Evolution AB | Insider Insights: Unveiling the Online Gambling World
Decoding the Secrets Behind Evolution AB and the Dynamics of Digital Betting
The notes were compiled from interviews with insiders, some of which are dated and might not accurately reflect the current situation. Additionally, certain points are broad generalizations of specific comments, meaning they may not apply universally and could lead to misunderstandings.
Market Trends and Preferences
Evolution AB (EVO) garners a significant portion of its Gross Gaming Revenue (GGR) from China, while in Japan, Pragmatic is more popular than EVO. Players across various markets have shown a strong preference for crash games, with their popularity on the rise. In Brazil, EVO ranks third among suppliers, with Playtech and Pragmatic not making the top suppliers list. In Asia, games like Crazy Time and Funky Time are less popular as players there prefer simpler games. It's observed that the games placed first on operators' websites tend to be the most profitable for them. Evolution dominates the live casino market, capturing more than 80% of traffic, whereas Pragmatic leads as the number one supplier in Random Number Generator (RNG) games.
Supplier and Operator Dynamics
In the online gambling industry, supplier and operator dynamics have shown that Net Ent and RedTiger haven't made significant progress in recent years. Playtech, on the other hand, has been criticized for its arrogance, insisting that operators prioritize their games. The US market has proven challenging for smaller suppliers, with many losing their investments, and notably, Playtech also failed to make inroads in Brazil. Large suppliers are now enforcing stricter Know Your Customer (KYC) policies, leading to aggregators needing to supply more detailed information and facing more restrictions on their operations. Evolution Gaming's due diligence process strikes a balance, being neither too strict nor too lenient. Both Evolution (EVO) and Pragmatic Play are considered essential for any gaming portfolio, while NetEnt has lost its status as a top necessity. Playtech is no longer viewed as crucial to a portfolio. Additionally, it's observed that operators generating a Gross Gaming Revenue (GGR) of $250,000 to $500,000 begin to consider integrating directly with suppliers.
Financial Aspects and Business Strategies
Evolution AB's contracts stipulate monthly minimum payments, requiring big aggregators to pay between 5 to 20 thousand dollars and up to 50 thousand for small operators. Creating a decent RNG game necessitates a team of 20-40 people, but for live games, this number is significantly larger. Despite this, Evolution doesn't employ aggressive marketing strategies nor demand premium positioning on operators' websites. As a supplier, Evolution is the most expensive, charging 1-2% more than others as a percentage of Gross Gaming Revenue (GGR), yet GGR fees are not the largest expense for big operators, who prioritize other costs such as marketing over price when selecting an operator. There's a greater fear among operators of RNG suppliers monopolizing traffic and GGR than live suppliers doing so. Over the years, Pragmatic Play has increased its pricing. In Asia, operators aim for a take rate of less than 10%, though they may accept rates of 12-15% for premium packages or suppliers. Resellers and aggregators typically have a 1% take rate of GGR each, with aggregators paying between 10-12% take rate for Evolution's games, or even less in some cases.
Regulatory and Compliance Insights
In the online gambling industry, there are specialized companies that provide Know Your Customer (KYC) consulting services to ensure compliance with regulations. For instance, in New Jersey, it is mandatory for every employee involved in the sector to obtain a license. The gaming tax rate in New York stands at 51%, illustrating the financial obligations companies must navigate. Regulatory progress has been hindered in some states, such as Florida and California, where native tribes pose significant barriers. Interestingly, in certain countries like Argentina, regulations permit gambling with cryptocurrency, despite restrictions on using fiat currency. Politicians often show a preference for the development of land-based casinos over the licensing of new online operators or suppliers, citing the potential for greater job creation. However, for companies like Evolution AB (EVO), maintaining rigorous security protocols and processes is critical. Such measures can protect the company from sanctions by regulators in the event of an accident, underscoring the importance of compliance and operational integrity in the industry.
Product and Innovation
In discussing the product and innovation aspects of Evolution AB and the online gambling industry, it's noted that creating a decent Random Number Generator (RNG) requires a team of 20-40 people, contrasting sharply with the significantly larger teams needed for live casino operations. Despite the lack of a clear answer from a technical or gameplay standpoint, Evolution is outperforming its competition, highlighting the principle that the product reigns supreme in the online gambling sector. Live casino platforms are not primarily utilized for customer acquisition but are effective for cross-selling, particularly to sports bettors. The industry is moving towards standardized branded tables, and while game shows play a key role in customer retention and acquisition, they are not as effective for monetization.
Challenges and Risks
On the challenges and risks front, operating in Brazil demands a partnership with a local entity. Inside the industry, there are rumors that Evolution AB might be involuntarily involved in black markets due to the actions of aggregators and resellers, who may distribute their games to these markets without their knowledge. This situation underscores the complexities and potential risks facing companies in the online gambling industry.
Links:
https://inpractise.com/articles/building-an-online-live-casino-offering
https://inpractise.com/articles/evolution-gaming-workings-of-a-crypto-casino
https://inpractise.com/articles/evolution-gaming-asia-igaming-value-chain-and-crypto
https://inpractise.com/articles/evolution-gaming-a-se-asia-operators-perspective
https://inpractise.com/articles/evolution-gaming-asian-b2b-landscape
https://inpractise.com/articles/evolution-gaming-aggregator-operator-relationship
https://inpractise.com/articles/evolution-supplier-aggregator-relationship
Podcast Interviews:
Interview Evolution Gaming: US Regulatory Environment
Evolution Gaming: Asian B2B Landscape