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Ismail Vali – Sweden: The survival of the fittest

Confirmation came this week that the licensing process for the new national gambling code in Sweden has been delayed until 1 August.

SBC News took the opportunity to speak to industry consultant Ismail Vali about the number of operators he expects to populate the market, industry benchmarks for gaming legislation, and how to retain players when bonuses become non-permissible as a retention tool.

SBC: At the recent Betting on Football Conference, you spoke about the rush to “get in before the gates close” in Sweden; how do you see the situation developing from the current position of around 500 casinos, and nearly 300 sportsbooks?

IV: Sweden remains one of the world’s most attractive gaming markets, online and brick and mortar – that’s due to its status as a developed market with high disposable adult income. It has also acted as the Lone Star in the Nordics for many of the publicly traded gaming operators to be in, at least, to maintain the appearance of having “Nordic Operations”.

Whilst regulation has been talked about for several years now, and the ex-monopoly operator, Svenska Spel, has done much to raise awareness, politically especially, about unfair competition and a lack of social responsibility from the “offshore operators” – both salient points to be fair – not much has, in fact, been done to legitimise and regulate the Swedish market.

Many operators still labour under the misapprehension that offering betting and gaming to Swedish players, to date, was “illegal”. It is not and won’t be until active legislation is passed and enforced.

Unlike the USA, there has been no discussion of “clean hands” operators, who did not offer service in Sweden prior to regulation, being the ones who will benefit from a future licensing regime. Many operators then went “all-in on Sweden” in the space of this regulatory vacuum, and offered all the products they could, via whatever media channels they could, somewhat regardless of costs, competitive advantage or any USP for being in Sweden.

All this has combined to create the current free for all, prior to regulation, with a glut of operators across all products. The recently announced regulatory regime, with applications being accepted from August 1st, 2018, and enforced regulations from January 1st, 2019, now gives the market a clear finish line to cross, as the gates of gaming control are, clearly, about to close shut.

This matters from a market presence and share perspective given the huge number of competing operators in Sweden currently. The period from now, until the end of the World Cup, itself just prior to the licence application date, means operators have to compete aggressively for players simply to prove their ability to stay in the Swedish market.

Many firms, if failing in the imminent race to regulation, will not be given the internal sign-off to apply for regulated status in the market, especially since the discipline of being publicly traded means having to admit and forecast matters:

  • How much of the market is aware of your brand(s)
  • How much of the market you have gained, with what marketing budget
  • How much you forecast to retain, for the next quarter, and how much you believe you can grow, beyond that
  • At what profit margin are you running, with the added impact of taxation, and fees for regulation, compliance and social responsibility

The costs for licence application in Sweden are not particularly high, which will likely encourage a glut of entrants by August 1st, in line with the huge number of current operators. This will, in my view, not be upheld over the long term, and the future regulated Swedish market. The gates will close, on New Year’s Eve this year, I believe, with a large number of operators, in the hundreds easily, for the first year of regulated Swedish operations.

Thereafter? An amended marketplace, with advertising rules, fewer media channels openly available (via embedded deals for the big budget brands), and a brutal new discipline from bonus retention deals becoming unavailable, will, inevitably, lead to a thinning of the herd and a position likely by two years after regulation where the marketplace is populated by between 50-100 operators.

In line with this, there will likely be a consolidated top 10 scenario for the operators who get the next eight months right, and succeed in being top of mind, and top of monetary performance, through adapting to the specific Swedish market conditions.

SBC: Many countries have been inspired by Danish and UK models when enacting gaming regulation; how much of what we see in Sweden will be reflective of these regulatory successes?

IV: Both the UK and Danish models have one unifying feature – listening to operators, respectfully.

Of course, any imposed system, which needs to be mindful of player protection and social responsibility, is not going to be universally “admired” by the industry, but that is the historical position of our business since well before the online distribution channel emerged – we have to take regulation, taxation, player protection and social responsibility not just seriously, but to the heart of our business as usual approach to any market.

In the short term, there is going to be a margin Impact – in my view, a good thing, since it returns the business to the historical constant of focusing upon ‘little but often’ revenue from your players and moves away from the boom/bust cycle of simply opening new accounts with unrealistic and disbelieved deposit bonuses.

A hand-in-glove approach by regulators, where they work with the industry, to improve and perfect what become, I hope, industry benchmarks for operators is the ultimate goal of any of the new wave of gaming regulation – both the UK and Denmark have shown the path here, but much work remains to be done.

SBC: What is your advice for retaining Swedish players without the promise of bonus money?

IV: Many operators have been shocked by this draft legislation clause, stating that bonuses will not be permissible as a retention tool under regulation. That surprise is only a result, in my view, of our own me-too, copycat marketing efforts of recent years, as an industry.

We all have the same games; similar or identical access to the marketplace for advertising and all copy one another’s offers, pretty much down to the terms and conditions.

It is unsurprising that the audience respond to this as they did with banking – tons of offers for NEW customers lead to promiscuous account swapping; then impacting upon the retained base, who you need to then bonus to keep in the building.

It’s no way to run a sustainable business.

Coming from many years in the poker sector, with insane levels of competition from the early 2000’s when I experienced the shift from one operator – ParadisePoker – to hundreds in a matter of months, we learned to dedicate our marketing to as broad an audience as possible via “must play promotions” – similar to the concept of “must-see TV” that networks like HBO and Netflix have perfected.

Analogous to US TV Networks, operators have to create in online betting and gaming, within their core markets, one of the biggest branded “TV Channels” around, in order to matter in the market and survive the post-regulatory shift.

As an industry, what we need to focus upon now, I would suggest, is the quality and event status of our “shows” – in other words, our promotions are key.

Every day, on every dot country variant of their sites, across all products, operators promotional offering needs to feature “must notice”, “must be able to find”, and “must play” potential, in the same way that shows like Game of Thrones are classed as “must watch TV”, and available across a number of platforms for viewing.

Players have to feel they are, potentially, missing out on “something” by not locating, logging on, staying connected to, and playing with your brand.

It’s not just about the cash they could win or lose…it’s about the culture they take part in by playing with your brand, and the cultural phenomenon you’re building with, and for, your growing audience.

This commitment to the mass market, free to play offers and promotions to encourage awareness, trial and engagement, and segmented offers and incentives for the players once you had the data to really know them, was the only way to gain and retain “membership” of your brand, and target the top 10, and hopefully, the number one position, which with the teams and brands I had at the time I was Chief Marketing Officer, we were able to do with both ParadisePoker, and PokerStars, globally.

I use the word “membership” deliberately – seeing the audience as just potential “customers” encourages the “get and go” attitude from many of today’s online gamblers, and our industry response to them as “new depositing customers”, valuable only for their first month’s activity, and largely seen as “lapsed or lapsing” thereafter. Seeing them as “members” of your branded entertainment offering, across all products, shifts the manner in which you meet, greet, gain and retain them.

Ismail Vali can be contacted at ismail.vali@icloud.com.

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