Felíx: ‘Brazil is the locomotive of the region’
Exclusive interview with GBC CEO, Entain results, Coljuegos refocus, Chile online investigation +More
Good morning. On this week’s agenda:
An exclusive interview with Jonathan Felíx, CEO of Global Business Company of Peru.
Entain reveals its results for first half of year.
The new president of Coljuegos announces a renewed focus.
Chile: online bookmakers are accused of “clandestine trading”.
At a glance: APEJ, Catena Media, Golden Matrix and more.
So come on, come on, do the loco-motion with me.
Exclusive: Brazil locomotion
An interview with Jonathan Félix, CEO of Global Business Company of Peru.
Jonathan Felix Vilchez is a senior international executive and entrepreneur, with over 22 years of experience in the gambling industry in Latin America. He has been part of the staff of international companies with operations in Peru and, in addition, he has advised international companies based in the US, Europe and Asia for the development of businesses and projects in the Latin American region. He is CEO of Global Business Company, a firm based in Peru, specializing in consulting, business development and new investment projects in the gambling, financial and value-added services sector.
In which Latin American countries are investors and major global players in the betting industry focusing their attention?
Now, with minimal variations depending on the position and strategy for the region that they may have, the focus is mainly on Brazil.
Because it is a 250m people market opening. Where else?
After Brazil, I would say that the focus is on Mexico, Argentina, Colombia, Venezuela, Chile and Peru, more or less in that order.
Venezuela?
Yes, despite the situation they are going through. They have a not very developed or sophisticated industry, but it is a very robust one. There is a lot of demand. That market has skyrocketed over the past year. (See ‘At a Glance’).
Does Brazil’s overshadow other countries in the region?
I don't think so. I believe it's the opposite. Brazil attracts a lot of eyes, but once those eyes are set in this direction, investors stay here looking for opportunities in other markets. Brazil is like the locomotive of the whole region.
I imagine it's also a matter of risk diversification?
Yes, Brazil is locked in on itself, and although the law governing betting and gambling is – apparently – soon to come out, not much is yet known about the real conditions investors will face once that market opens. There are many questions left.
Are you referring to the costs of licenses and the projected rate for taxation?
Brazil, being number one in size and population, is like a continent separated from the rest of Latin America and closed in on itself. It has the largest number of companies operating and is the country with the most growth potential. But it is also the one with the most open questions regarding regulation, which is ultimately what defines whether a market is attractive or competitive or not. There are many companies that do not feel prepared to enter such a market with its own peculiarities that have not only to do with regulation, but also with cultural issues. To start with language: it's a continent separated from the rest by language, it’s multicultural, multi-ethnic, it’s a federal state, and each state can – and probably will – have its own regulatory framework, and so on. It is not just a matter of the cost of the license or the tax regime, it certainly impacts the decisions, but those are not the only things.
Regulatory certainty is still a long way off in Brazil and while this issue is being clarified, investors can look to other markets...
The main Brazilian states are already bidding and issuing licenses, and the law is not yet published. There is a long way to go in Brazil and there must be a sincere adjustment to the final regulatory framework. And that’s just the tip of the iceberg of gambling on and offline: gambling is, today, still illegal. For example, there are no casinos, it has been banned for decades.
But there are operators established in Brazil...
All that are physical casinos and bingos operate with court rulings in their favor. In our region, as we know, if you have money and good connections in the judiciary, you can get sentences in your favor. But not all operate in this way or use, or are able to use, these mechanisms.
As you say, that's not exclusive to Brazil. Regulation should give predictability to the market and industry. Reducing uncertainty often has a similar effect on corruption; it also reduces it. Transparency and predictability play against it, depriving it of space.
That’s right. But if the regulation is not right and does not promote the development of business in the formal sector (with reasonable and appropriate licensing costs and taxes, etc.), first it will create a monopoly and, secondly, a black market and an illegal market. And the black market – which already exists – is going to triple because of the very characteristics of the country. In all the good and all the bad, Brazil is the number one.
Brazil is a reflection of what there is in Latin America.
Indeed.
What does it take for the industry to skyrocket in Peru?
That the Mincetur — the ministry in charge of regulation — publish the regulations of the gaming law that has already been approved and even amended by Congress.
Why is it taking so long? It was supposed to be ready by the end of July and it’s mid-August and we still don’t know about the regulations.
The director-general of Casino Games and Slot Machines, Eduardo Sevilla, announced it, but there are interests that seek to hinder the entry into force of the law. For starters, because there's going to be more competition. Other operators will enter to compete and the margins of the business of the industry will surely drop a little and moderate. Nobody likes competition and as soon as the regulation is published, the market is going to skyrocket. That happened in Colombia, the day after the law was published, the industry took a huge leap.
