Online gambling resilient during COVID-19
The global online gambling market showed healthy growth in 2020 whilst the land-based industry faced major disruption from global lockdowns during the COVID pandemic.
The global online gambling market is estimated to be worth €82bn in 2020, having grown at 21% YoY1. The market has been very heavily impacted by the COVID-19 pandemic and global government responses to it. One of the features of all global markets was the resilience of online gaming to the pandemic, although it should be noted that overall levels of gambling fell significantly due to the enormous and continuing disruption of the landbased gaming industry.
While suffering from significant disruption of live sporting events during Q2, a combination of moving delayed content into Q3, pent up customer demand and favourable sporting results, led to the betting market increasing by an estimated 10% YoY in 2020 to €40.1bn1. The gaming market, with the exception of poker’s Q2 activity spike, had a less volatile year, growing at 33% globally to €41.9bn1. While every market is different, growth has largely come from two areas:
- Increased online player activity in all markets during periods of consumer disruption, which has tended to normalise as disruption eases
- Increased player adoption in less mature markets, which so far seems to be a more permanent shift, although we note that it is far too early to be definitive on any clear trends
Gamesys’ global market share is best understood in terms of its core addressable market and therefore excluding betting and poker: the solus gaming market that is either regulated at Point of Consumption (like the UK) or regulated at Point of Supply (like Japan). Gamesys has no involvement in any ‘black markets’ and does not consider these addressable. Given the broadly accessible choice of platform and content, combined with the global nature of demand, Gamesys’ addressable market is structurally fragmented. However, this fragmentation is reducing, driven by three factors:
- Growing mass market participation, which reduces the number of accounts used over time and consolidates market share into trusted brands with a strong offer
- Increasing regulatory scrutiny and more regulated markets, which favours larger operators and can encourage greater mass market participation over time
- Industry consolidation, albeit this does not always affect the number of brands a customer might have access to
These drivers are still in relative infancy, however, meaning Gamesys’ addressable market share of 3% globally and c.14%1 in the UK are among market leading rates for gaming. Indeed, the Virgin brand is among the top 3 casino brands in the UK (10% segment share) while the Jackpotjoy brand remains the number one bingo brand (19% segment share)1. We believe that the increasing focus on mass market participation, tighter regulation and industry consolidation all favour Gamesys’ brand and balance sheet scale, proven in-house operating capabilities and strong safer gambling ethos. The outlook for 2021 and beyond is highly uncertain. At the macro level, there are four significant converging issues that Gamesys is constantly monitoring.
The first is how the pandemic will impact consumer behaviour in terms of longer-term digital adoption and also how any economic factors will affect the online gaming market. While these are unknown, the resilience demonstrated so far is encouraging.
The second is how governments will respond to the crisis from a fiscal and regulatory perspective. Again, this is both unknown and likely to be highly varied by market. Nevertheless, the online gambling sector has overall shown itself to be a responsible stakeholder during the pandemic and government engagement is an area that Gamesys takes very seriously. Gamesys will be working hard to ensure a fair and balanced outcome across all the geographies where the company has a presence.
A specific area of regulatory uncertainty not related to the Covid-19 pandemic is the UK Gambling Act Review and its preceding ‘Affordability’ consultation. Gamesys believes in the balanced and evidence-based approach that the government has outlined in its call for evidence and is engaged in providing both detailed evidence and working solutions to modernise Britain’s gambling laws. Gamesys is proud to be a key stakeholder in a market that has seen no material change in Problem Gambling rates for two decades despite the significant long-term growth in online gambling. It is, however, right that the government modernises protections in an effective manner and creates a regulatory framework fit for the digital age.
More positively, governments globally, and especially an increasing number of US states are recognising that online gambling is an activity enjoyed by many consumers regardless of the regulatory environment. Creating a positive regulatory framework that protects customers without diminishing their enjoyment is critical to good policy making. As more jurisdictions outside Europe seek to adopt or modernise online regulation, Gamesys will assess opportunities for further geographical diversification and sustainable growth.
Another key positive is that globally rates of online gambling adoption are closely correlated with wider e-commerce adoption. The UK, Australia, mature Asian economies and some Nordic counties still lead the way in e-commerce, with adoption at over 80%. However, in 2019 global ecommerce adoption was just 30% of the adult population. Increasing rates of e-commerce adoption underpin secular growth in global online gambling markets and these will further drive growth and diversification opportunities for the group.
The above highlights that the short-term outlook for the global gaming industry is somewhat in flux. However, while there are a number of risks and uncertainties, Gamesys is well positioned to navigate these challenges. More importantly for the longer-term, a combination of the three features below gives us high confidence in the long-term sustainable growth potential of the Group:
- shifting demand dynamics to high quality brands in more mature markets
- greater regulated markets reach
- global secular growth underpinned by attractive ecommerce adoption factors