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Report: Internet Sports and Gambling Biz Faces Squeeze in UK

By Clare Saliba
May 14, 2001 12:22 PM PT

Although many sports Web sites in the United Kingdom are adding gambling services in an effort to boost income levels, the country's saturated online sports marketplace will face a squeeze in the coming years with a number of companies falling out of the game, according to a report released Monday by Forrester Research.

Report: Internet Sports and Gambling Biz Faces Squeeze in UK

"Those sites developing in-house betting capabilities will retain all the accrued revenue, but will also bear the burden of a higher level of cost," said Forrester analyst Rebecca Ulph. "Without this new revenue stream to rely on, the sports market will be over-supplied and, despite recent closures, more casualties should be expected."

In the next two years, the firm said, Web sites Sports.com, Sky and the BBC will dominate the multi-sports market, while sites that cannot acquire strong, unique and focused content will be forced to close.

In conducting the study, "The Online Sports Survival Guide," Forrester surveyed 31 sports Web sites, including pure plays and offline media company sites.

Dollars Flowing

The study predicts that sports-related and gambling Web sites in the UK will only retain US$99 million of the estimated $991 million expected to flow through their sites annually.

The discrepancy is partially attributed to the fact that bookmakers will return much of the money placed as bets to the bettors in the form of winnings, while an additional 10 percent will be paid in taxes, Forrester said.

TV Trouble

Moreover, Forrester predicts that only 15 percent of sports sites' revenues will be generated from betting in the next few years.

The firm predicts that competing technologies, such as interactive television, will capture a greater share of the gambling market from the Internet channel.

Content Plays Well

Forrester said it will be critical for Internet sports firms to capture unique content rights, build a strong user community, and leverage both online and offline promotional capabilities, in order to survive the shakeout.

"The key to driving a significant, monetizable user base is to offer users content that they cannot get elsewhere," advised the study.

For generic sports sites, it will be imperative to acquire content, sign up notable personalities and enhance coverage with unique new and archive multimedia to survive. For those sites unable to afford exclusive online rights, user-generated content that spurs audience loyalty is a viable solution for supplying unique material, Forrester said.

Boosting Advertising

Currently, the UK sports market consists of an "abundance" of both multi- and single-sport coverage providers, with audiences spread thinly across the spectrum, the research firm said. The most popular UK sports sites are those belonging to football clubs.

In fact, traditional publishers are already pulling back and even the major pure play companies are suffering, said Forrester.

To maximize revenue and traffic, the study said that the sites need to re-evaluate their promotional offerings. Advertising also will remain the primary revenue stream for sports sites, accounting for 58 percent of income by 2006.

"To ensure that they attract advertisers, winning sports sites must offer online replication and offline sponsorship models, develop performance-based pricing and exploit cross-promotional capability," said Ulph.

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