Technology has played a major part in the development of the gaming industry, but how much is it worth in 2020? Will sports betting overtake casinos?
The year 2020 saw the world come to a standstill. Companies had to modify their plans and operations by moving to the digital world to keep up with demand and this was no different in the gaming industry.
The year 2020, saw gambling companies take on this virtual challenge and resulted in huge profits being recorded.
Companies were pushed to their limits and this resulted in new AI and innovative platforms being created, playing a significant role in the growth of online gaming.
It comes as no surprise that the worldwide global online gaming market for 2020 amounted to $66.72 billion, pushing the whole industry to new levels. Online and retail sports betting and casinos were one of the main contributors to the overall value of the gambling market registering $203billion and $227billion respectively.
Furthermore, the market is not showing any signs that it will be slowing down as forecasts presented by the "fortunebusinessinsights" estimated that global online gambling alone will be worth $71.17 billion at the end of this year, increasing to $158.20billion in 2028 with a compound annual growth rate (CAGR) of 11.4% for the period.
If we add in retail and land-based for the additional years, that amount will be much more than forecasted. However, in 2020 due to the pandemic retail revenue was quite limited.
In this report we will take a look at specific categories such as key industry factors and types of markets that have contributed to the rise of online gambling. At a later date we will also identify the most influential gaming companies and analyse the top casinos, sportsbook and innovative platforms in the industry that are pushing this huge growth.
Key gambling industry factors
1. Ease of Online Payment
The move from physical to digital platforms has pushed companies to develop an easy payment system for online players. Online payment systems provide an instant, secure and safe mode for transactions to happen. Due to their ease and necessity in the digital world, the online gambling industry has adopted these services to increase player participation.
This factor, together with Visa and Mastercard offering secured payment methods for online casino accounts has further helped the industry to thrive due to the immediate availability of secure digital payment platforms, fuelling the demand for online gambling.
2. Growing number of online casinos / sports books
As mentioned before, due to the pandemic and governments imposing strict regulations across the world, land-based casinos and sports books had to think of new ways generate revenue.
Furthermore, since many operators were moving their operations to the online world, it opened up opportunities for new casinos and sports books to enter the market.
Keep following this page as we will announce the top online casinos and sports books for 2020 at a later date.
3. Mergers and Acquisitions
Another key industry factor that has contributed to the value of the gambling industry is mergers and acquisitions. Gaming companies are always looking to expand their portfolio by acquiring other casinos or sports books across the world to tighten their hold at the top.
Furthermore, those huge companies that are primarily land-based also took the opportunity to merge or acquire online platforms to accommodate the needs of their players.
This resulted in major deals happening all over the world. Namely:
- GVC acquiring Portugal's Bet.pt
- Penn National Gaming acquiring Barstool Sports
- Caesars Entertainment acquiring Eldorado Resorts
- Flutter Entertainment acquiring The Stars Group ( Including Sky Betting & Gaming)
- DraftKings acquired SBTech
- Evolution Gaming acquiring NetEnt
- Acroud with a triple acquisition taking Voonix, Matching Vision and Traffic Grid
- Bally's Corporation acquiring Monkey Knife Fight
4. Worldwide regulation
When it comes to regulation, Europe is known to be the more advanced out of all the continents. The regulation front has undergone several changes due to the rise of online gaming.
Due to such heavy regulation across the world, with regulators such as the MGA, AGA, PAGCOR, KSA and UKGC all implementing their own rules and regulations, online casinos have become more transparent than ever.
Due to this transparency, users are more willing to throw in their money in online casinos as they know the are not being misled and are playing in a safe and controlled environment.
We take a look at the top gaming law firms in Malta - here.
5. Barriers to Entry
Barriers to Entry are those obstacles encountered by companies to establish themselves in a specific market. Every industry will have these barriers and it is up to the company to think of new ways to overcome these challenges. The main barriers in the gaming industry are:
Gambling in certain countries, especially in Asia, is not favoured. For example, gambling in China is strictly illegal under Chinese Law while many forms of gambling in Japan are also banned.
