Licensing and the future of affiliates
Affiliate licensing appears to be inevitable in the UK but while limited sector experience suggests the reality is less onerous than many fear, there are questions still to be answered about the net effect with regard to black-market activity. Scott Longley reports
When the Responsible Affiliates in Gambling (RAiG) trade body announced at the very end of June its members now supported the introduction of a gambling affiliate licensing regime in the UK, it marked a signal moment.
The volte face – RAiG had previously said it was against the prospect of affiliate licensing – came just days ahead of the publication of a report from an influential House of Lords select committee into the gambling sector which recommended the UK government should legislate for official oversight of the sub-sector.
Taken together, the two events make affiliate licensing in the UK seem like a certainty and not surprisingly given the make-up of the founding members of RAiG, which include Better Collective, oddschecker and the Racing Post, that has prompted debate over whether licensing suits the larger affiliates more than those further down the ladder.
But Clive Hawkswood, chief executive at RAiG, denies that licensing is necessarily a process which will discriminate against the smaller affiliates. While the legislators might not pay any heed to the potentially harmful economic effects of any measures they introduce, Hawkswood suggests the Gambling Commission – the likeliest licensing body – might be more open to taking a more nuanced approach.
“It is reasonable to expect that this would include some kind of impact assessment and a banded approach to the setting of licence fees,” he says. “That will provide some comfort and they will be very mindful of the need not to discriminate against smaller players in the market.”
From the little experience the sector has had of licensing – notably in New Jersey and other regulating sports betting US states and Romania – the suggestion is that licensing is not as onerous as some might imagine.
Indeed, Fintan Costello, chief executive and founder at BonusFinder, says that in the US at least, for smaller affiliates there is a lack of form-filling compared with the mountain of paperwork faced by larger competitors.
Fintan Costello, BonusFinder
“The paperwork is easier,” he says. “I have spoken to people in bigger organisations, and they say that rounding up the details of 10 executives is a much harder task. Of course, there is always a risk the regulators goes over the top and the requirements can be insane. But the UK is pretty sensible and straightforward.”
Suited and booted
The move to license affiliates is taking place against the backdrop of a sector which for a number of years now has been transforming away from a landscape filled by one-man, back-bedroom entrepreneurs and towards one which is much more corporate.
Typical of this era is the rise of the super-affiliate, businesses which largely via M&A have come to dominate the European affiliate space, including the UK. Among the leading pack – and by some measures the largest super-affiliate of them all – is Catena Media.
A spokesperson for the company says that “regardless of size” all lead generators should ensure that they are compliant. “This may be more onerous for smaller companies, but in order to work with the largest operators you have to ensure that what you do meets the relevant markets requirements,” they add.
This chimes with the view of many others in the space. “Being an affiliate isn’t some sort of casual side-job anymore, as it might have been seen 15 years ago when gaming brands were just coming online and setting up their affiliate programmes,” says Mathew Symmonds, chief executive at Web Analysis Solutions, the company behind such sites as WinDrawWin and PredictZ.
“Any affiliate today needs to operate in a professional manner and under the umbrella of an official company, no matter where they operate from.” By this reckoning, such a dynamic is an existential threat to smaller affiliates and as Symmonds admits may “discourage many from either becoming or continuing as an affiliate.”
Hey, hey, my, my
Of course, another option is left open and that is the black market. But it is a route which is fraught with risk, both for the affiliates which decide upon that course as well as those which opt to remain in the regulated market servicing their operator clients.
However, while many think that a shift to black market activity is inevitable on the part of some affiliates, it won’t necessarily be licensing that is the cause of the move. Instead, some suggest that other regulatory initiatives, particularly on stake limits and player bonuses, will act as a pull factor on consumers.
“The biggest push towards the black markets is always coming from bad regulation,” says Feda Mecan, affiliate expert and board member at KaFe Rocks. “If we look at the Swedish market, where the black market is rising again, some affiliates jumped on that bandwagon once the search volumes went up for terms around unregulated operators. And increasing search volumes is simply the mirror of customer demands. Why should a customer pick an unregulated offer otherwise if not for a better offer and product?”
“As the restrictions come in – on bonuses or stake restrictions or other product restrictions – that will create the black market,” agrees Costello. “The demand comes from consumers, for what they had previously. I don’t think the affiliates will get the blame there.”
Indeed, in terms of policing, it isn’t clear whether the Commission will be looking for affiliates that stay outside of any licensing regime as long as they aren’t working with UK-licensed operators.
“I don’t think the Commission will be concerned if a UK-licensed affiliate decides to market to offshore US operators, for instance,” says Tom Galanis, founder at TAG Media. “The Commission’s concern will be the UK-only and affiliate licences will only be granted to those who target only UK-licensed operators.”
Tom Galanis, TAG Media
There is a precedent here. When it comes to football shirt sponsorship, for instance, unlicensed offshore operators, such as Fun88 at Newcastle United, are allowed to advertise in the UK market even though they do not take UK custom.
Of course, the Commission looks differently at offshore operators that do offer to UK customers. But whether they will be able to police the affiliates working with such operators is very much an open question.
Notably, a prominent member of the anti-gambling lobby GamVisory recently made a public appeal for help from the Betting and Gaming Council (BGC) to help in the fight against both offshore operators and affiliates which were targeting those that searched the term ‘websites not on GAMSTOP.’
BGC chief executive Michael Dugher said in a statement that non-listed operators and the affiliates promoting were “totally unacceptable.” “We have called for more action to tackle illegal sites and for affiliates to be licensed,” he said suggesting this was “an important matter” that should be addressed by both the government and the Commission.
If affiliate licensing is the route taken by the UK, then the hope is that some of these questions will be addressed in whatever final legislation appears. However, a lot appears to be up in the air right now.
Ironically, the best arguments against affiliate licensing are contained in the segment of the recent report from the House of Lords, which explicitly recommends that the UK government should pursue the path of greater regulation.
As is clear from the evidence, the major operators, already under pressure from the Gambling Commission for being ultimately responsible for all advertising and marketing being done in their name, have moved to restrict the number of affiliates they utilise.
Citing the evidence of Dan Taylor, chief executive at Paddy Power Betfair, the report states that the company says it has reduced the number of affiliates by half in the previous 12 months. The report also presents comments from Conor Grant, then chief operating officer at Sky Betting and Gaming, pointing to the closure of its affiliate marketing scheme in 2017.
Then there are the comments from RAiG – at the time against affiliate licensing – stating that current Gambling Commission policy had led to “thousands of affiliate relationships being terminated because the operators could no longer be satisfied that some of the affiliates they were working with were sufficiently compliant.”
As RAiG told the Lords committee, the actions of the regulator have already had a major impact, “which begs the question of how much additional impact licensing would have when taken together with the existing regulations?”
The Lords report seemingly answered that two paragraphs later when it recommended that affiliates should be licensed before they can enter into any contracts with operators and vice versa.