Market Analysis: How different parties can contribute to channeling in the New Zealand iGaming market
The opening of the New Zealand online gambling market was not the spectacular blow that many people expected. Despite six months of preparation, only 10 of the 29 received online casinos their application was approved. Of that dozen, some were not online after a few days and CRUKS, the central registration system for vulnerable players, could not cope with the influx. The only thing that lived up to the hype was the deluge of marketing messages.
After that disappointing start, the storm has subsided and the contours of the gambling market are becoming clearer. The biggest problems with CRUKS have been solved and more casinos are expected in the coming months. It's time to take a look at The New Zealand license. The idea behind the license was to curb the large illegal gambling market and convert it into legal options that are more strictly controlled. With this, over time, the legal offer must occupy 80% of the market: channeling.
Channeling seems counterintuitive
This channeling seems to be somewhat disappointing at first glance. The ten legal casinos have a fairly small range of games, much smaller bonuses than their illegal competitors and surprisingly few casinos use the powerful affiliate websites that have a large share in the growth of the market. Many players are therefore still referred to illegal casinos with those big bonuses, the better offer and (higher) commissions for the affiliate websites.
To better understand the current state of channeling, in this article we describe six different parties that play a role in the New Zealand online casino market. In addition to the kansspelautoriteit (KSA), there are also other parties that can contribute positively or negatively to the channeling. For example, What do game developers, payment systems and providers do to lure players to legal casinos? Based on research and responses from parties, we have found some answers that touch on the core of the New Zealand Remote Gambling Act (KOA).
The New Zealand online gambling market
As early as 2007, the first signs of a legal New Zealand market for online casinos appeared. only fourteen years later did the Upper House indeed confirm a law that allows online gambling. On april 1, 2021, casinos were able to sign up for a New Zealand license, and on October 1, 2021, players were able to play at these casinos for the first time.
Most players have not waited fourteen years to play and have taken refuge in illegal foreign casinos. during that time, the online gambling market has grown to about $ 750 million dollars in 2020 . Because the KSA was not big enough to go after every website, it only targeted the biggest offenders. As long as players only played at English-language casinos with international payment methods, both casinos and players managed to stay out of the shot.
New Zealand has always had a strict gambling policy. Royal Vegas Casino has a monopoly on operating casinos, physical slot machines have disappeared from the Daily picture, and most laws are aimed at protecting vulnerable players (against themselves).
Also in the online license, The New Zealand legislation differs mainly in terms of player protection. Players who sign up at a casino are registered with their BSN, after which the player is tracked in the CRUKS. As a result, players who have been banned from one casino will no longer be able to sign up at other casinos.
Another notable measure in the New Zealand license are the mandatory limits. When a player logs on to a casino, he or she must set mandatory Game limits. Together with CRUKS ' central registration, this measure clearly shows how the New Zealand license is emphatically focused on protecting players.
This channeling is especially important. Foreign casinos do not have many of these measures. For example, a well - known flaw in the NZ license (which, on the other hand, is known to be very strict) is that players can join a casino and sign up at another casino the next day-even if this casino is under the same company.
New Zealand casinos now offer iDEAL as a payment method, a New Zealand-language customer service and even New Zealand live dealers. At the same time, players have never experienced these benefits as a hindrance, as witnessed by casinos’million-dollar turnover. at the same time, stricter rules can also make playing (and the bonuses) less attractive. In order to actually bring about the channeling, the KSA needs help, even if fines are now much higher.
The different parties
The research in this article focuses on six different parties in the New Zealand iGaming market. All parties have been analyzed separately to get a clear picture of what exactly has changed after the market opening and how these parties can each contribute to the channeling. The following parties are distinguished:
- The game developers
- Payment systems
- Affiliate websites
- Providers
- KSA
- Players
Game developers play an important role
Although most players have an eye for the providers and payment systems, Game Developers also play an important role in channeling. Every game must be thoroughly tested and certified before it can be offered to New Zealand players. This means that developers directly influence which games are offered in the legal casinos.
One party that indirectly falls under this is the auditor who certifies the games. There are only a handful of companies that are eligible for this and thus have an active role in the implementation of the New Zealand policy. For most game developers, that's auditor Gaming Labs International (GLI).
