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In Brazil, the Ministry of Finance has published its long-awaited statistical report on the activities of the Betz regime and its first six months in operation. The report reveals tax takings of more than 3 billion reais, alongside strong action against illegal gambling and the introduction of new safer gambling tools and measures. But is Brazil's regulated industry worth the hype? And with tax rises and ad restrictions on the way, changing the future outlook, can we even read too much into this report? Welcome back to iGaming Daily. iGaming Daily is supported by Optimove, the creator of positionless marketing and the number one player engagement platform. If you're heading to SBC Summit in Lisbon, mention iGaming Daily when you visit Optimove at stand A555 and get your first month for free. Joining me, Charlie Horner, for this one is none other than SBC Noticias Brasil's Ana Maria Menezes and SBC Media's editor-at-large Ted Menmure. Anna, it's great to have you back on the show. How's things? It's a big story for you. Oh, yes, it is. Hi, Charlie. This actually, story has changed and given some very good information to the Brazilian market and just reflecting the work that the industry has been putting for the first semester. So I'm pretty excited to talk about it. Brilliant. And Ted, how are you doing? It's good to have your expertise on the show. I'm not so sure about that, but I'll... I'll let Ana Rift on this podcast, that's for sure. Great. Well, let's dig straight into this. Ana, I'd love to get the local view, the local insight on this. So how has the report been received by people in Brazil? ah I do believe from the people I've talked to, from the groups that I've also looked into, from hearing the discussions, ah it's just with relief in a way, because we've been expecting this information and this report. for quite some time now. We thought it was going to be launched in July and we're almost in September. So there was high expectations for when it was finally going to be released. And I talked to Regis Zudena, he's the Secretariat of the sports betting regulator here in Brazil. ah And he told me they have a big volume of information to be analyzed and not enough staff for that. So there is also this matter at hand with the process of information. We have lots of companies working. We have uh lots of ongoing uh law projects, projects of lobbying, instated and all of that. So too much work. It looks like not too many groups working on it. ah So yeah, it's a high volume of information for not as many people as we would like. Well, it's nice to get those figures through finally. uh Let's have a little rundown of some of the top line numbers then. So we've got over 17 uh billion Reyes in GGR, which is about 3 billion euros for our European listeners. And that's from about 17 and a half million uh active accounts, if I'm not mistaken there. uh Ted. Look, the regime has had a difficult inception and obviously we know it took a long, long time for us to even get to this point. But for foreign operators, this must be viewed in positive light. Is the market heading in a positive direction in your view? Yes, I think it is. And I think that's underlined by what the H1 reports have reflected. Look, if we take the... uh the view of PLCs and this was noted a long time ago that the first six months of the market, they wouldn't view an initial downturn in results and in comparatives. And that's mostly due to kind of high compliance costs. It's now much more difficult to kind of onboard customers. And there's one of the kind of regulatory adjustments, especially with not being able to offer a welcome bonus. This is still very much stage one and the positive signs of the foreign and domestic operators is that they're investing or increasing investment in media, licensed, in localized marketing operations, dedicated compliance. So these are factors that should be viewed in a positive light. I think that when we look at these reports, it's just not fair just to judge a market on its GGR trend. I think you've got to analyze all elements that have kind of been attributed to the market and how the market is developing in a much wider scope. And Ted, I just want to stick with you really because I want to compare Brazil to other international markets. So where is Brazil standing on that global scale after this report's come out? So if we reflect on that top line GGR of plus 17.4 billion, that's circa 3.5 billion euros, man. You deem kind of Brazil's opening position as modest. And it's a figure that really doesn't break the top 10 global markets in comparison to much more settled European and North American jurisdictions. Yet this is an unfair comparisons due to the regulatory adjustments that the market has undertaken and its transition from CRE to regulated system. Again, Brazil did not have the same starting platform as others. As its underlying laws are still to be formed. I don't think that GGR is the right metric to compare in contrast. Positive should be taken from the make-up of the market competition, which still maintains 78 licensed operators competing in bets. That number is, I think that number will dwindle