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Thunder Down Under

Is the Australian gaming market primed for a resurgence?

Thunder Down Under

Following the Australian gaming market over the last half-decade has been eerily similar to the experience of following an Australian Open final on Centre Court—one’s head continuously snaps back and forth in an attempt to keep pace with the constant change, with the highest stakes on the line; sometimes the ball cracks to and fro in an epic rally, and other times it careens headlong into the net. Either way, the emphatic groans from either side can always be heard, and invariably, the bettors look on with eager anticipation.

The list of twists and turns in such a short period of time is exhaustive, and couldn’t fit the entirety of this issue. The longstanding dual empires of Crown Resorts and Star Entertainment have both been brought to the verge of ruin, and depending on who you ask, may have already eclipsed that mark.

Both have been saddled with governmental inquiries resulting in hundreds of millions in fines for widespread anti-money laundering violations among other regulatory failures, and both C-suites have been all but cleared out in attempts to return to suitability in several states.

Regulators throughout the country have beefed up enforcement measures almost continuously, and in some cases have spawned entirely new divisions in reaction to the tumult. A phased, three-year iGaming advertising ban is currently under review before the federal government, and sports leagues are under increasing pressure to ditch bookmaker sponsorships altogether.

And yet, even in the midst of all this, one thing remains true: the resiliency and appetite of Australian punters remain extremely strong, perhaps more so than ever. According to a study from the Australian Gambling Research Centre, an astonishing 73 percent of legal adults (18-plus) reported spending money on at least one form of gambling in 2022; the average number of offerings purchased was two, but almost a quarter (23 percent) of respondents cited at least six offerings, from lotteries to slots, sports betting, racing and more.

Based on such data, the Australian market is still widely accepted as the most lucrative and prolific market per capita in the world, surpassing counterparts such as the U.S., U.K., Macau and others. This is despite the laundry list of recent developments mentioned above.

Now that extensive remediation efforts are under way, there is increasing optimism that the Aussie market will return in a big way in 2024 and beyond—that said, the race for market share is also still under way, and only the best and brightest will capitalize on this unique opportunity.

Let the Games Begin (Again)

When it comes to forecasting the current and future prospects for Australian gaming, it’s difficult to start anywhere else than with Aristocrat Leisure Limited, the global slot Goliath whose Sydney roots first took hold some 70 years ago.

David Ronson, managing director of the company’s Asia Pacific region, emphasizes that it’s “deeply important that we have a strong presence in the Australian market, as this is where the games began.”

Given that the market is largely decentralized, capped and scattered across the pub and club scene rather than the mega-casinos of the U.S. and Macau, Ronson notes that it has always been essential for the company to commit wholeheartedly to “fostering brand recognition and building trust among our customers,” especially in an environment such as today, when the margin for error is perhaps the lowest it’s ever been. The benefit of that commitment over the years, Ronson says, is that it has “established Aristocrat as a household name synonymous with gaming.”

Keeping up with such a diverse client list represents a unique challenge, as he notes that some customers “have fewer than five slot machines on their gaming floors, while others host hundreds of them.” Additionally, Ronson acknowledges the difficulties of growing in a strict (and increasingly stricter) regulatory environment—the best methods, he argues, emphasize engagement and the human element.

“Unlike other industries that rely on mainstream media advertising, our strong presence is the result of hard work and engagement with the local market,” he says. “We are proud of the strong relationships we have built in here, and I think that’s been the key to our longevity. Our commitment to our customers, and the gaming industry at large, has enabled us to develop a deep understanding of the nuances of our market.”

Conversely, if Aristocrat is to be viewed as the steady and deep-rooted incumbent, its counterpart Light & Wonder (L&W) has played the role of disruptor, especially following its pivotal restructuring which included the divestiture of its sports betting and lottery businesses in 2021 and 2022, respectively.

According to Ben Frederiksen, L&W’s managing director for Australia/ New Zealand, the company “is now focused on driving sustainable growth across our various markets with a streamlined organization, clear product roadmap, a healthy balance sheet and a disciplined capital allocation strategy.”

Frederiksen refers to the Aussie market as a bellwether of sorts, as he asserts that “experience tells us that games that work well in the market tend to perform well in North America and other global markets.” For the most part, higher-volatility games have reigned supreme in the region, with stand-alone progressive and link games performing especially well. Non-jackpot games, he explains, have seen recent declines.

“Over the last few years, we have nearly doubled our market share in Australia,” he says. “This is a result of our investment in R&D, content and hardware, and a commercial execution that aligns with market trends. This growth has also been driven by the success of our overall portfolio with key titles such as Dragon Unleashed, Thunder Drums, Huff N’ More Puff and most recently Dragon Train, which has been setting records for the company in Australia since its release last year.”

Of course, in Australia and in all other regulated markets, game testing and certification is a fundamental piece of the equation, and few firms can rival the influence and expertise of Gaming Laboratories International (GLI)—-the company’s regional office, GLI Australia, is currently celebrating its 30th anniversary.

In those three decades, GLI Australia has essentially grown alongside the industry, having aided in the development of spinning-reel slot machines and other foundational technologies now central to the market. What first began as a partnership with the University of South Australia has expanded into a key resource for the market at large.

