Managing new markets

The Twelve40 CEO examines how white label solutions can help lottery operators to navigate the choppy waters of regulating markets

There is no denying that the gambling industry is currently moving at an almost unprecedented pace. The technological innovations on display at the recent ICE Totally Gaming conference were as numerous as they were impressive, with new approaches to sports betting, virtual reality and player engagement on display. However, the speed with which the industry is moving is by no means limited to all things technological – we are currently witnessing promising signs of regulation in a number of jurisdictions, with many regions putting concerted effort into formulating robust and reliable frameworks for regulated iGaming activity.

In Europe, the Netherlands could potentially be moving towards a comprehensive regulatory framework, while Portugal has made progress in issuing licences under its refreshed regime. Meanwhile, in Latin America, Colombia has recently received the green light for its new structure under the oversight of regulator Coljuegos, and there are promising signs that other nations, including Brazil, could be set to follow suit.

Certainly, newly regulated jurisdictions present a distinct set of challenges to operators when it comes to issues of compliance and player protection. These are challenges that operators must face, and face successfully, if they are to deliver well modelled and responsible gaming experiences.

Avoiding a cut-and-paste approach

On top of that, a one-size-fits-all approach to platform provision is also unlikely to be the first step on the path to success in new territories. The demands of players in different markets vary a great deal, and multi-jurisdictional operators must ensure they are prepared to cater for these varied demands, shunning the temptation to take a cut-and-paste approach to the expansion of their horizons.

By way of example, in a number of Latin American markets there is a fondness for number-based games, as well as titles that are linked to animals and signs of the zodiac. Players in more mature markets across Western Europe favour games with more complex animation, while Asian players prefer content with a focus on higher volatility.

When it comes to the lottery draws that complement this kind of instant win and casino content, there are also regional intricacies in how jackpots are best delivered to the customer. In Jamaica, for example, players respond favourably to having several draws a day, while in other regions, a more effective approach involves a more rounded offering, with a blend of instant-win and entertaining content to support the draw event.

An approach that has the potential to form a core part of any lottery operator’s strategy for entry into new markets across the globe is turning to white label platform providers. White labels are unique in their ability to act as bespoke solutions, tailored to the specific needs of an individual market, while also being configurable to each market’s particular range of regulatory requirements.

With an ability to either integrate games quickly and efficiently into an operator’s existing site and technology stack, or simply provide the framework for the entire site, white label platforms are highly configurable to the requirements of each individual market. When it comes to the lottery experience that different regional markets demand, the variety is nearly endless, and white label platforms are particularly well placed to meet the challenges this presents, with the capability to push draws to players at their preferred frequency alongside their favoured style of instant win and slot titles.

Moreover, as new regulatory trends emerge, the platform and development roadmap must be adaptable to ensure that the products they offer are always compliant and relevant. Harnessing the ability to handle all aspects of the regulatory side of the business, white label platforms remove regulatory distractions, providing operators with the freedom they require to keep marketing and customer experience considerations front of mind.

In an industry where flexibility and speed to market is king, white label platforms provide operators with the autonomy to finesse their offering to the needs of each individual market. Operators would be well advised to note their potential to meet the requirements of audiences in Europe, Africa, Latin America and beyond.

It is no exaggeration to say that the gaming industry is at the crest of a wave of true innovation, with new operators and fresh product propositions coming to the fore what feels like a daily basis. Innovation is a word that sees its fair share of use across all technological industries, and gaming is no different – those that walked the halls of ICE in February will have struggled to move more than a few paces before being struck by another stand, display or sales pitch built around the concept.

However, while that wave of innovation is showing no signs of slowing down, it is one that the lottery industry has often had difficulty catching in recent years. The traditional draw-based lottery can trace its history back to medieval times, and the way in which people enjoy the game has not undergone a great deal of change in the centuries that followed.

The lottery sector’s need to innovate is highlighted by the aforementioned scramble in other gaming verticals to offer players the latest in new products and gaming technology. Many in the sportsbook, online casino and virtual sports space, among others, are following this trend, and the lottery sector must equal this hunger for innovation if it is to compete.

A streamlined alternative

If lottery is to continue to succeed in a rapidly changing and modernising marketplace, it must embrace both innovation and flexibility, and much of that must come at platform level.
A large number of modern lotteries are served by rigid, outdated technological platforms. While these may appear broadly workable in the eyes of an individual user, these can frequently prove poorly suited to meeting the varied demands of different regional markets. And with more markets than ever before showing signs of regulating, including areas such as Latin America, it is adaptability in the face of both customer demands and licensing requirements that will drive lotteries to success.

Bespoke platform solutions are increasingly the surest route to success in the modern lottery market, with scalable technology capable of being tailored to match the demands of a particular target audience. Providers and operators must maintain a full and open dialogue long after the technological integration has been completed, in order to most efficiently deliver a tailored user experience that keeps players coming back.

