Roundtable: Dutch PotentialBy Lewis - 19 May 2021
In April, Dutch regulator Kansspelautoriteit (Ksa) began processing applications for 35 online gambling licences ahead of the market’s opening on 1 October. The Koa Act, passed by the Senate in February 2019, legalises and regulates online games of chance under strict conditions.
The Koa Act will see all (including country-bound) providers of games of chance have additional requirements in the field of addiction prevention and new requirements introduced for advertising and recruitment applying to all providers, including lotteries. In the regulated market, Ksa will also be given additional powers to tackle illegal activities.
René Jansen, Chairman of the Ksa, said: “The Games of Chance Act, our current legal framework, dates from 1964. There was no question of digitisation at the time. It was therefore high time for the Remote Gambling Act (Koa), which in fact supplements and changes the current law.
“Ultimately, our work revolves around the interests of the player, of the consumer. A fair market remains an important objective, but is above all a means to allow consumers to play safely.”
Ahead of the Koa Act’s implementation, G3 canvasses the expertise of interested stakeholders to assess the market’s potential and how the new environment will shape up over the months and years ahead.
How do you expect the market to shape up in the immediate months after going live? Will there be a rush to market?
Antoine Bonello, COO and Managing Director, Aspire Global: To put it plainly, yes. The Netherlands is one of those markets that has taken an eternity to regulate and even as early as 2012 or 2013, there was a buzz and element of excitement at the prospect of the country regulating.
The Netherlands is a strong market for both tier 1 and tier 2 operators and despite having a number of regulations already in place, operators are acutely aware of the value of Dutch players and the potential of the market in general.
The regulator plans to approve 35 licensed operators, initially. However, there will also be a cooling-off period enforced. Certain operators that may not have fully abided by the Dutch regulation will be subject to a cooling-off period which commences from the moment they became fully compliant. This process ensures that the applications are phased organically.
Operators that are not subject to a cooling-off period may apply immediately through the immensely structured license application system. Operators require certifications for not only the platform but for offerings and other elements of the core business. All in all, it is a long process.
There are tech, product and development efforts that need to be made in order to ensure compliance. Across the board, there is significant interest among operators but the process will be phased out based on these different parameters.
Blanka Homor, Sales Director, Playson: We expect the regulator to impose a stringent set of rules, similar to frameworks that are already in place across Europe. Like many other suppliers, we may need to adjust our games in line with the strict player protection provisions. There’s a race on to apply for licences and ensure the necessary compliance measures are in place ahead of the market’s opening, with key industry players gearing up to enter.
The legislation that is coming into effect will also allow domestically based casinos and sportsbooks to significantly expand their operations, so there’s a flurry of activity about to take place in the Dutch market. We can’t wait to get involved and believe it will offer huge opportunities for businesses looking to expand.
Vladimir Pavlov, VP Product, Pariplay: When any new market opens up, it generates a buzz within the industry and that is certainly true of the Netherlands. At the time of writing, precise information on how the regulations will look is impossible to come by, so everyone is eagerly awaiting news on that front.
What is clear is that once the regulated market opens up, there will be a rush to act quickly. We are ready for that and will have our games available to Dutch players as soon as possible.
Alexia Smilovic Rønde, Chief Regulatory Officer, Relax Gaming: Initial applications are unlikely to happen in one sudden burst, rather they will be submitted gradually. Operators with existing exposure in the market have until the end of the cooling-off period to apply or exit, and for those, it is set to expire on April 1 2022.
The licence application period will not be without its challenges, mainly because of the cool-off period conditions that place a great deal of uncertainties on the market during the early days of operation. Not all the operators will be able to get on the starting blocks, as it still has not been clearly defined by the authorities.
Operators are also faced with an array of cumbersome policies to address, which require extensive adaptations as well as important calibration with their third-party suppliers. It’s certainly not a process to be taken lightly, therefore, we can expect a gradual series of applications throughout the next 12 months.
Although the Netherlands is generating great interest, the full introduction of the new regulations are expected to happen in waves. It’s therefore unlikely that there will be a ‘big-bang’ start, as has previously happened in other similar markets.
