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Casino & Gaming International
2010 ISSUE 1
2010 ISSUE 1
Inside Back Cover & Opposite
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Gaming
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WELCOME
DO THE ‘BAD GUYS’ HAVE THE UPPER HAND? Publisher Jamie Kean Email: jamie.kean@casinoandgaming.net Editor Stephen Lawton Email: stephen.lawton@casinoandgaming.net Publishing Services Manager Tracie Birch Email: louisa.bull@casinoandgaming.net Advertising Ray Blunt, Sales Director Email: ray.blunt@casinoandgaming.net Daniel Lewis, Sales Manager Email: daniel.lewis@casinoandgaming.net
Business Development Manager Mike McGlynn Email: mike.mcglynn@casinoandgaming.net
Woodland Place, Hurricane Way Wickford Business Park, Wickford Essex SS11 8YB. United Kingdom Telephone: +44 (0)1268 766 515 Facsimile: +44 (0)1268 766 516 Annual Subscription (4 issues): £107 United Kingdom £117 Europe & Middle East £127 USA & Canada £137 Rest of the World Please make cheques payable to ‘CGI Global Media Limited’ and send to: CGI Global Media Limited, Subscriptions Dept, Woodland Place, Hurricane Way, Wickford Business Park, Wickford, Essex SS11 8YB. United Kingdom. Photography © 2010 CGI Global Media Limited and it’s licensors. All rights reserved. © 2010 CGI Global Media Limited (except where otherwise stated). All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written permission of CGI Global Media Limited. ISBN 190200335 7 www.casinoandgaming.net
eeking silver linings in times of adversity is natural enough for optimists and even realists. By its very nature it underlies something that has temporarily gone awry, and that subsequently promises to bring out the sun. Not that it necessarily results in anything that you wouldn’t expect to emerge on the other side of our present economic doldrums in any case. However, the idea that there can be something as dramatically forward-looking as CityCenter emerging amid such uncertain times, is a signal boost to sustaining confidence and to changing opportunities ahead. The official opening in December – defiantly proceeding amid CityCenter’s own financial pressures – could well succeed in casting Las Vegas as something between a city within a city and a city state. As Paul Heretakis notes: “Only time will tell of its success; but we now have the urban city centre that the rest of the great cities of the world have. We have finally become an international city not just a city of international destinations.” (p12/13) Early days yet, but it does appeal to a much wider world: while still basking in the glory of landmark casino entertainment, it simultaneously appears distinct from that uniquely recognisable attraction. This new emphasis, for those who’s gambling is not a central value of their leisure activity, is also growing evidence that gambling is being refashioned from its pure, escapist reputation of old. Coincidental as it may be, in the month CityCenter was launched, the US UIGEA’s implementation of the ban on Internet gambling was postponed. It’s as though there is a simultaneous sense dawning that online and land-based interests require a new lease of life. We will see soon enough – by 1st June 2010 – whether Barney Frank’s bill to regulate online gambling has won enough time to win the day. No one is banking on it: online operators, prevented from planning such a significant market entry, inevitably opt for the buoyancy of much of the non-English speaking world. So how difficult was it last year? Julian Harris taunts: “If I might be forgiven for indulging in a little provocative over simplification, some in the industry might consider that in 2009 the ‘bad guys’ had the upper hand: the US Department of Justice maintains its stranglehold on online gaming; the European Court of Justice provided a lifeline to national monopolies; the French Government signalled a proposed tax rate that would make online licences unprofitable for the foreseeable future and in the UK – well, the horrors simply pile up!” (p35) Bob McCulloch also warns, for instance, that in France “state decisions can reverse strategies in a heartbeat” (p44). Nevertheless, Julian concludes, “even in all this Stygian gloom, there are signs of light ahead” (p35). And the means to widening that shaft of light are slowly being provided by professional systems of licensing and regulatory cooperation, combined with the industry’s ever closer attention to social responsibility, ranging from player dispute resolution to problem gambling. A powerful case for recognition of these efforts, and its mutual commercial value to government and industry, is almost a given now. This is the best guarantee there is, given the disproportionate attention paid to supposed social evils of gambling, of settling the spurious attempts to undermine industry efforts to move with the times. Even with stringent regulatory, social responsibility and governance systems in place, the scope for governments to upset the apple cart is inherent in the political process beyond the gaming industry. But contending with that where full recognition through regulation is the norm, creates a far clearer, level playing field than would be the case without that legally established engagement. As it is, with online and offline activities advancing in appeal and range and becoming more integrated over time – while facing up to exaggerated addiction claims – ever more effective controls are necessarily over demanded. Mark Griffiths sums up: “Over the last decade, social responsibility in gambling has become one of the major issues for professional gaming operators. Although the gaming industry understandably keeps an eye on their bottom line profits, there is an increasing adherence to social responsibility standards. Evidence for this is demonstrated by the fact that the gaming industry now has formal relationships with numerous organisations that address training, compliance, accreditation, and governance. There is also increasing integration between the gaming industry and a diverse set of stakeholders including government, practitioners, and researchers.” (p87)
S
Stephen Lawton is Editor of Casino & Gaming International
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2010 Issue 1
CONTENTS
11
19
47
FEATURES 11
THE GOLDEN AGE OF LAS VEGAS IS OVER! BY PAUL HERETAKIS
19
SAMPSON AND GOLIATH: THE SMALL GUY OVERCOMES THE OBSTACLES BY RANDALL HUGGINS
25
MANAGING, PLANNING AND ANALYSING LEGACY SYSTEM MODERNISATION IN CASINOS BY CRAIG GRAHAM
31
VIRTUAL MATRIX: REVOLUTIONS IN HARNESSING FULLY DIGITAL SYSTEMS INTERVIEW WITH STEVE WRIGHT
35
ARE THERE SIGNS OF LIGHT IN THE STYGIAN GLOOM? BY JULIAN HARRIS
41
STAYING SAVVY - AT THE TOP OF THE CURVE BY BOB McCULLOCH
47
ARE THE BEST THINGS IN LIFE FREE?
51
THE UK’S MOST VISIBLE GAMING BRANDS IN PAID SEARCH BY TORSTEIN LANGELAND AND CRAIG CHALMERS
BY PHIL FRASER
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CONTENTS
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55
63
FEATURES 55
AN ANCIENT ART: THE UNCOMMON COMMON SENSE OF KNOWING PEOPLE – AND YOURSELF BY VAHE BALOULIAN
59
WHAT WILL ACTUALLY KEEP ‘MICKEY THE ANT’ AND ‘TONY THE FLEA’ AT BAY? BY JOE KELLY
63
REAL RISKS IN A VIRTUAL WORLD
71
WHAT IS THE BUSINESS MODEL SHAPING UP TO BE?
BY JUSTIN WOLFF
BY CHRIS FANGMAN AND ANTHONY DICK
75
REFINING EFFICIENCY AND PROMOTING eGAMING SUBLICENSING FLEXIBILITY BY MILES BENHAM
81
TAKING PRECAUTIONS IS A NON-NEGOTIABLE OPERATOR OBLIGATION BY TEX REES
87
THE GAMING INDUSTRY’S ROLE IN THE PREVENTION AND TREATMENT OF PROBLEM GAMBLING BY MARK GRIFFITHS
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CASINO DESIGN
THE GOLDEN AGE OF LAS VEGAS IS OVER!
BY PAUL HERETAKIS
City Center, officially opened in December 2009, was conceived as the anti-themed resort; one that will bring an urban centre to Las Vegas in the way of an architectural monument. An allstar roster of planners, architects and interior designers have been brought together to build the most expensive resort ever conceived. You could argue that in the end, architecture is the theme of the property. It is cosmopolitan and city chic, everything it was planned to be, with wonderful outdoor spaces and glass clad towers. It is a totally new concept or theme for Las Vegas and time will tell if it will appeal to the escapism that made Las Vegas the success it is.
>>
ith the opening of City Center this past month, the golden age of Las Vegas is officially over. It began in 2002 with the explosion of the world economy and ended just as quickly with the failure of that same economy. Our sky rocketing home values and the stock market gave us the feeling of great wealth - early retirement and 5 star resorts was our given right. The future was ours and we were going spend our way through it. The largest US casino companies responded with some of the greatest resorts ever built. Each company created their flagship property – the crown jewel of their portfolio. Celebrity chef dining, spas, suites and shopping wrapped in the most expensive boxes ever created. All of them were must-see destinations that were going to redefine our expectations as well as our lives. The Sands complemented the Venetian with the creation of the Palazzo… Wynn delivered an Encore to his masterpiece… MGM Mirage created City Center to anchor their strip offerings… Harrah’s reestablished the lure of the Caesars brand. All of these properties are 5 star tours de force of service, amenity offerings and unparalleled design. Each property contained more expensive and exclusive experiences that appealed to our aspiration spending. These resorts were built for my lifestyle and I deserved it all….. BOOM! Well you know what happened next…. I’m poor again! All of these properties are a distant memory for me now. No more fancy dinners, Zen spas and designer label suits. It’s back to the buffet and souvenir shop for me. Before I continue on my own personal woes, let’s take a look at each of these resorts.
W
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THE PALAZZO This property is attached to the Venetian at the casino and shopping mall levels. While the colourful and ornate Venetian is themed and contains many replicas of famous Venetian monuments, the Palazzo is totally different. It is more about an essence of luxury and opulence. It has two amazing four story atrium spaces that lead you from one end to the other while an all-star roster of celebrity chefs and Italian designer labels round out the glamorous offerings. The interior is very beige and creamy with classic detailing that exudes elegance. It is a beautiful property that unfortunately opened right in the middle of the recession so it has struggled a bit. It is a stark contrast to the Venetian and in many ways the people responded very well to the obvious theming of the original resort and the related escapism factor, while the new resort has struggled to capture that same emotional connection with its customer. While many people forsake theming, there are times when you get caught up in the moment and lose yourself in the romance of a far away place. The Venetian has always been that type of experience and its appeal is very broad - a must see property on the strip; the true definition of escapism. ENCORE What can you say? Wynn “out Wynn’d” himself – again! The chamber design of the casino that brings the building down to a very comfortable human scale all the while you gaze out onto the pool is breathtaking. Restaurants, lounges and night clubs also open out to the pool where the beautiful night time weather kisses you throughout the evening. The casino features red prominently and it adds a visual level of energy and excitement that is missing from the original. A corridor rings the casino and has seven bars that are always busy and add a voyeuristic 12 I Casino & Gaming International
element that is so important in an American casino. The property is so visually expensive looking you are overwhelmed by its opulence. You can walk into the property and take 100 random photos and in each one you will find a new colour combination, texture or detail that has never been seen before. Monumental creative achievements to architecture and interior design that will be recognised throughout future generations as the grand hotels of Europe have. Wynn is the premier brand in the industry with his own adoring fans as well as the best aspirational following of them all. CITY CENTER It has been a poster child for the current economic times; having been only hours away from being stopped indefinitely, but it has persevered. It will open in all its glory before this magazine hits the news stands. City Center was conceived as the anti-themed resort; one that will bring an urban centre to Las Vegas in the way of an architectural monument. An all-star roster of planners, architects and interior designers have been brought together to build the most expensive resort ever conceived. You could argue that in the end, architecture is the theme of the property. It is cosmopolitan and city chic, everything it was planned to be, with wonderful outdoor spaces and glass clad towers. It is a totally new concept or theme for Las Vegas and time will tell if it will appeal to the escapism that made Las Vegas the success it is. Will it become a museum to the past economy of excess spending and ego driven showmanship? Will people spend money (for that is the only true goal of a casino) at the property or walk around in awe of its scale and magnitude as the current marketing campaign will have you believing it will be. Only time will tell of its success, but we now have the urban city centre that the rest of the great cities of the world have. We
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have finally become an international city not just a city of international destinations. In the end the three most important factors in real estate is location, location, location and it is in the centre of the city. CAESARS PALACE One of the grand dames of the Strip having been built in the mid-sixties, it is a true classic and for many of us our introduction to luxury gaming. It was the Casino that invented the Hi Limit pit and the catering to the foreign high roller. Unfortunately, what was once the premier gaming destination in the States had certainly lost ground to other newer more luxurious properties on the Strip. In order to reestablish its place in the echelon of 5 star offerings, Harrah’s invested over a billion dollars in hotel towers with massive suites, a forum mall expansion, spas, 3 star Michelin rated chefs and endless expanses of marble. The heavily themed resort took its rightful place amongst the elite and once again the wealthy returned. The results were so fantastic that Harrah’s decided to rename the corporation after its flagship creation. Topless Roman statues and the rhythmic offerings of columns enhance the theme and the impression of expensive materials - the theme is delivered. SO WHAT HAPPENS NOW TO OLD VEGAS? The last great wave of resort development began with the Mirage, Treasure Island, MGM Grand and carried through to Paris, Venetian and Mandalay Bay. They were wonderful resorts that have malls, beach pools, 5-star restaurants and villa accommodations. These properties have strong brands and in some cases strong themes that have become destination vacations within themselves.
The amenities and offerings are many and so varied that there was never a reason to leave the property. It was the beginning of the integrated resort and the transition of the majority of revenue being generated from the casino to the retail, dining and entertainment offerings. It was also the reinvention of Las Vegas into a 5 star international destination. The greatest chefs, Broadway plays and Villa accommodations that rivaled the palaces of royalty were common offerings; each one out did the last. It also paved the way for the latest reinvention. How do they survive and attract customers after this last building explosion of 5 star rooms are being so heavily discounted into the 3 star ranges? The older properties built prior to 1989 (the year the Mirage opened) are less integrated and have not been renovated to keep up with the times. They look weathered and worn. Many have great locations and mid-level offerings that carry great appeal to mass market customers that are looking for 3 to 4 star offerings. They might even have a restaurant or another amenity that can still temporarily draw additional people. In many cases they have become cheap dormitories for their larger and more glamorous neighbours. As the top levels of resorts have been redefined, all of the other properties fall a rung or two down the ladder. In the future, will they feel like 2 star resorts compared to the others? Will these properties become relics of a bygone era like the skeletons of the dinosaurs or are the brands strong enough to be heard in the future like Cher and cockroaches? The days of if you build it they will come are gone. So many flights have been cut that many believe there will not be enough customers to fill the rooms. Once fabulous restaurants stand empty, while Cirque shows run specials and suites can be had
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for less than a $100 a night. With so many people unemployed, conventions are empty and the related business expense accounts are a thing of the past; where will the money come from? This, of course, has been one of the casualties of the recession and a President who told his people not to waste money on trips to Las Vegas. THE 4 KEYS TO VEGAS SUCCESS THEMES Many of the present day snobs of the architectural world will have you believe that themes are bad things like wealth or sex. If you look a little closer many themes (if executed well) will not age and will look great forever. Caesars and the Venetian are great examples of this. These properties deliver on a promised experience of escapism that is tied to an emotional connection. Certainly the themes are obvious and everybody knows what to expect but that’s the key. They enter those properties and are quickly transported to another world; the romance begins immediately. Many of these current designers bash themes and tell you how original their work is; these quite often are the properties that age the quickest and often look past their prime before the doors even open. Nothing ages quicker than the use of the latest materials or lighting that appears on the covers of every magazine. This is not to say that contemporary designed casinos don’t work, they can and in fact have many times. The key is an emotional connection. Themes can create that connection immediately. A contemporary casino must be designed with great attention to an emotional connection and appeal. LOCATION The strip is but a few miles long, some people will explore all of its offerings while many others will never leave their property. Some travel by foot others by taxi but most will visit properties within their price range. Neighbouring locations are similar to living in a large city such as Paris or London; they are very large but one’s life revolves a few blocks around their office and home. Like a typical large city with must see attractions, the surrounding buildings always benefit; the same can be said of the strip. This close proximity will always be an advantage to certain properties even if they are not up to the collective experience of their competitors. They just need to figure out how to create enough excitement on their property so their guests don’t leave the property to spend money. Some properties that are out of the “central” strip and have aged poorly don’t have much of a chance to attract customers nor a successful future. BRAND Some properties such as the Palms are known to be the party place of the beautiful people. It’s not even on the strip but it is the place to see and be seen. The Wynn brand is synonymous with luxury; if you love the good life this is the place for you. Impeccable service with every convenience in mind is just the beginning. It is very difficult to create an incomparable experience and maintaining it takes great commitment but if you do, brand loyalty amongst your customers will reign supreme. EXPERIENTIAL ESCAPISM In the end the most important attraction a casino can have is the offering of escapism from ones normal life. We have a week or 14 I Casino & Gaming International
two vacation time a year and we want to make sure it is as far from our daily life as possible. This could be done with the thought of spending it in a copy of a European city or a sexually charged Eden. That has always been the main draw to Las Vegas; the opportunity to lose your inhibitions if only for a week. “What happens in Vegas, stays in Vegas” was built upon that belief of doing things you would never do in your normal life. This could mean different things to different people but Vegas did a great job in creating the best of all worlds - whether it happens to be golf, shopping, nightclubs, dining or even circus shows. Nothing exceeds like excess! THE IMPACT OF THE GREAT RECESSION AND THE FUTURE OF GAMING What has this done to the thought process of the customer? And how do the casino owners adjust? Will there be more buyouts and takeovers? I would certainly prefer to be the third owner of City Center rather than the first; I might even have a chance to make some money. Aspirational spending has been replaced with value driven spending. If a deal is not offered then the customer will certainly move onto your competitor who is willing to meet their needs. The desire for escapism will come back when people feel secure in their financial situation. This might not happen until Obama is out of office but it will return. Las Vegas needs to reinvent itself in order to meet this demand. Somewhere in between the 99 cent shrimp cocktail and 3 star Michelin chefs the new watermark can be found. At a destination resort the attraction of gaming is beyond the convenience factor. People visit Las Vegas for escapism, the resort is the attraction, gaming is understood and it will happen in due time – but ultimately the draw is the emotional escape. CGI
PAUL HERETAKIS Paul Heretakis, RA, Vice President of WESTAR Architects, has over 15 years of experience overseeing hospitality design and mixed use master planning projects throughout the World. His focus and direction has established WESTAR Architects as a key player in hospitality design as he continues to work with many of the largest gaming companies in the industry. His portfolio includes over 1,000 casino, restaurant, retail and hotel projects throughout the US, Europe and Southeast Asia, many of which have been published in industry books and magazines. WESTAR is headquartered in Las Vegas, with satellite offices in Phoenix, Philadelphia and an international branch in Macau. Additional services such as branding, marketing, restaurant development and operational studies have been added recently. Paul has also designed an award winning textile line and is currently developing lighting, carpeting and wall covering collections. WESTAR Architects continues to be ranked as one of the top 30 hospitality companies in the country by national industry magazines Interior Design and Hotel Magazine. Global Gaming Magazine has named Paul “one of the top 25 people to meet in 2009”. WESTAR Architects can be found on the web at www.wagnarchitects.com
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CASINO DESIGN
SAMPSON AND GOLIATH: THE SMALL GUY OVERCOMES THE OBSTACLES BY RANDALL HUGGINS
How does a small architectural interior design firm succeed on big projects with quick schedules? The answer for some lies in several business philosophies at the core of what is provided to clients, including being flexible with both registered architects and interior designers on staff. An atypical approach could be to focus on the architectural, construction administration and construction management aspects as well.
>>
ne of the most important aspects of our philosophy is to listen to what the client’s needs, goals and objectives are for the project. Any project is manageable as long as you approach it with common goals. On large projects egos must be checked at the door. We have seen many times where the focus of project or coordination meetings has become the issue of what another consultant wants or demands regardless of what the client wants or what the client is trying to achieve. On large projects, this equates to thousands of dollars per hour being wasted on someone’s ego. All team members must focus toward the client’s goals to get to a successful conclusion and to the opening. We constantly review the progress of its designs in-house, as well as with the owners to ensure that all the project goals are being achieved. We proactively keep the client involved in items of change that will affect the design and informs the owner of these situations, rather than the owner discovering them and calling to ask why. Conforming to the project schedule is the next critical philosophy to achieving a successful project for the client. A project that is behind due to any of a number of factors, as a result of design delays from concept architects and interior designers to indecision or changes to the programme by the owner, must be analysed and the real impact to the schedule determined. We take this situation very seriously because the owner may already be pre-marketing their new property or staff may already be selected and in the process of being trained, so delaying the opening needs to be minimised or eliminated. In scheduling the work for the project, we review the work required to complete the tasks and apply all necessary resources to ensure that contract documents and specifications can be issued on a timely basis.
O
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>> A COMPANY THAT HAS A SINGLE BUSINESS MODEL WILL LIMIT ITSELF TO HOW A CLIENT CAN WORK WITH IT, WHERE A COMPANY WITH SEVERAL BUSINESS MODELS CAN EVOLVE INTO WHAT THEIR CLIENTS NEED. IN THE CURRENT ECONOMY AS WELL AS DURING THE RECENT GOOD TIMES ONE THING REMAINS CONSTANT: THE CLIENT WANTS TO ACHIEVE THE PROJECT WITH THE LEAST COST AND THE FEWEST NUMBER OF CONSULTANTS IT CAN. CLIENTS ARE VERY RELATIONSHIP ORIENTED, THEY FEEL COMFORTABLE DOING BUSINESS WITH PEOPLE THEY HAVE HAD SUCCESS WITH IN THE PAST. >> We have had experience on many large projects as has the staff through the course of their careers. Placing the appropriate person, for the task at hand, is essential to the completion of a quality set of construction documents or FF&E (Furniture, Fixtures & Equipment) specifications. We assign tasks to people who have the experience, so learning curves are eliminated. Some projects require the creation of dynamic teams that take a SWAT team approach to accomplish and complete the design of one area and then move to the next. Having a complete understanding of the construction schedule and the critical path the contractor is taking may allow you to take the SWAT team approach, designing spaces that are early in the schedule first and setting a priority of dates for the other spaces of the project. This approach requires each package to be submitted to the government
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authorities for permit to be approached as a tenant finish-out project, but responds well to tight schedules. By being creative and developing a relationship with the owner, contractor, sub-contractors and project managers, open lines of communications can be established where everyone is working in unison toward the ultimate goal of the project. The next aspect of our philosophy that we live by is to be flexible. A company that has a single business model will limit itself to how a client can work with it, where a company with several business models can evolve into what their clients need. In the current economy as well as during the recent good times one thing remains constant: The client wants to achieve the project with the least cost and the fewest number of consultants it can. Clients are very relationship oriented, they feel comfortable doing business with people they have had success with in the past.
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Our business model maintains a flexible approach with both registered architects and registered interior designers on staff. We are not your typical architectural interior design firm, since we do not just focus on the interior portion of a project; it can focus on the architectural, construction administration and construction management aspects as well. Through the years we have built relationships with many of its current clients. We may be asked to be the Architect of Record for a project with another interior design firm as a consultant, to be the interior designer under another architect, or to provide both roles on a project. Construction administration and construction management can be added into the matrix the same way. We have also taken on the role both in architecture and interior design of taking the schematic and conceptual designs from concept designers and carrying the project through with construction documents, FF&E specifications and construction administration. So ultimately there are fourteen business models that can be developed to meet the client’s needs for particular projects. We can become what the client requires. This single philosophy opened the doors to greater opportunities and large projects to the firm by being able to fill in the missing gaps. That brings us to the next core element of our philosophy – honesty. As just discussed regarding the flexible business model, the key to success is being honest in what we feel we can and cannot do on a project. Everyone has seen it many times through their careers, a firm biting off more than it can chew to try to make that leap from a small or medium firm to a medium or large firm. Ultimately, they fail
because they over-extended themselves and could not complete the work in a professional manner. It is no secret that every firm wants to continue to grow and to create a larger client base, but this can only be accomplished by successfully completing projects. When you fail or struggle to the finish line that firm has usually left a bad taste in the owner’s mouth and this will probably result in that firm not being considered for more work from that client. In reality it goes much further: owners talk to each other; people move to new companies and they will remember what happened on their last project. The hospitality industry is very small and everyone talks, so not being honest with one’s self can be majorly damaging to a firm’s reputation. As I say, we review every project carefully, including the manpower required to achieve the project in relation to the project schedule. After review of these items we always and will continue to inform the owners if we feel comfortable that it can do the project. For instance, we would not feel comfortable being the Architect of Record for a new two thousand-room casino hotel, but we would be comfortable taking on the interior design role. Again, we would feel comfortable being the Architect of Record for a small hotel expansion and would also propose being the interior designer as well. Every project must be considered, and honesty in the ability to successfully complete the project must be adhered to for everyone to achieve a winwin situation. Honesty is a day-to-day responsibility that we cherish with our clients – to keep them appraised of everything going on with their projects, from good to bad. Honesty is one of the most important elements of team work. Casino & Gaming International I 21
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>> ONE OF THE MOST IMPORTANT PARTS OF OUR PHILOSOPHY IS TO LISTEN TO WHAT THE CLIENT NEEDS, GOALS AND OBJECTIVES ARE FOR THE PROJECT. ANY PROJECT IS MANAGEABLE AS LONG AS YOU APPROACH IT WITH COMMON GOALS. ON LARGE PROJECTS EGOS MUST BE CHECKED AT THE DOOR. WE HAVE SEEN MANY TIMES WHERE THE FOCUS OF PROJECT OR COORDINATION MEETINGS HAS BECOME THE ISSUE OF WHAT ANOTHER CONSULTANT WANTS OR DEMANDS REGARDLESS OF WHAT THE CLIENT WANTS OR WHAT THE CLIENT IS TRYING TO ACHIEVE. >> Commitment is another element that must be constantly monitored and reviewed for a successful project. When you sign a contract you are making a commitment to the owner that you are going to perform your services to the highest professional standards. Commitment is not only your involvement in the project but also your employee’s involvement in the project. Everyone working on the project must understand the goals and priorities and then make the conscious decision to commit to the course for the duration of the project. Without this you will not reach a successful conclusion. There is another part of commitment that most firms will try to wiggle around, the fee. It is the responsibility of the
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consultant to establish an appropriate fee for each project. It is also the responsibility of the consultant to manage that fee for the course of the project so that there are enough fees to complete it. Almost every project has at least one consultant who mismanages their fee and when it comes to the construction administration portion of the project they have no fee left. This usually ends up with the owner and consultant arguing for a period of time then a mutually agreeable amount is usually reached. The consultant gets additional money and the owner once again has a bad taste in his mouth. In the current economic climate there have been more firms appearing to be under bidding projects to get them. We had
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started to see more owners terminating the services of these consultants and completing the projects with their own project managers. This has not been good for any of the parties. The firms that have been under-bidding projects drive the market price of the design services down. And owners are not getting what they were told when the consultants signed the contracts that ‘design services’ will be completed for ‘X’ dollars. This is leaving an open door for owner’s to pursue breach of contract with the consultant. In our nine-year history we have never failed to complete a contract and have never asked for more money because it miscalculated the fee. This is a key element in establishing a firm relationship with your client; you are truly a partner in the project once you sign that contract. The last component is simple, work hard. If a firm has the drive, honesty and commitment to a project the last part is to stay focused on the goal and drive for the finish line. When we are working on a big project with multiple consultants and multiple architects of record, it focuses on issuing drawings on time, responding to RFI’s in 24 hours if possible and turning shop drawings around in 2-3 days. Where most consultants get into trouble is by not issuing a complete package on the agreed date. This can slow other consultants down, slow the contractor down, delay permits and ultimately cause a delay in the project. By responding to RFI’s and shop drawings rapidly this allows for the issue to be resolved quickly. If the contractor or other consultants need to be involved, there is time to work out the issue and be right rather than it being a last minute solution that may cause delays or cost increases to the project. By turning these items around on time or as fast as possible you stay off the project hot list of items that are potentially causing delays. The contractor and the owner both notice that your company is not mentioned on this list and l recognise you for the hard work to keep those items to a minimum. Reviewing issues on site and working with the contractor to find a “no cost increase” solution while maintaining the design intent should be your number one priority. As a consultant, remember we are spending the client’s money and we should be cognizant of the cost of items we are expecting the owner to pay. Working with the purchasing agents is a very critical portion of the project as well. We monitor the progress of the purchasing agent to insure that submittals, shop drawings and samples are being received and reviewed, and lead times are acceptable. We review the tracking reports to insure that all of the furniture will be delivered on time. You as the consultant were hired to look after your portion of the project. We have had the privilege of being a part of several big projects during the last nine years and it has been fun, exciting and stressful. We were the architect of record and interior designer for the public area interiors and the architect of record for the tower restoration of the Beau Rivage Resort & Casino an MGM Mirage property, except the casino gaming floor and three restaurants. The restoration after Hurricane Katrina took eight months and the hotel opened at the exact minute the hurricane hit, one year later. We had 12 people committed to this project broken down into a Lobby/Restaurant and Circulation area team, Tower Team and Retail Team. This allowed resources to focus on all areas of their responsibility at one time. As the public areas were completed, staff was
moved to the tower to develop the punch list for its more than 1700 rooms and suites. As the architect and interior designer of record for the retail spaces in the Bellagio – an MGM Mirage property, Spa Tower addition – our responsibility included coordination of the shell building and preparation of all contract documents and construction administration during its 18-month construction period. Latterly, we have been involved in the world’s largest privately funded multi-use development in the world, CityCenter Las Vegas – an MGM Mirage property, as one of the architects of record on site for the roof top pool deck structures where we worked with the concept designer to complete the construction drawings and provide construction administration services to the completion of the pool deck. The scope of work included retail, security, bars, restrooms and cabanas. Another project included working with a concept designer for the Cirque du Soleil Lounge and documenting the interior design for the CityCenter spa and salon overlooking the pool deck as well which opened in December 2009. So with hard work, determination and will power, small firms like ours can be involved in large projects. It’s like Sampson and Goliath: The small guy can overcome the obstacles. CGI
RANDALL HUGGINS Randall is a Principal at RDH Associates and works with the client to understand his/her vision for the property. Through innovative design and architecture he works to elevate the guest experience evoking a feeling for each space. This could be the excitement and buzz of a nightclub, blissful relaxation of a spa, or whatever feeling the client desires. Randall’s expertise includes over 20 years creating innovative design solutions for luxury hospitality properties in the US, Caribbean, and Africa. He is personally involved in and responsible for the architectural design, quality control, project management, and coordination of all projects in the firm. Ultimately, the final product is a reflection of the client’s goals, budget and vision of style. Continued client relationships are a testimonial to his level of commitment to his clients and success of each project. Randall is a registered Architect in Alabama, Arizona, Colorado, Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Mississippi, Nevada, Ohio, Pennsylvania, Texas and Washington and is a LEED Accredited Professional. www.rdhassociates.net
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MANAGING, PLANNING AND ANALYSING LEGACY SYSTEM MODERNISATION IN CASINOS BY CRAIG GRAHAM
The migration from analogue to digital technology can be carried out without any downtime, provided there is detailed analysis, a careful and methodical planning process and competent execution. And that is the point of the matter, because not every manufacturer or installer is suited for that kind of task. A casino looking to modernise its security system should choose a partner who already has comprehensive experience with such projects. This will provide the best and cost/time efficient outcome for the client.
