Being future-focused and agile often means adapting to change before it arrives on our doorsteps.
With self-regulation being one of the core principles at iGF, we caught up with Russell Mifsud, Head of Gaming at KPMG, to hear his thoughts on why it’s paramount to the sustainability of the industry.
How can increased self-regulation positively impact the future of our industry?
“When we start looking at the way the industry has evolved, particularly since the UKGC’s inevitable entry to the market (often considered to have been the gold standard of global gambling regulation), we’ve seen the industry move away from what some considered to be a laissez-faire attitude.
Operators had broad margins and were making a lot of money. This obviously made a lot of noise, and that’s what enticed new market entrants.
As reactive regulation began to clamp down on the online gaming sphere across Europe, it shocked the market. This shock continues to happen to this day due to the lack of harmonisation and various channelisation policies across European territories.
We see the industry constantly being put in the limelight, whether it’s for political reasons or whether it’s because of shortcomings on responsible gambling player protection, etc.
The operators have had to adapt quickly, as they were initially operationally reliant on those broad margins, which have now essentially shrunk with little room for error.
What we’re seeing in terms of regulatory changes, is largely due to the lack of self-regulation within the industry. We are now witnessing the impact of this short-sightedness.”
What examples of lack of self-regulation have we seen so far?
“A good example are the FOBT’s and the retail wager capping put in place within the UK.
In hindsight it’s fair to say that operators should have acknowledged the amount was perhaps too high, especially when you start wearing your problem gambling goggles. Had the industry anticipated this was going to be a problem and taken it upon themselves to reduce the limit to say £20; it would have indicated to the regulators that the industry is taking the necessary steps to prevent problem gambling without having been instructed to do so.
The £20 limit would have essentially been 10 times greater than what it currently is, and this would have helped ease out a significant amount of pressure from an operational perspective.
We’ve always wanted to see the industry instil self-regulation into its core values, but it’s become more of a buzzword as the years have gone on.”
How can the industry facilitate self-regulation?
“The key word is sustainability. The industry needs to find sustainable ways of effectively self-regulating, because if it doesn’t, the regulators will continue to clamp down without necessarily having the operational understanding to appreciate the degree of impact it can have.
The operators and the industry in general need to take it upon themselves to look at how they can sustainably carry on with their operations in order to safeguard players.
Strive to be one step ahead of the regulation, as nobody’s going to be able to understand the industry quite as well as the operators themselves.
The industry can take it upon itself and use its sustainably driven thought in the form of self-regulation. One way this could work is through specific action groups, which could also transpire to be positive PR.”
RAIG has recently announced plans to support a licensee framework for affiliates. How will this impact smaller businesses with less resources?
“I was an affiliate many years ago, so I can appreciate what that world was like. Even though the industry has matured significantly over the last few years, there was a lack of regulation back then and it’s still ongoing.
If we go back to the impact of GDPR, accountability was essentially pushed onto the operators for the actions of their affiliates.
You’d have an operator for instance, with 10 affiliate managers, and each affiliate manager would be managing 100 affiliates. These 100 affiliates may even have an exponential number of websites, which can become really complicated.
When we see affiliates stepping out of what’s considered to be reasonable, the finger gets pointed at the operators. Many of them don’t necessarily want that responsibility. For example, we saw Sky bet release the majority of their affiliates, as they wanted a fresh start. This presented an opportunity for recognised online performance agencies to provide operators with some of the comfort they required.
Through my conversations with some of the larger players in the affiliate market, I’ve not come across a profile who’s been overly averse to the idea of regulation. It’s viewed positively because it offers a framework which helps distinguish the white hat and the black hat affiliates from each other.
However, if you increase the number of considerations for smaller businesses, it does tend to present certain threats. This means they may need to get their house in order, but is that a bad thing?
If the larger affiliates are on board with regulation, the smaller ones should also be. If that means it’s no longer sustainable for a smaller affiliate to comply, then that’s all the more reason to explore how to become a bigger player in the affiliate market.
There are plenty of ways to position a transaction between affiliates, and it doesn’t always have to be an outright acquisition. There are merger opportunities or avenues for collaboration, many of which could offer new economies of scale.
It’s worth noting that with the wealth of recent regulation and the impact that this has had on certain affiliates (restrictions on advertising for example), we know that there is a tendency to focus on some of the greyer markets, or perhaps even some of the darker grey markets, which are not subject to regulation.”
How can this impact the US market?
“We know that the US has been exploring effective regulation just by looking at New Jersey or Pennsylvania. Interestingly, the affiliates are not always considered the golden boys as the market often feels there’s an element of bias.
Considering the US is viewed as the big prize for many of the affiliates (particularly super affiliates) regulation should be welcomed, because it will help gear them up for the future in a sustainable manner.
If the smaller players have a game plan and an exit strategy, whether it’s to present itself as acquisition target or to build up the offering (to compete alongside the larger businesses), getting your house in order is key. Regulation will help manage that process by making it easier to distinguish between the winners and the losers.”
Editor’s note: From speaking with Russell, it’s clear that self-regulation is an important factor in pre-empting outside controls and ultimately future proofing our businesses. Self-regulation offers the ability to act responsibly before needing intervention from regulators and government figures, and this rings true across all borders.
Could increased collaboration and communication between industry stakeholders will prove crucial in making self-regulation more than just a buzzword?