GIQ - Gaming Intelligence Quarterly Apr-Jun 2018 by Gaming Intelligence Quarterly

April – June 2018

Q1 REVIEW

• APRIL – JUNE 2018 • ISSUE 33

G A M I N G

I N T E L L I G E N C E

Q U A R T E R L Y

World Cup of opportunity An in-depth look at the biggest betting event of the year

A GAMING INTELLIGENCE PUBLICATION

Paddy Power Betfair’s new era | Sportsbook trading | Integrity in focus | SBTech CEO Richard Carter speaks

CONTENTS

LEADER Q1 REVIEW

ANALYSIS & OPINION

4 Snapshot Top stories, top quotes, top deals and The Stars Group’s entry into Australia 6 Thought leadership Scientific Games, SBTech, and Kambi Group 12 People Red Tiger’s new chief executive Gavin Hamilton 17 Technology & new products The partnerships and launches of the quarter 18 Lottery Lottoland Australia CEO Luke Brill 20 Games The launches that caught GIQ’s eye in Q1 2018 23 Social Gaming Intelligence KamaGames and Zynga celebrate 2017 success 24 Legal & regulatory The latest developments from around the world

AWARDS

32 Gaming Intelligence Awards & Hot 50 This year’s winners take home their prizes

FEATURES

38 A world-class marketing mix How will the industry market its services this summer? 42 A question of integrity The integrity solutions and fees under the microscope 52 Margins of error Loss of trading skills threatens the industry’s future 58 World Cup of opportunity Operators, suppliers and lotteries prepare for this summer’s FIFA World Cup 78 SBTech: From pretender to contender SBTech CEO Richard Carter reveals how the operator has become a leading sportsbook supplier 83 All change at Paddy Power Betfair What can we expect from the operator under new CEO Peter Jackson?

FINANCE – FY 2017

88 GIQ Stock Index Q1 2018 90 Finance Global Gaming explodes onto the GIQ finance chart

AND ANOTHER THING…

98 Ladbrokes Coral’s Juliet Daye on the industry’s equality issues

Robin Harrison

E D I TO R

EMBRACING UPHEAVAL HIS WORLD CUP will be different. Not in terms of what will happen; any one of Spain, Brazil, Germany, France or Argentina will win the tournament or be knocked out in the early stages. England will disappoint. One unfancied team will do slightly better than expected. Some element of the coverage or crowd will irritate spectators. But for the bookies, Russia 2018 will be a leap into the unknown. Much was made of Brazil 2014 being the first mobile tournament for betting operators, and there are rumblings of 2018 being the first omni-channel event (see page 58). This has prompted a change in how operators target consumers. TV advertising has long been the tentpole of bookmakers’ strategies for major tournaments, but as consumer habits have changed, so have the means to reach them (see page 38). Ever-tightening TV advertising restrictions are changing how companies can reach their audience (see page 38). What would have flown in 2014 will be shot down by wary regulators four years on. And other subtle evolutions are t a ki ng place.

Match-fixing is an ever-increasing concern, mainly as a result of the improved methods for detecting suspicious activity. The betting industry has arguably done more to combat this scourge than sports governing bodies or national legislators – a prime example being that match-fixing is not a criminal offence akin to insider trading in too many countries to mention. Yet it is still suggested that sports betting operators are part of the problem, rather than part of the solution (see page 42). Margin management is another area that continues to evolve, although maybe not in the optimum direction (see page 52). Traders were once central to major bookmakers, but with the function now largely outsourced, some argue they are no longer bookmakers but rather sports betting marketeers. Sports betting is in the middle of a major evolutionary cycle. The World Cup will serve as a testing ground for new ways to bet, new products to bet on and new ways to communicate with consumers. Operators will be watching rivals’ performances, and for this reason it promises to be a fascinating tournament. Perfect to keep an eye on after your team is knocked out of the tournament, England fans.

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EDITOR IN CHIEF Bobby Mamudi bmm@gamingintelligence.com

DEPUTY EDITOR Kio Dawson k.dawson@gamingintelligence.com

ADVERTISING & SUBSCRIPTIONS Omer Uziely omer@gamingintelligence.com

EDITOR Robin Harrison rhm@gamingintelligence.com

FEATURES WRITER Steve Hoare sah@gamingintelligence.com

www.GamingIntelligence.com

SUB-EDITOR Camilla Cary-Elwes info@thecopyeditor.co.uk

STAFF WRITER Macarena Rodicio m.rodicio@gamingintelligence.com

ART EDITOR Alan Bingle alan@forty6design.com

CONTRIBUTORS Luke Brill, Juliet Daye

GIQ Q1 REVIEW

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GIQ Q1 2018

Snapshot most popular news stories on GamingIntelligence.com Zynga to launch World Poker Tour branded tournaments Gaming Intelligence Awards 2018 Blog: ICE hands critics another stick to beat the gambling industry with Industry giants and rising stars honoured in the HOT50 Evolution launches first live casino in Canada with BCLC’s PlayNow.com Australia’s NSW introduces bill to cap pokies in high-risk areas William Hill first to launch new greyhound racing service from SIS Ladbrokes agrees two-year extension to Scottish football partnership Golden Nugget claims industry first with live-dealer poker in NJ FSB teams up with Paddy Power and Jade for Philippines sportsbook

The Stars Group snaps up CrownBet and William Hill Australia THE STARS GROUP has made a triumphant enter the market a few years back, it could be move into Australia, snapping up a majority argued that it has snagged a bargain. stake in CrownBet from Crown Resorts, and But the reduced price also reflects an using the deal as a springboard to take charge increasingly difficult regulatory climate. There of William Hill’s underperforming business are plans to introduce a point of consumption in the country. tax for the sports betting The PokerStars operator industry, new advertising acquired a 62 per cent equity restrictions are regularly Australia remains interest in CrownBet in being brought in, and a ban a large market with December 2017, for an aggreon credit betting is expected gate amount of USD$117.7m, to follow. Last year, 30 per huge potential, and though was not revealed as cent of William Hill AustralThe Stars Group the acquirer until February ia’s wagers came from credit expects to realise this year. It then increased betting customers. cost synergies of its stake to 80 per cent in Australia still remains around AUD$50m March, a day after CrownBet a large market with huge from 2019 announced a deal to acquire potential, however, and The William Hill Australia. The Stars Group expects to realoperator’s outlay for these two deals is $315m. ise cost synergies of around AUD$50m from This marks something of a coup for The 2019, mitigating any point of consumption tax. Stars Group, as it had to withdraw its core poker By backing CrownBet rather than acquirproduct from Australia in August last year as ing William Hill Australia outright, it has also regulatory controls on non-sports betting prodmade sure it has an experienced and successful ucts were tightened. Considering the hundreds management team to lead the two businesses, of millions spent by European operators to led by chief executive Matthew Tripp. This, in

QUARTER’S DEALS IN 60 SECONDS Quote of the Quarter THE The first quarter saw a number of deals agreed in Proving that regulatory uncertainty is no An integrity fee has only been adopted in two countries. In Australia it’s around 25 per cent, while in France the situation is so bad the gaming regulator has said we need to lower the tax rate. Why would we copy that?” Sara Slane, American Gaming Association (see page 49) 4

2017 finalised, with Scientific Games closing its acquisition of NYX Gaming Group, Aristocrat its USD$990m purchase of Big Fish Games, and Sazka Group cleared to take charge of Casinos Austria. LeoVegas, which acquired Royal Panda last year, further strengthened its presence in the UK with a £65m deal for a range of gaming sites owned by Intellectual Property & Software (IPS), and in Germany with a deal for the Schleswig-Holsteinlicensed World of Sportsbetting. Catena Media also moved to shore up its German presence with a €9.5m deal for sports betting and financial services affiliate Dreamworx. In addition it snapped up New Jersey-based iGaming affiliate Bonusseeker.com during Q1.

deterrent to iGaming companies interested in Germany, Gaming Innovation Group acquired Nordbet, an inactive business that holds a Schleswig-Holstein licence. Struggling mybet Holdings is now in talks with an unnamed partner over a strategic and operational joint venture to revitalise the business. The JV structure was chosen due to the difficulties of the potential partner acquiring the operator. Meanwhile, Fortuna Entertainment Group’s majority shareholder Fortbet Holdings made a CZK9.49bn (€371.6m) offer to take over full ownership of the Eastern European betting and gaming operator. Should the deal go ahead,

GIQ Q1 2018

Get the latest news from our website

GamingIntelligence.com

The quarter in numbers FINANCE

US$1.3bn

The Stars Group revenue in 2017

DEAL

OF THE QUARTER

turn, should stop the Australian business becoming a distraction for the wider group or cause management to lose focus on other markets. On the flipside, William Hill’s decision to exit Australia brings to an end an inglorious tenure in the market. The acquisition of Sportingbet and Centrebet in March 2013 for more than AUD$600m, fol lowe d by a n AU D $ 110 m de a l for Tomwaterhouse.com in August that year, was meant to be the start of a new era for the business, following the end of its online joint venture with Playtech. Instead, William Hill Australia came to represent something of a millstone around the operator’s neck. Constant management changes betrayed a confusion over how best to run the business. There was flip-flopping over whether to keep the separate brands. The ultimate decision to rebrand all sites as William Hill only served to confuse customers.

28%

Decline in NetEnt shares in Q1 2018

SEK22.6bn Total GGR for the Swedish gambling market in 2017 REGULATORY

The operator never seemed to get to grips with the business, and the £238.3m goodwill impairment for the division, announced in the operator’s full-year results for 2017, saw William Hill swing to a loss for the year. The fact William Hill Australia was acquired by CrownBet, a company it had been looking to purchase months earlier, was the final humiliation. There are still reasons to be positive for the operator. While its Australian campaign may have been something of a disaster, it can now focus on its core markets – and has recouped at least some of the money spent. It is a failure, but one that may at least position William Hill for future growth.

US betting integrity fee proposed by PGA, NBA and MLB

Operators approved by France’s ARJEL for cross-border poker M&A

AUD$300m Purchase price for CrownBet’s acquisition of William Hill Australia

80%

The Stars Group’s stake in CrownBet Fortbet plans to delist the company from the Prague and Warsaw stock exchanges. Staying in Eastern Europe, GVC Holdings acquired a 51 per cent stake in licensed Georgian iGaming operator Crystalbet. An option to acquire the remaining 49 per cent is in place until 2020. The operator also finalised its acquisition of Ladbrokes Coral following approval by the UK Competition and Markets Authority in March. The quarter saw a flurry of affiliate acquisitions. Better Collective acquired Polish sportsbook affiliate Goal.pl and Finland’s Premium Administration; Cherry’s Game Lounge division acquired Slot Tracker and Gambling. com purchased performance marketing network Happen Chances in a £3m deal. Happen Chances GIQ Q1 REVIEW

was advised by RB Capital in negotiations. XLMedia was the biggest affiliate spender, acquiring a network of Finnish affiliate sites in a €15m deal, and also £31.7m to fund further M&A activity. Gaming Realms exited the affiliate market, selling its Bingo Port and Free Bingo Hunter sites to lead generation specialist 1st Leads. Blueprint Gaming, the UK slot studio owned by Gauselmann Group, acquired rival UK developer Games Warehouse for an undisclosed sum. And we end where we began, with Scientific Games. The solutions giant acquired blackjack technology developer Tech Art and a stake in Brazilian video bingo studio E-SYS Tecnologia EM Informàtica.

€41.3m

Price for GVC’s 51 per cent stake in Georgia’s Crystalbet PEOPLE

Years as NetEnt CEO for Per Eriksson before departure in March LOTTERY

€54bn

China lottery sales in 2017 5

S P O N S O RE D E D I TO RI A L SCIENTIFIC GAMES

10 things 1

ASPA P Professional and Amateur Sports Protection Act of 1992

It is unlawful for a state or state-owned entity to “sponsor, operate, advertise, promote … a lottery, sweepstakes or other betting, gambling or wagering scheme based on … one or more competitive games in which amateur or professional athletes participate, and moreover bans states from licensing or authoris[ing] by law or compact” any such gambling activities.

otteries regulate L $135bn in legal sales (2016) 70% of legal sports 60+ countries worldwide allow legal sports betting betting globally 9 of the top 10 countries for sports betting sell through lotteries

US sports betting current situation

S lotteries U are naturally positioned to regulate the sports betting channel

The US Supreme Court’s overturn of PASPA would bring major changes to the US gaming market

$150bn estimated illegal sales per year $4.9bn legal sales in Nevada (2017) 7% CAGR in Nevada since 2005

220,000 US lottery retailers’ large distribution network

Brand integrity, responsible gaming controls and distribution networks are valuable for maximising regulated sports wagering

$22.5bn

70%

US lottery contributions to beneficiaries (2016)

Global legal sports betting regulated by lotteries

Exempt: Oregon, Montana, Delaware and Nevada

This federal law is currently under review by the US Supreme Court from a case filed by the State of New Jersey, challenging the constitutionality of the law. Even if PASPA is overturned, the Wire Act would continue to impose limitations on interstate sports betting and would require careful navigation in the context of mobile and internet intrastate wagers.

Scientific Games: a market-leading, global sports betting supplier

25+

20+

100%

Local sports solutions teams around the globe on four continents

With a history of successful sports solutions and customer growth

Scientific Games has only conducted business with lotteries and operators in regulated sports betting markets

LOTTERY SPORTS CUSTOMERS

YEARS OF EXPERIENCE

REGULATED

S P O N S O RE D E D I TO RI A L SCIENTIFIC GAMES

US lotteries need to know about sports betting legalising betting on pro sporting events, versus 1993, when a federal law went into effect banning the practice in most of the country and just 44% of Americans approved

34x larger illegal market

2018 Super Bowl $138.5m or 3% of total bets placed legally in Nevada l $4.6bn or 97% of total bets placed illegally across the US

If PASPA is overturned or modified, the US gaming landscape will change. Lotteries must educate stakeholders in advance of legislation, or risk future funding for beneficiaries

“Legalised US sports betting will dramatically change the gaming landscape. If lotteries do not participate, they will face significant threat to future beneficiary funding from increased gaming competition” Pat McHugh, senior VP, Global Lottery Systems, Scientific Games

l 2016 NCAA Men’s Basketball Tournament l $262m or 3% of total bets placed legally in Nevada l $9.2bn or 97% of total bets placed illegally across the US

CALL TO ACTION

urrent US C legislative action – sports impact to the US lottery industry

35x larger illegal market

™

l Now offering leading global sports betting platform l Two billion+ sports bets in 2016 l Trusted supplier to 150+ lotteries globally l Fastest growing lottery systems supplier in US

19 3

*As at time of press. Subject to change based on state legislative activities.

55% majority approve of

ONLY

Sample US consumer acceptance of sports betting

States* with sports bills pending

States* with sports bills that include lottery

US sports legislative best practices to responsibly regulate and maximise state profits

Primary recommendation

S tructure to successfully compete against illegal sports betting through broad regulated product distribution, and efficient tax and operating structures l O pen all regulated channels, including lottery retail, internet and mobile l P rohibit gaming entities not benefitting lotteries from accepting bets on lottery games l O pen the sports betting market by legalising an activity that state residents engage in on a regular basis l K eep the statutory framework simple and set sports betting details in regulations l E liminate illegal operators through a proper tax and regulatory structure l B ring substantial tax revenue to the state l B lock black market operators l I nstitute consumer protections l

Source: August 14-21, 2017 Washington Post-UMass Lowell poll of 1000 adults. Source: “AGA.” Americans to Wager More than $4.6 Billion Illegally on Super Bowl 52 | AGA, 30 Jan. 2018, www.americangaming.org/ newsroom/press-releasess/americans-wager-more-46-billion-illegally-super-bowl-52. Source: “AGA.” March Madness Betting to Total $9.2 Billion This Year | AGA, 14 Mar. 2016, www.americangaming.org/newsroom/ press-releasess/march-madness-betting-total-92-billion-year. Reprinted with permission from Public Gaming International. © 2018 Scientific Games Corporation. All Rights Reserved. GIQ Q1 REVIEW

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tives will discuss the global opportunities and challenges facing gaming. With a wide range of panels, break-out sessions and keynote speeches addressing the industry’s top issues and hot topics, it will be a gaming conference you won’t want to miss. Watch theiaga.org for more details.

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S P O N S O RE D E D I TO RI A L KAMBI

Pre-match is no World Cup warm-up With the bet distribution between pre-match and live more evenly split during a major summer tournament, the availability and depth of early markets will be key during the World Cup, says Michael Herry, Kambi head of football MORE THAN ANY other sporting event, pre-match and outright bets on the World Cup have the potential to make or break an operator’s tournament. Such is the level of interest around the 64-game competition, that the split of bets between pre-match and live is more balanced than the 2:1 in-play ratio we tend to see in domestic leagues. With this sharpened player focus on prematch and outrights, an operator’s depth and quality of offer, as well as speed to market, will be pivotal to player acquisition and retention this summer. Kambi is committed to providing customers with the widest selection of pre-tournament bets in the market. Pre-tournament bets are, in essence, a bookmaker’s shop window. If players can’t find the tournament-long bets they want to place, they will simply go elsewhere, potentially never to return. Armed with learnings from the 2014 World Cup and 2016 European Championships, Kambi begun its World Cup preparations in earnest last year. We held the first 2018 World Cup planning meeting 12 months ahead of the big kick-off on 14 June. We’ve never been in a better position going into a summer tournament and are excited about the new range of differentiated bets we’ll be bringing to the market.

Network benefits One of the many advantages of a supplier such as Kambi is the geographical reach we possess and how that feeds back into the range of markets and accuracy of prices we are able to offer. We now have 16 customers spread across six continents and, looking back over the past four years, have entered markets and major footballing nations such as Mexico, Germany and Colombia, and strengthened our positions in the likes of Spain, Denmark and Belgium. Furthermore, we have long been active in participating World Cup nations, including England and Sweden. This unparalleled reach means our customers benefit from us, week in, week out, delivering a market-leading domestic football product GIQ Q4 REVIEW

for each country. In doing so, our traders have gained a deep knowledge and understanding of the local game – whether players are in form or how certain referees respond in particular situations. This information influences our World Cup product, enabling us to identify and create popular markets to attract, reactivate and retain sports bettors. And importantly, price them accurately. Our odds are also informed by the millions of sports bettors using the Kambi Sportsbook throughout the globe. While our traders have an intrinsic understanding of the World Cup teams they are responsible for, smart players will on occasion know something we don’t. Using our sophisticated risk management tools, we can identify the knowledgeable players and use them to improve our prices to the benefit of all customers on our network. For instance, a sharp player in Mexico may have gained some injury news on the Mexican team that we have yet to learn. By managing their bet, placed through a local operator, we can adjust the prices so that all our customers benefit from the information gained, improving margin all round. This of course works whatever the location of the informed placed bet. Essentially, the greater our geographic reach, the wider our net to gather information.

The early bird The World Cup will also shine a light on the speed at which operators publish new or updated prices once matches are finished. There can often be a herd mentality among some opera-

“Using our sophisticated risk management tools, we can identify the knowledgeable players and use them to improve our prices to the benefit of all customers” Michael Herry, Kambi

tors and suppliers when it comes to odds setting – waiting for others to publish to ensure they are in line before publishing themselves. During the World Cup, Kambi will invariably be the first to market. During the knockout phase, we will publish the odds of games within seconds of the fixtures becoming known, all supported by an extended range of in-match multis and stats-based markets. No waiting for other bookmakers for guidance, Kambi will lead the market. The quicker we have markets available, the more time our operators have to organise their marketing efforts, and the more likely customers are to turnover their cash. While I’ve focused on pre-match, this should not detract from in-play which will, of course, be important for all operators, and Kambi is ready with a market-leading product, including high paybacks and low countdowns. New to this World Cup is the Video Assistant Referee. It will be interesting to see the impact it has in Russia. Over the past year we’ve developed a system to handle the effect this has on games and the user experience, while we’ve also created VAR-related bets. In addition, we have placed great effort into enhancing the player experience during the extra-time and penalty shoot-out periods, and will be offering more markets and extending their availability. Coupled with continuous improvements to UX and greater operator empowerment capabilities, Kambi customers will have a market-leading product at their disposal to ensure a successful World Cup. n 9

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S P O N S O RE D E D I TO RI A L SBTECH

World Cup marketing: from sign-ups to long-term customers

The World Cup is a massive marketing opportunity for betting operators. Ian Bradley, chief product officer at SBTech, explains how they can they ensure offer-driven sign-ups become long-term customers. Personalisation, CRM and data all play key roles, alongside a powerful sports engine to follow up on the momentum generated by the world’s most widely viewed sporting event

GIQ Q1 REVIEW

next-generation cash out functionalities such WITH THE WORLD Cup fast approaching, as Add2Bet, as well as Pulse, the company’s it will soon be time for betting operators to latest live betting innovation. market their products across all leading media and platforms. Deep dive – increased engagement As with all major sporting events, operaThese features enable SBTech operators to tors will attract large numbers of new players achieve true differentiation, enhance customer by promoting generous sign-up or first deposit engagement and increase brand loyalty, espebonus offers; but the perennial problem of cially on mobile. In hugely competitive territoensuring that these offer-driven sign-ups ries such as the UK, our emphasis on fast develbecome long-term customers will be one of the opment and regular iteration of new features is main – if not the main – topic under discussion a rare quality that sets the company apart from as sportsbook heads debrief their teams after the rest of the field. the tournament. Deep dives into customer data allow us to The question has never been more relevant, define and reach our target audiences more due to the increasingly prominent roles played effectively. World Cup players have distinctive by personalisation, CRM, user experience patterns: traditionally they make lower deposand customer journey, along with ‘simpler’ its and churn more, lowering expected lifetime technical issues such as load-time, site speed value. The way to break down the data is by and responsiveness. investigating customer behaviour according These considerations add to the pressures to criteria such as win/bet ratio, activity and produced by price comparison and the finanbet preferences in order to maximise value. cial targets that must be hit in markets where This segmentation into different customer regulatory costs and intense competition personas enables SBTech to suggest the right create highly challenging environments. action to the right player at the right time. All these factors strongly influence how This might involve a strong offer on the secSBTech analyses the sports betting market and ond deposit for a one-time depositing player, how it works to create a sportsbook and casino or increasing the value of a highly engaged platform that meets all requirements and delivfootball bettor by suggesting ers across all metrics. crossover bets to other sports T he compa ny’s twi n or products. focus on mobile betting “Understanding These educated, dataand on combining online, each of the customer supported decisions enable mobile and retail products personas and SBTech’s teams to drill down into consistent and coherent into the player database and omni-channel experiences preferences is the decide which layers of segenable it to design bespoke key to rewarding mented players to invest in. offerings that power profit- them in ways that Understanding each of these ability in some of the world’s will keep them customer personas and prefermost dynamic and demand- engaged with ences is the key to rewarding ing markets. the brand” them in ways that will keep The majority of today’s Ian Bradley, SBTech them engaged with the brand players are comfortable with according to their historical the principle of data collecactivities and betting patterns. tion and are highly receptive to betting sugThese approaches are proven to result in gestions based on their behaviour, chiefly when loyal, multi-time depositors, who can then be such recommendations relate to previous wins. engaged further to achieve optimal lifetime Meanwhile, as the industry looks to value. By applying deep analytics to the fields attract fresh demographics, focus groups of bet recommendation, user experience and comprising younger players have enabled customer journey, SBTech helps partners and SBTech to apply ideas drawn from gaming to operators get the best returns from their World its latest innovations, including bet recomCup-related CRM and marketing spend. n mendation engines like Action Betting and 11

The new beast in online casino C O LU M N Robin Harrison

Red Tiger Gaming is emerging as one of the industry’s most exciting new suppliers, with its rapid integrations, growing client base and ability to crank out quality content winning it praise. Under new chief executive Gavin Hamilton, plans are in place for an ambitious global expansion drive in 2018

RED TIGER GAMING has exploded into the B2B casino market, and is aiming to challenge the dominance of market leaders NetEnt, Playtech and Microgaming. It was founded by Nick Maughan, fresh from the sale of his previous company Cayetano Gaming to Paddy Power, and has enjoyed a beginning that few start-up CEOs would dare to dream of. Revenue grew by almost 800 per cent in 2017, and it expects income to grow threefold in 2018. It works with just about every leading operator and aims to complete as many as 50 client integrations this year. This is underpinned by some of the most innovative new titles in the industry. Games are developed and released at a dizzying rate, while clients can support revenue growth with the Smart Spins marketing application and daily jackpots feature. Not bad for a business only just past its third birthday – and one without a chief executive. Founder Maughan has been the de-facto chief in all but name. He has now entrusted managing director Gavin Hamilton to take the business forward as group CEO. The Red Tiger CEO role is an exciting, if daunting, job considering the company’s early growth. The company’s first year was spent developing content. The second two were spent building the customer base. In this third year, the focus is turning to global expansion. In 2018 it will push into new markets, while integrating new clients, rolling out new titles and acquiring new customers. Not to mention working on the development of a proprietary platform and occasionally testing games in retail stores. No pressure. Hamilton explains that it is this ramping-up that has led to him becoming the

company’s first chief executive. He initially joined as managing director in April last year, stepping down as director of gaming for Paddy Power Betfair to take up the position. That he left a role with a leading iGaming operator to join a start-up games developer is an interesting move. It is clear that it is largely because of a strong relationship with Maughan. The pair go back a long way. They first came into contact when Hamilton, then newly installed in Paddy Power’s business development team, was tasked with acquiring Maughan’s Cayetano Gaming. “Nick is a mathematician by background and had previously run a high-frequency hedge fund in New York, before setting up one of the first online financial betting companies, which he subsequently sold to IG Index,” Hamilton explains. “I must admit I was initially very sceptical of how this financial hedge fund-type had pivoted into casino gaming. “When I first went to meet him in Sofia during the due diligence phase I expected to meet a very dry, geeky type, so I was pretty surprised as he is anything but that. Then I was blown away by the quality and scale of the product and operations he’d built in just 18 months.” During this time, Hamilton was able to gain an insight into what Maughan was then developing in Red Tiger. “[It] was clear that the platform roadmap was by far the most impressive in the industry,” he says. “We dealt with a large number of gaming suppliers over the years and I’d never seen anything like it. “I was very pleased to end up at Red Tiger,” he adds. “The growth is phenomenal and we complement each other as we are polar oppo-

P EO P L E

RED TIGER GAMING

sites. He’s given me both great autonomy and strong support.” Even when Hamilton joined, the two-and-ahalf-year-old business was profitable, with an operating margin of around 50 per cent. That has risen to over 70 per cent in 2017. For many companies, the jump from startup to scale-up is the most tricky step to take, and Hamilton admits that this was no different for Red Tiger. “It wasn’t like I was worried about the company’s ability to grow,” he admits. “I was more concerned about ensuring that we built up the right resources to manage the demand. “The day I arrived, it was apparent that we had contracted to do considerably more integrations in the following 12 months than we had resources to deliver, so one of my first challenges was to resource up to manage that situation. It is obviously a very different set of challenges to my former roles, but under the circumstances my confidence in the company came naturally.” He is careful to stress the importance of scaling up properly. When adding to its product team, Hamilton says the supplier looks to bring in people who like to play casino games themselves, ensuring they have a “passion” for

“Our goal is to procure licenses in every regulated market in which they are offered. It is all about being a full-service supplier with a truly global footprint” Gavin Hamilton, Red Tiger Gaming

GIQ Q1 REVIEW

what they are creating. After all, its products are key to the company’s success, he says. “Fundamentally, we make great games. The players love them and we can prove this easily because they generate substantially more revenue than most of the other suppliers in the sector in any side-by-side test.” With capacity to develop 25 games a year and an exclusive distribution licence for Cayetano content via the Red Tiger platform, the company can offer a substantial content library. Red Tiger’s marketing application Smart Spins and its daily jackpots feature have also proved particularly effective. With bonus promotions under increasing scrutiny, these offer new ways to engage and retain players. However, Hamilton admits, competitors are looking to launch competing versions of each solution. Playtech has replicated the daily jackpots mechanic in its new suite of Sporting Legends slots. “That’s flattering and we hope they are equally as slow to copy our next innovations,” Hamilton jokes. “We genuinely don’t mind that though, because industry innovation is good for the whole ecosystem of our sector. “It was good to have a few years alone in the market with the jackpots, but nothing lasts forever. We are working on something new with one of our clients that we are confident will be much bigger. It will be rolled out later this year.” He sees this approach as key to industry growth. In the US, he says, suppliers “run around patenting every small idea they have”, whereas in Europe suppliers compete by staying ahead of the crowd. “This is a far healthier state of affairs,” he says.

