Why Gray Market Operators Must Pivot to Regulated Markets | David Carruthers

Barcelona, Dubai, San Paulo, Madrid, and now we here in Manila. And we spoke to leaders, experts, as well as industry pioneers talking about what's happening in Asia, what's also happening with the Filipino gaming market, and the wider Asian region. This series is brought to you by Kensho Media. They have been helping iGaming companies rank higher with SEO since 2008. This series is also brought to you by Quantum Gaming.

They help companies with white label and turnkey solutions in emerging markets. This year we're doing with real roadshow initiative as part of iGaming real talk where we go to iGaming events all around the world and cover the insights from the ground. Stay tuned and subscribe to iGaming real talk. Hello and welcome back to another episode of iGaming real talk.

I'm here with David at Sigma Asia in Manila, and I'm very excited to get into some of the things that I always wanted to ask him. So, David, welcome to the show.

Thank you.

It's great to always come back to Sigma because the energy is just different, and there's more people than ever all the time. Don't you think so?

Well, I mean Sigma's an iconic brand in the event circuit.

Yeah.

It's always been professional. It's always been entrepreneurial as well and expanding into new areas and this is an example of a new area...

Yeah.

Doing the podcast live from the floor of an event like Sigma.

Yeah, absolutely. I mean, I worked at Sigma so I may be biased but I always love coming back to Sigma because of the energy. I go to other events as well. All events are great. I think they have their own little thing but Sigma has a little bit more in terms of like the energy. That's what I feel.

Well, it has the DNA of Eman so maybe that's where the energy comes from. You know, I'm a great believer in the importance of leadership. Well, you mentioned before we had gone live talking to Alex from Alea. There is a gentleman that lives and walks his talk as a leader. Eman Pulis is another gentleman that lives and walks his talk as a leader. And no disrespect to the operational management in Sigma would do a tremendous job.

Yeah.

You know, leadership sets the scene and that's why this place is one different and two successful.

And I attribute a lot of things in my career as well as where I am today is also because of my experience at Sigma and I carry all the things that I have learned from Eman and working at Sigma in this journey because it's nothing like anything else. It's like stress testing yourself to the real world out there, you know.

Well, life is not a rehearsal. It's life. So, you can only take out what you put in and the most important thing understood and become in love with is the most important thing in creating a learning experience is having the discipline to listen. You have to listen. Sometimes you have to listen to yourself. Sometimes you have to listen to others. Sometimes you have to listen to a group but listening is the first point in a learning process.

That's why you think we have two ears and a mouth?

Uh, maybe. I never thought about it like that.

[laughter] Like we have to listen twice...

Twice as much as you talk. Uh, that's interesting observation and it might be a good best practice.

Yeah, yeah. We try. We try but you know, you've had one of the amazing journeys in the iGaming space itself in the very beginning with Ladbrokes as well as building your own company, taking it public, and then the aftermath which we all know. So, what I want to ask really ask you is what are your two biggest takeaways from this 50 years of experience? Someone watching, they're thinking should I go into iGaming business? Should I just make a lot of money because it's iGaming?

What would you say to them? Like what's your biggest takeaways from your journey?

Well, my journey is what's always inspired me is the opportunity. The opportunity is boundless. We said 50 years. I started in April 1976. And my first job was the lowest job in the ecosystem there is. I used to write the words on the whiteboard about who won the race, who was second, who was third. And I've done everything in between. And it's been a euphoric journey. It's not always step-by-step. Some was there but then a big step and then a big step or whatever.

But it gave me opportunity I never dreamt of. I've been all over the world. I speak Mandarin. I would never have done that without this industry. The thing that frustrates me about this industry is that sometimes I think the leadership in this industry do not demand the respect they deserve from the wider business community because it's gambling.

Yeah, there's a stigma attached to it.

Exactly. And it's ridiculous. Look at the number of people we employ. Look at the technology we generate. Look at the number of customers that we entertain and keep happy. Look how we are pivoting and learning and installing and implementing protection systems that will exist the longevity of this business, acting responsibly. That's because of this business.

What do you think needs to change? Is it mainly because of the regulators? Is it mainly because of the politicians? Where is this coming from? I mean, the stigma especially.

Everybody has to change. Everybody has to learn. Everybody has their weaknesses and everybody has their strength. Now, you can look at regulators and I will not select one particular regulator.

Yeah.

But, their biggest deficiency is understanding the commercial reality of this industry and the customer behavior.

Yeah.

And understanding and embracing and recognizing that if they are too strict, then they just increase the bad behavior. It's a little bit like bringing up a child.

Yeah.

You have to show discipline, but if you only show discipline and no love, you get bad behavior.

Yeah.

It's similar.

Cuz they do the opposite then, you know.

Yeah. It's market dynamics as well.

Yeah.

You will never eradicate everything that is bad. You will never create everything perfect. That's also a recognition that you need to have. But, as long as you're responsible and you are keeping up to pace with technological innovation, even things that are happening, analyzing the current and the past to make sure the future is stronger, then you're acting responsibly and you're doing a good thing.

