The global igaming industry has enjoyed significant regulatory breakthroughs around the world over the past year, but the emergence of a genuinely international sector is causing the world’s largest operators and suppliers to re-evaluate the role Asia plays in their revenue mix.
Online gaming has, for much of the last decade, revolved around a white market-grey market axis dominated by Europe and Asia.
Many of the most successful operators and suppliers have followed a simple formula, investing grey market revenues from Asia to grow in the regulated markets of Europe. This approach has powered the growth of many of the most recognisable names in iGaming, perhaps most notably bet365 and Playtech.
But a number of factors - including an increasing risk profile, the emergence of newly-regulating iGaming jurisdictions and greater local and international competition - are now combining in a way that is completely redefining the global landscape.
New jurisdictions are building regulatory frameworks for iGaming far more robust than anything on offer within Asia.
The most notable of these are in the US, where the repeal of PASPA has opened the door to legal online sports betting for the first time, with a number of states already live.
But this is very much a global phenomenon, where an economic downturn has led governments across the world to a conclusion yet to be reached in most of Asia: that it is better to regulate and tax online gaming than make futile efforts to outlaw it.
In Latin America, Colombia is live with a thriving online sports betting sector, while Brazil, Argentina and Peru are making steps in a similar direction; in Africa, the likes of Kenya and Tanzania are growing quickly; in eastern Europe and Eurasia, markets such as Georgia are being increasingly targeted.
The result is that many iGaming firms are shifting resources towards these new opportunities.
Take the example of platform provider SBTech, for a long time a strong performer in Asia, which in January appointed former Scientific Games CEO Gavin Isaacs as non-executive chairman in a clear pivot towards the US.
“Isaacs will use his extensive 20 years’ gaming experience across a series of senior management positions to further grow the company’s rapidly expanding US presence,” the firm said in a statement at the time.
Asian risk on the rise?
Attitudes to nature of risk in Asia have changed.
When the new wave of European regulation was introduced in the early 2010s, many of Europe’s largest, publicly listed operators withdrew from Asia entirely. Ladbrokes pulled out of China as early as 2010, with William Hill following in 2013. At the time, investors had little appetite for revenues from markets that were considered unsustainable.
But in the years since, we have seen a very different approach. Many have observed the impressive growth of GVC, a company which performed extremely well in grey markets, using that growth to land major M&A targets bwin.party and Ladbrokes Coral. Today, GVC is one of the world’s largest gaming operators in regulated markets.
Similarly, others have observed that white markets are not devoid of risk themselves; the reduction in stake for FOBTs in the UK is perhaps the most notable example of political and public pressure conspiring to deliver a hammer blow to operators within a regulated market.
“Diversification is the best way to mitigate risk,” one iGaming consultant based in Asia told AGB. “If you have a footprint in Vietnam, Cambodia, Thailand, China and Malaysia, having your website blocked in the Philippines is not necessarily a decisive blow.”
Looking at the region currently, of the major markets Malaysia and the Philippines remain the most politically uncertain. The biggest prize, China, has enjoyed a period of relative stability, even if operators are constantly playing a game of cat and mouse with authorities.
This is not to say the unexpected cannot have a major negative impact.
Last July, Playtech saw its share price collapse by 25 percent in a single day on the back of a profit warning which predicted Asian revenues for 2018 would be €70m below expectations.
The warning singled out the Malaysian market, where Playtech has found itself under greater scrutiny as part of a government crackdown on online gaming.
However, digging a little deeper and it appeared that it was actually increased competition in China that was at the root of Playtech’s woes. It would also suggest that even against a backdrop of the globalization of iGaming, the Asian opportunity remains too big to be ignored.
Take NetEnt, another iGaming giant that has been among the first-movers in the US. Despite this push, the slots developer has also undertaken a major expansion in key Asian markets over recent months.
“Europe still has top priority, followed by North America and Asia,” the the company says in its corporate strategy. “Focus on regulated markets but continue with dot.com as long as this is commercially viable.”
NetEnt CEO Therese Hillman has also recently pledged to “step up our efforts in the Asian market”.
AGB understands that over the past 12 months, many of the most successful European slot providers have made Asia a number one priority. These companies have enjoyed extremely strong growth by disrupting larger incumbents in regulated markets, and have now begun to implement the same strategy in Asia.
Despite the risks in Asia, its relatively low barriers to entry are particularly appealing. While the US is rightly generating a great deal of excitement, complex regulatory requirements fragmented across multiple states will likely rule out all but the largest companies.
For mid-sized firms looking for growth outside of Europe - particularly those with enough scale to mitigate some risk - Asia is a far more attainable goal.
“Yes, there are risks for iGaming companies in Asia,” the consultant based in the region told AGB. “But ultimately the opportunities are too big to ignore.”
Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.
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