Staying ahead of the crowd will be achieved through focused and efficient development processes, and not through churning out as many games as possible. The team has now built a new integrations portal for operators to integrate with the Red Tiger platform, rather than vice-versa. This will facilitate the bulk of client integrations scheduled for 2018. “Some of our clients will still want us to integrate to them, which is fine, but this new system expands our capacity while offering a faster route to launch for operators that are not yet on the roadmap,” he says. Game development, meanwhile, is based around a system where each title is prototyped – a model that is “particularly effective”, Hamilton argues – until the team is happy with the mechanics, when all other components are layered in. Everything is done in-house, he adds. And he means everything: “Right down to the voiceover on the games, which I once did when the guys wanted an Irish accent.” Considering the rapid rise of Red Tiger in its first three years, Hamilton is clear about the next step. He wants to become the most regulated supplier in the market. “Our ultimate goal is to procure licenses in every regulated market in which they are offered,” he says. “We don’t care if they cost more than we can make there, it is all about being a full-service supplier with a truly global footprint. In some cases the return on investment will be strong, in others weak, but our policy is not to cherry-pick. “The frequency with which our legal director asks me for utility bills for proof of address for regulatory KYC is such that I think I need more than one electricity supplier!” n 13

P EO P L E Q1 MOVES

NETENT AXES CEO

delivered, it is long-term growth. In each financial year since he took on the CEO role he has overseen year-on-year growth of at least 20 per cent in net profit until 2017. That year, the profit growth slowed to 10 per cent. It wasn’t a great year in comparison to the previous years, but net profit has still grown an impressive 372 per cent from SEK117m to SEK552m during his tenure. Eriksson has also overseen a geographical expansion to the UK, US and elsewhere. If that does not constitute ‘long-term growth’, then its rivals should worry about what comes next.

NETENT CHIEF EXECUTIVE Per Eriksson was removed from his role at the end of March, with chief financial officer Therese Hillman assuming his duties on an interim basis. The company statement insisted Eriksson had been replaced in order to increase focus on the company’s longterm growth, rather than as a kneejerk reaction to a January profit warning. One senses there might be more to this story, because if there is one thing Eriksson has

IN THE NEWS

WILLIAM HILL RECRUITS DIGITAL CEO

Gaming executives who have been making headlines and what’s in their inbox

UK BOOKMAKER WILLIAM Hill has appointed former Betsson chief executive Ulrik Bengtsson to the newly created role of chief digital officer. Bengtsson will have oversight of the William Hill Online business, including global data, brand, marketing and customer services. Bengtsson joins William Hill having abruptly departed Betsson in September last year, after

EXPERIENCED PADDY POWER CFO DEPARTS PADDY POWER BETFAIR chief financial officer Alex Gersh is leaving the group, with Saga CFO Jonathan Hill set to replace him. Gersh has been an integral part of former CEO Breon Corcoran’s successful executive team since joining Betfair Group in December 2012. Newly-appointed CEO Peter Jackson said Gersh was leaving after tiring of the travel associated with

being CFO of an increasingly international operator. More conspiratorial ly-minded

ANNEXIO BRINGS IN THE STARS observers are unconvinced by this plausible explanation. Jackson has maintained a degree of continuity among his senior executive team but the departure of one of the industry’s most talented and profitfocussed CFOs will be a loss. The new CEO leaned heavily on his experienced colleague during his first announcement to the market. Hill and Jackson will need to get up to speed quickly.

RANK DEPARTURE HIGHLIGHTS A PROBLEM LONDON-LISTED GAMING OPERATOR Rank Group announced the resignation of chief executive Henry Birch, who intends to join online retailer Shop Direct as its new CEO. The UK gambling industry is losing one of its most respected executives at a time of potentially massive upheaval. While the industry has been under fire from media, politicians and regulator, Birch has been one of the few chief executives ready to speak up in its defence. He is 14

less than two years as CEO and five years with the operator in total. Bengtsson is a strong character and it will be interesting to see how well he gels with the William Hill management. William Hill’s digital operation needs a steady hand on the tiller. Bengtsson can certainly provide that, but he will also need to take some bold decisions to return the operator to a leadership position.

departing for an interesting but not obviously irresistible role. As such, his departure underlines the unattractive nature of the industry for some of the most talented executives. The industry needs talented executives like Birch to overcome the political and regulatory barrage. But it also needs to improve its image to attract and retain such executives – a tricky problem.

MICHAEL HAZEL, THE former chief financial officer of PokerStars operator Rational Group, has joined the board of Isle of Manbased lottery betting operator Annexio. Hazel spent 10 years with PokerStars, mostly in the company of general counsel Paul Telford, who took charge of legal affairs for Annexio in in June 2016. As CFO, Hazel served as project lead for Rational Group’s CAD$4.9bn acquisition by Amaya in 2014, and served as interim chief executive of the business as it transitioned to the new ownership. Hazel left Amaya as the Canadian company caved to the New Jersey regulator’s demands that it purge itself of old PokerStars’ executives. He is only joining as a non-executive director, so his influence will be limited, but his experience is secondto-none. The lottery betting operator could not hope for a better guiding hand as it seeks to close the gap on Lottoland and traverse a tricky regulatory environment.

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T EC H

Q1 LAUNCHES

GIG ENTERS US WITH HARD ROCK INTERNATIONAL DEAL Gaming Innovation Group (GiG) has signed a deal to power a new online casino in New Jersey’s regulated iGaming market for Atlantic City’s soon-to-open Hard Rock Hotel & Casino.

What’s the big idea? The initial fiveyear contract sees GiG supply full-platform and front-end development services for Hard Rock’s first real-money online venture, which is expected to launch before the end of the

year. GiG has applied for a Casino Enterprise Licence from New Jersey’s Division of Gaming Enforcement, allowing the supplier to provide Hard Rock with a new digital consumer portal, a back-end platform to manage its operations, as well as a new front-end casino service GiG Magic. The rebranded venue, previously Trump Taj Mahal, is one of two new landbased venues to open this summer, along with Ocean Resort Casino (previously Revel).

LUXOR ESPORTS VENUE OPENS ON LAS VEGAS STRIP The first dedicated eSports venue on the Las Vegas Strip opened in March at MGM Resorts International’s Luxor Hotel and Casino.

BIG LAUNCHES Five of the quarter’s major product launches and what they mean for those involved

WHAT’S THE BIG IDEA? The 30,000sq ft Esports Arena Las Vegas features a main competition stage, gaming stations, twostory video wall, VIP rooms, bars, and production facilities in the main hall, alongside a VR experience and an interactive history of gaming display. The venue is operated by Allied Esports, a joint venture between World Poker Tour owner Ourgame International, Chinese online games provider Kongzhong, and Chinese sports events and venues operator iRena, which opened its first dedicated eSports facility in California in 2015, and has since expanded to include properties across North America, Europe and China.

FSB IN FIRST LAND-BASED DEAL WITH PHILIPPINES CASINO

DANSKE SPIL’S SBTECHPOWERED YOUBET BRAND

PLAYTECH ONLINE CASINO FOR POLISH NATIONAL LOTTERY

Sports betting platform provider FSB has joined forces with bookmaker Paddy Power and Asian supplier Jade Entertainment to launch a new sports betting offering for the Okada Casino Resort in the Philippines.

Denmark’s former gambling monopoly operator Danske Spil launched a new gaming and betting brand in partnership with SBTech.

Playtech has the contract to launch an online casino for Poland’s state-owned National Lottery operator Totalizator Sportowy.

What’s the big idea? The Youbet.dk site

What’s the big idea? Totalizator Spor-

will use SBTech’s Chameleon360 iGaming platform, offering thousands of proprietary bet types, casino titles and live dealer games. While the operator has succeeded in maintaining market share since Denmark introduced iGaming regulations in 2012, the Youbet launch will serve as a driver of future growth. “We are moving towards faster growth by adding a new brand to our portfolio, targeting players who demand a deep sports and casino offering,” said Danske Spil chief executive Niels Erik Folmann. “The sportsbook and casino platform looks good, as does the roadmap for new features, which will drive the success of our new brand through cooperation and co-creation.”

towy has operated the Lotto brand for more than 60 years in Poland, with its iGaming launch marking an important step in the company’s expansion plans. Following a competitive tender process, Playtech will provide the lottery with its online casino platform, games portfolio and related services. “We are thrilled to have been selected as its new online casino partner,” said Playtech chief executive Mor Weizer. “Given the scale and flexibility of our gaming platform Playtech is the partner of choice for leading land-based operators that are best placed to lead the online growth of newly regulating online markets.”

What’s the big idea? FSB will work with Paddy Power’s trading team to deploy its trading tools and platform for over-the-counter sports betting at the Manila-based casino. This will be followed by the rollout of self-service betting terminals and hand-held point-ofsale devices supplied by Jade Entertainment. “We are delighted to team up with Paddy Power and Jade, and look forward to a long, fruitful partnership,” FSB business development director Richard Thorp commented. “Our platform and trading tools have been successful online and I’m confident they will be equally successful in land-based premises.” GIQ Q1 REVIEW

F I NA NC E GIQ20 Q3 2012

Lottoland Australia: the fight for survival C O LU M N LOTTERY

Luke Brill

CEO, LOTTOLAND AUSTRALIA

Will a ban on lottery betting products achieve anything more than handing Tabcorp an effective monopoly over Australia’s draw-based games industry? TABCORP MAY SOON have the champagne corks popping as its newly acquired monopoly on lotteries (as a result of the merger with Tatts Group) could now be further entrenched. The government is moving to ban betting on secondary lotteries to protect newsagents. But where is the evidence to support this argument? Where is the proof that newsagents are being hurt financially by products such as those offered by Lottoland? Ian Booth from the Newsagents Association of New South Wales and the Australian Capital Territory says his members are concerned that the proposal to ban Lottoland will simply hand monopoly powers to Tabcorp. He thinks this is bad news for newsagents. Any impartial observer would be hard pressed not to agree with him. Tabcorp has persuaded politicians that Lottoland Australia, an innovative disruptor, should be wiped out. In financial terms, Lottoland is a minor hindrance to Tabcorp, with Lottoland Australia’s revenue representing less than two per cent of Tabcorp’s lottery revenue. In Lottoland’s opinion, this situation demonstrates a failure to encourage competition. 18

In sovereign risk terms, the Tabcorp sales and away from the pubs and clubs. Has challenge represents another black day for Tabcorp given assurances that it won’t apply a foreign-owned company which has legally the same strategy to newsagents and seek to entered the market, only to face destruction sell more lottery tickets online? by a monopolist who in its own annual report The federal government should think claimed to spend $5m on the ‘Lottoland’s Gotta again about the spurious reasons for this Go’ campaign in 2017, simply to protect its own prohibition. It should look closely at the actumarket position. Political commentators are al and potential impact on competition, and asking, “Is this the price of a government decithe reduction of choices to real consumers. sion?” We truly hope it isn’t. The Australian Competition and Consumer What message does this potential decision Commission (ACCC) should step in and send to foreign investors? The government is review this likely benefit to Tabcorp’s mareffectively saying it will protect its own homeket dominance and the potential for it to use grown monopolies from any real competition that dominance to increase its profits at the or innovation, regardless of the net effect on the expense of consumer choice. everyday customer’s freedom of choice. The ban on Northern Territory-licensed Furthermore, the government has actively operators taking bets on Australian lotterchosen to disregard all the new jobs that have ies solves the perceived problem. This latest been created, as well as the $30m that has move to ban betting completely is a step too far been pumped into the local economy on marand is bad for jobs, bad for investors and bad keting, sponsorship and for innovation. It is not in the community projects. public interest. Most importantly, the “The government Lottoland Australia will same freedom of choice is effectively continue to fight this ban as enjoyed by 6,500 Australian saying it will protect we have been fighting every punters who like the product day since we entered the Aushome-grown and the opportunity to bet tralian market in 2016.We monopolies from on something other than the will continue to challenge the antiquated lotteries offered competition or monopoly and offer Australby Tatts, and now Tabcorp, innovation, regardless ians freedom of choice. This has been removed without of the net effect battle is by no means over consent or consultation. when the legislation hits the on the customer’s What has Tabcorp done freedom of choice” House of Representatives in to better the lot of the hardMay. All avenues are being Luke Brill, Lottoland working newsagents who do explored, including lobbying, most of their work for them? legal and people power. The Has Tabcorp announced that it will put more ban will not come into effect until six months effort into newsagency-based sales and away after the bill has been passed, which gives from its preferred online sales channel? Lottoland Australia the chance to challenge What real and substantive benefit has gone to or ultimately adapt our business and evolve. the agents? The odds are long but at Lottoland we Tabcorp’s apparent strategy is to move play those odds every day. Long live more of its wagering business to online the disrupter! n

LOT T E RY Q1 NEWS

500.COM AGREES RETAIL DEAL FOR CHINA SPORTS LOTTERY…

GAMING REALMS PARTNERS THE HEALTH LOTTERY

BIG LOTTERY STORIES

LONDON-LISTED GAMING REALMS has launched a new iGaming site for UK charitable lottery operator The Health Lottery. Powered by the supplier’s proprietary platform, Health Games features a range of slot, casino, instantwin scratchcard games, as well as Slingo titles. The deal expands on a partnership between Gaming Realms and The Health Lottery’s parent company Northern & Shell, which has seen the launch of Expresswins.co.uk for The Daily Express and Starwins.co.uk for The Daily Star. “Gaming Realms has been one of our trusted partners for almost two years, delivering exceptional results, well above the targets,” Northern & Shell director of gaming Yakir Firestane said. “It was only natural for us to approach them when we decided to develop a new gaming site under The Health Lottery brand. We have high expectations for this new brand.”

This quarter’s lottery lowdown

“It was only natural for us to approach Gaming Realms when we decided to develop a new gaming site under The Health Lottery brand”

IGT TAKES OVER SOUTH CAROLINA LOTTERY CONTRACT

KAZAKHSTAN LOTTERY SIGNS WITH SCIENTIFIC GAMES

INTERNATIONAL GAME TECHNOLOGY (IGT) has been awarded a 10-year contract to replace rival Intralot as the new lottery systems supplier for the South Carolina Education Lottery (SCEL). The company will provide a new draw-based central system, lottery terminals, communications network and ongoing services to the state lottery. “Since its beginnings, the SCEL has effectively maintained itself as a successful and highly efficient traditional lottery, and an essential source of funds for schools and scholarships,” said Jay Gendron, IGT chief operating officer, lottery. “To support the SCEL’s long-term objectives, IGT will provide customised, high-performance back-office systems, heighten retailer satisfaction, and responsibly deliver sustained net proceeds – all cultivated through a collaborative relationship that puts the SCEL’s needs first.”

SCIENTIFIC GAMES HAS been selected as the exclusive supplier of games, technology and services to the National Lottery of Kazakhstan. Operated by JSC Satty Zhuldyz under a 15-year contract awarded in February 2017, the lottery will work with the supplier to roll out instant, scratch and draw-based games across a network of 3,000 retailers in Kazakhstan. “We are honoured to be the exclusive lottery supplier in this important mission,” said Jim Kennedy, group chief executive, lottery, at Scientific Games. “Our expertise launching lotteries in many countries around the world, and our ability to deliver global best practices in the Republic of Kazakhstan, will have an immediate and positive impact on the National Lottery’s performance, security and overall success for the citizens and government of the country.”

GIQ Q1 REVIEW

Yakir Firestane, Northern & Shell

New York-listed 500.com entered into a deal to develop a new lottery retail sales channel to sell Sports Lottery tickets across China. The framework agreement sees the China Sports Lottery Administration Center providing support to the project, with both companies cooperating in the development of the new physical channel. 500.com will aim to strike agreements with provincial Sports Lottery centres to install its Sports Lottery terminals, as well as providing relevant maintenance and operational services. The company said that the terminals will enhance the convenience of ticket purchases, enlarging the customer base and optimising the user experience.

…WHILE SUBSIDIARY LOTTO WAREHOUSE SIGNS B2B DEAL 500.COM-OWNED LOTTERY BETTING provider Lotto Warehouse secured its latest B2B deal following a partnership with Bethard, the Malta-licensed operator which has Swedish footballer Zlatan Ibrahimovic (pictured below) as a brand ambassador. The agreement enables Bethard to offer its customers the chance to bet on the world’s biggest lottery jackpots. “Bethard is a globally recognised brand that commands huge respect within the iGaming industry,” said Lotto Warehouse chief executive Thomas Biro. “It fully recognises the huge potential offered by lottery betting and was attracted by our strength, stability and expertise. Lottery betting is now viewed as an established iGaming vertical and we are perfectly positioned to offer an unbeatable solution comprising simple integration, an outstanding range of products and unbeatable margins.”

GIQ games round-up

New games that caught GIQ’s eye in Q1 2018

NETENT GOES RETRO WITH HOTLINE

SG DIGITAL LAUNCHES RAINBOW RICHES FORTUNE FAVOURS… EVERYONE’S FAVOURITE LEPRECHAUN is back in the latest title from SG Digital’s Barcrest Studio. This instalment in the Rainbow Riches brand features the opportunity to play four reel sets with a Magic Fairy symbol bonus that can transfer between reels for more potential big wins. “I’m excited to see the success of Rainbow Riches continue with this fantastic new game,” says Tom Wood, chief creative officer at SG Digital. “Our design and development teams created a refreshing spin on a long-time player favourite, and the game’s performance has been testament to the creativity that led to its release.”

…AND KING KONG FURY KING KONG FURY, from SG Digital’s NextGen Gaming, includes lightning reels that can appear during any spin, maximizing win potential. Kong’s Call can add up to 12 wild symbols, and the King of Skull Island free games can award up to 100 free spins with frequent re-triggers. “King Kong Fury builds on the success of NextGen’s fantastic game library, with unique bonus rounds, captivating features and amazing production quality,” says Tom Wood. “The game truly captures the epic scale of King Kong, while engaging players with beautiful art and sound design.” 20

NETENT RELEASED ITS retro 1980s-themed video slot Hotline, which is the first to include a unique multilevel bonus bet feature to engage a broader range of players. The five-reel, three-row slot takes players back to 1980s Miami, with palm trees in the sunset, neon signs, fast cars and a retro soundtrack. The game offers a selection of wild and expanding wild substitutions, re-spins and free spins. “The innovative Hotline Bonus Bet feature has the ability to give players extra options, which also has some cool new mechanics to make it stand out from other slot games,” says

chief product officer Henrik Fagerlund. “With this game we wanted to provide operators with the ultimate player entertainment, by bringing a popular retro look and feel to our players. I believe we’ve achieved that with the creation of Hotline and its great soundtrack.”

MICROGAMING SET TO LAUNCH CASH OF KINGDOMS SLOT M ICROGA M I NG ANNOUNCED THE release of its upcoming slot Cash of Kingdoms, a fantasy-themed five-by-three reel, 15-payline online slot, which introduces a crew of heroic allies – the dashing Knight, the magical Mage, the crafty Rogue, the feisty Archer, and the bearded Bombardier. The game introduces Invading Wilds, a brand new feature that unleashes a barrage of fiery arrows on to the reels. “Launching later this year, Cash of Kingdoms is built on a strong game engine that will give players an action-packed escapade with fantastic payouts,” says games publisher David Reynolds. “Combining an exciting feature set with a popular theme that appeals to many mobile gamers, we anticipate Cash of Kingdoms to be a long-term player favourite. It’s the perfect adventure to add to our diverse games roadmap for 2018.”

BLUEPRINT TURNS TO SHAKESPEARE WITH ROMEO & JULIET SLOT GAUSELMANN’S GAME DEVELOPMENT studio Blueprint Gaming launched a new video slot based on the Shakespeare classic, Romeo and Juliet. The 5x3-reel slot features special modifiers, such as Romeo Wilds and Lovers Super Spin, giving players the chance to win big prizes. The title can also be linked to Blueprint’s operatorspecific Jackpot King, a progressive jackpot that can be triggered on any spin and stake. “Love is in the air as we adapt this Shakespeare classic into an eye-catching video slot,” says Jo Purvis, director of marketing and relationships. “We’re sure Romeo & Juliet will become a hit with players, and look forward to rolling it out with our operator partners.”

G A M ES

Q1 RELEASES

GREENTUBE RELEASES VIKING & DRAGON NOVOMATIC INTERACTIVE SUBSIDIARY Greentube announced its latest release with the launch of its Norse-themed Viking & Dragon slot. The game follows the actionpacked journeys of a fearless Viking and his fire-breathing friend, Dragon, as they go in search of gold and legend. The five-reel, three-row slot with 25 win lines features free games and extra added wilds. The Coin and Dwarf symbols are even more special, as just two symbols next to each other win. The Coin is also the Wild symbol and substitutes all other symbols except the Chest (Scatter symbol) to form winning combinations and further increase the chances of winning.

ISOFTBET LAUNCHES LEGEND OF LOKI IN ANOTHER NORSE-THEMED slot, iSoftBet released a 20-line video slot, Legend of Loki. Drawing on Norse mythology, the title includes various features such as wild strikes, stacked re-spins and storm showers, as well as a free spins round with a unique sticky symbol. “While we know our players appreciate technical quality, an element of mystery adds real excitement to a game,” says head of business development Michael Probert. “We paired our audio-visual excellence and unique mechanics with the Norse Legend of Loki to produce a game that will keep players on the edge of their seats.”

PRAGMATIC PLAY ENTERS BINGO VERTICAL PRAGMATIC PLAY HAS expanded its product offering with the launch of a mobile-first bingo game. Featuring an in-game lobby on mobile, the game includes a simplified card view feature and extra prizes on each ticket. It has been developed to provide operators with the tools and flexibility to create a themed bingo product to fit their needs, with integration in under one month. “Bingo is a game with a rich history in gam-

ing jurisdictions all over the world, and we are delighted to bring to market a fresh twist on an increasingly popular vertical,” says chief commercial officer Melissa Summerfield. “For online casinos, bringing players a product selection tailored to their needs is increasingly important, and with the extensive customisation options built into our bingo product, we continue to deliver bespoke service levels to meet all of our clients’ requirements.”

LOTTOLAND GOES BIG WITH NEW €30M INSTANT-WIN GAME Gibraltar-based lottery betting operator Lottoland launched a new online instant-win game, offering players a jackpot of €30m. Developed by Glück Games, Bingo Jackpot utilises Lottoland’s Random and insured Number Generator (RiNG) to create a bingostyle game with multiple patterns and jackpot prizes, with users able to play between one and six cards on every single game.

“With our RiNG technology we’ve changed the game, offering customers the opportunity to win large sums of money whenever they want,” says Lottoland CEO Nigel Birrell. “Customers are demanding higher jackpots – and Lottoland delivers. We are proud to be able to offer life-changing wins in an instant. Bingo Jackpot is just the start.”

PLAY’N GO INTRODUCES HOUSE OF DOOM PLAY’N GO HAS partnered with Swedish doom metal band Candlemass to launch its latest slot, House of Doom. The game features exclusive music from the Stockholm-based band. “Our artists and developers have managed to bring an innovative concept to life which will appeal to heavy metal fans, as well as those simply wanting a top-quality slots experience,” says chief executive Johan Törnqvist. “It has been a pleasure working with Candlemass on the launch. The band has contributed heavily to the creative process and we believe this partnership paves the way for a new way of marketing slots in future.”

