The global online gambling market has continued to deliver double digit growth.
The global online gambling market has an annual value of around £50 billion1 and has continued to deliver double-digit growth in 20181. Gaming’s share of this is approximately 50%1, with small market share falls in recent years led by betting outperformance (mobile adoption, variance in win margins). However, this trend is showing signs of reversing as online gaming grows in Asia and other emerging markets. Double-digit growth remains a realistic medium-term expectation, though the shape of this growth is starting to change.
JPJ Group plc’s overall market share of global gaming (excluding poker) is circa 1.4%. This is overwhelmingly concentrated in Europe, where its estimated share of gaming is 2.7% – making the Group a major operator in a highly fragmented market. Some of JPJ Group plc’s main markets include the UK, Spain and Sweden.
Each has a different maturity profile which in turn has a significant impact on performance.
The UK is facing three maturity headwinds which have reduced overall online gaming growth in 2018 to high single-digit levels, from a previous medium-term run-rate of around 20% (prior to 2017).
1. Underlying sector maturity. Smartphone penetration is very high, consumer data costs are low and advertising has been broad, making consumer adoption rapid. There are now estimated to be over 10 million adults in the UK with a gambling account (excluding lottery) representing over 20% of the adult population.
2. Channel shift. Online gambling has delivered relatively rapid channel shift from land based. Over 50% of all commercial gambling revenue in the UK is now online, meaning growth from these levels increasingly implies greater overall gambling spend rather than simply shifting habits within the segment.
3. Tax and regulation. The UK has faced a number of changes to its tax and responsible gambling regimes, which have especially impacted this VIP segment; this is likely to have cost the total market 5ppts of growth1. Whilst JPJ Group plc is more mass market than most, it is by no means immune. However, the countervailing positives to the slowdown in growth should be seen as increasing sustainability through more active responsible gambling management. Going forward there should be increased opportunities for larger brands to drive consolidation and gain market share.
Spain is a much less mature jurisdiction than some other Northern European markets, with lower smartphone usage and far less channel shift. Moreover, the regime continues to be relatively liberal, with a 5ppt duty cut to 20%, though a review is being carried out into gambling advertising (similar to many other jurisdictions). Spain’s relative lack of maturity suggests strong double-digit market growth into the medium-term (25%+1), which Botemania, JPJ Group plc’s leading brand, is very well placed to capitalise upon.
Sweden became a Point of Consumption regulated market in 2019. This is likely to accelerate the maturity profile of the market as advertising becomes more open, efficient and responsible, and other social responsibility measures are adopted (e.g. national Self-Exclusion, less aggressive bonusing2). Equally, Sweden has a similar smartphone adoption and usage profile to the UK, meaning relatively high levels of underlying consumer maturity.
Also, established Swedish gaming operators now face direct competition from domestic monopolies (Svenska Spel, ATG) for the first time. All of these drivers point to a slowdown in growth from historical circa 20% Compund Annual Growth Rate (‘CAGRs’). However, as with the UK, there are clear positives in terms of sustainability and consolidation that should be important catalysts to a strong local brand such as Vera&John.
Other international markets
Outside of the three core markets above, all of which are now subject to Point of Consumption tax from a regulatory perspective, JPJ Group plc also has exposure to a ‘long tail’ of other markets. The Far East as a whole accounted for a substantial proportion of ROW revenues in 2018 and sales are also growing strongly across a number of other emerging markets. These developing markets contain a very broad range of individual characteristics (e.g. Norway is very different to Brazil), but they are all significantly less mature than the UK or Sweden. Consequently, from an underlying consumer perspective, these markets collectively should exhibit strong double-digit growth into the medium to long term, albeit with varying degrees of regulatory risk and opportunity.
Overall therefore, the global online gambling market is changing shape but continuing to deliver attractive growth. On the one hand, more mature markets, which form JPJ Group plc’s historical core, are naturally showing signs of moderation. In these geographies increasing regulation should lead to greater sustainability, market share gains for leading brands and industry consolidation. However, outside the more mature and largely Northern European markets, online gaming is exhibiting much higher growth driven by broader consumer digital dynamics and rising smartphone adoption. The global online gaming market is therefore becoming a more balanced business environment; sustainable growth in mature markets alongside regions exhibiting higher but less predictable growth. JPJ Group plc is proven in both environments, which can provide an attractive mix of growth and sustainability.
1. Regulus Partners Estimates
2. EGR Intel