Casino & Gaming International: Issue 19

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Casino & Gaming International

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CASINO | POKER | BINGO | NETWORK GAMING | MOBILE

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Step into a world of fantasy and adventure!

Hellboy™ Š 2010 Mike Mignola. Dark Horse Comics, Inc. and the Dark Horse logo are trademarks of Dark Horse Comics, Inc.

www.microgaming.com

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WELCOME

GAMING TRANSITIONS AND RESPONSIBLE GROWTH 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.

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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

ocial, leisure and entertainment activity generated on and via the Internet, engages hundreds of millions of people around the world for an increasing amount of their time. In the re-inventive, technology-driven environment we all live in, greater interdependence has created an easy connection between the real and the virtual. The recognition, since current generations effectively have the ‘Internet gene’, is that this vast medium has boundless uses and means, with online gaming advancing its position as a significant element to be explored and experienced worldwide. That has necessarily given rise to the sharpening pressures for tighter regulation and social responsibility commitments.

Evolving technology and efficient, rich differentiated content accommodates players’ widening range of attention from one form of gaming to another. As operators’ innovative systems and brand offerings are accordingly refined, so the responsive connection of the game to and among players is enhanced, attracting more custom where players’ preferences are subtly tuned into. Between gambling and non-gambling play and vice versa, there is an accepted, increasingly interchangeable norm for prospective, new and regular players. That is being reinforced by the social networking explosion which, in turn, could create new levels of gaming access, diversity and interaction.

In any event, players’ lifestyles invariably combine fun play with gambling online and casino visits for gambling and/or entertainment as part of a wider range of activity. The most effective online play-for-fun facility is a means to incrementally introduce the novice player to real money play, but equally it is often sophisticated enough to satisfy at the non-gambling level, reflecting a more natural identity with broader non-gambling entertainment interests, actual and virtual. The sense of separation that initially existed between the Internet and life generally is now largely past, so appreciation of new online directions creates greater opportunities for gaming operators and players worldwide.

Mahjong, for instance, is just beginning to extend the international profile of online gaming in a vast, essentially untapped, social and commercial market of hundreds of millions of players. It is an ideal means for shaping receptiveness to gaming concepts and ideas that have different cultural origins, promising a great deal through the game’s recently created free-play online presence. As it percolates the Internet and player consciousness, it could well demonstrate that ‘glocal’ (local-global) thinking is very much more than a buzz word, encouraging tenacious operators to gradually establish bolder portfolios in their quest for Asianfacing revenue streams.

Even though there remain wary cultural attitudes and resistant governments that perceive the overwhelming negative effect of online gaming – principally the US, China, Japan and South Korea which, combined, represent an immense market opportunity – many would argue the regulatory writing is on the wall because the case for taxes and jobs is, in the present climate especially, compelling. In this respect there should be a parallel interest with casino venues and new developments which, combined with remote gaming, governments will eventually need to evaluate on a rational basis. But that connection has some way to go on the regulatory level.

In the sense that the bigger picture of bricks-and-mortar and online, interactive and mobile play become more connected, gaming should be seen in its entirety as a transitional industry toward not just that common legal, responsible requirement – thereby strengthening gaming as a whole – but also toward recognition that such harmonising actually clarifies so much more about what is possible to achieve across a number of markets. It would surely encourage new standards of industry innovation and growth; cut down distortion, uncertainty and waste in product planning and deployment; secure stronger problem gambling prevention and controls; and perhaps establish the gaming industry’s mainstream place.

Frank Fahrenkopf, American Gaming Association President and CEO, is “watching the ongoing efforts of European land-based operators to level the regulatory playing field by ensuring that the online gambling industry is subjected to the same types of taxes and controls that govern traditional venues.” (p16) It’s a point that concerns Roy Ramm, LCI Compliance and Risk Management Director: “If an incoming government wants to see the major respected international bricks-and-mortar operators taking their place in the digital world – and in so doing bringing the kind of corporate discipline, compliance and social responsibility regimes that have lifted the reputation of the industry – it must find ways to close the regulatory gaps and embrace gaming as whole, real and remote.” (p33)

S

Stephen Lawton is Editor of Casino & Gaming International

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2010 Issue 2

CONTENTS

13

21

47

FEATURES 13

ASCENT OF DIVERSITY AND PERFORMANCE IN THE NEW DECADE BY FRANK J. FAHRENKOPF, JR.

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GAMING ADVANTAGE:FROM DERELICTION TO REGENERATION BY JANE GREENWOOD AND JON SPARER

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DELIVERING FANTASY: MAKE YOUR ONE SHOT WORK

BY PAUL HERETAKIS

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PROVEN BENEFITS REVEAL THE NEED FOR SPEEDIER ADOPTION BY LEE GREGORY

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ELECTING TO TACKLE CASINOS’ CONCERNS IN THE DIGITAL AGE BY ROY RAMM

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SETTING NEW LIMITS: REMOTE GAMING HUB AHEAD OF ITS TIME BY ANDREW ZAMMIT

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ADEPT STRATEGY: LEADING FROM THE FRONT INTERVIEW WITH GARTH KIMBER

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CONTENTS

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FEATURES 57

DOING IT RIGHT: THE PAYMENTS ARENA IN 2010

BY PAUL DAVIS

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MAHJONG: TRANSITIONING TO GLOBAL ONLINE IMPACT BY JONAS ALM

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GAMING EXPOSURE: CYBER-THUGS, HACK-ATTACKS AND OTHER PHISHY TALES BY JUSTIN WOLFF

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SPARKS OF NEW LIFE FOR eGAMING

BY CHRIS FANGMAN AND ANTHONY DICK

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MARKET SHIFT: POISED FOR THE GREEN LIGHT

BY MATTI ZINDER

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PROBLEM GAMBLING IN EUROPE: WHAT DO WE KNOW? BY MARK GRIFFITHS

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Meet us at booth #R80

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US & GLOBAL GAMING

ASCENT OF DIVERSITY AND PERFORMANCE IN THE NEW DECADE

BY FRANK J. FAHRENKOPF, JR.

Remaining robust and resilient, the US casino industry continues to undergo testing times, so the unexpected challenges there may be ahead are well prepared for. The perception of the industry, too, has altered significantly over the last decade with the ascent of non-gaming amenities. That, the swift global expansion of the industry especially in Asia, the parallel advance of online gaming and its contentious regulatory implications, has come to characterise the gaming industry’s persistent high performance revenue value.

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t was a decade fraught with tremendous possibilities and challenges, one marked both by tragedy and triumph. Natural disasters, volatile politics, the rise of social networking and the fall of the global economy forever changed the way people throughout the world live and work.

As the Aughts came to a close, the international gaming community emerged a larger, more diverse – and also a more guarded – industry than before.

The proliferation of gaming worldwide – from Latin America to Asia – was among the most important developments of the past decade. When the Chinese Government opened Macau’s gaming industry to competition in 2002, an international phenomenon was born. By 2006, revenues in Macau had surpassed those of Las Vegas, transforming the small sliver of land into the world’s largest gaming market. Simultaneously, casinos blossomed elsewhere across the globe, and hundreds of international gaming jurisdictions swiftly expanded.

In the US, commercial gaming was legalised in Kansas, Maryland, Ohio and Pennsylvania – and racetrack casinos were added in Florida, Indiana, Maine, New York and Oklahoma – further securing our industry’s place in the American economic landscape. While casinos still are new to Kansas, and they are not yet operational in Maryland and Ohio, Pennsylvania’s casinos are thriving. Last year, they amassed US$1.96bn in revenue, a 21.6 percent jump from the previous year due to several new properties opening in the state.

In addition, the perception of our industry was altered significantly by the ascent of nongaming amenities. This trend, which began in Las Vegas in the early 1990s, gained significant momentum during the past 10 years. Customers throughout

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the US, and in many other international gaming jurisdictions, now expect multifaceted entertainment experiences – including restaurants, live performances and sports recreation – when they visit casinos.

The debut and subsequent growth of Global Gaming Expo (G2E) marked another major milestone of the past decade. Since its launch in 2001, G2E has become the largest, most comprehensive industry event of its kind.

Spurred by the success of G2E, in 2007 G2E Asia debuted in Macau, bringing gaming operators throughout the region together like never before.

Also, as Internet usage skyrocketed, so, too, did the availability of online gambling websites. The most recent estimates available indicate that worldwide online wagering generated approximately US$21bn in revenue in 2008.

Countries across the globe continue to debate the possibilities and potential problems related to legalising and regulating online gambling. In the US, the controversial Unlawful Internet Gambling Enforcement Act that passed in 2006 had yet to be enacted at press time.

Finally, resiliency was a hallmark of our industry throughout the past decade. When Hurricane Katrina made landfall on the US Gulf Coast in 2005, our industry demonstrated compassion, generosity and resourcefulness.

Casinos throughout the region provided shelter for emergency responders and construction crews, and gaming companies supported the more than 14,000 affected casino employees for many months.

And when a different storm – the global financial crisis – hit in 2008 our industry forged ahead, propelled by hard work and innovation. However, despite our best efforts, we could not avoid the fallout from the crisis. The global credit crunch, rising unemployment, depressed consumer confidence and tightened spending took a substantial toll on our industry, from which it is only beginning to recover.

In the US, the commercial casino industry’s flagging revenues throughout 2008 and 2009 reflected the perilous state of our overall economy. In 2008, commercial gaming revenues were down 4.7 percent when compared to 2007, and last year’s revenues represented a 5.5 percent drop from 2008 totals. During this time of uncertainty, our industry was forced to make difficult choices to cut costs, including reducing staff and halting development projects that would have helped reinvigorate the communities that surround our properties.

Still, depressed revenues were not universal; while many US gaming states endured substantial losses during the recession, others managed to make modest gains. Casinos in resort destinations like Las Vegas were hit harder than casinos in local communities, which are more easily accessible and require less extensive travel. In addition to Pennsylvania, Colorado, Indiana and Missouri exhibited growth in 2009, thanks largely to new properties opening, as well as changes to gaming laws allowing increased betting in the states.

On the other side of the globe, Macau’s casinos were impacted by both the global recession and the imposition of visa restrictions on travelers from mainland China. During the second half of 2008, visitation to the peninsula dropped sharply and, as a result, gaming revenues tumbled 15 percent. The dip forced some of the region’s casino operators to suspend or postpone new development projects.

However, Macau’s decline was short-lived, particularly 14 I Casino & Gaming International

after the Government relaxed visa restrictions. By the first quarter of 2009, gaming revenues were beginning to climb; when the year came to close, the peninsula reported a 10 percent surge in revenue to a record of more than US$14.9bn.

Despite expansion during much of the past decade, most European markets also could not escape the recent economic downturn. In 2008, land-based casinos in at least 15 countries – particularly France, Germany and Great Britain, which are among the largest European gaming jurisdictions – experienced revenue declines. At the same time, Europe’s multi-billion dollar online gambling industry, which has become the most profitable in the world, continues to grow.

Burgeoning gaming jurisdictions in Latin America seemed virtually impervious to the sinking global economy.

Chile – the region’s most prominent gaming market – far surpassed even the most optimistic expectations for 2009, generating at least US$224m (thorough estimates are not available). Those numbers are expected to jump again in 2010 after three new casinos open. Gaming throughout the region – particularly in Argentina, Colombia and Peru – also continued to expand.

In the US, the commercial casino industry is now hard at work to regain its footing. Looking to the future, though many economic indicators portend a very gradual recovery process, several recent developments suggest that, as the American economy continues to improve, gaming will rebound as well. For example, though overall gaming revenues have been slightly down during the first months of 2010, the year-over-year declines have been less significant than during last year, indicating that our industry is turning a corner.

The numbers support what those who know commercial gaming best have long contended: Though the past two years have been challenging, our industry remains fundamentally strong. We have relied on ingenuity and agility – two traits that have long been a part of our industry’s legacy, and that have helped us overcome past challenges.

And those traits will not only accelerate our industry’s recovery in the coming months; they also will ensure that we are poised for success in the new decade.

After all, casinos across the US continue to host millions of guests each week. Our customers may be spending less when they visit our establishments, but they still consider gambling an exciting, entertaining activity – even on a budget. Quite simply, even in the aftermath of the most dramatic economic downturn our country has experienced since the Great Depression, the popularity of casino gambling has not abated.

Early data from the American Gaming Association’s (AGA) 2010 State of the States survey – which will be released in May – confirms this notion. It clearly demonstrates that commercial gaming continues to appeal to a broad range of people. Twenty-eight percent of the nation’s adult population visited casinos last year, and more than 80 percent consider gambling an acceptable activity for themselves or others. In addition, 73 percent of our patrons consider gambling good value for money when compared with other entertainment options.

But casinos provide more than good value to customers – they also are valued economic engines in communities across the US. According to the survey, 64 percent of gaming

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community residents agreed that nearby casinos have had a positive local impact. Likewise, the wide majority of residents – 69 percent – say that nearby casinos have bolstered regional tourism, and 68 percent would vote to support a referendum to keep casino gambling in their communities.

These numbers echo the sentiments our industry has long heard from gaming community residents. Critics’ wellworn claims about the negative impacts of gaming simply don’t hold water when compared to the realities of how the addition of casinos have helped communities across the country. The majority of those who live and work near gaming establishments consider casinos responsible, generous neighbours that foster economic opportunity and growth. It is a message we continue to disseminate widely – particularly among our nation’s most influential policymakers.

Currently, the political climate in Washington is extremely acrimonious. The recent passage of health care legislation – as well as the election of US Senator Scott Brown, which dismantled the Democratic supermajority – portends very competitive midterm elections. As November approaches, many lawmakers will begin spending a significant portion of their time campaigning, which is sure to create a legislative logjam. It is difficult to predict how these obstacles will impact the commercial casino industry, though we expect them to affect almost every policy initiative in which we currently have a stake.

Thankfully, our industry already has won a hard-fought legislative victory this year. In late February, Congress passed the bipartisan Travel Promotion Act, a common-sense solution to dwindling overseas tourism to the US. This landmark piece of legislation will create the first-ever public-

private partnership to execute a nationally coordinated travel promotion programme. It will help bring millions of new visitors to casinos every year, which is essential to our industry’s ongoing recovery.

Unfortunately, the political prognosis for other key issues remains rather murky. Currently, our industry is anticipating the possible passage of the US$18bn jobs bill, which is likely to include tax credits and extenders that will affect businesses of all stripes. In addition, we are monitoring the renewed efforts of Massachusetts Democrat Representative Barney Frank and other lawmakers to legalise Internet gambling in 2010.

In fact, the AGA recently revised its position on this issue. The AGA believes the technology now exists to properly regulate Internet gambling with appropriate law enforcement oversight and to provide appropriate consumer protections for those gambling online. However, we also believe that existing laws do not adequately protect the millions of Americans who gamble online every day. Thus, we acknowledge that a properly regulated legal framework for Internet gambling is the best way to protect consumers.

Perhaps nothing will alter the national political playing field this year more than the midterm elections. Though many important elections in gaming states and communities will be extremely hard-fought, longtime Nevada Democrat Senator Harry Reid’s bid for re-election is sure to be among the most challenging and consequential. It would be difficult to overstate the meaning of Senator Reid’s tenure to our industry. As the majority leader of the Senate, his influence is virtually unparalleled, and his support for the gaming industry over the years has been crucial.

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Because we operate in a politically charged world, enhancing our industry’s voice and building a robust network of support in Washington is essential. Throughout 2010, the AGA will work to secure our industry’s place at the table as legislators deliberate the policy issues that are vital to the future success of gaming – both domestically and internationally.

Also in 2010, the AGA will be keeping close watch on gaming developments overseas. We continue to monitor the legislative activities of the European Union, particularly regarding the elimination of state monopolies in favour of a more open marketplace. We also are watching the ongoing efforts of European land-based operators to level the regulatory playing field by ensuring that the online gambling industry is subjected to the same types of taxes and controls that govern traditional venues. And we are curious about the potential impacts of new technology, such as mobile gaming, on regional operators.

We also remain avid spectators of Macau’s astonishing growth. Not only did the region shatter gaming revenue records in 2009, but it continues to do so in 2010. In January, year-over-year revenues surged 55 percent to US$1.7bn; the following month, they jumped more than 69 percent to US$1.68bn. And, at press time, March revenues also were poised to break records.

Gaming industry watchers now wonder if recent regulatory changes will temper Macau’s skyrocketing revenues. Chief Executive Fernando Chui is undertaking a variety of efforts to diversify the region’s economy, which currently draws approximately 70 percent of its income from gaming. He recently announced plans to suspend approval of new casino developments and allow only 500 new table games during the next three years. He also intends to create a regulatory body to govern the future growth of the gaming megaregion, and to raise casino age restrictions to 21 from 17.

The impact of these proposed provisions – some of which have been met with dissent – remains to be seen.

Gaming jurisdictions elsewhere in Asia – such as Cambodia, where a US$100m luxury casino was recently opened – also are growing at a steady pace. Among the most significant events in Asia during the past decade was the legalisation of casinos in Singapore in 2005. Expectations are high for the city-state’s first gaming resorts, which are nearly complete.

Resorts World Sentosa, a US$6.5bn resort that ultimately will include a Universal Studios theme park and the world’s largest oceanarium, opened its casino doors in February. During its first week of operation, it welcomed more than 149,000 visitors. Marina Bay Sands, a US$5.5bn complex that will feature sophisticated convention facilities and a museum, is scheduled to open at the end of April.

