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IN-DEPTH 3 September 2018
Big Question: The Emerging Markets
In an increasingly connected and regulated worldwide gambling market, which of the emerging markets for gambling related services holds the biggest potential for gambling companies and why?
By Gambling Insider

BART ESPOSITO, CEO, Sirplay

Since the beginning, Sirplay has decided to invest its strengths in the emerging markets of the gambling industry. We started focusing on Africa and Latin America as our business targets and after more than 13 years, despite many things changing over that time, we still pursue this agenda.

Today our insight hasn't changed and we still hold true to be belief that Latin America is the region with the greatest potential for the gambling industry.

For us, the Latin American region is a market where gaming is rooted in its culture. It is a market where the majority of the population combines a strong passion for sports with a love of games of chance and social media.

In our opinion, the most concrete example of this is the recently regulated Colombian gaming market. Indeed, Colombia was the first country to regulate the gaming industry properly, thanks to the work of Coljuegos - its regulatory body in charge of all gambling activities.

Colombia carries with it significant scope for the gambling industry growth as betting is considered a popular pastime and slot machines are everywhere throughout the country. Its population of 48 million is extremely attracted by casino games and lotteries, without mentioning the strong interest in football competitions and horse races.

In light of these considerations, we weren’t at all surprised when Coljuegos' President, Juan B. Pérez, declared that from July to December 2017, the online gaming market in Colombia was worth over $5.362m and had over 213,000 players - of which 95% are active users. Quite a number for six months of regulation. Pérez also forecasted that this year the Colombian gambling industry will rise to revenues of COL$270m, and that this is just the beginning.

And we at Sirplay are seeing these results on our own experience through the ColBet betting platform, with that platform reporting a constant user growth that ranges from 18% to 24% per month.

Nevertheless, the potential of this market is yet to be fulfilled. At the moment there are only nine online betting platforms licensed by Coljuegos and the president stated they should double for the end of the year.

But the fact that makes us even more optimistic about the future gaming market in Colombia is the recent Coljuegos attempt to complete the current gambling regulation as well as other important pieces of the gaming offering. Indeed, a draft decree has already been published to discuss the regulation of online gaming products including live dealer casino games and virtual games, together with the chance to pool poker.

This could be the final piece of the jigsaw in order to boost the Colombian gaming market even further.

Besides legislation issues, an additional positive marker for the potential of the Colombian gaming market is the leap in technology that are being made that increase the exposure of mobile gaming to new swathes of the population, year by year.

The advance of technology and online payment options will undoubtedly make it easier to access the sportsbook and casino games, translating this passion for gaming into online success for those operators best able to target the country through its deep knowledge. At Sirplay, we firmly believe that the potential of the Colombian gaming market will soon be recognised worldwide and, don't worry, we'll be there to say: "We said so.”

RICHARD MIFSUD, CEO and Co-Founder, Helio Gaming

The two markets where we currently see the most opportunity are Africa and Latin America. From our perspective, Africa is the number one region that can provide a launchpad for companies like ours to really grow our client base.

Several African countries still need to regulate gambling, but there is certainly plenty of room for growth in them as and when the necessary frameworks are put in place. Currently, Nigeria, Kenya, Ghana, Tanzania, Botswana, and the Democratic Republic of Congo are the places where we are seeing interest from operators, and these could be the areas that provide the most valuable opportunities for operators and suppliers.

In Nigeria for example, reports suggest there are about 90 million internet users, or around 50% of the total population, according to the Nigerian Communications Commission. On top of this, over 100 million Nigerians have mobile access.

As is the case in any emerging jurisdiction, operators and suppliers will need to take the idiosyncrasies of the market into consideration, such as which verticals are the most popular, how often players play these games, the times of the day they play, etc. It is important to sell tailor-made region-specific games to operators, and that is what we plan to do in Africa.

Sports’ betting is of course extremely popular in many African countries, with small stake, high win multiples consistently proving popular with players. With modern lotteries, such as Helio’s Lotto Hero, there is a much higher frequency of opportunities to win, replicating the opportunities to win in sports betting. We can also tailor customer incentives by offering free bets for those who try our lottery games.

Furthermore, there has not been a clear strategy developed by any stakeholders as to how to target millennials in Africa. Helio Gaming’s custom games are very appealing to that emerging demographic, and this is important if lottery is to have success in any market, let alone a growing market like Africa.

We anticipate that African millennials will be no different to their counterparts elsewhere, motivated as they are by fast and frequent betting opportunities, which we can provide. You can then cross-sell other verticals to players on mobile, but it is important for us to target mobile as a starting point.

As a result, it is also crucial to be mobile-friendly in Africa, as mobile penetration continues to grow in these developing countries. According to GSM Association, the number of mobile subscribers in Sub-Saharan Africa alone should grow from about 445 million in 2017 to around 638 million in 2025. This is why we are developing a USSD solution for mobile play specifically in Africa, because we need to cater to the market’s needs and make sure we capitalise on the areas where it is growing.

We will again visit Lagos, Nigeria later this year for the West Africa Sports Betting Conference and Exhibition in July. It is important for all interested parties in Africa, whether that’s operators, suppliers, regulators, lawmakers, affiliates and so on, to keep discussing the current state of the market and future opportunities.

While that conference will focus in particular on sports betting, that does not mean this is the only area where the market can continue its growth. Again, we can use the example of Nigeria. According to PwC, the Nigerian casino market should make revenue of about $62m in 2018, up from approximately $49m in 2017.

Despite this, we would still see retail as the most lucrative channel in Africa for the time being. We are working closely with aggregators which will also offer our solution to retail operators, but it will be interesting to see how this develops in the future. Africa is a market open to change and new products will allow it to thrive. In most African countries, the legislators have met with us and have approved and endorsed our products. We feel this is the right time for us to move as mobile penetration and regulation should continue to improve in the coming years. Feedback has been positive so far, with legislators in all of the key African territories approving our products. We hope and anticipate Africa will provide several opportunities for moving forward.

