Episode Transcript
[00:00:00] Speaker A: Foreign.
Welcome back Everybody to episode 12 of Right to the Source. My name as ever is Robin Harrison and I'm here with the staedtler to my Waldorf, Mr. Ed Birkin. Ed, how the devil are you? Over the past week I've been doing a lot of home improvements, cleaning, fixing stuff along with the usual work. What have you been up to?
[00:00:29] Speaker B: I've been conducting an on site market research in Italy.
[00:00:33] Speaker A: How was the holiday?
[00:00:34] Speaker B: It was very enjoyable, thank you.
[00:00:36] Speaker A: Excellent.
[00:00:37] Speaker B: Yes.
But you know, a lot of market research being done as well in the Abruzzo region, where I can tell you, in case you're wondering that for example, horse race betting turnover in Abruzzo was 7 million in 2022.
[00:00:56] Speaker A: Wow. And are there a lot of betting shops by the swimming pool? Is that where they're generally found?
[00:01:02] Speaker B: Well, you know, I don't want to go in too much into about the research element of it yet as we're going to talk about Italy later in the podcast. But no, there were. I was in a more remote area, you know, to try and understand how the rural gambling situation works because it's easy to go to, you know, Milan, Rome and go into a betting shop. I don't think that really helps you understand the culture.
[00:01:22] Speaker A: Okay, that's an interesting approach. Go and do market research in an area with none of the components you need for the market research. But let's talk about that later because you're very keen on introducing features and structure to this podcast.
[00:01:39] Speaker B: Features, yes, structure I think we're still struggling on.
[00:01:42] Speaker A: Yeah, structure is still a bit, it's a bit fluid. We're more like a gas than a solid at this point.
But we do have a new feature to throw into the mix which we mentioned last week and you artfully breezed past it because you hadn't prepared. But this week let's introduce start of the week. So from the latest H2 weekly update, what is the one figure jumped out as you as the most interesting that you can share with our beautiful listeners?
[00:02:14] Speaker B: Well, I mean if we were doing stats on the week based on that, then it would have been good to have a heads up so I could have read what my team put out while I was away doing my market research. So I've got a stat of the week related to the Panama market as that's one of the ones the random country generator pulled out. So Panama, which introduced regulated onshore online Gambling in 2021, they have, you know, they're showing decent growth now in it, but from a very small base Obviously a small country, but the average online regulated GGR per capita in Panama this year is forecast to be $8, 8 US dollars. Now if you compare that to Brazil, that's $48, Mexico $27 and Italy, I found out from my market research is a 18. So that just show what a nascent market Panama is. And I think that's largely to do with I think a lot of it is the supply and it's something that we've touched upon in a roundabout way in a few of the markets such as why is the offshore bigger in Colombia than it is in Peru? And it really does go to show the number of operators you have in the market. And we also talked about this with the New Zealand regulation being limited to the I gaming and etc. And the number of operators does make a difference. Now doubling the number of operators isn't necessarily going to double the size of the market.
But if you have very few operators, be it through regulation or be it through, it just isn't seen as that bigger market or that attractive a market to be worth going into, then you do end up with a much smaller market size.
Before people kind of run on this and go oh, that's regulators therefore should restrict operators and therefore they want too big an online market. Obviously you're still getting players going offshore. So that is purely the onshore market being restricted. Not saying that total market size, that's.
[00:04:03] Speaker A: An important caveat to make. But with the Panama market, I mean the first thing that jumps to mind, I think it was when they put out maybe their kind of Q1 results. Coder online talked about ramping up in that market and that was essentially a direct consequence. I mean they linked that to pulling back in Colombia following the introduction of new tax.
So obviously Panama is a relatively new market, so it's relatively immature. I think it was 2019 as far back, if I remember right, removed a 5.5% tax on player winnings.
So with tax ramping up in countries such as Colombia, potentially Brazil, do you see that benefiting these smaller markets?
