Share boost for Amaya

One of the oldest stock market tips is to follow the insiders, so now could be the time to buy Amaya’s shares. David Baazov, chairman and chief executive, has acquired 110,000 common shares in the company that owns PokerStars. He has been joined by Marlon Goldstein, executive vice president and newly appointed CEO, Rafi Ashkenazi.

The total investment of all three amounts to CAN$3.3m.

The shares have fallen 42% over the last year and the Canadian dollar is down 15% against the USD. So if the buyers are holding USD the shares are a further 15% cheaper.
Whatever, this is a big purchase and demonstrates confidence in the company. All that is required now is that the launch of new products and some clarity on grey markets and happy days are here again.

By Warwick Bartlett

International interest in Cypriot casino resort

The licence to build a casino resort in Cyprus has attracted interest from at least six international companies. The Cypriot government’s deadline for expressions of interest in the project is 18 December 2015, after which three bidders will be put forward to the second round.

Cyprus’ Tourism Minister Georgios Lakkotrypis explained, “We aim to grant the licence by mid-2016 and it will come into effect from day one, so the winning company will have every incentive to move quickly”.
The successful applicant will be granted a licence for 30 years and will have a period of exclusivity for 15 years, both of which will begin as soon as the licence is issued, according to the Minister’s statement.

Local media in Cyprus has named the following companies as being interested in the project: 
-Genting (Malaysia) 
-Hard Rock International (Florida, US) 
-NagaCorp (Cambodia) 
-Sun International (South Africa) 
-Bouygues (France) 
Global Betting and Gaming Consultant’s Director Lorien Pilling commented, “The licensing process comes at an uncertain time in the geo-political situation in the region. Not least of these is apparent progress in the resolution of the “Cyprus problem”, which would re-unify the country.” 
UK Foreign Minister Philip Hammond held meetings in Cyprus in November 2015 and stated afterwards: “The leaders of both communities in Cyprus have created a sense of hope, a sense of momentum towards a solution to the long-standing Cyprus problem”.
But there have been false dawns before on this issue and Cypriots will believe progress when they see it. But a unified island does open up new potential locations for a casino not currently available because of the political situation. 
Cyprus also lies close to the Middle East war zone of Syria and is home to a UK airbase. The French navy has also sent its Charles de Gaulle aircraft carrier to the eastern Mediterranean to support coalition operations in the region. The Russian navy is also increasing its presence there too. In the immediate term, these events could hurt the island’s tourism sector. It is hard to predict what the region will look like in 2-3 years when any new resort might be nearing completion.
The new Cypriot casino could also face competition from a new casino in Eilat in nearby Israel. Israeli Tourism Minister Yariv Levin has said that even if legislation permitting casinos were passed any new casino would not open before 2020.
Given the relative scarcity of new casino licences in Europe, attracting only half a dozen expressions of interest for the Cypriot project so far is disappointing. But there are numerous risks attached to the Cypriot market which might be causing a few operators to hold onto their chips.

DFS follows online poker’s troubled tracks

Daily Fantasy Sports could face similar fate to US online poker, says leading gambling consultant. 

