Corporate Strategy In 2019: A Changing of the Guard?

January 9, 2019 7:45 AM
  • CDC Gaming Reports
January 9, 2019 7:45 AM
  • CDC Gaming Reports

There has been a lot of talk towards the end of 2018 concerning new efforts by the UK gambling industry towards more responsible gambling. These have included private “leaders’ meetings” to discuss voluntary self-imposed advertising restrictions or caps, as well as major PR campaigns such as Will Hill’s “Zero Harm.” In this piece I’d like to consider how much it is in the leadership’s interests, or even in their power, to make fundamental changes to the modus operandi of their firms, especially when it comes to changes which may better protect their customers at the cost of immediate profits.

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There are certain elements to the very nature of corporate structure, especially once a firm is publicly traded, which require that corporation provide maximum returns to its shareholders. There are very few protections in place for most stakeholders, which (lest we forget) includes all those affected by the business a firm does. Most externalities are written off as just that, something external to the firm, which they aren’t obliged to deal with directly, let alone seek to remedy.

There are numerous industries across the globe where we can see the egregious effects which untrammeled pursuit of maximum short-term profits yields, not to mention problems resulting from targets of constant economic growth, supported by almost every think tank and nation state. Those consequences play out despite many who set these very goals recognising that such goals are driving us further towards unsustainably high levels of exploitation of the earth’s resources. There are no easy answers, that’s for sure.

The same pattern can be observed within the gambling industry, only in this case the resources sought after by every company are generally very simple – the funds wagered by individual players, alongside a certain premium for detailed user data. Again, unsustainable business practices involve aiming for maximum short-term profits and growth, at the expense of any other considerations, even though this is ultimately harmful to the firm, by eroding reputation and increasing player churn. And, ultimately, such practices will invoke stronger government regulation, as we’re now seeing in the UK and across various parts of Europe (Italy, Belgium and even Spain in certain regards). That’s not to mention the harm done to players who get caught in the storm, and to the wider world.

Problem gamblers, and those who should never be playing in the first place, such as children and other vulnerable groups, will be most exposed to risk as a result of these types of corporate strategy, which we would term “max exploit” or simply “max value” in a poker game – trying to squeeze every last advantage out of the spot in which we find ourselves. This has also been seen in regard to several firms’ treatment of VIP players, encouraging further play where they should have been conducting sober customer diligence. All’s fair in love and war, in a poker game, within the framework of following the rules and practicing at least some basic good sportsmanship, but in a corporate context “maximum exploitation” takes on a darker connotation. Harm will also be done to communities, as well as wider society, which has to shoulder part of the burden created by problem gamblers.

How much can the industry be blamed for a trend across Europe towards tightening regulations and providing better player protections? How can we tell the wood from the trees when scrutinizing a PR campaign for reducing harm from gambling – how much is whitewashing, and how much is real intended change in corporate direction, backed by real funding for new approaches?

These are real, tough questions facing the industry as we move into 2019. Some corporate leaders may feel their hands are tied by their commitment to get maximum returns for shareholders. Ultimately, what we need in this industry, as in many another, is much more long-term thinking, with more responsibility taken to mitigate harm done to users and the wider society. Sometimes a licensing requirement is put upon a gambling firm that it must channel a certain amount of profits back towards specific goals which benefit stakeholders; perhaps making this a more common licensing clause could be a part of the solution.

One partial remedy which I hope will help to ameliorate some of the negative impacts from this hard exploit approach, seen so commonly in the gambling sphere, is the use of blockchain technology. True, blockchain offerings have been plagued by a long line of scams across the past two years, not to mention issues such as theft by hacking. Still, there’s potential in the technology, particularly in the brute fact that networked verifications of a distributed ledger offer a type of robust solution to prevent fraud, double-bookkeeping, and (in theory) money laundering, as well as better tracking of corporate activity. Shoring up existing weaknesses in customer diligence and AML procedure, perhaps even replacing or at least significantly improving on the need for a human auditing procedure, are ways in which this tech may help to improve things in the gambling sphere. Where a networked verification can be used to confirm that certain things have or have not taken place, there’s less room for human error or indeed for corruption.

I still believe that in the long run we’ll see many industries revolutionized, and for the public good, by blockchain. It may even be the solution for preventing rigged or fraudulent political elections. We are still far from the tipping point of integrating this sort of tech into most existing industries, but the gambling world is a little closer to the tech than most, and many early adopters do work in the gaming industry. In my humble opinion blockchain has a key role to play in helping to turn back the tide, moving from max exploit towards zero harm.

Still, it is hard to see how blockchain tech can help resolve the attitude of short termism which afflicts this and many another industry. In which case the question remains an open one – how can we reduce this problem in the gambling sector?