Sky Betting & Gaming has said it is ending its affiliate programme because managing the gambling lead generators “presents a significant risk to our business”, a step one online gambling consultant called “brutal”.
The online gambling company, the UK’s fourth largest, said on Monday that it will terminate its programme on October 2, ending all commissions and player referrals.
The “drastic” cost-saving measure is not a surprise, given Sky Bet is owned by leveraged-buyout firm CVC, and its relationship with part-owner Sky Television means the online gambling operator is less reliant than rivals on affiliates as a traffic source, said Tom Galanis, managing director of TAG Media, an affiliate marketing firm.
But whether regulation is at the core of the decision or not, “the tone has opened up more questions about the future of the UK affiliate landscape and the operator-affiliate relationship ecology”, he said.
“I imagine Sky Bet’s lawyers have their case ring-fenced on every level, so the reality is there is likely nothing affiliates can do to claw back lost earnings,” Galanis said.
“It’s brutal and will result in job losses and businesses going under.”
Other big changes may be coming, potentially signalled further by confirmation from Ladbrokes Coral Group that the operator has halved its use of affiliates following a recent review, a company spokesman said.
Affiliates, which bring in players in exchange for a commission or one-off fee, have become controversial in recent months as the UK, the Netherlands and Denmark seek to hold operators responsible for affiliates’ actions.
“As you will be aware, the regulatory landscape in which the industry operates is developing and maturing and operators are experiencing increased obligations regarding their regulatory responsibilities and level of compliance,” Sky wrote to affiliates on Monday.
“In order to continue to operate in a compliant manner, we feel that operating the programme is no longer viable and that managing the output of affiliates presents a significant risk to our business from a regulatory perspective,” the company said.
The UK land-based bookmaker industry is already under fire over controversial fixed-odds betting terminals, and the online gambling industry is next in line for scrutiny.
Last week, front-page articles in the Guardian claimed that some online gambling affiliates offer worthless or deceptive tips on sports bets and casino games to gain more income from operators, as they may get a lifetime commission on the players’ losing wagers.
UK competition regulators are investigating free bet and bonus offers by operators and affiliates, and the Information Commissioner’s Office is targeting 400 affiliates it claims improperly use personal data.
Change may be in the wind.
Ladbrokes Coral’s recent culling of affiliates means that “those that remain are now subject to ever-tighter restrictions on their use of our brand”, spokesman Donal McCabe told GamblingCompliance.
Ladbrokes Coral is also seeking to more closely monitor “use of our brands by unauthorised parties and will take action against those that breach our rights”, he said. “We will only work with those affiliates that operate in accordance with our operating procedures and standards of behaviour.”
One large affiliate applauded Sky’s move.
“I believe they are cleaning up the industry,” Catena Media chief executive Robert Andersson told GamblingCompliance. “It’s a good thing for all reputable affiliates.”
Malta-based Catena, which joined Nasdaq Stockholm’s main market on Monday, is a consolidator, seeking to grow by buying small- and medium-sized affiliates.
But a smaller affiliate said he was disappointed Sky abruptly announced the termination without first trying to promote better practices.
“It’s a kick in the pants for affiliates,” said Neil Walker of Live Casino Comparer. “We put a lot of time and effort into marketing their product, and to have it suddenly interrupted, it’s painful.”
The world of affiliates has been compared to the early days of online gambling, where small operations can reap big profit with minimal scrutiny.
Some in the industry call themselves “millionaires in pyjamas”, lone entrepreneurs finding fortune with basement laptops trying to fool Google using tools such as search engine optimisation.
As many as 2,000 gambling affiliates are one- to two-person operations generating up to 50 new customer leads a month, according to Catena’s August prospectus.
“It’s a very low entry, there’s no barriers for an affiliate to start a website to start promoting casinos,” Walker said. “The operators need to be telling affiliates what’s required, and affiliates need to do a better job of policing themselves.”
If affiliates are not yet clued in on the “growing regulatory concerns Sky alludes to, this will make them sit up and learn more about the concerns”, Galanis said.
“Affiliates have a duty to promote responsible gaming and can no longer rely on operators for guidance, as evidently there is not unilateral advice being passed down the chain,” he said.
Catena withdrew from the Dutch market last month after it was ordered to do so by regulators who said Catena was improperly promoting unlicensed gambling websites to Dutch residents.
Reining in affiliates, however, may have a cost in revenue. Last week, Ladbrokes Coral CEO Jim Mullen partly attributed a slowdown in online gaming growth to operators pressing affiliates to meet licensing requirements.
“Where maybe three or four years ago you’d have quite an aggressive affiliate approach to acquiring customers, that is not now the case,” he told analysts. “We are all wholly responsible for our affiliates’ communications.”
“We continually monitor our affiliate programme on an ongoing basis and regularly review our terms and conditions to ensure compliance with latest regulations,” a William Hill spokesman said.
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