Israeli gaming industry review

As more Israelis are exposed to gambling whether it be working for a gambling company, or knowing someone who does, than the taboo surrounding gambling may start to diminish.

By
December 30, 2018 11:31
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Israel is known to have one of the most innovative economies in the region, but has the country adequately taken advantage of one of the largest entertainment sectors, gaming?

In this article, we will discuss the current state of the Israeli gaming industry, what it may look like in the future, and how Israeli companies are shaking up the industry.

It may surprise some, but Israel has a long history of involvement from employees to industry titans.

Background

According to NewZoo, the gaming industry topped $138 billion in global revenue.  Mobile gaming is the largest sector, and it accounts for just over half of gaming revenue at 51%.

More impressive than the massive numbers is the unprecedented growth the industry has seen over the past ten years.  The total gaming industry has seen 10% annual growth over the past ten years, and these trends are expected to continue.

Once again, mobile gaming is the highest growing sector, and it is projected to account for an increasingly large portion of the gaming pie.  Mobile gaming has had over 10% growth every year since the first iPhone released in 2017, and as smartphones continue to spread across the globe mobile gaming will continue to grow.

In terms of geography, Asia-Pacific is the biggest region for gaming with 52% of the revenue coming from this area.  China and Japan may be leading the way, but all other regions are still seeing a massive growth in the number of gamers.

Mobile gaming continues to impressively grow as more people around the world gain access to smartphones and the capability to play mobile games.  Mobile gaming has also seen a shift in recent years, and small microtransactions are now the name of the game for game developers.

In total, mobile gaming is predicted to be a 100-billion-dollar industry by 2021, and the massive mobile sector has a wide impact on the total gaming industry.

Israel

But, where does Israel fit into this massive industry and how has the country impacted the direction of gaming?

The Israeli start-up scene is known for its strength around the world, so it would make sense that Israeli developers and entrepreneurs have their hands in the gaming world.  And in recent times, Israeli companies have made some headlines for their economic contributions to the gaming industry.

In 2017, Australian gambling company Aristocrat bought out Israeli company Plarium for $500 million.  Plarium owned Vikings: War of Clans, one of the highest-grossing mobile strategy games, and the sale earned Israel clout on the international gaming scene.

Plarium’s acquisition by a gambling company also highlights another trend in gaming: the entrance of the gambling industry in traditional gaming.

Online gambling is also a growing industry, and companies regularly shift their offerings from physical casinos to online gambling websites.  Companies hosting online casinos have expanded the industry and shown the thirst of consumers to have their gambling available online.

But, gambling has also entered traditional computer and mobile gaming in a very different manner.  Many video games use elements of gambling in their purchases such as loot boxes to diversify their revenue streams.  No longer do game developers solely rely on the purchase of the game, but gamers constantly reinvest in games for the chance at better items or chances of winning.

A noticeable amount of gaming growth can be attributed to this shift in gaming companies, and as evidenced by the Plarium acquisition, Israeli companies have made some innovative and profitable moves in this space.

Israeli gaming company Playtika was also purchased for $4.4 billion in 2016, and still has offices in Israel.  Similar to Plarium, Playtika is a gaming company that boasts an innovative story.  Playtika works in the space of social network games, and they are the highest grossing game developer on Facebook.

Both video game companies have produced countless jobs and contributed large sums of tax dollars to the Israeli government, and they are examples of how Israel can be a hotbed for gaming.

Gaming is growing, and it is seeing sea change that will impact the industry for years to come.  And, Israeli start-ups and entrepreneurs can continue to capitalize on the market growth and demand for gaming.

But, not only has Israel been big in the traditional gaming scene, but the country’s entrepreneurial spirit has also resulted in large changes in the online gambling industry.

Online gambling

While traditional gaming has taken some elements from gambling to implement in their game designs, online gambling is also thriving as an industry.

Due to relaxing regulations in countries across the globe, online gambling companies are increasing their offering on the internet.  Israeli entrepreneurs and companies have also factored into this industry push.

Four Israeli entrepreneurs founded one of the most successful gambling brands in 1997, 888.  888 operates out of Gibraltar, but the founders' roots are in Israel, and it can be seen as an Israeli success story despite the fact the company does not operate out of the country.

