Operator and player responsibility

Perrin Carey, independent analyst and former chief risk and compliance officer at Stride Gaming, speaks to Tim Poole about how the gambling industry can truly change its culture

Following a recent ruling from the Gambling Commission, supplier Playtech paid a £3.5m ($4.4m) fine to charity for social responsibility failings. Its subsidiary, operator PT Entertainment Services, originally escaped the fine having been closed since the original offence. The case in question saw customer Chris Bruney take his own life and leave a suicide note attributing his decision to problem gambling. Instead of intervening at any point, however, PT Entertainment Services allowed Bruney to deposit vast sums, encouraging him with further bonuses as he lost £119,000 in the five days leading up to his death.

The example showed that, despite much technological advancement within the field of responsible gambling, the industry can never truly progress in this area without a genuine change in mentality. For Perrin Carey, a compliance professional with over 15 years’ experience in the field, this means a shift in focus towards risk management. Gambling Insider caught up with Carey to discuss one of the most important issues facing the gambling industry.

The tragic case of Chris Bruney prompted you to comment on our LinkedIn post sharing the story. Can you tell us more about how you view this side of the gambling industry? With this very sad and sensitive case that has come to light, the reality is it won’t be unique. That’s the tragedy of all of this. There are and will be many cases which are unreported, unidentified, undisclosed. There are many reasons for that. I worked in the industry, not for a huge amount of time – 16-17 months – having been drafted in to support Stride and their operating company Daub Alderney. But I brought with me experience within other industries – not just financial services but international education and immigration. We talk in this industry about social responsibility, and I’ve thought long and hard about what that actually means, and whether or not it actually drives change.

My personal opinion is that it probably doesn’t; it doesn’t come at this issue from the right angle. My view is the angle this should be coming from is absolutely from a risk management perspective. This isn’t about carrying out social responsibilities; this is fundamentally an ethical, moral and risk management-orientated issue. Organisations across different industries have to consider not only the risks their customers pose to them – AML (anti money laundering) and CFT (combating the financing of terrorism) – but the stack of risks that go back in the other direction. This is why I don’t like, and I don’t mean to discredit it, the aspect of ‘we’re acting socially responsibly’. The real question is are you mitigating the risk you pose to your customers? Drill into that question and then come up with some clear, evidence-based data, decision-making and actions that demonstrate that mitigation.

The other side of the social responsibility concept I struggle with – and all industries do this – is how it’s used from a perspective of ‘look aren’t we good because we’re socially responsible?’ It’s your absolute moral and ethical obligation. This isn’t about being good because you are socially responsible. You, as a business, have to manage and mitigate these risks. You have to do that in an absolutely clear,

transparent and robust framework. If you’re not doing that, you’re not performing your fundamental and core obligations. You’re accountable, not just responsible, for what you do as a business.

How is the gambling industry faring with risk management at present? My experience is that – and this is a personal view – because we’re living in the gambling space under this concept of social responsibility, it isn’t emphasising the need for risk management. We haven’t really addressed the fundamental questions and therefore the fundamental outcomes we expect. Until that happens, I don’t think you’re going to see any real change in the outcomes. Let’s learn from the tragedy. Because, if we don’t learn, there will be others. It’s got to be about absolutely drilling into the risks, understanding how we’re monitoring those risks. Looking at the data our operators have on their customers, we should be investing millions into this as an industry. It needs to be more substantial, though I know there are efforts ongoing within the UK, some of them being led by non-profit contributory organisations, others by the regulator and others by the industry itself.

This brings me onto what I see as the centric change that needs to occur, which centres around culture. If you can’t change culture, you won’t get a shift towards true risk management. If you don’t change culture, you won’t move

away from a shareholder-centric model of approach. So long as your business operation is shareholder-centric – and many organisations are learning this the hard way – you'll ultimately collapse, because it’s a short-term method of business operation. It’s not about sustainability, long-term growth, contribution or collaboration. If there’s one aspect of corporate governance where gambling operators are decades behind financial services businesses, it’s in this multi-stakeholder model. This, very simply, means all stakeholders have equal opportunities within your business model. Your customers, therefore, should have equal opportunities to your employees, shareholders and third parties.

These are the reflective practices already occurring within financial service businesses and other corporations around the world. The UK is actually, in terms of financial services, leading the charge across Europe. The FCA (Financial Conduct Authority) started this journey in 2018 by launching cultural assessments. These assessments are already occurring and I don’t think it’s going to be long before the Gambling Commission does this; I know from the work I did with the GC they look to the FCA as a regulator to follow.