These new and growing markets, as well as other critical issues currently facing Asian gaming operators, will be thoroughly canvassed during G2E Asia 2010, scheduled to take place 8th-10th June in Macau. The AGA, in partnership with Reed Exhibitions, has once again assembled a top-notch program that includes something for every participant – from a dynamic show floor, to valuable networking events, to the one-of-a-kind gaming management certificate programme featuring special interactive educational workshops designed to help new casino managers in Asia further their knowledge of current gaming trends in Macau.

One of the most exciting new programmes at G2E 2010 16 I Casino & Gaming International

is the “View from the Top: Chief Officers Series.” During this multisession event, chief officers from leading gaming companies – moderated by experts from Deutsche Bank – will gather to discuss pressing concerns related to finance, marketing, operations, regulation and technology. Also sure to be insightful are keynote presentations from two of the region’s most prominent industry figures, Francis Lui, deputy chairman of Galaxy Entertainment, and Len Ainsworth of Ainsworth Gaming, who previously founded Aristocrat Technologies. Ainsworth will receive the 2010 G2E Asia Visionary Award for his innovative contributions to the manufacturing segment of our industry.

Also in 2010, the AGA is initiating a public awareness effort to demystify slot machines. Though not especially popular in Asian gaming jurisdictions, slot machines have long been Americans’ favorite casino game. And while slots are ubiquitous at casinos across the country, many gaming patrons regard their design and development as a complete mystery. Seeking to widen this knowledge gap, gaming opponents often falsely contend that slots are inherently addictive.

In an effort to ensure that public discourse about slot machines is well-informed – and to alleviate any misplaced suspicion of the industry – the AGA is publishing a white paper that investigates slots in great detail.

In addition, the AGA is closely following proposed revisions to the definition of pathological gambling in the forthcoming edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM), psychologists’ comprehensive encyclopedia of mental illnesses. These suggested changes – which largely are the result of the US commercial casino industry’s substantial contributions to the field of gambling research – have the potential to reshape how the disorder is understood and treated. They also are sure to inform our industry’s approach to responsible gaming, which remains a top priority in the New Year.

Ultimately, it is difficult to predict what 2010 has in store for the international gaming community; likewise, the new decade is sure to include many unexpected challenges. Still, our experiences during the past 10 years – from industry diversification to the global financial crisis – as well as our proactive efforts to address today’s most compelling issues – from legislative developments in Washington to the continued growth of gaming in Asia – have positioned our industry well to tackle whatever new challenges come our way. CGI

FRANK J. FAHRENKOPF, JR. Frank J. Fahrenkopf, Jr. is President and CEO of the American Gaming Association (AGA) in Washington, D.C. In his role as chief executive of the AGA, Fahrenkopf is the national advocate for the commercial casinoentertainment industry and is responsible for positioning the association to address related regulatory, political and educational issues. A lawyer by profession, Fahrenkopf gained prominence during the 1980s, when he served as national chairman of the Republican Party during the presidency of Ronald Reagan.

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CASINO DESIGN

GAMING ADVANTAGE: FROM DERELICTION TO REGENERATION

BY JANE GREENWOOD AND JON SPARER

A resort casino development that blends its boundaries with the surrounding city will be beneficial to both entities. The shared experience shouldn’t be seen as drawing the casino customer away from the gaming floor. On the contrary, it should be seen as providing other opportunities to extend their stay. And this can be done with due responsibility for the impact of their designs on natural resources.

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s architects we look at derelict buildings on fallow land as opportunities not blight. We see possibilities where others see demolition trucks lining up. The challenge is not how to restore a neglected structure but what viable use can bring it back to life. Many developed countries have hordes of abandoned industrial buildings such as factories and mills that have seen the height of the industrial age pass by.

Architects have a responsibility to consider the impact of their designs on natural resources. By finding new uses for abandoned industrial buildings through adaptive re-use, renovation, or recycling building materials that impact is reduced. There are a few examples of this adaptive re-use today, most notably in the Ruhr Valley, Germany where iconic steel mills and coal washing plants have been transformed into vibrant cultural centers and on a smaller scale, well known urban re-uses like Covent Garden, London and Faneuil Hall in Boston Massachusetts.

The long abandoned 126 acre Bethlehem Steel Mill site in Bethlehem, Pennsylvania is emerging as a commercial and cultural hub as a result of the recently opened Sands Casino Resort Bethlehem. While the casino is housed in a new building, there are 19 remaining industrial structures that are slated for re-development. As executive architects for the developer BethWorks Now, Kostow Greenwood Architects spearheaded a team of consultants who investigated the condition of over 30 vintage industrial buildings on the brownfield site. The success of the project was not based primarily on solid design decisions; without the inclusion of community support and business and political interests, the Pennsylvania Gaming Commission would not have awarded a license to the BethWorks Now site.

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The nature of many industrial age structures is their large volume of space including long column-free spans and high ceilings. These attributes are a natural yet unique fit for venues that bring large numbers of people under one roof – a casino is an ideal candidate to fulfill this goal. Casino design has begun to look beyond building new purpose-built structures on virgin land by finding opportunities to bring the gaming experience to dense urban areas and encourage economic development that complements both the casino and its host city.

Urban gaming is not a new concept but salvaging industrial relics from the wrecking ball by turning them into vibrant destination casinos may be. The urban casino experience must include the surrounding community and see it as a natural feeder. A city with a gaming establishment within its urban core will benefit from revenue generated by patrons visiting the casino if the two are seamlessly woven within the urban fabric. A big box urban casino that looks within and fails to embrace its surroundings will not encourage casino patrons to explore the community beyond its boundaries and thus drain the life out of the neighbourhood. Known as ‘island casino’s’ for having all their amenities contained within one envelope, this model fails to promote economic growth beyond its perimeter. Selfcontained developments such as these are better suited in less populated areas though they are often developed on green fields and require new infrastructure including roads, utilities and support services that may not currently exist.

A city should not be a back door to any major development 18 I Casino & Gaming International

within its boundaries. On the contrary, a resort casino development that blends its boundaries with the surrounding city will be beneficial to both entities. The shared experience shouldn’t be seen as drawing the casino customer away from the gaming floor. On the contrary, it should be seen as providing other opportunities to extend their stay.

It is a rare moment when an architect is asked to turn an abandoned behemoth such as a power station sited on 27 acres of contaminated soil into a vibrant entertainment venue within a historic city. This was our task in New Bedford Massachusetts, a New England whaling city that was the foremost whaling capital in the United States during the early 1800’s. A waterfront city with a rich history of commerce and architecture evolved as the economic tide turned against it to what it is today – a city with beautifully restored homes of past whaling captains and stoic public buildings along side run down residential neighbourhoods and struggling commercial downtown. New Bedford is no different than many other smaller American cities trying to encourage economic development to spur a resurgent tax base while revitalising the city.

Along the commercial waterfront of New Bedford harbor sits a 160,000 square foot 2 storey brick and steel structure.

At 100 feet in height, the power station rises above all other buildings nearby. The power plant and its 200’ smoke stack are visible from Interstate 95, the major artery between New York City and Boston, Massachusetts. Thus, two key design concerns, visibility and vehicular access, are fortuitously mitigated. By building a casino development near major

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>> A CITY SHOULD NOT BE A BACK DOOR TO ANY MAJOR DEVELOPMENT WITHIN ITS BOUNDARIES. ON THE CONTRARY, A RESORT CASINO DEVELOPMENT THAT BLENDS ITS BOUNDARIES WITH THE SURROUNDING CITY WILL BE BENEFICIAL TO BOTH ENTITIES. THE SHARED EXPERIENCE SHOULDN’T BE SEEN AS DRAWING THE CASINO CUSTOMER AWAY FROM THE GAMING FLOOR. ON THE CONTRARY, IT SHOULD BE SEEN AS PROVIDING OTHER OPPORTUNITIES TO EXTEND THEIR STAY. >> transportation arteries and within an established urban center, existing infrastructure becomes the basis for expansion to fulfill the needs of the development.

This site in particular was selected for its iconic 1916 industrial building, Cannon Street Station and 1856 Taber & Grinnell Iron Foundry building. Given the site’s history it was also assumed to be a contaminated brown field site. Contrary to most developer’s logic, these were considered attributes and not a warning to walk away at first sight. Given its track record of salvaging odd sites for new uses, the developer KG Urban Enterprises, engaged the Cannon Street Station project with a mission to position the site as a future resort casino all conditioned upon the state of Massachusetts legalised gaming activities.

As with most entrepreneurial developers, they had a goal in mind and began the ambitious task of figuring how to realise that goal. The Cannon Street Station project began as

a site with multiple owners, unknown ground contaminants and remediation costs. It was surrounded by a commercial fishing industry leery of loosing valuable water-front slips, and in a State that had recently resisted legalising gaming.

The acquisitions team went to work securing rights to the multiple sites; the remediation team led by environmental engineering firm TRC Companies, Inc began testing the soil, Architectural Preservation firm, Li-Saltzman Architects studied tax-credit options through the Historic Preservation Tax Credit federal program and began researching the site’s history, and an economic impact study was provided by Gaming Market Advisors. Our first on-the-ground task was to determine the structural integrity and viability of the two historic buildings. Once we determined they were sound, the design team created a master plan using the turbine room of the power plant as the gaming floor and the foundry building for use as support services. Kostow Greenwood Architects

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>> URBAN GAMING IS NOT A NEW CONCEPT BUT SALVAGING INDUSTRIAL RELICS FROM THE WRECKING BALL BY TURNING THEM INTO VIBRANT DESTINATION CASINOS MAY BE. THE URBAN CASINO EXPERIENCE MUST INCLUDE THE SURROUNDING COMMUNITY AND SEE IT AS A NATURAL FEEDER. A CITY WITH A GAMING ESTABLISHMENT WITHIN ITS URBAN CORE WILL BENEFIT FROM REVENUE GENERATED BY PATRONS VISITING THE CASINO IF THE TWO ARE SEAMLESSLY WOVEN WITHIN THE URBAN FABRIC. >> designed the new structures and collaborated with the casino design firm, YWS Architects of Las Vegas, Nevada, who provided the layout and programme.

Thinking outside the box, YWS was able to create space for 3,000 slot machines and table games by adding floor area beyond the perimeter of the power plant while preserving and celebrating the historic structure. Two glass enclosed arcades flank the power plant adding 28,000 square feet to the programme while letting filtered natural light stream onto the gaming floor. Recently, casino designers have embraced the use of natural light to improve the quality of the patron’s experience. The glass arcades also highlight the connectivity to the surrounding community and provide a view corridor from the adjacent streets to the New Bedford harbor and beyond.

One challenge working with large vintage buildings is how to create a human-scale experience without being overwhelmed by the grand scale of the building. Those who have experienced London’s Tate Modern and its vast turbine room will recall their first impression of awe, which without enormous art on display may be overwhelming. Though the Cannon Street Station is significantly smaller by volume, the challenge to create a pedestrian friendly experience remains the same. YWS fills the second tier which wraps the main turbine room and gaming floor below with dining and entertainment venues thus engaging the cavernous space with activity on multiple floors.

A new 600-room hotel tower and spa will rise between the restored power plant and the harbor walk. By placing the tower perpendicular to the river, the residence of New Bedford will maintain their view of the working waterfront just as they have for the last 300 years. Hotel suites will offer spectacular views along the Acushnet River to the Vineyard Sound and toward the historic town centre to the west. The existing street grid will flow onto the Cannon Street site creating continuous pedestrian walkways from the historic centre of New Bedford through the casino development down to the waterfront. A path that was severed during the 1970’s when a new roadway divided the waterfront from the heart of the city.

Approaching the site from the city toward the waterfront, the first array of buildings will be two-storey brick structures reminiscent of New England architectural vernacular surrounding a small town square. This area will become the retail zone. Two parking structures, wrapped in vertical greenery, will accommodate 3,000 cars. Rounding out the programme will be resort amenities such as an entertainment venue and conference centre. A second 300room boutique hotel, additional parking and an expanded conference centre will be added as the demand warrants.

Once complete, Cannon Street Station will occupy 20 I Casino & Gaming International

approximately three million square feet at an estimated cost of US$700m.

Placing an urban casino development on a working waterfront in the middle of an historic city with a rich history of past glories is a challenge in itself. Doing this on a contaminated site in a State that has not yet licensed gaming is not for the faint of heart. But without a growth industry such as gaming as the fuel for economic development, the deteriorating power station and crumpling fuel tanks would sit idle while the fishing industry continues to shrink as another natural resource dwindles. Most architects consider sustainable design and creative thinking as a discerning way of life. Finding clients with an appetite for innovation who subscribe to a similar mission will only enhance our built environment. CGI JANE GREENWOOD AND JON SPARER Jane Greenwood is co-Principal of Kostow Greenwood Architects. Since joining the firm in 1993, Jane has directed a large body of work focused on broadcast, media, and institutional clients, bringing her hands-on personal approach and technical expertise to every project. Prior to her partnership with Kostow Greenwood Architects, Jane specialised in the design and construction of large scale commercial and residential projects in the government and not-for-profit sectors. Jane is a graduate of the Pratt Institute School of Architecture, a member of the American Institute of Architects and a LEED Accredited Professional.

Jon Sparer, AIA is a principal of Las Vegas-based design and architecture firm YWS Architects, LLC. With almost 30 years of design experience finely honed in the entertainment capital of the world. He has worked on a variety of world-class Las Vegas properties, including Bellagio, Mirage, Treasure Island, Paris Las Vegas, The Forum Shops at Caesars Palace, as well as The Borgata in Atlantic City. His range extends to Native American properties such as Avi Resort and Casino (Laughlin, Nevada) and Cocopah Resort and Casino (Somerton, Arizona). Jon is a graduate of Ohio State University and attended the University of Oxford, England. He is a member of The National Council of Architectural Registration Boards (NCARB) and the American Institute of Architects (AIA).

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DELIVERING FANTASY: MAKE YOUR ONE SHOT WORK

BY PAUL HERETAKIS

Design has always to tread a fine line between its visual and functional impact and the bottom line return on whatever was invested in that outcome. How design economics is applied defines the success or failure of casinos, from boutique through to resort. Inevitably, sophisticated and discerning customers are the decisive influence and keeping them on side at all times means design should be about the customer.

Deceptively straightforward, it remains the crucial challenge ahead.

>>

understood Thomas Friedman’s book The World is Flat as a warning of change. The world was going to be ruled by a bunch of young computer savvy kids while the old guard was going to be shut out of this new future. Some of this is true, but old dogs like us still have a few tricks left. We just needed to adjust our thoughts towards technology and its impact on our businesses and society as a whole. Hope is anew and I believe all of this change is for the better. As a designer of casinos I knew the expectations of the customers would also change, they would become better educated and more demanding. Since these expectations and desires are the greatest influences on design we all have a lot to learn from this flat world we live in.

Design and economics go hand in hand. Design, planning and branding is directly linked to your marketing plans and the intended customer. Those early decisions are the most important. In many cases the more you spend the more you make; Steve Wynn can attest to that theory and knows his customers and their expectations better than anybody. Others spend money in the most unnecessary of ways in order to appease their own egos instead of the customers’ desires. The cemetery that lies in the centre of the Las Vegas strip is as good an example as you will find of ego over economics.

Money is tighter than ever and our profit margins even slimmer. Design decisions need to be made with even more care, for design and reinvestment after five years is no longer possible. Fade design will come and go as quickly as your profits. Design needs to stand the test of time and make that instant connection to the intended customer. If you can strike that immediate chord with their heart, then their wallet will follow.

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The design of hotels and casinos is all about escapism and connection. Whether you are a city club, regional casino or an exotic destination location; each casino or resort must deliver a sense of escapism. The feeling of escapism is the emotional connection that people look for in their happy place. It can be felt the moment that customer walks through the door and it is the difference between success and failure. For a destination this connection needs to be great, for a city club it can be as simple as a place to decompress from their daily grind of life. It can be made through design and employees with service and operations.

If you can do them all well, then you’ve got them hooked.

Just like a person every successful casino needs that soul; it’s what makes us connect to each other and it will be what makes a person connect to your casino. This connection can start as early as those first few seconds of a browse on the Internet.

THE INTERNET With the advent of the internet, information is available instantly and from multiple sources. In the beginning hoteliers were able to carefully craft their marketing messages. Now with blogs, twitter and other social web sites, information and reviews of the properties are out of your control. So how do we as hoteliers adjust to this very open form of communication?

The Internet has also allowed the customer to become educated about us and our competition. Small properties with little budgets can get the same exposure as the big companies on the web. It has become the great equaliser.

Customers can also learn about what services, types of food, beds, bathrobes, toiletries and so on are available. You have to address each detail because it is out in public view even before the guest arrives. The good news is that the Internet is free, but that’s just the beginning.

MARKETING A HOSPITALITY BUSINESS WITH THE WEB How do we use this instant technology to our advantage?

Many operators tweet a customer about drink and food specials, entertainment happenings while they are at the property. Players’ cards have given us the tool to send instant rewards to a player on a machine. It can also give us the information to craft specific marketing plans to attract customers based upon their unique interests.

How do we design buildings to excel in this new marketing tool? Well the money shot has never been more important. That one photo that captures the story of your property is worth a million words. The pool that overlooks the ocean, the suite that looks more comfortable than your own bedroom – these are factors we need to keep in mind when the casino is being designed. It all becomes part of the brand. That brand needs to be simple and clear and easily understood in an instant. When surfing the web that instant might be the only view you will get which must be thought of from the inception of the project, along with marketing plans and design direction. How will you differentiate your property from an already crowded field of competitors in an instant through a website? People are looking for a fantasy and design is the perfect way to deliver that dream. Our design and branding firm was born out of this need to analyse all of these questions and answers in the initial planning and development phase.

