GPWA Times Magazine - Issue 13 - June 2010

June 1st 2010, having been delayed in late 2009, and it will be interesting to see the impact, if any, this will have on existing offshore activity taking place in the U.S. In terms of potential regulation to be introduced, much has been made of federal moves from legislators such as Rep. Barney Frank (D-Mass.) and Sen. Harry Reid (D-Nev.). However, whilewewouldnot rule out federal-level legislation/regulation, it has always had a number of difficult hurdles to jump, and this time it will be no different. If any U.S. regulation is introduced, it looksmore likely that itwill beona state rather than a federal level. As has been widely reported, numerous states such as Florida, California and New Jersey are looking closely at regulating interstate Internet poker. Our current forecasts assume no change in the U.S. situation from a regulatory perspective, and we estimate that the U.S. interactive gamblingmarket was worth $5.1 billion in 2009. We have estimated that if the U.S. were to fully regulate all forms of interactivegambling that it could create approximately 30,000 jobs and would generate $22 billion in gross gambling yield in a full year. Innovationwill continuetodrive growth inthe industry Innovationhas been a key driver of the industry since itsorigins in themid 1990sand this is likely to remain thecase.Akey innovation in the industry in the last number of years has been live betting or betting in running. Leading sports-betting operators have stated that live betting is accounting for in some cases more than 50 percent of interactive sports-betting turnover. While live betting has led to some cannibalization with traditional online sports betting, it has grown the overall online sports-bettingmarket. The upcomingWorld Cup in South Africa is likely to furtherdrive livebetting/betting in runningproducts. Another area of innovation within the sector ismobilebetting,whichwebelieve it is on theway tobecoming a significant driver of growth. While we have seen many false starts for mobile over the years, the introductionof the iPhoneand the impact it has had onmobile devices in general means operators can finally offer customers a highly user friendly and interactive mobile experience in interactive sports betting. In terms of other verticals (casino, poker andbingo), wemay not be there just yet in terms of mobile technology for them to become a mass-market mobile product offering, butwatch this space. Outside of betting, innovation in interactive casino gaming is constantly occurring, with live casino offerings becoming more prevalent and many operators reporting stellar growth from live casinos. In addition, online casino games are using an increasing level of interactivity. This interactivity is what players are demanding and many operators have stated how games with high levels of interactivity have been successful in increasing player life cycles and player yields. In addition, we are also seeingmore andmore convergence between online gambling and online gaming. We believe this is likely to continue, particularly as the current generation of online gamers matures into online gamblers. This convergence is likely to lead to further innovation in casinogames in the future. Interactivegamblingstill remainssmall in relationto overallgambling Given the impressiveratesofgrowth that have been delivered by the interactive gambling industry over the last 15 years, people will still ask how it can continue to grow at impressive rates. Looking at the overall interactive gambling market globally, we estimate that it was worth $26.6billion in2009, just 8.6percent of theoverallglobalgambling industry.This rate of penetration is low compared to that of other industries. For example, in the travel industry 42 percent of activity takes place online, while household goods see 35 percent of activity online and computer software sees 21 percent. We believe the penetration rate of interactive gambling will continue to grow. Ourpositive view isunderpinned by the fact that broadband penetration continues to increase, new products continue to be introduced and the newer breed of gamblers are more technologically savvy and thus more likely to conduct a more significant proportion of their gamblingonline. In summary, the interactive gambling industry will continue to be impacted by the unique economic times inwhichwe find ourselves.However, unlikemany other industries, interactive gamblingisinanenviableposition given the structural growth drivers that are underpinning its growth. These structural growth drivers look set to remain in place, which gives us confidence in the positive view we have for the futureof the industry. Gavin Kelleher is an independent gamblingconsultantwhoworkswith H2GamblingCapital,a leadinggam- bling market intelligence and con- sultinggroupbased in theU.K. “Innovationhasbeen akeydriverof the industrysince its origins in themid 1990sand this is likely toremain thecase.” 30 Gazing into the Crystal Ball