The cooling-off period imposed on operators before the regulation came into force may prevent the mass applications everyone expected when the window opens. The delays accumulated by the authorities in finalising the regulations, policies, and the application conditions are also taking a toll on stakeholders’ ability to prepare timely, so it’s unlikely that there will be a rush to market.
Javier Sacristan Franco, Director, R. Franco Digital: We believe the Dutch Market will become one of the biggest in Europe. Players love to play slots, roulette and blackjack and with the new regulation, they will be able to enjoy casino games legally and safely.
It comes as no surprise that the biggest operators intend to enter this new market, because local players spend more money on gambling activities than in many other regulated markets in Europe.
What makes the Dutch market so attractive for online casino suppliers?
Alexia: The Dutch market has long been in discussion, so to see it coming to fruition offers clarity in what has always been regarded as a region with great potential. The attraction is largely rooted in an understanding of how to approach and support regulated operators but also it would seem that while there will be some perceived lead times for licensed operators going live it will hopefully grow into a strong market in the coming years.
One of the early positives that has been noted is its perceived openness to marketing initiatives, this should help stimulate positive growth and creative product positioning, which will in turn attract Dutch players. The Dutch regulators are well aware of the need to succeed with the channelisation challenge.
Despite the relatively strict vetting conditions and the extended period of time it will take to achieve, the market conditions are good. This will eventually culminate in the development of a functional and diverse market, a model that harks back to the earlier days of regulation on the continent.
The Netherlands is also one of the last markets to regulate in Europe, so it’s also one of the final opportunities to increase companies’ regulated footprint, which is key in this industry landscape. The European market’s consolidation and increasingly frequent regulatory scrutiny continues apace and in some regions is accelerating, so access to a brand-new market feels for many like a breath of fresh air.
Javier: The potential of this market is very high, because Dutch player spending in online gambling, per capita, is higher than Germany, on a par with France and only slightly behind Spain.
Vladimir: Every new regulated market is very attractive for suppliers and the Netherlands is no exception. The land-based gaming market is fully regulated and is growing every year, so with the current market conditions in place we fully expect offline players to seek online opportunities in order to stay entertained.
Antoine: As the Netherlands has a high entertainment spend per capita, the underlying factors are all in place to categorise the country as an attractive market. Not only does the market appear to be promising with ample potential but such potential has been tried and tested by a number of operators with their .com brands already.
Now, operators have the necessary experience to navigate the Dutch market with some having already accumulated a database. There is a high propensity between Dutch players and the live casino vertical as they are familiar with prominent casino games, and there is already familiarity from a land-based perspective which in turn provides a strong market for live casino.
Regulation will provide the right frameworks for responsible gambling and marketing. With the right parameters in place the market will grow further in a sustainable yet regulated way, making it even more attractive for operators and suppliers alike.
Blanka: The Dutch market represents a very lucrative prospect, which we know from those who are currently permitted to operate in the country. Put simply, Holland is a jurisdiction that’s brimming with potential, and I predict that it will become one of Europe’s most important territories in the months and years to come.
Is there a typical Dutch player? What types of games are preferred in the country?
Blanka: Gambling is a popular activity in the Netherlands, a country known for implementing liberal policies on social issues. Dutch gamblers tend to be passionate football fans, so from the casino sector’s perspective there’s strong potential for cross-sell. We will be monitoring local player preferences very closely and adapting our offering accordingly.
Lottery is a vertical that has proved popular within the Netherlands, with table games such as roulette and blackjack also attracting a significant local following.
In terms of slot games, classic titles with traditional casino themes, such as ancient Egypt and Vegas-style fruit symbols, tend to feature among the country’s top-performers, so we feel confident that Playson’s acclaimed Timeless Fruits Slots portfolio and Funky Fruits series will be especially well received.
Looking at the statistics, roulette is currently the most popular game amongst Dutch-based gamblers, with blackjack a close second. Slots, meanwhile, are enjoyed by around a quarter of the country’s players, although we expect to see some variation in those numbers when private offshore operators go live in the market.
Antoine: We cannot necessarily categorise a typical Dutch player. However, what we do know is that the Dutch are a nation of avid slots players. Some providers native to the Netherlands have migrated and transitioned pretty seamlessly from land-based slot machine preferences into online casino slots- so there is a clear affinity to be noted.