[00:04:48] Speaker B: Yeah, I think it makes it more attractive for relatively, I suppose for the operators. But the fact is when you've got a market size, just a scale of Brazil, Colombia compared to Panama, I think it's going to be pretty niche who gets licensed. And it's easy when as an analyst you focus a lot on new regulation and always focus on really is the tax rate. Obviously if there were certain things like complete curveballs such as the Germany only allowing online slots for commercial operators with a €1 maximum limit, etc. Huge spending limits. But I think when you look at operators, there's a lot of nuances to the regulation about how easy it is for them to enter the market. Do they need local presence, how the systems need to be set up, reporting that we sometimes it's from my side industry rather than being down in the weeds as an operator, you can of probably take, you know, ignore a little bit. So again, if it's easy to go in as an example, not saying they should do this or this could even work, but if they said right, the legislation, all the technical requirements etc are mean exactly the same as what you need for Buenos Aires, then you'd assume that anyone who has a Buenos Aires license, because we talked about maybe other, other provinces in Argentina doing that, the smaller ones, so that, you know, the bigger operators, the likes of the bet365 batsons, will go into all the other provinces. Then why wouldn't you just automatically do something for Panama now? You wouldn't just have a skin site, you probably need to be a bit more localized but you know, same language, etc. Well, Panama is probably English language but you know, you can have the Spanish version etc. And yes, it would just make people more likely to, to kind of get licensed there. So there's a lot of nuances to the legislation that is more than tax that we perhaps don't, don't really take enough account of, especially for smaller markets.
[00:06:25] Speaker A: Okay, that's interesting. But I suppose you could also argue that in Europe with the Baltics for example, these are all kind of like relatively small markets, but they do provide kind of incremental gains and new growth. I mean, do you think that factors into operators thinking they can say, well, this is kind of like a new revenue stream, the bigger markets are maybe more challenging, but we are adding these kind of marginal gains, to use David Brailsford's favorite phrase, to create that almost kind of like sense of growth or sense of progress for the big operators.
[00:07:01] Speaker B: I don't think so because it just doesn't move the dial at all. And I think that's why we've seen in Eastern Europe was largely ignored by a lot of the traditional larger operators. And it's why you've seen the likes of, you know, Bitano and Superbet and others gain such momentum by being able to operate in these markets that there was possibly less competition for the more established guys initially and then really grow the base. And now they are, you know, huge competitors to, you know, the people who've been around for 20 plus years. So I think, yeah, local operators the likes of, you know, you talked about Kadero Online again, they're doing well and growing well in Mexico and Spain and they've got Colombia. But pulling back from Colombia, you know, given their relative size, you know, then something in Panama is going to kind of add incremental growth that is probably noticeable to their, to their financials. You know, you look at someone like Flutter, they could have 100% of the Panamanian market and no one's probably going to realize, you know, a bit like the only US operator that I can really think of off the top of my head that is really in Latam in any meaningful way is Rush Street Interactive. And that's because they don't, you know, you look at them, you look at their US revenues and you're like, okay, Latam makes a difference again like DraftKings, you know, kind of flutter in with, in Brazil. But yeah, I think if you look at some of those like bet Mgmr as well in fairness. But you know, it's just not, it's just these kind of markets, Brazil aside, are just so small that it just doesn't, you know, you look at a percentage point difference of hold margin in the US and that's going to make much bigger difference than what Panama does in six months.
[00:08:36] Speaker A: Yeah.
[00:08:37] Speaker B: So yes, I think it is an interesting opportunity but for probably some of.
[00:08:40] Speaker A: The smaller operators know, it's an interesting point using mid size. Yeah. Using these smaller markets as a springboard to really kind of get in that competitive position.
[00:08:49] Speaker B: Yeah, absolutely. You know it's things can also take time and traction. I mean Italy, which we'll get onto, you know, for various reasons but their online penetration has remained low for a large number of years. We've seen very strong growth over the last few years and it's continuing, we know Panama. So first, first six months of this year they reported $10 million of online betting and gaming gross win over six months. Not a lot, but that's up 68% year on year. Okay. So you know, if you keep seeing these growth rates, you know, the fact is in 2024, the first six months, four years after opening, three years after opening, it was only at 6 million. So average of 1 million a month is pretty small. And it's not just because of population. As I said, they only have 7, $8, technically 7.8 dollars per per adult. But if you can start seeing this traction game which we're seeing this year of these growth rates and getting, you know, 60, 70% next year. If that goes to 50, 40% from a much higher base, then you'll soon start catch up with maybe the Latam average, not. Not perhaps Brazil, but some of the other markets. And then it becomes a lot more meaningful. And then maybe then you get this. And I'm going to call it Snowball because it just really pisses me off how the industry has adapted this phrase of flywheel. Constantly using it, you know, everyone loves to use it. But the snowball effect of as it becomes a bigger market, maybe some more operators will be interested, there's more competition, better products, more advertising. And then you start to see it perhaps fulfill its potential.