Ensuring that as many developers as possible comply with the license requirements is therefore a prerequisite for an attractive game offer for players. Players who are looking for
slots
or
roulette
games for example, will resort to illegal casinos to play the games anyway. Due to the size of the New Zealand market, the reverse is also true: developers want to ensure that their games are available to New Zealand players, giving them more attention and market share.
An example of such a company is Playtech, which was delighted with the cooperation with Royal Vegas Casino , one of the most important names in the New Zealand gambling market. The American company High 5 Games reacted in a similar way following the collaboration with one of the largest New Zealand affiliate websites.
Mor Weizer, CEO of Playtech
:
“[We] are very pleased with the strategic cooperation. For the success of
Playtech is essential to partner with the biggest companies in the most attractive markets.”
Lauren Gazneli, director of Client Partner at High 5 Games : "[We] are always looking for a wider audience for our games and also want to gain a foothold in dollarpa. This partnership with New Zealand's best affiliate website is an excellent opportunity to achieve that.”
Several developers now have a license to offer their games in New Zealand as well. Games from Blueprint Gaming can be found in Toto's casino, Relax Gaming is found in several casinos and Stakelogic can be found in every casino. Live casino game developer Evolution Gaming is also licensed, as is subsidiary NetEnt, which is responsible for the most popular online slots.
Those big names in particular are good news for channeling. If online casinos offer the best and most popular games, players have much less reason to look outside the legal offer.
Change in payment systems
The shift from illegal to legal casinos also means a change in payment options for New Zealand players. Before the KOA Act was active, New Zealand players mainly used Skrill, Neteller, Trustly and credit cards. iDEAL, by far the most widely used online payment method, was not available. Casinos that still offered iDEAL, could count on a hefty fine from the KSA. IDEAL is now the main payment method.
As we see in detail below, iDEAL was nevertheless available through third parties. These parties have often withdrawn from The New Zealand market, so that iDEAL has become more important as a separate payment method. Skrill and Neteller no longer offer their services to New Zealand players, but not all parties have followed suit.
The shift from popular payment methods to iDEAL as the main method has a big effect on channeling, especially if iDEAL is only available at legal casinos. if players abroad cannot pay, they cannot play at those casinos either, so channeling is a natural consequence. How well that goes depends mainly on payment methods and closing the loopholes.
The KSA has already announced that it will also tackle payment methods. In the past, these methods were seen as neutral parties, but now the payment systems can also be classified as promoters . This means that the KSA can also use its extensive arsenal of resources against payment systems: an administrative fine, a periodic penalty payment, a binding instruction and warnings. These measures will indeed be applied from 1 november.
As a result, payment systems have every reason to contribute to the channeling of New Zealand players. Following the laws and regulations ensures that New Zealand players can not go to foreign casinos. But what else can the payment systems do?
No longer offering services to New Zealand players
The law prohibits several providers from discontinuing their services in New Zealand. The two largest e-wallets, Skrill and Neteller, have now complied with the law and were no longer available (for casino-related services) well before the date of november 1st. This leaves some smaller payment options:
LinkedIn
, ecoPayz and Paypal. Obviously, this is not a technical problem, but what is behind the decision to stay illegal?
Below we discuss the different payment systems. We have tried to reach every payment option for comment to assess their commitment in the channeling and provide an opportunity to explain their motivations.
iDeal-a legal provider
iDEAL has been the leading provider of online payments for years. Every legal casino therefore offers iDEAL, while the possibility is not (legally) offered abroad. However, iDEAL is still available via a detour, because, for example, Trustly and Klarna offer iDEAL as a payment option. As a result, casinos do not offer iDEAL directly, but players can indirectly use this payment option in this way.
Although Trustly no longer works with New Zealand players, Klarna is still available at the time of writing. In response to this, Currence (iDeal)says,
Berend Jan Beugel, Press Officer at Currence (iDeal) : "[We] do not manage other payment solutions and we do not enter into partnerships with end users such as casinos or online stores. [We] also do not maintain a list or register of end users, but we may ask Klarna why iDEAL is offered. Furthermore, we do not make any communication about the correspondence with Klarna."
Skrill, Neteller , Trustly-have stopped the illegal offer
Skrill, Neteller and Trusly are the best examples of payment systems that help with the channeling. These three payment solutions announced their departure on October 1, 2021. This departure also shows how the law does indeed help with channeling. Instead of neutral parties, these payment methods are given the choice to comply with all regulations or to offer their services illegally. In a response, Trustly named the following:
Meredith Popolo, Head of PR and Communications at Trustly : "[We] only offer services to casinos that have their licenses in order.”
