With the recent closure of land-based casinos, retail wagering venues and gaming venues, sign-ups to online gambling operators are increasing at a significant rate as retail customers shift to online. Australia’s 194,000 poker/slot machines sit dormant and venues are not expected to re-open in the short term. Coupled with the current stay at home rules, individuals are getting bored and are looking to the internet for entertainment.

Sharp rise in online gambling

A joint study by Australian credit bureau illion and analytics firm AlphaBeta revealed a 67% increase in online gambling for the period 30 March to 5 April 2020, following the recent shutdown of all of Australia’s non-essential services due to the worldwide Covid-19 pandemic. This is one of the largest boosts for any sector of the Australian economy. If this trend continues, then it is estimated this will amount to approximately $2 billion of additional expenditure in this sector by the end of the year. An obvious question also arises as to what percentage of retail customers who have shifted to online product are likely to migrate back?

Whilst online wagering on racing, sports and other approved events is permitted across Australia, online gaming (including casino products) are among the activities strictly prohibited under the Interactive Gambling Act 2001 (Cth).

The upward trend in online gambling is happening globally, albeit with a different mix of wagering/gaming compared to just wagering and online lotteries in Australia. In the US, FOX Bet has recently said its new online casino and poker operations sign-ups doubled in a particular week.

Israeli firm Optimove reported the company saw a 43% increase in online poker games and a massive increase of 225% of people who began to play poker online for the first time, when compared to the pre-Covid-19 figures.

In the UK, the BBC reported on 20 May 2020 that search interest in online casinos has hit an all-time high in the UK since lockdown began, as shown by recent data (Google Trends). An obvious concern is whether problem gambling is increasing.  The UK Gambling Commission has said there had been a rise in some online gambling, but there was no evidence yet of a rise in problem gambling.  Notwithstanding this, the UK Betting and Gaming Council members recently voluntarily agreed to remove all TV and radio gambling advertising for a period of 6 weeks in response to Covid-19, with the arrangement operating 24 hours per day, 7 days per week from 7 May to 5 June (at the earliest).

This voluntary arrangement follows the UK Advertising Standards Authority and Committee of Advertising Practice warning the online gambling industry in March that its conduct, including the nature and frequency of its advertising, is under scrutiny during ‘lockdown’.  This is a global issue, which government, regulators and the industry need to keep in mind during Covid-19 restrictions.

In Australia, thoroughbred, harness and greyhound racing have shown how resilient the sector can be in a time of crisis with races continuing to run most days, albeit without crowds in attendance.

With most other major sporting leagues around the world cancelled or postponed, interest has now shifted to those that still remain in operation, giving visibility to sports that would otherwise be low down on the list of betting options such as Russian ice hockey, Tajikistan Northern Cup basketball, Japanese baseball, Belarus tennis, Ukraine’s table tennis cup and Nicaraguan soccer.

Entertainment and novelty betting markets and esports increasing

Australian betting operators are also diversifying their range of available entertainment and novelty betting markets. More exotic products offerings have recently been added such as wagering on reality TV shows such as Lego Masters Australia, the weather including betting either over or under predicted daily temperatures of capital cities, Triple J’s Hottest 100 countdown, quarterly positive and negative residential property market fluctuations across Australian cities with results to be confirmed by the Australian Bureau of Statistics quarterly data, Nobel Peace Prize winner, interest rate movements and what colour tie Prime Minister Scott Morrison will wear to his next press conference.

‘Churn’ on novelty and entertainment products can be mixed. Unlike thoroughbred, harness and greyhound racing, which has a great entertainment factor for the punter as well as being higher margin product for bookmakers, other products can be longer term plays. This is especially true when it comes to betting on the outcome of a reality TV series, and will generally have little impact on an operator’s bottom line.

Another relatively new betting vertical seeing significant gains during the traditional sports shutdown is esports. Esports betting has been on a steep growth curve since Pinnacle took their first bet in 2010, and now betting on matches turns over an estimated $13bn per year globally.

With live esports tournaments shut down due to Covid-19, tournament organisers like ESL have been able to quickly shift from in-person LAN events to a remote online format. Without all of the other traditional sports being played at the moment, this is giving esports more prominence in the list of available betting options.

Operators need to ‘future proof’ their businesses and engage with government and regulators

Epidemiologists in Australia and overseas have been warning of a coronavirus outbreak for years and say that further pandemics will occur. The speed and severity of the next outbreak however, may or may not be as detrimental as the one we’re experiencing now.

Operators need to be thinking about how they can ‘future proof’ their businesses, particularly those exposed to retail or with a limited online offering. They need to be critically reviewing the following:

• Contracts and arrangements, including with suppliers,
• Risk frameworks, which typically wouldn’t have included any significant references to pandemics,
• Insurance arrangements, including “acts of God” and coverage in the event of a pandemic,
• Responsible gambling practices, including in circumstances where there is a significant increase in online activity. Do “red flag” indicators need to be re-set?
• Potential new revenue streams and product innovation, which generally require regulatory approvals. The use of “regulatory sandboxes” by regulators assessing novel products may accelerate, and
• Alternative ways of operating to help them be as resilient as possible to any future shocks.

A number of these areas will involve operators working closely with government and regulators to change the way in which they currently do business and further embrace innovation (without increasing the risk of gambling-related harm), to prepare for what may lie ahead.

AUTHOR

Julian Hoskins is a Principal at Senet, who provide IAGR with pro-bono legal services.

Senet is Australia’s leading multidisciplinary firm in Australia specialising in gambling law and regulation, related advisory services and gambling compliance training. Senet provides IAGR with specialist expertise on legal and regulatory policy, governance and practice matters as well as continuing regulatory and legal education and contract or related commercial negotiations.

Julian is recognised in Chambers & Partners Global and Asia Pacific as a leading gambling law expert.