The global online gambling market has continued to deliver double-digit growth.
The global online gambling market has an annual value of around £50 billion and continued to deliver double-digit growth in 2018. Gaming’s share of this is approximately 50%, with small market share falls in recent years led by betting outperformance (mobile adoption, variance in win margins). However, this trend is showing signs of reversing as online gaming grows in Asia and other emerging markets. Double-digit growth remains a realistic medium-term expectation, although the shape of this growth is starting to change.
Gamesys Group is a major operator in a highly fragmented market. Some of the Group’s main markets include the UK, Spain and Sweden.
Each has a different maturity profile, which in turn has a significant impact on performance.
The UK is facing three maturity headwinds which have reduced overall online gaming growth in 2018 to high single-digit levels, from a previous medium-term run-rate of around 20% (prior to 2017).
- Underlying sector maturity. Smartphone penetration is running at nearly 80%, mobile data costs are low and advertising has been broad; all in all, a fertile mix for rapid consumer adoption. Estimates suggest there are now over 10 million adults in the UK with a gambling account (excluding lottery) representing over 20% of the adult population.
- Channel shift. online gambling has delivered relatively rapid channel shift from land-based offerings. Over 50% of all commercial gambling revenue in the UK is now online, with the level of growth increasingly implying greater overall gambling spend – rather than just shifting habits within the segment.
- Tax and regulation. The UK has faced a number of changes to its tax and responsible gambling regimes which have especially impacted the VIP segment; this is likely to have cost the total market 5ppts of growth. While Gamesys Group plc operates in a more mass-market environment than most, it is by no means immune. However, there is a counter-intuitive positive to be taken from the slowdown in growth: it is a sign of increasing sustainability, borne out of increasingly active responsible gambling management. Going forward, there should be increased opportunities for larger brands to drive consolidation and gain market share.
Spain is a much less mature market than some other Northern European counterparts, with lower smartphone usage and far less channel shift. Moreover, the regime continues to be relatively liberal, with a 5ppt duty cut to 20%. However, a review is being carried out into gambling advertising (similar to that seen in many other jurisdictions). Spain’s relative lack of maturity suggests strong double-digit market growth into the medium-term (25%+1), and Botemania, Gamesys Group’s leading brand, is very well placed to capitalise on it.
Sweden became a point of consumption (POC) regulated market in 2019. This is likely to accelerate its maturity profile as advertising becomes more open, efficient and responsible, and other social responsibility measures are adopted (e.g. national self-exclusion, and less aggressive bonusing . Equally, Sweden has a similar smartphone adoption and usage profile to the UK, meaning relatively high levels of underlying consumer maturity.
Also, established Swedish gaming operators now face direct competition from domestic monopolies (Svenska Spel, ATG) for the first time. All these drivers point to a slowdown in growth from historical compound annual growth rates (CAGRs) of around 20%. However, as with the UK, there are clear positives in terms of sustainability and consolidation that should be important catalysts to a strong local brand such as Vera&John.
Other international markets
Outside of the three core markets above, all of which are now subject to Point of Consumption tax from a regulatory perspective, Gamesys Group also has a ‘long tail’ of interests in other markets. Indeed, the Far East as a whole accounted for a substantial proportion of ROW revenues in 2018 and sales are also growing strongly across a number of other emerging markets. Although these developing territories vary widely in character – for example, Norway is a very different proposition to Brazil – they share the status of being significantly less mature than the UK or Sweden. Consequently, from an underlying consumer perspective, these markets collectively should exhibit strong double-digit growth into the medium- to long-term, albeit with varying degrees of regulatory risk and opportunity.
Overall, therefore, although the global online gambling market is changing shape it continues to deliver attractive growth. On one hand, the more mature markets, which form Gamesys Group’s historical core, are naturally showing signs of moderation. In these geographies, increasing regulation should lead to greater sustainability as well as market share gains for leading brands and industry consolidation. However, outside the more mature and largely Northern European markets, online gaming is exhibiting much higher growth, driven by broader consumer digital dynamics and rising smartphone adoption. The global online gaming market is therefore becoming a more balanced business environment; sustainable growth in mature markets alongside regions exhibiting higher but less predictable growth. The Group is proven in both environments, which can provide an attractive mix of growth and sustainability.
- Regulus Partners’ estimates
- EGR Intel