What conclusions have you drawn from your own research into governance, compliance and culture? My research isn’t specifically in the gambling space; my research lies in “WITH THIS VERY SAD AND SENSITIVE CASE THAT HAS COME TO LIGHT, THE REALITY IS IT WON’T BE UNIQUE. THAT’S THE TRAGEDY OF ALL OF THIS. THERE ARE AND WILL BE MANY CASES WHICH ARE UNREPORTED, UNIDENTIFIED, UNDISCLOSED” - Perrin Carey

governance and whether or not we can influence organisational culture through different methodologies. The methodology I’m looking at currently is whether we can influence organisational culture by introducing narratives. As human beings, we live our lives through story. It’s how we make meaning within everything we do. It’s what supports our decision making and everything we do on a day-to-day basis. We make stories for the world to make sense.

An extension of that within the gambling space would be can we change the narrative of our risk management frameworks and the stakeholder models by injecting different narratives into those organisations? The evidence that’s coming out so far would be yes. Those stories have to have a framework and operate in certain ways. It can’t just be any old story; the story needs to do certain things and follow a pattern. But it’s actually one of the most powerful ways of changing organisations. It may be a strategy operators can use as evidence, for example, when the Gambling Commission asks how companies are instigating cultural change.

This recent case is an exact example of this kind of story. Every single employee within an operator’s organisation needs to read this. Human beings are influenced not by what we understand but what we feel. I’ve seen this in boardrooms, it doesn’t matter what industry you’re in; it isn’t the data that influences our decision making as much as how we feel about something. Therefore, stories like this are tremendously powerful when it comes to changing patterns of human behaviour. Every employee of every operator in the UK should read that story. Will they? No. But should they? Yes.

With scrutiny only increasing as a result of these kind of examples, a short-term ‘cash-grab’ mentality is clearly not sustainable – and ultimately self-defeating – for the industry. How can change be achieved in this area? Organisations make a choice. They choose to be an evolutionary organisation, meaning they sit in their space and respond to how the environment is around them. They follow Charles Darwin’s theory of evolution and survive as a consequence. There's another type of organisation, which I call a behavioural organisation. They’ve actually set themselves up to be deliberate in the decisions they make. They influence their environment, not vice versa. They influence their stakeholders, customers and the journey those customers are taking. In other words, they’re market disruptors. My view of the gambling sector is that it’s really enjoyed itself for the last 30 to 40 years. It’s been in this fantasy situation where it’s lived in an unregulated, fairly evolutionary space.

But now the world is definitely changing. It’s been changing in the UK since much tougher regulation and a proper regulator coming into the space in 2014. Ever since then, they haven’t really known what to do, because they don’t have the systems and culture in place to be behavioural. I have come across a couple of operators in the space that appear to be getting this picture and appear to understand that they can be deliberate and intentional, shaping the market around them. But at the moment, they are few and far between; there are still organisations asking the question ‘are we compliant?’

You can never answer the question ‘are we compliant?’ because the answer’s always no. In a world of regulation, compliance doesn’t exist but non-compliance does. So you will always be non-compliant. The issue is by how much? The way you measure that is by looking at your risks and doing what you can to mitigate those risks. I’ll be honest with you – the operators I’ve seen are a million miles away from this. That’s not to be critical, because it’s hard work. But if you’re making the money you’re making, yes, it’s hard work, but get on with it. That’s my view.

But what about player responsibility. Players who are not problem gamblers can blame a bookmaker for a lost bet out of pure frustration, and for what is ultimately their choice. How much responsibility lies with the player here and can that be incorporated within this kind of framework? Absolutely and I think it needs to be incorporated. This is why the partnership between an operator and its customers needs to be as wide open as possible. It’s that channel that enables the operator to understand the risks the customer poses and to express clearly the risks posed to the customer. Within that comes what you’re calling player responsibility. I understand the concept of players taking responsibility, for the fact they understand that by playing, they undertake certain risks. Just like there are risks in me choosing to buy a packet of cigarettes from my local Morrisons. I’m undertaking the risk that there are health consequences should I smoke those cigarettes. The same if I buy a bottle of wine and drink that every evening.

