So the way Betfair tried to justify the second iteration of the Premium Charge was by telling all and sundry that they would use the money it generated to bring in new players. They were in essence saying they would replenish the pond with fish. It’s important to understand how the Betfair ecosystem works. Like the whole sector the winners are funded by losing punters. The idea in essence was that Betfair would introduce more losers to the exchange for the bigger players to feed off. Justifying the charges.
However, whilst there were a few token marketing campaigns, there was clearly a huge disconnect between the money Betfair generated from the new Premium Charge and the money they spent trying to revitalise the ecosystem. It ended up another money grab. Betfair were happy to take the bigger margins on the sportsbook rather than convert customers to the exchange.
One other thing Betfair were trying to do was to remove what they felt as undesirables from the ecosystem. Even at the 20% Premium Charge plenty were making the game pay well. At the highest 60% level very few would be eligible and those who were, wouldn’t be for long. However, like the first iteration plenty of people who shouldn’t have been caught in the net as such, were. These were people who weren’t courtsiding, weren’t beating delays, didn’t use information, weren’t syndicates, etc. They weren’t what the Premium Charge was created for.
With the new higher charges (lifetime profits of £250k+) you were essentially subject to Premium Charges if you had not paid 40% commission/charges on your lifetime profits. At the lower levels this was 20%. Big numbers. This had a massive knock on effect with people having to seriously consider whether the time and hassle they had spent on the exchange was worthwhile going forward. Liquidity was falling and yet people were being charged more than ever. I know plenty who said enough is enough.
The reality is that these charges affect very small numbers of people. Let’s get the violin out for those who have made £250k+ etc. However, if that was someone’s full time job, when spread out over 10+ years that’s not a huge amount each year. That was when it was introduced. Eleven years down the line and that £250k number hasn’t changed. £250k over 22 years is nothing. This is one of the big problems with the Premium Charge in that it hasn’t changed/evolved since it was introduced in 2011. Limits and levels haven’t increased.
As people leave this is having a big knock on effect to liquidity. It has done since it was introduced and the situation appears to be in terminal decline. That’s particularly the case with in running markets. As liquidity decreases then less people are incentivised to play in the markets. The rewards are not there for them. If you are not getting new customers to play on Betfair then all that happens is that you are in essence left with sharks against sharks. Of varying degrees. When that happens you will see more people leave the ecosystem and the decline continues. Betfair have a huge problem. They have gotten fat off the Premium Charge monies and to change it or reverse the decision to charge it, would have a short term impact on their share price. If they don’t do anything though the exchange wont be around forever.
One of the selling points of Betfair when it first came about was that it was aspirational. If you knew your stuff, put the time and effort in, then you could be suitably rewarded. Increasingly, those aspirations and dreams of being able to make the game pay are disappearing. In the next tweet I will talk about how the Premium Charge affects things in real life, what strategies you can potentially use to help, deals Betfair offered at the time and other exchanges.
ProPunting 