FOCUS

In this edition of Asia Gaming Briefings, we dedicate our focus section to online gambling in Asia, looking at the outlook for 2020 and beyond. After a difficult year in 2019, with Cambodia shutting its door to the industry and the Philippines putting a moratorium on further growth, we take stock of the state-of-play, emerging trends and marketing tactics.

Our first article delves into the potential of blockchain in gambling. The technology is attracting significant attention, especially for its uses in igaming, however, the land-based sector too is starting to take notice. We speak to Melco Resorts & Entertainment’s Global Chief Information Officer Avery Palos, who is widely recognised as being one of the leading figures when it comes to blockchain in gaming. He outlines some of the ways the technology is being trialled across the company’s integrated resorts and in particular discusses an ambitious project to use blockchain to help operators meet their responsibilities when it comes to responsible gaming.

Our second piece tackles the thorny issue of marketing online services in Asia. A growing number of companies are using influencer marketing to attract highly social media savvy clients across the region. The practice is evolving from the use of a high-profile, celebrity name to a more nuanced and authentic approach, seeking characters who have more affinity with the brands and products they are seeking to promote. We look at the advantages of this approach to connecting with new players and the potential pitfalls.

We also look at the general outlook for the industry after last year’s setbacks and how companies operating in Asia will need to adopt the best practices possible when it comes to their compliance departments, in the absence of any meaningful regulation on the ground.

For our final article, we examine some of the trends in content provision across the region. We find that there are very few areas where online operators can argue that there is a one-size fits all solution. Instead there is a need for products that are increasingly tailored to individual markets. On top of that, within these markets, personalisation is also gaining in prominence. The use of jackpots and individual promotional tools is evolving quickly as improvements in technology and data collection allow firms to swiftly identify player preferences.

Unfortunately, what isn’t discussed in these pages is the hope that these grey and black Asian markets will become fully regulated igaming jurisdictions any time soon. Hopes for incremental progress were dashed by Beijing’s dictat last year, calling on its Asian neighbours to help stamp out the scourge of online gaming, which it blames for rising social crime at home.

In terms of regulation, attention this year is more likely to be focused on India, where individual states continue to test the bounds of the law when it comes to online skill-based gaming.

Heading up Melco’s blockchain activity is global chief information officer Avery Palos, who spoke to AGB about the way it can revolutionize the way casinos operate.

Palos has spent almost six years with Melco, having joined from Las Vegas Sands in 2014, and he oversees the way technology is delivered across all facets of the company, with a focus on next generation tools including AI, big data, biometrics - and blockchain.

“Melco CEO Lawrence Ho has been driving tech as an enabler for the casino industry for many years now,” Palos told AGB. “We recognise that blockchain technology has the potential to unleash a revolution across casino floors.”

Palos initially became interested in blockchain technology a couple of years ago, reading and researching the topic against the backdrop of Bitcoin’s headline-grabbing surge in value, which saw it reach $20,000 by the end of 2017 before rapidly retracing.

One Bitcoin is currently trading at around $7,000.

But it was the underlying blockchain technology, as opposed to cryptocurrencies like Bitcoin, which caught his attention.

“I found the potential applications of distributed ledger technology (DLT) extremely interesting. It didn’t take a huge leap of imagination to see how this technology could be used on the casino floor.

“New technologies can reach a tipping point for adoption very quickly. A few years ago Las Vegas casino floors were packed with quarter slots. Today they have almost fully been replaced by TITO slots.”

To prepare for such a potential revolution, Melco has moved quickly to implement real-world use cases for blockchain technology on its casino floors.

The first of these sees the operator using BigchainDB, a blockchain database, to immutably capture all cage transactions across its properties in Macau, Manila and Cyprus.

The blockchain is integrated with Melco’s proprietary casino management system, and was picked because of its speed, which enables it to process upwards of 30,000 transactions per second, comfortably keeping pace with Melco’s server-based databases.

Palos said the system, which has been in operation for about a year, showed that blockchain can already bring demonstrable benefits to casinos.

Melco’s second project is rather more ambitious in its scope: a blockchain designed to allow the future casino licensees of Japan to more efficiently deliver upon responsible gaming obligations.

Operators across jurisdictions have often struggled to link up protections for at-risk players; it can often take hours or days for a player, who has self-excluded from one casino to be self-excluded from others.

Melco is betting that blockchain tech can help operators meet the requirements of the Japanese framework by cutting down on time lags and providing a secure environment through which operators can share the vital customer information.