After almost eight years under the radar, the Daily Fantasy Sports (DFS) sector is firmly in the sights of US regulators, and GBGC director Lorien Pilling thinks history could be repeating itself as state governments realise the lucrative potential of a regulated DFS sector.
With Nevada’s announcement last month that it considered Daily Fantasy Sports (DFS) a form of sports betting, US operators were catapulted into a wave of speculation and uncertainty.
Federal legislation had previously exempted fantasy sports from its remit, but with DFS operators like FanDuel and DraftKings finding success in the mainstream, state governments in Nevada, Pennsylvania and Florida have decided to think again.
“One of the results of poorly thought through legislation is unintended consequences,” said Lorien Pilling, director of leading consultancy firm Global Betting and Gaming Consultants (GBGC). “The 2006 UIGEA was poorly considered legislation (and didn’t actually achieve what it set out to do) and DFS was the unintended consequence it created.
“Fantasy sports games were given a carve-out to exempt them from UIGEA and the sector has simply evolved to make use of current technology, which has led to the creation of DFS.”
Pilling, who has monitored developments in the United States closely as part of GBGC’s renowned Global Gambling Report, sees a distinct parallel between the fate of online poker from 2000-2006 and the subsequent development – and potential regulation – of DFS.
“A new online service is launched and grows without much attention from law-makers and regulators – but then there comes that “breakthrough” period when it hits the mainstream and becomes the centre of attention,” he explained. “The first DFS games were launched in 2007/2008 but the breakthrough period could be argued to have started in late 2013 with the first $1m FanDuel game and DraftKings subsequently becoming an official partner of MLB in early 2014.”
A comparable instance, he points out, can be found in the instance of PartyPoker in mid-2005, whose IPO garnered the attention of legislators as it revealed exactly how much the company was earning. A year later, the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed.
“Assuming the US does not ban DFS outright, then it will suffer the same fate as e-gaming in Europe when governments have got involved: regulation, licensing, taxation,” said Pilling. “As well as increased taxation and compliance costs, there will no doubt be calls for DFS operators to contribute to social responsibility and problem gambling funds too. Operating costs will increase, leading to consolidation and less competition for players.”
The situation is complicated by the devolved legislative powers that allow each state to formulate its own gaming legislation, coupled with what Pilling describes as a “patchwork of attitudes” toward fantasy sports. 
As he points out, Arizona, Iowa, Louisiana, Montana and Washington all specifically prohibit their citizens from collecting winnings from fantasy sports.
“If each individual state tries to impose its own regulation and taxes it could be a real headache for the sector,” he suggests.
Nevada is the first state to consider regulating DFS on a comparable basis to mainstream sports betting, which will make it one of a handful of states that can issue DFS licenses. 
According to Pilling, the move could serve to legitimise sports betting as a practice in the US, but it’s unlikely to pave the way to a full acceptance of online sports betting in the near future.
“The benefit of a licensed DFS sector would be to show that people can engage in sports games for real money without the integrity of US sports leagues being compromised,” he added. “But it still feels like a long-shot for DFS to act as the catalyst for full internet sports betting in the US.” 
This interview was conducted with GBGC by Imogen Goodman and first appeared in the November 2015 edition of Betting Business Interactive.

Gambling in Eastern Europe

This article is a version of the presentation given by GBGC manager Tihana Jurican at the Malta Igaming Seminar (MiGS) in November 2015. 

Gambling revenues (GGY) in most Eastern European countries peaked in 2008 – the last year before the recession. Out of the 14 countries researched, there are just 2 exceptions, both Baltic countries – Latvia and Estonia – GGY peaked in 2007, so it started falling already in 2008. By 2014, most of our countries were far below the peak of 2008 when looking at gambling revenues. Only Lithuania and Montenegro had revenues slightly surpassing that of 2008. Poland was the worst hit, with revenue falling over 50% compared to the peak year, followed by Bulgaria with a 45% fall and Hungary with a 43% fall.
In all those countries the sector most hit were gaming machines outside casinos, which were banned in Hungary from 2013 and in Poland from 2016. The Bulgarian machine sector was also hit, but with higher levies and a smoking ban rather than a full ban. The effects of the crisis have been devastating to the industry, and they also brought new taxes and regulations along as government revenues fell as well. Our forecasts show that by 2019 only 7/14 countries will have revenues higher than in the peak year of 2008. Those are: Croatia, Czech Republic, Estonia, Latvia, Montenegro, Serbia and Slovakia. 

Overall propensity to gamble by country 
One of the ways to measure propensity to gamble is to look at share of gambling revenues in the country’s GDP. We have here taken UK as a benchmark due to its long tradition of gambling, unlike in Eastern Europe, where the sectors other than lotteries were either legalised or opened to domestic customers only in early 1990s. The graph shows that 6 countries have higher propensity to gamble than the UK, with one more country at almost the same level of 0.6% of GDP. Poland is the country with the lowest share of gambling in GDP, at 0.17%, which is mostly due to very low supply of land-based gambling premises and the Internet market that is in its infancy. On the other hand, Latvia, Slovakia, Slovenia and Croatia have very high propensity to gamble at 0.8% of GDP in 2014. 
E-gaming overview 
All the jurisdictions under consideration allow Internet sports betting and most allow Internet casinos. However, only half of the countries in our table have opened up their markets to foreign companies, which is unexpected given the fact that most of them are part of the EU, with Freedom to Provide Services among the most important rules to which they all agreed. Of those 7 countries, Poland, Serbia and Slovakia have no foreign licensees yet, usually because they only opened up the market recently. That means that only 4 countries, Bulgaria, Romania, Estonia and Latvia currently have foreign operators doing business there. Eastern European countries are still being targeted by large e-gaming companies from offshore, but only 5 countries have opted for ISP blocking. 
 
Conclusion 
E-gaming markets across the Eastern European region are opening up. They are still in their infancy, so there is still room for new brands. The growth is faster than in the established countries. But newcomers must be aware of complex and costly regulation and have to be patient as the legislative process usually moves very slowly – for example 5 years passed in Romania between the passing of regulation and issuing the first online licences. 
A copy of the full slides for this presentation can be obtained by contacting GBGC.

iGaming: Past, present and future

At the 2015 Malta iGaming Seminar (MIGS) Global Betting and Gaming Consultants’ Director Lorien Pilling gave the following presentation looking at the changes in the i-gaming sector over the last decade – from 2005 to 2015. 

