• APR-JUN 2017 • ISSUE 29
G A M I N G
I N T E L L I G E N C E
THRE TO HEE LETTER THE I LP TACKLS N E PERCDUSTRY’S E PROBPTION LEM
Q U A R T E R L Y
A GAMING INTELLIGENCE PUBLICATION
Does the prevalence of TV gambling ads spell trouble for the industry?
SPOTLIGHT ON SCANDINAVIA | ASIA | NOVOMATIC LOTTERY SOLUTIONS | OPAP
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LEADER Q1 REVIEW
FEATURES 30 Corporate social responsibility A way to address the industry’s increasingly negative public image 38 Time up for TV advertising Is a crackdown on gambling adverts on TV all but inevitable? 48 Asian games How a new breed of operators are carving out a legal presence in the market
ANALYSIS & OPINION 4 Snapshot Top stories, top quotes, top deals and deal of the quarter 7 Thought leadership Jov Spiero of Aspire Global 10 People Daniel Silvers on Hydra’s expansion ambitions; plus Cherry, William Hill, NYX and more 14 Gaming Intelligence Awards 2017 The industry’s best and brightest recognised 18 Lottery Novomatic Lottery Solutions’ expansion plans 22 Technology & new products Opap’s trio of tech deals; plus new launches 74 And another thing… Steve Donoughue predicts new UK regulatory controls
FINANCE – FY 2016 54 Spotlight on Scandinavia 59 The GIQ 20 71 The GIQ Stock Index FY 2016
E D I TO R
A QUESTION OF PERCEPTION
HE WORLD IS hardly in a happy place at the moment. A reality TV star sits in the White House, farright parties are growing in prominence all over Europe, and the global economic outlook isn’t rosy. In the UK things have got surreal, with the lunatic fringe of the UK’s ruling Conservative Party talking of war with Spain over Gibraltar. The gambling industry has proved reasonably resilient in times of economic turmoil, and for every market closed off, another springs up. But it also provides a convenient scapegoat. When times are tough for a government, legislators are not above looking for an industry to blame. A flashy crackdown against a sector can help politicians seem caring, on-the-pulse and distract their electorate from more pressing issues. It’s in this context that the UK government is likely to crack down on what it will paint as a greedy and overreaching gambling industry. Gambling is an easy target, as many people have contrasting opinions of the sector. As Ian Barber of the Advertising Association says, some people just won’t ever accept the industry (page 38). And advertising that prioritises controversy for controversy’s sake hardly helps. Confusing
terms and conditions for offers and promotions are even more troubling. But that hardly justifies disproportionate action against a sub-sector of the entertainment industry. Perception is indeed a problem for gambling (see page 30) but as we explain in this issue there is already a solution to tackle it. Corporate social responsibility is now being embraced by a number of operators. If more adopt an ethical approach across their business the knock-on effects could help change the sector’s image. CSR boils down to putting ethics at the heart of a company’s business strategy. As Laura Da Silva Gomes of Silverfish CSR tells me: “It’s not what you do with the money you earn, but how you earn that money.” The standard industry adage is that gambling is entertainment. Fair enough. Entertainment can be ethical, and it always looks better when companies voluntarily make it so. CSR can play a significant part boosting the sector’s image. It may even eventually help change the mind of some of its most vocal detractors. The sooner companies take decisive steps to tackle their image, the sooner the sector may not find itself being used yet again as a political punch bag.
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GIQ Q1 2017
Snapshot most popular news stories on GamingIntelligence.com Gaming Intelligence Awards (GIA) and HOT 50 2017 Latest Illinois DFS bill proposes tax of up to 22.5% for operators GI HOT 50 2017 – The Next Generation of CEOs Kindred set to acquire 32Red in £176m deal GIA Marketing Campaign of the Year: 888Sport GI HOT 50 2017 – Backstage Heroes GIA Casino Operator of the Year: Amaya Catena revenue hits €40m as iGaming lead-generation strategy takes off Scientific Games expands Golden Nugget player rewards with Landry’s tie-up Actress Heather Graham becomes new face of Foxy Bingo and Casino
Quote of the Quarter Everyone argues that they can’t watch sport without seeing gambling ads, but they don’t realise that these ads help pay for the content Donal McCabe, communications director, Ladbrokes Coral. See page 38
Brexit begins period of industry uncertainty THE PROCESS THAT will see the UK leave the European Union is underway. We have had a white paper on the subject, the key take-away from which is that there will be another white paper that will set out the repeal of EU laws and their UK replacements. Despite the current lack of detail, Brexit will have an impact on the iGaming industry. From operators based in British jurisdictions such as Gibraltar to those that have taken advantage of the UK’s liberal regulatory framework to air TV commercials on European TV channels, the departure of the leading iGaming jurisdiction from the EU is going to be felt across the sector.
Free movement The status of Gibraltar, and movement to and from the territory, has already become more complicated. This is nothing to do with Brexit, however. Effective from 7 April, people passing in and out of Gibraltar are subject to stricter controls due to Schengen Borders Code amendments. Flashing a passport at a border guard is no longer sufficient when crossing the border. What was once a relatively quick process has suddenly become more complex. A shut-down of the border is unlikely. Spain is a major beneficiary of Gibraltar’s remote gambling industry. The territory provides up to 12,000 jobs. La Linea, just over the border, has one of Spain’s highest employment
rates. Simply put, if the border is restricted, Spain suffers.
Will my licences still be valid? Amid all this uncertainty, the most reassuring point is that licences are safe. The emergence of the dot.country regulatory model means that operators are approved, active and paying taxes in a range of jurisdictions. It is unlikely that a company that has already been confirmed as fit and proper to operate in a market will suddenly be kicked out. Advertising could be more problematic. At present, the UK’s inclusion in the European Audiovisual Media Services Directive means that channels can broadcast from the UK to other European countries. This has allowed Scandinavian operators in particular to circumvent advertising bans in their native markets. Unless the UK can negotiate with the EU on this point, broadcasters serving European markets will likely have to relocate to the mainland, where they would be subject to additional regulations.
What does it mean for UK operators? UK operators can anticipate an impact on their businesses. Experts suggest consumer spending will dip, and this will hurt UK-focused operators. The UK has been one of the most stable gambling markets for years, but now overexposure may severely disadvantage operators.
GIQ Q1 2017
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Kindred unveils £176m 32Red takeover KINDRED GROUP HAS agreed a £175.6m deal to acquire Gibraltar-based 32Red, strengthening its UK presence and expanding its multi-brand strategy. The operator formerly known as Unibet will pay 196 pence for each 32Red share. This represents a 16.3 per cent premium of 32Red’s share price of 172 pence per share as at 22 February. “32Red is a high-quality, customer-focused business with a similar culture to Kindred’s and we are delighted to welcome 32Red and its team into the Kindred Group, and look forward to further developing the brand going forward,” Kindred CEO Henrik Tjärnström said. Tjärnström explained that the acquisition of 32Red was consistent with Kindred’s multi-brand strategy and UK focus, where it already operates under the Unibet and Stan James brands.
“We have consistently and profitably grown 32Red’s market share in the regulated markets of the UK and, more recently, Italy,” 32Red CEO Ed Ware added. “The management team at Kindred have a similar business ph i lo s ophy t o ou r ow n and we look forward to joining forces with Kindred and continuing our successful growth within Kindred Group.” Upon completing the deal Kindred will look to achieve cost and revenue synergies by integrating 32Red into its existing business. For the first time OF THE 32Red will expand its QUARTER casino games offering beyond Microgaming, when it is migrated to the Kindred platform. This is expected to ensure the acquisition is earnings-enhancing in its first full financial year after completion.
THE QUARTER’S DEALS IN 60 SECONDS Betsson and Fortuna Entertainment have both had busy quarters, with each operator completing two deals apiece. Betsson’s biggest deal was its £26.4m purchase of UK-facing NetPlay TV, as it looks to bolster its UK presence. This has been complemented by a €3m deal for Premier Casino, a brand owned by Spanish TV network Mediaset España Comunicación. This marks the operator’s first foray into Spain. Fortuna, meanwhile, has finalised two deals which focus largely on Romania’s newly-regulated iGaming market. An €85m deal for Dublin-based Hattrick Sports Group sees it take charge of the country’s leading betting operator Casa Pariurilor, as well as Croatia’s second-largest operator PSK. It also gains a joint venture with Spanish operator Luckia. Its Romanian business is further strengthened through the acquisition of four local operators from its majority shareholder Fortbet Holdings. It has acquired Bet Active Concept, Bet Zone, Public Slots and Slot Arena for approximately €47m. GIQ Q1 REVIEW
Not to be outdone, Playtech has completed yet another acquisition, purchasing games developer Eyecon in a deal worth up to £50m. Eyecon is a specialist developer of online slot content, founded in 1997. Its games have proved particularly popular as add-ons to online bingo sites, especially the perennially popular Fluffy Favourites. Its games are already available through distributors such as 888’s Dragonfish and Playtech’s Virtue Fusion. Going from an M&A veteran to a novice in the space, we move to LeoVegas, which made its first acquisition during the quarter, buying Italy-facing Winga.it from Paf. The Malta-based operator agreed a €6.1m deal to acquire the business, giving it a foothold in Italy’s regulated iGaming market. The quarter also saw the end of an era with Sportech finally agreeing a deal to sell its Football Pools business. FP Acquisitions, a newly-incorporated company controlled by funds advised by private equity firm OpCapita, will purchase the Pools for a cash consideration of £83m.
The quarter in numbers FINANCE
Amaya’s casino and sportsbook revenue in 2016
Digital revenue growth in 2016 for Ladbrokes Coral
Paddy Power Betfair’s revenue in 2016 LEGAL
Lottery betting licences issued in Malta (2 for operators and 1 B2B)
Likely rate of Australia’s Point of Consumption tax
iGaming sites blocked by Colombia regulator Coljuegos M&A
Kindred group deal to buy 32Red
FP Acquisition’s deal to buy the Football Pools
Total paid by Fortuna for Hattrick Sports and Fortbet’s Romanian operations LICENSING
Upper limit of proposed Swedish licence fee 5
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Strong first quarter sets up Aspire for successful 2017 Aspire Global has made a storming start to 2017, with multiple partnerships signed in Q1 alone. Vice president of sales Jov Spiero shares his insights into the latest market trends and how these will influence the company’s growth this year and beyond
GIQ Q1 REVIEW
Can you summarise Aspire Global’s (ASG) first quarter performance?
associated with operating a successful online casino. ASG’s industry-leading solution, built around our extensive experience and wideI’m delighted to say that we broke all records ranging expertise, covers all aspect of CRM, for signing up new partners in Q1. Customer Support and VIP Management, along with vast acquisition was even stronger than anticiregulatory knowledge. pated, surpassing the goals In Q1 we continued to we had laid out in an ambiinvest heavily in our solutious business plan. We have tion, in order to consolidate worked exceptionally hard We broke all our industry standing and to spread the word, and it’s records for signing provide the very best platgratifying to see our efforts up new partners form in the market to both our paying off. in Q1. Customer existing clients and our new More and more comacquisition was partner operators. panies are now looking to This technological stratexpand their existing busieven stronger egy is built around undernesses through closer coopthan anticipated standing and fulfilling the eration with specialist platneeds of our partners, enaform providers. In essence, bling them to achieve their full potential, they want a solution that will provide them with all the services they require in one comthanks in part to our advanced tools for player plete and comprehensive package. Upgrading analytics and proactive reporting. their operations in this fashion enables them We’ve also expanded our casino portfolio to keep on doing what they know best – acquirwith leading games developers Play’n GO, ing quality new players – enjoying all the benBlueprint, Realistic, ELK and Thunderkick, efits of being brand owners, while eliminating as we advance towards our goal of offering an industry-leading selection of slots. virtually all the operational challenges 7
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Can you explain why increasing numbers of operators are opting for a complete iGaming solution? There are a number of benefits associated with a complete turnkey solution. First and foremost, it enables operators to focus on marketing, without the overheads associated with CRM, customer support, licensing and regulation. A solution such as the one offered by ASG makes the whole process far simpler than it has been in the past. Our suite of software and services enables smooth and rapid entry into virtually any market. There’s no need for an operator to go through the complex and time-consuming process of applying for a licence, the customer support services we provide mean that operators don’t have to go to the trouble of finding premises and multilingual staff, while our back office systems deal effortlessly with KYC, AML and frauddetection processes. Another reason for this trend is the amount of networking that takes place within the iGaming industry. At numerous conferences, expos and events, affiliates and other potential market entrants can easily find out about how their peers have stepped up to become fully fledged operators through choosing a white label solution. It boils down to this: “He did it, so why can’t I?” You can’t underestimate the sheer prestige of owning your own brand. It opens so many doors, as well as securing ongoing and returning player revenue streams. The bottom line is that a comprehensive solution doesn’t demand an initial investment in infrastructure, dramatically reducing the financial risk for a new operator.
You mentioned a record high in terms of new partnerships – what can you tell us about your new clients and their target audiences? We’ve recently closed deals with a wide range of key partners, including existing casinos and operators which have decided to broaden their appeal by creating additional brands. In addition, several companies specialising in online marketing from the wider gaming industry have also come on board, as well as those from different other sectors, which have chosen to leverage the power of their respective brands by providing iGaming products to their audiences. We’ve also experienced some very pleasant surprises: several well-known gaming companies, which were already operating online casinos have decided to migrate their offerings from other platform providers to our complete solution. GIQ Q1 REVIEW
We offer the easiest route to market there is, since we literally take care of everything a new operator needs to get up and running
Why do you think so many of these migrations have been happening? The iGaming industry is continually evolving, and many issues that were relevant a year ago no longer apply. Operators need to constantly keep their ear to the ground in terms of new developments, best practices and regulatory requirements, and I’m glad to say that at ASG, we’re always ahead of the curve in these and other respects. The stability of our platform is second to none; this is probably the main factor for choosing us over others. Our quality of service and average response times are some of the best in the business and we offer the easiest route to market there is, since we literally take care of everything a new operator needs to get up and running. I also believe our clients rightly feel that they’re in a true partnership with us. It is something that’s hard to quantify, but it’s always a big part of the feedback we receive.
How do you ensure the success of each new partnership?
Because of the nature of our business model, we only succeed when our partner does, and our track record with our proprietary brands makes us acutely aware of the needs of all our partners, from reporting and management tools and grade-A content to the drilled-down data that enables our partners to maximize their profits from each traffic source. Our partners sign up with ASG because of the reputation we’ve earned for driving the success of our clients through our commitment to close collaboration across any and all operational requirements.
What do you predict for Aspire Global over the next few months? I’m anticipating continued investment in our platform and further additions to our portfolio of gaming providers, allowing us to further improve our unique offering; more partnerships with leading brands from the gaming world and beyond; and ASG’s entry into several newly regulated markets.
It can take time to achieve the ideal working relationship, as trust has to be earned. What I’ve discovered, however, is that our partners quickly come to rely on our insights. 9
ON THE FOLLOWING PAGE
12 IWG, William Hill, NYX and more
Silvers joins Inspired to drive ambitious expansion plans C O LU M N Robin Harrison AS MORE COMPANIES look beyond the gambling sector in the search for a new chief executive, the trend of new management bringing in trusted lieutenants when they take charge of a business is dying out. Not so at Inspired Entertainment, the New Yorklisted business formed from Hydra Industries and the virtual sports and server-based gaming specialist it acquired in a £200m deal in July 2016. When Hydra founder Lorne Weil, now Inspired Entertainment’s executive chairman, agreed the deal it was only a matter of time before he called for Daniel Silvers. Silvers, Inspired’s new chief strategy officer, and Weil go way back. A former Bear Stearns employee, Silvers served as Scientific Games’ lead investment banker before leaving in 2005, working alongside Weil for around 20 years. It was a natural step to reunite once Hydra was established, Silvers says. “I’d left Bear Stearns in 2005 and joined a firm called Fortress, working in the same industry as before, but on the buying side,” he says. “After three and a half years I then went on to do opportunistic deals and transactions on my own. I worked on a few boards [he served as SpringOwl’s representative on the bwin.party board], then worked closely with Lorne again when the opportunity came up with Hydra.”
The right deal While Inspired is a highly-respected business, it is not an obvious target for US investors. For one thing, its core market remains the UK, 10
Following Hydra’s £200m acquisition of Inspired, Lorne Weil has brought in a trusted ally to drive expansion. Here, the supplier’s new chief strategy officer Daniel Silvers explains why he is confident the company can cut it in a market dominated by newly-merged behemoths with Italy an increasingly important second. Yes, it is making forays into other territories but its server-based gaming business is hardly in a place to take on territories such as the US, where businesses such as Weil’s old company, Scientific Games, rule the roost following years of M&A-assisted growth. Silvers, however, believes that Inspired’s current management team gives it scope to join these companies in the upper echelons of the industry. “We were hugely excited about the deal to merge Hydra with Inspired, especially the opportunity to work with the team led by [founder and CEO] Luke Alvarez,” he says. “I did some work with Hydra when they were looking at a number of candidates, very much focused on gaming, and as soon as the chance to do a deal with Inspired arose we kept coming back to it – it just felt like the right deal. Hopefully history will prove us right.” Inspired may be focused on server-based gaming and virtual sports, he says, but this focus means it offers the sector’s best products in each vertical. Rather than competing with the same products as larger rivals, it is bringing something new. “It has done a great job in terms of the server-based gaming business and moving from the UK into Italy and more recently into Greece, in addition to the ground-breaking virtuals product,” he says. “Inspired is the world leader in this vertical. “We saw an opportunity to take great products primarily offered in Europe and to work with Inspired to truly make it a global gaming
technology company, distributing the content in more locations. There are terrific opportunities in North America and Asia, and we’re very excited to be part of it.”