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HIP AND COOL, THE LATEST TREND In order to attract this young Internet customer we all changed the way we designed. The traditional look came across as old and out of date on the web. It is difficult to convey classic service through a picture on the web. A pretty picture of design is an easy message to deliver. That perception becomes reality. Everybody wanted to be the hip and cool place to go. Since the web is very ‘buzz’ oriented, only the newest properties got that press. The grand dames of the industry had a hard time getting attention. Every property needs a hook. Hip and cool was the answer. Hip and cool depend upon trends and styles; you are always keeping ahead of the curve. The Palms Casino, Hard Rock and Borgota have done this well. Celebrity sittings and endorsements were promoted and many times paid for by the operators, all to make their property seem that much more impressive. They became the new centres of pop culture in our time. Unfortunately, technology, lighting, colours and fabrics are always linked to fashion and are extremely vulnerable to the ever changing tastes of the customer. This direction has a generational edge to it, but nonetheless, it has influenced design over the past decade.

Cool and hip became the new opulent and rich. Where has this led us to? Cool and hip, if not done well, can go in and out of style very quickly. The hip and cool of yesterday is often the old and washed out of tomorrow and worse yet, not cool to be scene at.

BOUTIQUE VS INTEGRATED A boutique designed hotel was a label used to add flash to a small property that could not compete with the big boy integrated resorts that offered everything under the sun.

They relied heavily on cool design, unique restaurants, bars and nightclubs. Lots of smoke and mirrors were used. Multispacing was invented. Restaurants transitioned into nightclubs while lobbies became meeting places for breakfast and happy hours. It was a cheap way to get publicity and attract guests and it worked. Some became like a one line joke with a short shelf life based upon a quick image found on the Internet. Others offering good design and attentive service are able to ride the wave of success for a few years.

What is the next generation of boutique hotels; can we compare them to the small theatres of London and New York? With the use lighting, screens can create optical illusions that lead the guest to see more than really exists.

Can we take this approach with hotels and casinos? They can change lighting, music and ambience throughout the day?

Can we create the interaction that today’s younger guests requires? Like a five year old they need constant attention and stimulation. Technology, the overall essence or vibe and an engaged staff is key. You must stay relevant. The bigger picture is longevity. We can’t afford to remodel our properties every 5-7 years as we have in the past. Design, branding and a focus on the customer is the key and that must be done from the start.

The integrated resort offers all things to all people. They are extremely successful in Las Vegas but are still a bit ahead of their time in Macau. You always need guests who are looking for that convenient all-inclusive experience; otherwise they become overwhelmed with the sheer size and offerings of these mega resorts. The experience becomes too crowded and lacks the personnel service they Casino & Gaming International I 23

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crave. If you love malls, multiple theatres, every type of food conceivable, then you will love the resorts that offer it all under one roof. The bigger problem in today’s economic environment is finding US$2-3bn worth of financing. Then the next issue is getting a return on this investment. Not an easy challenge in today’s world.

WHO IS SUCCEEDING TODAY? I can’t think of a more successful property created in the past few years other then the Venetian in Macau which is currently welcoming 20 million visitors a year. That’s more than most cities and certainly more visitors than City Center will greet before the bank takes it over. The Venetian created a must see property that has become a beacon of Asian.

Much like the Eiffel Tower is to Europe. With its close proximity to Hong Kong it has become an easy two-day add on. They have created a must see brand, much the same as they have in Las Vegas.

The Grand Lisboa in Macau is also a massive success and always packed with people. Although it has a modern presentation, lots of gold leaf, crystal and wood let people know that money has been spent on them. It is also a visual explosion of excitement; you can’t help but to feel lucky in that environment.

Monte Carlo Casino is a great example of the grand dame. It has and will always look stunning, a testament to the initial investment. Many of the classic European hotels have this same allure. Of course, technology over the years has been added to these properties, but always in a sophisticated

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manner, not an overblown and overbearing statement of gaudy behaviour. If you have the clientele to support this look it is recommended. It will be passed down from generation to generation as an example of the lifestyle of the rich.

HOW WILL THIS TOOL CHANGE THE WAY WE DESIGN IN THE FUTURE? Escapism and connection have never changed; it’s always the goal when creating a resort destination as well as a city slot club. People need a break from the norm or a relief valve.

Some of these are planned months in advance and require multiple days. City clubs rely upon a quick escape from the daily grind. Either way the customer must be greeted instantly with a world that is different than the one they are currently in. this might be a reason themed resorts and classic hotels fair better than modern properties that only offer the best of today. They go out of style quickly. Funky light fixtures age over night. Very neutral interiors that lack colour get boring quick, they also don’t compete well with the excitement of a colourful and loud slot machine. They have a tendency to bring the energy level down. Technology is here today and gone tomorrow, to base a design on it can be the death of you. Think of all the cool technology you saw a few years ago and how it has changed three times since.

Many people working in major cities work in buildings that look like City Center in Las Vegas. With its contemporary finishes and elitist architecture, people can’t connect with a building that resembles a museum – it has no soul, nothing to

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romance or fall in love with. Who wants to escape to a place that reminds them of the building they work in? A casino that was designed to be viewed like a museum, not a place to be entertained, is not a winning recipe for a return on an investment. People can’t relate to plastic and slick metal finishes, they are used to the class and familiarity of marble and wood. Other successful casinos with contemporary designs have always used certain materials that are familiar to people – woods and marbles are comfort food to the eye.

We design entertainment spaces, for people that are looking for fun. Once again that brings us back to escapism and connection.

Escaping to Paris or the beauty of the Venetian or the Lost City seems to strike a connection with people. Even if it’s not the real city, it might be the closest some people will ever get to that city; others fall for the romance of the copied and familiar architecture.

Monte Carlo, Bellagio and the Wynn are too much of a statement of opulence and beauty and instantly connect with people and are also backed with amazing service. Many successful city clubs offer this same experience on a small scale. Others have obvious themes that people enjoy as light entertainment.

ECONOMICS DEFINES DESIGN You have one shot at creating a casino that will generate the returns you are expecting. The first 10 decisions you make about the design, planning and branding will be the most important decisions you will ever make. Don’t take the message too seriously, its all about fun and entertaining people. If you need to copy Paris, than so be it, as long as the

customer likes it. Give the people what they want. Don’t make it into more than it needs to be or more about you than the customer. Your job is to make money off the entertainment of others. Take that end of the business very seriously and that will become the driving factor in many of your design decisions.

This is the gaming industry and we are at the forefront of evolution, progress and the world where dreams come true.

Even Santa Claus wishes he was us! CGI

PAUL HERETAKIS Paul Heretakis, RA, Vice President of WESTAR Architects based in Las Vegas, Pheonix, Pennsylvania and Macau, has over 15 years of experience overseeing hospitality design and mixed use master planning projects throughout the World. 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. 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”. www.wagnarchitects.com Casino & Gaming International I 25

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SERVER BASED GAMING

PROVEN BENEFITS REVEAL THE NEED FOR SPEEDIER ADOPTION

BY LEE GREGORY

In the summer of 2005, the casino industry was abuzz with excitement over the latest innovation - Server-Based Gaming (SBG). It was set to create a major technological shift in how slot machines work and how consumers can interact with them. The following year saw SBG start to make a tangible impact on the casino market. Building upon server centric gaming concepts with technology and design principles from ‘thin client’ (system-based) computing and online gaming, SBG marked a significant step forward for the casino world. So moving from server-assisted to centrally server-based is now essential for operators in this market.

>>

erver-Based Gaming (SBG) has revolutionised machine and content management for gaming operators, driving innovation, better content and increased machine revenues. The basic SBG technology had significantly shifted the casino market but there was an opportunity to build on this innovation with Open SBG. The casino market has really grown on the back of this; its introduction was an important development, allowing all terminals to be centrally managed over broadband ensuring the latest and best content is constantly uploaded on to each.

Before its introduction, the actual hardware itself would have to be physically replaced at regular intervals.

S

DIGITAL OVER ANALOGUE Digital is excelling over traditional analogue and operators who have already tapped into the advantages of SBG are undoubtedly weathering the storm better than those who have not. Digital is crucial to the future of the gaming industry.

But for SBG to reach its full potential there needs to be more adoption from leading content providers to allow for differentiated content. This is where open SBG proves itself as it allows content developers to add their games on the platform offering a wealth of content to venues and machine owners.

The significance of SBG has proven incomparable as the terminals have lead to incomes doubling over their analogue equivalents. The ability to download games remotely takes away the need to physically remove the machines so they have a longer lifespan reducing material and labour costs.

The real-time content downloads and remote terminal monitoring also deliver enhanced flexibility and responsiveness to consumer needs as well as higher uptime. A Casino & Gaming International I 27

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casino manager can control his or her entire estate from a dark room, changing stakes and prizes and switching between games at the touch of a button. Implementing Open SBG will also transform operators’ returns by delivering more compelling content to consumers. Manufacturers who restrict themselves to proprietary systems that only accommodate their own games are not taking the needs of the operator or consumer into account.

Gala, a major player in the UK market place, was an early adopter of Open SBG and has helped shape the casino Open SBG market. The incumbent operators want to deliver everything to their 21st Century customer. Consumers now have a greater desire to absorb a wider variety of content and are more familiar with technology, such as iPhones and Playstation. The 21st Century consumer is more likely to browse available content before deciding whether to play or not. With more content, Open SBG offers the best platform for the 21st Century customer entering the casino today.

A GLOBAL DEMAND Convergence has played a key part in the growth and adoption of this new technology with Open SBG enabling the first multi-functional terminals. These offer a range of different games, including slots, multi-win roulette and skill gaming, all within one machine. This has been a significant development for the casino market which constantly needs to look at improving the customer experience.

Whilst there has been a high level of demand for Open SBG, the number of casino sector suppliers to have adopted the technology remain limited.

The future of gaming lies with content and not hardware, but it has taken companies a while to realise this, and a number of the incumbent suppliers to the casino sector are finding it difficult to innovate and expand into new territories. It requires a big change in mentality to think about the best content first and not the best cabinet. Open SBG is the only platform that has truly delivered this.

In some markets, Open SBG is becoming the norm with territories across both Europe and Asia investing heavily. The platform has been designed in a modular way to adapt to the different regulatory requirements and legislations that are so prolific in the gaming industry. Its flexible nature has allowed us to rapidly expand internationally building on the success in the UK. For the gaming industry in any country – the desired outcomes are always the same – increased income from greater player satisfaction.

One sticking point is the United States which is proving a slow adopter due to restrictive legislation. The Nevada Gaming Commission is much harder to manage; there are more difficult regulations and stricter licensing rules to follow.

This may be why the US market has been more challenging and interest in the new innovative Open SBG has had a slow adoption rate.

Our international approach has been either direct or by establishing valuable relationships with key players in the market. In Asia, we work with SHL as well as other gaming organisations such as Genting Group and leading casino groups in Macau. The Open SBG platform is performing particularly well in East Asia with a number of terminals generating the highest gross wins per terminal in the region.

OPEN OR CLOSED? One of the big questions looking forward is open or closed?

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Open SBG platforms are set to be the model of the future, particularly in this economic climate where operators need to focus on maximising income. For operators, open platforms allow them to choose content from different game developers and to offer the latest games to maximise revenue and encourage repeat play. For developers, it also allows a level playing field for all game developers, large or small, to distribute their content. The benefits to the Open SBG platform are endless. A more engaging player experience increases machine income, while operators can enjoy a lower cost base through fewer machine changes. In addition, remote diagnostics mean less site visits by engineers.

The open nature of the platform is compelling because it incentivises content developers – and is helping developers and niche to small-medium innovative businesses, which is

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extensive skills in general IT. In addition to new skills, attention needs to be paid to the networks on which the server-centric systems run on. As the quality of graphics and load speed increase, so will the size of the games.

WHAT DOES THE FUTURE HOLD? The main benefit of Server-Based Gaming is that it enables casinos to push brand new games to slot machines quickly saving thousands of man hours. The future for the casino world is likely to see a continued shift to accommodate more server-based games. The gaming industry is seeing a dramatic shift in their customer base too now that the general population is growing up with revolutionary games and technology. It is the new breed of gamers marking the way for SBG to continue growing.

Open SBG will continue to evolve as more content is made available and companies realise the benefits of having an open platform. Through this open platform, all machines are easily accessible worldwide so wherever the terminal is it can be fixed remotely. Offering a 24-hour service where, before the player or customer realises there is a problem, the support team is able to identify and fix it is essential. This revolutionises the way casinos and bookies are able to operate on a daily basis with the reassurance that revenues will keep coming in as the machine will never have to go away for repairs.

There is no doubt that those who have adopted Open SBG have seen clear business benefits but the industry as a whole can be slow to move. As the economy starts to correct itself, sales can be expected to increase as venues start to reinvest in technology. This demand will have a knock-on effect on supply and the market is likely to be jolted forward. SBG and all its benefits are breathing life back into an industry that has had to adapt quickly to changes in technology, consumer habits and gambling legislation. However, there is still a lot of change needed to modernise a gaming world where much of the market is still server-assisted rather than centrally serverbased. CGI

LEE GREGORY

boosting their revenues. The only restriction that has been a cause for concern is that SBG providers need a clear mechanism for regulatory approval for cross platform content testing. At the moment content is approved in isolation, but it looks likely that this situation will chance in the near future.

UNDERSTANDING THE TECHNOLOGY As the demand changes and SBG technology rolls out across the different territories, there has been a real need to adapt the skill set of those within the industry. SBG uses conventional enterprise software and PC based technologies.

The advantage of this is that the techniques to operate securely are already widely understood in other industries – banking and finance for example. On the flip side – there is a need to hire from outside the gaming industry looking for

Lee Gregory is Managing Director, Inspired Gaming Group, UK Gaming, and a specialist with 25 years expansive knowledge of the gaming sector worldwide. He was Game Development Director for the Maygay group until the acquisition by Leisure Link. In the server-based space, Lee was instrumental in the early rollout of the Gala Gaming Platform before taking responsibility for the Digital Gaming offer in pubs.

Inspired have been a leading player in the SBG market for seven years having deployed over 50,000 machines in 10 countries and, to date, in excess of 25,000 machines have been connected to the Open SBG platform. When Leisure Link rebranded to Inspired Gaming Group, it took advantage of having a single asset with multiple content available and is now a leader in Open SBG.

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F R E E TO AT T E N D

INCORPORATING BRAND NEW AWARDSÅ CELEBRATING EXCELLENCE AMONGST SERVICE PROVIDERS IN B2B

I<>@JKI8K@FE EFN FG<E NNN%<>IC@M<%:FD AT THE HEART OF THE INDUSTRY

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UK GAMING PERSPECTIVE

ELECTING TO TACKLE CASINOS’ CONCERNS IN THE DIGITAL AGE

BY ROY RAMM

Legislating to gain significant tax revenues from gaming is never without dispute, but in the UK across-the-board clear and fairly applied regulation to realise that for the mutual benefit of the gaming industry – remote and real – needs to be addressed as the digital economy progresses and social responsibility issues come to the fore.

While casino development in the UK has contracted, with notable singular exceptions such as the Hippodrome, remote gaming has been in the ascendant. As a new government takes office there is another key opportunity to consider the issues.

>>

nce the casino industry had something of a reputation for poor associations, but who would have thought the industry’s image could be damaged by association with banks? During the continuing crisis in the financial sector every time a journalist wants to illustrate a point that involves any element of risk, the word ‘casino’ litters the prose with such frequency that you could be forgiven for thinking that casinos are the only place in the UK where risk is relevant to business. ‘Casino banking’ entered the accusative lexicon along with ‘sub-prime’ and the ‘bonus culture’; but as a word ‘casino’ is anything but sub-prime: it is sexy, evocative and visual. Set it against dizzying images of slot machines reeling round, passing the pound notes signs and inevitably landing on the lemons and you have a clichéd linguistic and visual metaphor that distorts more than it illustrates. The truth about risk, casinos and slot machines is – just like the banking crisis itself – a little more complicated.

During the passage of the 2005 Gambling Act it was the notion of a ‘super casino’ with a thousand or so slot machines on Blackpool’s blighted esplanade that excited and angered in equal measure. Fleet Street attacked, Parliament retreated, Las Vegas on sea sunk and there are still just 140 or so much smaller casinos in the UK to serve as inspiration to the hacks.

It wasn’t the glamour of the entertainment or the attraction of the promised smart bars, restaurants and the jobs they offered that failed to attract political support; it wasn’t even the clatter of the ball in the roulette wheel that turned the political backbone to foie gras; it was an irrational fear of the social consequences of ‘large numbers’ of slot machines that stirred the media frenzy and caused ministers to dance like the good guy sheriff scared stiff by the gun slinging gangsters - or in this case editors - firing warning shots at their political feet. In

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>> IF AN INCOMING GOVERNMENT WANTS TO SEE THE MAJOR RESPECTED INTERNATIONAL BRICKS-AND-MORTAR OPERATORS TAKING THEIR PLACE IN THE DIGITAL WORLD – AND IN SO DOING BRINGING THE KIND OF CORPORATE DISCIPLINE, COMPLIANCE AND SOCIAL RESPONSIBILITY REGIMES THAT HAVE LIFTED THE REPUTATION OF THE INDUSTRY – IT MUST FIND WAYS TO CLOSE THE REGULATORY GAPS AND EMBRACE GAMING AS WHOLE, REAL AND REMOTE. >> true Vegas style, common sense and good policy got run right outa town! The result was an Act confused in its intentions and overburdened with measures to deal with a problem that was already under control and generated a public misperception that the UK gaming industry is dominated by thousands of casinos full of high-stakes slot machines.