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couple of months ago, the first fully digital video surveillance system that is one hundred per cent IP based went into operation at the City of Dreams. While Macau’s casino industry now talks of “Business Intelligence” and “Unified Communications”, in many other locations casinos still use analogue security systems and staff are busy exchanging video tapes. Casino security expert Dallmeier explains the benefits of digital technology and outlines the issues that need to be considered when migrating to an IP solution.
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1) ADVANTAGES OF DIGITAL RECORDING Digital recording as opposed to recording on video tapes offers numerous advantages including enhanced image quality, faster search for relevant image sequences, less required space and eventually cost savings regarding staff and material inventory. In the following the individual points will be explained in greater detail. IMAGE QUALITY Over time videocassette tapes will degrade due to regular and multiple re-uses, as well, the VCR recording heads will also degrade if not cleaned regularly – both issues will have significant impacts on the quality of the footage. This can hamper the correct detection of an incident or a perpetrator and in some cases may not be admissible in a court of law due to the poor quality of the footage. Digitally stored images, however, will never degrade and therefore the images are only impacted by the quality of the camera and how clean the lens/dome cover is. Digital is routinely accepted to be three times the quality of an analogue image, with a resolution at 500 TV lines Casino & Gaming International I 25
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whereas analogue is limited to 240 lines. When duplicating the image from video tape, there is an immediate and irreversible loss of quality – this includes reproducing an image on a printer. There is no loss when copying a digital image from one digital storage media to another and printing of a digitally stored image can provide quality at a photographic level. This will improve the detection of incidents, person(s) involved in anti-social or illegal behaviour, etc. With image quality three times that of video tape, it can be expected that incidents can be dealt with significantly faster due to the quality of the proof. INCIDENT SEARCHING Locating an incident on video tape is labour intensive and can take an operator hours and sometimes days to do so. With video cassettes the operator must manually use fast-forward and fast-rewind to get to the specific time he is looking for. More time is wasted if the footage required is on a video cassette that has been relocated to an off-site storage facility. As well, you exclusively have to rely on the human eye and concentration. Searching for an incident in the digital environment can literally take seconds due to the digital technology. It is as simple as inputting the date, time and location of the incident into the software and the footage is immediately brought up to be viewed. Digital technology, however, provides significantly more search options to the operator. This is a
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huge saving in time and money. When searching the video tape for the incident, a new video tape is required for the original camera. With digital technology, footage can be searched by multiple operators on multiple screens whilst the footage is still being recorded on the HDD, i.e. there is no requirement to transfer the footage to another media whilst searching to ensure that footage is still being recorded. PROTECTION AGAINST FORGERY VCR tapes and recorders are very easy to manipulate and tamper with and in most cases there is no ability to automatically detect that the item has been tampered with. HDDs and their accompanying system make it almost impossible for footage to be tampered with. FTE SAVINGS With digital recording there is no requirement for operators to change over tapes on average 3 times in a 24 hour period. With a casino that has approximately 250 VCRs this can be a saving of over 1 FTE per day as it can generally take about 3 hours to change the tapes, box up the used ones, label them and then send them to an off-site storage facility. There are savings on time spent when upgrading a digital system as opposed to an analogue system: With digital it is a software upgrade, with analogue it is a hardware upgrade (also see point “investment protection�).
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>> DEPENDING ON THE ENVIRONMENT OF THE SPECIFIC SITE, THE TRANSITION TO DIGITAL CAN BE DONE IN STAGES OVER A PERIOD OF TIME OR IN ONE COMPLETE CHANGE. THE ANALOGUE AND DIGITAL SYSTEMS ARE ABLE TO RUN IN PARALLEL WITH EACH OTHER UNTIL SUCH TIME THAT THE ANALOGUE SYSTEM IS SHUT DOWN – FROM THERE, IT IS JUST A MATTER OF DECOMMISSIONING THE LEGACY SYSTEM AND “THROWING IT AWAY” (A FULL CHANGE OF AN ANALOGUE SYSTEM WAS DONE WITH COMPLETE SUCCESS RECENTLY AT THE SKYCITY CASINO IN DARWIN, AUSTRALIA, WITH ZERO DOWNTIME). >> STORAGE An HDD will typically last for between three to five years and is covered by the manufacturer’s warranty. It is continuously being overwritten during its life-span with no degradation of picture quality. A video tape will generally last between 7 and 10 recording cycles before it should no longer be used due to degradation in image quality. Just imagine the required space for this example: A casino that has 300 cameras typically requires upwards of 900 video tapes to get through the 24 hour surveillance period (generally each tape, if recording at 25fps, is required to be changed every 8 hours). Based on a requirement to keep 7 days of footage, this means that over 6,300 tapes may be required to be stored on site at one time. This also means that a minimum number of the same amount of tapes stored on-site would be stored off-site creating additional expense for operational budgets. With digital DVRs, a casino that has 300 cameras has 300 HDDs that record at 25fps and 4CIF, 24 hours, 7 days a week. There is no requirement for off-site storage and no HDD changes as the HDDs use cyclical recording. So just compare the storage capacity: Video tapes are limited to up to 8 hours recording, whereas the storage capacity of the HDD can range from 250 Gb to terabytes and can provide recording for a full 24 hour/7 day cycle at 25 fps. Footprint savings Video Cassette Recorders (VCRs) are bulky by design and can generally only record up to 4 channels as a split screen. The size of a Dallmeier DIS-2/M blade chassis is roughly the size of 2.5 standard VCR units – the chassis, however, holds up to 10 separate channels that have mirrored HDDs. There is a significant increase in the amount of channels that can be recorded on HDDs within the same space of a VCR housing, which provides a high level of expansion possibilities without having to make sometimes costly building expansions to accommodate more VCRs. Redundancy The use of VCRs does not allow for any redundancy in the event of failure due to the size of the units. If a VCR fails, there is no redundancy and therefore footage will be lost during the time it takes for the VCR to be replaced or the channel being redirected to another VCR. Most casino regulators around the world require that a game, or games, cannot operate without full coverage – so potentially this instance could be a loss of revenue to the business. Furthermore, there is little or no redundancy for both power and cooling fans within the VCR (from the VCR to the switcher).
DIS-2’s have mirrored hard drives which provide dual recording. In the event of an HDD failure, the mirror continues to record. DIS-2’s are “hot swappable“, allowing for the footage to continue being recorded on the mirrored hard drive whilst the faulty component is being replaced. And DIS-2 blades provide N+1 for both power and cooling fans within the unit. SOFTWARE ANALYSIS There is no ability for software to analyse footage captured on a VCR tape. With digital technology, software is able to automatically detect various incidents. These include motion detection, number plate recognition, face recognition, card recognition and the list goes on. All of these can be set up on the system so that an alarm is set off if the incident matches the criteria set. Operators are no longer required to search through a myriad of cameras to “catch“ something that has happened – in almost all cases this is “luck“, with digital the system can assume this task for the operator. INVESTMENT PROTECTION Few of the major electronics manufacturers, if any, still make VCRs – generally they are a hybrid VCR-DVR. This type of antiquated technology is deemed as substandard for modern surveillance. It can be expensive to fix faulty VCRs and it is not uncommon for a faulty VCR to be replaced with a new one as it is generally cheaper. It would be safe to assume that the manufacture of this technology will cease in the near future. HDDs have been part of the technology landscape for many years. As digital technology continues to evolve, significantly increased space is being provided at a fraction of the cost it once was just 5 years ago. Apart from that, with an analogue system you are restricted to analogue cameras. With digital technology you have the choice: analogue or IP cameras, these can even include megapixel or high-definition cameras allowing for clearer pictures and the ability to zoom in on an item with very little loss in detail. Upgrading an analogue switcher is via hardware which is expensive, time consuming to install and requires it to be sent from the manufacturer. In some cases to upgrade will require a shut down of some or all of the cameras causing loss to the business in gaming revenue. Analogue switchers are reaching the end of their lifecycle and, though some companies are still manufacturing them, it would be safe to assume that they are also at the end of their development life cycle. From a future proofing of investment perspective this is a big negative. Casino & Gaming International I 27
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Upgrading a digital switcher is software based. Upgrades to software and firmware are generally available from the manufacturer’s website and are downloaded and then installed – with no interruption to recording. Generally regarded as being at the beginning of their lifecycle, there is significant ongoing development of additional functionality and streamlining. And, the system is not restricted to any size: it can accommodate over 10,000 cameras. 2) MIGRATION TO AN IP SYSTEM Depending on the environment of the specific site, the transition to digital can be done in stages over a period of time or in one complete change. The analogue and digital systems are able to run in parallel with each other until such time that the analogue system is shut down – from there, it is just a matter of decommissioning the legacy system and “throwing it away” (a full change of an analogue system was done with complete success recently at the SkyCity Casino in Darwin, Australia, with zero downtime). Either way you choose, there is one crucial factor for the successful migration from analogue to digital: planning and a methodical approach! It is absolutely necessary to do a full site audit to determine the specific requirements of transitioning a legacy analogue system to digital. It is crucial that all risk factors are identified prior to going ahead with the upgrade! There are a number of questions that the surveillance company should be asking of the client and similarly, the client should be asking questions of the surveillance company. The surveillance company needs to know what the client’s requirements are of course, but also and equally as important, the details of the site – cabling infrastructure, existing surveillance equipment, site limitations, risks identification, and so on. The client requires the above information from the surveillance company in a format that lists these items and explains the impact and provides recommendations – this will allow the client to better determine which path to take (gradual replacement vs ”big bang” full replacement), budget calculation and timeframe. This is before a vendor has even been selected by the client. It is the role of the vendor to ensure that the client is fully aware of what will be required to change from a legacy system to a digital system. Although digital has a lot of advantages, some minimum requirements have to be fulfilled. For instance, a server room will be necessary to house the server and HDD equipment and it has to meet minimum cooling requirements of the hardware. Good project management is fundamental for a successful migration. If everything is analysed and planned carefully and professionally, the transition can be done without any downtime of the system. This is a very important aspect for the casino because, as said before, most casino regulators require constant video coverage, otherwise the game has to be closed. And obviously, where gambling is not allowed, no turnover is made. One of the most important responsibilities, however, is the communication with the customer, i.e. the responsible personnel at the casino, both in the planning and in the commissioning phase. Managing client expectations is the core priority for us. Therefore, it is essential to clearly identify the wishes and requirements of the new system right at the beginning of the conceptual phase. What is specifically 28 I Casino & Gaming International
important for the casino? What functionalities should the new system have? In a lot of cases the responsible personnel at the casino have been working with analogue systems for many years. The level of understanding and experience of IP technology is sometimes low and moving to unfamiliar technology can be quite daunting. Extensive communication with the client, collaboration with the client and guiding them through the migration process is as important as the technical aspects of the project management. It should be seen as a partnership – after all, all parties want to ensure that the best possible outcome is achieved with a minimum of fuss and little or no downtime to casino gaming operations – so the vendor must work with the client and vice versa. Therefore, we have a special Casino Project Team – a group of high-level professionals with specialised experience in casinos. They not only provide the client with support from the start of the project planning to the technical implementation of the video surveillance solution, but are also available after the commissioning process to provide support and offer advice. 3) RELYING ON COMPETENT PARTNERS In summary it can be said that digital technology offers significant advantages compared to analogue recording. And one should bear in mind that this article only deals with the benefits of digital recording. A purely IP based system without any analogue components as is used at the City of Dreams offers numerous further possibilities and opportunities owing to its diverse integrations and connections. The migration from analogue to digital technology can be carried out without any downtime, provided there is detailed analysis, a careful and methodical planning process and competent execution. And that is the point of the matter, because not every manufacturer or installer is suited for that kind of task. A casino looking to modernise its security system should choose a partner who already has comprehensive experience with such projects. This will provide the best and cost/time efficient outcome for the client. CGI
CRAIG GRAHAM Craig Graham is Project Manager at German casino security expert Dallmeier. He has more than 10 years of IT project management experience in the Banking and CCTV industries and has been responsible for many CCTV/IP projects worldwide.
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VIRTUAL MATRIX: REVOLUTIONS IN HARNESSING FULLY DIGITAL SYSTEMS INTERVIEW WITH STEVE WRIGHT
Casinos are the most demanding users of CCTV systems and it is here, not surprisingly, that the boundaries are pushed as the full digital system at M Resort is revealing. Digital systems have huge potential for advanced analytic algorithms to automatically monitor and detect events, individuals and behavioural patterns, but at present only the surface of what is possible with analytics is being scratched. So what stage are we at today?
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GI: Over the course of your history what has been the impact of breakthrough changes for casinos?
SW: Digital recording of video has eliminated time consuming VCR tape changes, freeing up security staff to focus on actual surveillance operations. Before the introduction of digital IP Video systems, casinos could have 500 to 1000 VCR’s recording camera video. Each VCR required a tape change every eight hours and tapes had to be rewound and stored for seven days. On a typical eight hour shift an operator would spend 60 to 90 minutes purely dealing with the tape changes. CGI: Are we close to reaching an optimum level of efficiency in casino surveillance systems? SW: No. Digital systems have huge potential for advanced analytic algorithms to automatically monitor and detect events, individuals and behavioural patterns. Our analytic functionality is built into every IP camera, which will in the future be used increasingly to reduce the workload on system operators. However, today we are only scratching the surface of what is possible with analytics. CGI: Has casino management evolved over the years to keep abreast of fast changing systems? SW: We see casino managers being tied down by gaming regulations that were introduced before digital systems were developed for casinos, so the equipment cannot currently be used in full. For example, many Gaming Commissions regulate that casinos have to operate surveillance on a closed network Casino & Gaming International I 31
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>> WE SEE CASINO MANAGERS BEING TIED DOWN BY GAMING REGULATIONS THAT WERE INTRODUCED BEFORE DIGITAL SYSTEMS WERE DEVELOPED FOR CASINOS, SO THE EQUIPMENT CANNOT CURRENTLY BE USED IN FULL. FOR EXAMPLE, MANY GAMING COMMISSIONS REGULATE THAT CASINOS HAVE TO OPERATE SURVEILLANCE ON A CLOSED NETWORK WHEN THERE ARE CLEAR BENEFITS IN BEING ABLE TO ACCESS THE SYSTEM REMOTELY. MODERN NETWORK SECURITY FUNCTIONALITY IS NOW GOOD ENOUGH TO PROTECT AGAINST UNAUTHORISED ACCESS AND YET STILL CLOSED NETWORKS ARE MANDATED. >> when there are clear benefits in being able to access the system remotely. Modern network security functionality is now good enough to protect against unauthorised access and yet still closed networks are mandated. CGI: Can you always be sure to maintain a balance between human intervention and remote operations? SW: Yes, because all operations are logged automatically in our system, providing full traceability and accountability of actions taken. CGI: Some regard highly developed casinos as the toughest test of a security system. Is that your experience? SW: Yes, in our experience casinos are the most demanding users of CCTV systems. All gaming cameras must be full frame rate (25/30fps) and high-resolution (4SIF) and a typical casino will have 500 to 1000 of these cameras in a system. In the control room four to five operators are continually switching cameras, panning, tilting and zooming continuously as they track patrons through the property and observe players on tables and slot machines. Casinos also operate 24/7 365 days a year and all gaming cameras have to have failover recorders to provide 100 percent redundancy and no video can be lost so its not only high use but also high availability. CGI: What are the advantages of being ‘fully digital’ and how do you see the IP Network expanding its role? SW: There are four points to make here: Firstly, better quality of video especially when reviewing recorded video. The old VCR tapes degraded the live video and as the tape aged the degradation got worse and worse until eventually the tape had to be replaced. Secondly, faster review of recorded video. In a digital system an operator can instantly playback an event or a card play or deal, whereas in the older analog systems a tape had to be found and taken to a special review station. With our system an operator can review an incident in 30 seconds that used to take 30 minutes in an analog system. This leads to more reviews and hence the detection of more problems, cheats and events. Thirdly, analytics can be used to reduce an operator’s 32 I Casino & Gaming International
workload. For example, parking lot cameras can be set to automatically trigger when movement is detected reducing the requirement for manual PTZ sweeps of the areas. Similarly, with other low-traffic back of house areas. And finally, the use of High-Definition (HD) megapixel cameras offers casino operators far higher resolutions and better quality evidential video. HD video can only be delivered using networked digital systems and not with analog. The adoption of HD video for mainstream CCTV applications will be the final nail in the coffin for analog CCTV. CGI: How long before this becomes the norm? SW: Budget restrictions in the current economic climate are delaying the update of analog systems in casinos, however as the economy improves the pace of digital upgrades will accelerate. Another driver to update is the proliferation of “slip and fall” litigation which is causing major problems to casinos still recording onto tapes. A typical casino property will have three or four slips or falls on escalators every week and as many of their customers are aged over 50, even a minor fall can result in broken bones, making each event a possible compensation claim. A casino is forced to settle out of court unless it can provide compelling evidence that the slip or fall was the fault of the patron and this defence requires good video of the event. But with a VCR recording system there is no guarantee that the recorder is functioning correctly or that the video will be of good quality on playback. Hence, casino staff discover the recorder has malfunctioned or the tape has degraded to the point of no use only when they review the video. If they do not have video evidence the casino is forced to settle out of court, sometimes for six-figure sums. A digital system, as provided by us, automatically detects and alerts the casino staff to a malfunction and because the recording is a digital process there is no degradation of the video no matter how often the recording is over-written or replayed. This gives 100 percent certainty that the casino will have good evidence to defend slip and fall cases. CGI: Does this also mean there will be greater off-site operational ability?
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SW: Currently, gaming commission regulations mandate closed networks so remote access to the video is not allowed.
our capability of replaying video from several cameras simultaneously, an operator can identify team plays around a pit.
CGI: To what extent does that apply now to the many casinos you have installed?
CGI: Presumably, your installs are also a component in resolving gaming disputes?
SW: One hundred percent.
SW: The resolution of 99 percent of gaming disputes in a casino is based on video evidence and our system’s ability to deliver full frame rate replays, without missing frames, is key to this process. The recorded video is available instantly so resolutions can be made quickly, which reduces the down time of the gaming table.
CGI: What are the common fault factors and how do you handle them? SW: All of our systems are fully redundant with no single point of failure but other digital systems have central servers typically used for licensing and/or virtual matrix servers. These central servers are very difficult to duplicate for redundancy and if they crash or lock-up the system experiences system wide problems and loss of functionality. We led the market by designing out central servers in our architecture over seven years ago. Network Video Recorders (NVRs) using servers are also points of failure. Windows OS has improved greatly over the years but its use in 24/7 high availability systems is very questionable as regular reboots are required and upgrades and patches that have to be installed cause regular downtime for maintenance. We have had standalone server-less NVRs for many years, which use an embedded processor running the highly reliable Linux OS and we have many users who have not had to reboot their NVRs for several years. CGI: Does the pace of change really mean that virtually every casino is likely to be at some stage of transition? SW: Budget restrictions are delaying many casinos from upgrading to digital but approximately 70 percent of USbased casino properties have begun a move to digital. Often the first step is to implement a digital recording system then move along to a virtual matrix and then implement IP cameras as a final step to full digital operation. CGI: What differences are there in centre control capabilities between a small casino and integrated resort? SW: None. The ‘control centre’ software requirements are exactly the same. CGI: What role have your installations played in detecting gaming fraud? SW: Our systems play a central and pivotal role in detecting fraud within the casino. Our IP video system is on the front line in the battle against casino cheats and scams every day. A typical casino CCTV operator observes both table and slot players and is trained to identify unusual plays or behaviour and once identified they track that individual. They observe the individual as they make their plays and they check that all the payouts are correct for each and every hand played. If either the player or the dealer makes an error the operator stops the game and the Pit Boss and security move in. Sometimes the individual player is part of a team and using
CGI: What value to you is long term monitoring and feedback from onsite performance? SW: We maintain close relationships with our end users and we value their feedback highly and this feedback is used in generating new feature requests and also to establish the priority on new feature/product development. CGI: Does this contribute to informing your next steps in product development? SW: Yes very directly. If an end-user requests a feature that feature becomes a higher priority in the development cycle. CGI: Are especially high security/surveillance and monitoring demands sometimes made for casino environments? SW: Sometimes extra cameras may be added where problems have occurred, for example, if a particular Bar is producing a high rate of losses. Due to the flexibility of a digital networked IP Video system, it is easy and cost effective to quickly add additional cameras. CGI: What component of security and surveillance is subject to, or requires, the most significant technological development? SW: The constant push for higher and higher resolution video at the highest frame rates is still the major driver in the development of video systems for casinos. IndigoVision has introduced a range of High-Definition (HD) megapixel IP cameras that can be installed alongside standard 4SIF resolution cameras and provide operators with amazing levels of detail. The HD cameras are also guaranteed not to drop frames, so are ideal for casino operations. Integration with third-party systems such as access control and Point-of-Sale (POS) is also a major development area. This allows the CCTV operator to monitor alarms from all systems through a video management workstation, improving operator efficiency and incident response. The Mohican North Star Casino in Wisconsin uses one of our solutions to integrate CCTV surveillance, access control, intrusion detection, panic alarms and POS system all over an IP network! CGI: Systems being far less obtrusive, is there more scope for you to meet design concerns? Casino & Gaming International I 33
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SW: We use less floor space, power and air-conditioning loads are lower than the old analog systems which makes for lower running costs. We have just introduced a range of ‘Green’ standalone NVRs, which have more than double the performance of the company’s existing models and have excellent green credentials with extremely low power consumption and heat dissipation. Replacing PC servers and attached storage with these new NVR units requires much less energy, less air-conditioning and power infrastructure and a smaller equipment footprint. CGI: Can you foresee development of 3D characteristics in the systems of the future? SW: Not at the moment as the processing power required is just not practical in embedded processor devices within camera architectures. CGI: As we enter 2010, has there been a defining moment for last year? SW: When the M Resort opened it was the first Las Vegas Casino on the Strip to operate and pass gaming inspection with a full digital Virtual Matrix. Something sceptics had said would be impossible and some still don’t believe until they visit the property and see the system in operation. If a Virtual Matrix works on the Strip then acceptance anywhere is possible. CASE STUDY: INDIGOVISION IP-CCTV KEEPS WATCH ON NEWEST LAS VEGAS CASINO Our complete IP Video solution has been deployed by the $1bn M Resort, Spa and Casino. The newest Las Vegas casino resort resides on South Las Vegas Boulevard and is owned and operated by Anthony A. Marnell III. Approved by the local Gaming Commission, the system provides CCTV surveillance for the property and is the only Las Vegas casino currently using a digital virtual matrix system. Over 500 cameras have been installed in the casino by IndigoVision’s approved partner, Southwest Surveillance Systems. Each camera is connected to a transmitter/receiver module which converts the analog feed to DVD-quality, 4SIF, 30fps digital video for transmission over the IP network. This is achieved without any frames being dropped, whatever the level of motion and activity in the camera scene. This is a fundamental requirement of the Gaming Commission and casino operator. Any dropped frames within a video clip could hide fraudulent or criminal activity and make any customer disputes more difficult to resolve. The M Resort uses our 9000 product, which was the first ever implementation of H.264 video compression in any casino worldwide. “We are particularly impressed with the video quality provided by the IndigoVision system and the efficient use of network bandwidth and storage,” said the former M Resort Vice President of Security and Surveillance Bill Houtchens. “Choosing IndigoVision was not just about first-rate technology, it was also a low-risk decision as the company already had a large installed base of working and proven digital CCTV systems in casinos.” Operators use CCTV workstations running ‘control 34 I Casino & Gaming International
centre’, our enterprise IP Video and alarm management software, to view and analyse live and recorded video from all of the cameras. ‘control centre’ is licensed on an unrestricted basis within the cost of our hardware, allowing the casino to deploy as many workstations as required for no more than the cost of the PCs. Recording is achieved using our Windows Network Video Recorder (NVR) software running on a Pivot3 Cloudbank Serverless Array. The NVR system uses 200 Terabytes of RAID redundant storage providing continuous recording of all cameras at 4SIF, 30fps for seven days. A hot spare NVR is installed to provide a fully redundant recording solution. “The ‘control centre’ software provides our operators with some great features, including the ability to overlay the camera positions on an interactive map of the casino floorplan,” added Houtchens. “Excellent analysis tools allow fast access to recorded footage, which helps to quickly resolve gaming disputes.” The combination of ‘control centre’ and the IP network creates a ‘virtual matrix’ which, unlike its analog matrix equivalent, provides a totally flexible and scalable solution. Any camera can be viewed on any ‘control centre’ workstation and additional cameras can easily be added to any point on the network when the system is expanded. This project further demonstrates that IP Video is an established and field-proven solution for the demanding CCTV requirements of casino operations, which need high-quality video images and fast retrieval of recorded footage. IP Video provides significant benefits compared with traditional analog CCTV systems, such as scalability, real-time camera-based analytics and fault tolerant configurations. CGI
STEVE WRIGHT After Graduating with a BSc in Electronics and gaining over 20 years experience in electronics chip design, Steve Wright joined IndigoVision in 2001 to manage the design of the company’s video compression ASIC. In 2006 he moved into a global sales role and is now IndigoVision’s Director of Sales, Gaming and Casinos, based in the USA. In this role he has helped sell and design over 20 Casino surveillance systems using the IndigoVision IP Video solution. www.indigovision.com
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ARE THERE SIGNS OF LIGHT IN THE STYGIAN GLOOM?
