Q & A: Con Kafataris, SportOdds

Con Kafataris, has gained a unique understanding of bookmaking in the interactive arena. In 1995, he founded SportOdds, a sports betting business based in the Australian Capital Territory. Seven years later he finds himself at the helm of Australian's largest private sports betting company. It's no surprise that he got there by embracing the Internet. Today SportsOdds.com sees 7 million hits per month, and online betting accounts for 90 percent of the company's transactions. With a customer base of 50,000 and a hefty piece of Australia's domestic betting market, the company is a model for success in the Internet space.

With that under his belt, not to mention the 18 years of bookmaking experience gained before embarking on the SportOdds venture, Kafataris is more than equipped to offer valuable insight on the many issues effecting interactive wagering today.

Last month during the Gaming & Casinos World Asia Pacific conference in Singapore, IGN had the opportunity to chat with Kafataris, who offered his thoughts on mobile betting, the World Cup, the Asian market, P2P betting, Australia's interstate bookmaking policies and his company's planned expansion into Europe.

"Interactive betting and the proliferation of sports books have put a squeeze on margins, but that's not a bad thing because the volume's increased to offset that."

IGN: While speaking at the conference, you mentioned that Asia's illegal bookmaking operations will slowly convert to legal services via the Internet. Can you expand on that?

Con Kafataris: The people I've spoken to have been in the business for 30 to 40 years and either they're getting on in life and would like to take some sort of capital benefit out of it--sell their business, basically--or legitimize their business. They are looking and/or speaking to people to actually find a method of bringing all their existing client base, through technology, into a legal format. It's their desire (some of these networks) to merge in with someone and/or form their own corporations.

In a lot of countries it's legal to place bets with western bookmakers. It's just not legal to place bets with local bookmakers. That's what (the local bookmakers) are looking at--instead of them taking the bets, getting their customers to bet with legal bookmakers and get some capital for it.

IGN: Where do things stand with SportOdds' mobile betting services?

CK: It's been about four months that we've been working on it and it rolls out next month. . . in about two weeks.

IGN: What kind of technology are you using?

CK: It's a Java application. We'll be providing the phones; Java phones aren't widespread in Australia at this stage. The phones that we're using aren't the high-end type; they're only a couple hundred dollars each. At this stage we'll charge our clients cost recovery. Basically over a 12-month period they'll pay $20 a month.

IGN: Will the market share among operators shift as the industry increasingly adopts mobile betting? Will new players come into the picture

CK: The phones are just a distribution network. I don't think it will be much different as far as the operator goes. You might get telcos getting involved because when using these phones you have to use the network. The service providers, or the networks, will want to affiliate themselves with the bookmakers. They may buy into it, but not at this early stage. I can't see them wanting to look at the market until the ballgame starts picking up.

IGN: Are telcos in a position to overcharge for their services or is there enough competition to keep prices down?

CK: I think there's enough competition to keep the prices pretty low. We've tested it. To place 50 bets in a day and browse all the information to do so costs less than an Aussie dollar. It's not expensive at all at this stage.

"The only thing that is a concern is these bet exchanges. They are throwing a spanner in the works, and I think we're probably going to enter the market. We will have to enter the market in the next six to 12 months and provide the liquidity to it."

IGN: Where does that leave the Internet? Do you think we'll see Internet betting go down as mobile betting picks up or do you think most mobile betting will be in addition to Internet betting?

CK: I think a lot of transference is going to happen. A lot of the Internet business will move over to the mobile network, but because (the bettors) don't have to sit in front of the computer, they'll bet a lot more often and they'll browse a lot more often. So the activity, I think, will grow.

As well you've got the older generation of, say, 45-plus that aren't really computer literate and find it difficult to work with computers. The mobile application will assist them greatly.

IGN: So there's certainly new customers to be gained in the mobile space?

CK: Yes, there are new customers. Once again, these old guys, they use their voice at the moment. They ring up and they place their bet. Now they'll be able to get online, look at the odds and bang, they'll have a bet.

IGN: What are SportOdds' distribution channels at the moment?

CK: Voice and Internet are our main areas. It's about 85 percent Internet and 15 percent voice. I'm actually hoping to do away with my call center and only have a help desk call center within 12 months.

IVR (interactive voice recognition) is something that we've looked at. For horse racing, maybe it might work, but for sports it's not necessary.

IGN: The industry obviously saw a huge rise in sports betting during the World Cup, but how does that drop off afterward? Do you expect volume to drop to its level before the tournament or will it level off at a higher level?

CK: Definitely, I'm hopeful that it will be at least 10 percent higher. But I'd like to think it's going to be closer to 20 percent.

