For this week’s Becky’s Affiliated I decided to interview one of the UK sports betting industry’s most well known characters, Ian Hogg of GamCrowd. Hogg has a rich professional background including almost ten years as a lieutenant with the Royal Navy, three years as MD of At the Races, seven years at Arena Leisure PLC, five years at Better Bet, two years at Fox Poker Club, four and a half years with Sportech and now serving as Chairman of GamCrowd.
What makes Hogg’s experience in the gambling industry unique is that he’s had senior roles in both retail and online sports betting organizations. From his perspective, its possible to gain insight into both sides of the industry, especially within the UK market. Hogg has decided to use his extensive experience to help out start-up companies in our space via GamCrowd, an organization providing crowdfounding and crowdsourcing for the online gambling industry.
Can you give me your perspective of the retail landscape here in the UK right now?
I think its very, very tough. A lot of bookmakers are expecting a very tough year next year.
I think they’re going to get some punishment on the stakes at FOBTs which will make a huge difference and I think it’s a fairly difficult industry to be in, its hard to recruit new talent into it, its pretty down at the moment and I think it needs some change. I think the industry recognizes that. I’m quite pleased not to be in it at the moment.
What do you think about the online side from a sportsbetting perspective, what’s that landscape like?
Just as tough.
They’re about to get the Point of Consumption Tax coming, that’s sort of acting like a bit of planning blight– there have been no mergers or acquisitions or anything because people want to know what’s happening, what impact POC will have.
And I think it’s a saturated market, so the spread between cost of acquisition and lifetime value is pretty narrow at the moment. I think most of the UK operators are looking elsewhere, so its like holding the fort at home and looking for expansion overseas. I would suggest a lot of the companies, that’s where they are.
Some people actually think POCT will be good because it will weed out some of the smaller, weaker companies and there will be consolidation- what do you think?
I think there will be lots of changes coming and that will be one of them. I’m sure some of the smaller operators will disappear or get quiet. Whether the sum total of all the good things and the bad things mean that its good for the industry, I won’t really know until we see the various impacts of all the changes. But taking 15% of the gross win out of an industry can’t help it.
The ASA has done a study on the advertisements that have come out on TV for gambling- what do you think about the new advertising rules and complaints in the news- how will this impact the industry?
I think the industry, both online and offline- we’ve had a few years where we’ve felt a bit immune to the regulation and we’ve pushed the boundaries with the advertising, we’ve pushed the boundaries with FOBTs offline, and I think some of this is coming back to bite us as an industry and we need to address it. I think sometimes we’ve ignored the pressure that has come from politicians and I think if we do that on television advertising I think we’re doing it at our peril.
Do I think the industry prefer not to have these regulations come in their way? Course they would. Do I think we need to take them seriously and deal with them? Yes, I think we do.
What can the industry do to educate and get closer to the politicians, some people think that might help.
Nobody has ever called me a lobbyist or a diplomat, so its not my field of expertise, but we’ve probably gotten by following some of the things they want us to follow – we need to build up the trust again because I think we had it seven or eight years ago and I think the politicians think we’ve pushed it too far.
I know when I was in betting shops we were opening them up all over the place, we had a case in Harrogate and we pushed it through because we thought it was legal and we wanted to advance the business. We weren’t breaking any laws, but we were offsetting a few people locally and some of those things, not just what we did, but what the rest of the industry had done as well, have come to bite us, I think.
You’re in a unique position as you’ve had a lot of experience on the online side and the retail side of the business. What did you learn from your years in the betting shops? How did you apply this knowledge to online side of the business?
Some elements are very different, offline is about operations and managing people much more, managing your own staff and trying to put across the brand through that staff and through the shops, keeping them clean and all those sort of operational type issues. Whereas online is all about managing technology and marketing and really detailed analysis of numbers, so those two are really different and there isn’t really much across. What there really is across is the motivation behind a bet, the excitement about a sporting event- it’s the same across both.
I like employing people that have run a betting shop because they have spent afternoon after afternoon talking to punters, watching the look on their face when they’ve had a losing bet, watching the look on their face when they’ve had a winning bet, talking to them about what they feel the bookmaker is doing wrong, and they understand the mentality. Right down to the guys that think that on the virtual race we have a button right under the counter that we press and that decides who the winner is based on who he’s had a bet on, so he doesn’t win.
So that sort of knowledge that you get speaking to punters in a betting shop is very hard to get online and so I think some of the best operators online have run betting shops and spent hours in them.
