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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
February, 2006
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.
Legislative Environment:
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.”
Going Mobile:
Considering that total worldwide mobile subscribers worldwide increased
in 2005 to over 2 billion, with expectations that this total will grow
to approximately 4 billion worldwide subscribers by the end of 2011,
according to Portio Research, it is not surprising that many are turning
to mobile games for their entertainment choices.
Many companies that have established themselves as an online casino or
poker presence are extending their position to take advantage of the
growing adoption of mobile technology and portable entertainment. “A
number of companies involved in traditional methods of gambling such as
betting and casino gaming also operate remote platforms, as the
membership of the Remote Gambling Association (RGA) illustrates. The
onset of new technologies allows operators to develop compelling muti-platform
experiences that are engaging to the experienced gambler as well as the
interested newcomer. Therefore in terms of market growth for the
gaming/gambling industry as a whole, the 24 hour global accessibility
those remote gambling mediums provide will ensure continued growth for
years to come,” explains Wright.
Mobile Gaming Now’s products and services focus on interactive
casino-based games for online and mobile gamers, as well as the casino
patron, enabling both single and tournament play opportunities. “We
offer free games, games for prizes and games for gambling. People can
risk it, play casually or simply play for fun. We also offer integrated
play for the online gamer or the mobile player. Players compete
head-to-head on a PC or a mobile phone. Our players can play at home or
anywhere a mobile phone goes,” describes Jensen.
Maintaining the Competitive Edge:
With the rapid growth experience by the online and mobile casino gaming
industry there are a variety of differentiators that have helped
participating companies stay competitive. “In casino, it’s about being
smarter and delivering more market-targeted, sophisticated innovations
to enhance player’s entertainment value in order to grab market share.
CryptoLogic is breaking new ground by bringing the latest innovation and
entertainment concepts to Internet gaming to meet the demands of
sophisticated gamers playing more frequently in an online environment.
Our software is research-driven. It’s about delivering games that
players want to play, and games that translate into incremental revenue
for our customers,” states Nancy Chan-Palmateer.
MGN describes their strength as stemming from the platform behind the
games. “We choose to release traditional games such as poker and black
jack because people know them. Our gaming platform has to outperform our
competitors with the same games. We have to create a better user
experience on the platform. Key performance factors are an easy-to-use
interface that make the games fun to play, feedback to give players
information about their performance and, most importantly, speed.
Players need to play seamlessly and the speed of the game is a critical
factor,” explains Jensen.
According to Segal, PartyGaming’s overall success and advantage is due
to their business model, which is based on systems, marketing and
customer service that has generated attractive financial returns and, in
particular, strong cash flow. “As many new entrants to the market have
realised, the bottom line in the world of online gaming is that scale is
of fundamental importance to achieving success. The future at
PartyGaming is all about cross-selling a wide variety of gaming products
to customers. We are focused on increasing the average spend by
customers by providing them with additional games they want to play,”
adds Segal.
Looking Ahead:
Despite the ongoing legislative uncertainty, many insiders anticipate
the growth momentum of online and mobile gambling to continue as
technology improves, mobile gaming expands, players establish trust with
operators and companies continue to attract new and experienced players
to their offerings.
As Chan-Palmateer explains, “The online casino industry has grown into a
multi-billion-dollar global market and is now entering its second
decade. Internet casino gaming is here to stay and has yet to expand
broadly into mainstream entertainment. There remains vast market
potential, although Internet casino gaming is more developed after ten
years and increasing in competition.”
Ann-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.
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