Best Odds Guaranteed Plus: a boost too far?

Now that bet365 has joined Ladbrokes in offering Best Odds Guaranteed Plus, Julian Rogers investigates if rivals are likely to fall into line with this head-turning price boost and whether online operators just see racing as a recruitment tool. 

In today’s cut-throat world of bookmaking, best odds guaranteed (BOG) has become so ubiquitous among the major operators it’s reached the stage where customers simply expect it when having a flutter on horse and greyhound racing.

But eyebrows were raised in April when Ladbrokes broke rank and rolled out BOG Plus on all UK and Irish horseracing for its new and existing online customers.

With regular BOG, if you back a horse at 4/1 but the starting price (SP) is bigger, for instance 9/2, the bookmaker pays you out at the longer odds (9/2) if your selection wins. Yet the same situation with BOG Plus would result in a payout one further rung up the fractional odds ladder – 5/1.

The ‘Magic Sign’ hailed BOG Plus as a groundbreaking differentiator and enlisted the services of flat jockey Frankie Dettori to advertise the odds-enhancing offer.

Almost six months after Ladbrokes went out on a limb with BOG Plus, industry leader bet365 became the first rival to throw its hat into the ring with the same offer, although the Stoke-headquartered firm has no cap on stakes (Ladbrokes limits bets to £200).

“Bet365 will not allow themselves to be uncompetitive,” states Warwick Bartlett, chief executive of Global Betting & Gaming Consultants and ex-chairman of the Association of British Bookmakers.

“They have the resources to match, and go further as so much of their income is outside of the UK. In a race to the bottom they will be hard to beat.”

While bet365 gatecrashing Ladbrokes’ party raises the prospect of other operators following suit – mainly out of fear of losing more ground to the sector’s online behemoth – BOG Plus has come under fire as an offer.

Devon-based independent bookmaker James Patrick says: “BOG Plus is a stupid idea but not a surprising innovation from online operators who only see racing as a tool to drive customers to their fixed odds products like online casino and slots.”

Eroding margins and higher costs
Bartlett uses a shopping analogy to echo these sentiments: “Supermarkets sell bread and milk at a loss because we all use those basic foods, and once we are in the shop we buy other products that have more margin. BOG Plus is clearly a loss leader in the hope that the gambler will play on the casino where the margins are built in.”

Even before BOG Plus, horseracing’s betting margin was increasingly being eroded with the introduction of the UK’s point of consumption tax and the authorised betting partner (ABP) initiative instigated by the British Horseracing Authority (BHA).

Furthermore, costs associated with data and streaming rights have soared, while new customer offers and other concessions are tossed around like confetti at big meetings.

At this year’s Cheltenham Festival a succession of winning favourites contributed to estimated industry losses of £60m.

“Lunacy” is one word Stan James’ former head of public relations, Rory Jiwani, uses to describe BOG Plus.

“In a Cheltenham Festival race a 20-1 shot in the morning could easily win at 33-1 and then you're looking at a 40-1 payout. Bookies need unfancied outsiders to come in – it’s plainly bonkers to then have to pay out substantially more when that event occurs.”

During Ladbrokes’ first quarter trading update chief executive Jim Mullen said he wanted no part of the “race-to-the-bottom offers” seen at Cheltenham and that rivals had “abandoned bookmaking principles” as they chased customers. He added that some operators “lost their mind” during the four-day meeting.

So it was perhaps understandable some observers were taken aback when Ladbrokes immediately took BOG to the next level.

Independent bookie Patrick says: “The neck of Ladbrokes to use it [BOG Plus] after their CEO chastised their competitors for abandoning bookmaking principles at Cheltenham shows how desperate they are to claw back lost ground to bet365.”

When quizzed in October by Morgan Stanley analyst Vaughan Lewis as to whether BOG Plus was profitable, Mullen’s response was yes, although he conceded that you need to “give away some margin” to make it work.

With BOG Plus, Ladbrokes is patently targeting recreational gamblers, yet it’s debatable whether this kind of inducement is actually what horseracing bettors want.

After all, many firms have attracted criticism among gamblers for quickly restricting or closing accounts and the more studious, price-sensitive horseracing punter is now persona non grata. It clearly suggests the industry only wants ‘mug’ punters reeled in by all manner of offers and free bets.

In August a new online bookmaker, Black Type Bet, entered the crowded betting arena with a pledge not to restrict or ban punters for winning, alongside a guarantee to lay any price on horseracing to lose at least £500. Crucially, the FSB-powered horseracing specialist doesn’t have BOG, let alone BOG Plus.

“It’s refreshing to see a company offering prices that are actually available,” says Stephen Harris, racing editor at Betting Expert and an ex-senior trader at spreadbetting outfit Sporting Index.

“Punters who have been around a long time would sooner know they can have £200 on Cue Card at evens rather than £5 at an enhanced 10/1 with the bet profits redeemable in free tokens.”

While Black Type Bet swims against the tide with a more traditional bookmaking service, sans BOG, all eyes are on whether any of the other market leaders will cave in and offer BOG Plus.

Where are the profits for the BHA and the bookies?
After all, doubters didn’t think the majority of major bookmakers would eventually go with BOG yet they did.

“Others will reluctantly follow suit if they see their customers walk,” Bartlett stresses. This is a view shared by Patrick: “I expect within a year to be taken seriously as an online operator you will have to offer BOG Plus because once one does it, they all have to do it.”

That would mean the major players all hawking a ‘me-too’ offer that could effectively wipe out profits altogether on horseracing.

However, a concession like this is probably a drop in the ocean for the likes of privately-owned bet365. With pre-tax profits of £448m in its most recent fiscal year and £1.1bn of cash reserves, the online giant is more than equipped to absorb the hit and continue a price war in order to obliterate the competition.

Nevertheless, it is all rather troubling for the so-called ‘Sport of Kings’ as ABP deals, which so far include bet365 but not Ladbrokes, are based on a percentage of gross profits rather than turnover.

“If bet365 doesn't make a profit on racing then racing won't get a penny,” Jiwani warns.

BOG Plus may be dismissed as a nonsensical giveaway amid an avalanche of race-to-the-bottom, loss-leading offers, but there is no doubting this is a golden period for casual (losing) horseracing punters.

Indeed, 20 years ago a bookmaker trebling the odds for one winner on a ‘Lucky 15’ bet was deemed a generous firm.

“There has never been a better time to be a horseracing punter, especially to relatively low stakes,” suggests Joe Saumarez Smith, non-executive director at the BHA and a consultant to the online gambling industry for 18 years.

Ladbrokes, bet365 and Black Type Bet all declined our requests for comments for this feature, so quite where all this price boosting ends is anyone’s guess.

Perhaps BOG Plus will be trumped by BOG Super Plus whereby the odds jump two rungs up the ladder. That probably would be a step too far for everyone.