This is the open channel of communication and transparency that needs to exist between an organisation and its stakeholders. Within this, you’ve got your customer. But I think the reason it hasn’t got the traction is because we’re not looking at this from the point of view of this exchange of risk. I think this really needs to be an educational journey, and operators may have to lead it so players can understand more clearly the risks being undertaken. I don’t think there is enough clarity. Often the trouble is the language used by the operator isn’t transferrable.

During my time in the industry, we thought we were making ourselves clear but actually, we could only have said this if we had done proper consumer research. We could canvas 1,000 customers and ask whether they understood key terms, conducting focus groups, etc. If you did that every six months and could say 98% of people understand these terms, we could then be confident of our marketing messaging. There’s an illustration of how I think the relationship between operator and customer can be enhanced a hundred-fold by simply engaging and saying ‘we really want to make this clear to you, because you’re gambling, that there’s a risk you might lose your money. You need to understand this.’ This is absolutely where it has go.

Ultimately, what would be your advice to an industry with this juxtaposition – the drive to maximise profits and the essential need to protect vulnerable customers? My advice would be to ask four questions. Who do you serve? What do they need? What do you have? What do you know? They’re very simple questions. Players need to be protected. They’re a customer of yours. Why would you not want to protect them? They need to be valued, understood and to have fun. They need to know they can trust you.

These are the things your customers need; are you providing those things? I don’t think operators have asked ‘What do you know?’ enough. The reality is if they were to begin to really look at the data they have, the amounts of information they can take from that would make them know a lot more. But it takes effort, graft, grit and determination. The industry genuinely has something to offer. It just needs to really look hard at itself and say ‘How are we doing this?’

Iqbal Johal reviews Af liateCon Virtually Live and looks at how the industry has dealt with the coronavirus outbreak, with the esports vs virtual sports debate one of the main topics

Being adaptable during the coronavirus pandemic has been one of the key themes and takeaways for the majority of businesses across many industries. With face-to-face communication on hold during the current crisis, being able to quickly move to online has helped companies all over the world survive.  e gambling industry is no di erent. Nor are we here at Gambling Insider. So when it was deemed the third AffilateCon scheduled for 12 and

13 May in So a, Bulgaria, would be postponed, the decision was quickly made to make it a Virtually Live conference, crammed into one day on the 12th.

It was a glimpse into the future of communication, with panelists and speakers interacting directly from their homes. There was a range of stellar speakers from all sides of the industry, be it operators, affiliates and up-and-coming markets such as virtual sports and esports. Viewers were given a  rst-hand view of how the industry has dealt with the COVID-19 pandemic, and what lessons can be learned to come back stronger.

In keeping with the online theme, Netpeak Bulgaria CEO, Gennadiy Vorobyov, kicked the day off with an insight to SEO techniques and trends in the current period. Unsurprisingly the digital marketing agency CEO admitted betting search terms had decreased significantly during the pandemic, with all major sport being suspended in mid-March, before slowly returning in June.

Vorobyov said: “My research into betting projects showed for the last two months the trend has gone down.

Searches have decreased but impressions and clicks have increased.

“It is normal and our expectation is it should get back to normal, not to the same volumes but it should be back, maybe at 50% for the next three months.

“Right now the searches depend on what the big players in betting are offering. For example, looking at what’s active for matches and betting at Bet365, the keywords didn’t change. The volume has decreased but the exact search terms are the same.”

The suspension of live sport meant affiliates and operators had to offer something different, whether it’s niche

markets or di erent verticals.  e general consensus of the panel looking at how sports betting operators and a liates are recovering was cautious optimism, despite the initial interest of niche offerings such as stay at home darts or the  ash-in-the-pan Belarusian Premier League.

“One of the misconceptions is gamblers have switched uniformly from betting on the Premier League to obscure offerings,” Pressbox PR Director Alex Donohue explained.

“To me, it seems like that hasn’t really happened and we’re not really going to be able to judge the recovery until we have proper recognisable live sport and live horseracing under our belts.

“One of the problems you have is overkill of these niche o erings and an opportunity for fatigue to set in with the customer base.”

While the panel was quick to praise the adaptability of affiliates, from pivoting to promoting the niche o erings, the outbreak has had an impact. On March 26, the Racing Post temporarily ceased publication of its newspaper a er 34 years of daily UK circulation before reopening to coincide with the return of British horseracing on 1 June. As CMO of parent company Spotlight Sports Group Louise Agran explained, “No sport means no betting and very little content”.

In terms of the move from retail to offline, while Agran admitted the pandemic will accelerate some of the online trends, she still sees a future for betting shops.

