Reflections on WGES 2020

The 2020 World Gaming Executive Summit (WGES), which was held online in December 2020, mirrored the main trend of 2020 – going digital.

The summit is usually held in the summer sunshine at the W Hotel in Barcelona. WGES was initially postponed in March, as the virus spread through Europe, with a new December date. But as the year progressed, it became clear no events were going to be possible, so WGES morphed into a digital summit.

Gambling, too, saw the shift from ‘physical’ to ‘virtual’. GBGC’s provisional calculations suggest that online gambling increased its share of global revenues by three to four percentage points in 2020, taking its share to almost 15%, as gambling venues were forced to close.

But some WGES speakers highlighted the fact that not all countries have the infrastructure in place to facilitate this digital switch. This happens in the places where one would expect it, like parts of Africa, but also in some more unlikely locations, such as Eastern European regions of the EU. Having a good Internet signal during ‘normal’ times does not mean you will have a good connection when suddenly everyone migrates to working from home and people use a lot of bandwidth for video meetings and streaming. This impacts not only our daily lives, but also the way we gamble and place bets.

African sports betting is one of the gambling sectors most dependent on retail. WGES attendees heard that retail still dominates the sector, with mobile betting growing in importance, but still a couple of years away. The situation on the continent is varied, so experience depends on country, or even province when talking about markets like South Africa. Retail shops are what conveys trust in the brand, which is the most important factor determining success. Betting shops have huge TVs and free Wi-Fi and are places to gather, have drinks and bet.

Other sessions discussed the role of new events stepping in to fill the void when top-level live sport was cancelled. We also found that people need something to bet on. During Q2 and Q3 2020, betting on virtual sports and esports did receive a boost. In some African countries, operators even went as far as launching virtual sports without graphics, with the outcome determined by RNG.

There was discussion about the specifics of esports, which consist of many different sports and is constantly changing, with Asia being the main market.

US horse racing also profited from the postponement in other sports, with handle increasing. In New Jersey, Monmouth Park started offering fixed-odds betting on horse racing, which also helped increase its handle. Fixed-odds betting on horses was common in the US before 1930, when it switched to a pari-mutuel model because of the high takeout.

Horseracing in the US now faces further competition from sports betting. One of the features of trying to enter the nascent US sports betting market is that it is very expensive. Companies are having to invest heavily in marketing – sometimes more than their annual revenues. The US is now where Europe was a decade ago, with a focus on customer acquisition, not retention.

But US operators who spoke at WGES said that some ‘old technology’ – namely email – was still a useful marketing tool to attract customers back to venues after reopening.

By Tihana Jurican

The economy in 2021: the boom is coming

Getting back to normal is going to take longer than people think. The vaccination of the peoples of Europe and North America is going to take time. The Isle of Man, where GBGC is based, has already cancelled its summer festival of motor bike racing, the TT, for a second year in a row. The authorities clearly think there will be risks for it to go ahead, even though they have acquired enough vaccines to serve the entire population.

The best shot for a bounce back in the economy, if all goes according to plan – which these days is no guarantee – would be improvements from April.

A friend of mine working for one of the UK’s big banks tells me they are stuffed out with money. Not surprising when the UK Government has forbidden them from paying dividends and their customers have not been out spending on cars, holidays and eating in restaurants. Savings are up £113 billion from January 2020 to October 2020.

Goldman Sachs has said that the bounce back in the US, now a major internet gambling market will be significant and point to 5.9% economic growth. Consumers and business have accumulated $3.5 trillion. Some forecasters are saying we are going back to the roaring 1920s. The last big influenza type pandemic was 1918 and lasted two years. So, you get the significance of comparing now with then.

Where will this money go? Primarily on what has been denied, holidays, restaurants, and some will go on gambling which represents just under one percent of the global economy. As the economy grows so will the growth of gambling services. Las Vegas will be a big beneficiary, and so will racetracks, sports betting will grow as the stadiums fill with fans, and casinos either those that service locals but especially resort properties that combine gambling with holidays.

Everyone will suddenly want everything, and this will create bottlenecks in supply, leading to higher prices and bigger margins of profit. The stock market is forward looking, the Dow and S&P500 are at highs. Valuations are justified if all goes to plan, otherwise it’s going to be a major correction.

By Warwick Bartlett

The lessons 2020 taught

Digital

The large increase in market share achieved by digital companies in everything from shopping to entertainment, gambling, and communications under the lockdown will not rise so quickly from here. But these companies will keep many of their new customers. Working from home, the use of laptops, pads and smartphones, online shopping, home entertainment will all play even bigger roles in our lives than they already do.

Adapting to Change
As a species we have survived by being able to adapt to change. 2020 has proven our collective adaptability. Working from home, digital meetings with Teams, Zoom, Google Meet, and a host of others proved how resilient we all are. We were at the start of the pandemic all turned on about the excitement of change and doing something to overcome the obstacles.

The gambling sector is one of the most adaptable on the planet. Companies that were internet only did so well despite sports betting being cancelled. The real winners were poker and casino. The first lesson? Without an internet solution to your business, you are not going to survive. The second lesson was the speed of the bounce back when sports betting resumed, there is significant pent-up demand to be released once this pandemic is over.

