Key Online Gambling Markets to Watch over the Next Five Years
There are few certainties in this world, though there is no question that the online gambling industry will become one of the biggest over the next few years. For over two decades, iGaming has steadily been increasing in popularity - we have already seen numerous changes since this was introduced to the world, and there are likely to be many more that occur as technology continues to develop.
Early Stages of Development in the iGaming Industry
An increasing number of countries have already witnessed just how popular online gambling is - exemplified by the ever-growing list are introducing legislation and making this a legitimate activity. For years, the UK was one of the biggest online gambling markets in the world after the Gambling Act was passed in 2005 in order to police the industry more efficiently, following a major increase in participation.
During the years that followed, multiple UK casinos were founded (Figure 1), as well as some poker-specific organizations, while sports betting centric sites also hit the market, as well as online bingo, which is still played by millions.
Figure 1: Total Number of operating casino premises in the UK from 2011 to 2020
By 2018, the industry in the UK was thriving, while a number of other jurisdictions were also reaping the benefits due to having a license courtesy of the Malta Gaming Authority (MGA) - considered to be one of the most robust in the industry, capable of standing up to heavy scrutiny.
Iterations to hardware such as smartphones were effectively the most important springboard for the industry, with the majority of participants preferring to use these devices for gambling online purely due to convenience. Smartphone technology effectively changed the way people gambled online, with a number of patterns and correlations gradually emerging over time that gambling companies considered valuable data for marketing purposes.
Over the last couple of years, we have seen a new beast awaken in the iGaming industry, with a global pandemic effectively stirring it from a stupor. Of course, that is the US gambling market, with many states realizing that they could no longer ignore such a large source of income (via taxation) at their fingertips. As a result, numerous important states have since passed legislation in some form or another (online sports betting or online casino), which has seen many operators enter the US, including a number of UK-based brands, with the market growth being considerable.
A number of states have already surpassed all expectations over the last two years in many different ways, from participation, sponsorship interest, monthly wagering figures, and state-wide revenue. There is no doubt that the US will become the biggest online gambling market in the world over the next few years, especially when more states (as is predicted) pass legislation.
While this is a relatively obvious prediction, it does beg the question - are there other global markets that can, if not challenge the US in this industry, then have a significant impact? Below we explore a number of other key markets that could affect the iGaming industry over the next few years, based on recent events and potential future trends.
The Canadian online gambling market has been a tenuous one over the last few years because the legislation has always been so convoluted. While there was never any kind of blanket approval from a regulatory standpoint in the country, online gambling was still available via a certain loophole that proved to be relatively successful.
What it meant was, in certain provinces, those who wanted to participate in online gambling could do so with an operator that was based ‘off-shore,’ with these usually having a license from Curacao or the MGA (Malta Gaming Authority).
Rather like the US, which has states that independently govern the rules around online gambling, this is similar in Canada, with provinces. Very recently, though, a major province in the country - Ontario recently passed legislation that can have significant effects on the industry in this province over the next few years.
With regulated online gambling launch in Ontario on April 4 of this year, the news has been greeted positively in general, and it has seen many different operators start the application process for a license from all over the world.
Similar to the US, though, external operators are required to have a Canadian-based (or, in this case, Ontario-based) gambling partner in order to legitimately offer their websites to the public, such as a land-based entity like a land-based casino or bingo hall.
The regulation of Ontario is seen as a major development in Canada, with this being recognized as a key province for online gambling in the country and one which plays home to over 14 million people - the most populous province by nearly six million.
It indicates that online gambling and, by extension, sports betting can be of substantial interest in the province, with many people already having enjoyed ‘off-shore’ participation for a number of years. However, it is hoped that legitimate operators in the province can sway these people by having official procedures in place for their own protection, such as AML (anti-money laundering) and responsible gambling standards in place.
Ontario also plays home to a number of the country’s most-followed sports franchises, and this could lead to potential sponsorship partnerships for operators, in the same way that is happening in the US - which has been considerably successful for onboarding new customers. With NHL (National Hockey League) sides, the Toronto Maple Leafs, and Ottawa Senators, the province plays home to one of the fiercest rivalries in ice hockey - one which can certainly garner significant betting interest.