BY JULIAN HARRIS
Some in the industry might consider that in 2009 the ‘bad guys’ had the upper hand: the US Department of Justice maintains its stranglehold on online gaming; the European Court of Justice (ECJ) provided a lifeline to national monopolies; the French Government signalled a proposed tax rate that would make online licences unprofitable for the foreseeable future and in the UK. Nevertheless, even in all this Stygian gloom, there are signs of light ahead, as we look at some of these developments in more detail.
>>
ost years have something of the questionable quality of the curate’s egg about them; 2009 may not have been an exception to this, though for my part – and I suspect that of the gambling industry whether online or landbased – the year represents an egg that most would probably have rejected. As always, however, there are lessons to be learned from the past, and history can often provide a signal to the future. Whilst 2010 might economically not be the ambrosian nirvana that Gordon Brown and his Darling would have us believe (and it almost certainly won’t be for them!), there are at least some hopeful indicators that 2010 may bring some important changes, some of which at least will be beneficial to the industry. If I might be forgiven for indulging in a little provocative over simplification, some in the industry might consider that in 2009 the “bad guys” had the upper hand: the US Department of Justice maintains its stranglehold on online gaming; the European Court of Justice (ECJ) provided a lifeline to national monopolies; the French Government signalled a proposed tax rate that would make online licences unprofitable for the foreseeable future and in the UK – well, the horrors simply pile up! The Government suffers from petrified inertia, like some tragic Greek hero, whilst the regulator seems to be playing the part of Goliath to the industry’s David. Nevertheless, even in all this Stygian gloom, there are signs of light ahead, as we look at some of these developments in more detail.
M
WILL EUROPE SHOW US THE WAY? For the online industry at the end of 2009, there was no Santa Claus, only Santa Casa. Whilst some operators have successfully argued in the ECJ that national legislation Casino & Gaming International I 35
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infringed Article 49 (Free Movement of Goods and Services within the EU), these have been in cases where the Court found that derogation from Article 49 was not justified on public interest grounds. So, in Gambelli, the Court held that restricting gambling activities to state monopolies is unlawful, if the restriction is based on purely financial grounds: though it was acknowledged that such a restriction might be lawful where protection of the public is the main purpose. Where the National Government has legitimate – and there lies the rub – public interest grounds, the ECJ has ruled against operators. In September 2009 the ECJ ruled against Bwin in the Santa Casa case, which concerned Bwin’s provision of gambling services to Portuguese residents. In a nutshell, Bwin had been fined under Portuguese legislation, prohibiting anyone other than the State licensed Santa Casa from offering gambling products. The case was referred to the ECJ to determine whether Article 49 precludes Member States from enforcing legislation which prohibits operators established in another Member State from offering their residents betting via the Internet. The ECJ held that Member States are free to set their own policy regarding gambling, but that any restrictions imposed must meet the test of proportionality. In the Bwin case, the Portuguese Government submitted that by giving Santa Casa the exclusive right to offer games of chance to Portuguese residents, it was seeking to protect the public from the risk of fraud or crime particularly associated with internet gambling. The circumstances of the case probably dictated the result. Of particular note was the fact that Bwin
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sponsored the same football league on which it was accepting bets, raising concerns about the potential for corruption. The ECJ took the view that, in these particular circumstances, the measures taken by the Government were proportionate, and justified by the objective of preventing fraud and crime. The corollary of course is that where such perceived risks cannot be established by the Member State, disallowing operators licensed in a fellow Member State would not be a proportionate measure permitting prohibition and the maintenance of a state monopoly. Nonetheless, the result was greeted with dismay, and was taken by pessimists to be a victory for the monopolies. Ladbrokes and Betfair are more optimistic. Bravely – and no doubt expensively, they have continued their long running battle against the Dutch Government, and the result of their ECJ case is eagerly anticipated, early in 2010. Commentators are divided about the prospects, having sifted through the runes of the opinion of the Advocate General provided on 17th December. Whilst the opinion is not legally binding on the Judges, these sometimes foreshadow the eventual decision. Attorney General Bot concluded that Article 49 must be interpreted to mean that: “the principle of equal treatment and the transparency requirement that flows from it also applies to the gambling sector in the context of a single licence regime”, thereby implicitly questioning De Lotto’s right to act as the Netherlands’ only licensed supplier of online gaming, sports betting and the national lottery, without any other operators being allowed to compete in any form of tender process. The bad news is that AG Bot does not specifically
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>> THE GOOD NEWS FOR OPERATORS IS THAT [THERE] IS A MAJOR NEW LICENCE AVAILABLE IN LONDON, WITH A HUGE CATCHMENT AREA AND POPULATION. THE BAD NEWS IS THAT, SO FAR, THERE ARE NO INDICATIONS THAT THE REMAINING 15 AUTHORITIES WILL BE STARTING THEIR PROCESS ANYTIME SOON AND THAT THE RECESSION, WITH ITS CONSEQUENT FINANCIAL CONSTRAINTS UPON OPERATORS, TOGETHER WITH THE ADDITIONAL BURDENS INFLICTED BY GOVERNMENT, RENDER SOME OF THE LOCATIONS UNATTRACTIVE, AND ALL PROJECTS DIFFICULT TO FUND. >> question the right of a Member State to operate a monopoly, where it is justified to do so, e.g. to prevent fraud or gambling addiction, which takes us back to the Bwin position. But in this case there was no evidence of fraud or addiction. If all that is necessary for a Member State to satisfy the test of proportionality is to show that a monopoly protects citizens from accessing unregulated sites outside the EU, then Article 49 is, in effect, a dead duck for the gambling industry. The good news is that AG Bot has signalled that it may not be legal for a Member State simply to create its own state monopoly, without having conducted a competitive tender process open to operators licensed in other Member States. Potentially, that could spell the end for the national monopolies, if Member States consider that such a process, and the possibility of having to appoint say Ladbrokes or Betfair as their provider, would be unpalatable. Much centres on the Court’s interpretation of the proportionality issue. If the Court makes it easy, as AG Bot’s opinion predicates, then this will slow down the process begun by Italy and France, If, however, the Gambelli principles are strengthened then prospects for the industry will be improved. Long term, the issue is more of a political one than a legal one: both Italy and France opted for change in order to address ECJ and European Commission issues. But the real elephant in the room is economics. If Member States allow multiple licences specific to their jurisdiction there may be huge economic benefits for them. The products offered by the likes of Ladbrokes, Betfair and the other big names in the industry are much more attractive than the rather pedestrian offerings of the likes of De Lotto and Santa Casa. If they generate more business, state revenue from gambling will increase and there will be less incentive for players to go “off-piste” into unregulated sites elsewhere. That way everyone wins. FOG OVER ENGLAND Rather like the Lord Chancellor at the beginning of Dicken’s Bleak House, Gerry Sutcliffe, the Minister for gambling at the Department for Culture, Media and Sport (DCMS) sits in a fog of apparent indecision. To continue the illusion, one needs only to substitute DCMS for the High Court of Chancery in the book, to make the following quote from that great novel rather apposite: “Never can there come fog too thick, never can there come mud and mire too deep, to assort with the groping and floundering condition which this [DCMS], most pestilent of hoary sinners, holds this day, in sight of heaven and earth”. Following the outcry that the white listing of Antigua
prompted, DCMS determined that it would no longer entertain any applications from any jurisdiction, however strictly regulated, and disappeared into the fog. Then on 30th April, DCMS and the Gambling Commission announced that they were reviewing the current system that enables any online operator licensed either in an EU Member State or a white listed jurisdiction to market and advertise its gambling products in the UK. They would consider issues such as “securing fair contributions from overseas licensed operators towards the cost of regulation, the treatment of problem gambling and the horserace betting levy”. DCMS intended to report its findings to Parliament before the end of 2009. The report was anticipated in November, then December, and had transpired recently that it will not be presented to Parliament before “January or February“, 2010. The delay, which on past form may yet be extended further, leaves UK gambling operators unsure about the future of UK online gambling, and may result in further offshore emigration, as operators question the point of being subject to regulation by the UK Gambling Commission, increasing UK taxes, payment for problem gambling and the horserace betting levy, when they can be based in a low tax, low cost jurisdiction with the same advantages. Even if Gerry Sutcliffe emerges from the fog early in 2010, any changes he proposes are likely to require primary legislation, and that means that nothing will happen until we have a new Government after the 2010 General Elections. By then, the bookmakers are predicting that Mr Sutcliffe will be firmly ensconced on the opposition benches. NEWHAM (NOT MONTE CARLO) OR BUST The open online gambling market for the UK was one of the few fundamental planks of the Gambling Act 2005 (“the 2005 Act”) that survived its tortuous passage through the legislative process. That passage epitomised Otto Von Bismarck’s comment on legislation, when he said “Laws are like sausages. It’s better not to see them being made”. For the land-based gambling industry, and perhaps especially the casino industry, the un-appetising offering eventually produced by weak Government and Parliament on the one hand, and the undue weight given to the Daily Mail and religious interests on the other, has been rendered almost inedible by the recession. When, 40 years ago, the first licences were being granted under the Gaming Act 1968, no one would have predicated that the time would come when it would again be impossible to apply for a casino licence in the UK. Yet that has been the position since April 2006. Now, at last, the process for 16 new licences envisages by the Casino & Gaming International I 37
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>> THE REAL ELEPHANT IN THE ROOM IS ECONOMICS. IF MEMBER STATES ALLOW MULTIPLE LICENCES SPECIFIC TO THEIR JURISDICTION THERE MAY BE HUGE ECONOMIC BENEFITS FOR THEM. THE PRODUCTS OFFERED BY THE LIKES OF LADBROKES, BETFAIR AND THE OTHER BIG NAMES IN THE INDUSTRY ARE MUCH MORE ATTRACTIVE THAN THE RATHER PEDESTRIAN OFFERINGS OF THE LIKES OF DE LOTTO AND SANTA CASA. IF THEY GENERATE MORE BUSINESS, STATE REVENUE FROM GAMBLING WILL INCREASE AND THERE WILL BE LESS INCENTIVE FOR PLAYERS TO GO “OFF-PISTE” INTO UNREGULATED SITES ELSEWHERE. THAT WAY EVERYONE WINS. >> 2005 Act has begun, with the London Borough of Newham releasing for consultation details of its proposed competition process for a large casino licence. Newham envisages that the date for applications to begin the first stage of the competition process will be May 2010, with a final decision to be reached in February 2011. The casino must have a gaming floor area of between 1,500 and 2,500 square metres, including a table gaming area of at least 1,000 square metres. Up to 150 slot machines will be on offer, along with nongambling areas offering additional recreation facilities. Those applicants who reach the second stage of the process will have to demonstrate the benefit they can offer to the local community. Under Newham’s draft proposals, “deliverability” of the proposal will be a key factor in deciding which applicant will ultimately be awarded the licence. This may mean that the licence could be awarded to the operator with the greatest financial muscle, and the greatest ability to fund the development rather than the one whose proposal “would be likely, if granted, to result in the greatest benefit to the authority’s area”, which is the criterion prescribed in the Act. The sting in the tail is that Newham reserves the right to pass a “no casino resolution” if there are insufficient applications, or if it feels that the applications do not offer sufficient benefit to the area. Although there is no reason to believe that Newham is likely to take this measure, if employed, it will be a huge blow to potential operators who will, by then, have spent very considerable time and resources preparing their application. The good news for operators is that this is a major new licence available in London, with a huge catchment area and population. The bad news is that, so far, there are no indications that the remaining 15 authorities will be starting their process anytime soon and that the recession, with its consequent financial constraints upon operators, together with the additional burdens inflicted by Government, render some of the locations unattractive, and all projects difficult to fund. In 2010 it will be operators, not just licensing authorities looking to see where the greatest benefit lies and both are likely to have to lower their expectations. UNDIPLOMATIC RELATIONS Since the establishment of the current regulator, the Gambling Commission, under the Gambling Act 2005, the industry, and particularly the casino industry, which has long been used to the firm hand of regulation, has worked tirelessly, and with considerable patience, to seek to establish 38 I Casino & Gaming International
a cooperative and constructive working relationship with its new master. Inevitably, there have been difficulties along the way: apart from the fact that the Commission is very much larger than its predecessor, the Gaming Board, and therefore has many new staff without any background knowledge of the industry, many, if not most, of those who had built up such a wealth of experience with the Gaming Board, did not make the transfer to the Commission, and the required move from London to Birmingham. Furthermore, the 2005 Act is a very different animal indeed from its predecessor, though the fundamental principles of regulation have not changed, and the requirements upon the industry are in many respects similar, if differently expressed. Whilst no one could properly suggest that the relationship between a regulator and the industry which it regulates ought to be a cosy one, nevertheless, if regulation is to be successful, and cost effective, a working relationship, an understanding of the needs of the industry and regular dialogue are essential elements. Apart from the obvious differences in staffing levels and cost, there are important differences between the old Gaming Board and the new Gambling Commission:• The Commission is much more “process driven” than the Gaming Board; • The Commission relies heavily on the concept of “selfregulation”; and • As a consequence of these points, there is much greater separation between the industry and Commission staff than with the Gaming Board, who relied substantially on frequent, unannounced, visits to casinos. The promise of regulation with a “light touch” has proved to be a myth. Whilst it might perhaps be an exaggeration to say that the “light touch” has become a heavy hand, the Commission is inevitably more distant from the industry than the Gaming Board was. The opportunity to discuss issues for the industry with its regulator seem to have diminished, and many of those now regulating the industry, perhaps as a result of the lack of opportunity for contact and discussions, have little experience or knowledge of the industry. The reliance on process is proving not to be a substitute for dialogue and understanding. Unfortunately, where there is a lack of understanding, it is always easier to say no to developments and changes which a commercially straightened industry wish to make. The ability of the Commission to pray in aid of social responsibility provides the regulator with sufficient
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ammunition to prevent many proposed developments which have no apparent adverse regulatory consequences. Hitherto, the industry may have seemed supine in its relationship with its regulator. That would be an unjustified criticism of an industry which has simply made every possible effort to comply, in the hope that eventually, and certainly by now, the regulator would have developed a body of knowledge and understanding that would forge a healthy and constructive partnership. Recently however there have been signs that the industry may be ready to stand its ground, as did David against Goliath. An issue arose in November 2009, which finally forced the industry to rebel against an extraordinary, and arbitrary, volte face by the Commission. The Commission had interpreted Section 81 of the Act in such a way that operators were not deemed to be providing illegal credit, if they used their own cash to fill an ATM machine on casino premises. Importantly, not to have this ability causes practical difficulties, and has substantial cost implications. There are no customer implications, nor have there been any regulatory issues with the way the system has worked. Nevertheless, without any warning or consultation, the Commission overnight reversed its previous stated position, expressing the view that such activity would henceforth be regarded as illegal. Whilst not a fundamental issue, going to the basis of the Act, this may well have been the straw that will break the camel’s back: not surprisingly, the industry rebelled. Whilst it may not yet be ready to subscribe to Keith Richards’ view that “if you’re going to kick authority in the teeth, you might as well use two feet”, 2010 may see the industry taking a more robust approach in its dealings with the regulator. SON OF... As if the industry did not have enough difficulties with DCMS and the Gambling Commission, the “offspring” of those two bodies, the Responsible Gambling Strategy Board, has some way to go if it is to establish a healthy working relationship with the industry, but also with the current providers of advice and care to problem gamblers. The Board was set up late in 2008 by, and in order to advise, the Gambling Commission and DCMS on research, education and treatment programmes to support the National Gambling Strategy and funding requirements. Although it expresses itself to be “independent”, this is a somewhat meaningless and empty claim. Its website forms part of the Commission website, and its members are appointed by the Commission. If it were truly independent, surely the industry and the existing providers would have a say in its appointees though the industry is represented on the Board. At first sight, it may appear that the industry connived in the creation of this body: the reality is rather different. In effect, the industry was given the Hobson’s choice of the Board or a statutory levy. Not surprisingly, it chose the Board. The Board’s terms of reference include the development of and strategic priorities for research, education and treatment, the quantum of funding required on a three year rolling basis and the most effective arrangements for commissioning services and distributing funding. The Board is also tasked with advising on “the development of a robust, needs-based strategic framework to identify priorities for what should be funded and commissioned”. Though somewhat impenetrable, this
Orwellian sentence gives the Board the power to determine how the industry’s money will be spent. This entails directing the strategy. The Responsible Gambling Fund is the distributing body, which then has to ask the industry – via the GREaT Foundation – to provide the money. GREaT then checks that spending is consistent with strategy. Over many years, both GamCare and Gordon House have voluntarily provided excellent advice and care to those with gambling problems. In that time they have built up a greater understanding and more experience of the subject than any other organisations or individuals. They are held in great respect by the industry, and have developed a good working relationship with it, which frequently seeks advice from them on prevention, care and the development of responsible gambling. Of course, GamCare and Gordon House can bid for the money, along with others, but one has to ask whether these extra pressures and bureaucracy, with their obvious costs, are really going to result in better care and services for those who need it. As in all these issues, time will tell……. CGI
JULIAN HARRIS Recognised as a leading expert in national and international gambling and licensing law, Julian Harris is highly regarded by both operators and regulators throughout the world. He and John Hagan are the founder partners of Harris Hagan, the first and only UK law firm specialising exclusively in legal services to the gambling and leisure industries. He, John and other members of the firm have been at the forefront of those advising UK and international operators alike on the opportunities presented by the UK Government’s major reform of gambling law. With over 25 years experience of gambling law Julian has advised some of the world's largest gaming and entertainment industry corporations, he and his team have also advised governments, trade associations and private equity houses in both online and land based gaming. Julian came to specialise in this area representing the Gaming Board for Great Britain (the then UK regulator) for five years early in his career. Julian is an experienced advocate, a respected and sought after conference speaker and the author of numerous articles and papers for gaming and legal publications and the national press. He is recommended in all guides to the legal profession, and has been described by Chambers Guide as “the best gaming lawyer in London”. Julian is a Trustee and Treasurer to the International Association of Gaming Advisors. Contact Julian: harris@harrishagan.com
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ONLINE BINGO
STAYING SAVVY AT THE TOP OF THE CURVE
BY BOB McCULLOCH
It is vital that shifts in popular interest and culture are accurately understood – and quickly given how player inquisitiveness and confidence is growing apace. With the march of new trends, software capabilities and fluid media, maintaining and expanding products that respond to up-to-theminute demand and push new boundaries, is pivotal to retaining the competitive edge.
>>
ingo has had to regularly update and reinvent itself in order to keep in touch with customer demand and increasingly computer literate consumers; many of these changes have been linked to improvements in technology, but never more so than since the game’s online conception. Keeping ahead of and creating new trends has enabled us to stay at the forefront of the online bingo industry. Since launching in 2001 our strategy for expansion has been carefully considered, most importantly in ensuring that we do not neglect our existing operators and their players. Organic growth through continued product development and providing innovative and entertaining games is a priority whilst the provision of a wide portfolio have been key to fulfilling our principle objective of retaining business that we have been successful in acquiring and, in doing so, maintaining our competitive edge.
B
INNOVATE OR GET LEFT BEHIND Marketing and advertising may draw customers in, but their ever-increasing knowledge and sophistication means that choice is the catalyst to retention. Fuelled by industry competition, their expectation is inversely proportional to attention – as the former increases, the latter decreases. The casino gaming sector was established online before bingo and it is clear that a pattern seen there is being recreated with regards to product offering. At first, software suppliers concentrated on the core well-established games like roulette, blackjack, craps and baccarat. Now this is not enough for players – they want more choice and a regular influx of new gaming content to keep them entertained. It is vital that we gauge shifts in popular interest and Casino & Gaming International I 41
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culture. We have identified that players’ lifestyle choices can greatly influence where they play bingo. For instance, they want to experience the thrill and excitement of a contestant they have seen on a television show. Monitoring trends and the most popular programmes can provide us with unique features and games that could plug into our current offering. Having identified ‘Deal or No Deal’ as a particularly captivating concept, we agreed an exclusive deal with Endemol to use their brand to develop a new bingo variant that synergises the best elements of 90-ball bingo and the fun and excitement of the hit show. Feedback from our clients shows ‘Deal or No Deal’ has been immensely popular, and indicates players will continually want to see new branded games. Branded products help us swell our offering outside of the traditional bingo games, as seen with the Celebrity Big Brother-themed side games that have been produced as part of the Endemol tie-up. However, branded content is just one of many ways of acquiring new players and the competitive market dictates that operators explore new advertising and communication channels and continually assess the return from each. We will, of course, continue to monitor what’s engaging consumers; be that on TV, in terms of land-based products and popular games, or within other gaming genres like casino, poker or sportsbooks and establish what can be utilized. Furthermore, the cross selling from casino, games, poker rooms and sportsbooks over to bingo to build our base of players also forms an important part of our strategy. Players expect a rich, entertaining gaming experience for their side games, and we pride ourselves on being able to
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provide compelling, networked gaming propositions to our operators and ultimately their players. Branded content certainly increases the diversity of these particular products, but the main criteria is to stick to popular gaming formats such as slots with ‘free spins and wilds’, while being innovative, such as with our multiplayer slots like Marine Mayhem and Clover Countdown. The social environment is changing within the virtual world and it is imperative that businesses obtain as much exposure as possible via social networking channels to build awareness of their brand. Bingo operators in particular can maximise profits by exposing their brand on social network sites due to the closeness of the demographic audience. There are many ways of utilising social network sites to gain brand awareness such as advertising banners, promotional movies, detail-registration software or group pages that include forum and blogging sections. However, one area that has, to date, been conspicuously absent from bingo games has been imbedded social networking. So, after nearly a year in development, we are very proud to have just rolled-out the first-ever bingo games with integrated social networking. Social network sites have a proven model of acquiring, converting and retaining customers, but their continual downfall is their inability to monetise their product offering. That’s where bingo sites can add value, by producing a revenue stream. The technology will enable players to develop their own online communities, to chat to friends during games, as well as uploading information and pictures to their profile. All accounts will be screened by our team of online monitors to ensure that all
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>> IT IS ESSENTIAL THAT WE STAY ON TOP OF [THE] CURVE BECAUSE SOMETHING ELSE THAT WE ARE SEEING IS AN INCREASED INQUISITIVENESS AND CONFIDENCE ABOUT THE AVERAGE BINGO PLAYER. THEY ARE SAMPLING OTHER GAMING CONTENT THAT YOU’D GENERALLY ASSOCIATE WITH A CASINO PLAYER INCLUDING GAMES LIKE SLOTS, VIDEO POKER AND ROULETTE. THEY CAN TRY VARIOUS OTHER GAMES FOR FREE AND ONCE THEY FEEL COMFORTABLE ENOUGH WITH A GAME TYPE THEY’LL START PLAYING FOR REAL MONEY. >> content meets strict criteria for privacy and decency. Keeping Customers Happy Keeps Customers Being voted the Bingo Summit 2009’s leading Bingo Software Provider means we are now the benchmark for the industry and the company everyone wants to beat. There is never a moment to relax and put our feet up, thinking that the hard work is done. With players impatient for more: more variety, more entertainment, more prizes and, everincreasingly, more value, they are increasingly opening multiple accounts. This allows them to cherry pick the best promotions and the most enjoyable games at the best price. This in turn means that each site is finding it increasingly more difficult to acquire and retain customers. Aside from driving product innovation, this demand means that we are forced to adapt prizes and create novel promotional content. Progressive jackpots, bonus bets and also new types of games completely unique to the online sector are examples of this. Bingo players now want the ability to spice up their session by experiencing a number of different game variants, hence we now see add-ons like BOGOF, 1TG (one to go) features, losers’ prizes and so on. It is essential that we stay on top of this curve because something else that we are seeing is an increased inquisitiveness and confidence about the average bingo player. They are sampling other gaming content that you’d generally associate with a casino player including games like slots, video poker and roulette. They can try various other games for free and once they feel comfortable enough with a game type they’ll start playing for real money. The need to maintain such a multi-pronged range of products continues relentlessly. That said, the game is constantly evolving, especially online, and, so too, is the demographic of the player with the metamorphosed products providing entertainment sufficient to satisfy the continually changing players’ hunger. However, what will remain consistent is the 90-ball bingo game itself, just as basic roulette will never cease to exist. OUR NETWORK: STRENGTH IN NUMBERS While the development of new games is key to our ongoing expansion, the obvious other attraction is the size and scope of our network which typically accommodates 30,000 players every day and drives total stakes of more than Euros 100,000,000 each month. These figures have grown steadily and help to underpin the growth of the company, just as they will continue to do so. We offer a flexible network model where operators can utilise our prize pool liquidity as much or as little as they want in offering as many networked games as they require, while still being free to offer the stand alone games they need in order to provide a differentiated, bespoke gaming experience.
