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Africa: the right opportunity to accelerate shift to online play?

By - 2 November 2020

The ongoing coronavirus pandemic has plunged the world into a global health emergency. Among the economic casualties affected by the pandemic, major sporting and entertainment events all over the world had to be cancelled, businesses were shut down, and livelihoods curtailed.

How has Africa faired during this pandemic?

Surprisingly the continent seemed better prepared to combat the pandemic than other regions, with the number of active cases kept under control and not registering the same upward spike as witnessed in mainland Europe or the US. Regardless of what the reasons may be, most African countries have decisively put their populace under lockdown. Some have even imposed curfews, which have effectively led to the shut-down of almost every commercial activity.

How has the pandemic affected the gambling industry in Africa?

Not only was the iGaming industry not immune to this disruptive scenario, but was one of the industries to feel the immediate impact of the pandemic, with practically all live sportsbook events grounded to a halt on a very short notice. With live sports events that previously ran into the hundreds of daily events reduced to just a handful, the whole sportsbook vertical had to endure a significant redimension. The lack of live content translated directly to a significant loss in terms of turnover, with many operators registering as much as 70 per cent or even higher in terms of loss.

The knock-on effect that this has had on the revenue, was not only evident but also disruptive. Bookmakers, especially retailers, had to act fast and in a decisive way to adapt to the new circumstances, re-think their business model, identify alternative content to cross-sell, and make a redistribution of their revenue stream… all of this in the least-time-to- market.

And whilst medically speaking the region has fared very well, from an iGaming industry perspective Africa was perhaps one of the regions most heavily impacted by the pandemic. Not only is the local population particularly passionate about sports and follow keenly the major European leagues and competitions – among the first to be cancelled or suspended –but the prevalent dominance of the retail arm in the local betting industry due to a lower smartphone and internet penetration when compared to more mature markets, and the relatively high cost associated with mobile data has meant that the local industry has had to share a relatively higher burden due to the pandemic.

Whereas online operators could implement contingency plans to diversify their revenue stream by integrating new content and expanding alternative and complimentary verticals and cross-selling these expanded verticals to their target players, retail licensees have had to face the conundrum of diversifying their business setup and migrate to the digital mediums in a bid to maintain their market share, and retain their fold of players.

Failure to transfer virtuals’ popularity to online

On another note, whilst virtual sports have played a crucial role in minimising the negative impact of COVID-19 for so many operators, particularly in Europe, the betting industry in Africa has fallen behind in this aspect, struggling to transfer the success of retail-based virtuals to the online space.

In more mature markets, primarily Europe, operators have mitigated the lack of live sports events by turning to virtual sports and esports. And numbers at hand this diversification of content proved to be quite successful in its own way, with the UK’s Virtual Grand National attracting an audience of almost five million viewers, and with bets placed on the race raising over £2.5m.

So why did this trend not pick up in Africa in the same way as in other markets? Across the African continent, and especially in Nigeria if one were to take the country as a point of reference, fixed odds betting dominates the industry and is attributed as the primary revenue generator.

On the other hand, despite the advancements registered on a year-on- year basis in terms of internet accessibility and smartphone ownership, retail is still king in Africa. What is more surprising is the fact that on a retail level, virtual sports are an absolute favourite amongst punters, with Nigeria being a case in point.

In fact operators concur that in what is considered as Africa’s biggest economy and most populous country, the betting ratio in retail shops dips much more in favour for virtual sports rather than live betting. However it was evident that the African market failed to transfer the success of virtual sports from retail to online. It all boils down to betting preferences and internet accessibility.

If one were to look deeply into the market everything points out to a technological infrastructure that is still lagging behind the more advanced markets, and the relatively high cost associated with mobile data packages. The continent is still deemed to have a low internet coverage characterised by high latency issues that hinder drastically the online streaming of virtual sports events. This problem is even further accentuated by the high cost relating to mobile data, resulting in players unlikely to place multiple bets on virtuals from their mobile device throughout the day.

