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Betting goes mobile

Mobile sports betting has single-handedly revolutionized Sports betting entails the activity of predicting sports results and placing a wager on the outcome. Less people are walking into casinos and instead placing their wagers on sports events, mostly foot- ball, via their phones through mobile money services. Moreover, mobile based betting apps allow users to place wagers as low as Sh50. This has really revolutionized the indus- try, presenting an opportunity for those who couldn’t put together the minimum bet demanded in casinos, while simultaneously limiting the growth of traditional casinos.

“Kenya’s casinos will face increasing competition from legal online and mobile gambling,” says PwC in a 2015-2019 report on gam- bling covering Kenya, Nigeria and South Africa. Some of the big names in online and mobile based sports betting include: SportsPesa, which in 2014 invested an additional Sh400 million into its business, Oxygen 8, Betin, mCheza and Betway.

Though there is no definitive data detailing mobile betting market shares, it is evident that SportsPesa is by far the most widely used plat- form.  It  was  the  first  mobile  bet

ting site to be licensed in 2013 by the Betting Control and Licensing Board (BCLB). It is really a big hit, more so with the younger demo- graphic, which is more enthralled by European football.

As sports betting activity shifts away from brick and mortar casinos to mobile phones, sports betting is becoming increasingly popular, even in rural areas where some gamblers have never even seen a casino, let alone set foot in one.“Growth of sports betting has been   aided   by   technology,”   said

BCLB outgoing Chairman Professor Musili Wambua.  “People  can  bet on matches through their mobile phones wherever they are, at any time,” he added. The integration of tech into sports betting is expected to drive turnovers going forward. Annual gross turnover in the sports betting  industry  is  expected  to hit

$50 million (Sh5 billion) in just three years, from the current $20 million (Sh2 billion).

Brick and mortar casinos are having a hard time competing with mobile betting apps. It also  doesn’t 20 percent withholding tax imposed on the thriving gambling sector in 2014 cut down the industry’s growth by close to half, according to PwC.

“Casino gambling revenues rose by 6.9% in Kenya in 2014, down from the 11.2% increase in 2013 and the 24.2% compound annual increase between 2009 and 2011.  It is believed that the imposition of a 20% withholding tax on gambling winnings contributed to the slow- down,” said PwC in its report.

Understandably, the higher taxes on  casino  gambling  revenues have not been warmly received by play- ers in the industry, who have since voiced  their  concerns  through the Association of Gaming Operators. But it will be hard for casinos to con- vince a government that is currently pressed for cash to reduce taxes on an activity that is in the moral grey area.

Experts have urged the govern- ment to come up with a more friendly tax regime for casinos, arguing that there is some economic benefit to the activity.“Las Vegas, for instance, is a testament on the powerful ability of gambling to foster economic devel- opment. Taxation of  this  industry in  Las Vegas  is  simplistic  with the operators paying a certain percent- age on their gross revenues as tax,” say  Maurice  Lugongo  and  Salome

The  Kenyan government should, therefore, borrow heavily on the taxation of this sector from jurisdictions that have a thriving gambling business so as to ensure its growth and sustainability going for- ward,” the two PwC tax experts add. Against the backdrop of casi- nos’ wrangles over taxation, mobile sports betting firms will continue gnawing into the share originally held by casinos. This will further be aided by the fact that Kenya and indeed Africa is crazy about football.

Football fever
Football is by far the most popular sport in Kenya and Africa. In fact, one of the major selling points for Pay TV in Kenya is the English Premier League (EPL). This is the main product offering and typically attracts a premium on the various pay packages for service providers such as DStv. Simply put, you pay several thousand shillings more just to get month-long access to EPL matches.

In fact, some of the most popular internet searches in Africa are of top football stars such as Cristiano Ronaldo and Lionel Messi.  Even here in Kenya, social media sites like Twitter are most active  over  the weekend when EPL bigwigs such as Arsenal, Manchester City, Manchester United and Chelsea square it out in the U.K. Spanish La Liga matches, especially the illustri- ous El Clásico fixture between Real Madrid and Barcelona, also have a cult following.

Sports betting firms are using the manic popularity of football in Kenya as a promotional tool to grow their reach and attract the attention of more Kenyans. SportsPesa in par- ticular has gone the extra mile to ensure  that  its  brand  enjoys a presence both in the high stakes EPL and the Kenya Premier League (KPL).

SportsPesa has been able to secure a deal with none other than Arsenal, arguably the most popular EPL team in the  world. According to Arsenal’s website, the partner- ship will “help SportsPesa grow their business in the country (Kenya).”

SportsPesa will engage directly with Arsenal supporters in Kenya through the club’s digital channels, promotional activities and market- ing initiatives featuring first-team players and club legends. Arsenal fans in Kenya will also be offered a range of club-related benefits, includ- ing official merchandise and match tickets to see the team in action at Emirates Stadium, London. “We are delighted to welcome SportPesa as our Official Betting Partner in Kenya. Arsenal has  huge support across Africa and we look forward to engaging further with our fans in Kenya while also help- ing to drive the SportPesa busi-  ness  and,  through  a  wide   range of initiatives, the development of football in the country,” remarked Vinai Venkatesham, Arsenal’s Chief Commercial Officer.