Man in the shadows Despite taking charge of strategy, Silvers is keen to stress that he sees Weil and Alvarez as the public faces and leaders of the business. He is there to use his experience to support the pair, he says. “I think we are one unit,” he says. “It’s not a situation where we have a Hydra team then an Inspired team – it’s one group with the common purpose of building a world-class gaming technology company. “What I do in the day-to-day business is help both Lorne and Luke with any number of strategic initiatives,” Silvers continues. “That can be looking for areas to expand on a nonorganic basis by adding assets or businesses into our core platform, and thinking about what adds value to our offering.” He also looks to develop the company’s capital structure and liaise with its shareholders. It feels like a natural progression from his work with Bear Stearns, and this so-called “nonorganic expansion” is particularly intriguing. It feels as if Inspired may be dipping its toes in M&A sooner rather than later. “I think there are areas where we can look at transacting with other companies where there are substantial strategic synergies,” Silvers explains carefully. “Not that there is just overlap and the opportunity to take some expenses out, but situations where one plus one
P EO P L E
can equal three. So we definitely think there are opportunities to create value through revenue synergies. We are highly focused on potential transactions of this sort.”
Virtual gains This is not to say focus will shift too far from its core product offering, especially as virtual sports offer huge growth opportunities in new markets such as the US. Virtuals remained a UK-centric phenomenon for years, until moving into Italy and the US in recent years. Silvers believes that the market is set to explode, with Inspired at the forefront. “We believe Inspired has the preeminent content in the [virtuals] space, and ultimately the best content is going to win out no matter how fierce the competition,” he says. “This is an exciting space and it’s natural that other companies will want in on this sector. We are heartened by the results we are seeing and excited about the prospect of taking virtuals into new markets.” This has seen virtuals certified by the Nevada Gaming Commission following a successful field trial via William Hill-powered casino sportsbooks, while deals have been struck with Resorts and Golden Nugget in New Jersey. “[We] think virtuals are a product that fits naturally in the North American market, and one about which we are very excited. There is no doubt sports betting is prevalent in the US, and there are all sorts of estimates about the size of that market. “The same person or people who find sports wagering attractive, or at least a sub-segment of them, are likely to find appeal in our product.” Couple this potential audience with branded content, including a basketball gaming featuring Shaquille O’Neal and a boxing game with Mike Tyson, and Inspired can dominate this new virtual sports frontier, Silvers argues. Asia could be next. The supplier has already launched content for the China Sports Lottery, and a greater push into the Asian market is certainly seen as enticing. “In terms of being able to bring a compelling product into any jurisdiction, whether that’s horse racing, basketball or football, the breadth and quality of our content makes us the natural go-to partner to anyone worldGIQ Q1 REVIEW
wide,” he explains. “We think there is great runway for us.” Ultimately the plan is clear: “There is an opportunity to create a very compelling, purely digital gaming technology company,” Silvers says. “Time will tell exactly what the exact evolution is, but I come to work every day thinking through what we can be doing to create value for our company, and it’s exciting.” As exciting as the picture Silvers paints of Inspired’s growth prospects is, the supplier’s maiden results for the quarter ending 31 December 2016 did take a hit from currency exchange movements. This resulted in a 12 per cent decline in revenue, though this would have been an eight per cent year-onyear rise on a constant currency basis. These results served as the first ‘peek under the hood’ of Inspired, and revealed that despite its leadership of the virtual sports market with revenue of $7m (albeit affected by adverse currency impacts of $1.6m), the space still has a long way to grow. Inspired hardly has a clear field ahead, with the likes of Playtech, Betradar, Kiron Interactive, Vermantia and Leap Gaming, among others, looking to steal market share. Despite this, the company’s share price on the NASDAQ seems to be on a constant upward trajectory, suggesting investor confidence in an exchange that has long been criticised for not understanding the gambling sector. Having an experienced investment banker on board surely can’t hurt this. “I’m gratified, and I think we’re all gratified, that investors seem to be showing confidence in our ability to execute well on their behalf,” Silvers says. “It’s not for me to say whether anything is under- or overvalued; it’s up to our team to come in every day and create more value over time. “If we do that and execute well, I’m confident our investors will reward us. You can’t reverse engineer the data – you have to build the business and create value while doing so and hopefully we can continue to grow.” With Silvers and Weil reunited on the project, few would bet against them. n
“There are areas where we can look at transacting with other companies where there are substantial strategic synergies. We are highly focused on potential transactions of this sort” Daniel Silvers, Inspired
P EO P L E Q1 NEWS
SCOTT MADE TEMPORARY CEO OF LADBROKES AUSTRALIA
IN THE NEWS
Ladbrokes is contending with succession problems, with Jason Scott Jason Scott parachuted in as CEO of interim CEO, Ladbrokes its Australian business. Australia COO Paul Cherry was due to replace the outgoing Dean Shannon as Ladbrokes Australia CEO, only to unexpectedly leave the company. Scott, however, is not a new man needing time to get to grips with the business. He has been with the company since it was Bookmaker.com.au, and has also worked for Tatts Group. He may be the best man for the job – if he wants it permanently.
THOMAS NAMED IWG COMMERCIAL CHIEF
Gaming executives who have been making headlines and what’s in their inbox
L e on T hom a s joi n s after serving as chief operating of ficer for Rank’s Mecca Digital; Leon Thomas managing director of chief commercial officer, IWG US operations for NYX, and general manager of regulated online gaming for Caesars Interactive in recent years. Thomas has experience, contacts and something to prove, and will be able to build on IWG’s already impressive list of customers. If he’s in the role long-term he could have a transformative effect upon the supplier.
O’LOUGHLIN HEADS NYX SPORTSBOOK When it was announced Jeremy ThompsonH i l l w a s s t e p pi n g d o w n f r o m t h e OpenBet CEO role, following his company’s acquisition by NYX, it was difficult to identify an obvious replacement. However, in O’Loughlin, NYX may have the best man for the job. He has worked on the customerKeith O’Loughlin vice president – facing side of the industry sportsbook, NYX and has a strong tech Gaming Group pedigree, having served as Boylesports CTO. OpenBet’s platform needs updating, and he could be the ideal person to lead this project – and also spend t he £ 10 0 m i nve st ment from Sky Bet and William Hill sensibly.
Philip Bowcock CEO, William Hill
BOWCOCK CONFIRMED AS WILLIAM HILL CEO Phi l ip B owc o ck’s app oi nt ment a s James Henderson’s successor follows a nine-month stint as interim chief executive. After reporting William Hill’s first online revenue decline in a decade, he has a lot of work ahead of him. Having nine months getting to grips with the role he can hit the ground running, at least. Now he needs to build a team to initiate a turnaround. Ruth Prior has joined as the company’s new finance chief, and more appointments will follow. Time may not be on his side but the operator’s board clearly believes Bowcock is the man to revitalise William Hill.
HOLMGREN MADE CHERRY CEO The departure of Fredrik Burvall after a t r a n s fo r m at io n a l period for Cherry could have been a setback for Anders Holmgren the company just as its CEO, Cherry AB iGaming business was taking off. Instead the departure serves to highlight the strength of its management team. Holmgren, former CEO of Betsson Malta, is an existing director and can slot seamlessly into CEO role and continue his predecessor’s work. With majority shareholder Mortein Klein, Cherry iGaming (now ComeOn!) CEO Jonas Wahlander, and Dario Arruda, CEO of digital marketing subsidiary XCaliber, he joins a team of experienced executives running the business. Cherry is going places.
Greentube’s Haig Sakouyan, Greg Hennessy, Georg Gubo and Gabriel Cianchetto with the Social Casino Supplier prize
Be the House CTO Andrew Woolfson and CEO Seth Freedman receive Game of the Year for Cash Out Roulette
Gaming Intelligence once again recognised the industry’s best and brightest with the 2017 Gaming Intelligence Awards in February. Congratulations to all of the deserving winners
(L-R) Serge Bourenkov, Amaya Software; Jeff Cabral, Amaya Software; Hagar Raban, PokerStars Casino; Bo Wänghammar, PokerStars Casino; Asaf Noifeld, PokerStars Casino; Luigi Marciano, Amaya Software
Amaya Software president Serge Bourenkov and MD Dmitri Dain with the Poker Operator of the Year award
SBTech CEO Richard Carter receives the Sports Betting Supplier of the Year trophy from GIQ editor Robin Harrison
888 CEO Itai Frieberger with the Bingo Supplier and Marketing Campaign awards
GIQ’s Steve Hoare presents the Lottery Supplier of the Year award to Scientific Games’ Jim Kennedy
winners were Optimove marketing manager Amit Bivas is awarded Marketing Service Provider of the Year
NetEnt CEO Per Eriksson accepts Casino Supplier of the Year GIQ Q4 REVIEW
888’s Yaniv Schwartz accepts the Bingo Supplier of the Year for Dragonfish
F I NA NC E GIQ20 Q3 2012
Novomatic takes on lottery’s big three C O LU M N LOTTERY
Novomatic Lottery Solutions is looking to gatecrash the established lottery suppliers’ oligopoly. CEO Frank Cecchini explains why its modern technology is impressing lotteries NOVOMATIC LOTTERY SOLUTIONS (NLS) was formed after Austrian gaming behemoth Novomatic acquired Iceland’s Betware to make a major move into the lottery sector. This was back in 2014 and after a slew of deals, the company is finally pushing forward with its plans to take on the market-leading trio of IGT, Scientific Games and Intralot. Backed by the might of its parent company, NLS is now a serious contender in the industry and has just secured its biggest deal to date to help Opap with its technology revamp (see page 22 for more). It’s strange to talk about NLS as a newcomer to the lottery market, as it isn’t really at all. The company has been taking lotteries online since 1996, when it developed the first iLottery solution for Iceland’s Íslensk Getspá. It has also worked with Denmark’s Danske Spil and Canada’s British Colombia Lottery Corporation (BCLC). Thanks to Novomatic’s investment, NLS has poised itself in recent years to take more market share from its rivals. This began in July 2015 when it poached the contract for Loteria de Catalunya from Scientific Games, 18
and has continued this year with a landmark agreement with Opap to replace Intralot. In between these, there were deals with Estonia’s Eesti Loto and Norway’s Norsk Tipping. “We have made significant investment in technology over the last 18 months to be able to win the deals that we’ve won. We’ve pushed very hard,” says Cecchini, a veteran of 14 years service at GTECH before he joined Betware the same year it was acquired by Novomatic. OPAP is the big story right now though, and it is a significant move by the Greek national lottery operator to replace its current supplier Intralot – which has been powering its offering for 30 years – with NLS. But Cecchini believes that the company is well equipped to handle the pressure and deliver a more advanced offering for the sector. “We’re newer, our technology is more up to date than theirs, and delivers a much quicker product in terms of time to market,” says Cecchini. “Our platform was designed in 2010, built in 2011 and has gone through several major updates since then. We’re talking about modern technology. We’re talking about webbased transaction engines that make it easy to connect to external providers. “We’ve come with a system from the other direction, we’re not moving from lottery into gaming, we’re moving from gaming into lottery. This is why we’re different.” Despite this, Cecchini admits that for a state lottery to partner NLS requires “a leap of faith”. “It’s a new company with a new product, in a very established business environment,” he continues. “The more innovative lotteries such as Estonia, such as Opap, are willing to take that risk because of the benefits they know they can get from us.” “Eesti Loto wanted a system that was flexible, utilising standard APIs that would give them what they wanted,” he says. “They couldn’t get that from anywhere else. Opap was
“We’ve come with a system from the other direction, we’re not moving from lottery into gaming, we’re moving from gaming into lottery. This is why we’re different” Frank Cecchini, Novomatic Lottery Solutions the same, once they knew that we had something in retail, once they saw our designs, they were convinced. We showed them what we were capable of, and they bought into it. “We’ve got a lot of work to do between now and Q3 2018. When I joined the company in 2014 we were 120 people. We’re almost 450 now, and we’re winning business. I think our strategies are being proven.” It won’t be easy but so far Cecchini and NLS have already proven they can deliver. The market has been crying out for new technology, and they are answering that call. n
MALTA REGULATOR AWARDS FIRST LOTTERY BETTING LICENCES
BIG LOTTERY STORIES This quarter’s lottery lowdown
Multilotto.com and Jackpot.com have become the first operators to be granted bet-on-lotteries licences by the Malta Gaming Authority (MGA), as the jurisdiction follows in the footsteps of Gibraltar, which granted Lottoland a licence back in 2013. The licences allow the operator to offer players bets on the outcome of the world’s largest lotteries including EuroMillions, EuroJackpot, MegaMillions and Powerball. Multilotto is powered by Lotto Warehouse,
which received the MGA’s first B2B lottery betting licence during the quarter. “Malta, an international gaming hub, provides the ideal environment for the growth of our business and offers a comprehensive, yet flexible operational framework,” said Multilotto’s head of communications Andrew Clarke. Yariv Ron, co-founder of Jackpot.com, added: “We plan to work closely with the MGA to continue to expand the range of this offering.”
AGTECH’S CHINESE LAUNCH
SAZKA MAKES ONLINE MOVE
AGTech Holdings has taken steps to cement its position in the Chinese online lottery market, ahead of the long-awaited introduction of new regulations. The company has agreed a deal to launch a new lottery channel on the online platform of Alipay, Alibaba’s Chinese online payment processor. Alipay is a subsidiary of Ant Financial, which together with Alibaba holds a majority stake in AGTech. The 50:50 joint venture operation of the Alipay Lottery Channel will enable AGTech to tap into the online lottery sector, ahead of any potential reopening of the Chinese market. Online lottery sales have been suspended in China since March 2015, and AGTech acknowledged there was “uncertainty as to the timing of the reopening of the online distribution market of lottery products”. However it is now in a position to make an impression on the market as and when sales are permitted.
Czech national lottery operator Sazka has launched its core lottery offering online for the first time. The operator has taken advantage of the opening of the Czech Republic iGaming market to roll out a range of lottery variants via its Sazka.cz site. Games such as Sportka, EuroJackpot, Euromillions and Kasicka are now live alongside a revamped sports betting product. The SBTech-powered Sazka Bet will offer live betting markets on 250,000 sporting events each year, three times as many as before, with a number of events streamed live. The new site has been developed in partnership with a range of suppliers including NeoGames, IGT and BetSys, as well as SBTech. “After years of waiting for the change of legislation which enables lotteries to operate online, Sazka is entering the digital environment,” Sazka CEO Robert Chvatal explained. “Our ambition is to have the widest and the most varied portfolio of games on the internet, which will be gradually launched during the following months.”
IGT WINS LOTTERY DEAL IN NZ
LOTTOLAND EYES GERMANY
International Game Technology (IGT) has signed a new five-year deal to provide its gaming platform and instant-win content to the New Zealand National Lotteries Commission and its MyLotto.co.nz site. IGT has been a partner of the lottery since its inception 30 years ago, and will provide interactive instant-win games hosted by its remote gaming server. This will enable MyLotto to leverage IGT’s gaming content, as well as integrate games from third-party developers. “The agreement demonstrates the customer’s continued trust in our ability to deliver industry-leading solutions and content that will responsibly increase lottery sales and continue generating funds for good causes,” said Declan Harkin, IGT senior vice president and chief operating officer. The lottery generates around NZ$1bn (£560m) in sales each year, with the online and mobile channel representing around 10 per cent of the total.
Lottery betting pioneer Lottoland is looking to force its way into Germany’s state-run lottery market with an application to become the first private operator of a major lottery in the country. By applying for a licence to operate its own lottery in a number of German states, Lottoland is directly challenging the current state monopoly. While its chances of success are slim, it aims to at least force the government to set out the minimum requirements for licensure. The operator wants to offer a range of games similar to those already popular in the country, including EuroJackpot games. “The German State Lottery Association called on private sport bets suppliers to agree on mutual standards for a controlled opening of the sport betting market,” Lottoland spokesman Rolf Stypmann commented. “No comparable measures have been taken concerning the lottery sector which is less at risk of manipulation and less dangerous. We see this as absurd.”
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THE BIGGEST SOCIAL CASINO NEWS OF THE QUARTER IN BRIEF GAN continues Simulated Gaming roll-out
Mount Airy casino partners Greentube THE MOUNT AIRY Casino Resort in Pennsylvania is to develop a custom social casino platform in partnership with Novomatic’s Greentube Pro. The companies will work together to create a new digital gaming platform that mirrors the look, feel and content of the land-based venue. “The partnership with Mount Airy Casino Resort and Greentube will enable players anywhere in the US to enjoy the gaming experience we offer at Mount Airy,” executive vice
president and general manager of the venue, John Culetsu said. “This platform keeps us ahead of the gaming curve and, through Greentube, we will be able to engage players through multiple digital channels from any location around the country.” Developed by Novomatic’s BlueBat Games, the social casino will allow for in-game marketing to further engage existing customers and attract new players, and will be available across desktop and mobile.
Betfred goes social with Caleta Gaming UK BOOKMAKER BETFRED has moved to establish itself in the social casino market with the launch of a new app developed in partnership with London-based Caleta Gaming. “We are excited to offer this social casino to a wide audience and want all players to enjoy playing Betfred Social,” Betfred head of content Andrew Horne commented. Betfred Social has gone live for desktop, mobile and tablet devices, offering a range GIQ Q1 REVIEW
of free-to-play slots, bingo and table games. It features the exclusive Betfred Bonus King Blackjack and Magical Clover games, with two other titles, Jungle Beauty and Day at the Races, to follow. “We’re really excited to bring these new games to the Betfred audience,” Caleta Gaming chief executive David Marcus said. “It’s an incredible opportunity for players to engage with Betfred and play new content which has unique qualities.
