13 minute read
Latin America
from SBC Leaders Issue 19
by SBC Global
HOW WILL DIFFERENTIATION SHAPE SUCCESS IN LATIN AMERICA?
KYM SLEEZER, PRESIDENT AND CEO of gaming advisory firm Triple Ripple Group, shares his personal in-depth analysis on what can be expected from the online gaming markets in Latin America in 2022
BY LUCIA MOURIÑO
As we edge further into 2022, the Latin American journey of online gaming success is a target for many aspiring and existing stakeholders. While there is still a lot to discover for many companies, those that have already set their plans in motion know that 2022 is the start of a new chapter.
But what do these plans look like? Are they really factoring in the dynamics of Latin America or are they set in a more legacy mindset of practices transferred from matured markets?
The region is rapidly gaining the attention from domestic and international start-ups to more incoming top tier global operators. 2022 will be the year where the region undergoes some form of reshuffle; Latin America will continue to be an emerging market, but one where established operators that have been testing their support systems in their ongoing operations will now have sufficient comfort to scale up and confidently seek stronger market share.
Global operators that have been in the region for the last two or three years can now increase their investment with a lesser degree of risk as they have gained regulatory, fiscal and legal experience while, at the same time, have plenty of historical customer data analytics to make stronger and more informed customer acquisition and retention decisions.
Any company that is on its journey into the region, whether currently generating revenue or on its final planning stages and ready to deploy and execute, should be well versed on the dynamics of the region. They have a game plan of their choosing based on their success and expectations criteria.
While I am one of many voices that strongly promotes partnerships into the region, I acknowledge that by no means it is the only way to enter the Latin American market. But time will be the best validator.
Differentiated partnerships
A well vetted and right-fit local partner will, as a minimum, provide a fast track time to market, solid regulatory, fiscal, legal and compliance turnkey
services, a strong local network of service providers, as well as customer cultural and consumption behaviors and insights.
But Latin America requires a drill down of differentiation from the structure of traditional partnerships as well as for the execution of operations. Everyone from B2B and B2C operators, content and service providers and the rest of the stakeholders need to adjust their traditional mindset of their niche if they want to match their revenues to their vision.
The primary partnership models in Latin America to run a B2C operation are equity, joint ventures and licensing rights agreements. Obviously, there
are other ways to fund a new or existing operation and, of course, the structure of each specific agreement has various levels of complexity in the details that makes it unique to the parties involved.
It may be totally valid that international operators determine that to enter different markets in the region, they would be in a position of having different partnership models.
Regulation, size of the market, competition, investment levels and local partnership strength are but a few factors of why there could be differences in partnership models from one multi-market operator.
The traditional B2B technology partnership model must be restructured if these operators want to achieve their expectations in Latin America. This includes content, services, support and pricing models, but also expanding the traditional boundaries and stretching into the B2C to nudge and support deployment and ongoing Go-Live engagement.
It’s already a work in progress for those that have partnered in LatAm but also it must be closely observed by anyone else looking to come into
the region and proactively make the adjustments.
In Latin America, a profit sharing model under this concept can be devastating. Not all B2C operators are fully equipped to successfully get the operations off the ground. Timelines can be a constant ongoing moving target. This will create tension as modeling revenue projections could be difficult to establish.
The concept of managed services is already part of the arsenal of the more astute B2B operators. How this is presented as an insource or outsource service, how costs are built into it and support timelines to transition out of it still need further fine-tuning for seamless success and healthier revenue streams.
From a B2C point of view, they too are looking at more resilience business efficiency. There is a growing awareness that multi-year commercial agreements where there are fees , development costs, upgrade costs and revenue share, puts a chokehold on profitability margins.
There is an increasing number of these operators that have realised that they can significantly reduce operational costs by equity ownership into a technology provider company. In fact, there is a growing number of “built-to-sell” technical platform companies that are making their products available in the region.
While an increase in options in the supply chain is healthy and it creates an expanding ecosystem of stakeholders, the dust will eventually settle. From here to there, those involved in this evolving process must carve out and design an attractive model that is both profitable and allows for profitable growth in the region versus just expanding with negative profit margins.