Furthermore, white label solutions can be a core part of the answer for operators faced with the challenges presented by rapidly evolving regulatory regimes. The capability of white labels to take care of everything on the regulatory side is invaluable for operators looking to exhibit true speed to market, while also giving them the freedom to focus entirely on their brand and market positioning, areas where their resources can be most effective.

Capitalise on instant win

Instant win games are currently skyrocketing in popularity across a large number of jurisdictions. While traditional lotteries remain relatively tried and true in the experience they provide to their player-base, instant-wins have had demonstrable success in providing short, engaging bursts of lottery-esque content, with many operators successfully incorporating them into their wider customer acquisition and retention strategies. Put simply, there is little doubt that effectively deployed instant win content can significantly elevate the traditional online lottery experience.

They are also highly flexible to the needs of individual brands, both in terms of mechanics and volatility as well as in themes and animations, giving operators far greater scope to provide their players with an offering streamlined to their brand proposition.

While instant wins are only one piece of the jigsaw when it comes to providing a lottery experience capable of both bringing in players and engaging them on a long-term basis, they can be a crucial factor in enlivening the modern lottery proposition.

The potential of the lottery market is not in question, and with players in markets all over the globe displaying a hunger for modern and exciting content, the need to approach those markets with flexible, innovative solutions has never been clearer. The opportunity is there – it is now up to the lottery industry to seize it.

It will not have escaped people in the sector that lottery has not ridden the same wave of innovation that much of the rest of gaming has in recent years.

Many modern lotteries are, in technological terms, built on the foundations of outdated and inflexible legacy platforms. While often serviceable in the eyes of an individual player, they can see operators run the risk of delivering an experience poorly tailored to the specific needs of different regional markets.

It is increasingly through the use of bespoke platform solutions that lottery operators will find success, with scalable technology that can be streamlined to perfectly line up with the demands of a brand’s particular target audience. This is especially true as the popularity of online lotteries grows on a global scale, particularly in emerging markets across Africa and Latin America.
We have found in our dealings in both regions that flexibility and building bespoke solutions in active dialogue with partners to be of paramount importance. It is only by working in close partnership and constant communication that a truly tailored lottery solution will be viable in the long term.

The regulatory landscape is constantly changing as markets emerge and regulate around the world. It will be operators with flexible platforms, capable of delivering on true speed to market that will be the ones to succeed in a marketplace that is showing no signs of slowing down. Partnering with a white label solution capable of handling everything on the regulatory end can be a solution for operators here, giving them the freedom to focus entirely on the brand and their market positioning.

The need for innovation in the lottery sector is placed into sharper focus by the increasingly crowded nature of the igaming industry at large. Lotteries are now competing for the attention of players with sportsbooks, online casinos and virtuals, all sectors that are falling over themselves to offer players the latest in gaming technology and innovative experiences. If the lottery sector is to compete, it must match this hunger for innovation.

The power of instant win

The buzz around instant win games has been building to a crescendo in recent years, and has become a consistent topic of discussion at industry conferences across the world. Operators are becoming more and more aware of the power of such games to enliven the traditional lottery experience offered on their sites.

For player’s after a quick burst of lottery-esque gameplay, instant win titles deliver. Combining a robust and bespoke platform offering with the most appealing instant win content can help to elevate an operator’s game play. The importance of these games in driving acquisition and retention for the modern lottery operator should not be understated.

The lottery market boasts significant potential, there to be tapped by operators in both established jurisdictions, such as the UK, and in emerging regions across Africa, Latin America and beyond. It is in embracing flexibility and new innovations like instant win games that they can harness this potential for their benefit.

Following from my previous post on Gibraltar’s UK challenge, the final judgement concluded, as I hinted, that Gibraltar and the UK should be treated legally as a single member state.

The European court rejected the Gibraltar authorities case saying that whilst it was not technically part of the UK, the court regarded that the dispute between Gibraltar and the UK was a situation confined to a single member state.

The result is that the special 1% tax rate paid by Gibraltar based companies will now be replaced by the UK’s 15% point of consumption Tax. This industry analyst believe will effect 80% of the customers of Gibraltarian companies.

It will be interesting to watch what happens next for Gibraltar’s operators in the light of this new regime which is further complicated with Brexit. Will opportunities be created for other premier offshore locations or will the UK’s desired result play out with a relocation to the UK. However, the industry is very important to Gibraltar and so it remains to be seen what incentives they may come back with. Certainly interesting times a head.

The global lottery market is expected to grow at a CAGR of 9.44% during the period 2017-2021 and yet it faces significant challenges.

One of the major challenges faced by operators in the lottery market is jackpot fatigue. Lottery is a game of chance and players know that they have limited chances of winning a jackpot.