She said: “We see firsthand what a vital part betting shops and managers play for customers and within communities, and I think there’s still a lot of people who enjoy the whole experience of going to betting shops.

“I would still be relatively optimistic about the future of retail bookmaking. I don’t think it’s something that is going to fade away quickly now. I think there’s a lot of life in it yet.”

It’s not all been bad news, as the success of the virtual Grand National suggests. It raised £2.6m ($3.2m) for NHS Charities Together, with a peak

audience of 4.8 million viewers, shown live on ITV in early April. “As a massive racing fan and someone who has been in the gambling industry all my working life, the virtual Grand National for me was probably the proudest I’d ever felt about our industry,” admitted Donohue.

He also praised the industry when it comes to responsible gambling during this period.

He added: “What I’ve been impressed by in the regulated industry, is that operators and a liates have been incredibly responsible in the way they’ve marketed themselves, obviously learning lessons from past mistakes. I think the industry has stepped up and been incredibly responsible.”  ose views were echoed by ActiveWin managing director Warren Jacobs, in the affiliate and operator panel. Jacobs explained why he believes those within the industry have excelled in addressing customer protection concerns.

He said: “ e industry has made massive strides when it comes to the understanding of responsible gambling.

“In any meeting of any value for a reputable gambling company, there will be a compliance person present, contributing to the strategy and making sure it’s front of mind.

“I genuinely believe the majority of gaming companies are far more responsible for their actions. I’d assess that the industry’s responsible gambling efforts are player-focused and with a long-term vision.”

Back to the theme of adaptability, Assaf Stieglitz, Odds1x2 and PlayWiseCasino co-founder, agreed this was vital across the industry to survive.

Speaking in the Tal Ron All Stars Panel, he said: “The main thing is to diversify. Nobody could have anticipated how this pandemic would halt sport totally.

“We started an operation in the casino space not so long ago called PlayWise and we pushed it a bit, but then came back to our comfort zone and focused on sports.

“If I could, I would do this differently by enhancing this casino o ering and also focusing on esports – the things that are ongoing right now.”

And he would have good reason to target esports, with the vertical one of the strong performers as operators look to fill the void of live sports betting. Quoting statistics, SickOdds co-founder Tom Wade suggested there’s been a 40-times growth in esports betting during the pandemic, and is hopeful a signi cant percentage of new players remain.

“I see it as ‘why wouldn’t people stay and watch esports?’ because of my background, but people will probably transcend back to live sports,” Wade said.

“My hopeful estimate is we will see 30 or 40% of the new audience stay with esports in some capacity; a pessimistic view would be 10 to 20%, which would still be a massive rise.”

The big debate currently is which vertical is more sustainable; virtual sports or esports? There was no guessing where Wade’s loyalties lie.

“With virtuals, you’ve got a whole host of sports, which are determined by RNG before the match even starts,” he explains. “That’s interesting but I see it as you’re betting on something that already has an outcome.

“With esports you’ve got real players who are playing with real skills such as hand-eye coordination, reaction speed and teamwork.

“Also things can happen that could change the entire game. There’s also a lot of strategy behind it so it’s the fact people are actually playing it, as opposed to virtual sports.”

Backing virtual sports’ corner, Golden Race CEO, Martin Wachter, mentioned an increase in virtual sports activity, saying statistics he found show “virtual sports has increased by 206% as a result of the impact of COVID-19, in terms of average players.”

So considering the virtual sports vs esports debate, Wachter vehemently defended his own vertical, unconvinced that esports will sustain its current growth.

“Operators have said they have seen some growth in esports as it’s acted as a cover for real sports but they think it’ll go down when real sports are back. Virtuals, though, were strong before and will be strong in the future,” he said.

“I don’t see esports continuing its growth after the pandemic. I wish them the best but I don’t see them as competition as it’s a di erent audience of players. But I don’t want to hear they’re ahead without  gures, I’m sure virtuals sports are far ahead and will be in the future.”

Let the esports vs virtual sports debate rumble on, long into the coming years.

It’s been 18 months since the re-regulation of the Swedish gambling market, but Iqbal Johal explores whether the introduction of temporary measures is a backwards step for the Nordic nation

Nothing is ever straightforward when it comes to Sweden and the gambling industry. Following its re-regulation on 1 January 2019, there has been more than the odd teething problem. First, the market was re-regulated under strict measures, such as the restriction of bonuses to just one welcome bonus. That means operators are unable to provide monthly bonuses or promotional offers, like they can in the UK, for example.

