As AGS targets expansion, Latin America positions itself as a next natural step for the company. The manufacturer and supplier of gaming products already has a solid presence in Mexico -its most important and flagship international market- and is targeting further opportunities in other jurisdictions, having launched in markets such as the Argentinean one, and eyeing new countries in the near future.
In an exclusive interview with Yogonet, Drew Pawlak, AGS Vice President and General Manager for Latin America; and Eduardo Álvarez, Director of Sales Latin America, discuss the company plans and strategy for the region. The executives talk about new opportunities and challenges; the reception of AGS’ products in Latin America; and markets to target next, among other key topics of its international expansion.
Latin America’s gaming industry has been one of the most affected by Covid-related restrictions over the last two years, although latest figures show a rebound is in place. How do you assess the current state of gaming there, and how would you describe the company’s presence in LatAm at the moment?
Drew Pawlak: I think we can all agree Covid changed the world and it changed each of us personally. And the impact it has had on gaming has varied across the world. In wealthy nations, revenue has come back quite strong and continues to be strong today. Just look at Nevada, we have had 17 straight months of over $1B in taxable GGR. In smaller countries, it has taken longer but appears to be stabilizing over the last three quarters. But there is still a bit to go. I think the real important thing to remember is as an industry, we are in this together. And we need to continue to build it back together.
I have always felt gaming is a very fragile ecosystem. More fragile than most industries. In gaming, manufacturers and operators are dependent on each other. As a result of this, both need to support each other in staying healthy as businesses. It’s always been my view, and I think my customers and colleagues would agree, that this comes from doing fair deals, under fair terms. I am not sure this is shared by all.
Regarding where we are now: AGS Mexico, as a business, has done pretty well considering Covid and regional political controversy, which is always prone in this industry. Outside of Mexico, international is new to dAGS. We have a growing presence in Argentina and in 2021 we successfully entered a few Caribbean markets, and they also grew in 2022. Eduardo Alvarez and I -well, mostly Eduardo- have been doing the groundwork to enter 3 additional markets in 2023, meaning technical and market development. Our initial assessment is that AGS will see similar results in these new markets when we launch.
Which Latin America markets are a priority for AGS at the moment, and which ones could see a launch next? What is AGS’ strategy for Latin America like, and how does it differ from that in place in other regions in which the company operates?
Drew Pawlak: AGS started in the US, then through acquisition found ourselves with significant operations in Mexico. So, company operations have always been our method of expansion. In South America, our strategy has shifted to partnering with local distributors. These long-time tenured professionals are the ones who live and breathe their market day in and day out, as we do in US and Mexico. So, growth through distribution is vastly different than what we have done in our existing operations in the USA, Canada and Mexico.
We don’t see relationships with distributors as short-term market entry relationships, but truly as partners in growing our business over the long term. This allows us to focus on what we both do best. We are preparing for Chile and Peru in 2023, both I think are feasible for us to execute, without us taking our eye off growing our current business.
Which AGS products have seen the better reception in the LatAm market thus far, and what can you tell us in regards to localized offerings for this market? How would you describe customer preferences in the region, and what technologies/products could give AGS an edge here?
Eduardo Álvarez: Honestly, all the products we have introduced into Argentina have worked very well. With the Icon and Orion Portrait cabinets, the operators have realized the quality of our Class III games. But if I had to choose one, I would say that the Orion Curve is the cabinet that is helping us stand out as a top performer in the expansion markets we enter. Orion Curve is the most complete and robust product that we have released to date. While our customers were very happy with Orion Portrait, as soon as they tried Orion Curve they were amazed at how are far our game design has come and now consider AGS as a long-term partner.
Latin American markets have always been competitive, but as they matured over the years it’s ever more competitive. Although the floors are very similar in all countries, the key is to understand the player: what he is looking for, what motivates him and even what he does not want in a game, a math model. The big difference between LatAm and the US is in the scale: the size of the casinos, the number of machines, and the daily visits, but not in the quality of the products. As a supplier, we want to participate in the Latin American markets with the best products we have, so the competition becomes more interesting and challenging at the same time. AGS is very confident that we have put in enough time and understanding in these markets, and we feel solid about our product strategy for LatAm.
Thinking there is a single customer profile in Latin America would be a big mistake for any supplier. South America is a HUGE continent, it’s a great market and we have a great diversity of not only players but also operators and casinos, which makes it even more interesting and challenging. Our clients are now learning about our added value, which is based on two axels: AGS’ understanding of the markets, and the adaptability of our products. As AGS, we walk the floors, we tour the cities, we talk to the players and we listen to the operators, which allows us to have a better understanding of the markets. Based on this information, we offer a product that meets the specific market demands.
Once this selection is made, we work with the local distributors to target the correct location and configuration. It is here where help from our local distributors and operators becomes magic. We understand that only by working as a team, do we continue to reap success. The products that we are taking to the different countries have been tested in the US and Mexico, so our customers can rest assured that we have traveled several kilometers. What’s coming? I can only say that it’s on its way. It’s designed to meet the highest expectations of the most demanding Latin American markets.
AGS first entered Latin America through Mexico, where it holds a large presence; while the first point of entry for South America was later announced through Argentina, where the company has Permaquim as its distributor. Can you update us on the company’s operations in these two countries? What is AGS’ long-term goal for the LatAm region at large in terms of market share?
