2017 ISSUE 29
Publisher’s Note Publisher Jamie Kean firstname.lastname@example.org Client Services Director Tracie Birch email@example.com Editorial Assistant Harry Wainwright firstname.lastname@example.org Production Designer Nancy Rae email@example.com Circulation Manager Natasha Harvey firstname.lastname@example.org Commercial Director Daniel Lewis email@example.com Account Manager Nathan Charles firstname.lastname@example.org
Editorial Contributors Julian Harris, Genevieve Gimbert, Stefanie Kicrhheimer, Aleš Gornjec, Dorothy Creaven, Valéry Bollier, Susan O’Leary, Henrik Lykkesteen, Wulf Hambach, Stefanie Fuchs, Joe Pappano, Cory Aronovitz, Jeff Catanzaro, Dr. Mark Griffiths
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s an event driven publication, we have always endeavoured to
support as many trade shows, expos and conferences as we
possibly can and although the established events seem to
get bigger and more impressive with every year that passes, we
are always intrigued and excited to see new events popping up around the
We are even more excited to welcome old and new contributors to join us
for each of our quarterly editions, where they are invited to share their thoughts and expertise with our readers.
So who better to open our Q2 edition than long time contributor to CGi,
Julian Harris (Harris Hagan) who discusses the distribution of casino licences 10 years after the ‘2005 Gambling Act’ came into force in 2007 and whether it
could be time for a review, whilst Genevieve Gimbert and Stefanie Kirchheimer
(PwC) join us for the ﬁrst time and take a detailed look at fraud risk in online gaming and what precautions companies should be taking moving forward.
Aleš Gornjec (Comtrade Gaming) explains the beneﬁts and advantages of
server based gaming and we welcome Dorothy Creaven (Element Wave), also
for the ﬁrst time, as she shares her marketing expertise and in particular, looks at mobile marketing automation and analytics.
Valéry Bollier (Oulala) opens up our sportsbetting focus discussing all
things related to daily fantasy sports, Susan O’Leary (Alderney eGambling)
addresses the hot topic of match ﬁxing and what is being done to combat it, whilst Henrik Lykkesteen looks at sportsbetting aﬃliates.
Wulf Hambach and Stefanie Fuchs (Hambach & Hambach) give us an in
depth review of the new eGaming regulation in Germany and Joe Pappano (Vantiv) shares his views on the latest payments technology.
Cory Aronovitz and Jeﬀ Catanzaro take a look at what the lottery sector is
doing to acquire and retain new customers in an ever competitive market, whilst Dr. Mark Griﬃths concludes with a thought provoking look at the psychosocial impact of gambling in virtual reality.
© 2017 Danancy Media Limited. The opinion expressed in each article is the opinion of its author and does not necessarily reflect the opinion of the publisher. Any form of reproduction of any content in this publication without the written permission of the publisher is strictly prohibited.
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Jamie Kean, Publisher
The next edition (Issue 30) of CGi will be published on 28th July 2017.
Is It tIme to re-evaluate the dIstrIbutIon of casInos In Great brItaIn?
onlIne GamInG: the new frontIer for the GamInG Industry...and fraudsters
Julian harris, harris hagan
Genevieve Gimbert & stefanie Kirchheimer, Pwc
drIvInG floor Performance wIth server based GamInG
mobIle marKetInG automatIon and analytIcs
mIllennIals: the consequences of a marKet revolutIon
Game, set and match fIXInG
aleš Gornjec, comtrade Gaming
dorothy creaven, element wave
valéry bollier, oulalaGames
susan o’leary, alderney eGambling
chanGInG the face of sPorts bettInG affIlIates
new eGamInG reGulatIon In Germany
assessInG the modern Payments landscaPe… and maKInG the most of It
henrik lykkesteen, better collective
wulf hambach & stefanie fuchs, hambach & hambach
Joe Pappano, vantiv entertainment solutions
same challenGe – new aPProach: how lotterIes attract new customers In a crowded fIeld cory aronovitz & Jeﬀ catanzaro
the PsychosocIal ImPact of GamblInG In vIrtual realIty dr. mark Griﬃths, Professor of behavioural addiction International Gaming research unit nottingham trent university
IS IT TIME TO rE-EvALuATE THE dISTrIbuTION Of CASINOS IN GrEAT brITAIN? T
Julian Harris Partner harris hagan
his year marks the tenth anniversary of the Gambling Act 2005 (the ‘2005 Act’) coming into force in 2007. This year also sees the Government’s triennial review, which – apart from diﬃcult issues concerning Fixed Odds Betting Terminals (FOBTs) and the advertising of gambling products - has led to calls for a review of the number of Category A machines permitted in casinos. This inevitably draws attention to the apparent discrimination between those licensed pursuant to the 2005 Act, and those with grandfather licences originally granted under the Gaming Act 1968 (the ‘1968 Act’). The reality is that there is probably little chance of Government taking any action in this regard, given the political hot potato that is gambling generally, though that is not to say that these arguments should not be made, nor that they do not carry considerable weight. However, in addition to that important issue, this important anniversary year should also prompt a look at the casino market more generally, given the rather curious position in which the industry now ﬁnds itself; a position not of its choosing, not recommended by the Gambling Review Body (‘GRB’) and not intended by Government. The recommendations of the GRB1, chaired by Sir Alan Budd, proposed in relation to casinos an abolition of the demand test for the granting of new licences and of their limitation to certain “permitted areas”, a subject to which I will return. Instead, there was to be a free market, with the number of casinos left to commercial considerations, but with a minimum size requirement to prevent a return to the proliferation of small casinos seen prior to the passing of the 1968 Act. Even the gambling regulatory authority at the time, the Gaming Board for Great Britain (“GBGB”), whose Chairman, Peter Dean, was a member of the GRB, applauded the recommendations, as achieving: “a proper CGiMAGAZINE.COM
<< The vast majority of the casino market – over ninety percent – was originally licensed under legislation passed almost fty years ago. >> balance between increasing consumer choice for adults, aﬀording greater protection for young people and the minority who have a problem with their gambling and ensuring that those who provide commercial gambling observe high standards of probity and social responsibility.” In its decision document published in March 20022, the Government largely accepted the recommendations of the Budd report (156 of 176), and with the ﬁrst draft of the Gambling Bill published in November 2003, the scene was seemingly set for what the GBGB described as a “long overdue modernisation of Britain’s gambling laws”, with a free market for casinos, balanced by increased regulatory requirements, speciﬁcally with regard to social responsibility measures. Then politics intervened. Suﬃce to say, given that the story is painful and well known, the Gambling Bill became caught up in a press frenzy and the “wash up” negotiations immediately prior to the 2005 general election. In order ﬁnally to get the new legislation onto the statute book, the Government was forced to introduce an experimental period of small numbers of the new casinos proposed by the Gambling Bill, in each of the three categories of casinos deﬁned by size: regional, large and small, with just eight of each. In their “Casinos: Statement of National Policy” document3, the Government recognised that the casino proposals “represent[ed] a signiﬁcant change” which needed a “cautious approach”. This was to enable them to assess whether their introduction would lead to an increase in problem gambling. However, and importantly, they also stated their belief that there needed to be a suﬃcient number in each category to allow the impact to be assessed in a range of areas and types of location that might be suitable. Then, when the assessment was made, it was decided that “it will be easier to judge the continuing need for a limit.” This assessment was proposed to take place “no earlier than three years after the award of the ﬁrst premises licence.” The assessment was to be based on advice from the Gambling Commission, and, with the help of regional bodies, establishing the extent of the regeneration and other economic beneﬁts. In some respects, the story since then, is a sorry one. The largest proposed category fell victim to the factors mentioned above, so far as seven of them were concerned, and then in 2007, the one regional casino still proposed (in Manchester) was bluepencilled by Gordon Brown as one of his ﬁrst acts as Prime Minister. The large casino licences have now all been awarded, but of the eight small casino licences, only ﬁve have been awarded, and in at least two areas, it remains unlikely that there will be any commercial interest in the foreseeable future.
Meanwhile, what of the assessment of the success or otherwise of this experiment? And an experiment is what it was. This is supported by the instruction to the Advisory Panel4 appointed to recommend areas in which the new casinos were to be located; namely to identify “a good range of types of area, and a good geographical spread of areas across Britain” in order to best test the social impact and regenerative beneﬁts of casinos. This signalled a complete departure from the former demand criterion and the population basis on which permitted areas were selected under the previous legislative regime. In this context, it is perhaps odd that of the sixteen areas selected for the new casinos, no less than nine were in areas already permitted for casinos under the 1968 Act. The wisdom of placing casinos in areas in need of regeneration might also be queried, from the perspective of social responsibility. The ﬁrst licence was awarded to Aspers for the large casino in the London Borough of Newham in 2011, and it opened in 2012. By the end of 2016, thirteen of the sixteen available licences had been awarded, and of those, four5 casinos had been opened. Several of the new licences were simply put into existing 1968 Act casinos. The Leeds casino opened in January 2017, bringing the total to ﬁve. Therefore, the earliest date for an assessment of the results of the experiment was 2014. Unfortunately, there was no long-stop date proposed by Government: The trigger was expressed in the Statement to be that the Government would “ask the Gambling Commission to advise…”. Government has not, so far as I am aware, done so; nor, again so far as I am aware, has the Gambling Commission suggested that it should do so. The Commission has a duty to advise the Secretary of State about the regulation of gambling when it “thinks appropriate”, which the Commission might to mean when it considers there is a threat to the licensing objectives. It might be asked by some why this matters. However, the present position was intended to be temporary, and for good reason. Plainly the Government mentioned three years before having an assessment for a reason: presumably on the basis that this would be suﬃcient. But more than ﬁve years since the starting gun was ﬁred on that period, it is beginning to have the air of permanence. As a permanent regime, it is illogical – anathema to a lawyer; it is contrary to market principles, and it has created barriers to entry greater even than those under the 1968 Act, which was one of the main criticisms of it. But most importantly, it undermines the whole basis of the regime proposed by the Budd Report, the GBGB and the Government. It is perhaps ironic that, pursuant to regulation made under
the 1968 Act6, anyone who could pass the regulator’s probity test could apply for a casino in any one of ﬁfty-three so-called permitted areas, including much of central London and other major cities, such as Manchester, Liverpool and Birmingham. Yet in 2017, no person or company can apply for a new casino licence anywhere in the United Kingdom, unless casino competitions start in a now very limited number of areas. Instead of a “great leap forward”, we have regressed more than ﬁfty years to the period before the 1968 Act when licences for casinos ﬁrst became available.
Logic and commercial considerations Flaws in the Betting and Gaming Act 1960 Act led to a proliferation of small unlicensed gaming clubs: over 1,000 by 1968. The 1968 Act therefore set up a regime in which gaming licences would be limited to certain permitted areas, and then only where the local licensing justices were satisﬁed that suﬃcient demand existed for the additional facilities proposed. The permitted areas, aside from some seaside resorts and three central London boroughs, were county boroughs with an estimated population of 125,000 or more during the years 1970 and 1973. Although this too created a market set in stone and with no ﬂexibility, at least permitted areas were selected on the basis of population, and there were ﬁfty-three of them. Moreover the demand test at least provided the opportunity for new licences where unmet demand could be shown. The current regime, with the experimental aspect of ﬁxed numbers, has no basis in logic, other than as a test. Furthermore, the brief to the Advisory Panel was to select areas other than on a commercial basis, so these were not necessarily those that a free market would choose: the evidence on that is clear, not least in the absence of any interest in some of them, where no suﬃcient demand is thought to exist.
Barriers to entry In contested cases for new licences under the 1968 Act, this was an inevitable argument, especially when several operators in an area together objected to a new applicant. This was particularly so in areas where the casinos were in the hands of the major national operators. Today, single casino businesses are unusual, but the barriers to entry are even more stark. Yes, there are competitions for the new licences under the 2005 Act, but the high costs, complex issues and enormous amount of time that these involve, make them a serious barrier to entry for new or smaller entrants, especially those without access to very substantial funds. In any event, those licences have either been granted, or there is no competition process available. The remainder of the market; i.e those casinos whose licences were granted under the 1968 Act, was frozen in 20077. Although there is a limited ability to move licences within the same licensing area, they can neither be moved elsewhere, nor can any more be granted. So unless an entrant or other operator can acquire an existing licence, the market is completely static. Again, ironically, it cannot respond to demand. Furthermore, given the ultra low limit on machine numbers permitted in 1968 Act casinos, they are hamstrung and, in the main, cannot even viably expand into larger premises because of the imbalance they would then suﬀer in the ratio between gaming tables and machines.
No wonder then that some of these licences are no longer in use, while others have been moved adjacent to other licensed premises in order to maximise machine numbers and develop a viable business. There can be no barrier to entry greater than the fact that in 2017, no new casino licences can be applied for.
Purpose of the 2005 Act Both in relation to casinos, and generally, the 2005 Act was intended to modernise what were generally agreed to be outdated gambling laws, stemming from an age when gambling was seen as “at best morally questionable” and “grudgingly tolerated” to a time when it had become “part of the main stream of leisure activity”8. Accordingly, there was to be a removal of unnecessary regulatory burdens on an industry which the Government believed had “built a world reputation for integrity”.9 The balance was to be a requirement to adhere to a code of social responsibility. That code has been developed, and this, together with many other developments designed to protect players, is embodied in the Licence Conditions and Codes of Practice, which after three revisions, now runs to some eighty-one pages. By contrast, we have a position where there is almost no scope at all for growth in the casino industry. In 2007 there were 142 casinos operating in Great Britain. This had grown only to 148 by March 2016 though in some cases there are two licences per premises. This then became 147 with the closure of Genting’s Star City casino in Birmingham, formerly the largest casino licensed under the 1968 Act. Signiﬁcantly some forty 1968 Act licences are dormant. Without change to the current licensing regime, there is likely to be further ossiﬁcation, given that the market is prohibited by law from opening any new premises, or, in most cases, even from enlarging existing ones in a way which works commercially. Instead of a free market, with operators able to apply for licences in areas where a casino would be successful, subject only to a minimum size to prevent proliferation, as prepared by the GRB and accepted by Government, the market is now moribund, with no scope for expansion, or even to respond to consumer demand.
