The online gambling industry is undoubtedly highly lucrative, but competition is fierce, with new operators entering the sector on a regular basis. You need to be on top of your game, thinking a few steps ahead if you want to thrive rather than simply keep your head above water in this industry.
The competition in the online gambling sector has never been stiffer, with NoDepositDaily.com new no deposit casinos showing the insane rate of attrition of new casinos. Recently we’ve seen the likes of gaming giants such as Flutter and 888 Holdings presenting some of the worst-performing stocks year-to-date. With Flutter being down by 31 per cent and 888 Holdings experiencing a loss of 37 cents.
In an attempt to turn the tables around in their favor, Flutter, which owns the major names in the gambling sector such as Fanduel, Betfair and Paddy Power, has demonstrated moves to diversify its portfolio of produces and boost its operations in the UK market. In fact, both Flutter and their rivals at 888 Holdings have announced plans to expand US operations as the UK authorities look to tighten regulations on activity in the online gambling sector.
However, this still begs the question of whether these moves are enough to win back the confidence of investors and improve stock prices?
The Impact of The COVID-19 Pandemic
Much of the online gambling sector’s recent boom can be attributed to increased interest from people at the height of the COVID-19. As people were forced to retreat into their homes and away from public spaces, including casinos, they turned to online portals to get their gaming fix. However, as life returns to normal with the lifting of restrictions, so too does people’s reliance on online gambling as a form of entertainment. From an investor’s perspective, the sector is beginning to look less attractive in terms of investment.
Regulatory Concerns in The UK Market
It’s no great secret that gambling is addictive, and there is no shortage of horror stories demonstrating the dangers involved in developing a gambling problem. Authorities in the UK have also shown a growing concern about the increasing number of people showing signs of having a gambling problem, which in turn has resulted in talk of overhauling current legislation related to gambling.
In addition to a review conducted by the Gambling Commission, it is expected that a new set of rules protecting consumers deemed to be at risk is likely to come into force in September. In a statement from the Gambling Commission, it was indicated that these new protocols touch on methods to flag indicators of harm and put measures in place to prevent the ‘marketing and take-up of new bonuses for at-risk customers’.
While both Flutter and 888 Holdings have acknowledged the risks involved in gambling and shown a commitment to putting protocols in place to protect gamblers, some are likely to cause damage to their bottom line, given that the UK market represents a significant chunk of their target market.
Is A Transatlantic Move The Right Decision?
While restrictions in the UK will certainly have negative implications for gambling giants Flutter and 888 Holdings, it is unclear whether their prospects in the USA will be that much brighter.
For one thing, much of the loss of interest in online gaming stocks is a result of economies emerging from lockdown. This is not only the case in the UK but will extend to the US market as well.
Sentiment of Shareholders
Another factor that both Flutter and 888 Holdings need to consider when making a move is the sentiment of their shareholders. As a result of recent poor share price performance and decreasing interest in the sector, investors have been reluctant to support raising ‘fat cat’ salaries.
Shareholders across the board at various gambling companies, including those at 888 Holdings and Flutter, had expressed anger at salary hikes at a time when their investments were not showing signs of being at all profitable.
At a recent Flutter AGM, around a 3rd of the company’s investors voted against awarding a 26% pay rise to the company’s CEO, who currently earn around GBP 1.17 million per year.
Looking To The Future
Despite this unfavorable sentiment amongst investors, their feelings may change if US expansion goes according to plan.
In all honesty, US expansion has been on the cards for a while for these gambling giants. It just seems that tightening regulations in the UK, as well as pressure to improve their stock prices, has acted as a catalyst for the move.
Some would argue that prospects in the US look bright as 888 Holding has already experienced some benefits after being awarded a provision betting license by the Virginia Lottery and the launch of SI Sportsbook in Colorado.
At the end of the day, both Flutter and 888 Holdings are under pressure to perform as revving up their operations in the US looks to be lucrative. Broadening their geographical portfolio could also help them buffer the impact of forthcoming legislative changes in the UK. So while the results of US expansion remain uncertain, it is certainly a necessary move.