The continuing consolidation in the online gambling and social casino sectors begs the questions as to the future of the overall online gambling sector as a growth or consolidation play. Essentially, is the sector still offering new and engaging games to players that result in the growth of players and revenue? Growth rate predictions for the online gambling sector are only in the single digit category, Social casino is also slowing and entering the single digit growth category. However, acquisitions such as the Candy Crush acquisition by Activison in the social casino category make for interesting opportunities for truly knowledgeable investors.
The surprising 2015 launch of Fantasy Sports as a semi-regulated "skill game" presents new and interesting opportunity for gaming operators going forward. The "skill" category as a gaming category that can garner a large following of players has been a pleasant surprise to gaming operators. 2016 may see some interesting "regulatory" challenges to this business model requiring existing or potential fantasy sports operators to factor in regulatory compliance fees into their business models.
The surprising 2015 launch of Fantasy Sports as a semi-regulated "skill game" presents new and interesting opportunity for gaming operators going forward. The "skill" category as a gaming category that can garner a large following of players has been a pleasant surprise to gaming operators. 2016 may see some interesting "regulatory" challenges to this business model requiring existing or potential fantasy sports operators to factor in regulatory compliance fees into their business models.
The online gambling market is estimated at 40 billion USD . The size of the online gambling market is significant. However, The online gambling space is far from homogeneous making it difficult to fully comprehend it as a single sector. It is also highly fractured from a regulatory perspective making a proper assessment of its potential growth rate challenging. Some jurisdictions are regulated and some are not. In addition, there are many different forms of online gambling; casino, sports book, etc. From an activity/regulatory perspective gambling has traditionally included three elements; chance, consideration and prize. However, that is beginning to change with "skill" gaming/fantasy sports entering the mix of legalized gambling. In the US the skill sector is regulated and limited to certain states . Nevada's recent move to regulate fantasy sports as a gambling activity adds more complication to the notion of what is and is not gambling.
In the social casino sector the virtual currency payout format has been used to avoid standard gambling regulation. However, from a pure experience perspective the virtual currency payout does not change the fact that players are still wagering. Many of the traditional online gambling and in some cases land based casino operators realize this and are engaged in both the 'real money" and social/virtual currency casino space.
Other factors making it hard to fully understand the sector is the existence of regulation in some markets and no regulation in others. Regulated markets usually keep track of player activity and unregulated ones do not or have questionable numbers. Even in regulated markets such as the United States many Americans regularly play games hosted in territories that are not regulated such as Costa Rica and Panama.
Given all of the moving parts in the gaming/gambling sector it will take a very savvy investor and or organization to make the proper decisions on how to enter the online gaming space, stay in the sector or make acquisitions in 2016. With this said the complicated nature of the sector favors knowledgeable investors and existing businesses in the online gaming space. There are certainly new opportunities in the "skill" game arena and in the consolidation of gaming models such as skill, chance and social gaming. Fantasy sports and its "skill" category will also draw the attention of traditional sports book operators as they have access to sports activity content and feeds that can be leveraged in fantasy sports.
Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane has developed, launched and operated Internet gambling sites in Europe. The company engages with land based casino operators, online gambling operators, social casino operator and game developers to assist them in determining their strategy and implementation of game content. Gameinlane develops "social and real money" casino games for third parties. Kevin has worked for and with US land based casino operators helping them evaluate social casino and iGaming platforms for the purpose of joint ventures and acquisitions. Kevin can be reached at kflood@gameinlane.com.
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