Opinion: Time for reinvention

The UK Government’s point of consumption tax (PoC) is now three months old – and beginning to bite. While some operators look to spend their way out of it, increasing marketing to make up for the 15 per cent shortfall and the associated overheads, others are reining things in.

Indeed, William Hill admitted in January that PoC was directly responsible for them not renewing their long-standing sponsorship of the Lincoln Handicap at Doncaster Racecourse.

But very little has been said so far about the industry’s suppliers, for whom this tax has serious consequences too. As most of these offer revenue shares, applied to net gaming revenue which incorporates the deduction of gaming taxes, they have been hit equally hard.

The likelihood is that we will see just as much consolidation among those who provide the products and services as the operators who present them to the consumer. Yet for others, who are not robust enough to weather the storm, the future could be a whole lot bleaker.

Finding solutions

As far as I’m concerned, there are four areas to explore in order to counter a decrease in revenue. The first, as obvious as it sounds, is new markets.

At Realistic Games, we’ve spent the last few years working with the best operators in our home market. Yet, as others are doing too, we are now tailoring content to new markets in order to spread the load. That takes flexibility and adaptability, both in approach and product, as well as an understanding of what is required for genuine localisation.

A carefully considered territory selection strategy is vital too as suppliers should never jump lemming-like in to new markets without understanding if there is a real commercial opportunity for them. New market entry can be extremely costly, resource-intensive and time-consuming, so it’s worth developing an appropriate strategy.

In some cases collaboration with fellow suppliers provides an option that companies may not have explored before. In the case of slot and table games suppliers like us, that involves, for example, aggregating content through third parties once seen as rivals, for mutual benefit.

Stronger together

The reality is that we are stronger together than fighting independently, particularly in the face of the challenges presented by regulatory change.

The recent announcement by Playtech and SG Gaming that they have launched a bingo version of the popular game Rainbow Riches is one such collaboration. It also highlights a further area of opportunity open to suppliers, that of new distribution channels. Much of the industry’s recent growth has been powered by land-based operators and suppliers expanding into online.

But the opportunity exists to reverse that trend with exciting new content that works on machines as well as PCs and mobile devices. The same can be said for social gaming, where companies have been trying to convert to real money for years.

The move in the other direction has already proven extremely successful for the like of Double Down, and this is certainly an area that offers further opportunity.Changing tack like this requires a fresh approach. It also requires innovation. That is not easy to achieve when revenues decrease overnight, as there is less money for research and development.

But suppliers need to do all they can to develop new ideas, rather than endless versions of the same old stuff, and operators need to be brave enough to give them a proper chance.

Together we can reinvent ourselves and the industry; divided we are all liable to suffer from punitive legislation like point of consumption tax.