RAMIRO ATUCHA, COO, Leander Games

In my opinion LatAm represents the biggest potential for gambling companies.

It is undoubtedly Colombia which leads the way in this region following the recent regulation of their gambling industry and with nine companies already receiving licenses to operate there.

In addition with Perú, Argentina and Brazil getting closer to complete or state by state regulation, the region can certainly be presented as an area which significant promise in the midterm.

The strong penetration of smartphones, internet and specially the long history of land-based gambling in the region generate conditions which allow gambling companies to be optimistic about new product adoption and the growth of future online players.

That being said there are challenges, the constant delays and government difficulties to agree on a regulation strategy, alongside with the lack of connectivity infrastructure that can remain up to pace with the growth of smart phones and their need for bandwidth lend a note of pessimism to this assessment.

In my opinion, Asia with its complex regulatory outlook and requirements does represent a huge opportunity for those operators who can create highly customised content tailored for the region, primarily due to its large population and smartphone penetration.

Of the ones to follow closely, I'd list Africa and India. The steps in their journey toward regulation and the demographic of players there are becoming clearer as the events and conferences start to appear in those markets.

It’s important to highlight that the product offering will need to be a dynamic one. The fact that players in these markets are currently not playing certain types of games is potentially linked to their lack of exposure to such games.

That's why in the case of slot games, markets and operators that historically were focused on other gambling opportunities, start on this path by creating very simple games, before slowly evolving into slot games of higher complexity.

As content suppliers we have an important role educating these new markets on the standards of social responsibility, player retention, promotions and regulation since the mature European market has gone through the development of all such initiatives.

Irrespective of the fact that there are some types of games that are successful worldwide that will eventually be launched in these new markets, there first needs to be a localisation of gaming offering in order for games to fit regional requirements and be found attractive locally.

While recently attending G2E Asia, I had the opportunity to walk in the different casino floors and review the type of games that are popular there.

Normally I would have imagined that the traditional European titles would also have a strong presence and success while mixed with a few locally themed games. But in this case it was interesting that almost all (if not all) the titles there are based on the Asian culture, topics, beliefs and superstitions.

LatAm will not be an exception. Local traditions and places like the Iguazú falls, Brazilian beaches, Machu Picchu and the Andes amongst many other topics will help the local players feel more comfortable around this expanding industry. Localising is a lot more than translating. It is analysing the local culture and working together with locals as to make sure that the right elements are being considered.

On a regulatory side, PAGCOR (the gaming regulator in the Philippines and one of the main regulated markets in Asia) will accept European games and platform certifications after a review and validations. The same has happened in Colombia, which requires just a transfer of approval of the certificates issued by the main labs used in the European markets. So far the compliance side seems to be aligned with what is being done in Europe.

In summary, I believe that the new markets have become a reality that cannot be missed or ignored by the big European corporate players. For me a mix of porting the long experience in acquiring, marketing to and retaining players, plus localised content and offering that considers the local cultures will take us to the best of both worlds.

VICTOR ARANEDA, International Business Development Director, GAMING1

For me it is undoubtedly the United States. In the aftermath of the US Supreme Court ruling to repeal PASPA (Professional and Amateur Sports Protection Act) there can be no other answer.

While this was to a large extent an expected outcome, there’s a sense of relief to have the top economy in the world decide for regulation instead of continuing under the blatantly flawed system in place since 1992. The time is now for states to find the right model to legislate sports betting, including mobile and online, and the industry as a whole has now the responsibility of taking part in legislative process.

Currently licensed operators, traditional brick-and-mortars, should actively participate in the discussion given they stand the most to win or lose in this. Their brands and long-term investments should be prioritised and protected by legislators. At GAMING1 we understand the importance of having a strong regulatory framework because we are brick-and-mortar operators ourselves and international experience dictates that a wrong model can be worse than no regulation at all.

States shouldn’t be looking to automatically adopt other states model – and I believe there will be a strong impulse to copy Nevada or New Jersey - but instead a comprehensive discussion should be carried out at a state level as the needs and reality of each state may vary significantly.

Other stockholders such as sports leagues, need to find ways to ensure their interests align with the reality of the industry. The NBA should be commended for taking the initiative but is partially at fault by mentioning integrity fees based on handle. A correct and standardised terminology, together with the understanding of small operation margins, is obviously relevant to any regulation discussions.

Certifications labs with their extensive knowledge of platforms, KYC, risk and fraud, player safety, etc, have a part to play as well. Entities such as the AGA must help ease communications, including the issue of public perception. An informed market, particularly after privacy issues raised by other online entities, will be key to fighting illegality and protecting customers.

One of the issues that I believe has not been properly addressed by existing state bills and regulatory projects is that of online gaming. Right now, the states are looking at this as a secondary component of the sports betting discussion, even considering it a part of the “mobile” experience or in some cases not considering it at all.

Online gaming should be front and centre. In 2018 we do everything online, and the industry should expect this channel to be a major source of income for operators and it should be regulated properly. Failing to do so would create opportunity for the illegal market to continue thriving. Casino content, live streaming, non-sport event betting, eSports, virtual bets, among others are a reality and should be included in the discussion.

At GAMING1 we made a decision early on to only operate in locally regulated markets and so we’ve always betted on regulation which, as the industry knows, might be a long-term bet but it’s never a long shot. It’s exciting to welcome the US into the 21st century, but it feels it’s only the beginning. If the US example is developed correctly it should encourage other markets internationally that may have postponed or neglected the issue of gaming regulation: Germany, Brazil and India chief among them.
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