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Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer.

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Sean Aylmer: It's been incredible over the last year or two watching

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Sean Aylmer: the growth of some of the betting stocks on the ASX.

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Sean Aylmer: PointsBet is up around 600 per cent since its IPO (Initial Public Offering) two

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Sean Aylmer: years ago and the price of betting technology provider BetMakers

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Sean Aylmer: has soared as well, both off the back of changes

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Sean Aylmer: to betting laws in the US. Last week there was

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Sean Aylmer: a new entrant on the ASX with the arrival of BlueBet.

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Sean Aylmer: BlueBet was started by industry veteran Michael Sullivan in 2015,

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Sean Aylmer: building on his years of experience running SportingBet and William

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Sean Aylmer: Hill in Australia. While BlueBet may only have a relatively small

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Sean Aylmer: share of the local market, it's eyeing off an enormous

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Sean Aylmer: opportunity in the United States. BlueBet founder and Executive Chairman

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Sean Aylmer: Michael Sullivan is my guest this morning. Michael, welcome to Fear and Greed.

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Michael Sullivan: Thank you very much, Sean, and great to be here.

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Sean Aylmer: Just how big is the opportunity in the US?

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Michael Sullivan: Look, it's untold. It's very unusual that you'll find an

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Michael Sullivan: industry that is in such a greenfield state as gambling

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Michael Sullivan: is in America at the moment. It has been illegal

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Michael Sullivan: there for so long. And just to give you some background,

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Michael Sullivan: about four years ago, New Jersey took the federal government

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Michael Sullivan: to the Supreme Court to want to legalise gambling within

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Michael Sullivan: a state. Sports betting, I'm talking about specifically. Obviously, they have had casinos.

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Michael Sullivan: And they won the case. And that's why there's been

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Michael Sullivan: this watershed. It still has to be state based. I mean,

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Michael Sullivan: as we've probably found out through COVID, to call the

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Michael Sullivan: United States of America, the United States, is probably a bit

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Michael Sullivan: of a furphy. It is very state based. So we've

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Michael Sullivan: got to get licences in every state. And the thing

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Michael Sullivan: about that is some of these states, which are still

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Michael Sullivan: to come on line, New York, Florida, Texas,...

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Sean Aylmer: The big ones.

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Michael Sullivan: California, they've got the population of Australia alone, some of them. So, look,

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Michael Sullivan: there's tremendous opportunity there. And that's why we have gone

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Michael Sullivan: down the path we've gone.

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Sean Aylmer: And it's betting on all sports, professional and college sport,

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Sean Aylmer: is it?

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Michael Sullivan: Yeah, they do. They do. It's all sports. The predominant

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Michael Sullivan: sports that Americans like to bet on are NFL and basketball,

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Michael Sullivan: NBA but also baseball. Horse racing over there, which is

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Michael Sullivan: very dominant in Australia and very dominant in my business,

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Michael Sullivan: has been a bit of a poor cousin over there.

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Michael Sullivan: But what we've seen through COVID is that it's actually

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Michael Sullivan: had a bit of a resurgence, especially through lockdowns, because

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Michael Sullivan: the operators that are up and running found that, we call

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Michael Sullivan: it filling the clock. They were looking for the stock

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Michael Sullivan: to put on the shelf and when they put up

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Michael Sullivan: horse racing, the punters were betting on it. But really,

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Michael Sullivan: when you're talking about sport in America, you're talking NFL

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Michael Sullivan: and NBA as far as wagering is concerned.

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Sean Aylmer: OK, so how does a company from Australia get into

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Sean Aylmer: the US market and make a difference?

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Michael Sullivan: Yeah, good question. And look, everyone's focusing towards it. The

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Michael Sullivan: situation in America is it's starved of talent and it's

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Michael Sullivan: starved of technology in this sector. Now, you don't often

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Michael Sullivan: get to say that about America, but it has been

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Michael Sullivan: so underground for so long that some of the operators

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Michael Sullivan: that have been given licenses, some of the mid-tier casinos,

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Michael Sullivan: which is where our strategy is based, they've tried putting

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Michael Sullivan: up their own sportsbooks and they've taken technology from outside

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Michael Sullivan: providers just off the shelf technology. They don't have the

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Michael Sullivan: people to run it and some of them are running

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Michael Sullivan: negative margins, which you just shouldn't be. So what we found,

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Michael Sullivan: I started talking to some mid-tier casinos about eighteen months ago,

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Michael Sullivan: about coming in and running the whole operation for them

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Michael Sullivan: because they had the brand and they said, well, look,

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Michael Sullivan: we know you've been successful in Australia, but how do

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Michael Sullivan: we know about America? So what my strategy is, is

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Michael Sullivan: to go over there, we go into some smaller states

