INTERVIEW | Enrico Bradamante: Malta at risk of losing gaming edge
Enrico Bradamante, iGen chairman and CEO of Maverick Gaming, tells BusinessToday Malta needs to get its act together if it is to retain its edge in the gaming industry and achieve its aspirations in the blockchain and AI markets.
You are currently the CEO of Maverick Gaming. When was the company set up, and what services does it offer?
I am Italian, but I’ve led a very international life and career. I have worked in the US and the UK with big multi-national companies like Dell and Kodak. Seven years ago, I joined the premium gaming solutions company NetENT, and this was the point when I came to Malta. For most of my career, I had been involved in the corporate side of things, but, a year and a half ago, I left NetENT and started Maverick Gaming. Maverick is an online slots producer, working in the casino game arena and currently engaged primarily in the Asian market. We are, however, in discussions to implement the second phase of our plan for the company, to take the products slots to the European market.
You are also the chairman of iGen. What is iGen, what are its main goals and how many companies are members?
One of the other initiatives I undertook when I left NetENT was to set up iGen, a Maltese association of iGaming companies. iGen holds a general meeting six times a year – every two months. In the first meeting, all the topics for discussion are placed on the table, and in between the meetings I drive a number of action points, conversations and also organise other meetings, depending on the issue in hand. One of the topics we are discussing is the rent law, but we also discuss subjects such as banking support, technical issues within the gaming industry, transport, and other common problems which gaming companies operating in Malta experience. In each meeting I report on what progress and developments have taken place.
Last year, the gaming sector accounted for over 13% of Maltese overall economic activity, and gaming makes up a 15% share of the economy’s gross value added. What makes Malta attractive as a jurisdiction for iGaming?
Malta has been a pioneer when it comes to iGaming. The first legislative framework was put in place 15 years ago, and this is when the country first entered the gaming sphere. Since then, it has gone from strength to strength in the right direction as a jurisdiction. The MGA, over the years, has improved its processes and made them more stringent, by holding operators to greater accounts and tightening due diligence procedures and Know Your Client (KYC) requirements.
In the past decade and a half, Malta has really become a hub for iGaming. Moreover, I would argue that in the past three years, since Brexit, the relative weight of Gibraltar, the Isle of Man and Alderney – which are the other important hubs when it comes to gaming – has lessened, while that of Malta has increased. Bet365, for instance, is moving hundreds of employees to Malta, and this goes to highlight the jurisdictions positives. I think the island now has achieved the critical mass for this industry.
There are, however, a number of issues which come in to play when it comes to maintaining Malta’s attraction as a gaming jurisdiction. One of the issues which iGen has highlighted is the cost of renting property in Malta. At a recent gaming conference, a number of CEOs in the sector said that the high rent costs risk affecting Malta’s competitive edge. How big of a threat are the rent costs?
Rent costs represent a big and growing problem, with different facets. Gaming industry employees have a very wide range of functions, skills sets, ages and salaries. Employees range from those who don’t have degrees – who might be undertaking their first job and are in their early 20s, working in customer support or as live casino dealers or copywriters – to those who have more skills and experience – such as managers or executives.
The vast majority of the workers in the sector are, in fact, those at lower end of the scale, and these earn a modest wage. The industry’s business model is such that we pay these employees a fair salary for their competences, and within the gaming sector they are offered higher-than-average salaries for the type of work they do.
The gaming companies feel that they are paying these employees generously, however, with the salaries which they are earning, it is still very difficult for them to live in the Pembroke, St Julian’s, Sliema, Gżira and Ta’ Xbiex area, because their buying power has been eroded by the rising rent prices. Both private and corporate rent prices have gone through the roof, and rent inflation has far outpaced the inflation of salaries, even within the gaming industry.