GAN is aiming to complete at least four roll-outs of its free-to-play Simulated Gaming product for US casino partners in the first half of 2017, with Station Casinos among those to go live. The Nevada-based operator first announced its partnership with GAN in September 2016, and will now launch the StationPlay offering before the end of Q2. This product will offer a range of casino games and a tournament feature. It will also be integrated with Station’s Boarding Pass loyalty programme for players to collect points for use in its bricks-and-mortar venues. The supplier has also expanded its existing partnership with Everi Games to add a number of repurposed land-based slots to the Simulated Gaming product portfolio. GAN has integrated a range of Everi’s Class II and III slot titles, joining popular slots already available such as Starry Night, Total Meltdown and Carnival in Rio. GAN CEO Dermot Smurfit described the platform extension as a ‘privilege’ for his company.
Zynga beats 2016 expectations Fallen social giant Zynga continues to show signs of recovery, despite the company posting a three per cent decline in 2016 revenue. Though revenue was down to $741.1m, the company surpassed its revenue target for the final quarter of the year, with the $190.5m figure above its guidance range for the period. CEO Frank Gibeau said the results provided further evidence of the business’s turnaround. Zynga’s social casino franchise was the main driver of growth, led by Zynga Poker (20 per cent of gaming revenue); Hit it Rich! Slots (10 per cent) and Wizard of Oz Slots (10 per cent).
Rush Street expands Konami partnership The success of free-to-play slots from Konami Gaming on Rush Street Interactive’s apps has prompted the operator to deploy real-money variants on its New Jersey-licensed sites. Titles such as Fortune Stacks and Gypsy Fire proved so popular on the SugarHouse Casino-branded social sites that the decision was taken to launch the content for real-money play. This marks the first time the Konami slots have gone live on a New Jersey iGaming site.
F I NA NC E GIQ20 Q3 2012
Trio of tech deals part of a new future for Opap C O LU M N TECHNOLOGY
Opap’s €100m investment in its technology is a big statement of intent for the Greek monopoly operator. CEO Damian Cope explains why it was necessary OPAP IS EMBARKING on a major overhaul of its offering. The signing of not one but three technology partnerships in February was just the latest phase of its expansion plans for the next 18 months. Chief executive Damian Cope has placed technology at the forefront of his growth strategy for the business since joining in July 2016. The operator’s CTO Michele Fusella was one of Cope’s first hires last August and has over 16 years’ experience in the industry through Gala Coral Group and Sportium. He has been tasked with implementing Cope’s plans. “When I came here last summer, I undertook a brief review of the company, looking to see what was required for the next phase of its growth, and technology was one area where I could see that there was lots of opportunity,” says Cope.
Multi-vendor strategy Opap, the exclusive rights holder for most forms of gambling in Greece, has worked with just one major provider, Intralot, for 30 years. Cope sees this as the time to introduce more modern technology. This change in strategy has seen Opap move away from its reliance on having a single vendor for all of its products. 22
So in come Novomatic Lottery Solutions (NLS) and Betgenius to revamp Opap’s digital capabilities in lottery and sports betting, with Playtech BGT Sports chosen to launch new selfservice betting terminals (SSBTs) and betting solutions for Opap’s 4,000 agencies. In the midst of all this, the Greek monopoly is in the process of rolling out 16,500 VLTs – via Scientific Games, IGT, Synot and Inspired – introducing virtual sports to its players for the first time, and opening several hundred new gaming halls across the country “I’m not aware of any other organisation that is going through such a massive transformation in such a short period,” says Cope. He’s not wrong. It’s all part of a €100m reboot of Opap’s technological platform across all channels to make its offering more attractive to Greek players.
Online woes The Betgenius deal is perhaps the most intriguing piece of the triumvirate of deals and marks a serious attempt by the operator to catch up in the digital arena. A new online sports betting platform is planned for launch before the end of this year, ahead of a busy summer of sport in 2018 which includes the football World Cup in Russia. “Digital is a very small part of Opap’s organisation, but we think it’s got a long way to go and we’re quietly confident we can grow our digital business quite significantly,” says Cope. It is a huge opportunity for Opap but its most popular products are lotteries, of which t he
most successful by far is Kino, which generates around €2bn a year in revenue. This is where NLS comes in (see our Lottery feature on page 18 for more on NLS). “That’s the platform that needed the most focus and attention, and we did a long tender process,” explains Cope. “In the end Novomatic was the partner we were happy to choose and work with.” Opap’s third technology partnership, with Playtech BGT Sports, stems from the company’s belief that the future of its retail network will be driven by self-service betting devices, both traditional cabinets (SSBTs) and also tablet-type terminals which Paddy Power has introduced recently. “Over the next 18 months we are going to be incredibly busy,” says Cope. “By the time we get to the World Cup next summer, I’m hopeful that we will have delivered on all of our major technology plans.” Cope and his team have a big task on their hands but Opap has made its choices, now it’s time for the suppliers to deliver. n
“By the time we get to the World Cup next summer, I’m hopeful we will have delivered on all of our major technology plans” Damian Cope
NE W PRODUCTS
FORTUNA LAUNCHES ONLINE CASINO IN CZECH REPUBLIC The Eastern European gaming operator, Fortuna, became the first to launch an online casino product in the newly-regulated Czech iGaming market, going live with an offering powered by partner Playtech.
What’s the big idea? Having secured an iGaming licence in the Czech Republic in February this year, Fortuna wasted no time in launching its iFortuna.cz site. The Playtech-powered launch includes a range of
the supplier’s most popular slots, and builds on the partnership the companies signed last year. Through this deal, Fortuna has already gone live with Playtech in Romania, with plans to expand into Poland and Slovakia underway. Once again this looks like a strategic masterstroke by Playtech. It is moving into newly-regulated markets for which there are optimistic growth forecasts, and doing so with one of Eastern Europe’s best-known gaming brands.
MYBET GOES LIVE WITH NEW BETTING AND GAMING PLATFORM Germany’s mybet has gone live with a new and improved online gaming platform from Amelco following an extended period of development.
BIG LAUNCHES Five of the quarter’s major product launches and what they mean for those involved PLAYTECH LAUNCHES CROSSBORDER POKER NETWORK Playtech launched the first ever cross-border online poker network in the industry in March following an agreement between statecontrolled operators in Austria and Finland.
What’s the big idea? The limitations of mybet’s legacy platform has been cited as a key factor in years of poor financial results, meaning there is a lot riding on the new solution created in partnership with Amelco. After almost two years in development the platform will quadruple the range of sports betting options, improve the live betting offering and double the number of casino games available. Following the ratification of Germany’s amended State Treaty on Gambling, which sees mybet provisionally approved to operate in its native market, the timing could not be better.
PLAYTECH AND BETFRED EXTEND SUPPLY DEAL
What’s the big idea? Pooling liquidity
Playtech will continue to be Betfred’s main software provider following the signing of a new multi-year contract and the breakdown of talks between the Betfred and GVC earlier this year.
between different regulated markets has long been hailed as the best way to reinvigorate the online poker market. This new network brings together Finnish and Austrian players, combining win2day’s 150,000 registered players with Veikkaus’ 2.5m-strong customer base. It aims to attract new users with larger prize pools and an improved experience for all abilities. Operators and regulators in other countries will be watching with interest.
What’s the big idea? Playtech has served as Betfred’s principal software supplier for the past decade, so when the operator’s attempt to partner GVC failed, it was no surprise that it returned to its existing partner. Through this new deal Betfred will continue to feature Playtech’s online casino, bingo, poker and live dealer products, as well as an upcoming suite of DC Comics-branded games.
GIQ Q1 REVIEW
NYX SIMULTANEOUS REALMONEY/SOCIAL LAUNCH NYX Gaming has simultaneously launched real-money and social casino games for Rush Street Interactive’s SugarHouse Casino brand in New Jersey.
What’s the big idea? The roll-out of realmoney and free-to-play content for the SugarHouse sites marks a step forward in NYX’s development. With the launch of the NYX Social OGS service to complement the existing iGaming OGS, the supplier is looking to spread its games further, and could help it emulate GAN in targeting customers in US states that are yet to regulate iGaming. 23
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ON THE FOLLOWING PAGES
28 World regulatory briefing
ASK THE LAWYERS…
SPOTLIGHT ON SWEDEN Dr Ola Wiklund and Mattias Kelmeling of Hansen Advokatbyrå discuss the long-awaited report into the re-regulation of Sweden’s gambling market
GIQ Q1 REVIEW
What are your initial impressions of the report?
filled, and I think many may underestimate the volume of work that is needed.
Mattias Kelmeling (MK): I think it is a very thorough investigation. I believe the state monopoly and private operators are going to be satisfied, which is good. It is similar to the Danish system, which has proved to be successful. What strikes me is that this is a very big project, bigger than any other legislative project launched in Sweden in recent years. It includes new criminal laws, such as the criminalisation of match-fixing, without creating the necessary funding for law enforcement to handle these new responsibilities. Considering the scale of this project I don’t think Sweden will be able to launch a new regulatory framework for gambling in just a year. A lot of new positions must first be created then
Ola Wiklund (OW): We represent clients ranging from listed operators to mid-size and lower-tier gambling companies, and currently we would say the market is fairly liberal. Companies can market their services properly,
I don’t think Sweden will launch a new regulatory framework for gambling in just a year. I think many underestimate the volume of work that is needed 19
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even though it is technically prohibited. What will happen now is the market goes from a liberal model to a more repressive bureaucratic environment – they’re putting a straitjacket on gambling companies. The usual neoliberal argument in favour of introducing a licensing system is that this liberalises markets, but this could in fact make things harder for smaller or mid-tier operators. There are a lot of new levies and fees, as well as a lot of new criminal offences. It’s a bureaucratisation of the market really.
What sort of timescale would be more appropriate for developing a new model? MK: When I first studied the report, I have to admit thinking, “How are they going to do this?” I think looking to open the market in 2019 would be more appropriate, though this would still be very ambitious. Aiming for the end of that year or even early 2020 might offer sufficient time to introduce a satisfactory regulatory framework. History has shown time and time again that even when politicians have a clear goal of what they would like to do, things can spiral out of control. Perhaps they will surprise us this time.
Do you feel the proposals are fair to the incumbent monopoly operators such as Svenska Spel and AB Trav och Galopp (ATG)? MK: Lotteries are excluded from the open market and betting on horse racing is included, which will please private operators. There will also be a monopoly on certain forms of landbased gambling, so we won’t have privately operated casinos. One thing the investigation does not touch on much is the future of Svenska Spel.This is a very political matter; in Sweden the government generally does not maintain a stateowned company in a sector open to private operators. However, to sell it would take a long time – if this was to be done before the market opened I believe it would delay the market opening. They might try to sell it off in parts, but the willingness to do it depends very much on the party in government. Our current left-wing government is unwilling to sell off state-owned companies, but the main right wing party sold off three during its last spell in power. There is also the question of ATG. Changes to current management structures are likely. ATG is owned by the Swedish Trotting Association, and has state representatives on its board. The report suggests that this needs to end. GIQ Q1 REVIEW
It could suddenly find itself becoming a market powerhouse. Not only does it offer gambling on horse racing, but it also controls the product [as it organises the races]. It could simply stop private companies from broadcasting live streams of racing, or even grant that right to ATG exclusively. This is purely speculative but it could become a major player in the iGaming market. Until now it has only been allowed to offer betting on racing, but as it has lost its monopoly status it could apply for a casino licence, then cross-sell slots to its racing customers. Of course, this could be seen as an unfair advantage and lead to legal action by private operators entering the market.
much more open system in the UK and without the immense bureaucracy this Swedish system could create. We have an internet penetration of over 90 per cent, but compared to France or the UK, Sweden is still a small market.
How effective do you feel enforcement will be against unlicensed operators? Do they go far enough? OW: Some of the new punishments set out
state-controlled operators. Svenska Spel is divided into a monopoly division and one open to competition, but you have to understand that almost 80 per cent of Svenska Spel’s revenue comes from the protected sector. If there is so much concern for public health why not just get rid of these protected slot machines? They are often found to be especially accessible to the vulnerable. Therefore this approach seems quite cynical to me.
in the report are pretty severe, considering people can be imprisoned for up to six years. I could find myself representing my clients in a criminal court, which I haven’t done for a long time! The next issue that springs to mind is whether they have properly thought out the resources needed to introduce these enforcement actions. Looking through the report, the only sign of this is an estimate that the regulator will require an additional 25 staff. If you want to push through this kind of expansive bureaucratisation you need to enforce it. Otherwise, if the new prevention measures cannot be implemented why should operators comply?
How achievable is the target of channelling 90 per cent of players to a regulated offering?
What happens now? Is the government likely to tweak or alter any of the recommendations?
OW: I recently spoke to two CEOs from leading gaming businesses and both admitted it’s a big risk for them to go into this system. If the regulations aren’t able to channel at least 70 to 80 per cent of the market towards the legal offering the first years, then they’re stuck in a failing system with a number of additional liabilities and burdens. I’m not sure we will reach the 90 to 95 per cent channelling rate targeted. If we look at France as the worst-case scenario, and aspire to be like the UK market, even then I can’t see that happening. There is a
OW: I’m not sure smaller operators will be
OW: Of course they are breaking up the two
Smaller operators may not be able to make money under this system, so will weigh up the risks of getting licensed or operating without a licence
able to make money under this system, so will weigh up the risks of getting licensed or operating without a licence. There’s a lot of selling going on now so there may be another wave of consolidation. One big problem I foresee is that if we don’t get tax exemptions for non-profit organisations, such as sporting organisations, it could be a major political problem. These businesses will need an exemption from European Union state aid rules, as some of those exempted already to some extent compete with private operators. Politicians seem very optimistic about securing this, but if there are any problems with the legislation, that may push the implementation of regulations later into 2019. However, there finally seems to be a broad enough political consensus to push new regulations through parliament. n 27
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The first quarter of the year saw intense legislative activity on gaming issues in the United States, led by daily fantasy sports. Pennsylvania has seen the most activity, with bills introduced to both legalise and ban iGaming. Most recent is a proposal from Senator Jay Costa to allow iGaming, taxed at an eye-watering 25 per cent of gross gaming revenue (GGR). It followed the introduction of HB392 and its Senate equivalent SB477, which propose a 14 per cent online GGR tax. These bills would also allow for expanded gambling through DFS regulation, gambling in airports and online lottery sales. A separate fantasy sports bill was also filed in March, aiming to impose a 12 per cent tax on contest revenue. The number of bills in favour of expanded gambling suggest a proposal to ban online gambling, HB801, will likely fail. West Virginia Representative Shawn Fluharty has proposed a bill to regulate iGaming under the authority of the state Lottery Commission. It proposes a 14 per cent tax on gross gaming revenue, and a licence fee of $50,000. The state is also progressing legislation to legalise lottery games based on horse racing results, to the delight of Equilottery, a company active in the sector. In Mississippi, Governor Phil Bryant signed permanent DFS regulations into law, allowing for three year licences and setting an eight per cent tax on net revenue. Progress was also made on DFS regulation in a number of other states, with bills in play in Georgia, New Hampshire, Vermont, Nebraska, Alabama, Ohio and Montana. However, a DFS bill was rejected by Kentucky lawmakers. Finally, Michigan saw progress on three related iGaming bills which passed the Senate Regulatory Reform Committee and now head to the Senate floor.
Colombia’s new iGaming regulations have come into force, allowing licensees to offer players online poker, bingo and casino games, as well as fixed-odds and exchange betting. Operators are subject to a tax of 15 per cent of net gaming revenue and a requirement to set a rate of return to players of at least 83 per cent. The country’s gambling regulator Coljuegos has made an aggressive attempt to force operators to secure licences, with the introduction of a blacklist which requires internet service providers to block access to those sites. At the time of writing there were over 300 gambling domains on the Colombian blacklist.
The UK’s Horserace Betting Levy replacement has completed the parliamentary process and is set to come into force as soon as State Aid clearance is received from the European Commission. This will see the levy extended to all offshore betting operators, who will be required to pay 10 per cent of gross profits earned above £500,000. The new levy was due to come into force on 1 April.
Gaming Intelligence outlines the latest legal developments from around the globe
WORLD REGULATORY UPDATE 28
NETHERLANDS The Netherlands gambling regulator has been actively pursuing operators that continue to serve Dutch players despite the current prohibition, even as progress on gambling legislation stalls. The regulator has been contacting operators that offer their services in Dutch, or who promote their services to Dutch players. This has seen Trustfulgames, the Maltalicensed parent company of the Tiplix.com iGaming brand, fined €170,000 in February for continuing to market to Dutch players. The current blanket ban on online gaming will only be lifted once the country’s long-awaited bill to regulate iGaming comes into force. This was expected to occur in January 2018, however numerous debates and amendments have seen the bill bogged down in parliament.
SWITZERLAND The Swiss parliament continues to debate the country’s revised Gambling Act, adopting a proposal to block access to unlicensed online gaming sites that serve Swiss customers. The IP-blocking proposal was approved by both chambers of the Swiss parliament, despite opposition from the National Council’s (lower house) Legal Affairs Committee. For its part, the National Council voted down a proposal to tax players’ lottery and gambling winnings, despite the measure having already been approved by the Council of States (upper house). The gambling legislation now goes back to the Council of States for further debate.
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Q1 REGULATION HIGHLIGHTS
DENMARK The Danish government has notified the European Commission of proposed changes to its gambling legislation to liberalise the online bingo and racing markets. The changes will allow any licensed operator to offer online bingo, as well as betting on horse, dog and pigeon racing.
The changes to bingo are in response to consumers’ growing use of unregulated sites, with the grey market now estimated at twice the size of the regulated monopoly offering. Meanwhile, liberalisation of racing betting markets is designed to revive the horse racing industry, which has been in decline for a decade.
