As 2022 dawns, experts, operators weigh in on the state of the gaming industry (Part 2) Rege Behe, CDC Gaming Reports · December 28, 2021 at 7:50 pm Publisher’s note: This piece is part two of a two-part series. Part one, linked here, was published yesterday. Last year’s buzzwords included sports betting, cashless payments, and responsible gaming. Care to predict any trends that may emerge in 2022? Cath Burns, Aristocrat Executive Vice President of Customer Experience Solutions: Convergence: bringing together a single seamless player journey across igaming and Retail gaming experiences Omni-Channel: providing players access to games on any device whether they are at home or in the casino Augmentation (or Automation): operations optimization, automation, robotics, and AI assisted customer service and support to address resourcing challenges Lawrence Shen, Co-founder and Principal, C3 Gaming: The first buzzword coming to mind is expansion. All types of expansions. Many states have to expand to dip into people’s gambling wallets to make up for revenue deficits caused by heavy unemployment payout and slower economic growth during COVID. This expansion could be issuing more brick-and-mortar licenses like in Illinois, opening up sports betting like in Illinois, Indiana, Iowa, and many, or considering igaming. With expansion on all fronts and most new casinos will be on state borders, more states and the affected tribal casinos will take action to expand as well. Another buzzword is M&A. Mergers, acquisitions, divestitures have been ever more frequent in the last few years. Large corporations are acquiring smaller operators for synergies, and smaller corporations are merging for a larger player database and less overhead. Operators of all sizes are divesting less profitable or non-core properties to raise capital for acquisitions or strategic alliance, and with the aforementioned predictable expansion in multiple states, operators need cash to either compete for market share in sports betting or commit to a capital-intensive bid-and-build process to win one of the new licenses to be issued. Martin Lycka, Entain Senior Vice President for American Regulatory Affairs and Responsible Gambling: I would predict that 2022 will be the year of online casino as well as enhanced responsible gambling protocols. Cybersecurity might also attract more industry attention in the year ahead. Financial and tech companies around the world are increasingly focused on cybersecurity, for good reasons. I believe we need to apply our amazing technology capabilities here; it’s really another form of player protection. Omer Sattar, Co-CEO and Co-founder Sightline Payments: Omnichannel. Today’s player experience will look completely different than it did a decade ago. An integrated gaming experience will now span mobile and brick-and-mortar offerings, different verticals like sports betting and online casino, and even non-gaming amenities on and off property. Customers expect to do just about everything from their mobile devices with pers personalized experiences delivered right to the palm of their hand. In 2022, the industry will unlock true omnichannel solutions that integrate a patron’s whole journey while rewarding them for their loyalty along the way. Digital payments are the backbone that binds this omnichannel ecosystem together. Steve Ruddock, Content Director, BettingUSA.com; Editor-in-Chief, Gaming Law Review: 2022 is going to be the year of supplementary products. Sports betting is proving to be an expensive business, and widespread online casino gambling is still several years away, so I can imagine companies turning towards sports betting adjacent products like NFTs, esports events, and virtual sports. DFS landed on everyone’s radar in 2015, and sports betting marketing is even more brazen. What that looks like, I’m not 100% sure, as it could be industry self-regulation as it sees the writing on the wall, or it could come down from a handful of prominent states or even the federal government at some point. Mike Kaplan, Chief Revenue Officer, PayNearMe: I think there will continue to be rapid state adoption and accelerated growth particularly with large states like New York and Ohio getting into the game. I expect that we will see a fair number of new entrants to the market hoping to capitalize on the rapid expansion. I also believe we will continue to see more in the way of mergers and acquisitions as operators and platform providers attempt to carve out their piece of the market. In the payments space, I think there will be a significant amount of innovation particularly in cashless payments. Cashless will be a driving factor to bridge the online and offline worlds and create a seamless experience for players. I also think we’ll see a cashless strategy that matches the online experience from a payments perspective, meaning a cashless offering that goes beyond cards and allows players to use the alternative payment options and digital wallets they prefer such as PayPal, Venmo and Apple Pay. Joseph Greff, analyst, J. P. Morgan: In gaming, we still see growing EBITDA streams in the U.S., most notably out of the Las Vegas Strip as group business recovers, a segment that is approximately 15 to 20% of the market’s annual total room nights sold. Outside of the regional markets, margins have expanded meaningfully versus pre-pandemic levels; we think that as revenue mix