Oct - Dec 2017
• OCT-DEC 2017 • ISSUE 31
G A M I N G
I N T E L L I G E N C E
Lottoland CEO discusses its rise - and resulting backlash
Q U A R T E R L Y
A GAMING INTELLIGENCE PUBLICATION
LOTTERIES LOOK FOR A WAY FORWARD Lotto Hamburg | Camelot | Ithuba | Svenska Spel | IGT | Scientific Games and more
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LEADER Q3 REVIEW
ANALYSIS & OPINION 4 Snapshot Top stories, top quotes, top deals and Matt Davey on Scientific Games’ NYX acquisition 6 Thought Leadership Scientific Games, Pragmatic Play and SBTech 14 People The Stars Group’s new chief customer officer Christopher Coyne 17 Technology & New Products Sportradar seals eSports deal, Superbet partners ioSport and more 19 Lottery New Hampshire goes online, Lottoland launches instant win games and more 20 Games The launches that caught GIQ’s eye in Q3 22 Social Gaming Intelligence LottoInteractive on why social is key to the future of lotteries 26 Legal & Regulatory The latest regulatory updates from around the world 32 Marketing How lotteries look to balance attracting players with highlighting their role in society
FEATURES 35 State of Play: The Lottery Industry Gaming Intelligence looks at the key issues facing state lotteries around the world 60 Lottoland Takes on Lottery Giants Nigel Birrell discusses the lottery betting operator’s rapid rise – and the resulting backlash
FINANCE – H1 2017 67 Finance M&A key to growth as Cherry, GIG and NYX secure top spot in the GIQ20
AND ANOTHER THING… 78 GIQ editor Robin Harrison on the negative publicity faced by UK iGaming operators
E D I TO R
TIME FOR LOTTERIES TO GET CREATIVE OTTERIES MAY SEEM set apart from the rest of the gaming industry, but many of the issues they face are the same as those confronting private operators. There are concerns over regulatory change and product development and innovation is a focus, as operators look to bring in a younger clientele. Increased competition from small, but rapidly-growing competitors is also a worry. Operators need to look at new ways to remain relevant and attractive to customers at a time when there is greater competition for wallet share than ever before. Lotteries have the built-in advantage of vast distribution networks. Customers can buy a ticket or scratchcard on impulse when making other purchases. For private operators retail may be an increasingly difficult channel, but it is still responsible for the bulk of lottery sales. Despite companies’ complaints (see page 36) online competition is not diminishing retail sales. T h at do e sn’t mean that online can be disregarded, and lotteries need to
get creative if they are going to increase interest in their wares among younger, more tech-savvy consumers (see page 22). This will necessitate difficult conversations with retailers, many of whom are resistant to the lotteries increasing their online presence (see page 44). It may also force them to learn from, rather than try to ban, new market entrants such as Lottoland (see page 56). Lottoland is a bookmaker that offers a new product on which customers can bet (see page 60). It embodies lotteries’ worst fears of private operators drinking their milkshake, rather than a genuinely new threat. It has also made lotteries seem engaging and new. Beyond the intense competition that exists today in many jurisdictions for a share of consumers’ gaming spend, operators must also compete with a never ending range of alternative entertainment options vying for a share of the consumer’s wallet. This is seeing once separate sectors begin to encroach into one another’s territory, as they expand their product offerings to give consumers the range of choice that they now demand. For lotteries in particular, this might mean re-evaluating the role they play in their domestic gaming market. n
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GIQ Q3 REVIEW
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GIQ Q3 2017
Snapshot Scientific Games acquires most popular news stories on GamingIntelligence.com Blog: A reality check for the UK gambling industry Scientific Games acquires NYX Gaming Group for CAD$775m Aristocrat begins search for new Las Vegas-based finance chief London-listed Paysafe Group at the centre of M&A activity GameCo partners Bandai Namco on Soulcalibur video gambling game Blog: Breon Corcoran leaves to hero fanfare but what of the inheritance? Camelot outlines plan for private management of Illinois Lottery Scientific Games appoints Leigh Nissim to lead interactive B2B division Mr Green brings in Mattias Wedar as permanent CEO of tech division Gamblit Gaming to develop skillbased PAC-MAN game for casinos
SciGames’ $775m deal for the OpenBet owner positions it as a frontrunner in a regulated US sports betting market SCIENTIFIC GAMES DID not buy NYX for its lottery or bingo product. It will benefit from its casino platform and games, but the real reason why SciGames bought NYX is because of OpenBet. While NYX CEO Matt Davey denies his company was actively searching a buyer, he believes the deal “makes a ton of sense” for all involved. “We were around six months into a threeyear strategic plan I had devised,” he tells Gaming Intelligence. “We’d completed the acquisition of OpenBet and were reorienting our customer focus, and there were signs it was working.” In Q2 the company reduced its net loss, increased EBITDA and completed a debt refi-
THE QUARTER’S DEALS IN 60 SECONDS
We’re probably experiencing some of those issues of a maturing company right now with the regulatory headwinds, but it’s kind of a testament to our success
Scientific Games’ acquisition of NYX Gaming Group may have been the supplier’s most eyecatching deal of Q3, but the company also found time to snap up Red7Mobile and Lapis Software. Red7Mobile is a studio developing casino and sports betting products, based in the UK. Lapis, meanwhile, is a long-term partner of SciGames. The New Jersey-based business develops lottery and retail sales performance applications. In Austria, the country’s Federal Competition Authority (BWB) has approved Sazka Group’s acquisition of a majority shareholding in Casinos Austria. The BWB expressed no
OF THE QUARTER
nancing transaction. Things were settling down for the supplier following a frantic few years of M&A, but under the Scientific Games banner Davey believes that all the elements are in place to accelerate its strategy. “It allows us to push forward faster with our strategic plan, without changing it fundamentally to create a global digital gaming powerhouse.” NYX’s gaming business will be bolstered by around 300 SciGames employees, creating a 1,500-strong team, allowing it to speed up development of proprietary games to complement the third-party content offered via its OGS solution. “The industry’s speeding up, not slowing down, so we’re going to have to keep up with
Quote of the Quarter
Nigel Birrell, see page 60
opposition to the acquisition and said that it saw no need to launch an in-depth investigation into Sazka’s bid, given that the Czech gaming operator currently has zero market share in Austria. Playtech has completed the acquisition of technology, intellectual property and certain customer assets from ACM Group (Alpha), strengthening its newly-rebranded TradeTech Group financial trading division. It will pay up to $150m for the assets. Moving to the Caribbean, Intralot has raised $40m through the sale of its stake in Jamaican lottery and sportsbook operator Supreme
GIQ Q3 2017
Get the latest news from our website
NYX Gaming Group that,” he says. “The acquisition gives me access SciGames, given the unpredictability of Supreme to a number of the tools that I would otherwise Court outcomes and the snail’s pace of US legislahave to go out and buy a few years down the tion. Yet the announcement of the deal has many line as well.” thinking that legal US sports betting is a question This may help SciGames close of when, not if. the gap on the industry-leading Davey admits that this had a iGaming suppliers, but it is the bearing on the deal, saying his plans for OpenBet that have gennew parent company is “clearly” erated the most interest. After all, positioning itself for the opening despite several years of predictions of the US sportsbook market. about its imminent demise, Open“If sports betting is to be legalBet remains the world’s leading ised beyond the four states where sportsbook supplier. it’s currently allowed, companies It can become even stronger need not only a product, but also if the US Supreme Court rules in high-quality trading and pricing New Jersey’s favour in its chalservices. It’s time for the industry lenge against the Professional and “The acquisition to get its house in order.” Amateur Sports Protection Act. This puts the onus on SciGgives me access Development on modernisames’ competitors to make a simito a number of ing the underlying technology for lar move, and a new wave of M&A the tools I would seems likely. The likes of Amelco, the core OpenBet platform will be sped up, as will development otherwise have SBTech, Genius Sports and Kambi of a “lighter” version for compa- to go out and Group will all find themselves nies that find the main bespoke buy a few years fielding interest from US gaming product too expensive or not fit- down the line” giants – if they are not already. ting their needs. This will bol- Matt Davey, NYX The NYX deal is a canny move ster its existing business around by SciGames. Recent history the world, but the US remains shows that it does not make bad the focus. acquisitions. In acquiring Bally, Shufflemaster “Scientific Games is licensed in every state. and WMS, it has created an almighty supplier. If This means we can rapidly roll out a solution for sports betting really is the next frontier then the clients, rather than spending years going through $775m acquisition price will look as small as the the licensing process,” Davey notes. $80m pittance that Caesars acquired Playtika for, Some may see this as a very early move by before selling the company for $4.4bn. n
The quarter in numbers FINANCE
US$17.9m First-half net loss for 888
CAD$119.9m NYX Gaming revenue in H1 2017
US$203.1m Scientific Games interactive revenue in H1 2017 M&A
Scientific Games deal to acquire NYX Gaming
Playtech deal for financials trader ACM Group REGULATORY
888 settlement for social responsibility failings LOTTERY
8 Ventures. Trinidad-based Zodiac International has bought the company’s 50.05 per cent holding in Intralot Caribbean Ventures, which in turn owned a 49.9 per cent share in Supreme Ventures. The quarter saw significant upheaval in the payment sector, with Worldpay and Vantiv agreeing terms on a $9.3bn merger, and Paysafe Group’s board recommending a £2.96bn offer from the business by a private equity consortium. Scandinavia-focused operator and supplier Gaming Innovation Group boosted its affiliate business with the acquisition of Denmark’s Red GIQ Q3 REVIEW
Penguin and fellow Nordic affiliate Stk Marketing, for fees of €13m and€€25.6m respectively. SportPesa has moved into the Italian market after purchasing RCS Gaming, the iGaming arm of Milan-listed media giant RCS MediaGroup. In a similar deal, Gauselmann Group’s Cashpoint subsidiary has snapped up the Danish assets of rival operator Tipico. Finally, we end in the US, where DraftKings and FanDuel have scrapped plans to merge into a DFS behemoth. The Federal Trade Commission had filed an injunction to stop the deal going ahead. n
New Hampshire the 8th US state to approve iLottery
€500m Annual turnover of unlicensed lottery operators in Germany, according to DLTB (see page 36)
€300m Revenue generated by Lottoland in 2016 (see page 60) 5
S P O N S O RE D E D I TO RI A L SCIENTIFIC GAMES LOTTERY
The next generation of lottery loyalty
“When we looked at Bally’s rewards programme, we saw their members were far more engaged because they weren’t just taking their points and banking them – they were using them to play additional games or participate in some activity in order to win even more points” Adam Faust, Scientific Games 6
THESE DAYS, YOU’D be hard-pressed to find a consumer product or service that doesn’t offer some sort of loyalty rewards programme. Retail outlets, from health food to hardware, use them to drive traffic. Products, from shoes to shampoo, use the programmes to stand out from the competition and drive sales. In fact, according to a Harris Interactive poll performed for Transera, there are more than 3.3 billion loyalty programme memberships in the US. That’s approximately 29 programmes per household (how many bar-coded loyalty cards do you have on your key ring?). The psychology behind successful loyalty rewards programmes is fascinating and well beyond the scope of this article. But it essentially boils down to motivation. Are your customers sufficiently motivated to engage in your programme on a regular and on-going basis? Or do they become bored over time? Over the past decade, the lottery industry has slowly embraced the concept of engaging customers beyond just the moment of purchase. Most lotteries offer some version of a ‘players’ club’ that enables players to receive news and notifications. Some lotteries go a bit further and let their players use non-winning tickets as entries to second-chance draws. These second-chance draw programmes can be a valuable component in a lottery’s overall marketing effort, but are usually short-term, since they are typically associated with a specific and finite promotional period. A loyalty rewards programme, by contrast, is an ongoing effort that contributes to a lottery’s longterm strategic goals. Scientific Games has been creating loyalty rewards programmes for the lottery industry since 2009. In those eight years, we have learned a great deal about what motivates players to sign up, stay engaged and keep coming back. But when we set out to develop our latest loyalty rewards programme, we looked beyond just the lottery space to the broader world of gaming to see if there were lessons to be learned. And there were several.
“We realised that earning points only goes so far when motivating players,” said Amy Hill, vice president, Digital Content Studio at Scientific Games. “There needed to be a more active component to the programme that excites players beyond just watching their points balance grow. We also needed a way to modify a programme’s rewards on-the-fly so we are able to quickly make adjustments that influence player behaviour in a way that aligns with a lottery’s business objectives.” Adam Faust, Scientific Games’ director of product management, explained: “When we looked at what Bally (acquired by Scientific Games in 2014) was doing with their rewards programme, we saw that their members were far more engaged because they weren’t just taking their points and banking them – they were using their points to play additional games or participate in some activity in order to win even more points. Essentially, they had moved from earning points to winning points, which is a lot more active and a lot more fun. And that translates to significantly higher engagement rates.”
Bonusing So how do you move from an environment where members are focused on earning points to an environment where members are focused on winning points? That’s where bonusing comes in. ‘Bonusing’ is a gaming industry term that describes the process of letting players use their points at various intervals to play for even more points, by engaging in certain activities like playing a game on their mobile device or entering a draw. An important component of bonusing is the use of achievement-based thresholds which can be customised to encourage certain behaviours (more on this later). These thresholds are typically easy to reach and offer members the opportunity to engage in some desirable activity like spinning a wheel for the chance to win extra points. What makes these achievementbased thresholds so important is that they keep
S P O N S O RE D E D I TO RI A L SCIENTIFIC GAMES LOTTERY
members engaged with the programme on an on-going basis, versus simply watching their points balance grow over time. Players aren’t just rewarded once after accumulating and exchanging a large number of points, but are being constantly rewarded and motivated at all levels of participation. This combination of thresholds and bonuses becomes a powerful tool for affecting buying behaviour in a way that supports a lottery’s business objectives. Say, for example, a lottery wants to drive sales of its lower-price-point instant games. They would simply make $1 and $2 instant games the entry vehicle for these more focused activities, thus driving sales of the $1 and $2 games. Even more exciting, from a marketing perspective, is that all of this member activity can be aggregated and tracked in a way that provides enormously valuable insights, which can then be used to further support the lottery’s business objectives. Does the data show that female members between the ages of 35 and 44 respond especially well to a certain offer, or entering a particular game at a higher rate? That information can be used to develop messaging and create content that drives this demographic to retail. Are males between the ages of 25 and 34 entering a draw for a particular event prize (e.g. a concert or sporting event) at a higher rate? Why not create a game that features a similar theme to drive sales among that demographic? Demographic segmentation is just the beginning. Scientific Games’ ONE™ segmentation enables loyalty programme members to be grouped by motivation as well. That means we not only know who is buying our products, but why. The Acquaintance segment, for example, has an affinity for instant games but tends to prefer lower price points and seasonal/holiday tickets. Knowing this, a lottery might offer a special loyalty rewards programme around $1 and $2 holiday games to see if the number of GIQ Q3 REVIEW
Acquaintance members grows as a result of the programme, and whether there is an increase in participation among existing Acquaintance members. Motivational segmentation goes beyond demographic segmentation, enabling lotteries to develop far deeper relationships with their players. “That’s what is so exciting about our latest loyalty rewards platform,” says Jessica Diorio, Scientific Games’ senior director of planning and customer engagement. “It’s not a one-size-fits-all programme – we designed it to be flexible and customisable so that any promotion a lottery may run aligns exactly with their business objectives. A single lottery might have two, five, 10 different loyalty rewards promotions running at any one time depending on their business objectives, and our platform supports that.”
It’s all about options Lotteries with successful loyalty rewards programmes achieve consistently high engagement rates by offering their members
a wide variety of options. The Missouri Lottery’s My Lottery programme, for example, has two different types of points (prize points and draw points) and a number of exciting ways for members to spend those points. Prize Points can be spent on digital downloads, including music, eBooks, audio books and software. Prize points can also be used to get coupons for discounted lottery products and gift cards for popular products and services, such as Land’s End, Uber and Applebee’s. Draw points can be used to enter draws for concerts, sporting events, high-end merchandise, vacations, automobiles, and yes, everyone’s favourite – cash. Remember – every ticket entered, every point redeemed, every draw entered, and every game played means a database that grows more robust over time. This database provides an enormous wealth of information and insights into player behaviour and motivation. This can be used to increase member engagement, provide a better experience for players, and – ultimately – grow sales. n 7
S P O N S O RE D E D I TO RI A L PRAGMATIC PLAY
Quality and efficiency: Striking the right balance New gaming content suppliers must ensure they can sign up customers while expanding their product range if they are to gain a foothold in the industry, says Pragmatic Play head of business development, Yossi Barzely
“While finding a foothold in this industry has never been a simple task, making good on our momentum in both game development and technical integrations, without sacrificing quality, has always been a key priority” Yossi Barzely, Pragmatic Play 8
READERS OF THIS magazine won’t need me to tell them that the world of iGaming moves at quite a pace. For any relatively young company trying to enter an industry like ours – one that is lightning fast and packed to the rafters with established names – it can feel like sidling up to the autobahn in a pedal car. Getting up to speed can be challenging, but it is the agile and prepared that will find success. It is worth pointing out that younger companies should, by their nature, be well-equipped to react efficiently to developments and take vital business decisions quickly. Smaller, more dynamic teams will not be as bound by pre-existing commercial structures when releasing new products and services. However, the costs associated with changing direction must be factored in. Younger providers must be wary of falling victim to a tendency to underestimate the importance of speed to market. There is limited sense in having a stable of expertly modelled, top-of-the-line games if your business has not built up the commercial capacity to realise the potential of those titles through integrations with operators and platform providers. Equally, employing a team of talented sales people will not reap all the rewards its potential might promise, if there is not enough meat on the bones on the technological side. Becoming an established supplier to the regulated gambling industry is no mean feat, given the importance of regulatory compliance and the increasing quality of the competition. As such, a key measure of success for more freshfaced slot developers is to build and maintain momentum in their development processes and technical integrations – put simply, the greater the number of integrations that iGaming providers can put in place, the more they will be able to capitalise on their initial investment in their games and technical infrastructure.
Don’t get left behind Building up your distribution and doing so quickly, all while having a growing range of titles to match, is becoming ever more important as the multitude of providers releasing their games with dozens of partners at once increases. Striking the right balance between the push on integrations and product releases is critical.
Velocity is something we at Pragmatic Play have needed to show a great deal of commitment to. While finding a foothold in this industry has never been a simple task, making good on our momentum in both game development and technical integrations, without sacrificing quality, has always been a key priority. We have since expanded our portfolio via GVC’s impressive stable of online gaming brands, while our recent tie-up with leading platform solutions supplier GAMEIOM was fully executed within less than two months of our first meeting. Delivering on these integrations with a high development speed must also be at the forefront of a provider’s strategy, and is certainly an element that we have had front of mind as we continue to make headway as one of the industry’s fastest growing game developers. We release two new games a month, and our speed to market (while maintaining excellent performance) continues to be an important string to our bow.
