In a year that has seen the UK Gambling Commission fine British operators £18m, up £1.6m on the previous 12-month period, the signs are clear that the days when the UK was the world’s most open and permissive, liberal might be a better description, market are long gone.
When it comes competitiveness however the UK is still the hardest and, possibly, the most expensive market in which to operate, whether we’re talking barriers to entry or marketing and advertising costs.
So why has the Commission toughened the way it regulates operators? The new approach has been ongoing for the past three years, or ever since Sarah Harrison, who recently left her role as chief executive, took over from Jenny Williams, the previous incumbent.
Harrison took up the reins at the Commission in October 2015 and very quickly made it clear that she expected higher standards from the industry and that she would defend the interests of consumers, who she felt were getting a raw deal.
Whether it was operators changing terms and conditions whenever they felt like it, not honouring their promotions, putting unreasonable demands on players in order to trigger features like bonuses or free bets or taking too long to pay out winnings.
In 2016 she urged brands to act quickly and “raise your ambitions and your sights higher and told them to step up the pace of change in how you handle customer complaints; ensure advertising is clear; simplify terms and conditions; develop your risk management strategies on money laundering… don’t wait for a crisis to happen that shakes the very foundation of customers’ trust in your industry.”
This has meant groups like Gala Coral (as it was then known), Paddy Power, Rank Group, 888 and most recently 32Red have all been handed major fines by the Commission. Which also means that many of them are feeling increasingly resentful, especially as there are rumours of further major sanctions.
The political and regulatory atmosphere in the UK has been very much anti-gambling in the past two years and with a Prime Minister who disapproves of the gambling sector, it seems like the situation will not improve soon. The fact that gambling is one of the few sectors where the government can raise taxes without consumers or the mainstream press protesting about will not help an industry looking for relief.
But in a market that is not growing as much as it used to and where the economy has already been hit by the uncertainty caused by Brexit, with the outlook potentially worsening depending on how negotiations go with the EU, operators have been looking at international markets and may well decide to invest more readily in countries like Spain, Germany or even Sweden, where there is also intense competition but the markets are not as mature and the regulators not as domineering (or happy to dish out fines) as the UK’s Commission.
The UK market as a whole is worth nearly £5bn, online makes up roughly £2bn of that number, with digital revenues growing 9% in the first three months of 2018. This compares with 20% growth levels from just two years ago and with a rise in remote gaming duty from 15% to 20% due in April next year, to make up for the loss of tax income from the lowering of the FOBT maximum stake from £100 to £2, further headwinds are gathering for the online companies.
Does this mean UK operators will explore opportunities elsewhere and will it cause a significant drop in marketing or advertising spend? It’s unlikely that a major fall in advertising spend will occur, but it could mark the start of a shift.
What is noteworthy about this legislative move is that Sweden is one of the pioneers of the online gaming industry, with many key suppliers, the likes of Net Ent and Evolution Gaming, and operators such as Unibet, Betsson, Leo Vegas or Mr Green, all originating from there in the past 20 years to become leading companies in the industry.
Why has the country taken so long to regulate its online gambling industry? No one is sure, but the usual mix of state lottery and betting monopolies wanting to protect their turfs is part of the reason. Of more relevance will be how the market shapes up once it is licensed. Sweden has a population of just 11 million and many operators targeting consumers there.
The major companies just mentioned will fight it out with the state company Svenska Spel and a whole raft of new or medium-sized operators, such as Casumo, Bethard or Hero Gaming will be hoping to make a fist of it. There will inevitably be some consolidation in the next two to three years, but much will also depend on how accommodating and business-friendly, or not, the regulations are for the sector.
Finally, we’ll finish this instalment by looking at Italy’s recent decision to ban all gambling advertising. The ban will start in June next year and is one of the stranger regulatory moves to be enacted by a market that has been fully regulated to online gaming and betting for 10 years.
The ban’s aim is to fight problem gambling, which apparently has been rising in Italy recently, although no hard figures were provided. However, its impact will very likely have the opposite effect, as players look for unlicensed sites that will only be too happy to offer their products to Italian consumers.
And once again, governments show their bias towards their state providers as Italy’s lottery will be the only gambling company to be exempt from the advertising ban.