Please gamble responsibly: Are operators adapting fast enough?

The maxim of “all publicity is good publicity” has been sorely tested by the online gambling industry so far this year. As regulators and legislators turned the screw on this hitherto low-key part of the leisure industry we’ve seen some operators scrambling for cover and others wondering quite how to adapt to the new conditions. It’s shown up more than a few cracks in the current system and there is a sense they are only going to increase in the near term as countries across Europe increase the squeeze on the sector.

We’re in the middle of the most significant re-positioning of the online gambling sector since the launch of the regulated markets and it’s not quite clear just how far and how fast things will move. Due to its scale most of the attention so far has been paid to the UK market where change has been sudden, substantial and with the promise of a lot more to come. But this is far more than a localised issue, and moves in the Nordics and Italy have proved just how fragile the status quo really is when it comes to gambling.

The UK is perhaps the most obvious example of this. What we’ve seen in recent months is a slew of fines and increased enforcement of existing regulations with operators scrambling to adapt quickly tied into the promise of more change to the legislation in future. Partly this has been due to a bit of a redrawing of the lines by the Gambling Commission and partly this is due to the industry stepping a little too far over those previously drawn. But what’s most interesting is how the regulator is making it increasingly clear that abiding by the minimum regulatory standards won’t be enough in future.

Neil McArthur, chief executive of the Gambling Commission, made his position quite clear at an industry event in May. “We can enforce our way to minimum standards (and we can keep raising the bar on those minimum standards) but, ultimately, we need the industry to step up and work to raise standards and to innovate to reduce the risk of harm,” he said. What this means in practice is a shift in thinking for the industry from reacting to issues as they arise to actively looking to prevent problem gambling happening in the first place.

Learning its lessons

For a guide as to how this might work the egaming sector needs to look at how other sectors have handled this challenge. Although tobacco is often mentioned as comparable it is alcohol that is arguably the most obvious example, with a lot of work done to reposition itself and its products to the wider public. It’s like a model the Gambling Commission’s McArthur was referring to in his speech when he said: “There is a real opportunity to learn from other sectors before the point of statutory intervention. Now is the time to use the resources and technology available to you to make improvements and prove that you are a socially responsible sector,” McArthur added. And that could mean a fairly radical shift in how products are sold to consumers.

Interestingly he added that the use of the “When the fun stops, stop,” message in the UK didn’t go far enough and there may need to be more of a radical rethink with many of the industry’s most relied on tools and strategies appearing to be potentially problematic. The humble casino bonus with its rollover requirements has created all number of problems for operators. In the UK it’s use with restrictive terms and conditions has led to fines and censure for a number of firms, but the contention around them stretches beyond the shores of the British Isles. Regulators in Denmark have discussed capping the maximum amount that can be awarded through bonuses as they try and control the rapidly expanding online gambling sector there.

As reported in EGR back in April, MP Jesper Petersen said bonuses were causing users to play too much, and blamed TV adverts offering large online bonuses for a rise in problem gambling. The Socialist People’s Party (SF) has suggested banning bonuses all together as it believes they target the most vulnerable players, while state-owned operator Danske Spil told EGR it had “advocated for a cap for several years”. What’s interesting about this is this comes against the backdrop of what appears to be a hugely successful regulated market with the black market squeezed out, the local monopoly maintaining share and more operators willing to invest in the market and help to grow the tax revenues for the state.

But even the most casual glance at the leading sites or a google search for online casino will show very little action has been taken to curtail their use despite the continued push back from regulators. This is understandable as they are an incredibly effective as a marketing tool and they will likely need to be legislated or regulated away rather than disappearing of their own accord, but it’s an indicator of the wider trend. Regulators do not want to ban gambling but to control the way it is promoted to both new and existing players with the constant push of bonuses seen as a crude tool to lure players into playing more. They want some self-control, more awareness and prevention of problem gambling and less focus on the hard sell.

Victim of success

For regulators a successful market is just as problematic as a large grey one. The rise of mass-market advertising that accompanies it and the rising profile of gambling creates an uneasy environment where anti-gambling campaigners are quick to criticise the new liberal environment. When this is tied into the rising trend for populism in politics, as most neatly demonstrated in the recent Italian elections, where the populist Five Star movement gained a share of power, it can be bad news for the egaming sector. In Italy one of the first actions of the new coalition was to launch a broadside attack on the gambling sector with promises of sweeping reforms to the regulated market.

Potential restrictions being considered include: a total ban on gambling advertising and sponsorship, the enforcement of financial transparency for gambling companies, restrictions on gambling forms with repeated bets, the limitation of gambling times playable and the reduction of ‘machine gambling’ through restricting installation to certain areas. But while it’s uncertain if all or indeed any of these measures make it through Italy’s notoriously volatile parliamentary system the intent is clear. But the fact this is even being discussed in Europe’s largest gambling market and second largest regulated online market is hugely significant.

