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IN-DEPTH 10 July 2019
Who will be first to cry "nanny state?"
Industry veteran Kevin Dale argues for a strategic plan for the industry to find middle ground in regulation and change the narrative
By Gambling Insider

Barely a day goes by without some article announcing the advent of new regulations, operator fines, advertising bans and restrictions - and the headlines make for some uncomfortable reading. With little by way of industry response, it often feels like a battering.

How is it in 20 short years, we have gone from a dynamic, internet-ready entertainment sector to social pariahs? More to the point, what can we do about it?

Many of our younger customers won’t remember the days when the choice for gamblers in some countries was a smoggy casino or a seedy betting shop with darkened windows and no advertising.

The experience of entering a betting shop had that clandestine feel of looking over your shoulder before entering the velvet-curtained sex shop next door. Fast forward through the boom times and the sector is now a victim of its own success – or its own failings.

There’s no doubt the easing of advertising restrictions, combined with the brave new world of internet access, has led to some serious social issues. With a broader market appeal, there are now more of us betting than before and, since a percentage of all players are vulnerable, there are more problem gamblers out there than there used to be.

The same can be said for other pastimes too, such as drinking. Quite simply, there are some of us who have less tolerance, less self-control or a propensity to abuse the freedoms afforded to us.

Some of the new products we designed didn’t help either – fixed-odds betting terminals in particular have come in for some justifiable criticism. The more socially acceptable punt on a football match is a far cry from pouring your wages into a machine designed to maximise engagement.

Profits were reinvested into marketing and we are now one of the biggest advertisers across all media and the largest sponsors in sport. In our efforts to make gambling a broad and socially acceptable pursuit, we have achieved the opposite; at least if the headlines are anything to go by.

Some argue the high-profile campaigns of gambling companies amount to a deluge. So, the pendulum swings back, with regulation coming thick and fast. Given some of our excesses, this is not necessarily a bad thing per se, but where does it all end up? Back to the dark ages of velvet curtains and outright bans? Rebranded as the vice of the great unwashed and frowned upon in social circles?

While we all have a view on this, we don’t seem to have found a voice. Maybe it’s time to set out our own vision, speak as one, seek support and change the narrative.

Our vision

Governments, gambling regulators, political parties, charities and anti-gambling pressure groups – they all have a vision for the future of gambling. Not only that, they also publish strategic plans designed to achieve their goals.

Meanwhile, we the insiders, prolific producers of corporate plans, have precious little to present collectively. In the absence of a vision, it’s no wonder we are bent over on the receiving end. If we don’t collaborate, individual business plans will be projecting revenue decline due to ‘unfavourable market conditions.’

I think most of us now accept two things: a) we overstepped our commercial freedoms and b) we really do have a duty of care. But how does this translate into policies across all aspects of marketing, operations and customer journeys? What is our view of the right level of affordability checks, of minimum bet guarantees, of sports sponsorship, of customer bonusing etc.?

On the continuum from Wild West practices to an outright ban on gambling, where do we envisage our commercial freedoms should end up? With the flick of a pen, a regulator can have a massive impact on company KPIs. Player protection, for example, can be achieved in many ways; not all of which have the same impact on costs and revenue.

The devil is often in the detail - a definition or interpretation here or there. National (or even international) self-exclusion lists, for example, are not only more effective in protecting players, but simpler and cheaper for the industry.

Proactively, we might add to our current time and loss limits some functionality forcing self-selection of deposit and stake defaults. Affordability checks (like KYCs) should not to be used as barriers to the withdrawal process and our real-time chaser identification tools can be improved too.

All these initiatives take time and money to implement; but they also reduce player burnout and this aligns with our interests. If we have a vision to espouse, then the sensible route to realising our duty of care will be more likely. A responsible industry will also find it easier to justify its marketing and sponsorship spend.

One voice

Some of the voices ranged against us in this debate have very extreme views – “indoctrination,” “epidemic” and the “modern plague” to quote a few. To grab the headlines, they’re not afraid to misinterpret the research either, even with an unproven claim that “gambling causes two suicides per day.”

