Online and Mobile Gambling Market Momentum
PartyGaming, WPT Technologies, CryptoLogic, and MGN Technologies Continue to Innovate to Satisfy Today’s Online and Mobile Poker and Casino Player
By Ann-Marie Fleming
As the gambling arena has extended its reach from brick and mortar, onto mobile and online platforms, the audience and level of worldwide participation continues to grow. According to Juniper Research, mobile casino services are expected to generate worldwide revenues reaching $4.6 billion by 2009, with mobile gambling as a whole (casino, lottery, and betting) is anticipated to generate revenues in excess of $19 billion by the same year. This growth has occurred despite the ongoing legislative uncertainty that has plagued the online and mobile gambling industry, leading many to place their bets on continued international growth driving this industry onwards and upwards despite regulation jitters.
Key Market Drivers:
Driving the growth of the online and mobile gambling market are several key factors that include the increase in the availability and adoption of broadband connections and the rising popularity and reliability of mobile Internet access. Mark Jensen, CEO of MGN Technologies, d.b.a Mobile Gaming Now (OTCBB: MGNLF), an online and mobile casino gaming software developer, explains, “Broadband is a key market driver for both online and mobile games as it allows more information to be delivered at a faster rate. Online gaming will continue to grow because games are easier and more fun to play with a broadband connection. A second key market driver is the mobile wireless Internet. More and more people are accessing the Internet on a mobile device. The US will see 50%+ subscriber penetration of 3G by 2011 according to Portio Research. A third key market driver is smartphones that combine the functions of a cellular phone and handheld computer in a single device.”
Brian Wright, Business Manager, Remote Gambling Association, associates improved Internet access, digital TV and innovative technology in terms of software, mobile devices and available products, as contributing to the growth of this arena. In addition, he acknowledges that companies have helped generate momentum through the utilization of effective marketing and the securing of consumer confidence as major online brands are now established, well known and trusted.
According to Nancy Chan-Palmateer, Director, Communications with CryptoLogic Inc.(NASDAQ: CRYP), “As an industry pioneer and an industry leader with more than a decade of Internet gaming software experience, CryptoLogic recognized early on the strength of trusted brands to inspire consumer confidence. This is why we work with some of the world’s most trusted online and land-based gaming brands including InterCasino, William Hill, Littlewoods Gaming, ukbetting and The Ritz Club London.”
CryptoLogic has also introduced major consumer brands like Marvel and Bejeweled to Internet casino software. “Not only are we enhancing the entertainment value, but also the trust factor for players. Players feel that if Marvel licenses its names and reputation to us, they can trust that our games are fun and fair,” explains Chan-Palmateer.
PartyGaming, (LSE: PRTY.L), flew into the spotlight with their highly successful IPO in the summer of 2005 making them London’s biggest IPO in five years. Richard Segal, Chief Executive of PartyGaming, describes product growth as an important driver to market growth, but one that finds itself second behind the power of cross-selling a variety of games to a common customer base. “Our belief in this dynamic is supported by the success we have had since introducing the cross-selling of blackjack to our poker customers since October last year. We will take cross-selling to a new level in the first half of this year by launching a fully-integrated, Party-branded platform that will enable customers to move from poker to casino and vice versa through having just one account,” states Segal.
Global perspectives are important for companies in this space. WPT Enterprises Inc. (NASDAQ: WPTE), creators of World Poker Tour, sees the internationalization of poker right now as their biggest driver for future growth. Todd Steele, Chief Financial Officer explains, “Our show is now licensed to broadcast in over 120 countries and territories. Poker was relatively unknown in many of these regions as recently as a few years ago. And because of the success of the television show and the fact that it gets people excited about playing, we believe that it is going to help create new poker markets around the world.”
In addition, the ability of online casinos and poker sites to enable players to participate anonymously and with the creation of interfaces that promote ease of use, this market has been able to attract a large number of new players to the gambling arena alongside experienced participants. This has contributed to the surge in growth for both online and mobile poker and casino games.
Interestingly enough the rise in market share of online and mobile gambling is occurring despite obvious legislative uncertainty. Lawrence G. Walters, and Internet gaming attorney, understands today’s gambling environment as dictated by the pursuit and realization of profit. “Today’s main driver is the profit incentive. In an age where many online business models have been tried and many have failed, online gambling has consistently produced profits and strong results and therefore it is a model that people continue to look at as a potential option.”
“Gambling has become a part of the American culture,” states Walters. “When looking at this industry for investing or to start a business, people tend to dismiss the legislative uncertainty in the United States because it has been the same political environment since 1998. At some point this consistent uncertainty becomes like background noise.”
Ironically companies operating in this space have publicly announced their desire to have this industry regulated to end the historical level of political and legislative uncertainty to in fact strengthen this industry even further.
Nancy Chan-Palmateer describes, “At CryptoLogic, we’ve said for years that gaming on the Internet should be regulated just as strictly as gaming on land. This is the best solution for the safe, secure and responsible use of this form of entertainment. This is why CryptoLogic is one of the world’s few software providers with government approved gaming software in the most regulated jurisdictions for Internet gaming. Government approval will foster a transparent and credible market that will allow the online gaming industry to reach its full potential. It will provide the reassurance necessary to attract a broader base of recreational players and drive market expansion.”
Brian Wright explains, “In the past it was wrongly argued that online gambling could not be regulated due to the nature of the games and there was a widespread misconception that consumers could not be protected and criminal infiltration would be the end result. In truth the industry welcomes regulation to ensure that the appropriate protections are guaranteed. It will underline the credibility of the industry and promote its long-term health.”
Many companies have made efforts to protect themselves from this legislative insecurity by maintaining operations outside of the United States and in many cases have gone to great lengthens to ensure that wagers are not accepted from problematic regions. MGN doesn’t accept US bets today because the US Department of Justice says it’s illegal. The Company also restricts registration through geo-location software so US residents can’t create a player account.
WPT’s Todd Steele describes, “Since all of the activity in the US is currently occurring in an unregulated and untaxed environment, our hope is that legislation changes in the future to address this void. However, it is likely to be some time before this happens,therefore we continue to focus from a company perspective on the non-problematic international markets.”
According to Nancy Chan-Palmateer, “We don’t expect the legislative uncertainty in the US to resolve any time soon, which is why CryptoLogic has focused on a global strategy in those major markets that embrace online gaming. We have grown a geographically-diversified business with more than 65% of our customers’ revenue derived from international (non-North American) players. In particular, it’s exciting to see that the UK — one of our key markets — is leading the way to regulate Internet gaming for the first time in that jurisdiction.”
Legislative progress, however has been made evident as a result of the UK’s moves towards regulation. As Wright describes, “the British Gambling Commission, set up to regulate the new gambling regime introduced by the Gambling Act 2005, has the opportunity to develop a regulatory system that could set the standard for the world. There are bound to be some sticking points, but so far the new Gambling Commission is adopting a pragmatic and collaborative approach. At the moment we are optimistic that the balance we are searching for will be found.”
Chan-Palmateer believes, “Brand name operators and games along with increasing government regulation such as we’re seeing in the UK will be key drivers to foster a credible marketplace and spur further market growth of online gaming into mainstream online entertainment.”
Considering that total worldwide mobile subscribers worldwide increased in 2005 to over 2 billion, with expectati
By Anne-Marie Fleming
Ann-Marie Fleming completed her MBA in the United States, where she attended Webster University. She also holds an Honors B.A from the University of Toronto. She has over fifteen years of experience within the financial industry to include retail banking and brokerage, investment banking, and mortgage brokerage within the United States and Canada, with a firm background in corporate research.