GIQ Q1 REVIEW

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THE BIGGEST SOCIAL CASINO NEWS OF THE QUARTER

KamaGames marks strong results with product launches SOCIAL CASINO STUDIO KamaGames, operator of the Pokerist social app, has reported a strong financial performance for the full 2017 year, off the back of an increase in active users. Revenue was up 63 per cent to US$57.5m in 2017, with results benefiting from six consecutive quarters of growth. Managing director Andrey Kuznetsov (pictured) described t he s t r on g p er for m a nc e as “unprecedented” in the current social casino market. T he resu lts c a me as KamaGames saw its registered player base hit the 100 million mark this year, with five million of those players being added during Q1 2018 alone. Providing a breakdown of its users, KamaGames said 40.7 per cent came from Europe, followed by 22.9 per cent from the US and 17.9 per cent from Asia. The increase in new users was credited with a range of new product launches, most recently KamaGames’ first entry into the social slots vertical. The operator said the new launch was intended to diversify the company’s player base. “As a company, we have already achieved success with our leading 3D casino

games. However, the slot-playing audience was still an untapped market segment for us,” Kuznetsov commented. On the product front, KamaGames also launched its flagship Pokerist title on Facebook’s Instant Games platform for the first time, making it “easily available to the two billion Facebook Messenger users”, according to Kuznetsov. With an eye on the future, Kama also released Poker Champions, a new social casino product targeting the Indian gaming market, in partnership with Shanghaibased YooZoo Games. The product is a white-label variant of Pokerist, with tweaked graphics and in-game mechanics tailored towards quicker rummy games that are popular in India. “This is an especially good time for a major mobile game launch in India. We know that the average time Indian consumers spend on their phones increased by 50 per cent in 2017, and with the continued increase in smartphone penetration, it is expected to lead to a h i g h e r mobi le c o m m e r c e s p e n d ,” Kuznetsov said.

Zynga posts first fullyear profit since 2010 SOCIAL GAMING GIANT Zynga has posted its first full-year profit for seven years as it reported revenue ahead of expectations during the final quarter of 2017. Revenue for Q4 increased 22 per cent year-on-year to US$233.3m, bolstered by the launch of Words with Friends 2 and a partial contribution of Peak Games’ casual card games studio, a $100m acquisition in November. Full-year revenue for 2017 was up 16 per cent to $861.4m, with a net income of $26.6m – compared with a $108.m loss in 2016. “[We] intend to use the strength of our balance sheet and positive cash flow from operations to explore M&A opportunities that will enhance our growth potential,” said Zynga CEO Frank Gibeau. “Our goal is to bring talented teams and compelling franchises into Zynga that align with our strategic priorities, to grow our live services, create new forever franchises and build out our capabilities on emerging mobile platforms.” In a bid to grow its poker product, Zynga has also launched World Poker Tour (WPT) branded tournaments via Zynga Poker as part of a new partnership with poker event organiser Ourgame International. Zynga said the partnership would enable it to leverage WPT’s presence across multiple channels, and will see it launch free-to-play WPT-themed tournaments on Zynga Poker from the second half of this year.

IN BRIEF Greentube

AGTech Holdings

FlowPlay

BlueBat Games, a subsidiary of Novomatic’s Greentube interactive division, has launched a new social casino as part of a wider deal with Seminole Gaming and Hard Rock International. Customers at the Atlantic City’s soon-to-open Hard Rock Hotel & Casino will be able to link Atlantic City Wild Card rewards account to BlueBat social gaming site HardRockSocialCasino.com. Points accumulated can be redeemed for merchandise, meals and other prizes. Meanwhile, Greentube’s Funstage social casino has integrated cryptocurrency CashBet Coin as a payment solution.

Hong Kong-listed AGTech Holdings has partnered with mobile payments provider Paytm to enter India with the launch of its new Gamepind social gaming platform. The Gamepind platform went live in India in January, offering casual gaming to players while shopping online. The joint venture between AGTech and Paytm that launched the platform is the first major global business expansion for AGTech since it became a part of Alibaba Group last year.

Seattle-based social casino developer FlowPlay has named Craig Robinson as its new chief revenue officer, with Scott Pultz handed the role of chief architect. Both are internal promotions, with Robinson previously serving as vice president of mobile games and Pultz as senior architect. “Craig and Scott have been invaluable members of the leadership team as the company has grown over the past ten years, especially in their individual and collective contributions to our most recent corporate initiative to overhaul our entire platform,” said FlowPlay chief executive Derrick Morton.

GIQ Q1 REVIEW

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25 World regulatory briefing

Colombia The blueprint for LatAm iGaming regulation

From a small, emerging market, unnoticed by much of the sector, to the flag bearer of Latin American online betting regulation, Colombia has come a long way over the past 12 months. By Macarena Rodicio IT HAS BEEN less than a year since Colombia issued its first online gambling licence to Wplay.co, but already Coljuegos president Juan Pérez Hidalgo believes the number of licensees will grow to at least 20 in 2018. “The growing list of licensed operators not only consolidates our position as the first Latin American jurisdiction to regulate online gaming, but also reflects our commitment to promoting and strengthening a legal framework that contributes to the country’s economic development,” Pérez Hidalgo explains. With the 2018 FIFA World Cup in Russia just around the corner, Pérez Hidalgo is forecasting a hike of more than 20 per cent in online bets during the tournament. “It will undoubtedly have a positive impact on the industry, which will see an increase both in bets and player volumes,” he says. “Such a sporting event provides an exciting opportunity for authorised operators to expand their player base, and we expect new punters ranging between the ages of 18 and 30 to place their bets via the internet.” Through to the end of 2017, Colombia had six licensed iGaming operators, which generated COP5.4bn (€1.6m) in taxes. With the issuance of additional licences, that number rose to COP7.1bn in January of this year, enabling a COP6.5bn contribution to the country’s healthcare. This financed the provision of health services to over six thousand Colombians. Since iGaming regulation came into effect in 2017, online gambling turnover has amounted to COP112bn. Coljuegos expects online turnover to increase to COP270bn this year, enabling 24

it to collect COP12.9bn in exploitation rights. 2018, the regulator had confiscated 425 ille“By February 2018, there was a total of 442,998 gal slot machines that had avoided paying registered players across the different authorCOP1.2bn in taxes. On 13 March, Coljuegos shut ised betting sites,” Pérez Hidalgo comments, down two unlicensed sports betting sites based adding that 94 per cent of them are active. in the Colombian city of Cúcuta. Clearly this Via its ‘Jugar Legal es Apostarle a la Salud’ is an ongoing project. It should also be noted (a legal bet is a bet on healthcare) initiative, that enthusiasm for regulation in Colombia is Coljuegos is striving to furyet to spread into many other ther reinvigorate the indusLatin American markets. try, while combating illegal Brazilian iGaming legislation activity. “We want to make Since iGaming seems trapped in parliamentasure Colombians understand regulation came ry purgatory, while Argentina the importance of betting into effect in 2017, and Uruguay are actively takthrough our licensed websites, online gambling ing measures to reduce gamas this means greater resourcbling activity. turnover has es for our community and However, Peru looks set amounted to a safer environment for users,” to be the first to follow in the Pérez Hid a l go ex pl ai ns. COP112bn (€33m) footsteps of its neighbour. “Betting with an unlicensed Although online gambling operator contravenes this culture of legality.” and sports betting in Peru are not prohibited, The flourishing sector has been aided by the there is currently no legal framework. Peru’s elimination of value-added tax (VAT) on online gaming regulatory body Dirección General de gaming operations. This came into force in Juegos de Casino y Máquinas Tragamonedas January 2017. It has led directly to an increase (DGJCMT) will look to sign off this year on a in participation from both investors and play“modern, efficient and transparent proposal” ers, enabling a competitive online offering and to regulate online gambling and sports betting. channelling players towards legal sites. The legislation is currently at the final stage of Despite this, illegal operators remain a validation, ahead of its introduction before key concern. The illegal market in Colombia Congress. is currently estimated at around COP350bn. If Peru does succeed in introducing a workLast year, Coljuegos and the national police able framework, and Colombia’s online marconducted several raids in a number of departket continues to grow, it would be a surprise if ments, seizing 3,880 illegal gaming machines, other jurisdictions across Latin America did which should have been paying annual taxes not follow the example. And that is a prospect to the state of COP23.6bn. that operators and suppliers in search of new From January to the beginning of March opportunities will relish. n

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AMERICAS REGULATION

World regulatory update Gaming Intelligence outlines the latest legal developments in the US and Latin America Washington US Court of Appeals for the ninth circuit has set a potentially dangerous precedent for social casino operators, after ruling that Big Fish Casino’s free-to-play games constituted illegal gambling under state law. Class action lawsuits have also been filed against DoubleDown, Playtika, High 5 Games and Huuuge Games, though DoubleDown owner DoubleU Games has refuted the claims.

Kansas The Kansas House of Representatives’ Committee on Federal and State Affairs has filed a bill to legalise sports betting in the state. The bill would give the Kansas Lottery power to authorise sports betting at racetracks where betting on horse racing takes place, though there are currently no active pari-mutuel licences held in Kansas for horse or dog racing. HB2533 would require racetracks to reopen under new pari-mutuel licences before offering sports betting.

Kentucky Kentucky lawmakers are pushing to regulate sports betting should the US Supreme Court overturn PASPA. Representatives John Sims and Dean Schamore introduced HB536, which looks to have the state lottery operate sports betting. SB22, introduced by Senator Julian Carroll, proposes a $250,000 licensing fee for applicants and 20 per cent tax on amounts wagered.

Louisiana Louisiana Senator Daniel Martiny proposes giving voters the final decision on whether to legalise iGaming. Martiny’s SB322 would hold a referendum in each of the state’s 64 parishes on whether or not to permit internet gambling in that jurisdiction.

Maryland Six republican lawmakers have co-sponsored HB1346, a bill to authorise and implement sports wagering. The bill would authorise video lottery and horse racing licence holders to apply to the State Lottery and Gaming GIQ Q1 REVIEW

Control Commission for a sports gaming licence, subject to an initial licence fee of $300,000 and annual fee of $50,000. The bill would allow sports wagering at licensed video lottery and horse racing venues, but not via the telephone or internet.

Massachusetts Senator Eileen Donoghue has put forward a series of permanent regulations for daily fantasy sports, with temporary controls passed in 2016 set to sunset on 31 July. Under Donoghue’s guidelines operators will have to secure a licence from the state, paying a fee of up to USD$100,000, and a 15 per cent tax on gross revenue. The proposal uses language that leaves the door open for additional forms of online gaming, including sports betting, to be legalised.

Argentina Argentina has moved to limit gambling by stepping up efforts to prosecute those behind unlicensed gambling sites and shutting down the country’s national lottery. The owners of Miljugadas.com, licensed in Misiones, have been banned from leaving the country and face up to six years in prison. Other unlicensed operators, including Spingol.com, are also under investigation. Meanwhile, the Argentinean government has passed a decree dissolving the country’s National Lottery after deciding it is no longer viable for the state to operate the business. The Ministry of Social Development will appoint a liquidator to oversee the “dissolution and liquidation” of Lotería Nacional SE.

Brazil Missouri Missouri Representative Justin Alferman put forward a proposal allowing any of the state’s licensed gambling facilities to apply for a licence to conduct sports wagering. HB2406 imposes an initial licence application fee of $10,000 on both operators and suppliers, alongside a wagering tax of 6.25 per cent of adjusted gross receipts.

Hopes for new Brazilian gambling laws were dashed after the country’s Comisión de Constitución, Justicia y Ciudadanía (CCJ) parliamentary commission voted against Senate Bill 186/2014. The proposal aimed to legalise a range of new forms of gambling in the country, including iGaming. A rival proposal put forward by the Ministry of Tourism would legalise integrated land-based casino resorts, but leave online gaming prohibited.

New York Senator John Bonacic’s S3898, which would legalise online poker, has been reintroduced. The bill would allow for up to 11 online poker licences to be issued at a cost of $10m per licence, and also imposes a tax rate of 15 per cent of gross revenue. Bonacic has also introduced S7900 to legalise sports betting in New York’s four upstate resorts, imposing a tax of 8.5 per cent of gross wagering revenue on the casinos.

West Virginia West Virginia has adopted legislation to regulate sports betting should PASPA be repealed. SB415, or the West Virginia Sports Wagering Act, aims to legalise single event betting on professional and collegiate sports at the state’s five existing gaming facilities. Operators would be permitted to apply for five-year licences, paying a 10 per cent GGR tax.

Paraguay Paraguay’s gambling regulator Conajzar has put pen to paper on the deal that grants the country’s monopoly sports betting concession to Asuncion-based operator Daruma Sam. Daruma Sam will serve as the monopoly operator for a five-year term through its Apostala brand, and is expected to generate PYG$544bn (€78.8m) for the state over the licence period.

Uruguay Legislation banning unlicensed online gaming was signed into law by Uruguay president Tabaré Vázquez last September and came into force on 1 January this year. It also confirms that stateowned lottery operator La Banca de Quinielas is the only authorised provider of sports betting and online lottery games. 25

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WORLD REGULATION

World regulatory update Gaming Intelligence outlines the latest legal developments across the world

France, Portugal, Spain The French, Portuguese and Spanish regulators have all approved technical regulations to facilitate cross-border poker liquidity sharing. A number of operators including Betclic Everest Group, The Stars Group and Winamax have already secured approval to launch multi-country tables. Italy, which is also expected to join the agreement, is yet to set out the necessary regulations.

Austria Austrian Finance Minister Hartwig Löger has drafted a bill that would give the state power to block access to unlicensed iGaming sites and recoup unpaid taxes from their activities in the country. The Austrian Association for Betting and Gaming (ÖVWG) has criticised the plans. It claims that the move could endanger up to 1,000 jobs in the country, cut sports sponsorship and advertising revenue by €50m, and drive consumers to unregulated sites.

UK The UK authorities have continued a crackdown on compliance failings, with a number of high-profile licensees hit with hefty fines. William Hill faced the largest of the lot, with a £6.2m penalty for lax money laundering and consumer protection controls. Sky Betting & Gaming was fined £1m for deficiencies in its self-exclusion controls, and GVC Holdings’ ElectraWorks £350,000 for using misleading bonus terms and conditions. BGO Entertainment has been forced to change terms and conditions associated with its promotions to ensure its own compliance. The UK Gambling Commission (UKGC) and Competition and Markets Authority have pledged to continue this crackdown, warning that repeat offenders face losing their operating licences. The UKGC has also warned licensees to make major changes to their terms and conditions linked to bonus promotions to avoid enforcement action by the regulator. Operators will be required to be more up-front and clear in the conditions associated with bonuses to ensure they comply with UK consumer protection law (see page 29).

Russia The Russian Ministry of Finance has drafted legislation to simplify the player identification process for iGaming customers. It aims to remove a requirement for players to register in person after completing an online process. By doing so, the Ministry hopes to channel more customers to regulated gaming sites. 26

Sweden Sweden has notified the European Commission of its proposed regulations for responsible gambling, consumer data management and associated fees, as it moves towards opening its iGaming market. The country’s gambling regulator Lotteriinspektionen will begin accepting applications from prospective licensees from 1 August, with the market to open on 1 January 2019. Betting and gaming licences will cost SEK400,000 each, or SEK700,000 for both. The regulations are subject to a standstill period ending 2 July.

The Netherlands The Netherlands’ highest administrative court has ruled that the country’s gambling regulator Kansspelautoriteit (KSA) cannot penalise payment companies processing transactions for unlicensed gambling sites. The Council of State said that under the current gambling legislation, a payment processor could not be seen as facilitating illegal gambling. The KSA described the decision as a major setback in its efforts to tackle online gambling, which remains illegal until the new Gaming Act is passed.

Switzerland Switzerland is to hold a national referendum on its gambling legislation on 10 June. Lawmakers have proposed allowing casinos to offer roulette and poker online, with products taxed at 40 per cent of gross revenue

of up to CHF10m, rising by 0.5 per cent for every additional CHF1m of revenue. However a proposal to block access to unlicensed sites remains a contentious point between parties in the Swiss parliament.

Malta A bill to revamp Malta’s gambling regulations has been introduced in the country’s parliament. The new gaming act looks to replace the current multi-licence system with one offering two different types of licences – a Business-to-Consumer (B2C) licence and a Business-to-Business (B2B) licence – covering different types of activities across multiple distribution channels. In addition, B2B licensees will be exempted from gaming tax, which the government claims will increase Malta’s competitiveness as a hub for B2B activities. Compliance will be handled on an objectivebased approach, instead of the current prescriptive framework.

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WORLD REGULATION

Slovenia Slovenia’s National Council has vetoed a bill that would have allowed for regulated online sports betting. A proposal to create a licensing framework by MP Branko Zorman was approved by the country’s National Assembly in January. However, the Upper House scuppered the move with a vote of 18-12 against the proposal.

Hungary The European Court of Justice has concluded that Hungary’s online gaming legislation is discriminatory to businesses in other member states and incompatible with European Union law. The case was launched by an operator after it was hit with a HF3.5m fine by the Hungarian Tax Authority in 2016 for offering online games without a licence. It is the second case to rule that the country’s iGaming laws are illegal under EU law, and could derail plans to block payments to unlicensed operators. GIQ Q1 REVIEW

Belgium A Belgian court has overturned a law that imposed value-added tax (VAT) on online gambling in the country. The ruling by the Belgian Constitutional Court overturned a 2016 amendment introduced by the Belgian Finance Ministry, which ended a VAT exemption for gaming operators. Introduced on 1 August 2016, this amendment required licensees to pay an additional 21 per cent tax on Belgian operations. Gaming operators successfully argued that with lotteries still exempt from VAT, this distorted competition in the market.

Australia The Australian government has introduced new restrictions on gambling advertising. The controls, part of the Broadcast and Content Reform Package announced by the government last May, came into force on 30 March. The new rules are designed to prevent children from being exposed to gambling content

during live sports broadcasts, prohibiting promotions from five minutes before the scheduled start of play until five minutes after the conclusion of sporting events. This applies to all live sports broadcast between the hours of 5am and 8.30pm. Similar gambling advertising rules are proposed for online content service providers, with a bill currently pending before parliament. The government has also published draft legislation to ban private lottery betting and keno providers. The Interactive Gambling Amendment (Lottery Betting) Bill 2018 will amend the Interactive Gambling Act 2001 (IGA) to “prohibit betting on the outcome, or a contingency that may or may not happen in the course of the conduct of a lottery, including a keno draw”. The bill is expected to be introduced in parliament during the 2018 autumn session, which ends on 7 May. Should it pass, the prohibition of lottery betting products will come into force six months following Royal Assent to allow gambling operators and consumers to adjust their practices. 27

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BONUS RULES

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…about new UK bonus rules David Zeffman of CMS Cameron McKenna Nabarro Olswang explains how to stay on the right side of all the different bodies issuing new codes on bonuses and advertising THE UK COMMITTEES of Advertising Practice (CAP) recently announced new standards on advertising and bonuses. CAP’s new guidance on free bets and bonuses covers much of the same ground as previous guidance on the topic. Given that the advertising of free bets and bonuses is one of the most common areas in which operators fall foul of the advertising codes, the additional guidance is still welcome. There is one key area where the guidance has developed. It states what information must be included in adverts significantly limited by time or space. The CAP Code provides that “marketing communications that include a promotion and are significantly limited by time or space, must include as much information about significant conditions as practicable and must direct consumers clearly to an easily accessible alternative source where all the significant conditions of the promotion are prominently stated.” This has generally been construed to mean that, if an advert is significantly limited by time or space, as many significant conditions as possible must be stated in the advert itself. By implication, this means that some significant conditions might not appear in the ad itself, as long as they are easily accessible and as many have been included as practicable. In its new guidance, however, CAP explains that “if a term or condition alters a consumer’s understanding of the offer and is deemed significant, it should be stated within the ad itself ”. CAP essentially distinguishes between a “significant condition” and a “significant condition that alters a consumer’s understanding of the offer”. In respect of the latter, CAP has made its position clear that it expects all adverts, irrespective of whether they are limited by time or space or not, to include such terms in the ad itself.

What is The UK Committees of Advertising Practice and how does it relate to the Gambling Commission? And how do the new standards relate to the Commission’s licensing conditions? The CAP is responsible for writing the UK’s advertising codes. For broadcast advertising (TV and radio) we have the UK Code of Broadcast Advertising (BCAP Code) and for non-broadcast advertising, the UK Code of Non-broadcast Advertising and Direct and Promotional Marketing (CAP Code). The Advertising Standards Authority (ASA) polices compliance with these codes. CAP also produces guidance from time to time, which builds on and explains their interpretation of the CAP Code and BCAP Code. All UK Gambling Commission (UKGC) licensees are required to comply with the CAP Code and BCAP Code by ordinary code provision 5.1.6 of the Commission’s Licence Conditions and Codes of Practice (LCCP). They are also required to “have regard to” the guidance that CAP produces from time to time, which would include its new guidance on free bets and bonuses.

Would the Industry Group for Responsible Gambling’s new code for advertising comply with these standards? The IGRG’s Gambling Industry Code for Socially Responsible Advertising sets out rules in addition to those set out in the CAP and BCAP Codes. Again, licensees are required to follow the code under ordinary code provision 5.1.6 of the LCCP.

There is a degree of co-operation between all of these bodies, and UKGC licensees have to comply with the guidelines of all of them

Are CMA, CAP, ASA, UKGC and IGRG working together? Do I need to follow all guidelines? Are there other bodies I need to be aware of? There is a degree of co-operation between all of these bodies – in some cases more than others (for example the recent crackdown on adverts appealing to children) – and UKGC licensees have to comply with the guidelines of all of them.

Isn’t there a Competitions and Markets Authority (CMA) investigation being conducted into promotions? There is. The CMA has been investigating a range of potential consumer law breaches in the remote gambling industry, particularly focusing on promotions. The investigation has led to four operators – William Hill, PT Entertainment, Ladbrokes and BGO – entering into undertakings with the CMA, which prohibit them from taking certain actions. The Gambling Commission has also publicly stated that it expects all licensees to conduct their business in accordance with the published undertakings. This will likely result in big changes to the way promotions are run across the remote sector as a whole.

Do affiliates have to comply with these standards? Am I, as an operator, responsible for my affiliates’ advertising? Affiliates still need to comply with the CAP Code, BCAP Code and guidance produced by CAP. Affiliates can be found to be in breach of the codes by the ASA in their own right, but the ASA would also hold the party whose services are being advertised as responsible for noncompliance. The UKGC has no jurisdiction over affiliates and therefore holds the operator solely responsible for the actions of its affiliates. n

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And the 2018 winners were... Winners of the 2018 GIAs and Hot 50 celebrated their triumphs at a special event in London this February. We would like to once again congratulate our winners

Beehive takes home the Marketing Solutions Provider gong

The Stars Group’s Jerry Bowskill, Bo Wänghammar, Asaf Noifeld and Luigi Marciano accept the Poker, Casino and Operator Innovation trophies

Sportradar sales director Lorenzo Caci’s efforts are recognised with inclusion in the 2018 Hot 50 32

VideoSlots’ Ulle Skottling, Lorraine Sammut and CEO Alexander Stevendahl with the One to Watch Operator Award

Scientific Games’ Jim Kennedy receives the Lottery Supplier and Supplier Innovation prizes

Sky Bet trading director Andy Wright receives the Sports Betting Operator of the Year Award

Scientific Games’ Cole Rush receives the Social Casino Supplier Award from GIQ editor Robin Harrison

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Red Tiger Gaming’s Luisa Allegro, Carl Ejlertsson and Julie Allison with the One to Watch Supplier trophy

Hot 50 winner, Superbet’s James Curwen

Stride Gaming head of strategy and M&A Elliott Berg with the Bingo Operator Award

BetGenius’ Mikael Westerling, Moritz Maurer, Tom Washington and Jonny Clegg celebrate winning eSports Supplier of the Year

Gaming Intelligence’s Bobby Mamudi hands The Stars Group CTO Jerry Bowskill his Hot 50 certificate 34

LeoVegas chief commercial officer Rikard Ljungman with the Marketing Campaign of the Year prize

Inspired VP of interactive Lucy Buckley was ranked in this year’s Hot 50

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Lottoland CEO Nigel Birrell’s efforts to grow his business, and a new gaming vertical, were recognised with a place in the Hot 50

Since-departed NetEnt CEO Per Eriksson celebrates winning Casino Supplier of the Year, with Henrik Fagerlund and Sandra Karlsson

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Gaming Intelligence editor-in-chief Bobby Mamudi hands Playtech’s Eran Gilboa and Eyal Narkiss the Game and Bingo Supplier prizes

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Working out a worldclass marketing mix C O LU M N MARKETING

Caroline Parry

Changing customer behaviour will force a shift in how operators promote their brands around this summer’s FIFA World Cup

WHEN IT COMES to customer acquisition, the FIFA World Cup creates a feeding frenzy every four years. The 2018 edition, taking place in Russia, is set to be no different. Betting and gaming operators are gearing up to launch major marketing assaults aimed at pulling in new bettors and re-engaging lapsed customers. In tournaments gone by, this was achieved via significant investment in offer-led TV advertising. The build-up would begin as the European football season came to an end during the lead-up to the World Cup, then would continue throughout the competition. Viewers can indeed expect a similar TV assault for Russia 2018. “TV still has a place in the marketing mix, especially when you’re dealing with a major sporting event,” says BetVictor head of brand Shane Stafford. “It remains the strongest medium for awareness. As a purely digital company, we don’t have a high street presence like a lot of our competition, so TV is an alternative avenue to increase awareness and acquisition. Unless an outright ban happens, TV will always have a place in marketing.” However, this may be the final tournament dominated by TV. Customer habits are shifting, and operators will need to reorganise where they spend their money. Betting and gaming operators are investing increasing percentages of marketing budgets in digital channels, such as video

content and mobile, which allow for a datadriven approach to acquisition. James Gregson, former digital marketing manager at Betfred, now managing director of digital performance agency WeDisrupt, says that in the past operators have used TV advertising as a direct response tool. “In previous tournaments, operators have taken a broad-brush approach,” he explains. “Advertising has been very much offer-driven. Campaigns have been bought according to networks, designed to appeal to a mass audience.” Not only have the past two years seen a shift in how budget is invested, based on the industry’s understanding of the vast amount of data generated by customers playing via

“Operators are now investing in video, social media and on-demand channels to drive engagement further up the funnel” James Gregson, WeDisrupt mobile devices, and also on digital marketing. A granular approach is becoming the norm. Gregson adds: “We have been in a learning phase in the industry over the past two years. Operators are now investing in video, social media and on-demand channels to drive engagement further up the funnel.” While the 2010 FIFA World Cup in South Africa was considered to be the first social media World Cup, for many operators it was during the 2014 tournament in Brazil that mobile really began to make an impact on results.