This means that, coupled with the individual operators’ marketing prowess, it is a formidable combination. The operator benefits as the prize pool liquidity helps drive player liquidity and keeps the cost of acquisition low with our network benefiting as it grows accordingly. It is vital to the success of the company that we continue to explore new market potential both in the UK and abroad. To do this it is often necessary to attract operators from varying disciplines, thus widening our player reach and bringing the game of bingo to people who have possibly either never played the game before or have not considered playing online. Our operators are well aware of the benefits the network brings and it is a major influence when deciding on us as their exclusive provider of bingo software. They are able to offer large prize pool bingo games on a regular basis at no risk or liability to them, and can launch a new networked game that will be guaranteed to have high player numbers, thus minimising the chances of the game bombing after launch. Many of our larger operators are able to cherry pick the networked liquidity as and when they choose, so that either during off peak periods, or on games with limited players, they can still maintain larger prize pools. A brand and its big marketing budgets will always drive player numbers but the argument for a networked site versus a standalone site remains the same. Ultimately, bingo players want to play in a thriving bingo community with a rich gaming offering. When a standalone site launches, the jackpots are low as the operator needs to make sure they are covering the seed value, in addition there are not many bingo variants on offer. Where is the excitement or attraction for the player to register and deposit? The key is to have a flexible network model whereby the operator has all the benefits of being stand alone, whilst in addition being able to offer the networked games and life changing jackpots from the day they launch. STICKING TO WHAT WE KNOW BEST As the company grows we are often asked whether we are tempted to turn toward B2C. When considering this, the term ‘gamekeeper turned poacher’ comes to mind. For a number of reasons I do not believe that it is in our interest to enter the B2C market, foremost of which is that it would be like biting the hand that feeds us. It would pitch us in direct competition against the very people with whom we rely upon for our revenue streams. What is to our benefit is working closely with operators to produce world-beating products and not to take business from each other. There is the view that by going B2C you secure the market base and are more able to determine your future as you are less reliant upon the success of your operators to create market share. Our viewpoint, however, is Casino & Gaming International I 43
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that by working together we can continually develop and improve the software package and establish ourselves as the foremost bingo software supplier in the marketplace while enabling our operators to retain their individuality. This ensures a competitive and stimulating environment resulting in major entertainment benefits for the players, the very people we need to remain successful. DEVELOPING TRENDS Free bingo is something that customers are more frequently searching for – many want the opportunity to play without playing 24/7 and they do not mind hunting for it. This is greatly skewing the performance of each site in the market as free bingo sites on the face of it appear to be leading the market, but there are a significant proportion of players who don’t spend a single penny. To overcome this, sites will have deposit requirements to qualify for free games but again players are alert to this and will deposit a small amount to their account knowing this gets them entry. It has huge cost implications to the platform providers as larger player numbers can impact bandwidth size and it soon adds up on a network, meaning infrastructure needs to be more robust to cope with the increase in player numbers. Free bingo has been available on our network for some considerable time now and, although an essential element of marketing to new customers, today’s online players are quite savvy and you need to accept that some will be off to the next site offering more for less. It really is debatable as to whether or not this type of customer has any added value unless they can be retained. The key is obviously to keep the attention span of these players and attract them to other games where they can be encouraged to spend and keep them entertained. As many bookmakers are finding, mobile phones increasingly provide a suitable experience for customers with the major issues over connectivity being addressed. At the moment, bingo is available to mobile users, but cannot claim to have a huge player base. Mobile gaming is evolving but not quite as fast as the online product and is less proven, especially in bingo, as a product that can yield significant returns. However, operators cannot rest on their laurels and need to cover all avenues of game play platforms. Some may want to be first movers in the market and, as long as they are able to soak up the costs of development, it may help them justify the risks. We started life as a mobile software supplier and decided to concentrate efforts on developing the best webbased flash product online. We know there is demand for mobile gaming and we’ll be looking to find a partner to aid us in launching our bingo solution at a cost that our operators are willing to outlay. NEW TERRITORIES We already have a presence in mainland Europe and Scandinavia but before we launched there, and as remains the case, our principle thoughts are that we would only expand into new territories if it is to the benefit of our current clients, not just ourselves. Of course, we always have an eye on new and emerging markets, but the opportunity to develop these are very much restricted by the legislation applicable to the respective countries and we do not want to divert resources away from our main efforts. Take, for example, the issues with France where state 44 I Casino & Gaming International
decisions can reverse strategies in a heartbeat. Local vagaries are also important and must be considered when entering new territories. The main point is that this is a part of expansion that must be treated with caution. There is also the issue of developing multi-jurisdictional business growth – for instance, operating out of Alderney and Malta – and whether that is a logical step more and more operators will take to remain competitive and to generate greater breadth of international operations. Flexibility is vital in the gaming industry, as we have seen recently with a number of companies moving their operations to Gibraltar, and not for licensing reasons. As such we work closely with the Alderney Gambling Control Commission to provide the best possible service to our operators and also ensure that we remain compliant with the AGCC requirements. It is more through necessity to be able to operate in new territories that we may need to obtain additional licenses, rather than the need to remain competitive. CGI
BOB MCCULLOCH Bob McCulloch is CEO of Virtue Fusion Alderney Ltd. Born in Leeds; he joined Virtue Fusion Alderney as CEO in 2007 and has since doubled the size of the operations and established it as one of the leading bingo and networked games providers available to the market anywhere in the world. He originally qualified as an accountant and has since spent much of his career in sales and finance. For a large part of his early working life Bob focused on the global automotive industry, evaluating corporate potential to ensure well resourced, financially secure entities. Having built up his own business and exited successfully, he moved to Alderney in the late 1980s where he continued in his role as financial consultant to banks, financial institutions and private equity organisations. Bob then saw the formation of the eGaming industry in the late 1990s from close quarters, monitoring and watching its growth closely before assuming his role at Virtue Fusion Alderney. www.virtuefusion.com
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INTERNATIONAL iGAMING
SEARCH LEADERS YOUR RESULTS... OUR PASSION To register for “The UK’s Most Visible Gaming Brands In Paid Search” white paper visit: www.marketdefender.com
International Organic Search Multilingual Paid Search Social Media Marketing & Optimisation Community & Content Provision Link Building & Strategy Consultancy & Training
You can contact Stickyeyes Sales Director Paul Hill at IGE & LAC
E: paul.hill@stickyeyes.com M: +44 (0) 7795 521 660 T: +44 (0) 113 391 2929 INTERNATIONAL EXPERTISE UNRIVALLED PERFORMANCE
YOUR RESULTS...OUR PASSION
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ARE THE BEST THINGS IN LIFE FREE?
BY PHIL FRASER
As we enter 2010, we can reflect on 2009 as very much ‘The year of Online Bingo’. It was the most prominent sector of the online gaming market to appear in UK TV advertising and it was the programme sponsor of choice for many TV shows.
>>
he most hyped aspect of online bingo in 2009 was ‘free bingo’, or more specifically, ‘free bingo to win cash prizes’. Marketeers know that offering something for free and giving away cash is not far from the Holy Grail. The four letters of the word ‘F-R-E-E’ are like a sprinkling of gold, adding magic to any marketing campaign. Any promotions expert will tell you that prize winners will always take the cash before the car, the holiday or anything else. Putting ‘free bingo’ and ‘cash prizes’ together should, in theory, create the ultimate offer; a ‘no-lose’ player recruitment campaign with limitless possibilities. But is the concept all that it is cracked up to be? If we dig a little deeper and scratch at the shiny surface of this offer, will we find hidden problems? Before we look at the 2009 phenomenon of ‘free bingo’ it is important to take a very brief history lesson. Online bingo in the UK hasn’t always been as high profile as it is today. It is hard to believe that just four years ago there were little more than 50 sites in the whole market, and playing bingo on the Internet (“You can play bingo on the Internet?”) was almost unheard of by the vast majority of the population. As the following chart illustrates, the growth in the number of online bingo sites in the UK over the last few years has been meteoric. The market was given a further boost during 2007 by the UK smoking ban (meaning fewer bingo players – 65 percent of whom smoke – went to their local bingo hall but rather stayed at home and found their way into online bingo) and the fallout from the late 2006 UIGEA in the United States meaning that major operators had to abandon the US market and refocus on Europe, where the UK market was the obvious choice. 2007 was the time when online bingo really started to behave like a
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Source; WhichBingo UK (http://www.whichbingo.co.uk)
grown up, ‘proper’ industry; the first major deal of the market saw Cassava, owners of 888, buy the Globalcom bingo software and its network of (at that time) around 50 sites. 2008 saw the gloves come off. Marketing budgets were inflated and the battle for market share began in earnest, with the battleground moving from the PC screen to the TV screen. According to Nielsen Media Research, over £7m was spent on TV advertising during 2008. Online bingo was now well and truly grown up. Twelve months ago as the market entered 2009, UK online bingo had around 250 sites, big and small, corporate and independent, all fighting over the players’ pound in their purses and pockets. Promotions departments were tasked with thinking up ever-bigger jackpots, free money trials, more generous first deposit bonuses and larger re-deposit match bonuses. And then in February 2009, into this cacophony of marketing noise came a new business model - a new marketing tool, one that had been flirted with and employed to a limited degree by many sites but never grabbed, stripped down and shouted out as loudly before. Cashcade, the company behind Foxy Bingo, launched a site called Cheeky Bingo that promised ‘free bingo for cash prizes’. “I can win cash but I don’t have to buy a ticket to enter?” The online bingo players loved it and flocked to the site. Very soon other sites cottoned on and launched copycats; Posh Bingo, Costa Bingo, FoxyZero (Cashcade actually copied themselves!) and, most recently, LiveBingo. However these sites are not the free bingo sites they claim to be. They are simply using free bingo games as a marketing tool to recruit pay-to-pay players. And the cash prizes? Prizes for these free games are as little as £1.00. Quite simply, it’s not free if a player wants to win real money - to win real, withdrawable cash, players have to spend. When you look more closely at the free bingo market in 48 I Casino & Gaming International
the UK there are only four real free bingo sites; sites that offer players the opportunity to play free bingo with no catches. All of these sites offer a legitimate, free, no cost bingo experience, with no ulterior motive to move players from the free play option to a pay-to-play option. The market leader is a site called FreeBingo UK (http://www.freebingo.co.uk). The site was launched in September 2005 and was the UK’s first only free play site. It now boasts almost 200,000 members. Other sites that offer true free bingo are FreeBingo.net and Bingo Port (which are both also portals), BingoPals and the newly launched Woohoo Bingo (although this is a player driver to its sister pay site). The problem with sites that are using free bingo as a marketing tool to recruit pay-to-pay players is that they are creating untold trouble for themselves and the market. Firstly, the online bingo playing public is being misled. Yes, factually it is correct but in many cases the prizes being played for are miniscule and the rooms so overcrowded that the game experience is poor. Secondly, in many cases, should a player actually win a prize they have to deposit first to claim their prize. Such player experiences cannot sustain long term player numbers. Thirdly, these sites are creating an ‘expectation’ from the online bingo-playing public, that online bingo should be free and thus “why should I ever pay for my bingo”. It can only damage the greater market in the long term. Think about it; do you ever pay full price for your double glazing? Do you ever by a sofa that isn’t ‘in the sale’? These are two markets (of many) that have damaged their price list to such an extent that it is irrelevant. Do we want bingo to go the same way? To make actually paying for your bingo (“you do what?”) the exception rather than the norm? During 2009 other pay-to-play sites were forced to offer ‘free bingo for cash prizes’ to once again ‘keep up with the
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>> IT IS NO SURPRISE THAT MANY SITES HAVE NOW DROPPED...‘FREE BINGO’ OFFERS, OR AT LEAST LIMITED THEM. THE REASONS? FIRSTLY, THESE FREE BINGO OFFERINGS DO NOT CREATE HIGH VALUE DEPOSITING PLAYERS, AND IN SOME CASES NO DEPOSITING PLAYERS AT ALL. SECONDLY, MANY OF THESE SITES ARE REPORTING COMPLAINTS FROM EXISTING PLAYERS ABOUT THE FREE PLAY PLAYERS DAMAGING THEIR PLAYING EXPERIENCE. ONLINE BINGO IS AN ENTERTAINMENT PRODUCT AND IF THE CUSTOMERS ARE NOT ENJOYING THEIR EXPERIENCE, THERE ARE MANY OTHER SITES AT WHICH TO DO SO. THIS IS THE REAL FEAR OF THE OPERATORS. >> The end of 2009 saw 888 buy out Wink Bingo. How they use this will be interesting to see, particularly as they have just launched a new site of their own, called simply 888bingo.com, as well as having their existing 888Ladies site. The long awaited switch by the St Minver Network bingo sites from Parlay software to their own G2 Gtech Bingo 2.2 will bring fresh impetus to the many sites in their network. Major operator and supplier JackpotJoy/Gamesys are in the final throes of re-designing their whole platform, which will be a major event. In addition there are noises suggesting that, as in 2009, a number of online bingo sites will be switching software suppliers. There is also the imminent arrival of Caesars Bingo, from the US gaming powerhouse Harrahs. Could this signal be the first of many US gaming brands to enter the fray, perhaps using the UK market as a testing ground in preparation for the oft-discussed but not-expected-any-time-soon reopening of the US market? And then, of course, there’s free bingo as a recruitment tool for pay to play sites. Will this survive as a key marketing tool for many sites? Perhaps it will prosper, perhaps it will morph into something else or perhaps it will die away, as a short-lived marketing exercise used as a player ‘land grab’. Search Google UK pages for ‘free bingo’ and behind FreeBingo UK (a true free bingo site) there are apparently another 961,000 entries… it looks like we have a long way to go to find out whether free bingo as a marketing tool to recruit pay-to-pay players continues to be a major force in UK online bingo. CGI
Joneses’. For example, Gala offered ‘free bingo Thursdays’ and Mecca are currently offering free play for new players, two sessions a day. But it is no surprise that many sites have now dropped these ‘free bingo’ offers, or at least limited them. The reasons? Firstly, these free bingo offerings do not create high value depositing players, and in some cases no depositing players at all. Secondly, many of these sites are reporting complaints from existing players about the free play players damaging their playing experience. Online bingo is an entertainment product and if the customers are not enjoying their experience, there are many other sites at which to do so. This is the real fear of the operators. As we wave goodbye to 2009 (forever also to be known as ‘The year of Free Bingo’) and we enter 2010, what will the year bring for the online bingo market?
PHIL FRASER Phil Fraser has been involved in the online bingo industry since its very early days of 2000. He has long been recognised as a leading expert in the online bingo market and chairs the annual ‘Bullet Business’ Bingo Conference. Phil has spoken at many online gaming conferences around the world as well as appearing on BBC radio. He is a respected commentator on online bingo, with many articles appearing in both print and online. Casino & Gaming International I 49
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SEO
THE UK’S MOST VISIBLE GAMING BRANDS IN PAID SEARCH BY TORSTEIN LANGELAND AND CRAIG CHALMERS
Gaming operators with the best paid search strategies will in 2010 take the biggest slice of the market. Therefore, enabling operators in the market to understand their own strategic deployment of paid search and benchmark it against the competition is becoming a significant means of cost reduction, analytical and product use efficiency. Through publishing data that highlights interesting market trends, as well as the leaders of the gaming industry in each vertical it is possible to understand how the highly visible top ranked brands are thereby differentiated.
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he total UK market for search engine marketing was estimated to be worth in excess of £3bn in 2009 . Whilst UK paid search (PPC) was expected to grow by around 12 percent year-on-year, the advertising of gambling related services through paid search saw even further growth following the decision taken by Google on 17th October 2008 to remove their blanket ban on advertising gambling in the UK. Estimates believe that the change in policy is generating Google approximately £100m in additional revenue per annum, with the market to advertisers thought to be worth up to £300m. Following the reversal of the ban, the gaming vertical has as a result become extremely competitive, with cost-per-clicks as high as £25, so only the online gaming operators with the best paid search strategies will in 2010 take the biggest slice of the market. With this review of the current PPC marketplace for the gaming sector, we want to enable operators to understand their own strategic deployment of paid search and benchmark it against the competition. We have been collecting data for all major verticals (inc. gaming) for 18 months using our proprietary tool, which records activity on the main search engine advertising platforms on an hourly basis. By publishing this data we intend to highlight key market trends, as well as identify the leaders of the pack in each vertical. On the back of this unique data, we have developed a Share of Voice algorithm to determine the top 10 most visible gaming brands in the UK, as well as the top five within each gaming vertical; casino, poker, bingo and betting. The algorithm weighs the appearance frequency against estimated click-through-rate (CTR), taking into account position and the
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Figure 1 shows the UK’s overall top 10 most visible gaming brands and how their visibility is spread between the main verticals; casino, poker, bingo and betting.
search volume for each term. To ensure optimal reach, up to 18 terms have been recorded for each vertical, representing up to 75 percent of traffic from Google AdWords. Based on the findings, the most visible brands have been analysed to determine how their activity differentiates them from the rest, with key findings and recommendations outlined in this article. A separate white paper, to be released on a quarterly basis from the beginning of February, will reveal the top ten lists in the UK with further analysis for all the four key verticals; bingo, poker, casino and betting. Further studies will also be released, focussing on other noteworthy verticals. THE UK’S MOST VISIBLE GAMING BRANDS In an increasingly competitive market, the most ambitious gaming brand owners will aspire to have the highest market share and be the most visible. Paid search is no different to organic search and other channels in this regard and it is this principle that has been the basis for this research. Two of the major gaming brands, 888 and William Hill, had the highest visibility in Q4 2009. Whilst 888 have always been highly aggressive online, William Hill saw 106 percent increase in marketing spend in H1 2009 which will explain their high Share of Voice. William Hill is followed closely by Bet 365, Betfair and Sky Bet, all of which are sizeable gaming brands. Figure 2 shows the top five list for each of the four main gaming verticals; casino, poker, bingo and betting. In most cases brands are highly visible in three of the four verticals. Examples include 888 who, despite dominating the casino, poker and bingo verticals, ranked just 14th in the betting vertical. Similarly, William Hill is highly visible in casino, bingo and betting whilst not having any presence in poker. Interestingly, Casino Choice is the only affiliate appearing in any of the top five lists, and 4th in the casino vertical. WHAT SEPARATES THE BEST FROM THE REST So how are these brands able to achieve and maintain higher visibility than the average gaming brand? Several factors such as brand recognition, offer, ad copy, landing page and their 52 I Casino & Gaming International
account setup will be contributing to this, with some of the key factors illustrated below: Brand Recognition: It is no coincidence that many of the most visible brands are amongst the most recognisable, such as 888, William Hill, Bet365, Betfair and Sky Bet. If you fit into this category, you are immediately better geared towards a successful PPC campaign, with the key reason being that a higher recognition factor amongst searchers gives you a higher click-through-rate. If you have a higher click-throughrate, Google will then allow you to pay less for your clicks (lower cost-per-click), making increased aggression a more viable strategy. The end result is cheaper traffic and potentially a very good ROI. Ad Copy Optimisation: Companies performing well in paid search will, in most cases, have tested a multitude of ads to find the ad that achieves the highest click-through-rate whilst, at the same time, manages expectations correctly through to the landing page to maximise the conversion rate. As an example, our analysis of data found that Bet365 Bingo tested a total of five different ads for the term ‘bingo’ during the period October – December 2009. From the analysis of the ads in figure 3, two ads tested with the description ‘Calling all Bingoheads! Deposit £5 & get £25 absolutely free at bet365’ have had very low visibility, not rising above two percent in any month. Ads with the description ‘Deposit £5 & get £25 free! Amazing 500 percent bonus for new bingo players.’ had a visibility often above 60% in any given month and therefore appears to have yielded greater acquisition rates for Bet365. The way for Bet365 and other advertisers to stay ahead is to discard non-performing ads and continue testing new versions until the optimal ad combination is found. Analysing what works for the competition is also essential in finding the right formula of which offer works best for each creative. Landing Pages Split Testing: Brand recognition is an essential variable to leverage in a highly aggressive paid search campaign. However, a common error for gaming brands is to assume that the contribution of strong brand recognition will increase conversion rate to the point where sending traffic to the homepage will suffice. The fact remains
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Figure 2: The UK’s most visible gaming brands in PPC for Q4 2009, by vertical. Percentages and ranks are based on Share of Voice for the relevant period.
however that a conversion rate can almost without exception be improved with the implementation of targeted landing pages. 888 is seen as one of the more active brands in testing new landing pages. Promotions will generally be launched with multiple landing pages, such as the latest £8,888,888 jackpot promotion which for the term ‘casino’ in December had two dedicated landing pages tested against a generic casino landing page. Whilst most brands have caught onto the idea of ad copy testing, few are actively split testing landing pages, which may be due to the often higher cost and resource requirements of designing, building and continuously analysing different landing pages. The fact remains though that landing page split testing activity is generally higher amongst the most visible brands. Day-Parting & Week-Parting Strategies: Unless you are able to dominate your vertical due to a combination of brand recognition and great ad copy and landing pages, day and week parting (or ad scheduling) is one of the key elements of sustaining a successful PPC campaign in a competitive market. Many marketers do however base their scheduling decisions solely on click cost and acquisition costs, without considering the value of players recruited and competitors’ aggression patterns throughout the day. In essence, analysis shows that successful gaming brands will be more aggressive in paid search at the times of day and week when their high value players come through. Another consideration when choosing the day-parting strategy is the click-to-lead time. Like the retail sector, people may search or click through during a certain point of the day (lunch time for example) and register/play at a later time. With the right tracking systems in place it is possible to monitor the average time from click to deposit. This means that clicks that appear ‘wasted’ may convert later. Successful gaming brands often have a good understanding of the time from click to lead and know to use this knowledge when setting out their day and week parting strategies. In summary, gaming companies with highly recognised brands will find it easier to gain a higher visibility and ROI in
paid search. It is however at the same time clear that the most visible brands are also employing a strategy which is geared towards continuously improved performance. FIVE RECOMMENDATIONS TO GAMING COMPANIES Based on the above analysis and our experience in paid search in the gaming sector, the following are key recommendations to gaming companies who are looking to employ or improve on their paid search strategies, going beyond the essentials of ad copy and bid optimisation. Use Variable Acquisition Cost (CPA) Each gaming company will be aware of the games that drive the highest revenue for them. However, many advertisers still fall into the trap of applying one static CPA across the entire account. Applying different CPA targets to different campaigns depending on each game’s player value allows you to capitalise on the available volume for all keywords. In essence you can pay more for a player worth £1,000 than a player worth £200. Use Targeted Landing Pages: As analysed in this article, more visible gaming brands are generally more active in landing page testing. There are however three key elements that as a general rule should be on every successful landing page. These elements include content and images relating to the specific product group (e.g. roulette or video poker), clear communication of the offer (a good offer also helps), combined with a strong call-to-action such as ‘Join Now’ or ‘Register Now’. The best strategy is to learn from what your top performing competitors are doing and improve on it. Split-Test Different Offers: A strong offer can make up for lower brand recognition. With the use of genuinely free bonuses booming in 2009, advertisers must make a judgement call as to which offer will provide the best balance between player volume and ROI. Paid search makes it easier to split test different offers, which should be done using both ad copy and landing pages. After investigating which offers your competitors have used over the last 2-3 months, test 2-3 different promotions against each other over a 3-5 week period. Choosing the right offer for your brand could make all the difference. Closely Monitor the Competition: In too many cases Casino & Gaming International I 53
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Figure 3: Ad Visibility comparison for Bet365 Bingo on the term ‘bingo’. Date range: Nov-09 – Dec-09. Visibility is based on Share of Voice for the relevant time period.
both agencies and gaming brands focus a lot of effort on their own campaigns and not enough on looking at what the competition is doing. What offers do they promote and are they better than yours? Are they A/B split testing ad copy or landing pages? What time of day/week are they most and least aggressive? How does your share of voice compare? The best way of getting ahead of the competition is to find out what they are doing, and then use this intelligence to optimise your own campaigns. Protect Your Brand Terms: Whilst all competitors are allowed to bid on each other’s brand terms, it is essential to protect your own from rogue activity. Too few know what their competitors and affiliates are up to during evenings and weekends when paid search results are rarely checked, and may unknowingly be losing thousands of pounds each day from rogue activity on brand terms. Most brands with active affiliate programmes will have clear guidelines for whether or not their affiliates can bid on brand terms. A total brand bidding ban is often used to avoid having to pay affiliate commission on these terms which normally drive players at a fraction of the cost of generic terms. Whilst most affiliates will follow the guidelines, there is likely to be a few that participate in rogue affiliate activity. A prime example of this is illegitimately appearing for brand terms on evenings and weekends when no one is present to monitor affiliate activity manually. As a result, many brands experience loss of players and increased costs during the times of the week where they should be getting the highest levels of player activity. Web services like ours are an essential tool in ensuring that competitors are not infringing trademarked terms, and that rogue affiliates are not using your ads to direct traffic through their affiliate IDs (i.e. you have to pay extra for your players). By employing the above recommendations you should be a few steps closer to having a gaming brand geared towards high visibility and maximised player volume and ROI. The key to success is ongoing testing and optimisation until you find the optimal formula. NOTE All founding data for this article is collected using Market 54 I Casino & Gaming International
Defender and other public sources. The article is part of an indepth study by Stickyeyes, which will be published as a gaming white paper in the beginning of February 2009 and be published every quarter from then on. The white paper will show the UK’s top 10 most visible brands for all 4 gaming verticals with further in-depth analysis and examples from each vertical. Once released it will be available on www.marketdefender.com where you now can go to sign up to get an alert when the white paper is available. Market Defender is a proprietary competitive intelligence web service developed by Stickyeyes. It enables users to easily benchmark position and ad copy strategies against the competition, as well as protect their brand against rouge brand bidding activity. Market Defender is currently available for the UK, US, France, Germany, The Netherlands, Sweden and Australia, with more countries soon to come. CGI
TORSTEIN LANGELAND AND CRAIG CHALMERS Torstein Langeland has a BSc Marketing Management from the Norwegian School of Management and is educated to Masters Degree level at Leeds Business School with major in International Business. He has been with Stickyeyes for four years, specialising in the technical and commercial applications of paid and natural search. Whilst successfully heading up several of Stickyeyes’ key multi-million accounts, Torstein is now leading the commercial launch and further development of Market Defender, Stickyeyes’ flagship monitoring web service for paid and natural search. Craig Chalmers, Managing Director of Stickyeyes, is an expert online marketing strategist across Organic & Paid Search, Email Marketing, Affiliate Marketing, Online Content and Communities and Social Media. Craig developed Stickyeyes from an independent consultancy to become the UK’s 9th largest search marketing agency. (source NMA 2009) employing 50 staff from offices in central Leeds.
