6 Predictions for the Online Casino Market

Posted by Harry Kane on Sunday, December 10, 2017

OK, so we know that the online casino market in the UK represents huge business. Even so, looking at the numbers can be quite startling, as the sector continues to grow at a rapid and genuinely awe-inspiring pace.

In short, online gambling delivered a gross yield of £4.5 billion in the year ending October 2016, while the industry has a whole turned over just under £14 billion. This means that virtual gambling and sports betting accounted for around 33% of the total marketplace, with this share set to increase incrementally in the years ahead.

The online market is also becoming increasingly diverse, as new trends, technologies and regulatory measures continue to change player behaviour and the way in which operators deliver their services. This is creating an unpredictable and changeable marketplace, and one that participants must keep pace with if they’re to benefit.

So. in this article, we’ll make some predictions for the online casino market, and ask how this market is likely to evolve further in the near-term.

1. The North American Market will Bloom

Since the state of Delaware legalised online gambling in 2013, the U.S. marketplace has failed to achieve its expected levels of growth and expansion. In fact, the last four years have seen numerous bills opposed by local authorities across North America, while the states have legalised online gambling have struggled to regulate platforms and enter into potentially lucrative, asset-sharing agreements.

The landscape has changed markedly in the last few months, however, with a couple of pivotal developments creating some much-needed momentum in the U.S. market. Firstly, New Jersey governor Chris Christie finally reached an amicable agreement with Nevada and Delaware, enabling these states to share online poker liquidity among all licensed areas.

This will include assets such as software and player pools, potentially reducing costs, eliminating barriers to entry and optimising profitability nationwide.

Beyond this, the state of Pennsylvania has also become the fourth to legalise online gambling, with Governor Tom Wolf signing off an expansion bills after months of intense negotiation. This comprehensive legislation will create a regulatory blueprint for online casino gambling and daily fantasy sports betting, and while it may take a year or more for operators to be fully established it should ultimately help the state to reduce a sizeable $2.2 billion budget deficit.

We believe that this could serve as a catalyst in the American market, particularly with states like Michigan, New York and California currently considering amended legislation that would legalise online gambling. As a result, we could this potentially huge market grow and begin to realise its full potential in the next few years, while triggering huge expansion in the global industry.

2. The UK Regulator will Benefit from the Growth of Online Gambling in the U.S.

With Brexit negotiations becoming increasingly tempestuous and frustratingly slow, experts in a number of industries are becoming increasingly nervous. This is even true in the online casino market, where an impromptu exit from the single market could prevent UK brands from entering into lucrative liquidity pacts with EU member states.

This could restrict the profitability of UK operators, while in some instances it may even force companies to relocate abroad so that they can remain within the EU.

The expansion of the UK market offers considerable hope to British based operators and the UK Gambling Commission (UKGC), however, particularly once Pennsylvania is a fully established force and has entered into the existing liquidity pact with its fellow U.S. states. This will create an opportunity for the UKGC and British operators to enter into their own agreement with these states, paving the way for firms to access a global pool of players and leverage the very latest in online gambling technology.

The UKGC would certainly be able to bring considerable value to such a deal, thanks to its exceptional reputation as an iGaming regulator and ability to establish a similarly transparent marketplace in the U.S. This would improve the terms of the deal for UK casinos, creating a truly lucrative pact that will offset the cessation of EU ties.

Now, you may recall that the UKGC failed to negotiate such a pact when it liaised with New Jersey’s Division of Gaming Enforcement (DGE) back in 2015, after months of discussions. The market opportunity and incentive for all parties is far greater now than it was then, however, while it’s also important to remember that the existing agreement between U.S. states can be used as a framework to help conclude a deal.

3. Responsible Gambling will Become a Key Focus for Operators

When you review the UKGC’s five core strategy objectives for the next four years, it’s clear that responsible gambling is here to stay. In fact, all five objectives are focused on customer safety and the protection of vulnerable gamblers, while there’s also a a clear drive to ensure that operators adhere to responsible messaging and advertising techniques at all times.

We’ve already see the UK regulator flex it muscles in an attempt to help implement these strategies, most notably reviewing advertising practices during live sporting events and ensuring that independent comparison sites operate transparently and without any affiliation to online gambling operators.

The aim of the former is protect vulnerable gamblers from the lure of in-play better, while the latter measure will ensure that players are able to access objective information and responsible gaming messages at all times.

While this represents a natural progression for the UKGC (who have already overseen monumental growth in the online gambling market during the last decade), the challenge facing operators is less clear. Sure, operators will need to comply fully with any new regulatory measures that the UKGC implements, but will they be able to realign their own strategies to place a greater focus on responsible gambling while also optimising profits?

