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IN-DEPTH 3 December 2018
LatAm's gateway market
Harrison Sayers ponders whether Mexico is ready to emerge as LatAm’s greatest gambling market
By Gambling Insider
Home to over 127 million people across 31 varying states, Mexico is without doubt one of the most tantalising markets for any international gambling company looking to expand into new areas. The country’s economy is the world’s 15th largest, with an impressive GDP twice the size of Argentina’s, and is a LatAm market currently attracting the attention of many operators.

Its close proximity to the US opens up potential partnerships with North American gambling firms. On top of everything else, a warm climate and a relaxed image make the country one of the most desirable holiday locations in the world, meaning tourists are in abundance in most parts of the country.

To understand the landscape of gambling in Mexico, it is vital to have a grasp on the history and culture of the country. Many remnants of European colonisation are still present in most facets of life in the nation and the gambling industry is no exception. Spain’s legacy of bull fighting is still very much alive in Mexico, as is betting on the Basque-created sport jai alai.

Public sentiment towards gambling can still be largely traced back to the Catholic church’s influence on the country. It cannot be ignored that many religious Mexicans, of which 83% identify as Catholic, have a very negative view on the gambling industry.

As a result, legal and regulatory expansions and developments benefiting the gambling industry have been rare to say the least.

On top of its complicated cultural past, Mexico has also seen some drastic political changes over the past 50 years. The political landscape appears to be constantly shifting. Now is no exception, with the recent election victory achieved by anti-establishment outsider Andrés Manuel López Obrador. This massive leftward turn, after what was considered a bitter election campaign, has left many in the gambling industry in the dark over which possible direction the president will head in.

Alfredo Lazcano, Andrea Avedillo and Francisco Del Real, Gaming, Sports & Entertainment Lawyers at Mexican Law Firm Lazcano Sámano, S.C., told Gambling Insider: "López Obrador did not publicly pronounce himself as being against the gambling industry during his recent presidential campaign and his 'Nation Plan' for the next six years does not contain any anti-gambling measures. Also, he has appointed Olga Sánchez Cordero as the next Minister of the Interior, who is the ultimate gambling authority in Mexico. Sánchez Cordero is a remarkable lawyer, who was a Justice in the Supreme Court, known for her progressive rulings.

"Moreover, the president-elect has mentioned he has no intentions to seize or ban any economy sector like other leaders linked with populism, but he intends to ensure all business is carried out lawfully and within their applicable legal framework.

"We detect this as encouraging signs for the Mexican gambling industry. However, López Obrador will be assuming office in December, so it is too soon to tell."

One company which still believes that Mexico offers gambling operators a great economic opportunity despite the political situation is slots specialist Play’N Go.

Steffan Cnattingius, Head of Sales LatAm at Play’N Go, told Gambling Insider: "Mexico currently has one of the fastest-growing gambling industries on the planet and the country as a whole has become a robust developing economy in recent times. Mexico provides plenty of opportunities for anyone willing to venture into that arena.

"Regulation across Latin America is an ongoing process where the market is slowly opening up and so we felt the time was right to make a move into the area. Fortune favours the bold and you don’t want to be the last on the uptake.

"We felt we were ready to enter the Mexican market after successfully becoming licensed and certified in Colombia and we felt Logrand were the right casino to do it with. Logrand are a well-established name in the Mexican market, known for providing a high level of entertainment and with multiple locations across the country. We knew with our experience and their expertise, we could join together to create a successful partnership and that has proven to be the case.

"Our games continue to be well received and with titles geared towards the Latin market, such as Grim Muerto and Aztec Princess, we are seeing the benefits of moving into such an opportune area of the world."

Mexico is clearly an attractive market to some operators, but countries must not settle for being attractive. Countries looking to attract foreign operators and suppliers must be able to guarantee a return on investment.

One way to evaluate the size and appetite of the Mexican gambling industry is to look at domestic operators. There are few online operators as well known in the country as Caliente Interactive. Operating out of Tijuana, Baja California, the company has quickly grown and established itself as the nation’s leading online gaming provider in what is a relatively newly legalised gambling segment.

However, the country’s poor banking infrastructure and lack of understanding surrounding e-commerce has proved a stubborn obstacle to online gambling growth in Mexico.

Guido Murguia, CFO of Caliente Interactive, told Gambling Insider: "From our point of view, the biggest trends and developments are the same ones we’ve been seeing the last few years. Due to the low banking penetration and underdeveloped e-commerce, having a very strong retail presence is a requisite for success in this market, as has been proven by past experiments. While having a retail footprint is not a guarantee of success, without this, it’s extremely difficult for the customer to trust your brand. Additionally, due to the lack of widespread e-commerce adoption (related to the low banking penetration), the retail footprint is also important on the financial side due to the cash-based nature of the market.

"We think these trends are not necessarily specific to Mexico, but to Latin American countries overall. If the economy is able to steadily grow and avoid any setbacks, e-commerce/banking penetration improves, etc, and then naturally the gambling industry should grow as well.