Unintended consequences Had the criteria set for the Advisory Panel been commercially based, the practical need for re–assessment might be less urgent. Currently there is no scope for review or change to the areas permitted for 1968 Act casinos. The fact that 2005 Act casinos were allowed only in sixteen areas, not all of which are commercially viable, in eﬀect means that the industry is substantially worse oﬀ then it was before the new legislation. In this context, it is interesting to note that as early as 1976, the Royal Commission report recommended that the regulations on permitted areas be revoked. Given that the 1968 Act had reduced the number of clubs from over 1,000 to about 125 by the end of 1977, it concluded that a rigid and arbitrary formula should be replaced by entrusting the decision to the good sense of local licensing authorities, subject to advice from the GBGB. Now we have a rigid system even for the 2005 Act casinos. The subject was not, however, pursued until the deregulation proposals of the 1990s. The then Government in February 1996 concluded, sensibly, that there should be additional permitted
areas on the basis that the 1971 criteria were no longer relevant. The somewhat complex proposals would have added as permitted areas: Croydon, Dartford, Folkestone, Gloucester, Hastings, Ipswich, Morecombe, Oxford, Peterborough, Redbridge, Slough, Swindon and Weymouth. The second, in November 1996, proposed: London Docklands, Bath, Eastbourne, Exeter, Harrogate, Norwich, Telford and York. Finally, in March 1997, Milton Keynes and Weston-Super-Mare were added. Whilst this might be thought only to be of historical interest, the signiﬁcance is that many of these areas are those that would have qualiﬁed under the 125,000 population trigger, had the ﬁgures ever been updated. The same and others too would seem to be obvious candidates. Nevertheless, leaving the detail behind, these locations serve to emphasise the rigor mortis besetting the casino market. Apart from Bath and Milton Keynes, which were included in the sixteen new licences, none of these other towns and cities have ever been permitted casinos, regardless of public demand or other consideration. The vast majority of the casino market – over ninety percent – was originally licensed under legislation passed almost ﬁfty years ago. Even forty years ago it was thought to have outlived its limitations. Twenty years ago it was thought appropriate to add some twenty-three more permitted areas. None have ever been added. And instead of creating a substantial market of 2005 Act casinos, there are only sixteen allowed, and those exclude some important and large cities and towns. Whilst some of the former restrictions on 1968 Act casinos were removed by the new legislation, such as the ban on alcohol on the gaming ﬂoor, less restricted advertising and the removal of the twenty four hour rule and membership requirements, they remain at an enormous competitive disadvantage to 2005 Act casinos, primarily due to lower machines, in terms of numbers and stake and prize limits. Moreover, they face enormous competition on gambling spend from remote gambling, where there are limits on live numbers, no stakes and prize limits, no speed of play restrictions and when all forms of permitted gambling may be provided on one site. Indeed until 2014 even obtaining a licence and paying UK tax was optimal.
Conclusion It is perhaps unfortunate that Government did not provide a more speciﬁc framework for assessing the eﬀects of the new licences and moving on from its test programme. As Dan Waugh of Regulus Partners pointed out in his excellent review of gambling “Budd Revisited – Gambling in Great Britain 15 years on”.10: “Restraining gambling venues within anachronistic licensing constructs while at the same time unshackling remote gambling can create regulatory imbalance – and the consequences of this may not be uniformly positive”. In an ideal world, we would, as Dan Waugh suggests, have a further systematic review of gambling policy after ﬁfteen years since the Budd report, given that the GRB’s recommendations were never implemented as intended, and given the profound changes that have taken place during the intervening years. But that is a hope that cannot translate into realistic expectation. :: CGi
References 1 Gambling Review Report: CM 5206 2 A Safe Bet for Success – Modernising Britain’s Gambling Laws: CM 5397 3 DCMS 16 December 2004 4 DCMS January 2007 5 The Opera House Casino in Scarborough was awarded the small casino licence in February 2012 but they are still operating under their original 1968 licence. 6 Gaming Clubs Regulations 1971 7 Gambling Act/Commencement and Transitional Provisions Order 2006 8 A Safe Bet for Success – Modernising Britain’s Gambling Laws: CM 5397 9 A Safe Bet for Success – Modernising Britain’s Gambling Laws: CM 5397 10 UNLV Gaming Research & Review Journal Vol. 20 Issue 2
Recognised as a leading expert in national and international gambling and licensing law, Julian Harris is highly regarded by both operators and regulators throughout the world. Harris Hagan is the ﬁrst and only UK law ﬁrm specialising exclusively in legal services to the gambling and leisure industries. With over 30 years experience of gambling law Julian has advised some of the world's largest gaming industry corporations. He and his team have also advised governments, trade associations and private equity houses in both online and land based gaming. Julian is an experienced advocate, a respected and sought after conference speaker and author. He is recommended in all guides to the legal profession, and has been described by Chambers Guide as “the best gaming lawyer in London”. Harris Hagan was awarded “Gaming Law Firm of the Year” in 2013. Julian is past President of the International Association of Gaming Advisors.
ONLINE GAMING: THE NEW frONTIEr fOr THE GAMING INduSTrY... ANd frAudSTErS T
raditionally a brick and mortar industry — deﬁned largely by slots, table games, racing, sports wagering, and the lottery — gaming has expanded over the last ﬁve years to include iGaming, eSports, social gaming, daily fantasy sports, and games of skill. As tech savvy consumers increasingly play online and use their mobile devices, companies should be prepared to address the challenges of the digital age. The threat landscape is evolving and so is the rate of cyber fraud attacks through hacks, botnets, malware and scripts, to name a few. Technology is part of the preparedness equation. Companies are strengthening payment platforms, mobile device security, and blockchain appears to be entering the mix to manage online fraud challenges. Technology alone, however, will not suﬃce. To keep pace with the promising online gambling and betting market outlook, companies should implement comprehensive fraud management programs. 
Genevieve Gimbert & Stefanie Kirchheimer Pwc
Next generation of gamers As we wrote in our July 2016 Tell Me More publication, new gaming platforms such as games of skill, daily fantasy sports, and eSports are emerging in response to millennial preferences. For millennials, the on-demand digital experience — download, livestream and live-bet games, anyplace, anytime — is essential. In response, established gaming companies are taking a cautious approach to digitization while start-ups, social gaming companies, and internet-based gaming companies are taking a digital-ﬁrst — even a mobile-ﬁrst — approach.  Consumers, meanwhile, can take advantage of new payment methods like virtual currencies in addition to credit cards and bank account transfers. In 2016, the United Kingdom’s Gambling Commission legalized virtual currencies for licensed online gaming
companies, perhaps setting the tone for the rest of the world. The emergence of virtual currency creates new fraud threats and complexities for the industry as new products are rolled out for patrons wagering online.
Regulations in ﬂux Regulators are taking notice of the growth of online gaming as illustrated by the daily fantasy sports companies’ experience with several US state regulators. In addition, recent policy coverage (in the US) points to a potential Federal online gambling ban. However, with industry voices advocating their position, some online gaming may gain further traction.  Other countries are taking a position on iGaming as well. In Australia, regulators banned online poker and live sports betting. On the other hand, Singapore legalized online wagering for certain games and horse races. As regulators address online gambling as a whole, data privacy and security protection issues could come under scrutiny, given the vast amount of personal data iGaming companies collect, store and process — creating demands on fraud management practices. The European Union’s General Data Protection Regulation, for example, will inﬂuence how companies collect personal information about EU residents. Meanwhile, compliance obligations like the Payment Card Industry Data Security Standard — updated in 2016 — also play a critical role in enabling fraud management. Industry selfregulation should not be overlooked as iGaming companies assess fraud threats aﬀecting patrons and businesses. As the iGaming market grows, companies should consider the impact of the evolving regulatory environment on their fraud management programs.
Fraud risks Fraudsters are becoming increasingly more sophisticated. On certain occasions, automated attacks such as botnets and scripts
accounted for 60% of gaming traﬃc.  According to an online video game company, around 77,000 of its accounts are hijacked each month.  And the online gaming industry is experiencing higher levels of mobile fraudulent activity than other industries.  Fraudsters follow the money — and iGaming is making money. Fraud may take many diﬀerent approaches : 1. Account Takeover: Fraudsters may impersonate a customer or employee to gain access to an account, then change depository account numbers or contact information. Alternatively, the fraudster may bundle and sell the information obtained to other fraudsters who will defraud the victim. 2. Fraudulent Disbursements: Fraudsters may gain access to an account and conduct activities for personal gain, such as transferring funds from the compromised account to an externally controlled account. 3. Mobile Device Compromise: A fraudster may steal sensitive information by compromising mobile devices through malware, risky apps, device vulnerabilities, or a rogue Wi-Fi access point. 4. Pharming and Spear Phishing: As one of the oldest forms of fraud, attackers can use phishing schemes to impersonate a known sender and personalize messages to entice a victim to click a malicious link or open an infected document. Players may be deceived into entering sensitive data into a malicious website masquerading as an authentic website. 5. Collusion: Fraudsters may work together to game the system whether to abuse online gaming bonuses and win tables or collude with an employee to commit internal fraud. 6. Malware: As iGaming is a download-heavy activity, malware is one of the largest fraud hurdles to conquer. For example,
Keylogger is a program that sits in the background and records keystrokes which are sent to a remote server for analysis. Fraudsters use the analysis to steal usernames, passwords, credit card numbers, and other personal information.
Take Action Fraud risks will continue to evolve as iGaming matures. Companies can prepare by focusing on preventive and detective measures for an eﬀective fraud management program. While no “one size ﬁts all” solution exists, these four principles oﬀer guidance: 1. Centralize fraud management to foster ownership and a culture of compliance. Leadership: To set the right “tone at the top,” iGaming companies can appoint a leader to champion fraud management across the organization. A governing body implements and operationalizes the fraud program. Consistency: Risk managers document entity-wide policies and procedures that steer consistent fraud management eﬀorts spanning from fraud detection, alert review, investigations, oversight and facilitate information sharing across cyber, privacy, and anti-money laundering functions. Roles and Responsibilities: To avoid gaps and overlaps, companies deﬁne roles and responsibilities across three-lines-ofdefence: (1) the ﬁrst line is charged with fraud detection and analytics, alert review, investigations, and SAR ﬁlings; (2) the second line is responsible for setting policies and assessing fraud risks and controls; and, (3) the 3rd line, also known as Internal Audit, evaluates and tests the eﬀectiveness of a company’s fraud management program. 2. Conduct risk assessments to identify vulnerabilities and close gaps. Assessing risks and controls allows iGaming companies to strengthen the controls environment and enhance resilience by integrating fraud detection and prevention controls into the enterprise risk management (ERM) program — while also testing the operating eﬀectiveness of controls and conducting vulnerability assessments. 3. Surveil and enhance fraud prevention and detection capabilities. Using behaviour analysis and transaction monitoring, iGaming companies can identify deviations from betting patterns, shifts to playing at much higher levels, and transaction patterns that fall just below reporting requirements. Behaviour analysis uses algorithms to identify deviant behaviours, such as anomalous logins, credit card usage outside of a customer’s typical location or times. Transaction monitoring uses the data recorded from all online participant behaviour to determine trends and expected activity. Companies can also use digital identity solutions which includes internet protocol (IP) monitoring and geolocation capabilities to identify a suspicious login or device, detect movements, malicious software, or spoofed identities. These capabilities can address risks involving fraudulent disbursements, account takeover, and mobile-device theft.
4. Implement multi-factor authentication. Consider leading practices when crafting customer authentication and veriﬁcation programs, including guidance from the American Gaming Association and UK’s Gambling Commission. The combination of authentication and veriﬁcation process increases protection against fraudsters and maximizes the return on fraud program investments. Multi-factor authentication (MFA) safeguards against fraud risks by layering authentication methods with something you know (e.g., passwords), something you have (e.g., phone) or something you are (e.g., ﬁngerprint or voice biometrics).
What’s next? Technology is a good starting point in addressing fraud risk but it’s not enough. An eﬀective fraud management program extends beyond technology solutions for a holistic response to evolving vulnerabilities to fraud. In our experience, a well-deﬁned, scalable fraud-management program yields tangible beneﬁts related to reputation, consumer trust, and a resilient, risk-aware culture that creates competitive advantage. :: CGi
References 1. http://www.transparencymarketresearch.com/online-gamblingbetting.html 2. https://www.pwc.com/us/en/industry/entertainmentmedia/publications/tmm/assets/tmm-the-evolution-of-the-gaming-indust ry.pdf 3. https://www.threatmetrix.com/digital-identity-blog/cybercrime/online-gaming-betting-fraud-trends/ 4. http://store.steampowered.com/news/19618/ 5. https://www.chasepaymentech.com/documents/safetech_bp_gaming.pd f
GENEvIEvE GIMbErT & STEfANIE KIrCHHEIMEr
Genevieve Gimbert is a Principal in PwC’s Financial Crimes Unit. She co-leads the Anti-Fraud practice, which includes over 100 practitioners that brings together cross-functional fraud expertise with strategy, risk, operations, forensics, technology and industry expertise. This enables us to provide a holistic approach and solution to help our clients be proactive in preventing, detecting, responding to and mitigating fraud. Genevieve helps companies identify their vulnerabilities and optimize their anti-fraud programs while balancing enhanced customer experience. Genevieve is a certiﬁed fraud examiner and helps her clients from strategy through execution. Stefanie Kirchheimer is a director in PwC’s Financial Crimes Unit, with nearly 15 years of consulting and auditing experience with PwC. She focuses on providing anti-fraud services to clients, assisting them with fraud program development and assessments, as well as ﬁnancial crime risk assessments and controls design.