A world of opportunity The door for iGaming companies is also beginning to widen with regards to regulation. The market is expanding. Not just in the traditional territories of Europe, but also in regions including Latin America. Colombia is leading by issuing its first licences as part of its robust new regulatory framework. Being aware of these trends and ready to enter those markets when the time is right is a critical factor in success. Also, capitalising by gaining the appropriate licences, while tailoring your offering to suit the needs of each specific market, is becoming a factor that sets companies apart. Having recently entered Portugal and Denmark, with the latter going live in August 2017 with Vera&John, the development of global iGaming regulation is a trend not lost on Pragmatic Play. A firm, considered and swift approach to commercial, technical and regulatory considerations is important for all young companies if they are to find their feet in an increasingly fast-paced business. n Yossi Barzely is head of business development at Pragmatic Play. He is responsible for driving the company’s growth, as well as providing support to its operating partners.
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S P O N S O RE D E D I TO RI A L SBTECH
The prospect of US regulation The US Supreme Court hearing of New Jersey’s legal challenge to PASPA could pave the way for sports betting regulation in the US. Although many issues still need addressing, Richard Carter, chief executive of SBTech, says it could be a momentous event, for which SBTech is ready
THE US SUPREME Court’s hearing of New Jersey’s case against PASPA this winter opens up the possibility of seeing sports betting regulated across the US. This is an exciting prospect for the industry and one that was hotly debated during the recent G2E congress in Las Vegas; whether by operators, sportsbook suppliers or other business service providers. The size of the market is one obvious reason, the other being that not so long ago it seemed very unlikely that the industry would even get the opportunity to argue its case in front of America’s highest court. This is testimony to the legal efforts of New Jersey, the growing pro-state lobby and antifederal government interference movement, and the educational work undertaken by the American Gaming Association’s betting taskforce (of which SBTech is a member). This means that now, the industry has reached the stage where there is an increasing consensus among many stakeholders that regulation of sports betting in the US is a desirable and welcome scenario. Compare this to the aftermath of UIGEA in 2006 and the contrast is striking; 10 years on there is an acceptance that a sports betting regulatory framework is a viable option in the US. GIQ Q3 REVIEW
Nonetheless, some caveats are necessary: lE ven if the Supreme Court rules in favour of New Jersey and clears the path for US states to move towards regulating sports betting, the framework will still require much work and will be the focus of intense lobbying. lW ould regulation include all channels: online, mobile, land-based? Would betting be allowed across all of those or only in casinos? And what about retail outlets? lA nd would licences only be available to casinos and/or state lotteries? What about tribal casinos and racetracks? Will affiliates (as in the case of New Jersey) require licences?
Market make-up It is beyond doubt that considerable consumer demand for betting products is there Stateside. The estimated size of the black market alone demonstrates the point (even
There is an increasing consensus among stakeholders that regulation of sports betting in the US is a desirable and welcome scenario
though estimates vary considerably, they still range from US $10bn to US $150bn). The rise of daily fantasy sports betting in the past five years has also spurred regulators and sports leagues to acknowledge the fact that a regulatory framework for US sports betting is necessary. Interestingly, should sports betting become regulated in the US, it could well be the first truly omnichannel market for iGaming. The rates of mobile commerce, scale and acceptance of the channel, in 2016 close to US$350bn was spent via apps in the US; mean older consumers are already familiar with land-based, mobile or desktop platforms, while for younger players online may actually be the first and only medium through which they wager. As far as SBTech is concerned, we are committed and prepared for a potential regulated US sports betting market and have the product offering to address either a retail-only market, online-only or omnichannel. We have already announced the opening of a US office in early 2018 and will continue to assist the American Gaming Association and all stakeholders in any way we can. Talks with US contacts and prospects are ongoing and we have every intention of being ready should such a momentous event occur. n 11
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One more for the Stars dream team C O LU M N Steve Hoare
Christopher Coyne returns to the UK as chief customer officer of The Stars Group after a successful stint Down Under at Crown Resorts
THE STARS GROUP chief executive Rafi Ashkenazi has been building a formidable executive management team around him since taking full charge of the company in August last year. Former Crown Resorts chief marketing officer Christopher Coyne is the latest to join the team as chief customer officer. Coyne joins GTS co-founder and former SciGames CTO Jerry Bowskill, who joined as chief technology officer, Robin Chhabra was nabbed from William Hill to become chief commercial development officer, and Brian Kyle, who joins from Pivot Technology as chief financial officer. The C-level executives complement the other new recruits: Bo Wänghammar, formerly of bwin and Mr Green, who has been brought in as managing director of the Stars casino; and Zeno Ossko, the former mybet CEO who takes charge of BetStars. Together with Ashkenazi’s trusted lieutenants, chief 14
operating officer Guy Templer and corporate and almost obsessive in your commitment to communications VP Eric Hollreiser, it is an providing the best product and service.” experienced team. That commitment to customer service Coyne is thrilled to be joining the team. He runs deep inside PokerStars’ DNA as well. likens it to his time at Paddy Power, working If it was lost slightly during the Amaya under Breon Corcoran and Patrick Kennedy, years, it is a value that the Scheinbergs when the Irish bookmaker was making its first espoused vigorously. foray into online gaming. “Stars has been doing this for years,” says “It was electric,” says Coyne. “It was an Coyne. “My job is to take it to the next level.” amazing place to be and this feels similar.” Coyne’s role will involve the complex task While that experience clearly of ensuring some consistency of stands out, Coyne enthuses about customer experience and serall the companies he has worked vice across products and jurisat, from Crown Resorts to predictions, while also optimising industry roles at BT, John Lewis it for each vertical or country. and GE Capital. After finishing at While Stars has years of experiCrown Resorts in March, Coyne ence in poker, what works for the was adamant that he wanted to poker player does not necessarily join a company of similar standing. work for the casino player or the Ashkenazi had known Coyne sports bettor. for a number of years and when He will work with the executhe latter became available, he tive management team, the MDs “It’s an all-star was keen to exploit that experiof each vertical, the marketing team, and to be team, developers and data anaence. The pair met up and creatpart of that is ed the chief customer officer posilysts to make this happen. very exciting” tion that gives him a crucial role Given his role, it is perhaps in shaping Stars’ aim to become no surprise that Coyne also Christopher Coyne, “the world’s favourite iGaming mentions working with director The Stars Group destination”. of social gaming Lloyd Melnick, “Great businesses in all secanother industry heavy hitter tors are typically very good at the customer who has been at Stars a bit longer than the new piece,” says Coyne. arrivals but joined from market leader Zynga. He offers the example of his former employer Social gaming has been something of a slow John Lewis, a 150-year-old company that is conburner for Stars, but Coyne sees it as a vital tinually ranked as the UK’s favourite brand in part of the Stars universe. Coyne talks about retail. contributing to Melnick’s social vision and it is “There is something in the DNA of the comclear that this is another area that will receive pany. When you join John Lewis as a partner fresh impetus. [all of the shop’s employees are shareholders] “It’s an all-star team,” says Coyne, “and to you become exceptionally customer-centric be part of that is very exciting.” n
P EO P L E Q3 MOVES
SPORTECH CEO AND CFO RESIGN SPORTECH’S LONG-SERVING CEO Ian Penrose and CFO Mickey Khalifa resigned from the company during Q3. The pair have been responsible for a huge turnaround at the company that used to be known for running the UK’s football pools. Now it is an international organisation with the majority of its operations in the US and a fledgling business in Asia. With the football pools sold, this leaves Sportech as a UK-based company with little or no UK assets. The strategic review initiated by Penrose will look to address this situation and his successor will inherit an organisation that is unrecognisable from the one Penrose took over in 2005. He or she will hope to inherit a business looking forward to a regulated US sports betting market – wherever the new CEO might be based.
IN THE NEWS
MR GREEN NAMES NEW CEO OF TECH DIVISION MR GREEN & Co has named Mattias Wedar as chief executive officer of its development subsidiary Mr Green & Technology. Wedar took over as chief executive in September, replacing Stefan Gustafsson, who had held the position on an interim basis since the departure of former CEO Niclas Enhörning in December 2016. Wedar takes the helm at an exciting time
for the Swedish operator, which is embarking on a new strategy it has dubbed Mr Green 2.0. He aims to continue recent innovation, which has seen the operator launch a new responsible gaming tool and refresh its sportsbook and secondary brand Garbo.com. This is a good gig for Wedar, as he joins a dynamic and hungry executive team at just the right time.
DAVID FLYNN BECOMES VERA&JOHN CEO
BETSSON CHIEF EXECUTIVE ULRIK BENGTSSON DEPARTS
PADDY POWER TAPS BOARD FOR NEW CEO
JACKPOTJOY GROUP HAS appointed former NYX CEO David Flynn as chief executive of its Vera&John division. It’s the company’s first appointment since the David Flynn departure of founders Dan Jackpotjoy Andersson and Jörgen Nordlund in September. Flynn replaces Johan Königslehner, who remained with the group at the time of going to press, but whose stewardship was linked to the Andersson-Nordlund partnership. Flynn joins Irina Cornides at the company, who was appointed CEO of the Jackpotjoy division in June. The pair will be charged with taking their respective divisions into a new era, independently of their dynamic founders. Vera&John revenue rose 30 per cent during H1, so Flynn is not taking over an operator on the wane. His challenge will be to maintain that momentum and the team dynamic fostered by Andersson and Nordlund.
BETSSON PRESIDENT AND chief executive Ulrik Bengtsson left the company “with immediate effect” in September. The sudden departure of the respected chief Ulrik Bengtsson executive suggested a straBetsson tegic disagreement, with sources claiming that the company’s Turkish business was at the centre of the dispute. A rival operator is looking to offload its Turkish business as it looks to focus efforts on regulated markets. Betsson, which is also present in the Turkish market, has been mooted as a possible buyer. However, Bengtsson is said to have favoured increasing Betsson’s exposure to regulated markets, not decreasing it. He is succeeded on an interim basis by chairman and former CEO Pontus Lindwall. With Lindwall temporarily returning to his previous role, the operator has named director Patrick Svensk as its chairman until further notice.
PADDY POWER BETFAIR named its nonexecutive director Peter Jackson as its next group chief executive, replacing Breon Corcoran, who will step down after 16 years at Peter Jackson Paddy Power, then Betfair, Paddy Power then Paddy Power Betfair. Jackson will join the business from payment processor WorldPay, where he has served as UK CEO since March of this year. He has served on the board of Paddy Power Betfair since 2016, and the board of Betfair Group prior to that. Jackson has a post-merger challenge on his hands to arrest the decline of the share price, which has declined from a peak of £10.80 to £7.27. Furthermore, the company’s product development has effectively been on hold while the merger has been completed, gaming revenue has stagnated since 2016 and during Q2 total online revenue sank 12 per cent. That adds up to a tricky inheritance.
Gaming executives who have been making headlines and what’s in their inbox
GIQ Q3 REVIEW
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T EC H
SPORTRADAR EXPANDS ESPORTS OFFERING Sportradar has secured the rights to distribute audio-visual streams and data from all competitions hosted by PvPRO, an eSports platform powering CS:GO tournaments and leagues.
What’s the big idea? The deal covers the global betting market, while data distribution will be handled exclusively by Sportradar for both betting and non-gaming sectors. PvPRO’s first Electronic Sports Global Tour (ESG Tour) event took place on the Greek island of Mykonos in September, with the tourna-
ment sponsored by iGaming operator Betway. Sportradar’s Integrity Services division will also deploy its Fraud Detection System to monitor betting patterns to identify any suspicious activity relating to tournaments hosted on the platform. “Securing Sportradar’s support and expertise was really important to the credibility and distribution of the Tour and as we start this journey, we could not be happier to have Sportradar by our side,” said PvPRO chief executive Stamos Venios
ASPIRE GLOBAL PARTNERS COFINA FOR PORTUGAL LAUNCH
new Aspire Global-powered iGaming offering under the Nossa Aposta brand, offering players
a selection of online slots with plans to launch casino games and sports betting in the future. “We are excited to start operating in the Portuguese online market together with Aspire Global,” said Fernando Paes Afonso, CEO of Nossa Aposta. “Combining our own media knowledge with their wide experience from online gambling, enables a unique and attractive offering for our players.”
MR GREEN REVAMPS ONLINE SPORTSBOOK
ENDEMOL AND BLACK COW LAUNCH B2B PLATFORM
SUPERBET IN DEVELOPMENT DEAL WITH IOSPORT
Mr Green has launched an enhanced version of its sportsbook, developed in partnership with analytics specialist Bettorlogic.
Production company Endemol Shine Gaming has formed a joint venture with Black Cow Technology to launch a new B2B gaming platform.
Romanian betting and gaming operator Superbet has entered into a new development partnership with automated trading specialist ioSport.
What’s the big idea? The Kambi-powered
What’s the big idea? The Playzido content
What’s the big idea? The operator, which
Sportsbook 2.0 leverages Bettorlogic’s analytics and modelling solutions to offer customers bespoke bet types tailored to individual preferences. The operator can offer more than 15,000 prompts to customers each week, presenting bets on football, tennis and other major sporting events. The upgrade also includes a new Football Combi Spin feature, which allows players to set their odds, then spin reels to find preferred selections that can generate big wins.
distribution platform will feature exclusive branded games from Endemol Shine Gaming’s IP catalogue, including games based on the TV hit gameshow Deal or No Deal, for use in both real-money and social casino sectors. London-based Playzido will be headed up by Stuart Banks, who has held senior management roles in gaming at both Paddy Power and Betfair. The company’s board will be comprised of directors from Endemol Shine Gaming, Black Cow Technology and others.
is growing its iGaming team in Gibraltar, will work with ioSport on a range of ‘next-generation’ betting solutions, leveraging ioSports’ automated pricing and machine-learning tools. “The world is changing rapidly, driven by advances in our use of technology,” Superbet group director of eCommerce Jamie Hart said. “The betting industry has been stagnant but we intend to build an enhanced betting experience that embraces those advances, and the guys at ioSport think in the same way we do.”
Five of the quarter’s major product launches and what they mean for those involved
GIQ Q3 REVIEW
Aspire Global entered the regulated Portuguese iGaming market through a partnership with leading media group Cofina, which owns Portugal’s leading daily newspaper Correio da Manhã among others.
What’s the big idea? Cofina launched its
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Venetian Macao 14-16 November 2017
LOT T E RY Q3 NEWS
IGT TAKES RHODE ISLAND LOTTERY MOBILE…
NEW HAMPSHIRE MOVES TO SELL LOTTERY TICKETS ONLINE
BIG LOTTERY STORIES This quarter’s lottery lowdown
NEW HAMPSHIRE WILL allow lottery tickets to be sold online after Governor Chris Sununu (pictured) signed legislation into law in July. The state lottery could be online as early as next year, following in the footsteps of Georgia, Illinois, Michigan, North Carolina, North Dakota, Kentucky and Virginia. The amendment to existing regulations of the sale of lottery tickets was included in HB517. It permits lottery sales via mobile applications or over the internet, with the New Hampshire Lottery Commission to introduce a number of player protection controls. These controls include age verification tools and geolocation technology to ensure all transactions are initiated and completed within the state’s borders.
LOTTOLAND TO OFFER MULTIMILLION INSTANT-WIN PRIZES
ILLINOIS APPROVES CAMELOT PRIVATE MANAGEMENT DEAL
LOTTOLAND IS COMBINING its prize Insurance Linked Security (ILS) infrastructure with a random number generator to create new instant-win games, offering prizes of up to €100m. The Random and Insured Number Generator (RiNG) has allowed Lottoland.com to launch games such as KeNow Play, which is offering a €5m top prize, as well as a €10m scratchcard. The products will also be made available for B2B clients via Lottoland Solutions and partners Glück Games and Gamevy. “We look forward to sharing this breakthrough combination of technology and insurance,” Lottoland chief executive Nigel Birrell said. “It will enable the instant-win gaming and younger generation lottery players to get access to high jackpot instant-win games, while operators can freely decide which prizes they want to offer – we will provide the insurance.” (See page 60 for more.)
THE US STATE of Illinois has officially approved Camelot as the private manager of its lottery after the selection was formalised by the state’s Chief Procurement Office. The Illinois Lottery said that the 10-year private management contract with Camelot aligns financial incentives and includes new permanent points-of-sale at retailers, new games, and a next-generation iLottery platform that supports omni-channel lottery participation. Camelot Illinois will work with Intralot for draw game services and Scientific Games for instant ticket services. “The lottery and Camelot Illinois have common goals to responsibly grow the Lottery’s player base, align incentives, eliminate conflicts of interest, introduce new technology and innovation, and ensure responsiveness to public needs and concerns,” said Illinois’ acting lottery director Greg Smith.
GIQ Q3 REVIEW
INTERNATIONAL GAME TECHNOLOGY (IGT) has launched its PlaySpot mobile platform with the Rhode Island Lottery, allowing players to purchase tickets via their mobile device but only within a licensed retail lottery location. The launch follows a successful nine-month pilot test that included several retail locations throughout Rhode Island. The PlaySpot app allows lottery customers to play live iKeno and instant-win games, as well as check and collect winnings in a licensed retail location, while connected via Bluetooth to the lottery network. “The Rhode Island Lottery is proud to be the first, and currently the only lottery in the world, to have IGT’s PlaySpot solution,” said Rhode Island Lottery director Gerald Aubin. “We have long been advocates for finding new strategies for growth, and are pleased to partner with IGT on this innovative solution for our players.”
... AND SEALS RIGHTS FOR THE VOICE LOTTERY GAMES IN A BUSY quarter for the supplier, IGT also secured the exclusive rights to develop games based on the international reality TV singing contest The Voice. The supplier will develop and distribute The Voice-branded lottery games globally, including instant scratch, traditional and instant online games, interactive games, as well as mobile games. “We are committed to creating a robust, multi-channel and multi-jurisdictional programme for the lottery community by extending this compelling and iconic brand across all available platforms and territories,” said Michael Chambrello, IGT CEO, North America Lottery. Premiering in Holland in 2010, The Voice has gone on to become a global sensation with 65 versions of the show airing in over 180 countries to date.
GIQ games round-up New games that caught GIQ’s eye in Q3 SG GAMES INTRODUCES NEW OMNI-CHANNEL GAMES Scientific Games has released a two new omni-channel games through its UK division SG Gaming, including a new Hasbro-licensed MONOPOLY Bring the House Down slot game which will be launched for the retail and online sectors through SG Interactive. SG Gaming has also released Pig Money, a £100 jackpot Category C game from the Barcrest brand, exclusively for its arcade and bingo operator partners. “The SG Gaming and SG Interactive teams have worked together again to provide an offering that is important to many of our customers’ business strategies and ultimately helps to drive cashbox performance,” said Rick Mountney, UK director of content development at SG Gaming.
