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How #Malta carved its niche in the entertainment market

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The island nation of Malta is a mere speck in the Mediterranean Sea, dwarfed by nearby Sicily and so small that it is often overlooked on a map of Europe. Yet this tiny 316km2 of honey-coloured limestone has established itself as a global hub for iGaming, fintech, blockchain and more in its self-described digital economy. How did Malta achieve this, and can it overcome recent political events and maintain its status into the next decade and beyond?

The film industry in Malta

Before the dawn of the digital age, Malta was already a draw for the entertainment industry. Low costs, guaranteed sunshine for many months of the year, and a landscape of dramatic rocky cliffs, historic monuments and sparkling blue waters – all these factors have made the island an attractive filming location since the early days of cinema. The Malta Film Studios have been in business for more than half a century, working on productions such as Gladiator, Munich and The Da Vinci Code. The tourism industry also benefits from the many visitors who flock to the places seen in the first two seasons of Game of Thrones.

First steps in iGaming and new casino regulations

Being a small, densely populated island with little arable land and few natural resources, Malta has had to look to other sources of economic activity. Tourism and services make up the bulk of GDP, and the administration spotted a golden opportunity upon joining the EU in 2004. With the Malta Gaming Authority (MGA) having been in existence for some three years at the time, Malta was primed and ready to launch remote gaming regulations, becoming the first European country to do so. In conjunction with a favourable tax landscape, this move established Malta as the place to be in the burgeoning iGaming sector.

Today, iGaming accounts for around 13% of GDP, putting it almost on a par with tourism. The early influx of UK and European operators allowed Malta to weather the financial crisis of 2008, and it has remained one of the most flourishing economies in the bloc ever since. The majority of new online casinos in UK and Europe look to the MGA for a license, and the sector employs just shy of 7,000 people. Read more here about the latest online casinos, most of which are physically based in Malta.

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Beyond iGaming – Crypto and Blockchain

Buoyed by the success of the iGaming sector in Malta, the incoming administration of 2013 took up the mantle of the digital entertainment economy and ran with it. Led by Prime Minister Joseph Muscat – now embroiled in political scandal, more of which later – the country set its sights on becoming the blockchain island, passing regulatory legislation in 2018. The country plays host to two deluxe events, set to become annual fixtures; the Malta Blockchain Summit and the Delta Summit, both of which bring the biggest names in fintech to the island. Crypto investors have already taken the bait, with two of the biggest crypto exchanges – OKEx and Binance – establishing premises.

eSports and video games

The Maltese administration make no secret of their ambitions to keep building the digital and entertainment economy. Silvio Schembri, Parliamentary Secretary for the Digital Economy, aims to diversify and grow the sector, with the goal of ‘future-proofing’ the country’s economy. Part of this vision is to get a slice of the multibillion-dollar video gaming market, including the growing popularity of competitive gaming known as esports. Already around 200 people on the island are employed in video game development, and there is some potential crossover with the established film production sector. eSports will come first, and Schembri is hoping to make Malta host to major tournaments. His goals for game development are ambitious – publishing activity within four years – but, based on past performance, not unreachable.

How Malta has risen to challenges facing the digital economy

The meteoric rise of the digital economy in Malta might suggest that there is nothing standing in the way of the island becoming the undisputed European – or even global – king of the industry. Of course, this is not exactly the case; challenges have been present from the start, and continue to grow as time goes on. Malta has so far shown impressive resilience in the face of these challenges.

Improving public image

Public perceptions of the iGaming industry have threatened to derail growth, and pressure on governments to tighten regulations has led to some dramatic changes in legislation. Some European markets have become completely closed, meaning that Malta-based companies can no longer operate in those jurisdictions. The MGA has shown itself to be highly responsive to these changes, and has managed to maintain and strengthen rules governing compliance, responsible gaming and advertising.

Meanwhile, the iGaming companies themselves have taken initiatives to improve their public image. Engagement with local good causes is high, and employees from the majority of the more than 300 firms regularly take part in charitable events. Some have taken it further, setting up their own charitable donation schemes.

Filling the talent gap

Perhaps more pressing than the issue of public image, there is growing concern over the talent gap in Malta. The tax, banking and legislative landscape make it relatively easy for new casinos and tech start-ups, and there are plenty of organisations geared to helping fledgling companies establish themselves. The issue comes when the start-ups want to scale up, as there is currently a dearth of local talent. This has already been apparent in iGaming, which sources more than two thirds of its workforce from other countries. Although it is relatively easy to entice European workers to Malta – English is one of the official languages, and the promise of almost year-round sun is very attractive – this is an expensive process with a high turnover. Many of the start-ups who find their feet in Malta eventually move away to grow their business.

If the Maltese digital economy is to succeed in the long term, there needs to be a considerable increase in the share of jobs held by Maltese nationals. The current situation is partly due to the rate at which the industry has risen. With the creation of academic courses in relevant fields, and shifts in social attitudes, it is hoped that this can be achieved.

Overcoming political adversity

This brings us to the current political crisis, which has unfolded like the plot of an unlikely fictional thriller as the world looks on in shock. Recent revelations appear to have implicated some of Prime Minister Muscat’s inner circle in the 2017 murder of journalist Daphne Caruana Galizia, who was a vocal critic of the Muscat government. It seems unlikely that the Prime Minister will weather this storm, and accusations of corruption run deep. It was Caruana Galizia who broke the story that two senior Labour Party figures were involved in the Panama Papers scandal, and there appear to be deep links between some government officials and businesses that are less than above-board.

The crisis has raised alarm within the community, with fears for the future of the digital economy. However, there is reason to believe that the downfall of this administration does not spell disaster for iGaming and other Maltese tech and entertainment initiatives. Although Muscat was a vocal champion of all things related to Malta’s digital future, he was neither the progenitor nor the driving force behind it.

It was the previous administration, and Malta’s Nationalist Party, which presided over the economic restructuring and legislation that allowed iGaming to flourish. Muscat and his cabinet may have focused on growing the sector, but it was already thriving when they inherited it from outgoing Prime Minister Lawrence Gonzi.

How things go from here depends somewhat on how the community responds. It seems fair to assume that Malta’s tech firms will be quick to distance themselves from Muscat. While there may be a temporary dip during an adjustment period, forecasters are optimistic that the scandal will cause little lasting damage to Malta’s digital future. The frameworks are already in place, and the reputation of the island as a global tech and entertainment hub is not dependent on the politicians in power. The sector is simply too valuable to Malta for any administration to abandon it, and, whether it is under the guidance of Schembri or his successor, every effort will be made to protect its interests. With the EU poised to step in and take action, it’s hoped that the industry will come out the other side relatively unscathed.

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