Waking the sleeping giant: Why Brazil is the biggest sports betting opportunity since PASPA's repeal

When Jair Bolsonaro, Brazil’s current president, told local media in September that he would veto any proposals to regulate the country’s gaming market, it was yet another twist in one of the industry’s longest running ‘will they, won’t they’ sagas. Indeed, since 2016, there has been a renewed push in the country to regulate several forms of gambling, and while progress has been made, observers have become used to setbacks whenever it looked like the finish line may be in sight.

Despite the strong words from the embattled president appearing to mark a decisive shift against long-standing efforts to introduce a new and wide-ranging regulated gaming framework in Brazil, there are reasons to be optimistic for those looking at opportunities in Latin America’s biggest market. “Operators should not yet give up on their faith and expectations for the proposed legislation to move forward by the end of the year,” says Neil Montgomery, founding and managing partner at Brazilian law firm Montgomery & Associados, which has offices located in São Paulo and Rio de Janeiro.

Indeed, for many operators, Brazil is already an important market. Generally treated as ‘light grey’, online fixed-odds sports betting was legalised at the end of 2018. However, SECAP, a department of Brazil’s Ministry of the Economy overseeing evaluation, planning, energy and lottery, is yet to formally regulate it.

“Operators were also expecting the regulations for fixed-odds sports betting to have been rolled out by now, especially after so many promises from SECAP,” says Montgomery. “Unfortunately, the pandemic and bureaucratic delays have led to such procrastination. Notwithstanding, SECAP’s secretary Gustavo Guimarães recently promised that the regulations will ‘indeed’ be rolled out by the end of 2021. I reckon we will have to wait and see.”

The consensus among those who spoke to EGR Intel at the time of writing is that the sports betting regulations should be in place either later this year or in early 2022.

Competitive edge

When regulations are in place, those operators taking bets from Brazilian players will require a licence and will be taxed on a GGR basis, after an initial decision to tax based on gross wagers was scrapped earlier this year. Montgomery notes that the change would significantly benefit the market as well as enhance competition.

While this decision was cheered, Bolsonaro’s September repudiation of Bill 442/91 was less well received by the industry, even though it was qualified, with the president himself noting that his veto could be overridden by Congress. His comments were likely aimed at his evangelical fan base; indeed, with the presidential elections due next year, Bolsonaro’s approval rating sits at an all-time low and the bookies have him odds-on to be booted from office.

Bill 442/91 provides for a broad legal-isation of games of chance in Brazil, including casino, bingo and online-based games. Remarkably, the ‘91’ in the bill’s name refers to 1991, the year it was originally introduced, although it was significantly redrafted in 2016.

Countless delays to the bill have done little to dampen the appetite of operators, primarily because the size of the prize is simply too large to ignore. Estimates vary, but many who spoke to EGR said that Brazil could quickly take third spot behind only the UK and US in a list of the world’s largest regulated online gaming markets by revenue, should it move forward with proposed legislation.

The total size of a regulated Brazil gaming market could top BRL74bn (£9.5bn) per year, according to Magnho José, editor of Brazilian gaming portal BNLData, and president of the Instituto Brasileiro Jogo Legal (IJL), which advises a working group created to update the bill that aims to legalise games of chance in the country’s Chamber of Deputies.

Magnho José estimates that 20 million Brazilians wager daily on Jogo do bicho, or ‘animal game’, a type of lottery draw with close ties to organised crime. A further 10 million are thought to be betting each day on offshore sites. These offshore operators are currently generating annual revenue estimated at BRL10bn as part of a BRL27bn unregulated gaming market in Brazil. In contrast, government-sanctioned games operated by Loterias Caixa are generating a little over BRL17bn annually.

First movers

As SECAP continues to work to roll out its regulated framework, many of Europe’s biggest operators are already making moves to stake a claim to a slice of this fast-growing market with a population of around 212 million.

Entain’s Sportingbet brand has long been a powerhouse in the market; as far back as 2009, a Sportingbet plc annual report noted that the brand had developed “a strong business” in Brazil. Entain, which also owns the Betboo brand in Brazil, said last year that it was the largest operator in the market.

More recently, it has been Betsson Group among the tier-one operators which has been most active in the country. In 2019, it acquired a 75% majority shareholding in Brazilian racing-focused operator Suaposta.

“Suaposta was and still is the first and only fully authorised betting brand in Brazil, fully accessing local payment methods, digital media and local know-how,” Andre Gelfi, managing director of Betsson in Brazil, tells EGR.

Since the acquisition, Betsson has migrated Suaposta to its own platform and rebranded to its core Betsson brand, with a view to the introduction of fully regulated sports betting which it expects to be in place by 2022.

For Gelfi, the acquisition of Suaposta was significant on several strategic levels. It holds Brazil’s only betting licence on account of its strong links to the country’s racing community. “It was a way to position and contribute to the Brazilian market evolution even before regulation. With the regulated market, we can offer new entertainment options to our players and get closer to them,” says Gelfi.