The reality is that even if all the licences granted by the new gambling legislation eventually emerge from the tortuous licensing process as real developments and a few old 1968 Act licences are pulled yellowing from the filling cabinet, it is unlikely there will ever be more than around 187 casinos in the UK and none will resemble the successful resort hotels enjoyed by millions almost everywhere else in the world. According to the UK Gambling Commission less than one percent, or only around 2,300 of the UK’s 248,000 gaming machines, are to be found in casinos. Compare that with the 32,000 machines located in high street betting shops and the remaining 200,000 or so spread between around 640 bingo clubs and the thousands of small arcades and casinos suddenly look like the poor relations.

But the Gambling Commission is wrong: there isn’t a quarter of a million or so machine in the UK: there are tens of millions and many more to come! All 18.3m households in the UK with Internet access, everyone with a laptop, a mobile phone or a PDA and every home with a digital television has the potential to access a virtual casino in a world with millions of slot machines with unlimited stakes and prizes and without, on many hundreds of sites, any information on social responsibility or a trained member of staff in sight. And the manifestos of the major parties make various promises about better access to high speed broadband. That also means faster access to online gaming.

Google the word ‘casino’ and find hundreds of millions of results, most of which lead directly to online gaming sites.

The Remote Gambling Association represents around 28 of the biggest and best run of the online casino sites, but there are hundreds more. Though the major operators have licensed their businesses in respectable, well regulated (low or no tax) jurisdictions, others have not and it is still possible for UK gamblers to play online with casinos in obscure unregulated jurisdictions – some of which have excited international law enforcement for all the wrong reasons, mainly for their risky attitude to money laundering and terrorist funding!

It’s now perfectly okay with the regulators for a punter to whip out his or her laptop or PDA almost anywhere and gamble away directly connected to any of the world’s tax free havens. Strangely, in fact about as counter intuitively as you can get, the only place where the law tries to prevent access to online casino games is in the regulated environment of UK 32 I Casino & Gaming International

casinos! It is illegal for a licensed casino to offer online gaming or any device that offers a similar product unless it forms part of the casino’s allowance of just 20 machines and then limits the stakes and prizes accordingly. Why would you bother? The maximum stake on a UK casino slot machine is £2 and the maximum prize £4,000. Go online and there are dozens of sites offering prizes in excess of a $1m! If the punter doesn’t like the casino, he can take his own mobile slot machine to the pub, restaurant, college, a place of worship or even to the marbled corridors of DCMS or the Gambling Commission!

Whilst the regulator borders on being obsessive about the conduct of gaming in real premises and the Government wrings the industry dry through taxation, how the Government’s strict codes on social responsibility are enforced in the virtual world is unclear and along with other jurisdictions taxing Internet revenues remains a challenge.

These concerns have prompted a new DCMS consultation on ‘The Regulatory Future of Remote Gambling in Great Britain’ (March 2010), but the consultation is a DCMS document and is clear that it does not intend to address issues of taxation. To be fair it also says “...there will need to be close liaison between the Department and HM Treasury to ensure that any implications for taxation policy are properly considered as the regulatory proposals progress ...” (para 3.32) as in ‘joined up government’ I suppose: we travel more in hope than expectation.

An incoming government needs to recognise that British jobs need protecting and it must move quickly to allow casinos to offer online gaming and other electronic products in the controlled, regulated and taxed environment. This isn’t a case of if you can’t beat ‘em join ‘em: it’s about maintaining contact with the reality of 21st century life.

There are other issues that, unconnected with the digital revolution, are wrong with the 2005 Act. It has evolved a disproportionate response and Byzantine mechanisms to deal with problem gambling that continues to dominate the debate on gambling to the exclusion of other important issues like its contribution to the economy and employment.

It has enacted a truly bewildering casino regime which creates no less than three different types of casinos on this small island! Some 2005 Act Large casinos will be smaller than some existing large 1968 Act casinos which are deemed, for the purpose of the 2005 Act, to be smaller than Small casinos licensed under the 2005 Act. Harmonisation of the law is essential – if only to stop the criminal abuse of the English language and mass consumer confusion!

The restriction of the market through the de facto continuing recognition of Permitted Areas defined by economic and demographic data that is now more than half a century old, is

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UK GAMING PERSPECTIVE

>> AN INCOMING GOVERNMENT NEEDS TO RECOGNISE THAT BRITISH JOBS NEED PROTECTING AND IT MUST MOVE QUICKLY TO ALLOW CASINOS TO OFFER ONLINE GAMING AND OTHER ELECTRONIC PRODUCTS IN THE CONTROLLED, REGULATED AND TAXED ENVIRONMENT. THIS ISN’T A CASE OF IF YOU CAN’T BEAT ‘EM JOIN ‘EM: IT’S ABOUT MAINTAINING CONTACT WITH THE REALITY OF 21ST CENTURY LIFE. >> an embarrassing anachronism. If in September 2007 (when the 2005 Act passed into law) an activity - casino gaming was decreed by Parliament to be legal, licensable, regulated and subject to taxation for the greater public good, it is indefensible and insulting for a Secretary of State, sitting in Westminster (where there are 24 casinos) to say that that the activity is okay in Torquay, but not in Tottenham and may in the future be permitted in Stranraer but not Streatham. And dare I say it, why, if the people of Blackpool want a Super Casino, can they not decide locally to have one? What the digital gaming revolution has shown us is that if people want to gamble they will find a way to do so, no matter how patently absurd the attempts to stop them may be. It should be the ambition of good government in a liberal democracy to allow decisions on gambling to be made locally by the people who may be affected by it.

There are some new casino developments in the UK. In 2011, the Hippodrome is expected to open in Westminster and no doubt there will be a scramble of bidders for the new 2005 Act Newham licence. Both are in affluent London. The Hippodrome clearly hopes to benefit from the perpetually strong tourist market and Newham from the advantage of having roughly more than seven times more profit generating product than any other premises paying similar rent, rates and wages than any other casino in the capital.

As for the other 15 new 2005 Act licences, not all will be built and those that do will not bring the levels of regeneration dividend that local authorities granting the licences anticipated. Some will be so disappointed that they may decide not to proceed. Overall though, the trend in development is down. Since the end, in September 2007, of the flurry of applications that emerged from the excitement and expectation of what the 2005 Act might bring and the grim reality of the emasculated piece of legislation (the castration took place at the hands of Michael Howard and Tony Blair in the ‘wash-up prior to the 2005 General Election), ever increasing taxation, a smoking ban and increased competition from other forms of gambling, casino operations have been at best stagnant and are now in decline. Of 187 licences in force, only 140 are currently operating.

But it is the emergence of the digital economy with all its inherent freedoms that exposes both the most serious flaws in the Act and the Government’s unwillingness or inability to address them in other than at glacial speed and in baffling complexity. If an incoming government wants to see the major respected international bricks-and-mortar operators taking their place in the digital world – and in so doing bringing the kind of corporate discipline, compliance and social responsibility regimes that have lifted the reputation of the industry – it must find ways to close the regulatory gaps

and embrace gaming as whole, real and remote. Neither the on-shore real industry nor the Government should try to challenge the remote industry like some analogue King Canute attempting to fight a digital tide, but neither should we be swamped by it.

The Gambling Act 2005 was the first piece of new gambling legislation for over 40 years. When it passed into law in September 2007 it was already out of date and ineffective. Some officials soon recognised the flaws, but Ministers were so relieved to see the back of what had been a bruising legislative process they have, at least from a political perspective, been understandably reluctant to bring any sort of amending legislation back to Parliament. Unless a new government has the courage and intelligence to grasp these issues an important contributor to the UK leisure sector maybe be damaged beyond repair and our staff forced into seeking jobs in banking! CGI

ROY RAMM Roy Ramm joined the British gambling industry in 1996 following a 27-year career as a senior Scotland Yard detective and is still a regular media commentator on policing and criminal justice issues. He was appointed to the main board of London Clubs International plc in 1997 and has been involved in numerous international casino gaming operations in the US, Europe and the Middle East. Currently, he is the Compliance and Risk Management Director for LCI with international responsibility and the Chairman of the Emerald Casino Resort in South Africa. Since joining the industry, he has been an active member of the industry's trade bodies and jointly chairs the National Casino Industry's Operations Forum.

Casino & Gaming International I 33

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MALTA

SETTING NEW LIMITS: REMOTE GAMING HUB AHEAD OF ITS TIME

BY ANDREW ZAMMIT

In pursuit of the ultimate remote gaming destination, Malta has become a versatile, effective and reliable centre in the European Union since its swift regulatory adjustment in 2000. And 10 years on the Island’s egaming stature has grown apace, pushing boundaries, extending limits and demonstrating to the egaming industry its consistent commitment to responsible commercial growth benefiting islanders and operators alike.

>>

hilst much has been said and written both for and against the removal of barriers to the free movement of gaming services within the European Union, anyone trying to get to grips with understanding how remote gaming is regulated within the EU is bound to have a tough time digesting the variables involved – not to mention the legal ‘black-holes’ created by the inter-jurisdictional structuring of operators’ affairs, with different laws applying in each of these jurisdictions. Clearly, the explosion of the Internet as a medium through which products and services of any kind or description can be marketed across the globe in real time has left lawmakers equally awe-struck and perplexed.

The perplexity is caused primarily from the difficulties encountered when attempting to regulate the virtual world using conventional enforcement methods. Or, put another way, the obstacles that must be overcome by sovereign states when enforcing their laws and public policies against operators that are not affected in any manner by geographical distances and/or national boundaries. Indeed, the only physical elements on which such operators depend is the physical infrastructure required to deliver their services through the virtual world of the Internet-to-Internet users in the physical world.

So whilst sovereign states enjoy the freedom of regulating and controlling any activities taking place within their respective political or jurisdictional boundaries or any extensions to their boundaries (as would be the case with seagoing vessels or aircraft), the enforcement of such laws becomes a tremendous legal obstacle course which significantly weakens the enforcement methods applied by law-enforcement authorities. For this reason the Internet has evolved into a veritable free-for-all virtual world, having a

W

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MALTA

>> MALTA IMMEDIATELY RECOGNISED THE IMPORTANCE OF REMOTE GAMING AS A NICHE MARKET AND WAS QUICK TO ADOPT A REGULATORY FRAMEWORK IN THE YEAR 2000... MALTA’S APPROACH HAS ALWAYS BEEN THAT OF PROVIDING A WORKABLE LEGAL FRAMEWORK FOR MALTABASED LICENSEES THROUGH ACTIVE AND EFFECTIVE ENFORCEMENT, SAFEGUARDING THEIR COLLECTIVE INTERESTS WHILE ALSO PROTECTING THE INTERESTS OF PLAYERS AS CONSUMERS OF REMOTE GAMING SERVICES PROVIDED BY SUCH LICENSEES. WITH THESE PRINCIPLES FIRMLY ESTABLISHED, MALTA HAS MATURED INTO A RESPECTED JURISDICTION FOR THE REGULATION OF ONLINE GAMING AND THIS POSITION WAS FURTHER REINFORCED IN 2004 WHEN MALTA BECOME A FULL MEMBER OF THE EU. >> combination of everything imaginable in the physical world – the informative; the obscene; the regulated; the unregulated; the pious; the profane; the good; the bad and the ugly.

As a virtual reflection of the real world, the Internet has also seen an incremental rise in the number of gaming operators, providing a meeting place for punters from all over the world to play against each other, creating an industry which would have been unimaginable as little as ten years ago. In 2008 online gaming alone generated over ?15.6bn revenue worldwide. European Parliament studies indicate that, even as other industries shrink amid the economic downturn, the remote gaming sector is growing by between eight percent (Austria) and 17 percent (Italy) a year in the EU. Against this backdrop, operators large and small have sought the optimal arrangements to, as it were, ‘legitimise’ their operations by obtaining whatever credentials, recognition or licenses that are available to them to provide their players with more peace-of-mind and to dispel the ‘flyby-night’ perception that may be associated with Internetbased businesses, particularly when these operators expected players to deposit funds before playing for money.

The fact that Internet businesses are very mobile – operating equally effectively from Valletta, Vilnius or Vladivostok – made the attainment of such credentials, recognition or licenses significantly easier since operators could congregate in those jurisdictions which offered operators the possibility of licensing their remote gaming business without any material setback. These jurisdictions include Costa Rica, Curaçao, Khanawake, Alderney, Isle of Man and Malta to name a few.

MALTA’S ROLE AS A REGULATORY HUB Malta immediately recognised the importance of remote gaming as a niche market and was quick to adopt a regulatory framework in the year 2000 through an amendment to the Public Lotto Ordinance. Malta’s approach has always been that of providing a workable legal framework for Malta-based licensees through active and effective enforcement, safeguarding their collective interests while also protecting the interests of players as consumers of remote gaming services provided by such licensees. With these principles firmly established, Malta has matured into a respected jurisdiction for the regulation of online gaming and this position was further reinforced in 2004 when Malta 38 I Casino & Gaming International

become a full member of the EU. The Lotteries and Gaming Authority, which has succeeded the Public Lotto Department as the regulator of the industry, continues to demonstrate commitment and determination to retain its position as Europe’s leading remote gaming jurisdiction. Besides, the establishment of certain legal and diplomatic precedents over the past few years have gone some way towards establishing clearer parameters for Malta-based operators, providing them with heightened levels of comfort, and it is towards these developments that we turn our attention at this stage.

1. Obstacles in the way of enforcing public policy restrictions applicable in an EU Member State against Malta based operators - The Zeturf Case The case of Paris Mutuelle Urbain vs Zeturf Limited, otherwise referred to as the ‘Zeturf Case’, was a significant legal milestone from a Maltese legal perspective as it gave interpretational life to the application of Council Regulation on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (EC 44/2001), creating a procedural obstacle for the enforcement in Malta of any public policy judgments delivered by a court in another member state.

By way of general factual background, Zeturf Limited, a Maltese-registered company was licensed by the Malta Lotteries and Gaming Authority (LGA) in 2005 to act as bookmaker, holding a Class 2 Remote Gaming Licence and began its operations in June of that year. Barely a fortnight after launching its online operations, Zeturf was served with a writ issued by PMU alleging that Zeturf breached PMU’s monopoly to organise betting activities on horse races, a monopoly which is granted to PMU by law. An interim order was issued by the French tribunal on 8th July 2005 in which Zeturf Ltd was ordered "to cease online bet taking operations on horse races organised in France" and a penalty of ?15,000 per day was to apply with effect from the lapse of 48 hours from notification of the court’s decision. This decision was subsequently confirmed by the Paris court of appeal on 4th January 2006.

Subsequently, PMU sought to have the judgment recognised and enforced in Malta, in terms of Regulation 44/2001. On 16th March 2006 the Maltese First Hall of the

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Civil Court upheld PMU’s request and ordered that the decision given by the Court of Appeal in Paris become enforceable against Zeturf. At this stage Zeturf appealed to the Maltese Court of Appeal to overturn this order for the recognition and enforcement of the French judgment. Zeturf based the main thrust of its appeal on the arguments that the order issued by the French court was in fact of an administrative nature and that consequently regulation 44/2001 could not be invoked for administrative matters.

The Maltese Court of Appeal observed that although PMU was organised as a commercial company, it is controlled by the state as a non-profit making organisation with the primary objective – enshrined in its statute – of safeguarding French public policy in respect of betting on horse races.

Consequently, it was reasoned by the Court, PMU acted before the French Courts not within the ambit of private law that regulates civil or commercial dealings between private persons, but in the ambit of public law intended to safeguard a monopoly in the interest of l’ordre public francais. The Court concluded that it necessarily follows that the subject matter of the decision of the Court of Appeal of Paris (4th January 2006), although formally or apparently of a civil nature or commercial, in reality falls within the ambit of public law. Therefore, the decision is expressly excluded from the remit of Regulation 44/2001. On the basis of this conclusion the Court cancelled and revoked the decision of the First Hall of the Civil Court and denied the request for the enforcement of the judgment against Zeturf in Malta.

The effect of this decision was that it created a barrier to any sovereign states or person(s) acting under their authority attempting to enforce public policy judgments pronounced by the courts in their jurisdiction against operators established in and operating from Malta.

2. The challenging of enforcement measures adopted by a member state intended to restrict accessibility to the websites of Malta-based gaming operators - The Italian ISP Blocking Measures Legal procedures are not the only route that may be considered by sovereign states in seeking to enforce their laws and public policies within their territories or political borders. Indeed, the ‘new world order’ of the Internet requires new approaches to enforcement. With this approach in mind, Italy, for example, adopted a creative approach towards enforcing its prohibition of allowing non-Italian gaming operators from offering their services in Italy.

In February 2006 the Amministrazione autonoma dei monopoli dei Stato (AAMS) – which falls within the responsibility of the Italian Ministry of Economy and Finance – ordered Internet Service Providers (ISPs) based in Italy to block over 650 Internet gaming sites which were not licensed in Italy and considered to be illegal, to protect Italian gamers from ‘phishing’ – the fraudulent acquisition of passwords and credit card details. All operators based and licensed in Malta were included in this list.

The ISPs faced a fine of ? 180,000 for each default in blocking the listed sites in breach of the order. Malta-based operators and the LGA were obviously outraged by the situation and took collective action to counter the effects of the order without delay. As a temporary solution, the websites of Malta-based operators were linked to the LGA’s website and disguised using a web anonymiser to hide the IP

addresses. As a result, the only visible IP address for Maltese gambling websites would be the address of the Maltese gaming authority. The response by the Italian authorities has been to include the IP address of the Maltese Gaming Authority in the list of blocked websites.