GREENTUBE DEBUTS OKTOBERFEST FREIBIER! SLOT
NOVOMATIC TO DEVELOP FROM DUSK TILL DAWN SLOT Novomatic has signed a licensing agreement with Miramax for the rights to develop online and land-based casino games based on cult film From Dusk Till Dawn. A demo of the game was unveiled at G2E Las Vegas in early October, featuring George Clooney, Quentin Tarantino, Salma Hayek, Juliette Lewis and Danny Trejo (pictured above with Gaming Intelligence’s Kio Dawson) in footage from the film. “From Dusk Till Dawn is a cult film that has regained attention due to its 20-year anniversary,” said Novomatic’s CTO Thomas Graf. “We are excited to combine our world-class technology with this distinguished film and bring it to casino players around the world.” 20
Novomatic’s interactive subsidiary Greentube has launched a new slot for its B2B partners, based on Munich’s annual Oktoberfest beer festival. In celebration of the Bavarian culture, the Freibier! slot will appeal to lovers of pork knuckles, pretzels, gingerbread hearts and flagons of beer frothing over the sides. It is a five-reel slot with up to 40 win lines, with a beer mug acting as the Wild symbol. Matching all symbols of the slot except for the Scatter increases the chances of winning on reels two, three and four.
MICROGAMING TO DEVELOP HIGHLANDER SLOT Microgaming signed a licensing agreement with French production giant StudioCanal to develop a new slot game based on the 1980s action film Highlander. A number of iconic characters from the film are featured in the slot, including Christopher Lambert as Connor MacLeod and Roxanne Hart as Brenda Wyatt. “Highlander is one of the cult hits of the 80s,” Microgaming games publisher David Reynolds commented. “With its action-packed storyline and hefty rock composition, it is a fantastic brand for an online slot. The game’s features will incorporate the Scottish Highlands and gritty New York City, with a classic movie poster-art style and blistering guitar tracks.”
G A M ES
GAMBLIT BRINGS DEAL OR NO DEAL POKER TO THE CASINO
NEXTGEN’S EXCLUSIVE GAME FOR GOLDEN NUGGET
Skill games developer Gamblit Gaming has partnered Endemol Shine Gaming to develop land-based casino games based on the hit TV gameshow Deal or No Deal. New branded games will be rolled out in 2018 on Gamblit’s Model G interactive gaming tables and TriStation terminals, including multiplayer title Deal or No Deal Poker Special, as well as a single-player Deal or No Deal Poker game. “I’ve loved Deal or No Deal ever since I watched the first episode with my family,” Gamblit chief marketing officer Darion Lowenstein said. “Now being able to recreate the excitement, intensity and pure fun of the massive global hit show with friends or as a single player in the modern arcade – the casino – is both a personal and career high.”
NextGen Gaming, NYX Gaming Group’s game development studio, has launched its Wild Play SuperBet slot game in New Jersey with Golden Nugget. It is the first in a series of bespoke slots to be released under the partnership. The game will be available exclusively to Golden Nugget for one year, before a wider roll-out to operators outside of New Jersey. “Working in partnership from the initial stages of game design provided NextGen with insight directly from local players,” said NextGen’s chief commercial officer David Johnson. “The knowledge shared during the development of the game has proven beneficial for both parties, while enhancing the SuperBet innovation further will prove attractive to players and operators alike.”
YGGDRASIL LAUNCHES JUNGLE BOOKS GAME Yggdrasil Gaming has released its biggest game production to date with the launch of Jungle Books. The slot game takes players on a journey through the jungle, inspired by Rudyard Kipling’s classic novel. It features three different reel sets, five different characters and 10 different features, which can create up to 45 possible feature combinations – the biggest in Yggdrasil’s history. “Jungle Books is by far our biggest production to date and throughout development we’ve been testing the boundaries of slot technology,” said Yggdrasil Gaming’s head of slots Jonas Strandman. “The outcome is something we couldn’t be happier with. Thanks to the new Fusion Realms mechanism, we’ve managed to combine five worlds into this one microcosm, a lush extravaganza of features and graphics.”
PLAYTECH RELEASES AGE OF THE GODS LIVE ROULETTE
GLÜCK AND LOTTOINTERACTIVE LAUNCH INSTANT WIN GAME
Playtech has launched Age of the Gods Live Roulette, a game which combines live dealer roulette with the supplier’s popular Age of the Gods online slot and progressive jackpot. While playing live roulette, a small percentage of players’ stake goes towards the four-tier progressive Age of the Gods Mystery Jackpot. “The innovative and market-first launch of our new Age of the Gods Live Roulette linked to a four-tier progressive jackpot that offers massive cash prizes, will significantly increase the cross-sell of the product for our licensees across both channels and enhance the gaming experience for players,” said Shimon Akad, chief operating officer at Playtech.
Instant-win games developers Glück Games and LottoInteractive have teamed up to launch a new game for operator Lottoland. Star Match is described as a first-of-its-kind crossover experience, where players try to match three or more Hollywood icons to collect as many stars as possible, gaining points and bonuses along the way until the lottery cash prize is revealed. “As an iGaming developer with a focus upon the ‘casual real-money gaming’ crossover, we are very excited to introduce the skillbased playing experience that Star Match provides to our ever-increasing player base,” said Glück Games CEO Robert Lenzhofer.
GIQ Q3 REVIEW
NETENT RELEASES EMOJIPLANET SLOT NetEnt launched its new Emoji Planet slot game following a partnership with the Emoji Company & Global Merchandising Services, owner of the official emoji trademark. The five-reel, six-row video slot uses the supplier’s Cluster Pays mechanics, and sends players into the midst of an Avalanche, with playful music setting the scene as emojis cascade down. “The emoji has become a worldwide phenomenon, so we’re pleased to be able to give players the chance to enter their world,” said NetEnt chief product officer Simon Hammon. “Emoji Planet was made to bring fun to the gaming experience and we’re confident players will love everything it offers.”
THE BIGGEST SOCIAL CASINO NEWS OF THE QUARTER ON THE FOLLOWING PAGE
26 Zynga, GAN, PokerStars and more
Lottery’s social opportunity C O LU M N Robin Harrison
Lotteries can look to mobile social gaming as they push to attract younger players, says LottoInteractive CEO Brian Ward
WHEN IT COMES to attracting young players to play lotteries, instant-win games are seen as a potentially key product. The reasoning is that young people want instant gratification, something offering a quick jolt of excitement. Evidence from the UK Gambling Commission certainly suggests that younger players prefer instant-win titles to draw-based games. But hoping that traditional scratchcards will draw in younger customers may not be enough. With more competition for customer wallet share than ever before, the onus is on games developers to create products that are immediately familiar to this demographic. This is where LottoInteractive comes in. The supplier aims to address the lack of millennial interest in lotteries by offering them something familiar and engaging. It aims to develop products that mimic gameplay found in popular mobile social titles. Instead of offering an experience that is over in seconds, it looks to stretch out the instant-win experience by up to two minutes. “We set off with the strategy of taking the most popular mobile gaming features and translating them for real-money gaming,” 22
allow online lottery sales, and Ward believe LottoInteractive founder and CEO Brian Ward explains. “We took the gameplay, removed the there is a general unwillingness among US skill-based element, then added the real-money lotteries to innovate. This, he says, is somegaming element.” thing a start-up will struggle to change. As a 20 -year veteran of the console “As a start-up we can’t spend 10 years develgaming industry, Ward is ideally placed oping the market. We have a limited amount to develop games targeting younger playof runway,” he says. “I think there is not as ers. He has worked for some of the leading much incentive for lotteries to innovate in this companies in the sector, space as we initially thought. including Electronic Arts, Lotteries are growing at Activision and Microsoft between 1.5 to two per cent a Xbox. year, and that’s perfectly sat“I wanted to tackle the isfactory – if they were growproblem of how to make loting 10 to 15 per cent it would tery products attractive to attract a lot more attention younger players, especially and scrutiny.” as the target demographic This has shifted LottoInmakes up the core video teractive’s focus to Europe, game audience,” he explains. where almost all national “My premise was that lot teries a re avai l able we could bring new players online. As we discuss on to lotteries by offering interpage 36, many European lotactive, long-playing, immerteries blame private iGamsive products, similar to ing operators for ‘stealing’ their players. In reality ones they were already “From my perspective, is this more a case of lotplaying.” teries’ offerings failing to Star Match, for example, real-money gaming attract the sort of younger combines the match-three feels like a huge customer that will place a mechanics of King’s Candy market with a limited Crush with the small-stakes number of genres and bet or play casino online. Ward believes LottoInbet of a standard instantverticals” teractive can help address win game. Players look Brian Ward, LottoInteractive t hi s i ssue, as wel l as to match stars, similar to increasing expectations of matching sweets in Candy what lotteries can offer. Crush, then scratch off their stars to win priz“From my non-gambling perspective, reales that are determined by a random-number money gaming feels like a huge market with generator. It’s a simple concept, but is already a limited number of genres and verticals,” proving successful where live. he says. “For me that’s like walking into a “We are live with operators including Lotbookstore and only seeing romance novels and toland, the Georgia Lottery and Tipp24, and autobiographies for sale. our games are among the best-performing “There just seems to be so much opportuniinstant-win titles for each,” Ward says. ty to do something new, interesting and interDespite this early success Ward admits that active, and I believe we can bring some innovaprogress has been slow in the US, his original tive features and genres to this space.” n target market. Just seven states currently
PokerStars relaunches flagship social casino product
Social casino giants diversify into new genres TWO MARKET-LEADING SOCIAL casino operators are to move into casual and mid-core gaming through new acquisitions. Playtika has moved to acquire casual games business Jelly Button for an undisclosed sum, while Aristocrat Technologies has agreed a $500m deal for strategy gaming specialist Plarium. Jelly Button, founded in 2011, has been snapped up as part of Playtika’s long-term strategy to become the world’s leading mobile gaming business. It aims to achieve this by diversifying into new genres though M&A. “Since our first acquisition in 2012, Playtika has been successful at identifying promising products and teams, and leveraging our marketing, monetisation and analytics capabilities
to grow our acquired businesses,” Playtika co-founder and chief executive Robert Antokol explained. “Jelly Button has exactly that – a great team and great products – and we are excited to take Jelly Button’s games to the next level.” Plarium, meanwhile, has offices in Israel, Russia, the Ukraine, the UK and US, and is a leading developer of multiplayer online and mobile strategy games, such as Soldiers Inc (pictured). The deal is expected to boost the revenue contribution from Aristocrat’s Digital division. Aristocrat CEO and managing director Trevor Croker said: “The acquisition of Plarium allows Aristocrat to expand our addressable market into logical adjacent segments in the fast-growing mobile gaming market.”
IN BRIEF KamaGames KamaGames has strengthened its presence in Russia with the launch of its flagship Pokerist title on the new Direct Games platform of Russian social network VK.com. Direct Games is a new HTML5 platform that allows studios to incorporate their games into VK’s iOS and Android apps, making them immediately available to players without additional download, install or sign in. KamaGames will also roll out a new branded app for Poker Night in America, a CBS Sports Network show created by Rush Street Productions, through a new partnership.
Zynga Zynga has appointed Phuong Phillips as the company’s new chief legal officer. In the role, Phillips will oversee all legal affairs and government relations for the company,
reporting directly to CEO Frank Gibeau. Phillips brings 15 years of technology and clean-energy legal experience to the business. Prior to joining Zynga she served as associate general counsel for Tesla, where she managed the post-acquisition integrations of SolarCity Corp and Grohmann Engineering.
Novomatic Novomatic’s interactive subsidiary Greentube is aiming to attract more male players to its social offering with the addition of Leap Gaming’s virtual sports titles. Through a new partnership, Leap Gaming will deploy its turnkey virtual sports product to the Greentube Pro social casino platform, which is marketed to US landbased casino operators seeking a legal online presence.
POKERSTARS HAS RESURRECTED its free-to-play app PokerStars Play, with the new iteration currently being released through a phased roll-out. PokerStars Play offers a range of poker variants, including Texas Hold’em, Spin and Go, and Omaha, alongside casino-style slots. It allows users to compete against poker pros, collect trophies and climb weekly leaderboards, as well as entering fast-paced tournaments. “PokerStars Play is the next phase in our progress towards being a leader in social casino,” PokerStars director of social gaming Lloyd Melnick said. “PokerStars Play is a unique product, taking the best of real-money gaming and merging it with the features players expect from mobile games.”
“PokerStars Play is unique, taking the best of real-money gaming and merging it with the features players expect from mobile games” Lloyd Melnick, PokerStars
L EG A L
US regulatory update The most significant regulatory events to take place in the US over the past quarter New Jersey
The governors of New Jersey, Nevada and Delaware, the three US states with a regulated online gaming market, have reached an agreement to pool their online poker liquidity. This will allow New Jersey poker players to compete online against players in Nevada and Delaware for the first time. “New Jersey has been a pioneer in the development of authorised, regulated online gaming, which has been a budding success since its launch in late 2013,” New Jersey Governor Chris Christie said. “Pooling players with Nevada and Delaware will enhance annual revenue growth, attract new consumers and create opportunities for players and internet gaming operators.” New Jersey has also become the 16th US state to regulate daily fantasy sports (DFS) after Christie signed the legislation into law. A3532 introduces measures to regulate and tax DFS contests. The bill will require DFS operators to pay a licence fee – which is yet to be determined – as well as a quarterly operations fee of 10.5 per cent of quarterly gross revenue. Finally, Christie has also looked to prevent President Donald Trump from enacting a ban on iGaming. He has signed a joint resolution brought forward by the Senate and General Assembly. This asks the Trump administration to clarify its position regarding online gambling, with some lawmakers in Washington pushing to ‘restore’ the Wire Act and overturn the Department of Justice’s 2011 interpretation that the act applies only to sports betting.
Alabama Attorney General Steve Marshall has filed suit against casinos in five counties that have continued to operate illegal slot machines in defiance of state law. The state has repeatedly determined that the game of bingo cannot be played on electronic devices, and that slot machines are clearly illegal, though a number of venues continue to offer these games.
Washington DC The US Supreme Court has confirmed that it will hear arguments in New Jersey’s attempt to overturn the federal ban on sports betting in December. The Supreme Court has consolidated and scheduled two related cases – Christie v National Collegiate Athletics Association (NCAA) and NJ Thoroughbred Horsemens Association v NCAA – on Monday 4 December. This could see the Professional and Amateur Sports Protection Act (PASPA) scrapped if the state prevails in its appeal. 26
Michigan Michigan Representative Brandt Iden introduced new legislation to establish the Lawful Internet Gaming Act. The proposed legislation, HB4926, would create the Division of Internet Gaming and authorise the body to licence and regulate online gambling in the state. Sports betting would be permitted alongside other games of skill, which must include poker, and only casino licence holders will be eligible for online approval.
Indiana The state has awarded its first DFS licences following the passage of legislation in March this year. Industry giants DraftKings and FanDuel were among the first two licensees, alongside FantasyDraft.
New Hampshire New Hampshire Governor Chris Sununu has signed into law legislation allowing lottery tickets to be sold online and via mobile devices. The amendment to existing regulations of the sale of lottery tickets was included in H517, an omnibus bill passed by both houses of the state legislature late last month. It permits the sale of lottery tickets via mobile applications or over the internet, to players aged 18 and over. Sununu also legalised fantasy sports by signing HB580 into law in July, though the final legislation had the $10,000 licence fee and five per cent gross revenue tax removed.
Kentucky Kentucky Senator Julian Carroll has introduced BR155, a bill to legalise sports betting. Operators would be required to pay a licence fee of $250,000, as well as a 20 per cent tax on amounts wagered.
Connecticut Connecticut Governor Dannel Malloy has signed a bill authorising the state to develop sports betting regulations and to increase the number of off-track betting facilities. The Regional Economic Development Plan authorises the state Commissioner on Consumer Protection to adopt sports betting regulations to regulate “wagering on sporting events to the extent permitted by state and federal law”. It also increases the number of off-track betting facilities in the state from 18 to 24.
California Assemblyman Adam Gray has proposed a constitutional amendment to allow legal sports betting in California. This would amend Section 19 of Article IV of the California State Constitution to allow for detailed sports betting regulations, subject to the repeal of the Professional and Amateur Sports Protection Act (PASPA).
Maine Maine was another US state to regulate DFS after Governor Paul LePage allowed legislation to pass into law without his signature. Senator Roger Katz introduced SP0449 in April of this year, securing House approval in June and Senate approval in July.
Massachusetts DFS operators have suffered a setback after a Massachusetts report ruled their games were a form of gambling. The report, put together by a bipartisan special commission formed by the state legislature, recommended that DFS be legalised in Massachusetts as a sub-set of online gaming. The report has been adopted after it was approved by five committee members, with three voting against enforcing it and one member abstaining.
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F I NA NC E
World regulatory update Gaming Intelligence outlines the latest legal developments from around the globe UK Gambling has faced a flurry of negative publicity in the UK after 888 paid a £7.8m settlement for flaws in its social responsibility controls. A technical flaw saw 7,000 customers that had self-excluded able to gamble, with one turning to crime to fund their habit. The UK Labour Party has urged measures to limit the industry, such as banning sponsorship of sports teams, and has told operators to increase contributions to problem-gambling support services.
Belgium The Belgian government has introduced advertising restrictions for gambling, with sports betting ads only permitted after 8pm unless shown around a sporting broadcast. The number of betting shops will also be reduced to 600, and controls for gaming machines in drinking establishments are to be enforced. Virtual sports will also be treated as a form of ‘automatic gambling’, requiring a Class E slot machine licence.
Denmark Denmark has set out regulations for online bingo ahead of its legalisation in January 2018. It can be offered by online casino licence holders, and only allowed in 75- and 90-ball formats. TV bingo will also be permitted, and subject to less stringent ID verification controls.
Switzerland Switzerland’s new gambling legislation is set for a final vote after lawmakers compromised on tax rates. Both the National Council and Council of State have agreed to leave sports betting, online gaming and lottery winnings of less than CHF1.0m tax-exempt. This paves the way for online gambling to be legalised in Switzerland.
The Netherlands The Netherlands’ ban on iGaming will remain in place until its new Gambling Act comes into force, a Hague court has ruled. The court rejected a challenge from Betsson asking for the ban to be lifted over the delays. With a coalition government now in place, the market is not expected to open until 2019.
Malta The Malta Gaming Authority (MGA) is looking to devise a new regulatory framework. This may see only two types of licence available, with taxation also streamlined. B2B licensees would be exempt from gaming tax, in a bid to make Malta more attractive to suppliers. This would be accompanied by a switch from a prescriptive regulatory approach to an objectivebased one, allowing companies to comply with the terms of their licence in any way they see fit.
Italy Latvia Live casino providers Playtech and Evolution Gaming could be hit by the introduction of fees for live dealer games broadcast from Latvia. The country, which houses each provider’s main live dealer studio, is looking to charge unspecified fees per table. While these plans have been approved by the country’s parliament, they do not have the support of the Cabinet of Ministers.