MARKETING FIFA WORLD CUP

“Online behaviour is trending towards shorter ‘snacking’ sessions, where the customers’ expectations are towards a faster check-out” Manuel Stan, Kindred

Left to right: Simon Smith, Perform Group; James Dickens, Goal.com; James Gregson, WeDisrupt

In its 2014 annual report, Ladbrokes labelled it the “first mobile World Cup” after seeing a 1,100 per cent increase in mobile stakes, while Unibet (now Kindred Group) reported that during the World Cup, 52 per cent of related revenue in its sportsbook business came from mobile devices. William Hill reported a record World Cup, with operating profits up 11 per cent, partly attributed to the growth of mobile revenue. By the time the UEFA Euro 2016 tournament in France kicked off, mobile and digital channels were making an impact on marketing spend. BetVictor’s Stafford says the brand saw “very positive results” around video-ondemand highlights from the previous night’s action during the event. He adds: “In terms of value offers, you can be very targeted and reactive, especially around the content people consume. This will be even more interesting at this year’s World Cup, with the introduction of video assistant referees. This will provoke social conversation.” According to Manuel Stan, central brand marketing director at Kindred, there is now a clear shift towards digital channels during big sporting events. He adds: “In 2014, we saw above-the-line channels [TV, radio, print] take a higher share during the second quarter [pre and during the World Cup]. By 2016, the above-the-line share remained flat, with some channels, such as radio, losing a small share to TV.

In 2018, the trend towards digital will continue, with Q2 seeing a higher relative spend on digital channels.” This will be combined with a closer alignment between abovethe-line and below-the-line campaigns, says Stan. “This will be both in terms of messages and timing,” he adds. “Even if channels have a different place in the conversion funnel, the message is much more consistent, with small adaptations for each channel.” While targeting and re-marketing c ap abi l it ie s have sig ni ficantly improved since 2016, there are still limitations in some countries and on some channels, adds Stan. “While this World Cup will be the most ‘digital’ football event yet, it will still see a rather even marketing mix.” The rise of digital has changed much about the industry, but one battlefront remains exactly the same – retention. The enhanced offers and bonuses used to acquire customers during the World Cup increases churn by an average 30 per cent, according to Motti Colman, new business

MARKETING FIFA WORLD CUP

director at marketing software developer Optimove. “Customers acquired during the World Cup are a high churn risk. Operators must try to separate the different types of behaviour these customers demonstrate, then look at different approaches based on that behaviour,” explains Colman. “That will increase retention dramatically.” For that reason, says Stan, the only way a brand can stand out now is by offering the best customer experience. He adds: “The simple fact is that it is substantially more expensive to acquire a new customer than retain an existing customer, hence our strategy has always been to focus on providing a good experience to all customers.” One of the most effective way for operators to retain customers is by getting them to download their app, says Michael Fenlon, head of affiliate site WeCompareCasinos.com. “There are two main reasons for this,” he continues. “The first being the use of push notifications that allow the operator to promote enhanced odds or bonuses at any time. The second being that when using that app, there is no competition or distraction.” This is where content plays a significant role, too, says WeDisrupt’s Gregson. “Brands need to observe how customers engage with their existing communications and content. This should help them create a solid and strategic approach that will engage customers on an emotional level.” While BetVictor is remaining tightlipped on the details of its World Cup campaign, Stafford says the brand is launching BetVictorDNA, a content campaign for the run up to Russia 2018. He explains: “With several notable countries absent from this year’s tournament, we thought we’d reconnect

people to their heritage using an Ancestry DNA kit. It will then give them a team to support that is literally in their blood. It should offer an interesting and alternative talking point.” This value exchange, where customers receive a more interactive marketing experience in return for their custom, is another key weapon in the battle for retention, says Rachel Swann, commercial director at engagement agency 3radical, which works with Foxy Bingo. “Customers do not always need a financial incentive to engage with a brand,” she explains. “For example, a game on site where some of the content is free or playing wins something within the game. People will engage for fun, and it offers brands additional opportunities to speak to customers and maintain loyalty.” James Dickens, editor-in-chief of dedicated football news site Goal.com, believes Russia will offer some unique content opportunities. Fewer fans are expected to travel, while those that do will find data roaming charges inhibitive when it comes to posting on social media. He adds: “I think this will be a travelogue World Cup. There will be more behind-thescenes footage, almost like stepping back a few years, to bring the atmosphere to the fans.” Meanwhile, according to Duncan Alexander, vice president data, editorial, analytics and innovation at sports data provider Opta Sports, younger fans do not just support a team now, they follow specific players and are increasingly seeking to place bets on their performance. Simon Smith, head of marketing and commercial at Perform Group, parent group of Opta and Goal.com, adds: “These types of player bets are becoming incredibly popular, and a quick look at Twitter reveals the extent to which bettors are engaging with bookmakers to build their own bets around their favourites.” It is a trend also highlighted by BetVictor’s Stafford, who points to its PriceItUp product, which allows customers to create their own markets. Kindred’s Stan adds: “When it comes to onsite behaviour, players are looking for personalised, relevant and efficient experiences. Online behaviour is trending towards shorter ‘snacking’ sessions, where the customers’ expectations are towards a faster check-out.” With a clampdown on advertising in the UK around free bets, and offering bets during live events (including a ban on using ‘bet now’ in marketing), the rules of the game are changing for customer acquisition. Customer experience powered by data should be the starting point for all brands, and those that do not respond to the changing landscape will lag behind. n 41

F E AT U R E MATCH-FIXING

A question of

integrity Match-fixing looms large over the sports betting industry, and solutions to tackle betting-related corruption are more important than ever. A small but growing industry of service providers has emerged to take on the fixers MATCH-FIXING IS INSIDER trading for sports. Unlike financial insider trading it is not covered by stringent regulations and the threat of criminal penalties. In a surprisingly large number of countries, including the UK, it is not a criminal offence. An attempt by the Council of Europe to enforce a standardised approach to tackle match-fixing is approaching its fourth birthday, but still no closer to coming into force. Sportradar managing director of integrity services Andreas Krannich says: “If there was evidence of insider trading on a Monday, by Tuesday there would be a public warning, and by midday Wednesday you would see a huge impact on the share prices and a police investigation. This should be the same for match-fixing.” The lack of legal consequences does not make match-fixing less of a hot-button issue. Bookies run the risk of having to pay out huge wins from bets on manipulated events. Should a sport’s governing body find that an event it organises has been targeted, it may refuse to license data gathered on their competitions for gambling purposes. These issues are played out against a backdrop of increased political interest. Antibetting activists claim that sports betting puts sports at risk. The argument is that if bookies are encouraging fans to have a financial interest in a result going in their favour, they are increasing the likelihood of match-fixing. Sports governing bodies moved to address this with demand for so-called integrity fees. Similar to the levy on UK horse racing, this 42

is designed to ensure a percentage of profit or turnover generated by betting on a sport is reinvested to ensure it is protected from corruption. In the US this is expected to be a key topic as sports betting legislation is developed in a number of states (see page 49). “Ten years ago, you didn’t hear much about match-fixing,” ESSA secretary general Khalid Ali says. “As online gambling has risen to prominence, a number of sports being uncomfortable about operators taking bets on their games have used the integrity argument to say that they deserve funding from the operators.” By sharing data with third-party providers for betting purposes, the sports put themselves at risk of reputational damage. Yet it is also hard to see why the progress of legislation to protect players and sporting integrity should be held up in order to strike commercial agreements.

Marriage of convenience The relationship between bookmakers and sports is not always the happiest. “[Many] sports are suspicious of developing close relationships with betting companies,” Genius Sports integrity operations director Ben Paterson says. Asian Football Confederation integrity officer Ahmed Alosaymi suggests that it is a marriage of convenience above all else: “Bookmakers, on one hand, offer betting markets on matches we are seeking to protect,” he says. “However, since betting is a reality, they also hold the key in providing information to assist stakeholders and law enforcement when investigating match-fixing.”

These factors have prompted the rise of integrity solutions providers. Companies such as Genius Sports and Sportradar, the marketleader, have become as visible for the services they provide to protect sports as their data rights and trading products. The integrity solutions providers are a recent phenomenon. The sector was jolted into existence by the so-called ‘Hoyzer Affäre’ in 2005. A German referee, Robert Hoyzer, was revealed to have fixed a number of matches in the country’s second- and third-tier football leagues. Hoyzer, and his co-conspirators, were then able to make significant profits betting on the matches. Sportradar, which had been monitoring odds movements since 2004, started developing services to help tackle match-fixing by identifying unusual betting patterns, as well as developing educational systems to inform relevant parties of its dangers. One of the men working for the German Football Association at the time, Andreas Krannich, now runs this division. Some may be surprised that this cottage industry has developed, but sports-governing bodies do not have the money or resources needed for in-house solutions. “The problem is that it is very costly to start gathering the level of data required [for an effective integrity monitoring system],” Paterson says. “There is only a handful of companies that could effectively run a monitoring system, as to start from scratch would incur significant costs and major resources.” Alosaymi adds: “Taking into consideration the complexity of the betting industry and odds

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F E AT U R E MATCH-FIXING

Robert Hoyzer at his court hearing

movement, monitoring the betting market, which includes more than 500 betting operators, to identify suspicious betting patterns requires both a well-maintained database of historical odds and specialised betting analysts to investigate irregular betting patterns. “While implementing these two elements obviously entails a lot of investment, time and effort, and while resources of sporting bodies are limited, it would not be conceivable for us to do it in-house,” he says. Even world football governing body FIFA – which turned a profit of USD$2.6bn in 2014 thanks to that year’s World Cup – scrapped its own Early Warning System (EWS) in favour of Sportradar’s Fraud Detection System (FDS). “When FIFA president Gianni Infantino was elected, he was already aware of our capabilities, as he had launched the integrity solution for UEFA when he was their secretary general,” Krannich says. “We were delighted when he recommended us to FIFA and now we are honoured to be supporting them on monitoring football worldwide”. This has sparked an arms race in a rarified space. The tools, resources, expertise and connections required are far beyond that of a sports governing body. Therefore the data rights holders are in positions of power.

How it works Sportradar, Perform and Genius Sports’ solutions start by monitoring the movement of odds across a range of bookmakers. In Sportradar’s case, this sees it monitor more than 550 bookmakers, from listed, regulated operators to 44

Asian black-market businesses, assessing more than five billion price changes a day. Genius Sports, meanwhile, has its integrity team working alongside its traders to assess unusual odds movement or customer activity, with alerts triggered when the expected odds, determined by mathematical algorithms, deviate from the market odds. “If there are significant deviations, something has either happened on the field, or huge amounts are being wagered on an outcome forcing the bookie to change their prices,” Paterson says. “We need to then try and find a legitimate

explanation for the change in odds. We try to exhaust all mitigating factors for an event before we start to investigate it as suspicious. If we think something is suspicious we’ll call the sporting body to notify them immediately, and provide them with a detailed report within 48 hours.” Perform also monitors odds, using a solution developed by TX Odds, as well as using a data intelligence monitoring system. ESSA operates an alerts platform, which allows companies to flag suspicious activity to its other members and launch an investigation. However, not all are convinced by this as an initial approach. Sporting Solutions chief executive Simon Trim, an experienced trader with stints at William Hill and Ladbrokes on his CV, is particularly dubious. He argues that due to operators outsourcing trading services, odds are based on an average of those offered across the industry, rather than individual trading expertise. This means that odds changes are not necessarily indicative of wrongdoing. “You cannot have meaningful customer care and integrity solutions in place unless you can see the actual behaviour of the consumer through their activity – through the bets they place,” Trim explains. “Monitoring for ‘market moves’ is a very poor basis for an integrity solution in an industry that increasingly relies on copying and scraping the competition.” Perform head of integrity Jake Marsh agrees: “Analytics and the monitoring of betting markets can be a very useful effective trigger for investigations, but they are not proof of criminal activity. “Betting market monitoring analytics revolve around whether the observed market activity can be explained by known factors,” he says. “Where market activity cannot be explained, concerns over a match should be escalated, but this is a long way from proof of match-fixing or criminal activity. Analytics alone only tell a certain amount.”

Bridging the gap

“Prohibition never works. If there is interest in an event, we always ensure that the governing bodies have safe data that is collected properly” Andreas Krannich, Sportradar

Therefore the investigative element is key, Krannich says. For every 100 alerts generated by unusual odds or turnover movement on Sportradar’s systems, Krannich believes that up to 98 will be found to have a perfectly reasonable explanation. “We have been investigating suspicious matches since 2004, but originally we only created reports for use in disciplinary cases,” he says. “Our partners, however, needed more information to prove offences.”

Visit www.sgdigital.com

F E AT U R E MATCH-FIXING

T h i s le d t o t he e st abl i sh ment of by-case basis. “There are sports that are even Sportradar’s intelligence and investigation covered at an amateur level, and as we are unit, staffed by experts in counter-terrorservice providers to the media as well as the ism, financial crime, law enforcement and bookmaking industry, we are required to colinvestigative journalism. This is supported lect accurate data,” he says. by a team of developers using Sportradar says that as a technolog y employed by rule it does not collect data on military and law enforceyouth competitions, but will ment to apprehend criminals make exceptions if those events and terrorists. are televised, such as FIFA’s Further efforts to refine Under-17 World Cup. Genius the investigative services are Sports and Perform say they being made through Sportramaintain similar policies. dar’s Managed Trading Ser“The problem for me is that vices (MTS), a risk managewe always have to find the right ment product that monitors trade-off,” Krannich says. bets as they are placed in real“Prohibition never works. If time. This ticket data can be there is interest in such an used as an intelligence source. event, we always ensure that Having this anonymised the governing bodies have account data means Sporsafe data that is collected tradar can see stake properly.” level transactions for over “For example, Tipico decid100 bookmakers. ed not to offer odds on [German These systems are certainfifth-tier] Oberliga matches,” he ly impressive – and not cheap. continues. “It was a strong sign Those with the data rights of its integrity, but all other agreements, operator relationparticipants were extremely ships and trading solutions are grateful as they could then snap just about the only companies up Tipico’s customers.” that can offer effective integMarsh points out that a rity solutions. These integrity commercial partnership is by solutions would not be viable its nature a long-term commitwithout the money generated ment for both companies: “The from the commercial arms of role of the service provider the business. should not simply be to provide The integrity divisions a service and then walk away. cannot hope for any more than “There is also a capacto break even. In ESSA’s case ity building and support role it is funded by its members, that can enable sport governwhich also supply the data ing bodies to better manage allowing it to monitor unusual the integrity risks of their betting activity. Sportradar, From top: Ben Paterson, sports,” he says. “This does Genius Sports; Khalid Ali, ESSA; Genius Sports and Perform Jake Marsh, Perform not just involve monitoring but do not have this luxury. Comalso advice and support on mercial considerations must education, investigations be taken into account. and regulation.” Paterson argues that rather than using For Sportradar, this educational element is integrity services to push through deals, it is important. “We work with sports federations, out of a duty of care to the sport. He points out leagues and clubs, and provide them with eduthat some lower-level competitions offer top cational programmes,” Krannich says. “Why? prizes of £1,000 for competitors, making them Prevention is always better than cure. potential targets for fixers. To ensure this “When we talk about match-fixing, does not occur, Genius Sports will insist that the focus is usually on tennis, football and at least an information-sharing agreement is cricket, but so many more sports are affected put in place alongside any data collection deal and have already taken steps to tackle it. If you to ensure unusual activity is flagged. are speaking to players and officials, you need Krannich admits that each potential to frame things in their context. That is why we partnership has to be considered on a casealways provide tailored solutions.” 46

Controlling commercial urges Without the threat of criminal prosecution, the governing body of the sport affected is responsible for punishing those involved. These bodies may not necessarily act in the most ethical manner. In football, questions have been raised over the effectiveness of football bodies’ ability to limit the spending of clubs with billionaire owners – with the term “financial doping” coming to the fore. Leagues may be wary about their top competitions becoming a parade of the same teams winning every year. It may be dull for fans to see the same sides winning each year. But it also generates international interest, new sponsorship opportunities and gives a reason to raise ticket prices. Cycling appears to have fallen victim to its commercial urges. Doping looms large. Taking performance-enhancing drugs equates to match-fixing. The sport’s world governing body, Union Cycliste Internationale (UCI) repeatedly overlooked doping by once-legendary cyclist Lance Armstrong. In a damning 2015 report, this was blamed on Armstrong benefiting from a “preferential status” afforded to him by the UCI leadership. One source cited says: “The UCI chose business to be the priority for the sport. The primary concern was the commercial and international development of cycling […] and the UCI closed its eyes to the rest.” The Armstrong revelations have not deterred other cycling teams from using performance-enhancing drugs. David Brailsford, general manager of the UK’s Team Sky was accused of using medical loopholes to provide its athletes with such drugs in a report earlier this year. We are not trying to suggest that sports governing bodies are untrustworthy. But there is evidence of commercial interests taking precedence over ethics. This highlights the need for clear legal definitions and punishments. Krannich suggests that law enforcement capabilities are “not quite there”, with many jurisdictions yet to criminalise match-fixing. “Match-fixing needs to be criminalised,” Paterson says. “Similar to Australia, for example. Clear criminal penalties for matchf i x i n g wer e first introduced in Victoria and have since been rolled out nationally. “By having these

F E AT U R E MATCH-FIXING

clear criminal penalties, law enforcement can get warrants to track financial records, gather mobile phone data, and the sort of evidence that can lead to a prosecution.” Until laws are passed there are limits to what the integrity solutions providers can do. Paterson says it is not the integrity companies’ duty to conclusively state that an event has been manipulated – that must be left to the sports bodies and, ideally, law enforcement. “It’s not our job to stop a pay-out or say an event has been manipulated. We do it up to a point, then pass it on to the sports governing bodies and support their investigations.” This restricts the penalties to sporting sanctions, such as lifetime bans. This requires a much lower burden of proof than criminal sanctions, but does not tackle match-fixing at the source. “Any organised match-fixing conspiracy may involve fraud, bribery, money laundering, rule

breaches across multiple sports, and multijurisdictional account activity and money transfers,” Marsh says. Sportradar is looking to go a step further by working with state authorities in a number of countries. “I’m particularly proud of this, as law enforcement rarely trusts private companies. We work with Interpol and Europol for example,” Krannich says. “While legal provisions can be inconsistent and patchy, Sportradar is doing its utmost to fill the gaps.” But what if sporting sanctions have no effect? Some culprits may not be deterred by the threat of punishment. Albanian football club Klubi Futbollistik Skënderbeu Korçë served a year-long suspension for betting-related match-fixing over the 2016-17 season. It is once again under investigation, with a leaked report from UEFA suggesting that it has been involved in match-fixing “on an industrial scale”, and recommending a 10-year ban.

Flawed solutions The Council of Europe has not been idle. In 2014, it looked to criminalise match-fixing with the European Convention on Manipul at ion of S p or t s Competition (Macolin Convention). This calls on governments to adopt measu res to prevent conflicts of interest between sports betting operators and sporting organisations. It also looks to encourage regulators to fight against sporting fraud, limiting the supply of betting markets where necessary, and restricting access and blocking transactions to and from illegal betting sites. Malta was quick to speak out against the convention, arguing that its definition of sports betting overreached the goals of the treaty. It attacked the wording it felt would put operators licensed by its regulatory body at risk of prosecution by other EU member states. Almost

Performance-enhancing drugs: Lance Armstrong

four years since it was published, it has only been ratified by three countries – Portugal, Norway and Ukraine. It must be ratified by at least five to come into force. This puts the onus back on the service providers. For things to continue to progress, Marsh argues that cooperation will be key. Perform has recently partnered Genius Sports to work alongside Football DataCo, the official data rights holder for all professional football leagues in England and Scotland, to jointly monitor betting activity across 14 leagues. “The principal attitude to integrity in sport should be one of responsible partnership and co-operation, a philosophy that we at Perform are trying to lead,” Marsh continues. “No single organisation is therefore in a position to prevent, detect and investigate this alone. Collaboration is the only solution.” This sentiment is admirable, but it does not feel as if it is shared by Perform’s peers. Marsh argues that this competitive nature is a byproduct of a relatively young sector, in which a small number of companies are jostling for market share. “Competition within this space should also be used to drive innovation and development, which can benefit the fight against corruption and unethical practices, but we must ensure competition is not at the expense of the industry’s efforts on integrity,” Marsh adds. “This requires areas of sports business that have traditionally operated on a solely exclusive basis, to consider their role as a responsible partner that is prepared to support sport.” This is far from simple. The companies capable of providing integrity services do so while competing for rights deals, data partnerships and clients, meaning they are not natural bedfellows. The fact that such fierce rivals are so willing to work together where necessary is admirable. It is a big ask for these companies to set aside differences and collaborate when they are fighting on other fronts. That doesn’t mean they can be accused of favouring commercial concerns over ethical – without their commercial divisions they could not provide integrity solutions. And these companies should not be viewed as the last guardians of sporting integrity, but rather the first responders in the fight against fixers. The sports governing bodies are those with the most to lose as a result of the slow progress of anti-match-fixing legislation. They are also the ones with the most to contribute. Until governments face concerted pressure to fight the fixers there is little chance of match-fixing disappearing from view, despite the betting industry’s best efforts. n 47

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The price of integrity If the Supreme Court overthrows sports betting prohibition, can the US improve the relationship between sports integrity and sports betting? By Steve Hoare THE FEDERAL LAW that prohibits sports betting in all US states except Nevada, Oregon, Montana and Delaware is under threat. The Supreme Court will decide in the coming months – possibly by the time you read this article – whether the Professional Amateur Sports Protection Act of 1992 (PASPA) is constitutional. The Supreme Court only hears 100-150 of the 7,000 cases that it is asked to review each year. The fact that it is prepared to listen to New Jersey’s case against the sports leagues, has been taken as a sign that it is likely to repeal PASPA. Lawyers believe that the opening arguments support this view. Legislators have been acting quickly. New York, Pennsylvania, New Jersey, Mississippi, Connecticut and West Virginia have passed, or are close to passing, laws that will enable them to open sports betting markets, and 11 other states are preparing legislation. More than 46 bills relating to sports betting have been prepared by lawmakers. However, if PASPA is repealed, the protection of amateur and professional sports will not die as an issue, it will only become more intense. The buzzword will be integrity, and the first battles will be fought over integrity fees, data rights and a “fair return to sport”.

The price of fair play “One of the biggest challenges will be the integrity of the game,” Pennsylvania Gaming Control Board head of licensing Susan Hensel told the audience at February’s ICE Totally Gaming conference in London. New Jersey Department of Gaming Enforcement director David Rebuck agreed: “We cannot have failure. We cannot have an integrity breakdown. We cannot have a scandal. The justice department is looking at us to fail.” While the regulators concern themselves with avoiding match-fixing scandals, the sports leagues’ biggest concern seems to be monetising integrity. GIQ Q1 REVIEW

At the end of January, the National Basketball Association (NBA), with support from Major League Baseball, fired the starting pistol on negotiating the price of integrity. The NBA has been the most outspoken supporter of a regulated market among the US sports leagues, but it made no friends in the industry when it outlined a one per cent integrity fee on all bets placed. The American Gaming Association (AGA) immediately wheeled out law enforcement officers, competition experts and consumer protection advocates, who panned the NBA’s proposal. “The leagues are doing what they can to make sure there is a commercial element to sports betting, and that they are a part of it,” says Sara Slane, the senior vice president of public affairs at the AGA. Slane points out that a one per cent tax on turnover equates to 20 to 25 per cent off the bottom line. She argues – and anyone working in the industry would agree – that it would make regulated operators uncompetitive and allow the black market to remain attractive. “The concept of an integrity fee has only been adopted in two countries: Australia and France,” continues Slane. “They both have a thriving black market. In Australia it’s around 25 per cent, while in France the situation is so bad that the gaming regulator has said we need to lower the tax rate. Why would we want to copy that?”

Untangling the arguments The relationship between sports and betting has a complex political and legal history. “We have done a lot of fighting, and that is not the answer. An adversarial relationship is not a positive one; it needs to be a collaborative relationship,” says Adrian Ford, general manager of Football DataCo. Ford has more experience of that relationship than most people. Football DataCo is the UK-based company that determines how British soccer leagues best exploit their data rights. The AGA and other betting industry advocates like to point to the UK as a model market, where no integrity rights exist and no black market exists. The two must be linked, right? Not quite, according to Ford. “The UK has grown through osmosis and probably has never really had to worry about a black market – at least not since the 1960s. The US is starting with a huge illegal market and needs to neuter it,” says Ford. In the UK there is no framework to govern the relationship between sports and betting. Football DataCo tries to use data rights as the tool to do it. The company used to generate revenue from bookmakers by selling them

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the rights to reproduce the fixture list. This was shot down by the European Court of Justice, which stated there is no IP protection for fixtures. Following that was the Stan James and Sportradar case against Football DataCo, which established a database right for live data. The outcome allowed Football DataCo to insist that bookmakers’ buy a licence to use the data from their third-party provider Perform Group. “It is quite cumbersome,” says Ford. “Operators don’t particularly like me knocking on the door and saying they need a licence. There is an IP right, which has been hard fought in the courts, but nobody likes it. It is not a desirable system.”