SWEDEN The Swedish government has released its long-awaited report into the re-regulation of the country’s gambling market. It proposes an end to the current monopoly system to be replaced by an unlimited number of licences. This would allow online operators to offer bingo, poker and casino games, as well as sports betting to Swedish players against an 18 per cent tax on net revenue. Licence fees will be set on sliding scale of between SEK60,000 and SEK700,000 (approx €6,000 to €73,000), with an annual renewal fee of between SEK30,000 and SEK1.0m (approx €3,000 to €105,000).
NEW ZEALAND Svenska Spel will retain its monopoly on lottery games and the Casino Cosmopol landbased casinos while losing its exclusive online rights. This will result in the company being split into two divisions, with the commercial iGaming arm likely to be sold off. Current horse racing monopoly operator AB Trav och Galopp will have to compete against private operators under the new system. Sweden intends to draft a new regulatory framework by late 2018 with a view to opening the market in 2019, although some have suggested the scale of the project will require more time (see page 25).
GERMANY The Minister-Presidents of Germany’s 16 federal states have ratified the country’s amended State Treaty on Gambling, setting up a showdown with the European Commission which has already criticised the legislation. The 20-licence cap on sports betting concessions has been removed, with the 35 operators that passed the first stage of the 2012 licensing process given ‘provisional permits’ to either continue or begin operating in the country. Other controls, such as payment blocking to tackle unlicensed casino and poker sites, have been retained in the newly-approved
Operators will be required to pay eight per cent of the gross value of bets placed on Danish horse racing into a special fund that will support the industry over a five-year transitional period. The amendments are scheduled to come into force on 1 January 2018.
legislation, which is set to come into force on 1 January 2018. However the Treaty has already been criticised by the EC. It is seen as continuing to push an unenforceable ban on online casino and poker, as well as giving those with a provisional permit an unfair advantage over new market entrants. The EC noted that it had also changed the economic terms of operating in Germany without updating the legislation accordingly. This means the EC could launch infringement proceedings against Germany as soon as the Treaty comes into effect.
Offshore bookmakers offering bets on New Zealand racing or serving players in the country will face new taxes under proposed changes to gambling regulations. Amendments to the country’s 2003 Racing Act will force offshore bookmakers to pay a fee for using New Zealand race data, providing a financial return for the country’s racing industry, while other betting will be subject to a point of consumption tax. The government also intends to make the TAB more competitive by allowing it to offer in-running betting on horse races, as well as expanding the range of betting opportunities by removing the restriction that requires the TAB to only offer bets on sports represented by National Sporting Organisations. The exact fees will be set out in subsequent regulations which will be subject to consultation, although the government expects each of the charges to be in line with two per cent of turnover.
AUSTRALIA A national point of consumption (PoC) tax for online gaming is set to be introduced in Australia, similar to the model coming into force in South Australia on 1 July. Federal Treasurer Scott Morrison is working with state and territory governments on devising a consistent approach to iGaming
GIQ Q1 REVIEW
taxation, describing the 15 per cent South Australian tax as “a good starting point”. The PoC proposal came one week after lawmakers approved the Interactive Gambling Amendment Bill 2016, which imposes a ban on online poker and casino games and in-play sports betting.
F E AT U R E CSR
Tackling the industryâ&#x20AC;&#x2122;s perception problem The gambling industry has an image problem and operators need to do more to address it. If companies can embrace corporate social responsibility (CSR) they could tackle an issue that has long dogged the sector 30
F E AT U R E CSR
GAMBLING COMPANIES ARE looking to stiff their customers and offer products that can harm family life. This assessment may seem harsh but it reflects the perception of the sector by the UK public. Peopleâ&#x20AC;&#x2122;s attitudes towards gambling are becoming increasingly negative. The figures are at the worst since the UK Gambling Commission began monitoring public opinion of the industry in 2008. Just 34 per cent of the British public think that gambling is fair and can
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be trusted, representing a drop of almost 50 per cent from 2008. More than two-thirds of those surveyed (69 per cent) believe gambling is dangerous to family life. Based on t he At tit udes Towa rds Gambling Scale (ATGS), which assesses attitudes based on eight criteria, gambling achieves a total score of 21.5. The scale awards scores of between eight and 40 points based on the questions, with 24 being considered neutral. Anything below 24, the Commission
says, represents an overall negative view of gambling. These figures refer to the UK market but they indicate a problem for the wider industry. That gambling provokes such distrust in a jurisdiction governed by one of the industryâ&#x20AC;&#x2122;s most liberal regulatory regimes should be a major concern. What happens when antigambling campaigners can point to a worsening public image to support their criticism of the industry?
Japan Gaming Congress Grand Hyatt, Tokyo | 10 â&#x20AC;&#x201C; 11 May 2017
F E AT U RE
way, always doing what is right rather than what Gambling companies are soft targets. Thanks to they can do within the law, the notion of gamthe power of social media and lazy reporting by bling as a form of entertainment can take root. much of the traditional media, half of the world’s One goal of CSR is to help a company become ills can be attributed to immigrants, banks or accepted and trusted in the society in which it gambling companies. If anti-gambling camoperates, among the customers it serves, and paigners shout the same message often enough, by those in the wider populace – including nonit becomes irrelevant whether what they say is gamblers. This acceptance is described as ‘social true; people will believe them. And when the licence’, a community’s acceptance of a business suggestion of wrongdoing emerges, the indusoutside formal regulatory processes. try’s narrow band of support can disappear fast. Many operators will argue that they are The industry needs to take steps to address already committed to CSR and working towards its public image problem. It has formed the selfthis ‘social licence’. They provide money to regulatory body Senet Group, adopted stronger responsible gambling initiatives, offer their responsible gambling measures, and the UK own responsible gambling controls and provide Gambling Commission has taken steps to shore funding to sports. But this blurs the line between up regulations. But this has not led to a shift in compliance and corporate social responsibility. perception, and investigations by the CompetiCompliance is a legal requirement, while CSR tion and Markets Authority (CMA) and Parliais a commitment to be a responsible citizen actmentary All-Party Betting and Gaming Group ing beyond the aim of profit maximisation and have not helped. regulatory compliance. UK Gambling Commission programme director Paul Hope says that the CMA invesLegal vs ethical tigation is aiming to assess The EU’s Forum on CSR whether gambling consumers defines it as “a concept whereare being treated fairly. by companies integrate social “CSR is not just “Using information we and environmental concerns what you do with supplied, the CMA contacted in their business operations the money you a range of gambling operaand in their actions with stakeearn, but how you tors to find out about their use holders on a voluntary basis.” of potentially unfair terms In the gambling sector this earn that money” and misleading practices,” he can be viewed as a way of ensurLaura Da Silver Gomes, said. “This comes as a result ing that all business transacSilverfish CSR of concerns that consumers tions and communications have raised about issues such with customers are performed as cancelling bets, altering odds after bets in an ethical manner. This in turn ensures that have been accepted, and offering misleading the conduct of the business as a whole is sustainsign-up promotions.” able in the long term, enhancing brand value and This gives the CMA a wide purview to invessafeguarding the company’s future. tigate a range of actions by operators, ranging “Corporate social responsibility is not just from sign-up offers with unfathomable terms what you do with the money you earn, but how and conditions, to refusing bets from savvy you earn that money,” consultant Laura Da punters. In short, there is a perception that, as Silva Gomes of Silverfish CSR explains. “So the UKGC survey attests, operators are looking ultimately it’s the company’s business strategy.” to engage in unfair practices at the expense of The misconception, she says, is that CSR is their customers. seen by too many companies in the gambling This is the environment in which effecindustry as an add-on to existing business practive corporate social responsibility (CSR) can tices, which too often seem to be focused around come into its own. CSR is a complex subject what is legal, rather than what is ethical. This is and not a silver bullet for the industry’s woes, demonstrated by the CMA review. but it is something that in the long term could Operators rightly maintain that their marhave a potentially transformational effect on keting practices are within the regulations, the industry. but legal doesn’t necessarily make it right. All marketers know that a consumer will tell a lot The go-to defence for operators facing a more people about a bad experience than a good crackdown is that they are offering a form of one, and in the gambling industry reputation entertainment. A Senet Group campaign tells management is vital. punters, “When the fun stops, stop” to warn of A company can raise money for charity, help problem gambling. CSR can help support this support sports teams or recycle all the paper it argument. If operators do business in an ethical GIQ Q1 REVIEW
PUBLIC PERCEPTION OF GAMBLING
think gambling is fair and can be trusted
think gambling is linked to criminal activity
think there are too many opportunities to gamble
think gambling is dangerous for family life
think gambling should be discouraged Source: UK Gambling Commission, Gambling Participation in 2016: Behaviour, awareness and attitudes – Annual Report 2016
F E AT U R E CSR
Corporate Responsibility Report 2015 Performance update
RESPONSIBLE BUSINESS PRACTICE AT LADBROKES
“There is so much filler on these [CSR] pages,” Da Silva Gomes notes. “Some of them even say bonus offers are linked to responsible gambling impact reports,” Da Silva Gomes says. “First of all, in most instances this won’t be the case, and if this is what they are doing they should be quantifying it. Rather than doing good Limited efforts they are talking about action without much subThe industry is well aware of CSR. The likes of stance behind the words. It’s hard not to be critiPaddy Power Betfair, William Hill and Ladbrocal of these reports.” kes Coral all have dedicated sections on their Mr Green is a good example of a starting corporate websites. But only one – Ladbrokes – is point for companies looking to embrace CSR. ranked in the Dow Jones Sustainability Index. The operator looks to ensure fair business This ranking of companies based on their ethipractices and ethical employment condical approach to business, anti-crime policies, tions, with a focus on the environment and customer relationship and risk management, responsible gambling. among other factors, is seen as an endorsement “Green Business is how we work in an of a company’s approach to CSR. Chief Exec utive’s in troductio n ethical way, and follow local and international The industry should be concerned “I am prou busines d of Ladb ro behavio s has cham kes’ journe y pi regulations. We want the markets to be locally that only one gambling company I am a urs across oned resp and the w ay lso on ou on our pleased to r industry sible gam the bl fo w strides ider CR pe introduce ou r many year ing regulated, since that creates a clear set of rules merits inclusion. rfo that, m in some area rmance. r annual up s. W da y aim s, e te have m perform is to re others le ade ss m Ladbro ance, impr ain ever at so. Having great for both the operator and the players,” Mr Green “Over the past 12 to 14 years we ove ye tentive said kes’. So ar on to there will alw year, and Ladbrokes’ ‘Buil ays be more d a Better CEO Per Norman says. “We pay have been listed on the to do.” taxes and work against money Dow Jones Sustainabillaundering and corruption. Our ity Index, and as far as I customers should be protected can remember we’ve been and safe.” ranked in the highest posThrough Green Employment, sible category,” Ladbrokes the company aims to employ an Coral head of responsible equal balance of men and woman, gambling Graham Weir and has a workforce of more than explains. “We’re one of the 20 nationalities in Malta and Swefew companies to consistently den. Its Green Environment focus be included on that list. Others looks to ensure it recycles as much are starting to wake up to it, but “We want as it can and is environmentally we’ve been there for years.” the markets friendly. Finally, Green Gaming Weir is clear about why this to be locally is its programme to ensure cuslisting is so important to the regulated, since tomers do not gamble in an irreoperator: “The players trust us.” sponsible way. Jesper Kärrbrink, This is cer tainly that creates a praiseworthy, but as clear set of rules former chief executive of Svenska Spel and now CEO of Mr Green’s Weir says it is an isofor both the operating subsidiary, is currentlated example of CSR operator and ly overseeing the development efforts in the industhe players” of data-based solutions to help try. Even the compaPer Norman, Mr Green players monitor their behaviour. nies that appear to be “Such a concept is natural for succeeding in implea Swedish business,” Kärrbrink says jokingly. menting a socially responsible business “Just look at the country’s most famous make culture are perhaps not as far along with their strategy as they could be. of car. It’s a case of making the car as safe as In fact, each company’s dedicated CSR possible, which in turn makes it appealing to page betrays some issues. Paddy Power customers. If you have two cars almost exactly Betfair simply uses it to list charities that the same but you know that one is safer – which it supports. Close, but no CSR. Ladbrokes one do you choose? “Volvo was one of the ugliest cars back in Coral goes further, setting out its various controls for responsible gambling; the 1980s, with giant bumpers, but it was hugely popular as it was so safe,” he says. “The differcustomer and employee safety; its ence here is that we are building a ‘car’ that is support for charitable projects both safe and good looking. and backing of various sports. “In a Volvo today you get alerts telling you to William Hill also publishes an take a coffee break or slow down,” he continues. annual CSR report. uses, but if a proportion of its customers feel they are being cheated or offended, they will complain about it loudly and the internet gives them a global platform to do so. All the good deeds of a company can be quickly drowned out.
Ladbrokes is ranked in the Dow Jones Sustainability Index
Socie tal in soci expectatio ety inform continue ns around the ation-r to place ich, me develop androle of bus to has alw hide. In res dia savvy env in an inc iness rea and I in ays been a ponsible bus ironment, singly leader the Head tend to kee of the iness terms, re is no p of our So Responsi it that way. pack among Ladbrokes ble The app cia its pee us to bui l Responsi Gambling and the ointment of rs ld on this bility Bo a form ard leader We are ship posCommittee ation of licensi a regulated hav ition. e enable ng we reg conditions business and d ard ser tak hea e our non-ne lth and iously. In reg Ladbro gotiables in safety and delivering ourulatory how kes strateg has act we go responsib and su y le about ive Group. pported sel ly led the our eve gambling as f-regul indust ryday ry licensi We remain atio ng commit n initiatives in best pra business. offer to objective ctic ted , such as e to foc s and our cus tomers delivering using on fulfi the Senet 2015 wa . a safe and res lling our over as s a year of ponsib le transfo Chief Executchange at Lad a new rmational dea ive in April, brokes. I too bus stop the iness stra l with Coral announced k a across re, the yea tegy in the in July and potentially same r also then lau our bus saw sig mo iness. nifican nth. And wenched t progre didn’t ss in CR
F E AT U R E CSR
“We recommend customers to have a break and act in a way that supports them not gambling too fast. Ultimately it is up to the customer to take this advice.” The company’s commitment to social responsibility also extends to its marketing, where it aims to ensure that all customer offers are clearly described, and uses its advertising to portray a sense of fun and entertainment. Mr Green fell foul of the UK Advertising Standards Authority on one occasion in 2013, when an ad was found to have included unclear promotional terms, but it has stayed out of trouble since. And with the ASA ruling against online gaming operators on an almost weekly basis, Mr Green should be commended for staying out of trouble, particularly as it invests in growing its UK market share. Paddy Power Betfair is another company with strong CSR credentials. It is also responsible for some of the most controversial ads seen by UK consumers. Paddy Power caused an uproar in 2014 when it produced the UK’s most-complained-about ad of all time. The press ad featured an Oscar statuette with the face of Oscar Pistorius, along with the text: “It’s Oscar time; money back if he walks.” The double-amputee Paralympian and Olympian was on trial in Johannesburg at the time, accused of murdering his girlfriend Reeva Steenkamp. The ad was seen by many to trivialise the death of a young woman and mock Pistorius’s disability. It was promptly banned by the ASA for “bringing advertising into disrepute”. Many also questioned the morality of offering odds on a murder trial. The company did learn from that lesson. It still offends, but in compliance with ASA regulations. Its 2015 press ad in The Guardian telling then-FIFA president Sepp Blatter to “Just f**k off already!” was cleared by the ASA, which accepted that it was in keeping with the brand’s “distinctive voice” a nd t hu s u n li kely to cause offence. In 2016 Paddy Power scooped two of the top ten spots in the ASA’s list of mostcomplained-about ads of the year. Seventh place went to its Scotland’s EURO 2016 Anthem, while its Blind Footballers campaign was the fifth most-complained36
“If you get your employees to understand that there is a possibility to grow by doing good, then the marketing will come. It’s employee-driven evolution” Laura Da Silva Gomes, Silverfish CSR about ad. However, both were cleared by the ASA following complaints. Paddy Power’s marketing department will tell you that advertising is designed to appeal to its target market, and there is no doubt that it does, and their cheeky chappie antics draw a huge response on social media. But the ads also annoy and offend many non-gamblers, who make up a majority of the UK population. These people would have hea rd t hat Paddy Power had two of the most-complainedabout ads last year. The story appeared in virtually every UK newspaper and magazine in late January 2017. “Bookmakers up to more bad things again.” What they will not know is the great steps the company takes to promote responsible gambling on its websites, or that it funds programmes to educate children on the risks associated with gambling, or any of the good work it does under its CSR programme. And that negative perception of operator and industry will exist at the next local planning meeting to approve a new betting shop, or when a survey respondent is asked whether there are “too many opportunities to gamble”.
Employee-driven evolution An effective CSR programme needs to balance the near-term financial goals of the business with its long-term viability, and to do that it needs to move out of the boardroom and spread across the business. To ensure it can spread throughout the business, employees must be made aware of the concept and supported by a culture that allows the free exchange of ideas.
“The central part of CSR is raising employee awareness,” Da Silva Gomes says. “If you get your employees to understand that there is a possibility to grow by doing good, then the marketing will come. The responsible gambling, the match-fixing prevention and the customer service will all come as a natural knock-on effect from this employee awareness. It’s employee-driven evolution.” This can be aided by ethics training, something that can be rolled out across a business, which teaches employees to choose the most ethical option when there are multiple solutions to a problem. This helps to shift the focus of the entire organisation towards ‘ethical compliance’ rather than just legal compliance. Da Silva Gomes believes this can help companies break a cycle of sticking to tried-and-tested ways of doing business. “You can’t just say that the proven money-making ways are preferable,” she argues. “Operators could invest as much in CSR as they do in marketing.” This, in turn, would bring the marketing focus towards ethical marketing, where it is not acceptable to mislead players with deceptive or complicated bonus offers, or to knowingly offend much of your audience for the sake of attracting a few. By going beyond simple compliance to trying to do what is right, the gaming industry could have avoided the CMA review and probably better handled the long-simmering FOBT ‘crack-cocaine of gambling’ accusations. Gambling certainly has an image problem but it remains a form of entertainment for the vast majority of players. The industry can and should portray a better image. In the long term, CSR can help the industry confront these issues. It can put in place the tools to shield companies from unfounded criticism and create an environment that benefits customers, employees and shareholders alike. n
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YGGDRASIL INNOVATOR OF THE YEAR 2017
TIME TO TURN OFF?
