The online gaming business is progressively moving into markets around the world, changing the model of the gambling industry as many consumers turn to the Internet to bet on sports, gamble on slots or play cards.
Despite potential political and legislative restrictions, the market, which already produces more than US$20 billion in worldwide revenue, may be ready to grow further as new geographic regions open up and many governments become more receptive to Internet-based gaming.
One attraction of the online gaming market is its very high rate of growth. It is composed of a number of different types of games, each with its own business models and technology.
Online gaming include:
• Sports betting: Betting on sporting events such as games, horse races, dog races, etc.
• Online poker: Like land-based (or traditional) poker, the provider often takes a commission from wagers, and may be less risky than other casino games.
• Casino games: Games of chance such as slot machines or roulette that operate the same as in a traditional casino.
• Online bingo: A web-based version of the ages-old game.
• Online lottery: Online versions of frequently government-sponsored lotteries.
Market Trends in the iGaming Industry
Potential of the American market
Online gaming growth continues worldwide as the potentially richest marketplace remains largely unrealized. Many companies abandoned the American market in 2006 with the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) that year. But the issue of Internet gambling hasn’t ended there. Bills to end the online gaming restrictions have since been introduced, although few expect any bill to sail through the legislative process. These activities suggest a public policy debate that could still evolve and in so doing regulate and tax online gaming. U.S. land-based casinos and global online gaming enterprises are actively preparing6 for and betting on that very outcome.
Deregulation of other markets
Many European countries, for instance, have been shifting their online gaming regulations to open up markets to non-native competitors.
In France, legislators have been discussing a bill that would end the state monopoly on online gaming, allowing privately owned websites to offer wagers on horse racing, soccer and poker.
Italy, one of Europe’s largest gaming markets, has also been reforming its gambling laws. Perhaps even more attractive are Asian countries where online gaming is still outlawed, but where traditional gambling is often thought to be part of the culture. China is an exploding market for Internet games; however it does limit land-based casino gambling activities to Macau, and prohibits online gaming altogether. Korea, an enormous market for online multiplayer games, may have online gamblers, however gambling online remains illegal in Korea as well.
Entrance of traditional “land-based” casino
Many major casino players have been looking into online gaming as a way to increase their market share and reach consumers who might not be willing to come to their physical casinos. In early 2009, for example, Harrah’s (which owns the World Series of Poker) brought in the former CEO of online poker site PartyGaming to head Harrah’s Interactive Entertainment, a new company that will handle its online operations. Then in August, Harrah’s Interactive Entertainment entered into a long-term deal with Dragonfish, the business-to-business technology arm of gaming site 888 Holdings, to power the Harrah’s site.
Moreover, much of this effort is likely to be for incremental revenue, coming from people who don’t ordinarily go to casinos. “The online gambler is often a loner,” says Joseph M. Kelly, a business law professor at the State College of New York (SUNY) in Buffalo and co-editor of the Gaming Law Review. “He is not the kind of person who would go to Las Vegas and play blackjack or craps.”
Online gaming growth rates have also helped to drive market consolidation, as larger players in the gaming sector have looked to fill out their capabilities or reach into new markets. It is predicted that new rounds of merger and acquisition activity, both among traditional gaming companies reaching into virtual markets and existing virtual leaders taking over smaller niche competitors.
Games hosted on social networks such as Facebook that are meant to be enjoyed and played with friends—has taken off in the past year, and online gaming companies are closely watching this growth for even more social games such as bingo. Online bingo has become the fastest growing sector of the online gaming market and offers huge potential for further growth. The Screen Digest study notes that the U.K. market is the largest, most mature and most competitive online bingo market globally. Other markets ripe for expansion are likely to include Spain and select markets in Eastern Europe, Asia and Latin America.
Growth of mobile gaming
With consumers increasingly comfortable using their mobile phones for products and services such as mobile banking, wireless Internet via 3G networks, and picture and video messaging, mobile gaming is likely not too far behind. While sports books have long taken advantage of sports-related subscription services to provide updates and scores, the mobile gaming market may still be fairly untapped, and its potential size may be huge. For example, mobile gaming will enable bettors (or punters) to place bets at an event or at a bar or pub while watching a game. Live streaming of sporting events via faster 3G connections has the potential to further enhance this market.
While online gaming has taken off in Europe and holds potential for the U.S. should legal issues be resolved, other global markets also hold tremendous promise. A solid infrastructure of broadband Internet connectivity, easy access to mobile applications, and safe and secure payments through a native banking system are three of the key factors that could support this growth. Emerging regions such as India and Latin America are likely to be the next major markets to come into view for the industry.
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