Industry predictions: Malta becomes less attractive and the move to modular technology

Joe Saumarez Smith, chairman of Eyas Gaming

US gambling stocks re-rated

The valuations of the US online gambling sector have come down around 30% from their highs but it feels to me like there is a lot more downside from current levels. You have maybe 25 companies all claiming that they are going to have between 10% and 15% of the US online market, which clearly doesn’t add up. The total addressable market feels to me to have been exaggerated and the player lifetime value assumptions are being skewed by the hardcore early adopters. I think 2022 is the year that investors realise that not all the excitement is fully justified.

Malta becomes less attractive

I am surprised how little has been written about the likely implications of the Financial Action Task Force (FATF) placing Malta on its ‘grey list’ of 22 jurisdictions where the Group of Seven can’t be confident that basic financial safeguards are in place. I think banks around the world are trying to work out the implications of this and whether they can accept payments from the Maltese banking system. It feels to me like this poses a huge threat to the Malta online gambling industry and I imagine that a large number of finance directors are looking at a Plan B which probably involves places like Gibraltar, Isle of Man and Alderney. Perhaps Malta can get itself off the list in time but that’s no easy task.

Taxes on gambling go up

A lot of governments have big holes in their balance sheet due to Covid and taxing ’sin industries’ is an easy, non-contentious way to increase revenues. It’s hard to imagine that the net tax burden on gambling companies around the world won’t increase in 2022. The only place where taxes could (and should) come down is Germany, whose ridiculous legislation for online gambling allows a huge black market to flourish and makes it close to impossible for legitimate operators to make a sensible economic return.

Mark Israney, partner at Propus Partners

Move away from the US

Of course, there will be more headline M&A activity with eye-watering valuations within the US in 2022, I’m not going to waste a prediction discussing that! We do, however, think that things are beginning to feel a little bit too busy in some US states, with 57 (by our count) unique online brands (excluding Nevada) now live and servicing customers across 18 ‘online’ states.

With tough tax rates in some cases, crazy high CPAs in most cases and a significant market share being enjoyed by the top few, we struggle to see how this economic position can be sustainable for some. The math(s) just doesn’t work. Therefore, we do expect to see some that have already entered, to either exit within 2022, or shy away from expected state expansion.

Despite far fewer headlines, we have seen a clear increase for information and opinion on the Indian market over the second half of 2021. From a regulatory point of view, this remains complex, and we cannot forecast what 2022 will look like. However, from a product development point of view, we do expect cricket to receive significantly increased focus going forward.

The move to modular technology

As the global marketplace continues to regulate and expand, with many bookmakers intending to operate across an increasing number of markets, it only follows that their system requirements (functional and non-functional) will change. The one-size-fits-all model that is offered by some platform suppliers will begin to fail, and so technology modularisation will come to the fore.

The use of third party data and odds has been essential to nearly all operators since the birth of in-play betting and given coverage has never been higher (one million in-play ‘events’ per year for some), this will not change. However, we expect to see more third party ‘services’ used (risk management, bonusing, CRM), as well as code bought to fill in gaps or to replace under-performing components.

System performance for some, often older, platforms is an issue that despite not being discussed much (outside of EPL Saturday or NFL Sunday Twitter), will continue to rise as ever more data is processed. Third party services can, and we think will, be used to relieve some of this strain.

Winter World Cup wonderland

Ever since Qatar was named as host for the 2022 World Cup, the tournament has been written off by football purists as one likely to be ruined by temperatures, and one without an atmosphere to match some of the great tournaments of the past (Italia 90 topping the list, just to put that argument to bed). Whether Qatar is an appropriate host for one of the world’s largest sporting events can (and should) be debated elsewhere, but while there will be a small number that turn off the tournament, we actually expect betting activity records to be broken.

December temperatures in Qatar match those of some tournaments gone by, although a quick plot of average temperature versus goals per game (albeit from a tiny sample) just about tells us that the hotter, the better. Daily kick-off timings appear suitable for European and African audiences, and not awful for East Coast Americans. With the World Cup squeezing in, and not significantly extending domestic competitions, we can also look forward to months of quality sport on either side.

It’s almost inevitable that this tournament will creep up upon us, but once here, from a betting point of view, we see no reason that it will not eclipse previous editions.