Betfair warns of exchange “race to the bottom”
Operator’s head of exchange pricing Rich Hayward says the sector must not make the same mistakes as poker
Betfair has issued a warning to its exchange rivals following the recent flurry of offers and lower commissions, suggesting the current “race to the bottom” is not sustainable for the sector.
Betdaq recently cut its commission rate to 2%, while Matchbook is commission free on horse racing through the Cheltenham Festival and charges as little as 0.75% commission on some bets.
However, speaking to EGR, Betfair’s head of exchange pricing Rich Hayward warned the exchange market “can’t survive at those levels”.
“To support a vibrant exchange and support an ecosystem with enough recreational players coming in, you need to compete with the marketing of the big sportsbooks,” Hayward said. “So you have to have the margin from your winning customers to generate that revenue to reinvest in the exchange.
“We’ve been able to do that in recent years but if it becomes a race to the bottom, it would probably benefit us because we’d be able to survive that, but it’s not sustainable business for anybody.
Hayward said Betfair was constantly looking at its 5% commission base rate, but suggested the firm would be measured in any changes, with higher charges for winning bettors crucial to balancing the ecosystem.
The operator has also been experimenting with 2% commission on Premier League games over the last six months as well as 2% Tuesdays for horse racing commission, but said the data from these promotions is still being evaluated.
“Poker is the key one to learn from and not make the same mistakes,” Hayward added.
“Our learnings are that you have to have a monetization of your winning base to keep that reinvestment going. Anyone can get the winning bettors on site, but getting the recreational flow in an incredibly competitive sports betting market is difficult.”
Cenkos analyst Simon French said Betfair had little need to get involved with the current pricing battle because “liquidity is still king”.
Hayward was speaking to EGR ahead of a wider feature on exchanges for this month’s EGR Intel magazine.