You would like to think most of our lawmakers are generally a bit more moderate. After all, many of those who regulate the drinks and gambling industries like a punt and a tipple too. But, faced with one-sided arguments and a supine industry, it’s difficult for a legislator to arrive at the centre ground of sensible regulation; one which balances protection from players' excesses against preserving individual freedoms.

It’s difficult to present our vision if we don’t speak with one voice. On social responsibility, the CEOs of the largest gambling companies are very guarded in their responses to the press, politicians or regulators – and for good reason. One strident line in defence of the sector could make them a target. One slip up could turn them into the embodiment of the evils of gambling. Reputations and share prices are at stake and the political parapet is a scary place for a lone leader.

Instead, they embrace new regulations or even compete in their desire to show willingness to change, announcing new policies such as pre-watershed advertising restrictions, for example. Cynics say some of these are simply introduced ahead of impending regulation, but it does show there is a desire to at least define our duty of care.

But this isn’t how industry representation should work; it’s not the job of individual CEOs to champion an industry. Since our trade associations are largely mute, directors are being asked to comment by default. We have a number of organisations across the various offline and online gambling products and historically they’ve not been that well aligned, not least because they reflect (at times) competing interests. Not that long ago, we had the incongruous alliance between Christian groups and land-based Las Vegas casinos who successfully lobbied against internet gambling in the US – my enemy’s enemy is my friend and all that. Given the multi-product, omni-channel and international nature of our sector, it is time to put differences aside, pool our views and get behind a body that speaks for the majority. If the vision they present is a bit too 'responsible' for some of the bad actors out there, that’s fine, because this will lend the voice more credibility.

Meanwhile, when a regulatory proposal is inconsistent, unworkable, not justified by independent research or whose current implementation is grossly disproportionate to its impact on the sector, we would have a designated spokesperson who is willing to stand tall and say so. I agree with Steve Donoughue, my fellow Gambling Insider columnist, that perfect self-regulation is a pipe dream; what industry ever managed this? But a vision, backed up by a mature and robust dialogue with regulators, is within our reach.

We need allies

In our quest to arrive at this centre ground of sensible regulation, we also need allies. A voice of our own would be great, but external support is even better.

The economics of sports and betting, for example, go hand in hand. More than 60% of shirt sponsors in the top two English football leagues last season and nine of the top 10 sponsors of UK horse races were betting companies. Having edged out drinks sponsors over the years, betting and sports are a natural fit. For the vast majority, having a punt is a fun leisure activity which also increases engagement in the event.

Despite this, sports associations, clubs and players are keeping a low profile in the debate on TV ads and gambling sponsorship – even though their revenue is at risk. Horseracing gets an exemption from UK TV advertising restrictions, because it can’t survive without the money, and other sports bodies don’t question the moral logic.

Given the current one-sided narrative on the issue, it’s understandable – they don’t wish to be tarred with that wicked gambling brush. What a sad indictment this is on how far perceptions of our sector have moved in the last few years. A gambling industry with a vision and a voice would nurture their support.

What of our customers? There is good reason to expect their backing. They enjoy products far better than they were. The land-based experience abounds with technology, hospitality and vibrancy. Online, there’s a great variety of games, in-play betting and cash-out functionality. Customer value is far better too. Increased competition and online comparison tools mean achieved sports margins, for example, are in the single digits compared to 15% to 30% many years ago, meaning better returns to players.

Crucially, our customers also have a sense of their own personal freedoms to engage in entertainment activity, which irrational regulation can put at risk. While drinkers won’t mourn the absence of advertising, they will object to the pub closing at 10.30pm or being told they can’t be served after three pints. Similarly, gamblers are happy enough to set their own betting limits, but don't try telling them what their limits are.

Branches of the wider gaming sector have converged and there are allies here too. Sportsbooks offer bets on lotteries, while lotteries promote their online scratchcards and keno games. These blurred lines do not justify the televised draws and positive coverage of jackpot rollovers on the one hand, while betting companies are slated by the same states which run these lotteries.

