Monday, 8 September 2008

The Email


I was going to write a post this afternoon saying the usual stuff about having a quiet week etc. but unfortunately my intentions have had to change following receipt of the following email from Betfair:
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Dear Mark,
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We will shortly be making changes to our terms and conditions. These changes will come into effect on the 22nd of September 2008. From this date we will be introducing a new charging mechanism (Premium Charge) that will affect a small number of our most successful customers.
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We are writing to inform you that had the new charge been in place over the last 6 months then you would, at some point, have been required to pay Premium Charges. If your betting in the future continues to be as successful as it has been in the past then you could be required to pay Premium Charges in line with others who, like you, fall into the top 0.5% of our customers.
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Please note that whilst the changes to our terms and conditions will come into effect on the 22nd of September 2008, the first charges will not be collected until the following week (week commencing 29th September 2008).
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The changes to our terms and conditions and full details of the new charge can be found here.
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Any questions that you may have in relation to the new charge should be directed to premiumcharge@betfair.com.
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The Betfair Management
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So what does it all mean? In short, it appears that Betfair are targeting consistent long term winners and are looking to take a larger slice of the cake when it comes to their %. Full details of the new charge can be found on their website but the summary below highlights the key points:
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Premium Charge Summary
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You will only be considered for the Premium Charge if, over the previous 60 weeks, you satisfy the following criteria:
  • Your account is in profit
  • Your total charges paid are less than 20% of gross profits; and
  • You bet in more than 250 markets.

Two further conditions reduce the likelihood that you will be required to pay the Premium Charge:

  • Any single win that constitutes more than 50% of your gross profits over the previous 60 weeks will be excluded from the calculation; and
  • Each customer will have a 60 week allowance of £1,000 against the Premium Charge.

Each week the customers who meet all the conditions set out above will be charged the lesser of:

1) The difference between 20% of the previous week’s gross profits and the total charges paid during the week; and

2) The difference between 20% of the previous 60 weeks’ gross profits and the total charges paid during that period.

As you can imagine my initial reaction has been quite negative, and I've been scratching my head all afternoon thinking where does the ethos of 'winners are welcome at Betfair' fit into all of this?
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Will I be affected? Yes - providing I continue to post the type of results I've become used to over the last 12 months etc. I've done some quick calculations and I'm guessing that the amount of charges I pay would double.
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e.g. Between 1st January 2007 and 30th June 2008 I made just over 15k Gross profit and paid Betfair £1,110 in Commission to leave me with a net profit of just under 14k. Under their new scheme I would expect to pay over £2000 for the same level of profit over the same period of time.
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This is a hefty increase and I just hope Betfair know what they're doing as not many companies would survive if they increased prices so significantly. The markets exist because of the liquidity provided by the bigger players and if there was a viable alternative I'm pretty sure some of them would now be looking to jump ship. But this is where the problem lies as the lack of competition ensures that Betfair are able to do what they like and the rest of us have no option but to follow.
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This is a stark reminder that good times don't last forever and if this is the beginning of the end, then one thing I don't want to be doing in 10 years is sitting here kicking myself for missing the boat.
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It's time to consider my options and hope that Andrew Black returns from his sabbatical sooner than expected.
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35 comments:

Anonymous said...

Yep - my response and analysis is similar to yours. I've decided to pack it in. By the way, I post(ed) on the forum as viva el presidente. When I suggested people who didn't like it should all just move to another exchange the day it came in (without naming one), that post was deleted. They then deleted a post pointing out the censorship, and I got banned from the forum.

Which I think gives an insight into levels and subjects of sensitivity at BF on these changes. Sad day for a company I used to be fond of.

Mark Iverson said...

Hi anonymous,

I'm sorry to hear you're packing it in. My fear is that you may not be the only one.

Betfair was a great idea that has revolutionised the way we look at betting but have the new management team now got different ideas on where to take the company?

Only time will tell.

All the best for the future,

Mark

Anonymous said...

I glazed over those new terms thinking it was a maths problem, they (BF) sure don`t explain comm or matching logic or whatever clearly.

BF say it`ll affect only a few, so why did they even bother at all, knowing the blow to their reputation it will cause.

I can`t see Purple having the infrastructure (yet) to manage the volume of customers and the domination of their markets by 1 (One) client make it tricky to use for some methods.

We can hope.

Gary said...

I know it's over simplifying things a little Mark, but from a positive perspective... In the early days of this blog wouldnt you have been just over the moon to be told that on the 8th Sept 2008 you would be receiving such an e-mail.

If i was you i'd print it out, frame it and put it on your wall for all to see! Well done mate.

Mark Iverson said...

Hi anonymous,

In their last set of annual accounts, Betfair declared that it had 433,000 active customers during the year.

0.5% of this would indicate that 2165 customers will be affected.

I suspect that the number of customers that Betfair are using to derive the 0.5% figure is much higher though.

All the best,

Mark

Mark Iverson said...

Hi Gary,

Good point!

I have to admit, I did have a small smile on my face whn I read the first bit - but that soon went!

All the best mate,

Mark

Anonymous said...