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AN ANCIENT ART: THE UNCOMMON COMMON SENSE OF KNOWING PEOPLE – AND YOURSELF BY VAHE BALOULIAN
Customer service is an art, just like every other functionality in the gambling establishment – but only if it is done right. Easier said than done perhaps. However, it is possible to explain exactly what it takes to develop an intelligent, honed sense of how to nurture customer relationships. In the end, it can be the long term difference between success and failure of a gaming company.
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t seems so logical – don’t fix something that's not broken. Unfortunately, not everyone can resist the temptation and one day, many years ago, I received a phone call. It was regarding the customer service department at what was at that time the world’s largest online gaming company. A newly minted MBA graduate was flown in by our company to one of the customer service centres we ran. His task was to see if there was anything that could be done to improve what was at that time widely regarded as the best customer service operation in the industry. He came up with some ‘sophisticated’ suggestions from the books he had read, but the most important discovery that he made was that we treated all players equally, whether they played with real money or just practice chips. This had to be cured immediately, he said. Since we had already been providing superior service, the brilliant solution offered was to treat those playing with practice chips worse than those contributing to the bottom line with hard cash. Common sense, one might say. However, after contemplating this exercise, the most unanticipated for him and expected by us outcome was that there were no costs to be cut as we would still need the same number of service personnel on every shift to serve our real money players. The problem with common sense, as Voltaire taught, is that it is not very common. This MBA graduate was trained to sell products in the retail world and he was convinced that there was no difference between gambling and, let’s say, shoes. The predicament with his thinking and attempted restructuring of the way we handled players’ concerns was that we knew otherwise, and not from books but from
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experience - gamblers are a different breed. The same person buying retail turns into a totally different person when buying gambling entertainment, especially when it is offered online. Online gaming is not a very old industry and obviously in those days, it was even younger. Most owners and executives didn’t boast scientific or management degrees beyond bachelors or just high school diplomas. When it came to the degreed outsiders, there was this peculiar combination of arrogance (I don’t need a degree to run this company) and fascination (this MBA chap may actually know something that I don’t since he paid so much for his education). My experience, yet to be proven wrong, is that no academic degree can cure the lack of common sense and the abundance of overconfidence. Over the years of working with online gamblers, I learned some basic concepts and rules. Although I don’t think that any of these are unique, I came to learn most of them while communicating with the people we served. One of the main principles that I've adopted in providing customer service to players comes from Aristotle. "Think as the wise men do, but speak as the common people do." This one has never failed me. Take a look at the many pieces of communication delivered by service personnel to their customers in any industry. The language is convoluted and the substance, if there is one, uninformed. That’s the exact opposite of what Aristotle was arguing for.
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Before serving someone, we have to learn who that someone is. Is he the bottom-line guy who would come in and say “Here is what’s wrong, let’s solve it”? Is he the bigpicture person who is not easily satisfied even with the best of solutions unless you tell him why things work that way? Is he the gentle-soul ready to apologise for disturbing you and needing you to go slow with him and make him feel comfortable? Is he the numbers-and-facts fellow who just needs hard data? How does one deal with these people? There are many ‘firsts’ in customer service and it is hard to say what’s more important when working with players and what’s not. For starters, finding commonalities is essential. Players are fond of people who are similar to them, and players believe and trust people they are fond of. To come across someone whose job is to take care of your concerns and find out that he or she is so similar to you is unexpectedly satisfying. We live in such a small world nowadays that finding commonalities (without faking them) should not be hard thing to do for any customer service person. Showing concern and compassion is another important skill that should be used generously. Players will hear your words and will trust you if they feel your concern about them. Gaining this trust is very critical if you want them to accept your solution to their problems, especially if it is not a completely agreeable one. To be credible, you must demonstrate that you are acting in good faith and to the best of your knowledge and
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>> ONE OF THE MAIN PRINCIPLES THAT I'VE ADOPTED IN PROVIDING CUSTOMER SERVICE TO PLAYERS COMES FROM ARISTOTLE. "THINK AS THE WISE MEN DO, BUT SPEAK AS THE COMMON PEOPLE DO." THIS ONE HAS NEVER FAILED ME. TAKE A LOOK AT THE MANY PIECES OF COMMUNICATION DELIVERED BY SERVICE PERSONNEL TO THEIR CUSTOMERS IN ANY INDUSTRY. THE LANGUAGE IS CONVOLUTED AND THE SUBSTANCE, IF THERE IS ONE, UNINFORMED. THAT’S THE EXACT OPPOSITE OF WHAT ARISTOTLE WAS ARGUING FOR. >> ability. Players may forgive you for poor judgment, but hardly ever for poor intentions. Demonstrating good intentions while trying to resolve their problems works great when assisted by undivided attention. Making notes of seemingly unimportant facts from a player’s story and repeating them later will show that your mind was not wondering around while they were pouring their hearts out. One of the most annoying service issues for me is the disconnect that occurs between a company’s message and its employees’ performance. To be credible, our words have to match our policies, our welcome message, our ‘customer is god’ story that we've spent so much money and effort selling. Demonstrating competence does not equal looking down on your players. Players trust experts and accept your solutions if they have faith in your competence. Just make sure to avoid arrogance when sharing your expertise. Be careful when making assumptions to cover for lack of information. Always be ready to provide the source of your information or reason for your conclusions, regardless of their importance. What’s not important to you or seems self-evident may leave your players in total bewilderment. Providing correct and full details builds credibility for all of the information and conclusions coming from you. If you don’t know something - admit it. It’s OK. Honesty may not always work in customer service but in this case it does. Players will push when they smell a bluff. Nothing makes your customers believe what you do know like admitting what you don’t. To be useful and avoid misleading your customers, make certain to stay current. Outdated information becomes incorrect and leads to misunderstandings and loss of trust. Double-check when in doubt. It’s always better to provide correct information with a little delay than to provide wrong details promptly. You may be very experienced and know your ‘subject’ inside-out but do not allow your familiarity to make you careless in describing it. Vagueness and uncertainty sneak in when we least expect it. Meanings depend on context, tone, timing, personal experience, and reference points. Be clear to avoid unintentional ambiguity. Unless warranted, avoid intentionally nonsensical explanations with convoluted details or irrelevant facts that aim to obscure rather than enlighten. Be clear and don’t pretend to communicate when you are not actually doing it. Not only will you ‘succeed’ in shirking your responsibilities, you may end up losing the player for good. Even when you are itching to make a long-lasting impression on your customer - avoid exaggeration. It may
make a great show but may also destroy your credibility. In your personal life you can take that chance, but with customers, particularly online customers, you are the company. There is no way around it. Your credibility will also be at risk if you reject criticisms and objections without evaluating them. Show your customers that you are a reflective rather than a reactive thinker. You can always reject their negative comments but doing so after having given them due consideration will carry more weight. Managing to find something in their comments that you can agree with, however insignificant, is even better. Any objection that starts with “I agree with you” has a much better chance of being accepted. Unless it is absolutely true, do not deny your responsibility. Always accept responsibility for decisions, actions, and results where you have or had some control. Sometimes even take responsibility for the actions of others. This often changes a player’s attitude from offensive to apologetic. In order to believe you, the players take a risk. If they risk trust, they want to know that you share their risk: the risk of being honest; the risk of exposing your own weaknesses and shortcomings; the risk of telling things that can be used against you; etc. Taking risk by being transparent inspires players to risk taking you at face value. It’s a two way street. In some cultures people just can’t accept that they don’t know all the answers and they will give you the answer to the question they know and not the question you asked. Avoid this classic mistake of answering the question you wanted the player to ask. If you don’t understand the question, request that they elaborate. In any case, always answer the question your player is actually asking. Before you speak, make sure what you are about to say doesn’t contain words or expressions that imply your superiority to the player. That immediate but momentary satisfaction from placing your customer a few levels below you will pass very quickly but the respect you were expecting to get will never materialise. To avoid awkward situations be meticulous when assessing the knowledge and experiences of others. If you assume that players are more knowledgeable than they really are, they may misunderstand your message, give up on trying to understand your explanations, and become frustrated or angry because they think you are posturing. On the other hand, if you assume that members know less than they actually do, you may insult their intelligence, bore them, or waste their time with already-known information. To meet them exactly at their knowledge and Casino & Gaming International I 57
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interest level, I ask myself certain questions. What is their primary interest in this situation, event, issue, etc? How much do they already know and from what likely source and perspective have they received this information? How will they use this information for themselves? Why would they want to know this? What reaction will they have to the subject – skepticism, embarrassment, doubt, defensiveness, support? Finding correct answers to these questions will save you from apologising later on. You can find many answers and solutions by being interested in your players, not just being interesting for them. Interesting people amuse and entertain us. Interested people win us, create magnetism and we tend to stick to them. For players, nothing is as flattering as a show of your personal interest in their relationship with the casino or cardroom, their background, their experience and views. Soften down to get your interest through. Softening communicates openness. Soften your voice, soften your tone, and soften your smile. Allow players to get to know you as well. Members feel loyal to you only when you are willing to let them learn more about you. They can’t like and trust someone they do not know. During conversation, put in a word or two from your relevant experiences. Disclose your emotions too but do it sensibly. Often after a few successful cases assisting the players, we forget that we are not doing them a favor by helping. They are doing us a favor by allowing us, and not our competitors, to help them. Don’t make the player feel stupid. Superior, arrogant manner drives them argue with you, even if they are in agreement with you. This is the best case scenario. The worst case – they simply leave. It is hard to accept but sometimes when dealing with gamblers being logical may be very ineffective. Your communication with the player involves emotions as well as intellect. Emotional arguments may prove very effective where logic has failed to persuade. An emotional appeal to player’s self-interest may deliver more conceding attitude from him than a logical explanation of fairness to all concerned. The English novelist Samuel Butler said, “No mistake is more common and more fatuous than appealing to logic in cases which are beyond her jurisdiction.” He knew something we often forget. Although the adage “the end justifies the means” is often used in a negative way, I learned that one of the best ways to serve the customer in distress is to visualise the end, and then create the means. Take a quick moment to decide what reaction you want from the player and then think how to structure your answer to get that reaction. If you want the player to be emotional about the decision, choose anecdotes and stories to bring him to action. Use the notes you made during your contacts with him to bring about the emotional response. If you want them to come to a logical conclusion, choose facts and reason to deliver your message. An often neglected aspect of customer service is the between-the-lines messages. They come from the context, the relationship, the timing, the purpose, and the player’s personality. Use a lot of common sense when dealing with these messages. In some cases you can hide behind your words to avoid hearing the real message. In others, you do need to respond according to the player’s tone and 58 I Casino & Gaming International
subliminal point delivered with his or her words. In both cases be aware of true meaning of the message received. You may also send these between-the-lines messages with your answers, whether you realise that or not. Use your awareness both to employ and to avoid them, depending on the situation. I have witnessed situations, seldom as they may be, where the employee intended to give support gets carried away moralising. In the casino business, this is one of the worst things you can do. You are not here to teach players how to live. You are here to make their gaming experience comfortable and fun. In one of these situations, a player simply kept silent and the support person failed to hear his silence as it was intended. When your message, statement, or answer is met with silence, it can have several meanings. The player may be reflecting on what you said; in complete agreement with you; mistakenly thinking he understands what you said; too angry to speak; confused, but doesn’t want to sound ignorant by asking another question; in a state of shock; feeling too powerless to respond. It’s up to you to probe for the meaning of the silence. Last but not least - do not ignore your ‘gut feeling.’ Before taking any action consider all implications and consult your ‘gut feeling.’ Do you have a racing heart, sweaty palms, knots in the stomach, etc? Your body is telling you to look behind the words. Customer service is an art, just like every other functionality in your gambling establishment – but only if you do it right. It’s not a simple task. I often compare it to raising a child. Every one of your actions with a child places a stamp on your relationship, defining your happiness and success. Be as considerate with your customers as you are with children. CGI
VAHE BALOULIAN Vahe Baloulian is CEO of Red Planet Marketing GmbH (www.redplanetgaming.com), technology and consulting company based in Vienna, Austria and Las Vegas, USA. Red Planet provides uniquely flexible solutions to own and operate online gaming cardrooms/networks and specializes in turning struggling poker networks into profitable ones.
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WHAT WILL ACTUALLY KEEP ‘MICKEY THE ANT’ AND ‘TONY THE FLEA’ AT BAY? BY JOE KELLY
Assumptions that there is an endemic connection between online gambling and money laundering overlook the demonstrable case that strongly regulated jurisdictions minimise and even eliminate this activity in its various guises. As the evidence of its effectiveness is clear with land based gaming, there is every reason to believe that a similarly robust approach to online gambling will establish a sound defence against serious wrongdoing.
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umerous well-respected authorities believe there will always be a connection between Internet gambling and money laundering. For example, by letter of 13th November, 2009, the US Department of Justice (in preparation for 3rd December Congressional hearing) stated its view to Representative Spencer Bachus, a vocal opponent of Internet gambling regulation, that Internet gambling, including poker, would be vulnerable to money laundering and cheating. Specifically, the Justice Department claims that: several poker players “working in unison (could) defeat the other players who are not part of the team;” an online poker player could transmit “ill gotten gains” to a “mule account” by cheating in a private tournament; and age verification and “geolocation” verification “can be spoofed.” Fear of money laundering and criminal activity was also expressed by the Government of New Zealand. Its website warned that the wagerer would have “little protection” if, for example, an operator took “people’s money” and then shut down. It also warned of the danger of organised crime using Internet gambling for money laundering. A significant international concern is the potential for Internet gambling sites to be used for money laundering by organsed crime. The proceeds of crime may be disguised amidst the money coming in as bets and going out as winnings. If a site is linked to organized crime, then its operators are unlikely to have any scruples about ripping-off gamblers. (http://www.netsafe.org.nz/keeping_safe.php.) The fear of online money laundering was also shared by the European Parliament which, on 10th March, 2009, adopted a resolution on the “Integrity of Online Gambling (2008/2215(INI))” and confirmed that member states should
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>> THE UK IS ONE OF THE FEW JURISDICTIONS TO HAVE EXTENSIVE ANTI-MONEY LAUNDERING REQUIREMENTS FOR BOTH ITS LAND-BASED AND ONLINE GAMING OPERATORS. BESIDES THE UK, THERE ARE OTHER WELL-REGULATED INTERNET GAMBLING JURISDICTIONS IN ALDERNEY, THE ISLE OF MAN AND GIBRALTAR THAT ENSURE SUITABILITY, SOLVENCY, AND SOCIAL RESPONSIBILITY OF GAMING OPERATIONS WHILE ENFORCING STRICT ANTI-MONEY LAUNDERING ONLINE REGULATIONS. >>
continue national regulation of online gambling for many reasons, including the prevention of money laundering: [T]he growth of online gambling provides increased opportunities for corrupt practices such as fraud, matchfixing, illegal betting cartels and money-laundering, as online games can be set up and dismantled very rapidly and as a result of the proliferation of offshore operators; [the European Parliament] calls on the Commission, Europol and other national and international institutions to closely monitor and report on findings in this area….(7) It is undisputed that unregulated or under-regulated Internet gambling would be susceptible to money laundering. Internet gambling businesses that have engaged in money laundering are often sports books operated by organised crime in Costa Rica or some other under-regulated jurisdiction. For example, one of the most notorious Internet gambling operations was run by Ron “the Cigar” Sacco out of the Dominican Republic. Sacco, who went on 60 Minutes to emphasise that the US Government could not reach him, was ultimately sentenced in 2003 to 21 months in prison when he pled guilty to one count of illegal gambling (18 USC § 1955) and one count of money laundering (18 USC § 1956). In another instance, the US Government brought criminal charges against about a dozen defendants who had an offshore sports betting operation in Costa Rica and used unlawful means to collect wagering debts and disguised money payments to US customers. The 2005 indictment also included allegations of illegal land-based slots as well as sports wagering. Money laundering allegations claimed the defendants had used legitimate land-based businesses to launder illegal gambling proceeds. (U.S. v. Gianelli, et al., 585 F. Supp. 2d 186 (D. Mass. 2008)). In 2007, various defendants pled guilty to illegal gambling charges when they admitted operating a sports book in Dominica (Sports International) that accepted wages from toll-free telephones from Maryland citizens. One defendant admitted to collecting money from losing bettors, depositing monies into bank accounts and wiring money to Dominica. Another defendant deposited over $50,000 into the bank account of a former girlfriend to conceal the sources of the money. (“Three Men Sentenced for Running an Illegal Sports Bookmaking Operation in Baltimore and Washington, DC,” www.usdoj.gov/usao/md, 5th March, 2007). There is no doubt that unregulated offshore operators might be susceptible to money laundering, but strict regulation can minimise any criminal activity. In “How Vigilant Should We Be Against Money Laundering,” three former regulators (Mark Clayton of Nevada, Frank Catania of New Jersey, and Alan Pedley of the Northern Territory of Australia) and James Darcy (a former FBI agent in New 60 I Casino & Gaming International
Jersey) agreed in a Roundtable Discussion that strictlyregulated online gambling was less susceptible to money laundering than land-based casino gambling (Gaming Law Review (13) (4) at 279-280(2009)). A similar conclusion concerning the need for strict regulation to minimise criminal activity was reached by Malcolm K Sparrow in Can Internet Gambling Be Effectively Regulated? Managing the Risks at 36 (2nd December, 2009), which suggested that strict regulation could minimise criminal activity in online gambling. Although criminal control of gambling websites is a possibility, strict regulation would exclude unwanted site operators. It is unlikely that criminals would subject themselves to strict regulatory checks and demanding admission standards. Instead, they may attempt to operate gambling sites without licenses. Regulators can work to educate consumers about the dangers associated with unlicensed websites, and steer them toward licensed, regulated sites which offer protection against criminal activity. At the risk of losing their licenses, legitimate operators would have a strong interest in avoiding ineligible associates as is the case with bricks-and-mortar casinos. We would expect legitimate, licensed sites to be receptive to a fair degree of scrutiny because such scrutiny would enhance the reputation of the industry. Strict regulation would also minimise player-to-player money laundering: Players or groups of players acting in concert may attempt to use legitimate gambling operations for money laundering. To curb such activities, regulators could subject online gambling operators to anti-money laundering regulations that are currently in place for bricksand-mortar casinos and for online merchants, banks, and payment providers. The online environment provides better opportunities for detecting money laundering by players or player groups than do bricks-and-mortar casinos. (Id. at 42). Regulation would also minimise any operator money laundering. As with the prevention of fraud and any other criminal conduct by site operators, an effective regulatory regime would seek to bar criminals from entering the Internet gambling industry, and seek to detect and prevent linkages developing between site operators and criminal organisations. Regulators would also develop the capacity to search for laundering patterns among the betting transaction data, as well as among the external financial flows data for regulated sites. Regulators of the online gambling industry would also become natural partners for the broader lawenforcement community seeking to detect and prevent money laundering. (Id. at 45). A similar conclusion concerning the lack of money
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laundering in well-regulated jurisdictions may be found in Online Gambling, Focusing on Integrity and a Code of Conduct for Gambling (European Parliament, November 2008) (IMCO Report). The IMCO Report suggests that in government-licensed online gambling, there is “limited hard evidence of gambling operators defrauding consumers. We do not say that it does not happen, but there is little evidence in the public domain and prima facie it happens on a very small scale.” The IMCO Report goes on to state: The nature of the Internet inevitably means that the risk of fraud against consumers can never be entirely eliminated. However, there are reasonable grounds for confidence that the risk that it creates for EU [European Union] consumers is not great. The major suppliers in the EU market are EU-licensed. Licensing conditions reinforce other law in prohibiting fraudulent behaviour. The operators, trade bodies and regulators we have spoken to … all say that license conditions are routinely enforced. We heard no concerns from any of these interviewed about the standards of inspection and enforcement. National rules concerning the advertising and promotion of online gambling products, and the costs of promotion, create not insignificant barriers to market entry and tend to funnel EU consumers in the direction of these EU-licensed firms. Finally, it is in the long-term interests of gambling operators to attract repeat business, and a reputation for fair dealing is regarded by operators and their associations as fundamental in this respect. [Par. 2.19-2.20]. It would thus seem that well regulated Internet gambling would minimise fraud or cheating by the operator and, impliedly, also reduce or limit money laundering. The IMCO Report gave examples of how well-regulated Internet gambling could reduce money laundering: [In] our view the real need is for evidence of fraud against consumers to be fully and consistently documented. The scale of such fraud is not well documented, and we think that if it operated on a substantial scale the evidence would by
now have been forthcoming. The adverse evidence we have seen does not in general make clear whether “rogue” operators are EU-licensed or not. On the face of it, consumers using EU-licensed sites are at less risk of being defrauded than if they use non-EU-licensed sites. [Par. 2.26]. In defending the state-owned National Lottery monopoly of Internet gambling, the Belgian Finance Minister, stated: [M]uch of the online gambling offered to Belgians is based in offshore jurisdictions where there is little emphasis on money laundering and problem gambling issues. Placing online gambling under the umbrella of the national operator would ensure that a number of safeguards are put in place to protect players. [Par.3.15, citing GamblingCompliance.com]. One of the best and most objective analyses of Internet gambling and money laundering is the US Government’s study, Internet Gambling: An Overview of the Issues (GAO Report, 03-89, Dec. 2002). However, the GAO Report made no recommendations: Representatives of law enforcement agencies, regulatory bodies, and the credit card and gaming industries expressed mixed views regarding the vulnerability of Internet gambling to money laundering. Law enforcement officials said they believed that Internet gambling could potentially be a powerful vehicle for laundering criminal proceeds at the relatively obscure “layering” stage of money laundering. They cited several characteristics of Internet gambling that they believed made it vulnerable to money laundering, including the volume, speed, and international reach of Internet transactions and the offshore locations of Internet gambling sites. In their view, these characteristics promoted a high level of anonymity and gave rise to complex jurisdictional issues. Law enforcement officials acknowledged the lack of adjudicated cases involving money laundering through Internet gambling sites but cited what they believed to be contributing factors, including the lack of any industry regulations or oversight. [GAO Report at 5]. Treasury officials stressed the vulnerability to money laundering because gambling operators “are frequently located in areas with weak or nonexistent supervisory regimes. “ The FBI expressed concern on how criminals could launder money, even at a “legitimate” site, by depositing a huge financial amount with the operator, placing $100,000 bets on opposing teams, and then receiving payment that “would appear to be legitimate winnings.” [GAO Report at 35,36]. Gaming regulatory officials and banking and credit card companies expressed doubts that Internet gambling was “particularly susceptible” or “posed any particular risks” concerning money laundering. [GAO Report at 5]. This would be true “especially when credit cards, which create a transaction record and are subject to relatively low transaction limits, were used for payment. Likewise, credit card and gaming industry officials did not believe Internet gambling posed any particular risks in terms of money laundering. As noted earlier, the credit card industry has other reasons for restricting the use of credit cards in Internet gambling transactions. The associations, a credit card company, and a few issuers told us that they believed their broad anti-money laundering program or coding system covered potential money laundering through Internet gambling.” Gaming industry officials noted that the financial industry “is better suited to monitoring for related suspicious activity in the area than the gaming industry itself. A few Casino & Gaming International I 61
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officials commented that, in their view, on-line casinos should probably be subject to anti-money laundering requirements similar to those required of brick-and-mortar casinos.” Gaming industry officials, however, “also cautioned that, in their view, Internet gambling could become more susceptible to money laundering as US financial institutions continue to block the payment of Internet gambling activities through credit cards. They explained that credit cards would likely be replaced by newer forms of electronic payments that might not be subject to the same level of record keeping or transaction limits as credit cards and could thus be more susceptible to money laundering.” [GAO Report at 37]. The GAO Report has been cited both by those opposed to, and in favour of, the regulation of Internet gambling. After the GAO Report was made public, Nevada Democrat Senator Harry Reid, then the second most powerful Democrat in the US Senate and now the Senate Majority Leader, said the “GAO report shows how the industry could be a ‘safe haven’ for money laundering activities.” [“Editorial: Is There a Spin Doctor in the House?” IGN, 9th December, 2002]. It is undisputed that the Unlawful Internet Gambling Enforcement Act, which attempts to prevent players from using financial transaction providers for offshore gambling, would never have been able to become law by being attached to an unregulated Safe Harbor bill without the tacit approval of Senator Reid. The GAO Report was also cited as authority for the lack of money laundering in well-regulated jurisdictions by pro-regulatory sources, such as www.onlinegamblingmythsandfacts.com/money.htm There has been minimal money laundering activity in well-regulated jurisdictions. The UK is one of the few jurisdictions to have extensive anti-money laundering requirements for both its land-based and online gaming operators. Besides the UK, there are other well-regulated Internet gambling jurisdictions in Alderney, the Isle of Man and Gibraltar that ensure suitability, solvency, and social responsibility of gaming operations while enforcing strict antimoney laundering online regulations. The UK is perhaps the jurisdiction with the most stringent anti-money laundering procedures. The Gambling Act of 2005, Statutory Instruments and regulations, ensure that all online licensed gambling and wagering operators have detailed anti-money laundering policies which must be enforced. Antigua and Barbuda has also developed extensive Internet regulatory policies that allowed it to be one of the two non-European jurisdictions that meet the stringent UK requirements to be ‘White Listed’ for Internet advertising within the UK. In fact, Antigua’s Internet gambling regulations were recently praised by the US State Department, which is generally skeptical of the ability of a state to prevent money laundering: Internet gambling executed via the use of credit cards, Internet payment service providers, and offshore banks represents yet another powerful vehicle for criminals to launder funds from their illicit sources and to evade taxes. These Internet gaming sites are a particularly difficult problem for law enforcement, as the beneficial owner may live in one country, with the anonymous corporation registered in another country, and the server located in yet a third country…. As such, Internet gaming has the potential of becoming a greater money laundering threat than actual physical casinos. The Report did make an exception for Antigua. Currently, Antigua and Barbuda does a very good job of 62 I Casino & Gaming International
regulating Internet casinos and is probably the world leader in dealing with AML [anti-money laundering] issues with the Internet gaming industry. In fact, their regulations in this area have been copied by other highly regulated Internet gambling jurisdictions such as the Isle of Man. [International Narcotics Control Strategy Report, Bureau of International Narcotics and Law Enforcement Affairs, March 2008 at 1,3,4]. However, not all experts agree that Antigua has wellregulated Internet gambling. Sparrow, in Can Internet Gambling be Effectively Regulated? at 5, suggests that Antigua, Grenada and the Kahnawake Indian reservation are less well-regulated or unregulated jurisdictions. There is agreement, however, that Grenada, along with Antarctica, has no Internet gaming operators. Strict regulation of Internet gambling will minimise or eliminate interactive gaming money laundering. “Mickey the Ant” and “Tony the Flea” would know better than to waste time trying to obtain an interactive gaming license in Alderney, Antigua, Gibraltar, the Isle of Man or the UK. The lack of money laundering and organised crime involvement in land-based gaming jurisdictions has been the result of strict regulation in Nevada, New Jersey and the UK, which regulation can be adapted to online gaming. CGI
JOE KELLY Joseph M. Kelly, Ph.D., J.D., is a Professor of Business Law at State College at Buffalo, and an associate of the Catania Consulting Group of New Jersey, specializing in gaming matters. He is licensed to practice law in Illinois, Nevada and Wisconsin. Professor Kelly is co-editor of the Gaming Law Review and Economics, a leading gaming law journal. He is considered an expert in the field of gaming, having lectured on various gaming topics worldwide. His law review publications have been cited as authority by federal and state courts in the United States. Articles published by Professor Kelly regarding Internet gambling law and problem gambling were presented to the British Parliament by the Secretary of State of Culture Media and Sport .A report he coauthored entitled “Problem Gaming and Self Exclusion” was accepted by the South African Responsible Gambling Trust and cited as authority by the California Gambling Control Commission (2006). Professor Kelly has been used as an expert witness for several gaming companies, the United States Virgin Islands Casino Control Commission, the South African Parliamentary Committee on Trade and Industry ,Antigua and Barbuda and as an expert on poker in the trial of R v Kelly (Gutshot)(2007) in Crown Court (London), UK .He was also the major speaker on poker law at the Barcelona conference of the International Association of Gaming Regulators in 2006
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COMPLIANCE
REAL RISKS IN A VIRTUAL WORLD
BY JUSTIN WOLFF
While there is plenty of overlap between security risks facing physical and online casinos, online operations face some unique challenges. Both online and physical casinos must implement competent and effective compliance controls to ensure due diligence on customers and employees informs risk management. As long as there are games of chance, there will be people who are not averse to giving Lady Luck a nudge in the right direction.
