Industry predictions for 2023: Sector an easy target for tax rises and marketing budgets feel the squeeze

Joe Saumarez Smith, chair of Bede Gaming 

Realities sink in across the pond  

The realities of the US market will start to catch up with some operators, especially those who have made expensive long-term marketing commitments. The early lifetime value numbers for US customers were naturally skewed as the biggest punters moved into the regulated market and that has led some operators to sign long-term deals based on uneconomic CPA figures. They may be able to re-negotiate some of them but cashflow is going to be an issue for some of the operators.

I also expect regulators to start cracking down on some of the more egregious practices related to bonusing and VIP schemes, especially in terms of what can be offset against tax, and that will have a major impact on the profitability of some of the bigger operators. US public opinion about the excesses of operators is already starting to mirror much more mature gambling markets like the UK, Spain and Sweden and I expect European-style regulation will start to hit online gambling in some states in late 2023 and through into 2024. 

The sector is an easy target to raise taxes

With recessions either looming or already happening in most economies, governments will look to gambling for increased tax contributions. The gambling industry is an easy target at a difficult time and while the big operators argue that the tax burden is already too high in many countries and that it deters channelisation, it is easy just to increase the tax rate by 10% and deal with the consequences down the line.

Whether those rates ever come back down when there is economic growth in the future, only time will tell but it’s much easier for governments to put tax up than reduce it. The only possible place the tax burden may come down is Germany but that’s because it is insanely high at the moment and is driving a huge black market. 

Is a scandal due?  

I don’t have anything in particular to base this on but it feels to me like we might have a major match-fixing story in 2023. There hasn’t been a major scandal for a while but the number of suspicious betting reports that I see, especially in esports and lower division football, suggests to me that there are some large criminal organisations trying to influence sports results and that it can’t be long before the police catch up with some of them.

It’s easy for people to forget how sports integrity needs to sit at the heart of every sport, and it doesn’t take much for bettors and fans to turn off – just looking at Belgian horseracing or jai alai in the US. It feels like some sports aren’t paying enough attention to this and I think esports is probably the worst of them at the moment, because if I were an operator I would be extremely reluctant to offer it is a market for anything other than tiny stakes. 

Rob Painter, CMO consultant for Oddschecker 

Market movements 

Last year saw bet365’s aggressive generosity strategy pay off in terms of market share gains in the UK. They have clearly chosen to pay heavily for share in the most mature and highly competitive of markets, funded by the global business. But should we expect more of the same in 2023 and are there any other operators that could make progress through the field? 

Oddschecker benefits from seeing clickshare data across key sports, which enables an enlightened view, at least from the slice of the market that enjoys pre-betting research. So taking the trends here and what we are seeing from other research and market activity, what do we think will happen? Generally, we expect to see inroads made by Paddy Power, Sky Bet and William Hill, all predominantly in football. Paddy Power and Sky Bet will surely focus on bet builders.

Our brand tracker show their reputations gaining on the popular bet type in the past quarter. This coupled with Sky Bet’s enduring reputation for being ‘easy to use’ will be an asset in the growth area of football margins. So while the Flutter brands make inroads there I’ve been closely watching William Hill apply the deep ‘epic’ offers in pre-live football that played a role in the rise of Sky Bet. There seems to be a consistency and conviction behind Hills of late and that could lead to marginal gains in football market share.

That said, I don’t see any of the operators having the pockets to unravel the 2022 gains of bet365 in the short-term, and especially in racing. We will watch with interest. 

Marketing shifts 

It can’t be easy sat in the marketing divisions of operators. The approaching footsteps of the CFO and their entourage of analysts can only mean one thing – another conversation about marketing ‘efficiencies’, a ‘re-focus of investment’ and ‘bottom line necessities’. It’s been tough out there in terms of player deposits and margin. The UK market has become more sustainable and recreational (good) but in the short term there is a squeeze on budgets (bad). So what will this mean for UK marketing in 2023? 

• A further shift in focus towards existing customers, share of wallet and reactivation at the expense of pure acquisition budget. This means plenty more ‘superboosts’, ‘Free £1 reactivation bets’, ‘Epic odds’ etc. put in media to deliver an ‘All customer’ strategy. 
• Less top of funnel, speculative and ‘untrackable’ media spend. I see event/team sponsorships, outdoor advertising, PR all being challenged. ‘If you can’t track it, cut it’ may be the message. 
• More focus on reliable audiences, where marketers know there is a high strike rate of available and regular bettors and where you can land specific messages, not just awareness. Places like talkSPORT, Oddschecker, Sky Sports and the targeted offerings of digital platforms should be able to take advantage. 
• More partnerships where ‘value’ can be extracted from a number of marketing channels and activities with trusted partners. 
• In response, expect to see partners and affiliates expand their offering beyond acquisition and further into meeting broader marketing objectives through CRM, content and ring-fenced activities with key segments. 
• We would however expect the long tail of operators in the UK to keep wagging, recent months have seen good returns for relative newcomers like BetUK and LiveScore Bet, proving you can still get a foothold and acquisition is the oxygen needed. 

 There will be a tendency for marketers to go with the tried and trusted, but someone once said ‘fortune favours the brave’, so we’ll see who wants to stand out in 2023. 

Operator innovation

And what exciting betting propositions can we expect to see? Convergence and the creation of new entertainment betting spaces seems to be the watchwords lately with the biggest exponents being LiveScore and DAZN. It’s a great industry development. It will be exciting to see how mature operators react to bolster the ‘experience’ and in turn how the ‘convergence’ operators actually compete on the betting front. So I expect another new entrant in this new market position and some new content plays from operators.  

Meanwhile surely the old dog (well horse actually) needs some new tricks? Let me explain, I remain bemused why there isn’t more betting innovation in horseracing in the UK. The margins are skinnier for sure but that’s the very reason we need innovation to build the popularity of fun and higher-margin bets. For inspiration we can look east to markets like Japan, Hong Kong and closer to home with some of the Tote’s bet types to see some potential. Which operator will saddle up first in 2023?