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Michael Sullivan: first where I'm going to get my own licenses. It's

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Michael Sullivan: been documented in the prospectus that Iowa and Virginia are two that

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Michael Sullivan: we're concentrating heavily on and establishing our own license with

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Michael Sullivan: the joint venture, a "skin", as they call it, over there with

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Michael Sullivan: the casino, get our technology up and running, take our

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Michael Sullivan: first bets, and then I'm going to go to these

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Michael Sullivan: mid-tier casinos and offer what we call sportsbook as a

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Michael Sullivan: solution which revolves around we will do all the back

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Michael Sullivan: end of all the operations. So we will onboard the client,

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Michael Sullivan: we will verify them, we will take care of all the

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Michael Sullivan: fraud checking. More importantly, we'll give the technology there, we'll

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Michael Sullivan: run the bookmaking side of it, which is the really

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Michael Sullivan: important part. And what they will provide at the front

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Michael Sullivan: end is the marketing and the brand. So we don't

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Michael Sullivan: have to have that big capital drain on the marketing and

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Michael Sullivan: the capital drain, but we will run everything else for

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Michael Sullivan: them as a joint venture. And we really think we've

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Michael Sullivan: got a lot of support to do that. But first of all,

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Michael Sullivan: I want to establish our technology and my team by

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Michael Sullivan: getting these smaller licenses. So what I've been saying through

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Michael Sullivan: our presentations is it's really capital light and it really

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Michael Sullivan: fits in with the way I run my bookmaking operations

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Michael Sullivan: over thirty years. It's all to me about risk-reward, right?

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Michael Sullivan: I teach my young traders. I said, I'm happy to

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Michael Sullivan: do two hundred thousand at a race on Randwick on Saturday,

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Michael Sullivan: but you show me the reward. I want there to

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Michael Sullivan: be risk-reward and I need them to be in balance. So to me,

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Michael Sullivan: this is a really good low risk for a high reward.

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Michael Sullivan: So it really fits in with our modelling in relation

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Michael Sullivan: to that. So, look, we're really excited about the opportunities

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Michael Sullivan: in America. Understand it's going to be competitive, but also

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Michael Sullivan: understand that we're not betting the farm.

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Sean Aylmer: So effectively you're white-labelling your services to these guys. Is marketing normally

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Sean Aylmer: the big spend in a gaming operation?

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Michael Sullivan: It is. I wouldn't actually quite call it a white label.

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Michael Sullivan: I know what you're saying. It's very much a joint venture.

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Sean Aylmer: Right.

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Michael Sullivan: But look, Sean, marketing is definitely the spend. I mean, look, PointsBet have

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Michael Sullivan: been incredibly successful in the market here, but their cash

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Michael Sullivan: drain is coming through marketing and some of their deals,

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Michael Sullivan: the NBC deal, it's a national deal. So it doesn't

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Michael Sullivan: really sort of fit in with the fact that it's

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Michael Sullivan: very state-based, a lot of it. So I assume there's

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Michael Sullivan: a lot of it, without going into it closely, there's a

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Michael Sullivan: lot of wastage.

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Sean Aylmer: So what's it, you'll have to explain what the NBC deal is.

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Michael Sullivan: They signed a deal with NBC to spend US$450 million

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Michael Sullivan: dollars in advertising. They're one of the big...

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Sean Aylmer: Yeah,  one of the big  broadcast networks.

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Michael Sullivan: It's a spinoff off NBC. And so that deal, look,

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Michael Sullivan: it was well received by the market here. Extremely well received.

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Michael Sullivan: And in five years time, we might look back and say,

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Michael Sullivan: you know, one of the best deals that has been done

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Michael Sullivan: in the industry, but it's a big bet.

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Sean Aylmer: Yeah.

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Michael Sullivan: It's a really big bet in an emerging market. So

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Michael Sullivan: that's why we like our strategy better, that we will

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Michael Sullivan: partner with someone who's got a brand. The other opportunities,

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Michael Sullivan: I've been talking about casinos, but in some states, the

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Michael Sullivan: government's going to award the "skins" as they are called to

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Michael Sullivan: sporting teams. So, for instance, Arizona is the latest that's

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Michael Sullivan: announced that that's what they're going to do. I think

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Michael Sullivan: it's the Cardinals. If they were to give that side

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Michael Sullivan: a skin and they've got such a strong brand and

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Michael Sullivan: because it's state based, you see you can't do it

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Michael Sullivan: in Australia because, you know, SwansBet? It's Sydney. Western Australia, Victoria are not interested.

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Michael Sullivan: Because the licence is so state based, it works. So

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Michael Sullivan: there's tremendous opportunity there because obviously they know nothing about gambling.

