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One of the biggest success stories of the last couple of decades has been the seemingly inexorable rise of the online gambling sector in the UK. In the space of just twenty years it has risen from being a fringe activity enjoyed by a few people in the know to become the single biggest subsector of the UK gambling Industry.
The Gambling Commission is the body that oversees, regulates and reports on all aspects of gambling and in their figures, released in May 2019, they found that the gross gambling yield for the previous year running from April 2018 to March 2019 had been £14.5 billion, £5.6 billion of which had been raised by remote gambling.
More remarkable still was the fact that the overall market had declined slightly (by 0.4%) but remote gambling yield had increased by 2.9%. While this represents a slowing down compared with the same period a year earlier when remote gambling had grown by 12.6%, it suggests that the trend will continue to be upward, perhaps to the detriment of other land-based forms of gambling including traditional betting high street betting shops and “bricks and mortar” casinos.
Of course, the connections between overall sector performance and the individual operator market moves are complex and not always precisely correlated due to numerous factors and influences. While the overall trend may have been upwards in the last 12 months, this has not always been the case in terms of share prices.
An industry under siege?
Without naming any names, the last year has seen a fairly steady decline in share prices, even for the biggest and most powerful operators. So, the industry as a whole has been going through something of a retrenchment, driven by a number of factors. However, as we shall see, this is regarded by many as a temporary blip, this list on bestcasinosites.net have plenty of reasons to be optimistic when we look to the potential growth of individual company values in the future.
As you might expect, when any sector sees the meteoric growth that has been experienced by the online gambling sector since the late 90s and early Noughties, it’s come under increasingly close scrutiny by the government as well as pressure groups who might like to see its wings clipped a little. And while the vast majority of players play responsibly and within their limits, there have been instances where operators may have fallen a little short in their duty of care.
With this quiet rumble of disapproval in the background, however, the biggest names in the industry have been quick to act and have pledged at least £100 million to address the issue. At ten times the previous contribution, it’s very much anticipated that this will be more than enough to satisfy government and critics alike – and instil much needed confidence in investors that this is an industry with a bright future ahead of it.
Another aspect that has been responsible for the falling share price of many of the biggest betting organisations has been the long-running controversy over so-called “fixed odds betting terminals” (FOBT). These are machines that have long provided a strong and reliable revenue stream for high street betting shops, many of which also have online casino operations too. The government had long pledged to cut the maximum stake on these machines from £100 to £2 and this rule finally came into force in March of this year, but not before a government minister had to resign over the matter.
Already this has seen a number of betting shops close their doors for the last time. But, more significantly for the online sector, the government is aiming to make up for the lost revenue by raising the tax payable by online operators from 15% to 21% from October of this year. It’s expected that this blow may well lead to a drop in the market price, so worth bearing in mind if one were thinking of starting to invest.
Looking to the future
But that’s not to say that the outlook is all bad. Online casinos which look after their players are thriving. They usually feature high-quality games, while appealing to fans of casino games through constantly adding new games to their collection. So, while others are struggling, leaders of the industry continue to flourish – resulting in plenty of cause for optimism.
For the first of the reasons why there’s cause for optimism, we only have to look at one of the first principles of investing, namely that it’s for the long term. Again and again, it’s been shown that being able to ride out the rises and falls in the market can reap rewards, eventually. And there is plenty to look forward to with the online casino and gambling sector through 2019 and beyond.
The first change that some are predicting is the opening up of new markets where online gambling is still in its nascent stages, including Russia, India and, to a lesser extent, Brazil. But perhaps the greatest potential of all lies in the US where a number of UK operators already have a presence. Of particular interest is the sports betting market after the activity was legalized by the Supreme Court last summer following pressure from states including New Jersey. Before the legislation was passed, the illegal sports market was estimated to be worth $150 billion a year. So even if a fraction of this amount is directed towards legal betting it could transform the fortunes of many operators.
A final element that has to be considered when looking at the investment outlook is the possibility of some mega mergers taking place.
There has already been a marked trend for the big players to come together in an attempt to reach an insuperable size. And, like all mergers of this kind, it can have a very advantageous effect on their market valuations.
Far from being down and out, there’s every reason that the online gambling industry could very soon be on the up and up – and any investor who would like to take a small wager on it themselves would be well advised to bear this in mind.