Despite the 87 per cent mobile penetration, Nigeria has one the world’s most expensive prepaid mobile data plans compared to median incomes. In fact, according to statistics compiled by broadband, TV and phone comparison site “Cable.co.uk”, the average data plan costs $1.39 per 1GB. This is much costlier than the average cost of $0.81 for 1GB of data in France.

A changing scenario?

Yet this is bound to change in the short to medium term, with the continent registering strong infrastructural growth aiding service providers and operators alike in their bid to deliver an elevated and cost-effective betting experience. This is particularly evident in Nigeria with 169.2 million mobile subscriptions from a population of 203 million people – translating into a 83 per cent penetration rate – the country has one of the highest mobile subscription rates on the continent. This is also reflected from an internet accessibility point of view where at 42 per cent the Internet penetration is well above the median penetration rate in Western Africa which stands at 36 per cent.

Worthy of notice is the strong growth registered in terms of mobile and internet penetration when compared to the previous 12 months, with mobile phone connections registering a 7.7 per cent increase (+12 million connections) from January 2019 to January 2020, and internet users increasing by a further 2.6 per cent (+2.2 million users) throughout the same period.

The country has also registered significant improvements in terms of the average speeds of mobile internet connections – which at 15.32 MBPS registered a 31 per cent year-on-year increase – and fixed internet connections, which registered an 11 per cent year-on-year increase.

The smartphone is by far the most popular device, with 83 per cent of internet users aged 16 to 64 owning it. On the other hand only 12 per cent own a non-smartphone mobile phone, whilst laptop and tablet ownership stands at 52 per cent and 20 per cent respectively.

On the other hand 95 per cent of all internet users access the internet via smartphones, while only 2.3 per cent access the internet via feature phones. The average daily time spent using the internet on mobile devices stands at 4 hours and 50 mins, which is relatively high.

Data consumption on the rise

Data consumption in Nigeria will also experience rapid growth with a compound annual growth rate (CAGR) of 44.9 per cent to 2023, when traffic will reach 11.9 billion GB from a 2018 level of 1.9 billion GB.

Although video will be the major component of data consumption, there will be very significant growth in the smaller sectors of music and Web browsing, which are each expecting compound annual growth rates above 70 per cent.

As elsewhere, the most important means of data consumption in Nigeria is smartphones, which overtook other portables in terms of market share in 2018, attaining 34.3 per cent of overall data consumption traffic. Smartphones will continue to expand their proportion of the market to 2023, when they will account for 38.2 per cent of all data consumed in Nigeria.

What will the industry look like post Covid-19?

The increase in popularity of gambling across Africa has given rise to the need for legislative reforms. Of particular concern is the need to curb vices such as gambling addiction and gambling-induced debt. On the one hand, this can be viewed as a direct consequence of socio-economic problems.

And on the other, it highlights a need to augment dwindling government income through gaming taxes by harnessing the industry’s potential.

The continent’s iGaming legislative reform could be even more accentuated in the post-Covid-19 situation, which could see a shift towards mass regularisation of the online gambling industry, that are still lagging behind in the process. Governments are already gauging how they can weather the economic fallout brought about by the pandemic. The iGaming industry will be seen as a resource not only in terms of tax revenue, but also as a source for job opportunities during these trying times.

Having said this, live sport events have resumed and operators are already registering high levels of player engagement. The iGaming industry is a very agile industry and operators will pick up where left.

The industry is becoming increasingly digital, players are increasingly seeking remote access, and no market can risk being stuck on a business model that would eventually result in less revenue. It is with this in mind that I expect the industry to accelerate in its shift from the retail to the online channels, in order to meet players’ requirements opting to place their bets from their mobile, smartphone, tablets, or laptop.

I truly believe that the post-Covid-19 situation will eventually result in operators, especially those basing their business model on vast retail networks, seeking to diversify their strategy. Those operators backed by the right technological partners who will aid them with the provision of an advanced omnichannel sportsbook and gaming platform, which is able to provide an optimal betting experience to the interconnection of all channels, will eventually be in the optimal position to significantly increase their market share.

The digital mediums are set to be the primary point of sales on the medium to long term. I expect this trend to be reflected also in the African context, and this is what operators and service providers alike must capitalise on.

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