Taking flight: How Sky Bet plans to conquer Europe

In 2014, former Chancellor of the Exchequer, George Osborne, laid out plans to rebalance the UK economy away from London and create a new economic stronghold in the north of England. While this so-called ‘Northern Powerhouse’ proposal was met by many sceptics and naysayers, a certain Yorkshire-based online gaming company has been doing as much as anyone to make Osborne’s vision a reality.

Sky Betting & Gaming (SB&G) – a lean, fast-growing and innovative digital business – has over the past two years become a major employer in the north. The firm increased its headcount by 37% in FY16 and doubled the number of tech-focused employees in the 12 months which followed its buyout by CVC Capital Partners in early 2015. The company now boasts more than 1,000 employees across its two main hubs in Leeds and Sheffield.

And the recruitment drive, which continues today, perfectly reflects the company’s current upward trajectory. The firm is growing at a rapid rate – revenues were up 51% for the year ending June 2016 on the back of 36% growth the previous year, putting it firmly among the industry’s UK top five. And such has been SB&G’s rapid rise in recent years that it’s easy to forget the firm’s humble beginnings.

Back to the start
The company was founded as the Sports Internet Group back in 1999. The Group, which contained among other things a small betting arm called Surrey Sports, was a year later purchased for £300m by the then BSkyB. Richard Flint, SB&G’s current chief exec, joined in 2001 and a year later the betting arm was rebranded to Sky Bet.

Richard Flint, Sky Betting & Gaming CEO

However, only in recent years has the operator really managed to leverage the strength of the Sky brand, with efforts such as its Super 6 product pushed via Sky’s Soccer Saturday show and its headline sponsorship of the Football League, which is screened across Sky Sports’ channels. “We are basically like a 15-year overnight success story,” Flint muses when he speaks to EGR.

The CEO is running in and out of meetings across London, fresh from an analyst presentation in the UK capital held just a few days earlier. This is an aspect of his job – largely a consequence of his shift from MD to CEO following the CVC purchase – which has become increasingly important as the firm becomes a more corporate, large-scale business. Indeed, one of the worst kept secrets in gaming is SB&G’s plan in the near-to-mid-term to go public and list on the London Stock Exchange.

Evolution, not revolution
Under the leadership of Flint, SB&G has firmly secured its place among the UK online betting elite. But having limited its operations solely to its home market, the operator is now ready to spread its wings and expand into new territories. And based on past success, operators in SB&G’s targeted Italian and German markets might be taking a nervous look over their shoulders.

SB&G’s international strategy can simply be described as: ‘If it ain’t broke, don’t fix it.’ According to Flint, the operator will stick to its winning UK formula by utilising the strength of the Sky brand in other European countries. “The model in Italy will be essentially the same but, as was the case in the UK, it takes a while to get that right. So we will invest in a modest way,” he says.

“In Germany, it will also be exactly the same as in the UK and Italy, although probably a year behind the latter,” he adds. “The regulatory situation is complex and we are keeping a close eye on that, but the received wisdom is that we can launch an online sportsbook and pay tax without encountering too many issues. Exactly how we do that, and what else we might do, is a bit unknown and is one of the first things our new MD is tasked with.”

And SB&G has hired some big industry names to lead its international charge. In Italy, Paddy Power’s former Italian MD, Giovanna D’ Esposito, has taken up the same role at Sky Bet Italia, while the firm recently secured the talents of Deutsche Telekom VP of gambling and lotteries, Jochen Weiner, to become its Sky Bet Deutschland MD.

“We will be investing in a modest way rather than spending lots of money on a big bang launch” – Richard Flint, CEO

With an experienced international leadership team in place, the operator may have been tempted to go all guns blazing in Italy and Germany. Instead, Flint says the firm will take a more prudent and patient approach. “I think it will be incremental, steady build rather than anything dramatic,” he says. “But that is what we have done in the UK and we expect it to work in Italy as well.”