This leaves individuals who earn lower wages in the sector with two choices. The first is to move away from this area of Malta, but, once they do so, they will still have to travel to the St Julian’s or surrounding areas, because that is where gaming companies are located. This means they have to either rely on public transport – which can be improved – or on private vehicles, adding to the traffic problem. The second option is to share a two or three-bedroom apartment with others in the industry. This might be a short-term solution for young or single professionals, but it is not a long-term one, because once these individuals grow older and have families, such an arrangement no longer works.
Another connected issue is that there is a shortage of one-bedroom apartments in this area of the island. Seven years ago, this wasn’t a major problem because the price dynamic was different, so people could afford to rent two or three-bedroom apartments instead of a one-bedroom flat, but this buying power has been eroded over the years.
Can you give us some details of the discussions iGen is having with the Maltese government on this issue? Will the new proposed laws be enough, or is iGen proposing changes before they are approved in Parliament?
The government has acknowledged that there is a problem with the rental market in Malta. Last year, a public consultation took place which led to the draft Bill which is being discussed at the moment. As chairman of iGen, I have been involved in this process from the public consultation till now, including having sat through two parliamentary sessions where each article of the law was debated. I would say that the draft Bill as it stands at the moment is positive and a step in the right direction.
There are however aspects where it can be strengthened, and I think there is a particular area which represents the biggest issue: the increase in rent demanded from one contract period to the next. When a rental period comes to an end, it seems that there is no connection between the previous contract and the new contract, with landlords requesting very, very high increases on the rent when a contract comes up for renewal. This situation has happened to me personally, with a landlord having asked me for a 53% increase to renew my contract for the same property. And, unfortunately, the new law does not address this. The law proposes to introduce year-on-year caps for increases in a multi-year tenancy, but this is decided at the beginning of a contract, and applies to increases from one year to the next within the same contract period. It does not regulate the increase requested to renew a contract.
Tenants are at the weaker part of the negotiation process when it comes to renewing contracts, because not renewing means having to move, which can be a significant upheaval.
For the landlord, however, it is essentially only a financial exercise. Most other EU countries have in place stronger protection for the tenant than there currently is in Malta and more than is being proposed by the Bill. This is the biggest thing which I think can be improved in the law which is being discussed.
Is the government being receptive to iGen’s concerns?
The government is listening to the input from everyone during the consultation, and of course every stakeholder has their own angle. I am sure the government is taking into consideration all the points being made. Ultimately, it is the committee responsible for finalising the law which will make the decisions on what amendments will be included. The government is definitely listening and has been very open and pro-actively engaging with iGen. Of course, we will know when the Bill is finalised what the outcome is.
Are you confident the situation will be addressed?
I am an optimist, so I am confident it will be addressed. […] Otherwise the industry would lose its competitiveness… Malta risks losing its competitiveness. This is an economic argument, the prices can’t continue to rise at this rate, outpacing the rise in salaries within the gaming industry.
Do you know of companies which are considering leaving Malta because of the rent issue?
To date, I do not know of any company which is planning to leave because of the rent situation. However, a number of companies have already decided to grow less or stop growing in Malta, and to instead expand their other offices elsewhere, because of the general high cost of living.
A number of executives, CEOs and so on have decided to leave and join their companies’ offices in other countries. So, I can definitely see the early signs of this inflection point being reached. I don’t think the companies will leave Malta altogether, but there are certain departments which companies might feel it makes sense to host in a lower-cost jurisdiction.
Do you encounter problems in finding people with the right skills for gaming jobs?
Yes, it is an issue. This is the reason why the gaming industry needs so many foreign employees. From a company perspective, it would be much easier to hire locals who are already established and usually don’t have to find property to rent, and so on. Things are starting to move in this area however. MCAST has launched a one-year gaming course, and over 50 people will be graduating this year. This is a start, and we have to start somewhere.
Another issue which foreign companies, not only gaming ones, often complain about is the reluctance of local banks to open accounts. Have there been any improvements in the attitude of the banks in recent months?
The short answer is: yes, I’ve seen improvements. But this improvement is not coming from the local banks – these are by and large continuing on the same path, and, if anything, they are increasingly de-risking the portfolio of companies and sectors which they service.
