Interactive gambling has generally enjoyed a good decade between 2004 and 2014. The sector has overcome some dramatic regulatory and economic episodes to see global gross win grow from US$ 12.4 billion in 2004 to US$ 41.4 billion in 2014. But, as things stand, the sector could struggle to replicate that rate of growth between now and the end of the decade, for a variety of reasons across the different i-gaming activities.

Globally, interactive gambling had a 9% share of all global gambling in 2014. This is an increase from the 6% share it had in 2007 but GBGC forecasts that interactive gambling will struggle to break through the 10% mark in the next few years. Indeed, its share of the global gambling market could remain fairly static over this time for a variety of reasons. 

One major reason for interactive gambling’s failure to gain more market share in the last few years has been the strong rate of growth in land-based gambling, which e-gaming has not been able to match. This might seem an unusual phenomenon given that e-gaming is meant to be the new, technology-driven growth sector compared to “mature” land-based gambling. But it should be remembered that over the same decade from 2004 to 2014 Asian casino revenues have grown from US$ 7.7 billion to US$ 56.6 billion, thanks mainly to the rise of Macau as a gaming jurisdiction and new properties in Singapore and the Philippines. 
By default, Macau’s current woes, which look likely to extend into most of 2015, could help interactive gambling boost its market share. But the interactive gambling sector is facing its own challenges in the next five years that could limits it ability to account for a greater share of global gambling. 
Internet poker is a drag on interactive gambling’s ability to take a greater share of the market. The internet poker sector peaked in 2010 and has been in decline since then. GBGC believes this decline will continue in the near future. At the peak in 2010 online poker accounted for nearly 16% of all e-gaming. By 2019 GBGC believes poker’s share could have shrunk as low as 7%. Local licensing in Europe and the requirement to create domestic pools of players has been structurally harmful to the game. On top of this, the conflict between recreational and professional players has meant that global internet poker revenues have fallen. The one thing that could halt this decline is if a major US states passes regulation permitting internet poker. The performance of online poker in Nevada and New Jersey has been mediocre, which is not surprising given the small local populations. Poker operators’ main prize would be for California to finally pass poker legislation, something that has been under discussion for several years in different guises but has yet to materialise. 
Another sector that GBGC forecasts to be in decline is skill gaming. Until recently the sector was very popular with casual gamers and had the advantage of being legal in the US because of the skill element, meaning players could win cash payouts. But the sector has been overtaken by the rise of the “social games” phenomenon on platforms like Facebook. Several of the early leaders in the skill games market like King (MidasPlayer) and GameAccount have switched their attention away from those original skill games to the social games market. GBGC does not currently consider social games in its sizing of the global interactive market because the mechanics of the games do not allow for cash payouts. So far, there is no strong evidence that social games have been successful in converting the casual gamers into players of online casino games or online slots for higher, real-money stakes. 
With two sectors forecast to be in decline, the interactive gambling sector must first replace those lost revenues before it is able to grow the overall total and, therefore, its share of the global gambling market. 
One key reason for e-gaming failing to grow its share of global gambling past 10% is that, in general, state lotteries are not doing enough to make ticket sales via interactive channels. Global lottery revenues are in the region of US$ 138 billion (2014) but GBGC calculates that only 4% of that figure comes from interactive channels. US lotteries in particular have failed to embrace mobile and internet sales in the three years since the US Department of Justice changed its position on the Wire Act, which seemed to enable lotteries to offer their services over the internet. Until US state lotteries make a greater portion of their revenues from the internet, like some of their European counterparts, it will be difficult for interactive gambling to increase substantially its share of the overall market. 
In the early part of 2015 the decision by China’s Welfare and State lotteries to suspend internet lottery sales for an undetermined amount of time will also have an impact because these two lotteries contributed a large portion of global interactive lottery revenues. If the suspension is a lengthy one that extends beyond 2015 the impact will be even greater. 
Sports betting and casinos have proved their popularity and longevity in the land-based sector and have been the main source of growth in the interactive sector too. The 2014 World Cup was a successful one for the online betting operators, it’s just a shame it happens only once every four years. William Hill earned nearly GB£ 25 million (US$ 39 million) in gross win from last summer’s tournament at a good margin of 15.6%, an increase of 142% on the 2010 event. Unibet’s World Cup gross win grew by almost exactly the same percentage (142%) from tournament to tournament, earning GB£ 16.0 million (US$ 25 million) in gross win. Overall, the global internet betting sector grew by 7% in 2014 and accounted for 49% of all global e-gaming. By 2019 GBGC estimates sports betting will account for 53% of e-gaming. 
The on-going regulation of new markets in Europe, such as Germany and the Netherlands, should be a cause for growth in online sports betting, as will the cycle of future international football tournaments. But whilst there will be growth at the gross win level for online betting and casino operators, the level of profitability further down the balance sheet could be less healthy in the near future. The process of regulation of internet gambling has brought with it higher taxes and higher operating costs. At the end of 2014 a point of consumption tax was introduced in the UK at 15%, mirroring tax developments in other European markets, and the early trading updates from operators in 2015 have suggested that they are struggling to mitigate some of the increased costs, which has hurt profitability. Paddy Power’s experience in Ireland encapsulates the tax and regulation headaches facing operators. January 2015 saw the introduction of VAT being applied to e-gaming at a rate of 23%. In March 2015 the Betting Amendment Bill was finally passed and will impose a 1% turnover tax on telephone and internet betting. Based on 2014’s revenues, Paddy Power estimated the former would incur a net cost of €2 million and the latter a gross cost of €8 million. 
Given the regulatory and tax developments in various markets, a greater focus on the profitability of e-gaming operators could be a better indicator of the long-term health of the sector rather than simply looking at the top line revenues.