[00:10:11] Speaker A: And then. Let's hop in a plane. I don't even know if you can get a plane, you know, on this route, but from Panama to Liechtenstein, we said, we talk about.
[00:10:22] Speaker B: You'd get a direct flight. I probably go via shoulder Gaul. No, I reckon you'd have to go US I reckon you have to go US Then Lisbon, London or Amsterdam, maybe Paris or Frankfurt and off to Liechtenstein.
[00:10:37] Speaker A: Yeah, or you could fly to the US and then get a direct flight probably to Switzerland and then you could probably drive.
But getting away from travel arrangements. I know you're a big fan of travel, judging by the number of business trips you've been taking this year.
[00:10:56] Speaker B: We're a global consultancy, Robin. It can't all just be done from Bristol.
[00:10:59] Speaker A: You, Mr. Worldwide, your pet bill.
[00:11:02] Speaker B: Well, what. What global?
[00:11:03] Speaker A: Mr. Worldwide. Pitbull.
[00:11:05] Speaker B: What's Pitbull? Isn't he a rapper?
[00:11:07] Speaker A: Yes.
[00:11:08] Speaker B: Okay.
[00:11:09] Speaker A: He calls himself Mr. Worldwide.
[00:11:11] Speaker B: Slightly out of my genre. I think we need to air more back towards Christina Aguilera. Okay, Right, so shout out to talking about great musicians. Ozzy Osbourne unfortunately passed away this week.
[00:11:21] Speaker A: Yeah, yeah, that's. That's. That's a sad one.
Yeah.
[00:11:26] Speaker B: I mean, like, what mentioned his name so we can't be blamed for this one.
[00:11:28] Speaker A: Yeah, that's. That. That definitely helps. But, you know, incredible career, incredible legacy. I mean, it was. And weirdly, weirdly kind of universal growing up. Like, you know, guys who were into. Well, maybe not Pitbull, because I don't think he existed at that time, but kind of like rap music, all that kind of stuff. Like growing up in Glasgow, kids loved Aussie, you know, Sabbath, A, you know, incredible band. But I'm not sure he ever played in Lichtenstein.
[00:11:54] Speaker B: He says, you know what I mean?
It's potential. I'm actually gonna. You keep talking. But he did do a. Do a concert on July 5th. I think it was for charity, which raised a load of money for charity just before he passed away.
[00:12:08] Speaker A: Yeah, in Birmingham with like an incredible lineup. But. But that doesn't have much to do with Lichtenstein, he says, desperately clawing his way back to the Liechtenstein gambling market. So it feels very much so. Unless there's been a development that have missed. There is essentially a moratorium in applying for online licenses until 2028.
There's disquiet among the casinos because self exclusion passporting system with Switzerland has significantly curbed the number of people they could bring into their casinos. Whereas that sort of system, again unless there's been a change, doesn't apply to German or Austrian casinos. So the level of player protection is really not that great. So what in terms of market size does license time look like?
[00:12:59] Speaker B: Well, I mean I should really have used this as stat of the week actually. So I don't have the total market size. We should have talked about this for LinkedIn style at the moment. But as you said there was. What happened is in very recently is the Swiss and the Liechtensteinian authorities decided to do a shared blacklist. So effectively everyone who's blacklisted from Swiss casinos is now blacklisted from casinos in Liechtenstein, which the government said they expected to reduce either a 30% drop in gaming revenues, which is pretty big. But you know, if these are blacklisted for problem gambling or whatever other reason, then they're the people you don't necessarily want in the ecosystem anyway. However, within two weeks it actually led to an 85% drop in gaming revenues which they've estimated is going to lead to a 50 million euro annual gambling tax revenue decline. And there's already in February, LV Casino in action was the first one to shut its doors permanently and they're expecting others to do so as well. So this is a huge thing that they're now asking the government to look into because if, you know, if the market stays down 85%, then there's not going to be many casinos left.
