The Business of Gaming : A Nuanced Goldmine

Business outsider

Tunji Adegbite

Gaming – the action or practice of playing gambling games is one of humanity’s oldest activities. Historic activities like Cleromancy (casting lots) to render an unbiased decision like modern-day throwing dice were not perceived as gambling but as an activity to reveal God’s will or other universal forces and entities.

Gaming activities like lotteries and sports betting have rapidly spread globally, and emerging technology continues to blur the lines and expand the range of ways people gamble. Despite deeply polarized societal views because it tends to lead to compulsive gambling, severe socioeconomic consequences, and gateway to other social vices, gaming as a business continues to thrive. “At least 1.6 billion people gamble at some point during a given year, and 4.2 billion people have gambled at some point in their lives”. This statement by a group of researchers from Washington University at St. Louis shows the global popularity of gaming.

The global gaming market is currently estimated at US$443.2 billion and is projected to reach a revised size of US$647.9 billion by 2027, growing at a CAGR of 5.6%. The online gaming market size surpassed $55 billion in 2019 and is anticipated to grow at 16.5% CAGR between 2020 and 2026. Europe and the Asia Pacific have taken the lead regarding market size primarily because of the prevalence of legalization of gaming among countries in the region and the steady influx of gaming tourists in those regions. According to the European Gaming & Betting Association, Africa currently accounts for only 1.10% of the global online gaming market share while Europe and Asia dominate the market with 53% and 28% market share, respectively

The gaming industry is segmented into – Casino, Lotteries, Sports Betting and Others; the lotteries segment remains the largest segment, valued at $207.3 billion. However, sports betting is estimated to be the fastest-growing segment going forward at a CAGR of 6.9%

In Nigeria, a survey by NOI Polls showed that the young population (18-35) has a stronger online betting preference. The most popular online betting activity being sports betting, and as a football-loving nation, football remains one of the most popular sports betting options. However, as the age range goes up, there is more awareness in both pools and lotto.

The allusion of Pools and Lotto to be the “poor man’s stock exchange” might hold given that investment and gaming have similar characteristics, yet both differ. Many of the pool/lotto participants are not as wealthy as those who manage investment portfolios. These pool/lotto participants are usually those looking for ways to make fast windfall gains, as depicted by the survey’s reasons people participate in gambling.

Gaming activities in Nigeria have skyrocketed mainly due to socioeconomic reasons. Today, betting shops are littered across the country. On campuses, libraries, newsstands, and everywhere you can think of, little bet slips are littered on the floors dashed like the hopes of the persons that owned them before.

The poor are not the only demography participating in gaming. With the increasing proliferation of technology, globalisation, and particularly internet access, the gaming demography has shifted to more educated and wealthier populations in casinos (offline or online), online sports betting, etc. Technology has made it such that it is easier to place bets from the confines of your room; as gaming remains unpopular, there exist many closet gamblers who enjoy the privacy technology offers them to gamble anonymously. Also, an increase in the media’s reach has led to advertisements getting to a broader audience whose risk appetite has already been shaped by the prevailing economic conditions.

Gambling exists on a continuum. So, irrespective of risk tolerance, some people will never gamble, some will gamble sparingly, others are compulsive gamblers and have been called various names in sociological and psychological texts- problem gamblers, addicted gamblers, gambling deviants, etc. The problem arising from those on this end of the continuum are numerous. Researchers have inextricably linked gambling to an increase in theft. Some of the criminal activities are perpetrated by gamblers, others by miscreants taking advantage of the influx of gamblers arriving in gaming/casino hotspots. On the other hand, compulsive gamblers go to the extent of borrowing and increasing family indebtedness—a rising public health concern.

Many jurisdictions either ban gaming or heavily control it by licensing the operators. The variances in the unilateral regulations generally lead to “gaming tourism” and illegal gaming in the areas where it is not allowed. The government’s involvement via regulation and taxation has led to a close nexus between some governments and gaming companies, especially where it provides significant government revenue, for example, Monaco and Las Vegas.

Establishing a business in this industry is very capital intensive, although lucrative because the returns on investment are guaranteed, as “the house always wins” via commissions, losses, etc.

Companies in this sector may have a multiplier effect on the economy as they create jobs and income for people who manage these outfits. Starting a betting shop has a low entry barrier requiring just thermal printers, A4 printer, fixtures board, selling point cubicle, computer (desktop or laptop), and a generator. There are opportunities for technical support systems to partner with local operators in the country by providing IT services, virtual games, gaming software, etc., to cater to the growing demand in this sector adequately. The adoption of blockchain technology and the emergence of cryptocurrency is disrupting the gaming industry. Cryptocurrencies have gradually become popular in casinos across Europe, used either as the primary payment system or as an alternative to fiat-based systems. This trend would cater more to the needs of gaming tourists and the online community as it would cushion the costs of converting and withdrawing foreign currency.

With Nigerians reportedly spending over N730 billion annually — N2 billion daily on sports betting, the sector remains a goldmine of opportunities for investors and entrepreneurs though the irony is that bankruptcy risks to their consumers remains extremely high.

•Tunji Adegbite is a thought leader in Strategy and Supply Chain, who has worked with leading organisations like PwC and an IOC. He also founded Naspire, a business research platform using business insights to help entrepreneurs and professionals succeed in Africa. He can be reached via tunji@naspire.com