Ecopayz, PayPal, Brite , Klarna-offer their services in illegal casinos
The other payment methods have not changed. Of these parties, Klarna is the most obvious offender. Although the other providers are not popular, Klarna offers the option of paying with iDEAL. With this, it provides the illegal option for players and casinos via a detour. Klarna has not responded to questions about offering an illegal payment method - a clear contrast with the other parties.
In addition, parties such as Ecopayz, PayPal and Brite still offer their services in illegal casinos. this results in the fact that New Zealand players still have the opportunity to play with different payment methods at illegal casinos. these payment methods can easily promote channeling when they decide to no longer offer their services in illegal casinos.
Offering services for legal casinos
Although New Zealand players (finally) just have the most popular payment method at their disposal, they can no longer use other popular methods. Whether Skrill and Neteller will become available later is still unclear. Trustly is available, but offers limited advantages over iDEAL in New Zealand casinos. Adding e-wallets as a payment method will give players an extra reason to play exclusively at legal casinos.
Affiliates can point players to the right management
Online affiliates are often seen as the driving force behind the growth of online casinos. these websites make money by recommending casinos to players. Thus, in an ideal world, the affiliates refer to reliable casinos for which they receive a commission. In practice, however, the commissions are leading, which means that many affiliates still recommend illegal casinos.
Just like the payment methods, the affiliates will also come into the sights of the KSA from november 1st. Because these affiliates send a lot of players towards those casinos, they play a big role in the channeling - players go where the affiliates send them. This raises the question of why these affiliates still offer the illegal casinos and what they can do instead.
One of the biggest differences between legal and illegal casinos is in the bonuses that the illegal casinos offer. Although New Zealand players are not shy about bonuses and extras, the competition in the market has not yet led to the expected flow of bonuses.
BetCity is currently the most aggressive new casino. It offers affiliates a partnership and gives players a $ 200 welcome bonus. As can be seen here, that bonus pales in comparison to the bonuses of illegal casinos. this makes the bonus not yet an attractive reason to switch to legal casinos.
These bonuses do not only affect the players. Affiliates can join most casinos within a few minutes. these affiliates need several of these casinos to be successful. After October 1, 2021, only BetCity will offer an obvious way for affiliates to register. Other big names, such as
Bet365
&
Lucky Nugget
, also have such affiliate programs that can help the channeling.
This could change once big names, who are not yet legal in the New Zealand market, make their return. According to the KSA's directNZD, the casino market really took shape around July 2023.
What can affiliates do to improve channeling?
There are three ways affiliate websites can speed up channeling:
- First of all, affiliates can simply stop referring players to illegal casinos. This is the easy solution and is in line with the strategy of the KSA.
- They can lead players from illegal to legal casinos. Here, the illegal casinos are indicated as such and the legal options are considered as alternatives.
- Affiliates can inform players about the dangers of playing in illegal casinos.
This always creates a conflict of interest. Even if the difference for affiliates between legal and illegal casinos is less than it seems, offering a more casinos allows for more options and thus more commissions.
Providers play the biggest role in channeling
The providers play perhaps the most important role in the channeling process. After all, without these providers, channeling would not be a problem. Although many casinos have withdrawn from The New Zealand market after October 1, 2021, other casinos are still available. Although these casinos could technically have stayed online until november 1, the larger casinos did not wait until this deadline.
To better understand why casinos may or may not withdraw from the market, we look at the risks that casinos run if they illegally offer their services to New Zealand players. We also look at how the attitude in New Zealand has changed and how the channeling is going so far. By looking at the figures from websites and Google Trends, a clear picture can be drawn of before and after 1 October. This again shows how players look at the providers and what the reasons are for whether or not to continue offering illegal services.
The figures
To clarify the difference between the periods before and after October 1, 2021, we looked at five major casinos in New Zealand:
Unibet
, Bwin, Pokerstars, LeoVegas and Casumo Casino. To measure the interest of players, we analyzed the figures from Software Program Ahrefs and verified these numbers with Google Trends. Because there was not yet a month of data available, a representative week was chosen and those data multiplied by four.
This picture shows a clear decline in the search volume for these casinos, even if a considerable margin is taken into account. Unibet and Bwin, the two largest casinos, saw their search volume drop with a combined 450,000 monthly results. How that translates to revenue is best seen in a Unibet press release . It states that it will withdraw from The New Zealand market and thus expect to earn about $ 14.25 million less.