Following the announcement that Ontario had passed online gambling legislation, Steven Salz, CEO of Toronto-based sports betting and esports company Rivalry Corp. revealed his delight, stating: “We are very excited to learn that Ontario residents will have access to safe, regulated internet gaming.”
Meanwhile, a number of other operators have also welcomed the news, particularly NorthStar Gaming, which is owned by NordStar - an investment management company founded and driven by Jordan Bitove and Paul Rivett. It is understood that there are already plans underway for NorthStar to start its own online betting brand, with an advertising and marketing agreement already believed to be in place with sister company Torstar Corporation - a media firm.
CEO of Northstar, Michael Moskowitz, expressed his excitement about the announcement indicating that this is a landmark agreement for many eager enthusiasts which: “gives Ontarians more choice and flexibility for online wagering and gaming, something gaming enthusiasts have been requesting for many years.”
A market that has for the last few years been on the rise, online gambling in New Zealand is perhaps, surprisingly popular. Arguably one of the strongest reasons for this is that operators in the country are regulated by the UK Gambling Commission (UKGC), which means that residents there can effectively access the same sites as those in the UK.
In addition to this, there is also a regulatory loophole allowing people to access operator sites off-shore via the New Zealand Gambling Act, similar to how many in Canada were able to for so many years.
Where the confusion arises concerning New Zealand is the legalities surrounding what sites residents can enter. Those that are considered to be ‘off-shore’ are technically illegal because they do not have approval from either Lotto NZ or TAB New Zealand, which is a statutory monopoly for sports betting in the country.
It is why big firms, such as UK operator bet365, can legally offer their services to customers in New Zealand, having received regulatory approval from TAB, which means primarily its sports betting services are available.
The next few years represent an interesting challenge for New Zealand in the iGaming industry, with potential pressure from other global markets to make it more regulated. What the country might not be able to ignore is the revenue that it can make via taxes, from opening up legislation further and allowing more online gambling firms to operate.
Sports betting undoubtedly has a market in the country, with rugby league, rugby union, and cricket considered to be the main markets, though the English Premier League (football) also attracts a lot of attention for operators from customers.
Like neighboring New Zealand, the Australian online gambling market has been gradually on the rise for a number of years. Perhaps slightly more established than New Zealand in the online gambling and certainly sports betting industry, the potential that Australia has, in accordance with relevant regulatory approval, is substantial.
Indeed, between 2015 and 2020, Australia witnessed a considerable surge in online gambling participation; however, during and since the global pandemic, this has increased even further, with 16 percent more of the population now engaging in iGaming compared to before. According to Statista, in 2017, Australia was the leading country in the list of largest gambling losses per adult worldwide (Figure 2).
Figure 2: Countries with the largest gambling losses per adult worldwide in 2017
According to data provided by analytics firm AlphaBeta, online gambling growth reached 67 percent for 2021 since the global pandemic, based on 250,000 transactions from the Australian public.
What this means is that it has positive connotations for the future of the industry, with the Australian market certainly primed to move. It is also reflected by the growing awareness of certain firms that are native in the country - in particular, PointsBet, which should be congratulated in their efforts to establish a foothold in the ever-growing US market.
Arguably, the country’s premier online gambling and sports betting operator, PointsBet, has gradually adopted a clever strategy in the US, securing sponsorship deals with a number of major franchises across certain states in order to capture a segment of the market.
Then there is Aristocrat Leisure - essentially a software firm that registered interest in buying global company Playtech, with two bids rejected in the past six months. Originally servicing the land-based industry, they are also considered to be one of the major developers of the online industry in the country.
Widely regarded to be one of the major Latin American markets to watch over the next few years, Brazil could become a global force in online gambling should relevant legislation be passed on a widespread basis; however, this one is somewhat of a slow-mover.
The unregulated online gambling market is already considered to be a major business in the country, while the potential once regulated expects a median gross revenue of just over Є100 million per year.