[00:14:07] Speaker A: I mean in terms of the overall market, I mean like how many casinos are there? Because obviously it's quite a small country. So I imagine it does rely on, you know, kind of like visitation from, from other places like Switzerland, like Germany, like Austria, to really kind of function.
[00:14:25] Speaker B: Yeah, it does, as you say, that's exactly right. So it does allow, it does rely on other people coming in and the taxes. So we could probably work this out actually, because tax in Liechtenstein is 40 for large casinos, they're 35 smaller casinos. So let's say, let's say 40 overall. So 50 million. 40, that's going to say that's a reduction in revenues of 120 million. And if that's because it's down 85 and gross set up, then ballpark, that's from exact. But it's about 150 million euro market, they're kind of saying, in fact like 120 over. 150, I think is 85%. So yeah, so 150 million euro GGR market, they're saying they're going to lose 120 million of that. So I think there's this kind of six casinos in Liechtenstein. And yeah, as you say, the issue is that blocked players are still allowed to play in Germany. So they're moving to kind of casinos, you know, just across the border from that. And that's where they're losing it. So they are. These foreign players are now, you know, Austria, Germany going to those ones rather than Liechtenstein. So, you know, it's not stopping anything. It's just a shift away from the Lichten Lichtenstinian, if that's how you say it, casinos to the German and Austrian ones.
[00:15:34] Speaker A: Can I just say that was some really impressive mass.
[00:15:37] Speaker B: Well, it's not quite right. I mean, let's just. It's ballpark. Right. But let's see what's so 120 divided by 0.15. Let me just get my calculator. I think it was slightly out. 120 divided by 0.85.
It's 141, not 150. Yeah, yeah.
[00:15:55] Speaker A: Still, still really impressive mass.
[00:15:57] Speaker B: Well, thank you. That's the nicest thing you've said to me on this podcast. And we're in episode 12.
[00:16:01] Speaker A: Yeah.
[00:16:02] Speaker B: I'll think of a compliment for you soon.
[00:16:04] Speaker A: Oh, yeah, Give it a few more weeks.
Aim for episode 20.
[00:16:08] Speaker B: Yeah, well, we'll be in your new house by then if you've actually managed to finish all the restructuring and stop it falling down and all those huge structural issues that you've got going on.
[00:16:17] Speaker A: I don't have huge structural issues in.
[00:16:20] Speaker B: My house, but congratulations on your new house, Robin.
[00:16:22] Speaker A: Thank you very much. That's very kind of you to see. Look at you. Look at us.
[00:16:27] Speaker B: Very stressful time. Time to moving with a young child.
[00:16:30] Speaker A: So, you know, for a minute there, I thought we were almost turning nice in this podcast. Then you, then you brought it back. Appreciate that. It was getting weird, but let's stay in Europe.
Similar to what we did when we talked about the and Florida and France.
Let's do what I did in my holiday special on Italy. So you mentioned the Abruzzo region with its horse racing, relatively small horse racing revenue and you also mentioned the remoteness. So I'm keen to get a better understanding of the market research methodology you applied.
[00:17:13] Speaker B: Well, as a not necessarily related sector, maybe in some tax terms, but I can confirm that the grapes on the vines in the Abruza region are significantly larger and in better health than the ones at least in my fields in the Essex region. So that was slightly disappointing. And yeah, I can confirm I did not see a single betting shop where I was which shows that perhaps it is more focused on the. Less focused on the rural area. So there you have it. That is a definitive guide to gambling in Italy.
[00:17:41] Speaker A: But just staying in Italy, I mean looking at that market, you mentioned earlier that the online component has been growing strongly in recent years. And obviously we've the new concessions issued this year and I think it was, was it 46 in total?
[00:17:55] Speaker B: That's your bag, Robin. I'm sure there's an IGB article about it somewhere. So let's go with 46.
[00:17:59] Speaker A: Yeah, something like that. Okay, but what do you see that market continuing to grow this year?
[00:18:06] Speaker B: Yeah, I mean online gaming. Online casinos up 15% year on year, you know, from, from a strong base. I mean if we look at, if you look at sports betting, you know, which is one where there's a much higher share of online. The reason that the casino is a lower share of online is one's just such a large base of land based gaming with slots and AWPs, VLTs, albeit they're having their struggles, you know, it's continuing to take share online, but it's also, you know, still quite a cash based economy if you look at sports betting. I mean, let's go prior to Covid, as everyone does, 45% was online. Last year it was 63%, you know, but it's, you know, the, the land is still growing. So if you look at 2024 versus 2019, you know, land has grown at 10%.
