The online gaming market has shown positive growth in recent years. The global game win for online gaming, including all game segments, has been estimated at EUR 40.0 billion for 2016, an increase of 11 percent compared to the previous year. The corresponding size for the global online casino market has been estimated at EUR 10.7 billion in 2016, an increase of 13 percent for the year (source: H2 Gambling Capital, February 2017).
Europe is by far the largest gaming market and is expected to represent close to half of the gross gaming yield in the coming years. Deregulation and reregulation of national gaming laws is taking place in many European countries. NetEnt closely monitors the development on all markets that are undergoing regulation. The online gaming markets have recently been regulated in Portugal, Romania and Bulgaria. In Romania, NetEnt obtained a gaming license and launched its games with several operators during the year. In Bulgaria and Portugal, NetEnt games were certified and launched with customers in 2016. New gaming legislation is expected in the Netherlands and Czech Republic during 2017. Online gaming is regulated in Spain, where NetEnt holds a gaming license and its games have been available with several customers since 2015. In Great Britain, the largest gaming market in Europe, new regulation was introduced in 2014. As a result, all operators offering gaming services to British players need to have a British gaming license and pay gaming taxes in Britain, regardless of where the operator is based. NetEnt obtained local licenses from the UK Gambling Commission in 2015. The Italian market was reregulated a few years ago, and NetEnt has developed a close collaboration with the Italian regulator, where both parties are actively trying to get unlicensed operators, with a focus on Italian players, to acquire a local license. The market in Denmark was regulated in 2012 and NetEnt’s games are live with several customers, including Danske Spil.
In September 2015, the Swedish government initiated the process to reregulate the online gaming market and a new law proposal is expected to be announced in 2017 and, if approved by the parliament, come into force during 2018.
Today, the majority of NetEnt’s customers are located in Europe and the Company will continue to focus on the European market, but expansion into North America is also expected to contribute to long-term growth. In the US, a few states have opened for online gaming: Nevada (poker), Delaware (all games) and New Jersey (all games). Political steps towards reregulation have also been taken in other states, for example in Pennsylvania and Michigan. NetEnt has applied for a license in New Jersey and has been granted transactional waivers to launch games with several operators in the state, while its full license application is being reviewed. NetEnt is continuously monitoring developments in other US states that are close to regulating and the Company intends to launch its products on these markets if the conditions are right. In Canada, the market is regulated and open for online casino in several provinces such as Ontario, British Columbia and Quebec. As a first step to enter Canada, NetEnt applied for a license in British Columbia during the fourth quarter.
Among suppliers, the online gaming market is dominated by a handful of companies. Most of these offer a broader product portfolio than NetEnt, which remains focused on casino games, and many have also chosen to focus on the poker market.
NetEnt’s main competitors are Playtech and Microgaming, but there are also several smaller competitors. In the live casino segment, Evolution Gaming is the key competitor. In 2016 NetEnt had an estimated global market share of 15 percent, and 25 percent in Europe, based on market statistics from H2GC. The market share has risen steadily in the past few years. The future outlook for online gaming remains very bright and NetEnt has excellent prospects to continue gaining market share.