Gambling regulators in France, Portugal, Spain and Italy have signed a crossborder liquidity pooling agreement for online poker, enabling players in the four nations to compete against one another for the first time since the introduction of ring-fenced national poker networks. The official agreement, signed in Rome, sets out the framework for cooperation between the different jurisdictions, covering information-sharing agreements, the fight against illegal operators and player protection.
Germany The ruling coalition government of the German state of Schleswig-Holstein has said that it will only support the country’s new State Treaty on Gambling if it provides protection to all gamblers. As the CDU, FDP and Green party group believe this can only be achieved through legalising online poker and casino, it appears the state may again break away from the Treaty and pursue its own regulatory regime. GIQ Q3 REVIEW
Spain Spain’s gambling regulator has submitted a request to the Ministry of Finance to open a new licensing round for operators. Regulatory authority La Dirección General de Ordenación del Juego (DGOJ) has requested that the government approve a new year-long licensing window to enable as many operators as possible to apply. Meanwhile, Andalucia has adopted new
online and land-based sports betting regulations, ending its status as the only Spanish community not to authorise the activity.
Slovakia The Finance Ministry of Slovakia has published a blacklist of 10 operators which it says illegally target players in the country. They include some of the biggest names in the iGaming industry, including GVC’s bwin brand, William Hill, bet365, 888 and bet-at-home.com.
Isle of Man eSports betting and fantasy league operator eSportsPools has been licensed by the Isle of Man government to allow gambling using virtual goods. eSportsPools will look to legitimise the sector – commonly known as skin betting – by working under a licence from the Isle of Man Gambling Supervision Commission.
Australia Australia has tightened its gambling laws with the introduction of the Interactive Gambling Amendment Bill. This enforces a ban on online casino and poker, and removes the ‘click-to-call’ loophole used by operators to circumvent the country’s in-play betting ban. Senator David Leyonhjelm revealed he received a letter from Communications Minister Mitch Fifield stating that his department would do “some preliminary work” examining the feasibility of licensing Australian online poker operators. The Australian states of New South Wales, Tasmania and Victoria have all pledged to push for a ban on lottery betting in a concerted effort to force Lottoland from the country (see pages 56 and 60 for more). Tasmania may also move to restrict or reduce the number of gaming machines in operation in the state. Western Australia has confirmed plans to introduce a point of consumption wagering tax from the start of 2019. This will apply to all online betting operators and is consistent with the model implemented by South Australia in July.
New Zealand The government of New Zealand has unveiled the Racing Amendment Bill which aims to introduce a point of consumption tax for racing and sports betting. The bill is based on recommendations put forward by the Offshore Racing and Sports Betting Working Group. 29
F I NA NC E GIQ20 Q3 2012
Selling the dream C O LU M N MARKETING
How lotteries balance promoting the prospect of winning vast riches with raising awareness of the social projects that ticket sales help support FROM TALES OF epic adventure and stories of enduring friendship and love, through to highlighting major sporting achievements, lottery advertising sits in a class of its own, apart from the brash calls to action typical across the rest of the betting and gaming sector. Some lotteries, such New Zealand’s Lotto and Spain’s Christmas Lottery El Gordo, create mini films which take the viewer on an emotional journey. The New York State Lottery, one of the oldest in the US, has a history of snappy, lighthearted ads based around its ‘Hey, You Never Know’ strapline. While core betting and gaming advertising tends to be focused on the key consumer segment, both in content and media channel, the challenge for lottery advertising and their agencies is to create compelling work that appeals to a far broader section of society. “NZ Lotto is based on maximising the contribution we give back to the community,” explains Guy Cousins, NZ Lotto chief marketing director. “In marketing terms, this means reaching out to the many, not the few.” The core insight ‘What if I won…’ tends to be at the heart of many of the lottery campaigns. 32
What makes each lottery’s advertising different, says Charlotte Burlin, marketing manager of games of chance and lotteries at Swedish operator Svenska Spel, is how they tailor that insight to their own brand. “What makes us different is, of course, our way of telling the stories and making them true to our core values and target audience,” she explains. “Humour and recognition is very important in our advertising.” Svenska Spel is currently focused on its new Lotto concept Miljonärsfabriken – or Millionaire Factory – and how it makes many millionaires and multi-millionaires every year. At NZ Lotto, the strategy is to inspire people to dream about what they would do with a big win. “Over the years the themes have evolved in line with consumer sentiment,” says Cousins. “It’s less about big material things, and more about being able to share with people you care about in life – and not just sharing money, but sharing time and dreams.” Executions have included a grandfather’s win that allows his grown-up son to stop working on fishing boats and spend more time with his own son. They arrive in a pirate ship when they break the news. In another, a group of
siblings meet at the request of their recently deceased mother to dig up a long-buried time capsule. Instead, they find an old photo of their mother brandishing a winning ticket, and a haul of gold bars. “We have found a heartfelt space that is resonating with people,” adds Cousins. “We aim to make an authentic, emotional connection with our players. They’re essentially family tales of love and freedom, with a fantastical dimension.” The UK’s National Lottery has become one of the country’s best-known brands since its launch in November 1994. Originally using the strapline ‘It Could Be You’, its advertising has moved through other iterations of that sentiment, including ‘Maybe, Just Maybe’ through to ‘What Would You Do…’ and today’s ‘Who Wins if You Win?’. According to an agency insider, these later straplines aim to embody the spirit of generosity. “‘What Would You Do’ allowed us to show more of the generous side of winning,” says the insider. Camelot, however, does not enjoy some of the same freedoms as its overseas counterparts when it comes to advertising, according to the insider, a former creative director on the account. Much of what it does, he explains, is dic-
tated around the licensing cycle, as should it lose that licence, Camelot ceases to exist overnight. For that reason its advertising (done by Abbott Mead Vickers BBDO since 2004), is split into two distinct categories – pre-bid and post-bid. “There are two phases of advertising produced for Camelot,” he says. “Coming up to the licence bid, Camelot tends to focus on all the good causes that it funds, such as arts and heritage projects and sporting triumphs, so it is seen as a force for good. This tends to be quite straightforward advertising, saying here’s what it does for you, the nation. It tells players that even if they don’t win they are doing a really good thing. “There is also retail-based advertising that promotes new games and products. The government wants to know that the National Lottery is being run efficiently and that its future is in safe hands. Also that the operator is forward-thinking and innovative, so it will grow revenue.Players try out new games as well continuing to buy their Saturday ticket, but after a while they get tired of the games and revert to their usual ticket. This creates a short-term spike in sales.” The source adds: “Camelot tends to time these to coincide with the licensing bid period, as it can point to the revenue growth created.” Only when the licence has been secured and the pressure is off slightly, does the Camelot marketing team consider doing any brand advertising. “That’s when they do the soft, warm and feel-good stuff that isn’t telling you why you should play.” Even then, he adds, Camelot’s marketing team tends to keep its simple and straightforward. “The people commissioning adverts inside Camelot are cautious. They don’t take risks.” Camelot declined to be interviewed by Gaming Intelligence for this piece. All national and state lotteries contribute to the public good or to good causes in some way. Svenska Spel contributes the turnover from every game it operates, including Lotto, to the Swedish state budget. However, Burlin says, it is not able to say exactly what it is spent on. Similarly, money from the New York State Lottery is used for public education. Indeed, according to its website, it contributed £3.27 billion in the 2016/17 fiscal year. This accounts for 14 per cent of the total GIQ Q3 REVIEW
It changes everything, significantly improving state education funding to local school dishis standing in the school. tricts. Yet, no mention of this is made in “It’s a story that celebrates the underdog. The its advertising. main character is someone we all might know,” Both the National Lottery and NZ Lotto, on explains Cousins. “It aims to the other hand, have made highlight that lottery funding their support of good causes can be ‘life-changing’ in many a key strand of their overall “Our ads are big, small, incalculable ways – and advertising strategy. The heart-warming helps build and support the National Lottery says it has funded 510,000 projects since stories. This helps us New Zealand way of life.” Camelot tends to shy away its launch, including sports, stand out from the from big, glamorous ads that arts and heritage. advertising clutter. would impress the ad indusAds have highlighted We share stories that try itself, says our source. its association with British reflect what we hear “It would worry them that Athletics, at the London 2012 from our winners” it would look too flash. They Olympics and beyond. Last Charlotte Burlin, Svenska Spel don’t want to be accused of year, for its Christmas ad, wasting public money, even Abbott Mead Vickers BBDO though it’s funded by them.” created an animated film showing a lottery ticket For that reason, they admit to being “enviblowing through the country, filling run-down ous” of the freedoms enjoyed by other agencies areas with colour and activity. It aimed to show working on lotteries. “There is a simple joy or the transformative effect of lottery money and epic nature to a lot of the work you see elsewhere ended by thanking people for their contribution. around the world.” Lotto NZ is not obliged to highlight its fundSvenska Spel’s Burlin says its players expect ing to good causes but is increasingly doing so, its advertising to be “relevant, surprising and says Cousins. “Our players like to hear stories maybe create a laugh or two”, while Cousins of the positive impact on communities, thanks says people like their work because they don’t to lottery funding.” feel like ads. “They are big, heart-warming stoThis is seen in its latest work, called Love ries. This helps us stand out from the advertisSport, about community funding. This tells the ing clutter. We like to share stories that reflect story of unlikely football hero Dylan. On finding what we hear from our winners. The advertising the ball at his feet, Dylan manages to right-foot is about people and generosity of spirit.” n it to a female team mate who goes on to score. 33
LOT T E R I ES GLOBAL
Lotteries look for a way forward
THE GLOBAL LOTTERY industry remains a wildly profitable sector. Companies generate billions in sales, and prop up a range of important social and civic causes in a number of countries around the world. However, there are early signs that life for lotteries is not as easy as it once was. While these companies retain staunch backing from governments and retailers, progress in the form GIQ Q3 REVIEW
of regulation and technological advances are increasingly hard to ignore. Customers want more than weekly draws and instant win games. Lotteries are finding that simply launching these products online is not enough to retain players and attract a younger generation. Online game revenue may be dwarfed by lotteries, but iGaming continues to grow much faster, with
new opportunities for further growth on the horizon. The first cracks are starting to appear in lotteriesâ&#x20AC;&#x2122; solid foundation around the world. The biggest problem is that there is little sign that the lotteries know exactly what to do to address these issues. Over the next few pages we run down the issues facing the worldâ&#x20AC;&#x2122;s largest lottery markets. 35
LOT T E R I ES EUROPE
European lotteries at a crossroads The European lottery industry seems to understand that things must change if it is to safeguard its long-term future. It just can’t quite decide who is to blame for its predicament, or what changes are needed. By Robin Harrison and Bobby Mamudi
FIGURES FROM THE World Lottery Association revealed a 0.9 per cent decline in European sales for the first quarter of 2017. At a time when the re-regulation of markets across the continent has led to increased competition, the industry is thinking long and hard about how it responds. And although many state lotteries have been quick to identify private (or publiclyowned) gaming operators as a threat to their model, competition is more widespread. In 2015, European Lotteries members are estimated to have generated total sales of €86.4bn, and gross gaming revenue of €38.8bn. Online GGR for European Lotteries members was €2.5bn. They see billions of euros in revenue generated online that didn’t come from lotteries, and believe that they could have had a share of this if not for private competition. Svenska Spel chief executive Lenart Käll points out that unlicensed operators have built up a 25 per cent share of Sweden’s gambling market since entering the country in around 2005. “Given the lack of controls introduced by the Swedish authorities, coupled with the strict regulations governing Svenska Spel or AB Travoch Galopp, the evidence is clear: they have taken market share from us,” he says. “Our market share has fallen from 55 per cent in 2007
to around 40 per cent today.” Michael Heinrich, co-CEO of Lotto Hamburg and Germany’s powerful state lottery association the Deutsche Lotto und Totoblock (DLTB), claims that unlicensed companies offering lottery products in the country turn over “around €500m per year”. These figures are the DLTB’s own, based on members’ revenue. “Many of these private companies operate from the gambling tax havens, Malta and Gibraltar, where they pay almost no taxes,” he says. “The activities of these ‘black’ lotteries are not a competition issue,” Heinrich continues. “They are a public order issue, as they are illegal and undermine our lottery system, which is oriented towards the common good.”
Reality bites Of course, the uneasy relationship between lotteries and private operators in Germany and Sweden is down to legislation which is incompatible with European Union law. This is certainly true in Germany, which is attempting to pass its latest, already-discredited iteration of the State Treaty on Gambling. In Sweden the looming threat of infringement proceedings has forced the government towards reregulation. Existing laws give these state-owned opera-
LOT T E R I ES EUROPE
“We’ve seen the emergence of larger, umbrella-style lotteries that have positioned themselves as national competitors to the National Lottery” Richard Hickson, Camelot
tors a degree of protection, with the products they offer the only ‘legal’ ones in the market – albeit under an illegal regulatory framework. In Sweden, little has been done to stem the flow of unlicensed competition due to the country’s outdated legislation. In Germany the federal government seems content to take tax revenue from unlicensed (or SchleswigHolstein-licensed) operators, despite the DLTB’s protests. Private competition is increasingly a fact of life for state lotteries. This is especially true of the hyper-competitive UK market, where the National Lottery has competed with private operators since its inception. “To be clear, we have never had a problem with competition, as long as the competition is fair,” says Camelot Group head of policy and public affairs, Richard Hickson. “For a start,
GIQ Q3 REVIEW
there is rigorous public competition for the National Lottery licence – and we’ve bid for and won three such competitions. “More widely, we’ve always operated in the intensely competitive fast-moving consumer goods market, vying for consumers’ discretionary spend.” But, Hickson argues, there are other factors at play which have “muddied the waters” for Camelot.
Society lotteries “We’ve seen the emergence of larger, umbrellastyle lotteries that have positioned themselves as national competitors to the National Lottery – therefore directly challenging the policy principle that there should be only one national lottery,” Hickson says. “There is clear evidence that this development is causing consumer confusion and diverting money from good causes. The singleoperator model maximises player interest and participation.” The National Lottery was established as a single entity in order to maximise returns to good causes and society, as well as ensuring a high level of player protection. This does not amount to a licence to print money, Hickson is quick to add. “As a monopoly operator, our competition is limited, but so are our profits – our profit after tax is only around one per cent of total revenue, while around 95 per cent goes back to winners and society. “But we knew that when we bid for each of our licences and we’ve invested huge amounts in the National Lottery brand over that last 23 years in the expectation that we would continue to be protected against unfair competition.”
With other lottery operators muscling in on the National Lottery’s patch, this all breaks down, Hickson argues. “Research by Frontier Economics found that multiple operators would end up developing similar products and competing for market share, leading to significantly lower sales and less money for society,” he explains. “Frontier’s analysis shows that increased competition reduced cumulative National Lottery sales by £738m between 2011 and 2016,” Hickson says. “This resulted in National Lottery returns to society falling by £258m – £169m for good causes and £89m for lottery duty – compared with what would have happened in the absence of competition.” Since its launch in 1994, he says, the National Lottery has delivered £37bn for good causes, “far exceeding all predictions”; awarded 510,000 individual grants; paid out £63bn in prize money and handed over £14bn in lottery duty to the taxman. In Germany, state lotteries give around 40 per cent of turnover to the German state and good causes, such as supporting the financing of sports, arts, cultural heritage and social and charity projects. “If the unfair encroachment that we’ve seen in recent years is allowed to continue unchecked, we strongly believe that the ability of both the National Lottery and smaller society lotteries to deliver social good will be significantly hampered,” Hickson says. The Health Lottery is the first society lottery with a national profile to emerge in the UK. Total proceeds from large society lotteries have soared from £178.7m in the 12 months to April 2009, to £531.6m in the 12 months to September 2016. Society lotteries are a common feature of European gambling markets. Käll admits that Svenska Spel’s declining lottery sales are in part due to the strength of society lotteries, such as postcode lottery Svenska Postkodföreningen. They are “really strong” in Sweden, he says. With H1 turnover of SEK1.2bn, Svenska Postkodföreningen is Sweden’s third-largest gambling operator. 37
Healthy competition Chris Lunn, communications manager for the 51 health-related community interest companies (CICs) that operate under the UK Health Lottery scheme, argues that society lotteries should be seen as complementary to the National Lottery. “So far, more than £93m has been raised by the 51 Health CICs through The Health Lottery scheme. This important funding has supported over 2,500 local projects of all shapes and sizes and helped more than 436,000 people across Great Britain.” He argues that when the Health Lottery scheme launched in 2011, it had a “catalytic” effect on the UK lottery sector. Rather than resulting in the National Lottery taking a hit, he points to UKGC statistics that show an increase in the sums raised for good causes from £103m to £155m between 2011 and 2013. What the Health Lottery scheme has done, he says, is simply raise awareness of the use of society lotteries as a fundraising tool. “The success of the Health Lottery’s launch was perhaps a matter of reminding the public that there is a wide range of lotteries and not just ‘the Lottery’,” he adds.
Problems with products Hickson admits the main issue facing Camelot is the poor performance of the draw-based games. This has not been helped by ‘fragile’ player confidence following the changes, which saw more numbers added to the draw, lengthening the odds of winning the jackpot. There have been more jackpot rollovers than ever before, but consumers understand that’s because it’s harder to win. “There’s clearly work to be done to reengage players and address the performance of our draw-based games,” he says. 38
This is reflected in the UK participation figures. Only 25 per cent of young people aged 16 to 24 buy lottery tickets, compared to almost 60 per cent of those aged 35 to 44. It could be argued that state lotteries are hamstrung by a lack of product diversity. This issue has plagued Svenska Spel for years, Käll says. The operator has long lobbied the Swedish government for approval to launch casino games. All requests to date have been rejected. Online casino is the fastest-growing gaming vertical in Sweden, generating around SEK3.2bn in gross gaming revenue from just 200,000 players, he explains. The re-regulation of the market will finally allow Svenska Spel to roll out slots and table games, but likely through a spun-off private arm. “We applied for casino licence in 2014 – it’s difficult to understand why we have to watch these offshore businesses taking market share, growing and advertising, when they are not complying with the regulations,” Käll says. He also acknowledges that the Swedish government views slot games as particularly addictive products. “It’s the product that the government has the most problem with, in terms of kids between 20 and 30 gambling,” he admits. “We have problems with gambling addiction among younger, male players when it comes to online casino.” Despite this, he believes there is demand for new products among younger players. “ [ You ng p eople ] want quick results, a short period between betting and the result, and generally for everything to be more dramatic. We must understand
“The activities of these ‘black’ lotteries are not a competition issue. They are a public order issue, as they are illegal and undermine our lottery system, which is oriented towards the common good” Michael Heinrich, Lotto Hamburg & DLTB the experience the younger audience has from casual gaming, and how we can combine these unique positions and be more able to offer real money prizes,” he says. “Millennials are diverse and fickle, who live lives that are constantly changing.” Camelot is also looking to address this issue as part of the strategy review that came out of the sharp revenue decline in 2016. It is understood to be considering lobbying for an expanded product range, rivalling the public sector, but this is complicated by the licensing arrangement. The UK Gambling Commission granted Camelot its latest licence to operate the National Lottery in 2009. This contract runs until 2023, so any changes to its licensing conditions are unlikely before then. Another crucial part of the strategic review is the acknowledgement that the National Lottery has a duty to be the most responsible operator in the market. In a political and media environment that is increasingly toxic for private gambling companies, this can be a real USP.