That's over that period, not per year, but you know, it's 123% growth. So you know, much more than double for, for the online sports betting. So you're still seeing this pent up demand and as online's growing, land is still also able to grow. I think part of the bit that we don't see there is the, the black market in Italy and it's, it's very hard to, to measure even the online side of things because a lot of it is, is a kind of hybrid. So especially sports betting. A lot of the stories that come out are around people paying in cash in the kind of retail, the, the tobacconist or however they want to do it and then using the, their kind of either that person's tobacco online account or just completely illegal online accounts where they effectively just get a piece of paper with the login details rather than the kind of traditional grey market we will advertise and hoby users over one of the locally licensed operators. So there still is that cash element to it. So a lot of this is kind of almost a hybrid land online and that makes it very difficult to track on our numbers where we're seeing very low illegal online market revenues. It's because there's a lot of this hybrid nature and a lot of it's hidden and word of mouth and to be honest don't tell what that. But you know, according to some people organize crime backed stuff and it's. Yes, it's a very difficult market in that respect and there's been a crackdown on that and I think that's probably why there's been some, some of the strong growth in the onshore things for the crackdown against this kind of offshore activity.
[00:20:21] Speaker A: Okay.
[00:20:22] Speaker B: But it's still, it's still a market that everyone. You know what's interesting in it is one, it's highly consolidated now, especially with, especially with all the automatica kind of activity and Golbet and all the others that they did. So now they are a clear number one. It's also been a big focus from the international operators. So you had playtech who went in, you had Flutter who went in. Now Flutter owns both, both SNAI and czal. You know, there's, there's been a, there is. Yeah. It is one of the markets where you've seen a lot of, because of the size of it, the scale of it, you've seen a lot of international operators or a couple of international operators really take focus on that market rather than being locally led or locally led. Locally led operators have done very well there and they're acquired by large international groups. And I think we can start to see it, we haven't seen it happen as much elsewhere in fairness, but it is something that potentially could happen, could happen elsewhere. I mean there's very few other markets in Europe actually where you can see.
[00:21:13] Speaker A: That kind of having been done and we are coming up on time. I think we've been ridiculously disciplined in this episode, even with diversions into Aussie and Pitbull. And the last thing we have to do is to choose next week's markets using a random number generator and hoping that it lands on a slightly bigger market than nothing against. Just to be clear. Nothing against a Panama or Liechtenstein, but it'd be interesting to have some of the bigger markets to talk about if.
[00:21:47] Speaker B: It lands on a bigger market, which is pretty much going to have to by the law of averages. And it's going to seem as though this is somewhat planned. So if it's. I actually hope it's a smaller market.
[00:21:55] Speaker A: Come on.
[00:21:57] Speaker B: Well, I don't. People think there's any. I mean, I'm sure just by listening to us, they know nothing in this is planned. Okay. Random country generator. Slovenia. Okay.
[00:22:05] Speaker A: Slovenia. Okay.
[00:22:07] Speaker B: It's got some facts here, so I'll just read them out now so you can't use them. Capital Robin is a.
[00:22:12] Speaker A: Is that Lubjana?
[00:22:15] Speaker B: Looks like it. I'm glad I couldn't say it. So that's why I asked you. Population nearest million.
[00:22:19] Speaker A: I would. Wouldn't have a clue.
[00:22:21] Speaker B: A2 language.
[00:22:22] Speaker A: Slovenian.
[00:22:23] Speaker B: Yeah. Currency.
[00:22:25] Speaker A: It's not Florence, is it?
[00:22:27] Speaker B: Euro.
[00:22:28] Speaker A: Euro. Okay.
[00:22:29] Speaker B: And the national flower is the red carnation. The national dish is veal and buckwheat dumplings.
[00:22:35] Speaker A: Quite nice.
[00:22:36] Speaker B: I don't. I'm not sure about buckwheat, but. Okay, so Slovenia. And the next one is. Next random country. You know how I said the law of averages would mean that it has to be a bigger one? Belize.
[00:22:47] Speaker A: Belize.
[00:22:47] Speaker B: 400,000 people.
Should we skip that one?
