BUSINESS

Keith McDonnell: Hitting the right balance of taxes and regulation

TAGs: Asia, CAI, Keith McDonnell, kmigaming, sports betting

The Asian market for gambling continues to evolve and grow at an incredible rate, with new opportunities arising and products to meet them all the time. It can still be a tricky space to navigate though, so our Stephanie Tower chatted with Keith McDonnell, CEO of KMiGaming, about his insights on the topic.

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Sports betting is one of the big topics of the moment, as more states and countries are regulating the activity. Just creating the right mix of taxes and regulation is not easy though. “They understand there can be big revenue streams earned from legalizing sports betting,” McDonnell said. “They can get tax, they can protect their people. But it’s really, the stigma with sports betting, and being seen to invest in it, and to find talent, because they don’t have the talent to design taxation or legislative frameworks and implement it. It’s just not part of the culture.”

Some countries are getting really close though. When Tower asked McDonnell which countries look close to the right legislative mix, Vietnam came to mind. “If they can really break down the negative connotations of sports betting, they can be pretty close,” he answered. “For me, it’s a race to who can be the U.K. of Asia. The U.K. got it pretty much right from an online taxation and regulatory framework. There’s some recent changes but I think that spots up for grabs.”

The mistake many markets make is to over tax the industry, either to prove their tough on gambling or to rake in the most revenue. “If you over tax and become too greedy, the net effect could be that you feed the offshore market,” he warned. “There’s no way that operators paying high tax can compete in value with bonuses or sports prices with an offshore market that doesn’t have to pay any of that. So if you try and charge too much, you risk legitimizing sports betting and then feeding the offshore market by educating customers who then go offshore.”

Turning back to the topic of Asia, McDonnell has lots of experience in localizing to local tastes, and he helped describe what sets the Asian gambler apart from others. “The Asian gambler, in my experience, far more interested in the payback,” he noted. “So they will be less emotional, lower margin, higher staking, but it’s more of a serious activity. It’s very much about winning. If they don’t win, they don’t enjoy it. Whereas, I think the Americans will put up with a few losses to get the entertainment.”

For others looking to start up their own operation in the Asian market, McDonnell left us with his best piece of advice. “Find a good local partner,” he said. “You can’t learn culture in a year or ten years, you either have it, and understand it or you don’t. So from a marketing perspective, a payments perspective, to the key operational issues, find a good local partner. Don’t rush it, get the air miles in, you will need a lot. But when you have that, it really gives you an edge over other international operators coming in.”

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