The Maltese Government and a number of Malta-based operators separately lodged formal complaints with the European Commission about the measures introduced by AAMS with a view to having infringement proceedings instituted against Italy. However, in the course of the prior formal exchanges between the Commission and Italy in this regard, Italy appears to have knuckled under the pressure and proceeded to open its market to those operators obtaining an Italian gaming license.

Although Italy’s enforcement measures were generally effective in blocking out Malta-based operators from Italian ISPs, this incident served to demonstrate the LGA’s role in exercising its lobbying and political influence to champion the assertion of the right of Malta-licensed operators to avail themselves of the freedom to provide services within the EU, as enshrined in the Treaty of Rome.

3. Intervention intended to protect players’ interests and the stability of gaming systems - The Boss Media Case Another case which emphasised the LGA’s role as the protector of players and its licensed operators alike is the Boss Media case (Trillion Limited vs Boss Media AB et) filed in the First Hall of the Civil Court on 29th April 2008. The application, filed by Trillion Limited as operators of the poker affiliate website ‘Pokertrillion’, sought to recover damages from Boss Media as a result of an allegedly illegal termination of its affiliate agreement by Boss Media. The dispute was purely private and pecuniary in nature and did not involve any regulatory issues, and it is only as a consequence of events that this case became relevant for the LGA. Contemporaneously with the filing of its claim for damages, Trillion requested the Maltese courts to order the issuance of a precautionary warrant of seizure against Boss Media for the purpose of seizing the defendant’s assets, with a view to having any potential final judgment for such damages ordered against Boss Media enforced against the assets so seized. This warrant was intended specifically to seize the servers operated by Boss Media in a co-location centre in Malta, which servers were made available to its licensees to conduct their Malta-based operations from.

Initially, this warrant did not pose any threat to Boss Media’s continued ability to operate its business from the servers, which remained within the co-location facility under the custody of a custodian or ‘consignatary’.

Eventually, however, Trillion obtained a court order for the removal or shutting down of the servers, on the basis of the court’s acceptance of Trillion’s argument that the continued operation of the servers could lead to a diminution in their market value – and it is at this point that the servers were exposed to vulnerability. Boss Media successfully extended the enforcement period by two months, that is until 18th September 2008, allowing it a more reasonable time to organise the migration of any business affected by the removal of such servers. Clearly, the defendant depended on these very servers for the continuity of its business and had every interest to ensure that any private dispute would not have the effect of causing an effective economic sabotage to Casino & Gaming International I 39

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its Malta-based business.

The LGA followed these developments closely to ensure that no interruption in the business of Boss Media licensees was experienced as a result of this private dispute between Trillion and Boss Media. As 18th September deadline drew closer it became increasingly clearer that this deadline would not be sufficient for a full migration of that business to an alternative co-location site. Consequently, on 10th September 2008 the Authority took the bull by the horns and filed an application in court in its capacity as the regulator of remote gaming business in Malta to ensure that the appropriate time frames and procedures were followed in the course of applying the court’s order for the removal or shutting down of the servers.

The LGA argued that the enforcement of the warrant would materially impinge on the smooth operation of the industry, posing a great risk to operators using the defendant’s servers and to players registered with such licensees. It requested the Court to order: (i) the notification of all interested third parties of the removal or shutting down of the servers, (ii) the appointment of qualified experts to oversee the removal or shutting down of the servers, and (iii) the extension of 18th September deadline for a further period of 6 weeks.

On 12th September the court decreed that the LGA, as a regulatory authority constituted by law, had sufficient locus standi or legitimate interest to intervene in the dispute on the basis of the fact that such intervention was aimed at enabling the Authority to exercise its role as regulator of the industry by safeguarding the interests of Malta-based and licensed operators. The LGA’s requests were acceded to in their entirety and the Authority continued to exercise an active monitoring role to ensure full and proper compliance with the court’s order within the set parameters. The enforcement order was, however, never implemented since Trillion withdrew all proceedings in the following weeks.

From a Maltese legal and regulatory standpoint this case provides a significant milestone in establishing the LGA’s locus standi to intervene in any private disputes where circumstances threaten to cause an interruption in the stability of the industry or to the continuity of remote gaming business from Malta. This recognition goes some way to complementing the LGA’s role and enabling to exercise this role in a more complete and effective manner. The Authority has proved itself a dynamic and effective regulator, placing the interests of its licensees and their players at the forefront of its day-to-day regulatory function.

Besides, we understand that the LGA has also spearheaded an extensive exercise to review Malta’s law of procedure to ensure that the assertion or enforcement of creditors’ rights do not cause disproportionate prejudice to third parties, as could have been the case if the servers were removed or shut down prematurely in terms of the first court order obtained by Trillion.

EXPERIENCE PAVES THE WAY FORWARD Malta’s legal, regulatory, diplomatic and political systems have experienced substantial pressure from all sides as a result of its becoming the jurisdiction of choice for most operators seeking to market their services within the EU, and the three incidents analysed in this article serve to demonstrate the LGA’s versatility in addressing industryrelated issues, be they legal, regulatory, diplomatic or political 40 I Casino & Gaming International

and regardless of the materiality or complexity of the issues involved. This versatility is further complemented by the Maltese Government’s commitment to providing an environment of sound and reliable regulation, with the ambition that this general approach to regulation may well become the benchmark within the European Union.

With increasing pressure building up within the EU’s institutions to put together a coherent approach to regulating gaming, Malta’s vision of being a centre for the effective regulation of remote gaming, coupled with the LGA’s ongoing support, may well prove to have been ahead of its time. Indeed, Malta is likely to tap into the additional opportunities created by legal and political developments brought about by the European Union’s institutions, besides the fleshing out of legal precedent relating to remote gaming issued by the European Courts of Justice on the basis of the principle of free movement of services. CGI

NOTE: The author would like to thank Ms Natalie Renou, In-House Counsel at Tain for her assistance with some of the research for this article.

ANDREW ZAMMIT Dr Andrew J Zammit is the founding and managing Partner of Zammit & Associates- Advocates and Group Legal Counsel-CSB Group. He holds a Doctor of Laws degree from the University of Malta and a Masters of Law degree in Company Law and Financial Services Regulation from the London School of Economics and Political Science (LSE). Andrew has been in private practice for 10 years and, among several other practice fields, focuses on Internet and remote gaming law. That includes the preparation and review of remote gaming licence applications prior to submission and on-going support for operators establishing their operations in Malta. He is certified by the Institute of Financial Services Practitioners in Malta as a Trust Law and Administration practitioner, and is a member of the Chamber of Advocates, International Tax Planning Association, International Bar Association and FinanceMalta. Andrew lectures on Corporate and Business Law at the Malta Institute of Accountants. web: www.zammit-law.com email: ajz@zammit-law.com

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e-Management Group: A Partner in Business …

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ISLE OF MAN

ADEPT STRATEGY: LEADING FROM THE FRONT

INTERVIEW WITH GARTH KIMBER

The Isle of Man is adept at meeting any regulatory requirements and international standards required to create a secure, flexible, innovative and responsible environment for egaming business growth in a diverse economy. In the psyche of the international egaming community, the Island has been diligently cultivating its well regulated, ‘open for business’ posture, with a keen sense of achieving the commercial high ground through its international strategy.

>>

C

GI: Over the last five years – bearing in mind crucial policy changes in 2005 – what have been the key egaming landmarks for the Isle of Man?

GK: Perhaps the most recent ‘landmark’ event was the introduction of new gambling exclusion regulations in early 2010. These were introduced to ensure that the Island was best positioned to keep pace with the continuing evolution of the gaming industry. More and more companies are fitting into ever more niche areas and large global operations are carrying out various functions across a number of countries and jurisdictions. With this in mind, the new regulations now make it possible for an egaming company to base its non-gambling related activities such as marketing administration, software downloads, customer support and relay servers on the Isle of Man without requiring a license.

Achieving ‘white list’ status back in 2007 was also undoubtedly a key building block in gaining recognition as a premier jurisdiction of international repute. We have since managed to attract a number of sports betting companies that are UK facing, and so this stamp of approval was vital in their relocation decision making process. We are proud of the standards we have achieved in meeting the requirements of the UK ‘white list’; and are confident that, as the review runs its course, we will further prove that the Isle of Man is adept at meeting any regulatory requirements and international standards.1 As well as having flexible regulations one of the most vital elements for a jurisdiction in attracting new business is having the right people and processes in place to make relocations a reality, and to this end the Isle of Man has made a number of key appointments in recent years. We have effectively worked Casino & Gaming International I 47

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>> WE ARE AT THE BEGINNING OF THE PROCESS TO INTRODUCE SPECIFIC TRAINING IN THE GAMING SECTOR. OUR AIM IS TO PRODUCE AND OFFER MODULES FROM THE BOTTOM UPWARDS. THE PRIVATE SECTOR HAS BEEN CONSULTED AND THE COURSES ARE BEING TAILORED TO MEET THE NEEDS OF EMPLOYERS. IT IS OUR INTENTION TO EVENTUALLY OFFER QUALITY COURSES WITH RECOGNISED QUALIFICATIONS AT THE BUSINESS SCHOOL WHICH WE WILL HOPE WILL BE A FURTHER PULL TO INTERNATIONAL TALENT. GRADUATES WILL THEN HOPEFULLY SPREAD THE WORD ABOUT THEIR POSITIVE EXPERIENCES HERE. >> to embed a perception of the Isle of Man as a well regulated, ‘open for business’ jurisdiction in the psyche of the international egaming community.

The Gambling Supervision Commission has also had to evolve to keep pace with the radical changes in the egaming industry.2 Since August 2007 the Commission has been strengthened and developed into a system allowing the Isle of Man to confidently state that complete applications would result in a company appearing before the Commission for a license only 10 weeks after the submission.

These landmark events have all served to play their part

48 I Casino & Gaming International

in demonstrating that the Isle of Man is an approachable, agile and well regulated jurisdiction. Added to which, each new licensee who relocates to the Isle of Man is an important milestone in itself and 2010 is set to be our busiest year ever in welcoming new arrivals of all shapes and sizes.

CGI: The Island has fared remarkably through straightened times recently. No doubt that will be due to how the Government combines investment with a growing international strategy, particularly in Asia, and resting on a strengthened reputation in Europe?

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GK: Against a backdrop of a faltering international economy and unprecedented political scrutiny, the Isle of Man needed to reinforce its status as an economically competitive and internationally responsible country. In such a context it was necessary for the Isle of Man Government to communicate the benefits of its existence – beyond low taxes – to key stakeholders by raising its profile as a well-regulated, diverse economy; and also to promote the benefits of doing business in the Isle of Man. A lot of time and energy has been invested in this endeavour in recent years.

There is much to be said for both an inward and outward looking strategy when attracting new business and this has served the Island well over the years. The Government has invested heavily to ensure that the Island’s infrastructure is hospitable to as wide a variety of businesses as possible, whatever their stage in their growth cycle.

As far as our international strategy goes, we are continuing to look both near and farther afield, with the Asian market proving a particularly lucrative market for us. Fresh from AIG in Macau, we continued our relationship building exercise with a number of prospective companies in the region, capitalising on our reputation in Asia for delivering to time and specification, and acting on our promises. We are certainly seeing a clustering effect of Asian businesses on the Island, with SBOBet, 188Bet and Fun88 all relocating to the

Isle of Man in the last couple of years, proof that we can provide everything that large Asian companies require.

Our numerous international ‘stamps of approval’ means our reputation precedes us when we venture into new markets. The inclusion of the Isle of Man on the OECD ‘white list’, and the move to automatic exchange of information with the EU puts the Isle of Man at the forefront of international tax cooperation and transparency. The Tax Information Exchange Agreements (TIEAs) and double taxation agreements which the Isle of Man Treasury has negotiated also mean that other countries now have a greater understanding of the Isle of Man and, in turn that we are able to talk to them about access to our gaming market as well.

Most recently, a report by the UK House of Commons Justice Committee supports the Isle of Man’s aspirations for enhancing its international profile and developing further opportunities to represent itself on the world stage. This recognition, along with its membership of the World Trade Organisation and links to the City of London is of particular appeal to our international prospects.

CGI: Has the Island’s development been boosted in part by the DTI’s role in balancing companies’ revenues with building the Island’s general infrastructure?

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GK: The Island’s development has been supported and driven by DTI3 investing time and energy in actively working to ensure the Isle of Man is a dynamic international business centre, and promoting it accordingly. By proactively working with established, existing companies on the Island, together we have successfully communicated the message on all fronts that the Isle of Man is a world-class jurisdiction from which to operate. This ambassadorial network is vital to our growth.

Trade shows continue to be an important platform for us to promote ourselves as an approachable jurisdiction and open to conversations with well-run businesses. The cooperation between the public and private sector at these events, as well as on a day-to-day basis, is a powerful tool in communicating this message. Prospective companies are able to hear ‘from the horse’s mouth’ what the business landscape is truly like on the Island.

As well as there being an open and honest dialogue between business and the public sector, the Government works to facilitate networking opportunities between the onIsland businesses themselves to encourage the development of mutually beneficial business-to-business relationships.

CGI: Even so, do you think that there could be an undue reliance on egaming at the expense of other sectors because the revenue stream is strong?

GK: The success story of the Isle of Man is down to a sum of all its parts. The Island prides itself on the diversification of its economy with no over-reliance on any one sector. Actually, the egaming/ebusiness sector contributes about 4.5 percent** of Government revenue, so less than more established sectors such as Finance (36 percent)**. It is,

50 I Casino & Gaming International

however, the Island’s fastest growing sector, having enjoyed significant year-on-year growth since its origin nine years ago.

The sector’s growth shows no signs of slowing and consequently is a core area for future investment and development.

The sector currently supports 550 jobs, an increase of 18 percent over the last year, with an increase of 20 percent (to 650 jobs) forecasted in 2010. As well as creating a number of jobs, the total spend (excluding capital spending) by the industry in the Island last year was £123m which is estimated to increase to £154m this year.

**Isle of Man National Income Accounts 2007/2008

CGI: There is a sense that as the Isle of Man consolidates and integrates that the egaming industry becomes ‘networked’ into the economy. You would expect this to occur?

GK: Consolidation within the economic sectors on the Island is already occurring. We are certainly seeing fluidity between sectors within the labour market. The Isle of Man’s highly skilled tech-literate workforce hold transferable skills which

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are in demand across the ebusiness and gaming sector and sub-sectors.

The egaming industry’s strength is supported by the Isle of Man’s success in attracting interrelated peripheral companies. The arrival of big industry names such as Microgaming and the presence of leading datacentres, along with quality payment service providers (PSPs) and corporate service providers (CSPs), have been essential in creating a network or clustering effect. This interaction between businesses and sectors strengthens the Isle of Man’s offering and helps achieve an overall goal of developing a long term sustainable sector. Improvements made in one area or sector quickly feeds into other areas resulting in constant incremental improvements.

CGI: Are there special investment incentives on offer to egaming companies that are prepared to be embedded in the Island?

GK: Special incentives are on offer to egaming companies that are prepared to commit to the Isle of Man. We offer grants of up to 40 percent of certain activities including relocation costs, first years rent, capital investment, hosting and some unique marketing support. Our intention in this respect is to speed up growth in cases where a company is genuinely creating and sustaining jobs. It is important for our economy to support a sector which is employment based, and not one which is merely a number of fee paying brass plaques.

CGI: How significant is AIM market access for companies entering the Isle of Man, and does that lead to a less committed response to the Island?

GK: AIM market access is not key to all of our prospective and existing licensees, but it is highly significant for some.

For those for whom market access is of greater import, it doesn’t translate to less of a commitment to the Isle of Man. Once companies arrive and decision makers start doing business from the Island, it is rare for us to then lose that company in the future. Our retention levels are incredibly robust and we find that companies who opt to base themselves in the Isle of Man, whatever their initial rationale or incentive to make the move, go from strength-to-strength in the environment the Island provides.

CGI: Can you explain how egaming technology-driven start-ups are progressing and how that relates to the egaming industry?

GK: It is a fact that not all start-ups will succeed, especially when financing is still quite hard to come by in the current climate. Those that we find stand the best chance are those that feed off ideas from other companies with similar entrepreneurial ambitions. Many of the start-ups we deal with though are growing. Our experience is that these companies experience slow growth in the initial stages of their cycle, but their growth accelerates after a period of eighteen months or so.

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CGI: Nurturing early stage entrepreneurial interest is important to trade and business growth, but to what extent is that a Government priority and how is business participating?

GK: Our belief is that small companies today could become the big companies of tomorrow. We are the only jurisdiction to offer grants to new businesses to support them in realising their ambitions. Aside from supporting new business, we are committed to helping the Island’s existing business to grow which is equally important.

The specialist consultants the Isle of Man Government has across the different sectors are vital in this respect. They understand how business works and act as important and trusted links between the public and private sector. Business has a key role in influencing policy and requesting changes to help them operate to their maximum peak, and more importantly the Government listens. Notably, within the egaming industry, the Gambling Forum meets regularly to ensure a joined up approach to the development and regulation of this industry on the Island.

CGI: Do events like the annual careers fair that has just taken place and educational and training programmes tangibly benefit Isle of Man-based companies eventually?

GK: Very much so. We have a good track record in our education system and our careers support services. This both helps keep talented younger people on the Island, and also lets them know the opportunities available to them should they return after university. The greater the diversity of jobs and industries available the more people will want to come back and work in them.