Furthermore, even though a number of US states have legalised sports and mobile betting, there are still a few states were tribal casinos run the gambling industry. These cultural issues may effect a companies generated revenue or even reputation.
Gaming companies are subject to high taxation rates in many countries. This may deter a new company from entering the market. As an example for taxation on profits, we take a look at the UK and their taxation fees:
- Point of Consumption Tax - 21%
- Lottery Duty - 12%
- Sports betting - 15%
- Slots - 5% to 25%
- Blackjack, poker and roulette - 15% to 50%
Licence fees for startups
Another obstacle for startups may be the licensing fees for a specific licence. Different regulators issue different licencing fees. Some fees may prove to be too expensive to pay on a yearly basis, and therefore, may be another entry challenge.
Sometimes too much competition and low barriers to entry could be another problem. The gambling industry is littered with different casinos and sports books, online and land-based. Due to so many operators, profit margins may be quite small and to actually achieve brand loyalty may be a challenge in itself.
6. Impact of Technology
Mobile and internet has changed the face of the gambling industry. Mobile betting has become the preferred means for users in the gambling industry with many operators focusing on their products and services to be mobile optimised.
Technology advancements has impacted the way users gamble, bringing both advantages and disadvantages.
With gambling apps so easily accessible, problem gambling is on the rise with people more likely to develop an addiction since it is available at the tip of our fingers.
Fortunately, through technology itself, these disadvantages are also mitigated through spending limits, reminders on amount spent and time limits being incorporated into the apps.
The rise of technology has also seen a number of gaming operators push technology to its very limits through innovation.
We will look at the most influential gaming companies with the best innovative platforms at a later date - keep following!
7. New Entrants (Competition)
Even though Europe is the number one continent for online gambling, especially in sports betting, the US will definitely catch up soon. In 2020, a number of states decided to open up to online sports and mobile betting in a bid to recover from their economic downturn.
With all these states opening up to sports and online betting it will be interesting to see whether Europe can hold on to number one spot in relation to online gambling market size. Currently, Europe's online gambling market size for 2020 is at $30.92billion.
Our SiGMA Europe event is also popular among Europeans with 62% of attendees coming from the EU, showcasing just how keen Europeans are on anything gaming - whether it comes to online gambling, sports betting or gambling events.
Competition always benefits innovation as operators will be pushing their limits to overtake their competitors. With the US states suddenly legalising sports betting and online betting, Europe, Asia and LatAm operators should be looking to create new solutions and platforms to keep ahead of the pace.
Competition will bring innovation, quality service, better knowledge about customer preferences and newly found motivation to the industry.
If you want to know more about the US and sports betting - we ranked the best US states for sports betting - here.
8. Threat of Substitutes
This has more to do with land-based casinos and retail sports books. The threat of the online world is certainly effecting brick and mortar casinos and sports book.
The pandemic has also accelerated this substitute to take over the industry and we will definitely keep an eye out on the performance of land-based and sports books throughout this year.
Sports betting vs Casinos in 2020
As expected the two dominant markets when it comes to online presence are sports betting and casino. When it comes to just online market, sports betting edges major markets such as casino and lottery - mainly due to COVID-19 restrictions closing all land based casinos and lottery shops.
However, when combining online and land-based, casinos are back on top.
The global market size of casinos and online reached a massive US$227billion while sports betting amounted to US$203 billion.
Casinos still managed to pass sports betting, even though their brick and mortar establishments were closed for several months.
However, with America opening up to sports betting and constant technological advancements, will we see sports betting overtake casinos in 2021? Will casinos continue to thrive in the post pandemic era?
We will be including new interesting topics throughout the year including, but not limited to:
- Most influential gaming companies
- Gaming firms in crypto
- Top innovative platforms
and many more, keep following SiGMA News for more content focused around the gaming world.
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