There are growing calls in some of the worldâ&#x20AC;&#x2122;s largest gambling markets to reduce the level of advertising, or ban gambling advertising completely. GIQ examines the issue to see if gambling companies are being unfairly singled out for scrutiny
GIQ Q1 REVIEW
F E AT U R E CMA FALLOUT
“The CMA will come to a view as to whether the organisations they are looking into are or are not compliant, then they will consider further action against the noncompliant organisations” Dan Smith, Gowling WLG 40
IN AUSTRALIA, THE deputy premier and attorney general of the state of South Australia, John Rau, is leading calls to impose much stricter restrictions on gambling advertising at a national level, describing gambling as “ a growing social menace”. The deputy premier’s stance appears to be influenced by an unspecified report which he says shows that up to 70 per cent of Australian children gamble at least once a year and that some teenagers have accumulated gambling debts of up to AUD$30,000. In the United States, daily fantasy sports operators FanDuel and DraftKings have been buried under an avalanche of state-by-state regulations, simply because their aggressive advertising led to a major public outcry. In the United Kingdom, the Competition and Markets Authority, working with the Gambling Commission, is carrying out an investigation into gambling advertising terms and conditions to determine whether gambling operators are treating their customers fairly. The investigation was launched following consumer complaints over issues such as operators cancelling bets, altering odds after bets have been accepted, and offering misleading sign-up promotions. Then there are the ever-more powerful antigambling campaigners, such as the UK’s Campaign for Fairer Gambling, which wants to see all advertising banned. Its founder, Derek Webb, believes that operators have had it “too easy for too long”, generating substantial cash which they can direct towards advertising.
“We exhibited at all the political party conferences,” Webb says. “The most support we got at grassroots level was at the Conservative conference, and the main question was about what can be done to tackle TV advertising. The Campaign for Fairer Gambling predicted that TV advertising would come under review before the review was announced. I’m confident there will be restrictions announced.” The Campaign’s lobbying efforts have proved extremely successful, particularly in the absence of any form of robust defence by the industry. UK Minister for Culture, Media and Sport, Karen Bradley, is one of those who believes that there is too much gambling advertising on TV, claiming that her own children can “recite just about every gambling advert there is”. Even William Hill chief executive Philip Bowcock recently said that he is “sympathetic” to calls for a curb on gambling advertising, although the operator’s expansive retail estate means that it can cope with such a ban more easily than its online-only competitors.
Consumer perception Whether there are in fact too many gambling adverts on TV or too many opportunities to gamble remains open for discussion. The UK Gambling Commission’s most recent survey on industry perception showed that 78 per cent of people believe there are too many opportunities to gamble. It is important to note that like banks, gambling companies are an easy target for consumers and politicians alike. There is a general
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F E AT U R E CMA FALLOUT
GAMBLING ADS IN NUMBERS
90,000 number of TV gambling ads in 2005 Source: Nielsen
number of TV gambling ads in 2014 Source: Nielsen
gambling industry TV ad spend between 2012–2015 Source:Nielsen
£118.5m industry TV ad spend in 2015 alone Source: Nielsen
BT’s total outlay for Champions and Europa League matches over three years Source: BT
The rules were rightly introduced to miniacceptance in the industry that consumers’ views towards gambling are shaped by a hosmise children’s exposure to gambling ads, tile media, but the same survey shows that 35 but have had the unintended consequence of per cent of people’s perception of gambling is concentrating sports betting and online gamformed through the content of gambling ads, ing advertising around televised sports or in second only to personal experience (40 per cent). the few hours after the watershed before most This is why the CMA is specifically examviewers switch off for the night. This narrow ining promotional terms and conditions used window of airtime means that a consumer can in advertising, because of the sheer volume of see multiple gambling ads in a short period of complaints which they generate. time, reinforcing the view that there is “too The CMA has a broad remit to review the much” gambling advertising. gambling advertising landscape and there are Anti-gambling campaigners point to figalready suggestions that it will look to further ures showing that gambling ad spend on UK restrict daytime ads, even before the investigaTV increased from £81m in 2012 to around tion is completed. £150m in 2016, although they do not acknowl“At this stage it’s merely a request for inforedge the change to UK gambling legislation in mation, so the CMA is investigating and look2015 which spurred the war for market share. ing for businesses to demonstrate that they are The same increase in gambling advertiscompliant [with advertising regulation],” Dan ing is held up by anti-gambling campaigners Smith, head of the advertising as evidence that the current law at Gowling WLG, explains. regulatory regime does not go “They will go through that profar enough to protect young cess, they will come to a view as people and problem gamblers. to whether the organisations In reality however, gamthey are looking into are or bling is estimated to have are not compliant, then they accounted for around only three will consider further action per cent of the UK’s £5.4bn TV against the noncompliant ad spend in 2016. And despite organisations.” the higher level of advertising The concern in the UK is in recent years, this has not led that the issue may have spread to a corresponding increase beyond a minority of ads that in gambling participation or can be dealt with on a case-byproblem gambling rates. “We predicted case basis by the Advertising TV advertising Standards Authority (ASA). Apples and oranges would come The fact that the matter is As Ladbrokes Coral group being handled by a body sencommunications director under review. I’m ior to the ASA suggests this Donal McCabe explains, basconfident there to be the case. The CMA has a will be restrictions ing policy around the growth stronger range of sanctions at of gambling advertising fails announced” its disposal, from education and to address the issue in context. Derek Webb, Campaign guidance controls, to securing “People compare today to for Fairer Gambling undertakings from those found the past, naturally, but in the at fault or launching criminal past there wasn’t half as much prosecutions for unfair trading. live sport, and fewer channels, so not as much “It depends on the nature of the evidence, demand for betting,” he says. “Now we’ve got and the extent of any wrongdoing, which option all this live sport – and advertising is paying for they plump for,” Smith says. “If this is an indusa chunk of it. Everyone argues that they can’t try-wide issue, it certainly wouldn’t surprise watch sport without seeing gambling ads, but me to see them look to secure undertakings don’t realise that these ads help pay for the from a number of key players and for that to content. It doesn’t mean that advertising has serve as a warning.” exponentially grown, it’s just there are more opportunities to advertise.” Ian Barber, communications director for Advertising in the UK the Advertising Association, agrees. “It’s not Under UK legislation, gambling operators may surprising there are concerns about the conadvertise online bingo during the daytime, as centration of ads around sports – if you can only well as sports betting during televised sporting advertise in one space it’s not surprising,” he events. All other gambling advertising on TV is says. “It’s a fast-growing, quickly innovating prohibited before the 9pm watershed.
F E AT U R E
“Everyone argues that they can’t watch sport without seeing gambling ads, but don’t realise that these ads help pay for the content” Donal McCabe, Ladbrokes Coral
GIQ Q1 REVIEW
F E AT U R E CMA FALLOUT
In the industry’s favour, Karen Bradley, as Minister for Culture, Media and Sport, has to look at the effects of a gambling ad ban on not only operators, but also broadcasters and sporting bodies 44
sector, and in those sectors you also see a high volume of advertising as this helps companies establish brands and market share. Just look at price-comparison sites. “It’s difficult to argue that advertising isn’t driving the overall awareness of gambling and participation rates. But the industry is focused on whether this is resulting in a rise in problem gambling, and the figures suggest it is not.” Despite this, perception remains a problem. McCabe argues that even if you have figures backing up a statement suggesting advertising is not driving problem-gambling growth, if people believe this to be the case, then “you have a problem”. Barber explains that the whole issue is dependent on perception. For some, one gambling ad is one too many. Others accept that operators need to promote their services. Barber believes advertising is still seen as a ‘proxy’ for gambling products, which stops people looking at issues with the products themselves. “I am never going to convince people that gambling advertising can be responsible if they are fundamentally against it,” he says. “The one thing we know for certain is that when you have debates about the legality of a certain sector, we are always going to get a lot of scrutiny.
We are a fairly easy target in that nobody wants more advertising in their lives.” McCabe believes that the industry’s opponents will never accept that gambling needs to be respected, especially considering the negative public perception. “The industry has to be careful it doesn’t come across like King Canute, standing against a tide of adverse public opinion,” he says. “I watch sport with my kids, and they know most of the adverts. When I’m watching TV with my mother I see gambling ads. We can all argue that we’re acting within our rights – we are – but if the public think there are too many ads, that is the issue.”
Sport is for everyone, but it is not free What the industry has in its favour is the fact that Bradley, as Minister for Culture, Media and Sport, has to look at the effects of a gambling advertising ban, not only on operators, but also the broadcasters and sporting bodies. And gambling advertising does generate significant revenue, not only for TV companies but also for sports. Sky Sports and BT recently shelled out £5.1bn for the rights to the English Premier League for the 2016/17 season, representing a 70 per cent increase over the cost of the 2015/16
season. Now they must recoup their outlay. The BT Sport service, that was previously free to its TV customers, will now cost ÂŁ3.50 a month. This has led to accusations that the higher costs are being passed on to customers, but the reality is that only a fraction of the cost is passed directly to the consumer. Sponsors and advertisers subsidise the cost to the consumer. The real beneficiaries are the football clubs who receive more in TV rights, making lower-tier Premier League clubs more valuable than high-profile clubs in other countries. Without the support of the gambling industry, it is unlikely that broadcasters could afford to pay the everincreasing fees to air live sport.
History repeating Of course, we have seen this all before. Before sports betting, it was alcohol and tobacco that were GIQ Q1 REVIEW
in the firing line for sponsoring and advertising around sports. In fact, up until 1984, there was still an official cigarette sponsor for the Olympic Games. For the same reasons that apply to gambling, the other â&#x20AC;&#x2DC;sin productsâ&#x20AC;&#x2122; were similarly restricted in their advertising, resulting in a concentration around live sports. The tobacco industry in particular took advantage of this opportunity, sponsoring numerous Formula One teams and partnering with or advertising at practically all MLB, NFL and NBA clubs.
Above: Until relatively recently tobacco companies advertised extensively around sporting events
Gambling sponsorship generates significant revenue for broadcasters and sports teams
F E AT U R E CMA FALLOUT
It is estimated that by 1994, tobacco-maker RJ Reynolds alone sponsored more than 2,700 individual sporting events each year. These marketing opportunities have obviously since been closed to the tobacco industry (excluding e-cigarettes) but the alcohol industry has survived, primarily because, like gambling, alcohol consumption is something that is enjoyed responsibly by the vast majority of consumers. The arguments then, as now, were centred on the risk that such advertising poses to children, particularly around live sports. But according to the Premier League’s own figures, the average age of an adult fan at live games is 41 years old, with children accounting for just 12 per cent of all season ticket sales. Likewise, the 18 to 34-year-old age bracket represents the largest group of TV viewers. Formula One is perhaps the sport that has had the most difficulty dropping its smoking habit. Thirty years ago it boasted one of the highest live sport TV viewership figures in the world. Not only did sponsorship allow F1 to broadcast free-to-air, it also enriched the teams involved in the sport, allowing them to pay for the best drivers in the world to drive their cars. The end of tobacco sponsorship was meant to herald a bold new era, where family-friendly brands such as Coca Cola and McDonald’s would step in to fill the sponsorship void. In reality however, it has never recovered. The luxury of watching every race live for free is now a distant memory for most fans, or at least the ones who have not deserted the sport after teams were forced to offer their race seats to the drivers who could bring in their own money, rather than those deserving to be in the sport. As a result, the opening race of the 2017 season in Australia attracted its lowest live TV audience, at least in the UK.
What next? According to the Campaign for Fairer Gambling, an ad ban is on its way, even if it is not imposed immediately.
“The industry needs to move away from above-the-line advertising, so for me it comes down to two things: creating a bespoke relationship between the brand and consumer, and new product development” Pearse McCabe, marketing consultant
ing Standards Authority’s non-broadcast “[Karen] Bradley genuinely wants to advertising, sales promotion and direct change things,” says Webb. “I think the timmarketing CAP Code and the BCAP Code for ing is important. “The [CMA] review will broadcast advertising. not be published until April at This code requires t he e a rl ie s t . It c ou ld b e operators to ensure their adversubstantially later.” tising does not appeal to minors, Webb believes that a packthough not quite as strictly age of reforms, targeting both as the ASA’s alcohol advert fixed-odds betting terminals – restrictions. It also states that another key bone of contention adverts “must be legal and not – as well as advertising, will misleading”. Considering the be introduced. CMA is embarking on a major Webb may see this as the review of advertising terms industry’s chickens coming and conditions, it’s safe to say home to roost. But if the industhis is not being enforced vigortry prepares for this outcome ously enough. and shows a willingness to New controls could also proweather more regulation in vide impetus for the industry the name of consumer protecto innovate, as marketing and tion it could help itself in the branding consultant Pearse long term. McCabe says. A w i l l i n g ne s s t o s el f“ T he i ndust r y needs regulate is being talked up to move away from above-themore and more. The received line advertising, so for me it wisdom is that the industry comes down to two things: needs a self-regulatory body creating a bespoke relationsimilar to the alcohol industry’s ship between the brand and Portman Group. Senet Group consumer, with promotions is the latest body seen as through digital channels. The capable of achieving this. Senet other thing is new product Group, however, is focused development. on responsible gambling and “What comes after in-play on FOBTs and not responsible betting? That’s when things advertising. become exciting,” he says. Established in 1989, the However Barber argues that Portman Group is often held new advertising controls will up as the best example of how miss the target. He believes that an industry can police itself. if concerns about the effects of By accepting and enforcing gambling are genuine and more regulatory measures it has From top: Ladbrokes’ Donal McCabe; marketing regulation is seen as necessary, helped improve the alcohol and branding consultant targeting advertising is the industry’s public image and Pearse McCabe; and wrong approach. helps head off further controls. Gowling WLG’s Dan Smith “The arg ument [by the While alcohol advertising Adver ti si n g A ssoci ation] regulations are largely similar against government bans is always the to gambling, they include a number of stricter same,” he says. “If you don’t like the product, controls. For example, no alcohol promotions regulate the product. Don’t regulate the way can appear in a medium if 25 per cent or more the product is talked about.” of the audience is under 18 years old. This Whatever the outcome of the CMA review, covers all channels, including sports sponand the UK government’s response, it is sorship; television and even social media. clear that the onus remains on operators to Similar controls could be enforced on the not only accept new controls but to also find gambling sector. other ways to effectively market to players. But self-regulation of gambling is not The picture critics paint of gambling a new concept. The Remote Gambling advertising being out of control is clearly an Association (RGA) has already set out the exaggeration, but that’s unlikely to stop new Gambling Industry Code for Responsible controls coming into force. All the industry Advertising. UK licensees are meant to can do is be prepared. n adhere to this code, alongside the Advertis-
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Asian games The Asian market has long been considered too difficult or too risky for listed companies but skill games could provide a legitimate way in
GIQ Q1 REVIEW
F E AT U R E
here are untold numbers of companies making fortunes from online gaming in Asia. If you have a look through the licensee lists of the Isle of Man or the Philippines you will see operators such as Bodog, Dafabet, SBObet, 188bet, Fun88 and several hundred other brand variations featuring the lucky number eight. All of them will be making a small fortune, but notable for their absence are signs of any of Europe’s dominant listed gambling businesses. Betsson tried to explore opportunities in China with little success and Ladbrokes has a joint venture with Hong Kong-based lottery company AGTech. Five years ago, Sportech signed a joint venture agreement with India’s largest lottery provider Playwin, a subsidiary of the multi-billion-dollar Indian conglomerate Essel Group, which owns a selection of the country’s leading entertainment, technology and media companies. Nothing much came from any of the ventures. Meanwhile, the Chinese government vacillated between promises of new licences for mobile and internet lottery sales, and crackdowns on iGaming sites. Most were scared off by the vagaries of a market which was far too grey for the faint-hearted. However, there are signs that both India and China could turn into legitimate gaming markets.
