Betfair Sells Australian Interest to Joint Venture Partner Crown Resorts
Betfair Group PLC announced last week that the UK based company has sold to Crown Resorts Limited its fifty percent interest in the Betfair Australia betting exchange business. The sell off gives Crown full ownership and control over Betfair Australia, as the latter was established in 2004 as a 50-50 joint venture between the two companies. The British betting company received AU$10 million as payment plus the early settlement of a shareholder loan extended by Betfair Australia.
Still, UK Betfair will still be involved in the operation of the Australian sports betting business but only as the provider of the betting exchange technology, which is in line with a parallel business-to-business (B2B) agreement signed with Crown. Under the B2B agreement, UK Betfair will receive a percentage of the revenue that will be generated by the now Crown-owned Betfair Australia. Betfair and Crown customers will be unaffected, since they will still continue to enjoy the benefits of the pooled-liquidity arrangements.
Betfair Chief Executive Officer Breon Corcoran commented on the B2B agreement as one that “represents an extension of Betfair’s B2B operations and is a new and profitable operating model for the exchange.” He also mentioned that the company is quite pleased with “the long term agreement that facilitates Betfair’s continued participation in the fast growing, licensed Australian market alongside a partner with a strong local presence.”
Although the Betfair CEO did not elaborate about the company’s decision to give up its fifty percent share of the Australian betting exchange venture, Australia’s Fairfax Media via The Sydney Morning Herald had reported earlier this year that a Crown buy out was in the offing. Accordingly, UK Betfair had been seriously considering selling its 50 percent stake in the Australian venture, since it was not operating as profitably as the British company had hoped for; and not as well as rival Paddy Power and William Hill’s Australian ventures are faring.
Moreover, the report stated that Crown’s Chairman James Packer was keen on pursuing a buyout agreement, since it will give the Australian casino operator full control of Betfair’s Tasmanian bookmaking licence. Now that Crown has succeeded in doing so, Packer’s company currently has the full authority to modify Betfair’s bookmaking model into one that includes the offering of fixed odds betting products in order to be more competitive in Australia’s betting market.
As it is, reports have it that Betfair Australia’s betting exchange business is still struggling in the Land Down Under, and the latest Crown 2014 reports show that the Betfair Australia venture has incurred a net loss of AU$1.8 million to date.
About Betfair’s Betting Exchange Model
Under Betfair’s betting exchange model, the bookmaker does not maintain retail operations or on-site representations as a conventional bookmaker. Betting exchange transactions are serviced exclusively via Betfair’s online facility and via telephone.
Through Betfair’s online betting exchange platform, punters bet on opposing views regarding the possible outcome of a sporting or racing event, with which the bet price is fixed and set by the wagering parties. The model is similar to a binary option offering, in which participants can either buy or sell a backed option.
Betfair’s role is to validate the identities of the punter, to ensure that the parties to a bet exchange have sufficient funds to cover any loss, to introduce measures for consumer protection and in preserving the integrity of the system. As a betting exchange operator, Betfair earns by collecting a commission from the winnings.
