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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