the sheer competitiveness” of the UK sportsbook market. He also criticises Sun Bets for focusing on digital when the majority of its target audience are more comfortable with retail betting.

Director of betting and gaming at News UK, Tom Ustunel, vehemently denies the accusations that the firm was complacent enough to underestimate competitors. He points to Sun Bingo which overcame similar issues to become an established market leader.

“In terms of the losses we’ve made, it’s a tough market. It’s incredibly hard to launch a sportsbook and we know that it’s probably one of the most competitive industries in the world,” Ustunel says. “No-one went into this expecting to make millions off the back of the first year. The main thing on our to-do list was just getting it off the ground. We knew how competitive the space was, we’ve had Sun Bingo for 10 years so we know this industry. We’ve operated in it and we know how the competitors are always hot on our tail.”

“In terms of the losses we’ve made, it’s a tough market. It’s incredibly hard to launch a sportsbook and we know that it’s probably one of the most competitive industries in the world” – Tom Ustunel, director of betting and gaming at News UK

Many commentators feel the product itself was the fundamental issue with Sun Bets, and that hiding behind a partnership with a popular and established media brand was not enough to mask the obvious technical difficulties. Some punters also complained the sign-up process was flawed and took too long, causing them to simply look elsewhere.

Simon French at Cenkos Securities describes Sun Bets as clunky, with an extremely complicated and problematic sign-up process when the sportsbook first launched. “It’s all about product. The amount of people that have jumped ship from Sun Bets tells me they had next to no faith in the product and there’s only so far a brand can take you,” he says.

“Sky Bet wondered for years why people wouldn’t bet with them. They were an established brand in people’s homes, on their TVs in their living rooms. It was only when [Sky Betting & Gaming CEO] Richard Flint came in and said ‘Look, if we’re not going to be the best in class then what’s the point in all this?’ And that’s when things started to turnaround.”

Cross-sell opportunities

Despite experiencing plenty of teething problems since making its debut, Sun Bets is confident it can still produce a turnaround. The current focus is tech improvements and a plan to cross-sell more players from The Sun’s fantasy football product, Dream Team, into its real-money sportsbook.

The Sun Bets team say they are still confident the brand can make a splash in the UK market

Going forward the Dream Team product will include live odds and widgets promoting Sun Bets during the new football season after the firm admitted it needs to make better use of the powerful News UK brand. The integrations are designed to pull Dream Team customers over the line and into sports betting, where they will be encouraged to set up an account with the “new and improved” Sun Bets.

The plan sounds good on paper. Sky Betting & Gaming, for example, has enjoyed massive success from cross-selling into Sky Bet with its free-to-play predictor game, Super 6.

However, while Sun Bets itself is confident in its long-term future, 60% of EGR readers voted in a recent poll that a potential turnaround was extremely unlikely. And French agrees: “Sun Bets can use a product [Dream Team] that already has an established audience as much as they want; it’s not going to be that easy to implement when their demographic prefer to bet in a retail environment or already have accounts with other firms.”

But the team behind Sun Bets, at News UK and Tabcorp remain sanguine of an upturn in fortunes for FY17 as they prepare to cross-sell the product to more than one million Dream Team customers. However, people like Hart will take a lot more convincing. He concludes: “If cross-selling was that simple, Tampax would be making Pinot Grigio.”