Wednesday 17 September 2008

Betfair Premium Charge - Guardian Article

Betfair Stand Firm On New Charges
September 16 by Greg Wood

Betfair, the internet's dominant betting exchange, yesterday denied a report that it is preparing to scrap a controversial new charge to be paid by its most consistently successful clients.

"Contrary to reports, there was no crisis board meeting today," Tony Calvin, a Betfair spokesman, said, "nor was one ever planned."

However, the firm refused to offer any further comment on the charge, or the precise reasons why it has been introduced. A question-and-answer session conducted on the forum section of its website last week remains Betfair's only public comment on the new charge.

The premium charge, which will be levied for the first time later this month, will target clients who are winning significant sums annually while paying relatively little commission to the exchange. Betfair insists this will be an average of 600 clients per week, while about 2,000 can expect to pay the charge at some point each year.

In particular, this will affect clients who "trade" positions - that is, both backing and laying to guarantee a profit in a particular market - but could also snare some backers who have an exceptionally good strike-rate with their bets.

While suggestions of a "crisis meeting" appear to be wide of the mark, the announcement of the premium charge has been widely seen as a PR debacle for the exchange, not least because it has made so little attempt to explain its reasoning.

Betfair's competitors, including traditional bookies and its much smaller rivals in the exchange market, have also been quick to take advantage, with promises that they will not levy any unexpected taxes on winnings. The new charge has fuelled speculation that the business is being fattened up for a float, which would allow Betfair's founders to cash in shares worth many millions.

Another possibility, though, is that Betfair is concerned that a small number of its customers are making so much money from the exchange that the situation is unsustainable and they will, at some stage, effectively run out of losers.

On this basis, the premium charge can be seen as the price that consistent winners must pay for an ongoing supply of losers, though if this is the case, a clear statement of the fact is unlikely to do much to attract new business.

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