“Blockchain can bring together three operators and the regulator in Japan. It is a scenario where operators are not keen to share customer data. This technology provides a trustless framework where it can happen.”

Palos said that Melco has held encouraging talks with the Japanese regulator about the project.

Elsewhere, and particularly in Macau, regulators have tended to take a hands off approach to blockchain technology.

While we are unlikely to see Bitcoin on the casino floor any time soon, Palos stressed that there is a big opportunity for regulators to bolster safeguards by embracing the technology.

“The default is to assume regulators are afraid of blockchain. But if used intelligently, it can really aid regulators in doing their job. Financial transactions, tax, responsible gaming data, the veracity of games - all this can be written in a permanent, immutable record on the blockchain. It gives regulators the chance to have complete oversight on activity.”

Next on the agenda will be exploring other areas where blockchain technology can have a positive impact with the casino sector.

Palos concedes that progress can be slow; casino providers have yet to truly embrace blockchain, so off-the-shelf solutions are generally a little limited.

Some are trying to change this, including AXES, which is developing blockchain-based casino solutions, and Cammegh, which recently integrated blockchain technology from CasinoCoin into its roulette wheels.

“There is an opportunity for blockchain companies which have not previously worked with casinos to enter the space. I am hopeful of seeing new entrants over the coming months,” he said.

In-house development, which Melco has focused upon, also comes with challenges, particularly in terms of hiring the best talent in a competitive yet still relatively small field.

Nonetheless, Melco has additional blockchain-based projects on its roadmap, although Palos is coy when it comes to revealing the details.

“We are clearly excited by the possibilities of this technology. We are just getting started.”

According to Business Insider Intelligence, brands are set to spend up to $15 billion on influencer marketing by 2022, up from $8 billion spent in 2019. This comes parallel with a general shift away from self-promotional tactics to more nuanced inbound strategies in the marketing industry.

This has become especially the case for online gaming companies, who see influencer marketing as a way to circumvent often strict regulations in advertising.

Bhavesh Parthi, Head of Affiliates at Asia Oppo Ltd, an online betting company, attributes the growth of influencer marketing to consumer demand for greater authenticity from their brands.

“Everyone now relies on the internet and social media when it comes to recommendations and reviews, with influencers now playing a much larger role in helping, or swaying a buyer’s final decision making,” he said.

The concept of influencer marketing, however, is not new. For decades, variations of influencer marketing have existed in traditional advertising - in the form of celebrity endorsements.

In the land-based casino sector, football superstar David Beckham has been the official brand ambassador for Las Vegas Sands’ Asian properties since 2013, utilizing his popularity amongst football fans to promote new openings and developments for LVS in Asia.

But brands, especially those online, have started to move away from celebrity or “mega influencers,” opting instead for “nano”, or “niche” influencers - those who have a smaller following but make up for it by being highly engaged and respected by a brand’s target audience.

“With influencers [now] able to generate substantial income as an affiliate, more people are moving into this field, be it as a stable income or as a side income,” said Parthi.

However, whilst nano-influencer deals are cheaper and easier to implement, experts warn that online gaming brands will still need to be smart to avoid wasting their marketing dollars, and to navigate murky advertising rules.

“There is the challenge of gambling being one of the most regulated sectors in the world, and where it is not regulated it is prohibited or even illegal,” said Christina Thakor-Rankin, Principal Consultant of 1710 Gaming.

“Social media sites themselves have constantly changing views about the promotion of adult products as well, meaning what is allowed one week may not be if public opinion changes. This poses a real issue for anyone looking for a long-term opportunity,” she added.

These challenges extend to the influencers themselves, who need to work hard to be noticed amongst the growing competition and avoid breaking local laws.

“Old school affiliates had it easy compared to the new generation of influencers,” said Thakor-Rankin. “Aside from operating in a saturated and highly competitive marketplace, social media affiliates operating in the betting and gambling space also have the tricky problem of regulation to navigate.”

In 2018, Irish glamour model Jesse Vard, 19, became one of fifteen “net pretties” nabbed by authorities for violating Thailand’s gambling laws by promoting World Cup wagering for online wagering company SBOBET.

The women were sentenced for violating Section 12 of Thailand’s Anti-Gambling Act, specifically in their promotion of online gaming sites that were not authorized to operate in the country.

“Influencers have had to be smart and careful while promoting betting brands in Asia, as online betting/casino is still considered somewhat taboo in many communities,” said Parthi. “From not revealing their true identities online or even working under a pseudonym and using fake photographs, or even having their faces replaced by cartoon characters during live or recorded streams where their face is shown.”