Then there has been endless talk about channelisation rates since January 2019. The market was regulated to meet channelisation targets, among other reasons. Swedish Gaming Authority (SGA) coordinator Marcus Arronsson announced the country had achieved the 90% target, reaching 91% in H1 2019, but these figures were quickly lowered down to 87%. However, an independent estimation made by Copenhagen Economics puts that figure at 80 to 85%, but other estimations have it even lower.

So when the Government’s social security minister Ardalan Shekarabi announced in April that measures will be implemented from July until the end of the year to curb against problem gambling in response to the COVID-19 pandemic, you can imagine they weren’t greeted with a lot of enthusiasm.

Restrictions included a weekly gambling deposit limit of SEK 5,000 ($545), set time limits to players’ casino activities and a SEK limits to players’ casino activities and a SEK 100 cap on bonus offers. Although in May, 100 cap on bonus offers. Although in May, sports betting and horseracing were made sports betting and horseracing were made exempt from the measures.

In an already restricted market, these In an already restricted market, these measures will do nothing to help falling measures will do nothing to help falling channelisation rates, and in fact, could have channelisation rates, and in fact, could have the complete opposite desired effect. the complete opposite desired effect.

That’s the view of the secretary general for That’s the view of the secretary general for the Swedish online gambling trade association the Swedish online gambling trade association Branschföreningen för Onlinespel (BOS), Gustaf Hoffstedt. The secretary general has been vocal about potential government interference when it comes to Swedish regulation, a point supported by the measures coming directly from the social security minister. But more importantly, Hoffstedt is now worried the Swedish market might take a step back, with channelisation rates potentially dropping to before January 2019 levels.

“I believe the market in Sweden is too restricted currently but what is more important is the regulation we see right now

is so different to the regulation that was is so different to the regulation that was presented to the operators from 1 January presented to the operators from 1 January 2019,” Hoffstedt explains to Gambling Insider.

“The biggest fear with these new restrictions is it will drive players to the black market.”

“What was more troublesome from the Copenhagen Economics statistics was the estimation online casino has channelisation of 75% and is still dropping. This was prior to the new measures.

“We expect channelisation to drop even further, maybe as low as the figure before re-regulation. Sweden re-regulated for the very reason that channelisation was very low and now the Government is taking measures that it seems will push punters outside of the licensing system and we will be back to the very situation we faced two years ago.”

On the face of it, the reasons for the temporary measures seem clear. The Government was concerned a rise in online gambling activity would arise from people spending more time at home, and were hopeful these measures would limit that. However, Hoffstedt was critical of that train of thought without any evidence. By May, the SGA stated that no such increase in online casino activity had taken place. However, figures from the Swedish Tax Authority show a dramatic increase in horseracing betting, one of the verticals exempt from the measures.

“Considering horseracing betting has increased by 30 or 40% in Sweden, the COVID-19 measures are full of contributions,” Hoffstedt says adamantly.

“The Government believes consumers shifted to online casino and the Government

believes online casino is more hazardous than just about every other gambling vertical. than just about every other gambling vertical. The problem is the Government hasn’t been The problem is the Government hasn’t been able to prove this is the case. able to prove this is the case.

“Therefore, it’s obvious that the revised “Therefore, it’s obvious that the revised restrictions are not connected to any kind restrictions are not connected to any kind of customer protection measure.”

Instead, the BOS secretary general points to government self-interest. With government representation on the board of horseracing betting company ATG, and its majority hold in state-operator Svenska Spel, Hoffstedt isn’t surprised that horseracing and sports betting are exempt.

He added: “I think we are getting closer to a situation when we have to face the real reason of government interference when it comes to fair competition regarding gambling in Sweden.”

Hoffstedt also said that while it’s a difficult task for the Government and regulator to make the licensing measures attractive to punters, both parties could do more.

He concluded: “We certainly hope the SGA and Government will shift sides and safeguard the system. At the moment, they are both the greatest threat to the licensing system but we hope that they can come over to our side and protect it.”

Operator Kindred Group is also concerned about the market, and indeed the new measures. CEO Henrik Tjärnström said in May the operator is “concerned the Swedish gambling market continues to shrink” while the new Government measures will lead to a continued decline.