LOT T E R I ES EUROPE
Risky business The challenge is to create games that offer a quick and easy reward to players while ensuring customers are gambling safely. Instant-win games, such as scratchcards, seem an obvious route. However, the fast-paced nature of instant win could pose problems for lotteries looking to maintain a high level of consumer protection. Svenska Spel has been a pioneer in responsible gambling. In 2014 the company launched a number of new consumer protection controls. It introduced a mandatory customer registration policy for online and retail customers, requiring them to show a driving licence or player card before gambling. All bonus promotions were also banned. This led to an SEK800m way of attracting a new generation of lottery drop in revenue and SEK500m decline in profit. players. “When we launched traditional lottery “We showed the rest of the market that games online we saw the average age of our regcustomer protection is more important than istered players decline,” Käll says. “When we profit,” Käll says. launched on mobile the averThis is ref lected in its age age dropped further.” instant win portfolio. Svenska Spel currently only offers four Casual competition online scratch games, all with As Hickson says, lotteries soft themes such as Scratch are “vying for consumers’ C r o s swor d a nd S cr atch discretionary spend”. And Bingo. Loto-Hamburg offers there has never been more no scratch games online. competition for a sha re Heinrich of Lotto Hamburg of the consumer wallet, from believes that lotteries should Netflix and Spotify subscripfocus on developing existing tions to an endless stream of draw-based products, rather casual games. than moving into new vertiFew would immediately cals to generate growth. He identify casual mobile games argues that German state as a competitor to lotter“it’s difficult to governments have effectiveies, but in the US last year understand why we ly handed responsibility for have to watch these they were more popular channelling players to “legal, than streaming sites such offshore businesses as YouTube, Hulu and Netfstrictly regulated and contaking market share lix, according to SuperData trolled gambling products”. when they are not He admits, however, that Research. In 2016 around 56 such a channelling policy per cent of the US population complying with the only works if the products played mobile games. It is regulation” remain attractive. “This estimated that 57 per cent of Lennart Käll, Svenska Spel requires a combination of Americans play the lottery. good traditional games and Mobile games also appeal innovation. LOTTO 6aus49 is a successful to the lottery’s core demographic – over fortraditional product. Eurojackpot, which we ties – and the target demographic – the launched with our European partners in 2012, 18 to 35-year-olds. Candy Crush has strong growth rates and attracts more peomay be more dangerous than ple in the younger generation. online slots. These games pro“To this end we’ve also adapted to players’ vide entertainment for little expectations by creating an attractive online spend and offer players the offer, continuing to develop innovative instant “reward” of winning and tickets, setting up self-service terminals in progressing through levels, shops, and more.” even if not the prospect of Adapting to players’ expectations, particureal money offered by lottery larly around the use of technology, is one simple products. 40
At the same time, the competition that exists in gaming is also present in charitable giving, with no shortage of appeals for donations. Does the fact that lottery proceeds go towards social causes still resonate strongly with consumers? According to the Charities Aid Foundation (CAF) World Giving Index 2017, every western country in the top 20 most charitable index saw a decline in giving in 2016. New Zealand, the United States, Australia, Canada, Ireland, the Netherlands, the United Kingdom, Malta, Iceland, Germany and Norway have each seen a decrease in their CAF World Giving Index score of between one and five percentage points. The index also shows that older people are more likely to give to good causes than younger generations, partly due to their greater wealth and partly due to their view of the world, although fewer did so last year. All of this puts lotteries in a difficult position. How do you make the product offering more attractive and competitive versus private operators while maintaining the highest level of consumer protection? How much emphasis should be placed on the social causes that lotteries support, versus the opportunities for players to win life-changing prizes? The European gaming landscape has changed beyond recognition in the past ten years and lotteries need to define their place in this new, competitive, yet highly regulated market. This requires acceptance of the fact that the state lottery today is one of a number of licensed gambling operators in a market. This may have deprived them of their special monopoly status, but not the important role they play in society. n
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LOT T E R I ES UNITED STATES
Retailers hold the key as instant games dominate Retailers’ priorities across the United States are focused on instant lottery games, which have become the leading product in the industry, writes Kio Dawson
THERE ARE SEVEN US states that currently allow online lottery sales – just three of which include online instant games – and there remains an appetite among lawmakers in other states to continue to discuss iLottery (sale of games via mobile and internet) as a means to increase sales. So far, the appetite among players has been muted and the results disappointing. The Michigan Lottery has been rightly celebrated for pushing the cause as the most interactive lottery in the US, but games sold online account for just three per cent of total sales there. In other states such as Kentucky, it’s more like one per cent of sales. According to La Fleur’s, online sales from lottery and eInstant games grew 54 per cent to
just over $143m in the 2017 fiscal year. At the same time, instant lottery games have grown to become a $45bn a year market. They now represent 63 per cent of US lotteries total sales. And retailers are an essential distribution network for the lotteries. Industry trade association National Association of Convenience Stores (NACS), which represents more than 2,100 retail members across America, estimates that its industry was responsible for more than $50bn in lottery sales last year, equivalent to nearly two-thirds of the 2016 total. The association, which is opposed to online lottery sales, said that on average a convenience retailer earned a commission of 5.5 per cent of sales on lottery.
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LOT T E R I ES UNITED STATES
“We are very bullish on interactive. But the other road is making sure that the retailers – the people who are the backbone of the lottery industry – are well taken care of” Jim Kennedy, Scientific Games “Commissions earned on lottery sales are just under one per cent of inside sales for a convenience retailer, so it’s not significant from a sales contribution perspective,” explained Lyle Beckwith, NACS’ senior vice president of government relations. “However, the reason most operators have it is because of the foot traffic it can generate. We estimate that lottery is the main reason just under seven per cent of shoppers go into a convenience store, and the category is consistently in the top three for impulse sales (meaning a category a shopper didn’t go into a store to buy, but saw it while there and decided to add it to their basket).” Beckwith points out that despite the traffic and excitement generated by the record $1.6bn Powerball jackpot in Q1 2016, lottery sales for convenience stores were five per cent less in 2016 than the previous year. In Massachusetts, the legislature is weighing up a move to allow the lottery to go online. The Massachusetts Lottery 46
says that it needs to position itself where the customers are (i.e. online and mobile), and that it needs the extra sales to continue to survive and generate funds for local aid. The retailers say that passing the bill (H 26) would decimate their business. A coalition of six retail associations in the state, Save Our Neighborhood Stores, argue that online lottery ticket sales would “greatly decrease” foot traffic to stores and be another challenge to already struggling business owners who haven’t seen lottery agent commission rates increase in over 40 years. The association claims that 80 per cent of Massachusetts residents think there is “enough access” to the lottery, and that “most” Massachusetts residents oppose expansion of the Massachusetts Lottery to the internet, describing it as an “unproven and risky proposition”. “An online lottery would only hurt the small businesses, leading to a loss in excise tax revenue for communities,” says the association, which includes the New England Store and Energy Marketers Association (NECSEMA) and the Retailers Association of Massachusetts (RAM) among its members. “If it isn’t broken, don’t fix it, at the expense of local neighborhood stores.” For retailers, they see no benefit from players going online to play the lottery, and any
LOT T E R I ES UNITED STATES
“Consumers like the games, the flexibility of the games drives content, and the retailers recognise the economic benefit of lottery, so they have become much more supportive” Jim Kennedy, Scientific Games
loss of commissions would “add insult to injury” to businesses already struggling with increased costs from wages, healthcare, energy and tobacco taxes. It puts leading suppliers such as Scientific Games in an interesting position. While the company’s games and technology are ready to serve US lottery customers in a digitalised world, its relationships with retailers are equally as important. “We are very bullish on interactive, in fact we see that as one of the major roads ahead,” explains Jim Kennedy, lottery industry stalwart and group chief executive of lottery for Scientific Games. “But the other road is making sure that the retailers – the people who are the backbone of the lottery industry – are well taken care of.”
The rise of instant games In the US and across the world, instant games (or scratchcards/scratch-offs/scratchies/ scratch-its, depending on where you are) have become the most important product in a lottery’s portfolio. Draw games may take the limelight when there is a big jackpot to be won, but instant GIQ Q3 REVIEW
games were the only major lottery category to achieve year-on-year growth last year, according to figures released by La Fleur’s in its 2017 World Lottery Almanac, with declines across lotto, keno, numbers, passive and toto games. Excluding video lottery terminals (VLTs), worldwide lottery sales fell marginally by 0.5 per cent to US$274.9bn – the second consecutive year it has declined. Sales from instant-win games topped $80.5bn, representing nearly a third of total worldwide lottery sales. In the North America region, this figure rises to 58 per cent ($47.3bn out of $82.3bn), revealing just how important instant games are to the market. Across the 44 US states which offer instant game products, sales were up three per cent in FY 2017 to $45.1bn according to La Fleur’s, representing 63 per cent of US lotteries total sales. At the same time, sales of draw games have stalled, with Powerball in particular seeing sales drop 31 per cent following the record $1.58bn jackpot in FY 2016.
“If you view the longer trend, you would certainly see the fact that the instant game continues to dominate compound annual growth,” says Kennedy. “Over the past seven years, the instant games business has grown over $15.6bn, and if you look at the draw game category, it’s been relatively flat. The story continues to be the growth of the instant game business. “One of the side benefits of this is that it has really driven the retail economics in a way that I don’t think anybody ever expected.” Kennedy believes that we are seeing a “shift in the centre of gravity” for lottery retailers who have previously prioritised draw games but now prefer instant games. “It’s close to a 30-70 split. We’re certainly heading in that direction.” One of the reasons instant games are so popular is because there is a constant stream of new products being launched weekly, covering a whole range of brands. “Most lotteries are launching 50-something games a year, so when you’re actively making and launching a new product, you have got this great content pipeline,” says Kennedy. “It’s a combination of more exciting games and higher price points. The retailers are making money and they are getting behind instant games and lottery as a category. “So you’re in a virtuous cycle right now, where consumers like the games, the flexibility of the games drives content, and the retailers now recognise the economic benefit of lottery, so they have become much more supportive.” Part of this stems from the sheer number of products on display. The average US lottery retailer now has 30 instant games on their counter-top. In comparison, UK retailers have around 16. “It’s that variety of choice that is part of the stimulus here,” says Kennedy.
Willy Wonka Golden Ticket Scientific Games has been doing its bit, too, and has enjoyed spectacular success this year with a new multi-state instant-linked game, Willy Wonka Golden Ticket – the company’s most successful linked instant game yet. The game features a unique bonus online second-chance opportunity, where players get a chance to take part in the Billion Dollar Challenge event in April 2018. 47
Willy Wonka is one of Scientific Games’ top three casino licensed properties, of course, but there is genuine excitement over the multi-state potential that it is opening up by bringing the scaling power of multiple jurisdictions together around a single game. “We are very proficient at determining when it comes to what works, and what doesn’t work,” says Kennedy. “What works in jurisdiction A, may not work in jurisdiction B, and contrary to the myth out there, there is a tremendous amount of innovation that goes on when you’re producing 3,000 pieces of unique content every year. “You learn a lot about where the market is, so I think we do a really good job of recognising the instant game as a category in relation to gaming consumers. You put on top of that these interactive layers that we’ve been driving in the last five years, and that gives us a whole new dimension to better understand what’s working and what’s not.” Kennedy revealed that the Willy Wonka Golden Ticket game has already launched in 12 states at the time GIQ went to press, with two more launching shortly thereafter and at least another two 48
finalising plans to join the game by the end of the year. It is currently the highest-indexing $10 game this year in Arizona, Colorado, Georgia, Maine, New Mexico and New York, and the highest indexing $20 game in Ohio. The game is also generating nearly two million secondchance entries across seven loyalty clubs. Next April’s Billion Dollar Challenge event will be the first time US players have had an opportunity win up to $1bn in cash prizes on a second-chance offer, which sees eligible non-winning tickets entered into an online drawing for a chance to win a trip to Las Vegas to attend the event. Scientific Games has already announced that it will hold another Billion Dollar Challenge event in 2019. These second-chance opportunities are a good way for the company to showcase its interactive capabilities. The supplier is working on 40 second-chance websites right now, and has developed 625 sites for lotteries over the years. It also developed 16 lottery mobile apps and 14 loyalty programmes. Together, these are helping lotteries better connect with their players, in a similar way to
what social casinos have done for land-based casinos – another sector that has struggled to increase sales in recent years. “It’s a matter of distinction,” says Kennedy. “I would say most US lotteries are online. They have an internet presence, or even a mobile presence. When you look at general consumer participation rates, which are in the two per cent range, second-chance lottery draws have been very successful. Second-chance promotions in the lottery sector are higher. They are generally in the 10-15 per cent range, sometimes as high as 40 per cent for special games. Those are unheard-of numbers.” “There’s no substitute for experience. We’ve surpassed the $5bn mark in terms of retail value of actual entries into our systems. So that learning really goes into the construction of the consumer experience, and in the reliability of that experience when we plug one of these programmes together like the second-chance feature of Willy Wonka Golden Ticket.” There may not be many US lotteries selling their games online, but the digitisation of these lotteries is gathering pace. Retail instant games may be the immediate future for the US lottery industry, but second-chance draws are helping to bridge the retail and online divide. n WILLY WONK A & THE CHOCOLATE FACTORY and all related characters and elements © and ™ Warner Bros. Entertainment Inc.
LOT T E R I ES CHINA
China in suspense Lottery suppliers to the Chinese market are diversifying because of a two-year suspension of interactive lottery sales but there are signs that the ban could be lifted. By Steve Hoare
THE TAKEOVER OF AGTech by Alibaba has subtly but fundamentally changed the nature of the company. For over a decade it has provided technology products for China’s Welfare and Sports lotteries and that continues to be the core business – for now. Alibaba’s influence has made itself apparent immediately. During the first half of the year, AGTech’s new Games and Entertainment business generated revenue of $17.1m, equivalent to nearly a third of the company’s total during the period. That represents pretty amazing growth for what is essentially a startup, albeit one with huge backing. This followed the roll out of casual and social games for mobile, including non-lottery play-for-fun and mind sports (skill) games, such as the Two-on-One competition poker game, which is not subject to lottery laws and regulations in China. These have been distributed across parent company Alibaba Group’s Taobao channel. The addition of mind sports to the AGTech portfolio is the first step towards the lottery supplier becoming a much more rounded business. Global Poker League’s Alex Dreyfus, who launched GPL China at the end of 2016, told us recently: “It is early days, but the Chinese government wants to promote sports and competition and has encouraged investment in football and the NBA. There will never be lots of Chinese NBA players for physical reasons. But with mind sports, we all have the same brain.
China will use mind sports as a gateway to the international sporting arena.”
Consequences of a crackdown Mind sports is an important new avenue for AGTech and potentially for other suppliers. The Chinese government has flirted with the regulation of interactive gaming and lottery for years but recent crackdowns have left this avenue closed for now. As far back as October 2009, the Chinese Ministry of Finance issued the Interim Measures for the Administration of Internet Lottery and Telephone Lottery Sales. Before that it had tacitly allowed the sale of retail lottery tickets on the internet before the emergence of a plethora of fraudulent websites prompted a crackdown. Since then, a new generation of interactive lottery resellers have sprung up. Mostly based out of Hong Kong, the likes of Success Universe Group and 500.com surged ahead before another government suspension in January 2015 halted the gravy train. Hong Kong-listed Success Universe Group sold its Chinese lottery subsidiary Honour Rich, citing the ongoing uncertainty in the Chinese lottery market. Honour Rich had served as an official lottery sales agent in a number of Chinese provinces prior to the suspension of online lottery sales. In the year prior to the suspension, the company recorded lottery turnover of HK$201m
LOT T E R I ES CHINA
(US$25.74m) and a profit of $24.5m, falling to a loss of $20.8m in 2016 on revenue of just $8.3m. Success Universe sold its 80 per cent stake in Honour Rich to British Virgin Islandsincorporated Wide Fortune Group for HK$12m earlier this year. 500.com was operating in similar circumstances. The Ministry of Finance approved its contract to develop interactive sales for the China Sports Lottery Administration Centre before halting such sales. Revenue dropped a devastating 82.8 per cent during 2015 from RMB579m ($87.25m) to RMB99.5m and then it lost 89 per cent during 2016. 500.com also turned to poker with the acquisition of a controlling interest in Qufan Internet Technology and its subsidiary Shenzen Qufan Internet Technology, which offers free-to-play mobile poker. This puts it head-to-head with the likes of Tencent Poker, which is the country’s most popular social poker product. 500.com then acquired Malta-based The Multi Group, operator of the Multilotto brand, for €49.8m. Multilotto allows players to bet on the outcomes of 11 of the world’s largest lotteries, making it a competitor to the industry leader Lottoland, which hired former AGTech executive Geaspar Byrne to spearhead its own push into Asia earlier this year. 500.com was not finished there. It returned to traditional Chinese lottery products with the acquisition of MelcoLot, which manufactures point-of-sale lottery terminals, as well as distributing scratchcards for the Chinese Sports and Welfare Lotteries. It also manages the Lucky Pool retail network that provides the Sports Lottery with ticket and skill-based games. The sum total of these three purchases suggests a belief that online lottery sales are unlikely to return in China any time soon, despite its insistence that its Ministry of Finance authorisation remains valid.
Signs of life But some continue to hold out hope. New York-listed gaming and lottery supplier International Game Technology (IGT) announced a joint venture with Chinese mobile phone reseller and lottery supplier Telling Telecommunication in July 2017. Telling will hold a 51 per cent stake in the Chinese joint venture, which aims to provide innovative lottery products to the regulated lottery market. “A number of market dynamics certainly influenced our joint venture,” IGT head of interGIQ Q3 REVIEW
“If and when regulations related to mobile lottery change, Telling is a core member of China’s mobile ecosystem and in an excellent position to distribute interactive lottery products and services” Walter Bugno, IGT
national Walter Bugno tells Gaming Intelligence. “They included the expectation that interactive lottery will soon be regulated in China, as well as our assessment that the instant ticket market is underdeveloped and constrained by game types and current regulations.” Telling has more than three decades of experience working with world-class technology companies, from Motorola to Apple. They know how to effectively and efficiently package and distribute technology in China, and IGT believes that expertise can be put to good use in the lottery market – regulations allowing. “If and when regulations related to mobile lottery change, Telling is a core member of China’s mobile ecosystem and is in an excellent position to distribute interactive lottery products and services,” continues Bugno. “As opportunities arise, we can also form additional partnerships for developing new ways to play.” Bugno accepts that he can do little but wait for a government announcement, however, he will have been emboldened by news from rival supplier AGTech. If anyone can be expected to understand or know the mind of the government it is Jack Ma, the founder of AGTech owner Alibaba.