IGN: Are there any other sporting events that provide a big boost in betting for SportOdds?

CK: As far as horse racing, from Australia's point of view, you'd look at the Spring Carnival, where we quadruple the number of bets we take in the regular season. That's about a six-week period in spring.

In regards to sport, the next closest thing to a big boost like that would be the Olympic games, but this is soccer in the Olympic games. The tennis is okay, the running events and the swimming are okay, but really it's the soccer once again. That's because every country's playing again in the Olympic games. It's nearly as big as the World Cup.

IGN: How has the market changed for your industry in the past three or four years and how do you see it changing in coming years?

CK: Margins have been significant. There's been a squeeze on margins for bookmakers. Interactive betting and the proliferation of sports books have put a squeeze on margins, but that's not a bad thing because the volume's increased to offset that.

In respect to other aspects, the product range is forever increasing. We're betting on a lot more events today than we were five years ago, and we're probably going to bet on a lot more events in five years' time.

Covering more and more leagues in specific countries as you promote yourself in those regions. . . I could see ourselves betting on the Asian soccer leagues soon. We don't bet on South American soccer leagues, but we will soon as well. Foreign currency transactions are important. (Editor's note: SportOdds only deals in Australian dollars, but will soon began handling bets in several foreign currencies.)

The customer wants to bet in their own currency. They don't want to go through the hassle of converting currency. A lot of sports books will take two or three currencies, but we'll be offering virtually every currency.

So what's significant is bigger product range. There's not much more room to squeeze the margins.

The only thing that is a concern is these bet exchanges. They are throwing a spanner in the works, and I think we're probably going to enter the market. We will have to enter the market in the next six to 12 months and provide the liquidity to it. In other words, it's no different to price makers and price takers in currency markets. You're going to provide both sides and let the punter choose. And there'll be a lot of spread in the middle. That's what' going to happen.

IGN: So you'd have a go with your own and not tap into an existing network?

CK: Well, we may, but I don't think we could put it on the same Web site. We'd regard it as two separate businesses. We've just got to plead the liquidity aspect of it. We'd probably cross over and allow members bet at the fixed-odds site and the exchange site using the same account. That's yet to be determined though. We need to do a bit more research.

"We're not even going to touch America until they sort themselves out over there."

IGN: To this point, you've concentrated on the Australian market. Will you begin marketing to international clients once you're taking bets in multiple currencies?

CK: One of our goals is to set up an operation in the U.K. We believe that market is very similar to the Australian market and we think we have a lot to offer.

Their margins are much higher than that of Australia. I think we go in there and undercut them a little bit and take a slice of the pie.

And the U.K., perhaps, would be the gateway to the rest of Europe. We're not even going to touch America until they sort themselves out over there. We're not going to focus on that. Whatever comes from America, that's fine, but we're not going to push it.

Our success has been our confidence in our markets. We do markets on everything in the world ourselves. Of course we look at what other people do. So we offer quite often different prices to a lot of their players. That is our unique selling point, if you will. Our markets are different to everyone else's on a lot of occasions.

IGN: How do you expect the U.K. operators to react?

CK: I'm not sure. Obviously the existing operators there certainly don't want more competition. It may be the catalyst of instigating a price war, but so be it. If that's the case, we're happy to match it with them.

Once again, it'll be our prices and our products that will determine our success.

IGN: How does the battle in Australia revolving around interstate sports betting affect your company?

CK: It does affect us. There are eight jurisdictions in Australia, and there's infighting among themselves as to trying to put up Chinese walls between states. And the biggest states are the ones trying to put these walls up. New South Wales and Victoria, they have the most to lose by breaking down the boundaries. They're trying to protect their domiciled residents (and keep them betting) in New South Wales, and hence they collect the tax. It's all money.

IGN: Does the solution lie in coming up with a way for the state in which the bettor is located to collect tax money?

CK: Exactly. There's a task force that's just been formed (during) the ministers conference back in May. It's supposed to report back by the 31st of October. It would not surprise me if one of the resolutions that comes back from the task force would be that all operators, no matter where they're domiciled, return the tax back to the state where the customer's domiciled.

That, I think, is the solution, but smaller states like the ACT and the NT won't really like that because it's going to cost them.

If they do use that model they should probably get some sort of fee, a processing fee over and above what's repatriated back to the states. I think that might make them happy.

IGN: Is SportOdds playing a role in the policy making process?

CK: We do. For example, we'll be part of the working party out of the ACT, where this is the hot topic. The regulator and the industry representative that's on that task force will convene meetings with the operators there and get our feedback as to how to approach it. Every operator there will have the chance to input into it.