The Alibaba connection The key to China seems to lie in the hands of Jack Ma, the chairman of Chinese e-commerce giant Alibaba Group. Alibaba holds a stake in the social casino market. Its private equity division Yunfeng Capital was part of a consortium
of Chinese investors that acquired Caesars small online gaming supplier into a real player. Interactive’s Playtika in a USD$4.4bn deal in Canada’s Mojo Games emerged out of July last year. But there are clear signs realnowhere at the end of 2016 with one of the most money gambling has caught his eye. eyebrow-raising deals of the year, when it Ma is thought to have met former Amaya announced an agreement with Alibaba to prochief executive David Baazov with a view to vide the Chinese company with software for investing in the PokerStars owner last year. an online poker platform. It followed that up The talks came to nothing and Baazov’s takeoin early 2017 with another potentially lucrative ver of the company failed amid a flurry of accudeal with an Essel subsidiary, Mercury Gaming sations and denials from potential investors. Solutions, to launch the India Poker Network. But Ma has not been deterred. Alibaba But what is Mojo Games and where did it acquired a 60 per cent stake in AGTech in 2016. come from? And, most importantly, is it legal? The agreement promised Mojo’s chief executive AGTech would be Alibaba’s officer Nick Mellios and exclusive lottery provider on chief financial officer Chris “Real-money gaming its Taobao shopping site. TaoMacPherson were happy to is legal in India, but bao has 5m registered users tell their story. if the partner wasn’t and has been ranked among the world’s 20 most popular Amaya as inspiration the Chandra family, it websites. It also plans to might be problematic. Mojo Games began life as launch a lottery channel on Euroclub, which Mellios China is a massive Alipay, Alibaba’s online payand MacPherson launched opportunity but if it ment platform which boasts in 2010. Mellios had worked wasn’t for Alibaba 300m users. It is hoped that at the Cake Poker Network monetising the AGTech’s lottery solutions, before launching Euroclub solution, I’d have combined with Alipay and as its CEO. MacPherson Alibaba’s reach, will domiretained his day job as a VP some concerns” nate the market. at wealth management firm Chris McPherson, Mojo Games Meanwhile, Sportech’s CIBC Wood Gundy while seemingly dormant Playprivately helping Mellios win joint venture is at last showing signs of raise the funds to begin his new venture. life. Late last year the JV began to supply techThings went well at first. The company nology to an Indian company which provides acquired a Maltese licence and launched Italian pool betting services for a Sikkim licence operator Goldbet in 2012 as its first major cusholder. Despite admitting that revenue was tomer. Revenue grew to over $40 million a year very small, the joint venture partners hope but Euroclub struggled to compete in Europe. to establish a proof of concept for the broader For a while it held a UK Gambling Commission market in India, as legislation permits. licence but it was not generating the revenue Then, Alibaba and Essel made separate to maintain it. Ultimately, the company was announcements that could transform one too small to compete in Europe’s regulating
Mojo Games factfile CEO: Nick Mellios CFO: Chris MacPherson Staff: 25 Offices: Vancouver, Dublin, Barcelona 2015 revenue: €665,000 Licences: Malta, Curacao Clients: Mercury Gaming, Baadshah Gaming, VLeague
GIQ Q1 REVIEW
F E AT U R E
The launch of Alibaba’s IPT Poker Tour
First comes India. The deal relies on two markets. So it changed its name to Mojo Games Supreme Court cases (see box), which judged and refocused on emerging markets. games such as rummy, poker and, strangely, That refocusing of effort has reaped horse racing as games of skill that lie outside spectacular dividends, with deals in India the prohibitive Gambling Act. and China. The success has emboldened Mojo. Mojo has formed a joint venture with MerMacPherson quit his day job to become Mojo’s cury Gaming Solutions and together they have full-time CFO. He engineered a reverse takeover launched MercuryPoker.com. It is the first skin of Sterling Group Ventures, a Canadian comon the joint venture’s Indian poker network, pany that had previously been involved in the which will also host a Mojomining industry. branded site and a site for “With Amaya entering Baadshah Gaming, a subsidthe public space, it really iary of land-based operator created a market,” explains Pride Group. Mellios. “Being from CanaThe latter already hosts da, we thought it made a lot a fantasy cricket game, of sense to take advantage which is another skill game of that access to capital. that has been carved out of And, as a B2B provider, we the Gambling Act. This has thought that a public listing provided a similar route would be good reputationback for another company ally.” that had struggled in its The deal has elements Mojo Games CFO Chris MacPherson first iteration. Joe Brennan, that could have been taken former lobbyist for iMega, straight from the David launched FastFantasy with a view to taking Baazov play book. From a structural point of on DraftKings and FanDuel in the US fantasy view, Sterling was a Nevada-based company, sports market. which might be useful in the US market and However, the legal problems that engulfed it had some Chinese company assets, which FanDuel and DraftKings made fantasy a dirty would be helpful with Alibaba. Primarily howword Stateside and the company rebranded ever, it gave Mojo a Nasdaq listing. as Sport Analytics & Data (SportAD). Its first But Baazov is not the only entrepreneur to launch comes with an Indian operator called provide Mellios with inspiration. “GVC has Tajbet, which runs SportAD’s GoldBall88 been very aggressive in certain jurisdictions,” product. says Mellios. “Where we can do that and not Again, Brennan is facing larger competitors violate the terms of our Malta licence, we will such as Dream11, which has offered fantasy do that.” cricket games for around five years. But these GVC built its reputation in Brazil, Germany sites all use the model whereby you buy a squad and Turkey before going mainstream with its of players with a certain amount of money and acquisitions of Sportingbet and bwin. Simimanage the squad, trading players depending larly, Mellios says he will shortly announce on what teams they are facing in any given week a deal in Brazil, and mentions a partnership and the likelihood of them scoring. Brennan in Russia. 52
feels a simpler approach, which pitches, say, Lionel Messi against Cristiano Ronaldo and asks who will score more goals this weekend, to be more attractive to punters. “It’s something that people can understand internationally, no matter the sport. The old model has a level of complexity that is not appealing to most bettors,” says Brennan. The product has had two test cricket series to bed in but is hoping to take off during the Indian Premier League cricket season. It might stand a better chance than Mojo’s poker. While Mellios and MacPherson acknowledge they have a dream partner with a huge amount of customers that they can drive towards the poker games, they also realise that rummy is India’s number one card game and cannot be sure poker will take off.
Ideal partners In China, the situation is more complicated. Mojo has partnered with Chinese company VLeague Internet Technology, which is the exclusive provider of social gaming products to Alisports’ chess and cards division. Alisports is launching its International Poker Tour with
F E AT U R E
INDIAN LAW ON GAMBLING
The key to China seems to lie in the hands of Jack Ma, the chairman of Chinese e-commerce giant Alibaba Group. Alibaba holds a stake in the social casino market
events across Asia, North America and Europe. Mojo and VLeague will launch its social poker product, which will give people access to the $7 million prize money tour. Mojo’s platform has been integrated with Alibaba’s Aliyun cloud, Alipay and Taobao, and the finished product is expected to go live during the first half of the year. For the product to be 100 per cent legal, Mellios says the software needs to be registered in China and owned 100 per cent by a Chinese company such as VLeague. Poker is classified as a ‘mind sport’ along with other games in Alisports’ chess and cards division. “Even sports challenge games can be categorised as ‘mind sports’ and that’s very close to sports betting,” says Mellios. “It’s a fine line between that and gambling. And it has to be social currency, not Chinese renminbi or any other real-money currency.” MacPherson is reassured by the standing of Mojo’s partners in both India and China. “Those markets are massive. Real-money gaming is legal in India but it is a greenfield opportunity. We don’t know if poker will catch on. If the partner wasn’t the Chandra family, it GIQ Q1 REVIEW
might be problematic,” he continues. “China is a massive opportunity but if it wasn’t for Alibaba monetising the solution, I’d have some concerns.” Because it’s Alibaba, it’s unlikely to be shut down by the government. While Mellios is 100 per cent certain of its legality, he would not be doing this alone. So MacPherson and Mellios are cautiously optimistic. Mellios describes his 25-person company as a team of “product guys and technologists”. They do not claim to be marketing gurus, and that might have been part of their undoing first time round. Now they have improved the platform and have found the joint venture partners with the marketing muscle to help them succeed. MacPherson is concentrating on building the corporate infrastructure. Sterling Group Ventures will be rebranded to become Mojo Games and will be listed in Toronto, where the likes of Amaya, Intertain and NYX have prospered. The CFO talks about using the company’s stock as currency to acquire smaller operators. If that is a road well-travelled, their path in Asia certainly is not. n
The principal legislation governing gambling in India is the Public Gambling Act, 1867 (PGA). The PGA criminalises the act of ‘gambling’ in a public forum and the keeping of a ‘common gaming house’. The PGA, however, creates an important exception in favour of games of skill, by stating that the provisions of the PGA shall [not] be held to apply to any ‘game of mere skill’ wherever played. In determining whether a given game or contest is a game of skill or chance, Indian courts have adopted the standard of assessing the ‘dominant factor’ of a game. The two most important Indian cases in this regard are State of Andhra Pradesh v. K Satyanarayana (AIR 1968 SC 825) (the ‘Satyanarayana’ case) and KR Lakshmanan v. State of Tamil Nadu (AIR 1996 SC 1153) (the ‘Lakshmanan’ case). In the Satyanarayana case, the Supreme Court defined a ‘game of mere skill’ to mean a game “in which, although the element of chance necessarily cannot be entirely eliminated, success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player.” By application of this definition, the Supreme Court held that the game of rummy was a game of skill, and did not amount to gambling under the PGA. While upholding the levy of a nominal service charge for provision of a physical space, cards, etc, to play a game of rummy, the Court reasoned: “Rummy requires certain amount of skill because the fall of the cards has to be memorised and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill.” In the Lakshmanan case, the Supreme Court held that the betting on horse races was a game of skill. It rationalised that in a horse race the winner is not determined by chance alone, as the condition, speed and endurance of the horse, and the skill and management of the rider are factors affecting the result of the race. The bettor has the opportunity to exercise his judgement and discretion in determining the horse on which to bet.
F I NA NC E GIQ20 Q3 2016
M&A activity drives Strong performances by leading Nordic-listed iGaming operators and suppliers continued in 2016 as aggregate revenue rose by 39 per cent to approximately SEK17.6bn (€1.8bn), writes Redeye analyst Kristoffer Lindström
CONSOLIDATION CONTINUES TO be the overriding theme for the leading Nordic-listed companies. All companies that grew by more than 100 per cent over the year did so due in part to M&A activity. This has continued into the first quarter of 2017 and we expect no slowdown in the near term. Within the affiliate space, the number of acquisitions has intensified further. Catena Media, Cherry, Gaming Innovation Group (GIG) have all expanded their portfolios of affiliate assets considerably, and the lesser-known but growing Net Gaming Europe snapped up Malta-based Highlight Media to expand its lead generation business. GIG has also raised an SEK400m bond with the ambition to further strengthen its affiliate portfolio. We expect to see further consolidation within the affiliate iGaming market, with larger players acquiring smaller ones. Given the business risk characteristics for affiliates, a portfolio strategy is favourable.
2016 Revenue comparison (SEK) Company Net Gaming Europe
Gaming Innovation Group
Cherry (excl. land-based)
Mr Green & Co
NetEnt Kambi Group
TOTAL Source: Redeye Research
For the operators, Cherry’s acquisition of ComeOn and GIG’s purchase of Betit were among the highlights of last year, while 2017 has begun with a proposed deal for Kindred to acquire UK-facing operator 32Red for £175.6m. Scale advantage for operators is becoming
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Nordic success more and more evident, offering better deals with the suppliers and operational leverage. One of the factors driving consolidation is the upcoming re-regulation of many European markets. With gross gaming revenue lowering gross profit margins, companies must leverage other costs to see increased profit in the next few years. 2016 EBIT comparison (SEK)
2016 Enterprise value comparison (SEK)
Net Gaming Europe
Gaming Innovation Group Catena Media Cherry (excl. land-based) Nordic Leisure LeoVegas Kindred Group Evolution Gaming NetEnt Kambi Group Mr Green & Co Betsson TOTAL Source: Redeye Research GIQ Q1 REVIEW
The aggregated EBIT for Nordic-listed companies amounted to approximately SEK3.5bn during 2016, up 49 per cent from 2015, meaning profits grew faster than revenue. Many midsized and smaller companies saw their bottom line turn from red to black, which has led to this sharp increase in profits.
Evolution Gaming Catena Media
Net Gaming Europe
Cherry (excl. land-based)
Gaming Innovation Group
Mr Green & Co
Aggr EV/EBIT Source: Redeye Research
n Spotlight o IA SCANDINAV
T he agg regate enterprise value (EV) of the 12 companies was SEK82.6bn at the end of 2016, which meant the sector’s value increased by 26 per cent year-on-year. In comparison, the SIX30 Return Index (the 30 largest Swedish companies with dividends reinvested) rose by nine per cent in 2016, showing just how successful a year it was for the iGaming sector. On an aggregated level, EV/EBIT (which measures whether a share in a company is cheap or expensive) decreased from roughly 28x to 24x. We believe investors are awaiting the upcoming re-regulation in Sweden and have put a larger ‘risk’ premium on the valuation compared to 2015. n
With gross gaming revenue lowering gross profit margins, companies must leverage other costs to see increased profit in the next few years 55
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The Scandinavian model n Spotlight o IA SCANDINAV
Five leading CEOs give GIQ an overview of their company’s performance in 2016, and their views on why Scandinavian companies are among the most successful in the iGaming market today
NetEnt President and CEO Per Eriksson NetEnt reported another record-breaking year in 2016, in what was an exciting 12 months of achievements and firsts, as we set new levels in revenue, earnings and cash flow. Following new licences and certifications, our games were launched in Romania, Bulgaria and Portugal. In total, we signed 45 new customer agreements, our highest ever. “Scandinavian tech companies have built a reputation for innovation, and we are recognised as world-leaders in this area. Fundamental to this is the nonhierarchical work e nv i r o n m e nt . This boosts creativity and firmly encour-
ages new ways of thinking by instilling an innovative mindset among employees. “Stockholm, where NetEnt hosts many of its development teams, is home to some of the greatest tech companies and talent on the planet. It is a tech hub, with pioneers from a range of different sectors, including the likes of Klarna, Spotify, iZettle, and King. “In Sweden, and Scandinavia as a whole, we benefit from being introduced to a stimulating environment from our earliest stages. Everyone, of all ages, has access to the internet, and we have a renowned university system that offers a first-class education, with a particularly strong reputation for IT, computer science and engineering. “With regards to iGaming, it is an approach t hat has a l lowed NetEnt and a number of likeminded companies to flourish and to drive the industry forward with new ideas and products.”
Evolution Gaming CEO Martin Carlesund
“We feel it’s a positive to be listed in Stockholm, where several gaming operators and system providers are listed” Martin Carlesund, Evolution Gaming
Naturally we are delighted with our performance in 2016, which was Evolution’s 10th year in business. New operators are coming on board at a healthy rate – and several of our larger customers are growing their business with us. Competition cer tainly increased during 2016, but we continue to take market share. “How much of our success can be attributed to our Swedish origins and DNA is debatable. Instinctively, I do
believe it is a strong factor, but let’s analyse the facts. Although Evolution Gaming has Swedish origins, our business today is international. Our main central studio is in Riga and our commercial operation is based in Malta, along with our second central studio. Our customers span all of Europe, as do our seven central and on-premise live casino studios. “Today, our Scandinavian connection is mainly from an investor perspective. We feel it’s a positive to be listed in Stockholm, where several gaming operators and system providers are listed. It builds interest in the segment from investors. There is a strong Swedish influence among our top and middle management. But then again, we also have senior
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LeoVegas CEO and co-founder Gustaf Hagman What five years ago did not exist is today being referred to as a Scandinavian success. It all started in 2011 when Robin (RammEricson) any I were playing with our iPhones and were spinning them on a table in front of us. “As they say, the rest is history. We quickly assembled a team of five people and started planning to launch the world’s first mobile casino. At LeoVegas we saw mobile devices with a totally new perspective – we saw them as entertainment devices. We had the foresight to see that smartphones will completely revolutionise the way we live, work and play. “We have managed to build an award-winning company made up of 400+ individuals who are the very best at what they do. Even though we are growing fast, I’m glad that the entrepre-
Betsson President and CEO Ulrik Bengtsson 2016 was a sometimes challenging year for Betsson, particularly in the second quarter, but the second half progressed well. We made a step-change in product development in 2016 and, to mention one effect of the improvements we made, our mobile casino is now one of the best experiences out there. “We entered 2017 with better products, strong underlying activity and are well positioned for continued growth. This will be an interesting year also from a regulatory perspective as we hope that both Sweden and the Netherlands will move forward in introducing a re-regulation of the gaming market to enable competition on fair terms.
+73% Market cap
SEK3.53bn % Change
neurial spirit which both Robin and I still show has remained a core culture at LeoVegas. This entrepreneurial culture is not distracted by internal positions or processes. At LeoVegas, we are agile, still able to change and adapt, but above all, we are able to execute. To put this simply – we make things happen.”
+11% Market cap
SEK12.09bn % change
“Today we have 48 nationalities in the company, so we’re really a European company that happens to originate in Sweden. Our success is not related to where you come from; the drivers are technology and user experience.”
le d to succ essf u l i nter net-ba se d managers from other countries and cultures companies in a number of industries, – England, Italy, Latvia and the USA to name not just gaming. but a few. Having said that, there “Finally, there is the are cultural, commercial and tech- 2016 revenue positive industry dynamic nology factors that go some way to SEK1,091m around larger successful explaining why several successful Change companies in the region, gaming companies have come out +56% such as Betsson and Kindred. of Scandinavia. Market cap “Firstly, there is a widespread Both have been successful betting culture in the Scandina- SEK12.08bn and many companies vian region, mainly around sports % change have either come betting. To this we can add early +68% direct ly from t hose g roups adoption of the internet in general or been started by forin Scandinavian countries, which meant early and good internet penetration. Togethmer employees of these er with a good supply of engineers this has companies.” GIQ Q1 REVIEW
Cherry CEO Anders Holmgren Cherry AB continues to go from strength to strength, and 2016 was yet another impressive year from a business performance perspective. And we are expecting this trend to continue in 2017 with our revenues predicted to reach between SEK2.6bn and SEK2.7bn. “Two things that will continue to be core to our concerted push to achieve this goal are innovation and technology. In fact, these are at the heart of everything we do. One key ingredient to achieving this has been having an agile and hard-working workforce. Indeed, we have some of the most creative, motivated and passionate employees – around 900 in total – working for Cherry, who are determined to see the business continue to 2016 revenue grow and innovate. SEK1,102.4m “But it’s not just Cherry; a number of Change Scandinavian opera+109% tors have been perMarket cap forming particularly SEK5.20bn well. One thing I put % Change this down to is that the +221% region has long been a hotbed for extremely tech-savvy and determined entrepreneurs. Likewise, an entrepreneurial spirit runs through Cherry’s DNA. I believe being able to recruit some of the brightest talent from Scandinavia, as well as other European countries, has been a catalyst for our explosive growth. “Another reason operators have thrived is because internet and mobile penetration rates have traditionally been high. Residents of Sweden, Denmark, Finland and Norway also enjoy particularly good levels of income, while gambling rates per capita are up there with the highest in Europe. And with long, dark winter nights in this corner of Europe, people have always enjoyed playing indoor games. Casino gaming is an extension of this.”