A new lottery model In March this year, AGTech announced a deal to launch a new lottery channel on the online platform of Alipay, Alibaba’s Chinese online payment processor. AGTech said that the 50:50 joint venture operation of the Alipay Lottery
Channel will enable it to tap into the online lottery sector ahead of any potential reopening of the Chinese market. Alipay boasts more than 450 million active users in China and worldwide. It is the most popular online and mobile payment tool in China, evolving into a ‘lifestyle enabler’ that allows users to hail taxis, book hotels, pay utility bills or book movie tickets. While AGTech acknowledged that there is “uncertainty as to the timing of the potential re-opening of the online distribution market of lottery products under the applicable PRC laws and regulations”, one senses the deal would not have been struck without some inside knowledge. From the beginning of the interactive suspension in 2015 until May 2017, the Chinese government conducted a two-year trial of mobile lottery sales in Jiangsu. Since then the government has authorised a number of other provincial mobile sales trials. According to China’s Ministry of Finance, the strict implementation of regulations governing the pilot programme resulted in a smooth and standardised process which identified no significant risk associated with the use of mobile phones as a sales channel. “The mobile lottery sales trial demonstrated that the government is still considering and evaluating new forms of gaming,” comments Bugno. “The government’s willingness to consider new ideas is good for the industry in the long term. The feedback from the market was positive, and we hope to see more provinces participating.” During 2016 China’s lottery market saw total sales increase by seven per cent to RMB394.64bn (€53.6bn), with Sports Lottery sales up 13 per cent to RMB188.15bn and Welfare Lottery sales climbing 2.5 per cent to RMB206.49bn. The addition of mobile and interactive lottery is a tantalisingly prospect. IGT and AGTech are positioning themselves, but the wait goes on. n 51
LOT T E R I ES SINGAPORE
Singapore Pools go online Gaming Intelligence speaks to Singapore Pools chief executive officer Chin Siong Seah about the company’s journey from legislation to online launch. By Steve Hoare SINGAPORE POOLS WAS established by the Singapore government in 1968 to provide a safe outlet for gamblers away from the gambling parlours run by Triads. In 2016, the Pools took a step into the 21st century with the launch of its online gaming website to counter the perceived threat from organised crime operating on the internet. The launch of the website was accompanied by the new Remote Gambling Act, which was introduced by the Singapore government in 2014 to combat illegal online gaming. “It was in response to this impending legislative change that Singapore Pools sought expressions of interest in providing an online betting platform. We envisaged that we stood a good chance given our excellent track record in Singapore and internationally, especially for responsible conduct,” says Singapore Pools chief executive officer Seah Chin Siong. The aim of the Singapore government was to institute the same regime online as it did offline. That meant gambling was prohibited with all except licensed operators. And licensed operators meant the Singapore Pools and Singapore Turf Club. “This is not about trying to create a new channel for gaming online,” said Singapore’s minister for trade and industry, S Iswaran, at the time. 52
Casino games and online poker would be banned, but the Singapore Pools was allowed to seek an exemption from the general ban that would allow it to offer the same games online as it does in retail outlets and over the telephone. The product portfolio consists of the lotto game TOTO, pre-printed lottery game Singapore Sweep, numbers game 4D, as well as betting. During 2014 and 2015, the Pools conducted a tender process to audition its technology providers. A hard-fought battle was won by UK supplier OpenBet, which provides a sports betting platform to many of the UK’s leading bookmakers, such as William Hill, Paddy Power and Sky Betting & Gaming. It has broadened its client base in recent years to include WLA members such as Canada’s British Columbia Lottery Corporation, France’s Pari Mutuel Urbain and Denmark’s Danske Spil. OpenBet (soon to be part of Scientific Games) was awarded a seven-year contract and the online service was launched successfully in October 2016. It included all the offline products and in-play or live betting. “The
launch was relatively smooth,” says Seah. “There were the usual initial minor system bugs but they have been mostly fixed. We continue to make system improvements.” Seah says they have put in place strong KYC (know your customer) and customer due diligence and screening, which is “not too different from the financial sector”. Casino-style games and poker continue to be banned in Singapore. Would Seah like the Singapore Pools to be granted an exemption to offer these games or are there any other game types that he would like to offer? Seah gives little away with his response: “We will work closely with our regulators to determine what game types to offer in relation to our mission to help counter illegal gambling activities in Singapore.” One senses he would like to say “yes” or at the very least “never say never”. However, when the Remote Gambling Act was passed the government made a point that it wanted to “cu r tai l t he options” avai lable to Singapore’s citizens. In addition to banning all unlicensed operators, the act criminalised individual gamblers, facilitators, agents and runners. It also introduced payment transactionblocking measures, as well as advertising bans and a public health education programme. So, has it been effective? “As we have operated the channel for nearly a year, it is still premature to conclude its effectiveness against illegal online gaming here in Singapore,” says Seah. He says the online contribution to revenue and customer numbers lived up to expectations, without wishing to divulge detailed numbers. “We do not expect revenue from our online channel to surpass terrestrial sales in the near term,” says Seah. “Online sports sales though may increase more than online lottery sales.” He says it is too early to analyse whether the operator is reaching out to a new, younger demographic, but sports betting is such a natural product to be reproduced online that Seah’s confidence is not misguided. The Pools is just at the beginning of its journey but it has already travelled much further than many of its WLA peers. The launch has clearly been a success. Now, the analysis will need to be done to ascertain whether it has been an effective tool to counter unlicensed operators. n
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LOT T E R I ES AFRICA
Ithuba leads the charge for online African lotteries South Africa’s national lottery operator is moving its services online while maintaining its charitable commitments WHILE IT HAS only been active since 2015, Ithuba Holdings, the gaming business created by the Zamani Equity Fund, has firmly established itself as a key player in the South African lottery market. The company won the tender for the country’s third national lottery licence in June 2015. This process was not without its hiccups, with the IGT-powered supplier challenged in court by former licence holder Gidani. This type of dispute is not unusual in South Africa and the challenge was unsuccessful. Ithuba has launched two new draw games since it took over the lottery, Raffle and Pick 3, as well as a range of instant-win products based on traditional African games and marketed as EAZiWIN. Its inaugural Christmas 2016 raffle sold two million tickets, something Ithuba claims has only been achieved by a “handful” of its peers. “For Ithuba, being awarded the operating licence presented an opportunity to modernise and grow the National Lottery, foster confidence and pride in the National Lottery brand, and introduce a higher level of service to local communities than ever before,” says Charmaine Mabuza, managing director of Ithuba. Last year, the lottery turned over ZAR6bn (€374.6m), a 65 per cent improvement on the first year of operation. A total of ZAR1.2bn was paid to the National Lottery Distribution Trust Fund and ZAR2.5bn was paid out in prize money. Growth has been aided by changes to existing lottery games that the operator inherited, Lotto and Lotto Plus, which now offer larger jackpots, fixed lower-tier prizes and a rolling jackpot for Lotto Plus. TV draws have also been revamped, with ball machines scrapped in favour of a new ran-
GIQ Q3 REVIEW
dom-number generator and dynamic graphics. The show also features video segments on lottery winners and highlights the good causes that receive funding from lottery money. One of the most important developments has been the lottery’s expansion into internet and mobile sales. The interactive offering was only launched last year, and Mabuza says it has grown “considerably” since then. “We have diversified our access channels into Unstructured Supplementary Service Data [or SMS gateways], which addresses the largest market in South Africa, as well as mobile and web,” she says. “We have had more than 300,000 player registrations since the launches, in less than 18 months.” Mabuza is the founder of parent company Zamani and one of South Africa’s leading female entrepreneurs. She was one of the first directors of Women’s Investment Portfolio Holdings (Wiphold), a black female-owned investment vehicle that became the first women’s group to list on the Johannesburg Stock Exchange. She was also the founder of Empilweni Payout Services, a distributor of social grants in South Africa. Ithuba, in some ways, continues this work. Grants are awarded to a range of beneficiaries, from charities and public benefit trusts, to sporting clubs, educational institutions and cultural bodies. Despite the positive improvements, Mabuza claims that Ithuba’s business has been harmed by unlicensed competition, reducing its revenue and the money generated for good causes. “Ithuba is not under threat per se,” she explains. “However it is engaging with the authorities to deal with any threat posed by illegal operators.”
“Ithuba is not under threat per se. However it is engaging with the authorities to deal with any threat posed by illegal operators” Charmaine Mabuza, Ithuba South Africa’s Department of Trade and Industry (DTI) is strengthening controls from the top down, replacing the current National Gambling Board with the National Gambling Regulator, which it hopes will play a more effective role in policing the sector. It will also close a loophole that has seen provincial licensing authorities approve operators that run private lotteries or offer bets on the National Lottery. This also extends to players, who now face confiscation of illegal gambling winnings and prosecution. Under a secure regulatory framework, Mabuza is confident that Ithuba can not only increase its contributions to society, but also set the benchmark for lottery operations across the African continent. n
LOT T E R I ES AUSTRALIA
Regulators and retailers lead Lottoland backlash
members, should Lottoland take them to court over their efforts to hinder the lottery betting operator’s growth. This is a particularly aggressive approach for a lottery giant to take. As we have seen in Europe, the US and Asia, the largest lotteries are traditionally heavily restricted in terms of the products they can offer. Tatts does not have this problem – yes, it is blocked from offering online casino or poker per Australian law, but it can compete against the private sportsbooks with its UBet brand, and in the land-based seca recent decline in revenue. Western Australtor with poker machines. It is in a stronger posiia’s Lotterywest failed to meet its budget contion than many of its contemporaries. tribution for its 2016-17 financial year – the first This position could get even stronger, time this ever happened – with its community should its acquisition by Tabcorp Holdings be contribution falling AUS$5.7m to $265m. finalised. At the time of writing the deal was Tatts Group also posted in the balance, with the Ausa decline for its 2017 finantralian Consumer Tribunal cial year, with lottery sales ordered to revise its decision to While Tatts is a down to $2.01bn. It holds ratify the merger by the counprivate business a near-monopoly across try’s federal court. working alongside Australia. It is licensed in The combined Tatts-TabVictoria, Tasmania and the state, its attacks corp business would be capathe Northern Territory ble of dominating all legal on Lottoland act as under the Tatts brand; as a contribution to the gambling in Australia. Hence Golden Casket in Queenswhy the deal has raised condebate on whether land; as NSW Lotteries in cerns from the Australian state lotteries New South Wales and the Competition and Consumer should be privatised Australian Capital TerriCommission and CrownBet. tory, and as SA Lotteries Creating a bogeyman in the in South Australia. form of Lottoland may offer a Lotteries post decline, then find a scapegoat convenient distraction, using a fear of the new for their struggles. Followers of the European to shift attention from the very real prospect of lottery sector may have heard this one before. competition being significantly lessened. Tatts is currently backing a new campaign While Tatts is a private business working organised by the Australian Lottery and alongside the state, its attacks on Lottoland act Newsagents Association (ALNA). Eschewing as an interesting contribution to the debate on subtlety in favour of getting its message across, whether state lotteries should be privatised. It this campaign is centred around the slogan may lack the state protection afforded to the lot“Lottoland’s gotta go!” Never mind that Lottoto-only operators in other countries, and have land generates a fraction of the market-leader’s the benefit of an expanded product range. Yet it lottery revenue, Tatts believes it poses a suffistill rails against private competition. If lottercient a threat to tackle it head-on. ies are to be privatised, are the buyers or operaTatts has even pledged to cover any legal tors only buying these businesses because they costs accrued by the ALNA’s near-4,000 believe they are buying a monopoly? n
Lottoland may be feeling the heat in a number of jurisdictions but the Australian campaign against the lottery betting specialist is by far the fiercest LOTTOLAND’S EXPLOSION ONTO the scene has led to grumbling from a number of national lottery operators in various markets, with some regulators even looking at the legality of its business model. In Australia, however, the backlash has been fast and brutal. At the time of writing, South Australia had banned placing bets on lottery outcomes. Now Western Australia, Victoria, New South Wales and Tasmania are all looking to follow suit. Each state has described the target of its new legislation differently, using terms such as “lottery outcome betting”, “synthetic lotteries” or even “fake lotteries”. But, as Lottoland CEO Nigel Birrell says on page 60, it’s perfectly clear which company is being targeted. The rationale behind the ban is normally that Lottoland is misleading consumers, siphoning players away from the state lotteries. Australia has shown a tendency to act swiftly when it comes to controversial forms of gambling. The move to close the click-to-call (a form of in-play betting) loophole exploited by bookmakers certainly suggests this to be the case. Yet while the click-to-call loophole was there to be closed, Lottoland appears to be in a stronger position. It is licensed in the Northern Territory – making claims that it offers “illegal online gambling” false. As it is keen to reiterate to anyone and everyone, it pays Australian corporate and income tax, and has paid goods and services tax as of July 2017. In territories where legislators are looking to ban lottery betting, there tends to have been
LOT T E R I ES BRAZIL
Privatisation could provide route into Brazilian market The privatisation of Brazil’s state-owned instant-win games business LOTEX could offer international operators a way into the country’s lottery market. However, the process is already running into difficulty, Neil Montgomery and Helena Calderano of Montgomery & Associados explain
States are questioning the federal government’s sole authority to operate lotteries and have resorted to Brazil’s Supreme Court in an effort to preserve their purported right to state-run lotteries
THE BRAZILIAN FEDERAL government is moving ahead swiftly with its plans to privatise LOTEX, its instant lottery with themes based on football, cultural references, holidays and events of public appeal. LOTEX is currently run by a governmental bank and is one of the few forms of legalised betting in the country. The invitation to bid is expected to be published in October and to take place by the end of the year. While this privatisation had officially been in the government’s plans since the beginning of 2016, the plans are now being put into motion: draft bid documents have been made publicly available, a public hearing was held on 26 September and the government is accepting feedback from the public. A road show for potential investors is visiting London, Las Vegas and Rio de Janeiro. The concession will be granted by public bid. The term of the concession will be 25 years and will be granted to whoever offers the Federal Union the highest remuneration, in a fixed single instalment, which must be of at least BRL916.6m (€246.4m). The concessionaire will be entitled to 18.3 per cent of the gross revenue of the sales of LOTEX, which is currently estimated at approximately BRL56m for the full term of the concession. Bids may be submitted individually or under a consortium, and foreign companies are free to bid. In fact, it has been reported in the media that International Game Technology, Intralot and Scientific Games all attended the public hearing held in September.
