Last year saw the rapid expansion of sports betting across the US, but also a number of regulatory and advertising clampdowns in Europe.
As the new decade gets underway, industry experts share their thoughts on the opportunities and challenges that lie ahead.
In part two we hear from those working in the finance arena. Tomorrow we'll cover marketing, with people, technology and innovation, and regulation rolled out over the rest of the week.
Simon Holliday, founder, H2 Gambling Capital
Paul Leyland, partner, Regulus Partners
Julian Buhagiar, co-founder, RB Capital
What were the defining developments or events of 2019?
Simon Holliday: The pace of development of the US sports betting sector as companies jockey for position to take advantage of it. The number of live sports betting states reached 16 by the end of 2019, with total gross win increasing from $450m to about $985m. The online channel is set to account for 42% of gross win and is expected to be as high as 55% of the $13bn handle.
Paul Leyland: The biggest single shift in our view is the reducing tolerance of visible online gambling in Europe and parts of Asia. This is partly a political backlash but it is also cultural – and it is the cultural element that should be most concerning to the sector.
Julian Buhagiar: The rise of regulatory fines across the European landscape in 2019, particularly the Nordics, has depressed asset values and investor sentiment, thereby placing these territories in a state of limbo, at least from an investment/speculative perspective. But by far the most impactful events of the year were the type (and audacity) of mergers and acquisitions across the landscape, the likes of Flutter/Stars and more recently DraftKings/SBTech. The latter is set to be the most disruptive, with a new class of acquiring party (SPAC, or special purpose acquisition company) set to lead the trend for the next decade.
How do you see these continuing to shape the igaming space in 2020?
SH: The potential DraftKings float will put the spotlight on sports betting. As long as the US election doesn’t slow things down, there could be 10-12 more sports betting states by the end of 2020, generating handle as high as $25bn and gross win of $2bn. Confidence also seems to be growing that more states will legalise igaming. With Michigan and West Virginia both expected to launch in Q1, igaming gross win could reach $750m this year.
PL: We are likely to see the reducing tolerance continuing to drive more restrictive legislation around advertising, product (including links to sport) and responsible gambling in a great swathe of jurisdictions, arguably except the US (for now). Also, jurisdictions will be looking to stamp out ‘illegal’ gambling much more effectively.
JB: A SPAC-derived acquisition has the potential to change the entire landscape for the gaming industry, as has been the case with pharmaceuticals and fast-moving consumer goods. Properly done, a SPAC will effectively unlock a large class of US private equity that hitherto had not even looked at gaming, to spurn bigger and bolder buyouts or even reverse mergers. Expect bigger and bolder brands to be bought or taken over, and on the flip side, delisting of some well-known operators with view to an (even bigger) private sale further on.
What do you see as the biggest challenges ahead for the sector in 2020?
SH: Across much of the more mature European markets, the proactive development of an innovative argument to counter the anti-gambling lobby’s efforts to define any problem gambling as a public health debate. The sector continuing the process of consolidation while still remaining nimble enough to take advantage of the areas of growth such as Africa, Asia and Latin America.
PL: The biggest challenge is to find a critical mass of public support to have a chance to operate in a relatively liberal commercial environment; the zeitgeist is very much protecting the vulnerable over freedom of choice – gambling is caught up in this more than virtually any other sector.
JB: We will shortly be dealing with the kind of regulatory pressure the likes of which we have only really witnessed in antitrust takeovers (GVC, Ladbrokes, Gala et al). If SPACs really take off, their buying/merging power will unlock new legislative challenges from governing bodies that will take months, or even years, to effectively clear. Our first exposure to this will be happening this year across Flutter/Stars and DraftKings/SBTech.
Related articles: Industry 2020 predictions: part one – operators and suppliers
Image: Horst Koenemund, Pixabay