One of the things that have always been, maybe in the last 20 years, has been less than satisfactory for me, is that I think people at the C-level in this industry have been rewarded too high.

Are?

Been rewarded too high.

Oh, that's true.

Too many bonuses and incentives that have skewed their behavior to a personal goal rather than an industrial goal. I can say that. I've been here 50 years, you know. It's different.

Yeah. But, do you think there's a way out? There's a way to change now?

Well, I mean, it's about education.

Yeah.

It's about education, you know. I mean, we talked about Alex. Alex doesn't talk about a team.

No.

He talks about a tribe.

Yes.

You're part of his tribe. Now, that's a bit cavalier thing, but he's the greatest team leader I've seen in this industry recently, cuz he walks his talk. He does what he says he's going to do. Doesn't say, "You do it like this." and then, when you're not looking, I will do it like that. He doesn't do that. But others do.

Yeah, a big admirer of Alex, very much in touch. Which also brings me to one of the things that you mentioned on Under Pressure Podcast very recently. You mentioned something like, you know, industry has a habit of giving more importance to short-term profits than the long-term. So, could you like expand on that a little bit more and tell us like what needs to be done?

First of all, people need to be more patient and more focused on reaching a sustainable model. We were talking about I was on main stage earlier today. And we were talking about the dynamics of bringing omni-channel together. So, land-based and online. You know, one of the success stories on this is that it's forcing businesses to really begin to try and understand the customer and the customer behavior.

Yes. And...

I said when I tried to make the point that it's not about love all your customers or high value customers. Every customer has value, but they only have value if you treat them in the appropriate way.

Yes.

Treat them in the appropriate way if you have the information.

Yes.

So, if you have that information on their behavior, then you can guide them from doing bad things.

What is relevant for them more?

Exactly. I but you can also give them opportunity to expand their experience or complement their experience. Whatever. But that take time, effort, energy, and focus. And we're just beginning that journey. New technologies, new big data analytics that are available...

Yeah.

Are giving us the tools. But if you abuse these tools, the short-term...

That's a very good point. And even when it comes to regulation in general, you've seen the industry from very long time. Do you think some of the mistakes are being repeated? For example, if you look at UK...

Absolutely.

Brazil...

Absolutely.

Do you think Asia is repeating the same?

But wait a minute. It's not just online.

Yeah.

Or before online, regulation was also stupid.

Same.

Well, it was the same. It was different, but it was also stupid. It was never perfect.

Yeah.

But it adjusted. It adjusted through proper, professional interaction between the operators...

Yeah.

And the regulator. So, how did we get TV in the betting shops?

Yes.

How did we get the betting shops open 7 days a week?

Yes.

How did we get to put a slot machine in the corner of the betting shop? Interaction with the regulator. Economic... was it tough?

All the time?

Of course it was tough. The people that did it were good at it. Then we had to go online and then we got a different view and a different context. And maybe some of the people that were good have moved on and have retired and their replacements weren't as strong.

Yeah.

It's all about interaction.

Yeah.

You know, the regulator is not a fool. He understands or she understands.

Mhm.

But without communication, without interaction that is proper and professional and structured and over a long period of time. You're not going to do everything in 5 minutes.

Yeah.

You have to be patient, consistent.

Yeah. You know, one of the other things also that you mentioned in under pressure podcast is that losing the integrity hurt you more than actual time in the prison itself. So, based on that, we see a lot of operations, operators pushing very aggressively in gray markets at the moment. What advice do you have for them?

Stop looking at your business model and pivot to the regulated market. Because if you've got a product and a capability and an understanding of this industry, you will be successful.

I think there's a misconception really that regulated markets don't get us enough.

No. Gray market operators as they call themselves are trying to take a shortcut to profitability. They're trying to use a USP that's not available to the regulated person because the regulated person is paying all the taxes and the blah blah blah, okay? They have an unfair advantage that they should not be given. Yeah. So, that's up to society. It's up to the customer to recognize.

It's up to the industry to educate the customer who the bad guys are and why they're bad guys and why we're good guys.

Yeah, but do you think they are doing that job correctly?

I don't know specifically.

Yeah, for example, if you look at the UK, I mean...

I don't underestimate the size of that job.

Yeah.

But, I think that it's a job that they must do.

Yeah. Yeah. For example, in the UK, according to the recent changes, I mean, it's very difficult to follow everything and stay profitable. That's what the operators are saying.

That's an economic fact. That there are some efficiencies that they can install and efficiencies that will help.

Yeah.

But, you know, if I was a CEO of a UK-facing...

Yes.

Omnichannel business, I'd be on the doorstep of the UK Gambling Commission one day a week, all day, every day. I'd be sharing data, sharing information, educating people. I'd be hiring professional people to lobby. I'd be using that initiative as a branding tool for my business. I'd be getting customer respect because of what I'm doing, cuz I'm doing the right thing for you. I mean, that's what got me into trouble in the first place, by the way.

Yeah.

United States, because I was successful in doing that. And what happened in the United States is what I expected would happen.

Yeah.

But, it didn't happen for 10 years.

So, you essentially fast-tracked it.

Well, I think I stimulated it, and I was right. I was just too early.

Yeah, now the market is exploding.

