The affiliate market has been one of the few areas in gaming that has not had to invest too heavily in compliance and licensing.
Some commentators believe they have largely had free rein on monetising traffic for quite some time now, and recent figures suggest 50% of all operator traffic is down to the affiliate.
With momentum building around the idea that gaming affiliates in the UK should be regulated, many areas of the industry are getting ready for this approach.
For part one of our Affiliate Licensing Spotlight, we caught up with Clive Hawkswood, Chairman of RAiG to hear his thoughts on how the new framework will better protect the player and the impacts on large vs small businesses.
With people being at home more often, is this putting pressure on the affiliate market to increase its standards in an effort to better protect the player?
“I think that journey for affiliates started pre-COVID.
The pressure’s on the whole gambling industry. Within that, marketing of gambling is a top priority amongst politicians and probably for the DCMS as well (Department for Digital, Culture, Media & Sport).
Within the marketing sector as a whole, the affiliates are looked upon as the scary unknown bit.
There’s been a lot of discussion about advertising on television and that’s held the attention of the opinion formers.
As you drill down, for people who don’t really know the industry, it very quickly becomes apparent how important affiliates are with the role that they play, and how diverse the sector is.
When regulators, politicians and officials don’t necessarily understand something, it makes them nervous straightaway.
Bear in mind we’re in the sensitive area of gambling, with sensitivity on marketing; affiliates are a subset of that.
With the backdrop of COVID, it heightened everyone’s concerns. Part of that is for obvious reasons, for example, we saw the switch of people from sportsbooks into gaming.
More people were at home, sport wasn’t available, and more people were playing online games. If that hasn’t led to everyone being more cautious and reflective, then there’s something wrong.”
How is the new proposed licensing framework going to facilitate protecting the player?
“We’ve discussed licensing long and hard, and there’s certainly pros and cons; If it were straightforward, we would have solved everything long ago.
But when you scrape away all of the issues, there is a need to raise standards.
How do you achieve that? It’s only really through licensing.
The other model, which is where the Gambling Commission (GC) stand, is for operators to enforce whatever rules they want. And I get that from an operator perspective.
However, if you look at it from an affiliate perspective, there are challenges.
Let’s assume you have multiple gambling partners, which most affiliates do, each of those operators could have a different interpretation of what the requirements are.
GC regulation is outcomes based, not prescriptive. There can be set certain boundaries, and each operator could interpret it differently. They could somehow sign that into their contracts with affiliates or operationalise it in some way. This can result in an affiliate trying to comply with a large number of different rules.
We’ve been working with the operators to try and bring some consistency to that.
Each operator’s interpretation of the rules also reflects their own appetite for risk, it also reflects the number of affiliates they have and who those affiliates are.
If you’re an operator who only works with the largest affiliates, you’re fairly comfortable. However, if you also have a couple hundred affiliates, then you may want to be more prescriptive and put tighter shackles on how they operate.
If you’re sitting on the affiliate side, that can leave you with having to comply with several sets of regulations rather than one.
The reputation of the affiliate sector would also benefit from being a licensed industry.
There are lots of arguments for and against, but it really comes down to ensuring standards are raised and complied with, pretty much a licensing regime of some kind.
But it doesn’t have to be onerous.
Rather than just saying this is what we want, we’re asking ourselves what it looks like, and it falls into two areas.
The first is having a fit and proper test of some kind, every licensed entity must have that.
The second one is some sort of uniform social responsibility code that they can abide by.
For the regulator, it doesn’t need to go further than that.”
How can we ensure that the new licensing framework doesn’t alienate the smaller businesses with fewer resources?
“Smaller affiliates should take some comfort from the approach of government and regulators.
When legislation comes forward, the government always has to consider the position of small businesses.
There’s a small business unit in government, which oversees every piece of regulation. Their job is to make sure that it’s not anti-competitive.
I’ve always thought that one of the strengths of the affiliate market in the UK is diversity. It would weaken the market if we drove affiliates out, which isn’t in anyone’s interests.
Proportionality is the key.
If you look at how the gambling commission trial’s license fees, they do it for operators on the basis of their GGY (Gross Gambling Yield).
They put them into categories depending on the size of the yield and the license is reflected in that.
Given the minimum level of checks we’re talking about, (which is essentially a registration system which you can be taken off of if you do something wrong) it really shouldn’t cost much.
As with most regulation, and certainly, for the gambling commission, the bulk of their costs are met by the largest operators, and it would be the largest affiliates who pick up most of the costs as well.
I’ve never had any sense from larger affiliates that they want to see the smaller ones suffer because of this. Raising standards across the board and improving the sector’s reputation must be in everyone’s interests.
For the Gambling Commission, it will be an absolute priority that they don’t negatively affect the smaller guys when this is introduced.”
Editor’s note: From speaking with Clive it’s apparent that there are pros and cons for each side of the licensing framework argument. However, it seems the good outweighs the bad for pushing the framework through.
The new framework can enhance the global reputation of affiliates, provide a consistent set of rules that make player protection guideline easier to adhere to. When this is coupled with support from the Government to protect business diversity, we feel it’s only a matter of time before the inevitable shift comes into effect.