We are at the beginning of the process to introduce specific training in the gaming sector. Our aim is to produce and offer modules from the bottom upwards. The private sector has been consulted and the courses are being tailored to meet the needs of employers. It is our intention to eventually offer quality courses with recognised qualifications at the Business School which we will hope will be a further pull to international talent. Graduates will then hopefully spread the word about their positive experiences here.

back to Earth. The Isle of Man is also leading the way in terms of space tourism. A company called Excalibur Almaz wants to put people into space commercially and is converting a series of former Russian space capsules that will house an astronaut and two tourists for up to a week.

Added to this, the Isle of Man remains at the forefront of educating the leaders of the industry through an MBA in the space business which the International Institute of Space Commerce at the Isle of Man International Business School runs in partnership with the International Space University and George Washington University.

CGI: Assuming the future of the Isle of Man is set fair, what prospects do you see ahead for egaming on the Isle of Man? GK: We are confident we will continue to attract diverse and high quality gaming companies. I also see no reason for our present companies not to continue double digit growth in the foreseeable future. With world-class business leaders and the clustering of both innovative and complementary businesses on the Island, I expect to see new ideas and business streams develop apace to further cement the Isle of Man’s position at the cutting edge of innovation in the gaming industry. CGI REFERENCES 1. The author’s appointment, coming from a business, brand and advertising background – building on the successful work carried out by my predecessor Bill Mummery, was a clear strategic move by the Government to improve the business development processes by better speaking the language of the companies they were hoping to attract.

2. Claire Milne, a qualified lawyer who was appointed Chairman of the Commission in August 2007, brought with her an extensive experience in intellectual property, IT Law and data protection, including emoney, ecommerce and egaming. Fast forward a year and in June 2008, the Isle of Man announced the appointment of Steve Brennan as the new Director of Regulation.

3. The merging of the DTI and other elements of Government concerned with growing various sectors to form the Department of Economic Development is further evidence of the Government’s commitment in keeping growth right at the top of its agenda.

CGI: Noting the influx of space technology companies, how far toward becoming an international centre of innovation is the Isle of Man? GK: The Isle of Man has done much to establish itself as an international centre of innovation. Aside from the innovation that lies at the heart of the egaming industry on the Island, developments within the space sector are certainly reinforcing our international reputation in this respect. At the recent Satellite 2010 conference in Washington, Telesat, Eutelsat and GE Sat announced their intention to join the Global Space Data Association founded by SES, Intelsat Ltd and Inmarsat, together with Island-based ManSat. We are confident that the Isle of Man’s satellite industry will remain robust and with the growth of high-definition TV, mobile communications and remote sensing, demand is only set to increase.

The Island is also home to Odyssey Moon, the first formal entry for the US$30m Google Lunar X Prize. The prize is for the first privately-funded mission to send a robotic rover to the moon, travel 500m and transmit video images and data 52 I Casino & Gaming International

GARTH KIMBER As the new Head of eGaming with the Isle of Man DTI, Garth Kimber has a wealth of business development experience globally. Previously, he set up a company in 2004 to supply major brand owners and the Outdoor Advertising Industry with innovative interactive communication solutions to increase customer attraction. Prior to this Garth was International Operations Director with the US Media giant Clear Channel. Garth has tendered for major contracts and set up new businesses across Asia, Australasia and South America.

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PAYMENT PROCESSING

DOING IT RIGHT: THE PAYMENTS ARENA IN 2010

BY PAUL DAVIS

Financial walls are closing in on processors, operators and their current or prospective bankers, creating opportunity, confusion and some very interesting unanswered questions. The pressures are felt in the US, Germany, Cyprus and China, which has meant savvy providers feverishly creating inventive solutions. Paradoxically, two of the most important movements forward in gaming processing have come from financial institutions with significant US ownership. It is fair to say payment processors live daily the Chinese curse; we live in interesting times.

>>

love the American Heritage Dictionary's definition of Catch 22: "A situation in which a desired outcome or solution is impossible to attain because of a set of inherently illogical rules or conditions." This to my mind perfectly sums up the mind-twisting debate raging in payments fora.

Everyone knows there is a global recession. Everyone knows there is a banking crisis, and one of the key underlying dynamics is a lack of liquidity (money). Internet gaming is still a growth industry with success stories, new entrants and major investments.

The liquidity of major iGaming operators is astonishing; we work with one such company that has approximately $400m (that's US$0.4bn) in daily cash assets and struggles to find sensible propositions for its deposit. And that's just one. Mastercard and Visa are seeing reduced card use numbers as a result of the retail slowdown in many countries, and the major acquirers would love to see the increase in volume that would result from Internet gaming business.

At the same time many financial walls are closing in on processors, operators and their current or prospective bankers. All this creates opportunity, confusion and some very interesting unanswered questions.

I

THE MAJOR DEVELOPMENTS Early in February 2010 Mastercard announced a firm decision to block all Internet gaming transactions in the United States. No reason was stated, but it is widely postulated that Mastercard is preparing for the implementation of requirements on financial institutions to comply with UIGEA. This is, in fact, an illogical conclusion; Casino & Gaming International I 57

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the UIGEA rules were originally scheduled for implementation in December 2009, yet Mastercard made no similar move ahead of that date. Implementation of the rules was postponed until 1st June 2010, and it is widely believed that a further delay may be imposed in light of other legislative developments. Two weeks later Visa announced a similar decision.

How much impact will this have on player deposits in the US? It is not a reversal from 100-0 percent; even prior to the restriction by the Card Schemes themselves, only about 30 percent of American issuing banks permitted authorisation of 7995 (gambling, casino) transactions with Internet Commerce Indicators. Add to that many acquiring banks block all transactions to US-issued cards, and the majority of European and Asian banks refuse to touch operator funds with links to US-facing operations.

There is a definite shrinkage in capacity to accept deposits, but the most pain will be felt by operators who have a firm policy of coding all transactions correctly and processing them legitimately. Need creates opportunity, and I have no doubt that all the competent operators with US-facing operations will find ways to fill the void.

Probably more significant was a parallel move by Mastercard to punish and block ‘uncoded’ US dollar transactions. While some major operators, notably Pokerstars, have a firm policy of coding all credit card transactions correctly and legally, several other household names employ (at a higher cost) processors who are prepared to misrepresent the nature of transactions to their acquiring banks and the Card Schemes. The putative product can be anything; the essence of the transaction is that the player appears to be paying for something which is not Internet gaming, but the funds end up in an internet gaming account.

How did Mastercard attack this practice? There has been no official statement, but it appears that it was done by some forensic analysis of duplicate transactions; a card is used for a failed (or blocked) transaction on an internet gaming site, then very shortly thereafter re-presented for an authorised transaction on a payment wallet or other site for a similar amount. In observing patterns of such transactions, Mastercard were able to identify not only merchants but also PSPs and acquirers who were routinely involved in rules-evasive traffic.

Mastercard is a powerful enemy, and the market rumours are that substantial fines were levied against operators and processors involved in miscoded processing, coupled with publication of offender names and prohibitions against future processing for them. One must beware of Chinese whispers, but it is widely reported that one European bank was fined US$20m for its aberrant practices and several household name operators were also punished.

Credit cards were not the only area under attack around the end of last year. Customers of several Florida banks, for example, might have been astonished to receive stern warnings about the consequences of involving their accounts in any Internet gaming activity. These warnings were printed on paper statements and mirrored on Internet banking home pages. Florida was obviously gearing up for the UIGEA rules implementation; the process must have been put in train ahead of knowledge of the postponement.

58 I Casino & Gaming International

Nor is the US the only geographical area under pressure. There was a scramble in late 2009 as the major banks in Cyprus served notice on their gaming operator customers that they were no longer prepared to bank for them. While Cyprus as a gaming market is small, as a home of operators and their bank accounts it was an important piece of the payments puzzle.

Meanwhile, major German processor Pago announced its intention to exit the gaming payments space altogether as a result of its shut-down and merger of its operations with Deutsche Bank.

In China, a world away, Internet gaming experienced continued growth through 2009 and Asian operators have high hopes for its continued success. The Chinese Government, however, announced an intended ‘crackdown’ on Internet gaming and it can be anticipated that the payments structure will be a point of attack.

Collecting player deposits in China is not easy at the best of times; operators wishing to avail of the formal banking system have a problem with lack of penetration of credit cards generally.

Market dominance in the debit card field of China Unionpay (which does not correspond with Visa/Mastercard and is fractionated into 10 or so separate banking structures) couples with a lack of other viable Internet banking transfer protocols. Operators in China have to avail of ‘agency’ arrangements, informal and betimes underground collection procedures reminiscent of the ‘bookies' runners’ arrangements of the era of Al Capone in Chicago and the Jogo de Bichos network in Brazil.

These arrangements are expensive, rely heavily on trust and expose them to unwitting engagement with organised crime. One very credible solution is Neteller's 1pay solution which relies heavily on a coupon-type scheme of cash collections through Internet cafes, but this is an obvious point-of-attack liability in the event the Chinese Government spearheads its offensive via online providers.

IS THERE NO GOOD NEWS? Necessity begets ingenuity, and the difficulties just described have put increased pressure on savvy providers to create inventive solutions. Paradoxically, two of the most important movements forward in gaming processing have come from financial institutions with significant US ownership.

AIBMS, the credit card processing company jointly owned by Allied Irish Banks and FirstData, is one of two major European credit card processors to make a strong play for increased traffic (and accompanying liquidity) in the internet gaming arena. Traditionally, banks with US interests shied away from operators with US-facing operations due to threats of Government intervention against their US assets; the needs and opportunity of 2010 have resulted in a re-think of the policy.

If operators can show complete separation of their US facing and rest-of-world funds, they are now permitted to acquire through, and bank with, not only AIBMS but also AIB itself. The other processor to enter the fray with a view to transactional count is Elavon, curiously also based in Dublin, Ireland but this time 100 percent US-owned. Its patron is none other than US Bank, a company which would not touch gaming processing on its home turf with

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the traditional 10 foot pole.

Both of these mammoth operations have opened their doors to processing transactions for iGaming operators including those with US-facing operations, though there is at least in the AIB case evidence of a heavy disconnect between the ambitions of the merchant sales department and the restrictions imposed by risk and compliance parameters. Still, progress is progress.

THE PARADOX Just as Mastercard and Visa appear to be getting their acts together in the US, the legal environment has again shown signs of changing. Not only are there moves afoot to legalise intra-state poker in California, recently the state of Florida introduced legislation to license and legalise online poker within the State. The costs of legal operation are high: a US$500,000 license fee plus rather poorly-defined ongoing taxation provisions which may take up to 30 percent of player deposits. Nevertheless, there is widespread support for the proposals including from Indian gaming interests, and this incentive has perhaps the best chance so far of becoming law.

If this comes to pass then the Mastercard/Visa restrictions will need a re-think; much as legal track betting can still be charged to a credit card due to absence of the ‘Internet commerce indicator’ on the transactional message, possibly a legal, licensed intra-state poker transaction will need a brand new Merchant Category Code. One can bet with certainty that the day licensed Florida or California operators are able to acquire transactions, the acquiring banks in those jurisdictions will be all over the opportunity and putting significant pressure on the Card Schemes to put enabling mechanisms in place.

THE OPPORTUNITY All this said it remains the case that increasing difficulties in acquiring credit card deposits, legally or illegally, increases reliance on other payment methods. I have written previously about the emerging importance of Real Time Bank Transfer (RTBT) systems, and the Card Scheme difficulties support this movement.

The problem from an operator point of view is that while Visa/Mastercard implementation for one country engenders a protocol which can be applied more or less internationally, RTBT solutions tend to be national in scope and disparate in format. Betimes there are two, three or even four different systems in parallel operation; in Germany, for example, different banks support different systems and there is no cross-over.

Non-bank processors have been quick to respond to what is essentially a software challenge. Leading the pack in visibility, Moneybookers have integrated several national payment systems on one platform; a less well-known but very credible system administered by the payment service provider PPRO, but available only through other PSPs, has much wider coverage. One effect of this development is an interchange of technology, and one can hope with some confidence for some consolidation and co-ordination between the disparate national providers.

Wallet and prepaid card solutions continue to emerge as the other winners in this environment. A tightening of restrictions in credit card processing augurs well for any operation which offers a back door entry to player

accounts and a non-bank solution for payment of player winnings.

We continue to see the emergence of Entropay's virtual Visa card as a true international payment solution, and feel that their stated policy of expanding into nongaming areas will underpin their predominance in gaming.

Intercash have a new sponsor in Banque Invik of Luxembourg, which should allow their expansion into plastic card multinational provision to proceed apace.

Neovia's NetPlus programme is equally running well and progressively, and while these are the most visible names they are not the only players.

IN SUMMARY I once wrote that problems in payment processing for iGaming resembled whack-a-mole - as you knock one down, another invariably pops up. Nothing has changed, but opportunity in the forum has equal characterstics. As one door closes another opens, and technology is more than equal to the challenge. Payment processors live daily the Chinese curse; we live in interesting times. CGI

PAUL DAVIS Paul Davis is Managing Director of Counting House Ltd in the Isle of Man, which manages bulk payment processes for 80 percent of the world’s top 50 Internet gaming companies. He studied law at Cambridge University and gained a doctorate from the University of Ottawa. He has been a member of the Ontario Law Society since the early 1980s, but has worked in financial transaction processing for the same 30 years. He founded Accu-Rate Corporation, Canada’s largest privately held foreign exchange, and the innovative cashbycourier.com, the first viable Internet foreign exchange which delivered liquid funds to clients. Since 2001 he has been based in Europe at the head of a major non-gaming payments processing group, and co-founded Chexx Inc, the world’s largest multi-currency paper cheque issuer. He is also a qualified airline pilot, and frankly admits that on most days, he’d “rather be flying”. paul@countinghouseltd.com

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ASIAN GAMING

MAHJONG: TRANSITIONING TO GLOBAL ONLINE IMPACT

BY JONAS ALM

Mahjong, ‘the game of a hundred intelligences’ and ‘the gift of heaven’, has immense online prospects and continues to grow throughout Asia.

With international celebrity tournaments gaining an ever higher profile over the last five years, Mahjong is becoming a dynamic fixture in America and Europe. As its popularity soars, the online drive is slowly taking hold and clued-in operators have now to judge how they will harness this potential.

>>

lattering tiles, the defining sound of Mahjong, is slowly getting louder in the online space. As its multiple forms and variants jostle for popularity, we must be witnessing something of the excitement for the game that was felt back in the 1920s when the world beyond China began to adopt and adapt this completely new gaming experience.

Having caught on big time then, today there's almost a second wave underway: It is perhaps the most significant opportunity yet to connect with the immense traditional Asian interest in the game; while the take-up in Europe and America offers diligent operators tremendous possibilities.

Much gaming industry interest has rightly emphasised achieving commercial goals through understanding how to hone innovation - and the resulting products - by harnessing local traditions, tastes and desires. Such has been the case wherever new market potential has been realised. This is part of the bedrock of leading gaming operators' strategies that have now become more surely focused on the vivid variety that exists in the sheer vastness of the Asian scene. Consequently, we have to keep at the forefront of this positive move.

Of course, games that are more deeply embedded in a local culture you would expect to remain stronger than the more universally familiar games, not to mention even more localised variants of a particular game. Nevertheless, we live in a shrinking world and Asia is increasingly becoming a harbinger of internationally oriented gaming ideas and concepts with products being launched into Europe, America and elsewhere.

Live in-play sportsbetting, successfully taking hold in Europe, is a notable example pointing to how much more receptive Asia is becoming to intercontinental gaming products.

Mahjong will always retain its powerful following in Asia, similarly to the way poker does in the US. Although Mahjong's

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export value from Asia will probably never match its fundamental appeal at home, market receptiveness to the game elsewhere has nevertheless surprised many. Any operator, therefore, that focuses on Asia with Mahjong as the central part of a product offering must recognise there are broader market possibilities than may not have previously been appreciated.

ORIGINS AND POPULARITY Mahjong has long been an extremely popular game throughout much of Asia and with an estimated 700 million Mahjong players today, this famous, multi-faceted game has been catching on fast around the world. Considered part of the social and cultural life of most Asian countries - especially China, Taiwan and Japan - the global growth of interest in the game is enhanced by several factors, including the numerous versions and derivatives of the game, different skill and entertainment elements, growing world tournament promotion and immense online potential.

Frequently described as the 'Asian poker', the attraction of Mahjong is made all the more compelling for the colourful stories about its origins. Was a variant of Mahjong created by the famous Chinese philosopher Confucious as far back as 500 BC? Did Chinese army officers, serving during the Taiping Rebellion, create the game to pass the time? Or was it a nobleman living in the Shanghai area who created the game between 1870 and 1875? The stories go on. It seems, however, that types of tile-based games have been identified from c1120 AD, so perhaps Mahjong has a 'lineage' that could go back many hundreds of years.

At any rate, over time the 144-tile game has gone through several material changes from paper cards (too fragile to last), to bamboo, bone and ivory tiles while modern sets are also made in wood and plastic. Far more definitely understood is the course of Mahjong's success since the late 19th

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Century, when the first recorded mention of the game is so far thought to have been made in 1893. It is more generally accepted that Mahjong originates to around the 1880s and around 40 years later Britain and its Empire territories, North and South America and Japan began to adopt the game. As they adapted Mahjong to suit both commercial and national tastes, it became firmly established.

Today, as it has evolved, the British take on Mahjong is regarded as being closer to the classic Chinese game than either that in America or Japan. Indeed, the US version is almost a completely distinct game now. In essence there are six major Mahjong game types: Chinese Official, Hong Kong, American, Riichi Competition, European Classical and Taiwanese.

