Birkin explained that, unfortunately for regulators, you can’t ban online gambling, the best you can do is try to make a legal alternative that is attractive for the customer but also provides player protection. You have been working for the company for over 9 years. How would you assess your contribution over that time?
My background is in investment banking, and prior to joining H2 Gambling Capital, I was an analyst covering the gambling industry – and I was actually one of the first subscribers to H2’s data back in 2010. By the time I joined H2 in 2016, analysts were only covering 3 or 4 of the major gambling operators, and I saw a large gap in the market for providing data / intelligence on a wide range of gambling operators / suppliers, which were not being covered by the large investment banks. As well as being a new product in itself, this focus on company data also improved our core market data product, and also allowed us to launch market share data.
Over the past 9 years – in part due to the launch of this company / market share data – we’ve tripled the size of the company, so I suppose in that respect it’s been a successful 9 years. But what excites me more is the potential over the next few years. What subscribers haven’t seen is all the work we’ve been doing at the back-end of our data, which will make the company more agile going forwards in terms of how we can package and distribute our data, and I’m really excited about some of the new summaries and new products that we’ll be launching over the next couple of years.
It is clear that the progress of iGaming and sports betting regulation in Latin America has sparked global interest. How do you evaluate this process that is developing in different countries?
I’ve been analysing the gambling industry – as a banking analyst or as a consultant at H2 – for almost 20 years, and it’s interesting to see how the focus of the industry / investors has shifted. What tends to happen is that there are a handful of early movers, others then look at the market, don’t see much happening, and lose interest. Then the growth really starts to take off, and suddenly everyone is interested. If we look at Latin America, this is also the case. Whether it is the early move of Betsson into the Brazilian market with their stake in Suaposta, or their acquisition of Inkabet in 2021, or others launching in Mexico or Colombia – there was initial interest in the market but no significant catalyst.
Mexico was dominated by one large operator, and while the Colombian market was well regulated, it wasn’t large enough to be of significant interest for most global operators, while Argentina’s provincial regulation made it a less attractive market. However, the shift towards regulation of Brazil is what really put Latin America on the map for most people – and coupled with the accelerated growth of online since the COVID pandemic, it has now become a market that is too big to ignore. But just like Europe, or Africa – an operator can’t just “win in Latin America” – each market is so different – especially Brazil – that there needs to be a locally focused operation in each individual market. Gone are the days when you can translate your dot com website into Spanish or Portuguese and run your Latin American business from an office in London or Gibraltar.
H2 Gambling Capital has recently launched a study on the characteristics of the Brazilian betting scene and the market share of the main operators. Do you really see a growing concentration of companies in this territory, or do you think there will be greater dynamism and competition between local and international companies? What will happen with illegal gambling?
Brazil is a really interesting market, because it has been “about to regulate” for what seems like a long time. If we look at the Netherlands – which regulated in October 2021 – when the market regulated, a number of local operators launched online businesses to compete with international operators who had targeted the market prior to local licensing. In Brazil, this seems to have happened over the past couple of years, prior to regulation. If we look back a few years, the market was really dominated by global operators. Now, there is a very strong set of local operators competing hard in the market.
So, the competition that you would expect to see after regulation has already started – which is what has led to the very strong market growth over the past few years. That said, I can only see this competition intensifying. The concern about this is that it creates a negative sentiment towards gambling operators, as we saw in the Netherlands and other markets where operators fought hard for market share post-regulation.
It’s very hard to ban illegal online gambling, and the best way to prevent the illegal market is to make the legal market more attractive to customers. I think that this is going to be the case in Brazil – and with the Pix payments, Brazil has an advantage over other markets that have a wider range of payment systems. But it’s important to understand that a small proportion of high value players generate a large proportion of revenues – and these are the ones who are most impacted by restrictive regulations. So, you only need a very small proportion of players to use the illegal market, for the illegal market revenues to be relatively high.
Do you believe that, once the correct development of the iGaming market in Brazil has been confirmed, it will be possible to move forward with legislative approval for land-based gaming. How would this affect this market?
I’m a bit less sure of this, to be honest. I’ve seen that Brazil’s Minister of Tourism, Celso Sabino, – amongst others – has come out and said he expects this to be passed in the first half of 2025. However, if the online market continues to grow, with increased competition leading to even higher levels of advertising, there could be more political pressure to prevent the expansion of gambling even further.
That said, bingo halls are generally viewed as lower risk venues (depending on whether they contain slot machines), and casinos can be more focused towards foreign tourism – so on balance I think that there will likely be some form of land-based gaming. But the customer base for bingo halls or foreign tourism focused casinos is very different to the current online betting / iGaming customer base, so I don’t see any significant overlap – and wouldn’t expect any land-based gaming to reduce the growth in iGaming revenues.
In addition to illegality, other problems in Latin America’s gambling are the growing tax pressure, underage gambling and the manipulation of results. What is your view on this situation?
Unfortunately for regulators, you can’t ban online gambling. You can try, but there are so many operators who will continue to operate – especially now with crypto casinos – that any ban is ineffective. The best you can do is try to make a legal alternative that is both attractive for the customer but also provides player protection. This then gives the added benefit of tax revenues, compared to an illegal market.
The manipulation of sports results is less of an issue in a legal market than an illegal market. Licensed, reputable operators tend to all be members of sports integrity associations, and in Brazil that is a requirement of licensing. So you see very little of that activity going through licensed operators, and when you do, it gets reported. There is a misconception that betting operators don’t care about sports manipulation – but that makes no sense.
Anyone winning money from a betting operator due to manipulation is defrauding the bookmaker – and costing them losses. From a purely economic point of view, the bookmaker is highly incentivised to stop any manipulation / match fixing, as it costs them money – and that is before the negative sentiment this causes around gambling and sport. There will always be people trying to manipulate sports events and profit from betting on these – but a well regulated legal market, with integrity associations involved in this, is the best way to fight this.
Looking ahead to the Latin American region, do you imagine greater involvement and confidence from the financial services segment in relation to the gaming industry?
Absolutely. Financial services favour two things very highly – clarity of legality and stability regulation. As more countries across the region license online gambling – making it explicitly legal – and there is a consensus of stable regulations, then this market becomes more and more attractive to investors and the financial services sector.