In order to emphasize that picture even more clearly, we can compare different parties. The following two graphs indicate the search volume of the 5 largest illegal brands (brands that have now withdrawn from the market) and 5 new legal casinos respectively. This shows equally significant differences in the New Zealand gambling market.
The first graph shows the search volume of the Big Five illegal casinos listed above. Several conclusions can be drawn from this. Firstly, with the withdrawal from the market, Unibet's market share has fallen and is now more distributed among the various casinos. secondly, and most importantly, we see a solid drop in search volume after the opening of the market for all illegal brands. This means that they may have been looking for legal alternatives.
The second graph shows the volume of the new legal casinos. the two have a strong negative correlation - where the search volume dives down on one side, it rises on the other graph just as suddenly. Thus, the search volume for illegal casinos is falling sharply, and the search volume for legal casinos is experiencing a large increase. If this actually translates into channeling, that's good news. However, it is clear that some of the necessary conditions for channeling are present.
If we zoom in further on two individual parties, that image is reinforced. Unibet Tote we had the same sports betting offer for years. Toto had the monopoly and thus a legal offer, while Unibet was by far the largest illegal sports betting provider. This graph shows the same pattern.
A similar graph shows a less dramatic difference. Pokerstars.net for many years it was the most popular (illegal) poker site, but GGPoker the company is the only one with a New Zealand license.
Although the search volume for Pokerstars.net obviously decreased, GGPoker especially got a push at first, but then the difference is less big. However, compared to Toto, GGPoker was an unknown party, entering the New Zealand market almost out of nowhere.
It is clear that the departure of the big names has directly influenced the New Zealand market and promoted channeling - especially since these casinos plan to enter the market with a license later. For channeling, however, these large casinos are not of the utmost importance.
Many smaller casinos have made a different decision. For these casinos it seems a conscious choice to keep their offer to New Zealand players. To understand these casinos better, it is good to see the figures behind the organizations.
Risk analysis
According to the KSA, the total cost for a New Zealand gambling license is between $ 1 and $ 1.6 million. The application itself already costs a whopping $ 48,000 - parties will not get this money back if the application fails. These amounts are the highest in the world and much higher than in other countries (including those with strict conditions). For Unibet, these amounts are manageable, but smaller providers will approach their risk analysis differently.
The risk for these parties mainly consists of an administrative fine from the KSA. The smallest fine (for casinos with a turnover of less than $ 15 million) is $ 600,000 ; this was $ 200,000. If we look at previous cases, it turns out that in practice the fine can be much higher. For example, just before opening the market, a foreign casino was fined $ 531,250 - where the basic fine was "only" $ 200,000. Increasing the fine should have a deterrent effect.
Starting from that basic penalty, paying a fine is cheaper than getting a license. In practice, the fine is usually higher; aggravating cases are precisely those that are mandatory under the New Zealand license. In other words, fines are more expensive for illegal casinos that deviate from New Zealand regulations than for casinos that already meet many of the conditions.
Moreover, for large casinos, the fine is always more expensive. The annual turnover of $ 15 million on which the basic penalty is based is converted by Unibet per month. The penalty is therefore undoubtedly more expensive than the license itself. The KSA has also indicated that it mainly focuses on large casinos; the more New Zealand players in a casino, the higher the chance of a fine. Large casinos also suffer from fines in other ways: large fines for Unibet can have an effect on, for example, the price of a share.
As a result, Unibet has three good reasons to withdraw and wait neatly for the license. At the same time, it can be seen that smaller casinos will make a different trade-off. The fine will be lower, the chance of a fine is smaller as long as there are not too many players and small casinos generally have no shareholders to keep satisfied.
As long as these casinos do not get too big, it can therefore be worthwhile to run the risk of a fine. Monitoring this balance can be a reason to still offer the casino in New Zealand. In an ideal balance for those casinos, they occupy a 'sweet spot', a position in the market that is small enough not to attract attention, but to earn enough.
Why small casinos remain in New Zealand
To provide further clarity on casinos that try to monitor that balance, we dive deeper into the finances of these casinos. through a combination of online research and information from experts, a realistic picture can be drawn of a (non-existent) casino that is large enough to earn New Zealand players and small enough to avoid fines.