If we had gathered here in Malta just ten years ago in 2005: 
• The Apple iphone, which helped revolutionise mobile betting, was still almost two years away from being launched 
• The letters “U I G E A” meant nothing to i-gaming operators 
• PartyGaming had just been included in the FTSE 100, as one of the UK’s largest publicly listed companies with a value of nearly 5 billion pounds. 
How things change.
In general interactive gambling has enjoyed a good decade between 2005 and 2015.
The sector has overcome some dramatic regulatory and economic episodes to see global gross win grow from US$ 16 billion in 2005 to a forecast US$ 41 billion in 2015.
Globally, interactive gambling had a 5% share of all global gambling in 2005. This is forecast to have increased to 9% share in 2015.
And a look at our iGBGC index of listed e-gaming companies also points to the apparent health of the sector. The index was started at a level of 100 on 1 January 2005 and now stands at 689 – an impressive increase over the last decade.
On closer inspection, however, things might not be as buoyant as they appear and the sector could struggle to replicate that historic rate of growth over the next decade.
A comparison between the situation in 2005 and 2015 can highlight what is changing in i-gaming and the impact it is having on the sector. 

2005 – 2015 

Tax and regulation have always driven the gambling market – the products that are viable, the bet types offered, the margins and the extent of an underground market.
And the nature of Internet gambling regulation has changed substantially over the last decade, especially in Europe.

Internet gambling was founded on the following pillars: 
• Low gaming taxes based on gross gaming yield 
• High payout to customers – made possible by the low taxes and giving online gambling an advantage over the land-based market 
• Offshore jurisdictions 
• One licence, targeting many markets 

In 2005 few major economies had regulation in place that would allow private e-gaming firms to obtain a licence. Indeed, it was only the likes of Malta and Gibraltar in the European Union that had regulation in place for internet gambling licensing. The UK had partial regulation at that time. Internet betting could be licensed via the existing regulation but there was no licensing for e-gaming. The UK Gambling Act 2005 was passed in April of that year but was not enacted until September 2007.
As a result, offshore jurisdictions found a niche for themselves in offering e-gaming licences. The argument was that by holding a valid licence in an offshore jurisdiction an operator could legally offer its services across borders into other countries around the world.
In 2015 21 of 28 EU member states have some form of i-gaming regulation in place or pending in the near future. Some of this regulation is restrictive, or excludes certain products or is limited to land-based operators. In general this EU regulation has brought with it higher gaming taxes and numerous tax agreements between offshore jurisdictions and the member states. 

Examples of EU i-gaming tax rates 
• Bulgaria: 20% on GGY 
• Ireland 1% on turnover
• Portugal: 8%-16% on turnover for sports; gaming 15%-30% of GGY 
• Romania: 16% on GGY 
• UK: 15% of GGY 

France is a good example of the new internet betting market. For all of their efforts, internet sports betting companies in France generated a total loss of €23 million in 2013. Internet horse race betting and internet poker fared no better with operating losses of €3 million and €9 million respectively. The reason is clear. Taxes, levies and VAT amounted to €352 million in 2013, which represented 51% of the companies’ gross win. It is hard to turn a profit in a low margin business with an effective tax rate of 51%.
The total number of licence holders has fallen from 35 in 2010 to 17 in 2014.
The French government is actually not too unhappy with having a loss making sector. Prior to regulation in 2010 the French government was not getting any tax from operators licensed offshore. In the almost five years since regulating the market in mid-2010 it has collected a total of €1.5 billion in taxes.
For government it has been an overwhelming success. 

The golden age for certain parts of e-gaming is over.
And the implications for operators as we enter the second half of the decade are: 

• Scale is becoming important in Europe to cope with the costs of individual licensing in each jurisdiction.
• Consolidation is occurring either to achieve scale or because companies cannot remain viable.
• Operators are being selective about which markets they choose to enter and are leaving some markets because the regulations are too onerous.
• Regulatory costs and taxes are increasing, so operational costs are coming under greater scrutiny.
• Customers in some markets are getting worse value for money and less choice under the new European set up because operators have to cover their greater costs. 

The changing regulatory position is highlighted in the changing proportion of revenues earned under local, onshore licences. In 2005 it was just 27% globally and 37% in Europe. This year these percentages have risen to 44% and 65% respectively. 

