Online Gaming

Transcription

Online Gaming

I N F O R M A T I O N , C O M M U N I C A T I O N S & E N T E RTAINMENT
Online Gaming
A Gamble or a Sure Bet?
KPMG INTERNATIONAL
© 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are
affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Foreword
For thousands of years, people have been playing games of chance or wagering
on the outcomes of various games and events. Today, that activity often takes
place at casinos, game parlors, bookmakers and—increasingly—online.
The online gaming market represents one of the fastest growing segments of
the gambling industry. H2 Gambling Capital, a leading supplier of data and market
intelligence on the global gambling industry, puts the size of the global online
gaming market at about US$21 billion, hitting US$30 billion by 2012. But that
may be just a drop in the ocean, considering that some of the biggest potential
markets—such as the U.S., China, Japan, and South Korea—still prohibit many
forms of gambling over the Internet.
Market prospects could abound in the coming years. While it is difficult to predict
political and legislative action, many markets that now ban online gaming could
easily change their laws as a means of authorizing what is now an underground
economy and increasing tax revenues—something that the current recession
may be making more urgent.
Another key opportunity may lie in the regions where online gaming is now
legal. For example, KPMG firms are now starting to see a shift in online gaming
regulations in Europe; state monopolies may now be giving way to privately
owned websites, as we see beginning to occur in France, Italy, and Denmark.
Other important trends include:
• Industry consolidation: As is the case in many maturing markets, some KPMG
firms are seeing an increase in M&A activity related to online gaming.
• Business-to-business expansion: Established gaming sites are looking to license
their software and services platforms to establish new revenue streams and
gain market presence.
• Entrance of land-based casino operators: Looking for incremental revenue,
companies like U.K.-based Rank have already moved into the online space to
complement their traditional casino and bingo services, while casino giant
Harrah’s and gaming technology leader IGT are also taking steps in this direction.
• Emerging platforms: Gaming is moving to the same mobile and social platforms
that are exploding for casual games.
We are pleased to present this overview of the state of the global online gaming
sector and some of its major players. This is a dynamic and rapidly changing
business, facing unquestionable consumer demand. Many operators, media,
software and technology companies, payment solution providers, regulators,
attorneys, and investors alike are all keenly watching how this industry will develop.
Sincerely,
Gary Matuszak
Global Chair
Information, Communications and Entertainment
2 O NLINE GAMING: A GAMBLE OR A SURE BET?
A Gamble or a Sure Bet?
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,1 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.
H2 Gambling Capital, one of the most widely quoted sources of online gaming
statistics, says the market for global interactive gaming will grow about 42
percent to US$30 billion in 2012 from US$21.2 billion in 2008. This is significantly
faster than the 15 percent growth that H2 forecasts for the gambling industry as
a whole over the same period.2
The online gaming market is composed of a number of different types of games,
each with its own business models and technology. They include:
• Sportsbetting:Bettingonsportingeventssuchasgames,horseraces,dog
races, etc.
• Onlinepoker:Likeland-based(ortraditional)poker,theprovideroftentakesa
commission from wagers, and may be less risky than other casino games.
• Casinogames:Gamesofchancesuchasslotmachinesorroulettethatoperate
the same as in a traditional casino.
“
• Onlinebingo:Aweb-basedversionoftheages-oldgame.
• Onlinelottery:Onlineversionsoffrequentlygovernment-sponsoredlotteries.
1
2
The market for global
interactive gaming
will grow about
42%
to US$30 billion in 2012
from US$21.2 billion
in 2008.
eGaming Report,” H2 Gambling Capital, July 2009
Ibid.
O N L I N E G A M I N G : A G A M B L E O R A S U R E B E T ? 3
Key Trends
Potential of the U.S. 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 introduced3, although few expect any bill to sail
through the legislative process.4 Separately, the U.S. Treasury Department and
Federal Reserve Board announced in November 2009 that they were delaying
enforcement of the UIGEA for six months.5
Taken together, 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
While the U.S. may be an alluring gambling market, other geographic regions
may hold more short-term, and even long-term, promise for the online gaming
industry. 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,7 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 such as World of Warcraft, may
have online gamblers, however gambling online remains illegal in Korea as well.