Digital meetings are fine, but after a while they become sterile. You miss the interaction between people, during, before, and after a meeting, where ideas are bounced for one to another. I fear innovation may suffer if this continues or becomes the new norm. Companies may save on rent and rates but will lose out on creativity and thus revenue. Working from home happened by accident, working from offices was part of a tried and trusted formula that worked for decades.

Public Health Trumps Tax

The big lesson for me in 2020 was that public health trumps the economy. In the gambling industry, I have always known this, but listening to televised interviews few businessmen outside gambling seem to know it.

If you need confirmation the British Prime Minister Boris Johnson, when returning to cabinet after his near-death experience with COVID quoted Cicero the Roman statesman. He said, “The health or welfare of the people should be the supreme law.”

The betting industry would do well to remember that. Arguments in this age on the tax governments would lose against the welfare of gamblers is somewhat futile when health trumps tax all day long.

Politicians the world over struggle with the legalisation of gambling, and the path to legitimise gambling is tortuous. The arguments that swing it toward legalisation are the ones that will cause more protection for the gambler, in terms of security in payments, traceability for problem gamblers, and keeping crime out of gambling. When you have satisfied all that, the throw away at the end of the presentation is, oh, and by the way Mr Government, you will raise some money in taxes.

Inevitability of Regulation

Sundar Pichai is the CEO of Google, in a thought-provoking article on regulation the FT said that like it or not, for Google, government intervention is now an inescapable fact of life. Faced with the inevitable, Mr Pichai’s strategy is clear: to publicly welcome new forms of regulation, while at the same time trying to head off its most onerous effects. The tactic is evident from his response to Europe’s proposal last week for a new Digital Services Act which would put more responsibility on the most powerful tech companies to police their platforms.

A policy that will no doubt serve the gambling industry equally as well in 2021 with the forthcoming Gambling Act Review. To be fair gambling UK has so far embraced the new norm. We no longer live in the Thatcher 1980s where personal responsibility, taking control of your own lives was the doctrine.

By Warwick Bartlett

Chart of the week – 20 January

The UK online poker sector benefited from the first national lockdown to halt the pandemic. But the boost was only temporary and ended when the lockdown was lifted.

Data for the final two months of 2020 has not yet been published. There were further restrictions imposed during November and December, so online poker might again expect to receive a boost.

The graph below takes as its base the revenue for March 2019. The first UK lockdown began in the second half of March 2020 (highlighted in red), and poker revenues for that month were 50% above the base. A full month of lockdown in April 2020 saw the peak for online poker.

The summer months and looser restrictions meant that online poker revenues were not much greater that the base level between July and October 2020.

GBGC Chart of the week – 13 January

The performance of Macau’s casinos in 2020 highlights the challenge the land-based gambling sector faces to recover from the COVID-19 pandemic.

Casino revenues in Macau fell by 79% in 2020. But the casinos themselves were only actually required to close for a fortnight in early February – as highlighted by the red bar in the graph below.

Macau is a destination casino market. The problem has been the lack of visitors willing or able to travel to Macau to gamble.

International or cross-border travel has certainly been unappealing during 2020 – the need for quarantine periods, either on arrival or upon return, requirements around negative tests prior to arrival, governments imposing travel bans and discouraging non-essential travel, and a general caution about public concerns about prolonged periods in the confined space of planes.

It is clear that some countries will be keeping similar measures in place well into 2021. This poses a problem for destination gambling resorts that is hard to solve.

Drone racing gets betting boost

DraftKings will begin taking bets on drone racing, starting with the championship of the Drone Racing League. Betting will only be available to customers in five US states: Colorado, New Hampshire, New Jersey, Tennessee and West Virginia.

GBGC first wrote about drone racing and its potential as a sport upon which to bet in 2016, shortly after the launch of the Drone Racing League.

At the time GBGC highlighted the sport’s appeal, describing it as “betting for the Star Wars generation”:

• Fast-paced live or pre-recorded sports action – 70mph drones
• Thrills and spills without concerns for human or animal welfare
• First person viewing makes viewers feel part of the action
• Regular and frequent events – the drones don’t get tired
• An element of form, skill and personalities in the pilots flying the drones
• An appeal to younger, non-traditional sports fans

Drone Racing League President Rachel Jacobson explained, “The opportunity for us to elevate our engagement through all forms of gaming and gambling will only increase as mobile betting becomes more adopted across the country.”

DraftKings believes there is a market for betting on drone racing. Free-to-play contests on drone races were offered in 2020 and the participation was reportedly 30% higher than usual for a new sport introduced to the betting platform.

The company reports that consumer research finds that drone racing fans are three times more likely to place a bet than fans of major sports leagues. Furthermore, fans of drone racing are 90% more likely to be interested in sports betting in general than the average sports fan. Draftkings plans to offer both pre-match and in-play betting on drone races.

Since GBGC first highlighted drone racing’s appeal as a betting medium, two further events have enhanced that appeal:

1. The repeal of PASPA in 2018, which allowed US states to regulate sports betting, including digital channels.

2. The COVID-19 pandemic in 2020, which disrupted much live, professional sport and gave an opportunity for esports to fill the void.

Join our Mailing list

Receive the GBGC monthly gambling newsletter with our views, industry news and much more. You can unsubscribe at any time.