The SEK 100m fine by the SGA in March to subsidiary Spooniker Ltd for offering incentives in a non-compliant way, which Kindred argues is based on “unnecessary ambiguity” in regulation, certainly won’t help the operator’s opinion about the market.

Speaking to Speaking to Gambling Insider, group head Gambling Insider, group head of communications, Alexander Westrell, of communications, Alexander Westrell, reiterated Kindred’s concerns, also citing reiterated Kindred’s concerns, also citing government interference. government interference.

He said: “From the beginning, we’ve He said: “From the beginning, we’ve expressed that we believe the new expressed that we believe the new proposals from Minister Shekarabi are proposals from Minister Shekarabi are a step in the wrong direction. a step in the wrong direction.

“We wish for the Swedish Gambling “We wish for the Swedish Gambling Authority to be allowed to carry out its Authority to be allowed to carry out its regulatory duties without government regulatory duties without government interference. This is absolutely the time for interference. This is absolutely the time for the minister to trust his own agency and give them more space. SGA should focus on channelling, as that is a basic prerequisite for a well-functioning licensing process.”

“The new proposals will only direct Swedish customers to the black market where there is zero customer protection.”

“If the regulated companies were to be seen as a part of the solution instead of the problem, we can fight the black market together and provide the customers a sustainable and responsible gambling market.”

“The way chosen by the Government will result in worsened consumer protection for which the Government now must take full accountability.”

While we’ve heard an array of criticism of the new temporary measures from the Government, the state of the Swedish market and the SGA, it would only be fair to hear from the other side, so to speak.

When reaching out to the SGA, the gaming authority directed Gambling Insider to their own reports in May, both responding to the measures and providing a mandatory update of the impact the pandemic has had on the Swedish industry.

The monthly report showed that online and betting turnover decreased by 6% year-on-year in March, and 5% in April. With January turnover up 21%, it suggests the impact of COVID-19 had actually reduced online activity, rather than increase it like the Government feared.

Even the SGA was sceptical of the measures, saying it is all “for a temporary strengthening of player protection, but questions some of the expected consequences of the proposals”. They believe the proposals will only have a marginal effect on player protection.

While the SGA doesn’t have any objection to measures taken in the “emergency situation”, it said the changes ahead of July could be time consuming, and there was a risk many licensees won’t be able to meet the requirements on time.

The authority did mention that the SEK 5,000 weekly limit doesn’t go far enough, stating it’s a “relatively high amount in itself”, with figures in 2019 suggesting “when referring only to those who play for money”, those over 18 years averaged SEK 5,072 in bets made, or lost, annually in the regulated gaming market.

It pointed to the fact five to 25% of players account for up to 90% of total wagers in the gambling market, suggesting the limit will only affect big-money players who can still switch between other operators and unlicensed markets.

These findings continue to question the measures, although the SGA believes it can cause an “interruption in players’ gambling”, which can be seen as a positive from a responsible gambling point of view, while it also thinks the mandatory casino time limits will have a positive effect.

There are always going to be positives and negatives when further regulations are put in place. In this instance, it’s right that player safety is at the forefront of the industry at this present time, more than ever. However, such measures should look at the wider picture and statistics. It can lead to a dangerous precedent with the Government overriding gaming authorities, and with the bigger picture in mind, the general consensus is the COVID-19 measures will do more harm than good to the Swedish market.

Cast your mind back to July 2019. Macau casinos had just posted a 6% annual growth in June revenue, while Nevada’s casinos generated an 11% rise. Combined, the two gambling hubs took $4bn in revenue for the month alone, while sportsbooks were gearing up for a new football season and major tennis tournaments in Europe, and were fresh off the NBA Playoffs in the US. The phrase ‘how times change’ has never felt more cliché yet, at the same time, never more apt. With the world gripped by the coronavirus pandemic, no one in the gaming industry could have foreseen the downturn in revenue that has befallen numerous areas in the sector.

But there is industry-wide hope following the most unprecedented period in gaming’s history. Online casino, poker, esports and virtuals have capitalised on a growth opportunity, with increased interest from stay-at-home players. With major sports also returning and casinos beginning to reopen around the world, the gaming industry will be hopeful it’s on the road to recovery – without any second waves of COVID-19 cases. Analysts at an ICE Asia panel in June, for instance, discussed the possibility of Macau returning to 2019 revenue levels in H1 2021; New Zealand casinos are also now able to function with no domestic restrictions whatsoever. (The country has declared itself free of COVID-19 but still has travel limitations in place.)

