Is Increased Competition Good for Online Casinos?

Posted by Harry Kane on Tuesday, March 14, 2017

As a general rule, consumers tend to consider increased competition between brands as a largely positive thing. After all, this often translates into lower price points and more competitive promotions, while it also creates a culture in which the needs of the consumer are prioritised by brands.

This generic rule also applies in the world of online casino gaming, where there remains a large number of independent operators and brands active across the globe. As this market has grown in accordance with demand, we have seen the level of competition intensify while the cost of gaming has fallen dramatically.

How Increased Competition Impacts on Operators

While this may offer numerous benefits to consumers, however, the question that remains is how it impacts on individual operators? After all, online casino operators have been forced to make considerable price concessions in order to remain competitive, which in turn has had a potentially negative impact on their profit margins.

In truth, the answer to this question varies and depends primarily on the nature of each individual operator. After all, each brand has their own unique cost bases and underlying business model, which creates a percentage-based profit margin that ultimately determines their success or failure. As a general rule, larger and well-resourced operators are able to reduce costs more aggressively and command higher profits, whereas smaller, independent brands typically have far less margin for error.

This makes a considerable difference in the current climate, as a flexible profit margin enables larger brands to offer more generous promotional offers. More specifically, established operators can easily deliver deposit matches in excess of 100% to players, simply by reducing costs and factoring in any increase in turnover that will be earned through a specific promotion. In contrast, smaller chains may not have the option of offering such lavish bonuses up-front, restricting their ability to compete and impact negatively on their turnover as a result.

Is This Level of Competition Good News for Brands?

As we can see, increased competitiveness in any markets forces brands to amend their pricing and make concessions when offering promotions. While this is not necessarily the type of news that excites brands, larger online casino operators can still profit by leveraging their flexible profit margins and targeting new customers with a generous promotion. The picture is less rosy for smaller brands, however, many of which simply cannot compete and often lose customers and the level of competition intensifies.

This is also reflected by share prices, as major brands are likely to see the value of their stock grow as the market becomes more competitive and their consumer bases grow. The loss of customers and profits will hit smaller operators hard, however, causing their stock to lose value as they become a less viable commercial proposition.

Ultimately, this is why competition in a growth market such as the online casino sector should always be well-regulated, in order to safeguard the interests of independent operators and maintain the a healthy level of competitiveness for all.