• The last ten years have seen new opportunities in i-gaming:
– New markets
– New technology
– New services like in-play betting 
• But it has come at the cost of more expenses:
– More marketing spending as competition increased 
– More regulatory costs 
– Higher taxes
These are the consequences of a sector that is maturing and being recognised by major governments, who all want their share of the pie.

Offshore jurisdictions feel the pinch

With the decline in the offshore financial centres e-gaming has grown as a proportion of GDP in states such as Alderney, Isle of Man and Malta. The push to attract more e-gaming operators has never been greater as all these jurisdictions grapple with a decline in financial services.

Jersey, for example, published its new e-gaming law in 2011 and there was a push at ICE 2014 to get more companies to take up licences. The Isle of Man is putting great effort in expanding its e-gaming sector.

Both need to do so because the decline in financial services on both islands has created problems for government budgets.
The States of Jersey, one of the most successful Crown Dependencies and financial offshore centres in the world, announced in October 2015 that its citizens were about to face austerity.
The recent budget announced that savings mostly from the public sector of £145 million had to be passed to avoid the State going bankrupt by 2019. Households, it is said, will be £1,000 a year worse off.
Among the plans are £90 million of cuts from Jersey’s public sector, including £70m of staff savings, and cuts to the welfare bill to save £10m, including the axing of the pensioners’ Christmas bonus of £83 a year. Add to this a new health charge of £35m and a charge for sewage raising £10m.
Jersey is not alone. The Isle of Man faces similar problems.
The financial sector has undergone considerable consolidation and rationalisation in recent years following the FATCA measures introduced by the USA coupled with similar UK legislation to prevent off shore being used by companies to save tax.
In fact the Isle of Man has been hit harder than Jersey. The IOM had a VAT sharing agreement with the UK which in 2009 and 2011 was renegotiated in favour of the UK that resulted in a loss of £200m, a third of the Manx government income.
Balancing the budget since then has been an arduous task. Personal tax allowances that were once more generous than the UK are now less so. All this has taken a toll on property prices with the average house for sale in the Isle of Man now £20,000 less than in the UK.
The IOM economy, however, is more diversified and is less reliant on the financial sector than Jersey.
E-gaming is now one of the island’s main tax contributors, add to this the aircraft and shipping registers and a space registration programme along with the Government taking responsibility for adjusting the budget in 2009. The island is in better shape than Jersey.
But none is out of the woods. The IOM has a huge public sector pension deficit, as does Jersey.
The question then arises if the money is leaving the financial centres of the IOM and Jersey where is it going?
According to the World Bank, Singapore’s GDP per capita has just reached an all time high of USD 38,087. Hong Kong is doing better at USD 52,551 up from USD 43,446 in 2007 when the Great Recession began. Both economies have managed to grow during the recession.
Looking at the banking sector, five of the twelve safest banks in the world are based in Hong Kong and Singapore, according to Bloomberg. None is British.
The biggest loser of FATCA and the UK equivalent has not been the IOM, Jersey and the other Crown Dependencies. It has been the UK. The billions on deposit in the Crown Dependencies could not be invested in those small markets; the money was re-cycled through to the City of London where it was put to good use. Now it is being invested in Asia. One in three jobs was lost in the City from 2008 to 2012.
There is a certain irony that when political dogma trumps financial pragmatism politicians always seems to be able to shoot off their own foot.
The problem now facing all offshore e-gaming sectors is that the UK has introduced Point of Consumption Tax which causes operators to licence in the UK. Start ups wishing to be offshore now have to face the prospect of paying two license fees, offshore and onshore, at a time when they need to conserve their resources to develop the company. Most will choose to go to the UK. Avoiding corporation tax in the first three years of operation is not an issue; most will lose money in the early years.
The Crown Dependencies need something new if they are to survive. One thing is for sure, do not look towards the UK for help, you are on your own! 

by Warwick Bartlett

GBGC at MIGS 2015: opportunities in Eastern Europe

GBGC MIGS Eastern Europe propensity to gamble 

GBGC MIGS Eastern Europe propensity to gamble

Global Betting and Gaming Consultants will be making a presentation at MiGS 2015 (17-19 November) on the i-gaming opportunities in Eastern Europe.

Details here:
http://www.maltaigamingseminar.com/event-day-1/

GBGC at MIGS 2015: 10 years of e-gaming progress

Global Betting and Gaming Consultants will be presenting its views of internet gambling at the 2015 Malta i-Gaming Seminar (MIGS) 17-19 November. 

GBGC will be covering the past, present and future of i-gaming and one presentation will look specifically at opportunities in Eastern Europe. 

Details here: http://www.maltaigamingseminar.com/event-day-1/  

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