3
“Frank Introduces Internet Gambling Regulation and Enforcement Act of 2007”, Press Release, April 26, 2007. Retrieved
from http://www.house.gov/apps/list/press/financialsvcs_dem/press042607.shtml, http://www.forbes.com/2009/05/06/
gambling-barney-frank-markets-equities-online.html
4
“Online Gambling Moves Need Traditional Backing,” Financial Times, November 8, 2009
Retrieved from http://www.federalreserve.gov/generalinfo/Foia/Reg%20GG-UIGEA-Comments.pdf,
http://www.pokernewsdaily.com/uigea-regulations-officially-delayed-six-\“;months-6701/
5
6
“
Harrah’s Hire Ex-Party Boss for Online Push”, GamblingCompliance Ltd., April 14, 2009. Retrieved from
http://www.gamblingcompliance.com/node/36950.
7
“Market Data Focus: Italy,” eGaming Review, October 2009
“
The online gambler is
often a loner.
— Joseph M. Kelly
Entrance of traditional “land-based” casinos
Many major casino players—including Harrah’s, Rank, MGM Mirage and Las
Vegas Sands—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.8
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.”9
Industry consolidation
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. For example, IGT, the leading maker of gaming
machines, in 2008 purchased Million-2-1, a developer of mobile/cell phone
gaming technology. Million-2-1 also has a consumer-facing Internet games portal
called Kerching that offers online casino, poker, bingo, SMS games and cell
phone java slots games in legal territories.10 In September 2009, bwin purchased
one of Italy’s largest online poker sites, Gioco Digitale.11
We predict 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.
“Harrah’s Interactive Signs Development Deal with 888 Holdings,” Poker News Daily, September 12, 2009
Interview with Forbes Insights, November 2009
10
IGT website, https://www.igt.com/content/base.asp?pid=58
11
“ bwin to Buy Italian Gamer for Up to 115 Mln Eur,” Reuters, September 14, 2009
8
9
“
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.
Bingo: online gaming with a social twist
Social gaming—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. In a recent special report on Internet bingo in
eGaming Review, Peter Trinz, senior vice president for Internet bingo software
developer Parlay Entertainment, was quoted as saying: “The social networking
phenomenon has run parallel to the development of the bingo product. Bingo is a
social game and people now feel very comfortable interacting on the Internet.”12
According to a study by media analyst Screen Digest, with growing broadband
penetration, increased promotional activity, a trend towards regulatory relaxation
and the current economic downturn driving demand for in-home entertainment,
online bingo has become the fastest growing sector of the online gaming market
and offers huge potential for further growth.13
The Screen Digest study notes that the U.K. market, estimated to generate over
£220m of revenue in 2008 (by gross win), 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.14
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.
Emerging markets
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.
12
13
14
“A New Dimension,” eGaming Review Bingo Report ‘09
Bingo in the Digital Age: Global Market Assessment and Forecasts’, Screen Digest, March 2009
Bingo in the Digital Age: Global Market Assessment and Forecasts, Screen Digest, March 2009
Risks
It would be remiss to discuss the online gaming industry without taking a look
at a few of the possible risks—or challenges—that could have an impact on
companies that are targeting this marketplace.
Legislation
While much global legislative action focuses on liberalizing online gaming
regulations, in many cases these efforts move slowly, and it may take many years
for markets to actually open up to licensed competitors even after laws pass.
In addition, there is still potential for legislation that is intended to reduce or
eliminate online gambling. A movement in this area could suddenly decimate
some players. For example, when the U.S. passed the UIGEA in 2006, many
online gaming companies that had been hoping for the best were quickly crippled
or forced out of business.
Payment crackdowns
Also in the U.S. market, credit card companies have recently tightened
restrictions on the use of credit cards for e-gaming transactions. Both Visa and
Mastercard have toughened their stance on allowing e-gaming transactions to be
coded as other kinds of online commerce, keeping U.S. customers from using
their cards to gamble online.15 These restrictions were put in place in anticipation
of UIGEA law going into effect in June, 2010.
Reputation and privacy concerns
Prospective online gaming customers remain sensitive to any perception that a
provider cannot in some way be trusted, while existing customers may be fickle
and easily switch to a provider which they perceive as more trustworthy. The
constituents of trust are broad and range from the potential for fraud or players
using software to beat the system, to security issues that cause players to be
concerned for their online information.
The management of personal data gathered by an online gaming provider is subject
to regulation by various EU privacy laws that are growing considerably in importance.