So far, Instagram, Facebook and social media messaging apps, such as WeChat and Telegram, have been used by online gaming brands across all territories - with each platform coming with numerous strategies to avoid detection or a ban.

It’s a constant game of cat and mouse that needs to be played to circumvent administrators and the authorities, explains Parthi.

Thus, when it comes to influencer marketing, success is all about securing the right person for the job.

“Successful engagement today is all about authenticity,” said Thakor-Rankin. Most customers today are aware that a recommendation or endorsement on social media is as likely to be driven purely by financial interest rather than actual interest in the product itself compared to a would-be Kim Kardashian gushing about the bonus round on a slot game.”

“Taking those very things that make social media a success, a smart influencer can tap into the fact that sport (watching, playing, punditry and betting) can be social and multi-generational, as can other gambling products such as bingo, poker, table games, esports, and multiplayer slots, making it not just about winning.”

“The thing to bear in mind at all times is that any influencing has to be predicated on authenticity and the experience,” she said.

Finally, Parthi said it is imperative for a brand to create tight-binding and enforceable contracts with its paid-influencers.

“Not all influencers out there can be trusted. Scams or backing out of a deal after payment is common. Therefore proper black & white agreements between each party are a must,” he said.

Tony Jones*

Gambling is a traditional and important part of Asian culture, and with a growing middleclass market and an increasingly tech-savvy and outward-looking youth, the prospects for businesses catering to Asia look increasingly bright, with those who offer the highest quality products likely to benefit most.

According to Transparency Market Research, the online gambling & betting market in Asia will grow at a significant compound annual growth rate (CAGR) of 14 percent between 2018 and 2026.

Investment opportunities have become more evident in Asia as a result of e-Gaming sector growth, whether this be technological innovation in infrastructure right through to supporting running gambling operations.

The recent developments in Cambodia and the PAGCOR imposed moratorium on new licensees may have cast doubt on the attraction of further investment in these regions, however companies and investors affected by these developments do have options further afield.

There are opportunities for Asian operators looking to expand into the West, and with the M&A activity associated with maturing markets, there are opportunities for Western operators to increase their market reach into Asia. The robust yet flexible regulation available by licensing in a top-tier international business centre, such as the Isle of Man, ensures quality corporate governance which in turn increases the attractiveness of companies to investors as well as opening new doors in other geographical areas.

Newer business models, such as those enabled through crypto-currency and blockchain technology, are interesting areas for investors, with potentially very lucrative results. Blockchain technology is becoming ever more popular in the gaming sector, as evidenced by the increase in applications the Isle of Man has received for gaming operations utilising this tech and savvy investors will be keeping up to date with related developments and opportunities.

Despite the phenomenal growth over the last decade or two, there are several challenges facing operators targeting the Asian market. The region is very fragmented with some countries encouraging the online gaming sector, some discouraging it, some enforcing outright bans and some with un-enforced legislation. Most countries are in a state of flux, often leaving operators in a state of confusion, with regulations and requirements changing regularly. Therefore ensuring the compliance function within a company is operating to high standards is essential. The compliance teams will have different levels of compliance requirements to adhere to for each jurisdiction, so often operating to the highest standards is the best way to ensure all markets are covered, especially as AML/CFT/Source of Wealth requirements are becoming ever more important in the modern world of international trade and no company wants to be associated with tainted funds.

Other challenges for e-Gaming operators in Asia include satisfying local languages and customs protocols, understanding regional game type preferences and securing an easy and secure mechanism for transferring money. The regulatory landscape is also adapting quickly, meaning operators must deal with inconsistency regarding regulation and rules, however as the e-Gaming sector evolves and develops in the region, these challenges can be overcome.

The e-Gaming market in Asia is maturing, with competition intensifying amongst companies for dominance in the region. For companies to thrive, it is crucial that they satisfy the demands of modern consumers by embracing industry and technological trends, and providing innovative solutions, in order to stand out in the market.

Reputable operators targeting this market are looking for jurisdictions in which to base their operations, that have a strong reputation for compliance and strike a balance between keeping crime out and supporting high quality businesses.

* Tony Jones is e-Gaming Development Manager at Digital Isle of Man. Digital Isle of Man is responsible for the digital sector in the Isle of Man, spanning the Island’s international e-Gaming industry, digital economy, and digital media sector. Digital Isle of Man works with Government, private industry and key associations to create the right environment for the sector to flourish.

When asked to provide trends that span the entire continent, experts point to just two common themes. Beyond that, they say companies need to provide unique solutions. The first common thread is the growth in mobile gaming on the back of the adoption of mobile phones in Asia.