Searching for compromise So what is a desirable system? Ford believes there should be some sort of regulatory framework that provides a fair return to sports for betting on their events. The concept of a “fair return to sports” has an equally tortured history. Way back in 2010, when European states were discussing the now-aborted harmonisation of online gambling laws, one of the European online gambling industry’s most respected lobbyists, Clive Hawkswood of the Remote Gaming Association, outlined the industry’s case. “Many in the sporting world are seeking to use the issue of integrity to persuade legislators to introduce statutory mechanisms to increase the levels of funding from the betting industry. This is often dressed up as the concept of a ‘fair return’ but, as a report by Europe Economics in 2009 highlighted, the gambling industry already provides €3.4bn per annum to EU sport,” said Hawkswood. For Europe 2010, read US 2018. Ford accepts this is a process that needs careful negotiation. The gambling industry is highly taxed and it does provide money through sponsorship – another mutually beneficial arrangement. However, data is everything in modern business and, as such, it has a value. The general consensus, on both sides of the fence, is that the Association of Tennis Professionals (the ATP, which runs the men’s tennis tour) has the most effective system of exploiting its data rights. Tennis umpires generate live game data from their chairs by pressing a button that operates the in-stadium scoreboard and simultaneously provides a data feed that cannot be beaten for timing. The ATP has sold the rights to that data to IMG, which sells it on to betting operators as a live in-play data feed. 50

Nobody sitting courtside – and certainly nobody watching on television – can compete with the umpire for speed. The data has an inherent value to operators, which they are willing to pay for. It is not based on an intellectual property right, which is legally questionable in the US. Disputes over proprietary data and game-related rights have been litigated in the US for decades, and have sometimes resulted in conflicting decisions. The National Football League (NFL) is perhaps best-placed to be able to reproduce such a model. The NFL’s Game Statistic and Information System (GSIS) and its proprietary Next Gen Stats system generate real-time scores, player statistics and play-by-play data straight from the pitch. In 2015, the NFL signed a four-year contract with UK supplier Sportradar to distribute this data. Sportradar went on to sell the data to daily fantasy sports operators and others. If sports betting is legitimised, that contract becomes a lot more valuable when it expires in 2019. Companies such as Sportradar, Perform and Genius Sports sit at the centre of this debate. Genius Sports chief communications officer Chris Dougan believes data rights hold the key to bridging the divide between sports and industry. “If there is one source of truth, where every in-play moment is fast and accurate, it provides the leagues with a currency that gives them a revenue from the data that is used in the sports betting market,” says Dougan.

“Many in the sporting world are seeking to use the issue of integrity to persuade legislators to introduce statutory mechanisms to increase the levels of funding from the betting industry” Clive Hawkswood, RGA

The immediate battle So there are models that US sports could look to replicate to generate an income from sports betting. But for now, the arguments continue to rage over the integrity fee. Pennsylvania and New Jersey passed their sports betting legislation before the leagues started banging the drum for an integrity fee. The leagues lobbied hard for an integrity fee to be included in West Virginia’s sports betting law and failed. However, they succeeded in having a 0.25 per cent integrity fee included in legislation proposed in their home state of New York. “The leagues are not going to get it from the states,” argues Sport Analytics & Data chief executive officer Joe Brennan, who was working with New Jersey on the original sports betting litigation back in 2009. Brennan says that the prevailing view among politicians is that the leagues are fundamentally representatives of rich team owners, who already receive plenty of public money to help them build stadiums and are in no need of more tax breaks. It will be difficult for the leagues to convince the legislators that these owners are more deserving of public money than schools, hospitals or transport infrastructure. Ford politely scoffs at this argument: “This is a business. There is no commercial logic in that argument. While the same could be said of Premier League owners, what about those in the Scottish second division?” For a US equivalent of the Scottish second division, one could look at US college sports. While the latter is infinitely more popular for spectators and punters alike, the athletes are amateurs. And, like the modestly paid Scottish soccer players, this leaves them more easily corruptible. The not-for-profit association that regulates US amateur sports is the National Collegiate Athletic Association (NCAA). It is the named party in the Supreme Court case against New Jersey. It is expected to demand that college sports are exempt from the betting market if legislation is passed. With college sports perhaps accounting for as much as 50 per cent of betting turnover in Nevada’s regulated market, an opt-out by college sports would single-handedly destroy all attempts to extinguish the black market. If the NCAA does change its position in the event of losing the Supreme Court case, it is the one sports body that probably would need more resources to protect the integrity of the game. If the commercially savvy and wealthy NFL does not need an integrity fee, the not-for-profit NCAA might. For both, the answer might lie in data. The negotiations must continue. n

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TRADING

As trading has become an increasingly automated service, the bookmaking industry is losing a key skillset. This is putting pressure on operators’ margins, to the point where sports betting is at risk of becoming more akin to a casino product. By Robin Harrison

of error MARGIN CONTROL IS frequently cited when operators report weaker-than-expected sports betting revenue. It’s become a useful catch-all term for the bookies to explain away hits from ‘adverse’ sporting results. This, of course, is nonsense. Bookies could argue that risk is very concentrated. Punters tend to bet on the same things. But why have the traders not made more effort to spread this risk by moving prices? “If you actively move your prices a bit more, then you could attract the other side of the book,” one trading expert suggests. “You could be bestpriced on half the selections offered and take volume there. Instead of standing up a price for the favourite in a football match, you could offer the best price in the market on the rival team. “You would get more customers there. A lot of customers wouldn’t bet on the favourite in this

GIQ Q1 REVIEW

case, many would probably argue, but if you have a more dynamic approach to odds compilation, customers will appreciate it and you will be able to attract more.” So why isn’t this done more? The simple answer is that many operators won’t know how to, according to Sporting Group chief executive Simon Trim. Due to the sheer volume of markets offered, both pre-match and in-play, trading has become an almost entirely automated function. Rather than being handled in-house, it is outsourced to third-party suppliers. Despite this, risk management is still performed manually and in-house. “As a result of this move to ‘commoditised pricing’ or generic white-label solutions, the sportsbook no longer has the incumbent trading skills in place to know when or where they should differentiate on price – and therefore 53

F E AT U R E TRADING

Marco Blume, Pinnacle

“If you add a loss of skill and a reliance on commoditisation and standardisation, it isn’t difficult to see why the current business model for a lot of firms in the industry is no longer sustainable” Simon Trim, Sporting Group

attract additional exposure – against their competition,” he says. “The result is that the risk management function hasn’t evolved to manage the increased amounts of content on offer. The pricing on that content has generally become more homogeneous due to a lack of investment in trader skill. Subsequently, the main way of controlling risk is simply by limiting the customer on stake size and cutting off exposure at source.” This ultimately means margin control is not dictated by trading expertise. It becomes a case of restricting players, and effectively shunting out the experienced bettors. Pinnacle trading director Marco Blume argues that the definition of what constitutes a successful sportsbook has shifted for the listed betting operators as a result. “[They] resemble marketing companies more than they do bookmakers,” he says. “Noisy and expensive marketing campaigns aimed at building brand image are emphasised more than trading and risk management.” However, marketing and trading do not sit well together, he continues. As marketing is by its very nature more attention-grabbing, it has forced itself to prominence. “The emergence of bonus-led players has only amplified this fact in recent years,” Blume says. “A bookmaker will offer headline-grabbing bonuses, subsidise marketing campaigns with high-margin odds, and then ban players when they win. “The alternative option is to offer low-margin odds and high limits that attract serious bettors who understand the value they’re getting without the hook of a bonus. You can’t have it both ways.” Trim believes that the shift of the sportsbook from a trading- to a marketing-driven offering has been necessary, to an extent. “If you’re tracking back how the industry has evolved over the last 10 years, something that has definitely improved is the customer experience,” he says. “To achieve this it has, at times, been necessary to take business decisions around pricing and trading strategy away from the trading floor and put it into the hands of product and marketing in order to grow brand recognition and market share. “Overall, the result is a much better sports product offering and more value for the consumer. The level of overround (the percentage of profit a bookie can make by offering a market), on core markets at least, has decreased during that time – which is essentially the same as prices being cut on tangible goods – so the industry is much fairer and better value now than it was.”

But, he adds, this has not led to rampant growth in online betting. Instead it has led to players migrating from retail, and from historical operators to newer companies that have poached customers from their older peers. “During this ‘land grab’ for new business there has, at times, been short-term actions around bonusing, price boosts and ‘free’ offers,” he continues. “At the same time that this ‘cutprice competition’ for new business is happening, the underlying cost of actually running a sportsbook has increased – point-of-consumption regimes, stricter licensing and the cost of data rights are all incremental to the increase in marketing spend to attract new custom.” This, Trim argues, has created an industry that has not grown hugely but is charging less for its core products, giving away more for free, and costing more to run. “If you add to this situation a loss of skill and a reliance on commoditisation and standardisation, it isn’t difficult to see why the current business model for a lot of firms in the industry is no longer sustainable.” One trader says that skills are lost to the point that companies can offer totally wrong pricing on events, as every operator copies one another. “The focus is on copying, and not the quality of odds compilation,” they say. “Bookmaker A takes the average of the prices offered by bookmakers B, C, D and E, while bookmaker B takes the average of A, C, D and E, and loses sight of what the price should actually be. “It’s feeding burgers to cows,” they say. “I found a game that was 25 per cent mispriced. The first company had gone out with the market, the second tweaked its price to reflect that, the third copied, and suddenly the market was 25 per cent wrong. Then they just get clobbered by punters, and everyone has to reprice the markets.” The standard margin for leading listed bookmakers tends to be between four and five per cent, which is set to ensure they can make meaningful returns from operating a sportsbook. This is much higher than the tiny margin percentages made on financial trades, but our trading expert argues that this is appropriate for betting. “There is huge variance in the market, and a temporal element with sports,” our trader says. “The chance of a win and a loss will shift between zero and 100 per cent in 90 minutes, with a game state that is constantly evolving. That’s a lot of risk to take on.” However, some believe that operating with high margins helps facilitate the shift from bookmaker to sports betting marketeer. It definitely helps fund it – without the

revenue generated through higher margins there would be less budget for promoting betting products. “I don’t see it ever falling to two or three per cent,” the trader says. “To get people to bet on the site, you need the marketing budget, and it’s a brave company that will spend huge amounts on marketing, and run at half the margin of the rest of the market.” But this is exactly what Pinnacle does. Blume says operators that work on lower margins – his company operates at a two per cent margin – simply don’t need to run big-budget marketing departments. “Pinnacle’s value proposition is on giving the best odds, offering the highest limits, and never banning or restricting winners,” he says. “The customers we want know what this means, and we will happily continue to service them with our unique approach.” The missing part of the puzzle here is risk management. The low-margin operators have kept those capabilities in-house, with their focus on trading as the driver of revenue. The GIQ Q1 REVIEW

others have all but lost it as focus shifted to marketing, with trading outsourced. “The problem for operators is how to get the necessary improvements in risk and customer management into their business if they have outsourced their pricing and trading management to suppliers that do not have at least the same skill and heritage of running a sportsbook that they have,” Trim says. “Costs and a lack of capability are precluding operators bringing this expertise back in-house, so the ability to outsource the risk function is going to become increasingly important for many operators to meet their regulatory and social requirements, while still building a competitive business. This is why we have launched our new Risk Management Services division. “In order to effectively manage risk on such a broad range of content, the solution needs to be automated to both improve business efficiency and provide seamless experiences to the consumer,” he says. “Prices should be objectively adjusted for current or potential risk exposure to give the operator confidence

to offer instantaneous, personalised content delivered in real-time.” The purpose of this is to use risk management to enhance, and not disrupt, the customer journey. This, in turn, makes skilled players less of a bogeyman for major operators. Few seem comfortable to take on savvy bettors, as evidenced by pressure groups such as Justice for Punters highlighting how customers are often mistreated simply for being good at spotting value. Key to all this is the fact that the sportsbook is still a valuable acquisition tool for higher-margin, less skilled gaming products, such as slots and table games. It can be used to maximise a brand’s share of customer wallets. But competitors are equally aware of this. This means high-cost, standardised solutions will not maximise revenue. They are protected by margin to an extent, but if Trim is right in thinking that the shift from retail to online has created an artificial impression of just how much online has grown, there may be a need for new dogs to learn old tricks if the online-only bookies are to remain viable. n 55

WO R L D C U P SPECIAL REPORT

World Cup of

opportunity The World Cup is the most widely followed sporting event in the world. This summerâ&#x20AC;&#x2122;s tournament in Russia will be the first fully mobile World Cup. The M&A merry-go-round in Europe has changed the industry landscape since the last event in 2014, with bookmakers, iGaming operators and lotteries all set to battle it out for the same customers. This will be the first major event to take place since the industry mega-mergers of Paddy Power Betfair, Ladbrokes Coral Group, and GVCâ&#x20AC;&#x2122;s takeover of bwin.party. In the US meanwhile, a nation

GIQ Q1 REVIEW

awaits the Supreme Court hearing decision on the Professional and Amateur Sports Protection Act (PASPA), which could completely transform the betting market Stateside. For operators, the World Cup provides a unique opportunity to acquire new customers, particularly with player acquisition costs on the rise and increased regulatory restrictions on marketing to players, potentially creating opportunities in fantasy sports and social casino sectors. GIQ reveals how the industry is preparing for the sporting event of the year.

WO R L D C U P 2 0 1 8 SPECIAL REPORT

An industry’s evolution SG Digital’s OpenBet is the dominant sports betting platform supporting the UK’s biggest bookmakers. Executive vice president of sportsbook Keith O’Loughlin tells Steve Hoare what he is expecting from the World Cup

WO R L D C U P SG DIGITAL

SG DIGITAL SPORTSBOOK vice president Keith O’Loughlin has a special relationship with the World Cup. He joined Gala Coral as sportsbook director on the first day of the 2014 tournament. He went on to become chief product officer of the combined Ladbrokes Coral before joining OpenBet in March 2017. Before joining Coral, he was CEO of Boylesports Online and overall CTO of Boylesports. As such, he is in the perfect position to offer a technological perspective on sports betting’s biggest event. O’Loughlin sees the Russia World Cup as the first fully mobile tournament. “Mobile and desktop were pretty much neck and neck at the last World Cup,” he explains. “Mobile is now the platform.” While mobile had sneaked ahead of desktop in 2014, O’Loughlin says it has increased dramatically since then. William Hill’s most recent annual results revealed that 82 per cent of online sportsbook bets were taken via mobile phone, compared with 56 per cent in 2014. That figure far outstrips the 63 per cent of gaming revenue derived from mobile. O’Loughlin notes that the increase in mobile revenue has been accompanied by a drop in bets from tablet devices. The tablet seemed to be a coming force in 2014, but as laptops have grown lighter and mobile phones have grown more powerful, the tablet has declined in popularity. The immediacy of the phone has helped make it the betting medium of choice. “The time from thought to bet can be just five or 10 seconds. Touch ID and Apple Pay have made the whole experience much richer for customers,” says O’Loughlin. “We take Touch ID and Apple Pay as de-facto standards now, but they weren’t even on the product roadmap back then.” He says that customers are far more demanding than they were four years ago. They want more statistics. They demand a richer experience. They want shorter bet delays. “A number of our customers are down to one second or, in tournament conditions, possibly zero bet delay in-play. At the last World GIQ Q1 REVIEW

Cup, it would have been between three and seven seconds,” says O’Loughlin. The major product development since the Brazil World Cup has been the cashout feature. O’Loughlin notes that of the six largest OpenBet customers, only William Hill had a cashout product at the last World Cup. “It has changed the way people think about their money. At any point they can take their money away and decide to do something else,” says O’Loughlin. “It seems funny to talk about it now but people can place their bets in a retail store and cashout on their phone at home. That just wasn’t possible at the last World Cup.”

Back to Brazil When O’Loughlin thinks back to the last World Cup, his overriding memory is walking in the door for his first day at Gala Coral and feeling the buzz about the ‘Brazil to wear yellow’ promotion. “It got massive, massive uptake,” says O’Loughlin. “This acquisition offer captured the imagination of people at the beginning of the World Cup and started the frenzy.” There were a few unusual things about the first weeks of the last World Cup. There were very few upsets in the group stages, which fuelled customer interest. These were punterfriendly results. “Customers had their wallets well-loaded over the first two weeks,” recalls O’Loughlin. “This gave them a slush fund to have some fun during the second half.” There were more upsets in the knockout stages. None were more dramatic than the

“Customers want to be able to get a bet on, they want to know they can cashout. They are not interested in comparing prices in the fifth minute, looking at what is the best price for the next goal” Keith O’Loughlin, SG Digital

WO R L D C U P 2 0 1 8 SPECIAL REPORT

hosts’ 7-1 loss to Germany in the semi-final, Brazil’s one goal arriving in the final minute. “World Cups bring this industry fascinating insights. The swing on that last goal was absolutely staggering for OpenBet’s customers,” says O’Loughlin. There were a huge number of punters that had bet on Germany to win and both teams to score. Several million pounds swung on that last goal at each and every operator. “Those idiosyncrasies are what sets pure sport apart from betting on sport. It was inconsequential for the result but huge for the industry.” The UEFA European Championship (known informally as the Euros) of 2016 benefitted from the exponential industry growth in football betting, but betting volumes still failed to match the last World Cup. “The World Cup captures the imagination in a way that the Euros just can’t compete with,” says O’Loughlin. With games being held in France, the timing of matches at the Euros benefitted European operators, who had to contend with late-night matches in Brazil deterring some punters. A Europe-based World Cup – this summer’s host country is Russia – is a bookmaker’s dream. Brazil and Germany are the favourites going into the World Cup. The dream tournament scenario from a betting operator’s perspective is for the favourite to stay in until the later stages and then lose in the last minute. 61

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WO R L D C U P 2 0 1 8 SPECIAL REPORT

“Back when Tiger Woods was dominating the golf world, we always wanted him to lose on the 18th in the final round. The same thing with Ronnie O’Sullivan in snooker. We always wanted him to lose on the black in the final frame. OpenBet’s tier-one UK-based bookmakers will want England to stay in the tournament as long as possible. An operator will lose money on an England victory, but the operator wants England to stay in to maintain interest. “Big sporting events traditionally see an increase of recreational punters wanting to have a slice of the action, quite often driven by their patriotism and desire to back their country to perform well on the biggest football stage,” agrees Steve Clift, chief operating officer of digital for Ladbrokes Coral.

Product power OpenBet and its customers will be unveiling a number of new functions, ad campaigns and products at the World Cup. “World Cups are good punctuation points in the evolution of products,” notes O’Loughlin. “We are working with all our customers on their individual 64

product roadmaps, and helping them to each try and get new products to market. We are working to facilitate customers who want things like [Sky Bet’s] Request A Bet. They can use our APIs and our toolset to enable them to build new and innovative products.” Other new OpenBet products include the new ‘Insights’ data service that allows operators to compare their performance against the market and suggest optimisation improvements; and the new ‘Tickers’ filtering tool that shows real-time activity across an operator’s product portfolio. However, OpenBet’s big launch is its Managed Trading Service (MTS), which will offer customers a full suite of trading products at the World Cup for the first time. The end-to- end solution is designed to allow operators to choose their level of support, either by adding MTS to their existing sportsbook or taking the complete solution to focus on marketing. “This is quite a departure from what we’ve done before because typically we’ve just provided a platform rather than a turn-

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Brazil 2014 online sportsbook revenue William Hill

£24.7m £16m £15.9m £9.1m £7.9m* £5.6m* £2.6m* Unibet

Betfair

Ladbrokes

Paddy Power (estimate)

Bwin.Party

Betsson

*Converted to GBP for sake of comparison

key proposition with a fully managed trading service,” says O’ Loughlin. It also illustrates another point in the evolution of the bookmaking industry. Your average member of the public would presume trading was a core function for any bookmaker, but the core business of the bookmaker has been boiled down to marketing and customer experience. “Customers want more differentiation in the front-end. That’s the medium of how they communicate with their customers. They look at their front-end as the epitome of their brand. It is their brand represented in a digital format,” says O’Loughlin. Operators such as Paddy Power Betfair, as new chief executive officer Peter Jackson explains on page 83, operate two very distinct brands. In the case of PPB, Paddy Power seeks to attract recreational punters through its fun, cheeky campaigns and personality, while Betfair targets the serious punter, who analyses stats and looks for the best prices. “If you are looking for different customers, your interface must resonate with the type of customer you want,” says O’Loughlin. “It GIQ Q1 REVIEW

is going to become more and more of a focus. Not only that it’s easy to use but that it shouts the excellence of the brand, and that customers can feel it.” O’Loughlin believes M&A activity in the sector has only increased competition and operators’ desire to save costs. It can be difficult to find a competitive advantage trading 350,000 in-play events in any one year with up to 100 markets on each one. So customers are looking to reduce their costs and partner with someone who can offer that service. “Don’t get me wrong, trading is still a very important part of their business. But, particularly with in-play, it’s about the range of products,” continues O’Loughlin. “The majority of betting is now in-play. Customers want to be able to get a bet on, they want to know they can cashout, and that they have that experience. They are not interested in comparing prices in the fifth minute, looking at what is the best price for the next goal.” O’Loughlin says ante-post betting is still quite price sensitive, with price comparison sites providing customers with the tools to find the best prices. “That is great for the Cheltenhams of this world and other sports, but football, where inplay is the majority, customers aren’t as price sensitive,” he continues. “If you think about how an operator differentiates itself with inplay, it’s around offers and it’s around product.” O’Loughlin draws parallels with online gaming products, where operators rely on third parties to provide games, while concentrating on the customer experience around the games. “There is no bookmaker who can scout and come up with their own prices and manage their own trading for 75,000 tennis games and 125,000 football games that are available inplay. They can either trade it themselves with algorythms or they are partnering with third parties to provide the prices. Those lines have become blurred over the past few years.” O’Loughlin believes twice as many events will be traded in 2018 than there were in 2014 – possibly more. He sees OpenBet’s job as

“Operators want to be the striker putting the ball in the net. If they don’t feel they can do that then they end up being more defensive with their offer” Keith O’Loughlin, SG Digital

supporting that activity. He makes an apt analogy with a football team. “Operators want to be the striker putting the ball in the net. If they don’t feel they can do that then they end up being more defensive with their offer. They have to be confident they are going to get fed the ball, or in our scenario, that they have a platform that is going to work.” Clift at Ladbrokes Coral confirms: “We can expect that most operators will be making a concerted effort to create exciting promotional initiatives around the event and we have great new marketing ideas up our sleeve as well. The competition will be fierce, such is the size of the sports betting market, and it has meant a lot of our attention in the lead up to the World Cup has been on marketing campaigns, with technology providing a stable foundation to deliver these.”

