SBC News Voice of the Sports Betting Industry
Outsourced pricing and risk management services have delivered multiple positives for sports betting operators, but they have also created an environment in which many struggle to differentiate themselves from the competition. However, that is beginning to change and there are now ways that sportsbooks can utilise the latest iterations of outsourced services to develop strong local market offerings that really stand out from the crowd.
To find out more, SBC News spoke to John Humphreys, Product Manager at Sporting Solutions about how operators can address concerns over localisation and being competitive in their target market whilst still leveraging the benefits of outsourced services.
SBC: What challenges are you seeing when it comes to operators being able to use pricing and risk management as a way of being competitive in their local marketplace?
John Humphreys: When we speak to operators, we know they want to use pricing and risk management as a way of standing out and competing. That’s not just on the top global competitions but on events with strong local interest, they want to be priced early, bet to competitive margins, and to take large bets relative to the overall global standard for the event.
With their larger limits and more competitive margins on their local content, operators are also seeing local liabilities that are differing from the global marketplace and therefore need to apply pricing that is relevant to their local liability rather than following the global liability that they are happy to follow for top tier events.
Having an automated risk management system that offers a localised price that fits with their unique circumstances and may be completely different to the global market is a problem they have and that’s something we’re trying to provide a solution for.
All operators are under pressure to be competitive with their offer, whilst also maintaining streamlined trading and risk teams to manage this. As a result, manual effort that could be adding value and differentiation to local content via specials and player props is instead focused on manual risk management tasks. Sporting Solutions can help automate many of these processes through Odds Services Plus.
SBC: Do you also see difficulties and inefficiencies for operators who are present in multiple jurisdictions or multiple states?
JH: Lots of operators want to operate in multiple countries in Europe or multiple states in the US, but the business they receive in the different jurisdictions varies from sport to sport.
To have pricing that reflects the business that you receive, or you anticipate receiving, rather than homogenised across the board can be of significant benefit. We’re not talking about wildly differentiated pricing or risk management, but subtle, automated optimisations based on the local elements of your trading strategy can make a big difference.
Operators present in multiple jurisdictions at times have collated their liabilities together, risk managing a single liability rather than multiple liability levels. Operators are always seeking ways to make additional margin gains and are utilising jurisdiction-based pricing and risk management to make these gains.
SBC: Does the boom in popularity of player props and statistics-based betting provide further challenges? Can more effective automated pricing and risk management tools help this sector to grow even further?
JH: We know these markets are difficult to price and that even some of the biggest players who almost exclusively price in house, do outsource these markets.
It’s then very difficult to ‘down the chain’ risk manage this content, especially if you want to offer it at scale. If you’re offering pre-match and in-play player props across the full slate of NFL and NBA games on a Sunday, the effort required to risk manage it is huge, particularly given you can expect some sharp action.
That leads to lots of manual effort for the operator in terms of risk management, but also to a very conservative approach with low limits and defensive suspensions, which creates a poor customer experience.
The ability to have first-level automation and optimisation of pricing on these markets when you receive business allows them to be offered with more confidence. We’ve rolled out player props across US sports this year, compatible with Odds Services Plus, providing the ability for operators to have their prices automatically refined as they see specialised business.
Player props are a huge part of the industry now and the ability to apply more effective automation will allow operators to differentiate. We know many operators choose to only offer one side of these markets for risk management reasons, but if they’re going to get automated optimisation of prices based on their business the prospect of offering two-way propositions on a broader range of markets will increase.
SBC: When talking about differentiation via risk management, do you believe this is something that is being properly utilised? Is there an appetite for this among operators?
JH: Is it being used effectively at this stage? I would say not. When we speak to operators, they are keen on this angle to differentiation, taking a more refined and less defensive approach. However, many don’t have the tools available to them to do this in a cost-efficient way. I think the motivation here is twofold.
Can operators incentivise skilled players to bet at the right times, knowing that the information will be leveraged for real-time price optimisation which in turn will drive margin? At Sporting Solutions that is something that we’re allowing operators to do via Odds Services Plus, as we receive valuable information from the activity of bettors who we can automatically profile as highly skilled.
Secondly, with a strong emphasis on driving turnover, operators want to be more confident that if resorting to stake factoring, they are making the correct decision. Currently, there’s no doubt that operators are leaving turnover on the table through overly defensive stake factoring, often because of a lack of tools to help them. There’s going to be a need to reverse that trend and the ability of our automated tooling to quickly assess player skill and likely long-term profitability can certainly help.
SBC: Do you anticipate any regulatory pressures that are also likely to impact risk management strategy?
JH: We are seeing examples of this already – a desire from regulators to be seen to be treating players more equally, more fairly and that’s definitely influencing our product strategy.
When we look at the US, even though the market is still very young, we’re starting to see the media question the sort of stake factoring that happens in the UK or in Europe. So, who knows whether there will be legislation or if someone in the US is going to take a decision to be seen as the operator that offers all players an opportunity. The aggressive bonusing race also looks to be slowing down, so operators will be looking for ways to differentiate.
We are owned by FDJ, which operates in France, where they cannot limit customers and they have to play everyone to the same limit. We also work with other lottery-run sportsbooks around the world which take the same view even if the regulation doesn’t state they have to treat everyone equally.
With the global tightening of costs, bonuses being reduced and responsible gambling principles becoming mandatory or a tool for operators to differentiate themselves from their competitors, they will consider moving to a ‘treat everyone equally’ approach in the coming years.
We’ve seen this in Australia for a number of years now, in terms of the minimum bet guarantees that they have. Australian operators are some of the best in terms of profiling customers, particularly on horse racing, because the regulations mean they have to accept sharp action. If they didn’t use that information and manage risk effectively, they would see their profits impacted significantly.