SErvEr bASEd GAMING ::
drIvING fLOOr PErfOrMANCE WITH SErvEr bASEd GAMING O
Aleš Gornjec General manager comtrade Gaming
ne of the most prominent characteristics of the modern casino are simpliﬁed processes for operators and gaming experiences that immerse players in gameplay. A single technology is used to the advantage of both consumers and casino management and utilises advanced features to drive retail businesses forward. Server Based Gaming more speciﬁcally supports remote conﬁguration and game downloads and centralises game logic for increased security. With the management system, operators can modify gaming content, monitor ﬁnancial operations and conﬁgure reports to optimise internal processes, creating a highly-targeted gaming ecosystem. Casino operators look to optimise gaming at multiple levels and SBG targets a variety of business points and the player journey. As an integrated solution, SBG lowers maintenance costs while improving venue/terminal performance and player engagement. Beginning from ﬂoor management, the burden of managing individual slot machines is replaced with a simpliﬁed format of remote conﬁgurations and integrated game content deployments. By dynamically conﬁguring game content on individual machines, the land-based gaming landscape changes to match a venue's players segments. Data monitoring is included to evaluate player, game and machine activity and the operator is able to eﬃciently respond to the needs of each of the aforementioned business variables. Incorporating SBG lowers maintenence costs without sacriﬁcing the venue's eﬃciency at preserving new content
:: SErvEr bASEd GAMING
<< As long as land-based venues exist alongside online channels, they will have to match the advanced marketing strategies employed by their online counterparts. >> at the expense of business KPI's. Compared to traditional gaming operations, technologysupported gaming oﬀers greater potential to oﬀer tailored experiences based on advanced analytics. By implementing player proﬁles, gaming operators now focus business development on segmentation and engage players in the form of personalized promotions, bonuses and loyalty campaigns. The diﬃculty is then selecting the optimal games to present to the venue's demographics and engaging players from the moment they sit at the machine. The gaming experience must be conﬁgured in a way to optimise player activity because they respond best to choice and variety. Server based gaming's main beneﬁt is that all relevant venue variables can be adjusted on one terminal rather than having the customer move around the ﬂoor to create their own player journey versus one that is already curated for them. In an online article written by Luis A. Solferino, General Manager at Loustaunau & Asociados, he explains slot ﬂoor optimisation in terms of proﬁtability and popularity analysis and the quantitative strategies utilised in improving VLT and ﬂoor performance. While there are a variety of techniques used to determine the viability of particular slots in operator development, slot performance and slot comparisons are used as the two main categories in determining their beneﬁt to casino business. Additionally, ﬂoor managers must assess how much each game contributes to casino proﬁt and its popularity among players. Casino managers are well aware of how slot location aﬀects performance, the relative comparisons to casino-wide WPD (win per unit per day) or CPD (coin in per unit per day) and the percent of contribution to either one of the aforementioned numbers. Solferino summarises, that slot comparisons guide operators in making decisions as how to best optimise ﬂoor performance and slot zones, manufacturers and game titles all play their role in the end result. While data analysis techniques provide operators with data-support to evaluate activity and adjust their ﬂoor strategy, it is server based gaming that ultimately provides the solution to driving proﬁtability on the casino slot ﬂoor. With numbers as a data source and KPI's set as a standard that needs to be maintained, server based gaming can create a combination of content that mitigates low-activity slot zones
and highlights the strengths of both manufacturers and game titles. In comparison with stand-alone slot machines, SBG uniﬁes operational processes, content management and targeted campaigns to be supervised by an operator regardless of machine location and venue layout. The signiﬁcance of server-based gaming is most necessary with distributed gaming as operators dynamically adjust their gaming environments with minimal ﬂoor maintenance. In terms of operational processes, SBG monitors real-time data from slot machines. This form of connected gaming creates a standardised view over operational reports, manages remote optimisation possibilities and streamlines game downloads by connecting terminals to upgrade business performance. As long as land-based venues exist alongside online channels, they will have to match the advanced marketing strategies employed by their online counterparts. Datasupported changes and customised marketing campaigns create superior oﬀers that optimise player activity. By assessing player and game data, operators are able to instantaneously adjust bonus features and game content to accommodate venue demographics. The speed at which online channels develop sets the pace that the land-based industry must match. Linked gaming content can be supported by SBG and cross-channel promotions enable players to take advantage of oﬀers on multiple formats to adjust to preferred gaming environments. This expands an operator’s multi-channel strategy to seamlessly oﬀer a continuous player experience across multiple channels. While e-wallets facilitate a streamlined payment system for both operators and players, a single wallet also serves to manage and monetise loyalty features across land-based and online gameplay. Operators can further design their land-based content oﬀer around the balance and activity tracking metrics that are embedded into this feature. Taking advantage of multiple gaming channels requires traditional gaming venues to renew their operations and transform themselves into connected solutions. Advanced player centered functionalities (such as central wallet with 360 view of the player, promotions based on advanced analytics) will become a necessity in casinos that want to stay competitive in a multi-channel age.
SErvEr bASEd GAMING ::
• • •
Cross-promotional opportunities can be leveraged both in casinos and online and serve as an additional data plan around which to draw more venue visits and attract players to extend their play. The bonusing and loyalty strategy is further strengthened along this activity as operators integrate marketing strategies into a single view. Scaling loyalty schemes on this level of interaction encourages players to engage on every channel as they advance through an interconnected marketing and content strategy. Developing a relationship with the player through tailored products is the end goal of the gaming environment. Comtrade Gaming diﬀerentiates it's sCore SBG product oﬀer through advanced technological capabilities to simultaneously meet venue and player expectations. The following beneﬁts are found with Comtrade Gaming's sCore SBG management and operation monitoring.
Centralized CRM, Loyalty and Player Protection functionality RNG, Jackpot, Cashless/TITO modules CMS system with inventory management
There are increased security beneﬁts with SBG mainly due to the product’s structure. In the cases where the RNG and game logic are located on the server, they cannot be manipulated to work against the player. With the increased amount of operator control over available content, machines can be easily disabled. Due to the nature of SBG, there is a considerably lower risk of piracy. In terms of activity oversight, operators receive more control and supervision over venue operations and individual terminals that allow for immediate responses in the case of game manipulations. Therefore, an eﬀective SBG system permits operators to closely monitor game and terminal performance while ensuring the validity and integrity gaming terminals. Extensive data capture serves as the foundation for exceptional business practice. The challenges of big data are lessened with our sCore SBG technology as it is able to segment and analyse player proﬁles to create personalised content. There is a general interest in regulation and simplifying casino processes and with that comes the need for standardised products and monitoring eﬀorts. We will see SBG in a strengthened position among the leading operators whose products will need to incorporate the appropriate technology to not only drive competition among operators, but meet the content interests of players. :: CGi
Venue Beneﬁts • Remote conﬁguration settings on the terminals, enable/disable devices/terminals, payout percentage, and other parameters • Improving operational eﬃciency of a distributed gaming environment by providing real-time system data • Detailed venue, terminal, and game performance reports and remote optimization possibilities (game download and conﬁguration). Business Advantages • Data collection from terminals, meters, transactions, daily aggregates, alarms, and events • Data warehousing and BI which provides real time management KPIs • Reporting utility with pre-deﬁned tax authority, ﬁnancial and operator reports System Features • Engaging players with membership and loyalty programs combined with personalized content oﬀerings (favourite games, targeted campaigns, etc.).
Aleš Gornjec founded the Comtrade Group's gaming division and serves as Comtrade Gaming's General Manager. Comtrade Gaming is an independent software supplier to the gaming industry that delivers open gaming platforms, casino management systems and professional services to both online and land-based sectors.
MObILE MArKETING AuTOMATION ANd ANALYTICS T
dorothy Creaven chief executive element wave
he growth of mobile apps since the launch of the App Store in 2008 is undeniable. In parallel, the marketing eﬀorts of these apps has become an industry unto itself. A whole new vertical was born: marketing technology, better known to the masses as MarTech. Initially aimed at the US retail market, brands knew that the more they understood their mobile customers, the better they could market to them. Now almost nine years on, successful operators in sports betting, casino, bingo, and social gaming are actively dissecting their CRM and analytics eﬀorts with precision detail to inform future marketing decisions to better boost their mobile and online turnovers. And, rightly so. Element Wave provides mobile marketing automation for sports betting and gaming brands, and we work with some of the biggest players in the iGaming industry, and we’ve seen dramatic results happen with minimal investment in mobile CRM. Mobile as a revenue channel makes up between 70% and 80% of overall turnover for many iGaming brands, and competition for market share is ﬁerce. Innovative thinking and further research into what makes players enjoy their app experiences are critical, as is further investment into accessing real-time data and marketing automation. In Element Wave, we have seen ﬁrst-hand what works well on mobile and which metrics are key to long-term player retention and monetisation, thereby reducing long term player churn. It's no longer the case where marketers can cross their ﬁngers and hope for the best once their shiny new app is released to the masses. Across every vertical, marketing teams are often forced to rely on old data to lead the way. In betting and gaming, this data tends to be at least 24 hours old at best. With this limitation, it is almost impossible to react to live events with innovative on-the-ﬂy marketing campaigns and genuinely excite players. With further advancements in technology, iGaming operators CGiMAGAZINE.COM
are now considering deeper integrations with marketing automation and analytics platforms. We’ve seen over the last 12 months that integrating with bet settlement feeds and live sports feeds can add a compelling dimension to, what would normally be, quite mainstream CRM campaigns. Our analysis of thousands of realmoney players across 16 countries reveals that campaigns involving real-time interactions and contextual in-play marketing are the future of revenue generation on mobile for sports betting, social and casino-led gaming. Indeed, it is the future of the iGaming ecosystem. Just last year there were over 2.2 million apps available to download from the main app stores: Google Play, Apple App Store, Amazon Appstore, and Windows Store. In 2016 alone, there were 1.5 billion smartphones sold . The big question is, in such a competitive market landscape, how do businesses win access to these prospective mobile players? And once able to access them, how are these players retained and monetised? The answer is by closely analysing player data and creating innovative actions, and journeys based directly on those results.
Mobile Strategies With increasing marketing budgets comes a stronger focus on digital and mobile strategies. From studying the global app market over the last number of years, it is always surprising that many large brands across all industries still are not aware of how their apps are performing. In general, these companies tend to know ballpark ﬁgures for the number of new downloads and monthly active users. However, when it comes to deep-dive statistics and uninstall ﬁgures, it seems there is a lot left to discover. These days on mobile, players expect all brand interactions to be tailored to their needs and interests. Marketing engagement strategies are now taking a consumer-centric direction, with highly targeted in-app or push notiﬁcations delivered as a result of a direct action that they have completed. Our data tells us that mobile players are becoming non-responsive to blanket-style messaging… the more generic the message, the lower the hit rate and the greater the risk of player churn. On the ﬂip side, operators and brands are seeing incredible success with the more data-led consumer-centric approach: targeted, individualised smart messaging delivered at the right moment for each and every mobile player. It starts from the very ﬁrst interaction the customer has and follows their journey through the conversion funnel from new customer status to registration, ﬁrst spin or bet, and on to repeated consistent actions.
Mobile Metrics It sounds obvious but tracking mobile speciﬁc KPIs and metrics will ensure the most lucrative return from your marketing and CRM eﬀorts. Gleaning information like how eﬀective was your last campaign, what is the peak time each week for usage, or which day of the week tends to gain the highest number of new downloads, all plays a big part in driving engagement through in-app marketing. Since player activity, time spent per app session, and bets placed are all directly proportional to the amount of monetary turnover you can generate through your app, it makes sense to track analytics (real-time and historical) to generate a clear post-campaign analysis. The more metrics gathered from mobile players, the clearer the picture will be of how successful your marketing campaigns are individually, and how successful your app is on a broad level.
Key Mobile Marketing Analytics for Betting & Gaming There is a deluge of metrics to choose from to indicate good performance, and many operators are probably already using some of them. However, every business is diﬀerent so the important part is deﬁning the most important ones to your app and ensuring you understand them correctly, and how they feed into overall business goals. App install rates do reﬂect the success of certain parts of your strategy, namely acquisition, but become somewhat meaningless if there is little or no follow-up afterward to retain these expensive newly acquired downloads. Some of the main KPIs worth tracking include bets placed by game, league or event, as well as average revenue per unique active player, and mobile player lifetime value. It is when marketing teams begin to drill down into analytics that it gives more meaningful knowledge about mobile behaviours, player spend and app usage. Understanding player habits and motivations ensure your marketing messages are tailored to deliver a strong return .
The Price Is Right When examining the success of any betting and gaming apps, the data relating to turnover and bets placed are among the most important metrics to watch. However, it’s important to your metrics to weed out anything that could potentially be misleading. Our data indicates that in many European sports betting mobile apps, active players can place between 90 and 100 bets per year. However, there is an obvious diﬀerence between an active real money player and an active app user. ●
Acquisition Source and Spend: ○ Linking revenue generated back to its original source distinctly proves the value of campaigns, and combining this with retention metrics highlights the value of speciﬁc channels. Deducing the cost per player acquisition will give an indication of the success of
which tends to be a broad term that directly impacts mobile turnover generated. Although ‘engagement’ is a somewhat vague term, these related metrics should be fundamental to a successful app strategy. By monitoring engagement levels, you can see where you are without any marketing intervention on a customer level. Consider if players were twice as active in your app at certain times of the day, or days of the week. Engagement is when your players return to an app for any reason: place a bet, claim their bonus, visit a casino room, or play a hand in a poker game. Engagement metrics must be deﬁned within the context of each particular app.
campaigns, and monitoring players by source helps to deﬁne personalised journeys. Average Revenue Per User: ○ ARPU is a useful top-line ﬁgure that can give an overall benchmark. However, beware of the word “average”. Our research shows ARPU can be €1,000 in cases where over 40% of players are worth less than €50 and less than 10% of players are worth more than €1,000. It’s better to group players into value brackets and tailor the marketing approach for each group.
Bonus Monitoring: ○ Tracking bonus claims against player numbers will reﬂect ﬂuctuations between segments of players and see how valuable your bonus strategy is in attracting and retaining valuable players.
Player Churn: ○ Mobile churn is the rate at which a player downloads an app and then abandons it. Churn-rates indicate how happy players are with what’s on oﬀer and highlight vital information about when to encourage deeper engagement and reactivate lapsing players.
Drop-oﬀ Points: ○ Tracking the speciﬁc points in an app where players tend to abandon it will signiﬁcantly help improve all players experiences, including user onboarding blockers, and give insight into payment and deposit ﬂows in the customer funnel to better feed product roadmap decisions.
Stickiness: ○ Monitoring Daily Active Users (DAU) and Monthly Active Users (MAU) will reﬂect how sticky is your game or sports betting app. Comparing the ratios against each other gives an indication of how much work is needed to boost player retention.