kind of in year two as competition toughens. But look, the make-up, the underlying make-up of the market in Brazil is positive. It is a competitive landscape. It is what the PLCs wanted. Yeah, no, a really competitive landscape. think there's 78 companies, over 180 brands as well. So, Yeah, plenty of competition there for sure. Anna, I want to come back to you now um because the report does go into player demographics and it analyzes not just the monetary value of what people are betting, but who's betting. Could you break down the stats reflected in the player metrics of this regime and tell us a little bit about the makeup of the market? Sure. As you already mentioned, by the time that the report was finished, So by the time they stopped analyzing data from the first semester, we had 78 licensed operators and they were overseeing 182 brands. ah And the data management part of the sports betting uh secretary showed that we had, as you also mentioned, 17.7 million Brazilians placing bets during the first half of the year. ah pretty big number just as a comparison. have right now in Brazil more than 200, 210 million people in Brazil. It's a big country. It's in the top 10 biggest countries in the world, biggest country in Latin America. So we have this big amount of number and we have to remember we're not even talking about uh the illegal market here. It's only the licensed market. But Here and something that wasn't that much of a surprise, most batters are men. It's a 71 % ratio. Again, pretty high and women make up for 28.9. And the largest age group would be from 31 to 40 years old, which is almost 30%. Then people from 18 to 25, which is 22 % or so. And then 25 to 30 years old, which is 22%. So again, it shows that young people are betting and this just justifies the concern of the secretary of how are responsible gambling campaigns working. ah Were they being exposed to people under 18, I mean. So we have a big amount of young people playing and not by surprise, this is also the age group that pays more, that buys more. So we also have this alignment. It makes sense that they're betting more because this is the age group that spends more and consumes more media, consumes more products as well. So it makes a lot of sense. It aligns up. It's nothing um that out there, know. And it's interesting because, you know, we do have to take into account that this is just the regulated market that we're talking about. We're not accounting for any illicit gambling that's going on. yeah, potentially many more people that are betting as well. But look, launching a new market is never easy. There's been a lot of work that's gone into this process so far. I want to open this up to both of you and get both of your thoughts on this. So where have the SPA and the Ministry of Finance have shown dynamism and strong work in protecting the regime from risk? from the black market for protecting those young players that you talk about, Anna? Okay. Look, as you said, I really view what the SBA have done is something quite unique because just of the market size of Brazil and it's not only in terms of just its scale, but it's also the dynamics and what is made up as consumers now. I think one of the positive steps that it did is put in this kind hard coordination, how to tackle and how to transition the market from its gray status. And when we say gray, it's very much kind of how to transition from unlicensed regime to regulated regime and really kind of focus on making sure that licenses undertook kind of compliance duties from day one. um The other kind of angle that I put in is that kind of coordination, not only with the licenses, but with wider stakeholders, wider authorities, and especially got immediate platforms to police uh unlicensed websites. Now, one thing that we've learned this year, and not just in Brazil, but across all markets is what kind of evolving threat the black market is and how you've got to act on the kind of front foot to kind of shut down websites, shut down IP access. but also shut down kind of any instrument that these companies can use. you know, whether they're Telegram, bank controls, et cetera. How do you actually stop these guys kind of impeding, sort of engaging with the consumer? I actually think kind of Brazil has been much more dynamic than a lot of European jurisdictions on this. So this should be credited there. I do believe it's also worth mentioning that the SPA is trying to find ways of separating and teaching the customer. of what are the legal, what the legal websites are. So we have the domain bad.br and this domain represents a licensed and legalized company. The thing is how many players actually know that? How impactful is really the work on teaching people? Again, it's not been that many months since it started. So it is a long process. uh but the SPA is trying to find a way of making sure, of making clear visually uh to separate what is legal, is illegal as well. And as I mentioned, the whole work of shutting down websites, and this has been talked about here by the Anatel president, so it's the telecommunication agency, the regulator here in Brazil, and also by Regis Zudena, the secretariat. uh It's hard because you shut down one