All the best for the future,

Mark

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Cheers Mark. It's been a fun couple of years, but time to move on.

One thing that hasn't been picked up on yet that I've seen is that BF is now effectively charging the pros what they ought to be paying in income tax on what is let's face it work. And they can only do so because the govt haven't found a way to close that loophole.

How that affects the debate on taxing pro gamblers / traders will be interesting to see. But I think it may increase the pressure to find a mechanism by which it can be done. The argument would be: "why should this money go to a gambling firm's bottom line rather than the exchequer? We didn't do it, so Betfair took advantage and had the money themselves."

vivaelpresidente!

leonthefixer said...

Hi Mark,

A sad day in Betfair's history, Black Monday as someone put it on the forum!

I worked out my sums and things do not look great. I echo you thoughts on an alternative exchange. Hopefully they will get their act together but I suspect they are unable to handle the volume that would need to switch to make Betdaq a useable alternative.

Oh how this industry needs some viable competition!

Fingers crossed it comes to the fore quickly!

All the best,

Leonthefixer.

slipperytoad said...

It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change. – Charles Darwin.

That’s gambling for you Mark. Only been punting for 5 years and have seen countless changes for the punter (and in myself). It’s a calculated move that could turn fowl for BF however they know there are no alternatives for us punters; unless you count the bookies (don’t make me laff!) so they are pressing up their advantage to squeeze more commission from their “lucrative” customers.

Remember, Betfair are not the only game in town. As non trader (yet) I can bet with other exchanges given enough liquidity.

Competitors (who currently don’t have much market penetration) will see this as an opportunity to “get some” Betfair turf via reduced charges i.e. where were Google 11 years ago? Now they are eating Microsoft’s lunch!

So the options are roll with the punches, adapt or give up.

Mark Iverson said...

Hi vivaelpresidente,

It's an interesting point - is this Betfair's way of paying more to the Government and solving the problem of taxing pro-gamblers?

Who knows!?!

All the best,

Mark

Mark Iverson said...

Hi Leon,

Yep - the figures do look worrying. Especially if performance improves - the more you win the more you pay.

B*gger!

Mark

Mark Iverson said...

Hi Mike,

I love the quotes!

Adapting is normally the best way 9especially if you can continue to make a profit) but what's bugging me most is that I feel this will be harmful to Betfair in the long run.

I'm sure they've tried to highlight the risks but what effect will less liquidity etc. have on the business model?

They've fiddled with a winning formula too much recently for my liking.

All the best,

Mark

slipperytoad said...

They've fiddled with a winning formula too much recently for my liking.

Simple answer … greed! It affects us punters from time to time, now BF are mesmerized by its siren call.

BF believes their model is bomb proof and that punters can be fleeced. Well they (and their bean counters, whose noses are not satisfied in troffing in all that profit) are about to get a lesson in market forces if you read the feedback on the BF forum

Matt said...

looks like my next blog post made it self up.. this is a sad day indeed. the change represents a 110% price hike for me on current form. Yes, that's right, 110% !!! Quite unbelievably arrogant and greedy of Betfair and perhaps, (hopefully) the beginning of a needed change in the exchange industry.

Matt
Punt.com

Pug Munter said...

This is going to cause Betfair widespread problems. The exchange business is essentially driven by word-of-mouth. Word-of-mouth businesses can decline just as quickly as they grow when stupid decisions are taken by those in grey suits in upper-management that turn the public off.

As an ordinary punter, I'm now going to worry that my winnings could be subject to a 20% tax whenever I place a bet on Betfair. Is this going to change my betting/trading habits when it comes to pushing money through the Betfair exchange? Too damn right it is!

It won't take long for word to spread among offices, friends and networks of people about these changes. And given how complicated Betfair are making it, people are probably going to understand it badly and make it sound even worse when they start talking down the pub with their mates.

Those that want to compete with Betfair have suddenly been gifted an open target to shoot at. They will never have a better opportunity to compete with the goliath that is Betfair.

It will be interesting to see how things play out in the weeks ahead....

Anthony said...

Difficult question. I'd rather pay the 10% commission they're about to 'steal' than pay the goverment 30% in tax and National Insurance. However, at least if I pay the government I might get something back in return.

Anthony said...

Whoops, sorry, 20% !

Mark Iverson said...

Hi Anthony,

The question is - what if the government introduce tax on gambling winnings as well?

Betfair will go into meltdown.

All the best,

Mark

Gary said...

Gutted- I've just checked my mail and have the dreaded e-mail from betfair.

Not your dreaded e-mail the opposite, i've been told i am amongst the 99.5% that wont be affected by the changes, but wait it gets worse!...It goes on to inform me that i have only a small chance of it affecting me in the future!! Cheeky Gits! Dont they know how much attention i have been giving this blog or reading the books from Matt's reading list!!

You wait til next year when i'm the only one left trading on betfair, they will be a bit nicer to me then! lol

Mark Iverson said...

Hi Gary,

I'm sure they're wrong - cheeky buggers are saying you're useless at betting - LOL!

