Central and Eastern Europe (CEE) may seem an attractive proposition for operators looking to move into the market, but those within it have advised navigating it with caution.
At SBC Summit, a high-profile list of executives gave their thoughts on the current state of the market – and warned that they are still wary of facing ‘another Brazil’ situation.
“There are exciting opportunities across the region, but I can’t pinpoint specific markets,” said Irakli Asanishvili, Chief Executive Officer of Flutter CEE.
“We also need to think about the future of the market from a regulatory standpoint – you’ve seen what’s happened in Brazil.”
Heavy regulations on various CEE markets are there for all to see, and are in place with initial good will – in order to sustain player protection.
For example, the Magistrát of Prague (City Council) in Czechia has the right to apply specific gambling laws, and allow individual city districts to ban or restrict live gambling independently.
Meanwhile, in Slovakia, a controversially-high, government-approved, flat-rate levy per device, alongside a gross gaming revenue (GGR) tax rate of 27%, has caused disputes and may dissuade some potential market entrants.
This in turn, panellists said, not only keeps operators on their toes about a potential wipeout of a regulated CEE market, but also pushes players towards unlicensed operators, with channelisation rates still leaving a lot to be desired in various regulated CEE markets.
Overcoming the barriers in CEE
Entering any market in CEE sounds like an arduous task, if comments from Asanishvili and his fellow panellists Bojan Scekic, CEO of Balkan Bet; Mikolaj Cymerman, Chief Commercial Officer, Entain CEE; and Ionut-Valeriu Andrei, CEO of Loteria Românǎ, is to go by.
Alongside fears of overregulation and low channelisation, the CEE gambling landscape is dominated by local giants, many of which are transitioning from a long-successful retail model to online.
With this change of market dynamics in mind, any challenger brand has been advised that successful market entry and stabilisation will require significant expenditure.
Despite all panellists arguably at companies which are four prime examples of these local giants, they still showed sympathy towards potential challengers.
“The barrier for entry for any newcomer is very hard,” explained Cymerman.
“As you can see here, from my fellow panelists and the firms that they represent, it’s very difficult for one specific brand to capitalise on each and every particular market in CEE.”
Cymerman did offer some glimmers of hope for potential incoming operators, however.
He pointed to Poland, which has a monopoly system over gambling but with private licences issued for betting. Cymerman sees this market as having the potential for further opening up, however.
He suggested that in the future there may be some “political will” to move to an open market, much like other European regions including the Netherlands, Sweden and Finland have done in recent years.
Change on the horizon?
Hungary was also a hot topic, given it is a country set for significant industry changes after the conclusion of Viktor Orbán’s 16-year-long stint as Prime Minister.
Just last week, following the panel, Parliament voted in favour of limiting the Supervisory Authority for Regulated Activities’ (SZTFH) power of its concession powers, with the Concessions Council within the SZTFH being dissolved.
It remains an open question as to exactly what institutional structure will replace the current supervisory setup, but opportunities may arise on the back of these developments.
Scekic was blunt in his assessment of the Hungarian market, commenting: “If you’re a CEE operator, and your answer to being interested in Hungary is ‘no’, then you are straight up lying.”
Questions remain in CEE, as much as they do in many parts of the world, regarding retail vs online.
Andrei, a figure leading by far and away the most prominent retail firm in Romania due to Loteria Română’s monopoly on traditional draw games, did admit that while retail is still an important contributing factor to the state-owned organisation’s revenues, times are changing.
“Romania sells over 50% of lottery tickets online now. Three years earlier it was 15%,” he explained.
“We were nervous about killing the retail. But it is still very important as so many Romanians still use cash.”
Andrei also affirmed that “omnichannel is the future” – a statement challenged by Asanishvili as he believes having a retail presence is no longer a necessity.
He countered: “I fully believe that humans operate on convenience. If you can build something that customers think is more convenient, there’s going to be more demand for it.
“If you can build brand, trust and have a variety of payment channels, I don’t see why you can’t be successful without a major retail presence.”
Despite the panel at SBC Summit being titled ‘CEE in Transition: From Established Giants to Emerging Opportunities’, it appears that challenges lie ahead for any operator looking to enter any CEE market – and those that are prepared to do so may need more planning, and funding, than they initially set out.