domain, next day another two come. It's a chimera if I can say it this way. ah It's hard. And the resources are in the house of millions and millions of reais. So they are doing their best. ah But there is again, the resources are needed. And a lot of those resources are being used as well right now ah to take care of other. uh important matters such as the national betting system that is being created again to help separate legal from illegal and is being made with the help of states in Brazil. So this is an effort together with the states and this is also something that I think is worth mentioning about SPA's work. They're trying to do the best they can with the help from the market. Yeah, absolutely. A lot of work has gone into this. There's no mention of channelization rates in the report, but over 15,000 illegal websites have been shut down, I think, since October. yeah, a lot of hard work. Ted, Anna, we'll take a quick break and then we'll delve into this a little bit more. Welcome back to iGaming Daily. We're talking all about Brazil today because the Ministry of Finance have released their first half-year report on the market. So, but it's not all... good news. There is a little bit of doom and gloom as we've sort of alluded to on the show a lot over the last month or so. But as we enter September, there's a lot of judgments that are about to loom in Brazil. So particularly on advertising and tax, how is that discourse presenting itself at the moment? Ana, we'll come to you first. uh Recently, Regis Dudenha, again the secretariat, he He was part of an interview with one of the biggest news outlets we have here in Brazil. So he reached a broad audience and he talked about the government uh imposing stricter rules on sports betting and online gaming ads here. um He said he acknowledged actually the growing criticism about the volume of ads involving influencers, TV hosts, sports channel, athletes as well, and also former players. And he said, and with quotes here. When people criticize, they're often referring to stadium activations, football shirts, and TV ads. Obviously, at some point, these may need tighter control. We have here being discussed in the Congress the limits of time. So by the time when the ads can be placed, also limiting athlete endorsements when they're active. um Also how it is placed for young viewers. This is also something that has been discussed a lot here. And in terms of taxes, we have, it's a bit more developed. This part of advertisements is still sort of like ongoing. We still have to, as Fernando, our other host likes to say, hashtag wait and see. ah But with this part is still in development with taxes. However, we are still, we are a bit far ahead. ah The government already prepared a measure to place the rise from 12 % to 18 % taxes on GGR. It's probably happening. We're just going to have to, again, see how the market adapts to it. The government doesn't seem to be willing to come back from that at all in a way to sort of make up for the lack of tax collection. And this comes from different sides. Again, it's not like the sports betting market ah is the reason behind every, no, a government in a country is composed by different aspects. So the justification for raising the taxes comes from the lack of tax collection in other financial areas. However, we have also some uh organizations here in Brazil that said that this rise of taxes is not going to actually impact the market. So again, we're going to have to hashtag wait and see, but it's already been said it's independent agency actually connected to the Senate. They said this rising is not really going to be seen. It's not really going to make that much difference for the government. So again, in my view, then why is it uh being raised if we're not going to see it? Yeah, indeed. We'll have to we'll have to wait and see on that one. But Ted, I want to come to you now because we've just come out of. the H1 reporting season. You've been reporting on this quite extensively. How closely are these sort of developments being viewed at the C level of a lot of these global and listed operators and what do they make of these changes? Well, I can only kind of reference for European PLCs on this point. And for me, I believe kind of that that tax increase has already been factored in and it's been factored in as kind of a market commitment. So yes, look, we're staying out in Brazil. uh The revision here will be how it impacts scale and long-term ROI and planning for the market. And I view that the tax factor will be the great equalizer between foreign and local operators and who has the best localized operations and who can navigate those economic headwinds most comfortably. ah My prediction here is that if a local operator proves its agility soon and can really show kind of its quickest ROI, especially managing those tax increases. I think that points to signs of like a very earlier M &A coming into play uh possibly by next year. ah Then going back to kind of these regulatory adjustments, for me, the much more challenging narrative for foreign PLCs will be the restrictions applied to advertising, especially as they increase investment. And the operators need to kind of build uh