Eduardo Álvarez: In Mexico, we continue to be a leading brand, we are top of mind for our clients, and we maintain a solid market share. Unfortunately, Mexico has been one of the most affected gaming markets in North and South America, and there are many obstacles and restrictions we have had as an industry in the last two years. Despite this, we are experiencing a significant recovery. Mexico is definitely our most important and flagship international market. We definitely are expanding into other international markets. Our commitment is stronger than ever, but we understand how demanding it is. We have a historical success story in Mexico, but the best is yet to come, the products that are arriving and being developed will give us an even more important boost in the coming months.
In Argentina, we are already writing our own history. We have in Permaquim a player who has their own reputation and together we are forming a synergy that has been very well received in the industry. We are taking solid steps, with the right commercial partners (operators), they have opened the doors to us trusting in our philosophy and the products have responded with numbers. We will close 2022 as our true first step in LatAm, definitely having chosen Argentina as our first option was the best decision. It is a robust, well-regulated, professional marketplace and showcase for our industry.
When we think of LatAm internally, Drew and I always believe we can replicate the market share that we have in Mexico. It is clear that it is an ambitious goal, but we have the right partner-distributors, the right products and the soul to achieve it. Arriving in a new country or city is a great satisfaction but knowing that the market already recognizes us as a true player is what motivates us to continue giving our best as a company and drives us to carry the best products.
As for other countries, we have seen changes in the region over the last months, with Chile’s regulator recently renovating for 15 years the licenses of 10 casinos in the country. What’s your take on this market, and other established ones like Peru or Brazil? What kind of partnerships is AGS seeking in the region?
Eduardo Álvarez: Chile is definitely one of the most mature and interesting markets on the continent. Chilian operators maintain a high level of professionalism, know their clients extremely well and are focused on providing added value in every area of business. Additionally, they are open to new products, which is great for AGS. Regarding the players, it goes without saying that they are true connoisseurs of the game, they are demanding, and they know what they want. That is why it is one of the target markets for AGS, and we are sure that the development particularly designed for Chile will be appealing to the players. Our expectations are high, and we are very optimistic about landing in the Andean lands in the short term.
Drew Pawlak: For sure Peru is a target market for us. I have been working in Peru for nearly 20 years and love the country! Some great, great operators and very close friends. But as with everything, opportunity dictates the timing. Even though I love it, we need the right product, the right partner and the right market timing. I think this could all come together in 2023.
And Brasil…. Well, it’s Brasil; that is special. When it happens, and as you can see I did not say ‘if,’ I assure you AGS is ready.
Several Latin American countries such as Colombia and Argentina have introduced a regulatory framework for online gaming, while others like Peru and Chile are still discussing potential legalization. While still a nascent industry, what prospects do you see in iGaming within the region? Could this present an opportunity in the long term for AGS’ Interactive division?
Drew Pawlak: AGS is currently integrated with over 20 different PAMs that operate 100+ brands. So any LATAM operator using one of these platforms can easily begin to deliver AGS content now. I know several are. And we are always open to adding more!
I have always been a believer that land-based, and iGaming can coexist happily in any market. I still am. The real challenge in the LatAm region is iGaming operators finding effective ways of getting money on and off the site seamlessly for the player. Credit cards are simply not as prevalent in the entire population as in other global regions. To really add gaming revenue in any specific market, in any country, this must be figured out. This is as much or more of a cultural shift as a technical one and those always take time.
In my second view, governments need to ensure that the markets players are actually playing on are only on the countries’ licensed and regulated iGaming sites. This takes more proactive enforcement by the government. This strategy is not always easy to develop and implement. So, for the entire LatAm region to see the full potential of iGaming, these areas need to be solved.
How do you assess the regulatory environment in Latin America, and in comparison to the one in the US? Having worked in compliance for a part of your career with BMM, what can your experience bring to the table?
Drew Pawlak: Though I have been out of a compliance-centric role for over 6 years, the reality in this industry is no gaming professional is ever really far from compliance – right? But if I had to summarize the differences, I would say complexity and size are the two major differences. But that does not tell you much.
Both regions have effective regulatory structures. If we compare a single US jurisdiction to any well-regulated market in LatAm the similarities are greater than the differences. There is supplier and operator licensing, product compliance and approvals, minimum internal controls, shipping requirements, etc. Now the scrutiny in any one of these areas of compliance will have vast regional differences, but the fundamentals are all similar.
One of the areas that is different between most countries in LatAm and the US, is the size, which adds to the complexity. Severe complexity. In the US commercial gaming (non-tribal) is a state-authorized business activity. And with the tribes in the US, which are sovereign, are all separate jurisdictions. The impact on a supplier is pretty great. For them to get 100% market access to say Peru or Chile, it’s one license, one product approval, etc. Where in the US, to get nationwide access its well over 300 individual licenses, and multiple product approvals. And then various operational differences. All which need to be individually obtained and managed with internal and external costs in resources, time being the most valuable.
Another major difference is the level of enforcement that is committed by a government. In the US, most gaming authorities are independent and have their own investigators and division of enforcement agents. This really changes the landscape of the 2 regions.