888 owns a variety of websites and brands, and it has recently launched a new online casino to add to its many online offerings.

Despite the success of 888, Israel has quite strict gambling laws, and many online casinos and gambling websites are not legal in the country.

However, the national lottery, Mifal HaPayis, is allowed to operate in the country, and it offers several other gambling games outside of the lottery including card and numbers games.  The national lottery is one of the only ways in which Israeli citizens can participate in online gambling consumption despite many Israelis working in the industry.

The money from the national lottery was originally earmarked for healthcare services, but now the revenue goes to a variety of sectors including, art, culture, parks, and education.

However, the Israeli state is missing out on massive potential revenue from having very limited, legal gambling.  Increased tax revenue from gambling could go to the same services that the national lottery provides money for, and it could massively increase the nation’s tax base.

English bookmaker William Hill has offices in Israel, however, Israelis are not allowed to use the gambling services of the company.  Rather than allowing citizens to participate in gambling, the Israeli government has benefitted from the high-tech growth surrounding the gambling industry.

From marketing to financial support to software development, Israel companies have their hands all over the gambling industry, despite Israelis being unable to bet.

Playtech, a software development company that develops the software in many online gambling websites, is one of these examples.  Israeli entrepreneur Teddy Sagi founded the company, and the software giant now has offices in Israel and employs many Israeli workers.

Software development is a key component of online gambling, and Playtech’s service makes it possible for companies to host online gambling and build online casinos.  Playtech has served an integral role in the spread of online gambling popularity.

While the company was founded in Estonia and currently has its headquarters on the Isle of Man, Israel still benefits from the high-tech developments of Playtech.  Furthermore, the founder’s background shows that Israelis are often on the cutting edge of the industry.

Much of the Israeli involvement in the industry also revolves around marketing.  Marketing allows gambling firms the ability to differentiate themselves from the ever-growing pack, and many gambling companies choose to do their marketing business out of Israel.

In both marketing and software, gambling provides Israel with numerous jobs and is a great source of economic investment in the country.  Israel’s participation in the gambling industry is likely to grow as the current companies grow and gain trust in the industry.

Likewise, Israeli investors will look at their fellow countrymen and see a great business opportunity.  As gambling and gaming grow in the coming years Israel’s involvement in the gambling industry will only grow unless a massive backlash is taken against the industry.
Future

With mobile and computer video games entering into the gambling fray, the gray area between gaming and gambling continues to grow.  This is another area in which Israel’s tenuous relationship with gambling could grow.

While some countries have expressed concern about this development, it represents a new frontier for gaming and gambling.  And, it is one that future Israeli entrepreneurs may capitalize on in a big way.  If history repeats itself, Israel will produce some of the industry titans.

But, if Israel continues down the same path with its strict gambling laws, it will not fully benefit from this growth.  Countries like Malta and Gibraltar will likely host these young Israelis and provide them a haven to become gambling giants.

Israel will benefit from the growth of industries that work alongside gambling such as marketing and software, but the national lottery can only grow so much.  Israeli gamblers are restricted to the lottery or taking a trip overseas to do their gambling in a physical casino.

Of course, gambling is not part of Israeli culture as it is in other countries, however, there are many Israelis who would likely participate as the industry continues to spread into many areas of life.  The Israeli government has not expressed much public interest in further legalizing gambling online or otherwise, so it is difficult to make any predictions when it comes to the future state of gambling in the country.

However, it is safe to say that many Israelis have been at the forefront of industry change, and many Israeli workers benefit from gambling’s growth.  Many marketers and software developers work on gambling projects, and gambling executives and founders have made millions in the last several decades.

As previously mentioned, the mobile gaming industry is booming, and the latest and most impactful developments will likely come from the mobile gaming world.  More and more gambling companies are moving into the mobile platform, and the next innovations to shake up the industry will likely take place on a mobile platform.  Perhaps a new Israeli investor will be topping Forbes lists in the future after changing mobile gaming and gambling.

As more Israelis are exposed to gambling whether it be working for a gambling company, or knowing someone who does, than the taboo surrounding gambling may start to diminish.

Whether it remains taboo or not, the Israeli economy and therefore tax base and government are highly connected to gambling and the recent growth in the gambling industry.  The future largely depends on how connected regulators and politicians want to be seen to gambling.

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