OpenBet has also grown rapidly since 2014, when it had around 650 staff. The wider SG Digital business now employs 1,500 people and plans to hire another 400 this year. “The challenge, now we’re part of the wider SG business, is how do we bring the customer experience to omni-channel? Some customers [such as Coral] are offering the ability to cashout online after placing the bet in retail. SG has a strong history in retail. The challenge is how we leverage that for our customers.” O’Loughlin expects big growth at SG Digital and he is braced for a bumper World Cup. “In the UK alone, there was £1 billion gambled on the last World Cup. We expect it will be significantly more on this one,” he emphasises. It might not be the boldest prediction but O’Loughlin is willing to stick his neck out when it comes to choosing a winner. “I fancy Belgium to win,” he says. “I think if they hit the right note, they could do it. They have the confidence and they have skilled players. It would be great for football to see a new winner.” Amen to that. n 65

WO R L D C U P PLAYTECH BGT SPORTS

Will Russia 2018 be the first omnichannel World Cup? Playtech BGT Sports has been planning for this World Cup for the past year, managing director for UK, Ireland, Asia, and Australia John Pettit tells Steve Hoare

“THE BORING PART”, explains Playtech The second big software development BGT Sports managing director John Pettit, “Is was the BetTracker app, which allows retail getting the terminal density right. We need to customers to track and cashout bets on their figure out the optimum number of terminals mobile devices which have been placed on in each shop.” the company’s in-shop SSBTs, even without The more interesting part of Playtech’s an account. plan for Russia’s World Cup has been the Again, the thought behind it was based on development of new software that began over the World Cup and the likelihood of customers a year ago. wanting to watch World Cup games at home or The biggest one is the development of a in the pub, rather than in the betting shop. product called MatchAcca, which is The app has been taken up by about 15 similar to Sky Bet’s Request A Bet independent bookmakers, including but offered on self-service betting the likes of BoyleSports, Jennings Bet, terminals (SSBTs). It allows Joe Jennings, Megabet and Sean customers to create an accuGraham. mulator in-play and it updates W hi le t he World Cup the odds in real time. might have significantly This is the first time fewe r g a m e s t h a n t h e retail customers have domestic football season, it been able to create their attracts significantly higher own accumulators without betting volumes. traders needing to approve “Our big challenge,” says the bet. Playtech engaged Pettit, “has been building a niche software house product that allows operaWO R L D C U P 2 0 1 8 Algosport to develop the tors to take advantage of SPECIAL REPORT detailed algorithms needthe increased turnover ed to enable related while retaining a margin contingencies in real time. of 25 to 30 per cent.” “The SSBT customer likes accumu“The great thing about SSBTs, and what we lators, and operators obviously like it have started to see more of, is people betting because of the higher margins. So we across multiple sports. An SSBT is ideal for have been trying to build products that. You can put football and tennis matches accordingly,” says Pettit. together. They are the two most popular sports Pettit says the key difference on an SSBT, and people can mix and match between the World Cup and an across those two sports, which is unique.” average weekend of football durThis summer, when the first half of Russia’s ing the domestic football season World Cup coincides with the Queen’s Club is that the tournament only has Championships, and the second half of the two or three games a day. tournament coincides with Wimbledon – this “So we have been trying to could open up a whole new world of accumulafind a product that allows that tor bets for retail customers. accumulator experience but While Playtech BGT Sports has built with only two or three games its business on the retail success of its selfeach day,” he explains. service betting terminals, clients such as

WO R L D C U P PLAYTECH BGT SPORTS

“Our plan is to build products that work across multiple territories and multiple customers. It is one of the key benefits of having unbranched software code” John Pettit, Playtech BGT Sports

Sportium (Ladbrokes’ Spanish joint venture with casino and bingo hall operator Cirsa) and Mexico’s Caliente are important clients operating online. “More and more, our plan is to build products that work across multiple territories and multiple customers. It is one of the key benefits of having unbranched software code. It means you can develop once and deploy in many places,” explains Pettit. “The beauty of the platform is that if you develop it for retail or online, it immediately becomes available for the other channel.” The prime example of this is Playtech’s Acca Extreme, which was developed for the Italian market and is now available to UK operators. It is a bonus that grows as you go through each bet in an accumulator. “It would never have been developed for UK operators because firstly, they were never asking for it, and secondly, if they did, it would not have been high enough on their product roadmap.” The Playtech BGT Sports team has also been doing a lot of work with its trading systems to ensure that we have the whole range of markets and the right pricing. While Pettit explains that this is more of a “business as usual function”, he points out that there is only one World Cup every four years, and it is vital that every facet of the PBS product is ready for it. While BGT was founded in 2005, it is only during the past four years that SSBTs have become established in retail bookmakers. Before this, most bets were taken over the counter using traditional betting slips or coupons. “Now SSBTs are an established part of the retail experience,” says Pettit. “Not only is this the first omni-channel World Cup, it is also the first digital World Cup for retail bookmakers.” Pettit says that if you crunch the numbers from publicly-listed operators such as Ladbrokes Coral, you can figure out that around 50-60 per cent of football gross win derives from SSBTs. GIQ Q1 REVIEW

“I think that during the World Cup, for the first time, more bets will be placed on SSBTs than over the counter. That might not be the case if once-a-year customers continue to use the counter but I think that by the time of the World Cup, SSBTs will definitely be the preferred betting method for the regular betting shop customer.” As such, a number of customers have been finessing their omni-channel offerings. Playtech’s IMS back-office system forms the backbone for a player’s account and it is the account that links the full omni-channel journey. Coral’s Coral Connect was the first omnichannel development linking online and retail. It now allows customers to log on to their Coral Connect account on an SSBT, and then use the same IMS account to bet online or play casino games at home or in-store. More recently, Coral’s stablemate Ladbrokes launched its own loyalty card The Grid, which was inspired by Coral Connect. The addition of SSBTs was the final piece of the jigsaw that had to be integrated into Ladbrokes’ omni-channel journey. “It is a great example of how you can use IMS as the link between SSBTs and FOBTs (supplied by Videobet) with online,” says Pettit. The Playtech BGT Sports team works closely with the IMS team to make sure everything is running slickly, but it also works with the casino division to create a compelling betting and gaming proposition. The company’s Sporting Legends series of slots is testament to this, with its World Cup Top Trumps game set for release to coincide with kickoff in Russia. With timed jackpots that could be set to coincide with kickoffs, half-time or other significant events, it could be an ingenious link between the casinos and sportsbooks of Playtech’s clients. The solutions giant is more than ready for the first omni-channel World Cup. n 67

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LOTTERIES

European lotteries show the way forward for sports betting Lotteries in Europe are well positioned to benefit from the World Cup, with sports betting a key part of their offering. Lotteries in the United States could learn from their European counterparts if the Supreme Court overturns federal law, writes Kio Dawson SPORTS BETTING HAS become an integral nel into web and mobile, or expanding their two long-term partners; Swisslos in Switzerpart of the product portfolio for European sports betting product offerings. We’re really land and Hungary’s Szerencsejáték Zrt. lotteries. With sales of draw games stagnatfollowing the consumer interest in sports betFirst, the company won the implementation ing in recent years, it is a key area of growth, ting, and we are ready to integrate our leadof an online betting platform for Szerencsejáespecially in a World Cup year. ing sports platform for our lottery customers ték, which holds the exclusive rights to offer There are 14 European nations taking part that want to include sports in their product sport betting, as well as instant and draw-based in the World Cup, and almost all have a state offerings,” he says. lottery games in Hungary. lottery providing sports betting to customers. Scientific Games currently provides 25 Migration to the new platform meant that From Croatia’s Hrvatska lotteries across the world Scientific Games was able to support the lotLutrija to Iceland’s Íslensk with its sports betting sertery’s entire gaming portfolio, delivering Getspá to Sweden’s Svenvices, with the business sports betting via mobile and internet, as well “Everyone is ska Spel, Spain’s Sociedad having grown following as through a distribution channel of nearly watching very Estatal Loterías y Apuesthe acquisition of Icelan5,000 retail lottery terminals. closely to see tas del Estado (SELAE) dic sports betting supplier “Sports has been a key part of their growth, and Denmark’s Danske Parspro in 2012. The recent and we’ve been a key supplier behind that in what the Supreme Spil, these operators have addition of NYX Gaming’s retail and now online,” says McHugh. Court does, and it embraced sports betting OpenBet platform will take Scientific Games also upgraded the betting could be the single and, through their extenthe business to another platform for Swisslos, the national lottery of greatest change in sive retail network, can level altogether. Switzerland’s German-speaking cantons, with US gaming” provide customers with “We’ve been very strathe supplier already providing its core lottery Pat McHugh, Scientific Games an omni-channel offering tegic about where we think system to the operator. Both of these deals were that can have a far bigger the market is heading, and completed well ahead of the World Cup. reach than bookmakers or obviously digital and sports “We implemented and replaced their private operators. betting are two of those key areas for us,” says existing sports betting engine, which really The cross-selling of sports betting to lottery McHugh. “We’re well into the integration and was focused around Oddset, to allow them an players may not be as obvious compared to slots, we’re putting our existing assets with those of expanded offering should they choose to continperhaps, but there is undoubtedly a huge benefit NYX and Openbet, which gives us more ue to expand their sports offering to their for state lotteries to be able to offer customers expertise and platforms to better serve customers,” says McHugh. a multi-product, multi-channel offering. And our customers. For lotteries with a competitive this is where suppliers and their technology “We think offering an omnisports betting offering, increased can help. channel experience, and expaninterest around the World Cup “Especially for some of the more mature sion into the digital world in can boost its draw-based and European lotteries, sports betting has been general, is absolutely funinstant products. one of the product verticals that has allowed damental for moving for“From Scientific Games’ lottery revenues to continue to grow,” explains ward in the industry. We’ll own research, we see signifiScientific Games senior vice president of global work with each customer cant crossover between varilottery systems Pat McHugh. “Many of our cusas we continue to evolve ous lottery products from a tomers are expanding sports betting offerings our roadmaps as products consumer standpoint, includas one of their channels for growth, given the come together.” ing sports betting,” says enthusiasm around sports betting in Europe. Scientific Games’ most McHugh. “One of our core WO R L D C U P 2 0 1 8 “What we are seeing from a lot of our cusrecent launches include focusses has been providing SPECIAL REPORT tomers is they are either expanding their chansports betting systems for omni-channel technology GIQ Q1 REVIEW

WO RL D C U P LOTTERIES

for our customers. So no matter what the product offering is, we are able to integrate retail, mobile and internet experiences for players. “By having that kind of integrator expertise, it helps us facilitate crossover between the products for many of our customers. The upcoming World Cup is an opportunity that will drive consumer traffic specifically for sports, but also for other lottery products due to the global level of excitement the tournament generates.” A look across the Atlantic at the US lottery market provides an interesting contrast to Europe. There, sports betting remains handicapped by the Professional and Amateur Sports Protection Act (PASPA). But the upcoming decision by the Supreme Court, expected in late spring or early summer this year, has got a lot of US states excited. Lotteries included. “Everyone is watching very closely to see what the Supreme Court does, and it could be the single greatest change in US gaming,” says McHugh. “Certainly the biggest change we’ve seen in our lives, given America’s great passion for sports.” West Virginia became the first US state in 2018 to adopt legislation that legalises sports betting in the event of a repeal of PASPA. Specifically, sports betting will come under the remit of the West Virginia State Lottery Commission. The legislature said that it was “in the best interests of the state of West Virginia for the state to operate a lottery in the form of sports wagering”, with the bill allowed to pass into law in March by Governor Jim Justice. The governor said that if there are issues that the state can address and make SB415 the

“model legislation that the entire country can use and duplicate, we should do so.” In Kentucky, a proposed bill would allow the lottery to offer bets on collegiate and professional sports (excluding horse racing) via lottery retailers, horse racing tracks and simulcast facilities. In Kansas too, the Kansas Lottery would be allowed to offer sports betting to players over the age of 21 at facilities operated by the lottery, through contracted lottery retailers, over the web and mobile devices, and through an interactive sports wagering platform. Aside from Nevada and the other three states with limited sports betting offerings (Delaware, Oregon and Montana), a total of 15 states have now introduced bills to allow Its acquisition of NYX’s sports betting if PASPA OpenBet sportsbook was a is overturned. real statement of intent, and In Nevada, the sports betsolidly positions the company ting market is dominated and its customers for future by casinos and sportsbooks. regulatory developments WO R L D C U P 2 0 1 8 But there is no state lottery in sports betting, particuSPECIAL REPORT there. The only lottery that larly in the US. The landis offering sports betting based casinos will be one of at the moment is the Scientific Games-powthe biggest beneficiaries of a regulated sports ered Delaware Lottery, and that is restricted betting offering in the US, but they will face under federal law and limited to NFL wagers. competition from racetracks, off-track betting The European market therefore provides US venues, VLT licensees and lotteries. lotteries with a model they could aspire to. “The lotteries will absolutely participate,” With its experience in the European market says McHugh. “Given what we see outside of the and extensive lottery network in the US, ScienUS, the distribution reach of lotteries and their tific Games is ideally placed to serve its cusability to maximise proceeds in a regulated tomers if there is a positive ruling on PASPA. market will be important.” It is not inconceivable to think that by the time of the next World Cup – in Qatar in 2022 – a number of US state lotteries could be in a position to offer sports betting to customers as part of a competitive regulated market. It sets up an interesting battle between casinos, sportsbooks, race tracks and the lotteries. And with the increase in mobile usage and popularity of self-service betting terminals, it is the lotteries that are the ideal partner through their extensive retail networks. “For the lottery retailers that offer sports betting in store, it also generates consumer foot traffic and incremental purchases,” says McHugh. “It’s one of the values of lotteries to their retail partners when they have big events like the World Cup. Sports betting not only helps the lottery’s proceeds, but it drives revenue for local businesses in the lottery’s retail network.” For US lotteries, sports betting remains a distant opportunity for now, but Europe can show them the way forward. n

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WO R L D C U P FLOWPLAY

FlowPlay to show US sports bettors its social side By the time of the 2022 World Cup in Qatar, there is every possibility that a legal, regulated and widespread sports betting industry will be thriving across the US. By Macarena Rodicio IN THE MEANTIME, and certainly during this summer’s World Cup, US players will turn towards a range of daily fantasy and social offerings to get their sports gaming fix. “Despite the US national team not qualifying, the World Cup remains a global event with a massive draw,” FlowPlay CEO Derrick Morton says. “Especially for those interested in sports wagering, anything timely and relevant tends to be appealing. In the US, however, sports betting remains illegal and FlowPlay’s social approach is one of the only widely legal ways for people to engage in the activity.” FlowPlay’s flagship Vegas World social casino offers a suite of social sports betting games. This includes options to bet virtual currency through a sportsbook, a daily fantasy offering, and a real-time wagering experience called Ready Set Bet. During this year’s World Cup, Vegas World players will be able to place a range of bets on various match results and prop bet outcomes, such as the tournament’s first goal scorer and which countries will reach the semi-finals. While FlowPlay boasts a global community of 75m users, particular attention will be focused on the intersection of the one-third of US consumers who consider themselves casual

gamers, and the 60m fantasy sports players “Unlike other traditional online betting across North America. offerings that focus exclusively on sports, we While the operator was initially focused also include several pop culture events which on social casino, its social sports product has draw a lot of engagement” says Morton. “In grown to account for around half of all virtual fact, this year’s Oscars saw the largest numcurrency wagered in Vegas World. ber of bets placed in our sportsbook to In light of the long list of failed date. By providing fresh content and social-focused sports betting apps new opportunities to put knowledge and products – Commologic’s to the test, we have attracted BetUP product was just one and retained a community of to shutter last year – Flowmillions of players across Play’s success in the space is the globe.” impressive. T h i s appr o ach h a s Part of this success has already seen Vegas World’s been achieved by using major sportsbook offering achieve sporting events to engage a significantly more balanced existing casino players with gender ratio than a traditional, the sportsbook offering. real-money sportsbook. “We use events as a While tradition sports WO R L D C U P 2 0 1 8 means to achieve player betting is split at around SPECIAL REPORT retention goals,” says Mor70-30 in favour of men, ton, adding that by offering Vegas World’s sports betcasino-style games alongside a sports offering, ting attracts a 50 percent female audience, FlowPlay opens a number of cross-selling possays Morton. sibilities to those players who tend to stick to “Long term, our goal is to continue creating one or the other. unique games that bend the rules of traditionFlowPlay has also found its social sportsal sports betting both from an audience and book popular with major non-sporting events. gameplay perspective to keep players coming back,” he explains. As with most social operators, the World Cup will not be a major acquisition event for FlowPlay. With CPAs on the rise in the mobile social casino space – an “astronomical” $12+ per player, according to Morton – the operator will not be leveraging the World Cup to target new customers. Instead, Morton believes a truly social approach, combined with casual casino gameplay, provides the “perfect formula” for boosting player retention rates. The World Cup may not be the acquisition-led event it is for real-money betting, but it clearly offers social gaming operators an opportunity to ensure their players continue to come back for more. n

WO RL D C U P

DAILY FANTASY SPORTS

Daily fantasy searches for new identity at World Cup The challenges faced by DFS in engaging players in markets where traditional sports betting is widespread and regulated are well documented, writes Macarena Rodicio IT HAS BEEN widely argued that daily fansay. One thing is for sure: they are not looking tasy sports (DFS) only enjoyed rapid growth to play luck games against the house.” in the US because of the lack of widespread Delivering active, skill-based gaming that licensed sports betting in the country, and keeps players engaged during the action is that it could never repeat the trick in Europe. key to reaching millennials, argues Bollier. More recently, however, a second school It is natural for these players of thought has emerged, which says that DFS to browse Twitter or Facebook still has an important role to play in mature while watching a football match, markets, particularly as a way of reaching and and DFS is a way of scratching engaging with younger players. that second-screen itch. “iGaming operators sense that DFS is growWith this in mind, Oulala ing and they do not want to miss this opporhas built its daily fantasy prodtunity to acquire younger customers,” says uct with an in-game element – in Valéry Bollier, co-founder and CEO of fantasy the form of live substitutions dursports provider Oulala. ing the match – front and centre. Bollier notes that DFS chimes with younger Unlike traditional fantasy sports, players because it more closely matches the users can bring in replacement active, social and mobile entertainment expeplayers during the match, incentivising them rience they expect. to keep watching. But perhaps the only thing “iGaming operators currently have an that will convert DFS sceptics is if it performs issue attracting the 18-35 age range and DFS strongly as a cross-selling tool to sportsbook is the perfect acquisition tool for them, during the World Cup. since it fits their new needs perfectly With acquisition costs rising, as both a skill and a social game. DFS presents a cheaper alternative “This year is an important for onboarding new players. The one for DFS, and the World question is whether they can Cup will help enormously then be converted into longbecause it is, in fact, the term sportsbook customers first main event that is happening within the football sector while fantasy sports are becoming known within Europe and elsewhere.” While DFS emerged in the US as a standalone WO R L D C U P 2 0 1 8 revenue-generating vertiSPECIAL REPORT cal, there is a sense that in Europe it may serve other purposes. Top of the list for Bollier is reaching millennials. “This year, I expect that the iGaming sector will finally realise that the world is changing. By the year 2020, millennials will represent 50 per cent of the work force, and that is more or less 50 per cent of our market. “Therefore, it is crucial to start listening to them and acknowledging what they have to 74

Bollier says that DFS provides an in-depth profile of players that can be used by operators to cross-sell with a bespoke sports betting offering. “The cross-selling opportunities are abundant. For instance, when building their teams, customers are picking football players from various teams in five different leagues. The operator therefore knows which football matches will be followed by the customer and will then be able to offer bets on those matches.” He adds that with DFS players tending to engage with the product at the same time as watching the match, operators can use it to view player activity and time push notifications accordingly. “As one can imagine, this will enable many cross-selling opportunities.” This, ultimately, will be the challenge for DFS as it continues to search for a place within Europe’s mature iGaming markets. With the World Cup offering a significant opportunity for the vertical to reach an unprecedented number of players, it could be the defining moment as it seeks a place within operators’ product offerings. n

WO RL D C U P

KAMAGAMES

ticularly well during the 2016 European Championships. For KamaGames, the World Cup will primarily be an engagement-focused exercise, rather than an opportunity to acquire new players. Kuznetsov notes that the parameters of user WO R L D C U P 2 0 1 8 SPECIAL REPORT acquisition will shift during the tournament, and they will not likely help a social poker operator. “As far as it goes for us, we do not tend to focus on user acquisition. Looking at the audience that is interested in the World Cup, they are different to those that follow the regular matches between clubs. “The reason is that international tournament are watched by entire countries (all genders and ages). If we launch ads on different marketing channels, dedicated to the World Cup, perhaps they will reach a wider audience and subsequently create more of a brand story than effective user acquisition.” Rising marketing costs, caused by the participation of big brands with larger marketing budgets, are also a concern during the tournament. Any campaign is likely to see a significant rise in the cost of marketing as a result. Instead, says Kuznetsov, attention will be on “retention, retargeting and monetisation of our current audience”. “If we deliver properly synced, themed content, promotions and sales, focused on our existing players rather than attracting new players, I am confident we will be able to positively impact our retention and average Andrey Kuznetsov says. “This means that the revenue per paying user.” World Cup is a marketing opportunity for the This was the case during the 2014 World Cup, social casino space.” when several key gaming metrics, including KamaGames is using the opportunity to session duration and number of hands played create football-related content for use during increased during the tournament. A common matches, including themed tournaments, trosight on the tables were players discussing the phies, in-game gifts, special offers, push notififootball action in the in-game chat box. cations and emails. “I can safely say that the World Cup is a In the past the operator has also enjoyed suctruly unique event which will appeal to a sigcess with activities based around the result of nificant amount of our current players.” matches, such as giving away free chips to playThe challenge for social operators like ers from a winning country, which worked parKamaGames will be ensuring they successfully grab a share of the huge volume of social engagement that will take place over the course of the World Cup. In 2014, Facebook alone accounted for three billion World Cup“I am confident we will be related social interactions, while Twitter able to positively impact our attracted 35.6 million tweets during Brazil’s retention and average revenue 7-1 defeat by Germany in the semi-finals. There is a clear prize to be won for those per paying user” social casino operators who can make their Andrey Kuznetsov, KamaGames voices heard above the noise. n

Engagement the goal for KamaGames Dublin-based social casino studio KamaGames, most famous for its flagship Pokerist title, has a clear picture of the impact major sporting events can have on its operations. By Macarena Rodicio KAMAGAMES BEEN TRACKING the impact of football matches on player volumes for some time, finding that active players tend to drop by around 10-15 per cent during major football matches. There is even a correlation between the importance of the match and the size of the drop-off, with player numbers returning to usual levels during half-time. While this might give KamaGames cause for concern ahead of the FIFA World Cup in Russia, the operator is confident that the marketing opportunities presented by the tournament will more than make up for the risk that players’ attention will be diverted away from its games, which typically attract 500,000 daily active users. “Our audience, just like any other social casino gaming audience, really loves football. We can tell this by the simple fact that football matches affect the number of players online in our games,” KamaGames chief executive GIQ Q1 REVIEW

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T H E G I Q I N T E RV I EW RICHARD CARTER

“SBTech’s mission statement is to be the dominant sportsbook and platform supplier in the industry. Our immediate focus is on making sure we execute this strategy” Richard Carter, SBTech 78

T H E G I Q I N T E RV I E W RICHARD CARTER

SBTech: from pretender to

contender SBTech has made big bets on casino and regulated markets as it targets a leadership position as a sports betting supplier. Chief executive Richard Carter discusses what is arguably the most successful period in the company’s history

GIQ Q1 REVIEW

DESPITE OPERATING IN one of the most competitive verticals in iGaming, SBTech is enjoying one hell of a winning streak. In the past year it has moved into the regulated Polish and Spanish markets, as well as strengthening its presence in Romania and launching a new brand for Danske Spil in Denmark. It has also begun preparations for regulated US sports betting through a partnership with GAN. In Luckia and Argyll Entertainment, it has poached clients from competitors. Its core product has also been enhanced by the launch of its gamified live betting feature, Pulse. Most importantly, of course, it secured the 2018 Gaming Intelligence Award for Sports Betting Supplier of the Year, its second consecutive win. Richard Carter is now into his third year as chief executive. Before joining SBTech in March 2016, Carter had spent years as an analyst for Deutsche Bank, helping operators such as 888 Holdings, 32Red and Empire Online raise equity and list on the London Stock Exchange. Industry commentators suggested that he had been brought in to oversee the business’s sale. Instead, he has overseen a period of rapid growth. And he refuses to take any credit: “It’s important to recognise that SBTech was already doing great things and had a lot of momentum in regulated markets before I joined,” he says. “I was perhaps lucky with timing and arrived at a time when regulators had started to re-regulate the online element

of the industry, having only had land-based gaming legislation previously. “What the team has done since I arrived is to continue to maintain that momentum, invest in the product and platform, and to deliver increasingly complex projects,” Carter explains. “I am happy to say that the outlook continues to be very exciting, as dynamics for sports betting, globally, remain very compelling.” On his watch SBTech has invested heavily in its core sports betting product, with a key focus on features to enhance the betting experience, such as Add2Bet, Pulse and Action Betting. It has also been particularly successful in leveraging its Chameleon360 platform to offer a full player account management system, supported by personalisation and localisation features. The company has also developed its Casino Hub solution, meaning it can complement its sportsbook with a range of gaming products. These three features would set up most companies for success, but Carter argues that it is SBTech’s regulatory focus that gives it an additional edge. “We’ve invested a huge amount in regulation and compliance tools, allowing our clients to deploy quickly and cost-effectively into newly-regulating markets,” he says. The company is currently licensed in 15 territories, “More than any of our B2B sports betting competitors,” Carter notes. It can point to deals with Danske Spil and Czech lottery 79

T H E G I Q I N T E RV I EW RICHARD CARTER

operator Sazka as evidence that the most regulated operators have confidence that SBTech is a reliable partner. In Carter’s eyes, a focus on regulated markets makes good business sense above all else. “When you look at the industry today, especially in Europe, regulation creates a lot of opportunities for companies like SBTech,” he says. Regulation has even been built into SBTech’s systems. The company’s platform has been designed to factor in “almost any regulation a regulator can think of”, making it more cost-effective and less time-consuming for clients looking to enter new territories. “You’ll see the same strategy with the US,” Carter continues. “We’re investing heavily in our product and on compliance and regulation, so we can continue to maintain our recent success in building market share in newly regulated jurisdictions.” This focus on compliance is supported by scalable software that is built in modular architecture, allowing clients to pick and choose the services they need, rather than a one-size-fits-all solution. “This is ideally suited for the major operators and ‘local champions’ who are looking to expand beyond their home territories for growth, and find it difficult with their historic incumbent suppliers.” Deals with Danske Spil to launch the new youth-focused Youbet brand, and to power Sky Betting & Gaming’s German site suggest that operators are starting to take notice. However, Carter admits, the incumbent suppliers have often worked with operators for a long time, 80

and have long-term contracts in place. This means it is a case of using smaller deals to build trust and show what SBTech can do. “It’s unlikely that major operators will want to have a lot of different suppliers, so it’s a case of proving ourselves and our capabilities, and then challenging for the existing contract over time,” he says. In the deal with Danske Spil, SBTech’s Casino Hub solution was key to it securing the contract. And, with single-vertical operators a thing of the past, it appears single-vertical suppliers may soon become less prevalent. “If you look at all major online sports betting brands, specifically in Europe, you’ll find that the majority are generating 25-50 per cent of their total net gaming revenue from casino and other products,” Carter says. “You can see that in the UK, Spain, Italy; so not having a competitive casino offering is going to be a huge disadvantage. Many operators make a lot of cash flow from cross-sell, and so the casino offering is always important. This trend of sportsbooks leveraging casino and vice versa has become a lot more evident in the past five years and is a big growth area for SBTech.” The importance of cross-sell is evident from the supplier’s latest sports betting innovation, due to go live in time for this summer’s FIFA World Cup. Your Bet is SBTech’s variant of the service where customers ask for odds on a result or event and have it instantly priced up, as part of a drive to add more depth to the sports betting product and enhance personalisation. Pulse, where players bet on a specific outcome in a defined period, for a payout that rises as time runs out, is another example

of how it is looking to offer an extra level of excitement. This could be seen as similar to a quick-fire lottery draw rather than a traditional sports bet, and highlights how suppliers are starting to take a bigger role in helping cross-sell players from sports to casino. While the tournament presents a major opportunity for operators, for suppliers it is more of a testing ground for products and services. “For us it’s a case of adding more depth to our sports offering, investing in more personalisation, and improving and refining our bet recommendation engine,” Carter says. The US is more of a pressing concern. With the industry awaiting a Supreme Court verdict on New Jersey’s challenge to the Professional and Amateur Sports Protection Act (PASPA), there has been a preliminary flurry of activity.