There also seems to be a lot of resistance to competition in Chile...
Is almost a monopoly over there, two companies operate around 95% of the physical casinos. In Chile the casinos are far from the cities, there are no signs on the streets that lead to them, but the parameters required to enter the casinos are very high. Lower to middle class people do not have the time or money to travel 30km to the casino and do not have the economy to play there. The Chilean market is an unattended market that was exposed by the pandemic. That is beginning to change with the entry of online gambling operators. That explains the resistance over there.
How much is it estimated that the Peruvian state could collect with the implemented law?
The government has calculated that it could be $40m per year because the Peruvian market is relatively mature. With the perspective and potential of the law, they could collect more than $100m a year from exploitation rights alone.
The migration from saloons to digital spaces is still underway, right?
With eSports and the pandemic, new consumers are digital, they only go to the physical venue when they need something that the digital world can’t give them. That’s the new generation of gamers, they are between 18 and 22 years old. In 10 years, they will be more empowered and sophisticated and will have a greater capacity to spend and invest in entertainment.
This is the case throughout the region, because of the demographic bonus.
That's right, what I have described can be extrapolated to all Latin America and we have been seeing it in many of the countries we visited. From Panama to Tierra del Fuego. Throughout the region it also happens that the established local national operators do not want the market to open up because there is going to be a lot of competition. And that is good: it improves the offer to the consumer. May the best one win.
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Entain LatAm thoughts
CEO Jette Nygaard-Andersen is keen to stress the positives over Brazil.
The path ahead: Entain’s boss said she was “pleased to see that a regulation has now been passed in Brazil that should allow licensed operators to start early next year, subject to a path proposed by lawmakers”.
While Latin America has experienced “intense competition ahead of regulation”, Nygaard-Andersen said Entain was now “starting to see the benefits of the improvements we’ve made there, including our acquisition of 365Scores, supporting good performance into the second half”.
She added that 365Scores is a sports app that has more than 18m subscribers, is the number one sports app in Brazil, number three in Latin America and top five worldwide.
The company announced that it will relaunch its first-half marketing approach to improve ROI and have a more sustainable customer base.
Entain acknowledged that Latin America is experiencing intense competition with a lot of noise in the markets, but they are confident that in the second half of the year, “the curve should turn for us.”
“And then we are ready for the market to be launched, hopefully, early next year,” said Nygaard-Andersen.
Organic: She explained that in markets like Colombia they are growing organically, but acknowledged that, very often, the fastest way to position oneself in an active market is to acquire one of the best-established brands with a strong team and platform.
Entain hopes that the situation of iGaming in Brazil will be resolved next year (2024). “We are following this closely, and we still don’t know how it will turn out,” the CEO concluded.
The sports betting and gaming group Entain posted a 14% increase in its net gaming revenue (NGR) to $3bn for the first half of 2023, thanks to the performance of online gaming and its retail sector.
Net revenue from online gaming was 15% higher than last year ($2bn), while sports NGR rose 6% to $939m. As for gaming NGR, this was 22% higher, reaching $1.1bn and, finally, B2B revenues increased 58% to $30m.
Although revenues in Brazil fell by 14%, these were more than offset by increases in some European countries.
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Coljuegos moves
Marco Hincapié, president of Coljuegos, announces new efforts for the formalization of illegal gambling.
Called to order: On August 9/10, the Seventh National Meeting of Compliance Officers of Colombia was held, organized by the National Corporation of Gambling Entrepreneurs (Cornazar) and the Association of Localized and New Games Compliance Officers (Asojul).
The event was attended by the new president of Coljuegos, Marco Emilio Hincapié. This was his first appearance before the industry, after assuming his new role vis-à-vis the gaming regulator in Colombia.
During his welcome speech, the head of the organization stressed that his presidency would focus on three main axes.
The fight against corruption.
The reduction of barriers for those who today operate illegally, while attacking those who insist on remaining outside the law.
The digital transformation of the entity, which will allow for the provision of a high-quality service to a sector that stands out for its high rates of growth and job creation.
Responsible: Emphasis was also placed on promoting responsible gaming. “The sustained growth of the sector and, in particular, the positioning of online gaming platforms has placed the risks associated with gambling on the betting public,” he said.
He indicated that the increasing presence of online gambling in the different media raises the need to “establish a responsible gambling policy that leads us to protect the vulnerable population and to position gambling as an alternative in the entertainment offer of the country”.
Chile investigation
Online bookmakers investigated and accused of “clandestine trading”.
Taxing times: Online bookmakers and the National Association of Professional Football (ANFP) are being investigated for their business relationship and signed contracts. Now, a new actor has joined the investigation: the Internal Tax Service (SII).