You were also a part of the Fox Poker Club here in London, how did you get involved with that?
Northy [Chris North] took me into it, basically. I was pretty good at getting betting shop licenses and the rules are the same for casino licenses. The government changed the rules in the 2005 act and there was a guillotine where we had to prove there was demand for a poker club and we pointed to all the illegal operators and said there wouldn’t be illegal operators if there wasn’t demand. We convinced the magistrate, they gave us a license and then all we had to do was open it and operate it which was the hard bit.
One of the reasons why I got involved is because I quite like a game of poker and I thought it would be great to have me own poker club and then be able to play poker in it whenever you want. The unfortunate thing as the chairman of Fox, I was licensed by the Gambling Commission and you weren’t allowed to play in your own club, so none of that ever came into fruition. So it wasn’t until we sold it that I played poker in it.
You were able to raise money in a way for Fox Club that mirrors the crowd funding model- how did that work.
There was no technology involved, it was pick up the phone- we needed a few hundred thousand to get this club opened. It was a mix of convincing the serious guys it was a good investment and the value of the license, that we could sell it and would eventually pay back, but we had to operate it and had to get it live first, and we convinced a few serious players of that.
Then there were some other guys who thought it would be really cool to be a shareholder in a poker club in Chinatown. They weren’t small, it was still five grand, but we needed quite a few of those. They were the best supporters- they turned up every Friday, they played in the club, they drank the beer, they acted like they owned it, they had a great time and they were disappointed when we sold. The guys who were the more series guys were delighted when we sold because we made them a profit.
With crowd sourcing now there’s an equity play- which was like the serious guys, then there’s a more rewards based thing where actually people just want to support the entrepreneur, support the idea, want to say they are part of it, and so we had both those mixed. But it was all done through people that either Chris or I knew, or once we got other shareholders in, they told their friends and they thought it was a cool idea and it was a networked type thing- on the phone though, not on the internet.
How did the funding you received for the poker club influence the way you put the GamCrowd community and website together.
We got some money from the Fox Club, and Chris disappeared to play daddy daycare for two years – he had a baby…well his wife had a baby, he can’t claim credit for that- he then started reading books and kept sending me some books to read and coming up with ideas and said he wanted to get back into doing a start up. We ended up having a mini-book club talking about ideas and there are a lot of good books about crowd funding and crowd sourcing.
It was Chris’s idea, we bounced around a bunch of ideas, most of which were rubbish and he said why don’t we just do crowd sourcing and crowd funding for the gambling industry and it was one of those once I heard the idea I was like, yep, absolutely- bang on.
So we both thought it was a good idea, we put some money into it to get it live, to pay the legal bills to get it live and once we got a platform live we decided to sell fund- which means we asked the pubic to put some money in- and we got about forty investors a lot of whom were Fox Club shareholders. We were phoning up people saying, do you remember the last time you invested you made a few quid, well guess what, its payback time- put your hand in your pocket. There’s a few people out there who would recognize this pitch.
That was probably half the people and the other half – I was speaking with Mark Fellows, he’s a b2b sales guy, he has a b2b business and he does some work for Betfair, and he put investment in and asked if there is anything he can do to help. He said, I love the idea, I’ve only invested because I love the idea and I feel I want to support start-ups, if any of your start-ups need any b2b sales training, give me a shout I’d love to help them out. And that is very typical of about half the investors that are in there.
That’s almost like if we go back to what we were talking about with the Poker Club, half put in twenty grand and “I expect a return and I’m going to nag you until I get it”- they’re the equity investors and the other half just wanted to be part of a poker club – we saw the same. So its just a different reward. So there are some good guys out there in the gambling industry that just want to help start-ups, and they are helping us as well, so we’re very grateful for that.
I can list loads of people who have said “I didn’t really think it was a great investment- I didn’t do it for that- I just did it because I thought we’d support it as a way for helping a business go forward”. So we’re grateful for that support.
What do the start-ups think who have signed up for the program?
They are positive- we give them more help than just raise money we think- and how long we can do that for, I don’t know because right now me, Chris and Andy are putting a lot of time into supporting start ups. As we go out and get more of them , hopefully we’ll be able to manage the same level of support .
So I think they are starting to see that they get a lot more than just the money that they’re looking to raise. They’re getting value adds- I hope we add value- but we’re introducing them to contacts, if somebody needs support, our shareholders have a range of skills and knowledge across the industry, so if Chris I or Andy can’t help, there’s somebody whose a shareholder who can. So yes, we think we’re adding value.