This represents an obvious challenge, and we’ll probably see the most forward-thinking operators tackle this head-on by fully embracing the renewed focus on responsible gambling. Ultimately, this will mean the market leaders competing to establish themselves as ambassadors for responsible gambling, as they look to go above and beyond the new regulations to become an obvious choice for customers.

With this approach, they can arguably increase their market share while also remaining compliant with the regulations laid out by the UKGC.

4. The Gap between Offline and Online Gambling will Finally be Bridged

In truth, this is less of a prediction and more of an assertion, as the once cavernous gap between online and offline gambling and become increasingly negligible over the course of the last five years.

During this time, we’ve seen online casino operators work closely with developers to achieve this goal, resulting in a number of subtle but significant changes to the virtual gambling experience. In the case of online roulette, for example, the pace of the game has been adapted to match the offline iteration of approximately two spins per minute, while the movement of the wheel and the spin of the ball has also been based on physical gameplay.

Additionally, all online casino games have seen the development of more authentic and immersive dealer (or croupier) interaction, replicating the type of interaction enjoyed offline. These targeted changes have had a cumulative impact in the minds of players, while the virtual simulation of corporeal gameplay online.

The final step of this evolution may soon be upon us, and virtual and augmented reality become increasingly prevalent in the world of online gaming. Gaming developer NetEnt has already announced its intention to launch the world’s first-time VR slot game, which is expected to hit the market in the spring of 2018. Using formative, WebVR technology, this game will offer an immersive VR experience while creating a more tactile experience for slot players in the UK.

In simple terms, NetEnt will reinvent its cult classic Gonzo’s Quest for the virtual medium, retaining much of the game’s narrative and features and presenting these in a three-dimensional setting. Similarly, players will have the opportunity to interact fully with their environment, adding an entirely new dimension to the experience and negating the sense that the game is actually being played online.

This will finally bridge the gap between off and online gaming, reinforcing the full potential of the virtual market while potentially sounding the death knell for offline casinos.

5. Slot Games will Continue to Dominate in the UK

In case you didn’t know, slot games remain the dominant force in the UK casino market.

To put this into perspective, consider that slot gaming currently accounts for around 80% of all online gambling activity, while this niche has also seen the level of player participation increase by more than 300% since 2007. In short, slots have taken the market by storm, while simultaneously targeting new and experienced gamblers in the UK.

Much of this has to do with the diversification that we’ve seen in the marketplace, as the emergence of themed slots have helped developers to target players by leveraging popular TV series’ and pop-culture icons. Similarly, the introduction of increasingly complex and lucrative bonus features (along with the large, progressive jackpots found within some gaming networks), has appealed to serious gamblers whose sole objective is generate income online.

We fully expect this trend to continue in the near-term, and there are a couple of reasons for this. Firstly, the ability of slots to incorporate popularly characters and narratives will ensure that this niche remains appealing, particularly for casual gamers who are new to the market and open to engagement. Similarly, the relative simplicity and opportunistic nature of slots also appeals to novice gamers, who can choose low and mid-variance games that offer RTP (return-to-player) rates of 97% and above.

Conversely, serious gamblers will continue to be drawn by progressive and big money slots, along with the inclusion of new features that afford skilled players to control various elements of gameplay. In fact, developers will continue to invest in this type of game as players continue to spend more, helping them to diversify the proposition further while also offering larger financial incentives.

6. The Rate of Growth in the Market may have Peaked

While there’s no doubt that the online gambling market will continue to grow in the UK, it’s fair to surmise that rate of expansion may have peaked for now. This is largely due to the period of transition that looks likely to impact on the market, which will surely require operators to adapt their strategies while temporarily reducing their capacity to generate profit.

We’ve already touched on the renewed regulatory focus on the UKGC, and this is sure to have a short-term impact on the effectiveness of advertising in the market. We may well see a ban on the broadcast of gambling messages during live sporting events, for example, and this would have an instant impact on the amount of income generated through in-play betting.

Of course, a change in advertising strategy could negate this in the future, but this would take time and require operators to amend the distribution of their marketing budget.

Similarly, the UKGC has also recently announced that it will review the terms of the promotions shared by operators. There will be a particular focus on transparency for consumers here, as regulators look to clear any uncertainty and ensure that messages are delivered as clearly and as concisely as possible.

Once again, this will only require a minor adaptation for some casinos and is unlikely to hinder long-term growth. In the near-term, however, we may well the gross gaming yield of the online casino market grow at a slightly slower rate, particularly if the UK government also looks to place increased consumption tax levies on operators or lowers the maximum wager threshold on fixed betting terminals (FOBTs).

The Last Word

So there you have it; six bold predictions for the UK casino market. What do you think though? If you have any thoughts or would like to share your own vision for the market, feel free to let us know in the comments below.