GBGC Gaming Leaders’ Seminar, IGE

GBGC will be attending the International Gaming Expo (IGE) in London between 26 and 28 January 2010.

GBGC’s Chief Executive Warwick Bartlett will be giving a seminar on “Political and Economic Trends in the Global Gambling Industry” as part of IGE’s Gaming Leaders’ Programme.
The seminar will take place at 2.30pm on Tuesday 26 January

In his presentation Warwick will:

  1. compare the current recession with past ones and their impact on gambling
  2. assess the performance of GBGC’s indices of listed gambling companies
  3. consider the role of monopoly operators in the European market
  4. address the issues that the Internet sector is facing in the coming years
  5. determine who is best placed to prosper in the global gambling market in the years ahead

International Gaming Expo, London, 26-28 January 2010
Details of Gaming Leaders’ Seminar Programme
warwick@gbgc.com 


Notes for editors:
GBGC is an independent, specialist consultancy firm dedicated to providing data, research and advice to the international gambling industry.
GBGC also produces the comprehensive Global Gambling Report, currently in its fourth edition, as well as data and analysis on the Interactive Gambling sector.
The gambling statistics and forecasts that are contained within the Global Gambling Report have become widely recognised within the industry, the financial community and the Media, as the industry standard for sizing both the online and offline gambling markets. 

Latest Reports:
Interactive Gambling Report – Internet gambling data and statistics for more than 50 countries including: France, Italy, UK, and Spain. The current edition includes analysis of the European market following the ruling in the ECJ Bwin-Santa Casa case (C-42/07).
Latin America Report – a specialist report covering 21 markets in Central and South America including: Argentina, Brazil, and Chile.
Current Reports Available from GBGC’ website:
– Fourth edition of the Global Gambling Report‚ ‘Change is on the Cards’
– Interactive Gambling Report
– Latin America Report
– Eastern European Market Report

Snow good for e-gaming?

Snow good for e-gaming?
In the current prolonged spell of wintry weather, William Hill claimed to have seen “a hundred-fold spike” in online players at its poker and casino tables on Wednesday last week.
“We have seen a ten-fold leap in new registrations alone from people stuck at home and bored and we look like shattering all previous records for the number of online players on the website at any one time,” claimed William Hill’s David Hood.
But whilst the online casino tables and bingo rooms might be busy, the sports betting action has been hit hard by the snow in the UK.
The weekend of 9-10 January 2010 saw just two Premier League fixtures played, while only three races meetings were held (all on the all-weather tracks of course).
Snow, however, is unlikely to halt the Africa Cup of Nations which started this week and there is a week’s worth of snooker action too in the Masters tournament, sponsored by PokerStars.

Comment on DCMS E-gaming Review

GBGC Press Release: comment on DCMS proposals for a new UK licencing requirement for overseas online gambling firms.

“It is understandable that the government would wish to protect consumers but we have to remember that it is the consumer who has decided of their own choice to bet abroad because of the exceptional value that is available to them online. I fear that the governments move is linked to a desire to catch more tax and horse race betting levy and that will be detrimental to the consumer and thus growth in the gambling market.
I suspect that the government may not have thought this through because although they may be able to pass law the question really is enforceability of that law as the US has discovered with UIGEA. Contributions to the UK’s problem gambling fund are voluntary I am not sure how the government will cause foreign operators to pay into this fund or how they could check if the payment was correct.
So far as the levy is concerned bookmakers have hitherto accepted that racing should be funded but such a move now could precipitate a challenge that the levy is state aid and if successful racing would then have to rely on the sale of media rights.
There is a certain irony with all of this. The U.K. has hitherto adhered to the principles of the Treaty of Rome and now we are copycatting the rest of the EU with protectionism.
The gambling industry should not look for help from the Conservative Party were they to form the next government – this was probably their idea in the first place. This is a bad day for the gambling consumer”.
Warwick Bartlett
Chief Executive GBGC (Global Betting & Gaming Consultants)
DCMS annoucement of new UK licence requirements for overseas online gambling firms

Trouble Ahead in 2010?

THE NEXT TWO years are likely to prove the most difficult for sizing and forecasting the egaming industry in recent times.

On the one side the principle drivers are still in place. The consumer' appetite for value and choice provided by Internet gambling is insatiable. The roll out of broadband continues, and now we expect to see significant growth from mobile gambling assisted by faster networks and better handsets such as the iPhone.

However the big negative is that the economy is likely to cast a long shadow over the market for some time to come.

Moody', the ratings agency, today published its ‘misery index' which shows fiscal debt and unemployment. It predicts unemployment rates for 2010 of 17.5% in France, 21% for the UK and USA, 22% for Greence, 25% for Ireland and even as high as 30% for Spain. Both Italy and Germany fare better at 14%, but these levels are still historically high.

Consumer debt will also de-leverage over this period and we expect to see bank credit card charge off rates to grow significantly from 10% to 14%. To put this figure in perspective, charge offs peaked at 4% in the 1992 recession. Total credit card debt in the UK is £64bn, and not much less in both Germany and France.

The news that Bwin and Party are said to be discussing a merger is no surprise at all. Going forward the consumer will have less money to spend as the acquisition cost per customer rises, so it makes sense to merge a large sports book with a large casino and poker site.

The new entity will gain from the cross-sell synergy of both businesses, shared costs on marketing, and reduction in overall costs. The profits for the new business should be greater than the sum of the profit parts.

Such a deal, if it materialises, will herald a turning point in the industry where legal legacy issues will be put to one side in favour of improved profitability to make it through difficult times (and beyond). That will be a landmark event in more ways than one.

This article first appeared on the Egaming Review website on 15 December 2009

US Internet Gambling

In the recent deal between Harrah’ Interactive Entertainment and Dragonfish for its casino and poker software it was stated that the focus would be the launch of the World Series of Poker and Caesar Casino brands in the UK.

