Cantillon: Paddy Power hedging its bets on US gamble

Listed bookmaker Paddy Power sounded something of a note of caution on any move in to the United States after its annual general meeting in Dublin this week. Like all others in its sector, the company is carefully watching developments in the US, where individual states are looking to legalise some forms of online betting.

The odds are that New Jersey will be one of the first, as its lawmakers have made most progress to date, but others, including California are also considering liberalisation.

After Tuesday’s meeting, Paddy Power chief executive Patrick Kennedy stressed that the cost of the licence and the size of the market would be key criteria when it comes to deciding whether or not to invest there. “It needs to be a big market where you have an edge,” he said.

Putting it more simply, the company is not going to rush blindly in at any price, merely because it is the US, and its peers are lining up to get in there. This kind of caution is not unusual for the Irish bookie. It has avoided going into markets where there were regulatory issues of one kind or another. A number of its rivals have had their fingers burnt by going in to territories where regulation was not clear, only to find that they subsequently had to pull out.

In contrast, one of the factors behind its decision to move into Australia was the fact that it was a well-regulated jurisdiction. That’s paid off handsomely and that business grew its net revenues by 28 per cent in the first months of this year.

At the same time, Italy, where it began trading last year, is also making a contribution. So far anyway, its measured approach has delivered for investors.

Analysts seem to believe that liberalisation in the US will deliver a further burst of growth for the sector. The jury is out on that. It remains to be seen just what will be available to licensees at the end of the day, and there is also the question of the cost of getting into the markets that do open up.

After all, one of the main attractions for the states that intend legalising is that they will be able to charge for licences and tax those who get them.