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Entering the lucrative regulated market of Brazil would be an expensive and challenging venture, making an acquisition of an existing operator a more sensible investment, a strategic advisor has said.
Developing an “organic entity” to debut in the Brazil market would take hundreds of millions of dollars, making an acquisition the most appealing prospect, said Crispin Nieboer of Tekkorp Capital, a gambling consulting firm.
“It’s not an easy market to enter if you want a podium position,” he said, that is, the top three in market share.
Nieboer was among panellists discussing gambling in Latin America at the KPMG Gibraltar eSummit last week.
They focused on Brazil, where licensing has been delayed for years, most recently by a volatile political environment.
Today there are some successful operators, but it is not yet known whether those exhibiting bad behaviour will be handicapped in licensing, Nieboer said.
A potential acquirer might ask, “are they really a clean licence?”, he said.
Those in the market for an acquisition “need to ensure that the company you buy is reputable, highly regarded”, he added.
Panellists said they thought the Brazilian betting market was growing so fast, that earlier estimates of up to $1.5bn to $2bn in annual gross gaming revenue understated the potential.
The numbers are bigger than the industry expected, with “eye-watering” growth, said Chris Dougan of Genius Sports Group.
But the same adjective could also be applied to costs as well as growth, too, he said.
Operators that do not have their own payment gateway face paying up to 40 percent of revenue for transactions, he added.
Those that do have to pay less than 10 percent, Dougan said.
Pierre Tournier of the UK’s Betting and Gaming Council (BGC) wondered whether the Brazilian government’s approach to taxing sports betting was entirely rational, as it seems to want to cushion the impact of the country’s personal income tax with betting tax.
“This is the largest tax in the country, and they think they’re going to replace it,” he said. “This is a bit ridiculous, I have to say.”
The finance ministry has proposed a base rate of 15 percent of gross gaming revenue, though lawyers have suggested that the effective rate would be much higher, given local service charges and contributions to social security.
Tournier suggested officials may also have a tough time reining in the black market.
The unlicensed market may turn out to be twice the legitimate one, as many offshore operators may not want to apply for a licence, he said.
