Barriers and Strategies in Brazil’s Emerging Betting Market
Christian Tirabassi, a leading figure in mergers and acquisitions and the founder of Ficom Leisure, highlights the challenges smaller betting operators face in Brazil’s evolving market landscape. He anticipates that the sector will increasingly be dominated by a select group of 10 to 12 major players, while smaller entities may find it difficult to thrive amid tough competition.
As of January 1, Brazil’s regulated online betting scene welcomed 14 full-license businesses, and approvals from the Secretariat of Prizes and Bets (SPA) have since expanded that number to around 80. Despite these operators successfully navigating initial entry barriers—such as a significant BRL 30 million (approximately $5.5 million) licensing fee—ongoing compliance costs pose a substantial threat to smaller firms.
The landscape is further complicated by a proposed increase in gambling tax from 12% to 18% of gross gaming revenue (GGR), as well as tighter advertising regulations. These developments could lead to a scenario reminiscent of more mature European markets, characterized by a few dominant companies holding significant market share.
"The operators with a proven track record in Brazil are likely to maintain their positions of strength," Tirabassi asserts. He notes that aside from new entrants like the joint venture between MGM and Grupo Globo, many of the current players are established brands, including notable acquisitions like Betnacional by Flutter.
Tirabassi estimates that a market share could be concentrated among 10 to 12 entities—potentially representing about 30 distinct brands. He warns that operators below a specific GGR threshold may face serious hurdles in establishing competitiveness.
According to H2 Gambling Capital, Brazil’s online betting market could be valued at BRL 31 billion ($5.5 billion) in GGR by 2025, with projections reaching BRL 64 billion by 2030, not accounting for the implications of tax hikes.
Opportunities for Smaller Competitors
Despite the expectation that larger firms will seize the lion’s share of the market, Tirabassi believes there are avenues for smaller operators to carve out a niche. He proposes that regional operators, rather than aspiring to national status, might find success by focusing on specific areas where they can excel.
“Being a regional player can work,” he notes. “However, the scale of these businesses is unlikely to rival giants like Bet365 or Flutter, which are set to surpass BRL 200-300 million in GGR annually.”
Advertising and Customer Acquisition Challenges
The operational hurdles for smaller operators are compounded by recent advertising restrictions that came into effect, notably bans on influencer and athlete promotions and the introduction of watershed regulations. Coupled with a significant increase in tax rates, these changes could further hinder smaller companies struggling to maintain viability.
Tirabassi anticipates a surge in marketing expenditure—over $2.5 billion—over the next year and a half, as operators aim to establish themselves prior to the implementation of these new limits. Larger firms are expected to dominate this spending, racing to secure market share before restrictions take effect.
“While some limitations were anticipated, the preemptive push to capture market share will be significant,” he explains. “Those that act swiftly will likely solidify their footprint before any regulatory changes.”
Future of Mergers and Acquisitions
Looking ahead, Tirabassi sees Brazil positioning itself as a hotspot for mergers and acquisitions within Latin America’s gaming scene. This trend could present lucrative opportunities for smaller operators, either offering a pathway for profitable exits or integration into larger corporations.
To prepare for potential sales, Tirabassi advises smaller operators to establish a robust corporate framework to navigate the acquisition landscape effectively. He emphasizes the importance of proper corporate governance, including appointing a CFO and employing corporate advisors to ensure readiness for due diligence processes.
“An imbalance between the size of a business and its corporate structure can lead to challenges,” he cautions. “While compliance and licensing are essential, readiness for a potential sale hinges on having a well-organized operational and financial structure.”