Message Responsiveness: ○ Push and in-app notiﬁcations are the ideal way to grab a player’s attention on mobile. Whether it’s an in-app message driving players to open an account on casino, or a real-time push notiﬁcation to encourage an in-play bet in a sportsbook app, mobile marketing automation has a lot of power and scope in your mobile strategy. Tracking open and click-through rates, session information, and bets per player will deﬁne the eﬀectiveness of your mobile marketing. In-app CTRs vary depending on the type of message (a promotion, account information, or score update). An Element Wave study shows us that bets increase by over 200% when compared to a control group in direct response to a highly personalised, context-driven in-app messaging campaign.
Player Conversions: ○ This is a key metric. Information such as a number of spins per user on casino apps, or bet preferences in sports betting apps, will tell you how active your players are, and how much revenue they are generating. Your conversion rate highlights the number of players who go from install to a valuable player (e.g. more than 100 bets placed in a lifetime). However, this is often a fraction of a percent, 0.5% in some cases. Conversion metrics are best understood in the context of other data, like conversions per event or per campaign. Customer Lifetime Value: ○ CLV is the value or worth per player over the lifespan of their journey. It can be read as simple or complex. Mobile CLV is based on revenue generated in-app or mobile site and is used to understand customer loyalty and activity as well as the proﬁtability of your mobile app or site.
Boosting Engagement Metrics Engagement transforms acquisition spend into longer-term value,
Timing Tracking For betting and gaming operators, session information is a tangible
metric. This can include session data, the number of players who complete a speciﬁc action within the app, or opt-in rates. ● Session Activity: How long players spend in your app (and what they do while they are there) reﬂects just how valuable is your content. Knowing how your players use your app is just as important as knowing when they use it. ● Sessions Over Time: A player’s usage of your app over time is a strong indicator of future engagement metrics. If a punter accesses the app in the ﬁrst 24 hours after installation, or the ﬁrst week, they are highly likely to access it again in the near future. However, if a player installs and does not access the app within the ﬁrst week, they are 80% less likely to go back to it at a later date. Timing mobile marketing messages within a short timeframe after install provides stimulus to keep the relationship between operator and player growing.
Problem Account Tracking Analysis can identify possible abuse usage too. Monitoring abuse accounts can be a labour-intensive process, however, by personalising daily metrics it can alert operators to potential problem accounts. ● Abuse Behaviour: Track mobile revenue and compare it with deposit information. Most operators have a loyalty level at which players are comfortable. A spike in these ﬁgures can indicate a possible issue with an account. As soon as an app is installed on a player’s device, the journey is just beginning. The expectations of players are getting higher, and more apps means a more competitive marketplace, and advances in technology leads to more innovative ways to retain and monetise your players. Leveraging the data available is the only way to stay on top. Each mobile iGaming app, whether it is sportsbook, casino,
bingo, or social gaming has its own context and KPIs will change from operator to operator. However, one thing is consistent for all: mobile marketing and analytics are more important than ever, and having a strategic plan in place around automation of campaigns is a key method of staying ahead of the competition. Close monitoring of player churn and retention analytics can only help businesses navigate the competitive ecosystem of iGaming apps. Observing mobile metrics closely, with constant iteration of campaigns while putting the data to work towards product improvements will give your app a strong foothold with ﬁckle app players. Knowledge is power, and creating actionable insights from your data to leverage your future mobile marketing strategy is absolutely critical. :: CGi
Dorothy Creaven is co-founder and Chief Executive of Element Wave, the leading Mobile Marketing Automation platform built for sports betting and gaming. Element Wave has delivered more than half a billion mobile notiﬁcations for our customers over recent years. Their multi-award winning technology measures every single mobile player interaction: from a single tap to a player’s individual response, including the eﬀectiveness of promotions, to drive higher mobile revenue for betting and gaming operators.
MILLENNIALS: THE CONSEquENCES Of A MArKET rEvOLuTION T
he iGaming industry is currently approaching a critical stage, where the bulk of its customers have grown up playing video games; anyone born after 1970 most likely grew up playing on an Atari or a Playstation. Such a simple demographic fact should have led to a product revolution in the iGaming sector, yet, astonishingly, it has not happened yet. Over the last two decades, the video game industry has consistently been pushing boundaries when it comes to quality and customer experience, while teaching us a number of important things in the process. The most noteworthy one is that customers now expect to play skill games against each other. A stronger focus on the skill and social aspect are therefore what is expected of the market.
valéry bollier ceo oulalaGames
Why our sector’s embracement of the social revolution has been so overdue IGaming operators, sports betting and casino sites in particular, have been ﬁnding it rather diﬃcult to embrace the “social” revolution. When one has been betting against their own customers for years, it tends to cultivate a rather diﬃcult relationship. Therefore, when the “social” revolution kicked in over the past few years, the iGaming sector quietly ignored it, for fear of the inﬁnite consequences that this could have on its highly optimised but short term business model. “Why change a winning formula?”, most operators seem to think. In truth, this novel "social" business model would not bring about the same level of short term return. The proﬁtability, however, will be much higher in the long term because of the evident economic value that comes with a loyal customer. Nonetheless, regardless of these enticing beneﬁts, iGaming operators still seem apprehensive to embrace this change. The key point of this change rests upon the fact that it is far more gratifying for someone to win their friends' money rather than that of the house or a stranger. Surpassing your friends is satisfying but CGiMAGAZINE.COM
<< Our sector has not been recipient to the demands of the newer generations, and currently, the only solution our sector has come up with to respond to the social revolution is “gamication”. >> simultaneously taking their money is far more gratifying. Our sector has not been recipient to the demands of the newer generations, and currently, the only solution our sector has come up with to respond to the social revolution is “gamiﬁcation”. Our leaders’ plan is to “gamify games” by artiﬁcially inserting various social elements into individual games that were built to compete against the house. Were the consequences of such a decision not absolutely critical, it might even be considered comical that they are attempting to transform a game into a game. However, the future of our sector depends entirely on our ability to adequately respond to the growing need, and thus far, we have not been headed in the right direction. Why our sector is reluctant to oﬀer skill games. The iGaming sector has not been openly welcome to the skill games demand, mainly due to economic reasons. It is simply impossible to allow customers to play against the house in a skill game model. Thus, once again, oﬀering a skill game would mean abandoning the short term proﬁtable “Excel Business Model” that had been tailor-made by the sector. This involves: ● Buying disloyal customers, through aﬃliations; ● Making as much money as possible oﬀ them in a few months by playing against them; ● Losing them and beginning the cycle again.
It would be far more beneﬁcial to adopt a new business model and develop it into a market place to let customers play against each other as opposed to the house themselves playing against the customers. A percentage of the money played would then be retained. Their new business model would look like this: ● Gain/buy customers through word of mouth, referral programs and aﬃliations; ● Make less money per month per customer (taking a percentage); ● Retain them as customers for years (9.51 years). Naturally, this novel business model will not oﬀer the same kind of return in the short term, however, fostering loyalty would lead to a much higher proﬁtability in the long term. The economic value of a loyal customer over time is evident! Such a reluctance to adopt skill games was also present in European operators due to the lack of a legal frame. By default, DFS was considered a sports betting activity in many countries such as England and France. This could have proven to be a major obstacle to
market growth since the nature of the two games is fundamentally diﬀerent. The Malta Gaming Authorities (MGA) were the ﬁrst legislative authority to understand the urgency of the need and merely a few weeks ago, Malta launched the very ﬁrst skill game licence in Europe. Oulala is the ﬁrst B2B network in the DFS market to run under a B2B controlled Skill Games Licence (issued by the MGA). This is excellent news for the sector, and moreover, it will help greatly in convincing iGaming operators to adopt DFS. There are two important barriers that appear to prevent our sector from fully embracing the rising demand. How critical is this for our future?
The Kodak analogy Let us take a step back and look at the years of 97-98, when digital technology ﬁrst appeared in the camera industry. Kodak had proven to be an impressive market leader. The ﬁrst digital camera their lab produced emerged in 1975, however they claimed that the digital feature would not expand any further than a niche market. In truth, they were simply not prepared to take the leap into the radical change that was necessary with regards to structure, the team and technology; everything required in order to be fully reinvented. It wasn’t until 2004 that they acknowledged the critical mistake they had made and attempted to position themselves on the digicam market. Unfortunately, by then it was far too late and Kodak eventually went bankrupt in 2012. Conversely, Fuji, their main competitor, found the courage that Kodak could not summon and fully reinvented themselves when it was truly crucial for them to do so, and they were successfully able to survive. For a dominant multinational enterprise of that level that employed up to 145,000 people to go from an utopia to absolute perdition in less than 15 years seems unprecedented! Thus a word of caution, as the iGaming sector is in that exact situation right now, the only diﬀerence being that it is not a technological revolution but rather a customer based one. Speciﬁcally, customers that were born around the same period of time as digital cameras. This however, is already common knowledge as can be seen in the demographics of your customer database that clearly indicate the unwillingness of young generations to play the same way that their parents and grandparents did. The reason for this is that they were raised playing incredible skill games on their consoles and maintaining constant social interaction on their cell phones. Thus, the idea that they might be looking to play games of luck
against the house could not be more wrong. The iGaming sector has two choices: the Kodak one or the Fuji one. Most iGaming leaders appear to endorse Kodak’s exact analysis and excuse, claiming that all the new trends are fascinating, but will not go further than niche markets – does this argument sound familiar?
A few weeks ago, GVC’s Chief Executive explained in The Telegraph how Big Data has become a weapon between customers and operators. We are currently only at the very beginning of this battle. The consequences of Big Data for the sports betting market will therefore be massive and it seems logical that newer generations will look in another direction.
Sports betting will fail to attract the younger generations Another major game changer exists in Big Data. For the ﬁrst time in history, sports betting is becoming threatened by a new kind of technology: Big Data. The consequences will prove to be huge for our sector. Bearing in mind that, for instance, Microsoft and Baidu were able to predict 15 out of 15 matches (and Google 14 out of 15) thanks to Big Data during the last period of the last world cup is suﬃcient proof that companies having access to enough data can correctly predict the outcome of football matches. One may ask, then; will people in the near future want to play against the bookmaker, knowing that the house will be selecting the odds while already knowing the results? This seems highly doubtful. Playing against the house should be a risk yet it will soon start to look more like a con. A con may seem like a bold way to put it however, a quick look at the multiple law suits occurring in the UK, and currently in other countries too, by customers against the iGaming sector is proof enough that what may have been accepted by previous generations is being strongly refuted by the younger ones.
References 1 Fantasy Sports Trade Association, Industry Demographics, http://www.fsta.org/ (Sep. 2014). 2 http://www.webmarketingpros.com/blog/how-customer-loyalty-drivesproﬁtability/ 3 http://www.telegraph.co.uk/business/2017/03/23/clampdown-big-winnersboosts-gaming-business-gvc/
Time to face reality. It is imperative that iGaming operators ﬁnd the courage to fully reorganize their oﬀer, their business model and their own structure in order to grow within the next ten years. We should embrace the Fuji way and begin with a blank slate. Let us oﬀer customers games that will be fashioned after their real expectations and not resting solely on our own. Otherwise, other companies, possibly from the video gaming industry or start-ups, will most certainly colonize this expanding vacant space! In DFS, DraftKings has already transformed a noteworthy quantity of sports betting customers into DFS players in 2016, which is only the beginning for them, since very few iGaming operators appear to be taking this threat seriously at all. The following number is crucial to bear in mind: in 2020, youngsters, millennials, the Y generation, whatever they may go by, will represent 50% of the work force, which is approximately 50% of our market. Therefore, it is imperative that we start listening to them. The BCG matrix has shown us that a common great danger exists when you are satisﬁed to simply reap the beneﬁts of your mature market but then grow reluctant to begin investing in new markets, shielding the unwillingness with the excuse that they are smaller and not yet proﬁtable. Those who make such mistakes eventually tend to suﬀer greatly. Every B2B operator oﬀering a product that speciﬁcally targets millennials currently shares the same sentiment: that our products, whatever they may be, are not being seen as iGaming operators' priority. They may like what we do, they understand its concept and even be interested in integrating with us in the future, however, very few of them believe that we should be at the top of their priority list.
DFS is the sports betting of the new generations Daily Fantasy Sport (DFS) is a good answer to millennials’ expectations. For the very ﬁrst time, operators now have the opportunity to oﬀer a game that is a real skill game while also being structurally social. In fact, people are playing DFS in order to prove their knowledge of sports and that their skill is more relevant than mere luck or chance. Numerous companies such as Oulala have positioned themselves as DFS B2B providers so that any iGaming operators who are interested in oﬀering a DFS product to their customers will not need to invest large quantities of capital. Additionally, they have ready-made access to the latest technological innovations in our sector and they may beneﬁt from the customer mutualisation of the providers' network. iGaming operators should embrace this revolution. As time goes on, those who understand this Darwinist evolution in the very early stages will most likely be the future winners of our sector. To be absolutely clear, most of the bigger names in our sector have already acknowledged the strategic signiﬁcance of DFS for their future and are currently investing to develop their own solution (Unibet, SkyBet, Betclic, Yahoo). Moreover, in August, one of the biggest UK Sports betting brands will launch its own solution. It is now critical for the mid to small operators to react and start oﬀering DFS. However, because they cannot support the investment required to properly launch a DFS product (we have already spent over €2 million on our solution), they will need to work hand in hand with B2B providers. Radical changes are always brutal and it is true that the new paradigm should be seen as a threat, however such is only the case for those who are remaining stationary; for the others, the next decade will be a stimulating period where numerous opportunities will arise. :: CGi
Valéry Bollier has over thirteen years of experience in the iGaming industry. He is a regular speaker at industry conferences and seminars, as well as a contributor to various B2B publications. Equipped with a passion for Daily Fantasy Sports (DFS) and ''Big Data'', Bollier is the cofounder and CEO of Oulala, a revolutionary fantasy football game which was launched four years ago.
GAME, SET ANd MATCH fIXING F
or anyone doubting that match ﬁxing is big, organised and global, look no further than the recent FA Cup tie between Sutton and Arsenal. The game will go down in history, but not for the David versus Goliath nature of the contest, rather Sutton reserve goalkeeper Wayne Shaw, aka the Roly Poly Goalie, eating a pie at half time.
