Can digital betting achieve a pay-off?

Two of the front-runners in the UK horse-racing world are staking big money on plans to install an electronic bookmaker in half the country’s living rooms within five years.

Last week, news leaked out that Channel 4 is testing online horse-race betting to run on one of the digital channels that it will launch in November (MW April 9). The scheme is still in development, and will probably not launch until at least the year 2000.

At the same time, Ladbrokes, the country’s largest betting chain, has invested 11.7m in Two Way TV. The interactive television channel is also experimenting with offering punters the chance to back horses interactively from their armchairs, through digital TV.

Ivan Clark, TV buying director at media agency Mediacom, backs the C4 plan: “It’s a smart move. If online betting is going to work there needs to be a lot of racing coverage. That will encourage people to bet as much as possible.”

It is technically possible to launch such a system already, but as CIA MediaVision digital strategist Roger Randall comments: “There are a number of hurdles”. Ladbrokes itself has concerns about Two Way TV. Spokesman Steve Devany says: “We have made a substantial investment in it over the past couple of years, but there is an element of uncertainty as to how profitable the scheme will be.”

The doubts are not only about the business prospects for such projects – there are also moral concerns.

At Two Way TV (TWT) a debate is raging about whether to put an upper ceiling of, say, 5 on individual bets placed on its system. As one company source says: “We will have to be careful about how much people spend. People do not want their overdrafts in their living rooms.”

TWT says it has held talks with a most of the digital terrestrial and satellite players about incorporating the system in their set-top boxes. Last year, it ran a six-month trial in Birmingham where it used BSkyB-style analogue boxes to test the system. TWT allows viewers to play along with non-gambling shows, such as Telly Addicts, as well as C4 racing, which it has also tested.

TWT claims that homes with this interactive content watch two-and-a-half times more TV during the day, and in peaktime is able to boost the audience by one-and-a-half times. When C4 racing was shown on its system, the six per cent share of viewing that the programme usually receives in that slot was boosted to 14 per cent. C4 racing coverage attracts. on average, audiences of 810,000 for each show.

As a TWT spokesman puts it: “The key thing is not to be seen to be encouraging gambling, or to go against the law, or the spirit of the law on gambling, which is particularly difficult because the law is unclear on what can and cannot be done.”

The total size of the UK betting market is 6.8bn a year, of which horse-racing makes up 4.5bn. About 7 million people visit a betting shop at least once a year, according to the sports governing body the British Horse-racing Board.

The thinking at Ladbrokes is that the system will operate on a mass scale. TWT predicts that there will be 8 million digital TV homes by 2005. The bookmaker sees the system developing in a similar way to the National Lottery, with average bets of about 1, where lots of people make lots of small bets.

Others, however, take a more pessimistic view about the spread of digital TV. Research group Datamonitor estimates that the technology will only have penetrated 2.6 million homes by 2002.

Clark agrees with this view and sees online betting as a specialist service. “High-ticket items, not small ones, will make money on digital shopping. There simply won’t be enough people connected. This will be a premium service that will appeal to select groups which will spend heavily.”

Randall also thinks that online betting will not be readily acceptable in the home until viewers get used to spending money through the TV. He says: “This will not be a priority. Broadcasters will want to get services like shopping and banking on screen, before betting. But undoubtedly gambling will be there later on and it will be a lucrative revenue stream.”

The technology is straightforward enough. Viewers need a digital set-top box and a remote control handset. Before the race, they can call up more information on a horse, which is overlayed on the exist ing picture. This gives detailed information on the horse’s form, pedigree and other relevant information.

Then the viewer is invited to click through to another screen where the horse’s name or number, together with credit card details, is tapped in and the stake placed. Confirmation is sent back down the line. The whole process takes just 30 seconds.

But perhaps the system is too easy. It increases the opportunities for hard gambling in the home after years of it being confined to licensed premises. It is potentially more addictive than telephone betting, as it provides greater control and information, and could be seen as a form of entertainment in itself.

That other great institution of British gambling, the pools, is less likely to invest heavily in developing its business through digital TV.

Terrestrial digital company BDB has approached the pools operators to run their games on digital TV, but has so far failed to convince either Littlewoods or Vernons that a tie-up would be worthwhile. They complain that BDB is asking for “large amounts of money” but that there is little evidence players would take up the system. One source says: “At this stage of product development it is a bit early to judge whether it is appropriate for the pools. The traditional pools customer is not exactly at the forefront of technological development.”

The Gaming Board is concerned about a rise of Internet and digital TV gambling, fearing that “large-scale and hard gambling activities could become available in people’s homes with no proper control over gambling on credit or by children”, says last year’s annual report.

An Internet Gaming Working Party has been set up with the Gaming Board’s counterparts in other European countries, and it is due to agree a “position statement” when the parties meet at Helsinki next month.

If online gambling from the living room proves popular, it may attract criticism from the anti-gambling lobby. Bookmakers won’t be very happy either. They have lobbied hard for changes in the law to allow them to improve their betting shops, taking down the shutters, providing food and installing more fruit machines.

On the other hand, it could well turn out to be a lucrative niche service aimed at a small number of high-spending players.

They won’t want this extra investment in their retail estate wasted by encouraging large numbers of their customers to stay at home.