However, the federal government’s business model based on exclusivity may be in danger. States are questioning the federal government’s sole authority to operate lotteries and have resorted to Brazil’s Supreme Court in an effort to preserve their purported right to staterun lotteries. Therefore, in practice, the winner of the bid may not hold the exclusivity to the instant lottery market, which would certainly make the concession less attractive to potential investors. While it is unlikely that the Supreme Court will have given a definitive position on this matter before the tender process has been finalised, it is worth noting that state-run scratch-card lotteries should, in principle, not be significant competitors to a well-organised and experienced provider. A further complication has been thrown up by the fact that Brazil’s government-owned bank Caixa Econômica Federal may also be privatised. Caixa currently operates the country’s national lottery, including online sales, and its 12,000 points of sale are a crucial part of the LOTEX distribution network. This creates a degree of uncertainty. Would the banking and lottery business be sold separately? Or would a single buyer acquire the whole thing, then run a second tender to select a lottery supplier? Could this potential buyer look to sell off the lottery arm at a later date? Such uncertainty harms the value of the LOTEX stake. This may cause companies interested in LOTEX to shy away from a deal at this stage. n
F E AT U R E LOTTOLAND
Lottoland takes on lottery giants Lottoland’s rise has been nothing short of spectacular. But having ruffled a few feathers along the way it now faces a backlash in the UK and Australia, writes Kio Dawson HAVING DOUBLED REVENUE every year since its inception, Lottoland has become the spearhead for the growing bet-on-lotteries sector. This follows an aggressive marketing campaign in the UK and Australia, which has brought the product to a wider audience. But one of the problems with making a big noise when entering a new market is that it makes you a target. “I would rather we weren’t the ones getting all the attention,” says chief executive Nigel Birrell. “We have been a bit unfortunate in that we’ve copped a lot of the stick, when there’s all these other companies riding on the back of us. As my old boss used to say – it’s the pioneers that get the arrows in the chest.” It’s easy to forget that Lottoland has only been around since 2013. Others have been in the business for longer, such as ZEAL Network’s mylotto24 and Annexio-powered World Lottery Club, but none have quite made the splash that Lottoland has made in such a short space of time. “We’ve entered a market which is sophisticated and competitive in the UK, not so much in my subsector, but competitive in terms of getting noticed among the giants like Ladbrokes Coral, William Hill, bet365 or Paddy Power Bet60
fair, and all the huge advertising that goes on,” says Birrell. “Advertising is very expensive but we need TV advertising to get ourselves above the clutter.” Inevitably, this has led to several run-ins with UK National Lottery operator Camelot, which has attacked it for diverting money away from good causes. More recently it has found itself a target of Australia’s Tatts Group, which backed an ad campaign in September in support of itself and lottery retailers against Lottoland. Lottery operators in other markets have also railed against Lottoland. Michael Heinrich, co-CEO of Lotto Hamburg and co-chair of Germany’s state lottery body the DLTB, accuses the business of “plagiarism and product piracy”. Yet Tatts’ campaign was unprecedented in its vitriol. The ‘Lottoland’s Gotta Go’ ad campaign is said to have cost around AUD$5m and proclaims that Lottoland is “not a real lottery” and “bad news for Australia’s familyrun newsagencies, real lottery agents and our local communities”. Tatts also issued a call to action to its retail network partners by delivering a full toolkit of materials to be used at pointof-sale, with posters proclaiming: ‘Lottoland
could destroy our business’; ‘Lottoland does not support local schools, hospitals or roads’; and ‘Lottoland. It’s not a real lotto.’ “I can’t remember in 12 years of gaming someone targeting another company with an advertising campaign and mentioning a company in a non-factual way,” says Birrell. Tatts’ actions may be having the desired effect however, with the Australian states of New South Wales, Victoria and Western Australia all announcing moves to restrict lottery betting (see page 56). For now, Lottoland – which is licensed in the Northern Territory – is making the most of the limelight and saw new customers in Australia soar over 70 per cent in
the weeks following Tatts’ campaign launch. “If you weren’t worried, you wouldn’t bother with it, would you?” says Birrell. “And why worry about someone like us? They are obviously worried. The numbers and evidence doesn’t justify it to be honest.” Birrell’s not wrong. Camelot and Tatts have both seen lottery sales decline in the past year, but they are still giants in comparison. But they also have their own issues to deal with. Tatts is still waiting to merge with Tabcorp after a year of talks and delays, and Camelot initiated a strategic review after lottery sales fell by nine per cent to £6.93bn for its 2017 financial year – though this was still the fourth-best GIQ Q3 REVIEW
sales performance since the National Lottery’s launch in 1994. Total digital (interactive and subscription) sales fell by four per cent to £1.52bn, but have grown nearly 30 per cent in the past three years (FY 2014; £1.18bn) since Lottoland emerged on the scene. “You look at Camelot’s online revenue, for instance – its gone up since we’ve been around,” argues Birrell. “Maybe they could say that online could have grown more, but I think its much more affected by the level of their marketing, by their changing of the game rules, and by the level of jackpots.” It’s a similar story with Tatts. Lottery sales fell by six per cent to AUD$2.01bn in FY 2017,
“We’ve copped a lot of the stick, when there’s all these other companies riding on the back of us. As my old boss used to say – it’s the pioneers that get the arrows in the chest” Nigel Birrell, Lottoland
F E AT U R E LOTTOLAND
but the operator’s digital initiatives improved, with online sales comprising 14.5 per cent of the total (approximately $290m), up from 13.5 per cent the previous year. Birrell says this is something Tatts seems to fail to make much noise about when enlisting the help of the newsagents. In comparison, both Camelot and Tatts dwarf Lottoland, which made €300m in revenue last year across all of its markets, of which Australia, UK and Germany are the biggest. “We’re having no effect on them whatsoever, but just in case in five years’ time we become the size of Facebook or something, they want to obliterate us before we get there,” says Birrell. “So, for the betting-on-lottery industry, read Lottoland, so it’s like they are going after the whole industry… but it’s always Lottoland.” At the moment Lottoland may be fighting these battles alone, but having worked with some of its competitors such as World Lottery Club and Multilotto to respond to a recent consultation in the UK, there is now a more unified group of companies looking to establish the bet-on-lotteries concept as a more mainstream business. “One of the things we’re keen to do is to create a lobby group for betting on lotteries,” explains Birrell. “So we’ve got a couple of companies that are interested in doing that, and that way we can get our voice heard as a group rather than just Lottoland.” The industry body would maintain certain minimum standards, including full security on payouts, and would also place restrictions on how operators can advertise so that they are properly differentiated from the lottery. “That’s obviously one of the criticisms that Tatts are alleging towards us,” says Birrell, “and inevitably there is some confusion, but our own and third-party research has shown that the percentage of people confused has massively dropped as people become more aware that you have this ability to bet on lottery.” Lottoland is keen to ensure its products are not marketed as a lottery of any kind. It learned this the hard way after the UK Gambling Commission fined the operator in June for using ambiguous terminology in its advertising, which failed to make clear players were betting on the outcome of lotteries. The company was ordered to pay £150,000 to socially responsible causes by the Commission. “The Gambling Commission is keen to make sure we adhere to those principles, and that everything is a bet on lottery – you don’t buy a ticket,” says Birrell. “We’ve had to adjust accordingly.” 62
Lottery education What distinguishes Lottoland is the range of new products it is bringing to the market. It is being innovative in a market that has not seen much innovation for years. The state monopolies have previously held all the power, but suddenly there is someone new buzzing around and they are not happy about it. For Lottoland, the EuroMillions game is its most important product in the UK, and the Gambling Commission could be about to close a loophole which would ban the company from offering any form of betting on EuroMillions to UK customers. Under the terms of Lottoland’s UK licence, it is blocked from offering odds on any National Lottery draws, including EuroMillions, in the UK. However, it can circumvent this by offering players odds on a draw that actually takes place in Paris, for example. The company fears that changes to legislation could see it banned from offering any form of bet on EuroMillions to UK customers, and has argued that the game shouldn’t come under the National Lottery’s purview as it is coowned by eight other lottery operators, including France, Spain and Switzerland. “What Camelot has been saying to the government is that Lottoland is affecting good causes, and the government needs to close this loophole because it goes against the spirit of the Gambling Act 2005,” says Birrell. “What I’m saying is that the 2005 Act was written long before betting on lottery came up as a concept, so we are showing you evidence that there is no diminishment to good causes. “We’re showing you evidence that we’re
“The 2005 Act was written long before betting on lottery came up as a concept, so we are showing you evidence that there is no diminishment to good causes” Nigel Birrell
BILLION LOYALTY DOLLARS
Scientific Games’ Loyalty Plus™ program was first launched by the Arkansas Scholarship Lottery in 2009. Since then, the program has expanded to 14 different lotteries with a total of 1.7 million members who have entered an astounding $5.4 billion worth of tickets. Even better – all those entries become a wealth of back-end data that can be used to further drive sales. And that’s a real plus.
Because Real Counts Because Real Counts © 2017 Scientific Games Corporation. All Rights Reserved.
© 2017 Scientific Games Corporation. All Rights Reserved.
F E AT U R E LOTTOLAND
growing the market, we’re definitely showing you evidence that we’re providing consumer choice, and we are also showing by the number of people that have signed up to us – now more than six million worldwide – that people want what we offer.” The company has called for a two-year moratorium before any final regulatory or legislative changes are made. “Let’s run research, jointly-funded, over the next few years to prove or disprove that we’re affecting good causes. Let’s have decisions made based on proper evidence, not knee-jerk reactions,” says Birrell. “We’re not taking money away from good causes as we’re not actually diminishing the turnover of these lotteries. We have a different customer base and we’re 85 per cent mobile in the UK and would argue we’re actually growing the market through our marketing, bringing more people into the sector.” The loss of EuroMillions would be a massive setback for the company as it is the most recognisable underlying lottery game for UK players, and offers bigger jackpots than most other games. It also features on a lot of Lottoland’s marketing across the country, with the added benefit that once a player has signed up, the company can then cross-sell its other lottery-betting products such as Powerball and MegaMillions. “One of the challenges we’ve got is to try and educate people in terms of there being other lotteries out there to bet on,” says Birrell. “The Powerball was very useful in that respect when it has those big jackpots, but if you did a strawpoll of Brits asking what is the Powerball, they wouldn’t have a clue.” While last year’s record US$1.6bn Powerball jackpot helped to drive growth for Lottoland, particularly in Australia, the company is looking at ways to expand even further. This includes the launch of its first B2B partners, unique jackpot features such as DoubleJackpot and NumberShield, the introduction of its WorldMillions game, and new instant 64
games which combine Lottoland’s prize insurance infrastructure with a random number generator. “We’re upping their game, to be honest, so from a consumer perspective we’re providing choice and value, we’re bringing new products, and they then provide more choice and get better online,” says Birrell. “We are growing the market because the type of customer that we bring in is a totally different customer. “Those players are looking for international lotteries to bet on. Do they bet on the EuroMillions a bit? Absolutely, but really that’s not the person we are appealing to. We’re appealing to people who are young and internet savvy.”
Intellectual property One of Lottoland’s strengths is the intellectual property (IP) that it owns. The company currently has over 70 registered trademarks within its IP portfolio and more at the application stage. “We are careful not to infringe anyone else’s trademarks,” says Birrell. “We can’t directly use someone else’s IP in a jurisdiction where they have that trademark, so we try to use our IP and we have a huge portfolio of them ourselves. “One of our USPs at Lottoland, certainly relative to the other bet-on-lottery companies entering the market, is our IP portfolio, because we were one of the first out there. And the guys spent a lot of time and effort to make sure they registered a lot of useful names.”
“One of our USPs at Lottoland, relative to the other bet-on-lottery companies entering the market, is our IP portfolio, because we were one of the first out there” Nigel Birrell
Alongside the company’s IP portfolio, it is the Insurance Linked Security (ILS) jackpot insurance which provides the backbone to Lottoland’s operation. Describing the company’s risk-management strategy, Birrell says to imagine a tower. “The first couple of floors is our own excess, then we have the possibility to decide whether to go to the ILS or to use insurance contracts, and then, when it gets really high above a certain threshold, where all these three don’t add up anymore, which rarely happens, the fourth one comes into play, which we call physical hedging,” he explains. This is where Lottoland actually buys a physical lottery ticket and stores it, and in the event of a win, cashes the ticket to safeguard the company against mega jackpots in the region of €500m, €600m or €700m. This strategy has helped Lottoland develop into an insurance company with risk management at its core. “It is our key differentiator because it is disconnected to gambling,” says Birrell. “That is also the reason why many other operators say it is great to partner up with Lottoland rather than try to go to develop risk-management expertise on their own, which is outside the normal gambling operations of any big player.” Next up, the company is looking to bring its unique insurance facility to online instantwin games. Lottoland is promising players the largest prizes in the industry for instant-win games through a new solution combining its prize insurance infrastructure with a random number generator. The Random & insured Number Generator (RiNG) allows it to offer players the chance to win millions, with a €5m and €10m game already live on Lottoland.com, and further scratchcards with top prizes of €2.5m, €5m and €7.5m to come. In the midst of all this, Lottoland has also been granted an insurance licence by the Financial Services Commission (FSC) in Gibraltar. The company described the approval as a “historic milestone”, which would transform its risk management into its own fully authorised and licensed insurance company. “There’s an awful lot to go after yet,” adds Birrell. “We’re probably experiencing some of those issues of a maturing company right now with the regulatory headwinds, but it’s kind of a testament to our success.” Lottoland’s innovations in lotto may be what is driving the company’s growth, but its risk management strategy is what underpins its continued success. Despite Camelot and Tatts’ efforts, Lottoland is likely to continue its growth story. n
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GIQ20 H1 2017
ON THE FOLLOWING PAGES
61 GIQ20 H1 2017 results and analysis
The GIQ H1 2017 SCIENTIFIC GAMES’ ACQUISITION of NYX Gaming could see the US supplier soar to the top of the GIQ20 chart next year, once the results of the two businesses are combined. For the moment though, that top honour goes to Cherry after an exceptional period of growth from its iGaming activities during the first half of 2017. Revenue growth at the top end of the GIQ20 chart was mostly driven by M&A, which positively skewed results, most notably for NYX with OpenBet and Gaming Innovation Group with Betit Group. Together with Cherry, these three companies all recorded triple-digit improvements versus a year ago. Scientific Games’ interactive division has consistently delivered strong growth in recent years, generating revenue of more than $200m in H1. This will be only be enhanced by the inclusion of NYX and its OpenBet sportsbook, creating a giant capable of rivalling Playtech’s iGaming dominance. The battle of the British bookies was won by Ladbrokes Coral as its online resurgence gathered pace, with Paddy Power Betfair missing out altogether from the GIQ20 chart after a first half to forget. William Hill was one of four companies that recorded single-digit revenue growth – alongside ZEAL Network, Kambi Group and 888 Holdings – although this wasn’t enough to secure a place in the chart. GIQ Q3 REVIEW
The GIQ20 H1 2017 COMPANY
ONLINE H1 2016
ONLINE H1 2017
CHERRY (EXCL. LAND-BASED)
GAMING INNOVATION GROUP
NYX GAMING GROUP
MR GREEN & CO
LADBROKES CORAL GROUP
THE STARS GROUP
F I NA NC E GIQ20 H1 2017
Cherry, Gaming Innovation Group and NYX fly high in H1 2017 Paddy Power Betfair slips off the GIQ20 chart for the first time as Cherry continues Nordic dominance, writes Kio Dawson CHERRY 241% Net revenue (SEK)
Online Gaming, ComeOn!
Game Development, Yggdrasil Gaming
Gaming Technology, Xcaliber
Affiliation, Game Lounge
“We continue to be a profitable, fast-growing company, even if the integration of ComeOn! has not yet reached full positive effect”
Sweden’s Cherry once again topped the GIQ20 chart as the company saw group revenue soar 192 per cent to SEK1.08bn during the first half of 2017. Its growing iGaming business represented 93 per cent of the total. While all of its B2B divisions performed strongly in H1, Cherry’s B2C division saw the biggest growth despite the slower than expected integration of the ComeOn! business. Overall, Cherry was able to nearly double its net profit to SEK51m for the period. “We continue to be a profitable, fast-growing company, even if the integration of ComeOn! has not yet reached full positive effect,” said chief executive Anders Holmgren. Holmgren explained that rapidly merging the ComeOn! business had shifted attention from growth to integration, and that marketing efforts have not yet had the expected effect, although the online gaming business continued to develop positively. “At the same time, there is a high level of activity with a variety of initiatives that strengthen both the business area’s organisation and the offering as a whole,” he added. “We assess that the future of ComeOn! looks
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bright, but that integration will take a little longer than initially anticipated.” As a result of the slower integration, Cherry has reduced its full-year guidance and now expects to generate total group revenue in the region of SEK2.5bn in 2017, down from its previous guidance of between SEK2.6bn and SEK2.7bn.
GAMING INNOVATION GROUP 182% Net revenue (€)
Oslo-listed Gaming Innovation Group (GIG) also impressed in the first half, and enjoyed a record second quarter which boosted first-half revenue by 182 per cent to €49.7m. The Q2 performance beat GIG’s previous record high, set the previous quarter. The company’s B2C brands contributed revenue of €38.7m during the six-month period, with B2B revenue from the affiliate marketing division and the iGaming Cloud platform growing to €14.8m. GIG believes that its affiliate business is well on its way to becoming the largest affiliate in iGaming, having already achieved the largest presence in casino-related search results in the Nordic market. It was bolstered further by GIQ Q3 REVIEW
a trio of affiliate acquisitions completed during Q2, followed by a €25.6m deal for Stk Marketing in July and Danish affiliate Rebel Penguin in September. “We continue to expand our business at a rapid pace,” chief executive Robin Reed said. “We have made important affiliate acquisitions during 2017 which will strengthen our traffic-driving capability and increase activities and volumes for all stakeholders in GIG’s eco-system. “In parallel with launching innovative iGaming services, we are progressing towards our goal of becoming the leading iGaming company from the Nordics.”
Robin Reed, CEO, Gaming Innovation Group
NYX GAMING GROUP 118% Net revenue (CAD$) H1 2016
Royalty and licences
Social gaming TOTAL
Toronto-listed supplier NYX Gaming Group will soon begin life as a Scientific Games company, following its CAD$775m acquisition by the US supplier in September. Its price tag may have raised eyebrows, but NYX has been a strong performer in the GIQ20 chart for a while now. The first-half period was no different, as revenue climbed 118 per cent to $119.9m, mostly attributable to the results of OpenBet, as well as new customer launches and development projects. This helped NYX reduce its net loss for the period to $18.5m. A full quarter’s results from OpenBet provided revenue of $32.9m in Q2, a period which saw NYX sign 18 new agreements across its platforms and successfully launch content across 13 new client sites including SoftSwiss, JAXX, Sekabet, Casino Gran Madrid and Goldbet. NYX has a long list of operators waiting in the wings, with deals agreed with 36 customers that have not yet launched. “Our development pipeline remains strong and we continue to sign new customers at a steady rate, as our sportsbook, gaming and content offerings are resonating with customers and driving scale and operating leverage in our business,” said chief executive Matt Davey. 69
F I NA NC E GIQ20 H1 2017
“Through both organic and acquired growth, Catena Media’s vision is to become the world’s number-one provider of high-value iGaming leads” Robert Andersson, former CEO, Catena Media
78% Net revenue (€)
Search Paid Other TOTAL
With its shares recently upgraded to Nasdaq Stockholm’s main market, Catena Media is on course for another stellar year after seeing firsthalf revenue increase 78 per cent to €30.3m. The affiliate marketing specialist continued on its M&A splurge in Q2, snapping up Online Media, Newcasinos.com, as well as two German-facing casino affiliates. This was followed by the July acquisition of sports affiliate Bettingpro.com and September’s purchase of an unnamedJapanese affiliate. “Through both organic and acquired growth, Catena Media’s vision is to become the world’s number-one provider of high-value iGaming leads,” said CEO Robert Andersson, in his last trading update before stepping down in early October. “We remain optimistic on our 70
strategic, operational and financial development, and are confident that we will continue to grow in the same successful way, both through organic growth and through acquisitions across existing and new geographic markets.” In October, Andersson was replaced as CEO, with former Betsafe CEO and Catena director Henrik Persson Ekdahl assuming his responsibilities on an interim basis.
EVOLUTION GAMING 58% Net revenue (€)
Stockholm-listed live casino specialist Evolution Gaming posted an impressive 15th consecutive quarter of growth during Q2, pushing first-half revenue up 58 per cent to €82m. The strong growth was primarily attributed to increased commission income from existing and new customers, with demand for live casino games “generally high” over the quarter as the number of bet spots from end users increased by 83 per cent to 2.2 billion. Revenue generated from mobile devices
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exceeded 50 per cent for the first time during the quarter. Boosted by the strong revenue growth, Evolution’s profit for the first-half period increased by 79 per cent to €27.4m. “I am very pleased to be able to sum up an eventful quarter with positive development in several areas,” chief executive Martin Carlesund said. “The favourable momentum of the past quarters continued into this period, with a strong and steady growth for all products. Operators’ live offerings are undergoing constant development and we are working hard to optimise their environments to optimally reflect each brand and various player profiles.”
Lotto24 revenue rose to €13m in H1
LEOVEGAS 55% Net revenue (€)
LeoVegas was another Stockholm-listed company making shareholders happy in H1, and became the first gaming operator to reveal how much of its revenue was generated in Sweden. More than a third of LeoVegas’ Q2 revenue (around €18m) was generated in the country, having seen growth of 23 per cent year-on-year. Other Nordic countries, including Denmark, represented a further 20 per cent. LeoVegas said that having launched first in the Nordic region, it was natural that these markets accounted for a large share of its business. “Sweden alone accounted for 37 per cent of our revenue during the second quarter – something we are very proud of,” said group CEO and co-founder Gustaf Hagman. “More than five years have now passed since we launched the mobile gaming company LeoVegas. The vision we laid out then is more relevant than ever before – that LeoVegas will lead the industry into the mobile future.” Revenue from regulated markets accounted for 25 per cent of the quarterly total, almost doubling year-on-year. Mobile remains LeoVegas’ most important channel, contributing 67 per cent of total customers deposits, which in turn grew 67 per cent to €167.9m.
LOTTO24 41% Net revenue (€)
German online lottery broker Lotto24 recorded a maiden net profit during the first half of 2017 after benefiting from a 41 per cent improvement in revenue versus a year ago. The company, which sells lottery tickets via the internet, saw billings from its Lotto24. de offering increase by 33 per cent to €112.8m, despite increased market competition. There were 161,000 new customers added during the period, with total registered customers up 36 per cent to more than 1.4m. The strong revenue growth, combined with a 20 per cent reduction in marketing expenses to €4m, led the company to its first positive figures for both EBIT and net profit, which reached €0.4m and €0.6m respectively.