Susan O’Leary director of ecommerce alderney eGambling
His munching brought the integrity of the FA Cup, Sutton United and British football into question, while simultaneously damaging the reputation of the gambling industry. Sun Bets sponsored Sutton United for their match against Arsenal, and laid a novelty bet that Shaw would eat a pie live on air, with odds of 8-1. Come half time, the Roly Poly Goalie was ﬁlmed munching on a pie while stood on the touchline. Sun Bets later tweeted that Shaw had “cost us a bellyful” with the bookmaker understood to have paid out a ﬁve-ﬁgure sum to punters. The following day, the UK Gambling Commission announced it was investigating, and Shaw was let go by the club. Only Shaw knows whether he was aware Sun Bets were oﬀering punters odds on him eating a pie live on air, and whether it inﬂuenced his decision to do so. His actions highlight that the risk of match ﬁxing is more prevalent and widespread now than it has ever been, despite the UK betting industry being licensed and regulated. While licensing and regulation has turned up the heat on those seeking to rig the outcome of matches and scenarios in sporting and betting contents, more needs to be done. Before discussing exactly what, ﬁrst it’s worth taking a quick look at the diﬀerent types of match ﬁxing taking place. There are two main forms: CGiMAGAZINE.COM
Betting related: when persons oﬀ the ﬁeld direct match ﬁxing to make illicit ﬁnancial gains using a mixture of legal and illegal sports betting platforms and share a proportion of the proﬁts with those connected to the sport who execute the ﬁx on the ﬁeld. Alternatively, this form of match ﬁxing can be organised and controlled by sports participants who either place the bets themselves or persuade someone else to do so on their behalf.
Sporting motivated: This is match ﬁxing for sporting reasons that are not related to betting. However, there will usually be at least an indirect ﬁnancial beneﬁt from the ﬁxing. A motive for this type of match ﬁxing can be the ﬁnancial survival of a club. For example, towards the end of a season a higher placed team will be paid to lose so that the lower ranked team they are playing against does not get relegated. That said, those with inside information on the ﬁxing can use this on betting markets to make a proﬁt.
Ways of ﬁxing a match include: • The deliberate loss of a match or phase of a match for any reason • The deliberate underperformance of a player, or the deliberate or improper withdrawal prior to the end of a match • The micro-manipulation of an event within the game – missing a penalty, eating a pie at half time • The deliberate misapplication of the rules of a sport by a referee or game oﬃcial • Interference of the play, playing surfaces or equipment by venue staﬀ • The hosting of fake/ghost matches – betting markets oﬀered on a match or contest that simply hasn’t taken place I have just come back from the ASEAN Gaming Summit in Manila where I took part in a panel talking about the diﬀerent types of match ﬁxing, and what can be done to ﬂush it out as much as possible of the sporting and betting industries. I was joined by iGaming consultant Jesper Jensen, the deputy secretary of Liquor, Gaming and Emergency Management for New South Wales, Paul Newson and Melvin Byres, founder of Business of Sport Network and owner of MSB concepts, the organisers of the Hong Kong Rugby Sevens. The discussion was incredibly well received, with each speaker talking openly about their own experiences and insights when it comes to match ﬁxing. We agreed the scale and scope of the problem means the solution must be bigger, more organised and truly global. It requires cooperation between stakeholders and across international borders. No one regulator, association or government alone can ﬁx it; victory requires a strength in numbers approach through memorandums of understanding (MOUs) and other eﬀective cooperation. For example, Newson pointed to diﬃculties with Australia’s Interactive Gambling Act, under which there has been no prosecutions since 2001 despite numerous complaints to police. “Where a domestic regulator is seeking information against an oﬀshore operator, it’s just critical that there are suﬃcient memorandum of understandings or agreements in place. Perhaps at the moment that’s not as robust or mature as it could be. “There’s no panacea, there is no one answer, it’s a comprehensive response that’s needed. Cooperation is pivotal,”
he added. Forming an alliance between regulators, government agencies and sports associations will help bring match ﬁxing out of the shadows and into the light. It will make it possible to eﬃciently and eﬀectively spot rigged outcomes and identify those ﬁxing matches and operating illegal sportsbooks. It will enable us to go after them with the full might of the law; as a united front, we have substantial resources capable of stamping out match ﬁxing. A key strand to this, Jensen argued during the panel, was ensuring bookmakers are required to meet best practices. Most sportsbooks now oﬀer markets on every single sporting event in the world, from college basketball in the US to Premier League cricket in India. But some of these contests and leagues are more prone to match ﬁxing than others, particularly those where athletes and managers receive little to no pay. “If you are operating under-17 football, those guys are not paid. If someone comes and bribes them it will most likely happen so you have to make sure whoever is oﬀering the products has reasonable limits. That means you can’t bet big. You need to keep it very low,” he said.
Of course, regulating and licensing online sports betting from the outset is the most eﬀective way of ensuring operators are held accountable while aiming to halt match ﬁxing in its tracks. Not only does it ensure that operators and suppliers are compliant with internationally recognised gold standards, it also opens the door to give greater access to a network of authorities around the world. The Alderney Gambling Control Commission (AGCC) has been doing this for some time now, and has MOUs with FIFA and the International Olympic Committee (IOC), helping both organisations combat match ﬁxing in their respective sports. The AGCC does this by giving them access to data from the millions of bets processed through Alderney-licensed operators each day. By applying sophisticated analytical software tools, early trends can be detected that pinpoint suspicious activity such as result rigging. Licensing also means we have a forensic understanding of individual bookmakers, from the technology powering their online betting sites right through to the management team at the helm. If anyone is caught acting in contrary to the law or their licensing requirements, we can react quickly and decisively and bring them
to task. When properly regulated and licensed, sports betting is a fun activity that adds another layer of excitement for consumers when engaging with their favourite sports. Match ﬁxing should not stand in the way of this, and it is our job as regulators, governments and sporting bodies to ensure those acting unlawfully and without a moral compass are stopped. We need to move quickly, however, as the online betting industry continues to morph and change. Activities such as eSports are now very much considered to be sporting activities, with bookmakers oﬀering markets on the outcome of contests. Unlike more traditional sports, eSports doesn’t have a body such as the IOC or FIFA to enforce integrity and proper conduct. In that sense, it is up to regulators such as the AGCC to step in. Take daily fantasy sports. The sector was on a meteoric rise with market leaders FanDuel and DraftKings going from start-ups to billion-dollar behemoths almost overnight. But then the DraftKings data leak scandal erupted amid calls of insider trading. Both operators were thrust into the eye of the storm, and while neither was found to have acted inappropriately, the industry and those operating in it now ﬁnd themselves under increasing scrutiny. Had the industry been properly licensed and regulated from the outset, it would likely have prevented the data leak from happening in the ﬁrst place. Even if it didn’t, the response would have been calm, collected, and most importantly transparent with experienced regulators such as the AGCC quickly and eﬃciently assessing the situation and taking any necessary action. eSports is undoubtedly the next big thing in sports betting, and already the industry has had to overcome match ﬁxing scandals – both in terms of ﬁxing the outcomes of contests and betting on certain events occurring during games. It shows how quickly and deeply corruption in sport can run, and why regulators, governments and sporting bodies need to get their acts together now if they are to prevent it spreading further. From a goalkeeper eating a pie at half time to an eSports players deliberately losing a match and betting on the outcome, match ﬁxing continues to take place in all sports and across all borders. It remains a diﬃcult force to overpower, but progress is on the horizon and both the sporting and betting worlds now understand the need to stand side by side to defeat it. The AGCC has an open-door policy, and is willing to work with governments, sports associations and other regulators to crush match ﬁxing to dust. The more agencies we work with, the more powerful we become as a whole and with the likes of FIFA and the IOC already on board it’s only a matter of time before it is game set and match for match ﬁxing. :: CGi SuSAN O’LEArY
Susan O’Leary is a lawyer who has represented some of the world’s leading eGambling operators and gambling service providers including many of Alderney’s licensees and has a keen sense of what they require from a jurisdiction: a strong pragmatic regulator who understands the commercial environment, a resilient technical infrastructure, a favourable tax system, excellent support services and a fees system that allows businesses to grow.
SPOrTSbETTING AffILIATES ::
CHANGING THE fACE Of SPOrTS bETTING AffILIATES A
Henrik Lykkesteen chief commercial oﬃcer better collective
fter joining the Better Collective team back in 2014, I was tasked with developing the commercial side of the global sports betting portals and concept sites – including bettingexpert.com. Until this point, bettingexpert.com was a platform that continued to grow in multiple directions with add-on services to cater to endless needs. We were like a Christmas tree that we kept adding ornaments to until it became a bit too cluttered, so changes needed to be made. The strategy was still fruitful, but we decided to take a quick step back and assess the situation. In the boom of the aﬃliate industry, we were amongst the leaders of the pack, but we were constantly looking in the side view mirrors to keep up with, or outgrow, our competitors with new features. We decided to do some introspection regarding our bettingexpert.com strategy. We knew that our core value was to create a community for users—a community that catered to unique individuals looking for new ideas that could be personalized to them. This focus shifted away from the traditional aﬃliate model that prioritises the operator by focusing on providing new promotional oﬀers to the indiﬀerent depositor proﬁle. However, breaking away from a standard business model needs support. We decided to analyse the opinions of the punters by administering a survey to both our own users and general punters in the UK market to see if our assumptions would be as fruitful as we thought. The results of the survey stacked heavily in our favour, and it was conﬁrmed that our strategy to prioritise users over operators would create stronger value for all parties involved. With the approval from our users, we honed our strategy to make our tips and tipster platform more scalable and tailored to CGiMAGAZINE.COM
:: SPOrTSbETTING AffILIATES
the users themselves. We knew our users were important, so we decided to invest in them as well. Cash prizes for our tipsters became an important part for us to show our appreciation. Additionally, we would ﬂy our best tipsters back to our headquarters in Copenhagen to show that we truly value what they are doing, as well as gain insights based on their thoughts on bettingexpert.com. We took note of what our users were asking for (without them having to actually ask). Though, we’ve always been aware that our users are mainly accessing the site through mobile, therefore, everything was designed with mobile in mind ﬁrst. As a team, we made a bold decision and rebuilt the website as a series of modules that focused on certain areas. Our tips were housed in a single module, while other features (such as our stats and insight sections, like “Clash”) received their own separate modules. The modules became key in our scalability. We could use the tips module to develop widgets and other tools that could bridge gaps across the web. bettingexpert.com’s tipping widgets were now being featured on fan sites and forums, sharing the good word of our tipster platform. We wanted to show oﬀ the great work our users were doing, and make them feel rewarded for their eﬀorts – after all, they play a major part in growing the
brand. Another use of the tips module was as the building block of BE Live, the industry’s ﬁrst in-play tipping app. Having looked at data trends within the industry, we realised that in-play betting was becoming a major growth area in the gaming and betting industry. We decided to create a platform that oﬀered the same knowledge from our tipping experts to those looking to place inplay bets. This was a major highlight for us in 2016 and one we’re immensely proud of. A consistent goal of ours has been to reshape the role of the aﬃliate. In the past, it seems that many of the players in our space, and some operators included, have a very limited scope on how to approach the aﬃliate process. You will often ﬁnd that these sites will have a sole purpose of funnelling depositors through to bookmakers. Of course there is value in this simple one step model, but we realised that there is more that can be done as an aﬃliate. For us, depositing is just a basic step in the process— retention and becoming a valued part of the betting experience is the most valuable role for the aﬃliate. We’ve learned this from bettingexpert.com, having created a community for tipsters and punters sharing and looking for advice, we are becoming involved with the betting experience
SPOrTSbETTING AffILIATES ::
through every action a punter makes—not just the initial introduction to the bookmaker. Building this value with our users is what we continue to focus on, creating retention through our products, and becoming engrained in the process of their betting experience. Being crowned Sports Betting Aﬃliate of the Year at the EGR Nordic Awards, capped oﬀ a wonderful start to growing the bettingexpert brand and the recognition marked a remarkable time for the company, coming fresh oﬀ the back of winning the same category at the prestigious EGR Operator Awards just a few months before. We had learned from bettingexpert.com that our users enjoyed interacting with our product because we valued them as individuals. We rewarded their good eﬀorts, encouraged them to show oﬀ more, and expressed how their own knowledge was helping others place bets smarter and more shrewdly. Since we were providing the best tips for our users, naturally we felt we needed to show them where they could get the most value. With the notion that we want to enhance the role of the aﬃliate, SmartBets was born in 2016 and we could never have expected its growth to be so rapid, the potential is exhilarating. SmartBets is the culmination of our learnings—an odds comparison platform that serves as a complementary product to bettingexpert.com, while also being the most user centric odds comparison site in the whole industry. SmartBets is the industry’s very ﬁrst customisable odds comparison platform. We truly wanted to create a home for our users that would let us become included in their individual betting experiences—but every punter is a unique person, with their own personal tastes, and it was a given that we adhere to them. The site allows for our users to follow the teams and leagues that they truly care about. By creating their own account, we are creating an odds comparison platform that appeals to both the experienced bettor, and the sports fan – our demographic is far reaching and appeals to a lot of diﬀerent punters. Being user focused, our main objective is to make sure that our members’ value is being catered to ﬁrst. That’s why all of our bookmakers’ percentage pay-outs are included on our platform— to ensure complete transparency, and encourage honesty and value from our operator partners. SmartBets and bettingexpert.com are the two products we have created in hopes of facilitating the whole betting experience for our users. They are linked together, but have diﬀerent personalities—bettingexpert.com remains the personable interface where our users are interacting with real people who are oﬀering up their own knowledge and supporting their ideas. On the other hand, SmartBets is by the numbers. It is currently a simple dialogue between a single user and our data and insights. Working in tandem, bettingexpert.com is there to help users interact with experts and decide which team and market they want to place their bet on—SmartBets is there to make sure you get the most value for that bet. Within a year of being launched, SmartBets has already picked up two industry awards for being the Innovation of the Year (iGB and SBC) and is available in three languages (so far). Considering that bettingexpert.com is a two-time eGR Aﬃliate of the Year award winner, we are very proud (and have high hopes) for this new addition to our family – it’s recent launch in Italy just goes to show how quickly the brand is growing and how exciting
a time it is for the company. 2016 was a huge year for SmartBets, but bettingexpert.com continues to grow in its own right. It received both a design facelift and an engine upgrade. The new design is inviting users to engage with the product more, while the new capabilities of the site is helping provide more relevant information to our users. Additionally, a whole new version of bettingexpert.com is underway, so you can expect much more from our platform in the future. We have a mantra in the oﬃce about never being complacent, and we’re excited about the future endeavours of the site. Moving forward, as we continue to grow and progress the brand, one thing remains constant in our strategy: Our users are what make us great. Our mission is to continue catering to our users’ individual needs by enhancing our learning capabilities, providing our tipsters and value seekers with the most relevant information for them as individual people— we never want them to be seen as a collective sea of potential depositors. As previously mentioned, our goal is to encourage retention of users, rather than just funnelling depositors. We are going to create stronger community environments that help encapsulate the entire betting experience in one place. The SmartBets goal is to work closer with our operator partners to include direct betting into our platforms. This means that our users can use us to host their whole betting process, without ever leaving our site—bookmakers still receive their players, but we create the community that celebrates betting as a form of entertainment that can be approached through strategic choices and expert advice. We already have direct betting with partners like bet365 and Ladbrokes in the UK, but we want to provide the option for as many bookmakers and regions as we can. Even though bettingexpert.com and SmartBets are two diﬀerent brands, with diﬀerent personalities, they are still complementary products. Thanks to this, we are able to administer minor integrations across the platforms. In the personalised SmartBets feed, we will eventually include tips from expert tipsters on given matches. bettingexpert.com will continue to feature best odds widgets with data collected from SmartBets. The platforms will work in tandem to provide our users with everything they need to place a bet, and we will never stop providing them with information—even if they’ve already become a depositor. We used to tailor our strategy in relation to our competitors to keep the advantage, but over the years we have become conﬁdent in ourselves and our community. We are no longer peeking in the side view mirror to see what others are doing. We are cutting our own path forward, and there’s no looking back. :: CGi
Henrik Lykkesteen, chief commercial oﬃcer for Better Collective, is an expert in marketing with more than 15 years’ experience in digital sales and strategic management. He has been with Better Collective since 2014, with his main focus being developing the commercial side of the company’s global sports betting portals and concept sites.
