Brazilian Betting Market Faces Consolidation, Expert Predicts
High barriers to entry, potential tax increases, and advertising restrictions are likely to make it very difficult for smaller operators to compete in Brazil, according to mergers and acquisitions specialist Christian Tirabassi.
Tirabassi, founder and senior partner at consulting firm Ficom Leisure, anticipates that the Brazilian betting market will be dominated by 10 to 12 top-tier operators, while those in tiers two and three will struggle to compete with such high entry barriers.
The Brazilian online betting market launched on January 1st, with 14 fully licensed operators. Subsequently, the Secretariat of Prizes and Betting (SPA) has authorized approximately 80 operators in the legalized market today.
However, while these operators have already faced significant entry barriers, such as the R$30 million (US$5.5 million) license fee, some believe that the heavy costs for ongoing compliance could force smaller operators out of the market.
Adding to this a possible increase in the gaming tax from 12% to 18% of GGR (gross gaming revenue), along with further advertising restrictions, the market is likely to mirror more mature European markets, where a handful of larger players dominate market share.
“Companies that were performing well in Brazil before regulation are maintaining that leading position,” says Tirabassi.
“The only different strategy is the joint venture between MGM and Grupo Globo, which is [new to the market], but the rest are continuing brands, such as Betnacional being acquired by Flutter.
“The majority of the market will be divided among 10 to 12 operators, which may be 30 brands. The [operators] below a certain GGR threshold will struggle to compete.”
H2 Gambling Capital estimates that Brazil’s online betting industry could reach R$31 billion (US$5.5 billion) in GGR in 2025, growing to R$64 billion in 2030. This does not consider the potential impact of a tax increase.
Regional Operators Could Resist
Despite believing in the prevalence of larger operators, Tirabassi suggests that smaller competitors could maintain a reasonable market share if they can find a niche.
“It could be a regional niche,” Tirabassi continues. “Not as a national operator, but perhaps an operator that has a decent market share in a specific region for whatever reason.
But the numbers would be much smaller than those going to the national market share, such as Bet365, Flutter, EstrelaBet, the companies that will earn more than R$200 to 300 million in GGR per year.”
Customer Acquisition Under Pressure Due to New Advertising Measures
With smaller operators expected to struggle due to the cost of doing business in Brazil, recent developments may strengthen these companies.
New advertising restrictions prohibiting the use of influencers and athletes and introducing protectionist milestones were approved by the Senate in May. The increase in the tax rate, which represents 50% more than the current rate, will undoubtedly put further pressure on operators struggling to compete.
Tirabassi expects that more than US$2.5 billion will be spent on marketing in Brazil in the next 18 months as operators strive to compete in the new market. The forecast is that larger operators will account for the majority of this spending, already anticipating the advancement of future advertising restrictions.
“We expected that there would be some restrictions,” Tirabassi adds. “Before that happens, companies will flood the market.
They will try to get as much market share as they can. And if and when those restrictions come in, they [already] will have a considerable market share that they will possibly maintain.”
Possible Obstacles to Mergers and Acquisitions in Brazil
Tirabassi believes that Brazil will become the most important mergers and acquisitions market in the history of LatAm gaming, which could represent a lucrative exit for smaller operators, or allow them to operate within a larger corporation.
He advises that these independent operators ensure compliance with all necessary corporate requirements, in order to facilitate a possible sale. In his experience, a lack of corporate structure can lead to problems for operators.
“What we have seen is that if you have a very large business with a small corporate structure that is not aligned with the size of the business, that is where [operators] will have to recover,” says Tirabassi.
“Although they have met the legal and compliance requirements necessary for the license, they need to have a CFO and a business consultant aligned and keeping an eye on the numbers, so that they are prepared for due diligence and so on,” he concludes.
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