While in Italy and the UK the most contentious issue so far has been the proliferation of land-based machines in many ways that debate seems more settled and the industry has accepted its fate as one of mitigating the cuts and trying to achieve some stability. What has been less visible until now is the scale of the online sector, but this is coming more clearly into view for all sides and the debate, as anticipated, has started to focus on online gambling and what can be done to better protect consumers there. And while there is much that can be done on a technical level, it’s far easier to cut the industry off at its knees where it is most visible: advertising.

A shift in the balance of power

The removal of marketing channels, particularly TV advertising, creates a major shift in the balance of power within the gambling sector. Without mainstream marketing access all operators are really doing is paying for access, and the value of a regulated market becomes mostly about what the regulator can do to keep black market operators out and not what it can do to keep white market operators in. As we’ve seen in a number of markets there remains a large number of unregulated operators happy and willing to take customers from any and every country and there is no reason to suspect this will diminish any time soon, not least with the rise of cryptocurrencies.

Regulators and legislators then need to exercise some caution too. Gambling is not a bottomless chest of riches they can dip into at will and an overzealous effort to draw the industry as a cartoon villain is unlikely to end well for either party. But operators have an urgent need to recognise they still have a window of opportunity here to act in their own best interests and begin making changes to their products and marketing. Adding in features that will reduce top line revenues and decrease profits in the short-term may seem like madness but they are perhaps the only viable solution to keeping control in the hands of the operators themselves.

Gambling is an easy target and the industry’s efforts so far have been entirely too little and too reactive to protect itself from any sudden shifts in public or legislative sentiment. One of the more interesting outcomes from the debate over fixed odds betting terminal staking levels in the UK was the way the industry hoped the argument would be settled on hard data, but in reality it was as much based on anecdote, opinion and sentiment. The public and the government simply did not like the perceived social impact of the machines and so action was taken. The question is can the industry manage to put systems and tools in place to prevent a similar outcry over online slots?

There trouble is there seems to still be a real resistance to change in the wider egaming sector. In the UK a huge wave of fines, regulatory actions and even a rise in taxes has had very little material impact on marketing strategies. Against this backdrop we have a rapidly shifting regulatory picture and a new consumer base, the millennial generation, which doesn’t view gambling as a vice, but wants to be treated fairly and has far higher expectations of the product and customer service as a result. It’s not grateful to be able to gamble, it expects operators to be grateful for its custom. And part of this is going to be operators owning the problem of problem gambling and taking care of customers who can’t or won’t look after themselves.

More change to come

Nowhere is this new proactive stance more clear than in the soon to be regulated Swedish market where the regulator is looking set to create the most “player-friendly” regulatory environment yet. There will be a national self-exclusion scheme, likely similar to that in Denmark, and operators will be expected to provide a high level of customer protection and act in a “responsible” manner.  The most interesting part of the legislation, however, is a requirement for operators to adopt “moderation” in marketing. For a country where it’s fair to say the grey market has not followed this strategy particularly closely to-date it may present a challenge to operators to adapt to the new operating conditions.

But moderation in marketing is a big challenge facing the industry over the next few years. In all the major markets the issues of advertising is becoming more and more of a flash point. The UK has growing rumblings over the amount of gambling advertising around sporting events, we’ve seen similar issues in Australia, and now Italy’s new government seems to have gambling ads firmly in its sights. In mid-June the leader of the Five Star Movement said any gambling crackdown would start with advertising and repeated the plan to ban gambling advertising in any form in the country. For a market in the midst of a huge growth phase online this would clearly make a major impact, although it remains to be seen if this will actually come to pass in reality.

But the challenges being faced in the UK, Italy, Sweden and beyond are really just the start. There is a sense there is far more to come and as we’ve seen from Eastern Europe those markets regulating in 2018 are coming with much tighter and business unfriendly regulatory regulations than the industry has been used to. We’ve also not mentioned the contentious Netherlands market yet while the US is only just getting started in its roll-out of regulated gambling. The trend is fairly clear and it’s not one of increasing liberalisation and unrestrictive operating environments.

We’ve already seen some moves in terms of building in more player protections with Paf’s decision to cap gambling losses at €30,000 a year one of the more interesting recent developments. And while the adoption of responsible gambling micro-sites and player awareness drives are good, there is a sense it will be these kind of definitive actions that will really bring regulators on side. As McArthur said to the UK industry: “Online gambling firms must put in to place measures that protect those vulnerable to harm – and given the amount of data they hold about their customers there is no good excuse for not doing so.” The ball is very much in the industry’s court here and it needs to quickly decide what the next shot is going to be.