Depending on the varieties played, Mahjong requires varying balances of skill, strategy and luck from the player - in effect, similar to poker, backgammon and gin rummy (among western games, the latter is probably closest of all to Mahjong). Play involves each of at least four players being dealt, out of 144 (or 136), 16 (or 13) pictographic tiles in a hand; again, that will differ - sometimes greatly - according to the version being played. On their turn, players draw a tile and discard one, with the aim of making four or five sets and one pair, or 'head', as it were. There are numerous winning patterns, but the most common one comes 'on the draw' by drawing a new or discarded tile that completes the hand.

Thus, a winning hand actually contains 17 (or 14) tiles.

Proof that Mahjong has incredible online potential emerged in the early 1980s when the first electronic format of the game revealed its scope for greater design variety, combinations and styles. Brodie Lockard, a remarkable Stanford University systems programmer, developed Shanghai (Mahjong Solitaire) in 1981 which was officially released in 1983 as a paid online game. The popularity of the computer game, in all its variations, eventually sold in excess of 10m

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copies and has since been adapted for over 30 platforms. At the time players found the game had an enduring attraction and even then it had hundreds of challenging tile layouts for up to nine levels, with different game types and layouts in excess of 360. Clearly, this pointed to a remarkable online phenomenon in the making.

SHAPING GROWTH AND IMPACT There is no doubting the impact Mahjong is making internationally 30 or so years later. But while Mahjong clubs have long been established, achieving a similarly effective presence in the online space has proved problematic. I don't think it would be too alarmist to suggest that we must avoid the danger of allowing a major opportunity to pass us by, which could happen unless we get to grips with why this is proving difficult at this time. We can all see the huge success being demonstrated by the online poker industry in Western markets - a fact broadcast via many forms of media - but it has not been so readily successful with Mahjong.

Many operators know that the Mahjong solutions brought to market in the past have lacked a clear-cut gambling focus, or they have proved technically deficient and consequently failed. Naturally, we have learned to bear in mind those lessons: recognise that opportunities are there to be seized but do not underestimate how important it is to ensure service delivery. Translating that into practice depends, in part, on the operators' approach to cultivating player interest, attention to service delivery and adaptability, combined with game concept, form and content originality.

So beside the Mahjong game, providing a guide with international, riichi and Japanese rules and strategies - as well as a Mahjong school with free practice tables, enables the operator to give players a gaming experience where they can concentrate on the game play. That is why player protection and security issues must be a paramount concern while, at the same time, developing the play-for-money Mahjong offering as we have done. Of course, knowledgeable, multilingual support staff with payment system expertise is obviously essential in that process.

The groundwork for this to work is actually already in place since part of the reason Mahjong is rapidly becoming a magnet for players across continents is because of established Asian communities around the world and the sharp, creative and dexterous appeal of the game itself. Mahjong is so ubiquitous, in fact, that a simplified version is available as a default programme on computer operating systems including Windows Vista currently, and game systems like Playstation have recently adopted Mahjong.

Given that China currently has something like 338 million Internet users, which is bigger than the US population, the ultimate online potential for Mahjong is almost inestimable.

Online gaming in China is expected to reach over 80 million players by 2012. With Mahjong having been designated a national pastime in 1998 it became the 255th National Sport of China. There are over 20,000 terrestrial-based clubs in the Hong Kong SAR, and since Mahjong first hit Tokyo in 1907 there are now more than 30,000 clubs in Japan.

The development of televised celebrity tournaments is doing much to excite interest in Mahjong, and its steady expansion in player participation and international coordination of competition events has placed the game under a global spotlight. In 2006 in mainland China, with Mahjong having had a low-level rebirth since the mid-1970s,

the World Mahjong Organisation (WMO) was founded in Beijing with the cooperation of, among others, the Japan Mahjong Organising Committee (JMOC) and the European Mahjong Association (EMA). This organisation held its first World Championship in November 2007 in the Chinese town of Chengdu.

During this time tournaments in Europe and America have become a major draw: Last year's third annual European Mahjong Championships held in Baden, Austria, for instance, is a prime example. Most significantly, perhaps, is that the World Mahjong Championships are to be hosted in Europe for the first time when the 2010 event takes place in the Netherlands. So with the game on such a swift world wide expansion track, before too long Mahjong will be consolidating itself as a priority platform for operators everywhere.

LOOKING FORWARD When a market gathers momentum, as it has in Asia, it often does so with such speed that operators have to galvanise quickly to offer relevant games that appeal precisely to this market - if they intend to stay the course, that is. That means keeping on the ball with localisation insight and therefore to understand what the online potential is by adding new games rather than becoming bogged down exclusively in traditional game offerings like poker and casino.

Indeed, localisation isn't just a buzz word, it's the key: observing specific detail, patterns of player interest and how to harness that knowledge through to product creation is vital.

You rise or fall in this market accordingly. Operators taking this step are much more likely to succeed than those who dwell unduly on established 'core products' like poker, casino and even bingo and sportsbetting.

Certainly, for Asian-facing operators such a product range must at least include Mahjong, but in fact it is also essential to gear your strategy for its global impact. For instance, there is great interest in a true network-based multiplayer Mahjong, where players from all over the world can play and interact with each other regardless of language differences between players.

With so many millions of global players, if you add up all the components required to tackle local and global growth considerations - software capability, rich content range, network adaptability, extensive player base, service responsiveness, jurisdictional and game play security, and the mix with cash winning play - then operators projecting themselves into this market will surely generate far greater Mahjong magic online than we currently see. CGI

JONAS ALM Jonas has more than 10 years experience in the online gambling industry. He previously held the position as General Manager of a Boss Media Casino license, co-founded Mahjong Logic and recently took on the role as CEO of Mahjong Logic AB. He is also the founder of Interdo AB, an e-communications company with more than 350 clients throughout Scandinavia. Jonas graduated with a Masters degree in Business Administration at Hawaii Pacific University.

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The Perfect Match Live Betting Meets Tournaments in Single Juliet Package Live, lithe and readily integrated into any existing gaming site, the latest offering from Parspro provides operators with some of the most innovative options ever

By Rab Christie First create a cocktail using ingredients selected from a mix of any sports at all, be it soccer, rugby, hockey, horse racing, gridiron, golf, or any other events in progress at the same time.

Then garnish with a tempting range of bets centred on players and teams involved in the said matches. Top up with some tasty added offerings based on live in-game action, and promote the package well to customers.

The result? Pure excitement for punters, and pure profit for the operator. The only question is, how is it done?

When leading sportsbook software and systems developer Parspro introduced its Juliet solution in the autumn of 2009, the company brought to reality a phenomenon that many in the industry had contemplated but had certainly never experienced â&#x20AC;&#x201D; live betting with tournaments.

In doing so, Parspro opened the door to an untapped and potentially highly lucrative source of revenue for online sports book operators, present and future. At the same time, the company opened this door of opportunity to all, by ensuring that Juliet can be readily integrated into any existing gaming website, or run independently as a standalone application.

Built on Parsproâ&#x20AC;&#x2122;s highly successful Miranda sports betting platform, Juliet combines the key industry trends of live betting and multiplayer gaming by supporting both. The result is a completely unique solution that not only enables operators to run live match bets, but also allows them to create groups of multiple matches and events on which large numbers of players can bet simultaneously.

Tournaments are created by the site operator, and can be comprised of any combination and type of sporting events, enabling operators to provide clients with a virtually limitless stream of novel, attractive offerings. Even better, operator risk is entirely eliminated, as winnings derive from the pool created from the players involved.

Tournament properties are set by the bookmaker before publication, and multiple types of tournaments can be created for the same sporting event, such as single buy-in, re-buy, fixed number of players, fixed prizes, and pool-based prizes.

LIVE MULTI-PLAYER OFFERINGS Central to Parspro Juliet is the concept of a live betting tournament network, which allows multiple players from different customers to participate in the same tournament, greatly increasing rake size, prizes and the number of potential players.

Access is provided through a series of user-friendly interfaces, providing bookmakers and players alike with a wealth of real-time information designed to create an optimum gaming experience, all of which is changed and updated fully automatically.

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At the same time, enjoy the security of knowing that the purpose-built Juliet Management Client provides a complete overview of the system and full control of running bets, enabling operators to start, stop, or delay bets, change odds, and pay out to winners, all in real time.

“The launch of Juliet was a direct response by Parspro to a clear market demand,” reveals Parspro marketing director Thorvar Hafsteinsson. “From the outset, Parspro has always listened very closely to our clients and the needs of the market in general when it comes to developing new products. This policy applies as much today as it has always done, and Juliet is a direct result,” he continues.

“Although online sports betting is currently enjoying an unprecedented level of popularity, competition within the industry is also increasing at the same time. As a result, sports book operators are continually searching for new means of attracting new customers, and Juliet provides them with a ready-made means of doing so.”

NOVEL ARCHITECTURE Founded in 2000, Parspro is no stranger to the fast-paced and rapidly growing world of live betting. Having entered the sector in 2003 through an association with Scandinavian operator Bet24.com, a relationship that has continued since, and its role as a developer and provider of live betting systems and solutions has grown incrementally over the years.

Like all Parspro products, Juliet is built on its Miranda sports betting platform. Readily integrated into existing systems, Miranda is built on two key designs — an Event Driven Architecture (EDA) and Data Grid (DG) — which together address the core requirements of scalability, extendibility, robustness, fault-tolerance, and a fast transaction engine.

Robust in design, Miranda is comprised of multiple interconnected layers, each of which is responsible for a portion of the overall business logic. Functionality is partitioned into each of these layers, in order to boost performance and distribute load evenly across the entire system.

In addition to powering Juliet, Miranda also drives other Parspro systems such as Parspro Cordelia, a horse and greyhound racing platform designed for use on high volume sites.

In August 2008, leading online sports book operator Unibet became the first Parspro client to go live with Cordelia, deploying the platform on its Travnet Live Racing product (www.unibet.com/trotting)and Travnet.se website (www.travnet.se/Liveracing), Sweden’s largest trotting community.

Described by Unibet CIO and head of business development Daniel Alsén as “a highly competitive offering”, Cordelia has played a key role in enabling the company to offer its customers a unique gaming experience combined with rich content from the Travnet trotting community. Initial features include betting on win, place and double, with more offers planned for launch in the future.

BUILT FOR SPEED Parspro Juliet tournaments come in two main types, each with a fixed number of players and fixed entrance fee, and can be run either as fixed-prize tournaments, with prizes awarded for first and second place, or pari-mutuel tournaments, in which prizes are based on the turnover of the tournament.

Once a player has registered for a tournament, he/she receives tokens. These can then be used to place bets on the live markets, which are identical to the normal live betting markets offered on that particular sporting event.

During the course of each event, the user interface displays the top five placings and the player’s own position in the tournament. At the end of the event, the player with the most tokens wins the tournament.

Several tournaments can be associated with the same live event, and each can have a different entrance fee, different prizes, and different numbers of players.

Players can also partake in a full live event with only the entrance fee at stake, with the possibility of a sizeable win if they can outplay their competitors.

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Sports, competitions and events are all configured using a robust back-office application, which also provides the operator with full control of the scheduling and monitoring of both the tournament book and live book.

Built on Macromedia Flash and therefore accessible to any user, Juliet offers a range of innovative features not possible in a conventional HTML-based interface. For optimum speed and stability, processing power is derived not from the server, but from the client PC. To optimise security and ease of use, the system provides online bookmakers with a complete suite of advanced risk-management tools, to monitor all aspects of exposures, manage market prices, open, close, settle, and create new markets, dynamically adjust bet delays, and monitor high bets.

All data is collated and provided in real time, and is accessed through an ergonomically designed user interface. Added performance and security are provided by the fact that the server element of the solution runs independently of the web site server, connecting to it and exchanging information solely on a need-only basis.

At the same time, all system components use a tuple (customer, player, and password) to identify messages and data objects, while advanced sets of algorithms suggest new prices for all markets based on current scores and time elapsed.

READY INTEGRATION A further option for both new and existing operators when adopting Juliet is provided by Parspro ppTOTO, which since its release in 2001 has served as one of the industry‘s leading sportsbook platforms.

Flexible, dynamic and highly secure, ppTOTO enables online sportsbook operators to control their site remotely from any location, while allowing Parspro to readily add new features as they become available.

Features include a core betting server, full administration tool and back office suite, robust database and advanced risk management, as well as a betting page in the operator’s language of choice with two default languages included, limitless choice of currency, and complete page design by Parspro if required.

Built like all Parspro products on a solid foundation of scalability, extendibility, robustness, fault-tolerance, and a rapid transaction engine, ppTOTO provides operators with complete administrative control of every aspect of their operations, including full management of active games, payout plans, results, winning selections, actual payout, and general settings.

Comprehensive in design, ppTOTO stores and collates information on sales and payouts for every possible result in every game, thereby providing an extremely high level of risk management.

Whenever sales on a single outcome are greater than a predefined limit, odds are automatically recalculated, a feature that can also be triggered manually by the administrator.

“Ready, willing and very able” Shortly after Juliet’s introduction at last September’s EiG Expo in Copenhagen, Parspro announced that a future release of the system currently in development will enable a network to be created in which multiple site operators can pool their players, thereby increasing liquidity and offering larger prizes.

“One of the most striking trends of recent times has been the spectacular growth in popularity of live sports betting, with latest figures from a number of leading sports book operators suggesting that it now accounts for the majority of all profits,” continues Hafsteinsson.

“As a result, growing numbers of online poker and casino operators are seeking to secure a share of this potentially lucrative market by adding live sports betting to their portfolios, and Parspro is ready, willing and more than able to help them to do so.

“By adopting Juliet, the potential for attracting new players to sites is limited only by the operator’s own imagination,” concludes Parspro marketing director Thorvar Hafsteinsson.

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CYBERCRIME

GAMING EXPOSURE: CYBER-THUGS, HACK-ATTACKS AND OTHER PHISHY TALES

BY JUSTIN WOLFF

As cybercrime goes corporate, vigilance is required in maintaining adequate website defences. Increasingly, largescale, sophisticated operations aimed at fraudulently acquiring sensitive information – since stealing data is becoming more significant than stealing money - have meant gaming operators’ monitoring systems are in a constant race to stay ahead of the menace. As the player base grows, the vulnerabilities are plain to all.

>>

omewhere very close to you there’s a new kind of scam going live. The days where hacking was the domain of a few social misfits are long gone – cybercrime is going corporate. Innovative Marketing Ukraine, which was closed down last year by the US Federal Trade Commission, is a case in point. As recently reported by Reuters, this was Internet fraud on a whole new level – hundreds of programmers packed into a three-storey industrial office block in Kiev cranking out new versions of malware to stay one-step ahead of anti-virus software.

This was hacking in corporate clothes. Distribution strategy involved a network of affiliates across eastern Europe and the company operated with many of the usual business trimmings – bonus incentives, corporate junkets, dedicated IT and HR departments and the exploitation of cheap student labour. There was even a call-centre in place to smoke-screen disgruntled purchasers out of claiming a refund.

S

BUYER BEWARE What is so cunning about the scam they operated is how cleverly it plays on the number one fear of new Internet users – the fear of losing their money and personal information online. Users were scammed into visiting sites that downloaded scareware onto their computers that threw up authentic-looking anti-virus messages announcing that the computer’s security was compromised. It was a double-win for the hackers: The user was duped into paying for fake antivirus software and the hackers harvested their financial and personal information at the same time.

Legitimate anti-virus software battles to defend against this kind of scareware because of the number of variants that are produced and the fact that it doesn’t behave like a typical Casino & Gaming International I 69

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virus – all it does is display false information. Panda Security, an online security-solutions provider, estimates that as many as 35 million computers worldwide are infected with scareware every month.

And although it’s likely that you’re reading this article thousands of physical miles from where the next operation is being set up, with the global reach of the Internet the hackers might as well be sitting on your lap.

THE SHIFT TO PHISHING The focus of online fraud has shifted from stealing money to stealing data. Customer information is the keys to the safe – once a criminal has it, they can strip the safe at will. So phishing (harvesting of sensitive information from a computer user) is moving to the next level. Much of this shift is due to banks, retailers and card-issuers beefing up their security around online transactions, so the older online fraud techniques are getting harder for criminals to exploit.

Fraudsters target online users as the weak link – new Internet users, it turns out, are right to be scared.

The latest cyber-criminal favourite, spear-phishing, targets users of social networking sites and creates messages that seem to come from someone in the victim’s social circle – someone they already know and trust. A link pretending to be something of common interest received from a friend is much more likely to be followed than an attachment on a random email. If the link is clicked it downloads ‘sniffer’ code onto the user’s computer – code that stays inactive until the user accesses one of the websites the malware is designed to detect – usually banking, gambling or social networking

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websites. The sniffer then steals the logon information the user provides and sends it back to hacker central where it is either used by the thieves themselves or sold on to other criminals. The same technique is also effective for infiltrating corporate security – people are much more likely to respond to requests that seem to come from the CEO or Financial Director.

IT’S WHERE THE DATA IS So how does this affect online gambling? Well, if Slick Willy Sutton robbed banks in the 30’s because ‘that’s where the money is’, he’d probably pop a hernia when he heard about online gambling, which combines the best of banking with a high-velocity money-intensive business.

Online gaming is exposed to a number of different types of fraud depending on who is perpetrating the fraud and the identity of the victim. Broadly speaking, there are schemes where: • a user is scammed by another user • a user is targeted by an external criminal • a user tries to scam the online gaming company • an external criminal targets the operations of the online gaming company.