Nice one mate,

Mark

Gary said...

Yeah i know, there not content with upsetting the 0.5% they want to get the rest of us as well now!

Still at least i rate a small chance of future success, i reckon thats based on my new found form within the cricket markets.

Did well last night incidentally with the first round of fixtures in the USA. Shame about Tampa not quite managing to pull of an opening victory. Though managed healthy profits in both that game and the Dallas match later on, thanks largely to your advice. Some of the swings in Tampa's match were scary late on, pleased i was out and green in the first half!

Mark Iverson said...

Hi Matt,

I can only imagine how this might affect you!

I'm sooooo angry at the moment.....

Mark

Mark Iverson said...

Hi Pug Munter,

Thanks for the comments.

I echo your thoughts completely. Betfair have forgotten that by dashing dreams they will suffer disinterest from everyone that uses the site - not just the big hitters.

Mark

slipperytoad said...

Good judgement comes from experience. Experience comes from bad judgement. – Anon

After reading the comments on the BF forum, BF are about to take it in a place where the sun does not shine for blatant abuse of their monopoly position. I wouldn’t worry about the new charges mark, yours is not a lone voice in the wilderness

www.slipperytoad.co.uk

slipperytoad said...

"Bert" Black explains all here

http://www.bertsblog.co.uk/horses/feeling-sheepish.html#comment-1474

Punters arn't listening though and are voting with their feet!

www.slipperytoad.co.uk

Mark Iverson said...

Hi Mike,

Betfair look like they've put their foot in it this time - I've never known a reaction like it.

I'm starting to feel like the Miner's did in the 80's.

Roll on the revolution!

All the best,

Mark

Gareth said...

Sad, sad day. I hope Betdaq shapes up and all the liquidity moves over. BF know they're untouchable. Strong competition is seriously needed and urgently. Such BS.

Was thinking about seriously having a go on there when I came home from America. I will not be doing it on BF.

Glad to see you're still posting good results though Mark. Hope you and the family are good.

All the best

Gareth

Mark Iverson said...

Hi Gareth,

Great to hear from you - I hope you're doing okay and the trip to America is going well.

Betfair have made me feel like a leper - I'm a winner but I definately don't feel welcome.

Cheers for the best wishes.

All the best,

Mark

Anonymous said...

I believe the 0.5% is the affected customers PER WEEK. After a few weeks, it will be much more than 0.5% of the active customers affected.

Brian said...

A funny response to Betdaq's commission video:

http://www.youtube.com/watch?v=f-Q_kyCjbXg

Anonymous said...

Dear Mark

First, im new here. I found this forum when searching for "premiumcharge+betfair".

Im one of the affected customers at Betfair. I agree this changes things totaly.

I would guess the majority of bets i have been dealing with at betfair have been straight bets, while the remaining have been trading (odds on soccermatches).

Imo, straight bets is no longer possible to place when the winning ones will be "taxed" heavily. Better to take the straight bets elsewhere from now on because of this.

When i was not fully aware about how this "premiumcharge" would affect me and my future betting, I did take contact with the Betfair-support last week. When the lady i did speak to could not explain this properly, she promised me that another person from their support would phone me up.
They called back within one hour. After a few minutes discussing the man who were speaking for Betfair exlained to me that they (Betfair) were putting this charge on bets i had placed 60 weeks BACK in time!

This has to be the worst part of the premium charge, bets I placed summer 2007 are now being heavily taxed by Betfairs, premiumcharge.

When i did read "These changes will come into effect on the 22nd of September 2008" I was sure Betfair would be starting with this "Premium charge" from 22:nd of September and afterwords. I can not belive they´re actually using this so called "premium charge" to tax bets placed 60 weeks BEFORE 22:nd September 2008. Bets placed summer 2007 is now being put under the so called "premium charge". Insane.

When they´re charging bets placed way back in the past, we cant be sure they wont do something even worse in the future. I have now withdrawn everything from my account with Betfair.

John H

Anonymous said...

Mark, I've been just hit by this atrocious thing. Do you have any tips to deal with it? How have you been doing regarding it? Thx

Mark Iverson said...

Hi Anonymous,

Unfortunately there is little you can do if you win consistently. The only way to reduce your charge is to have a higher % of losses whilst making the same level of profit.

Something very difficult to achieve.

All the best,

Mark

Anonymous said...

Mark, thank you for the quick answer and your kindness.

I'm pretty much losing my sleep searching for alternatives.

I have opened an account on Betdaq and Pinnacle Sports. They're becoming alternatives for me in terms of making punts(betting before the matches), but not on the in-play mode.

I'm trying to find a balance to pay the least premium charge as possible. When I reach the 40/60% premium charge I will have to rethink everything again cause it will become unworkable to pay Scandinavian income taxes for the greedy Betfair without getting anything in return. I am seriously thinking about changing my IP and subscribing Betfair through another person from my family with a different surname. What do you think about it?

Mark Iverson said...

Good luck but from what I can gather Betfair have sophisticated ways of linking accounts.

I don't think there's a way to avoid it unfortunately.

Mark