Saving online bingo: Part 1

With the bonus-obsessed, white label-fueled online bingo sector arguably having most to lose from the regulation and tax changes sweeping through the UK industry, Phil Blackwell looks at how it can restack the odds in its favour


In the first of a two part analysis, Phil Blackwell looks at why the bonus-obsessed, white label-fueled online bingo sector arguably has most to lose from the regulation and tax changes sweeping through the UK industry

The rate of Remote Gaming Duty (RGD) payable by online gambling businesses to the UK government increased from 15% to 21% on 1 April this year.

RGD, a form of point-of-consumption tax, was first introduced in 2014 and amended in August 2017 to incorporate levies on certain free bets and bonuses. The 2019 increase accompanies follows two other regulatory changes taking place this spring following a recent uprising of anti-gambling media sentiment and the resignation of sports minister Tracey Crouch. Also in April, the government reduced the maximum stake on fixed-odds betting terminals (FOBTs) from £100 down to just £2, while the second – and amendment to the Gambling Commission’s licence conditions and codes of practice (LCCP) – will force know your customer (KYC) checks at the point of player registration in May. These are sweeping changes that will affect both online and offline gambling operators and affiliates, with the effects seemingly anticipated through a series of recent industry reviews and acquisitions, from Jackpotjoy Group selling Costa Bingo to 888, to Sun Bingo extending its deal with Playtech by up to 15 years on a revenue-share basis. But as more restrictions are imposed and the cost of acquiring players increases, it is the bonus-obsessed, white label-fueled online bingo industry that perhaps has most to lose. Eyes down for an uncomfortable read. One way or another Perhaps the most frustrating aspect of the impending legislation is the hypocrisy displayed by the government in its structure and timing. When announcing the RGD increase, Chancellor of the Exchequer Philip Hammond clearly correlated the online tax rise with the need to offset the revenue shortfall that the new offline FOBT limit would bring. Combine this with the media’s incessant desire to report on the potential dangers of FOBTs with a complete ignorance of unrestricted online stakes, and you have a checkbox exercise in contradiction designed only for political point scoring and profit; not the protection of vulnerable gamblers. Whatever the motives, change is coming and challenges lie ahead. Squaring up to the problem It’s almost three years since Lindar launched an April Fool’s Day campaign designed to expose the vulnerabilities of the online bingo industry prior to the introduction of the free bet amendment. Square Bingo was the world’s first website to launch on brand new software, Shapesoft, with square bingo balls, a square root bonus system and square bingo daubers. It was also completely fake. However, what it did achieve was interest from multiple affiliates hoping to ride the wave of commission for a new site not restrained by the white-label status that was – and still is – so prominent in the online bingo space. We predicted that the expansion of RGD to bonuses would result in a contraction of the wider market and force operators to reconsider excessive promotions as acquisition incentives. While there has been evidence of this happening, such as the introduction of prize-based offers instead of mere bonus cash and the acquisition of Cozy Games by GVC, there is no better time than the present to consider the compounded impact of further legislation in 2019. Last October saw fiction almost become reality as we released, a brand new bingo site on (real) proprietary software and the first launch of its kind in over five years. More on that later. Paying for the 6% Like any point of consumption tax, the 21% RGD is unlikely to be absorbed completely by the point of consumption. It is far more likely, and currently the case, that the additional costs will be passed on by operators to customers and affiliates. The unavoidable tax and additional KYC expenses will be layered into marketing budgets, increasing average CPAs and reducing average ROIs. So what might this mean in real terms? The cost to customers

  • Fewer, more restrictive bonuses
    Wave goodbye to 500% welcome packages and say hello to poorer odds, more clauses and less return. If players don’t win, operators don’t lose. Squeezing probabilities is a viable strategy to retain revenues, albeit at the probable expense of bad publicity and lower player value.
  • Transaction fees or limitations
    Some bingo brands already charge players to deposit or withdraw in the UK, and we could expect to see such a direct approach applied more generally to recoup extra costs. In addition, we may find higher minimum deposit amounts imposed for players to put off every operator’s greatest nemesis, “the bonus hunter”.
  • Higher admin fees leading to reduced revenue share
    It’s already almost impossible to find an operator that doesn’t include at least part of a player’s RGD contribution within the admin fees deducted from gross gaming revenue (GGR) before commission is calculated. Perhaps the simplest way to offset the higher tax for affiliate channels is to incorporate the charge in this way.
  • Lower CPAs and higher baselines
    If you read my previous iGB Affiliate article, Trigger Happy (issue 72), you’ll already know my position on the issue of commission baselines. However, CPA-only or tenancy-based commission structures may have to concede some ground where an admin fee cannot be applied in the absence of revenue share, especially if the demand for players no longer exceeds supply.Saving online bingo

In Part 2 tomorrow, Phil looks at ways online bingo can restack the odds in its favour.

Phil Blackwell  is acquisition operations manager at Lindar Media and responsible for the growth of affiliate site and proprietary bingo platform In previous agency roles, Phil devised SEO strategies for multinational clients including Ebay UK, New Era, Mothercare and Carphone Warehouse.