There is a demand in Malta for corporate banking services, and, in my experience, it is practically impossible to open a bank account in Malta as a start-up company in areas such as cryptocurrency, despite the extensive due diligence process. This, of course, prevents companies from starting to trade.
I find this to be a paradox, because while the government is pushing Malta to become, for instance, the blockchain island and to attract companies in this area with its legal framework and entrepreneurial spirit, the reality is that once these firms come to the island, they cannot open a bank account.
In the past 12 months, however, there have been a number of FinTech start-ups which have come to Malta and started to offer banking services to these companies. The most well-known example of this is Revolut, which has solved the problem of opening individual bank accounts for foreign employees who were finding it hard to open an account with a local bank, having to wait for three months or more; But Revolut has not solved the problem of issuing corporate bank accounts, because although Revolut offers business accounts, it does not accept gaming companies.
Fortunately, there are other foreign companies which are willing to take on companies such as Maverick Gaming. Moreover, there will soon be Maltese start-up companies which are going to offer such services. I know of at least four or five companies which will start operating these kinds of services in the next six months.
What about issues related to other services, such as the availability of places in schools and the road infrastructure. Is Malta really geared to cater for the needs of the gaming industry in this sense?
School places’ availability is a huge problem. Just a few months ago I was assisting the CEO of a big gaming company, who came to Malta with her family, to find a place for her two children. She ended up finding a place for one of them, but at the time couldn’t find one for her second child. These are real problems which are happening now.
Every school, as I understand it, is full, and the international schools catering for the expat community have a waiting list. I also experienced this myself – I have three daughters, and they were on the waiting list for the first two years we were in Malta, until they got into the school we wished for them. In fact, I would say this is becoming an even bigger problem, because the industry is not only continuing to grow, but also maturing. There are now people who came here when they were single, but are now getting married, and having children.
I believe this is an issue not only for the expat community, but a general problem which affects the Maltese too, since many locals register their children in school shortly after they are born, to ensure they have a place available by the time they reach school age. The government has started to address this through the building of a new international school, Haileybury, in Mtarfa. As far as I know, however, the school will be ready for the 2021 scholastic year. Two years is a long time, and there will be plenty of children who require places between now and then, but, of course, I acknowledge that infrastructural projects take time.
When it comes to the road infrastructure, I realise that all the ongoing road works are a headache for everyone, since they temporarily cause traffic build-up. But the gaming industry is very happy that these infrastructural projects – such as the Kappara and Marsa flyovers – have been and are being undertaken, because they will improve the traffic problem for years to come. In terms of the transport situation, I’ve had a number of meetings with Transport Malta and there are ongoing discussions about the current projects and initiatives to improve the issue. I think this is an example of good engagement between the gaming industry and the government.
Looking towards the future, how do you see the iGaming scenario in Malta developing in the next five years? What opportunities and challenges do you envisage?
I think some of the sector’s mega-trends will continue. One of these trends is that European countries are increasingly having their own gaming regulatory regime, which means that the value of an MGA license will decrease, because other countries will be covered by their own legislation. On the other hand, I don’t see any other geographical area – with one exception – which can rival Malta as the gaming hub. The exception is the south of Spain, the area between Gibraltar, Malaga and Marbella.
There are also some companies moving to Barcelona. This is a growing area when it comes to gaming, with companies going there and finding the needed locally skilled talent. Moreover, the cost of living and salaries are lower there. This said, I don’t think this location will grow to the level that it will challenge Malta as a gaming jurisdiction. However, unless the cost of living in Malta starts to be reined in, it is going to constitute a bigger threat.
I can see companies making decisions to move their call centres and live casino studios away from the island. The reality of this industry is that it is very mobile. Maverick Gaming has staff in Malta, Asia, North America and the UK, so it’s a distributed environment, and collaboration tools allow us to be equally productive when it comes to software development through working remotely without having a big physical office. Of course, there will always be advantages to having a physical presence, and offering employees a great environment to work in has its pros.
Article originally featured on Business Today.