GPWA Times Magazine - Issue 29 - July 2014

license applicants to disclose the geographical source of certain of their revenues and the le- gal position of these operations – couldhave implications for their businesses. Since the start of the year a couple of big operators have announced they are withdrawing from certain markets for “regulatory reasons” or after a “re- view.” InMarch 2014,WilliamHillwrote to affiliates to say it was withdrawing from a range of 50 countries, including Afghanistan,CambodiaandSouthAfrica. The move meant the number of markets fromwhichWilliamHill no longer takes business rose from around 30 to more than 80. Similarly, at around the same time, bet365 announced itwaswithdraw- ing its services from customers in the Philippines. Prior to 2014 bwin.party had already embarked upon a policy of with- drawing from “gray”markets to focus on regulated jurisdictions. One can certainly take a flippant atti- tude toward some of these countries. What does it really matter if William Hill is pulling out of Benin? Howmany customers did it have there anyway? But what is important to affiliates is the overall trend. Some of the biggest brands are reducing themarkets inwhich they operate. It might start with some of the third-tier markets but it could soon spread to other more sign- ificant jurisdictions. Asia-facing operators are also caught by this disclosure requirement. At the mo- ment many of the Asian sportsbooks are licensed in the Isle of Man. Their main interest in the U.K. is not the punters but rather the ability to sponsor English Premier League teams whose matches are broadcast acrossAsia. Under theU.K. point of consumption regime, however, these firms will be required to get a U.K. license if theywish to continue to adver- tise. As private, non-listed companies, they are not happy at having to disclose the information. There had been talk of an “advertising only” license, whereby applicants undertook just to advertise in the U.K. but not take money from U.K. clients. Thiswouldhave ideally suited the Asian sportsbooksbut seems tohavebeen discounted as anoptionby regulators. In my last article (“Growing up is hard to do,” GPWA Times Magazine , February 2013), I wrote that it is harder for gov- ernments to dismiss maturing business sectors. Unfortunately, the measures an- nounced by the U.K. government on the point of consumption tax are amanifesta- tion of that process of iGamingmaturity. The government wants its share of the success and revenues. Change is part of survival, andaffiliatesneed tobeawareof the regulatory changes hitting the opera- tors because the shockwaves will ripple out to all areas of the business. Just as the operators are trying to minimize the im- pact by cutting costs, so toomust affiliates look at their ownoperations. This couldmean: • Switchingout of promotingone product to focus on anotherwhere marginswill bemore sustainable • Changing thebrandyoupromote to one that fits your strategy: ◦◦ privatelyheld, so it can set its own direction, not beholden toTheCity ◦◦ big, so it has the scale anddiversity to rideout thedisruption ◦◦ active (or not active) inparticular geographicalmarkets ◦◦ having a riskprofilewith regards to license requirements • Refining the type andqualityof traffic you attract tomeet the futuredemands of operators (likely tobedifferent from what theywant now) Under the new regulatory setup both op- erators and affiliates have the same three options:Get big, get nicheor get out. Consolidation is inevitable across the sec- tor. By the time the World Cup wagon rolls into Russia in 2018 (which, at the time ofwriting, couldbe adiplomatically interesting tournament!) it is a guarantee that the iGaming landscapewill lookvery different from the current picture as the tournament gets underway in Brazil. It’s abeautiful game! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LorienPilling is research director, Global Betting and Gaming Consultants. Under thenew regulatory setup bothoperators and affiliates have the same threeoptions open to them: Get big, Get nicheor Get out. COVER STORY Affiliates, get ready: The tax clock is ticking