What kind of measures can be taken by the regulator to mitigate this pandemic's effect?
Words by Ingrid Alvarado Lopez & Ramon Monros.
By the end of February 2020 news about COVID-19 affecting China and then rapidly spreading in Italy, Spain and the whole of Europe reached Colombia.
On the 18th of March, one week after the WHO announced COVID-19 outbreak a pandemic and a Public Health Emergency of International concern, the Ministry of Health of Colombia together with the Ministry of Commerce, Industry and Tourism, ordered the closure of land-based casinos and betting shops all over the country.
It has been almost two months since then, and it is interesting to evaluate the impact of this crisis on the Colombian online gaming market. Is someone benefiting from it? What measures have been adopted by the regulator –Coljuegos- in order to mitigate the damages suffered by online gaming operators? And what are the initiatives that could boost the reactivation of the industry?
The Colombian online gaming market is a story of success since it was born on 2017, when licenses were granted to 5 operators who generated almost 27 million Euro/26.502.302 euro of turnover. 2018 was a year of great development, 10 more operators entered the market generating altogether 433.241.655 euro of turnover. On 2019 the exponential growth was confirmed, by 17 active operators and 1.139.857.873 euro of turnover.
Up until the outbreak of COVID-19, 2020 continued with the aforementioned high trend. The average monthly turnover for January and February was above 118.324.100 euro.
To asses the impact of COVID-19, it is important to understand some particularities of the Colombian online gaming market. Land-based presence is vital, as most of the players cash-in and cash-out on physical points, and sports betting represents a very high portion/segment of the market. Even though, it is decreasing and giving some space to other products such as casino and virtual games, this is predominantly a sports book gaming market. Probably due to the fact that virtual games and live casino were recently authorized and poker liquidity is still in the process of being regulated.
The table shows the percentage that casino and other games represent on the total turnover and revenue of the Colombian market.
Although the turnover participation grew from 1,8% on 2017 to 8,1% on 2018, reaching 22% on 2019, it is still low in comparison with mature markets such as Spain, where they constitute about 50% of the GGR, while in Colombia barely represent 10%.
Given the dynamic of the market, it is possible to foresee a drastic fall on the GGR due to the fact that more than 70% of the turnover comes from betting on sport events that have been cancelled for the months of March, April and May.
It is estimated that the average monthly turnover will decrease from 94.663.080 euro to 23.665.770 euro; and even though casino bets will not decrease and might even go higher, generating an approximate GGR of 1.183.288 euro, the total monthly GGR will be lower than 3.549.865 euro in the next 3 to 4 coming months, representing a 70% drop on the average monthly GGR that up until February reached 12.435.709 euro.
Therefore, it may be noted that loses on the GGR on the second quarter of 2020 amount to 23.800.400 euro. The following quarter, could go back up to the numbers of the first quarter, as a result of the de-escalation of the lockdown and the new games authorized by Coljuegos.
But, has someone benefited from the lock-down established to fight the COVID-19 outbreak?
Non-regulated platforms of texas hold’em póker and Omaha have thriven, taking advantage of the absence of a regulated offer and registering many new players. One of the authorized operators have already requested the Regulator´s authorization to offer such products and it is expected to be approved soon. Additionally, the legal offer of games in Colombia will also be complemented by a coming regulation on national póker liquidity.
* Figures in Colombian pesos
|4.445.784 euro||923.127 euro||2017|
|36.315.166 euro||3.943.505 euro||2018|
|95.540.635 euro||7.817.730 euro||2019|
|121.858.048 euro||12.435.709 euro||2020|
Although the turnover participation grew from 1,8% on 2017 to 8,1% on 2018, reaching 22% on 2019, it is still low in comparison with other markets.
In the light of such an adverse panorama, the regulator –Coljuegos- has adopted several measures to support operators.
Coljuegos acknowledged that operators will face difficulties on performing the recertification of their platforms during the health emergency. Such process demands on site audits that cannot take place due to the suspension of national flights, the closing of the borders and the lock-down ordered in the whole national territory. Thus, the validity of the certifications that expire during the the emergency has been extended for the time of the emergency and for an additional six months. Moreover, while the land-base shops are closed, Coljuegos ordered to prioritize the on line operator requests’ regarding the addition and authorization of new games.
Restrictions of movement also affected lotto games, as the players are unable to attend land based shops. Coljuegos authorized the sale of these games through the online operator’s platforms, integrating for the first time lotto games to the online market. What’s interesting about this measure is that it will be permanent, as the Regulator indicated that new consumer trends force to adopt measures that respond to the players’ needs, such as commercialization through online channels.
Looking for alternatives to increase the turnover of operators, after receiving several requests from representatives of the industry, Coljuegos opened a public consultation period for a draft regulation authorizing live casino. This regulation was approved on the 28th of April 2020.
The National Government also adopted some measures specifically addressed to the gaming industry. For the State of Colombia is vital to guarantee the sustainability of this sector not only because gaming is a state monopoly managed through concessions to private entities and the gaming tax collected from this activity is exclusively used to finance the health system, also this industry generates more than 100.000 jobs in the country.
The National Government issued a decree adjusting the operation of land base and on line gamed to the new conditions imposed by the emergency, mainly social distancing and the great reduction on the games offer.
The Decree ordered the reactivation of the land base shops once safety protocols are adopted. Which not only benefits land base operators, but also online games operator, because the physical points where online games are commercialized and more than 70% of the players cash-in and cash-out are included.
Regarding the monthly gaming tax, operators are able to establish payment agreements for the sums owed in March and April, for late payment of up to six months without default interest, while the fixed annual tax was reduced by 50%. The Government considered that the annual tax could be excessive since 78% of the offer of games is based on sport events that were cancelled. On the same ground, Coljuegos even suspended the licence fees of an operator that only offers sportsbook on its platform.
Operators and representatives of the online gaming industry in Colombia applaud the actions of the regulator. Nonetheless, they insist on a problem that have encountered even before the crisis: rejection from the financial system. The obstacles to open bank accounts for the operation of online games have been constant and currently operators face barriers when trying to access to loans.
Coljuegos has intervened before the Association of Banks and Financial Entities of Colombia and The Bank of Foreign Trade, Bancóldex, a state owned commercial bank, asking for the inclusion of the gaming sector on the special loans launched to mitigate the effects of the pandemic. However, the financial system has not responded positively.
To summarise, the impact of COVID-19 on the Colombian online gaming market has been especially strong given the predominance of sports betting. The regulator acted in a timely manner, adopting adequate measures to assist operators extending the validity of their certifications, speeding up the process of their requests and reducing the gaming tax.
The crisis has incentivized the diversification of the current offer by boosting casino games, virtual games and the modernization of traditional lotto games. In addition, the authorization of new games is vital for the reactivation of the industry.
Thus, the approval of live casino is very convenient not only for online operators, but for land base casino, who will be able to give an alternative use to their game tables. Furthermore, regulation of poker liquidity is needed.
Lastly, the pandemic might be beneficial for online gaming on long term, since Colombian population have been forced to migrate most of their activities to online channels, contributing to gain trust and knowledge on e-services, including online gaming.
This article was published in collaboration with igamingcolombia and italtronic.
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