At G2E 2024, the gaming industry showed extreme optimism about the industry’s future. And “show” means across the board: conversations highlighting expansion opportunities, products pushing new technology boundaries, and the general demeanor of participants. We don’t see the optimism as blind or unwarranted; there were certainly risks noted and challenges debated. But if the mood at G2E is an indication, then 2025 could shape up to be a banner year for gaming.
KPMG firms representing professionals in the US, UK Malta, and Canada were present at G2E 2024. We gathered over 30 professionals who engaged in client meetings, had discussions with emerging companies, discovered new products on the trade show floor, held working sessions with executives and others, and attended assorted social and business events. As a result of our interactions at G2E 2024, KPMG was able to get a pulse on the outlook for the industry. What we heard, saw, and felt throughout was an optimism despite clear challenges for the industry.
Our team came in wondering how the industry would react to the potential for regulatory pushback, slowing growth rates in land-based revenues and an uncertain fiscal and economic environment. We left feeling energized, with a renewed sense of purpose to help our clients take advantage of opportunities and ensure they give risks—even risks perceived as longer-term challenges—their due attention.
Back to the future
For the past two G2Es, the messages we heard were around caution. Underlying metrics were so good in so many ways…so executives were tampering expectations as much as possible. They were also concerned about a lack of visibility in the world at large and the impact those uncertainties had on their ability to forecast the future for their companies.
This year, more clarity around interest rates and other economic factors was refreshing for those we spoke to. That clarity is more important than current quarter consumer spending on gaming, as it is helping companies feel confident about significant areas of focus like mergers and acquisitions (M&A) and new product development.
There was also almost universal applause (relief for some stakeholders) for the movement towards rational analysis of companies based on profitability and reasonable trading multiples. There was also a rational exuberance towards new products that could lead to step-change in consumer behavior or cost structure, including generative artificial intelligence (GenAI) and similar tools.
Finally, some other factors we heard contributing to optimism were a normalized supply chain; expansion progress in Brazil, Thailand, and other markets; and the continued strength of sports to attract viewers and mindshare, allowing sports betting to come alongside.
Not all roses, but not a lot of pests…for now
We had many conversations around risks and heard about many others. Certainly, cybersecurity remains a worry, in part because most in the industry feel it is somewhat out of their control and in part because budgets for cybersecurity protections have increased since the well-publicized breaches in the fall of 2023. Near-term regulatory issues like anti-money-laundering (AML) compliance were on the minds of those we spoke to as well.
But many other risks such as broader regulatory pushback In the US were categorized as longer-term issues, certainly something to be working on managing, but not something that would damper optimism for the coming one to three years. Potentially controversial new products such as sweepstakes were not seen by most we spoke to as a near-term threat, though there was an acknowledgment that there should be proactive measures to manage emerging products, including clearer initial regulation (compared to the perceived “clumsy” rollout of sports betting regulations in many states).
There was not undue concern about potential short-term shocks from the upcoming US election or geopolitics. Executives felt more focused on the core strength of the industry and had a long-term perspective that wouldn’t be swayed by near-term “shocks” or surprises. In multiple conversations we heard a focus on the fundamental and growing acceptance of gaming in the US and in emerging markets as a trend that cannot be usurped by near-term economic or other issues.
Buy, buy, buy
There is still a clear bias in gaming towards inorganic growth, despite the clear focus on new products we witnessed on the trade show floor. And conditions for M&A are expected to be better in 2025 than they have for several years. Investors and companies we spoke to seemed excited about the chance to make strategic investments and unlock value in the industry.
Generative AI – meat on the bone
We heard, saw, and discussed more concrete ways GenAI and other powerful AI and machine learning tools can be used in gaming. From analytics to marketing personalization to identifying bad actors to content generation to facilitating real-time wagering, there was more vision as to how technology can be leveraged in gaming. Our contribution to those we spoke to was to help ensure the underlying data is robust and robustly managed and to help ensure the model outputs are generating real value.
One underlying factor that could be leading to more optimism in these areas and others (like cashless gaming) is the widespread focus on younger demographics, with everyone from keynote speakers to company executives to casual attendees noting that the gaming floor and online lobbies have a lower average age than they did just several years ago.
To sweeps or not to sweeps
During G2E 2024, social and sweepstakes casinos were a hot topic, with significant exposure during panel discussions and clear opinions generated during numerous conversations around the conference. Those we spoke to are focused on the potential market opportunity, the divisive industry views of these products, and the uncertain legal and tax outlook for these and similar products.
In part, the rush to sweepstakes and other forms of social games is driven by the frustration of many industry participants related to the lack of progress in legalizing casino-style online gaming (as compared to the extensive legalization of sports betting). Some in the regulated space bemoan the tax and regulatory burdens that seem to have grown exponentially with the rollout of sports betting and are fast to contrast that to the sweepstakes companies, which they perceive as getting around regulatory and tax requirements.
Given the still nascent nature of online gaming in the US and the challenges described above, it is not surprising that players continue to turn to offshore operators or alternative products, which they may view as providing a similar experience with better odds and less friction.
We certainly heard many in the regulated industry considering how they might participate in or take advantage of the trend towards sweepstakes and other “quasi-gaming” products such as online skill-based gaming and DFS 2.0/DFS+ offerings. We note that these products have experienced explosive growth in recent years, and while estimates vary, the sweepstakes industry is poised to be a meaningful portion of spend in the sector in the next few years. While the regulatory and tax outlook for sweepstakes remains uncertain, with some state regulators and industry stakeholders taking a negative view, there is no denying the potential for continued growth.
Buckle up – 2025 will be here soon
There is seemingly no shortage of challenges that exist or could rise up to derail the gaming industry’s optimism for 2025. But those challenges will face a determined and armed wall of resistance, at least from the 25,000-plus attendees at G2E 2024. We see an industry pushing forward, being aggressive towards growth, and seeking new opportunities. We believe the industry must also ensure an eye towards existential risks like large compliance failures or a backlash of public perception. But we remain excited by the mood at G2E for a year in which companies are going to be actively looking for what’s next versus a worry about bogeymen behind corners.
How can KPMG help you?
KPMG has resources among a wide variety of services, with experienced professionals who can assist industry participants address the risks and opportunities discussed here. We act globally, with key resources for online gaming, lotteries, land-based operations, and suppliers serving clients in Europe, North America, Australia, and Asia. We are helping major companies manage their portfolios, improve their customer experience, attain a better regulatory posture, and navigate complex tax environments. We are helping emerging companies prepare for growth, situate their financial reporting and other infrastructure for capital markets transactions, and define strategies for the future.
We take responsibility to do our part in promoting a sustainable industry. Our recent report on the industry risk environment illuminates areas where challenges have emerged, grown in likelihood and impact, or spread to new industry subsectors. We support important industry issues like diversity, equity, and inclusion and environmental, social, and governance and seek to collaborate with others who want to see our industry be held up as an example of operating in the best interests of its numerous stakeholders.
We invite you to review our KPMG Gaming portal for the latest insights, trends, events, and information on how we can help you manage growth, navigate risks, and transform your business.
Together, we can shape the future of gaming—now.
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