These laws provide customers with rights, and online gaming providers with
obligations, to honor. Compliance with such regulations is also a relevant constituent
of trust between the provider and their acquired and retained customer base.”
15
“Visa declining U.S. egaming payments too,” eGaming Review, Feburary 5, 2010
User experience
In addition to reputation and security concerns, online gamers must be
assured that they have a fair chance to win, and that operators are conducting
themselves properly. Unlike “land-based” casinos, where players can physically
see the way the games operate or cards are dealt, online and digital forms of
these games require greater faith.
Aware of these concerns, groups such e-Commerce Online Gambling Regulation
and Assurance (eCOGRA), an independent standards authority for the online
gaming industry, have emerged. eCOGRA oversees fair gaming, player protection
and responsible operator conduct, acting essentially as a player advocate where
online gaming is lawful.
Geographic Sectors
Europe
According to a recent study by Arthur D. Little, the online gaming market is
opening throughout Europe, with annual revenue forecast to reach 8 billion euro
by 2012.16 Following the examples of the U.K. and Italy, and under pressure from
the European Commission, many other countries are currently preparing for a
control-led opening of their markets.
One of the biggest challenges in Europe may be the allowance of cross-border
online gaming. Currently, many countries have focused gaming reform activity
within their own borders,17 which may have the consequence of creating a
“balkanized” environment of multiple regulations.
With an online gaming market estimated at GB£1.48 billion, the U.K. has one
of the most established online gaming industries, including sports betting,
poker, bingo, lottery and online casinos. The online gaming sector has also
seen a steadily increasing share of the total U.K. gambling market, growing
from 3.7 percent in 2004 to an estimated 12.1 percent in 2009.18
One area of concern that leading international gaming consultants GBGC (Global
Betting & Gaming Consultants) has for the Internet gaming sector is that of credit
cards. The charge-off rate on bad debts by credit card firms jumped significantly
in Q3 2009. The firms have been raising fees and interest rates in response to
bad debts from customers in the recent recession. The credit card is the oxygen
of Internet gambling—if customers cannot transfer funds, the business model
can fall down. If access to personal credit cards becomes more difficult in the
U.K. in 2010, there could still be pain ahead for its online sector.19
“Online Gambling: All In?” Arthur D. Little, 2009
“Market Barriers: A European Online Gambling Study,” Gambling Compliance, 2009
18
GBGC Interactive Gambling Report, September, 2009.
19
GBGC Analysis report prepared for KPMG, February, 2010
16
17
Italy represents a huge gaming market, and the country’s industry is expected
to generate just under €18.7 billion in 2009. Still, its online gaming market is
relatively small; online gaming losses are expected to make up just 5 percent
of total gaming losses in Italy this year, compared to a rate of around 18 to 20
percent in the U.K., and 25 percent in countries such as Sweden.20 Italy has been
liberalizing its onshore Internet poker and gaming regulations, allowing more
providers to be licensed, although there is an onshore requirement. PokerStars
recently established an onshore presence in Italy, and bwin Interactive
Entertainment’s acquisition of a leading Italian poker site, Gioco Digitale,
demonstrates the draw that the regulated market has.
The gaming markets in France and Spain, meanwhile, are expected to open up
in 2010.21 In France (which like Italy has an onshore requirement), PartyGaming
is reported to be entering the market in 2010 through a business-to-business
partnership,22 and Paddy Power signed a five-year deal with French operator
Pari Mutuel Urbain (PMU), one of the country’s two state-backed gaming and
betting providers.23
North America
The United States may have the most potential as a lucrative market for online
gaming, but it is also the market with some of the greatest challenges. Currently,
online gaming is outlawed in the U.S. under the UIGEA, which prohibits U.S.
banks and credit card companies from processing charges to and from online
casinos. But should online gaming be legalized, the U.S. market for online
casinos and poker could be worth as much as US$12 billion, according to
Goldman Sachs.24
The consequence of the gaming ban in the U.S. has been to create a 21st Century
equivalent of Prohibition. Legalization’s proponents say today’s similar dynamic—
lots of enthusiastic bettors, no home-grown legal financial infrastructure—opens
the way to money-laundering and brings disreputable money handlers into the mix.
