Ones to watch in 2019

After a tumultuous 2018 there is no sense of the pace of change slowing in 2019 and it is a year where it’s hard to know what or who to keep an eye on. This could feasibly be a list of 2019 trends, companies and issues to note for the year ahead, but we’ve restricted it to 19 covering everything from German regulation to the rise of sports partnerships and, of course, the rising tide of regulation and responsible gambling prevention. Here then are some of the big issues set to shape 2019.

1: M&A

Bigger is better was the core theme of 2018 and there is no reason to think this will not remain the case in 2019 as operators look to gain the scale needed to survive in a regulated world. What is notable is major acquisition targets are running out and there are likely going to be more mid-sized deals in the coming months as operators look to maintain acquisition growth. One interesting trend to note here might be operators attempting to go private to avoid the relentless pressure of the public market reporting as we’ve already seen with the Cherry group, and there is always the possibility of a larger global financial slowdown putting the brakes on the whole thing.

2: William Hill

This feels like a huge year for William Hill. The operator has watched its rivals outgrow it through a mix of merger and acquisition while it dealt with a repositioning of its platform, product and operational structure but it now needs to recapture lost ground. The opening up of the US and Hills’ inherent advantages there can be a big boost to growth, but closer to home it must regain market share in the UK and kick on elsewhere with Mr Green needing to act as more than just a bolt-on boost. Some may argue it has to be involved with grander scale M&A to get back on parity terms with the likes of GVC and Paddy Power Betfair, but a year of organic growth ahead of the wider market must be the first priority here.

3. Playtech

After acquiring the Italian operator SNAI, facing up to serious challenges in Asia and finally looking in a position to enter the US market the stage is set for a truly significant year for one of the industry’s longest standing giants. Italy is the biggest immediate challenge with the ban on advertising and rising tax costs, but there is reason for cautious optimism there as competitive pressures ease and play into the hands of the land-based operators. Playtech’s move into sports betting has been a lengthy and difficult transition but it does feel well placed now to make a serious dent in that market, although it will need to be careful not to lose sight of the huge challenges it faces in a rapidly changing casino supply market too. Its product suite seems a perfect fit for the emerging US sports betting market, however, and that could prove the story of the year if it can keep the shifting tides of regulation from sweeping it away in some of its other markets.

4. Tipico

Germany’s largest sports betting operator with a reported 40% market share, Tipico is something of a quiet giant in the gambling world but could be a major player in the coming year. CVC acquired a majority share in the operator in 2016 and it’s probable they are already exploring exit plans and it would be no surprise to see it involved in some M&A activity in 2019 although this may be predicated on regulation and legislative changes in the German market. Another impact factor will be Tipico’s international ambitions and there is no reason to suppose it will be content to rest on its strengths in its home market and leave the wider European spoils to the current top tier. An interesting year ahead you sense.

5. Increasing anti-gambling sentiment

Inside the online gambling bubble it’s easy to think the wider world is at war with the industry and is determined to take it down, or at least take it back to the pre-internet age. But in reality it’s a much more nuanced environment where a public previously kept in the dark about gambling is faced with a mass of adverts, betting options and think pieces on the attendant impacts of the first two. What is undeniable is there is a rising tide of anti-gambling sentiment that is attracting support from sections of the media and the political establishment and the industry faces a real challenge in dealing with this. What is required is a unified front and an honest message to present as a counterpoint, but that is easier said than done. In the meantime expect the anti-gambling mood to grow a little darker during the year.

6. Grey market growth

With the regulated markets proving ever more difficult it’s no surprise to see so many operators turn their attentions to the grey markets in 2018, and this trend is sure to continue in 2019. The spread of grey markets entered will depend entirely on risk appetite, but Germany, Canada, Japan and Brazil (for now) will likely be high up most operators wish list. What will be interesting is how the financial markets respond to these moves. Previous instances of operators getting their feet burned after stepping too far into grey markets has led to sharp revaluations and share price falls.

7. Latin American growth

Several operators, most notably GVC, have been talking up the potential of the Latin American market for some time and with Brazil looking to move towards some level of regulation, this could be the year it breaks through to a must-enter market. There are already regulated markets of note on the continent with Colombia and Peru already home to operations from some of egaming’s leading players but it’s the big prize of Brazil everyone is looking at. Outside of this it will be fascinating to watch how operators navigate the co-existing grey markets in other nations such as Argentina in line with any plans to enter regulated markets in the region. It’s also worth noting any interest from the US operators in these markets.

8. Germany rumblings

It wouldn’t be a new year prediction list without some mention of “something” happening in the ever opaque German market. As with every year this decade there is a genuine expectation of movement in the regulation or otherwise of the online gambling market and the first signs of discontent have already been seen with politicians in the state of Hesse threatening to withdraw from the Interstate Treaty if no progress is made in 2019. There is a sense we’re approaching a tipping point with the continued rise of Tipico and the renewed growth of bwin in the market likely to make the issue hard to ignore. With such a large potential market and such huge variance between possible outcomes, this is a market nobody can afford to ignore over the coming year.

9. Active problem gambling monitoring

There was undoubtedly a lot of progress made in responsible gambling during 2018, but there is a sense a lot more still needs to be done and a shift from passive to active monitoring may be the next big step. Rather than act to protect players whose actions have become problematic, operators may begin to look for patterns and behaviours that could suggest issues and act to prevent them occurring. We’ve already seen Optimove look to move into this area with predictive modelling around problem gambling and it’s reasonable to assume as regulators get up to speed with the options available they may begin to require this level of monitoring from operators.