>>
n a casino in Athens, a Serbian man in his twenties pauses between spins of the slot machine in front of him and reaches for his mobile phone. With a press of a button he activates the electronic device he’s spent months building into it and the credits on the slot machine multiply one hundred times. He plays for another ten minutes, then cashes out his credits and heads for the next casino.
I
A disgruntled developer in an East European leaves malicious code in a piece of casino software destined for use online. The code, when activated, will allow him access into the gaming software to manipulate the odds. Twelve months later, when the software is in use on several high profile gambling websites, he leaves the company, safe in the knowledge that his code has gone undetected. An investigative reporter for a major US news channel breaks the story of the gambling excesses of the third wife of the monarch of a small African kingdom. The reporter links the money lost at the international arm of a US headquartered casino to the disappearance of a sizeable charitable donation to the kingdom, sourced from US donors and intended to fund women’s education. When a tropical storm forces a small charter flight to make an emergency landing in Saint Croix, the holidaying Chief Executive of a payment-processing company with clients in the online gambling industry, en route to the British Virgin Islands with his family, sets foot on US soil and is arrested on charges of money laundering. Outtakes from Oceans 27? Scenarios like this couldn’t happen in the real world. Or could they? The first scenario, for example, is Casino & Gaming International I 63
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based on the actions of two Serbians – an IT geek and an informed casino regular – who joined forces to create a device that defrauded casinos across Europe. The logistics around an online operation compared to a physical casino appear attractive. There is little in the way of physical infrastructure required and management attention can be fully focussed on gaming without the hotels, restaurants, nightclubs and all the other operations ancillary to modern casinos. The headache of safeguarding and managing huge amounts of physical cash disappears and there is none of the massive investment needed in machines, tables and all of the other concrete paraphernalia. The enormous payroll of the physical casinos is replaced by a much smaller team. While online casinos require far fewer people, skilled and experienced staff are essential for risk mitigation and such people come at a price. But there is plenty of overlap between the licensing requirements of both, regulatory oversight imposes similar duties and the risks facing both types of operation have many common characteristics. FINANCIAL LOSSES TO CUSTOMERS With customer winnings a cost of doing business, casinos constantly face the challenge of determining which winnings are legitimate, which are due to advantage players and which are due to outright fraud. Many people, perhaps inspired by Hollywood portrayals of casino owners as gangsters, seem to believe that defrauding a casino is somehow less than outright theft. • Cash Controls Virtual casinos can outsource the flow of money to fund transfer companies, sparing themselves the challenge of managing, safeguarding and transporting cash. Real-world casinos have faced the problem of physical cash grabs since they first opened and have refined controls over the years to protect cash from customers and employees.
64 I Casino & Gaming International
• Identity Theft Online casinos are at risk of having people access their systems using stolen or false identity documents to circumvent security controls. Stolen credit cards too are a major problem and effective risk management relies on corroborating several sources of information and applying other Know Your Client protocols. Physical casinos have the advantage of dealing with their customers face to face and the effectiveness of facial recognition software linked into surveillance systems has improved their ability to positively identify problem customers. • Cheating the machines A roulette expert took upwards of five million dollars from a casino after identifying and successfully exploiting an imperfectly balanced roulette wheel. Blackjack gamblers have used dealers’ dealing aberrations to their advantage. Glitches in electronic machines are reportedly not uncommon. These actions are not fraudulent, but they certainly do not qualify as desired behaviour in a casino. Outright cheating can involve the physical manipulation of a gaming machine through various gadgets and electronic devices, miniature computers to help with card counting or the use of concealed cameras, transmitters and off-site analysis to predict the order of cards to be dealt. Hacking of online casino systems are more likely to tilt the odds against the house and in favour of all users, rather than just the hacker, and would be quickly picked up and closed down. However, if news were to spread that an online system had been compromised, the reputational damage for the online operation would be severe. Physical casinos guard against cheating through a hierarchy of gaming staff supervision, surveillance using Eye in the Sky and aerial walkways, the codification of proper procedures for all aspects of gaming and cash management, and detailed analysis of gameplay to identify patterns that might point to illegal behaviour.
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>> ENSURING COMPLIANCE WITH ANTI-MONEY LAUNDERING LAWS IS A KEY FUNCTION OF COMPLIANCE DEPARTMENTS WITHIN BOTH ONLINE AND PHYSICAL CASINOS. THE REPUTATIONAL DAMAGE CAUSED BY AN INADVERTENT CONTRAVENTION CAN BE SEVERE, NOT TO MENTION THE SANCTIONS THAT CAN BE LEVIED ON BOTH COMPANY AND SENIOR EXECUTIVES IN THE EVENT THAT WRONGDOING IS PROVEN. THE WORLDWIDE DISPERSAL OF THE ONLINE GAMING COMMUNITY MAKES THIS A PARTICULAR RISK FOR ONLINE CASINOS, BUT PHYSICAL CASINO GROUPS WITH INTERNATIONAL OPERATIONS ARE EQUALLY AT RISK. >> Online casinos, cannot obviously use the same supervision and surveillance controls, but gaming software has built-in controls and operates consistently according to the procedures programmed. Analysis of betting and winning patterns is also built into the software to flag any potential problems. • Illegal customer behaviour A proportion of customers will inevitably do their best to scam a casino and the controls in place in physical casinos have evolved to effectively counter this. Again, due to the physical remove of online gambling, other compensating controls have had to be built in, mainly relying on gameplay pattern analysis. Collusion in online poker rooms is reported to be widespread, a practice that is less easy to get away with in a physical poker room. The use of poker bots to play hands for online players, the use of multiple accounts and datamining are further examples of dishonest gambling behaviour that affect online poker specifically. While the physical and software controls built into the gaming experience help, it makes sense to know as much as you can about the background of the customer who has just walked
in to your casino or logged on to your gaming website. Are they who they say they are? Is their personal information correct and verifiable? Do they have a history of illegal behaviour? Are they associated with anyone who does? Are they playing with their own funds or fronting for someone else? Perhaps due to their virtual nature, the online casinos tend to lead the way in fraud mitigation. In either environment, a skilled, experienced and thorough compliance department focussed on customers screening is an essential first step in managing the risk of fraudulent loss. FINANCIAL LOSSES TO EMPLOYEES • Collusion between employees and customers The normal controls designed to protect against customer scams can be circumvented by collusion with casino staff. The sheer size of physical casinos’ workforce make this a much harder area to control than in the online gambling environment. A staff member at a craps table might turn a blind eye when their accomplice switches the house dice for his own loaded pair.
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>> WITH CUSTOMER WINNINGS A COST OF DOING BUSINESS, CASINOS CONSTANTLY FACE THE CHALLENGE OF DETERMINING WHICH WINNINGS ARE LEGITIMATE, WHICH ARE DUE TO ADVANTAGE PLAYERS AND WHICH ARE DUE TO OUTRIGHT FRAUD. MANY PEOPLE, PERHAPS INSPIRED BY HOLLYWOOD PORTRAYALS OF CASINO OWNERS AS GANGSTERS, SEEM TO BELIEVE THAT DEFRAUDING A CASINO IS SOMEHOW LESS THAN OUTRIGHT THEFT. >> Threats of violence to the family of a blackjack dealer could entice her to accept a pre-ordered deck from a customer. Double cashing – the practice of cashing the ‘same’ cash for double the chips – is difficult to detect. • Losses to corrupt employees Given the size of the casino industry it is likely that there are a number of corrupt employees on the payroll at any given time, in both the physical and online environments but again the size of the physical workforce means this is a larger problem in the physical venues Surveillance, tracking and supervision play key roles in risk management around employees in a physical casino environment. These controls are not all applicable in the online industry which makes a comprehensive Know Your Employee programme even more important as a key component of effective risk mitigation. Due diligence should be conducted on employees before hire and periodically during employment. Even after employment is terminated there needs to be periodic checks to ensure that the employee is not enjoying the rewards of corrupt behaviour that has thus far gone undetected. REPUTATIONAL DAMAGE Given the commodity nature of the majority of gambling activities, casinos put great effort into marketing and loyalty programmes to attract and retain customers. All of this effort is wasted should a casino operation suffer reputational damage and its customers react by defecting to a rival casino. • Leakage of customer data The majority of customers on online gambling websites are concerned about the safety of their deposited funds and the degree of privacy of their personal information. While encryption technology and external verification of site security allay some of these fears, any reports of a successful hack into the website is likely to cause both new and existing customers to seriously consider gaming somewhere else. • Underage / self-excluded gamblers Resources have to be allocated to the identification and exclusion of underage gamblers and those on voluntary self-exclusion lists. Information entered in an online application must be corroborated and screened against self-exclusion lists before account activation. Physical casinos may make use of random (or obligatory) ID checks and facial recognition software to ensure compliance with licensing and regulatory requirements. • Money Laundering Ensuring compliance with Anti-Money Laundering laws is a key function of compliance departments within both online and physical casinos. The reputational damage caused by an 66 I Casino & Gaming International
inadvertent contravention can be severe, not to mention the sanctions that can be levied on both company and senior executives in the event that wrongdoing is proven. The worldwide dispersal of the online gaming community makes this a particular risk for online casinos, but physical casino groups with international operations are equally at risk. Overlapping jurisdictions and varying regulatory regimes compound the challenge for compliance departments requiring a thorough knowledge of the applicable laws and due diligence on customers’ background and known associates. • Jurisdiction Online gambling is currently outlawed in the US, although the exact status of online poker in the US is unclear. It is, nevertheless, incumbent on virtual casinos in the rest of the world to make sure that other forms of online gambling are inaccessible to US citizens or suffer the consequences. Thorough due diligence to corroborate and verify personal information is therefore essential. This particular risk clearly does not apply to a physical casino. While there is plenty of overlap between security risks facing physical and online casinos, online operations face some unique challenges. Both online and physical casinos must implement competent and effective compliance controls to ensure due diligence on customers and employees informs risk management. As long as there are games of chance, there will be people who are not averse to giving Lady Luck a nudge in the right direction. CGI NOTE This article was co-authored by Robert Mitchell, a Consultant at World-Check.
JUSTIN WOLFF Justin Wolff is a writer and a Chartered Accountant with ten years experience in financial services. He is a communication consultant to WorldCheck.
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www.alderneygambling.com
Regulation for the 21st Century Alderney has long been regarded as the leading jurisdiction in the world for eGambling regulation. The island has a hard won reputation for a strong but pragmatic approach which, coupled with an unmatchable commercial and technical environment, delivers performance at every level. Alderney is easily the world’s largest centre for eGambling. A recent, GSQTVILIRWMZI WXYH] GSRHYGXIH F] E [IPP ORS[R EGGSYRXERG] ½VQ concluded that Alderney was also a considerably lower cost base from which to operate than any other comparable jurisdiction. Marking its 10th anniversary, the Alderney Gambling Control Commission
%+'' JIPX MX [EW ETTVSTVMEXI XS I\EQMRI XLI ½XRIWW SJ MXW PMGIRWMRK regime. A comprehensive review concluded that from many perspectives, improvements could be introduced which might radically alter the way the industry is regulated. Three perspectives were considered: the jurisdiction, the industry and crucially, the changing regulatory environment, particularly in Europe but EPWS EGVSWW XLI %XPERXMG ERH JYVXLIV E½IPH LICENSING FRAMEWORK 8LI ½VWX SJ QER] RI[ ETTVSEGLIW XS FI XEGOPIH [EW XLI EGXYEP PMGIRWMRK framework. The current single licence system, introduced in 2006 [EW WIIR EW E [IPGSQI WMQTPM½GEXMSR EX XLI XMQI -X LEW FIIR GSTMIH extensively since, but is now felt to be outmoded. In particular, it did RSX VI¾IGX XLI RI[ FYWMRIWW QSHIPW FIMRK IRGSYRXIVIH TEVXMGYPEVP] the growth in ‘business to business’ services available to new entrants - such as media companies - and other channels to market. It has been noticeable that many new operators do not run the gaming themselves and outsource these functions to specialist providers. The split between those that contract with the player and those that provide the gaming platforms seemed logical and would allow a reduction in the licence fees to be introduced. Adopting a modular approach allowed for the greatest level of customisation with licensees able to construct the framework which suits them best. The creation of the Category 1 licence, which covers the player
Licensing Compatibility
management functions, is also compatible and complementary with the increasing trend for countries to introduce licencing for themselves. This allows them to control the activities presented to their citizens, impose a variety of controls on behaviour and gives them the ability to tax XLI ½RERGMEP EGXMZMX] ERH VEMWI EPP QERRIV SJ PIZMIW EW WIIR ½X F] XLSWI sovereign states. The illustration shows how national licences and the Alderney Category 1 dovetail together to offer the widest range of possibilities. The Category 2 licence, which covers the gaming platform, has a low ½\IH ERRYEP JII 8LMW VIGSKRMWIW XLEX XLI IGSRSQMG EGXMZMX] SJ FEWMRK the platforms in the jurisdiction has many advantages and licensees are able to make the most of the largest and most technically advanced infrastructure available in the offshore world. Their very presence also attracts holders of Category 1 licences who utilise those platforms. The very wide range of platforms based in the jurisdiction and the ability to access platforms located elsewhere (but regulated by Alderney), provides the widest choice of suppliers, games and activities to Alderney-based operators. NON GEOGRAPHIC The AGCC has also taken the innovative step of allowing platforms to be based outside of the jurisdiction. This could be considered a radical step but one that has many advantages as it increases regulatory oversight (platforms located outside the jurisdiction can voluntarily submit themselves to scrutiny by the AGCC). This in turn allows for the seamless transfer of those players to non-resident platforms. Additionally this facility affords greater performance for community based games such as poker that require global reach. It also delivers economies in costs in terms of regulatory compliance (one regulatory system across the entire system) and is particularly suitable for new activities such as live ingame betting and cloud computing technology. NEW LICENCE FEES %W LEW FIIR QIRXMSRIH XLI 'EXIKSV] PMGIRGI LEW E ½\IH JII ERH XLI opportunity has been taken to adjust the amount and the formula for the Category 1 licence fees. Alderney is a considerably lower cost base from which to operate than any other comparable jurisdiction. As such, the AGCC felt able to increase the potential licence fee payable based on RIX KEQMRK ]MIPH ;LMPI XLMW VIWYPXW MR MRGVIEWIW JSV XLI QSWX TVS½XEFPI MR Alderney’s regime it has also reduced costs for many. INTERNATIONAL CO-OPERATION While the structural changes increase Alderney’s attractiveness it is essential that jurisdictions today embrace the changing regulatory environment. It calls for high levels of co-operation between jurisdictions and the development of complementary licensing frameworks which recognise the rights of others to impose their own regulatory requirements. Alderney’s new regime works at all these levels and is now actively building relationships with like-minded regulators across the globe. This shared vision of deep and thorough regulatory oversight with a mutual sense of responsibility, heralds a new phase in the development of online regulation.
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Alderney’s new licencing regime separates regulated activities into two distinct areas: · the organisation of gambling operations - this includes player registration, management of player funds and of the gambling offering. This will be subject to a Catagory 1 licence. · the management and operation of a gambling platform - run from an authorised host. This will be subject to a Category 2 licence.
Licencing Model KEY
Conditions Apply Seamless Transfer
Category 1 Licence
Categor y 2 Licence
The Alderney Category 1 licence authorises the organisation of gambling operations, namely the registration and verification of players, the contractual relationship with them, and the management of player funds. Any Alderney-based operator providing gambling services to individual players will be required to have a Category 1 licence. Operators applying for such a licence will be required to do so through an Alderney registered company. The Alderney Category 1 licence complements the use of other (national) licences specifically acquired to gain access to par ticular territories.
A Category 2 licence authorises the operational management of a gambling platform located within an approved hosting centre. The holder of a Category 2 licence’s proprietary gambling software is approved and endorsed on their licence. Third-par ty gambling software operating on an Alderney-licensed platform must be approved and can only be supplied by a holder of a Software Suppliers Cer tificate (associate cer tificate). A Category 2 licence will be either resident or non resident. A Category 2 resident licence can only be held by an Alderneyregistered company. The non-resident licence will allow the non-resident platform operator to accept players from Alderney “seamlessly” i.e. without the need to warn them of the change of jurisdiction which
Provisional: Subject to legislative approval and may be subject to change
is otherwise required by Alderney. Any number of locations can be covered by a single non-resident licence. Similarly, operators in Alderney may establish fail-over facilities outside the jurisdiction without fur ther regulator y overhead. Categor y 1 licensees can freely send their players to Categor y 2 licensees wherever situated. Other non-cer tificated platforms may also be accessed but the Category 1 operator must inform their players of the change of jurisdiction.
Temporar y Use Licence Alderney offers a temporar y use licence for operators outside Alderney who may wish to make shor t-term use of Alderney’s superior technical infrastructure by establishing a secondary site in an approved hosting centre. Such facilities can
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Distributed N
etwork
Player Player
Player Player
Fees & Taxes Category 1 licence fees are charged based on the annualised 2IX +EQMRK =MIPH EW HI½RIH IUYEXMRK XS KVSWW TVS½X PIWW royalties) of the licensee concerned, on the following scale:Category 1 NGY up to £1m - annual fee £35,000. NGY of £1m to £5m - annual fee £70,000. NGY of £5m to £7.5m - annual fee £100,000. NGY in excess of £7.5m - annual fee £140,000. run under the operator’s primary non-Alderney regulatory system for a period of 30 consecutive days or 60 days in total in any six month period. There is no requirement for the holder to form an Alderney company. Activity in excess of those limits triggers a requirement to acquire the appropriate licence(s) from the AGCC.
'EXIKSV] PMGIRGIW VIWMHIRX ERH RSR VIWMHIRX GEVV] E ½\IH annual fee of £35,000. 7SJX[EVI 7YTTPMIVW GIVXM½GEXIW SXLIV[MWI ORS[R EW %WWSGMEXI 'IVXM½GEXIW GSWX † TIV ERRYQ )EGL ETTPMGERX SRP] VIUYMVIW SRI GIVXM½GEXI MVVIWTIGXMZI SJ XLI RYQFIV SJ KEQIW supplied and approved. Temporary Use Licences cost £10,000 per annum.
Alderney based licensees attract no corporation taxes, withholding taxes or gambling duties and there is no VAT.
Software Suppliers Cer tificate All third-par ty suppliers of gambling software are required to obtain an associate cer tificate and submit their software for approval against AGCC technical standards. Previous relevant testing from other regulators may be taken fully or par tly into consideration. There is no requirement to form an Alderney company for the purposes of applying for an associate cer tificate.
In the case of a new applicant’s Category 1 licence, the licence fee [MPP MR XLI ½VWX ]IEV SJ VIKMWXVEXMSR FI † -R WYFWIUYIRX ]IEVW MX will be linked to the Net Gaming Yield of the company subject to a cap EX † The fees applicable to existing licensees who transfer to Category 1 licensees under the new scheme will be phased in over a period of three ]IEVW 8LIVIJSVI E PMGIRWII GYVVIRXP] TE]MRK † TIV ERRYQ ERH [MXL E 2IX +EQMRK =MIPH MR I\GIWW SJ † QMPPMSR [MPP XEOI E QMRMQYQ SJ X[S renewals to reach the maximum fee. New applicants will, irrespective of XLIMV 2IX +EQMRK =MIPH WXEVX EX E JII SJ † ERH SRP] EX VIRI[EP [MPP they move to the fee related to their Net Gaming Yield.
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Alderney Gambling Fibre Optic Network
UK connections
International connections from London
International connections
International connections
International connections from Paris
Telecommunications Infrastructure Since 2005, Alderney’s legislation has allowed licensees to host in the larger neighbouring island of Guernsey, which has outstanding connectivity qualities and offers the highest quality of technical infrastructure in the offshore world. This superior technical capability has attracted many of the world’s largest operators to the jurisdiction and as a result Alderney has become the
Three Good Reasons for Choosing Alderney 1 Re regulaspected with c tion in tun needs ommercial e movin and a fast g indu stry. 2 The m ost co effect s jurisdiive Europeatction. n 3 The larges world’s advanct and most centre ed technic opera for eGam al tions. bling
world’s largest operational centre for eGambling. ;MXL QYPXMTPI ½FVI STXMG PMROW GSRRIGXMRK XS major global hubs such as London and Paris, and with Guernsey’s access to the largest transatlantic data routes, performance, speed and resilience are unmatched. Modern data centres abound and bandwidth requirements will never be an issue.
If you want to know more about what makes Alderney such a world class destination for eGambling, call Robin Le Prevost today on 0207 993 8564
Robin Le Prevost Head of E-Commerce Development Alderney Gambling, States of Alderney POBox 1, Island Hall Royal Connaught Square, Alderney British Channel Islands UK GY9 3AA Tel: +44 (0)2079 938 564 Mobile: +44 (0)7781 109 809 Email: info@alderneygambling.com Provisional: Subject to legislative approval and may be subject to change
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CURAÇAO
WHAT IS THE BUSINESS MODEL SHAPING UP TO BE?
BY CHRIS FANGMAN AND ANTHONY DICK
Curaçao’s international services providers are critical components in the Curaçao eGaming business model, the success of which has had a positive impact on job creation, the generation of foreign exchange and the increase in economic activities. With the creation of eZones an infrastructure for eCommerce and eGaming is steadily advancing, with benefits to gaming companies from a low fixed corporate income tax rate of two percent, no turn over tax, and no import duties.
>>
nternet gambling was introduced to the island of Curaçao in 1995 after the passage of legislation in 1993. The Internet was in its eCommerce infancy with players using dial-up modems and slow computers. Service providers and their clients had very little practical experience. Nearly 15 years later and technology has changed the business model dramatically with active competition between eGaming companies and jurisdictions alike. On the technology side a new brand of CTO has emerged who have to sort out the ongoing pressure of internal marketing and business development teams with the capabilities of the software platform. Curaçao has remained focused on industries like eGaming that emphasise intellectual capital and high valueadded services serving the international marketplace. Curaçao’s corporate trust companies and its IT/eCommerce providers are seen as being two of the more important ‘partners’ of this industry. A professional corporate trust company understands the challenges of the gaming industry and provides the corporate and tax infrastructure that supports both Curaçao and its international corporate citizens. The knowledge and experience of Curaçao’s international services providers who understand the eGaming industry are critical components in the Curaçao eGaming business model. The success of this business model has had a positive impact on job creation, the generation of foreign exchange and the increase in economic activities.