Should winnings actually flow through a U.S. financial institution, the consequences
could be unpleasant for all concerned. In June, 2009, for instance, U.S. federal
authorities froze bank accounts worth US$34 million representing 27,000 online
poker players. The accounts were managed by two service companies, Allied
Systems Inc. and Account Services, and were held at Wells Fargo, Citibank and
other U.S. banks.25
“Market Data Focus: Italy,” eGaming Review, October 2009
“Online Gambling: All In?” Arthur D. Little, 2009
22
“PartyGaming to Enter French Market with B2B Deal,” eGaming Review, August 28, 2009
23
“New Paddy Power B2B Arm Signs Landmark Deal with France’s PMU,” eGaming Review, November 12, 2009
24
“Goldman Sachs: PartyGaming, 888, Playtech, bwin to Surve on Legal U.S. eGaming,” eGaming Review, June 30, 2009
25
“U.S. Deals Blow to Online Poker Players,” The Wall Street Journal, June 10, 2009
20
21
“
The U.S. market for
online casinos and
poker could be worth
as much as
US$12
billion.
1 0 ONLINE GAMING: A GAMBLE OR A SURE BET?
“
Legislators in Florida
were presented with a
study from a lobbying
group showing that
legalizing online poker
could raise
US$90
million
annually in taxes.
There have been proposals in Congress to legalize forms of online gaming. One
bill, introduced by Financial Services Committee Chairman Barney Frank, has
66 co-sponsors as of March 2010 and would license and regulate all Internet
gaming, except for sports betting. A Senate bill from Senator Robert Menendez
would license only non-banking interactive poker and other skill games, as well
as legalize interactive horse racing.26 Neither bill progressed in 2009 or in early
2010, however.
Some individual states also have been considering legislation separately; others
have been presented with studies suggesting how online gaming could boost
tax revenue. California, for example, was considering a bill enabling intrastate
online poker, although the bill has since run into delays.27 Legislators in Florida
were presented with a study from a lobbying group showing that legalizing online
poker could raise US$90 million annually in taxes.28
Canada, with an online gaming market estimated at CDN$1 billion29, has been
looking to liberalize its own online gaming laws. All gaming in Canada must be
’conducted and managed’ by a provincial government or agency. In early 2010,
Loto-Quebec received cabinet approval to enter the online gaming business.
Loto-Quebec will work with B.C. Lottery Corp. and Atlantic Lottery Corp.—both
of which already offer limited online gaming—to develop a common electronic
platform across their jurisdictions, as well as to achieve the volume of players
that will be required to make online poker viable. These provincial agencies are
expected to offer online gaming by the end of the year30, while other provinces
such as Ontario, are expected to follow suit.31
“Internet Gaming Comeback?” Global Gaming Business, November 12, 2009
“California Legal Online Poker Bill to Be Delayed, Senator Warns,” eGaming Review, August 21, 2009
28
“Legal Online Poker Could Raise $90M a Year, Florida Told,” eGaming Review, November 16 2009
29
Canadian Gaming Business magazine, October, 2009, p. 6.
30
“Loto-QuebectoGetIntoOnlineGamblingBusiness,”CTV.ca,February3,2010
31
“Ontario may follow other provinces and allow online gambling: McGuinty”, The Canadian Press, February 23, 2010
26
27
O N L I N E G A M I N G : A G A M B L E O R A S U R E B E T ? 1 1
Asia Pacific and India
The two largest prospective markets in Asia—China and South Korea, both
remain closed to online gaming.
In China, the history of gambling can be traced back several thousand years.
Today, legal lotteries are available in most Chinese cities, as well as in Hong
Kong and Macau. But casino gaming is limited to Macau—which has now
overtaken Las Vegas as the biggest gaming city in the world today.32 However
while Macau’s laws cover land-based casinos, they do not currently grant
concessions for online gaming.
South Korea, meanwhile, has been cracking down significantly on online gaming,
which is still illegal in the country. Unauthorized gaming sites are available—a
popular one is Hangame—but winners have had to cash out by using illegal
money dealers, according to a report in Korea Times.33 To combat this, the
country’s Ministry of Culture, Sports and Tourism, proposed a bill that charges
people trading “excessive” amounts of cyber money with gambling.34
Japan currently bans most forms of gambling, with the exception of lotteries
and bets on racing. Certain gaming machines, such as Sega Sammy’s pachinko
and pachislot, are very popular in Japan’s leisure industry,35 although landbased casinos and online gaming are not permitted. Yet there has been some
movement to lift this prohibition, opening up this high GDP market of 128 million
people. The ruling Liberal Democratic Party in Japan has been reported to be
communicating with some of the largest online gaming operators to discuss
casinos in that country.36
“Unlocking the World of Chinese Gambling,” Global Gaming Business, September 2009
“Online Gambling Sites Mushrooming,” Korea Times, June 9, 2008
34
“HabitualOnlineItemBuyersFaceSanctions,”KoreaTimes,June25,2008
35
White Paper on Leisure Industry 2009, Japan Productivity Center
36
“Japan, a Potential Gold Mine for Online Gambling,” eCommerce Journal, February 13, 2009
32
33
“
The two largest
prospective markets in
Asia
—China and
South Korea, both
remain closed to online
gaming.