All in all, regardless of the type of partnership, the successful companies, both small and big, will be the ones that adjust their business model and structure an operation where the value chain in both their revenue and cost models takes in consideration these legacy conditions and mindsets and make the necessary adjustments moving forward.
The flexibility and versatility to enter new partnerships or restructure current partnerships with this differentiated mindset will bring forth the market leaders in Latin America.
Differentiated operations
An organisation has a lot of moving parts and is never a constant. Never more so in an emerging and evolving market where competition and market forces as well as availability of resources shift to accommodate opportunities and manage risks.
But one thing is constant in Latin American gaming: we are a high
frequency and highly sociable consumer.
Operators must build their strategy with this at its core. Yes, ecommerce is growing and there is a growing comfort zone in digital consumption. But this is a catalyst that will facilitate growth. Every operator will benefit from it. Realise the opportunity to differentiate and focus on the real opportunity and those will be the operators that will be better rewarded for their awareness, design and deployment of core-based initiatives.
I believe these are the drivers to design a differentiated strategy: upskilling the organisation; relationship and digital marketing; and payment solutions.
Upskilling the organisation is more than a resume. It is about developing the team to roll up its sleeves, to learn and apply, to test and adjust and to be challenged. It’s about raising the bar on deliverables.
It’s about discovery and creating commitment and achieving a sense of purpose and belonging. It goes beyond the catchphrase of “localisation”. Seniority does not equal experience or, much less, competence and execution.
A strong upskilled team will build the strategy and make the right decisions and understand how to design the second and third drivers of relationship and digital marketing and amplifying the ideal payment solution offers.
Relationship marketing will require hyper personalisation. The strategy for Latin America operators to create better and faster dividends is by focusing on the relationship from the onset. Year one marketing budgets probably will be less than $5 million for most incoming operators.
Monetising marketing investments must be scrutinised so that operators do not fall into a “follow the trend” trap and deal with a high player acquisition cost.
Regarding payment solutions, Latin America is and will continue to be a cash-based economy. To differentiate, operators must look beyond the traditional payment solutions. But, most importantly, operators must understand the dynamics of their customer base and understand the revenue potentials by different segments. They must look for payment solutions that cater not just to the banked customers but also to the underbanked and unbanked.
Every customer wants instant access and gratification when they want to bet and when they want to collect a winner. Real time cash-in, cash-out and pay-in and pay-out is how to monetise maximum engagement. Operators must understand and consider all payment sources and look to integrate. Where regulation is a constraint, lobbying must be fierce.
Companies that will dedicate the resources and allocate their energy in understanding the dynamics of their chosen markets in the region will thrive. There is no easy path, and nothing is guaranteed, but designing around high value market insights and designing a differentiated strategy should facilitate success.
I look forward to what 2022 will bring to Latin America. As a strategic resource in the region, I look forward to being part of success stories as well as collaborating with the various stakeholders in building a responsible and resilient industry. Fortune favours the bold! •
LATIN AMERICA: THE NEXT FRONTIER FOR BETTING?
AS MORE COUNTRIES ACROSS LATIN AMERICA
begin to introduce gambling legislation, which markets should betting companies be considering for future expansion?
Arcangelo Lonoce, Head of Business Development at Habanero
BY FERNANDO NOODT MOLINS
Gambling regulation across Latin America has come a long way in recent years, with more and more countries expanding and modernising their own sports betting frameworks.
It’s without a doubt that the COVID-19 pandemic increased the adoption of online gaming legislation exponentially in some of these countries, but the eyes of the industry remain firmly fixed on the developments taking place in Brazil.
For Arcangelo Lonoce, Head of Business Development at Habanero, Brazil presents a wealth of potential for the supplier.
Speaking to SBC Leaders, he explained that the developer has worked to establish different business links throughout Latin America. These, he said, are "key" agreements - all of which are with major, established companies in the markets where they operate.
Currently, Habanero has a stronghold in both Colombia and Mexico - two jurisdictions which the company uses to project its business on to the rest of Latin America.
As an older market, Colombia has given Habanero access to specific data which has enabled the developer to double in size - both in terms of online sports betting and casino games.