More inconsistency and double standards? Either we team up with fellow lottery providers or, if that proves unlikely, we break down the perception barriers between the two products. Despite a fondness for lottery and bingo halls, my grandma never did approve of me working in ‘that gambling.’

A little further afield, social casino and social games (e.g. Candy Crush and Fortnite) are not considered gambling, but they still charge for features/progress and are designed to maximise engagement.

They share similarities, in terms of player excesses and thus the need for player protection. This is all relevant context for our efforts to reposition the sector and its profile. Wider still, gambling is one of many leisure activities which, for most, is enjoyed responsibly. In this sense, it has close parallels to the drinks industry. Binge drinking and problem gambling are not good, but reasonable consumption is okay.

Don’t target children, but let adults be responsible for their own decisions. Make us aware of the dangers and provide support to those who can’t help themselves. While drinks companies are unlikely allies, there are clearly lessons to be learned, in terms of applying duty of care and steering regulation towards the centre ground.

Finally, we need to look to our media profile. Most of the narrative these days is decidedly negative. At least in the debates on binge drinking, sugar tax, meat tax, fast food or compulsory cycle helmets, there are voices challenging the moral crusaders for reasons of excessive interference. But in gaming, these opinions are yet to be heard.

Maybe the time is not yet right, maybe most initiatives today are justifiable (due to our past excesses and lack of self-regulation) but a tipping point will come. With the right cause célèbre, the media cries of nanny state could be our strongest ally of all.

The advent of the internet was a great opportunity for gambling and you can’t put that particular genie back in the bottle. We were also the benefactors of gaming liberalisation - but things have come full circle. In the absence of a vision, a voice and some allies, we now risk being regulated or taxed into decline. A long-term sustainable sector is what’s needed, one in which players are allowed to indulge but are protected from their excesses - and it’s one we should all be proud to work in.

Kevin Dale has been in digital businesses since 1999 with CMO roles at Eurobet, Sportingbet and Betfair and CEO of Gameaccount (GAN plc). He consults across the industry.
DISCUSS THIS ARTICLE
IN-DEPTH 16 August 2019
Roundtable: David vs Goliath – Can startups really disrupt the industry?

(AL) Alexander Levchenko – CEO, Evoplay Entertainment

Alexander Levchenko is CEO of innovative game development studio Evoplay Entertainment. He has overseen the rapid expansion of the company since it was founded in early 2017 with the vision of revolutionising the player experience.

(RL) Ruben Loeches – CMO, R Franco

Rubén Loeches is CMO at R. Franco Group, Spain’s most established multinational gaming supplier and solutions provider. With over 10 years working in the gambling, betting and online gaming industries, he is skilled in operations management and marketing strategy.

(JB) Julian Buhagiar – Co-Founder, RB Capital:

Julian Buhagiar is an investor, CEO & board director to multiple ventures in gaming, fintech & media markets. He has lead investments, M & As and exits to date in excess of $370m.

(DM) Dominic Mansour – CEO, Bragg Gaming Group:

Dominic Mansour has an extensive background of nearly 20 years in the gaming and lottery industry. He has a deep understanding of the lottery secto,r having been CEO at the UK-based Health Lottery, as well as building bingos.com from scratch, which he sold to NetPlay TV plc.

What does it take for a startup to make waves in gaming?

DM: On the one hand, it’s a bit like brand marketing; you build an identity, a reputation and a strategy. When you know what you stand for, you then do your best to get heard. That doesn’t necessarily require a TV commercial but ensuring whatever you do stands out from the crowd. Then you have to get out there and talk to people about it. 

AL: Being better than the competition is no longer enough; if you’re small, new and want to make a difference – you have to turn the industry on its head. Those looking to make waves need to come up with a new concept or a ground-breaking solution. Take Elon Musk, he didn’t found Tesla to improve the existing electric cars on the market, he founded it to create the industry’s first mass-market electric sports car. It’s the same for online gaming; if you want to make waves as a startup, you have to bring something revolutionary to the table.

JB: Unique IP is key, particularly in emerging (non-EU) markets. As does the ability to release products on time, with minimal downtime and/or turnaround time when issues inevitably occur. A good salesforce capable of rapidly striking partnerships with the right players is vital, as is not getting bogged down too early on in legal, operational and admin red tape.