We have calculated the minimum turnover that such a casino must make in order to also make a profit after the KSA has given a fine. The table shows the financial information for that (non-existent) casino.
A casino of this size has expenses of about $ 4 million per year, as explained in more detail in the table. The software, marketing and affiliate costs and payment methods take up around 75% of that number. A possible $ 600,000 fine would add 14.5% to expenses.
To justify that risk of the fine, casinos must have about $ 400,000 per month in revenue, which ultimately results in a profit of $ 115,000 - the profit without penalty in the calculation is at $ 715,000. Obviously, the most important thing in monitoring the balance is to assess the risk of a fine - that will be more important than attracting as many New Zealand players as possible.
So it will be more obvious that small casinos will remain in New Zealand than that new parties will seek out the New Zealand market. This of course has major consequences for channeling, which is undermined. Because the casinos want to operate unobtrusively with a limited size, players will be able to continue to visit the casinos just as unnoticed.
Contribution of the KSA
The idea behind the KOA Act is channelling: keeping players away from the illegal offer and letting them play at the controlled legal offer. The kansspelautoriteit (KSA) was established with the KOA Act in mind. This also partly explains the impotence of the KSA in recent years-the body was created to work within the framework of the law, not to combat the entire online offer of casinos.
The KSA works on the basis of three core tasks: protecting consumers, preventing gambling addiction and combating illegal and criminal activities. In all these core tasks, the KSA is helped by the law KAO, within which unique measures are taken to protect players from themselves.
As a governing body, the KSA carries out government policy: the authority handles applications for a gambling license, regulates the licensed casinos, and protects players from casino malpractice.
The main way in which the KSA can contribute to the channeling in that implementation is by preventing illegal casinos. Detecting and fining those casinos will reduce the illegal offer and thereby automatically ensure that players end up mainly with legal and reliable providers.
The importance of the players
Although all parties play an important role in the channeling, players ultimately have the most influence. To help these players make the right choices, the law also provides for fines for players. For the KOA Act, a tolerance policy was implemented for players. As of november 1, 2021, players risk being fined $ 8,700 and a criminal record.
Although there is still a difference between the offer of legal and illegal casinos, players no longer have any real reasons to play at illegal casinos. Players who choose to do so will trade the reliability and protection of the New Zealand license for a higher welcome bonus. At the same time, the strict rules can also act as a brake on channeling, so that bonuses are always higher with illegal providers, for example. The goal for channeling is for 80% of all players to play with legal parties by 2025. This means that one in five players still plays with illegal providers and that the channeling will take a while anyway.
Players are ultimately vezodiacally responsible for their own choices. Before October 2021, there was no single legal option for online casinos, and Toto was clearly behind other sports betting sites. With the KOA Act, those differences are a lot smaller, so playing at illegal sites means that players choose parties that put financial gain above player protection. Every casino is designed to make the player lose in the end, but players of illegal casinos can lose much more than just their playing money.
Conclusion
Although the player is vezodiacal, all other parties also have a clear vezodiacal ability to provide that main party with options and information. As long as the gap in quality between legal and illegal casinos continues to shrink, that's not too difficult. For now, however, affiliates have too few reasons to recommend legal casinos, the market is still far from complete and the bonuses of legal casinos stand out against the bonuses of illegal competitors.
At the same time, the KOA law ensures a major catch-up. Before October 1, 2021, Toto was a legal, but much more boring version of sports betting than, for example, Unibet. Now options such as live betting and online casinos are also legal to play, so there is simply less reason to look up the illegal offer.
The most popular games are all online, websites are available in New Zealand with a New Zealand customer service, New Zealand payment options and New Zealand dealers. The gap between the legal situation before and after the KOA Act is much larger than the current difference between the legal and illegal offer.
Especially if the competition increases, the bonuses can be higher and thus contribute more to the channeling. Also, this can give additional reasons for affiliates to recommend only the legal offer. Here the KSA can play a key role by also seeing affiliates as promoters and thus fining them.
Research method
All information used for this article comes from publicly available documents, supplemented by independent research and interviews with the relevant parties. These are the sources we used in this market analysis:
- Gambling authority
- Regulus Partners
- High 5 Games
- Blueprint Gaming
- Relax Gaming
- Stakelogic
- Evolution Gaming
- GaminginRoyal Vegas.com
- iDEAL-answers to requests
- Trustly-answers to requests
- Kindred Group
- Google Trends
- Public articles