SportsPesa has also been mak- ing some serious moves on the local front. On February 2, 2016 Kenya Premier League champions Gor Mahia FC secured a multi-million sponsorship deal with SportsPesa. According to Gor Mahia FC’s web- site the sponsorship by SportsPesa is part of the betting company’s “com- mitment to football development in Kenya.”

Gor Mahia is arguably the most popular local football club and a sponsorship from SportsPesa will go  a  long  way  in  giving  the latter the visibility it desires. It would also suffice to point out that SportsPesa has sponsored the KPL, giving it even more visibility as the top sports betting site in Kenya.

It may be tempting to restrict the analysis of mobile betting to sports betting. This would, howev- er, be inaccurate. There is a lot of gambling taking place over mobile phones outside sports betting that doesn’t socially pass by as gambling, but is in every respect identical to placing a wager in a casino. The most popular form are prize com- petitions that instruct a user to text their name to a specified number at a price of anywhere between Sh10 and Sh50 per SMS for a chance to win several million shillings.

Sometimes these prize compe- titions are attached to sales pro- motions of everyday products like airtime and detergents—perhaps to

appease the conscience of those participating in the competition that they are not actually gambling but just “trying their luck.” Promotional offers and lotteries of all kinds, run by all sorts of cor- porates, dominate the media— from radio to TV, the dailies, the Internet and outdoor advertising. In these offers, the term “jackpot” is used as a buzzword to elicit all kind of excite- ment and ensure unfailing partici- pation in the promotion, with some promotions offering jackpots as high as Sh25 million.

Reservations

Despite the economic benefit in terms of taxes and job creation that gambling generates, a lot of people still bear strong reservations about the practice. There appears to be universal consensus that gambling is a vice. The  debate is how bad of  a vice is it, and whether it should   or should not be permitted for con- senting adults. Should it be heavily regulated or completely abolished? That is the big question.

Some   countries,   especially in jurisdictions fully governed by Sharia Law, completely forbid gam- bling, arguing that it is haram; as one seeks to make gain with resort to chance and without actual human effort. Other countries, fully aware of the social risks of gambling, opt for heavy regulation rather than complete abolition. Kenya is in this second  category—heavy regulation.

“Addictive substances are heavily regulated because addiction causes great harm to society. Those addicted to gambling can lose all of their money and end up homeless, as well as drive their families and friends to bankruptcy,” says BCLB’s Professor Musili. BCLB regulates all gambling activities ranging from lot- teries, casinos, sports betting, prize competitions  and promotions.

Professor Musili also adds that the  high  taxation  on  gambling is justified. Gambling is a demerit good

demerit goods are subject to heavy taxation or direct control to reduce consumption because of their poten- tial harm to the consumers and their families, he observes.

There is a lot of research, espe- cially in areas such as the U.S. where gambling is deeply entrenched, indi- cating that gambling multiplies emo- tional stress and leads to addiction, sometimes even inducing victims to commit suicide.

David Phillips, a sociologist from the University of California-San Diego, in a study found “visitors to and residents of gaming communi- ties experience significantly elevated suicide levels”. According to him, Las Vegas, the largest gaming mar- ket in the United States and argu- ably the world, “displays the highest levels of suicide in the nation, both for residents of Las Vegas and for visitors to that setting”. In Atlantic City, the second-largest gaming mar- ket, he found “abnormally high sui- cide levels for visitors and residents appeared only after gambling   casinos were opened.”

In as much as there are some positive economic impacts of gam- bling, its social costs must always be deeply scrutinized. “No license should be issued unless the econom- ic impact outweighs the social cost, hence licensing gambling has to be informed by a cost-benefit analysis,” said Professor Musili.

The challenge sometimes comes in deciding the criteria to measure the social cost of gambling and contrasting this cost to a tangible economic benefit. Costs like bro- ken families and scandal in society cannot be measured in concrete tan- gible terms, despite their ravaging effects. Scandal in this context is the spread of behavior that entices oth- ers, especially impressionable young people, to enter into vice under the notion that it is “cool” or that “others are doing it without consequences”. Scandal typically prompts a vicious cycle.

The other problem with the increased forms of mobile gambling is that it has opened up a  loophole for cunning con artists to fleece Kenyans. A lot of people end up sending money to mobile phone confidence tricksters in Kamiti Maximum Prison masquerading as officials in charge of promotions at well reputed companies.

In 2011, mobile telephone opera- tor Safaricom and the Kenya Prisons Service disclosed that more than 70 percent of mobile related crimes originated from prisons.  Of  these, a high percentage are false promo- tions and M-Pesa frauds. In both instances, con artists use Kenyans’ increasing appetite for free things; an appetite no doubt nurtured by the prevailing gambling culture.

Even with strict regulation, the final responsibility falls with the gambler. When should they stop? Some gamblers can’t stop and even use gambling winnings to pay bills, including house rent. The director of communications at SportPesa, Kester Shimonyo, said people should bet for fun but it should not be taken as a fulltime economic activity.