T H E G I Q I N T E RV I E W RICHARD CARTER

Scientific Games has snapped up NYX Gaming Group and the market-leading OpenBet sportsbook platform – and a number of states have begun to prepare legislation. SBTech has not been idle, agreeing a strategic partnership with GAN, which will see it launch a sports betting solution for the casino suppliers’ landbased partners, regulation-permitting. This is just the first step in SBTech’s plans for the US, however. Carter describes the partnership as “an exciting first deal”, but it is nonexclusive, meaning there is nothing blocking further expansion. And as SBTech looks to make a splash in the US, it is likely to become an attractive target for potential acquirers. Consolidation is well advanced in the European gaming market, and regulated sports betting is GIQ Q1 REVIEW

likely to prompt a flurry of M&A activity by US companies looking for expertise and assets in the sector. Will SBTech see itself snapped up? Carter considers this question carefully: “I am sure if the right strategic opportunities come along, which would add value to SBTech, then the shareholders will definitely consider them. But first and foremost, SBTech’s strategy and our mission statement is to be the dominant sportsbook and platform supplier in the industry, and our immediate focus is on making sure we execute this strategy.” In his eyes, SBTech is more likely to be an acquirer than to be acquired. The company is enjoying a remarkable purple patch at the moment. If Carter can keep this going, maybe he will also take some credit for the company’s growth. n

“We’re investing heavily in our product and on compliance and regulation so we can continue to maintain our recent success”

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F E AT U R E

PADDY POWER BETFAIR

PETER JACKSON, THE new chief executive officer of Paddy Power Betfair, made his first presentation to the market when he delivered the company’s annual results in mid-March. He was perhaps understandably tentative. While he expressed satisfaction at a “solid 2017”, he repeatedly made the point that he was only eight weeks into a new job that he inherited from previous incumbent Breon Corcoran. It was a point he repeated time and time again. If there was a practical side to it (allowing him to pass tricky questions to experienced chief financial officer Alex Gersh), his main point seemed to be that he had inherited a listing ship and it was his job to put it right. “I think the reason it sounded discordant was because you were expecting him to say this is the year for growth and merger payoff; not stopping and thinking about

Jackson more or less skewered Paddy Power’s weaknesses. He highlighted a loss of focus, noted product gaps, and described a marketing spend that was too low for the mass market GIQ Q1 REVIEW

it and highlighting problems with Paddy Power,” says Peel Hunt analyst Ivor Jones. Another analyst points out that there are few new CEOs who will praise his or her predecessor. The easiest tactic is to say everything is rubbish and then over-achieve. “However, it’s possible he just hasn’t liked what he has seen since taking office,” concludes our source. Jackson’s description of the results was accurate. A 13 per cent rise in revenue is not too shabby. The concern for Jackson is the online business, which accounts for half of revenue and was up just five per cent. Furthermore, Gersh said he hated to use the word “decreasing” but accepted that there was no other word to describe the gaming side of the online business, which declined two per cent. Betfair’s gaming vertical grew four per cent during 2017 – but management still described it as underperforming against the market – while gaming at Paddy Power shrunk eight per cent versus the previous year. There are other adjectives Gersh could have used to describe the gaming segment – such as slumped, stagnant, depressed, concerning or worrying. It has been f lat or in decline since Q4 2016.

Paddy Power Betfair seems to be pulling itself out of its merger integration doldrums with relatively little scar tissue showing, so why is new chief executive officer Peter Jackson not feeling more bullish?

F E AT U R E

PADDY POWER BETFAIR

Jones expressed his surprise that this Industry insiders remain baffled why the was still an issue over a year after gaming technical integration of the two companies first flatlined. He had presumed it would be a has proved so difficult. Both sportsbooks live relatively quick fix. For example, GVC chief on the OpenBet platform – albeit different operating officer Shay Segev versions of the platform. And has talked about analysing both gaming operations rely GAMING STRUGGLES the areas where bwin.party on Playtech. Just when analagged behind industry norms, lysts were expecting Paddy and bringing them up to speed. Power and Betfair to convert These are not necessarily diftheir combined strength to an ficult from a technical perspecassault on market leadership, Total year on year tive but they can make a huge could they be aiming for more decline in FY2017 difference to the customer M&A instead? experience, while also making Jones believes that is the things easier for the operator. only conclusion to be drawn by But such have been PPB’s Jackson’s announcement that struggles that Jones now wonhe was aiming for a mediumIncrease in Betfair ders whether a merger with 888 term leverage target of one to gaming revenue is the magic elixir that could two times net debt to EBITDA. cure the ailing vertical. The This, Jackson assured us, is “to 888 management team runs a retain strategic flexibility” i.e. slick operation, based on the retain enough cash to make a strength of its casino product. big acquisition. Decline in Paddy Power It appears to have mastered Jones comments: “This is gaming revenue the art of continuing to run a a business with net cash, and profitable operation, despite all they are saying they would like the regulatory obstacles that to have a certain amount of debt. are placed in its way. Neither Betfair or Paddy They could have around £1bn of debt and £200m Power have ever run a strong casino. Just 26 per in cash. That is a lot of money. Why would you cent of revenue comes from the most profitable not give it back to shareholders now?” vertical, compared to around 50 per cent at WilAnother analyst answers Jones’ rhetorical liam Hill and 53 per cent at Ladbrokes Coral. question: “It’s perfect for buying big things.”

-2% 4%

-8%

Breon Corcoran, ex CEO of Paddy Power Betfair

The leverage target is one of Jackson’s three big initiatives that he feels will address the company’s “areas for improvement”. He also unveiled a change to the management structure, which sees Barni Evans become CEO of the hugely successful Australian brand Sportsbet and Dan Taylor appointed to the newlycreated position of Europe CEO. The final plank of his trio of big initiatives is a £20m marketing injection to boost Paddy Power’s UK presence and Betfair’s international visibility. Jackson more or less skewered Paddy Power’s weaknesses. He highlighted a loss of focus due to muddled decision-making in the management layers, he noted product gaps that have emerged versus competitors, and he described a marketing spend that was too low for the mass market. For each of these he offered plausible solutions. He could also point to a fairly good year for Betfair and some outstanding successes in the shape of Australia’s continued growth (revenue up 21 per cent) plus a retail estate set to benefit from competitors’ woes, if and when FOBT limits are lowered. So why did he sound so weary?

Who is Peter Jackson? The new chief executive is something of a business prodigy. He was appointed chief executive officer of Travelex, the world’s biggest foreign exchange retailer and one of the UK’s largest private companies, at the age of 34, following three years at McKinsey and five in a variety of roles at UK bank HBOS. During five years at Travelex he oversaw the sale of its business payments operation Travelex Global Business Payments to Western Union for £606m in 2011 and its Card Programme Management division to Mastercard for £290m. He left around a year after private equity owner Apax Partners sold the entire business to UAE Exchange for around £1bn. He took a year out from business before returning to the banking industry as head of innovation at Santander. Jackson has said he never saw himself as a career banker and it is likely that the Santander role only offered a mildly interesting route back into the saddle. When offered a route out and a CEO role to boot, he grabbed it. After just one year with the Spanish banking group, he jumped ship to become UK CEO of Worldpay. While he was CEO at Travelex, Jackson told a meeting of young entrepreneurs a story about how he got the job at Travelex. He had known Travelex founder Lloyd Dorfman for a few years, and when the CEO role became available, he called him and asked if he could apply for the job. It was quite a ballsy thing for

F E AT U R E

PADDY POWER BETFAIR

Dream team Peter Jackson’s Paddy Power Betfair management team

CFO Jonathan Hill (joins autumn 2018)

Chief strategy officer Aine Flanagan (with Paddy Power since 2007)

Chief technology officer Paul Cutter (with Paddy Power Betfair since 2014)

Chief development officer Johnny Hartnett (with Paddy Power since 1999)

Chief people officer Sally Cairns (with Betfair since 2015)

CEO – Sportsbet Barni Evans (with Paddy Power since 2001)

CEO – Europe Dan Taylor (with Paddy Power Betfair since 2015)

a 34-year-old to do. But he got the job. “Never be should endear the former banker to his new afraid of asking,” he said of that conversation colleagues. Another smart move was relocatwith Dorfman. ing to Paddy Power’s Dublin HQ, which will When Corcoran announced he was leaving send a positive message to the company’s Paddy Power Betfair, Jackson spied the opporheartland, when employees could be feeling a tunity to grab a role that was a step up from the bit jaded from numerous cuts and a perception UK CEO role he had at Worldpay. Despite being that the Betfair side of the business had taken less than six months into his new role, he was them over, rather than vice versa. not afraid to ask PPB chairman Gary McCann if he might be the right man to be named Subtle changes Corcoran’s successor. What Jackson failed to do during his debut Jackson is five years younger than his preperformance is articulate any evidence of a decessor. He told The Sunday Times a story grand vision. Again, he would say that he has about being mistaken for the tea boy when only been in the job eight weeks but this will starting as CEO at Travelex. But behind the be a key factor in making a success of the postyouthful looks, there is an ambitious characCorcoran, post-integration era. ter, and a smart business brain behind the mild He has put in place a very small team of manners. He is a committed globalist, who took senior executives, with Evans taking charge Travelex into Japan when everyone warned of Australia, Taylor managing Europe and against it, post-Asian crisis. A big part of his Kip Levin remaining CEO of Paddy Power desire to take on this role would have been the Betfair US. This aims to deliver a more streamglobal nature of the business. lined decision-making process. In addition to This will mostly be expressed in regulated the regional CEOs, Aine Flanagan has been markets or soon-to-be regulated markets, such appointed chief strategy officer. Flanagan as Australia and the US. Only nine per cent of worked with Corcoran at Paddy Power, Betfair PPB’s online revenues derive from unregulated and at the combined entity. markets. Gersh said that no single country is She will provide continuity and will also worth enough to justify it, because the income have overall responsibility for responsible from each unregulated jurisdiction fluctuates gambling. Jackson said a new leadership role wildly from quarter to quarter. However, he would be created to give responsible gambling also admitted an interest in Brazil. more prominence. Johnny Hartnett has been “As long as there is not a significant concenappointed chief development officer, Sally tration risk and the margins continue to make Cairns continues as head of HR and Paul Cutsense, we will participate in [unregulated marter remains chief technology officer. kets],” said Jackson. Jackson will need some continuity. Many This represents something of a sea-change saw former Sportstbet CEO Cormac Barry as for Paddy Power, which has always claimed Corcoran’s natural successor but he departed to be super-regulated. This to become the CEO of Irish might be a smart move car rental firm CarTrawler, towards accelerating top-line shortly after Jackson was “It is really important announced as CEO. Barry growth and it is normally a for challenger good thing to get a toe-hold joins his former boss Patrick in an unregulated market Kennedy at CarTrawler. brands to have that is expected to regulate. T he ot her exit from something that However, unregulated marCorcoran’s long-standing you can deliver to kets can also be seen as an management team is Gersh, your customers” unnecessary hassle. 888 who is leaving after apparPeter Jackson, Paddy and GVC have recently been ently tiring of the job’s travel Power Betfair threatened with extremely demands. Jackson has been large backdated tax bills in careful not to rock the boat Germany and Greece respectoo much, but has freshened tively. Meanwhile, The Stars Group’s exposure up the team with promotions and a subtle to the US has fundamentally changed the change of emphasis. It is probably a smart corporate entity’s structure and wrecked move. For all that the company’s products several people’s careers. Perhaps that is an have fallen behind competitors, while integraextreme example. tion has demanded resources, there is not much While Jackson acknowledged the queshere that is broken. tionable sustainability of unregulated marWhile William Hill is departing Australia kets, this approach hints at a pragmatism that with its tail between its legs, Paddy Power’s

F E AT U R E

PADDY POWER BETFAIR

CV Peter Jackson Jan 2018 Paddy Power Betfair: CEO Mar 2017 – Jan 2018 Worldpay: UK CEO Apr 2013 – Jan 2018 Paddy Power/Paddy Power Betfair: non-executive director Feb 2016 – Feb 2017 Banco Santander: head of innovation Mar 2010 – Mar 2015 Travelex: CEO Jan 2009 – Mar 2010 Lloyds Banking Group: MD of consumer products Oct 2006 – Dec 2008 HBOS: head of products Jan 2003 – May 2004 HBOS: head of personal loans products Mar 2002 – Dec 2002 HBOS: head of business development 1999 – 2002 McKinsey & Company: consultant

Sportsbet brand was the company’s outstanding success story during 2017. Revenue was up 21 per cent to £404m and gross profit rose 18 per cent to £292m. The US business is also performing well, with revenue rising above £100m for the first time. Sports revenue was up 13 per cent, while Betfair Casino in New Jersey now has a 12 per cent market share after growing 29 per cent during the year. Jackson continued to make positive noises about good positioning in the US market if the Supreme Court does repeal the sports betting prohibition across most of the country, while acknowledging that the process might still be slow. While the Supreme Court remains a big ‘if’, most stakeholders are gearing up to make it happen quickly if the judges deliver positive results. And Betfair is well positioned in the US. It has licences in over 30 states, from California to New Jersey, and its brand should play well in a country obsessed by integrity. While many land-based casinos will want to use their own brand, Betfair has an inherent brand advantage (it’s about betting fairly, geddit?) over a UK-based name such as William Hill or even Paddy Power, which would mean little to the average American. GIQ Q1 REVIEW

But, once again, Jackson urged caution. This can only be sensible. While most stakeholders are getting excited about a post-PASPA environment, we have been waiting a very long time for US regulation. Paddy Power stationed Eamonn Toland in the US in 2011 and only New Jersey had opened for business by the time he left in 2016. But if the US has potential, Australia is the model that the Paddy Power brand needs to follow to get back on track. Sportsbet has continually rolled out new products, while Paddy Power in the UK has suffered two years of stagnation as developers focussed on moving to Betfair’s platform. Jackson spent a long time during his presentation on highlighting and analysing Paddy Power’s weaknesses. He highlighted a low share of wallet and issues with ease of use that have meant Paddy Power has fallen further behind with the recreational bettors that form its core business. He noted that Sportsbet, Betfair and Paddy Power are all challenger brands. “It is really important for challenger brands to have something that you can deliver to your customers,” said Jackson. Gersh also made the point that “we are coming from behind”, and

that Paddy Power needs to roll out products to match the likes of William Hill’s Bet Boost and Bet365’s Bet Builder. To do so, Jackson said, the operator would have 1,000 developers, from Portugal to Romania, focused on getting products ready for the World Cup. All this talk of falling behind seems to be pointing the finger at the previous management’s failings, but it might also be an attempt to reinforce Paddy Power’s position as a challenger brand. It is not an easy position to maintain when the company is now a £6bn market cap giant, but it plays to Paddy Power’s strengths. Paddy Power rose to prominence as the lad’s brand in a culture where laddism was seen as trendy. However, trends change and there’s some doubt whether a lad’s brand can thrive in the current climate. That said, Betfair is being promoted as the international antidote to Paddy Power’s Anglo-centric (or maybe Celtic-centric) brand. It is also a non-lad’s brand, specifically aimed at the serious sports bettor. The combination of the two should have most bases covered, although neither has much of a gaming brand, of course. Jackson refused to rule out the launch or acquisition of a more gaming-focused brand. 888, perhaps? n 87

F I NA NC E STOCK INDEX

GAMING INTELLIGENCE STOCK INDEX Q1 2018

Disappointing first quarter for iGaming stocks

It was a tough start to the year for iGaming investors as the operators and suppliers featured in the Gaming Intelligence Stock Index saw their combined share prices fall by 12.73 per cent in Q1, writes Kio Dawson

Per Eriksson, former NetEnt CEO 88

AFTER SEEING GROWTH of 11.8 per cent during 2017, investors came back to Earth with a bump in Q1. More than half (29) of the public companies in the iGaming sector saw the value of their shares drop between 2 January and 29 March 2018. Topping the table in Q1 was New York-listed 500.com, which has successfully diversified its revenue through the acquisitions of Chinese lottery supplier MelcoLot and The Multi Group, comprising Nordic-facing B2C brands Multilotto.com and Multicasino.com, alongside B2B platform Lotto Warehouse. Shares in the company rose by 66.76 per cent to $17.16 by the end of the quarter, after 500.com’s acquisitions helped the company to its first annual revenue growth in three years during 2017. The company had been badly hit by the suspension of online lottery sales in China, enacted in March 2015. 500.com also made a move into China’s retail lottery market, with an

agreement to develop a new sales channel to sell Sports Lottery tickets. Working with the China Sports Lottery Administration Centre, 500.com will aim to strike agreements with provincial sports lottery centres to install its Sports Lottery terminals, as well as providing relevant maintenance and operational services. Last year was a milestone for Italian retail and online betting operator Snaitech, following the successful integration of the SNAI and Cogemat businesses. As well as unifying the organisational structures of the two rival operators, the company posted a profit for the first time in 10 years and saw its shares increase by 41.95 per cent to €1.89 by the end of March. In a further boon to shareholders, Playtech acquired a 70.6 per cent stake in the company for €846m in April, which will be followed by a mandatory takeover offer for the remaining shares before the end of this year. It marks Playtech’s first big move into the B2C retail market, and is part of the company’s strategy to improve the quality and diversification of its revenue. Snaitech and 500.com were among 21 companies to hit 52-week highs during the quarter. Others to hit new heights included Zeal Network and the Stockholm-listed trio of Scout Gaming Group, Catena Media and Kambi Group. The Stars Group also set a new 52-week high, following its Australian acquisition spree, which has seen the operator strike deals for CrownBet and William Hill Australia.

F I NA NC E STOCK INDEX

Cherry and Pollard Banknote also recorded new share price highs during Q1, closing the period up 22.18 per cent and 22.81 per cent respectively, while shares in Gaming Innovation Group climbed 20.28 per cent to NOK5.93. The quarter saw the GI Stock Index lose two big names in Ladbrokes Coral and NYX Gaming Group, which are now part of GVC Holdings and Scientific Games, following their respective acquisitions. There could be more to follow this year, with the likes of 888, William Hill and Rank Group all rumoured to be involved in M&A action. Replacing Ladbrokes Coral and NYX, two more Stockholm-listed companies joined the fray. Shares in B2B fantasy sports provider Scout Gaming Group were up 9.65 per cent to SEK43.30 during Q1, while Ninja Casino operator Global Gaming 555’s shares climbed 4.80 per cent to SEK33.00 in their first appearance in the chart.

COMPANY 500.com Ltd

$10.29

$17.16

€1.33

€1.89

41.95%

SEK51.30

SEK63.00

22.81%

CAD$17.40

CAD$21.26

22.18%

€21.42

€26.10

21.85%

CAD$29.25

CAD$35.56

21.57%

NOK4.93

NOK5.93

20.28%

Cherry AB Pollard Banknote Limited Zeal Network SE The Stars Group Inc (TSX) Gaming Innovation Group Inc Scout Gaming Group AB Catena Media plc Lotto24 AG Kambi Group plc Fortuna Entertainment Group (PRA) Churchill Downs Incorporated Global Gaming 555 AB Global Daily Fantasy Sports Inc Gaming Realms plc William Hill plc Intralot SA Aristocrat Leisure Limited International Game Technology plc

GIQ Q1 REVIEW

66.76%

SEK39.49

SEK43.30

9.65%

SEK105.30

SEK113.20

7.50%

€10.35

€11.08

7.05%

SEK95.50

SEK101.60

6.39%

CZK178.50

CZK189.00

5.88%

$232.85

$244.05

4.81%

SEK31.49

SEK33.00

4.80%

CAD$0.28

CAD$0.29

3.57%

8.48p

8.75p

3.18%

322.00p

330.30p

2.58%

SEK61.76

SEK63.12

2.20%

€1.13

€1.15

1.59%

AUD$23.70

AUD$24.06

1.52%

$26.50

$26.73

0.87% -0.65%

GVC Holdings plc

925.00p

919.00p

Safecharge International Group Limited

296.00p

292.50p

-1.18%

Jackpotjoy plc

828.50p

812.00p

-1.99%

SEK116.95

SEK114.15

-2.39%

281.70p

269.80p

-4.22%

Kindred Group plc 888 Holdings plc

The biggest faller in Q1 was Sydney-listed Topbetta Holding, which saw its shares decline by 65 per cent to close the quarter at AUD$0.14. There were also significant share prices drops for the likes of Inspired Entertainment and mybet Holding, down 44.44 per cent and 39.50 per cent respectively. Alongside these three companies, there were another 19 companies that recorded double-digit declines in their share prices during Q1, including Paddy Power Betfair, LeoVegas, Evolution Gaming and Mr Green & Co. After a buoyant year in 2017, shares in Scientific Games fell 18.43 per cent to $41.60, though the quarter saw the gaming giant hit a 52-week high of $56.45 in January. Stockholm-listed NetEnt had a quarter to forget as it announced a first profit warning in January, which led to a sharp fall in its shares and the departure of its chief executive Per Eriksson soon after. Its shares have now fallen by nearly 40 per cent in the past year, and reached a 52-week low of SEK37.33 in March. There were also record lows set by bet-athome.com, AGTech, Phumelela Gaming and Leisure, as well as London-listed Sportech and Playtech. n

% CHANGE

Snaitech SpA

Betsson AB

There could be more mergers to follow this year, with the likes of 888, William Hill and Rank Group all rumoured to be involved in M&A action

OP. PRICE 02.01.18 CL. PRICE 29.03.18

Zynga Inc Aspire Global plc OPAP SA Stride Gaming plc Ainsworth Game Technology Ltd Rank Group plc Playtech plc

$3.94

$3.66

-7.11%

SEK36.50

SEK33.45

-8.36%

€10.50

€9.29

-11.52%

247.50p

217.00p

-12.32%

AUD$2.16

AUD$1.85

-14.35%

241.50p

206.50p

-14.49%

860.50p

732.80p

-14.84%

SEK84.20

SEK71.10

-15.56%

ZAR17.50

ZAR14.75

-15.71%

8,825.00p

7,300.00p

-17.28%

GAN plc

32.13p

26.50p

-17.52%

Scientific Games Corporation

$51.00

$41.60

-18.43%

LeoVegas AB Phumelela Gaming and Leisure Limited Paddy Power Betfair plc

Evolution Gaming Group AB

SEK569.00

SEK457.40

-19.61%

Mr Green & Co AB

SEK55.80

SEK44.70

-19.89%

Tabcorp Holding Ltd

AUD$5.58

AUD$4.39

-21.33%

AGTech Holdings Ltd

HK$1.21

HK$0.93

-23.14%

80.00p

60.00p

-25.00%

Sportech plc Nektan plc

29.50p

21.50p

-27.12%

NetEnt AB

SEK58.00

SEK41.94

-27.69%

Webis Holdings plc

1.13p

0.77p

-31.86%

€104.37

€69.00

-33.89%

mybet Holding SE

€0.40

€0.24

-39.50%

Inspired Entertainment Inc

$9.90

$5.50

-44.44%

AUD$0.40

AUD$0.14

-65.00%

bet-at-home.com AG

TopBetta Holdings Ltd

F I NA NC E

GIQ20 H1 2017

ON THE FOLLOWING PAGES

91 GIQ20 FY 2017 results and analysis

The GIQ FY 2017 2017 WAS A strong year for the iGaming industry’s leading operators and suppliers, as all of the companies in the GIQ20 chart recorded at least double-digit revenue growth from the previous year. Nordic-listed companies once again dominated the top end of the table. Nine of the top 10 companies on the chart were listed in Stockholm or Oslo, with Global Gaming emerging to shore up the Scandinavian hegemony. While its revenue grew from a small base, the Ninja Casino operator had a year to remember in 2017 and outperformed both Cherry and Gaming Innovation Group – two companies which had topped the GIQ20 chart during the course of 2017. These three all recorded triple-digit revenue growth versus 2016, while the likes of Catena Media, Evolution Gaming, LeoVegas and Kindred Group all performed strongly. New Yorklisted Scientific Games broke the Nordic stranglehold on the top 10, and it should soar up the chart in 2018, once results from newly-acquired NYX Gaming Group are included. Paddy Power Betfair was the biggest listed company in the sector last year, with online revenue of £1.4bn, followed by The Stars Group with US$1.3bn (approx. £929m). They will both be usurped by GVC Holdings this year, however, once Ladbrokes Coral’s online businesses are swallowed up as part of its latest mega-merger. Betsson and NetEnt struggled but still saw revenue grow, while 888 Holdings, bet-at-home. com and Zeal Network posted single-digit revenue growth, though this wasn’t enough to secure them a place in the GIQ20 chart. n 90

The GIQ20 FY 2017 COMPANY 1

Global Gaming 555

Gaming Innovation Group

Cherry (excluding land-based)

ONLINE 2016

ONLINE 2017 CHANGE

SEK97.0m

SEK458.0m

372%

€53.6m

€120.4m

125%

SEK945.4m

SEK2,094.6m

122%

Catena Media

€40.0m

€67.6m

69%

Evolution Gaming

€115.5m

€178.4m

54%

LeoVegas

€141.4m

€217.0m

53%

Kindred Group

£544.1m

£751.4m

38%

Scientific Games

US$332.8m

US$427.8m

29%

Mr Green & Co

SEK924.5m

SEK1,192.0m

29%

GVC Holdings

€743.1m

€925.6m

25%

Aspire Global

€61.0m

€71.9m

18%

Betsson

SEK4,117.3m

SEK4,716.5m

15%

Churchill Downs Incorporated (excl. Big Fish Games, Racing and Casino)

US$56.2m

US$64.4m

15%

The Stars Group

US$1,155.2m

US$1,312.3m

14%

Playtech

€708.6m

€807.1m

14%

Jackpotjoy

£266.9m

£304.6m

14%

William Hill (excl. Retail and Australia)

£544.8m

£616.9m

13%

Paddy Power Betfair (excl. Retail)

£1,256m

£1,411m

12%

NetEnt

SEK1,455.1m

SEK1,625.0m

12%

Kambi Group

€56.0m

€62.1m

11%

F I NA NC E

GIQ20 FY 2017

Global Gaming steals top spot from Cherry and GiG place on 19 October. Increased marketing, a bigger workforce, new offices and a strong focus on innovative technology and infrastructure are all investments in the future, so we can continue our strong, organic growth.” Global Gaming was formed in 2015 following the merger of developer Connected Table, the company behind the InstaDeal brand, and affiliate LMA Gaming.