GErMAN rEGuLATION ::
NEW eGAMING rEGuLATION IN GErMANY T
he 2nd Inter-State Treaty amending the Inter-State Treaty on Gambling (“ISTG 18”) is the next chapter in a history of failed attempts to regulate the growing gambling market in Germany. Instead of a complete overhaul of the German gaming regulations the federal states opted for “minimally invasive” changes, keeping the failed ISTG from 2012 (“ISTG 12”) mostly in place.
Wulf Hambach & Stefanie fuchs hambach & hambach
I. Background The ﬁrst mutual gambling regulation of the German federal states was the Inter-State Treaty on Lotteries. However, in 2006 the Federal Constitutional Court held the ban on private sports betting operators contained therein as unconstitutional. Consequently, the federal states replaced it with the ISTG 08, which undertook the modiﬁcations demanded by the Federal Constitutional Court, but kept the monopoly on sports betting. However, in 2010 the CJEU ruled that this was not in conformity with EU law due to a lack of coherence. With the ISTG 12 the German federal states then tried to partially liberalize the sports betting market with an experimentation clause foreseeing 20 licenses for an experimental phase of 7 years until June 30th, 2019. But the licensing process was a complete failure. None of the 20 licenses was granted. The issuance was stopped by several court rulings. II. The ISTG 18 The ISTG 18 has been signed on March 16th, 2017, by the heads of the 16 German federal states and shall enter into force on January 1st, 2018, if all federal states deposit their ratiﬁcation certiﬁcates until December 31st, 2017, at the state chancellery of the chairperson of the prime minister conference. The key aspects are: • The limitation of 20 sports betting licenses is lifted. • The experimental phase is extended until June 30th, 2021 (the
:: GErMAN rEGuLATION
regular termination date of the ISTG 18). In case of a prolongation of the ISTG 18, the experimental phase is extended until June 30th, 2024. This prolongation requires an approval of at least 13 of the 16 federal states. • Those 35 sports betting operators who fulﬁlled the minimum requirements of the information memorandum of October 24th 2012 and thereby managed to come into the second round of the licensing procedure pursuant to the ISTG 12 (“Top 35”) are issued an interim statutory licence, which is limited to one year until December 31st, 2018, and revocable at any time. It is conditioned upon the Top 35 providing a security of EUR 2.5 million each. • All other sports betting operators may apply for a licence in a new licence procedure from January 1st, 2018, onwards for the remaining of the experimental phase. The Top 35 also have to apply for such a licence for the time after the expiry of their interim statutory licenses. The licence requirements of the ISTG 18 are largely the same as in the ISTG 12. E.g., the requirements of a provision of a security of EUR 2.5 million and of the payment of a concession fee are still in place. Further, the controversial ban on live betting still exists. • The federal state of North Rhine-Westphalia will be competent for the new licence procedure instead of Hesse. • The ban of online-casino games (including online-poker) remains despite the fact that Germany is the second biggest market for online-casino games. • A return to the state monopoly after 2021 (or 2024) is still possible. III. Assessment The European Commission considers the ISTG 18 as still not coherent and unfair, which is true. It is discriminative and the participation in the licensing procedure is economically unattractive. The remaining ban on online-casinos (including online-poker) is not suitable to reach the aims of the ISTG.
1. Unfair advantage for the Top 35 The issuing of interim statutory permits to the Top 35 discriminates unjustiﬁed sports betting operators who have not taken part in the initial licensing procedure of 2012 or have not managed to come into its 2nd round. These operators have to apply for a licence in the new licence procedure starting on January 1st, 2018, before they can enter the German market. The EU-Commission fears this may take at least one year (until the expiry of the interim statutory licenses). The licensing procedure of 2012 lasted for three years before courts stopped it. The competence-shift from Hesse to North Rhine-Westphalia, whose authorities have no experience with such a procedure, may make things even worse. Considering this, the granting of the new licenses might be not as swift as the federal states expect. It could take several years instead of “only” several months, if it will be successful at all. At the time when the non-Top 35 sports betting operators will receive their licenses, they will enter a market with up to 35 competitors who have already achieved a settled market position. This may result in severe competitive disadvantages for the non-Top 35 operators and may therefore be a restriction to the free movement of services. Moreover, a distinction between the Top 35 and non-Top35 operators seems not to be justiﬁed given the fact that the initial licensing procedure 2012 was found by courts as unconstitutional and not in compliance with EU law due to a violation of the principle
of equality, the prohibition of discrimination and the principle of transparency. Those violations continue to have an eﬀect with the distinction made by the interim statutory licenses and therefore restricts unjustiﬁably the free movement of services. 2. Economic unattractiveness The acquiring of a licence for a legalized oﬀer may not be economically attractive. The experimental phase has been shortened from initially 7 years to 3.5 years. Originally, the state monopoly was suspended for seven years in the ISTG 12 in order to evaluate the eﬀects it has on achieving the objectives of the ISTG 12, especially which eﬀects a liberalization of the sports betting market has for the combating of the black market and an increase of consumer and youth protection. These eﬀects have to be assessed in only 3.5 years (from January 1st, 2018, to June 30th, 2021) pursuant to the ISTG 18. The extension to June 30th, 2024, requiring an approval of at least 13 federal states cannot be assumed as given fact. Moreover, the licence term does not start on January 1st, 2018, but only at the time licenses are actually granted. At the same time, the economic environment is more competitive due to a potentially unlimited number of licensed operators. In light of the substantially shortened term of the licenses in a more competitive economic environment, the requirements of a bank guarantee of EUR 2.5 million and of the payment of a concession fee may hinder the economic sustainability of an acquiring of a licence. This applies even more to the use of the interim statutory licenses with a term of only one year and a revocability at any time. Adding to the legal uncertainty is the fact that applicants do not have a legal claim to an issue of a licence. Even if they fulﬁll all requirements, the competent administrative body of North Rhine-Westphalia could still deny them a licence. This opens the doors way to abuse and discrimination. Along comes the ban on live betting which is the most attractive oﬀer and therefore mainly used by illegal operators. Hence, in an overall view the set of licence requirements seems to be inappropriate for a canalization of the black market and for an increase of consumer and youth protection. Therefore, it most likely violates EU law. 3. Incoherence of the ban of online-casinos The ban of online-casino games (including poker) is not in accordance with EU law. During the pilot procedure concerning the ISTG 12 started by the EU-Commission against Germany in June 2015, the latter stated that the ISTG does not meet its objectives in the gambling sector, namely consumer and youth protection. A pilot procedure precedes an infringement procedure. In the notiﬁcation process, the EU-Commission remarked that according to the case law of the CJEU member states have to prove the suitability of all measure restricting the free movement of services to reach their aims and to lead to a coherent regulation. Hence, the German federal states have to prove the suitability of the complete ban of online-casino games – including online-poker – for reaching the aims of the ISTG. They have not rendered such prove to date, even though they had agreed during the notiﬁcation process for the ISTG 12 to provide an evaluation until July 2014. This date is long gone. To justify the ban of online-casino games the German authorities refer to the allegedly high risk of manipulation, of development of gambling addiction and of money laundering. However, these claims are not supported by facts. The assumption
GErMAN rEGuLATION ::
that online-casino games are prone to manipulation, gambling addiction and money laundering is rather false. Modern technology can be used to monitor the participants’ gaming activity. Moreover, only a coherent regulation legalizing such games and providing authorities with suitable enforcement measures may mitigate such risks, and not a ban, which authorities are not able to enforce and with which they have no possibility to control the compliance with youth and consumer protection measures. The unregulated market grows from year to year. In 2013 an amount of € 17 billion was staked, raising from € 9 Billion in 2012 and € 5 billion in 2011. A market of this size may only be monitored with a licensing regime providing for a canalization into a legal market. By the refusal of a regulation and the simultaneous enforcement deﬁcit, the German states do a disservice to the objectives of the ISTG. In the black market, the risks for consumers ﬂourish. Therefore, the EUCommission denoted the ban of online-casino games a “non-bearable solution”. Moreover, to combat the growing market German authorities try to execute the ban by issuing injunctions mainly against providers licensed in other EU member states rather than against operators seated in third countries because they cannot get hold of third country operators. But this ignores the compliance of the EU operators with the youth and consumer protection regulations of their seat member states. 4. The right of Hesse to terminate its participation in the ISTG Hesse has already expressed its doubts about the practicability of the ISTG 18. In 2015, the state government of Hesse issued “Guidelines for a modern Gambling regulation in Germany”, including not only a licence regime for (online-) sports betting, but also for online-casino games. Hesse argued that for the purpose of consumer and youth protection a regulation of online-casino games is mandatory. Although questioning the practicability of the ISTG 18 in light thereof, Hesse still signed it. It has, however, a right of termination, if the negotiations about the introduction of a licensing regime on online-casino games fail, which the federal states have agreed to undertake. Another potential candidate for exiting the ISTG 18 is SchleswigHolstein. Originally, this federal state did not take part in the ISTG 12. Instead, it established its own gambling regulation, including a licensing regime for online-casino games. Only after a change of government, Schleswig-Holstein joined the ISTG 12. With elections coming up, another change seems possible. Other states could follow suit.
IV. Conclusion With the ISTG 18 the German federal states missed again an opportunity to establish a coherent and up-to-date legal framework for eGambling in Germany. They did not implement the necessary adjustment of the legal framework to todays and foreseeable future challenges, but only ﬁxed the most glaring problems of the ISTG. While the dropped limitation on sports betting licenses is to be welcomed, the introduction of the interim statutory permits deepens the incoherent nature of the German gambling regulations by discriminating all non-Top 35 operators. A legalization is unattractive under the given licensing requirements. The ban of online-casino games ignores the reality and is therefore not suitable to reach the aims of the ISTG. An online-casino games market of the size existent in Germany – which makes it the second largest in the
world – may not be controlled with a ban. It may only be eﬀectively monitored with a licensing regime providing for a canalization into a legal market. Hence the ISTG 18 does not comply with EU law. Therefore, the CJEU’s INCE ruling still applies. Prohibitive actions and criminal prosecution may not be applied as long as the German gambling regulations are not in conformity with EU law. In the light of the EU Commission’s remarks during the notiﬁcation process, a satisfactory outcome of the pending pilot procedure against Germany seems unlikely. In fact, expecting the start of an infringement procedure might be more realistic. :: CGi References 1 BVerfG, March 28th 2006, 1 BvR 1054/01. 2 ECJ Carmen Media (C-46/08), Winner Wetten (C-409/06), Markus Stoss et al (C-316/07). 3 VGH Wiesbaden, April 16th 2015, 5 L 1448/14.WI. 4 See footnote no. 3. 5 See footnote no. 2. 6 This was stated by the Hesse Interior Minister, onvista news, article of 7 March 2017, downloadable under http://www.onvista.de/news/umfrageillegales-onlinespiel-verbreitet-kaum-unrechtsbewusstsein-56678541 7 EU PILOT 7625/15/GROW, downloadable under http://docs.dpaq.de/10848-pilotverfahren_eu-kommission.pdf 8 Willmroth, „Süddeutsche Zeitung“, article of 5 March 2017 „Rüge aus Brüssel“ [reprimand from Brussel] 9 ECJ C-334/14.
WuLf HAMbACH & STEfANIE fuCHS
Dr Hambach was awarded a PhD at the Max-Planck-Institute for foreign and international private law in the ﬁeld of media and gambling law. Dr Hambach is sought after as a speaker at leading international conferences on “eCommerce” and “eGaming”. He is a co-founder of the European legal information portal Gaminglaw.eu, a member of the European Advisory Committee of the International Association of Gaming Advisors (IAGA) and a General Member of the International Masters of Gaming Law (IMGL). Also, he works on the advisory board of the research institute for gambling and betting at the Universität Bonn-Rhein-Sieg, and is a member of the board of the Deutscher Verband für Telekommunikation und Medien e.V. (DVTM). Stefanie Fuchs studied law at Ludwig-Maximilians-Universität in Munich, and passed her ﬁrst state exam there in 2008. In 2010, she passed her second state exam, also in Munich. She was admitted to the bar in 2011. Before joining Hambach & Hambach, Stefanie Fuchs, while working on her doctorate thesis, initially worked for the renowned commercial law ﬁrm McDermott Will & Emery, followed by three years with the international commercial law ﬁrm Gowling WLG (formerly Wragge & Co, then Wragge Lawrence Graham) in Munich. In 2016, she earned her doctorate degree (Dr jur.) from LudwigMaximilians-Universität.