In particular, the online sports betting market for Brazil is huge, especially when the following for football is contemplated and how big the betting expenditure can be in this vertical. Most types of gambling in Brazil are state-owned, and, as yet, there is no licensing process in the country.
However, with neighboring Argentina having recently ramped up its legislation in the online gambling industry, albeit via certain provinces (two Buenos Aires recently passing approval) and having seen the response, it is likely that Brazil will not be far behind in determining regulation.
One interesting market to watch over the next couple of years is the Netherlands, which could represent one of the fastest-growing in northern Europe. In October last year, there was a complete overhaul of online gambling, and a major crackdown on illegal activity followed, with unlicensed operators blacklisted from offering their services to Dutch customers.
The de Kansspelautoriteit (KSA) regulator was formed and has swiftly become one of the toughest in the world when it comes to being approved for and receiving an online gambling and sports betting license.
So much so was that the KSA only approved 10 online operators to offer their services in the country in the initial round of applications, with over 20 having made submissions.
The casino gaming revenue in the Netherlands was slowly but steadily increasing between 2010 and 2017, when it reached its peak of 610 million euros (Figure 3). Principal estimations indicated that by 2025, the Dutch will surpass Є1 billion, as published in the Netherlands Betting Focus report by BTOBet in June of last year. While the report initially predicted a downturn in online gambling as customers got used to new legislation, with a slight switch to retail, it forecasted a slow and gradual turnaround over the following years.
Figure 3: Casino gaming revenue in the Netherlands from 2010 to 2017 (in million euros)
It revealed: “On the other hand, this market share diminishes in the online sector, with forecasts foreseeing the gap between the two sectors to further decrease after the regularization of the online market.
H2’s statistics assume that the introduction of the KOA law will have little influence on the size of the land-based casino sector, with the dip for the land-based casino sector in 2020 not linked to the introduction of the KOA Act but to the measures implemented related to the Covid-19 pandemic, and which resulted in the closure of the casinos and retail gambling shops.
At the same time, the statistics indicate that whilst the sports betting sector enjoys a greater market share in the online rather than in land-based channels, the market is still dominated by the casino vertical, and this trend is expected to be maintained even after the introduction of the KOA Act.”
In 2019, there was a substantial overhaul of the Swedish online gambling industry, designed to help filter out illegal sites that were operating in the country without a legitimate or recognized license and also to assist with tougher responsible gambling measures.
This proved to be great timing. Following the changes, the country witnessed a noteworthy increase in the number of participants. However, this was also aided by the global pandemic, which saw a rise in online gambling participation in many markets.
What the regulation revamp did was give customers more confidence that they were safe online. However, it also provided them with more choice in terms of new operators having been granted licenses that measured up to the new legislation requirements.
With a strong GDP (gross domestic product) in the country, the potential growth of the Swedish online gambling market is very interesting - and it could certainly establish itself as a major player over the next few years.
In its favor is that some of the biggest brands in the world hail from the country - Kindred Group, which owns Unibet and 32Red, have headquarters in Stockholm, while leading software provider Evolution, which owns Evolution Gaming, Red Tiger, and most recently, native firm NetEnt is also based there.
Sweden has strong roots in the online gambling industry, arguably rivaling the UK in terms of knowledge and expertise, which signals very positive signs for the future.
Final Thoughts about Industry Growth
Such growth potential of these six listed markets in the industry effectively barely scratches the surface in terms of new ones that could emerge, even over the next two years. It appears that once the US becomes as fully regulated as it can be (some states may still stand firm), then the country will be well-positioned to dominate.
However, there are certainly some interesting challengers - arguably Canada and even Brazil representing two countries that can have their say from a revenue standpoint. With Ontario recently becoming regulated, this will definitely have a major effect on Canadian provinces, and we could even see movement between provinces in the country.
Like in the US, when New Yorkers would frequently travel between state lines to places bets in New Jersey from their mobile devices, we could well see something similar occurring in Ontario’s neighboring provinces, where online gambling is still considered illegal.
What is not in doubt, though, is that there are going to be major challenges in the online gambling industry over the next few years, and this is just the beginning.