Israeli gambling companies are preparing for a big squeeze in one of their most lucrative markets as the UK makes significant changes to online gambling laws in 2020.
Since the birth of online gambling in the 1990s, the UK has been one of the most fertile grounds for customer acquisition and revenue growth. Liberal Gambling Acts passed in 2005 and 2014 paved the way for a market generating revenues of over £5 billion annually. In particular Tel Aviv business 888 has done well in this environment where their multi-product platform has enabled them to establish strong brand presence in every sector from bingo through to sportsbook. Another Israeli firm, Playtech, have also thrived with their high-quality casino products licensed by hundreds of the latest casinos and new slots sites that launch every year in the UK market.
But all that looks set to change as pressure on the government to tackle the growing issue of problem gambling leads to much tighter regulations on the operations and marketing of these businesses. An announcement about a ban on credit card deposits has already led to a big drop in the value of many UK betting firms and will surely affect Israeli ones too, whilst further restrictions on stake values and VIP programs are also in the offing.
These are the changes expected in the next 12 to 24 months:
A Ban on Credit Card Gambling
From April 14th 2020 it will be illegal for any online gambling firm to accept deposits via credit card in the UK. Estimates are that around 10% to 20% of deposits are made this way. The UK Gambling Commission believe a ban is important to prevent problem gamblers experiencing spirally debt as they gamble with money that is not their own.
An End to VIP Programs
In the competitive UK environment the use of free money bonuses to incentivise customers to make larger and more frequent deposits is an important strategy for gambling operators. This tactic is used particularly aggressively when trying to retain the custom of big spenders. Businesses like 888 use VIP programs, mixing free bonuses with tickets to top sporting events and luxury gifts to pamper their best players and keep them coming back for more. Now, with many recovering addicts saying that these loyalty rewards encouraged them to chase their losses, the UK Gambling Commission is preparing the industry for a ban on such schemes. Without these tools at their disposal, promotions teams will find it harder to drive revenues from their most important customers.
A Cap on the Maximum Stake
It is expected that the maximum stake per hand or per spin on online gambling games will be reduced to £2 in a future Gambling Act. Currently there are many games where the maximum bet is £100 or even more, as high as £500. Once again, this change is likely to hit gambling firms where it hurts, by restricting the spend of their most valuable customers who prefer to play high risk, high stakes games.
The cap has already been applied to Fixed Odds Betting Terminals (FOBTs) in high street betting shops, with a significant effect on revenues in the industry. An online cap will surely have a similar impact.
Advertising Regulation
The growth of the UK gambling market has led to a proliferation of marketing activity across every channel from print and TV to social media like Twitter and Facebook. With problem gambling very much in the public eye in the UK, there are now calls for restrictions to be put in place to make gambling brands less visible. This could mean a ban on advertising on TV at certain times, and a blanket ban on social media advertising. Such action will make it harder for gambling firms to acquire new customers and continue to grow their revenues.
It is unclear yet when these new regulations will come into force, though a cross parliamentary committee in likely to report back with recommendations in summer 2020. After this, a new Gambling Act with a less liberal outlook will surely only be a matter of time. For the many Israeli gambling businesses, including big operators as well as smaller marketing firms, the impact on revenues is likely to be significant. We can expect many to look to territories like the United States, who have just legalised sportsbetting online, to offset losses from the UK.
There are more regular updates on UK gambling legislation on the UK Gambling Commission website.