During the summer SB&G took its first tentative steps into Italy, launching the company’s popular free-to-play Super 6 product and has since released real-money sportsbook and gaming products. This free-to-play toe-dipping was recently replicated in Germany in partnership with Sky Deutschland; although a real-money debut in that market still appears some months away.

Super 6 has proven to be a formidable customer acquisition tool in the UK for the Sky Bet brand and Flint says he has been pleased by the initial response to the Italy and Germany-facing versions thus far. “The uptake is what we were aiming for and we are happy with the way things are going, particularly in Italy.

“But we only plan to ramp things up – especially with our marketing – very gradually. So we will be investing in a modest way rather than spending lots of money on a big bang launch,” Flint adds. “And we won’t be focused on revenue or customer number metrics initially either. It is really about getting the product and proposition right, building a relationship with Sky Italia and Sky Deutschland, and having the right trends rather than a specific share of revenue target.”

Taking the next step
In early November, SB&G made its real-money sportsbook live to the general public in Italy following a successful beta testing period to a select number of pre-registered customers. SkyBet.it might be limited in the number of betting markets and product features it currently has on offer, but it is arguably everything UK customers have come to expect from the operator – slick, easy to navigate and built with mobile front-of-mind.

Sky Bet will be up against some stiff competition in Italy and some might argue it has arrived a little late to the party. The operator originally applied for a remote licence way back in 2012 but waited nearly four years to go to market. During that time, bet365 accumulated roughly a quarter of the country’s online sports betting market, while indigenous brands such as Eurobet and Lottomatica have also acquired sizeable shares. Wrestling some of this away will be no easy task.

But it can also be argued that there is still room in Italy for those with a strong brand and product. The Italian online gambling market recorded revenues of €821m last year, making it the second biggest regulated market in Europe. In addition, the country’s recent move from a sports betting turnover levy to a 22% tax on gross gaming revenue could actually prove SB&G’s delayed entry to be a rather astute move in hindsight.

“We are like a 15-year overnight success story” – Richard Flint, CEO

As part of the CVC deal, Sky kept a 20% stake in SB&G and as such enables the operator to continue to utilise the Sky brand. And this could be a major point of differentiation in international markets, particularly against foreign rivals such as William Hill and Paddy Power. Sky Italia has just shy of five million subscribers and airs hundreds of Serie A, Premier League and Bundesliga games every year. This means SB&G should have less need to invest as much time and effort in establishing a brand proposition. The brand already resonates with its target audience.

“It [the Sky brand] is very similar but probably has a narrower and slightly more premium customer base in Italy and Germany [than in the UK]. I think this can only be positive and helpful,” Flint claims. “But it’s fundamentally the same as it is in the UK with Sky Sports – people love the brand and it has got a strong connection with sport and technology, which are two key aspects for us.”

But will SB&G complement the Sky brand in Italy and Germany with a major sponsorship deal similar to its Football League agreement in the UK? “You never know, we might do it one day,” Flint says. “It’s about getting the product right, the marketing machinery working and I think once we’ve done that and seen strong trends and growth, then that is the time we might ramp-up the marketing. It would be that order of things rather than the other way.”

Tried and tested formula
To aid its UK growth and push into new markets, SB&G opened up two new offices in 2015 in Rome and Sheffield, with the latter adding weight to its growing Northern Powerhouse tag. The selection of Sheffield was for its close proximity to its main hub in Leeds but also to enable it to tap into a new talent pool, including those graduating from the city’s two large universities.

SB&G’s long-serving chief technology officer, Andy Burton, says collaboration across multiple locations in both the UK and abroad has proven to be one of the most difficult tasks in preparing for international expansion. “The things that have contributed to our success – lean, face-to-face, co-location – don’t apply in the same way for Italy, so we have had to put more effort into solving those problems,” he says.