In the US, the road to recovery looks far longer – and far more socially distanced – with bond credit rating agency Moody’s projecting a 70% reduction in EBITDA for Las Vegas firms in 2020 and Fitch Ratings saying pre-COVID levels would only be re-attained by 2023. Moody’s analyst Adam McLaren told Gambling Insider levels could rise in 2021, however, and there will be a genuine buzz pervading the Las Vegas Strip if operators can get the requisite safety measures in place. In other words, things will be very different for gaming in the coming months – but there is reason to be hopeful. Peering over from what is hopefully the summit of what the sector has been presented with, a new landscape is coming into view.

The coronavirus has affected the land-based and online sectors very differently. While sports betting organisations have taken a hit, online casino has taken in the bulk of new players looking to take their business elsewhere. So much so, in fact, jurisdictions such as Sweden and Finland have imposed new player limits during the pandemic. While there have been increases in online volumes (as much as 140% in Australia, according to its regulator), the industry maintains there is little data to suggest overall gambling levels have surged uncontrollably, or that problem gambling has risen to levels higher than pre-pandemic. But the fact remains verticals such as online casino, poker and live casino have coped far better than betting shops, casino hotels and the like.

A prime example is Evolution Gaming. The live casino provider has been “unaffected” by land-based closures, although this is something CEO Martin Carlesund is not particularly pleased to announce, given the circumstances. In April, the supplier reported a 45% year-on-year rise in Q1 revenue to €115.1m ($124.2m), primarily crediting the growth to the absence of sports betting. Even during the pandemic, Evolution has done “very well”, as Carlesund tells Gambling Insider, wary though he is of benefiting from the “horrible situation in the world”.

From a neutral perspective, the executive has inevitably witnessed changes in player behaviour during a period of extended lockdown, describing a “paradigm shift” for the industry. Carlesund explains: “Of course it won’t change as drastically; it will revert a little bit to what it was before, at first. If you take travelling, for example, we had a peak for travel where people were flying everywhere. But, coming out of this pandemic, we’ll be a little more cautious, not travelling as much as before. If it does return to its pre-pandemic rate, it will take a long time.”

Travel is one example of enforced change, while another is inevitably a greater focus on digital gaming. Land-based companies may have always seen online as the enemy, as discussed at an industry conference earlier this year, but the pandemic may have helped persuade both businesses and regulators to see online as less of a threat. Carlesund says: “Of course, I see a growth in the player numbers that I think will be persistent after the pandemic. We will return to some kind of business as usual or as it was, but not really to 100%. It will change the view of online, player behaviour and regulation.”

Regardless of – but at the same time driven by – the pandemic, the Evolution Gaming CEO believes the majority of casino revenue will become digital in the future, warning the “online evolution has just started”. While as much as 90% of pre-pandemic casino revenue remained offline, according to the executive, he projects the landscape will be significantly different in the long run. “The biggest changes will be in markets that are heavily dependent on land-based,” he explains. “Now they’ll see that, if they would have had online, they would actually have some revenue. New Jersey, for example, is doing a lot better than Nevada. In total, 90% of revenue in casino is still land-based, 10% is online and 2 to 3% is live. So really the online evolution has just started. In the future, I think 50 to 70% of casino will be online. Maybe this [pandemic] has increased the speed a bit but the potential has always been there for online casino in general.”

While he reiterates his hesitance to discuss what live casino has gained from the situation, Carlesund feels the industry will have benefited from being forced to think in greater terms about long-term sustainability. He says: “I do like that the world is a bit shook up, and

maybe thinking one step further: What does this mean? How do we address the future? Should we travel as much? This is good for a lot of business, I think. Where are we going with this? How will the world look? Many people are looking at this right now, a bit distressed, but I think those thoughts are good.”

Where online has been fortunate, however, the land-based sector has suffered hugely due to the coronavirus. In the US, 100% of land-casinos were closed, as operators and suppliers began to see revenue, EBITDA and profits plummet. The aforementioned monthly figures in Macau and Nevada sum up a bleak picture, although they were far from the only jurisdictions to be afflicted. Even after reopenings in Macau – casinos resumed operations in February after two weeks of closure – travel restrictions have significantly reduced financial projections. Wynn Macau, for example, expects adjusted EBITDA for April and May to fall somewhere between $118.8m and $126.1m, representing a 157% drop.

