Egaming industry predictions for 2019 - including mega-mergers and UK regulation

Julian Buhagiar, co-founder, RB Capital

There will be at least one mega-merger next year on the scale of the Ladbrokes/Coral and Betfair/Paddy Power transactions. The marketplace is simply too crowded for all the big players to co-exist.

Swedish market regulation rules will initially cause confusion. There will also be gradual, but cautious, adjustment to the most successful acquisition strategies without incurring the wrath of the newly empowered regulators. Winners in Sweden will be second movers – those that learn from the mistakes of the first to market, just as we saw in France and Germany.

There will be a first wave of esports takeovers in the US by EU players. To date, post-PASPA, most EU operators have been cautiously watching early mover States, making small land grabs for free-to-play and data-based esports entities. That will change in 2019 with bolder plays for newly regulated States and/or rest-of-world ventures with initial offerings in the US.

UK Gambling Commission fines will rise in severity. This is only the beginning. The only reason we haven’t yet seen higher fines is that they are still under investigation by the Commission. FOBT limits will equally harshly impact Q2 and Q3 earnings reports leading to Year-on-Year stagnation.

DE and CEE acquisitions will increase significantly in 2019. Customer lifetime values (CLTV) Vs acquisition cost (CAC) still enjoy very healthy numbers in Eastern Europe. Coupled with relatively immature markets this makes acquisition one of the safest bets within the EU. Germany will renew Schleswig Holstein licences in 2019 which will spur a fresh wave of acquisitions with newly-confident buyers.

New spawn of Central African and South American brands. Colombia, Chile, and to a lesser extent, Brazil, have begun to regulate, taking a leaf from their European counterparts. Latin gambling branding is markedly different from Europe with many local brands enjoying good traction. If they are (locally) celebrity endorsed, they will start a growth spurt that will only be mitigated once they are acquired by larger (bolder) international brands. Central Africa is a different strategy. Significantly low LTVs can only be spurred on by persistent local marketing, coupled with strong external affiliate networks. Eyes on Nigeria, Kenya and Tanzania.

Stephen Ketteley and team, Wiggin

Comply or die – The recent regulatory sanctions meted out against Daub, Casumo and Videoslots were the culmination of a long-winded thematic review by the Gambling Commission of online casinos specifically. This marked a change in strategy, where the regulator was not drawn to an operator due to a specific case or cases. Rather, deep compliance assessments led to the conclusion there were systematic failures across these enterprises. The learning from such casework feeds into the Commission’s compliance work. Today’s regulator is better equipped and more knowledgeable than ever. Licence holders should expect rough rides on compliance assessments and if they don’t jump when told to, enforcement will swiftly follow. The Commission has given the industry the ball – it mustn’t drop it.

Have-a-go players – An industry that is already battered and bruised is facing a growing challenge of players perusing claims through the courts on the back of regulatory settlements and decisions. We have seen this with other regulated sectors (notably financial services). We predict a growth in claimants (and their solicitors) using a gullible press to market their strategies and envisage funding partners assessing the viability of bringing cases that will seek to establish direct responsibility to individuals in line with the regulatory landscape.

Co-operation is key to stopping a legislative tsunami – Old-fashioned lobbying and repeating mantras like “problem gambling only affects a tiny percentage of the population” won’t stem the political and media tide (they actually seem to be making things worse). Trade bodies and the larger operators have recognised this and begun actively co-operating in terms of changing their approach (e.g. advertising) and sharing best practice (e.g. social responsibility initiatives) in order to head the risk of further legislative intervention off at the pass – the industry needs to aim to be “alcohol” not “tobacco”. Meaningful collaboration in 2019 will be crucial to getting the Gambling Commission and others back onside.