[00:22:51] Speaker A: I don't know. Do you have data on Belize?
[00:22:55] Speaker B: No.
[00:22:56] Speaker A: Yeah. Let's look for something different.
[00:22:59] Speaker B: Okay. This is bigger. Chile.
[00:23:01] Speaker A: Chile. Let's do Chile. That's an interesting one. I think we've touched on it before, but yeah, let's do Chile.
[00:23:07] Speaker B: Okay. Quick fire. Capital.
[00:23:09] Speaker A: A Santiago language.
A Spanish currency. No, Peru. Solets. Actually Pesos.
[00:23:17] Speaker B: Chilean peso. Good. I mean, the national flowers are La Pagueria national dish, pastel de chocol, chocolate. But the population, that's a very.
[00:23:28] Speaker A: I'm not good in population, so you may have noticed. I thought Slovenia was four times bigger. Let's see.
Just thinking where it is.
[00:23:37] Speaker B: It's in South America.
[00:23:38] Speaker A: I know where. I know it's in South America. I'm just thinking where it is in the continent because it seems down the side. 15 million.
[00:23:44] Speaker B: I'll. I'll give you that. 19 million.
[00:23:46] Speaker A: 19.
[00:23:47] Speaker B: So we'll. We'll go with 15 as the adult population. In fact, actually the adult population is. Because we have that here.
The adult population is 5 in 20, 25, 15.5 million.
[00:24:01] Speaker A: Wow.
[00:24:02] Speaker B: You were going for the adult one and actually 15.47. So rounding down to 15. Well done, Robin.
[00:24:08] Speaker A: Yay.
[00:24:09] Speaker B: And that is now most of our stats for next week done.
[00:24:12] Speaker A: We can definitely find some more than that. There's definitely more going on.
[00:24:16] Speaker B: So we are forgotten the first one.
[00:24:17] Speaker A: Now, the first one is Slovenia, the second one is Chile.
So next week join us when we will be talking about Chile and Slovenia.
[00:24:28] Speaker B: And we will also have a stat of the week based on the HG data that I've been.
[00:24:33] Speaker A: Yes, yes, next week Ed will prepare. I don't think he's got a holiday this week. I'll need to double check. But assuming that he doesn't, he should have time to prepare for that.
So.
[00:24:43] Speaker B: And Robin will also, also provide a quick, very quick overview of the most interesting news story to go on the most viewed online gambling news platform. Gambling these online.
[00:24:57] Speaker A: Yes I will. Yes I will. I've got an excellent team who are doing great coverage of the market on both sides of the pond and stretching down to Latam. Also doing more in Africa.
So loads of great stuff on the site at the moment.
And I work for igb, but you know, the team is doing incredible stuff at the moment. So we just really want to kind of shout out them because I think the work they're doing is fantastic. And also the latest issue of GGB magazine or land based publication in the U.S. i think that's a really, really strong issue. Some really interesting FE features. So.
Igamingbusiness.com ggbmagazine.com Go and have a look, see what we're up to.
[00:25:37] Speaker B: And with that, another fact of the week because we've done stat of the week. Fact of the week because you haven't prepared. I'll save, I'll save you one.
Italian weddings.
Yeah, really long. Not the wedding, but in the whole like celebration and the amount of food is ridiculous. And it'd be helpful to tell English people that like the first course that involves like 12 different stations isn't the whole meal and that it's quite normal to get served main course at like half one in the morning.
[00:26:04] Speaker A: Wow, that sounds like a great wedding. Wonder if a, I mean obviously if you dressed appropriately, like a pair of pink trousers wouldn't be a good idea for a wedding like that.
[00:26:13] Speaker B: If you had pink trousers that you could pull off. Not as in pull off, as in remove, but as in you know, able to pull off the look, Velcro down the sides, then I think. I think it'd be a strong look at a wedding in the Abruzzo region.
[00:26:26] Speaker A: Yeah, yeah, yeah.
[00:26:27] Speaker B: Well, hypothetically.
[00:26:30] Speaker A: Hypothetically, you heard it here first. If you're going to a wedding in the Abruzzo region, wear pink trousers. And with that, we will bid you all farewell. We'll be back next week talking about Slovenia and Chile. This has been another episode of Right to the Source with Robin Harrison and Ed Birkin. See you in the next one.
[00:26:49] Speaker B: It.
