The igaming industry’s 2019 predictions: part two
2018 was packed with significant moments in the industry, from the repeal of PASPA to the rise of crypto. As 2019 begins, we talk to the sector’s leading founders, experts and opinion formers about the opportunities and challenges set to define igaming this year.
In part one we heard from operators and suppliers, regulatory experts and marketers. Here we provide insight from analysts and experts on technology and innovation and people.
ANALYSTS
Simon Holliday, founder, H2 Gambling Capital
Paul Leyland, partner, Regulus Partners
Simon French, partner, Bixteth Partners
What were the defining developments or events of 2018?
Simon Holliday: The SCOTUS repealing of PASPA provided the biggest buzz for the sector since the PartyGaming IPO in 2005. Other key developments were the legalisation of sports betting in Argentina (Buenos Aires) and Brazil right at the close of the year, the exponential growth of sports betting in China and mobile becoming something that is no longer being viewed as a sub/emerging interactive channel – rather the two terms are now almost interchangeable.
Paul Leyland: The defining developments of 2018 are threefold: a significant tightening of regulatory oversight; a material slowing of growth in some key mature markets (the UK especially); and a material leap in point-of-consumption opportunities – especially in the US, but also in Sweden and Brazil. There is a tendency to see two macro negatives and one positive but all are more nuanced: sustainability might be improving but at the expense of easy growth and cash flow.
Simon French: The acquisitions of Ladbrokes Coral by GVC and Sky Betting & Gaming by The Stars Group significantly changed the landscape of igaming in the UK. Added to this were the regulatory, advertising and tax changes in the UK and Italy – the two largest European markets – which effectively signalled the end of relatively laissez-faire approaches to the industry in the EU. On the flipside, the repealing of PASPA by the US Supreme Court offered hope for growth prospects on the other side of the pond.
How do you see these continuing to shape the igaming space in 2019?
SH: In the US, sports-betting states that adopt mobile will fare far better than those that do not. Even with dot.country launches in Sweden and (hopefully) the Netherlands expected in 2019, H2 expects Europe to have the slowest growth of any region in 2019, at less than 7%. However, the recent developments in Lat Am are expected to lead to more activity both in that region and in Africa. We also predict an increasing use of virtual reality/AI technology as millennials at last become the majority in company tech departments.
PL: The regulatory tightening of 2018 will largely be a 2019 event, operationally. Growth will also continue to be a challenge given a combination of this, growing underlying sector maturity and the lack of a major football tournament in the summer. Critically, we will also start to see just how big (or not) some of the new opportunities are and to what extent they impact on existing business practices.
SF: Dynamic regulation, increasing taxation and slowing top-line growth all point to ongoing consolidation in 2019, as has already been seen by William Hill’s proposed acquisition of MRG, among others. Reduced advertising in the UK and Italy clearly suggests that bigger players with higher brand recognition will thrive. The shape and pace of change in the US remains uncertain but it also remains unclear how and when non-US-domiciled entities will turn a profit.
What do you see as the biggest challenges ahead for the sector in 2019?
SH: Generally, the global economy is slowing. Land-based gaming is struggling to adapt and innovate, both in gaining more convergence with mobile and attracting a new millennial demographic. The industry needs to collaborate and speak with one coordinated political voice to articulate the positive arguments of the industry and fend off further regulatory tightening and/or taxation increases.
PL: The biggest challenge is simple, in our view: to persuade enough governments that a properly regulated and commercially viable online gambling sector is a good thing. Twenty years of most of the sector behaving to ensure that the opposite view is too often held is by far the biggest risk.
SF: Undoubtedly the industry has to convince the powers that be – and the general public at large – that gambling is a respectable form of entertainment enjoyed by millions of people around the world with no negative social consequences. For those consumers for whom gambling leads to negative outcomes, robust measures have to be put in place to identify, challenge and help within the confines of the law and established frameworks of regulating and licensing bodies.
TECH AND INNOVATION
Justin Bellinger, chief digital officer, Sure International
Will Mace, head of Kindred Futures
What were the defining developments or events of 2018?
Justin Bellinger: The emergence of the first companies using blockchain in 2018 – FunFair, TruePlay, BETR and the like – has set the scene for things to come. Now that we have got over the currency hype of this time last year, there is no doubt that the technology has a great place in our sector.
