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NEWS 7 August 2019

Gambling.com CEO: “I’ve been blown away by the activity in the US this year”

By Nathan Joyes

Nathan Joyes sat down with Gambling.com Group CEO Charles Gillespie to discuss the progression of sports betting in the US since PASPA was overturned.

First of all, how well do you think sports betting has been welcomed in the US so far?

Sports betting isn’t coming to the US; regulated sports betting is coming to the US. That’s where it is pretty hard to argue against regulation. Why should the state not tax regulated operators when it is already happening in the US? The majority of Americans appear to be in favour of regulated sports betting. Getting these states up and running is pure politics; it’s who is getting which slice of the pie. The moral/ethical side of the debate against gambling has really been diminished as a result.

Are restrictions preventing the pace of sports betting’s expansion in the US?

Every state has its own jurisdiction, so if one wants to offer online gambling to all Americans it is going to require all 50 states to have legislation at state level, and then you get licensed in every single state. Most states start with the lottery, that’s their gateway form of gambling. From there, the states can decide to do other types of gambling, where they just give it to the lottery commission to regulate and operate.

That’s fine but it can take on many different forms. If it ends up being a state monopoly, that is a very bad outcome for everyone. A private sector has a very limited role to play – but if they have a free-market approach there are multiple licenses, reasonable taxes and the lottery commission can regulate in a sensible, open market, which would be fantastic.

There is this kind of risk the lottery commission takes a very lottery-style view on it. The lottery in many states is run by the government, and then brings in one of its lottery providers, but that’s it.

If we take a similar view with sports betting, operators will go to a supplier and there’s no public open market process to regulate the market. That can be a negative outcome for both the industry and the consumer. This is because the consumer needs good options; otherwise they aren’t going to move their action away from offshore sportsbooks onshore. They need competitive products, otherwise these states won’t succeed.

Do you feel as though consumers will stay on the black market if this remains the case?

Absolutely. People in the US are positive about regulation but the offshore market is healthy, it is mature, it works and it invests hundreds of millions of dollars in its products. These are good customer experiences. So to just assume that to open a bare bones onshore sportsbook will immediately recapture all consumers is very naïve. For me, don’t make the licensing process too hard, don’t make the taxes too high – you really want to encourage investment.

The UK, for example, has this highly dynamic and interesting system because it has been relatively easy to get a gambling license there and that is why it is the spiritual home of the gambling industry.

Are you surprised by the lack of states which have welcomed sports betting since PASPA was overturned? Did you expect to see more states legalise wagering by now?

The opposite, in fact. I’ve been blown away by the activity this year. You’ve had 39 of the 51 if you count Washington DC; jurisdictions in the US introduce legislation for sports betting. I don’t think any other legislation can compare on any other issue.

Now, of course, all 39 of those efforts did not succeed but on the latest numbers, 15 of those have passed legislation and nine are now live. The states are far more nimble than federal law, they can change or reverse decisions far easier.

Tennessee has legislated with one of the most free-market approaches in the US, which is currently mobile-only, which made the political conversation in Tennessee simple. There was no one from the land-based side of the industry clambering to get a seat at the table. So Tennessee started mobile-only, tax rates and licensing fees are a little high but workable, but the result is you are going to have one of the most competitive and interesting markets in America for sports betting.

The door in Tennessee has been blown wide open and there’s this neighbour effect we are seeing. When one state legalises, others are rethinking about their approach to sports betting. It is truly an exciting time.

What do you make of the European affiliates making headway in the US?

I think it is very interesting. What you haven’t seen from European affiliates yet is any of them building a meaningful US affiliate business on their own. So the only way into the market thus far for them, in a meaningful way, has been through acquisitions.

They are all trying, that’s for sure, not least ourselves. We’ve put a huge amount of investment into the US, where we have had people based for ten years now. I think that will change in time; there will be a lot of organic growth in US states from the big European affiliates.

Gambling.com was granted approval in New Jersey. What have been your steps in the state so far?

We have been live in New Jersey for around 18 months. We entered the market with a basic license and now we have upgraded that license to the next tier, which means we can do revenue share deals – but we’re in the market and we’re sending players to operators.

We’ve got Gambling.com in the US as well as Bookies.com, which is a US-first media property for us. Gambling.com is global, which has a very big UK business, whereas Bookies.com we feel is a better fit for the US.

This is because this next wave of regulated online gambling in the US is going to be all about sports betting – and so Bookies.com and its brand is appropriate for that.

What are your goals for the remainder of 2019 and early stages of 2020?

This year we have been investing heavily into our internal platform, as we have continued to grow and staff has multiplied as a result. Some of our internal systems needed attention so we have re-built our business intelligence systems and we are at the tail end of year-long projects. We are expecting to launch the new version of our systems in the near future to radically improve our activity.

There has been a strategic view this year to diversify away from the UK. The UK market is under pressure from the Gambling Commission. You see it in the advertising restrictions, for example. I think we would share the sense with the rest of the industry there’s some uncertainty in the UK at present.

I think we have our hands full with the US. I very much plan on being the market leader in the US, so that should keep us plenty busy for the time being.

RELATED TAGS: Online | Land-Based | Industry | Sports Betting | Legal & Regulatory | Lottery | Affiliate | Feature
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.