Paddy Power Eyes Expansion Into US Market: Smaller Euro Firms Will Struggle
DUBLIN — (Reuters) - Paddy Power Betfair, is interested in expanding further into the United States amid intense competition in Europe that could see smaller rivals either join forces or "wither on the vine," its chief executive said on Wednesday.
The Dublin-based group, which already runs the leading horse racing television and betting network in the United States and has an online casino business in New Jersey, entered the U.S. fantasy sports market last week with the acquisition of DRAFT for up to $48 million (£37 million).
The fantasy sports market, which has surged in popularity and is worth an estimated $300 million according to Paddy Power Betfair, offers gambling firms the chance to compete across the United States where sports betting is illegal in most states.
"I think that market has yet to open up properly. I would hope we could do more there, it's a question of legislation and opportunity. There is a lot of appetite to do more if the right thing comes up at the right price," CEO Breon Corcoran told reporters.
Paddy Power Betfair said this month it was cautious about revenue growth in its main European market after a "pretty extreme" level of competition made it tougher to win new business in the first quarter.
Competition has intensified as firms seek to offset higher taxes and tighter regulation with increased revenues, leading to a flurry of mergers including last year's 6 billion pound tie-up between online betting exchange Betfair and Paddy Power, which operates shops as well as an online business.
Corcoran said it was hard to see the competition abating but growing revenue sensibly and enhancing profitability over the medium term was the right thing to do, describing the group as "cautious but guardedly optimistic."
Competition was coming from big, well-run operators as well as those "desperate to get bigger", Corcoran said, leading to inflated advertising costs and an increase in promotional activity that he saw ultimately hurting smaller rivals.
"I think the smaller guys will continue to struggle, they'll either wither on the vine or be forced to think about consolidation," Corcoran said on the sidelines of the company's annual shareholder meeting.
"Scale is the critical word. As online consumption matures and as regulatory and compliance cost go up, I think being large is ever more advantageous. There are very few markets in Europe right now where you'd prefer to be a smaller operator and I think that has long-term consequences for industry structure."