Hope is returning, though, with optimism generated by the June reopening of the Las Vegas Strip, the Hard Rock Seminole in Florida and many other iconic properties, not just in the US but globally. Yet the pandemic’s effect has left a large vacuum for the casino sector. Thousands have either lost their jobs or been furloughed. Executives across the board have taken pay cuts, forgone salaries completely or donated them to furloughed workers, and reopened casinos will have a completely different look post-pandemic to anything that had ever gone before.

Offering analysis from a land-based point of view, Lightning Box Games CEO Peter Causley sees long-lasting effects on the make-up of the industry. A slot games studio, Lightning Box works with both online and land-based operators. With clients in UK, Greece, Latin America and the US, Causley admits the least the supplier can expect is the delay of new game launches. The company’s partners have had to furlough a large percentage of staff, with fewer redundancies. Indeed, there’s no denying the “diminished” revenue potential of the casino floor in the coming months, chiefly due to social distancing measures.

Causley tells Gambling Insider: “With social distancing being with us from now and into the next 12 months or more, leading to every second slot machine in a bank disabled, obviously you’d think the purchasing of new games by venues will be diminished. Casino estimates are around a 40% reduction in slot offerings (since not all machines are in a bank), but possibly only a 25% reduction in revenue due to greater utilisation of remaining slots. Pair the above with lost revenue for casinos over the past three months and it becomes an inevitable downturn in sales for suppliers. Only the greatest optimist could see otherwise.”

The executive does see a silver lining in the potential resurgence of leased games, which will not eat into a casino’s diminished capital expenditure budgets. He adds: “If we were initially expecting 10 of our ‘for sale’ games to be launched over the next 12 months, that may change to four ‘for sale’ games and one leased product.” Like Carlesund, the Lightning Box CEO also sees the post-pandemic world acting as a catalyst.

More specifically, he foresees changing attitudes towards revenue-sharing products in light of reduced budgets on American and Australian gaming floors, along with potentially improved sharing rates for suppliers in the ultra-competitive UK retail sector. “This will culminate

in more of a partnership between the manufacturer and venue operator, wherein they both share in the ups and downs of game performance,” he theorises. “So there will be less risk for casinos, shrinking their capital expenditure, while still giving them access to new content and providing incentive for suppliers to keep innovating.”

Perhaps the most pertinent way of assessing gaming’s new landscape is not by viewing online and land-based separately, but rather evaluating acceleration in the convergence of the two. Carlesund’s point, regarding online being perceived as less of a “threat” is poignant here. While the land-based sector was at a standstill, the state of New Jersey best exemplified the divide, with the Garden State’s main headline being a record fall in overall revenue for April, and online revenue more than doubling to a record $80m. The Evolution CEO remarks: “The Las Vegas Strip was dark and shut down – billions of dollars have been invested and there was nothing happening. Each of these casinos could have been operating online. If I were there, I would think about that.”

Faced with a choice between online revenue and none at all, therefore, land-based properties can no longer afford to take a judgemental view. This is especially true of the period ahead where, as Causley has pointed out, casinos can expect reduced handle. In fact, the Lightning Box CEO believes the next 12 months could see staggering levels of progress in this area. “We had already seen great convergence of slot design for land-based and online a few years ago,” he explains. “Now we will definitely see those largely

retail-operating businesses accelerating towards getting into digital or growing their existing digital revenues, even if only to balance up their risk profiles. We could see growth towards this outcome in the next 12 months that we would have previously expected to take 10 years. This of course will just mirror what we see in the general business community.”

While the last issue of Gambling Insiderexamined the immediate impact of a pandemic, the scale of which the industry had simply never seen before, our current issue is filled with optimism. Providing there are no second waves of the virus, gaming has hopefully seen the worst of the crisis and we’re looking at a new horizon. Online companies have been able to adapt, helping weather the storm. But for land-based casinos, this new horizon will inevitably offer a period of downturn – even if it's nowhere near the absolute zero of the pandemic’s peak. Progress will be slow and, initially, results far below pre-pandemic levels.

As we move towards this new landscape, involving an ever-increasing intertwining of the online and retail spheres, it’s important to note we’re not out of the woods just yet. With guests in Las Vegas always seeking the ultimate tourist experience, genuinely maintaining social distancing will be tough. Measures are in place, with properties around the world making a concerted effort to prepare for a safe reopening. And, with the industry pulling together more than ever, there is much to look forward to. But with gaming only just setting off on the long road to recovery, the hard work is just beginning.