The slow death of globalism in egaming?

Something rather profound appears to be happening in the online gaming sector right now. In a move that almost mirrors the western world’s gradual shift from globalism to nationalism, the sector’s world view is being picked apart and put back together again with some haste. And the implications are fascinating.

The increasingly fractured nature of the egaming space, with a patchwork of locally regulated markets and a dot.com sector in varying shades of grey mean that no two firms seem to view things quite the same way anymore. While egaming as an industry is often fond of a group think, when it comes to international profile there are more differences of opinion than similarities.

Speaking to a major supplier it’s clear operators have varying opinions when it comes to grey markets. For some Russia is off limits, for others it’s a valid market. The same can be said for Canada, Germany, Brazil, Japan and almost every non-regulated market. Even within the Nordic markets there is a divergence of view with Norway and Finland viewed more sceptically than Sweden by many.

Turkey and China are perhaps the most obvious of the dark grey markets, but even here there are major operators with a presence who can rationally and passionately argue the legal case for their presence. The absence of regulation provides an opportunity and a threat and the balancing of those remains a tricky task for the industry to contend with.

Threat or opportunity?

The opportunity is clear and the threat of suddenly losing a large revenue stream is something everyone in the sector is closely attuned to. The lessons have been learned from history. As a result we’re finding that rather than a blanket “open to everyone” dot.com approach we’re seeing a more considered apporach. A balanced risk profile, and selected darker grey markets where the rewards outweigh the potential costs.

The net impact of this is operators with differing growth curves and profit margins, even among the very top tier. While Paddy Power Betfair and Ladbrokes Coral remain predominately regulated in profile the likes of Unibet, GVC, Betsson and 888 all have varying degrees of unregulated exposure while many mid-tier, and even some of the top-tier firms, are trying to increase its dot.com revenue mix to alleviate some short-term revenue pressure.

And no two firms think exactly alike. In the absence of legal certainty the decision to enter any international market will always come down to some degree of legal interpretation, but what is perhaps more interesting than this is where operators focus their attentions in the regulated or near-regulated markets.

In the new egaming regulatory environment shades of grey are quickly being replaced with more black and white options. Just this week we’ve seen 888 pull out of Australia in advance of an expected tightening of regulations Down Under. But not all markets are created equally.

Whiter than white

Some regulated markets such as Portugal, France and Poland are setting tax rates at such a punitive level that only those with a strong track record or local partner are willing to get involved. While others such as Spain or potentially the Netherlands are at a biting point where operators can only get involved if it’s a real market of focus.

If you are of the scale of bet365 or PPB then perhaps you can afford for every market to be one of focus, but for everyone else in the market it’s now time to be selective about where you apply your marketing and investment budget. This has been the case for some years now, but the last 12 months has brought this new reality into sharp focus.

The emergence of a more must-enter regulated markets in the mid-term from Germany and Sweden will likely only squeeze out some of the smaller markets such as Portugal, Spain and even the Netherlands as options for some. While the increasingly complex and tricky dot.com sector will likely see more regionally or even country specific focused operations emerege.

We’re entering a new period for online gambling, where the dot.com approach is fading fast to be replaced by a more complex operating environment. And it’s one where operators are going to need to be even more strategic and smart to thrive.