Taking centre stage: the second wave of operators wait in the wings to enter the Dutch market

The regulation of the Dutch online gambling market on 1 October 2021 was one that was long overdue and highly anticipated. As Justin Franssen put it while speaking at the 17th Kalff Katz & Franssen annual gaming industry event on 8 April: “Not only was the road to regulation lengthy, but it was also twisty.”

Addressing the audience at the same event was the Netherlands Gambling Authority’s (KSA) chair René Jansen who provided an update on the licensing process. While 10 licences were granted before 1 October 2021, 18 licence holders are now in place. With the controversial cooling-off period over from 1 April 2022, the KSA currently has 16 licences pending, with an additional 14 submitted in the last week of March.

Peter-Paul de Goeij, managing director of trade association NOGA, predicts around 60 licences to be submitted by the end of 2022 but he expects it will reach saturation point with consolidation taking place.

In March 2022, the KSA released its 2021 annual report giving an insight into how the market has been performing. As of 1 March 2022, there were 634,000 verified player accounts across 11 online operators, with roughly 17% opened by players aged 18-24.

The regulator also reported Q4 2021 gross gaming revenue (GGR) of €185m over the course of the last three months of 2021. In his recent speech, Jansen pointed out that the size of the market in terms of GGR has exceeded original projections. In a report published by the KSA in February 2021, the regulator stated a figure of around €630m based on estimations from sources such as H2 Gambling Capital.

However, translating the GGR of €185m into an entire year comes to €740m. Although Jansen was quick to add a caveat: “I will emphasise yet again that these initial developments must be interpreted with a high degree of caution. The market is still in its infancy and has yet to develop.”

The elite crew

One of the lucky few to be granted a licence to operate from day one was Malta-headquartered online casino operator Play North, which offers its Kansino brand to the Dutch market. For CEO Klas Winberg, the Dutch market has not disappointed. “It has beaten our expectations in terms of interest from players and positive responses. We have also had to really scramble to recruit to meet the growing demand, but I am very happy to say that we already have a full Dutch-speaking customer support department equipped with specialists within responsible gambling and AML,” he tells EGR Intel.

One Dutch operator that went live a month after the first 10 licensees was JVH gaming & entertainment group, which operates Jack’s Casino & Sports (Jacks.nl) through its JOI gaming subsidiary from Malta. The online brand launched in the Netherlands on 25 November and for its CEO, Eric Olders, the market has been performing well. However, he acknowledges the threat from the black market remains.

“What we are hearing on the grapevine is that the non-licensed operators have continued to stay in the market and have been doing quite well. I know it’s high on the agenda of the Netherlands Gambling Authority that they’re trying to address this issue, as they need to increase their enforcement for sure. Otherwise, it’s an unbalanced market,” he tells EGR Intel during an interview at ICE London 2022.

Time to cool off

Operators that had illegally targeted Dutch players in the past had been subject to a cooling-off period of 32 months, which finally expired on 1 April 2022. This now opens the door for a second tranche of operators to apply for licences from the KSA.

Olders speaks frankly about the strength of those international firms yet to enter the market as possessing a great deal of knowledge, experience and insights on player behaviour already. “So, I think they will come in hard and fiercely. There has been a lot for them to lose. If you’ve seen the press releases of the different big-listed companies, the impact was significant,” he comments.

For instance, Kindred Group said it anticipates delivering £247m in Q1 2022 revenue, down from the £352.6m posted in 2021 due mainly to its withdrawal from the Netherlands, while 888 reported a decline of 28% in betting stakes compared to the previous year partly as a result of the Dutch closure.

While Winberg is vocal about having the greatest respect for the large proven operators due to enter the market, he points out not all operators will compete on a like-for-like basis, especially as his business is casino-only. “I of course see that having a six-month head start is not a negligible advantage. The more operators that enter, the more we will have to share the market with. But I remain bullish that we will maintain a strong share of the online casino market.”

Being a local land-based operator itself, JVH’s Olders freely admits that the larger experienced online firms have a wealth of expertise behind them to target the Dutch market effectively. “They’ve built up that knowledge and probably know it much better than we do. We’re learning day by day but quickly,” he adds.

Eric Olders, JVH

While JVH addresses the market from a different angle, having a land-based presence also creates consumer trust in the brand. “We’re just another animal, another species – we cannot do what they do, and they cannot do what we do. That’s how we each find our position in the market. Obviously, we’re a local, well-manifested company – JVH has been around 65 years in 2023 – with a history and a strong name. There’s a lot of trust in us as a company and that is not something you can just copy,” Olders divulges.

Tax troubles

One contentious aspect of the Dutch market is the steep rate of tax and levies on GGR of 30.1%, one of the highest in Europe alongside countries such as Denmark with a rate of 28%. This is something operators need to factor into their projections of how attractive and profitable the market may be. Winberg adds: “It is a substantial tax level, and it will become a factor in ours and our competitors’ ability to remain profitable.

“I do think it is something that will put off smaller operators as you need to have volumes to make this work, and that is expensive both from a tax and marketing perspective. This fact will also likely spur on further consolidation in the market as we watch operators looking for ways to find profitability.” If you consider that bonuses are also non-deductible, you can be reaching over 35% of GGR, highlights Olders. “And what healthy market basically gives over one-third of their revenue to the tax authorities? That’s very, very significant.”