recovers, margin gains will moderate but still be at a healthy premium to 2019 levels. With respect to Online Sports Betting (OSB), we expect elevated promotions and user acquisition spend to persist through (the first half of 2022) but then moderate in the (the second half of 2022). The igaming opportunity is appealing from a margin perspective but doesn’t possess the jurisdictional growth that OSB has. Dave Kubajak, JCM SVP of Sales, Marketing & Operations: Omnichannel will be a buzzword in 2022 in terms of how operators will seek to give players a fully integrated gaming and payments experience. Players will be able to go to a casino to play, sit at home and play, or be out and about and play. To do this, casinos will need fully integrated payments solutions that power all three areas. With new markets emerging in sports betting, the regulatory landscape is increasingly diverse. Do you think a national regulatory system for sports betting will ever be considered? And is it incumbent upon the industry to regulate itself lest government agencies start drawing up regulations? Martin Lycka, Entain Senior Vice President for American Regulatory Affairs and Responsible Gambling: I am a firm believer in the state-by-state regulatory model that has proven its efficiency. Each state has unique characteristics which they rightly want to recognize in their markets and regulatory structures. I would suggest, though, that now is the time to further ramp up consumer protection-related efforts. As usual, the New Jersey regulator is leading the charge in this direction, which is a most welcome development. Entain will be supporting any such efforts by means of further education about responsible gambling. RG programs, including Entain’s, are already benefitting from the application of advanced technologies, behavioral science and regulatory requirements. Adding an element of customer priorities might be a further enhancement—and a very effective one—as states develop their regulatory structures. Regardless of the details, it’s incredibly important for states and operators to enact RG programs as essential factors in their regulatory approaches. Kevin Mullaly, Gaming Laboratories International Senior Vice-President of Government Relations & General Counsel: We have not seen any significant support for national regulation. It is difficult to imagine how it could be implemented in the current environment, which allows each jurisdiction to craft its gambling policy. These decisions reflect the diversity of each jurisdiction’s needs, goals, and socioeconomic fabric. Not surprisingly, it has produced many areas of relative consistency that promote efficiency. For instance, technology regulation has achieved a very high level of conformity on technical standards. Much progress has been made in standardizing the information collected for background investigations. Moreover, we see increasing interstate collaboration on responsible gaming programs. Perhaps most importantly, local regulation works. Gaming is rarely in the spotlight for issues relating to non-compliance, and the industry readily accepts the cost of regulation in most jurisdictions. However, the dynamic nature of online delivery channels for gaming entertainment, the modernization of the payment system, and the increasing use of technology to control risk in areas such as age verification, patron location, and responsible gaming will demand some level of cooperation among regulators. Most of these systems are deployed globally but regulated locally. If we start seeing many layers of uncoordinated, sometimes conflicting regulatory requirements, it will have a dangerously adverse effect on risk control. Agreeing on as many standard requirements as possible, using consistent terminology, will allow for more efficient audits, pooling of limited expert resources, and better risk control results. Colin Mansfield, Fitch Ratings Sector Head U.S. Gaming & Leisure: We don’t believe so. Land-based casino gaming is regulated at the state level and we expect sports betting to continue to be regulated on the state level, consistent with how the regulatory framework has already evolved for sports betting over the last few years. While fragmented, the state-level regulation has not precluded land-based casino gaming from proliferating and being legalized across the U.S. and sports betting will be similar. It is incumbent upon the industry to self-regulate certain aspects of their business, notably advertising for digital gaming. An example of more cumbersome regulations is the U.K. Gambling Act Review and ongoing regulatory headwinds over the last few years that has been meant to reduce bet sizes and curb certain forms of advertising over problem gambling concerns. Andrew Klebanow, Co-Founder and Principal, C3 Gaming: Federal statutes clearly place the decision to offer gaming and to regulate gambling activities with the states. I do not see any movement to create some form of federal oversight of sports betting. State governments have done an admirable job of creating sound regulations covering gambling activities. They have the regulatory infrastructure to oversee the rapid growth of sports betting. Thank you for reading! If you made it this far without reading part 1, click here to read it. Rege Behe is lead contributor to CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Please follow @RegeBehe_exPTR on Twitter.