Time to go Dutch for iGaming?

An Expert Overview of the Netherlands Market

Peter-Paul de Goeij and Wesley Kock discuss how to successfully launch in the Netherlands market.

Peter-Paul de Goeij | Managing Director at NOGA (Netherlands Online Gambling Association)

On 1 October 2021, the Netherlands opened its regulated online gambling market, clearing the way for players in the country to place legal sports bets and play casino games over the Internet. This has put the country in the spotlight of the entire iGaming industry. With an estimated 1.2 million active players, the territory could become one of the most important gaming markets in Europe.

But venturing into this legislative territory in the making is no mean feat. This interview is with Peter-Paul de Goeij, Managing Director of the Netherlands online gambling association (NOGA), and Wesley Kock, Head of Hosting Sales at Internet Vikings. Together, they discuss how to equip and guide operators with the essential knowledge they need for a successful entrance into the Dutch market.

Wesley: The Netherlands has been officially open to iGaming operators for a few months now. How can you assess the state of the market now?

Peter-Paul: What we have seen is a two-staged opening whereby the existing land-based incumbents and a few new entrants have had the possibility to launch but the vast majority of international operators had to wait in a ‘cooling-off period’. The market initially opened with only a limited number of offers (below five operators in the first week). After a month, around eight of the ten initially licensed operators were live. Currently, the number of live operators stands at approximately 14. Now that the cooling-off period has ended on 1 April, it is expected that many more international operators will receive their licenses.

A big issue during the startup phase from October 1st was that mainly the incumbent state-owned companies flooded the advertising market. This has led to a public outcry and action by Parliament calling for a ban on nontargeted advertising for online gambling, citing concerns about over-exposure to problem gamblers. But that is concerning for us, as an advertising ban really works against channelization and thus consumer protection. Advertising for the licensed offer plays a key role in channeling players away from illegal to legal offerings. Advertising is key to informing players. I believe that a ban on advertising would negatively affect channelization, which we hope to prevent.

Wesley: How does the Dutch market compare to other European markets? Are there things to be learned / improved?

Peter-Paul: Well, the market is new, so it is still evolving fast-paced. In comparison to other EU countries, we are the baby, Sweden is the toddler and Denmark is the grown-up parent. Denmark is where we aim to get to. How quickly we can achieve that depends on how regulation develops. The market is probably bigger than was realized. Currently, parliament is concerned that increasing (maybe too many) Dutch citizens started gambling and there could be an imminent push-back on advertising. The reality though, is that players were probably playing on illegal websites and were largely invisible. After the legalization they became visible, thus distorting the view and seemingly showing a huge increase in Internet gambling. We are at such early stages we really do not know how well the current legislation is working and the industry, being forced to restrict advertising as a result of this, could be significantly harmed in its development. Our association has a player protection first approach, and, as previously mentioned, advertising is essential to channelization and responsible development.

Wesley: Which opportunities does the newly regulated Dutch market offer? What verticals of iGaming are the most popular in the Netherlands — casino, sports betting, poker, etc?

Peter-Paul: Which is the most popular vertical? Well, licensees probably know better, there is no clear publicly available information yet. But the lottery is the undisputed number one right now. It has 200 years of unrivaled existence and the total lottery market is probably worth €2.4 billion right now in the Netherlands. Even if all other online games were combined, it would still be nowhere near the lottery. It is going to take years to catch up to those numbers.

Wesley: How difficult is it for an operator to enter the market? What should be done?

Peter-Paul: The Netherlands is attractive, but a very tough market to enter. Consumer protection is central to general policy, which is great, but there are many other things stacked on top. For example, the average tax rate is 29%, existing incumbents have a very good market position and are protected somewhat, they are able to advertise effectively with substantial budgets, and licensing represents a tough barrier to entry. Any new entrant would need to deal with that plus have enoughfunds to build a brand, and that means a substantial marketing budget. It is not the place to experiment, there needs to be vision and investment for at least the medium term. On the other hand, the Netherlands still lags behind other EU nations and the market is growing at a much faster pace than others, so there are potential rewards for operators who are prepared to invest.

Wesley: Back in April 2021, before the market opened, 35 operators applied for a Dutch license, but as of the end of the year, only 11 operators had received licenses. What do you think the refusals to other operators are related to?

Peter-Paul: The honest answer is that nobody knows, except for the regulatory authority Kansspelautoriteit (KSA) and perhaps the operators involved. KSA doesn’t publish any application information bar any general numbers because applications are considered confidential. The general view is that the picture is mixed, some operators were refused whilst others had not yet been informed or perhaps still needed to supplement their application, or provide more background checks for example. Some applications were submitted after the closing date of 15 April, so they would not be issued the license in the first batch. In any event, it is a tough procedure that requires lots of documentation.

Wesley: How about the new law that obliges operators to share player data (anonymously) with researchers. What do you think about it?

Peter-Paul: This probably refers to the central database connection that is mandatory for all operators. It gives the KSA a great level of detail on all transactions and all the data. If this information is shared with research companies in an anonymised way, I think that will give a lot of insight into how well responsible gambling is working and whether the operators perform the duty of care. It also gives us more concrete market figures which is good asright now discussions are largely based on assumptions and fear.

Wesley: What are 3 key factors that can ensure the success of iGaming operators in The Netherlands market?

Peter-Paul: I think that any operator should aim for market share which is sustainable in the medium term, with an emphasis on investments in the short term. Furthermore, you need a very good understanding of the legislation and regulations, which are vast and pretty complex. Finally, it is advisable to have someone on the ground in the Netherlands who speaks the Dutch language, to help guide you around on a local level. To kind of boots on the ground, so to speak.

Wesley: Is it a good idea to partner with a trade association?

Peter-Paul: Absolutely. It is highly advisable to become a member of a trade association, preferably, ahead of being awarded a license as it gives you the information advantage over companies that go it alone. You can learn from the experiences of other members and engage with the various working groups we have such as the technical working group, the sports betting integrity working group, the public affairs working group, and the tax expert group. A trade association like ours does not really give individual advice, but it helps members to foresee what is coming down the line, by providing regular updates, trying to help set the agenda locally, contributing to local discussions, and researching fact-based information. We can then take these facts to regulators in order to get the best regulation ensuring consumer protection and a tenable position for the industry. Trade associations like NOGA, for example, can give information on how the market is developing, and what to expect in the future.

Wesley: What are your forecasts for the development of the iGaming market in the Netherlands in the next two to three years?

Peter-Paul: Well, if Parliament allows the market to develop in a healthy and organic way, without too many restrictions such as a ban on advertising and other distorting measures, maybe we can get to the toddler market level like Sweden a few years from now.

Conclusion

For operators who are prepared to invest for the longer term, the Netherlands represents an attractive opportunity. There is no doubt that the legislation is formidable, and therefore it is always advisable to engage with industry experts that are already operating in the territory. Information, resources, and support are readily available from a number of sources, such as trade associations and suppliers that are already in the market.