In late 2009, foreign operators were submitting bids for the first online gaming
licenses in India; it is estimated that country’s betting market is worth about
US$60 billion. Bidders were said to include William Hill, Betfair and bwin, as
well as local Indian operators, with at least three licenses to be granted in the
Himalayan state of Sikkim. Reports said the goal was to have the betting services
running in time for the football (soccer) World Cup in April 2010.37
Online gaming may soon take place in Australia as well. In October 2009, the
government’s independent advisory body on gaming policy recommended lifting
the 2001 Interactive Gambling Act, which currently bans online gaming. The
Productivity Commission endorsed the idea of allowing operators to offer online
poker and casino products to Australian residents, subject to a strict regime
of consumer protection.38 Australians spent an estimated AU$790 million on
offshore gambling sites in 2008.39
“
In late 2009, foreign
operators were
submitting bids for
the first online gaming
licenses in India; it is
estimated that country’s
betting market is worth
about
US$60
billion.
37
38
39
“Betfair and William Hill Target India,” The Independent, October 27, 2009
“Lifting of Oz eGaming Ban Set to Spur Further Growth,” eGaming Review, October 26, 2009
“Lifting of Oz eGaming Ban Set to Spur Further Growth,” eGaming Review, October 26, 2009
Latin America
Brazil, with 192 million people, is the most highly populated country in Latin
America, and may have one of the strongest foundations for online gaming:
a solid base of regular Internet users and a cultural history of gambling. Brazil
currently operates different types of lotteries, all controlled by the federal
government. Bingo games are also popular, as is sports betting, especially on
football (soccer).40
Brazil has the potential on the surface to become a huge online gaming market,
however it is currently prohibited and no online betting legislation exists.
Argentina, meanwhile, may be the sleeping giant for online gaming of Latin
America. In Argentina, gambling and betting licenses are provincial, not national.
bwin, for example, operates through a license from the Provincia de Misiones,
while 888 has a partnership with Tower Torneos. Companies are currently trying
to push the envelope in terms of gaining a national presence through advertising
and sponsorships. bwin recently started advertising with a large national
publisher, and has a shirt-sponsorship deal with Buenos Aires-based football
team Boca Juniors.41
Another potentially lucrative market is Mexico. Mexico’s 1947 Federal Gaming
and Raffles Law regulated gambling, and 2004 legislation allowed online
gaming, with about 200 permits awarded in 2006, most of them to Apuestas
Internacionales, a subsidiary of the TV giant Televisa.42
It is estimated that the Mexican gaming market may be worth some US$4.6 billion.43
Until now the gaming business has been dominated by the government-run National
Lottery. Online gaming is expected to become one of the most lucrative niches
of the business. Through Mexican sites (ending in .mx) of the online casinos, it is
possible to access international sites of companies such as bwin, Intercontinental
Global and others.
“Brazil’s Gambling Potential,” eGaming Review, October 2008
“SleepingGiant,”eGamingReview,February4,2008
42
“Online Gambling in Mexico: A Safe Bet,” www.yogonet.com, September 2007
43
“Online Gambling in Mexico: A Safe Bet,” www.yogonet.com, September 2007
40
41
Some of the Key Industry Players44
Name
Headquarters
Annual
revenues (year)
Notes
188Bet
Isle of Man
Privately held
• Online sportsbook provider owned by Cube Ltd.
• Recently launched a mobile gaming product with Swedish mobile developer Mobenga
• Strength is said to be in Asia
• Has sponsorship deals with five teams in the English Premier League, including Liverpool F.C. and
Chelsea F.C.
888 Holdings
Gibraltar
US$256 million
(2008)
• Online gaming site that also operates Casino-on-Net and Pacific Poker
• Its B2B division, Dragonfish, provides technology, ePayment services and managed services through
partnership deals with other gaming sites
• Dragonfish has a deal with Harrah’s Interactive Entertainment to provide its online gaming services.
