Supply and demand – the new supplier landscape
The eco-system for gaming software suppliers is more open than it has ever been, as shown by Rank's decision to re-launch with Bede Gaming. Scott Longley looks at how this translates for smaller suppliers when it comes to collaborating with prospects and software counterparts.
The online gambling industry will be watching with interest the progress of the re-launch of Rank’s online gaming business on the all-new Bede platform.
The Maidenhead-based operator announced in mid-March that its Mecca Bingo and Grosvenor casino offerings were now live on the Bede platform with a broader range of content on each site from Microgaming, Realistic and Eyecon, and with Openbet and Playtech remaining as “key suppliers”.
Henry Birch, chief executive at Rank, said the company was pleased the new platform had been delivered within the proscribed timeline and on budget, but he and his board won’t be the only ones waiting to see how the effort is received by consumers.
Mecca and Grosvenor may be dormant brands rather than new propositions, but as Andy Harris, commercial director at Realistic Games points out, there is a “great rationale for Rank doing what it is doing”.
“It will be interesting to see if there is the opportunity for a ‘new’ operator to go with a new supplier,” says Harris. “It will be an interesting case study.”
It may or may not have been Rank’s intention to stand in as lab rat for a supplier experiment, but it is a sign of market maturity that the company should be viewed as an outlier by choosing an up-and-coming platform provider instead of plumping for one of the more established names.
The tectonic plates of the gaming supply landscape have solidified in recent years. In the US, Scientific Games and IGT have emerged as the winners from an almost frenzied bout of merger mania.
In online, meanwhile, Playtech’s 2015 annual results statement proclaimed it had 120 licensees globally, including many of the biggest names in European gaming, Microgaming and Net Ent remain large players and NYX is also taking the M&A path to bulk up.
Indeed, one of the more intriguing questions occupying the sector at present is whether it will be NYX, with some help from William Hill, or Playtech that ends up buying OpenBet.
The online world’s foremost sportsbook supplier might not have the lengthiest client list but it has a lock on large swathes of the UK-focused market, many of which are already Playtech clients.
This possible eggs-in-one-basket scenario is clearly on the minds of those at the top of William Hill; the company is funding the rival NYX bid in an apparent attempt to head that possibility off at the pass.
And Playtech itself will be well aware of industry nervousness about a single supplier gaining complete/majority control over operators, particularly the bigger names that are already on their books.
This is likely shaping the internal debate regarding an OpenBet bid as much as it is the external one.
Build a better mousetrap
Yet John O’Reilly, ex-online chief at both Ladbrokes and Coral and now the chairman at gaming technology firm Grand Parade, cautions that it would be “naïve” to believe that all Playtech casinos and OpenBet sportsbooks are the same, particularly as far as the consumer is concerned.
“It just isn't the case,” he says. “These are largely back-end systems on which operators control third-party and in-house integrations.”
Grand Parade is looking to set out its stall in the supplier space and is rumoured to be finalising a sportsbook supply deal to provide a renowned UK bookmaker with a platform for a new online launch.
Though O’Reilly wouldn’t confirm the deal, he did suggest the market was clearly open room for new supplier competition. “There has – and will continue to be – significant opportunities for suppliers to beat a path to betting and gaming operators with better or new ways of catching mice.”
Challenger suppliers have technological advances on their side. “Using what has come out of Silicon Valley in the past few years, we can use technology that can really help us produce scale,” says Dave McDowell, chief executive and founder of FSB Technology.
“Previously, the cost of launching a sportsbook was phenomenally high. But with the technology available now, it is a completely different business model. You can effectively launch a brand with no fixed costs. Never before have you been able to change the fundamentals of sports betting.”
The industry’s relationship with technology is changing, but it’s a slow process. A recent article in Computer Weekly focused on Bet365’s recent release of code into the GitHub open-source library in order to encourage developers to use the Erlang programming language that it adopted in 2012.
The company said it had opted to release code to “give something back” to the tech industry, but the Stoke-based company’s stance stands out as an exception in an industry where open source is generally viewed with suspicion.
