GPWA Times Magazine - Issue 13 - June 2010

By Clive Hawkswood, Remote Gaming Association M aking predictions about the remote gambling industry is always fun. People can disagree with you, but at the time they are made nobody can prove they are wrong. Then further down the road when everyone else has long forgotten about them it’s easy to go back and quote selectively to demonstrate your finely honed skillswitha crystal ball. Of course that only works if at least one of the predictions comes to pass, so to hedge my bets it makes sense to make predictions about lots of issues. The list below is therefore lengthy, so the odds are that at least some of them will turn out tobe right. 1. Therewill bemoreconsolidation intheindustry. Icanhardlysaythatyou heard it here first, butwe are amaturing industry and that is what happens. It is already happening even thoughwe have notyethadaso-called “headlinemaking” deal, and over the next two or three years I would expect that to accelerate. There are various drivers for this but one of the sticking points in the past, especially for publicly listed companies, has been uncertainty about potential legal liabilities. The risks of that can be expected to recedeas greater legal clarity emerges in a whole range of markets. It will happen; it’s just aquestionofwhen. 2. With consolidation will come accelerated diversification. Online gamblerswant and increasingly expect a one-stopshop.Companies that specialize in one form of gambling already find it hard when their carefully cultivated and expensively recruited customers go off to a competitor to access a different kind of product. For instance, an online sportsbook that might attract great new businessbecauseof interest in theWorld Cup in South Africa this year would be missing a trick if those newly attracted customers then go off to play poker or roulette somewhereelse. Inthesamewaythatspecialistfoodoutlets have been squeezed by the growth of shoppingmalls and supermarkets, it will becomeharderfornicheoperatorstothrive in the online gambling industry. There will always be exceptions to that rule and it would be a duller place if that weren’t so, but the economics of competitionwill inevitablymake it tougher. 3. Industry profits will be taxed at a higher rate. Although it sticks in the throat a bit to say it, this will be the real price of more companies gaining unfetteredmarket access. Therewill be a huge range of tax issues to address, not the least of which will be avoiding the threat of double taxation, but a “higher” (not “high”) tax burden will become the norm. The transition will not be an easy one for the industry because it calls for a huge amount of education of policymakers, regulators and politicians in lots of jurisdictions. Almost without exception theirpointsof referencewill be thetaxregimestheyhave inplacefortheir domestic brick-and-mortar industries, and that is irrespective of whether they have private-sector industries or state monopolies. It is and will be an uphill struggle to persuade them that the business models for off and online gamblingare completelydifferent. 4. Consumer demand and market growth will continue strongly for the foreseeable future. Prohibition and overly restrictive tax and regulatory regimes do not work. That is a bitter pill for some jurisdictions to swallow, but like it or not they will find it difficult to bury their heads in the sand and plow on regardless with policies that do not work in practice. In the wider world of e-commerce, of which online gambling CONSOLIDATION,DIVERSIFICATION ANDREGULATION In the sameway that specialty foodoutletshave been squeezed by thegrowthof shoppingmallsand supermarkets, so it will becomeharder fornicheoperators to thrive in the onlinegambling industry. 31 Gazing into the Crystal Ball