PAYMENT SOLuTIONS ::
ASSESSING THE MOdErN PAYMENTS LANdSCAPE… ANd MAKING THE MOST Of IT N
o one wants to be held up by a rickety payments system - whether you’re a patron on the casino ﬂoor or the developer of the newest innovation that’s set to sweep the gaming industry. There is no undermining the value of a frictionless experience across the various elements of a gaming experience. In the modern gaming realm, it’s important to know your payments technology options, understand the security that can come with them and how to best aggregate the diverse components of your business’ payments landscape for the beneﬁt of everyone who touches it.
Joe Pappano senior vice President and managing director vantiv entertainment solutions
Today’s Payments Technology Whether you process transactions in brick-and-mortar on the web or both, you need to start with the basics to help ensure you are setting your business up for success. Thinking about how you accept cards, secure your business data, and manage your fees can save you time and money in the future. In general, transactions fall into two categories – Card Present (where a card is physically swiped or dipped) and Card-NotPresent, meaning the consumer’s card is not present at the point of sale. Card-Not-Present transactions are becoming more and more present in the gaming space, with the rise of mobile, cashless, fantasy and online gaming, among other digital platforms. Mobile payments are slowly but surely emerging as a go-to option for gaming businesses, complementing traditional forms of payment and, in some cases, becoming the preferred way to pay. As a gaming entity, adding a mobile payments platform can not only beneﬁt your customers – providing a seamless way to pay and play – but positively impact your bottom line. Four of the key beneﬁts of mobile payments include:
The ability to close more sales. Today’s customers expect to be able to use their debit and/or credit card wherever they may be. In the gaming realm, this can equate to poolside at a casino-resort, at a property’s golf course, on a business’ social platform and more. Accepting mobile payments will only promote convenience and ultimately broaden your customer base.
Reducing wait time. Consumers are empowered with mobile platforms – they are in control of their funds and how much time is needed to complete a checkout process. In so many cases, customers have left a brick-and-mortar establishment because they simply do not want to wait. It’s also beneﬁcial to equip employees with mobile payment devices – empowering them to close a sale immediately.
Enhancing loyalty. Given how seamless and secure a mobile transaction can be, the experience may stick out as a signiﬁcant positive for customers. In choosing where to game/shop/visit, the ability to frictionlessly pay could be a deciding factor.
Having access to powerful data. Scouring through any data set can be quite time consuming. With a mobile payments platform, tracking customer data is simple. Data points include how often a customer comes in, what they like to purchase and what their preferred payment method is, among others. What you decide to do with the data is up to you. In an industry designed to get players/customers through the door, it can be incredibly mighty.
In an industry with a legacy of coins, cash and TITO, it’s important to now your options. From incredible cashless gaming solutions from Sightline Payments and ACS PlayOn to mobile payment platforms and digital wallets like NETELLER, there are a number of ways to boost customer convenience and business revenues.
Safe and Secure Equally as important – if not more important – than providing customers with a seamless way to pay is… security. Protecting sensitive payments data begins at the very ﬁrst swipe. Gaming operators have taken a big step toward reducing
PAYMENT SOLuTIONS ::
the chances of a successful cyber-attack by implementing pointto-point encryption—a data security product that encrypts customers’ card data at the swipe of a card and transmits the encrypted data through the merchants’ payments systems to processors for decryption and authorization. Point-to-point encryption protects gaming entities by rendering sensitive payment card numbers or personal information useless if breached during a sale and en-route to the processors. Gaming properties also need to retain guests’ credit card information for a much longer duration than merchants in the retail or restaurant industries. At the same time, casinos face the daunting challenge of protecting that data. Casinos’ data security can also include tokenization—a term used for a product that replaces sensitive card data by a surrogate number for storage or payments transaction processing. The system replaces guests’ credit card numbers with unique “tokens,” which can be used for payment transactions, customer analytics, rewards management and marketing. Tokenization works by assigning unique tokens for each credit card and those tokens can only be used by the merchant they are assigned to. By now, you’ve also surely heard of (or experienced ﬁrsthand) EMV chip cards and the US adoption of this payments technology. EMV—which stands for Europay, MasterCard and Visa—is a set of speciﬁcations for smart card payments and acceptance devices. EMV technology was adopted in Europe several years ago but the US has only ramped up adoption since 2015. The major beneﬁt of EMV technology is the reduction in cardpresent fraud that results from criminals using counterfeit, lost or stolen cards. It’s important to understand, however, that EMV also means a liability shift for certain types of fraudulent transactions from banks to merchants. If a merchant doesn’t have EMV-enabled equipment and systems in place and such a transaction hits the business, the merchant will probably be liable.
Tying It All Together Omni-commerce - it’s a buzzword that has taken the payments world by storm and is inevitably starting to make its round in every corner of business. Amid varying deﬁnitions, the idea at the heart of omni-commerce is ensuring an eﬀective consumer transaction across multiple experiences, whether online, via mobile or in a brick-and-mortar establishment. For example, many casinos oﬀer far more than just onproperty gaming. Casino operators in some states now oﬀer online gambling like poker and slot play, either free-to play or pay to play depending on the jurisdictions in which they operate. Traditional casinos can also include spas, retail, restaurants, selfservice ticketing kiosks and golf all within a property’s conﬁnes. Payment solutions today should help you oﬀer payment options that meet the needs of your customers and provide eﬃciencies to your operations. These options should be easy to use and available whether they are in-house at a counter, at a kiosk, online or using a mobile device. Data science has also evolved incredibly in recent years and is becoming more powerful for both brick-and-mortar and digital gaming businesses. Data is bringing enhanced insight to the omnicommerce approach, allowing businesses to build pinpoint-accurate customer proﬁles that can be used for customized marketing and outreach eﬀorts. While similar to how
casinos utilize data for player reward programs, data science helps establishments extend this same understanding to customers outside the boundaries of the reward program, and consumers in the market at-large. Technology now exists to help link brickand-mortar purchases to consumer behaviours online. This empowers clients to recognize their best customers across multiple channels, facilitate a consistent brand experience regardless of how their customers interact with them and improve digital marketing ROI. The end goal of omni-commerce is to always ensure the same experience when a customer is face-to-face, online or using their mobile device. An omni-commerce payment solution approach should enable this desired experience while also providing operators the added beneﬁt of less cash handling, better accounting reports and generating payments data analytics, so they can see the behaviours and trends of consumers. The most tangible example of an omni-commerce approach is from companies tying their land-based rewards programs to digital and social gaming sites. They can utilize player-tracking and pre-paid/cashless programs in conjunction with social gaming applications on their computers/phones/tablets. All of these interactions come back to the rewards program, which provide operators with invaluable insight and enable better marketing communications with patrons.
In Conclusion Regardless of how your business is set up, there are a number of possibilities and solutions waiting for you. No longer do you have to choose one or the other when it comes to a mode of payment, security and seamlessness. You can truly have the best of all worlds for your customers and your business. :: CGi
Joe Pappano is Senior Vice President and Managing Director of Vantiv Entertainment Solutions. His responsibilities include corporate business development, strategic sales, process improvement, administration, long-term vision, and overall direction for Vantiv Entertainment Solutions. Joe joined Vantiv in 1992 and possesses in-depth knowledge of all facets of the payments industry from merchant acquiring and card issuing, to agent banks and mobile payments. His primary focus is on helping Casino, iGaming, Lottery, ADW, and Social Gaming operators build strategic payments programs.
SAME CHALLENGE – NEW APPrOACH: HOW LOTTErIES ATTrACT NEW CuSTOMErS IN A CrOWdEd fIELd
Cory Aronovitz & Jeﬀ Catanzaro
he challenge for lottery has always been how to attract new players without losing existing market share. As the demographic changes to younger and mobile, what can lottery do to attract these app driven consumers that are ever evolving with technology that continues to outpace the ability to introduce compliant products. This, must of course, balance with maintaining the existing player base and not disrupt the core backbone of lottery sales – the brick and mortar retailer. Lottery has long relied on the large and few central system providers for guidance and innovation. Recently, however, smaller technology centric companies have been developing new and exciting products, enhancements and options for the lottery and its existing customers, business structure and potential new market of players. The new landscape of lottery product development presents options for lotteries to compete with the other gambling opportunities that utilize technology and current trends to attract a younger demographic. While there are many companies entering the lottery space, three stand out with unique approaches. Paymaxs has created a mobile gaming platform that works with traditional scratch-oﬀs, fully equipped with a data-focused backend system that allows lotteries to capture, categorize and analyze information not typically or easily obtained. Paymaxs also incorporates virtual reality and augmented reality technologies to enhance user experiences by allowing users to immerse themselves in the 3D game world. Paymaxs' application was introduced in New York last year and is planned to launch in several other states in the near future. Paymaxs' 3D games attract a younger demographic to the lottery, oﬀer new excitement for traditional scratch players and add a new online approach for lotteries to connect with their players. The 3D scratcher is sold by retailers as a traditional ticket with a CGiMAGAZINE.COM
validation bar at the bottom of the ticket. Players initiate the 3D play by scratching the bar code on the ticket and scanning it with the lottery's 3D mobile application. After the code is scanned, the gameplay jumps oﬀ the ticket to the screen with a 3D holographic experience that is dynamic and interactive. By the end of the gameplay, the application reveals the pre-determined end result to the player. Winning tickets are redeemed at the retailer. Playing the scratch oﬀ in 3D allows players to participate in second chance game options and promotions, and to share the game and their winnings on social media. Another new innovator to the lottery industry is InBet. For over 10 years the company has provided lottery companies with eﬀective solutions for e-lottery platforms. Using such technologies increases revenue, builds customer loyalty, and provides a transparent and cost eﬀective administration for operators and regulators. The Company has several products and technologies covering a range of diﬀerent sales channels from stand-alone vending kiosks, POS systems, lottery establishments and internet cafes. Aside from providing the technology, the Company integrates its products into existing oﬀerings and consults during the transition while scaling existing lottery processes and protocols. InBet focuses on compliance and has received certiﬁcations from major testing laboratories including GLI and BMM. InBet’s self-contained kiosk is a leading innovation. The kiosk can verify patron age, allow several types of game play, validate and pay winnings. The kiosk does not utilize the Internet to operate game play. Instead, the kiosk is pre-loaded with the various lottery e-tickets on the hard drive. Like an ATM, it utilizes cellular modem technology to connect remotely for the purpose of authorization of patron and for the purpose of polling data. In order to access the game play, patrons must provide their login information for their lottery account. This provides some measure of security and age veriﬁcation. The kiosk provides instant games that play attractive and dynamic animations, card games, bingo and keno games. The kiosk also allows for draw games, and allows patrons to cash winning tickets. Cash can be dispensed directly from the kiosks. The requirement for login allows the lottery to gather information on player activity and other demographics.
Finally, Jackpot is a mobile application utilized in connection with a retail lottery agent. The application allows players within a state to purchase lottery tickets as if they were purchased from the physical retail location. It is restricted to only those geographically located within the state and prohibits someone from outside the state from purchasing any tickets. The application is limited to draw games. The application allows for new innovative ways to attract a younger more mobile demographic and send messages promoting lottery. None of these technologies require any legislative or administrative rule change. They all work within existing legal framework. However, as more options become available and additional features are added, there may need some regulatory change. Paymaxs’ 3D scratcher is no diﬀerent than a traditional scratcher and only requires some integration with the central system provider. InBet’s kiosks simply enhance what is currently oﬀered in traditional ticket vending machines. The games operate as a scratcher or draw selection. It is only the presentation to the player that has changed. And the Jackpot application is not prohibited by any existing laws. The future will require a balance between advancements in technology, a desire to attract new players and preserving the integrity of the lottery platform. What is evident is that technology out paces regulation. Lottery will continue to look for new innovative ways to compete in gaming markets fast becoming saturated. :: CGi COrY ArONOvITZ & JEff CATANZArO
Cory Aronovitz is the Founder of Casino Law Group in Chicago, Illinois. He is an Editor of the Gaming Law Review and Adjunct Professor of Gambling and Casino Law. Jeﬀ Catanzaro is a Managing Director at Major Lindsey & Africa in their Managed Legal Services division (based in NYC) and a member of the Communications Committee for the International Association of Gaming Advisors (“IAGA”).
SOCIAL rESPONSIbILITY ::
THE PSYCHOSOCIAL IMPACT Of GAMbLING IN vIrTuAL rEALITY E
arly in my research career, I speculated that ‘virtual reality addiction’ was something that psychologists would need to keep an eye on. In 1995, I coined the term ‘technological addictions’ in a paper of the same name in the journal Clinical Psychology Forum. In the conclusions of that paper I asserted: “There is little doubt that activities involving person-machine interactivity are here to stay and that with the introduction of such things [as] virtual reality consoles, the number of potential technological addictions (and addicts) will increase. Although there is little empirical evidence for technological addictions as clinical entities at present, extrapolations from research into fruit machine addiction and the exploratory research into video game addiction suggest that they do (and will) exist”.
dr. Mark Griﬃths Professor of behavioural addiction International Gaming research unit nottingham trent university
Although I wrote the paper over 20 years ago, there is (as yet) little scientiﬁc evidence that individuals have become addicted to virtual reality (VR) applications such as gambling, gaming, and sex. However, that is probably more to do with the fact that – until very recently – there had been little in the way of aﬀordable VR headsets. According to a 2016 report by Juniper Research, VR gambling wagers are expected to increase 800% in the next ﬁve years driven from $58.5 million in 2016 to $520 million in 2021, and that VR gambling deployments will revolve around putting the player in an immersive casino experience (Juniper Research, 2016; Kharpal, 2016). Obviously, these ﬁgures are ‘best guess’ estimates and will depend on the cost of the hardware and the number of early adopters that are enthusiastic about gambling as an enjoyable VR application. However, VR’s potential in mass commercial markets does appear to be ﬁnally taking oﬀ because of mass-produced and seemingly aﬀordable hardware such as Oculus Rift, HTC Vive, PlayStation VR and the (ultra-cheap) Google Cardboard (in which a smartphone can be inserted into cardboard VR headset frame).