“Sweden alone accounted for 37 per cent of our revenue during the second quarter – something we are very proud of” Gustaf Hagman, LeoVegas
Gustaf Hagman, CEO, LeoVegas
F I NA NC E GIQ20 H1 2017
where Fortuna operates,” said chief executive Per Widerström. Fortuna’s retail business also saw growth in H1 and will soon include results from more recently acquired Romanian operations, which includes 787 retail betting stores across the Bet Active Concept, Bet Zone, Public Slots and Slot Arena brands.
MR GREEN & CO 31% Net revenue (SEK)
“This strong growth was the result of solid performances in all traditional markets where Fortuna operates” Per Widerström, Fortuna
Lotto24 said that it will look to continue its growth in Germany by using targeted marketing measures to win new customers, while expanding its product portfolio. In addition to the lotteries already offered such as Lotto 6aus49 and EuroJackpot, Lotto24 aims to introduce other state-licensed games of chance in the medium term “whereby [it] will continue to focus on the German lottery market”.
FORTUNA ENTERTAINMENT GROUP 34% Gross win (€) H1 2016
Online sports betting and gaming
Retail sports betting
The acquisition of Hattrick Sports helped Fortuna Entertainment post a 28 per cent increase in gross win to €97.9m for the first-half, of which more than two-thirds was derived from its growing online business. Online sports betting and gaming gross win climbed 34 per cent to €67.2m, with growth credited largely to the continued expansion of its sportsbook, the launch of online casino operations in the Czech Republic, as well as the first contributions from Hattrick. For the six-week period since its acquisition, the Hattrick business generated gross win of €6.2m, split across retail and online, with the Romanian business predominantly retailfocused and Croatian operations covering online betting and casino. “This strong growth was the result of solid performances in all traditional markets 72
Stockholm-listed operator Mr Green & Co also enjoyed a successful first half, as revenue increased by 31 per cent to SEK563.9m following a third consecutive quarter of growth above its 20 per cent target. Q2 revenue grew by 36 per cent following the launch of new products, including sportsbook, live casino and Reel Thrill slot tournaments. This helped the company to a profit for the period of SEK33m, compared to a loss of SEK4.7m a year ago. “During the spring, we maintained a high tempo in our activities relating to new product launches, integrating the acquisition of Dansk Underholdning and, in particular, taking good care of all our 116,700 new and existing customers,” said CEO Per Norman. “We are not decreasing our pace and will continue to maintain a high tempo to deliver on our Mr Green 2.0 strategy.” A new responsible gaming tool, Green Gaming, was unveiled in September to offer players deeper insight into their gambling behaviour. The solution will initially be deployed in the UK, analysing customers’ online behaviour in order to detect early signs of problem gambling.
SCIENTIFIC GAMES 30% Net revenue (US$)
Social gaming B2C
The New York-listed supplier surprised the industry with its move for NYX, leaving Scientific Games well positioned to significantly expand its Interactive division. In H1, revenue from Interactive grew 30 per cent to $203.1m, although this equated to just 14
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per cent of Scientific Games’ total revenue in the period. The NYX deal will substantially change this in future, particularly in B2B which contributed just $31.8m to H1 revenue. President and CEO Kevin Sheehan said that the NYX transaction would create a global gaming and lottery powerhouse. “Scientific Games will be a stronger industry leader offering one of the broadest end-toend portfolios of engaging content, innovative technologies and digital products and services across gaming and lottery,” he said. Social gaming B2C revenue was up 33 per cent to $171.3m, benefiting from the continued popularity of social casino app Jackpot Party Social Casino, the launch of 88 Fortunes, and the acquisition of Spicerack Media and its Bingo Showdown app in April. Average daily active users (DAUs) remained constant at 2.5 million, with mobile penetration now up to 72 per cent, compared to 67 per cent a year ago.
KINDRED GROUP 28%
Henrik Tjärnström, Kindred
Net revenue (£) H1 2016
Casino and Games
Poker Other TOTAL
Kindred Group attributed its record revenue high in Q2 to its investment in marketing in previous quarters, as well as the first contributions from 32Red. The operator was acquired on 6 June and generated revenue of £4.7m. Q2 revenue grew 32 per cent to £166.6m following growth across all product segments,
GIQ Q3 REVIEW
“The acquisition of 32Red will significantly accelerate our development and profitability in the world’s largest locally regulated market”
with first-half revenue up 28 per cent to £319.8m. Net profit for the six-month period rose 10 per cent to £36.7m. Total active customers by the end of Q2 were up three per cent to 1,171,166, including 39,268 from 32Red, from a total registered customer base of more than 20.2 million. “Taking into consideration the lack of major tournaments this year, we are confident that we have continued to outpace market growth and have continued to take market share,” said chief executive Henrik Tjärnström. “The acquisition of 32Red will significantly accelerate our development and profitability in the world’s largest locally regulated market.”
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5% Net revenue (€)
Gaming division Financials division TOTAL
London-listed Playtech posted strong revenue in the first half of 2017, with its Sports division seeing revenue nearly double following the acquisition of BGT. Casino remains the company’s biggest product vertical as revenue climbed 21 per cent to €225.9m, equivalent to more than half of Playtech’s total and 60 per cent of the Gaming division’s €376.5m total. The Financials division (since rebranded as TradeTech Group) 74
contributed a further €45.1m in revenue, up 44 per cent year-on-year. “The proven strength of the Playtech model was once again demonstrated, with a strong H1 performance driven by both underlying growth and recent acquisitions,” chairman Alan Jackson said. “Taken all together, this proven platform for growth across the business has again delivered a strong performance and management remain confident of further strategic progress in the second half of 2017.” Regulated markets generated half of Playtech’s revenue during the period, supported by recent acquisitions and organic growth from customers in the UK, Italy, Spain, Finland, Denmark, Mexico and Romania.
“The proven strength of the Playtech model was once again demonstrated, with a strong H1 performance, driven by underlying growth and recent acquisitions” Alan Jackson, Playtech
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GIQ20 H1 2017
“The continuous product development is clearly paying off, as both casino and sportsbook have developed strongly” Ulrik Bengtsson, Betsson
LADBROKES CORAL GROUP
Net revenue (€)
Net revenue (£) Pro Forma
Casino Sportsbook Other TOTAL
Betsson lost its president and CEO Ulrik Bengtsson in early September, but the company remains in good hands under the leadership of Pontus Lindwall who has temporarily returned to his previous role. The company had a decent first half as revenue rose 18 per cent SEK2.28bn, driven by continued growth in casino and a record performance in the Nordic region during Q2. Net income for the six-month period rose five per cent to SEK400.5m. “Betsson continues to gain market share, both in the highly competitive Nordic region and in Western Europe,” said Bengtsson in his final interim report prior to his departure. “The continuous product development is clearly paying off as both casino and sportsbook have developed strongly.” Revenue from locally licensed and taxed markets accounted for 24 per cent of Betsson’s Q2 total, up from a 19 per cent share a year ago. At the end of Q2 the company had 551,000 active customers, down two per cent year-on-year due to strong comparables last year, from a total registered customer base of 12.4m. GIQ Q3 REVIEW
Ladbrokes Coral struggled for growth in the first half of 2017 as group revenue climbed one per cent to £1.2bn. This was down to decline in the operator’s retail business, and there was continued momentum from digital. On a pro forma basis, digital revenue was up 17 per cent year-onyear, offsetting declines from the operator’s UK retail and European retail businesses, and represented nearly a third of the company’s total. Online sportsbook revenue was 25 per cent ahead of last year at £180.7m, with amounts staked up by 23 per cent to £2.8bn, following growth in all non-UK brands including Australia. Revenue from gaming grew 11 per cent to £193.8m, with sportsbook-led brands up 15 per cent. “Ladbrokes Coral continues to make good progress,” said chief executive Jim Mullen. “We entered the year with targets for the first half to complete the integration of our teams and migrate UK digital to a single platform. We delivered on both fronts and at the same time kept the business moving forward. It is pleasing to report strong digital growth, ongoing momentum in Australia, and in spite of adverse sporting results, market gains in Italy.”
“It is pleasing to report strong digital growth, ongoing momentum in Australia, and in spite of adverse sporting results, market gains in Italy” Jim Mullen, Ladbrokes Coral
BET-AT-HOME.COM 16% Net revenue (€)
Frankfurt-listed operator bet-at-home.com was another to enjoy a record performance in Q2 as first-half net gaming revenue increased by 16 per cent to €61.5m. The Betclic Everest subsidiary saw total betting and gaming stakes rise 23 per cent to €1.69bn in the second quarter, generating gross revenue of €76.8m, an increase of 17.5 per cent versus a year ago. This included a new quarterly high of €39.6m generated during Q2. Following a reduction in marketing costs due to the absence of any major football events this year, bet-at-home.com was able to nearly double EBITDA to €17.4m during H1, including a record high during Q2. bet-at-home.com’s management board has reaffirmed its guidance for the full year, with gross revenue expected to reach €144m and EBITDA between €34m and €38m. 75
F I NA NC E GIQ20 H1 2017
“I am delighted with the strong progress across the group, which has continued to exceed our expectations since last year’s acquisition of bwin.party” Kenneth Alexander, GVC Holdings
NETENT 15% Net revenue (SEK)
Swedish casino games developer NetEnt posted double-digit increases in revenue and profit during the first half, with the UK emerging as one of the supplier’s key markets. Revenue climbed 15 per cent year-on-year to SEK804.5m, driven by growth in the UK, Italy and mobile, with the UK now the company’s biggest geographical market. The revenue growth helped NetEnt post a 10 per cent increase in profit for the period to SEK258m. During Q2 NetEnt signed agreements with six customers, launched games with eight new customers, and held further agreements with 36 operators that have yet to launch. The supplier’s games were rolled out in the regulated Serbian market for the first time, while table games were introduced for customers in Spain. “The quarter featured continued solid growth, higher profitability and a strong cash flow,” said president and CEO Per Eriksson. “For the second half of 2017, we see conditions for continued solid growth.”
10% Net revenue (€)
Net revenue (£) H1 2016
There was another solid performance from Jackpotjoy as revenue climbed 13 per cent to £146.6m during H1, although net loss for the period more than doubled due to higher costs and financing expenses The online casino and bingo operator saw continued growth from the Vera&John and Jackpotjoy brands, which contributed revenue of £33.1m and £103m. Mandalay generated a further £10.5m in revenue, though this was down seven per cent year-on-year. Jackpotjoy said it expects “robust” revenue growth for the full year, but warned that there will be an impact on profitability during the second half, following the introduction of UK point of consumption (POC) tax on bonuses from August. “I am confident that our good momentum in the first half of the year puts us in a strong position to continue to deliver on our plans throughout the rest of 2017,” said CEO Andrew McIver.
The return to form of partypoker was the highlight for London-listed operator GVC in the first half, with the brand benefiting from the company’s recent investment. Total revenue for GVC grew 10 per cent versus a year ago, despite last year’s period including Euro 2016, with Sports Brands (bwin and Sportingbet) comprising 73 per cent of the total after seeing growth of 11 per cent to €355.1m. Revenue from Games Brands (partypoker, partycasino, CasinoClub, Gioco Digitale and Foxy) climbed eight per cent to €112.4m during the period, with the strongest growth from partypoker, which recorded a 32 per cent year-on-year improvement. B2B revenue grew 17 per cent and contributed €7.6m, with the planned launch of bwin.ru in Russia next in the pipeline.
F I NA NC E
GIQ20 H1 2017
“I am delighted with the strong progress across the group, which has continued to exceed our expectations since last year’s acquisition of bwin.party,” said chief executive Kenneth Alexander. “A combination of high quality talent, proprietary technology and proven brands are key components driving the business forward.”
ASPIRE GLOBAL 9% Net revenue (€) H1 2016
Stockholm-listed Aspire Global remains confident that its departure from the Australian iGaming market would not impact its long-term targets, despite the loss of a market worth eight per cent of its revenue in Q2. First-half revenue grew nine per cent to €33.4m with second-quarter results boosted by a record performance from its growing B2B division, up 19 per cent to €8.9m. Revenue from the B2C segment increased by nine per cent to €8.4m. “Since 2014 Aspire Global has focused on strengthening its position within the industry by developing and improving its B2B offering as well as growing the proprietary brands,” said CEO Tsachi Maimon. “The company is now in a position to leverage on the strong platform and position established during the last few years to accelerate Aspire Global’s growth; organically and through M&A.” Aspire Global’s withdrawal from Australia complies with new gaming regulations which came into force in September that specifically bans online and casino games.
GOING DOWN… There were four companies that saw revenue decline in the first half of 2017. Paddy Power Betfair missed out on a place in the GIQ20 chart for the first time following a disappointing performance from its online business during Q2. Online revenue was down marginally by 0.2 per cent for the six-month period, though this included a 12 per cent decline in Q2. The operator noted that its gaming performance had been weak since Q4 2016 and said that to achieve market growth rates it needed to invest in the gaming product. Overall, Paddy Power Betfair reported a nine per cent increase in H1 revenue to £827m, with growth in Australia, US and retail offsetting its online decline. New York-listed Churchill Downs Incorporated endured a difficult trading period for its Big Fish Games division in H1 as revenue fell by nine per cent to $224.6m. This included a second consecutive quarter of yearon-year decline for the social gaming business in Q2, although this was nearly offset by growth
Net revenue Company
Online H1 2016
Online H1 2017
Churchill Downs Incorporated
Paddy Power Betfair (excluding US and Aus)
THE STARS GROUP 8% Net revenue (US$)
Tsachi Maimon, CEO, Aspire Global
Casino and Sportsbook Other B2C TOTAL
Online casino and sportsbook continues to drive growth for The Stars Group which begun a new era after scrapping the Amaya brand and moving its Canadian head office to Toronto during H1. First-half revenue increased by eight per cent to $622.6m, despite revenue from its core online poker offering declining by two per cent to $421.6m. Online casino and sportsbook contributed $176.3m during the period, an GIQ Q3 REVIEW
of 12 per cent from the TwinSpires online betting business to $132.5m. Toronto-listed social casino operator Tangelo Games remains in discussion with a number of parties regarding a potential acquisition or sale of the business. In H1, revenue was down 13 per cent to $20.9m with the continuing to work on migrating to Unity and developing mobile applications, including a new version of Bingo Rider, one of Tangelo Spain’s most popular titles, and a Mundijuegos mobile app. German operator mybet Holding also endured a difficult first half, with revenue dropping to €17.1m, but claims to have seen positive changes in customer behaviour since the deployment of its new platform in March. Q2 revenue dropped 28 per cent year-on-year, with the key sports betting and casino verticals failing to match their previous year’s performance. Chief executive Markus Peuler said the results were “unsatisfying but not surprising”.
increase of 47 per cent versus a year ago, while revenue from other B2C including social games rose nine per cent to $24.6m. “Our evolution and transformation into The Stars Group continued as we completed our name change and head office move, while our second quarter saw the strengthening of our core senior management team and continued solid revenue growth led by our real money online casino offering,” said CEO Rafi Ashkenazi. “We plan to use this momentum to continue improving and strengthening our business and pursuing our strategic objectives.” In September the company raised its full year guidance and now expects full year revenue of between $1,285m and $1,315m, which would be up 11 to 14 per cent compared to the prior year. Online poker revenue is expected to be slightly higher as the company continues to see positive customer response to Stars Rewards. 77
C O LU M N AND ANOTHER THING...
The industry needs to tackle its image problem. This can only be done by taking steps to ensure it is operating in a fair and responsible way
A wake-up call for the UK gambling industry T
he gambling industry in the UK has endured months of criticism. This is metastasizing into the notion that gambling must be banned or heavily restricted. This stems from two events. First was August’s publication of figures on problem gambling by the UK Gambling Commission (UKGC), which suggests there are 430,000 problem gamblers in the UK. Second was the settlement agreed by 888 over failings in its social responsibility controls, that saw 7,000 people allowed to gamble after self-excluding. As boilerplate issues, these appear shocking, but they are not as clear-cut as they appear. Take the addiction figures. These are based on data collected in 2015. At that point the UK was less than a year into a new regulatory regime. It may be the most recent data available, but it is still two years old. Spread betting is included in the problemgambling figures. However, spread betting is regulated by the Financial Conduct Authority – not the Gambling Commission. It is being treated as a trading product for regulatory purposes, then dismissed as a form of gambling when it causes problems. That’s bad governance. With 16 per cent of betting exchange customers and land-based poker players showing signs of a problem, these were the joint second most risky forms of gambling. Both are popular among professional gamblers. Separate the professional gamblers from the recreational ones and the picture would look very different. The figures also cover players aged 16 and 78
OPINION Robin Harrison
It’s time for the gambling industry to take steps to address the issues that just won’t go away older. Players can only gamble on products from the National Lottery and Health Lottery between 16 and 18. There are no figures specifically covering online gamblers aged 18 and over. The private (for-profit) iGaming industry is being saddled with issues not of its making. This has led to a reaction governed by emotion, rather than evidence. That’s not to say there are not problems in how gambling companies operate that urgently need addressing. Let’s tackle the bottom line pushed by the media in its criticism of gambling. That gambling is an industry feeding on the poor and vulnerable. That’s wrong. It doesn’t make business sense to gouge a customer for all they are worth then move onto the next. Companies that simply bleed punters dry do not last that long; they would either be legislated out of business or become so toxic that custom-
ers avoid them at all costs. The industry’s terms and conditions have rightly come under scrutiny. Operators have been given too much power to dictate how customers bet. This has led to an investigation by the Competition and Markets Authority, and highlighted a lack of preparedness by the industry to tackle the issue. This has led to wider issues spilling into the open, exemplified by the 888 case. The industry seems incapable of formulating a coherent response to the resulting press attacks. Senet Group, the body set up to deal with exactly these issues, was quick to claim that the current furore was simply failings on 888’s part. This gives gambling’s critics free reign to ramp up attacks. There is often talk of how it’s up to gamblers to regulate their habits – a defence employed by the alcohol and junk food industries. They claim that it is a personal choice among consumers whether to indulge in these habits. Gambling has allowed itself to be hit by far too much negative publicity to maintain this argument. The industry needs to tackle its image problem. This can only be done by taking steps to ensure it is operating in a fair and responsible way. It then becomes much easier to defend against misleading accusations. Operators need to be using their reach into communities and links with high-profile sporting bodies to achieve this. This would also tackle the negative perception of gambling and its advertising. There has been talk about minors being exposed to gambling through sporting broadcasts. But it is important to note that gambling sponsorship helps subsidise the cost of showing live sports. While the criticism of the UK gambling industry may be well over the top, the fact that it has been allowed to build creates a major problem. The industry does not need to come out fighting to deny that there is a problem. It needs to address each criticism with an evidencebased response. Where a clear issue is identified, it must set out a plan of action. It must address the genuine issues that exist and refute the false accusations. The head-inthe-sand approach does not work. n