CONSOLIDATION OF GAMBLING BUSINESS

I’m used to say that I’m working in lottery business and/or in sports betting business. After our big merger I have used gambling business which includes also casino business. I have noticed that quite many lottery experts use word “gaming” instead of “gambling” but to me gaming is mainly casual and social games – not real money games which we are offering. I know that the reputation of word “gaming” is much softer than “gambling” but that’s not the core issue.

In which business we are working? That’s still relevant question! But the reason for that is not those words gaming and gambling. It’s important question because we have to know what our core business is, and we should know who our competitors are. We are used to think that other gambling companies are those competitors and they still are, but nowadays there are many other companies too. I would say that we are part of the entertainment business! That has been obvious for physical casinos already long time, but I’m not sure about lotteries and sports & horse betting companies.

I have said this many time before but I say it again: the most important feature for success is to understand your customers and their needs! You could serve them much better if you know their real motivations for buying your games. That motivation is not always the same and could vary from time to time. I believe that the main motivations for gambling are dreaming, spending free time and following sports.

We have already noticed that some quite big companies which are used to operate in other businesses have entered to gambling business. The first change happened when gambling technology suppliers moved to operation side. Those companies were used to operate games on behalf of lottery operators for example in US market. Probably technology suppliers noticed that there were bigger profit opportunities available if they have gambling licenses by themselves. Anyhow they have managed to get gambling licenses from some countries, but at the same time they are still taking care of their core business and selling tech for gambling companies. So, those companies have moved to gambling business but haven’t left their original business. That has caused slightly difficult situation for gambling companies when their technology partner is their potential competitors.

As I already said, we are competing in the entertainment market and traditional entertainment companies have realized that too. I know that big media companies are considering how they should react on gambling business. Especially the opening of sports betting in US has put more speed on that kind of analyzes. I wonder if there is any media company which have TV-rights for sports which is not planning their strategy for sports betting? I’m not saying that those TV-companies should move to gambling operations, but they should understand how they could utilize their rights in sports betting business. The entrance of big media companies will affect on gambling business a lot because those companies have lots of customers and they understand their needs. It’s always easier from customer point of view if you could get all services from one place.

Third and the most important and interesting “newcomer” would be GAFA companies (Google, Amazon, Facebook & Apple). Those giant companies have based their business models on customer data and in principle they could run whatever business with that excellent capability. I don’t have any “inside information” how actively those GAFA companies are in gambling area, but I would be surprised if they haven’t made any survey around that business area. If they, or just one of them, would enter to gambling business, it would mean dramatical change. To be honest, I’m not sure how well current gambling companies would succeed against them. I would say that we should hope that they won’t come or at least won’t act as operators! Probably they are not willing to take the risk of losing their brand when the reputation of gambling business is not so high…

That consolidation would also mean something else than just new companies entering to our business. We have already noticed that some gambling companies have started other businesses than just gambling. We have example even from lotteries where some big companies have moved partly to technology direction. For example FDJ from France and Camelot from UK have invested quite a lot to technology development and are nowadays trying to sell their solution to other operators. Some other lotteries like SISAL (Italy) and SAZKA (Czech) have tried to utilize their gambling solutions in other business areas like selling different kind of tickets and give payment services. I know that many gambling companies are looking for solutions where they could link gambling and casual games and offer something totally new which wouldn’t be gambling as we have used to define it. I believe that we shall see consolidation even more in near future.

I think that consolidation of different businesses would happen and succeed if there are possibilities to utilize your current competences somewhere else than you are used to do. If you have lots of information and understanding about your customers, you could use that almost in all possible business areas and that’s the main reason why those GAFA companies have managed so well. It’s much more difficult to enter in totally new area where you don’t have any expertise, capability or assets. That might be possible for start-ups, but for big existing companies it would be stupid risk. You should understand where your strengths are and try to find out new ideas where you could utilize them!

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