I
WHAT ARE THE COMPONENTS OF CURAÇAO’S BUSINESS MODEL FOR EGAMING? Since the Second World War the Netherlands Antilles Government has followed a consistent policy of Casino & Gaming International I 71
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CURAÇAO
>> THE RECENT CHANGES IN SOME JURISDICTIONS’ LEGISLATION HAVE RESULTED IN ONLINE POKER OPERATORS BEING TAXED TWO PERCENT ON GLOBAL WAGERS. SOME HAVE CALCULATED THAT ALTHOUGH THIS MAY SEEM LOW AT FIRST GLANCE IT WILL LIKELY RESULT IN AROUND 60 PERCENT OF GROSS REVENUE. SOME EU JURISDICTIONS’ ARE REQUIRING THAT EVEN AN EULICENSED OPERATOR OBTAIN AN ADDITIONAL GAMING LICENSE IN THAT COUNTRY IN ORDER TO OPERATE WITH THAT COUNTRY’S MARKET. THIS APPROACH SEEMS TO BE IN BREACH OF THE EU PRINCIPLE OF MUTUAL RECOGNITION OF BUSINESS LICENSED ELSEWHERE IN THE EU. >> encouragement towards international holding, finance, property and licensing companies, mutual funds and offshore banking. By the mid-1960s, the Netherlands Antilles, particularly Curaçao, had become a well-known international financial centre. Curaçao’s financial services sector is quite advanced and many of the world’s leading financial institutions and nonbanking financial intermediaries have offices in Willemstad. All of the larger international audit firms are represented in Curaçao. Legal practitioners and tax advisors are sophisticated in providing expert advice in the fields of international corporate and tax law. To assist companies to obtain the proper licensing and IT environment a number of professional firms have sprouted in the past few years that are knowledgeable about the process and able to provide the required assistance. CURAÇAO’S TRUST COMPANIES – PART OF THE BUSINESS MODEL Curaçao’s trust offices have provided the resources and technical capabilities to accommodate all the requirements of its international clientele and their various methods of payment. In 2001 new legislation for eZones were effected in the Netherlands Antilles with the purpose of creating an attractive environment for development of international eCommerce activities in designated eZones. International trade organisations that use the Internet highway for their international transactions can route their trade movements through an establishment in such an eZone. Thus they can benefit from a low fixed corporate income tax rate of two percent, no turn over tax, and no import duties. Trust companies provide the expertise to coordinate the application for this special tax status and the authority to operate an Internet eGaming company from Curaçao. eZone companies must meet certain requirements in order to officially obtain and maintain an eZone status. A professional trust company licensed and supervised by the Central Bank can organise all of the required licenses and permits, provide a local director and arrange for hosting of computer servers and Internet connectivity. CURAÇAO’S IT EXPERTISE – SUPPORTS THE CURAÇAO’S BUSINESS MODEL Very few jurisdictions can say that they were there from the beginning. Curaçao boasts being one of the only jurisdictions 72 I Casino & Gaming International
that gave birth to many of today’s most prominent eGaming companies. Since that time competition amongst jurisdictions has heightened and Curaçao’s most successful IT service providers continue to separate themselves from the competition in other jurisdictions. Ask any CEO and CTO’s that have done business in Curaçao in the past and the present. They can tell you that there is no better story than the Curaçao experience and the willingness and proactive approach of its most experienced IT professionals who help clients be the best they can be. Scalability and robustness are concepts understood in Curaçao. If one tracks the investment in data center capabilities on the island of Curaçao you will see that it has not only kept pace with the eGaming industry, it has invested in the future. The Curaçao business model is to be proactive rather than reactive. A case in point is the support by the Curaçao Government’s international telecommunications provider. No other jurisdiction has a public/private partnership in Internet services that support the eGaming industry. A new eCommerce Initiative is in play between the private sector and the Government-owned telecommunications concession holder United Telecommunications Services’ (UTS) subsidiary ePowerhouse. UTS has provided telecommunications services for nearly 100 years for all of the Netherlands Antilles. The colocation facilities for both eGaming and eCommerce at the UTS – Vredenberg eZone is the only direct 'back to back' mission critical connectivity point to the Internet’s International edge in Curaçao. The co-location and managed services facilities provide the finest eCommerce services in the Caribbean region. CURAÇAO’S EGAMING PRIVATE SECTOR – AN IMPORTANT PART OF THE BUSINESS MODEL The Curaçao Internet Gaming Association is an important spokesman for the various operators and service providers in Curaçao. CIGA is proactively engaged in direct communication with the government of the island and the territory of the Netherlands Antilles in order to ensure high standards. The co-author of this article is the vice-chairman of CIGA and also managing director of the entity that provides eGaming licensing and eZone co-location services. Being receptive to new game, trends and gambling products Internet eGaming operators and software companies are always looking to increase their portfolio of games. The
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CURAÇAO
flexibility to respond to the ever-changing and diverse needs of the eGaming industry such as licensing betting pools for horseracing and financial vehicles, live in-progress sports betting, network gaming, and so on. is an important part of Curaçao’s business model. Being receptive to the multitude of new betting trends separates Curaçao from other jurisdictions. As competition increases, the ability to supply clients new and old with the support they need is becoming more important than ever. TAXES, HARMONISATION VERSUS JURISDICTIONAL LICENSING Very often the actual cost of operating in a jurisdiction is not understood. It is now more important than ever to engage the services of a professional tax advisor when choosing an eGaming jurisdiction. This is an important issue for companies that are located in the EU. Curaçao has no VAT. A tax on the amount of wagers has never existed in Curaçao. There is only one tax in Curaçao for a properly licensed eZone company. – two percent of the corporate net profits. As a comparative example, the recent changes in some jurisdictions’ legislation have resulted in online poker operators being taxed two percent on global wagers. Some have calculated that although this may seem low at first glance it will likely result in around 60 percent of gross revenue. Some EU jurisdictions’ are requiring that even an EU-licensed operator obtain an additional gaming license in that country in order to operate with that country’s market. This approach seems to be in breach of the EU principle of mutual recognition of business licensed elsewhere in the EU. The ongoing discussion of harmonisation of eGaming licensing versus jurisdictions that favour their own licensing system is an evolving issue. Curaçao’s relations with the EU with respect to eGaming services are an important subject. Curaçao and the Netherlands Antilles have a unique standing within the EU as an Associate Member of the European Union (EU) and a designated Overseas Country and Territory (OCT) of the Kingdom of the Netherlands. The Directorate of Economic Affairs has indicated plans to promote services (e.g. telemarketing) under this arrangement, which offers preferential treatment to the Netherlands Antilles. All Member States of the European Union are required to abide by the ruling that the internal market should be open for free movement of services from Curaçao. The effect of which is believed by many that any company operating under the gaming license of an EU-OCT, has all of the same rights to operate and market to residents of the regulating EU state as are enjoyed by the licensees under its own licensing regime. Such recognition applies for all such services as may be offered, whether or not the EU regulating state regulates for the same scope of services or not. SUMMING IT UP Many believe that jurisdictions will have to adapt their legislation to the changes in technologies. Time critical gaming networks with global participation will require that jurisdictions understand these technologies. Whether a gaming operator is licensed in Curaçao, Malta, or the Channel Islands, the business model of Curaçao is to support the unique technologies of the eGaming market and to continue to present itself as a jurisdiction whose legislation
has always been friendly to eGaming; The Curaçao IT/Ecommerce service sector are experienced and proactive; and the professional providers of corporate formation understand the tax implications of Internet companies operating in this global economy. CGI
CHRIS FANGMAN AND ANTHONY DICK Chris Fangman is Director of Carmanco N.V. the e-management company of Curacao Trust Management N.V. carrying out management of gaming companies www.trustctm.com
Anthony Dick is Vice Chairman of Curacao Internet Gaming Association and Managing Director for Curacao eGaming Licensing www.curacaoegaming.com
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ISLE OF MAN
REFINING EFFICIENCY AND PROMOTING eGAMING SUBLICENSING FLEXIBILITY BY MILES BENHAM
The Isle of Man is recognised as a strongly regulated jurisdiction for eGaming, and that has served to enhance – rather than to restrict – the Island’s business attractiveness to gaming companies. In particular, companies are now benefiting from a range of modifications including a sublicensing system, special new B2B rules and changes allowing operators to provide credit for gambling.
>>
n the Isle of Man online gambling is a legal, licensable activity which is regulated by the Isle of Man Gambling Supervision Commission . The Island is home to the likes of Pokerstars, Microgaming, Playtech, NYX Interactive, 188.com and SBOBET.com. The Island was one of the first jurisdictions to license and regulate online gambling and since the first online gambling licence was granted in 2001 the Island’s regulatory and licensing system has been constantly refined and improved. There are currently two forms of online gambling licence available, a main licence and a sub-licence. A main licence allows an operator to conduct any form of online gambling (except spread betting) for a single annual licence fee of £35,000. For example, an Isle of Man operator could conduct online casino games, poker, sports betting, a betting exchange and a lottery all under one licence. The sublicensing system is new and was created to accommodate the requirements of the software companies licensed on the Island. The sublicensing system is designed to enable the providers of gaming software have sublicenses issued to their business customers. The idea behind this is to enable the software companies to provide a greater range of services to their customers in a cost efficient manner. For example, a customer may want to use the provider’s software but to use their own payment systems and keep control of their player data. This can be achieved through the use of sublicenses as the sublicense is a normal online gambling licence issued in the name of the sublicense holder with the only restriction being that the sublicense holder has to use the software of the main licence holder. A sublicense costs £5000 per annum. All operators pay online gambling duty to the Islands
O
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>> THE SUBLICENSING SYSTEM IS NEW AND WAS CREATED TO ACCOMMODATE THE REQUIREMENTS OF THE SOFTWARE COMPANIES LICENSED ON THE ISLAND. THE SUBLICENSING SYSTEM IS DESIGNED TO ENABLE THE PROVIDERS OF GAMING SOFTWARE HAVE SUBLICENSES ISSUED TO THEIR BUSINESS CUSTOMERS. THE IDEA BEHIND THIS IS TO ENABLE THE SOFTWARE COMPANIES TO PROVIDE A GREATER RANGE OF SERVICES TO THEIR CUSTOMERS IN A COST EFFICIENT MANNER. >>
Treasury on the gross gaming yield (bets less winnings or rake) at the following rates: (a) for gross gaming yield not exceeding £20m per annum 1.5 percent (b) for gross gaming yield of more than £20m per annum, but not exceeding £40m per annum 0.5 percent (c) for gross gaming yield exceeding £40m per annum 0.1 percent Island based operators also benefit from the Islands low rates of tax. Corporation tax rate is 0 percent and there are no capital gains taxes or wealth taxes. While personal income tax for residents is 18 percent of a person’s world wide income this is capped at a maximum of £100,000 tax per year. The combination of an attractive licensing system, low rates of duty and tax and a tax cap on individual taxation has
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encouraged a number of operators to base not only their business on the Island but also some of their shareholders and senior management. The Island offers a robust and genuine regulatory system. Regulatory oversight of all operators is conducted by the Gambling Supervision Commission which has an experienced team of gambling inspectors. The Island’s regulatory system has evolved over time and in response to demands from the industry and international best practice. While there is genuine and serious regulatory oversight there is not regulation for the sake of regulation and the current regulations are both workable and easy to comprehend. An example of the way the regulations have changed and adapted can be seen with the system testing regulations . The first regulations in 2001 were onerous and expensive to comply with. An operator was expected to have the source code of their software independently checked and no changes to the software or computer system could be made without the consent of the Commission.
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>> OPERATORS ARE NOW ALLOWED TO PROVIDE CREDIT FOR GAMBLING. IF AN OPERATOR WANTS TO PROVIDE GAMBLING BY WAY OF CREDIT TO INDIVIDUALS THEN SPECIAL PERMISSION NEEDS TO BE OBTAINED FROM THE GAMBLING COMMISSION. HOWEVER, IF THE OPERATOR SIMPLY WANTS TO GRANT CREDIT TO A PARTY IT IS IN A BUSINESS TO BUSINESS RELATIONSHIP WITH THEN CONSENT OF THE COMMISSION IS NOT REQUIRED. >>
After listening to the comments of the industry a more enlightened and workable system was introduced which still provides a robust system of regulatory oversight and protection for players. The new system testing regulations rely on the use of a 3rd party testing house but are based on output testing rather than a detailed analysis of the source code. Operators can make changes to their software and hardware without the need for regulatory approval or re-certification as long the overall “system� continues to comply with the regulations. The application process for obtaining an online gambling licence has been simplified and there are now detailed guidance notes on the Commissions website that provide a lot of useful background information. Essentially, the application forms are completed and references and a business plan are submitted. After consideration of the application and dealing with any issues that arise a licensing hearing takes place before the Commission. Most licenses are issued subject to certain matters being carried out before the operator goes live. The current turn around time for the granting of a license is 12
weeks from the submission of the application forms. There is a requirement for the operating company to have its mind and management on the Island. The Commission required an operator to fulfill this requirement by having a minimum of two directors who are based on the Island. In practice some established operators have opened offices and have hundreds of staff based on the Island along with the key management whereas a number of startups have utilised the services of a corporate service provider to achieve similar results. There are a number of licensed corporate service providers based on the Island that will provide operators with Island based directors and assist with various administration matters such as the holding of board meetings through to making payments and providing accounting services. It has been found that as the operators business grows and becomes established so does their presence on the Island. All operators must have a designated official who must also be a director of the company. The role of the designated
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>> A RECENT CHANGE TO THE ISLAND’S REGULATORY SYSTEM HAS BEEN THE INTRODUCTION OF SPECIAL RULES FOR BUSINESS TO BUSINESS GAMING. AN EXAMPLE OF BUSINESS TO BUSINESS GAMING IS WHERE A BOOKMAKER ACCEPTS BETS FROM ANOTHER BOOKMAKER THAT WANTS TO LAY OFF SOME OF ITS BETS. PRIOR TO THE CHANGES THE OPERATOR UNDER THE OLD ANTI-MONEY LAUNDERING LEGISLATION COULD TECHNICALLY HAVE BEEN REQUIRED TO IDENTIFY ALL OF THE CUSTOMERS THAT MADE UP THE BETS BEING LAID OFF BY THE OTHER BOOKMAKER. >> official is to represent the company before the Commission and to ensure that the regulations are being complied with. If the designated official is based off Island then the operator must also have an Operations Manager based on the Island so as to provide the Commission with a point of contact. As would be expected from a well regulated jurisdiction the Island has strict anti-money laundering and prevention of terrorist financing legislation which operators must comply with. All operators must identify their customers before any online gambling takes place. When a payment of over ?3000 (averaged over a period of 30 days) is to be made to a customer for the first time the operator must obtain evidence of the customers identity by obtaining a copy of their passport and a utility bill showing their residential address. There are exemptions from the requirement to obtain evidence of identity for operators of peer to peer gambling sites such as poker companies. However, in the event that an operator notices any suspicious activity by a player full verification of the players identity must be carried out. A recent change to the Island’s regulatory system has been the introduction of special rules for business to business gaming. An example of business to business gaming is where a bookmaker accepts bets from another bookmaker that wants to lay off some of its bets. Prior to the changes the operator under the old anti money laundering legislation could technically have been required to identify all of the customers that made up the bets being laid off by the other bookmaker. Clearly, this would be impractical and pointless as they are the customers of the other bookmaker. Under B2B rules the operators’ customer is the business that is placing the bets with it and not the customers of that business. This means that the operator only has to obtain verification of the identity of the company that it is accepting the bets from under the B2B relationship. Operators are now also allowed to provide credit for gambling. If an operator wants to provide gambling by way of credit to individuals then special permission needs to be obtained from the Gambling Commission. However, if the operator simply wants to grant credit to a party it is in a business to business relationship with then consent of the Commission is not required. The combination of the new business to business model, the availability of gambling using credit and the Islands proximity to Europe has made the Island an attractive jurisdiction for Asian online bookmakers. The Isle of Man is a crown dependency and has its own parliament, creates its own legislation and sets its own taxes. While Island residents can freely travel throughout Europe the Island is not a full member of the European Union and is not 78 I Casino & Gaming International
required to implement EU Directives. The Island is within the EU Value Added Tax system and the Islands VAT laws are the same as those in England. Gambling is exempt from VAT. One issue that is commonly raised when operators are comparing the licensing jurisdictions of the Isle of Man, Alderney, Malta and Gibraltar is that as the Isle of Man is not a member of the EU its operators have no automatic right to sell their services into Europe. This is correct in theory but in practice it is more of an academic argument in most EU states than a practical one. The Island is on the UK White List and operators can freely advertise into the UK from the Island. As the recent European Court of Justine case involving Bwin has shown the mere fact an operator has an online gambling licence in an EU state does not automatically give that operator the right to sell its gambling services across the EU. The ideal of a single EU licence giving access across the whole of the EU is also rapidly being undermined by individual EU states such as Italy and France bringing in their own licensing systems. All of these changes make the Isle of Man a safe jurisdiction from which to headquarter an online gambling operation. Global operators now have to have licenses in multiple jurisdictions in order to gain access to the worlds markets. The Island offers a safe, tax neutral base from which to operate an online business. CGI MILES BENHAM Miles was admitted to the Manx Bar on the 25th September 1996 and is a Commissioner for Oaths and a Notary Public. In September 1997 Miles and Timothy Mann formed the firm MannBenham. The practice of Mann Benham was transferred to the incorporated legal practice of MannBenham Limited on the 1st October 2000 which in 2008 changed its name to MannBenham Advocates Limited. Miles is a director and shareholder of the company. Miles has a diversified practice which includes general commercial work and High Court Litigation. Miles acts for a number of well known online gambling companies and e-businesses. Miles is a member of the International Masters of Gaming Law www.gaminglawmasters.com and has spoken at numerous international conferences on online gambling. Miles is the author of the Isle of Man chapter of the long running Internet Gambling Report. www.mannbenham.com
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RESPONSIBLE GAMBLING
TAKING PRECAUTIONS IS A NON-NEGOTIABLE OPERATOR OBLIGATION
BY TEX REES
Problem gamblers constitute a miniscule percentage of the legions of online players, yet attract a disproportionately large amount of media coverage and the attention of society. For these reasons alone, professional operators must commit to providing comprehensive facilities for handling this type of gambler, quite apart from it being the right and business-efficient thing to do. So how are online venues accredited by the organisation trained; and what should operators have in place for a best practice approach?
>>
esponsible gambling ranks very high in our priorities for both social responsibility and business reasons, and in October I completed a series of one day operator inhouse training courses in several countries, explaining the critical importance of problem gambling precautions to 70 key personnel from several operators accredited by my employer. This year is the fifth in which we have provided this professional service to Safe and Fair seal-bearing online gambling venues across the online casino, poker room, mobile, bingo, live dealer and sports betting platforms of the145 international, tier one gaming sites that are accredited. It is heartening to note that this service is in constant demand, illustrating a real commitment to responsible gambling by operators that goes beyond merely meeting the standard accreditation requirements in this regard.
R
A SMALL PERCENTAGE In the real world, problem gamblers constitute a tiny percentage of the hundreds of thousands, if not millions, of punters who go online for usually disciplined and enjoyable betting entertainment on a regular basis. For example, in its 2007 UK gambling prevalence study, an independent survey for the Gambling Commission found that only 0.6 percent of people were possibly at risk as ‘pathological’ gamblers. That small percentage attracts a disproportionately large amount of political, social and above all media attention. The good community work carried out by many operators receives scant applause, but a compulsive gambler who steals from an employer to feed a habit will invariably attract repeated headlines as the case is followed to its conclusion and the gambler punished. Rather than feeling hard done by at the apparent imbalance Casino & Gaming International I 81
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that this implies, we should take this keen interest in compulsive gamblers as indicative of the seriousness with which society views the problem. That should spur us to greater efforts to do our part in identifying and excluding those gamblers who are in danger of developing a problem – preferably before it becomes a critical issue. Stopping problem gamblers at website level is just one aspect of a responsible gambling programme, which should also embrace marketing and advertising, providing self-diagnostic aids and advice on counselling, and training staff in the right way to handle self-exclusion requests and indeed problem gamblers per se. Our course therefore addresses the following areas: • Awareness of what issues a problem gambler faces; • Perceived numbers as opposed to actual prevalence study percentages; • The implementation of best practice standards and requirements, including practical sessions on gambling websites where the facilities are analysed critically, and the reasons for inclusion in our standards discussed; • The demonstration of fairness through Payout Percentage and RNG reports; • Advertising standards, with examples of gambling ads recently criticised by the UK Advertising Standards Authority; • Identifying and dealing with problem gamblers and understanding how a compulsion can develop, concluding with role-playing exercises and in-depth discussion sessions. The objective of the course is not only to address problem and underage gambling timeously, but to continually underline for operators the critical moral and business imperatives of continued vigilance and the diligent application of genuine responsible gambling programmes, using rapidly evolving exclusionary technologies and training content. To maintain gambling as a form of entertainment, the pastime must be operated responsibly, and having an understanding of problem gambling helps to inform us on player protection and how to go about this. WHAT MAKES A PROBLEM GAMBLER? In broad terms, what constitutes a problem gambler? A problem gambler is a person who spends time and money gambling in such a way that it is harmful to him or her. A severe problem gambler is known as a compulsive or pathological gambler. The main symptom of problem gambling is a punter’s loss of control over his or her gambling. Loss of control can be described in the following ways: • Gambling will escalate, as the person needs to take greater risks to maintain a certain level of excitement or to try to win back his or her money. • Some people cannot stop gambling when they are ahead. If they win money, they feel they can win more by betting again. Eventually, luck runs out, but problem gamblers will continue gambling until all their money or credit has been depleted. Contrast these tendencies with the vast majority of gamblers, 82 I Casino & Gaming International
who regard the pastime as a form of entertainment and socialising: • They do not risk more than they can afford to lose. • They accept losing as “part of the game” and do not “chase” their losses. • Their gambling does not interfere with their work or family life. Professional gamblers are a separate sub-set who bet to make profits, not for the excitement, social contact or to avoid or escape problems. This class of gambler shows tremendous discipline and rarely takes unnecessary risks. They usually stop when they are ahead. Many problem gamblers claim to be professional gamblers, but the reality is that professional gamblers do not have problems caused by gambling. At the end of the month or the year, they are usually ahead, whereas people with gambling problems are almost always in the red. It is not unknown for even professional gamblers to fall prey to unhealthy gambling behaviour, however. It is important that operators understand the social responsibility obligations which running a professional online gambling company demands. WHAT IS SOCIAL RESPONSIBILITY IN THE ONLINE GAMBLING CONTEXT? The responsibility for an individual’s gambling is their own, but the responsibility to exercise a duty of reasonable and responsible care is that of the operator. That duty of care comprises: • “Reasonable and Practical” steps to protect customers from harm • Providing the opportunity for individual gamblers to become informed, using the website and through other means of communication. • In many ways the extent and nature of this responsibility is at the discretion of the operator, because the concept of Duty of Care is yet to be fully articulated in gambling law. One thing is clear, however, and that is that the law acknowledges that the decision to gamble resides with the player: Star City vs. Behrouz Foroughi, where Justice Jacobsen stated: “A gambler who enters a casino in breach of a voluntary exclusion order and suffers losses will have no redress in the form of a damages claim against the casino. That is not to say that the casino does not have some obligation to try to detect such persons and remove them. However, the questions of what measures the casino should have in place are, essentially, a matter for the Casino Control Authority.” And in the case of William Hill plc vs. Graham Calvert, Mr. Justice Briggs ruled that, William Hill did not owe a self excluded compulsive gambler a duty of care. The Judge pointed out that the firm had failed to take reasonable steps to stop Mr. Calvert betting by phone. However, he found that pathological gambling would probably have still led to the claimant’s financial ruin, but over a longer period of time.” William Hill’s failure to take reasonable care to exclude him from telephone gambling... did not therefore cause Mr. Calvert any measurable financial or other loss.”
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CONTRARY TO POPULAR BELIEF, WHEN TIMES ARE HARD, PEOPLE DON'T TEND TO GAMBLE MORE IN THE HOPE OF GETTING OUT OF FINANCIAL DIFFICULTY: ON THE CONTRARY, THEY TEND TO GAMBLE LESS BECAUSE THEY HAVE LESS TO SPEND GENERALLY ON ENTERTAINMENT. THIS IS WELL DOCUMENTED IN RELATION TO GAMBLING REVENUES AROUND THE WORLD, BOTH PAST AND PRESENT. NRGP EXECUTIVE DIRECTOR PROFESSOR PETER COLLINS >> JUST HOW PREVALENT IS PROBLEM GAMBLING? This statistic varies slightly around the world. We have already seen that in the UK 0.6 percent are at risk. In the British Columbia province of Canada (a survey in 2003) the figure for severe problems was 0.4 percent, whilst a 2006 study in Australia’s NSW territory showed a larger percentage at 0.8 percent. In South Africa, the National Responsible Gambling Programme (NRGP) reports that the percentage of problem gamblers has remained constant at less than 1 percent of adults since 2005. “Over 95 percent of the adult population experiences no problems of any kind. About 0.5 percent experience very severe problems, and about a further 4 percent have more or less mild problems,” NRGP executive director professor Peter Collins said. He observed: “Contrary to popular belief, when times are hard, people don't tend to gamble more in the hope of getting out of financial difficulty: on the contrary, they tend to gamble less because they have less to spend generally on entertainment. This is well documented in relation to gambling revenues around the world, both past and present.”
following criteria:
WHAT ARE THE WARNING SIGNS OF PROBLEM GAMBLING, AND HOW CAN AN OPERATOR PROVIDE THIS KNOWLEDGE TO THE PLAYER? One of the most effective tools for identifying potential problem gambling tendencies is the self diagnostic questionnaire. Examples include the NORC Diagnostic Screen for Gambling Problems using the NODS-self-assessment test and the Canadian Problem Gambling Index, which asks the player: 1. Have you bet more than you really could afford to lose? 2. Have you needed to gamble with larger amounts of money to get the same feeling of excitement? 3. When you gambled, did you go back another day to try to win back the money you lost? 4. Have you borrowed money or sold anything to get money to gamble? 5. Have you felt that you might have a problem with gambling? 6. Has gambling caused you any health problems, including stress or anxiety? 7. Have people criticised your betting, or told you that you have a gambling problem, regardless of whether or not you thought it was true? 8. Has your gambling caused any financial problems for you or your household? 9. Have you felt guilty about the way you gamble or what happens when you gamble?
In that test, a score of 5 upwards indicates pathological gambling risk.