In a lawsuit “against all those who are responsible” the regulatory agency revealed who would be behind the online gambling companies, as emissaries in Chile of international platforms.
The SII asked to punish them for evading taxes and legislation on payment of taxes and for the clandestine exercise of commerce.
Express rule: In its complaint, the SII explained that, according to the Superintendence of Gaming and Casinos (SCJ), except for the games of chance developed by the Lottería de Concepción, Polla Chilena de Beneficencia and Teletrak, “which have an express rule that enables them to operate certain online games of chance, other natural or legal persons… could not develop online gambling, as they do not have a rule of express legal rank that enables them to do so”.
For the same reason, after reviewing the investigation filed by the Office of the Eastern Prosecutor, the SII “verified the operation of the web platforms” www.betsson.cl, www.betway.cl, www.estelarbet.cl, www.betfaraon.com, www.betano.cl, www.coolbet.cl and www.latamwin.cl, and found that they offer the public (individuals) sports betting, casino, live casino and virtual sports without having the proper authorization in Chile from the Superintendency of Gaming Casinos.
This would therefore constitute “illegal gambling operations in Chile that do not meet the requirements of the law. regarding the declaration and payment of taxes, remaining outside the tax audit”, it pointed out.
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At a Glance
The Paraguayan Entertainment and Gaming Association (APEJ) is born: Vimerica, Tecnología Para el Desarrollo de Paraguay and Daruma Sam, three of the major gambling companies in Paraguay, have founded the Paraguayan Entertainment and Gaming Association, whose objective is to promote the development of the sector through activities, studies and research in close collaboration with regulatory bodies. It will also report on the contribution of the sector and the allocation of these resources to the national economy.
Sports betting in Venezuela is an opportunity waiting: Any Venezuelan citizen of full age with access to a device with an internet connection can participate in the games and place sports bets offered on websites and online casinos around the world.
Although there are no official figures, Venezuela is a potential market of almost 30m people, more than 50% of whom are adults, and a society with a long-standing and deep-rooted tradition of betting on horses. In fact, equestrianism has been the main and most demanded sports-betting game in Venezuela since the 1950s, ahead of baseball and basketball.
The National Institute of Hippodromes, the state entity in charge of receiving people's bets, does not have an updated space on the web. On the website of the National Lotteries Commission (CONALOT), the entity in charge of overseeing the gambling industry and betting, the latest news is from June 2022 and all links to download registration or application forms for gambling licenses are broken.
In the country, online sports betting is not regulated by the state, but reliable sites have international licenses. Only a handful of Venezuelan companies have authorization from CONALOT.
In 2021, the President of Venezuela, Nicolás Maduro, authorized the operation of 30 casinos.
Catena Media partners with The Sporting News to strengthen its presence in America: To consolidate its position in the sports-betting and online casino games markets of North and Latin America, Catena Media has partnered with The Sporting News, one of the most well-known sports publishing brands in the USA.
Catena Media will create digital, editorial and advertising content dedicated to sports, casino games and fantasy sports for three years as an exclusive partner of The Sporting News, which, with its 45m unique users per month, will allow Catena to “compete with some of the world’s leading sports publishers,” said Ryan Harper, vice-president of Catena Media North America.
The agreement is primarily focused on the US and, in addition, the association will direct its efforts to Mexico, Argentina and Brazil.
Golden Matrix posts record revenue in the third quarter. The company reported that its revenues exceeded $11m, thanks to “significant contributions” from its B2C segment in the UK, RKings Tournament Competitions, said its CEO Brian Goodman.
The Mexican casino and sportsbook of Golden Matrix, MexPlay, experienced a 383% increase in bets during the third quarter, compared to the second, which went from $1.2m to $5.8m. Deposits made by players into GMGI accounts increased from $67k to $476k over the same period, a growth of 610%; while the number of players grew 368% from 7,000 to 32,800.
According to Goodman, these results have enabled Golden Matrix to complete the acquisition of MeridianBet Group, “which will transform GMGI into a dynamic and highly profitable global gaming company”.
65% of Brazil Congress considers it likely to pass gambling taxes: A survey of 185 deputies by Genial Inversiones in partnership with Quaest Consulting and Research found that 65% of them considered it likely that Congress will approve taxes on sports betting as proposed by the Executive Branch in its Provisional Measure.
28% are uncertain and only 7% believe they will not be approved.
The Ministry of Finance estimates it will raise around $400m in taxes in 2024 alone from the betting market. For the coming years, the expectation is an annual revenue of between $1.2bn and $2.4bn.
Publishing schedule
This is the English version of the LosIngresos+Mas newsletter published yesterday (17 August).
An +More Media publication.
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