Betfair
London, U.K.
€303 million
(2009)
• Internet betting exchange that also operates a poker product and game arcade
• Claimed its 2 millionth customer in April, 2009.
bwin
Vienna, Austria
€403 million
(2008)
• Largest online gaming company focused primarily on sports betting, as well as Internet casino and poker
• Holds sports betting and casino licenses in Austria, Gibraltar, Italy and Argentina and an e-money
license for the UK
• Claimed 2.1 million active customers in 2008.
Cryptologic
Dublin, Ireland
US$61.5 million
(2008)
• Licenses gaming software, support services and payment processing
• Revised strategy in 2009 to focus on Internet casino, games development and licensing to top gaming/
entertainment brands
• Companies using Cryptologic solutions include 888, Betfair, BSkyB, GigaMedia and PartyGaming.
Gala-Coral
Essex, U.K.
Privately held
• Operates in multiple formats, including casinos, bingo halls, retail betting shops (in the U.K. and Italy),
and online gaming.
• Recently agreed to a £175m capital as part of a debt restructuring45.
GigaMedia
Taipei, Taiwan
US$183.6M (2008)
• Provider of gaming software and services to the online gaming industry, primarily in continental Europe
• Also offers platform of casual (non-gambling) games in Asian markets, including China, Taiwan, Hong
Kong, and Macau.
GTECH
(Lottomatica)
Providence, RI,
USA
€2,058 million
(2008)
• Leading operator of lottery systems, now a subsidiary of Italy’s Lottomatica
• GTECH G2, its online gaming arm, is comprised of four subsidiaries—Boss Media, St. Miniver, Finsoft and
Dynamite Idea—focused on providing software and services in the Internet and sports betting market.
International
Game Technology
(IGT)
Reno, NV, USA
US$935M (2009)
• Global gaming company specializing in the design, manufacture, and marketing of electronic gaming
equipment and network systems
• Operates two online gaming subsidiaries: WagerWorks, a casino software solution, and Million-2-1,
which does mobile/cell phone gaming.
Ladbrokes
Middlesex, U.K.
£1,172 million
(2008)
• Largest betting company in the U.K.
• Operates 2,700 retail betting shops in the U.K., Ireland, Spain and Belgium
• Operates online casino sites offering sportbooks, poker, casino games, bingo and backgammon
• Sites use the OpenBet system from Orbis Technology.
Microgaming
Isle of Man
N/A (privately
held)
• Software developer for online gaming industry
• Online casino operators using its software include Ladbrokes, 32Red, Fortune Lounge Group, and others.
Paddy Power
Dublin, Ireland
€283 million
(2008)
• Ireland’s largest bookmaker, now expanding in the U.K. and Europe
• Non-retail (online) activities now generate 70 percent of its operating profit
• Acquired a controlling stake in Sportbet, an Australian sports betting company.
PartyGaming
Gibraltar
US$472 million
(2008)
• Online gaming company best known for its PartyPoker online poker room
• Has made a number of recent acquisitions, including World Poker Tour and Cashcade (online bingo)
• B2B division uses its software to create and operate bingo and casino eGaming services targeting the
UK market.
Playtech
Isle of Man
€111 million
(2008)
• Provides software and managed services for the online gaming industry
• In joint venture with William Hill for William Hill Online
• Other companies using Playtech software include PartyGaming, GoldenPalace.com and Bet365.
Source: All information from company websites and annual reports, unless otherwise noted
Gala Coral Lenders Said to Eye Cash Infusion, New York Times, February 16, 2010
44
45
Name
Headquarters
Annual
revenues (year)
Notes
PokerStars
Isle of Man
Privately held
• Said to be the world’s largest online poker room
• Sponsors a wide range of online and offline poker tournaments, including the World Championship of
Online Poker
• Some 20,000 players are said be playing real money “ring games” daily.
Rank Group
Maidenhead,
U.K.
£522.2 million
(2009)
• Operates bingo services and casinos in the U.K., with complementary online gaming services
• Has direct operations in U.K., Spain and Belgium.
SBOBet
Philippines
Isle of Man
Privately held
• Online sportsbook and casino operator
• Has operations in Asia (licensed by First Cagayan Leisure & Resort Corp. in the Philippines) and Europe
(licensed by the Isla of Man)
• Uses video streaming technology to offer “live dealer” games online.
