The illusion of maturity in the online gambling sector

In an era of mega mergers it’s tempting to think of the online gambling industry as a mature one where the major players’ roles are all cast. The sheer scale of the likes of Paddy Power Betfair, particularly in the UK market, means operators talking of taking on the big names are often looked at with suspicion and even derision. And yet the new faces keep coming.

The latest to be making a stir is Romanian operator Superbet, which appears to be recruiting the majority of the executive team who ran William Hill so successfully in the early part of the decade. The operator’s online efforts are being led by ex-Hills man Jamie Hart, who appears to have huge ambitions for the hitherto unknown brand in the rest of Europe.

His focus is on doing things differently from the incumbents, as he told EGR Intel earlier this week: “For us to take market share we need to adapt to the evolving demands of the modern punter and deliver new experiences that satisfy better than the current industry offering,” Hart said. It’s a common style of statement from a new entrant, but at a time when most of the big firms are stymied by integration issues it carries with it some threat.

Lessons from history

What is frequently forgotten about the egaming sector is how quickly the status quo can change. Those operators currently dominating the industry have only taken their seats at the top table relatively recently. Betfair’s resurgence, and GVC and Kindred’s acquisition-driven growth has shaken things up hugely. While we’re not seeing start-ups breaking through outside of the casino sector, we are seeing that a large bank balance and some strong management can make a big impact.

GVC is the most obvious example of this, but Kindred’s rise over the past decade is perhaps more illustrative . From £84m in revenue in 2007 to £544m in 2016 it has grown by focusing on regions most have ignored or backed off from such as Benelux and the Nordics, as well as adding smart bolt-on acquisitions in key markets. And it’s now well placed to take an increasingly larger role in existing and newly regulated markets where it can invest from a position of scale against the incumbent “regulated” firms.

So can Superbet become the next Kindred? It has some obvious advantages with a dominant position in its core (now regulated) Romanian market and a far easier route into the remainder of Eastern Europe than most of the Western European competition. If it can use that base of revenues to invest not just into marketing but also into technology to try and compete elsewhere, it could be a genuine competitor. This is a market that is far from sewn up.

New ground to break

While the UK sports betting sector looks impenetrable at the present time there are plenty who believe it’s still there to be broken into. Betway’s continued huge spend on marketing shows a real commitment to breaking the UK, as its re-signing of a Cheltenham sponsorship deal for the next three years partly demonstrated. For a firm with substantial gaming revenues to invest so much into sports betting in Europe’s most competitive market shows it doesn’t believe this is a game in its final stages.

We’ve seen from the most recent results that a fairly brief period of the major operators taking their eye off the ball in casino has allowed a new generation of operators to steal market share. And who is to say the same thing couldn’t happen in sports betting? We’re only at the beginning of the mobile and entertainment revolution in gambling and is there any reason to think those embedded in the “old” way of doing things will emerge on top in a decade’s time?

But to just look at the UK is to really miss the major opportunity that exists in online gambling right now. There are relatively green territories of Germany, Netherlands, Eastern Europe, and even the Nordics to an extent, to be explored and conquered with huge growth potential in all of those. There are dominant players in each of the aforementioned markets, but they are markets that haven’t been through the transformative mainstream consumer revolution like the UK has. There is, in short, still an awful lot to play for.

An immature market

What exists in egaming in 2017 is something of the illusion of maturity. Large well capitalized firms that appear to dominate the sector, but in truth still face growing pains of their own and need to respond quickly to a changing market. In the UK we are seeing Sky Betting & Gaming continuing to outgrow their publicly-listed peers and proving the importance of a well-crafted consumer proposition. It’s not enough to simply throw money at the problem; your product offering and your marketing messaging needs to be sharp to cut through.

Outside of the UK it’s still mostly anyone’s game in the long-term. The Nordics has some well-established power players, but acquisitions and regulation could easily change this while in Italy we’re already seeing new entrants make a sizeable impact. In Germany the likes of bwin and Tipico will be strong rivals for anyone looking to come in and take share, but that is still a very immature market and one ripe for post-regulatory change. And a similar case can be made for nearly every market in Europe.

As history has taught us in online gambling, the time when things feel the most settled is often the calm before the storm. The big firms in the sector look extremely tough to shift, but buying into the notion of market maturity could be a very expensive mistake to make.