There is also a strong sportsbook affinity which provides the perfect bridge between the two and towards live casino offerings.
We have also witnessed a trend that typically Dutch players tend to enjoy playing across all verticals. This tendency usually brings good lifetime value to a casino operator who can cross-sell from one vertical to another. This factor does not incite the need for a one-size-fits-all approach but creates a high lifetime value customer base.
Javier: The typical Dutch Player knows the market and the best options available to them. They love to play online gambling games and their preferred games are roulette, blackJack and slots. Now with the new regulation, they will have more safe options.
Alexia: We find that there is often synergy with what players enjoy in Scandinavia to that which works in the Dutch market, that said, there is certainly specific localised game content which resonates particularly well.
Dutch players have historically enjoyed a rich legacy of gaming in the land-based sector, with arcades in the country being numerous and well-patronised for decades, so familiarity of that format has translated well online. We have proprietary and partner content within our portfolio with a specific Dutch appeal, which we believe will resonate with players there.
How quickly will Dutch players embrace licensed operators and new legalised gaming verticals?
Alexia: It’s difficult to say. Beyond the cooling-off period that many operators respected, Dutch players continued to gamble online in huge numbers. Having said that, there are no real identifiable issues for them to switch to the new, regulated offering.
The regulation framework will not drastically affect the content available, or indeed marketing activities – enabling licensed operators to be able to communicate with their players, offering better interaction and support when needed.
Vladimir: We believe that Dutch players will adapt quickly to the new conditions. Statistics show that a large section of society is already very comfortable with other forms of gambling, with 54.4 per cent of the population playing lottery at least once every year.
Javier: Under a regulated market, players usually welcome new operators quickly since they come with a licence and are regulated by the government. This gives them a security that they did not have before in a grey market.
Blanka: After a period of uncertainty which has lasted years, the new gambling legislation will finally come into force this October and I anticipate that local players will begin to enjoy the new legalised gaming verticals and online casinos immediately.
We look forward to entertaining them with our immersive suite of premium quality slot titles, which have generated widespread appeal in other European markets and beyond.
Antoine: It’s an interesting question. If we had to use other markets as proxies- the regulation seems to share the most similarities with the current Danish regulations, for example, platform certification, a centralised self-exclusion database, safe reporting and more. This has proven successful thus far.
Channelisation is expected to be higher in the Netherlands, when compared to other jurisdictions such as Sweden. For the latter there are documented cases of the percentage of online gaming that’s going to offshore companies and this does not seem to be improving. On the other hand, I would expect the Netherlands to be more proactive in limiting offshore activity.
A revised Gambling Interstate Treaty will come into force in Germany in July making online gambling legal and regulated across the country’s 16 states for the first time. What similarities do the two markets share? Do you expect one to be more lucrative than the other?
Antoine: There are some differences in the regulation- the Dutch seeming to be the more reasonable of the two. There are learnings evident in the regulation inspired by how other jurisdictions have chosen to regulate.
Two big markets with customer bases that have a propensity to go online for entertainment, however it is already clear during the transitional regime in Germany, that the current player restrictions have made it a challenging market for the operators who see long term prospects for the German market and currently going for the licensed approach.
On the other hand, a good number of German players are likely to be moving to offshore sites or operators who are not abiding to these restrictions. It is also still uncertain on how the licensing process will process and how tax will be applied.
The way forward for the Netherlands regarding the licensing requirements and the tax regime is better defined at this point. This can only help the Dutch market flourish sooner, especially for the operators who get a license earlier.
Blanka: Holland is not as large or as wealthy as Germany, which partially explains why the latter has attracted so much more attention. Nevertheless, with a population of nearly 20 million, the Netherlands will undoubtedly still be an important market for many.
We already know that Dutch players spend more on average than their German counterparts, and I predict that, with time, the Dutch market could be an even bigger revenue driver than its neighbour to the East.
Javier: Both markets are among the largest in Europe and have things in common, but players prefer different games in both countries. Although Germany is much larger than the Netherlands, the average spend per player is higher in the Netherlands than in Germany.
