Stake Limits Regulatory Changes

Looming Stake Limits Regulations — An Opportunity for Change

Posted by Christopher Conroy, Chief Data Officer on January 15 2021

Now is the time for gaming operators to increase the interaction they have with players and for game studios to understand player behaviour. Stake limits regulations are heading towards the sector in a number of leading European economies. Our research at Future Anthem indicates that legislated stake limits will have a major impact on the revenues of gaming operators and increase the complexity of the game studio business model, which ultimately impacts the bottom line for both business types.

However, the data science is at hand to enable both operators and studios to improve their understanding of the customer, and how they behave, and to implement new models that will mitigate harm to the player and protect the revenue streams of the organisation.

In a recent research study and Whitepaper, Future Anthem identified that gaming operators need to take a customer-centric approach to the highly likely scenario of legislated stake limits. The most important issue gaming operators face right now is the need to take action. Organisations cannot simply wait for the legislation to become statute law before they act. It is vital to use this period of time to prepare the organisation, and in doing so, enhance the relationship the business has with the customer through good communications and collaboration.

The big opportunity for gaming operators is to identify the customers playing at higher unit stakes and build a profile of their patterns and behaviours. Quality interactions with these customers can provide opportunities to nudge their behaviour into different directions, which will benefit both the customer and the organisations. Examples might include directing them towards different types of sessions.

Organisations need to consider the types of games these players play and lead them to diversification in their experience.

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The research by Future Anthem highlighted that it is vital for gaming operators to begin considering these questions and to be planning. The reason being, that as and when legislation comes into force, there is likely to be an implementation period, but the organisations that have already invested time into considering the customer’s perspective, and communicating with the player, will be able to use the implementation period more effectively and ensure that the new legislation has a reduced impact on their operating profits.


Studio of study

Studios will be impacted in a very different way to the introduction of regulated stake limits. The Future Anthem research and Whitepaper demonstrates that game studios will see a significant diversity in the effects of regulated stake limits across the games portfolio the studio produces.

To mitigate the impact on a game studio, Future Anthem, therefore, believes it will be vital for the sector to begin investing in developing a greater understanding of the player and their behaviour within the games. If stake limits are deployed by the legislators, studios with an understanding of player behaviour will be able to plan new game design, and therefore improve the player experience and, importantly, meet the compliance demands. Examples of changes to the player experience may include different types of session at a lower stake limit.

As with the operators, it is vital that the studios begin to analyse and prepare their response to stake limit legislation now, as the complexity of the challenge they face is significant. Changes to game design will need to incorporate the artistic, creative, mathematical and technical demands that game design relies upon. An added complexity is that studios rely on a game operating across a number of markets and therefore jurisdictions. The technical challenge of ensuring a game meets the unique legislative demands of each and every jurisdiction adds to the workload, and therefore cost of creating and supporting a game.

Stake limits regulations and impact

The industry has been forewarned that stake limit legislation is heading towards it. In the UK the Gambling Commission released a report in October 2019 indicating that stake limits were the direction of travel for regulation.

It is worth noting that a relatively small proportion of players play above £2, and an even lower proportion of players spend £5 or above per-stake.

Future Anthem’s research borrowed from Economics, finding price elasticity to be the closest concept to the potential application of stake limits. As a result, Future Anthem modelled on a range of different elasticity effects, which led to the Whitepaper concluding that a £5 stake limit in the UK could result in a 5% to 10% decline in revenue, and a £2 stake limit, which was introduced on fixed-odds betting terminals, could lead to a 10% to 20% fall in revenues for operators.

The Future Anthem modelling is based on the effect on players and revenues, and does not account for the cost of technical changes to operating a game or for the studios designing and building the games.

There was a recent Gaming Intelligence webinar debate on the impact of stake limits legislation with Steve Hoare, Gaming Intelligence Editor, Wes Himes, executive director of standards and innovation at the Betting and Gaming Council, Steven Matsell of Leander, and myself. In the webinar Matsell raised the prospect of stake level legislation creating or turbocharging a gaming black market. The Future Anthem study didn’t take this into account, but my personal analysis of this scenario is that it is logical that a black market exists, and that has to be of concern to the legislators and the industry.



Identity and Dynamic Stakes

Gaming operators will need to develop a deep understanding of the customer and be able to identify those players with a fixed pattern of behaviour, through to those with a more diverse frequency and behaviour, and who are more likely to change the way they play. This level of analysis will provide the basis for understanding, communications and possibly dynamic stake limits. The Future Anthem whitepaper takes a close look at dynamic stake limits. As a concept, the industry should expect the dynamic stake limit to gain interest, it was highlighted by the Gambling Commission report last year.

Dynamic stake limits would allow limits to be adjusted upwards based on due diligence checks, for example. In tandem, dynamic stake limits can utilise the data and analytics approach to ensure the stake limit reflects markers of harm. When linked to gameplay analysis of changeability and velocity, then the operator can be in a position of knowing a great deal about the player and can identify behaviours such as loss chasing.

As a result of this analysis, Future Anthem believes that dynamic stake limits may the player and the industry a better solution, as unilateral stake limits are not necessarily logical across a diverse range of players. Dynamic stake limits are therefore personalised to the organisation's understanding of the individual player, and the session, and can prevent issues such as loss chasing behaviour. This approach seems well aligned with the markers of harm lens because it responds to changeability in the player.

ML (or AI!)

Machine learning (ML) (or Artificial intelligence (AI)) are sometimes seen as a panacea technology by gaming and many other sectors. The terms are often used interchangeably, however ML is a branch of AI, and the term I’ll use. There is much to be hopeful about these technologies, and the work Future Anthem has carried out demonstrates there are significant opportunities in terms of harm markers with ML. The challenge is that harm markers provide ML with an unsupervised learning problem, which means there is not a ready-made dataset of historic labels that ML can use to train on. So the challenge becomes to build models against the body of research on markers of harm - the same research used by the Gambling Commission, for example. This is an exciting opportunity, but it is an order of magnitude more difficult than previous uses of ML to predict self-cancellation.

Despite the challenges that stake limit legislation provides to gaming operators and game studios, this is also an opportunity to enhance the use of data in the organisation and use that data to understand the customer and develop strong communications with the player. Together this will enable both operators and studios to manage a transition to regulated stake levels in an iterative manner, and not a big-bang change demanded by regulation.

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