Will Mace: In 2018, the first banks made their Open Banking APIs available to licensed bodies and by Q3 2019 all banks will have done so. These APIs give the gambling sector a huge opportunity to revolutionise our approach to often-onerous processes such as registration, verification, AML and SOW, affordability checks and payments. Streamlining these processes has the potential to make for a much-improved customer experience, lower abandon rates and a significant operational saving.
How do you see these continuing to shape the igaming space in 2019?
JB: There has got to be a place for blockchain in regulatory technology in the igaming sector; that’s one of the reasons that I am pleased that so many igaming crypto innovators launched last year. Even at its lowest common denominator, what better way of ensuring fairness in a game than an immutable log shared between operator and regulator through a permissioned blockchain?
WM: Last year also saw a huge development in the use of messaging channels, with Facebook Messenger coming out of beta for gambling operators. I very much hope to see WhatsApp also open up in 2019 and it is finally looking promising. Voice channels such as Alexa and Google Home are unfortunately likely to remain closed to gambling companies, in the short term at least. The rudimentary keyword chatbots have hopefully been consigned to history and are being replaced – albeit slowly – by highly effective, conversational natural-language technologies, enabling a highly effective and immediate engagement channel to seamlessly convert engagement into sports bets.
What do you see as the biggest challenges ahead for the sector in 2019?
JB: Continuing M&A activity and in-market consolidation points to a sector that has reached maturity. Digital transformation is the natural place for a mature industry player to seek improvements in many areas, be they customer experience, operational efficiency, strategy or technology investment choices. Transformation often requires changing organisational culture, which means messing with people’s hearts and minds – something that is challenging in any sector, but something that I think igaming businesses will face increasingly in the future.
WM: One of the most interesting opportunities of 2019 has been afforded by the Malta Gaming Authority’s digital currency/DLT sandbox, and it will be very interesting to see the operator response. Will this be the move that really starts the mainstream ball rolling for gambling with digital currency, lifting it out of the Curaçao mire?
PEOPLE
Andrew Bulloss, partner and head of global gaming practice, Odgers Berndtson
Alastair Cleland, manging director, Pentasia
What were the defining developments or events of 2018?
Andrew Bulloss: There are two key things from this year that will have a major impact on the talent agenda in 2019: one was the repeal of PASPA and the other was the continued regulation of the UK market and the ongoing crackdown by the Gambling Commission around customer protection. Both these issues will affect the type of talent required in gaming next year.
Alastair Cleland: The talent market opened up in 2018 as the effects of both the PASPA repeal and M&A consolidation were felt worldwide. Talent shortages – particularly technical development and industry-specific leadership – were a critical factor, limiting many businesses’ ability to deliver on growth plans. And despite a huge rise in remote work requests, our industry hasn’t yet effectively harnessed this workforce potential.
How do you see these continuing to shape the igaming space in 2019?
AB: As the US igaming and sports betting landscape takes shape, the demand for digital and sports betting talent will increase. US operators are looking for quick fixes to their talent gaps right now and so green card and US visa holders will get first bite of the cherry. Long term, the opportunity for European gaming execs to ply their trade in the US will come, however I do see some digital roles in igaming being filled by US citizens from parallel online sectors.
AC: An ever-increased strain on the talent pool is highly likely considering forecasts for significant growth in the US, newly regulating European regions, Latin America, Africa and Asia. For senior professionals, there will be hugely exciting leadership positions on offer. Expanding businesses, though, will need to place the utmost importance on their talent acquisition strategy if their growth plans are to become a reality.
What do you see as the biggest challenges ahead for the sector in 2019?
AB: The biggest challenge is one of perception and this has implications for talent attraction. Last year was a tough one for the sector, and the perception of the industry with mainstream media and, from my point of view, with potential out-of-sector candidates is sadly at an all-time low. It has become much harder to attract people to the industry. For this reason, the sector needs to come together to challenge perceptions, showcase some of the great technology, innovation and talent within the industry and find ways to get gaming back on the map as a credible career path for people at all levels, from graduates through to experienced hires.
AC: Growing our industry’s talent pool has to be a priority this year. We’re increasingly competing with other high-growth industries, such as fintech, blockchain and ecommerce, and we need to ensure we’re attracting, retaining and progressing the best people. Otherwise talent acquisition could well be the industry’s Achilles heel in 2019.