Section e: Punting on the web - Gambling sites in Britain are thriving, winning customers from abroad and attracting a new breed of punter who wouldn't be seen dead in a smoky betting shop. The rich pickings are tempting e-trepreneurs from the US, where a

Section e: Punting on the web - Gambling sites in Britain are thriving, winning customers from abroad and attracting a new breed of punter who wouldn't be seen dead in a smoky betting shop. The rich pickings are tempting e-trepreneurs from the US, where a

by
Last Updated: 31 Aug 2010

Visit the average bookmaker's and you'll find a scene unchanged in half a century. Cigarette smoke, vinyl flooring, and badly dressed men scribbling on scraps of paper, folded newspapers bursting from their back pockets. And no women, unless you count the odd desperate case, begging hubby not to put the baby's milk money on Regrette Rien in the 3.15 at Newmarket.

It's a caricature, but only just. These punters are not young, not well off, and the modern world seems to be passing them by. Predicting the future is a bookmaker's skill, but you wouldn't have to be Nostradamus to see that the internet, with its capacity for taking money off people in their homes, might be a better way to run a betting business. It's certainly a thought that has occurred to a growing number of e-trepeneurs, as the proliferation of gambling sites on the web testifies. Some, like the personal betting site flutter.com, have even crossed the Atlantic to set up in the UK.

The rise in online betting, though, has less to do with vision than with tax. Since 1966, the Government has sliced 6.75% betting duty off any stake money taken by off-course bookmakers: it is worth nearly pounds 500 million a year. The bookies in turn took 9% off their customers, recouping the duty - a levy to support the racecourse industry - and a handling charge.

But in the wider world, especially where bookmaking is illegal, the idea of paying tax is unknown. British bookmakers have long had offshore operations through which they offer tax-free betting to overseas telephone customers, but British punters were not welcome. A 1981 law made it illegal for offshore bookmakers to advertise their services here. But in 1998 the renowned British bookie Victor Chandler established a telephone bookmaking service in Gibraltar and aimed it straight at the British punter. He did it, he said, because a drop in Irish betting duty had lured his customers across the Irish Sea and he wanted to compete.

Chandler has a web site, but freephone lines are his real weapon. Mark Blandford's sportingbet.com is, however, the real thing. His pitch, rammed home on the site, is that sportingbet.com is thoroughly, reliably British - despite not requiring punters to pay British betting tax. He has achieved this by setting up camp in Alderney, in the Channel Islands, whose administration created an offshore bookkeeping licence specially for him. Before that, he had a small chain of bookmaker's shops, based in Hereford. But he sold them and invested the pounds 100,000 in the new technology, taking his first online bet in 1998.

Today he has a company worth pounds 150 million. People arriving at his site from the web can do the whole operation: open an account, pay money in and place a bet. The minimum is pounds 5. He won't take a bet where the payout would exceed pounds 20,000. 'We have deliberately, from a risk management point of view, positioned ourselves towards the small to middle bet,' he says.

The site explains in detail how to bet, not just for new UK punters but for customers from abroad, who may be betting legally for the first time.

He does not believe that he is creating new gamblers. Most are just changing their source of supply. 'I am sure we have a lot of people in other countries who have switched from an illegal supplier,' he says. He gives them what they are used to: American football, home soccer, British and Irish racing, and even a track in Turkey.

Not all the betting sites are offshore. The first mainland operation was Blue Square (www.bluesq.com), part of City Index, the originators of spread betting here. 'We're the fixed-odds side,' says spokesman Ed Pownall. 'A different audience, but more of them. It's easier to understand.' He might have added that in fixed-odds betting, unlike spread betting, you can only lose your stake.

City Index began its involvement with online sports betting in 1998, with BETonline, a joint venture with Sporting Life. When that ended, Blue Square was launched, in May 1999. The internet, insists Pownall, is finding a new audience for betting - people who bet from their offices during work time or from a home PC.

The interactive TV audience, on the other hand, is more like the traditional punter. Blue Square knows this, because it is available now via Open, Sky's private pseudo-internet, and will be available via OnDigital next.

It has found that the stakes are much smaller. 'There's a 50p minimum, and we are getting a lot of pounds 1s and pounds 2s,' says Pownall. On the internet the average stake is nearer pounds 20.

After a year, Blue Square has 75,000 accounts, of which about 40% are used at least once a week. Euro 2000 brought a rush of business from the less frequent punters. But it won't be eclipsing the high street bookies just yet. 'We are creating a new market, where betting is fun, rather than something serious,' says Pownall. That means a lot of non-sporting bets, with a maximum stake of pounds 100. Which Coronation Street character will die next? Will Ian Beale set up an internet business?

Like all the mainland internet bookies, Blue Square has taken on the bulk of the tax burden normally transferred to the punters: they pay 2.5% tax instead of 9%. This is, says Pownall, 'fairly crippling'. But Blue Square has to do it for what he calls 'the sharpies', people who will hunt around for the best tax rate as well as the best odds - there are several price-comparison sites.