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Michael Sullivan: So there is an opportunity for us to go in, say

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Michael Sullivan: 'We will run everything for you. All you've got to

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Michael Sullivan: provide is the marketing and the brand.'. So that's our

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Michael Sullivan: strategy in relation to that.

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Sean Aylmer: OK, so you're profitable already. What are you doing with the money

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Sean Aylmer: that you raised in your IPO last week?

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Michael Sullivan: Well, a lot of it's going towards this strategy we've

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Michael Sullivan: got in America. I mean, people ask me why I

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Michael Sullivan: wanted to list.

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Sean Aylmer: That's the next question, Michael!

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Michael Sullivan: It was a private company. I had no partners. I had no debt. I

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Michael Sullivan: gave the boys a bit of equity. But it was twofold

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Michael Sullivan: because we were determined to go to America. And I've

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Michael Sullivan: got a very big belief that to be a public

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Michael Sullivan: company in America matters, that America likes that especially, you know,

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Michael Sullivan: a lot of these companies that we're going to deal

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Michael Sullivan: with are listed. So it just gives you a lot

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Michael Sullivan: of credibility to be able to say, look, we're listed

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Michael Sullivan: on the Australian Stock Exchange. As you're aware, the process

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Michael Sullivan: to do that is not an easy one. And we've

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Michael Sullivan: been through it in the last 12 months and all

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Michael Sullivan: credit to my team to get us here. And it

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Michael Sullivan: was also to raise some capital to be able to

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Michael Sullivan: make sure that we can do it properly. So that's

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Michael Sullivan: where the majority of the money's going. We're also putting

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Michael Sullivan: some money into our technology here. And we're also going

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Michael Sullivan: to take our marketing. In the last two years, I've

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Michael Sullivan: started to spend more on marketing. We released a television

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Michael Sullivan: ad and we've done some more free to air stuff

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Michael Sullivan: and made some major commitments to Foxtel. And we're just

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Michael Sullivan: going to beef that up. And look, I'm really focused

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Michael Sullivan: on the Australian business. Bill Richmond who is taking over as

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Michael Sullivan: the CEO from me, he's going to be driving our

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Michael Sullivan: focus into America, but we've only got one and a

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Michael Sullivan: half per cent market share in Australia. And the business was

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Michael Sullivan: highly profitable. So if I can grow that to two, three,

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Michael Sullivan: four per cent, if you quarantine marketing, the rest of

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Michael Sullivan: it just drops to the bottom line because so many

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Michael Sullivan: of our costs are fixed. The business is so scalable

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Michael Sullivan: that if I can grow market share, it really just

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Michael Sullivan: drops very much to the EBITDA (Earnings Before Interest, Taxation, Depreciation, and Amortisation). So that's where the

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Michael Sullivan: money's going. The lion's share of it is going towards

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Michael Sullivan: our focus into America

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Sean Aylmer: Stay with me, Michael. We'll be back in a moment.

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Sean Aylmer: I'm speaking to Michael Sullivan, founder and Executive Chairman of BlueBet.

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Sean Aylmer: So, just on the Australian market, it is a very competitive

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Sean Aylmer: market though, perhaps not quite as competitive as it was

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Sean Aylmer: a couple of years ago, or is that not correct?

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Michael Sullivan: Well, it's a good point, you know, because people think

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Michael Sullivan: it is. But look, what's happened is a huge consolidation.

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Michael Sullivan: So if you look at SportsBet, SportsBet, which is by

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Michael Sullivan: far the market leader, it has even taken over from TAB Now,

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Michael Sullivan: as far as market share is concerned, which is a great effort.

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Michael Sullivan: But within SportsBet is about nine brands. So, for instance,

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Michael Sullivan: there's four of my old brands, there's SportingBet, there's Centrebet, which I've

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Michael Sullivan: bought along the way, there's William Hill and there's Tom Waterhouse,

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Michael Sullivan: which we acquired once William Hill bought my business. And

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Michael Sullivan: then there's BetEasy. There's CrownBet. There's about three or four

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Michael Sullivan: other little ones. So they're all merged into one brand. Now,

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Michael Sullivan: what we do know is the punters like about three

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Michael Sullivan: or four accounts. So, for instance, the latest one, I

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Michael Sullivan: think was when BetEasy blended into SportsBet, we saw an

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Michael Sullivan: immediate spike of sign ups because punters were ringing our

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Michael Sullivan: customer service and saying, ah, I want to have an

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Michael Sullivan: account because I had a BetEasy account and I had

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Michael Sullivan: a SportsBet account but I like to have a few

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Michael Sullivan: different accounts and they've made me into one account. And

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Michael Sullivan: so we think that's a tremendous opportunity for us because

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Michael Sullivan: really there's only about three or four players at the top.