“The region has long been a hotbed for techsavvy and determined entrepreneurs” Anders Holmgren, Cherry
SBTech We Know Sports
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ON THE FOLLOWING PAGES
60 GIQ20 2016 results and analysis 71 Gaming Intelligence stock index
The GIQ 2016 THERE WAS A Nordic flavour to the top of the GIQ20 chart for 2016, with seven of the top 10 fastest-growing companies listed in Stockholm and another in Oslo. Oslo’s Gaming Innovation Group stood out, after ending 2016 as one of a band of emerging iGaming specialists. Catena Media is another to have had a triumphant year, which included a Stockholm IPO in March. Cherry was the third and final company to register triple-digit revenue growth in 2016, as it benefited from the first contributions from operator ComeOn, while LeoVegas’ organic growth continued unabated. LeoVegas also joined the M&A bandwagon, acquiring Winga. it in February to gain a position in the Italian iGaming market. It was a successful year too for the Stockholm-listed trio of Kindred, Evolution Gaming and NetEnt. Scientific Games and 32Red were the two ‘outsiders’ to break the Nordic stranglehold. This will be the last appearance for 32Red in the chart as it joins Stan James Online as part of Kindred’s Gibraltar-based operations. Paddy Power Betfair will be a force to reckon with this year, following its successful integration in 2016, and while Ladbrokes Coral’s results weren’t released in time for this issue of GIQ, it appears to be on a path to success. Its main rival William Hill seems stuck in a downward spiral. New CEO Philip Bowcock will have a job returning the bookmaker to its former glory, and indeed the GIQ20. GIQ Q1 REVIEW
The GIQ20 2016 COMPANY
GAMING INNOVATION GROUP
CHERRY (EXCL. LAND-BASED)
MR GREEN & CO
CHURCHILL DOWNS INCORPORATED (EXCL. LAND-BASED)
PADDY POWER BETFAIR
(EXCL. RETAIL, AUSTRALIA & US)
F I NA NC E GIQ20 2016
Gaming Innovation Group takes GIQ20 crown for 2016 Stockholm-listed companies dominate the GIQ20 after another year of success, but Gaming Innovation Group takes top spot, writes Kio Dawson
GAMING INNOVATION GROUP 202% Net revenue (€) 2015
Oslo-listed Gaming Innovation Group acclaimed 2016 as a breakthrough year for the company, as revenue soared 202 per cent following a strong finish to the year. Revenue in Q4 climbed 237 per cent to €21.5m, including a full quarter’s contribution of €7.5m from the newly acquired Betit brands, without which organic growth amounted to 19 per cent. The number of active users for the B2C segment rose three per cent to 183,521 compared to 60
the previous quarter, with GIG’s original three brands reaching record high actives of 109,259. On the B2B side, there were 25 brands operational on the iGaming Cloud (iGC) platform by year end, with 24 external clients signed – beating the company’s target of 20 agreements. GIG’s affiliate business Innovation Labs also performed well, recording more than 10,350 new first-time depositors during Q4, an increase of 130 per cent year-on-year. The business has been strengthened further this year with GIG’s acquisitions of an unnamed affiliate network for €3.5m and Casinotopsonline.com for €11.5m. “In 2016 Gaming Innovation Group truly entered the iGaming scene,” said CEO Robin Reed. “Rizk.com has been one of the most successful iGaming launches of 2016 and we have completed several acquisitions. All this illustrates how the company has emerged during the year.”
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CATENA MEDIA 168% Net revenue (€)
Search revenue Paid revenue TOTAL
It was also a transformational year for Catena Media which saw the performance marketing specialist undergo a successful listing in Stockholm and integrate seven strategic acquisitions. Full-year revenue rose 168 per cent to €40.1m, with the company benefiting from a record Q4 performance. Revenue grew by 108 per cent to €12.3m and new depositing customers (NDC) climbed 170 per cent to 67,023. “2016 was the most eventful and successful year to date for Catena Media, with continued strong growth and solid results,” said CEO Robert Andersson. “Looking back at what we have accomplished over the last 12 months is rather impressive. “We have completed and integrated seven strategic acquisitions, entered three new markets, and concurrently broadened our offering, reaching over 204,000 NDCs and increasing the number of employees from 70 to 190.” Catena’s focus on its iGaming lead-generation strategy saw it acquire a number of businesses, including UK-based sports news provider SBAT, as well as affiliates Casinouk.com and the US-facing PlayNJ.com and USpoker. com. The company followed this up with a deal for Swedish affiliate Slotsia.com in February.
CHERRY 158% Net revenue (SEK) 2015
Cherry’s iGaming business now represents more than 85 per cent of the company’s total annual revenue, which more than doubled in 2016 to SEK1,102.4m. Excluding the land-based Restaurant Casino business, total iGaming revenue rose 158 per cent to SEK945.4m for 2016. Results were boosted by a strong fourth quarter performance, with revenue soaring 201 per cent to SEK519.4m after consolidating a full quarter’s results from ComeOn. B2C GIQ Q1 REVIEW
revenue rose 294 per cent in Q4 to SEK440.8m, of which ComeOn contributed SEK271m, while the company’s B2B businesses also recorded growth. Game Lounge revenue climbed 138 per cent to SEK18.7m, while revenue from Yggdrasil increased by 207 per cent to SEK31.8m during the quarter. “I am thrilled to see that there is still plenty of room for creativity and innovation in the gaming industry,” said the operator’s newly appointed CEO Anders Holmgren. “If you want something enough and develop your ideas with the right people and capital, then nothing is impossible. “Cherry possesses the size and the right entrepreneurial spirit to be able to act in major regulated markets while promoting innovation and appropriate risk taking. This is a recipe for success in the gaming industry.”
LEOVEGAS 70% Net revenue (€)
Operator LeoVegas made its first acquisition in February of this year with a €6.1m deal to acquire Italy’s Winga.it from Paf. This followed another record year of organic growth in 2016. Revenue rose 70 per cent to €141.4m during the year, with the company heading towards its long-term target of generating €300m in revenue by 2018. “Ou r two new gaming categories, LeoVegas Sport and LeoVegas Live Casino, have continued their strong development,” said CEO and co-founder Gustaf Hagman. “New initiatives are being taken on a regular basis in these categories with new innovations designed to clearly differentiate LeoVegas’s offering and continuously take the customer experience to new heights. “LeoVegas continues to develop according to our vision: to create the ultimate gaming experience and be number one in mobile gaming.” The Nordic region represented 57 per cent of LeoVegas’ revenue in Q4, down from a 64 per cent share the previous year with the UK contributing 11 per cent, down from 22 per cent. The rest of Europe’s share grew to 17 per cent, with this figure likely to grow further following the Winga acquisition, with the rest of the world contributing 16 per cent.
“Cherry possesses the size and the right entrepreneurial spirit to be able to act in major regulated markets while promoting innovation and appropriate risk taking” Anders Holmgren, Cherry
F I NA NC E GIQ20 2016
“2016 was another year of growth, progress and industry-leading product innovation for Scientific Games,” said CEO Kevin Sheehan. “With 2017 off and running, we are maintaining focus on playing smart to galvanise our business growth. “We are driving innovation to create new, differentiated products for our customers, improve financial performance to accelerate deleveraging, and build a culture open to new ideas and committed to exceeding the expectations of our customers and stakeholders.”
KINDRED GROUP 54% Net revenue (£) 2015
Casino and games
Net revenue ($)
Social gaming B2C
“With 2017 off and running, we are maintaining focus on playing smart to galvanise our business growth” Kevin Sheehan, Scientific Games
Scientific Games’ Interactive business was the star performer in 2016 as revenue for the division grew 58 per cent to $332.8m, although it still represented less than 12 per cent of the gaming and lottery behemoth’s annual total. While the company’s gaming and lottery divisions struggled for growth during the year, Interactive was boosted by the popularity and increased play of its B2C social gaming app Jackpot Party Social Casino, and the success of the recently released Quick Hit Slots, Hot Shot Casino and Blazing 7s Slots apps. Average daily active users (DAUs) rose 14 per cent to 2.5m during the year, while monthly active users (MAUs) climbed three per cent to 7.9m. Average revenue per DAU increased significant by 48 per cent to $0.31. Scientific Games also continued to expand its real-money gaming business with the launch of products at 18 additional online casinos.
Stockholm-listed Kindred Group surprised everyone with its £176m deal to acquire online casino operator 32Red, just weeks after announcing a record performance in 2016. The company generated £544.1m in revenue during the year, up 54 per cent compared to the previous year, with strong growth across all of its product offerings. Casino and games represented just under half of the total, having grown 57 per cent, with sports betting also impressing as revenue rose 52 per cent. Poker saw the biggest improvement as revenue increased 64 per cent, while other revenue was up 22 per cent.
F I NA NC E
“[The result] represents an all-time high and continues to prove the scalability of our business model and our ability to face and absorb the impact of regulatory changes,” said chief executive Henrik Tjärnström. Having recently added iGame and Stan James Online to its plethora of iGaming brands, Kindred agreed to acquire Gibraltar-based 32Red for £176m in February, further boosting its casino vertical. Upon completion, 32Red will be delisted from London’s Alternative Investment Market.
EVOLUTION GAMING 51% Net revenue (€)
Live-dealer casino specialist Evolution reported a 51 per cent increase in revenue to €115.5m for 2016, with a strong final quarter ensuring a successful end to the year. Revenue in Q4 climbed by 53 per cent year-on-year to €34.3m, marking the company’s 13th consecutive quarter of growth. Evolution attributed the positive revenue development to increased commission from existing customers, as well as new launches for the likes of 888, Virgin Games and bwin. The company also benefited from strong growth in mobile, with the channel generating 46 per cent of Q4 revenue, up from a 28 per cent share a year ago. “2016 marked Evolution Gaming’s 10th year in business and I am happy to report that we wrapped up a very successful year with a strong quarter,” said CEO Martin Carlesund. “Our focus on the quality of the user experience, offering the broadest product portfolio for all devices and delivering a leading service to our customers, are some of the factors behind our strong results in 2016. “2017 will be an exciting year for Evolution. We will continue to work according to our strategy where product innovation, regulated markets and land-based solutions are key areas.”
NETENT 28.5% Net revenue (SEK) 2015 TOTAL
NetEnt was another Stockholm-listed supplier to excel in 2016 as revenue reached a record SEK1,455.1m, up 28.5 per cent versus the previous year. GIQ Q1 REVIEW
32RED 28% Net revenue (£) Casino Other products TOTAL
London-listed 32Red delivered yet another record revenue performance in 2016 as revenue grew 28 per cent to £62.3m, but this will be the last time the operator makes an appearance in the GIQ20 chart as it becomes part of Kindred Group’s growing portfolio of iGaming brands. Online casino revenue rose 26 per cent to £58.5m, reflecting increased marketing investment in 32Red Casino and growth in Italy, while other products saw revenue climb 60 per cent to £3.8m, primarily driven by the Kambi-powered 32RedSport which continues to develop as an increasingly important customer acquisition and retention channel.
“In 2016 the group delivered continued strategic progress across the business, with outstanding growth on mobile” Ed Ware, 32Red
“It’s a pleasure to announce another record annual performance from 32Red,” said chief executive Ed Ware. “In 2016 the group delivered continued strategic progress across the business, with outstanding growth on mobile, further successful product enhancements and highly successful marketing investment, all the while maintaining one of the highest levels of regulated revenue amongst our peers. “We are confident that Kindred will provide the right fit both operationally and culturally to continue the group’s growth. The group’s outstanding performance in 2016 is, above all, testament to the efforts of our outstanding team.”
The casino games developer signed 45 agreements during the year and launched operations for 34 new customers. At the end of the year, the company had 168 active customers, up from 134 a year ago, with another 31 yet to launch. The quarter saw NetEnt’s recent focus on the UK market begin to bear fruit, becoming the company’s largest geographical market for the first time in December. Mobile is also becoming a key channel for the supplier, accounting for 43 per cent of revenue during Q4. “2016 was another exciting year for NetEnt with new record levels in revenues, earnings and cash flow,” said president and CEO Per Eriksson. “Looking ahead in 2017, we see conditions for continued solid growth, supported by a strong pipeline of new games, UK, mobile, new customers to launch as well as our expansion in North America.” 63
F I NA NC E GIQ20 2016
MR GREEN & CO 17% Net revenue (SEK)
Mr Green & Co reported a 17 per cent increase in revenue to SEK924.5m for 2016, which the company accredited to the launch of its new technology platform earlier in the year. The operator said that its Mr Green 2.0 business strategy helped to produce one of the company’s strongest-ever quarters in the final quarter of the year, with revenue up by 32 per cent to SEK265.0m. “During the year, we launched both a sportsbook and new live casino, which were
KAMBI GROUP 17% Net revenue (€)
“Our strong financial performance coupled with our ability to maintain a market leading position is supported by our commitment to invest in proprietary products whilst integrating complementary acquisitions” Ory Weihs, XLMedia
The Swedish sports betting supplier posted a 17 per cent improvement in revenue to €56m during 2016, despite a disappointing end to the year following a strong set of customer-friendly football results in December. The lower margin had an adverse affect on Kambi’s results and meant that revenue in Q4 rose by just 0.7 per cent to €14.3m. “As widely reported across the industry, December produced many events with playerfriendly outcomes,” explained CEO Kristian Nylén. “For our operators, these resulted in lower-than-average margins in the quarter, which in turn, together with increases in gaming-related taxes, impacted on Kambi’s revenues. “Despite this, I’m very pleased to report that our operators continued to demonstrate the underlying strength of the Kambi Sportsbook and reported solid increases in turnover, even when compared to a strong Q4 2015.” Nylén said that the supplier, which signed a sportsbook deal with Novomatic’s
well received by our customers and have performed according to plan,” said CEO Per Norman. “We also started to develop our customer communication to personalise it more, which is one of the reasons for our strong growth.” Norman said that 2016 was an eventful year that ended with the company being listed on Nasdaq Stockholm’s main market at the end of November.“The listing is a stamp of quality and a key milestone that we achieved in accordance with our communicated plan,” he said. In February, the company made a move into the regulated Danish iGaming market with a €9m deal to acquire Dansk Underholdning, operator of the Bingosjov.dk, Bingoslottet.dk, and Balletbingo.dk sites.
iGaming arm Greentube in February, will continue to invest in its sportsbook offering to maintain its position in the “evolving market landscape”. “We are confident in our strategy of investing in people and technology to create the best sportsbook on the market,” he added.
XLMEDIA 15% Net revenue ($) 2015
Partner network TOTAL
Benefiting from the continued diversification of its business away from the gambling sector, the London-listed performance marketing specialist recorded a 16 per cent improvement in revenue to US$103.6m for 2016. The gambling sector still represented 70 per cent of XLMedia’s annual revenue, although this was down from a 74 per cent share in the previous year and an 83 per cent share in 2014. Chief executive Ory Weihs said that it was another record breaking year in which the company made further progress in executing
Record Breaking Performance and Scale
Find out more at:
AN NYX GAMING GROUP COMPANY
F I NA NC E GIQ20 2016
PADDY POWER BETFAIR 14% Online revenue (£)
Paddy Power Betfair saw overall revenue increase 18 per cent to £1.55bn in 2016, following double-digit growth across all four of its business segments. Excluding its retail, Australia and US businesses, online revenue grew 14 per cent to £853m for the year, with active customers climbing 11 per cent to 3,904,000. Online sports betting revenue rose 14 per cent to £609m following a 19 per cent improvement in stakes to £5.27bn and seven per cent growth in betting exchange and B2B revenue. Revenue from online gaming also increased by 14 per cent to £245m, with growth continuing to be driven by cross-sell from sports betting and mobile. “2016 was a transformational year for Paddy Power Betfair with much of the integra-
tion of the businesses completed sooner and more efficiently than expected,” said chief executive Breon Corcoran. “We have created a business with considerable scale that is stronger and better able to compete than either of the individual legacy companies.”
on its strategic priorities. “Our strong financial performance coupled with our ability to maintain a market leading position is supported by our commitment to invest in proprietary products while integrating complementary acquisitions,” he said. “The board would like to thank management and our employees for another excellent year of results and remain committed to delivering further progress in 2017.”
CHURCHILL DOWNS 15% Online revenue ($)
Itai Frieberger, 888 66
ily by solid growth from Big Fish’s casual and mid-core segments and an improvement in revenue from ADW operator TwinSpires. Big Fish’s total bookings rose seven per cent to $486.2m, with a 39.5 per cent increase in casual and mid-core free-to-play bookings offsetting declines in social casino and premium bookings, down six per cent and four per cent respectively. The US-facing online horse race betting business TwinSpires saw revenue climb 10 per cent to $221.9m during the year, due to a 23 per cent increase in active players who were acquired from marketing efforts during the Triple Crown season.
Big Fish Games
Casual and MidCore free-to-play
Net revenue ($)
“888’s further expansion in the UK, Spain and Italy is a strong demonstration of the group’s ability to drive excellent growth and build leading market positions across regulated markets”
There were also strong performances from the operator’s other businesses with Australian revenue up 34 per cent to £312m, US revenue climbing 28 per cent to £91m, and Retail revenue increasing 11 per cent to £295m.