localized audiences, but also kind of a mass market appeal to help them kind of deploy these recreational strategies. I think there's going be a lot of scrutiny to how restrictions are applied to football and social media. we've got these advertising restrictions coming in, tax rises on the way. Once these are implemented, can we get a bit more certainty or will things change again? Anna, are there more twists and turns in the offing or is there going to be a calmer environment for operators to operate in? I'm going to be very honest and say Brazil is a box full of surprises. We were not expecting the tax raise as an example of the GGR because again, it was established when the law was passed down. So when the rise was just announced, it just got the market by surprise because... What do you mean you're going to raise the tax of something that was already agreed on? It's just, it's just undoable. But again, Brazil, and I know that other Latin American countries work this way as well. We're just again, a box full of surprises and sometimes in a good way, sometimes not such in a good way. In this sense, what I can say, and this is a conversation that I've had with many operators here in Brazil is that the best companies and the best. uh workers, if I can say it this way, are the ones prepared to deal with the unprepared. So to be creative and to learn how to navigate when you don't know what the next decision is going to be. So I believe this is also something for foreign uh operators listening. It's just focusing on that when you're talking about a country that is still establishing as well. So who you're hiring is someone who's going to freak out all the time when there's a new change, or is it someone who's going to plan ahead and think, okay, how are we gonna do from now? Instead of just like sitting there and crying, what are we gonna do? And this is something that Brazilians are very good with precisely because of that. are used to this. Unfortunately, we are used to this type of behavior and we are thriving as a country as well. So it's not something to be alarmed. It's just something to understand and to learn how to navigate. And I meant as in not to be highly alarmed because for people on the outside, they may look at this and say, oh, how are they going to just to make it work? We have been making this work since we became a republic even before that. So not to alarm. We are thriving as a country. Don't worry about that. Just hire the right people to deal with the uncertainty and who can dialogue as well with the government. So they are open to it. Again, it's about the right people placing the right time and learning how to navigate these changes. But I don't believe right now with that many open doors, we're going to have this tranquility, like 100%. I don't think so right now. Hopefully in the future, yes, and not in the far future. But until we have these main points resolved and we're not still even talking about land-based, we also have that in the future as well. we cannot talk about being 100 % non-moving when we still have that much to cover, you know? Yeah, well, if you want to stay ahead of those curves, find those creative solutions and get those jobs, make sure to keep tuning into iGaming Daily, read SBC News, yes Brazil, and you should be fine. Look, Ted, I want to just close the show out with a thought from you. You know, this market is so highly anticipated. We waited years for this. the first six months report is out. Has Brazil proven its status as iGaming's new growth market? Yes. Well, without a doubt. I think, look, you're going to kind of separate this out to whatever report says all kind of the metrics coming in. Let's assess what has happened in the last six months. Who's active in the market and how much they're investing in that. Now the. Your investment in Brazil from PLC perspective is that these companies really want to be there at the top of the podium. And in a sense, you look at the Brazil market, it is better to be the number one operator in Brazil than it is in many Western European markets because it is a dynamic marketplace on the whole. It is a younger marketplace and it's a market that is growing year on year. And not many European markets can say that. um I think this is a very promising start for Brazil. uh again, going back to what Anna was saying, it's like, know, you've got to kind of, you know, allow some leeways for the unexpected to happen and for the government to come to these kinds of judgments and settlements on tax and advertising. Again, what we know about gaming is that it's the best companies, it's how they react to headwinds. and who are the quickest to adjust. I don't think Brazil is any different in that. um It's, yeah, I think it's positive start. It's a good market to report on and we will be covering developments as they go along. Indeed we will. Ted, Ana, thanks very much for your insights on this one. It's been great to have you on the show. And to the listeners, if you want to get a full deep dive on all of the numbers from the first market report in Brazil, We'll leave links to Portuguese and English language coverage of that story and tune in tomorrow for another episode of iGaming Daily.