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Michael Sullivan: And we sit below that and we really think there's

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Michael Sullivan: great opportunity. And quite frankly, the TAB, it just continues to

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Michael Sullivan: be the gift that keeps giving. And I've been building businesses

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Michael Sullivan: for twenty five years on the back of them. And

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Michael Sullivan: this latest announcement about the demerger I think can only

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Michael Sullivan: benefit us. I mean, I've said all along when people

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Michael Sullivan: have asked me, you know, we've been doing presentations, what

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Michael Sullivan: do you think will happen with the TAB? I said, well it's,

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Michael Sullivan: quite frankly, the status quo would suit me, but no

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Michael Sullivan: matter what happens, they're going to be distracted for 12 months.

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Michael Sullivan: And for some time there's been stuff swirling around that

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Michael Sullivan: a demerger was going to be their preferred option. So

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Michael Sullivan: to me, that still looks like an opportunity. So to

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Michael Sullivan: go back to your original question, it looks competitive, but

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Michael Sullivan: there's been so much consolidation and we know punters like

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Michael Sullivan: a couple of different brands.

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Sean Aylmer: Yeah. Michael, you started as a bookies apprentice at 14 years old.

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Sean Aylmer: Did you ever think your career would have taken you

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Sean Aylmer: where it has?

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Michael Sullivan: Probably not but fourteen might be a bit of an exaggeration. I was 18!

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Sean Aylmer: 18? The story is better if it's 14!

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Michael Sullivan: It was 40 years ago.

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Sean Aylmer: I mean, you just must love horse racing. But, you know,

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Sean Aylmer: kind of love sport and what gaming brings to it.

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Michael Sullivan: I do love horse racing and horse racing only exists

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Michael Sullivan: because of wagering.

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Sean Aylmer: Yeah.

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Michael Sullivan: I mean that's the reality, that's the stark reality. Look, I

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Michael Sullivan: was very lucky. I started working as a 17-year-old university

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Michael Sullivan: student with a great man, Brian Ogilvy, who's the biggest

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Michael Sullivan: bookie in Queensland, who became a great mentor and a

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Michael Sullivan: great friend to me. I then started off as a

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Michael Sullivan: little bookie in Brisbane. And look, I've been very grateful.

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Michael Sullivan: I was very lucky in 2000 that we recognised that

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Michael Sullivan: the Internet might be something that was here to stay.

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Michael Sullivan: A lot didn't.

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Sean Aylmer: Yeah.

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Michael Sullivan: And from there on, we've really continued to grow businesses. So, look,

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Michael Sullivan: the whole industry has been great to me. It's been

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Michael Sullivan: great to be part of it. I'm very passionate about

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Michael Sullivan: horse racing. It just happens to be 80 per cent

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Michael Sullivan: of our business. But I own a lot of horses.

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Michael Sullivan: I'm very involved in the industry and it's been a

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Michael Sullivan: great path for me. And it's really exciting to go

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Michael Sullivan: through to this next stage. I mean, a lot of the

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Michael Sullivan: boys that have been with me, they've been with me 8, 10,

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Michael Sullivan: 12. Bill Richmond, who's taking over as the CEO, he's been with me fifteen years.

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Sean Aylmer: Fantastic.

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Michael Sullivan: So it's been very satisfying to see that next crop come along.

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Michael Sullivan: I'm not quite ready to give the baton up, but

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Michael Sullivan: I'm sort of getting ready to pull it out of

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Michael Sullivan: my pocket, so to speak.

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Sean Aylmer: Fair enough. Tell me one last question. Why it that my

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Sean Aylmer: horses are dogs? Why is it the ones that I have

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Sean Aylmer: these tiny shares in are dogs?

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Michael Sullivan: Oh, Sean, that's an age old question! I can't answer that mate!

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Sean Aylmer: Oh, you can't answer that one. Fair enough.

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Michael Sullivan: I have got about forty of the same myself! I've had a

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Michael Sullivan: bit of luck. The biggest problem is the slow ones

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Michael Sullivan: eat as much as the fast ones.

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Sean Aylmer: That's right. They certainly cost as much, that's for sure. Michael, thank

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Sean Aylmer: you for talking to Fear and Greed.

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Michael Sullivan: Look, thank you very much. It's been an absolute pleasure.

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Sean Aylmer: That was Michael Sullivan, founder and Executive Chairman of BlueBet.

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Sean Aylmer: This is the Fear and Greed Daily Interview. Join me

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Sean Aylmer: every morning for the full Fear and Greed podcast with

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Sean Aylmer: all the business news you need to know. I'm Sean Aylmer.

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Sean Aylmer: Enjoy your day.