It was a record year for the US racetrack, casino and social gaming operator as revenue grew eight per cent to $1.3bn in 2016, despite a continued decline in social casino which slowed growth from Churchill Downs’ Big Fish Games division. Excluding its Racing and Casino business, the company saw online revenue increase 15 per cent to $706.8m, driven primar-
Emerging offerings Total B2C B2B TOTAL
It was another year of strong progress for 888 despite declines across a number of its
F I NA NC E
product verticals and the impact of currency headwinds on its results. Revenue increased by 13 per cent to a record $520.8m, driven by its core casino vertical which accounted for 54 per cent of the total. The operator’s investment in its sportsbook also paid off as it delivered the strongest year-on-year growth across its product portfolio, helping to offset declines in poker, bingo, emerging offerings, and the Dragonfish B2B business. “2016 was another fantastic year for 888 during which we continued to deliver very strong organic revenue and profit growth,” said CEO Itai Frieberger. “This was again underpinned by further outstanding progress in casino, sport and across regulated markets. “888’s further expansion in the UK, Spain and Italy is a strong demonstration of the group’s ability to drive excellent growth and build leading market positions across regulated markets as the industry continues to head in this direction.”
BET-AT-HOME.COM 13% Net revenue (€)
Increased marketing investment during the year, particularly around Euro 2016, helped drive a 12.5 per cent increase in revenue for Frankfurt-listed Betclic Everest subsidiary bet-at-home.com. It was a year which saw the operator generate record gaming volumes, gross revenue, and earnings. This followed an increase in marketing activities during the summer football tournament, as well as an extensive bonus campaig n during the second and third quarters of the year, which boosted bet-at-home.com’s registered customer base to around 4.6m players. Gaming volumes were up 21 per cent to €2.93bn, with gross betting and gaming revenue climbing 14 per cent to €138.7m, including a new quarterly high of €38.3m set du ring the final quarter of the year. After betting fees and gambling levies of €16.5m and VAT of €9.2m, betat-home generated net betting and gaming revenue of €112.9m. GIQ Q1 REVIEW
The year saw Playtech sign more than 10 new customers, with 10 customers also launching new operations in partnership with the supplier. Nine out of 10 of its top customers are now on long-term contracts, with Paddy Power Betfair, William Hill, Rank and Betfred all renewing during 2016. “Playtech continues to focus on M&A to augment organic growth and its M&A pipeline remains healthy,” said CEO Mor Weizer. “Given the progress we have made in 2016, delivering on our strategic objectives, we remain confident of strong performance in 2017 driven by both organic growth and the acquisitions made in 2016.”
Net revenue (€)
Net revenue (SEK) 2015
Other Financials TOTAL
Playtech delivered an impressive set of results in 2016, a year which saw it also invest €240m in its M&A strategy and return €296m to shareholders. Revenue growth was also solid, up 12 per cent to €708.6m, with the compa ny laudi ng t he success of its Gaming division. The supplier’s flagship Ca si no of feri ng represented 55 per cent of the division’s total revenue, having increased 15 per cent year-on-year, offsetting declines across Services, Sport, Bingo and Poker. The Financials division also performed well, contributing €65.6m in revenue.
Its been a busy few months for the Stockholmlisted operator which has gone on a mini M&A spree with deals to acquire RaceBets, NetPlay TV, and Premier Casino. This followed another successful year for Betsson as revenue increased 11 per cent to SEK4,117.3m with strong growth in its casino vertical offsetting a decline in sportsbook during the final quarter. Casino continues to generate the bulk of Betsson’s revenue, with the product delivering revenue growth of 14 per cent in 2016. Unfavourable football results in December were part of the reason why sportsbook revenue fell by 15 per cent in Q4, together with lower contributions from Turkish B2B partner Realm Entertainment, and the withdrawal from a number of markets for regulatory reasons. “Betsson made significant investments in product development throughout 2016, which has pushed the casino growth,” said CEO Ulrik Bengtsson. “The sportsbook investments are expected to have a positive effect in 2017.” December saw the first of Betsson’s recent acquisitions with the €34m purchase of German horse racing bookmaker RaceBets. This was followed up by February’s £26m deal for UK-facing live TV casino games specialist NetPlay TV, and completed by the €3m purchase of Spanish operator PremierCasino.es in March. 67
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F I NA NC E
“Through the tremendous hard work of our people, we achieved and exceeded many of our goals and once again we were able to create significant shareholder value” Kenneth Alexander, GVC
GVC HOLDINGS 9% Net revenue (€)
Chief executive Kenneth Alexander acclaimed 2016 as a landmark year for GVC as it undertook its largest and most ambitious acquisition to date – that of bwin.party. The revamp of several products helped GVC beat its previous full-year projections as revenue grew by nine per cent to €894.6m, aided by a solid performance during the final quarter. Q4 revenue climbed seven per cent to €231.3m, despite the adverse sports results in the last few weeks of the year and the strong comparative period in 2015. The final quarter produced the highest daily net revenue run rate of 2016, with more than €2.5m generated per day in Q4. GVC said that the international diversity of its business, combined with a proven portfolio of both sports and gaming brands, helped cushion the company against particularly punterfriendly sports results in the UK and adverse currency movements in some of its markets. “Through the tremendous hard work of our people, we achieved and exceeded many of our goals and once again were able to create significant shareholder value,” added Alexander.
AMAYA 8% Net revenue ($) 2015
Casino & sportsbook
Amaya’s decision to diversify its offering and introduce online casino and sportsbook to its players paid off in style in 2016, helping the company generate record revenue of $1.16bn during the year. The continued development GIQ Q1 REVIEW
of the operator’s online casino and sportsbook overcame a five per cent decline in its core poker product, which finally looks to be on the road to recovery and could return to growth this year. “2016 was a record year of revenue for Amaya,” said CEO Rafi Ashkenazi. “Our changes to the poker ecosystem and customer acquisition initiatives continue to reverse certain negative trends and we are starting to see organic growth in that business.” Ashkenazi added that its casino offering exceeded expectations as the company introduced limited marketing campaigns and focused on cross-sell efforts. At the end of Q4, the company had 2.6m real-money active players, with online poker actives climbing five per cent to 2.5m, while Amaya’s online casino had 648,000 actives, up 47 per cent versus the previous year. The operator’s Amelcopowered online sportsbook grew active customers by 88 per cent to 247,000.
“2016 was a record year of revenues for Amaya. Our proactive changes to the poker ecosystem and customer acquisition initiatives continue to reverse certain negative trends” Rafi Ashkenazi, Amaya
GOING DOWN… 2016 was a challenging year for William Hill, with its performance falling below the board’s expectations. After several years of strong growth – aided by former JV partner Playtech – the operator’s online channel ‘stalled’ last year as revenue dropped three per cent, the division’s first year-on-year decline in 10 years. There were declines across both online sportsbook and gaming, with revenue falling two per cent and four per cent respectively to £270.1m and £274.7m, including declines in poker and bingo. William Hill will now be pinning its hopes on its three-year programme to reinvigorate its technology platform with OpenBet. The industry will be watching with interest. While its rival Scientific Games makes great strides in the social casino space, International Game Technology (IGT) was unable to stem the decline at its DoubleDown Casino which saw results worsen during Q4 2016. DoubleDown
revenue fell by 26 per cent to $61.7m, its fourth consecutive quarter of year-on-year decline, with the business now contributing $279m annually, just ahead of Scientific Games’ $274m from social casino. That gap is closing fast. German online lottery broker Zeal Network saw its results negatively impacted by aboveaverage jackpot pay-outs during the year, without which revenue would have increased three per cent. It has not been a good start to 2017 either as a €15m winner in a secondary lottery held by its MyLotto24 subsidiary caused the company to reduce its full year revenue guidance to €145m-€155m. Sportech saw revenue drop two per cent in 2016, but believes it is now strategically well-placed to benefit from further expansion of its US-based business following the sale of the Football Pools to private equity investors in early March of this year.
Net revenue Company
William Hill (excluding retail, Australia and US)
IGT (DoubleDown only)
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F I NA NC E STOCK INDEX Q1 2017
GAMING INTELLIGENCE STOCKS Q1 2017
Scientific Games in pole position
London set to lose two listed companies as Netplay TV and 32Red begin life under Swedish ownership, writes Kio Dawson
Below: the Scientific Games-owned Shuffle Master
as the quarter drew to a close, with the news THERE WERE DECENT returns to be made having a positive impact on a number of shares. by shareholders in the iGaming sector durKindred Group’s share price rose by around ing the first quarter of 2017, with listed operaeight per cent in the run up to the announcetors and suppliers seeing their combined ment on 31 March, while there were also gains share price grow by 3.60 per cent by the end for other Stockholm-listed operators such as of March. Betsson, LeoVegas and Cherry. There were 35 companies that saw their Mr Green (SEK40.90) and 888 Holdings share prices increase between 2 January and (273.88p) hit 52-week highs in trading on the 31 March 2017, including 23 that experienced day of the announcement, while Fortuna double-digit growth – that’s nearly half of the Entertainment capped a busy quarter for the Gaming Intelligence stock chart. company as its shares reached a new high Scientific Games is on a roll at the moment, of CZK110.00. reflected in its share price, which has soared Fortuna has significantly expanded its by around 150 per cent in the past year. While operations in Eastern Europe, in particular it is burdened with a mountain of debt followRomania, paying €85m for ing a number of acquisitions Hattrick Sports Group, operin recent years, revenue is ator of the country’s leading improving and its interacScientific Games betting operator Casa Paritive business is evolving is on a roll at the urilor, and a further €47m into a bona-fide industry moment, reflected for four operators including powerhouse. This was highin its share price, Bet Active and Bet Zone. lighted by another ‘stellar’ But Fortuna may not performance by the diviwhich has soared be on the GI chart for much sion in Q4, as its free-to-play by around 150 longer after its majority gaming initiatives drove per cent in the shareholder Fortbet Holdsocial B2C gaming revpast year ings confirmed plans to enue up 52 per cent. acquire full ownership of Shareholders would the operator and delist the company’s shares have been equally pleased as shares in from both the Prague and Warsaw stock the company rose by 65.96 per cent during exchanges. In Prague, Fortuna’s shares closed the first three months of 2017, hitting yet the quarter at CZK108.20, up 26.11 per cent comanother 52-week high of $23.95 on 31 March. pared to the start of the year. The gaming and lottery behemoth now has There were just 17 London-listed compaa market capitalisation of more than $2bn. nies that made this edition of the GI chart, Alongside Scientific Games, there were following the delisting of UK operators NetPlay 14 companies that saw their shares hit TV and soon 32Red, which were snapped up 52-week highs during March, includby Betsson and Kindred Group respectively. ing Gaming Innovation Group A listed company since 2001, NetPlay TV (NOK5.57), Inspired Entertainwas acquired by Betsson for £26.4m, while ment ($11.35), bet-at-home. 32Red was snapped up by Kindred Group for com (€112.40), and Aristocrat £176m. Its shares have been listed on London’s Leisure (AUD$18.10). AIM market since 2005. The publication of Sweden’s Nektan was one of the biggest risers in the long-awaited report into the re-regfirst quarter, despite hitting a 52-week low ulation of the country’s gambling of 13.50p on 15 March. Its shares were up by market was a major talking point 71
F I NA NC E STOCK INDEX Q1 2017
64.81 per cent by the end of the period however, with the company making significant progress as it transitions from a white label operator to a B2B gaming provider. The formal launch of Nektan’s new B2B business saw the company sign new agreements with Spin Games and High 5 Games. Gaming Innovation Group’s shares closed the quarter up 57.74 per cent, while mybet’s increased by 57.50 per cent following the operator’s long-awaited platform relaunch with Amelco. There were also notable improvements in share prices for the likes of Evolution Gaming (up 26.50 per cent), Lotto24 (up 26.26 per cent), Catena Media (up 21.39 per cent), and Sportech (up 14.55 per cent). Playtech and XLMedia both hit 52-week highs in March as their shares closed the quarter up 12.83 per cent and 12.03 per cent respectively on strong financials for 2016. Amaya’s shares rose 17.31 per cent as the company saw its founder and former chief executive David Baazov reduce his stake in the business to less than four per cent. Operationally, Amaya remains in rude health after posting record revenue in 2016, buoyed by a growing contribution from online sportsbook and casino, and indicators of a return to growth for its core poker product. GVC is another that is primed for growth this year. The integration of bwin.party is largely complete following a transformational 2016 for the London-listed operator. Shareholders are reaping the benefits as GVC declared a second special dividend in respect of 2016, with the company’s shares climbing 15.33 per cent in Q1. In contrast there were eight companies that saw shares hit a 52-week low, including Stride Gaming (215.20p), Jackpotjoy (528.50p), Gaming Realms (10.92p), and Tangelo Games (CAD$0.03). Zeal Network had a quarter to forget after it was forced to reduce its financial guidance for 2017 as a player won approximately €15m in a secondary lottery held by MyLotto24. Its shares fell by 28.16 per cent by the end of the three-month period. Kambi Group didn’t fare any better. Its shares were down 34.83 per cent in Q1, including a 4.09 per cent drop in its value following the release of its Q4 financial results in February. There were also declines for NYX Gaming Group and Betsson, down 11.36 per cent and 10.32 per cent respectively by the end of March. Both companies have seen the value of their shares slashed in the past year. Shares in Betsson have fallen around 40 per cent from last year, while NYX’s are down almost 60 per cent. n
OP. PRICE 03.01.17
Scientific Games Corporation
Gaming Innovation Group Inc* mybet Holding SE* Inspired Entertainment Inc Bet-at-home.com AG* Cherry AB Mr Green & Co AB* Evolution Gaming Group AB* Lotto24 AG
Safecharge International Group Limited
Paysafe Group plc
888 Holdings plc
Amaya Inc (TSX)
Aristocrat Leisure Limited
Fortuna Entertainment Group (PRA)*
Catena Media plc* Intralot SA*
GVC Holdings plc Sportech plc XLMedia plc
Kindred Group plc *
Ladbrokes Coral plc Zynga Inc
Snaitech SpA Rank Group plc
Nordic Leisure AB
AGTech Holdings Ltd
Webis Holdings plc Churchill Downs Incorporated OPAP SA
Tatts Group Limited
Tabcorp Holding Ltd
NetEnt AB* William Hill plc Paddy Power Betfair plc Stride Gaming plc
International Game Technology plc Jackpotjoy plc*** NYX Gaming Group
Ainsworth Game Technology Ltd
Gaming Realms plc
Contagious Gaming Inc** Tangelo Games Corporation Zeal Network SE* Kambi Group plc *
*Op. Price 2 Jan **Op. Price 5 Jan ***London IPO 25 Jan 72
CL. PRICE 31.03.17
C O LU M N AND ANOTHER THING...
Why our industry is an easy political target OPINION Steve Donoughue
The UK government may look to deflect attention from its Brexit woes with punitive actions against the gambling industry
f I were a betting man, and I am, I would have a healthy punt on there being a ban on gambling advertising on television before the watershed. I obviously qualify my comments by stating that political forecasting is more difficult than picking horses. Horses can only win or lose, but politicians can go round and round in circles for ages. So I may be wrong, but I do feel there is a certain element of sorting out the loose ends of gambling going on at the moment and it doesn’t seem to be in the gambling industry’s favour. Currently we have the secondary legislation going through Parliament that will extend the Horseracing Betting Levy to both on-course and online. This fulfils the wishes of the racing industry who think millions of pounds worth of Levy is being avoided by offshore internet bookies who must be taking billions of bets on British racing. I suspect there may be some disappointment in Newmarket ahead but this effectively kicks the can down the road about how to replace the Levy, which has been the government’s intention since 2001. Then, after April, we’ll have the outcome of the Triennial Review, which I think will see fixed-odds betting terminals have their maximum stake dropped from £100 to £10 or £20. The government put in a nominal limit of £50 in 2014 but the campaign against these machines has simply outplayed the rather mediocre lobbying efforts of the bookmakers who could fit 74
And this is the nub of my argument. Gamtheir friends in Parliament in a small minibus. bling should not be seen or heard. Our prime I think this political weeping sore will be cauminister is the daughter of a vicar, our secreterised once and for all as last summer’s change tary of state is an ex-tax consultant and our gamin personnel at both DCMS and Number 10 has bling minister is an ex-football coach. Gambling made it possible for the anti-FOBT brigade to is not something they do, not something they win over, lack of hard evidence or not. understand and to them it’s all problem gamThe Triennial Review also wanted to look bling, money laundering and what the workat TV advertising of gambling. Something that ing classes do, rather than buckling down and had been reviewed before and not found to be aspiring for a Waitrose loyalty card. too problematic. But last October, the secretary When gambling gets above the political parof state said her two children could: “Recite apet, history shows us it gets slapped down, and just about every gambling advert there is.” A having adverts during the day, mother scorned is one thing, when children can see them, but a secretary of state scorned regardless that they can’t do is another. Now obviously racNo politician is anything about it, is going to ing will argue rightly that if going to avoid get the ‘think of the children’ bookmakers can’t advertise the open goal of brigade up in arms. in the breaks between racing, ‘protecting the While Brexit hangs over the TV companies aren’t going vulnerable’ and Parliament like a malevolent to show racing on terrestrial ‘saving the children’ cloud and austerity-ridden television and this will relfrom the perceived budget cuts continue as the egate racing to the specialist channels where it will never be evils of our industry national debt expands, no politician is going to avoid the open heard of again. But, Ray Wingoal of ‘protecting the vulnerastone’s big old head shouting at ble’ and ‘saving the children’ from the perceived you to have a bet has made numerous enemies evils of our industry. It costs nothing, gives great in Westminster and Whitehall, as little Timmy newspaper column inches and ties up another and Cressida are now asking their politician loose end of the Gambling Act, which for many parents what gambling is rather than fixating a Daily Mail-reading middle class middle Engon some costume drama or documentary on lander went beyond the pale. interpretive dance.