MIGS this year moved back to the refurbished five-star Hilton hotel in St Julian’s Bay. A new conference centre has been built between the hotel and casino and the facilities are excellent.
This year my speech focused on the five-year performance of the e-gaming industry along with some difficulties, both known and potential, that the industry may face over the next two years.
Although the sector does benefit from improved internet and mobile connectivity, enabling more customers to enjoy the entertainment that e-gaming provides, this alone will not provide the growth the sector has experienced in the past. But that could all change if federal legislation for sports betting in the USA occurs, Germany takes a more rational approach to e-gaming, and the potential of new legislation in Brazil materialises.
What I did tell conference was not to expect a boost from any improvement to the global economy in 2017. Looking at three major multinational companies whose products we buy every day, Proctor and Gamble, Unilever and Johnson and Johnson their revenues have hardly grown this last five years. Indeed Nestle has shown only 1.2% a year compound annual growth this last five years. If the global economy was growing they would see it.
I listed ten obstacles, here they are:
1. UK Levy replacement: will capture offshore operators who are not paying horserace betting levy. This will hit Ladbrokes Coral, William Hill, and Paddy Power Betfair whose businesses are heavily focussed on the UK.
2. Free play tax: brings parity with the land-based business but will cost e-gaming operators £100m, unless they mitigate.
3. Triennial review for FOBTs: does not affect e-gaming directly but very often what happens in the retail sector drifts into online. (see 2)
4. Self exclusion database: no-one as yet has done an economic impact study. The Gambling Commission should have done one when it brought this forward but now it is the responsibility of the RGA.
5. Corporate debt: sold at premium rates to gambling companies. Companies are taking on debt at a minimum 5% and maximum 12% – high in an almost negative interest rate world.
6. European Council: recommendation to EU that “point of consumption” (POC) applies to all member states, if applied, will make Malta less attractive, causing jurisdiction “hop”. But Malta will oppose.
7. AML requirements: Customers do not like being asked where they got their money from. Having informed their bank they feel this is sufficient intrusion into their private life. They see it as having their integrity questioned.
8. Potential for 20% POC tax 2017/18: Operators are applying for licences in jurisdictions where the rates are much higher at 29% and 25% of gross profits. The tax on free bets will probably equate to a collection rate of about 20%, but after that has consolidated Government may consider another increase.
9. TV advertising restrictions: With bingo spending £57m a year on TV advertising, half of the total, they will be hit by a ban on gambling adverts before a 9pm watershed.
10. Competition & Markets Authority (CMA): investigation into slow pay and the operators’ terms and conditions. In my view this is a sector “own goal”. New people have come into the e-gaming sector with the perception that the customer should only lose. Those that have done their time in the industry welcome winning customers. They recognise that when customers win they tell their friends and promote the business. Whatever the CMA produces it will be helpful, and create standardisation across the industry that will be helpful to customers. I do not see this as revenue negative, in fact it is a positive. The downside is that the sector should expect lots of negative publicity in the media.
by Warwick Bartlett