“While a lot of companies say they use open-source technology, they don’t have an open-source mentality,” says Daniel Graetzer, deputy chief executive at Madrid-based services provider Mediatech.
“They don’t share much innovation. It’s very rare when I get to see what other companies are doing.”
In the wider tech and social world, the need to process colossal amounts of data and deliver customer personalisation on an industrial scale forced the likes of Facebook and Twitter to develop their own software to cope, says Dominic Hawken, chief technology officer at Grand Parade.
That (crucially open source) software dovetails perfectly with the challenges faced by the sportsbooks and though a sizeable investment is still needed, it is the willingness of new suppliers to embrace the new possibilities that (perhaps) sets them apart. “Many existing systems are already too late to the party to catch up,” he says.
A reliance on legacy technology often dogs the progress of product roadmaps for many of the larger operators. But further down the scale there is more of a willingness to work smarter and quicker, particularly if both partners are in a position to truly work together to achieve the technical goal.
“We chose customers that share our vision of being agile; they have the agility to do integrations,” says Fredrik Elmqvist, chief executive at Yggdrasil Gaming.
“We take the ones we know we can integrate quickly. We have done integrations in two to three weeks. That’s between contract signing and going live.”
For Harris at Realistic a spirit of cooperation can extend into working alongside fellow suppliers in order to better facilitate getting new deals in motion. “When we are doing deals with like-minded suppliers; that is interesting,” he says.
“There is a certain degree of them and us when we are talking about the bigger suppliers. It’s good to do business with like-minded competitors. It can make a huge difference. It feels like you are on an equal footing. It can be mutually beneficial. We can be more aligned.”
The road to mutually beneficial enhancements is clearer in the arena of back-office tools, suggests Andy Rogers, founder and managing partners at gaming consultancy firm Rokker.
“Personally I think there is more room for innovation in looking at things like data and payments,” he says.
This is corroborated by Graetzer at Mediatech, who says his company is effectively the “Switzerland of online gaming” because it doesn’t create content. “We are a platform services provider; we do all the plumbing, the infrastructure, the payments, the transactions, the anti-fraud,” he says.
A halt at the ideas factory
But from his vantage point of working with some of the big operators, Graetzer suggests the industry does have an issue with innovation.
“I don’t think the business has quite got past the fundamentals of creating the basics,” he says.
“The business hasn’t quite achieved the key building blocks. So we are not yet competing in terms of innovation, we are still competing in core functionality. Until all suppliers are competing on core functionality will they truly start competing on innovation.”
This isn’t for a lack of ideas. As Rogers at Rokker says, there is in fact an abundance of ideas. “There’s tonnes of it,” he says. But what he calls the “construct” of the industry mitigates against many products breaking through to achieve meaningful scale.
The difficult and patchwork regulatory backdrop, the corporate set-ups, the organisational structures, and the lengthy commercial contracts. “There is downward pressure on agility,” says Rogers. “It’s the perfect storm for lethargy.”
The inertia born of the fear of throwing caution to the wind operationally is compounded in a situation where the sector is undergoing merger upheavals.
“If a merger happens, then boom, the roadmap is gone for 18 months,” says Elmqvist. “There is no roadmap. Just go and have coffee for the next 18 months. So people with new ideas will start something new, will go somewhere more agile.”
Similarly, O’Reilly at Grand Parade suggests the moves towards ever bigger conglomerates at the operator level might not necessarily lead to the predicted market stasis.
“I don't see the big advantage of scale,” he says. “Just look at the way Bet365, and more recently completely new names like BetBright and Betway have come on the scene and taken share in a growing market.”
For O’Reilly there is a ready market of operators seeking new and innovative products that can help them take on the market leaders.
“There is considerable opportunity for small suppliers to grow by simply being better at their chosen area of expertise. Better slots, better data, more personalised player communication, a new gaming idea, a new betting product, integrated streaming content, access to bigger pools.”
He concludes: “There is plenty of space for smaller suppliers to pick off areas in which they can take and grow supply sided revenues.”
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