"If you expect Mexico to be like the UK, with a high per-capita GDP, flourishing e-commerce sector, strong gambling tradition, etc, then Mexico looks very much behind. But if you look at Mexico as a developing nation, with lower-middle income per-capita GDP (69th in the world according to the IMF), low banking/e-commerce penetration, 40%+ living below the poverty line, we think the Mexican market is where one would expect it to be."

There are clearly some fundamental improvements that must be made to the Mexican gambling industry and the country as a whole before it becomes more attractive to foreign operators. The modernisation of banking would be a great start, as would the removal of political uncertainty and negative public opinion towards gambling.

As the world becomes more connected, though, and gambling companies scramble to find new markets and opportunities for growth, there can be little doubt a country as large and rich as Mexico will be in their sights.
IN-DEPTH 4 September 2019
Virtual reality: Creating next-gen experiences for players

Singular CEO George Shamugia discusses a new revenue stream for casino operators

The competition in online gaming is intensifying, with players becoming more and more demanding. In some markets, single-customer acquisition costs can reach up to €400 ($440) alongside growing churn rates. Furthermore, the online gaming sector struggles to attract one of the most lucrative groups of players – millennials. The experience provided by casinos no longer appeals to the younger generation.

On  the other hand, the video gaming industry perfectly understands the needs of millennials and by introducing elements of luck in their games offers the best of both worlds. With the launch of loot box systems and Grand Theft Auto’s in-game casino, we have seen their first successful steps in targeting the online gaming sector. GTA V online, with 33 million active players, recently opened an in-game casino, where players gamble real money on games such as poker, roulette, slots, etc. As a result, churn users returned and GTA Online reached the highest number of active players since its launch in 2013.

The online gaming industry has almost fully utilised the potential of the mobile medium. The time has come to look for new, innovative ways of delivering a next-gen experience to customers.

The potential of VR

Could the next big thing for online gaming be a fully fledged virtual reality (VR) casino delivering an immersive experience and limitless new opportunities?

Although not widely adopted yet, VR has a sizable number of customers. Analysts predict it’s poised for explosive growth to become mainstream in about five years. According to market intelligence firms, the VR market will be worth $117bn by 2022, and according to Juniper Research bets made through VR will reach $520 billion by 2021. Upcoming 5G mobile network technology will propel VR’s mass adoption by allowing the development of fully portable untethered and affordable VR headsets.

Different level of social interaction

The captivating nature of gambling comes from its social aspect. Unfortunately, personal interaction is widely missing from online gambling sites. VR technology creates multiple opportunities to bring back and even enhance that social moment. The ability to connect with other players is one of the main reasons behind Fortnite’s popularity. This form of co-experience is the next generation of entertainment. Research conducted by Facebook has found participants spend more time on VR compared to any other medium. This directly translates into increased profits for casinos.

Pokerstars has made efforts in this direction by implementing Voice UI. Instead of using hand controllers to make a call, pass, or raise, players give voice commands.

Another opportunity for bringing in the social element are the players’ avatars. They enable players to build their identity reflected in the avatars’ appearance, but also the avatar's social, competitive and community status. For instance, players are willing to pay real money for virtual drinks at the bar. Operators can offer these social touchpoints for free to VIP customers as an act of appreciation.

VR also brings a new dimension to customer support. Customer support can also be represented with avatars to assist the player in person. The social moment increases the LTV of players and contributes towards lower churn rates.

Rethinking game design

VR is a way more capable medium than a 2D mobile or desktop screen. Instead of copying the existing online experience, games must be redesigned from the ground up for a competitive advantage with VR. For example, a VR slot game can become fully immersive by teleporting the user into the slots’ world of Ancient Egypt. Next, enrich the experience with high-fidelity graphics, realistic spatial sounds and animations. When betting on virtual race cars, the user can be teleported inside the car he/she made a bet on and experience the race firsthand.

New revenue streams

VR casino lobbies create new revenue stream opportunities: ad placement of brands on the venue walls, company logos decorating the bar etc. This kind of branding is not intrusive in the VR space and feels natural from the user's perspective. VR also gives users the ability to change venues from a Las Vegas casino today, to Macau or even Mars casino, the very next day. The dynamic and diverse experience increases retention rates.

The majority of profits for online gaming operators come from their high-roller players. Although they represent a small subset of active players, an operator can launch a separate VR casino brand for them. Providing exclusive VR gaming experiences to high rollers/VIPs, the operator can minimise churn and maximise VR efforts for these player demographics.

The catch with VR is to focus on quality, rather than scale. The target audience might be limited yet, once these players experience it, they will become ambassadors for your offering.

Surely, the opportunities and possibilities offered by the VR medium truly exceed anything offered by mobile and desktop. VR is a new frontier not just for gaming but for every industry, and it’s exciting to see where it takes the industry and what kind of innovation it brings upon us.