The acquisition also supports a wider Latin American strategy, with the company announcing the majority acquisition of Colombian operator Colbet last year, and more recently securing a licence in the province of Buenos Aires. The operator supported its Latin American activities in the summer as the main regional sponsor of the Copa America, while also launching fantasy football game BetssonFC.

Challenger brands

Alongside traditional industry heavyweights such as Entain and Betsson, a number of younger companies have quickly grabbed market share in Brazil. One such brand is Sportsbet.io, operated by Yolo Group. While Sportsbet.io is perhaps best known as a bitcoin-led brand, it has adapted its offering in Brazil to accept the Brazilian real.

The operator has also invested heavily in marketing partnerships. In October 2019, it expanded a previous betting partnership with one of Brazil’s most supported teams, Flamengo, into a fully-fledged sponsorship deal which saw the Sportsbet.io logo placed on the shoulder blade of the team shirt.

The deal couldn’t have been better timed; a month later, images of Gabriel Barbosa scoring two dramatic late goals to win Flamengo the Copa Libertadores – South America’s version of the UEFA Champions League – were beamed across the country and continent. More recently, Sportsbet.io has landed a front-of-shirt sponsorship deal with another Brazilian giant, São Paulo FC.

“We identified early that sponsorships could accelerate the growth of our brand in Brazil, but that we needed to go beyond that to really engage fans,” Justin Le Brocque, head of marketing at Sportsbet.io, tells EGR.

“Almost every top division Brazilian team has a sports betting partner, and there’s a lot of competition. We’ve enjoyed success with Flamengo and now São Paulo, not only because they are obviously massive institutions in Brazil, but because we’ve actually activated these sponsorships and worked extremely hard to engage with fans.”

Sportsbet.io has supported its sponsorships with a network of influencers which spans more than 100 sports stars, journalists and celebrities across Brazil, headed up by 2002 World Cup winner Denílson. “We aren’t pushing this network to drive acquisitions,” stresses Le Brocque. “This is all about producing and disseminating great content.”

As a brand-building exercise, it has already heralded some major successes. Sportsbet.io’s Deu Green campaign – the phrase, which literally translates to “it was green”, is commonly used to celebrate a little victory that owes itself to luck – has entered the mainstream consciousness of the country.

Meanwhile, its football content is regularly outperforming that produced by the teams it sponsors; when São Paulo announced the signing of Argentine striker Jonathan Calleri in July, a Sportsbet.io announcement video recorded 1.7 million views – more than twice the number of the official announcement.

“You can’t build a brand in Brazil by simply sticking a logo on a shirt. The market is too competitive for that. We have to remember that in Brazil, we’re talking to football fans first, and betting customers second,” says Le Brocque.

Sportsbet.io is not alone in securing high-profile sponsorship deals with Brazilian football clubs. Now 19 of the 20 teams in the Campeonato Brasileiro Série A – Brazil’s equivalent of the Premier League – have a betting partner in some form.

“I think regulation will bring a lot of benefits for clubs in Brazil,” says Pedro Henrique Cunha Melo, chief commercial officer at Atlético Mineiro, the team that tops this season’s Brazilian championship at the time of writing.

In January, Atlético landed a front-of-shirt sponsorship deal with Kaizen Gaming-operated brand Betano. The operator already had partnerships with major football teams in Portugal, Greece, Cyprus and Romania. Melo sees significant financial upsides for Brazilian clubs from such partnerships, with estimates putting the total sponsorship and media spend from betting brands in Brazil at over BRL400m for the first half of 2021.

Understanding players

The challenge for those brands looking to cut through the increasing noise this media spend is generating around sports betting in Brazil is delivering a proposition which resonates specifically with Brazilian customers. Here, there are also opportunities for challenger brands to outmanoeuvre larger operators.

“The Brazilian market is still immature, so the drivers that define potential customers’ behaviour are not the same ones as in mature markets, and that’s a good opportunity for young, flexible and innovative brands,” says Santiago Gándara, chief marketing officer of mobile-focused operator BetWarrior, which launched in 2019 with a focus on Brazil. For Gándara, Brazilian customers tend to favour brands which engage them on a local level. He says the biggest challenge is finding the right mix between “world-class quality and local flavour”.

Fabíola Jaeger, co-founder and CEO of games provider Caleta Gaming, which is based in Florianópolis, the capital of southern Brazil’s Santa Catarina state, warns operators not to underestimate the sheer size and cultural diversification of the country.

From a player perspective, Brazilian customers can differ significantly from others in Latin America. Jaeger picks out a strong preference for video bingo titles as just one quirk of Brazilian players. “Another important factor is the internationalisation and localisation of the games,” she says. “This makes a lot of difference for Brazilians, as according to surveys 95% do not speak a second language. We assume they feel more comfortable playing games in their local language, with a translated game name.”

What is certain is that even further political delays to the rollout of formal regulation will not stop those already building brands in a market Montgomery describes as a “sleeping giant” of the gambling industry.

“We know there are more chances to succeed if you have a better understanding of the market,” concludes Gándara at BetWarrior. “And that’s something you can only get by operating.”