Odds on faster growth firmly in Flutter’s favour

Cantillon: Stars Group merger should allowPaddy Power owner to grow more rapidly

Whether just 20 or a million customers bet on a race with Paddy’s Power, the cost of compiling the odds remains the same.

Whether just 20 or a million customers bet on a race with Paddy’s Power, the cost of compiling the odds remains the same.

 

Three people in Paddy Power owner Flutter Entertainment’s Dublin headquarters compile its horse racing odds.

Much of the work is done the day before the races themselves, after runners and riders are declared, so that they will be available to Paddy Power customers the evening before or early in the morning.

Whether 20 or a million customers bet on those races, the cost of compiling the odds remains the same. So the more clients Paddy Power recruits, the more money it makes. This is the particularly true now that much of its new business comes via its mobile and on-line apps.

In fact, this is the logic behind the digital betting business as a whole. It is possible to recruit large numbers of customers without opening lots of bookie shops or buying multiple racecourse pitches, so essentially the amount of money you make multiplies as you sign up more customers.

Betting opportunities

Flutter’s own logic follows this. Its merger with the Stars Group will save it £140 million sterling a year, much of this will come from combining back office and trading operations, essentially cutting the cost of offering horse racing and other betting opportunities to customers.

At the same time, the move will grow Flutter’s businesses in all its core markets: the US, where it will add Fox Bet to existing operation, Fan Duel; Ireland and Britain, where Sky Bet will join Paddy Power and Betfair; and Australia, where Easybet will be added to Sportsbet.

So the combination of scale and savings should allow the business to grow more rapidly.

In fact, its chief executive, Peter Jackson, stressed yesterday that the merger was about expanding in all its markets, not just the US, the territory that some observers assumed was the main target of the deal.

Flutter calculates that the global betting market is worth $450 billion and 89 per cent of it has yet to convert to digital. If that is correct, the company’s growth potential, from this juncture at least, looks close to endless.

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