Having answered these questions and scoring 0 = never, 1 = sometimes, 2 = most of the time and 3 = almost always, the player can then assess his or her condition based on the
0 = no problem 1- 2 = low risk 3 – 7 = moderate risk 8 + (to max. 27) = problem gambling potential The Diagnostic and Statistical Manual’s DSM-IV test devised by the American Psychiatric Association pretty much reflects the tendencies targeted by these questions: • Preoccupation with gambling • Tolerance (need to gamble with more money for longer) • Withdrawal (irritable when stops) • Escape; improve mood or escape problems • Chasing losses • Lying, tries to hide the extent of gambling • Loss of control • Illegal acts (theft, stealing, fraud etc) • Risked significant relationship (job, education) • Bailout (asks others for money etc)
Frequently observed characteristics in problem gamblers include: • Winning is very important in their lives. • There’s a need to be seen as ‘an achiever’ & ‘special’. • A tendency to live in the ‘here & now’ with little regard for the future. • Avoids responsibility passing this on to family and friends wherever possible. And in serious cases, the gambler will slip into denial: • Refuses to acknowledge a problem exists or is developing. • Rationalises failure as ‘I just don’t have enough money’ or that luck is about to change for the better if he/she can only keep going. • Will not admit to losses, regarding these as temporary setbacks no matter how prolonged or serious i.e. winning and losing ‘streaks’. • Tries to find other sources of money and chases losses. Conceals gambling activity. • Claiming the game is fixed, but can be beaten by perseverance. WHAT FACTORS SET THE SCENE FOR THE DEVELOPMENT OF A GAMBLING PROBLEM? Surveys and empirical knowledge suggest that major risk factors in the development of a gambling problem are: Casino & Gaming International I 83
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>> THE MAIN OBJECTIVE OF OPERATORS SHOULD BE FOCUSED ON EARLY IDENTIFICATION AND CHANNELLING THE PLAYER TO APPROPRIATE HELP; PROVIDING WARNINGS OF THE DANGERS INHERENT IN DEVELOPING A PROBLEM; SELF-HELP INFORMATION AND THE IMMEDIATE AND EFFECTIVE IMPLEMENTATION OF ANY REQUEST FOR A COOLING OFF PERIOD OR SELF-EXCLUSION. >> • • • • • • • • • •
Big Win/s early in the gambler’s experience Money problems Recent divorce/death/job loss Chronic boredom/limited hobbies Pattern of risk taking behaviour History of depression or anxiety, abuse or trauma Personal or family history with Drugs/Alcohol Preferred gambling is accessible Not monitoring winnings or losses and losing track of the extent involved. Neurobiology
Risks more usually associated with online gambling include: • Convenience and availability • Absorption • Detachment from reality in time and money • Underage play / exposure at an early age • Easier to conceal involvement • New, Internet savvy breed of gambler
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• SO, IS INTERNET GAMBLING MORE ADDICTIVE? The extensive Harvard/Bwin study involved the scientific analysis of massive amounts of directly accessed data as the first fully empirical study of actual gambling behaviour. It was released to the public in June 2007, and showed little evidence of a problem gambling epidemic proliferated by Internet gambling, debunking many political and social misconceptions. Conducted by Harvard Medical School, the study measured the gambling behaviour of sports betting customers, and found that of the 40, 499 subjects, only the top one percent exhibited behaviour that could be considered a gambling problem. WHAT CAN OPERATORS DO TO OBVIATE PROBLEM GAMBLING? Our standards and requirements for accredited operators have gained a substantial following and are now widely used. In summary, these provide for the following:
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• THE PRINCIPLE: Ultimately, all players are responsible for their actions, but there must nevertheless be a level of prevention and support in place. Through the use of well thought out policies and procedures operators can establish a culture of social responsibility within the industry. Responsible Gambling is about giving players the tools they need to play in a secure and supportive environment and guiding those who require assistance to places of help. • The homepage of the operator’s website must clearly display a ‘no under 18s’ or ‘no under 21s’ sign, which links through to a clear message about underage play. • The registration process shall include a clear message 84 I Casino & Gaming International
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that underage play is not accepted. A message that pops up when a registrant under the age of 18 or 21 is entered during the registration process is also acceptable. The site must then prohibit this registration. The operator’s responsible gambling page must provide a link to a recognised filtering programme to enable players to prevent minors from accessing gambling sites, such as: www.cyberpatrol.com www.gamblock.com www.safekids.com www.surfcontrol.com www.solidoak.com www.netnanny.com Warning that underage players will not be paid winnings if discovered, and provision made in the Terms and Conditions regarding such incidents. Preventative and detective controls and technology shall be in place to ensure that the prospect of players registering from jurisdictions specifically excluded by the operator is prevented. Appropriate operator personnel shall be trained on the issues of social responsibility and problem gambling. Player self-exclusion facilities must be available, easily found by the player and shall be clearly communicated to players on the operator’s website Self-exclusion due to a gambling addiction must be for a minimum period of six months and be fully implemented by the operator. At the end of the 6 months, the account should only be re-opened at the request of the player and this request should be made in writing. An operator should wait 24 hours before re-opening the account as a cooling off for the player. The site shall also provide a ‘cooling off’ exclusion option. The operator reserves the right to exclude a player for a longer period of time at their discretion. Remove the player’s details from any and all promotional databases and make every effort to remove the player from affiliate databases. The homepage of the operator’s website must contain a clear link to a Player Protection and Responsible Gambling page, which shall contain at a minimum: A warning that gambling could be harmful if not controlled and kept in moderation. Advice on responsible gambling and a link to sources of • help on problem gambling, including helpline numbers. An accepted and simple self-assessment questionnaire to determine risk potential. A list of player protection measures (deposit limits and self-exclusion) that are available on the site, and access
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to these measures. Details or a link to a page with the operator’s responsible gambling policy. A link to the Player Protection and Responsible Gambling page must be available to the player in the downloaded software. This can be in the shape of radio button, menu option, or on the main page. Messages of an operator’s support of responsible gambling shall not be misleading. Ensure that all information on Responsible Gambling is true, clear and achievable. There should be no bonuses or other advertising on the Responsible Gambling page. Players shall be able to decrease their deposit limits per day, week and month, and these requests shall be dealt with timeously by the operator. Increases in previously decreased deposit limits requested by players shall only be effective after 24 hours. A clock shall be available on the screen at all times. The denomination of each credit shall be clearly displayed on the games screen. The free play game website must provide links to the same age restriction, responsible gambling and player protection information as the real money website. All disputes received from players shall be dealt with timeously and conducted through a formal documented process. An easy and obvious mechanism for escalating player complaints shall be provided. Where convenient, direct communication with the player should carry a responsible gambling message as a f ootnote. The theoretical statistical return percentage for a particular game type should be no less than that of the equivalent game in free play mode. The placement and content of adverts shall not target those under the legal gambling age. Adverts should not be placed in publications or on sites targeted at children or made attractive to children through the use of overtly child friendly material. Adverts cannot present gambling as a solution to problems or misrepresent the rules of the game.
INTERVENTION AND INTERACTION WITH PROBLEM GAMBLERS: Our responsible gambling courses spend some time on the issues of intervention and interaction with problem gamblers. An intervention is the action taken by family, friends, employer and/or other concerned parties to actively assist a problem gambler to change his or her behaviour, in order to interrupt the progress of the addictive condition. Operational staff do not normally have in-depth counselling skills or experience and the course warns that great care must be taken in dealings of this nature, steering the subject to appropriate assistance as the preferred action. Particular care is necessary where the gambler is not ready to accept that he or she has a problem. We follow the recommendations of the UK Gambling Commission for interaction. These suggest that operators must put into effect policies and procedures for customer interaction where there are concerns that a customer’s behaviour may indicate problem gambling. THE POLICIES MUST INCLUDE: • Identification of the appropriate level of management who may initiate customer interaction and the procedures for doing so • The types of behaviour that will be logged/reported to the appropriate level of staff and which may trigger customer interaction at an appropriate moment • The circumstances in which consideration should be given to refusing service to customers and/or barring them from the operator’s gambling premises • Training for all staff on their respective responsibilities, in particular so that they know who is designated to deal with problem gambling issues. THE ONLINE GAMBLING ENVIRONMENT OFFERS REAL ADVANTAGES IN DEALING WITH POTENTIAL PROBLEM GAMBLERS: Interaction can be as simple as a standard email reminding players about the responsible gambling tools available on the site, or emails directed to specific players guiding them to the responsible gambling page and self-help test. Access to real time transactions can be accrued, assessed
MYTH Problem gamblers gamble every day. FACT Problem gamblers may gamble frequently or infrequently. MYTH Problem gamblers gamble at every opportunity and on anything. FACT Most problem gamblers have a specific form of gambling which causes them problems. MYTH Gambling is not a problem if the gambler can afford it. FACT Problem gambling is not just financial. Too much time spent on gambling can destroy relationships MYTH You should help a problem gambler out of a financial problem as soon as possible. FACT Bailing a problem gambler out of debt can make matters far worse. MYTH Problem gambling is easy to recognise. FACT No - problem gambling is known as the hidden addiction.
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and acted upon by tracking online gambling behaviour using advanced statistical techniques. With the assistance of experienced staff from both the technical, operational and responsible gambling departments, staff can potentially identify problematic behaviour. Tactful interactions can sometimes pre-empt a problem from arising. These are often opportunistic and can even consist of a single online or telephone conversation that can motivate the person to change their behaviour On occasion the gambler has already come to terms with the fact that a problem may exist and asks for relevant information, in which case a referral to the appropriate onsite responsible gambling facility and some encouragement will suffice. Trainees are urged to take an empathetic and encouraging rather than confrontational or argumentative line, which could trigger a negative defensive reaction from the gambler and prove counter-productive. Reflecting statements back to the player such as: “why do you feel you are unlucky” and “why do you feel like you can’t win” are often effective, as is sticking to facts and figures available from the players account. Problem gambling is in its fundamentals a type of addiction, and if caught early enough can be effectively handled by professional counsellors. The main objective of operators, therefore, should be focused on early identification and channelling the player to appropriate help; providing warnings of the dangers inherent in developing a problem; self-help information and the immediate and effective implementation of any request for a cooling off
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period or self-exclusion. Aside from the moral implications of the terrible impact on a life, an employer and a family, problem gambling represents a danger to everyone involved and every effort should be made to obviate it. CGI TEX REES TEX REES, eCOGRA Fair Gaming Advocate, with more than 15 years of management and customer relations experience in both land-based and online gaming businesses, personally handles player disputes as they occur, resolving most cases in 48 hours or less. Most recently, Rees managed customer relations for LiveBet Online, where she was the primary point of contact for clients regarding development and operational issues. Responsibilities included interpreting client needs to develop a software solution and overseeing the installation, testing and training of the platform. Prior to that, Rees managed a staff of 40 administrative and call center employees for SuperBet, which ultimately became South Africa’s first online gambling operation. While there, she managed customer dispute resolution, established a customer care protocol and oversaw its implementation. Rees also assisted in wagering software development and testing forSuperBet and served as a liaison to the Gaming Board regarding compliance issues.
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THE GAMING INDUSTRY’S ROLE IN THE PREVENTION AND TREATMENT OF PROBLEM GAMBLING BY MARK GRIFFITHS
There are many factors that could be incorporated within a gaming company’s framework of social responsibility and that while the industry should be proactive in the prevention of problem gambling, the treatment of problem gambling should be done by those outside of the gaming industry and that one of the ways forward may be online rather than offline help. This is reinforced by the gaming industry having formal relationships with numerous organisations that address training, compliance, accreditation, and governance.
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ver the last decade, social responsibility in gambling has become one of the major issues for professional gaming operators. Although the gaming industry understandably keeps an eye on their bottom line profits, there is an increasing adherence to social responsibility standards. Evidence for this is demonstrated by the fact that the gaming industry now has formal relationships with numerous organisations that address training, compliance, accreditation, and governance. There is also increasing integration between the gaming industry and a diverse set of stakeholders including government, practitioners, and researchers. Government bodies license and regulate. Gambling researchers can provide theoretical insight and models that they industry can apply in their day-to-day business. Practitioners can provide practical guidance and solutions linked to addiction treatment. Here, some of these relationships, particularly in relation to the gaming industry’s role in preventing, containing and/or treating problem gambling, are explored.
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ACCESSIBILITY AND EXPOSURE TO GAMBLING ENVIRONMENTS: IMPLICATIONS FOR PROBLEM GAMBLING PREVENTION Environmental factors additional to gambling exposure are known to have an impact on problem gambling (Griffiths & Parke, 2003). Some are part of, or closely associated with, the physical and social contexts in which gambling occurs and play a role in increasing or decreasing exposure. Others, while more peripheral, include a number of major risk factors for problem gambling (Abbott, Volberg, Bellringer & Reith 2004). Abbott and colleagues (2004) note that empirical investigation of relationships between proposed risk factors and Casino & Gaming International I 87
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outcomes requires accurate and reliable measurement coupled with methodologically robust studies in which exposure levels are varied while other factors that may affect outcomes are held constant or controlled statistically. If this is not achieved, Abbott and colleagues note that findings and conclusions may be invalid and/or misleading. With most drug-based addictions, different parameters of exposure are typically examined including dose, potency and duration. In the gambling situation, it is much more difficult to quantify social and behavioural exposures. Furthermore, practical and ethical considerations place constraints on experimental investigation. Gambling research is at a relatively early stage of development and it is only recently that public health approaches have been incorporated. In the future, it is likely that more complex measures of gambling exposure will be used. According to Abbott et al (2004), this could include the availability of, and expenditure on, different forms of gambling, the dispersal of and degree of accessibility to these forms, the time they have been available and extent to which harm minimisation strategies have been prescribed and implemented. The Australian Productivity Commission (APC; 1999) developed a multidimensional framework to assess exposure. It highlighted nine specific dimensions comprising: (i) number of opportunities to gamble, (ii) number of venues, (iii) location of venues, (iv) opportunities to gamble per venue, (v) opening hours, (vi) conditions of entry, (vii) ease of use of gambling form, (viii) initial outlay required, and (ix) social accessibility. Using these criteria the APC conducted several analyses to examine the relationships between accessibility and gambling using State-level electronic gaming machine (EGM) density and expenditure data as well as data drawn from a national Australian gambling survey of gambling prevalence. The results suggested that high levels of problem gambling with gambling machines correlated to their density relative to the population. In one analysis, the pathological gambling prevalence rate for different Australian States was plotted against the number of gaming machines per 1000 adults in each State. In another analysis, the number of gaming machines per 1000 adults was plotted against the estimated amount spent per capita on gaming machines. Both analyses showed positive relationships suggesting that (at a State level) a greater density of gaming machines per capita was associated with both higher per capita expenditure and higher problem gambling prevalence rates. However, it should be noted that although several other studies have shown that a higher density of video lottery terminals (VLTs) in the population correlated to higher rates of problem gambling (Delfabbro, 2002; Marshall & Baker, 2002) this does not, in itself, show that the number of machines in a specific venue has any impact on levels of problem gambling. The number of machines in these studies was related to a large number of venues, and consequently the number of VLTs in this context does not tell us much about the impact of the number of gambling opportunities in one or a few centralised venues. Furthermore, one might speculate that far fewer games in a venue could conceivably encourage a problem gambler to stay on one particular machine for fear of having to wait for another machine to become vacant. A more complex quantitative procedure was proposed by Shaffer, LaBrie and LaPlante (2004). They generated a ‘standardised exposure gradient’ that assessed gambling exposures within a particular region. This index includes the: (i) dose (i.e., number of gaming venues and people working in the gambling industry), (ii) potency (i.e., the number of different 88 I Casino & Gaming International
major gambling modalities), and (iii) duration (i.e., the time casinos have been legalised). Although limited, the accuracy could be enhanced by the integration of further information, (e.g., the extent of illegal gambling, access to gambling in adjoining jurisdictions, gaming venue attendance, and advertising). Whether or not exposure indexed by these types of measure has an impact is strongly influenced by the form of gambling involved (Abbott et al, 2004). Evidence suggests that gambling availability has a positive, but complex, relationship to the prevalence of problem gambling. The relationship is not linear and there are many other factors that determine problem gambling. In a review of situational factors that affect gambling behaviour, Abbott (2007) concluded that although increased availability of and exposure to gambling activities have contributed to increases in problem gambling, it was highly probable that other situational factors including venue characteristics, social context, access to cash or credit, availability of alcohol, and industry marketing and advertising also have an influence. Volberg (2004) also reached a similar conclusion suggesting there is a correlation between increased availability of gambling opportunities and problem gambling. However, she then reported that in a number of replication studies that problem gambling rates had stabilised or decreased. Looking at these jurisdictions in more detail, she reported that all of them had introduced comprehensive services for problem gamblers including public awareness campaigns, helplines, and professional counselling programmes. She concluded that the relationship between increased opportunities to gamble and problem gambling may be moderated by the availability of helping agencies/services for problem gamblers. In areas of the US (like Montana and North Dakota) that saw an increase in problem gambling following the introduction of casinos, no public awareness campaigns or services for problem gamblers were introduced. Consequently, it appears that the increased availability of gambling opportunities do not necessarily equate to increased levels of problem gambling. Collins (2007) has also reviewed this evidence and concluded that if a jurisdiction introduces new forms of gambling and does nothing else, it will most likely see an increase in problem gambling. However, if the jurisdiction combines the introduction of new forms of gambling with appropriate prevention and treatment services, it is likely to decrease numbers of problem gamblers. Collins noted in the national South African gambling prevalence study that the country witnessed a decline in problem gambling over a twoyear period following the introduction of the National Responsible Gambling Program. Non-dedicated gaming venues: Implications for social responsibility One of the more noticeable trends in the land-based casino sector is the growing shift from dedicated gambling casinos to a more generalised entertainment complex where gambling is part of the overall entertainment mix. One of the issues to consider is whether this makes problem gambling and social responsibility a more diffuse issue to track and remedy. Wood and Griffiths (2008) have argued that non-dedicated gambling venues have the capacity to encourage players to do other things and have a break (and a reflective time out) from gambling. However, dedicated gaming environments are more likely to minimise impulsive decisions to gamble. This is because players must travel to a specific dedicated gambling environment (depending upon location) having made a predetermined decision to gamble. There is always a chance
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that a person who entered the premises to do something other than gamble (e.g., watch live entertainment, have a meal, etc), could be encouraged to gamble (i.e., via intrinsic association of the other activities). However, it could also be argued that anyone who enters the premises of a dedicated gaming environment (even one that houses other entertainment activities) almost certainly knows that the primary purpose of the venue is for gambling. Impulse gambling by non-gamblers who knowingly enter a gambling environment still constitutes a predetermined decision to enter the environment. Wood and Griffiths (2008) have also argued that the marketing of the gambling venue as a general entertainment site promotes the notion of people congregating for social activities in a social environment where gambling is also readily available. This may increase the likelihood that some groups or individuals may participate in gambling as an ancillary activity to their other social behaviours. Patrons may also feel less stigmatised going to gamble in an entertainment establishment that houses some gambling activities rather than a dedicated gambling environment (e.g., a casino). There is currently no evidence to determine whether offering other non-gambling activities encourages responsible gambling, or encourages more excessive gambling by attracting vulnerable players drawn (initially) to those non-gambling activities. In essence, there are two schools of thought about the mix of gambling with other activities. The positive view is that patrons who frequent establishments that have a range of activities can spend their time engaged in many non-gambling activities without the need to gamble. The more negative view is that getting patrons to enter the establishment to engage in the non-gambling activities may in fact stimulate the desire to gamble because of the proximity of the gambling and nongambling activities. If peripheral activities are ‘loss leaders’ and are incorporated as a way of keeping patrons in the establishment, it could be viewed as an exploitative marketing and socially irresponsible tactic. Clearly, this is one area where research is needed. THE GAMING INDUSTRY’S ROLE IN THE TREATMENT OF PROBLEM GAMBLERS There have been some recent soundings about land-based casinos (e.g., Harrahs) directly helping problem gamblers through the use of on site treatment specialists (i.e., problem gamblers having access to treatment in the gambling environment itself). Although this sounds like a very socially responsible move on the part of the operators, my view is that it is not the gaming industry’s responsibility to treat gamblers but it is their responsibility to provide referral for problem gamblers to specialist third party helping agencies (e.g., problem gambling helplines, counselling services, etc.). It is thought that the number of problem gamblers who actively seek treatment is only a small percentage of the overall number of problem gamblers. This is because problem gamblers may feel embarrassed and/or stigmatised via face-to-face treatment interventions. This suggests that one of the ways forward may be for the industry to refer their problem clients towards online (rather than offline) help. Wood and Griffiths (2007) reported one of the first ever studies that evaluated the effectiveness of an online help and guidance service for problem gamblers (i.e., GamAid). The evaluation utilised a mixed methods design in order to examine both primary and secondary data relating to the client experience. GamAid is an online advisory and guidance service whereby the problem gambler can either browse the available
links and information provided, or talks to an online advisor (during the available hours of service), or request information to be sent via email, mobile phone (SMS/texting), or post. If the problem gambler connects to an online advisor then a real-time image of the advisor appears on the client’s screen in a small web-cam box. Next to the image box, is a dialogue box where the client can type messages to the advisor and in which the advisor can type a reply. Although the client can see the advisor, the advisor cannot see the client. The advisor also has the option to provide links to other relevant online services, and these appear on the left hand side of the client’s screen and remain there after the client logs off from the advisor. The links that are given are in response to statements or requests made by the client for specific (and where possible) local services (e.g., a local debt advice service, or a local Gamblers Anonymous meeting). A total of 80 problem gamblers completed an in-depth online evaluation questionnaire, and secondary data were gathered from a further 413 clients who contacted a GamAid advisor. It was reported that the majority of the problem gamblers who completed the feedback survey were satisfied with the guidance and “counselling” service that GamAid offered. Most problem gamblers (i) agreed that GamAid provided information for local services where they could get help, (ii) agreed that they had or would follow the links given, (iii) felt the advisor was supportive and understood their needs, (iv) would consider using the service again, and (v) would recommend the service to others. Being able to see the advisor enabled the client to feel reassured, whilst at the same time, this one-way feature maintained anonymity, as the advisor cannot see the client. An interesting observation was the extent to which GamAid was meeting a need not met by other UK gambling help services. This was examined by looking at the profiles of those clients using GamAid in comparison with the most similar service currently on offer, that being the UK GamCare telephone help line. The data recorded by GamAid advisors during the evaluation period found that 413 distinct clients contacted an advisor. Unsurprisingly (given the medium of the study), online gambling was the single most popular location for clients to gamble with 31 percent of males and 19 percent of females reporting that they gambled this way. By comparison, the GamCare helpline found that only 12 percent of their male and 7 percent of their female callers gambled online. Therefore, it could be argued that the GamAid service is the preferred modality for seeking support for online gamblers. This is perhaps not surprising given that online gamblers are likely to have a greater degree of overall competence in using, familiarity with, and access to Internet facilities. Problem gamblers may therefore be more likely to seek help using the media that they are most comfortable in. GamAid advisors identified gender for 304 clients of which 71 percent were male and 29 percent were female. By comparison, the GamCare helpline identified that 89 percent of their callers were male and 11 percent were female. Therefore, it would appear that the online service might be appealing more to women than other comparable services. There are several speculative reasons why this may be the case. For instance, online gambling is gender-neutral and may therefore be more appealing to women than more traditional forms of gambling, which (on the whole) are traditionally male-oriented (with the exception of bingo) (Wardle et al, 2007). Women may feel more stigmatised as problem gamblers than males and/or less likely to approach other help services Casino & Gaming International I 89
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where males dominate (e.g., GA). If this is the case, then the high degree of anonymity offered by GamAid may be one of the reasons it is preferred. Most of those who had used another service reported that they preferred GamAid because they specifically wanted online help. Those who had used another service reported that the particular benefits of GamAid were that they were more comfortable talking online than on the phone or face-to–face. They also reported that (in their view) GamAid was easier to access, and the advisors were more caring.
machines in Melbourne and Sydney, Australia. Journal of Gambling Studies, 18, 273-291. Shaffer, HJ., LaPlante, DA., LaBrie, RA., Kidman, RC., Donato, AN., Stanton, MV. (2004). Toward a syndrome model of addiction: Multiple expressions, common etiology. Harvard Review of Psychiatry, 12, 367-374. Productivity Commission. (1999). Australia’s gambling industries, Report No. 10. Canberra: AusInfo. Available at http://www.pc.gov.au/. Volberg, R.A. (2004). Fifteen years of problem gambling prevalence research. What do we know? Journal of Gambling Issues, 10. Wardle, H., Sproston, K., Orford, J., Erens, B., Griffiths, M.D., Constantine, R. & Pigott, S. (2007). The British Gambling Prevalence Survey 2007. London: The
CONCLUSIONS In their review of preventing problem gambling, Williams, Simpson and West (2007) make several important points that need to be taken on board by the gaming industry (and other interested parties) in relation to problem gambling prevention. These observations are also important for gaming operators when considering best practice in terms of social responsibility. (1) There exists a very large array of prevention initiatives. (2) Much is still unknown about the effectiveness of many individual initiatives. (3) The most commonly implemented measures tend to be among the less effective measures (e.g., casino selfexclusion, awareness/information campaigns). (4) There is almost nothing that is not helpful to some extent and that there is almost nothing that, by itself, has high potential to prevent harm. (5) Primary prevention initiatives are almost always more effective than tertiary prevention measures. (6) External controls (i.e., policy) tend to be just as useful as internal knowledge (e.g., education). (7) Effective prevention in most fields actually requires coordinated, extensive, and enduring efforts between effective educational initiatives and effective policy i initiatives. (8) Prevention efforts have to be sustained and enduring, because behavioural change takes a long time. It would therefore appear that there are many factors that could be incorporated within a gaming company’s framework of social responsibility and that while the industry should be proactive in the prevention of problem gambling, the treatment of problem gambling should be done by those outside of the gaming industry and that one of the ways forward may be online rather than offline help. CGI REFERENCES Abbott, M.W. (2007). Situational factors that affect gambling behavior. In G. Smith, D. Hodgins & R. Williams (Eds.), Research and Measurement Issues in Gambling Studies. pp.251-278. New York: Elsevier. Abbott, M.W., Volberg, R.A., Bellringer, M. & Reith, G. (2004). A review of research on aspects of problem gambling. Report prepared for the Responsibility in Gambling Trust. Collins, P. (2007). Gambling and governance. In G. Smith, D. Hodgins & R. Williams (Eds.), Research and Measurement Issues in Gambling Studies. pp.617639. New York: Elsevier. Delfabbro, P.H. (2002). The Distribution of Electronic Gaming Machines (EGMs) and Gambling-related Harm in Metropolitan Adelaide. Report Commissioned by the Independent Gambling Authority of South Australia. Griffiths, M.D. & Parke, J. (2003). The environmental psychology of gambling. In G. Reith (Ed.), Gambling: Who wins? Who Loses? pp. 277-292. New York: Prometheus Books. Marshall, D.C., & Baker, R.G.V. (2002). The evolving market structures of gambling: Case studies modelling the socio-economic assignment of gaming 90 I Casino & Gaming International
Stationery Office. Williams, R.J., Simpson, R.I. and West, B.L. (2007). Prevention of problem gambling. In G. Smith, D. Hodgins & R. Williams (Eds.), Research and Measurement Issues in Gambling Studies. pp.399-435. New York: Elsevier. Wood, R.T.A. & Griffiths, M.D. (2007). Online guidance, advice, and support for problem gamblers and concerned relatives and friends: An evaluation of the GamAid pilot service. British Journal of Guidance and Counselling, 35, 373389. Wood, R.T.A. & Griffiths, M.D. (2008). A centralized gaming model social responsibility assessment. Report prepared for Nova Scotia Gaming Company.
MARK GRIFFITHS Dr. Mark Griffiths is a Chartered Psychologist and Europe’s only Professor of Gambling Studies (Nottingham Trent University). He is Director of the International Gaming Research Unit and has won many awards for his work including the John Rosecrance Research Prize (1994), International Excellence Award For Gambling Research (2003), Joseph Lister Prize (2004), and the Lifetime Achievement Award For Contributions To The Field Of Youth Gambling (2006). He has published over 210 refereed research papers in journals such as the British Medical Journal, British Journal of Psychology, British Journal of Social Psychology, British Journal of Clinical Psychology, Journal of Community and Applied Social Psychology, British Journal of Sports Medicine, Personality and Individual Differences, Archives of Sexual Behavior, Journal of Adolescence, Addictive Behaviors, British Journal of Addiction, Addiction Research, CyberPsychology and Behavior, Journal of Psychology and extensively in the Journal of Gambling Studies. He has served as a member on a number of national and international committees (e.g. European Association for the Study of Gambling, Society for the Study of Gambling, Gamblers Anonymous General Services Board, National Council on Gambling etc.) and was former National Chair of Gamcare (1997-2003). He also does some freelance journalism (120+ articles published) and has also appeared on over 1,800 radio/TV programmes.
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