Time for restraint

KSA chair Jansen referred to his hope expressed two years ago that “the Netherlands would become a textbook example” but admitted this has not been the case. Discussing the focus of TV adverts in recent months, Jansen said, unfortunately, the self-regulation he had hoped for had not transpired.

“In the run-up to the opening of the market, I urged the sector to exercise restraint on several occasions. Not to open all the floodgates, and to take into account the limited social acceptance of gambling. We can now conclude that any such restraint was sadly lacking. Certainly, it was not exercised across the full breadth of all licence holders.”

Further advertising restrictions were detailed by Minister for Legal Protection Franc Weerwind in March, whereby operators will no longer be able to advertise across radio, print media and in out-of-home settings. The TV advertising window will be limited from 10pm to 6am and will bar the use of brand ambassadors who might appeal to under-25s.

NOGA’s de Goeij provides some further context on what triggered the new advertising restrictions. “The online gambling industry failed to curb the number of gambling ads on TV and, as a result of the advertising barrage organised mainly by the two government-owned incumbents [Holland Casino and Nederlandse Loterij], there was a political backlash which has led to an adopted motion in parliament calling on the government to ban advertising,” he explains.

While the minister is working on the preparation of a ban, de Goeij expects this will take some time as it has to go through as a formal act of parliament, while a restriction of freedoms requires a strict test and justification.

Olders at JVH confirms that the discussion around advertising has been one of the main setbacks within the Dutch online market. “The marketing got so overwhelmed with advertising that it made it very blurry for consumers and annoying for the general public, but it especially made it big prey for politicians. Managing media and appropriateness of marketing is our main challenge.”

Jansen confessed he may have been naïve in appealing to the industry to exercise self-restraint, “given that what we have witnessed in the Netherlands in recent months is exactly what we saw happen in Belgium, Spain, Italy and in the UK previously”, he remarked. However, he went on to acknowledge that, in order to compete, “it would take a considerable amount of self-restraint to do nothing and risk falling by the wayside”.

Jansen added: “In that sense, we need advertising, and depending on your views on gambling, it is a necessary evil. Channelling players to legal operators in the complete absence of advertising would be far more difficult to achieve. However, things could have been toned down slightly.”

JVH’s CEO tells EGR Intel that his firm was part of the discussions with the minister around advertising restrictions and what the industry can do from a self-regulatory standpoint. However, the self-regulation that the industry put in place didn’t materialise in time. Olders explains: “It was agreed upon in December, when the damage was already done. But then parliament had demanded tough measures to be taken by the minister. So, after the discussions the minister then held with the industry, we agreed on additional restrictions to be taken ourselves. However, an advertising ban is on the minister’s roadmap anyway.”

Franssen also mentioned his thoughts on self-regulation at the annual gaming event earlier this month. “I expressed my wish that the industry bodies, VNLOK, VAN Kansspelen and NOGA, take the responsibility to come up with proper self-regulation. It should have been here on 1 April. It’s not there. That’s really bad for business,” he said.

Olders aims his disappointment at the few companies that took a very aggressive approach to advertising, which ended up backfiring for everyone else. “If you’re a new player in the Dutch market, how do you bring the message across to the consumers that you’re there? If you’re not even allowed to promote your product whilst the first at the market advertised aggressively. I’m not even sure that’s how an open market works,” he questions.

While Play North has not been focusing its marketing efforts on the advertising methods under fire, Winberg acknowledges that it leaves little room for alternative options. “It will have an impact as, together with the addition of more operators, it will make the remaining marketing channels more crowded which risks having a negative impact on prices from our point of view.”

Black or white

De Goeij echoes this sentiment as he highlights the importance of advertising in fighting back against the black market. “Advertising plays a vital role and we should be allowed to make ourselves known. Operators who applied for a licence in the Netherlands did so under the justified expectation that they could advertise their offerings,” he asserts.

The KSA has been actively responding to those operators that have not complied with content requirements. For example, the regulator intervened when an operator advertised odds on the Eredivisie website and warned another to stop advertising on Twitter during a football match. Jansen shared some figures from recent months where the KSA’s enforcement division had investigated 158 gambling websites, with follow-up investigations being carried out on 16 of those cases. Meanwhile, the remaining 142 websites have discontinued activities in the country.

While it seems that last year’s EGR Intel cover feature on the Dutch market titled The bumpy road to regulation still rings true today, there is hope a new swathe of operators entering the Netherlands will entice more players to the licensed market.

Winberg is outwardly optimistic that there are good things to come: “We are already seeing signs of players that are ‘new’ to online gambling emerging. This would indicate that we could see an increasing underlying market growth which for us will be counterbalanced by more operators entering the market.”

Meanwhile, Olders is not yet ready to get his crystal ball out. “I’m just very curious to see what happens to be frank. We don’t know exactly what the timing is when people come into the market. We’ll have the obvious ones coming in and then also companies that I didn’t expect to apply for licences but have. So, it’s going to be interesting. I will tell you more on 1 January 2023!”