But with Harrah’ Entertainment being a major US gaming company it was inevitable that the deal would be seen as a dry run for a time in the future when the US Internet market is regulated. 

The importance and desirability of the US market to the Internet gambling industry cannot be overstated. It has a large, relatively affluent population, of which a sizeable proportion likes to gamble as a form of entertainment. 
From an operational perspective, Internet and broadband penetration is high – some 230m Internet users – and consumers, even in the credit crunch, can obtain credit cards, which are crucial to the payment methods used by the industry. 
Prior to the passing of UIGEA in October 2006, when companies were still operating in the US, Europe was something of an afterthought as a market. For example, in the year to 31 July 2006 Sportingbet took 57% of its turnover from the Americas and 95% of its operating profit. Europe contributed 26% of turnover and just 1.3% of the company’ operating profit. 
Even now European online poker rooms frequently cite the difficulty of competing with those rooms that continue to take business from the US and can use the dollars harvested there to build their businesses in the European arena. 
But on the legislative front the situation with regards to Internet gambling in the US continues to be as complex as ever. There are several pieces of proposed legislation that have been introduced, all with similarly unwieldy titles. 
In August 2009 Democrat Senator Robert Menendez introduced the Internet Poker and Games of Skill Regulation, Protection and Enforcement Act (S.1597). It is legislation that would regulate online poker and derive tax revenues from it. 
His proposals in the bill include: 
A 10% tax on all deposits made to Internet gambling sites, which would be divided between the state government where the player is located and federal government,
The ability for a state or Indian tribe to opt out of the regulation, making it illegal to accept bets from these states
A licence length of five years 
Money laundering, compulsive gambling, and age verification safeguards

Senator Menendez’ legislation does not contain proposals for Internet casino gaming or sports betting. It does include, however, several similar features to Barney Frank’ HR 2267 Internet Gambling Regulation, Consumer Protection, and Enforcement Act, particularly regarding consumer safeguards, licence length, and the ability of individual states to opt out of the regulation. Frank’ bill would also not allow sports betting.

HR2267 (introduced 6 May 2009) currently has 58 co-sponsors and has been referred to three committees, including House Financial Services. These committees will determine whether any bill receives a full hearing in the Senate or House.
Frank’ other related piece of legislation the Reasonable Prudence in Regulation Act (HR 2266) has 37 co-sponsors and seeks to delay the implementation of UIGEA by a year until 1 December 2010.
The Internet Gambling Regulation, and Tax Enforcement Act (HR 2268) introduced by Democrat James McDermott seeks to introduce a Federal Fee, which every licensee will be required to pay. It will amount to 2% of all funds deposited by customers during the preceding month. The bill has four co-sponsors and has been referred to committee.
The timeframe within which any of these bills will become signed laws is not certain and the current financial crisis already seems to have delayed Frank’ (HR 2267) Internet Gambling Regulation, Consumer Protection, and Enforcement Act. Indeed, there is no guarantee that any will fair any more successfully in their progress through the legislature than previous versions that have been introduced.
At a state level, the financial crisis could be beneficial for the prospects of state Internet gambling law. Many states, most notably California, are struggling with budget deficits and are cutting services. 
Regulated intrastate Internet gambling could be an attractive source of revenues. California, Florida, and Nevada are likely first candidates for such state regulated Internet gambling.
On 26 August 2009 a bill was signed into law which now allows Illinois residents to place horse racing bets online. Racing handle in Illinois has been generally falling from a peak of US$ 1.29bn in 1992, dipping below US$ 1bn in 2006 and in 2008 the state’ handle for all forms of racing stood at US$ 818m. Nevertheless, the new law should be of interest to the likes of Betfair-owned TVG.com and Youbet.
But it should not be taken for granted that UIGEA is dead. At the start of September 2009 the US Court of Appeals in Philadelphia upheld the law in a challenge brought by Interactive Media Entertainment & Gaming Association Inc. (iMEGA). One of iMEGA’ arguments related to the vagueness of UIGEA but the Court rejected this, saying “the Act’ prohibitions are not in terms so vague that persons of ordinary intelligence must necessarily guess at its meaning and differ as to its application”.
Many of the major operators based in European jurisdictions are taking hope from the proposed skill games regulation bills and are looking to the time when the US market opens up to Internet gambling. In April 2009 PartyGaming signed a Non-Prosecution Agreement with the US Attorney’ Office for the Southern District of New York, relating to its activities in the United States before the enactment of the UIGEA in October 2006.
In return for a payment of US$ 105m (payable in 8 instalments until 2012), the Attorney’ Office will not prosecute PartyGaming for providing Internet gambling services to US customers.
But there has to be a concern as to whether any of these companies will be granted a licence, assuming that any favourable legislation is passed. Despite settling their cases with the US Attorney there will always be a “reputation” linked to those firms that operated in the US prior to October 2006. The deal between Harrah’ Interactive Entertainment and Dragonfish suggests that B2B deals might be the way back in to the US for these companies. But as noted earlier, the Harrah’ deal is focused on the UK market, where Internet gambling licensing and regulation is in operation. 
If the US authorities do choose to regulate their domestic Internet gambling market it is certain that they will ensure their interests are protected and the benefits remain in the US. An initial attempt at using Internet gambling tax revenues for the benefit of society was made in September 2009 when Senator Ron Wyden proposed using them to subsidise health care reform.
Especially in the current economic climate – the fallout from which is likely to last for several years – the lawmakers will make sure that US companies benefit and no revenues are lost to companies based outside its borders. Witness President Obama’ September introduction of “safeguard duties” of 35% on tyre imports from China in order to protect US interests – unrelated to gambling but a definite sign of the economic times.

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