:: SOCIAL rESPONSIbILITY
<< Many industry insiders see VR gambling as one of the key areas that gambling operators are investing in to ‘hook’ the Generation Y ‘millennials’ into gambling. >> My own view is that three markets are likely drive sales, and they all happen to be areas that I research into from an addiction perspective – video gaming, gambling, and sex. I’ve noted in many of my academic papers over the years (particularly my early papers on online gambling addiction and online sex addiction) that when new technological advances occur, the sex and gambling industries always appear to be the ﬁrst to invest and produce commercial products and services using such technologies, and VR is no diﬀerent. When it comes to any activity becoming a repetitive long-term behaviour, the activity has to be reinforcing, arousing, and rewarding. Sex and gambling are two activities that have such a potential. In the gambling world, the most obvious application of VR is in the online gambling sector. I can imagine some online gamblers wanting their gambling experiences to be more immersive and for their online gambling sessions to be more akin to gambling oﬄine surrounded by the sights and sounds of an oﬄine gambling venue. There is no technical reason that I know of why people that gamble via their computers, laptops, smartphones or tablets could not wear VR headsets and be playing poker opposite a virtual opponent while still sat on the sofa at home. In a paper that I recently co-authored about online sports betting (i.e., Lopez-Gonzalez & Griﬃths, 2017), we noted that the hyper-technologized sports terrain, particularly when it comes to elite sports, has been predicting the arrival of virtual and immersive technologies for over 10 years (see Katz et al.  for such an example). The vantage position of sportspeople in the game was emulated by utilizing on-board cameras in cycling and motor sports. Multi-camera set-ups promised fans personalized viewing with angle and viewpoint selection in their hands, as well as 3D features created to revolutionize the sports experience. However, the public turned out to be far more conservative than anticipated about the best way to consume sports. Screens became bigger and ultra-deﬁned, but immersive realities like 3D have – to date – appeared to have failed to engage the spectator. The next generation of virtual reality headsets (e.g., Oculus Rift, HTC Vive, PlayStation VR and Google Cardboard), not speciﬁcally designed for media sport consumption, might have in sports betting a way to penetrate the market. Applied to gambling, virtual reality could facilitate the transition from gambling to gaming accentuating the adventure and joy components. For its horse racing market, William Hill has experimented with a merge between GPS data and virtual reality. Bettors can watch an online simulacrum of the actual race, built by real world live data, in a virtual environment where fans can impersonate the jockey (Davies, 2015). Theoretically, strategies such as immersive realities could pose a threat for gamblers. A deeper immersion could augment the illusion of control of bettors as their betting experience switches from a passive to an active
exercise, resulting in a bigger involvement with the events bet upon. This involvement could be interpreted by the bettor as playing a bigger role in the outcome of the race, emphasizing the correlation between skills and outcome (Tobias-Webb et al., 2017). Many industry insiders see VR gambling as one of the key areas that gambling operators are investing in to ‘hook’ the Generation Y ‘millennials’ into gambling. For instance, Paul Swaddle (CEO of Pocket App) noted: “We already know that participation in online gambling is snowballing, so if the entertainment industry can use VR to simulate the experience of being inside a video game, or social media sites can give you the opportunity to not just see your friends’ pictures, but to walk through them, why shouldn’t online casinos be able to do the same? VR may actually be the hook that mobile and online casinos need to draw in more millennials, with the average age of players in mobile casinos currently being 40 [years old], and the average age of mobile gamblers in general being 35 [years old]. Millennials simply aren’t engaging with mobile and online casinos to the same extent as older generations, and I suspect that this is down to younger players being much more used to immersive and sociable gaming, as a result of the cutting-edge developments that are being constantly rolled out in the video gaming industry” (Swaddle, 2016).
I agree with Swaddle’s observations as the gambling industry are constantly thinking about the ways to bring in newer players. Today’s modern screenagers love technology and do not appear to have any hang-ups about using wearable technology including Fitbit and the Apple Watch. As Swaddle goes on to say: “By using VR technology to transport players and their friends to exciting locations for their online gambling experience, such as a famous casino in Las Vegas, or a smoky basement room in 1920s New York, or even to the poker table in the James Bond ﬁlm Casino Royale, mobile and online casinos may stand a better chance of drawing in younger audiences if they use VR to gamify the casino experience” (Swaddle, 2016).
Again, this makes a lot of sense to me and I wouldn’t bet against this happening. Swaddle thinks that such VR gambling experiences will become commonplace in the years to come and that the gambling industry needs to get on the VR bandwagon now. However, Andrew Daniels, the Managing Director of the mobile app company Degree 53 says that although there have been many great gaming innovations in recent years, there are products that don’t meet user expectations and oﬀer “a seamless gambling experience” (Daniels, 2017). He noted that at ICE 2017: “We saw a few companies oﬀering a VR casino experience for playing games, from VR roulette to simulating an entire casino lobby.
SOCIAL rESPONSIbILITY ::
It’s a great marketing tool to attract people to the booth and introduce products via the latest tech, and it adds some fun to the business, but it may be trickier to sustain this in a conventional customer journey. VR is at too early a stage to really be available everywhere, as not everybody has a headset due to their high price and hefty hardware requirements. Gambling is something many would also prefer to do in private without any hassle – registering and starting a game as quickly as possible is key. Unfortunately, having to wear a VR headset adds extra eﬀort and time. VR needs more development and it may take a while for it to become a household item to be used on a daily basis, and making it part of a gaming service may not be for everyone at this point” (Daniels, 2017).
Microgaming is one of the gaming companies that have been developing prototypes such as VR roulette. Neil Whyte, their Head of Product Channels has said they are investing in such technology because “the opportunities are boundless” and that segmentation will occur based on the wants and needs of various consumers (Whyte, 2016). More speciﬁcally he asserted that: “Die-hard gamers will most likely embrace the Oculus Rift, which can provide the most stunning and powerful 3D experience. On the downside, the headset requires powerful hardware to run and has to be tethered to a PC. The signiﬁcant investment required will not appeal to all. For the more casual player, there’s the Samsung Gear, which is cable free but is only compatible with the Samsung phone, therefore limiting its reach. No doubt that’s a smart ploy by the company to get people to upgrade their phones. And the most costeﬀective VR device is Google Cardboard, which can be purchased online for just a few pounds…From a development and content perspective, it’s important to understand what devices will appeal to which gamers. Then it is essential to develop content that is relevant and applicable, harnessing the power of the device. Content is king” (Whyte, 2017).
Nick Jakubowski of BingoMania recently wrote an article about VR for gambling and bingo. He believes that VR oﬀers “an unparalleled opportunity to bring gaming experiences to people in the home” (Jakubowski, 2016). He also believes that VR can overcome some of the limitations of current online gaming apps. More speciﬁcally he claimed that with gaming apps there is no sense of reality or connection with the other individuals that the gambler is playing with and that the interface is limited. He believes that virtual bingo halls could open up the VR gambling market. His reasoning is that: “Many states that have restrictions on gaming have lower restrictions on bingo due to its history as a fundraising game. But beyond that, bingo is a social game that’s ripe for someone to come in and create a killer VR app. Online bingo halls like BingoMania push the social aspect of their gaming rooms. Players are able to chat with each other all over the world while the game is in progress. In fact, many players just let the bingo software play the game in the background while they converse. There are also social proof markers such as point systems and rankings to show which players are dedicated and which are dilettantes. You can see these same sorts of systems in popular non-monetary social games. But there are several elements that prevent online gaming from becoming as real as walking into your local bingo hall. First, you can’t see or talk with the other players like you would with a real person. Second, there’s no interaction with a caller. The caller is not just responsible for pulling numbers out and running the game. They are also an entertainer. Bingo slang and audience banter keep players playing. There’s no sense of gaming space either. No lucky seats. No watching others perform lucky rituals. No audience noise from players dabbing with paint pens
across their cards. VR bingo could do more than just replicate the traditional bingo hall” (Jakubowski, 2016).
Alexandre Tomic, the co-founder of ALEA.com, recently launched a multiplayer VR casino (SlotsMillion) that allows gamblers to select their own avatar to walk around a futuristic virtual casino and play up to 40 diﬀerent slot games. He admits that the ﬁnancial entry point for current punters is high but that it won’t be long before VR headsets reach a critical mass in terms of aﬀordability. He believes (like Paul Swaddle above) that millennials will be the key to the uptake of VR gambling in the near future: “Beyond the obvious novelty of VR and its potential to increase player engagement, it can also change the way operators interact with players…This level of personalised experience has become the basic expectation for the all-important Millennial segment that will drive the adoption of VR. Recent ﬁgures from the UK Gambling Commission have shown that 18-24-year-olds are actually gambling less than they were two years ago, so engaging with them through new technology is one way to turn the tide…For example, while SlotsMillion serves as the world’s ﬁrst VR casino, the next challenge is to create VR slots themselves. Imagine a slot that allows a player to walk around inside, with the reels ﬂoating in front of them and diﬀerent features activated depending on the player’s actions and movements. This will be an entirely new proposition in terms of immersion and engagement” (Tomic, 2016).
As far as I am aware, there has been no empirical research carried into the psychosocial impact of VR gambling. However, there have been a number of studies that have developed VR gambling environments as a way of possibly treating problem gamblers in the future (e.g., Giroux et al., 2013; Loranger et al., 2011; Park et al. 2015). Given that problem gamblers often get cravings and urges to gamble when they see gambling-related stimuli, some treatment techniques try to desensitize problem gamblers by repeatedly exposing them to gambling situations and not letting the problem gamblers spend money. However, this can be very time intensive and not always cost-eﬀective if therapists and their clients have to actually travel to a gambling venue. By developing VR gambling venues, such therapy sessions could take place without the need to actually go to a gambling venue. In all of the published studies to date, the researchers have designed VR gambling environments – typically VR casinos – and have used non-problem gamblers to see if their cravings to gamble are similar to real gambling venues. Results to date have indicated that VR gambling venues have a lot of ecological validity and that the physiological and psychological feelings experienced in VR gambling environments (e.g., cravings) can be induced just as easily in VR gambling environments as real ones. However, what these studies also show is that potential problem gamblers might be just as susceptible to developing a problem in VR gambling environments as in real environments – although this shouldn’t come as any surprise given the small minority of individuals who have online gambling problems (Griﬃths, 2003; Canale et al., 2016). The whole VR entertainment area is clearly still in its infancy but many stakeholders including academic researchers, treatment providers, policymakers, regulators, and the gambling industry itself are all waiting to see whether VR gambling will take oﬀ. If it does, there will always be a small minority that will develop problematic behaviour, but at least we can start to think about embedding social responsibility infrastructures from the outset. :: CGi
:: SOCIAL rESPONSIbILITY
References Canale, N., Griﬃths, M.D., Vieno, A., Siciliano, V. & Molinaro, S. (2016). Impact of internet gambling on problem gambling among adolescents in Italy: Findings from a large-scale nationally representative survey. Computers in Human Behaviour, 57, 99-106. Daniels, A. (2017). Understand your customer. Gambling Insider, 12, p.5. Davies, J. (2015). William Hill opts for Google Cardboard in VR experience aimed at reinvigorating sports betting. The Drum. Available at: http://www.thedrum.com/news/2015/05/10/william-hill-opts-google-cardboardvr-experience-aimed-reinvigorating-sports-betting Giroux, I., Faucher-Gravel, A., St-Hilaire, A., Boudreault, C., Jacques, C., & Bouchard, S. (2013). Gambling exposure in virtual reality and modiﬁcation of urge to gamble. Cyberpsychology, Behaviour, and Social Networking, 16(3), 224-231 Griﬃths, M.D. (1995). Technological addictions. Clinical Psychology Forum, 76, 14-19. Griﬃths, M.D. (2003). Internet gambling: Issues, concerns and recommendations. CyberPsychology and Behaviour, 6, 557-568. Jakubowski, N. (2016). VR for gambling and bingo. Gambling Insider, 50, 4. Juniper Research (2016). White paper: The rise of virtual reality. Available from: http://www.juniperresearch.com/document-library/white-papers/the-rise-ofvirtual-reality Katz, L., Parker, J., Tyreman, H., Kopp, G., Levy, R., & Chang, E. (2006). Virtual reality in sport and wellness: Promise and reality. International Journal of Computer Science in Sport, 4(1), 4-16. Kharpal, A. (2016). Virtual reality gambling expected to grow 800 percent by 2021 driven by ‘high rollers’. CNBC News, October 16. http://www.cnbc.com/2016/10/10/virtual-reality-gambling-expected-to-grow800-percent-by-2021-driven-by-high-rollers.html
Lopez-Gonzalez, H. & Griﬃths, M.D. (2017). Understanding the convergence of online sports betting markets. International Review for the Sociology of Sport, Epub ahead of print. doi: 10.1177/1012690216680602 Loranger, C., Bouchard, S., Boulanger, J., & Robillard, G. (2011). Validation of two virtual environments for the prevention and treatment of pathological gambling. Journal of CyberTherapy and Rehabilitation, 4(2), 233-236. Park, C. B., Park, S. M., Gwak, A. R., Sohn, B. K., Lee, J. Y., Jung, H. Y., ... & Choi, J. S. (2015). The eﬀect of repeated exposure to virtual gambling cues on the urge to gamble. Addictive Behaviours, 41, 61-64 Swaddle, P. (2016). Is virtual reality the future of mobile and online gambling? Gambling Insider, 23, p.9 Tobias-Webb, J., Limbrick-Oldﬁeld, E.H., Gillan, C.M., Moore, J.W., Aitken, M.R. & Clark, L. (2017) Let me take the wheel: Illusory control and sense of agency. Quarterly Journal of Experimental Psychology, 70, 1732-1746. Tomic, A. (2016). It’s time to enter a new reality. Gambling Insider, 38, 18-19. Whyte, N (2017). New technologies shaping the future. Gambling Insider, 5, 1819.
dr. MArK GrIffITHS
Dr. Mark Griﬃths is Professor of Behavioural Addiction at Nottingham Trent University, and Director of the International Gaming Research Unit. He is internationally known for his work into gambling and gaming addictions. He has published over 550 refereed research papers, ﬁve books, 130+ book chapters and over 1000 other articles. He has won 15 national/international awards for his work including the US National Council on Problem Gambling Lifetime Research Award (2013).
:: AdvErTISErS’ INdEX // fOrTHCOMING EvENTS
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