“Sometimes it’s just about jumping on a plane, other times it means developing new collaboration tools or spending a lot more time communicating to overcome cultural difference. There’s room for improvement, no doubt about that, but we are definitely on the right path and are now getting much better integration between the UK and the Italy team.”

Both Flint and Burton reiterate their desire for SB&G to stay true to its roots as a technology-first company. The operator decided at an early stage that all employees would ideally be both tech-savvy and product-led, taking inspiration from companies like Netflix and Spotify, rather than the bookmaking industry.

Andy Burton, Sky Betting & Gaming CTO

For Burton this means being lean and agile, creating a DevOps business culture and hiring people who, while they might not initially have much knowledge of the betting sector, understand the technology needs of an online-only business.

And the results speak for themselves. Mobile accounted for 75% of revenues last year – up from 65% during the previous 12-month period – while on the betting side of the business the figure is closer to 85%. The operator has also consistently been first-to-market with a host of innovative features, many of which have been replicated across the egaming sector, including Touch ID, single sign-on and, most recently, Apple Pay integration.

“The tech guys didn’t think single sign-on was a big deal at the time but from an external point of view, people really latched on to that because nobody else was doing it,” Burton explains. “It was just one of those little features that
makes life easier for the customer. One of the good things about it is that most of those ideas are coming from right across the business – it is not a top down thing at all.”

“Things like that just really improve the customer experience and that innovation isn’t generally coming from inside the sector – it’s coming from other adjacent industries. That is why it’s important for us to bring people in with that experience,” Burton adds. “We take a lean approach whereby we do the minimal amount to get the idea in front of the customer and gain some feedback as soon as we can. The ideas that work well we do more of it and have the ability to measure success all the time.”

Just the beginning
This agile approach to product development forms a key component of the operator’s DNA and culture. However, as SB&G looks to expand overseas and further increase its UK headcount, it appreciates that maintaining that same atmosphere and level of creativity may well become a slightly more difficult task.

However, Burton says the company is well-placed to minimise this risk. “When I joined Sky Bet it was a very small business and I’ve seen companies scale up in the past and lose some of the culture and ability to do innovative stuff they used to have,” he says. “So I’m really conscious of this, especially when we’ve grown so rapidly over the last 18 months. There are a few answers to this: one is that the culture we have is really about openness and collaboration, and the other part is the organisational structure we created.”

This structure – an idea taken from other digital companies and replicated within SB&G – includes breaking up the business into smaller parts and working in tribes, as opposed to silos like marketing, technology and product. These mini-business tribes – such as Bet, Customer Ops, Data and International – consist of small, co-located squads of people focused on specific product areas and working towards shared objectives. Real-time, personalised, one-to-one marketing is the current primary focus for these teams.

“Most [innovation] ideas are coming from right across the business – it is not a top down thing at all” – Andy Burton, CTO

While SB&G’s rapid growth might place pressure on some elements of the business, it also offers new opportunities. With the weight of CVC behind it, the operator has been able to accelerate its growth plans, primarily due to increased investment in platform and infrastructure.

It now also has far greater control over its own destiny with more of its technology stack owned in-house and access to exclusive content following its recent acquisition of CORE Gaming.

As a result, Flint says the company’s current position means he is content to sit out the current wave of industry consolidation; and perhaps even benefit from the situation. “I think it’s certainly an opportunity for us, the fact that everyone else is merging or talking about merging,” he claims.

“Inevitably that takes away some of the focus and our focus is very much on execution. So I think there are some opportunities for us from consolidation and it’s not something we really see ourselves participating in for the time-being.”

Flint’s readiness to let competitors play the consolidation game while SB&G goes it alone speaks volumes. While those that know the CEO may describe him as a humble and understated man, he’s certainly not one lacking in ambition or determination to push SB&G through its next phase of growth.

And if the operator’s record in the UK is anything to go by, rivals in Italy and Germany should take note that there’s a new player in town.

This feature first appeared in issue 151 of EGR Intel