Dealing with disruption
How industry leaders are balancing the tremendous opportunity of digital transformation with increasing risk and regulation
The gaming industry is at a defining moment, and disruption is bringing exciting opportunities to many players... But with opportunity, comes risk.
We spent our time at G2E 2021 (Global Gaming Expo) observing industry trends, talking to company leaders, and meeting the next generation of innovators. We found that the excitement portended by the wave of deals and other public announcements is not an exaggeration. Many in the industry are excited about the road they are on, even with potential potholes and roadblocks along the way.
Opportunities driven by growth
We spoke to leaders from several companies in discussions on the expo floor and in a closed-door roundtable, and we came away thinking the gaming industry has a generational opportunity to leverage the current moment of excitement around growth to make a step-change forward. Specifically, the digitization of gaming could allow the industry to attract a new talent base, provide the chance to “tell the story” of gaming to a broader audience, and become more consumer-centric.
To realize the potential benefits, the industry requires a level of cooperation and coordination on issues like responsible gaming. A change in mindset about the level of data sharing among operators and those providing products and services to the industry would also facilitate better games and more desirable customer experiences.
The trade show floor at G2E certainly didn’t grow since 2019, reflective of the impact of COVID-19 and not the state of the industry. We noted the continued influx of online services and products, plus emerging and expanding products like electronic table games, analytics, automation, and creative sports betting and online gaming.
Risk in a business built on risk
G2E hosted multiple education sessions around risk – responsible gaming, AML compliance, cybersecurity among others. Gaming leaders are concerned about regulations on multiple fronts:
- The pace of change is perceived as too slow.
- Regulations seem to change without transparency or a solid foundation in business reality.
- Regulators may not have enough industry experience to make proper decisions.
We sensed a dichotomy among those attending G2E around the topic of traditional land-based companies embracing digital transformation. Some thought the industry had a good chance to avoid the disruption seen in media and retail. Others worried that the industry wasn’t tackling a lack of innovation and an aging customer base fast enough.
Operators and suppliers alike bemoaned the current talent shortages, and suppliers have the double whammy of supply-chain issues. Neither seemed to be fixable in the short term based on the conversations we had. These issues also seem exacerbated by the pace of change that doesn’t show signs of slowing.
Beyond the near-term, questions on the pace of transactions (mergers, IPOs, partnerships) and where the online market may end up were palpable. Some worried we may be treating the customer as a short-term entity, leaving casualties in a race to market share. Many we spoke to believe the industry would be well served by treating customers like a sustainable asset.
In the longer-term, environmental, social, and governance (ESG) issues are a growing aspect on the radar of many leaders. ESG may prove to be ever more core (and strategic) to operations going forward, including the focus on responsible gaming mentioned earlier.
In all, the opportunities are immense, but risks are real. And the heightened visibility of gaming as it grows means the industry will have less margin for error.
What will the future bring?
Leaders we spoke to believe the industry will continue on a path toward an omnichannel existence and a converged future with other sectors like sports and media. We agree that the G2E of the future – say 10 years from now – will look vastly different from this year’s show. We expect more and more of a digital focus to meet consumers where they are.
Operators and suppliers need to innovate and experiment. They would be wise to leverage data far more than they have in the past. This effort includes bringing regulators “under the tent” as partners and explaining the “long story” of the industry and where it’s heading.
A common message at G2E concerned managing the industry’s affairs in such a way that the backlash and regulation seen in Europe to online gaming doesn’t happen in the United States. Some worry that we already may be failing in that task. Industry stakeholders should redouble their efforts and rededicate themselves to the long-term sustainability of the industry.
How can KPMG help you?
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Together, we can shape the future of gaming – now.