According to GSMA Intelligence, although growth of mobile phone adoption is slowing in Asia-Pacific, with 466 million new subscribers since 2014, the region will still account for more than half of new sign-ups globally by 2025. Around 90 percent of these subscribers will come from India, China, Pakistan, Indonesia, Bangladesh and the Philippines.

It is therefore going to be more important than ever to provide games that are truly optimised for mobile in Asia.

“Unprecedented smartphone adoption rates evident across the region are unlocking ample opportunities both in RNG content and in live casino, the popularity of which is growing significantly with improvements to mobile optimisation,” says Bryan Upton, director of games at NetEnt.

Another increasingly apparent gameplay trend, according to the likes of former RTG Asia chief marketing officer Alex Czajkowski, is that while punters in the west continue to prefer mediumvolatility games, in Asia there tends to be an initial desire for low-volatility games. With these, the players typically spend longer on one slot and money is spent more slowly, before they switch up to medium-volatility offerings.

Arguably though, that is where the market-to-market similarities grind to a halt.

The contrasting demographics within Asia’s leading gambling markets, coupled with the continent’s gradual transition from a single-solution to a sophisticated multivendor market for operators – as has been outlined by Nektan interim CEO, executive director and founder Gary Shaw – means that Asia-based operators are less reliant on turnkey solutions and can pick and choose providers for specific product offerings.

Presenting a one-size-fits-all proposition, without consideration of regional characteristics, will therefore become increasingly tough to sell.

“Asia is an extremely large and diverse continent, so it is important to approach the region on a market-by-market basis,” Upton said. “Maintaining cultural relevance is fundamental to appealing to the vast array of playing styles and tastes that exist in Asian territories and given the increased competition in the region, creating content through a European lens will only deliver sub-optimum content that fails to resonate with local audiences.”

On a similar note, and with user expectations rocketing across the continent, personalisation of content will play a vital role in enhancing the gameplay experience.

“Understanding the varied player preferences specific to individual markets is becoming ever-more crucial in Asia as online gaming matures,” Upton adds. “Consistency in all aspects of a game, from math-models and mechanics to aesthetics and themes, needs to be evident throughout a supplier’s portfolio in order to stand out amongst crowded casino lobbies.

“At the same time, we’re seeing jackpots and promotional tools take off at a rate that is almost surpassing Europe and we expect to see more development in this area. Speed is also very important, as in fast load times and spin times.”

The technology to support lofty gameplay expectations is improving throughout the region.

“Improvements in platform technology and remote server-based gaming have advanced the online slots offering significantly in the region,” Upton says.

“With the breakdown of technical challenges that have traditionally limited the boundaries of innovation in slot design in certain Asian markets, we’re now able to produce more immersive titles that excel in terms of gameplay and providing a seamless player experience.

“Couple that with advanced data modelling and player segmentation techniques and we’re able to produce and collate content precisely tailored to Asia’s diverse and fragmented markets.”

Whereas in 2018 there were signs that an increasing number of territories were moving towards adopting coherent gambling regulations to bring clarity to grey markets, China unquestionably added a layer of uncertainty in 2019, especially in Southeast Asia.

Beijing applied pressure on neighbouring countries such as the Philippines and Cambodia to curb their online gaming activities, with the latter having effectively shut down its igaming industry as a result.

Looking forward, though, suppliers remain generally buoyant about regulatory progress across the region, with the likes of Ivan Rozic, NSoft’s senior vice-president for sales and marketing, suggesting that five-to-10 years of high growth are likely, with sports betting set to be an increasingly popular vertical.

Upton also agrees with Rozic that there is particular cause for optimism in India, which the former says has “the potential to become a critical market if and when a supportive regulatory regime is given the green light by lawmakers”.

Aside from China’s sprawling influence, a general move towards softening legislative restrictions across the region has allowed home-grown start-ups to provide competition to established international operators and suppliers.

“Asia’s long-standing back-drop of regulatory uncertainty and political instability will of course present challenges, but that is where suppliers with experience in the region will have the upper hand. With any luck, we will see countries on the fence of legalisation advance their regulatory regimes,” Upton says.

“I strongly believe that 2020 will spawn a new phase of growth for the RNG casino vertical, with the combination of developments in promotion tools, mechanical features and the underlying platform technology creating a foundation on which innovation can thrive.

“The pace of newcomers entering the supplier market has kept those that have dominated over the last years on their toes. To maintain strong positions, informed innovation in product development and access to data will become ever more central to business strategies.”