Shining a spotlight on Mexico, Lonoce praised the company’s work with some "very important operators" over the past three years, assuring that this allowed Habanero to reach "many users" and drive interest among players.
Likewise, he highlighted the increasing interest in Chile and the Argentine market as well, where Habanero has just gone live in both the city and province of Buenos Aires during 2021, helping formerly-localised operators with the launch of their hybrid operations.
Looking towards the future, Lonoce explained that Habanero has been focusing on the recently regulated Panamanian market and anticipated that we will see new slots from them in 2022. "We continue to focus on quality," he said, adding that throughout 2022 there will be monthly launches of one or two titles. All will have different themes and varied graphics to reach as many players as possible, while
still focusing on original mathematical models.
In addition, he explained that they will seek to continue growing in the markets where they already have a presence and continue to certify themselves in new ones as they launch, in order to set foot there as soon as they can.
Plans have also been put in place to expand the company’s Malta-based internal team to ensure that it meets the evolving needs of its European clients.
But while European growth and expansion within existing markets is high on the agenda, all eyes remain firmly fixed on Brazil; with Lonoce emphasising that the country “is a gigantic market with a lot of potential” for its population and other factors.
Regulation in Brazil - a complex story
Gambling regulation in Brazil has generated a lot of debate in recent years, with continued expectations that Congress will move forward with the introduction of a regulated gambling framework. But unfortunately, we’re still waiting for that to happen.
Since the 1940s, casino gaming has been banned - although this hasn’t stopped people from gambling via offshore sites. Still, the most popular title is the Jogo do Bicho, otherwise known as The Animal’s Game.
The game is very similar to that of the lottery, featuring an animal for each number. During the game, players can bet as much as they want and, as is the case with a number of offshore sites, more than they can afford.
But since 2014, Jogo do Bicho has been the subject of much discussion in the Brazilian parliament. Two proposals have been submitted to policy makers - the first to regulate all forms of gambling, including Jogo do Bicho; the second to only permit gambling at integrated resorts that would be a tourism booster.
In December 2021, the Chamber of Deputies approved the request to urgently deal with bill PL 442/91, which legalises casino games, betting and bingo. This allows the floor to vote on the immediately without having to go through any parliamentary reviews.
However, the proposal faces
Brazilian President Jair Bolsonaro
ALL EYES REMAIN FIRMLY FIXED ON BRAZIL
opposition from religious lawmakers who reject gambling in all of its forms. That’s why Congress formed a task force to adjust the project and try to bring the prohibitionists on board.
Either way, the Brazilian President Jair Bolsonaro has already announced that he will veto any project that Parliament approves to regulate the market.
Even if that happened, Congress itself could vote to reverse the veto, although it would need a majority consensus to do so, which, right now, seems hard to achieve.
Regardless, the Supreme Court has recently annulled the federal state's monopoly on lottery gaming and given each Brazilian province the power to determine its own regulation. This has opened the regional lottery market, in addition to the fact that the ruling also authorised them to control sports betting within their jurisdictions.
The wider Latin American market: an overview
Colombia became a beacon for the Latin online gaming industry after opening its doors in 2017. This boosted the market’s capacity and, according to the latest report by Coljuegos, sales reached 36 trillion Colombian pesos (about $9bn) in the first 10 months of 2021.
Another active and attractive country for international operators is Mexico which has already authorised remote betting. However, experts agree that there is still room for improvement and market conditions need to be updated to adjust to meet current demands.
The pandemic acted as a catalyst for Argentina’s introduction of a digital industry. Its localised market is very mature, but the online gambling industry is still in its infancy.
Uruguay is a unique case for the region, with a state-owned monopoly for the online market, while Paraguay also has a single operator for sports betting, private-owned Daruma Sam.
The online market is not regulated in Ecuador, Bolivia or Peru, although the latter "allows everything that is not forbidden" - meaning that there is currently a market operating. Chile does not have its own regulation either but, among this group, it’s one of the most advanced and could soon establish new regulations.
Central America, on the other hand, has just seen Panama regulate its industry, which will likely create a major tourism boost for the country. Meanwhile, El Salvador continues to deepen its foray into the blockchain world and will launch a casino in the metaverse, linked with non-fungible tokens (NFTs). •