10. Advertising

The advertising of online gambling looks set to be the biggest talking point during 2019, with the UK in the midst of a war of words that may turn into something more meaningful and other regulated markets acting to shut down mainstream marketing entirely. How the industry navigates this increasingly emotive subject will likely be its biggest challenge in the coming months and it may have to take some backwards steps and concede ground in order to secure a more stable footing. A reduction in TV advertising and possibly sports sponsorships might be the outcome in some regulated markets and the digital marketing space could see some cost inflation as a result.

11. The grey Nordics

While everyone’s attention is on the Swedish and Danish regulated markets, it’s worth noting there remains a large grey market in the Nordics with the Norway and Finland markets still generating substantial revenues for some of egaming’s largest names. But both markets remain fraught with risks and a concerted effort from legislators and regulators to curtail the non-regulated sector. These markets may continue to play out as a counterpoint to their regulated neighbours and the contrast may place additional pressure on listed operators within them.

12. Sweden’s regulated market operators

All eyes are on Sweden in 2019 as its regulated market kicks into gear, but while much is known about the likes of Kindred, Betsson, LeoVegas and Mr Green there will be a new spotlight on some of the other brands that have been quietly generating strong revenues from that market prior to regulation. The likes of Aspire, which made headlines for all the wrong reasons in January, Global Gaming, Genesis Global, Hero Gaming, SuprNation, Videoslots and, of course, Casumo will all become more well-known names. How many of these will thrive, or even survive, in the new market remains to be seen but it feels like a sector ripe for further M&A.

13. Gamesys

The release of Gamesys’ annual accounts in early January showed a firm significantly outperforming the wider UK gaming market, including its core B2B customer Jackpotjoy. Revenues from the group’s B2C operations led by the Virgin Games brand in the UK grew by 32.2% during the 12 months to March 2018 to reach £166.2m. In comparison for the year to December 2017 Jackpotjoy grew revenues 12% to £211.3m. How it performed in the remainder of 2018 is less clear, but for a company that sold the crown jewels back in 2015 there seems like a lot of sparkle left in Gamesys heading into 2019 and could it even be an acquistion target once more? The long-awaited addition of sports should come in 2019 and the purchase of the LiveScore business for £89.5m is eye-opening in this context.

14-15. The US market

One of the biggest events to happen in 2018 was the repeal of PASPA and the long-awaited opening up of the US sports betting market. Since that point there has been something of a feeding frenzy in the US, but what comes next is what really matters and there are sure to be a few significant developments during 2019. The first is the rollout of new states adding sports betting legislation. Eilers & Krejcik estimates as many as 17 states could introduce sports betting legislation in 2019 with up to 37 possibly considering a bill during the year. What impact the revised opinion on the Wire Act will have on this remains to be seen, but it’s sure to be a year of considerable legislative movement.

The second is the rising involvement of the US land-based sector in the sports betting and online gambling space. Once again it’s possible the brakes will be applied here due to the revised Wire Act opinion, but we’re yet to see any seismic M&A activity, or media partnerships that really move the needle, and it would be no surprise to see greater activity here during the 12 months to come. The US is a market that rarely likes to follow when it can lead and is not one afraid to reinvent the wheel if it needs to. The likes of bet.works along with the US-owned NYX/Openbet as well as the GVC subsidiary Stadium Technologies appear to be building out products custom built for the US market and this is a trend we can expect to continue.

16. Bonuses

One area of the business that appears ripe for further regulation is bonusing, which is broadly the same as it was a decade ago in a mostly unregulated world. Denmark and Sweden appear to be leading the way here in terms of restricting the parameters of what operators can do and in the UK there are increasing moves from the regulator to bring some form of control over the offers used. It seems a stretch to think operators can wean themselves off bonuses as the main acquisition and retention tool, but those who want to think longer term may start working on plans for alternative strategies.

17. VIPs and affordability

Affordability checks have been mooted in the UK market and are a topic that’s sure to continue to be discussed both within and outside of the industry. Source of funds enquiries have had a major impact on the big firms in the UK to-date, but front loading the affordability responsibilities would if anything be a more significant shock to the system. Alongside this there is the issue of VIP programmes, which are an area that are sure to face closer inspection as the regulatory screws get tightened. An online casino sector with affordability checks on sign-up and no VIP programmes seems utterly ridiculous for those who have been in the industry a long time but it’s far from impossible in some regulated markets.

18. Sports data

Sports data rights remains one of the most controversial and carefully navigated areas in the betting world, but the US market could reignite some old fires during 2019. With the major leagues in the US jostling for their share of the emerging sports betting market and the in-play betting sector becoming ever more sophisticated and immediate, the rise and cost of official data is becoming a more prevalent trend. The thorny issue of sports rights, of course, comes along with this debate and the industry will be keen to move away from this and towards official data payments at a reasonable rate where possible.

19. Sports and media

Another trend we’re also starting to see more of in the US that could get re-exported back to Europe is media brands, sports leagues and gambling firms getting into bed together. The initial gold rush in the US has seen a few crop up already with more reportedly in the pipeline and the Sky Bet success story is one many are keen to copy. But the industry on both sides of the pond will need to be careful about pushing too far with these links in light of media and legislative concerns. As with many things in 2019 a little caution could go a long way.