How easy it for startups to bring their ideas to life? How do they attract capital?

AL: It depends on the people and ideas behind the startup. Of course – the wave of ‘unicorns’ is not what it used to be. Some time ago the hype was a lot greater in terms of investing in startups, but that’s changed now. Investors now want more detail – and even more importantly, to evaluate whether the startup has the capacity (as well as the vision) to solve the problem it set out to address. That’s not to say investors are no longer interested in startups – they certainly are – but now more than ever, it’s important for startups to understand their audience as well as dreaming big.

JB: To get to market quickly, you need a great but small, team. If slots or sportsbook, the mathematical engine and UX/UI are crucial. Having a lean, agile dev team that can rapidly turn wire framing and mathematical logic into product is essential. Paying more for the right team is sometimes necessary, especially when good resources are scarce (here’s looking at you, Malta and Gibraltar).

Building capital is a different beast altogether. You won’t be able to secure any funding until you have a working proof of concept and, even then, capital is likely to be drip fed. Be prepared to get a family and friends round early on to deliver a ‘kick-ass’ demo, then start looking at early-stage VCs that specialise in growth-stage assets.

How do you react when you see startups coming in with their plan for disruption?

RL: We welcome the innovation and fresh thinking startups bring. This is particularly the case in Latin America, with a market still in its infancy. One area we’d especially like to see startups making waves is in the slot development sector. Latin America is a young market that needs local innovation suited to its unique conditions – especially in regard to mobile gaming.

Operators eyeing the market have Europe‐focused core products, which creates a struggle to work to the requirements of players and regulators. To succeed there, it has become more important than ever to work with those with a knowhow of the local area to adapt products and games to besuitable from the off; we welcome the chance for local talent to develop and grow.

Do you think it’s easier for established companies to innovate and establish new ideas? 

AL: From a financial perspective, yes. It is without a doubt easier for incumbent companies to establish a pipeline of innovation via their R & D departments, as well as having the tools to hand for data gathering and analysis.

But it stops there. Startups hold court in every other way. Not only are they flexible, they can easily switch from one idea to another, change strategy instantly as the market demands and easily move team members around. Established companies know this – and this is why we’re seeing an emerging trend for established companies to acquire small, innovative online gaming start-ups. They have the right resources and unique ideas, as well as the ability to bring a fresh approach to businesses’ thinking.

RL: For me, it’s always going to be established companies. Only with the resources, industry experience and know‐how can a company apply technology and services that truly make a difference. Of course there are exceptions. But when it comes to providing a platform that can be approved by regulators across multiple markets – as well as suiting an operators’ multiple jurisdictions – it is simply impossible for a couple of young bright minds with a few million behind them to get this done.

DM: I actually think it’s harder for established companies. It’s key to differentiate between having a good idea and executing one. That’s where the big corporates struggle most. They’re full of amazing people with all sorts of great ideas but getting them through systems and processes is nearly impossible.

Is it essential to patent-protect innovative products?

AL: It’s a very interesting subject. If we take IT for example – patents can actually become a block to the evolutionary process within the industry. Of course, getting a patent future proofs yourself from the competition copying your concept but, having said that, if you’re looking to protect yourself from someone more creative, smarter and agile, you’ve probably lost the battle already!

In our industry everything is moving faster and research takes less time than the development itself. No matter how good you are at copy pasting, you can’t copy Google or Netflix. The most important thing is not the tech itself but rather its ‘use-case’ – or in other words, does it solve what it’s meant to solve? Competition is healthy and the key to innovation. If you spend your whole time looking behind you, you’ll never be able move forwards.

JB: Tricky question, and one that depends on what and where you launch this IP. It can be difficult to patent mathematical engines and logic, mostly because they’re re-treading prior art. Branding, artwork and UX is more important and can easily be copied, but the territories you launch will determine how protectable your IP will be once patented. US/EU/Japan is easy but expensive to protect in. But China/South East Asia is a nightmare to cover adequately. Specialised patent lawyers with experience in software, and ideally gaming, can help you better.

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