Good. The market is actually maturing.

Yeah.

The market is expanding because the product range is expanding and developing. And that's through technological innovation.

Yeah, what do you think about the prediction markets, which is the talk of the year?

Gambling.

It is g- Well, I mean, if we look at Kalshi...

Yeah.

90% of the bets on Kalshi are sports contracts, more than 90%, sometimes.

It's gambling. Full stop. There will never be anything other than gambling.

Do you think...

Call it what they like. You know, they will regulate it how they see fit.

Yeah.

But, it's gambling.

They branded it well. I mean...

Well, they didn't do anything. All they did is take a concept that was widely known before...

Yeah.

And they put it to market. And they put it to a market in a market that is synonymous with trading...

Yeah.

On the stock exchange because their pension fund is run through something called a 401K. So, everybody is participating or nearly everybody is participating in the stock exchange. And the stock exchange is up here.

Yeah.

And the betting shop in Vegas is down here.

Here.

You know? And that's the reality. So, it, they saw an opportunity and they used that up here high-end marketing tool.

Yeah.

Asked me the question is it gambling or what is it? It's gambling.

Yes. It's actually very genius and smart in a way because they're targeting the crypto guys. They're targeting the operators on gambling. They're targeting trading and binary ops. They've made...

All they've done is something.

All they've done is expanded the potential customer.

Yeah.

Now, remember I used to run betting shops.

Yeah.

I know the traders on the stock exchange bet in betting shops.

Profile is the same.

It's actually... You know, I know politicians bet in betting shops. I know garbage collectors bet in betting shops. But sometimes the betting shop is at the end of the street. Sometimes the betting shop was a telephone. Other times the betting shop was Ascot racecourse and you're in the high-end blah blah blah.

Yeah.

It just depends on which section you're in, what your capability and what you feel comfortable with. But it's all gambling. Prediction markets is the same. Doesn't matter whether you're, you know, deciding which year David Carradine's will retire...

Yeah.

Or whether you're betting on, you know, who's going to win the World Cup. It's the same thing.

Yeah. But do you think all our gambling rules should eventually will apply to prediction markets?

Absolutely.

Yeah. I think...

Absolutely.

I think some countries in Europe already are doing it.

Well, some people have banned it. Spain have banned it. Indonesia have banned it.

UK is looking into it very quickly.

Donald Trump loves it. He's probably playing on it.

Yeah, it's interesting though. I mean, because you know, especially caution polymarket they have taken over the business from FanDuel and DraftKings and other crypto companies as well. crypto.com, you know, there's a little bit of first mover advantage.

Yeah.

You know, so it's still very early days.

Yeah.

We'll wait and see.

Do you think there's still an opportunity for operators to bank on it or it's too uncertain at the moment?

Every operator would make their own take their own legal risk and evaluation of what the opportunity is and what is likely to happen. Some people might just sit quiet and wait and see. And be building a strategy that is well thought through that will roll into this when there's some clarity. And if that's synergistic with their geographical focus, then it might be right for them. It might be right to stay out.

It depends on your situation and your capability and what else you do. For example, prediction markets here in the Philippines, I wouldn't waste my time.

Yeah. Yeah. Yeah.

And so because it's a cultural nuance.

Yeah.

It's too big a decision. Too... The audience is minuscule, yeah.

Yeah. So it really depends on the market, on the customer, where they are, and what's the regulatory progress over there. Cool. Okay, let's talk about business in general. Like, what is the advice do you have for anyone like me who is in early 30s starting a business with some hope just ahead of life. What is the thing that they need to keep in mind?

Well, I think actually personal management of time and discipline is actually key. If you look at all of these famous people...

Yeah.

The really rich guys, they all have a drive and they have a system and they have a process. Underpinning that process is simple time management practices. I've told people that I do a to-do list every day.

Wow.

I update the to-do list.

Even today?

Yeah. Before I go to sleep every night, I update the to-do list. And then I prioritize the to-do list. Now, even when I was in the prison, I did a to do list. I had a to do list. I had to coach somebody to write a CV. I had to do my exercise. I had to write six letters. I had to read one chapter of the book, whatever. I did a to do list. So for you, that discipline for your priorities incredibly important. It's not what you like doing.

It's not what people are telling you to do. It's what you decide to do.

You know, sometimes when we look at the market and when we whatever we're coming up as a product or a service, it's not always easy to understand if it will work. How can one make a decision in terms of I'm being selfish here, but you know... How do one make a decision in terms of if something would work or not?

Well, there's a basic research and analytics and test. But you know the most important thing? Your gut feeling. Do you believe in this? Are you prepared to die for it? Not literally, but you know, lay yourself on the line. How committed are you to doing it? That's important.

David, thank you so much for joining me.

Very welcome.

And sharing everything so openly as well as what it is rather than what it's supposed to be. That's how a lot of things happen in our industry. That's why I called it real talk to keep it as real as possible. So thank you for joining me here.

Uh I'm very welcome and I'm very appreciative for the invite. Thank you.

So that's it guys. Share your thoughts in the comments below. Do follow David and I'll see you on the next one. Thank you.

[music]