GAMING INNOVATION GROUP 125% Net revenue (€)

Global Gaming enjoys a breakthrough year as Nordic-listed companies dominate the GIQ20 chart in 2017, writes Kio Dawson GLOBAL GAMING 372% Net revenue (SEK)

TOTAL

“Increased marketing, a bigger workforce, new offices and a strong focus on innovative technology and infrastructure are all investments in the future” Stefan Olsson, Global Gaming

GIQ Q1 REVIEW

2016

2017

Change

97.0m

458.0m

372%

It was a year to remember for Global Gaming, the latest Nordic-facing operator to to list in Stockholm following a successful SEK850m IPO last October. Making its GIQ20 debut, the company stormed to the top of the chart after seeing revenue more than quadruple to SEK458m and profit soar 951 per cent to SEK108.3m in 2017. The revenue growth was achieved through the performance of its flagship Ninja Casino site, as well as its Netticasino.com, Koti Kasino and Viking Slots brands. “I can look happily and proudly back on a demanding and successful 2017,” said chief executive Stefan Olsson. “A lot of time and effort was put into listing the shares on First North over the year, which successfully took

2016

2017

Change

B2C

42.4m

86.0m

103%

B2B

15.6m

44.4m

185%

Eliminations

(4.4m)

(9.9m)

125%

TOTAL

53.6m

120.4m

125%

Oslo-listed Gaming Innovation Group (GiG) was another to see revenue more than double during the year as revenue increased by 125 per cent to €120.4m following a record performance during the final quarter of the year. “Through the last three months of 2017 we made solid progress across the organisation – and reached the target of revenues above €120m for the full year,” said chief executive Robin Reed. “The achievements are a testament of the capabilities and value of our proprietary technology, products and organisation. “Our goal is to re-invent the value chain in the industry, replacing it with an open and connected ecosystem, benefiting users, suppliers and operators alike. I see the recently announced Hard Rock partnership as one evidence of our capabilities to develop these industry leading services.” The landmark deal will see GiG power a new real-money online casino in New Jersey’s regulated iGaming market, which is expected to launch before the end of the year. Through revenue share arrangements, it has the potential to be the largest platform agreement ever signed by the company. 91

F I NA NC E GIQ20 FY 2017

CHERRY

Henrik Persson Ekdahl, Catena Media

122%

LEOVEGAS 53%

Net revenue (SEK) 2016 Online gaming

2017

830.5m

1,823.4m

120%

Online marketing

57.0m

145.9m

156%

Game development

86.9m

169.1m

81%

Gaming technology

n/a

38.6m

n/a

Eliminations

(29.0m)

(82.4m)

184%

Total

945.4m

2,094.6m

122%

Cherry may have slipped below Global Gaming and Gaming Innovation Group in the GIQ20 chart but full-year revenue more than doubled in 2017, despite problems with the integration of ComeOn during the year. Excluding the land-based restaurant casino business, revenue rose 122 per cent to SEK2.1bn. Online gaming revenue grew by 120 per cent to SEK1.8bn, with the company’s game development division Yggdrasil Gaming contributing SEK169.1m. Revenue from the Game Lounge online marketing division soared to SEK145.9m, while gaming technology business XCaliber accounted for a further SEK38.6m. “Cherry’s strong development continued in 2017,” said chief executive Anders Holmgren. “We have captured market shares and our companies have strengthened their positions.” Following the integration of ComeOn into its online gaming business during the year, Cherry noted that the company’s costs, market focus and management had not lived up to expectations. “Following an intensive period in the second half of the year, the company is back on the growth curve that we envisage,” said Holmgren. “Together, ComeOn’s management and I have identified several priority improvement factors for 2018, and these will be implemented over the year.” Anders Holmgren Cherry

Net revenue (€)

Change TOTAL

CATENA MEDIA 69% Net revenue (€) 2016

2017

29.4m

53.9m

Change 83%

Paid

10.6m

12.7m

20%

TOTAL

40.0m

67.6m

69%

There was a strong performance too from digital marketing specialist Catena Media, which grew revenue by 69 per cent to €67.6m and profit by 31 per cent to €21m during 2017. Search revenue increased to €53.9m, driven in part by organic growth and through acquisitions, while Paid revenue, principally related to pay-per-click (PPC) traffic, climbed 20 per cent to €12.7m. Casino revenue represented two-thirds of Catena’s total, with €51.3m. Sports contributed €14.2m and financial trading the remaining €1m. “2018 will be a great year for sports, with major events such as the World Cup and the Olympic Games on the agenda,” said acting CEO Henrik Persson Ekdahl. “Both of these happenings provide us with extraordinary opportunities in 2018. I believe 2018 will be a strong year for Catena Media, both in terms of financial performance, operational excellence and new opportunities.”

“I believe 2018 will be a strong year for Catena Media, both in terms of financial performance, operational excellence and opportunities” Henrik Persson Ekdahl, Catena Media 92

2016

2017

Change

141.4m

217.0m

53%

2017 was the year that Stockholm-listed LeoVegas entered the M&A sector. Its acquisition spree began with Italy’s Winga. it at the start of the year and ended with UK online casino operator Royal Panda. These acquisitions, supported by continued organic growth, pushed the operator’s full-year revenue up 53 per cent to €217m for the year, with profit for the year climbing 26 per cent to €18.1m. Sweden continues to represent LeoVegas’ biggest market, accounting for a third of Q4 revenue, followed by other Nordic countries and the rest of Europe with 22 per cent each. The UK market generated 17 per cent of revenue, with the rest of world contributing the remaining six per cent. “Q4 2017 was one of our best quarters ever, with very strong underlying growth,” said group CEO and co-founder Gustaf Hagman. This year growth will be further driven by organic growth and its M&A expansion strategy, which has seen the company also snap up UK-facing casino brands from Intellectual Property & Software, German operator World of Sportsbetting and streaming service provider GameGrounds United.

Gustaf Hagman, LeoVegas

F I NA NC E

GIQ20 FY 2017

Henrik Tjärnström, Kindred Group

EVOLUTION GAMING GROUP

KINDRED GROUP

54%

38%

Net revenue (€)

Net revenue (£)

TOTAL

2016

2017

Change

115.5m

178.4m

54%

Despite an increasingly competitive sector, live dealer specialist Evolution Gaming continued to go from strength-to-strength in 2017 as revenue grew by 54 per cent to €178.4m, helping boost profit by 96 per cent to €31.7m. Evolution’s growth means that the supplier now has approximately 400 tables in operation across its live studios, which have been further expanded this year with new facilities opening in Canada and Georgia. “Looking back on 2017, it is easy to say that it was an exceptional year in many ways,” CEO Martin Carlesund said. “But that does not give us reason to take anything for granted – on the contrary, we must continue to work hard every day to maintain our position in the market. “On the whole, with new studios and exciting product launches on the cards, we see good prospects to continue strengthening our business in 2018, with a clear focus on profitable growth.” GIQ Q1 REVIEW

2016

2017

Sports betting

245.5m

346.5m

41%

Casino and games

269.4m

367.3m

36%

“Our investments in marketing and product development have also resulted in an all-time high in EBITDA and number of active customers”

12.5m

15.2m

22%

Henrik Tjärnström

16.7m

22.4m

34%

544.1m

751.4m

38%

Poker Other TOTAL

Change

Another strong year of growth saw Stockholm-listed Kindred Group generate more than £750m in revenue during 2017, with shareholders further buoyed by a 40 per cent increase in net profit to £117.4m. Casino and games accounted for just under half of total revenue, having grown by 36 per cent year-on-year, while its sports betting vertical performed even better as revenue increased by 41 per cent to £346.5m. Poker conMartin Carlesund, tinued its recent Evolution Gaming resurgence, with revenue up 22 per cent, while other revenue climbed 34 per cent. Kindred benefited from a record performance during Q4 as revenue increased by 49 per cent to £ 2 3 8 m , i nclud i n g £18.8m from newly acquired Gibraltarbased operator 32Red.

Of the Q4 total, 42 per cent of revenue was derived from locally regulated markets. “Strong growth across our major markets and an exceptional sportsbook margin approximately 50 per cent above the long-term average, have resulted in record revenue and profitability for Kindred Group in the fourth quarter of 2017,” said chief executive Henrik Tjärnström. “Our investments in marketing and product development have also resulted in an all-time high in EBITDA and number of active customers.”

SCIENTIFIC GAMES 29% Net revenue (US$)

Social gaming B2C Other interactive B2B TOTAL

2016

2017

Change

274.4m

362.0m

32%

58.4m

65.8m

13%

332.8m

427.8m

29%

Scientific Games’ interactive business will grow substantially when results from NYX Gaming Group are included this year with the B2B segment expected to be the bigger contributor. In 2017, the bulk of interactive revenue was derived from social gaming, which contributed $362m. 93

F I NA NC E GIQ20 FY 2017

“For 2018, we believe the company is well positioned to continue to grow and build on the success attained in the past year” Kevin Sheehan, Scientific Games

This primarily reflected a 32 per cent increase in social gaming B2C revenue due to the popularity of the Jackpot Party Social Casino and Quick Hit Slots apps, as well as 88 Fortunes and Bingo Showdown. Average daily active users (DAUs) amounted to 2.5 million, although average monthly active users fell by one per cent to 7.6 million. Revenue from DAUs increased by 29 per cent to $0.42, with mobile penetration rising to 72 per cent during the year. “For 2018, we believe the company is well positioned to continue to grow and build on the success attained in the past year,” said chief executive Kevin Sheehan.

“I can now state that 2017 was Mr Green’s most successful year ever,” chief executive Per Norman said. “We delivered on our strategy, Mr Green 2.0, our product offering is better than ever and we expanded geographically.” Revenue this year should be boosted by Mr Green’s acquisition of Evoke Gaming last December, which includes brands such as Redbet, Vinnarum, Bertil and MamaMia, and generated revenue of €3.1m during Q4.

GVC HOLDINGS 25% Net revenue (€)

MR GREEN & CO 29% Net revenue (SEK)

TOTAL

2017

Change

520.4m

663.8m

28%

Games brands

188.3m

228.7m

21%

13.3m

16.5m

24%

B2B 2016

2017

Change

924.5m

1,192.0m

29%

Stockholm-listed operator Mr Green & Co hailed 2017 as the most successful year in the company’s history after revenue grew 29 per cent and profit more than doubled to SEK109.4m. Revenue for the year climbed to SEK1.19bn, driven by a 25 per cent increase in the number of active customers to 297,667 and a 29 per cent increase in customer deposits to SEK3.5bn. 94

2016 Sports brands

Other

21.1m

16.6m

-21%

TOTAL

743.1m

925.6m

25%

London-listed GVC will become the biggest iGaming operator in the GIQ20 chart following the completion of its acquisition of Ladbrokes Coral. It was the third largest in terms of revenue in 2017, following a successful year which saw the successful integration of bwin.party. GVC said that its underlying growth was “even more impressive” given that the previ-

F I NA NC E

GIQ20 FY 2017

ous year included Euro 2016. Including its discontinued Turkish operations, revenue would have surpassed €1bn. Revenue from sports brands (including bwin and Sportingbet) increased 20 per cent to €663.8m, while games brands revenue rose by 12 per cent to €228.7m, buoyed by a 42 per cent increase in revenue from partypoker and a return to underlying growth for PartyCasino after several years of decline. “GVC achieved a significant amount in 2017 and as these numbers demonstrate, we have delivered material value from the bwin.party acquisition,” said chief executive Kenneth Alexander. “It is particularly pleasing that we have been able to produce such strong results at the same time as completing the integration of bwin.party and continuing to enhance our product offering.”

“2017 was a game changer for Aspire Global,” said chief executive Tsachi Maimon. “We went from being a private player to becoming a publicly listed company, from having a few key accounts to widening our customer base, and finally from general expansion to further strengthening our focus on regulated markets. “Out of our investments, the addition of a sports vertical to our platform is the single most important initiative for organic growth. Despite these events and a series of completed investments for the coming years, we managed to stay focused on our core business, driving organic growth with sustained, strong profitability.” Pontus Lindwall, Betsson

BETSSON 15% Net revenue (SEK) 2016

2017

Change

ASPIRE GLOBAL

Casino

2,907.8m

3,437.9m

18%

Sportsbook

1,080.4m

1,140.3m

129.1m

138.3m

4,117.3m

4,716.5m

15%

Other

Net revenue (€) 2016

2017

Change

B2B

30.0m

37.1m

24%

B2C

31.0m

34.8m

12%

TOTAL

61.0m

71.9m

18%

In its maiden results as another of the newest Stockholm-listed companies to emerge on the scene, Aspire Global saw revenue for the year increase by 18 per cent to €71.9m, driven by its growing B2B division. Aspire Global recorded a strong performance in Q4 as revenue climbed 27 per cent to €19.2m, despite being the first full quarter since the company was forced to exit the Australian market following a change in regulations last year.

TOTAL

Despite an unusually turbulent year, Betsson posted revenue growth of 15 per cent to SEK4.7bn in 2017, driven by its casino vertical, which accounted for nearly three-quarters of the total. With Pontus Lindwall returning as CEO following the surprise departure of Ulrik Bengtsson last September and planned redundancies of nine per cent of the company’s staff, these are difficult times for the Stockholmlisted operator behind the scenes. But operationally, it was a solid year for the company as online casino revenue grew by 18 per cent to SEK3.4bn, with sportsbook revenue climbing six per cent to SEK1.1bn. Higher

“We are systematically implementing actions to improve performance and expect to see results towards the end of the year” Pontus Lindwall, Betsson expenses meant that Betsson’s net profit for the year fell by 10 per cent to SEK786.5m. “When I stepped in as CEO in September, my first action was to analyse the situation the company was in and, together with management, set a plan on how to bring Betsson back to higher growth and earnings,” said Lindwall. “It will take some time until I am satisfied, but we are systematically implementing actions to improve performance and expect to see results towards the end of the year.”

CHURCHILL DOWNS (TWINSPIRES ONLY)

15% Net revenue (US$)

TOTAL

2016

2017

Change

$56.2m

64.4m

15%

New York-listed casino and racecourse operator Churchill Downs Incorporated (CDI) sold its biggest iGaming business, Big Fish Games, in January, leaving TwinSpires as its only operations in the online sector for now. Revenue from the company’s US advance deposit wagering business grew by 15 per cent to $255.6m, having seen handle increase by 17 per cent. This helped CDI’s total revenue

GIQ Q1 REVIEW

Presque Isle Downs and Casino

for the year climb seven per cent to $882.6m, with growth across its racing and land-based casino segments. Big Fish Games, which was sold to Aristocrat for $990m, would have contributed $486.2m in revenue during the year.

CDI is now expected to enter the real-money iGaming sector for the first time following the regulation of the Pennsylvania market, having agreed a deal to acquire the Erie-based Presque Isle Downs and Casino in March.

F I NA NC E GIQ20 FY 2017

Rafi Ashkenazi, The Stars Group

PLAYTECH 14% Net revenue (€) 2016

2017

Change

Casino

371.7m

411.3m

11%

Services

115.9m

94.3m

-19%

Sport

55.9m

85.7m

53%

Bingo

18.0m

24.8m

38%

Poker

9.0m

9.4m

5% 48%

Other

17.8m

26.4m

588.3m

651.9m

11%

Gaming B2C

54.7m

70.3m

28%

Financials division

65.6m

84.9m

29%

708.6m

807.1m

14%

Total gaming B2B

TOTAL

THE STARS GROUP

“We delivered another year of record revenues, and continued to strengthen our balance sheet, all while investing in marketing, growth initiatives and technology to support long-term growth” Rafi Ashkenazi, The Stars Group

14% Net revenue (US$) 2016

2017

Change

Poker

846.1m

877.3m

Casino and sportsbook

264.1m

384.0m

45%

45.0m

50.3m

12%

0.1m

0.7m

600%

1,155.2m

1,312.3m

14%

Other gaming Corporate TOTAL

Toronto-listed The Stars Group reported a 14 per cent increase in revenue to US$1.3bn for 2017, buoyed by another strong year of growth from its online casino and sportsbook, which contributed nearly a third of the total. There was also a return to form from its core online poker offering as revenue increased by four per cent to $877.3m, benefiting from a positive impact from the operator’s strategy of focusing on recreational players and the introduction of Stars Rewards. This helped counter certain regulatory headwinds, including the cessation of operations in markets such as Australia and Colombia. “2017 marked our evolution and transformation into The Stars Group,” said chief executive Rafi Ashkenazi. “During the year, we strengthened our core senior management team, delivered another year of record revenues, significantly deleveraged and continued to strengthen our balance sheet, all while investing in marketing, growth initiatives and technology infrastructure to support the longterm growth of our business.” 96

Its been a while since Playtech made it into the top half of the GIQ20 chart, but the London-listed gaming technology provider had a decent year in 2017 as revenue increased by 14 per cent to €807.1m. Casino remains its biggest product vertical and represented over half of the total with €411.3m. There was a decline from the services division, but growth for the sport, bingo, and financials divisions. For the first time, Playtech also provided a revenue breakdown of its B2C Gaming revenue, which grew by 28 per cent to €70.3m. Playtech’s shareholders may have seen the company’s share price slump by 20 per cent over the past year, but a 28 per cent increase in profit for the year to €249.1m proved a boon as the board raised final dividends by 10 per cent to 23.9 cents per share. This took the full-year dividend to 36.0 cents per share, an increase of 10 per cent compared to the prior year period.

JACKPOTJOY 14% Net revenue (£) 2016

2017

Change

Jackpotjoy

188.2m

211.3m

12%

Vera&John

57.0m

73.2m

28%

Mandalay

21.7m

20.2m

-7%

266.9m

304.6m

14%

TOTAL

In its first full year as a London-listed company, online bingo and casino operator Jackpotjoy posted record results for 2017 as revenue increased by 14 per cent to reach £304.6m. Revenue from the operator’s Jackpotjoy division increased by 12 per cent to £211.3m, following strong growth from the Starspins and Botemania brands, which now account for 22

F I NA NC E

GIQ20 FY 2017

per cent of the segment’s revenue. Vera&John revenue was up 28 per cent to £73.2m, while Mandalay revenue declined by seven per cent to £20.2m due to lower marketing spend. “The record financial results we achieved in 2017 reflect the dedication, ambition and work ethic present in employees across the business,” said executive chairman Neil Goulden. “As an organisation, we are committed to delivering the best customer experience across all our gaming verticals.”

“William Hill begins 2018 in a stronger position after a year of significant change for the business,” said chief executive Philip Bowcock. “We continue to gain ground in the UK where customers are responding to our improved online and omni-channel offers. We are a leader in sports betting in the US and are well positioned to benefit should more states start to regulate if the pending Supreme Court decision is positive.”

PADDY POWER BETFAIR WILLIAM HILL

12%

13%

Net revenue (£)

2016

2017

Online

853m

898m

14%

Australia

312m

404m

30%

308.6m

12%

91m

109m

21%

616.9m

13%

TOTAL

£1,256m

£1,411m

12%

2016

2017

Change

270.1m

308.3m

Gaming

274.7m

TOTAL

544.8m

Sportsbook

Reflecting its focus on rejuvenating its interactive business, UK bookmaker William Hill was able to record a 13 per cent increase in online revenue to £616.9m during 2017. Sportsbook amounts wagered increased by 10 per cent to £4.74bn following improvements to mobile, desktop and marketing over the past 18 months, helping sportsbook net revenue climb 14 per cent to £308.3m. Online gaming revenue rose 12 per cent to £308.6m, with core markets up 13 per cent and non-core markets up 10 per cent. Overall, William Hill saw revenue increase by seven per cent to £1.7bn in 2017, with growth in its retail, US and Australian divisions. Despite this growth, the company incurred a loss of £83.2m for the year after incurring £335m of exceptional costs and adjustments, mostly relating to the goodwill impairment of its Australian business, which was sold to The Stars Group’s CrownBet. Philip Bowcock, William Hill

Change

It was a challenging year too for rival bookmaker Paddy Power Betfair, which saw growth from its online division slow due to the underperformance of its gaming vertical (see page 83 for more). While there was strong year-on-year growth from its Australia and US segments, revenue for online was up just five per cent to £898m, with sportsbook growth of eight per cent to £660m, offsetting a two per cent decline in gaming to £238m. The operator said that a key focus for online last year was the integration of the Paddy Power technology platform on to the Betfair platform, with the substantial development work required limiting the release of new products during 2017. Including its retail business, total revenue increased by 13 per cent for the year to £1.74bn. Combined with higher M&A costs in the prior year period, the bookmaker saw profit swing to £217.7m, compared to a loss of £5.7m in 2016.

NETENT 12% Net revenue (SEK)

TOTAL

2016

2017

Change

1,455.1m

1,625.0m

12%

By anyone else’s standards, a 12 per cent increase in revenue and a 9.5 per cent increase in net profit would be a solid year of growth. But, coupled with a 40 per cent drop in NetEnt’s share price in the past year, it proved to be the end for Per Eriksson. The CEO was removed from his role after six years in March, and GIQ Q1 REVIEW

replaced by CFO Therese Hillman on an interim basis. Having been forced to issue a warning in January that it would not meet its financial targets, NetEnt revealed that Q4 revenue grew by just five per cent to SEK419.3m, impacted by the supplier’s withdrawal from Australia, Poland and the Czech Republic, which negatively impacted revenue by three percentage points during the quarter. “2017 was another eventful year, with profitable growth for NetEnt, even though we had expected a much better outcome,” said Eriksson, in what would turn out to be his final results presentation.

Kristian Nylen, Kambi Group

KAMBI GROUP 11% Net revenue (€)

TOTAL

2016

2017

Change

56.0m

62.1m

11%

The Swedish sports betting provider ended the year on a high with Q4 delivering record results. This pushed revenue up 11 per cent to €62.1m for the full year, although net profit fell by 21 per cent to €5.9m due to higher operating costs. Revenue in Q4 grew 33 per cent year-onyear to €19m, marking Kambi’s highest-ever quarterly revenue performance – a result of an extended run of favourable sporting results, driving operator trading margin to 9.7 per cent. “We are entering 2018 with strong momentum,” said chief executive Kristian Nylén. “With LeoVegas, Paf and Napoleon Games all signing long-term contract extensions, and an increasingly realistic proposition of a legal US sports betting market in the not-too-distant future, Kambi has never been in better shape and I’m personally excited for the year ahead.” The fourth quarter also saw Kambi sign South African gaming operator Sun International as a new client, the eighth consecutive quarter in which Kambi has added at least one new customer. 97

C O LU M N AND ANOTHER THING...

Changing the culture of the iGaming industry OPINION Juliet Daye LADBROKES CORAL GROUP

iGaming is often seen as a boys’ club, but there are practical steps that can be taken to tackle this image and set the industry on a more inclusive path

s a business psychologist I found the ICE conference fascinating, particularly given the political and media backdrop of the event. One thing was clear to me – that the industry needs to respond to the changing times in order to continue to attract future talent, of both sexes. I have witnessed first-hand what happens when an industry does not adapt to the changing demands of its customers and the wider world. My former employer was a large music retailer who, following the success of the CD format, was convinced customers would always want to buy the physical product, rather than download it. The change in customer needs was swift and fatal for most music retailers. This is something I am determined the gaming industry avoids, and while we have made a good start, there is certainly more we can do. False stereotypes are common: “Women choose not to work here”; ‘They’re not interested in tech”. Despite this, I believe it is possible for gaming to improve its gender balance and diversify its appeal and image. With increasing globalisation, the imperative to represent women and other groups fairly will only increase.

The following steps are a good place to start 1. Leadership

“Reducing the micro behaviours that make women (or anyone) feel excluded can contribute to a culture where women feel valued, taken seriously and able to perform at their best” 98

We need deliberate and visible acts of leadership. Male and female leaders in the industry need to make explicit and tangible commitments to improve employee gender diversity and the representation of women in marketing and product design. Leaders must tune into changing attitudes, and have the courage and conviction to seize the commercial opportunities this presents. We need more women in leadership roles and in decision-making spaces.

2. Start at home Each organisation needs to start by looking at its own culture and practices; improving gender diversity here can flow through to wider systemic change. Cultural change must be approached from multiple levels. a) Bias. We all want to work for a meritocracy where people are judged on their capabil-

ity rather than anything else, but the truth is that our decisions and beliefs about people are often influenced by systematic thinking errors, which can reinforce gender stereotypes. Unconscious bias can be misunderstood; it can be uncomfortable to realise we all have it, but without accepting this we don’t follow the practical steps that can reduce it. b) Behaviours. The behaviour of managers sets the tone; they must explicitly respect and value the contributions of women in their organisation, and call out inappropriate views or behaviours. Small things matter; raising awareness of and reducing the micro behaviours that make women (or anyone) feel excluded can contribute to a culture where women feel valued, taken seriously and able to perform at their best. c) Systems, processes, practices. Imagine a recruitment process where candidates’ names and schools/universities attended were removed from CVs. This simple step could go a long way to avoiding the common pitfall of ‘hiring people like me’. A careful rethink of systems, processes and practices, such as recruitment, can minimise the risk of bias. Equally, if your website and materials only include images of white men, the message is that is who’s welcome. Interview processes, parental leave policies, imagery on websites – all of these communicate the underlying beliefs of a business.

3. Influence beyond It’s a salutary fact that by the age of six, children are already able to categorise which jobs are typically male and female. It’s easy to blame others for the gender imbalance in gaming: “The industry is a boy’s club”; ‘Girls drop out of tech at school”. Waiting for change will take too long; we must be ambitious and engage young people to break down the messages society feeds them about what jobs they can and can’t do. We can do more to proactively manage perceptions by raising the profile and visibility of women in the industry, and design and market products that appeal to a wider range of consumers. n Juliet Daye is head of diversity & inclusion and talent development at Ladbrokes Coral Group

www.twelve40.com

GROUP