Alexia: I do not see too many similarities between these two markets. However, one defining parallel is the clear desire to regulate online gambling operations on their own terms and according to their respective vision of what responsible gambling and player protection should be.
Both markets will be lucrative but will be organised differently, with growth curves and the timing for consolidation varying widely. In Germany, it’s about accepting the opportunity of new terms – the ‘new normal’, if you will. The long-anticipated opportunity there will not materialise in quite the fashion that the industry expected, however we must accept the situation for what it is, and I believe success can certainly be achieved there.
While Germany is a large country with huge potential, the severe nature of restrictions on operators impedes the creation of a functional market, commercially. It will likely pan out to see the larger, more robust operators enjoy an oligopoly – those who possess the strength and durability to withstand the impacts of regulatory constraints – as the bar is set to be very high for the foreseeable future.
Developing the regulated market in Germany will require perseverance from the authorised operators, as conditions are likely to get tougher before they get better. In the early days, post April 1, the marketing advantages available would be offset by the grey market competition and the regulated space would not deliver the expected return in some cases.
Speed of enforcement among unauthorised operators will be key to consolidating the market for committed operators to start seeing success.
The Netherlands on the other hand, is closer to the market entries the industry experienced in the first half of the last decade, even if the cool-off period conditions are impacting the timing of entry for some operators, the number of participants will be larger and overall, more diverse.
Tying B2B supplier’s activity to an operator’s licence could prove a pivotal point in managing the grey market and should see more players commit entirely to regulated operations sooner than they may have otherwise.
There are quick growth opportunities available in the Netherlands for operators who can meet and sustain the licence application conditions, and for suppliers, it also offers the opportunity to access new casinos that have not yet started operating online locally but possess strong brand recognition and loyalty.
Vladimir: The current retail offering in the Netherlands, will continue to have an edge when the market regulates. But online has great potential too, given the size of the country, which is home to 17 million people. While not as big as Germany (population 83 million), expected player value is high and restrictions within the gaming offering in the Netherlands are not expected to be as strict as they are in Germany.
Dusting off your crystal ball, once the market has settled down, what are your long-term predictions?
Javier: At R. Franco we are betting that it is going to be stable, with a large number of players under the security of a regulated market. We are confident that the Dutch online gambling market is set to become one of Europe’s biggest.
Blanka: We anticipate that lotteries will be the most popular vertical, with sports betting playing a leading role as well. Casino games will be next in line and will grow rapidly in the period following the market’s opening.
Slots will capture more and more important market share as the months go on, with classically themed titles expected to comprise around half of all slot gameplay. Overall, the market will be awash with activity. Operators and suppliers are queuing up for a piece of the action, and the Dutch government should be applauded for its diligent research.
The decision to restrict licences to those who have not been targeting local players in recent years will create a level playing field, and I expect Holland to become one of Europe’s fastest-growing markets in the years to come.
Vladimir: The iGaming industry has a bright future in the Netherlands. As we see it, the Dutch market will grow and mature over the next few years to take its place as one of Europe’s most important. The potential is clear and we are excited to be a part of it.
Alexia: I believe Germany could consolidate in the medium term, as the conditions are more difficult for operators and although the level of enforcement is not yet known, the risks will increase significantly after 1 July. The operators staying in the regulated space may be able to regain larger market share, but over a period time of course.
The Netherlands will adopt a more traditional profile with substantial diversity of operators and suppliers supported by favourable conditions. My belief is that it is likely to become one of the more reliable and lucrative of the European regulated markets – and for a larger group of industry stakeholders.
Antoine: I predict that the first year will be slightly unstable but once operators work through their cooling-off period, apply for a license, and get certified, it should be somewhat smooth sailing. It will be interesting to see how the market reacts after the first year of being up and running.
After the first year or two, the market should fully stabilise and provide sustainable growth for medium-sized and larger operators. It will be a market where players quickly distinguish between the operators providing a good product and wide portfolio, and those who are not.
Sports will be a competitive market for sportsbook operators where pricing, the product offering and the range of markets will separate the leading operators from the ones lagging behind. Largely, I anticipate the Netherlands to develop into a strong, stable, properly regulated market in the medium to long term.