Here, there and everywhere: the view on global gaming from G2E 2017

G2E is always a great place to meet all those friends and colleagues you know from around the world. It is also where you can get a global perspective on our industry from experts. On Tuesday, I attended “Gaming Around the World: a Global iGaming Overview,” a session ably chaired by Sue Schneider where three knowledgeable speakers gave presentations on the size of the igaming industry.

First up was Rosalind Wade of Asia Gaming Brief, who outlined the size of the iGaming market in Asia. The numbers were eye-wateringly large, and from a market that is largely unregulated and which makes payment processing very difficult. There, sports betting is the name of the game.

In China and many other parts of Asia, the penetration of credit cards and debit cards is low, and so most transactions are carried out in cash. Not great for an online industry. In order to overcome this lack of liquidity, complex threads of middlemen supplying credit have evolved. Credit to bet on online sites is given to the bettors by first line agents situated in tea shops or bars, and the agent is also responsible for collecting the debts. The agent, in turn, is given credit by the next agent up the line, and they are given credit by the next agent, and so it goes on until you get to the top. As you go up the line, each agent is responsible for collecting greater amounts of credit. These networks somehow allow transfer of funds across borders where currencies are controlled. Given that everyone is in this for a profit, it does make you wonder what is left for the punter. But somehow it works.

Warwick Bartlett of GBGC, a UK-based consulting firm, then spoke knowingly about the European iGaming space, a market worth over $10 billion. The UK has one of the largest and most mature iGaming markets and represents over 50% of Europe-generated iGaming GGR. Europe has a vibrant, growing market with more and more countries joining the bright side: those that regulate iGaming. Of course, the protection of national monopolies has been a common theme in the reluctance of some governments to open up the online gambling market. But like water dripping on a stone…

Last up was Chris Grove of Eilers & Krejcik Gaming, who delivered a reasoned assessment of the U.S. iGaming market and presented three growth scenarios. All of his projections were based on the States that had had some legislative activity to legalize and regulate online gambling and those which may come online in the next few years. Chris had hard acts to follow; Asia is in the $40 billion range and Europe $10 billion, while the US may get to $2.6 billion at market maturity, at a push and with the wind behind it.

Granted, I am not being entirely fair; Chris was only looking at the potential for regulated gambling, whilst Rosalind was speaking about the mainly unregulated Asian market.
An attendee commented that New Jersey was now in the region of $250 million of GGR but this was because most of the State’s population lived in the north of the State, away from the casinos in Atlantic City, and so iGaming was an attractive possibility for them. Other states do not have the same geographies; population centres are closer to the land based casinos, so there was no necessity to legislate for online gambling – and if they did, it might cannibalize existing gambling revenues. Chris answered that there is very little evidence for the cannibalizing effects of iGaming on land-based casinos, since it is a new market with different demographics. I agree with Chris. This is certainly borne out in Europe, too.

Another session, this one about international market growth, saw Ed Bowers of MGM and Steve Tight of Caesars Entertainment give their assessment of the potential opportunities for their respective companies. When your company is as large as MGM or Caesars, the opportunities get fewer and fewer. Bowers said MGM is focused on Japan and keeping a watchful eye on Brazil, but has some doubts about the size of the Brazilian market. Steve Tight is also spending a great deal of his time in Japan, and why not; the size of the prize is too great. Or as he said, “the pearl is well worth the dive”. Caesars likes the look of Brazil, although progress there is slow, and obviously South Korea, where the company is developing an integrated resort in Inchon. The company does not dismiss doing something in Europe, as well.

Michael Soll of The Innovation Group chaired the session; at one point he put up a slide showing land-based casino revenues in the US, Asia and Europe. It was a completely different story to the iGaming market; the US stood at about $90 billion, Asia approximately $45 billion and Europe $9 billion. Although Steve Tight made the point that this only shows casino GGR, and if you look at the amount Europeans spend on all gambling, it is not dissimilar to the US. It’s just that, with the way the European gambling market is structured, casinos do not get much of a share. The casinos are, on the whole, small, and do not offer much apart from gambling – so why would you travel very far to go to a casino when you can play a slot machine or make a bet on your high street?

I am always asked why there are no large casino resorts in Europe, and if there were, would they be successful. My answer to the second question is yes, although it depends on your definition of ‘success.’ In certain locations, with the right amount of capital invested, a casino resort could be very successful. All of the research I have been involved with says that Europeans would love to visit, spend time at, and gamble in one. The answer to the first question is more complex but has to do with our tax structures and our governments’ lack of comfort with making the fiscal, legislative and regulatory changes necessary. Why bother? There are no votes in it. Also, Europe has a gambling industry already. Introducing a well-capitalized, 900 lb. gorilla into their market is not going to help them. They will likely not be supportive and will lobby hard against the proposal. Don’t forget: this is their playground.