One day, Blue Square will have its own IPO, but not just yet. It professes satisfaction with internet betting, but seems to be moving towards interactive television. Converting non-punters to betting through the 'fun' appeal of soap and celebs is more tricky than getting existing punters to click a new button on their remotes. Blue Square also hopes that the offshore brigade, with their dubious legal position, will be excluded from the new medium.

It may be disappointed. Blandford's sportingbet.com already has a deal with TeleWest, the cable operator, and claims to have taken the first bet over interactive TV some time ago. To do so, it had to establish a mainland subsidiary. But it won't be giving up the tax-free focus. 'Internationally it's essential,' says Blandford. 'Most markets have never heard of betting tax.' He says bookmakers must either give up the international business or pay the tax themselves. And margins are too tight to make that viable.

'Web-based customers are promiscuous on price,' he says. US and Far East clients expect keener odds than overhead-laden British bookmakers can give. Some British firms, he says, have been naive in trying to ignore that disparity.

All the high street firms have some kind of web presence. Early on, some chose to have two sites: one tax-free, for foreign customers, the other for the British. This did not last, and now they are paying the duty.

The Tote, with a string of shops, claims to be pleased with the turnover on its totalbet site, a joint venture with Sporting Life, but it is not talking about profit.

For many traditional punters, the internet lacks something. 'One of the main things about gambling,' says PR director Rob Hartnett, 'is being able to bet cash.' He conjures up a happier betting shop scene: someone walking out with wads of pounds 20 notes.

He too sees more promise in interactive television, which will let people switch between a sporting event and the bookie. The Tote does not have an interactive TV presence yet, but it will. 'It's much more important to do the right deal than the first deal,' says Hartnett. It is also planning an operation in Malta, aimed, it says, at foreign customers.

Everybody accepts that the current situation can't continue. More bookmakers head offshore every week, and although gambling duty revenue is still increasing (up to pounds 492 million last year), that might not continue. The Government wants a successful UK bookmaking industry, but it also wants it to pay tax. Two options have been proposed. The first will replace betting duty with an extra tax on bookmakers' profits. The second involves taxing UK customers' bets, wherever placed. Foreign customers of British bookmakers, meanwhile, will not pay tax.

If the Government makes up its mind, the solution could be incorporated in next year's budget. Certainly no-one in Britain wants to drive the bookies away, unlike in America. Telephone betting is already illegal there, and several US-owned Caribbean operations have been closed down.

Now a senator, Jon Kyle, has produced a bill outlawing internet gambling.

Passed by the Senate, it comes before the House of Representatives this year. The debate has been accompanied by extraordinary prohibitionist rhetoric.

Blandford, happily outside US jurisdiction, looks forward to the bill succeeding. When US-owned competitors are forced to close down, he is ready to clean up. But others are more sensitive about the issue. One site even refuses bets from people with US addresses. But then flutter.com almost likes to pretend it's not about betting at all. The word appears only in the meta tags seen by search engines. Instead, the word 'flutter' is ubiquitous, a euphemism that carries no cultural or class baggage.

Using flutter.com is like betting a friend a fiver that Arsenal will win the cup. Except that with flutter.com you get your money: both parties have paid a sum into the site's account via credit card and the money is held in escrow from the moment the deal is struck.

You can take someone else's bet. You can create a bet of your own. You can bet privately, via e-mail, or you can open it up to anyone who reads the web site. And you can bet on just about anything: sport and business, obviously, but also politics, celebrities, soap operas, films, and so on. Unless you're American. It appears that flutter.com's US founders, Vince Monical and Josh Hannah, want to go back there one day. They have been taking a keen interest in legislative developments on that side of the Atlantic, where running a sports betting web site has been compared unfavourably with crack dealing.

This must be unsettling for a team so dedicated to the idea of the 'flutter' as a little bit of fun and froth to liven up your lunch-hour. 'In a nutshell,' says Monical, 'flutter.com is the eBay or QXL of betting. We bring people together in a genuine open marketplace and let them bet with each other on anything in the world.' Meanwhile, flutter.com acts as 'the trusted bartender', albeit one who takes a 2.5% cut from both parties.

People usually deposit about pounds 50, then bet in pounds 10 bursts. The slick and rather pretty site tells them how much they stand to win. It explains what odds are, and how to bet. Monical insists that he often comes across people, particularly young women, who don't know how to bet, never having done it even in the playground. And when they 'flutter', they like it.

The design seems female-friendly: it could be one of those Clerkenwell coffee bars.

No bet can be against more than one person at once. Monical does not want professionals moving in. There are undisclosed limits on the number of bets an individual can make. The maximum stake is pounds 100. The maximum odds are 10 to 1. And you have to tick a box to say that you are not a bookmaker when you register. 'We are not going after the serious betters,' says Monical, 'Or even the regular betters.'

Those starting a 'flutter' are invited to tap in a little comment. A taunt, if you like. Soon you'll be able to click on a 'punter profile', so you know who you are dealing with, just like you do in eBay. The word 'community' pops up occasionally.

Of course, there are betting communities already. But if you want to belong to one of those, you've got to brave the smoke, and the vinyl flooring, and put pounds 2 each way on Dead Dog in the 2.15 at Uttoxeter. Flutter.com seems unlikely to evolve into that.

Find this article useful?

Get more great articles like this in your inbox every lunchtime