“Australia saw massive expansion during the late 1990s and 2000s, which GLI was a huge part of,” says Ian Hughes, GLI COO and managing director of GLI Australia. “We established a laboratory in (New South Wales) and tested the largest CMS in the world, which introduced responsible monitoring of 108,000 EGMs across almost 3,000 venues… GLI Australia also supported Australian-based suppliers entering U.S. and European markets by working with our laboratories in the U.S. and Europe. GLI Australia (formed in Adelaide) was GLI’s second laboratory, so global services were always part of the plan.”

With regards to recent trends, Hughes points out that “we have seen contraction in the Australian market with reductions in the number of gaming machines” over the last decade or so, which makes suppliers’ and operators’ jobs that much more difficult. However, it has also resulted in “a more mature, sustainable market,” he contends.

Bright, Shiny and New

In a situation where the overall capacity of the market is flatlining or even declining in some cases, yet the customer base is still as engaged as ever, the onus falls on the suppliers to inject new creativity into the available space or find new avenues altogether.

In the case of Aristocrat, the newest frontier in Australia may not be limited to the games themselves, but also in the form of cashless technology, which has been recommended for implementation in casinos across Victoria, Queensland and Western Australia; New South Wales and Tasmania have gone even further by mandating the technology across machines in all venues, as part of sweeping responsible gambling and harm minimization initiatives. These reforms, in turn, have created a sizable new opportunity.

The company deployed its cashless technology on a total of 144 machines at The Wests Group Australia’s New Lambton venue over a six-month period from October 2022 to June 2023.

“It was a groundbreaking development for our company and the market, showing our commitment to both technological advancements and enhancing the gaming experience,” says Ronson. “Our participation in this trial emphasized our ongoing commitment to product trials as an important way of contributing new responsible game play functionality. We look forward to participating in more trials in the future.”

From a testing and compliance perspective, Hughes agrees that there has been a lot of recent “development by the industry around player accounts and cashless gaming,” adding that “GLI has always had a strong systems capability, and with many of the technologies, especially around cashless, we have been able to leverage our experience from our U.S. laboratories.” He explains that his team has “recently created a full interoperability laboratory with servers and infrastructure,” which can replicate “the majority of Australian gaming environments.” Due to the urgency of demand, it should come as no surprise that “operators have invested heavily in both their production and test environments,” he says.

Not to be outdone, L&W is also slated to host its own trial at the Crows Nest Hotel in the lower North Shore. According to the trial register on the Liquor and Gaming NSW website, “an independent researcher has been engaged, with the trial expected to start soon.” In December, a bigger, expanded trial was announced in New South Wales, encompassing approximately 4,500 machines and five technology providers. Those results are expected to have a heavy influence on cashless implementation throughout the country.

Aside from cashless, L&W is also making a number of new investments on the game and content side, as Frederiksen notes that “more than 90 percent of new cabinet sales in the Australian market are dual-screen, and this has been a key focus for Light & Wonder from a hardware perspective.

“From a content perspective, we’re focused on emerging game segments such as persistent and triple-feature style games while also continuing to invest in the hold-and-spin category, as this is the largest segment in the market,” he adds. “Our increased investment in R&D has continued to grow our game portfolio year-over-year and we continue to invest in experience-elevating content and hardware.”

Forecasting ahead to the rest of this year, Ronson says Aristocrat anticipates 2024 “will bring stability to the Australian gaming market,” given that the bulk of the major policy changes in “New South Wales, Victoria, Tasmania and the Australian Capital Territory” have already been announced or implemented. And of course, he and his team are standing by with “a new lineup of exciting content that we look forward to bringing to market that we know players will enjoy.”

Frederiksen and L&W are relatively neutral on this year’s prospects, predicting that “replacement levels will remain consistent with 2023.” However, he also concedes that the market has demonstrated a fair share of resilience, and “is now back to pre-pandemic” expectations and performance.

For Hughes, forecasting can be left “to the analysts,” but one thing that can be said for sure is that “there is contraction in the number of gaming devices installed in Australia, and we have seen casino operators reduce their offerings as a result.” Despite this, however, the opportunity for growth in Australia still exists, and the innovation will be ratcheted to a new level to discover those new pathways.

“The Australian market, however, is a large market both in number of machines and revenue,” he concludes. “Meanwhile, online sports betting in Australia continues to grow. However the future of gaming unfolds in Australia, GLI is dedicated to the market, and we will continue to provide the world’s best testing, compliance, and consulting services.”

Jess Marquez is the managing editor of Global Gaming Business. A lifelong Nevadan, Marquez has communications experience across multiple sectors, including local government. Prior to joining GGB, he was the communications and advertising director for a prominent personal injury law firm based in Las Vegas and Seattle. He also founded and hosted The Pair O’Dice Podcast, a weekly show that focused on sports betting news and predictions. He graduated magna cum laude from the University of Nevada, Reno in 2019 with a B.A. in journalism. Outside of work, Marquez is passionate about professional sports, classic literature and leatherworking.