Complementary entertainment is one solution, effectively making the jackpot only part of the lottery appeal, but innovation in this sector has more challenges than most. To explain why it is important to understand that the lottery industry is tightly regulated in order to protect public interest, ensure that the revenues collected are appropriately redistributed to players and the society for good causes. It is the operator and platform providers obligation is to ensure that the games are fair and transparent and are provided through the channels permitted by law. Taking into account that innovation flourishes in an unstructured and creative atmosphere this level of freedom difficult to achieve in an environment where regulation usually lags innovation. This poses a critical issue for the industry, though there are jurisdictions where regulators are more proactive than others. One such location in is Jersey (Channel Islands) which is one of the reasons we based our businesses there, the home state regulator, The Jersey Gambling Commission, demonstrate a proactive approach to innovation which enables businesses to quickly establish whether or not to pursue projects early in their development life cycle. This approach is appealing to innovators and those in fast moving markets, making the jurisdiction attractive not just to the lottery sector but to the egmaing the industry as a whole.

This is important because traditional (physical) lotteries are being gradually replaced or augmented by other technologically advanced solutions which allow greater entertainment value and crucially create the opportunity to develop a personalised relationship. As such the interaction between lottery providers and players is slowly becoming multidimensional (omni channel), giving the players multiple options for providing entertainment driven by innovation. Innovation has always been considered a tool towards success this has never been more true than today as advances in technology provide a wealth of opportunity to differentiate and entertain thereby increasing the value of existing players and enticing new ones.

Mobile devices and social networks have created new trends and habits which change the way people communicate, are informed and influence purchasing choices, the lottery industry has to embrace this. As Virtual Reality matures this will have a major impact on the eGaming market as a whole but it has a particular place in the adjacent and growing complementary lottery games market.

Finally we are witnessing a trend of blurring the lines between games of chance and skill which is driven in part by the Millennial generations preference for games of skill. If the industry is to be successful it has to increase its appeal across the generation as well as access into new markets and target demographics.

Conclusion

The lottery industry operates under a tightly regulated environment, the industry has to evolve to maintain relevance in the new online world and enable a blended omni channel environment for players. The catalyst for this change requires new thinking in regulatory approaches and compliance to encourage and enable innovation. This trend has started, though there is significant scope for innovation and disruption with new player centric providers enabling new lottery experiences.

In 2014, the UK introduced a new tax regime for gaming duties under which all (foreign and domestic) providers of online gambling services are required to apply for a license and to pay a duty for all business placed with operators from UK customers. Under the previous regime, only service providers established in the UK were subject to gambling duties.

The Gibraltar Betting and Gaming Association (GBGA) is a trade association for gambling providers. Most of its members are Gibraltar based providers of remote gaming services and many have significant UK facing business. This new tax regime, if implemented as the UK intends could cause certain Gibraltar based operators to consider their domicile, at least for parts of their operations.

The GBGA challenged the new gambling duty regime before the UK courts, stating that it was contrary to the freedom to provide services as enshrined in article 56 of the Treaty on the Functioning of the EU (TFEU)

On 19 January 2017, Advocate General Szpunar of the Court of Justice of the European Union (ECJ) gave his Opinion in the case of Gibraltar Betting and Gaming Association Limited v. Commissioners for Her Majesty's Revenue and Customs, Her Majesty's Treasury

This is not a final ruling, just an opinion, but one that many suspect carries significant weight. The conclusions are not good for the GBGA.

A high level summary is as follows:

The AG began by noting that although it is clear that EU law applies to Gibraltar (article 355(3) of the TFEU), it is silent as to how the fundamental freedoms apply between the UK and Gibraltar.

After an overview of ECJ case law the AG considered that the TFEU uses the term "...nationals of Member States...". Article 355(3) of the TFEU does not grant Gibraltar itself the status of Member State. As such, the AG proposes, that the UK and Gibraltar can be nothing other than a single Member State for purposes of article 56 of the TFEU.

The AG proposes that whether or not the gambling duty represents a restriction on the freedom to provide services is hypothetical since they are a single Member State (and the freedom to provide services does not apply to purely internal situations). However, if the ECJ were to find that the UK and Gibraltar are not a single Member State, the AG, suggested that the regime charges tax in the same way for all providers of the defined gambling services, irrespective of where these providers are established.

The AG also rejected the GBGA's argument that the tax charged constitutes an extraterritorial tax (i.e. a tax on the profits of suppliers located outside the UK) and not a tax on consumption or consumers.

As to whether the tax constitutes a restriction on the (hypothetical) freedom to provide services, the AG proposes that it does not. In the first place, the tax is applied in exactly the same manner to both local and foreign providers of the gambling services. The argument that a tax may give rise to double taxation also fails: the ECJ has held consistently that double taxation is not prohibited by the fundamental freedoms.

Conclusion
The AG proposed that the ECJ answer the referred questions by deciding that: "The United Kingdom of Great Britain and Northern Ireland and Gibraltar are to be considered as a single Member State for the purposes of the application of Article 56 TFEU."