Sega Sammy
Tokyo, Japan
¥429,195 million
(2009)
• Manufacturer of pachinko and pachislot machines
• Amusement machines, including network-enabled trading card games
• Amusement centre operations and arcade machines
• Home video game software business, including content for mobile phones, PCs and toys.
Sportingbet
London, U.K.
£163 million
(2009)
• Betting site that operates in the U.K, Spain, Germany, Greece, Turkey, and Australia
• Operates Paradise Poker brand online poker site
• 64 percent of revenues come from sports, 24 percent from casino and games, and 12 percent from poker.
William Hill
London, U.K.
£963 million
(2008)
• Major chain of betting shops that operates primarily in the U.K. and Ireland
• Online efforts—William Hill Online—are through venture with software developer Playtech.
Conclusion
As the popularity of both gambling and online entertainment continues to grow,
the online gaming market is without a doubt an attractive area of expansion for
softwaredevelopers,casinosandotherland-basedgamblingoperators,related
suppliers, and industry newcomers and investors alike.
Even despite the unpredictable political and legislative hurdles and roadblocks in
many countries, online gaming seems to have taken a strong enough foothold
in some markets such as Europe that investment into this sector may have less
risk than it appears. Coupled with the enormous potential of the industry—in the
eventthatmajormarketssuchastheU.S.orAsia-Pacificallowonlinegambling
and supporting activities—it is not surprising to see that the online segment of
the gambling industry is by far one of its fastest growing divisions and piquing
the interest of the industry’s largest players.
KPMG
An experienced team, a global network.
KPMG’s global network of Information, Communications & Entertainment (ICE)
professionals work with our firms’ clients in the online gaming and related
sectorsthroughouttheAmericas,Europe,MiddleEast,AfricaandAsia-Pacific.
Companies and investors in this industry face many financial, information and
security risks and issues. In addition to helping our firms’ clients with these
concerns, KPMG professionals can also advise on reducing costs, improving
controls, protecting intellectual property, and meeting the myriad of challenges
of the digital economy.
Contacts
Global Contacts
European region
Americas region
Gary Matuszak
Partner, Global Chair
Information, Communications,
and Entertainment
KPMG in the U.S.
+16504044858
[email protected]
Mark Summerfield
KPMG in the U.K.
+442073113055
[email protected]
Wade Loo
KPMG in the U.S.
+16504045240
[email protected]
Neil Duggan
KPMG in Gibraltar
+35020048600
[email protected]
Silvia Montefiore
KPMG in Canada
+14162287211
[email protected]
Maureen Migliazzo
Global Executive
Information, Communications,
and Entertainment
KPMG in the U.S.
+16504044425
[email protected]
Russell Kelly
KPMG in Isle of Man
+441624681013
[email protected]
Asia Pacific region
Kieran Lane
KPMG in Australia
+61(2)93357514
[email protected]
Edwin Fung
KPMG in China
+861085087032
[email protected]
About the Authors
Mark Summerfield is Global Head of KPMG’s Gaming practice based in London,
U.K. Mark has worked with gaming companies for 14 years. More recently his
team has delivered assurance, acquisition and advisory services to online gaming
companies ranging in size from private enterprises to companies listed on the
U.K. stock exchange.
Wade Loo is a technology audit partner based in the U.S. firm’s Silicon Valley
office. He has a wealth of experience as lead partner for various global technology
corporations and a global business perspective having worked in KPMG firms in
Japan, China and Singapore for eight years.
Contributors
We would like to acknowledge the contribution of Archie Watt, Elaine Pratt,
Forbes Insights (www.forbes.com/forbesinsights) and Global Betting & Gaming
Consultants (www.gbgc.com) who assisted in the development of this report.
kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to provide accurate and timely information, there can be
no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate
in the future. No one should act on such information without appropriate professional advice after a thorough
examination of the particular situation.
© 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG
International provides no client services. No member firm has
any authority to obligate or bind KPMG International or any other
member firm vis-à-vis third parties, nor does KPMG International
have any such authority to obligate or bind any member firm. All
rights reserved.
KPMG and the KPMG logo are registered trademarks of KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Designed by Evalueserve.
Publication name: Online Gaming
Publication number: 1001505
Publication date: March 2010
Printed on recycled material

Online Gaming

Transcription

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