Asian online gambling market increasingly competitive

Online gambling software developer and provider Playtech‘s announcement this week that its adjusted profit in H1-2018 has taken a 34 percent hit (see previous report) was another illustration of the competitive pressure the company faces in Asia as new providers enter the market with cut-throat pricing.

The company noted that if its Asian market results were excluded from the H1 numbers it would have actually made a decent double digit reported profit.

The impact of fierce Asian competition was not a new experience for the Isle of Man based company; Our readers will recall that in July this year the company shares took a hammering after it issued a significant profit warning based on Asian revenues, which were worse than expected due to “a particularly aggressive pricing environment from new entries into the market”.

In short – a price war with Playtech singling out Malaysia for special mention.

However, it is probably also China where Playtech is feeling the pain; Credit Suisse has estimated that 40 percent of its profits emanate from that region.

Eight months prior to that, Playtech issued its initial profit warning, and its current share price is now roughly half of what it was back then.

The competitive manoeuvring in Asia has prompted many observers to warn against an unsustainable “race to the bottom” but this does not seem to have deterred continued price cuts from both new and established international and regional companies entering the market over the past year or more.

Among them are several major European companies with big reputations who are now competing vigorously in the region, with some analysts claiming that competitive firms with quality products have been slashing their revenue sharing offers to operators by as much as 50 percent…and there is every indication that this situation will persist for some time.

Younger (and presumably hungrier) European providers have entered the market in force, along with new and established Asian suppliers.

How Playtech is handling this is not entirely clear, but chief executive Mor Weizer has previously revealed that the company intends to maintain its prominent market positioning despite the competition, and will “further support” its partners in Asia.

That could entail a larger presence in the region in the form of staff and offices, and a higher profile through expos and conferences, a tactic adopted by many international companies.

Players in the region are benefitting in terms of the range of online casino games flowing from the influx of new and in many cases quality and innovative providers now in the market, observers note.

The bottom line for providers is that intense competition is likely to remain a major challenge in the region for the foreseeable future, requiring careful focus and planning by providers whilst maintaining the highest levels of client service and product quality.

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