There’s a very fine line separating the last two categories – is there a difference between a user trying to scam on online casino and a criminal? I’m also ignoring the situation where users feel that they have been scammed by the online gaming website (for example where advertised bonus offers change after customers fulfil the necessary conditions, or

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>> WHILE ONLINE GAMING WEBSITES DO ALL THEY CAN TO PROTECT CUSTOMERS ONCE THEY’RE ON THE WEBSITE, THE UNDERLYING FEAR OF EXPOSURE TO ONLINE FRAUD IS LIKE OPENING A PHYSICAL TABLE ONLY TO HAVE LENNY THE SLUG STAND OVER CUSTOMERS AND CRACK HIS KNUCKLES AS THEY ARRIVE TO PLAY. WHILE ONLINE CASINOS CAN’T GET RID OF THE CYBERTHUGS OUT THERE, THEIR BEST BET IS TO PROVE THE SECURITY OF THEIR SYSTEMS AND CONTINUALLY REASSURE THINSKINNED ONLINE NEWBIES. >> where gaming sites use inappropriate gaming algorithms) – putting those down to administrative errors.

USER ON USER FRAUD Offensive language between players and in-game spam may not have a direct monetary effect on users, but any negative impact on player gaming experience will drive customers away. This has an indirect effect on customer acquisition rates and therefore top line earnings of a gaming website.

Collusion amongst players is possible in games like online poker and again impact on the website’s reputation as a safe and enjoyable place to spend ones time and money.

CRIMINAL ON USER FRAUD The majority of online criminal activity against internet gamblers happens outside the gaming website. Estimates as to the size of global online fraud go as high as US$50bn per year and growth is strong. This is the ocean of phishing, spear-phishing, scareware and any number of new and innovative systems currently being designed to relieve users of sensitive financial and personal information and ultimately their money. However, where fraud networks can phish up enough information from an online gaming customer, they could take over her account and clean out the funds. Again, there’s no direct cost to the online casino, just a strong probability that the customer will move on with a tainted view of that website. If she’s a vocal critic, with a large social network, the reputational damage can be considerable.

While online gaming websites do all they can to protect customers once they’re on the website, the underlying fear of exposure to online fraud is like opening a physical table only to have Lenny the Slug stand over customers and crack his knuckles as they arrive to play. While online casinos can’t get rid of the cyberthugs out there, their best bet is to prove the security of their systems and continually reassure thinskinned online newbies.

USER ON WEBSITE FRAUD While the people who do it might argue that it’s not outright fraud, actions like creating multiple accounts to take advantage of a site’s promotional incentives result in a clear loss to the online casino. Player collusion and chip dumping are two other acts that tread on the hem of the definition of outright fraud.

CRIMINAL ATTACKS ON ONLINE GAMING OPERATIONS There was a time when the cost of an effective firewall was considered part of the cost of defending against online fraud – now it’s just a cost of doing business online. The same goes for the costs of defending a website against distributed denial

of service attacks. Direct losses to online casinos stem mainly from credit card fraud with details obtained through phishing attacks, and things like friendly chargebacks, where a customer claims a refund even though they received the product or service they paid for. With delivery of a service difficult to prove, banks tend to act in the customer’s favour and charge on the refund to the vendor by default.

THE COST OF ONLINE FRAUD The direct cost of fraud vary from operations to operation, but estimates run as high as 10 percent, implying that fraud losses could be over US$2.5bn a year. But that figure ignores the indirect costs – customers not acquired due to fears of online fraud, customers lost due to fraudulent attacks, costs of implementing online security and higher payment processing fees where chargebacks and credit card fraud are high. Each additional prevention procedure adds additional costs – costs for data, and costs for designing, implementing and manning the necessary controls.

Even an estimate of the direct and indirect costs underestimates the true cost of fraud - there is significant fallout in other areas that is much more difficult to quantify in monetary terms. Fraud has a big impact on employee morale, business relationships, company reputation and relationships with regulators and these can take years to patch up.

CRIME GOES SOCIAL What the social network explosion has done for dating and personal brand-building, it has also done for online crime.

Cyber-criminals can not only attack computers from anywhere in the world they benefit from the ability to collaborate with like-minded people worldwide. The depth of knowledge available to someone with cyber-crime predilections is astonishing – information is readily available in hacker chat-rooms and those that show an interest or aptitude easily find an outlet for their criminal leanings.

Effective control of online fraud takes a multi-layered approach. Beyond the obvious controls around website security and the protection of the online customer during their gaming experience, online gaming operations have to ensure that they are dealing with who they think they are dealing with at all times. The gatekeeper-role of online identity authentication is the first step in an effective control process.

Criminals that successfully hide behind stolen or fake identifications can be uncloaked by applications that identify the computer and connections from which they operate. IP geo-location applications can red-flag a customer logged-in on an apparently valid American ID but whose IP address is registered in eastern Europe. Device identification software Casino & Gaming International I 71

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>> ONLINE GAMING OPERATORS NEED TO TAKE A LEAF FROM CYBER-CRIMINALS AND TURN THE HUGE AMOUNT OF DATA AVAILABLE ON THE INTERNET AND THE EASE OF ONLINE COLLABORATION TO THEIR ADVANTAGE. JUST AS THEIR PHYSICAL COUNTERPARTS SHARE INFORMATION ABOUT PROBLEM PLAYERS, ONLINE GAMING OPERATORS SHOULD BE POOLING THEIR INFORMATION ABOUT COMPROMISED PLAYER IDENTITIES, PLAYERS GONE BAD AND PLAYER DEVICES KNOWN TO HAVE BEEN USED IN FRAUDULENT ACTIVITY. THIS MEANS SECURITY SHIFTS FROM A ‘ONE-TOUCH’ VETTING OF PLAYERS AT FIRST REGISTRATION, TO AN ONGOING, RISK-BASED DUE DILIGENCE OF PLAYERS, THEIR DEVICES AND THEIR GAMING ACTIVITIES. >> can alert control staff to situations where the same computer is used for multiple logins. Once online casinos start building a database where not only players, but player devices get a ‘reputation’, they can tighten controls on all accounts deriving from a single device when one account goes bad.

There are also sophisticated player-analysis applications that build data on a player’s gambling style and cashmanagement tendencies. A change in player behaviour, such as cash payments of a significantly higher value than prior trends can signal the need for further investigation.

Online gaming operators need to take a leaf from cybercriminals and turn the huge amount of data available on the Internet and the ease of online collaboration to their advantage. Just as their physical counterparts share information about problem players, online gaming operators should be pooling their information about compromised player identities, players gone bad and player devices known to have been used in fraudulent activity. This means security shifts from a ‘one-touch’ vetting of players at first registration, to an ongoing, risk-based due diligence of players, their devices and their gaming activities.

THE INSIDE JOB But the recent well-publicised arrests of two London-based IT contractors for defrauding a gaming client show that fraudprevention focused solely on customers misses the point.

According to the 2009 PwC Global Economic Crime Survey, more than half of all fraud is perpetrated on a company by insiders, and the figure for the Hospitality and Leisure Industry is even higher at 76 percent. While the data in the survey covers businesses across the entire industry and figures for Internet operations may be lower, it is likely that insider fraud in the online gaming industry makes up a significant portion of the whole. The same authentication techniques and background checks applied to customers must be carried out on every person that works in the organisation, at take-on and at regular intervals thereafter.

Good employees go bad and systems must be in place to pick that up when it happens.

ONLINE FRAUD FALLING? The 2009 figures on UK card fraud and online banking released recently by The UK Cards Association clearly highlight the shift in criminal focus. Card fraud fell across all categories and the incidence of Card Not Present fraud 72 I Casino & Gaming International

(which includes internet, phone and mail-order card fraud) fell 19 percent on 2008. The decrease is credited to the increasingly sophisticated fraud screening techniques being used by the banking and retail industries as well as the card issuers themselves. The change in criminal focus to the user as the weak link is reflected in online banking losses climbing - up14 percent to ?59.6m for 2009 in more than 51, 000 phishing incidents. These trends are likely to be similar across other markets.

Cybercriminals are better organised and more sophisticated than ever before. They can set up anywhere in the world and attack users worldwide. Most attacks are only detected after the fact and it is certain that new techniques are being tested and rolled out even as you read this article.

The PwC survey mentioned earlier shows how businesses tend to underestimate their exposure to fraud losses and a similar survey on cyber-crime by Deloitte highlights concerns that most businesses are not taking the cyber-threats they face seriously. As one type of fraud is successfully countered with new and innovative controls another new and unexpected threat is in the works.

While online businesses can’t hope to stay ahead of new online fraud threats, forewarned is forearmed. And while cyber-criminals exploit the strengths of the Internet to steal data, the more information companies have on people that pose a threat to their organisation, the better. CGI

JUSTIN WOLFF Justin Wolff , BSc.Med, BCompt (Hons), CA is a Chartered Accountant who has worked in varied financial services roles over the last ten years, from asset management to business services and consulting. He is a communication consultant to World Check, a risk management services provider to multinational companies. www.world-check.com

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CURAÇAO

SPARKS OF NEW LIFE FOR eGAMING

BY CHRIS FANGMAN AND ANTHONY DICK

The consequences of taxes have always been an important factor when companies investigate where to locate their business. Locating in a Curaçao eZone has many benefits, the most cherished of which is a special two percent net profits tax on earnings that are valid through 2026; and there is no VAT, import duties or turnover tax due for goods entering the eZone or for services that are rendered within the eZone or outside the Netherlands Antilles. For this and other reasons anticipated for 2015, egaming operators are taking note of Curaçao’s potential.

>>

here are a variety of reasons and incentives for operators to select the most ideal jurisdiction in which to obtain a license. These could include a combination of tax, regulatory requirements, infrastructure and staff availability and access to other markets. While global Internetbased gambling is booming, online gambling operators are keenly focused on the jurisdictions’ tax policy for gambling.

Many operators are now taking a second look, particularly in light of possible ‘white listing’ changes in the UK and other jurisdictions now applying VAT that is unrecoverable.

The thought of losing market share to offshore competitors based in jurisdictions such as Curaçao where operators pay much lower tax and, therefore, leave much more on the table to invest in marketing, and so on, has sparked new life into the Curaçao egaming venue.

Internet gaming became a central industry for the island of Curaçao in 2002 when the regulation of online gambling was decentralised from the Curaçao Gaming Control Board.

Cyberluck holds the longest standing Internet gaming license, which was granted under the old regulatory scheme in 1996. It has the authority to issue so-called sub-licenses to qualified applicants. At the last count there were approximately 293 licensed remote gambling sites in Curaçao.

Amendments to the VAT rules across the European Union will invariably impact most operators. Through the introduction of a system which will enable tax authorities to monitor the cross-border provision of services, 2010 will see the dawn of a new era in VAT. The most reliable source of information on current VAT rates for a specified product in a particular member state is that country's VAT authority. The aspect that has been reported to us that has been most important to egaming CEO’s refers to

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the fact that VAT is paid where the service is consumed irrespective of who is providing the service and the country of origin. Companies taking a second look at Curaçao have said that remote gaming companies cannot recoup VAT charged on invoices. This appears to be particularly important to ‘skins’. The skin operates on a much smaller scale than the operator, and as such, taxes and license fees are very important.

If you have an online global business, locating it in a Curaçao eZone has many benefits. The most cherished benefit is a special two percent net profits tax on earnings that are valid through 2026. There is no VAT, import duties or turnover tax due for goods entering the eZone or for services that are rendered within the eZone or outside the Netherlands Antilles.

Curaçao established its eZone National Ordinance in 2001. Admission of a corporation to an eZone requires a permit issued by the Island Territory of Curaçao’s Department of Economic Affairs. The process is straightforward and can be handled professionally by trust companies.

The consequences of taxes have always been an important factor when companies investigate where to locate their business. Curaçao does not have VAT. The consequences of VAT throughout Europe can be a significant factor as to where a corporation locates. The growth of remote gambling in Europe has focused more attention by entrepreneurs on VAT. VAT rates are in double digits.

CTM’s longstanding cooperation with the egaming sector has provided very interesting insight into the particular concerns of remote gaming operators. For the sake of clarity, an 'operator' is the company that actually runs the software that players play on, and will have a license to operate this software in another jurisdiction. A 'skin' is a marketer of the operator's product, usually under a 'front end' system through 74 I Casino & Gaming International

contracts with the operator.

This situation has generated interest in Curaçao by both ‘skins’ and their software providers in EU-licensed jurisdictions. Although an operator and a ‘skin’ may be offering the same service, that is usually offered through a different marketing strategy or vehicle, whereby the ‘skin's’ offering looks different – and indeed is different in terms of promotions – to the operators. Many consumers are not aware that the two companies, which compete directly with each other and are owned by separate entities, in fact are using the same back-end software system.

‘Skins’ that have contracts with the software providers are most often using the operator's license in another jurisdiction unless there is a requirement to also secure a license in the same jurisdiction. We, as the provider of both licensing and eZone co-location services, understand the VAT dilemma that ‘skins’ and their software providers in other jurisdictions are facing.

We continue a dialogue, through our designated representatives, with various regulatory regimes of other jurisdictions in respect of recognising the license of the other jurisdiction and to provide authorisation to conduct such operations from Curaçao in such a way that it compliments the other licensing jurisdictions’ terms and conditions. In all instances, it will be imperative to ensure that lines for legal recourse for consumers against all license holders are clearly set out.

Looking further ahead to 2015, we expect to see a shift in the place of supply of electronically supplied services – services delivered over the Internet – from the EU member state of the supplier, to the EU member state consuming the services. That is a change which will undoubtedly radically impact online gaming operators; however, the true extent of this impact has yet to be fully appreciated and understood.

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Examples of remote gaming-related activities that we understand are considered to form part of the gaming transaction itself and now subject to unrecoverable VAT are: Intermediaries • Intermediaries Commission Gaming Software • Gaming Software Licensing Fees/Purchase • Purchase of software that processes related to all game to player interaction • Systems Integration • Software maintenance and support S • Event Management/Event Purchase • Odds Management/Odds Purchase • Results Management/Results Purchase Fraud Prevention • Identification and Verification of Players • Know-Your-Customer Services • System Hardening Software (anti DDOS) • Player anti-fraud Management Services • Prevention of Money Laundering Procedures • Payout Management Services Game Integrity Checks • Game Logic Integrity Checks • Ongoing RNG/software Testing • Sport Integrity Checks • Game Collusion Management • Risk Management Player Support • Customer Support Services • Responsible Gaming Services Payment Solutions • Payment Service Providers (Payment Gateways) ‘Skins’, through their contracts with their software providers, are in many cases utilising the operator's license in another jurisdiction and in some cases their own license.

Representatives of the remote gaming sector here in Curaçao are in dialogue with other jurisdictions to explore the possibilities that licenses awarded here by Curaçao-eGaming to skins might compliment the other licensing jurisdictions terms and conditions. In all instances, it will be imperative to ensure that lines for legal recourse for consumers against all license holders are clearly set out.

Although not presently ‘white listed’ Curaçao is engaged in the review of its regulatory regime Curaçao’s Bureau of Telecommunication and Post (BT&P) has been recently requested by the Antillean Government to lead the Internet Gaming Commission, in regulating and guiding the Internet Gaming industry operating within our jurisdiction into the proper direction. The Bureau Telecommunication and Post (BT&P) is the regulatory body for Telecommunications and Postal matters in the Netherlands Antilles.

Recently, a review of the current system of remote gambling regulation in Britain, the UK Department for Culture, Media and Sport (DCMS), together with the Gambling Commission, has launched a consultation process on the feasibility of introducing a licensing system for overseas

remote gambling operators wishing to target the British market.

It has been reported that currently of the 2000-2,500 gambling websites worldwide, Britain has approximately 150 remote licensees that can offer Internet betting, casino or bingo. Of these, fewer than 100 are active. One of the possibilities is that the UK would enter into an MOU with other regulators for data sharing in addition to the ‘white listing’ process.

Curaçao has only one class of egaming license. The application process is similar to other jurisdictions. Recognised as a historical frontrunner in accommodating the international financial world, Curaçao has a long standing track-record of providing the total infrastructure necessary for supporting global egaming services and most importantly a jurisdiction where licensed gambling over the Internet is treated as a most favoured industry by our government.

To sum it up: • 2% Maximum Profit Tax on Net Profits and not on “drop” • 0% tax on Gross Bets • No import duties, no sales (turnover) or VAT tax • Dividend withdrawals are not restricted • Fast & Professional Company Formation and Trust Company Management • Over a decade experience as a Licensed Jurisdiction • One License which covers games of skill, chance and sports betting • egaming, eZone Co-location Services at the Dutch Antilles Government International Telecom • Issuance of primary or backup egaming Licenses • Special programs for Software and Network providers • Multiple major undersea fiber optic cable systems terminating to or originating from our Governments Telecom which we operate from NOTE: Jurisdictions interested in discussions leading to harmonising the terms and conditions of licensing awarded to skins whose software provider is licensed in their jurisdiction should email licensing@curaçao-egaming.com. CGI

CHRIS FANGMAN AND ANTHONY DICK Chris Fangman is Director of Carmanco N.V. the e-management company of Curaçao Trust Management N.V. carrying out management of gaming companies www.trustctm.com

Anthony Dick is Vice Chairman of Curaçao Internet Gaming Association and Managing Director for Curaçao e- Gaming Licensing www.curacaoegaming.com

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W H AT ’ S N E

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MOBILE GAMING

MARKET SHIFT: POISED FOR THE GREEN LIGHT

BY MATTI ZINDER

Milestones from the last twelve months in mobile gaming include the continued roll-out of games as web-applications for smartphones with advanced web browsers such as the iPhone. It is now possible to offer a user experience on these advanced handsets that provides a gaming experience – in terms of visual graphics and game-play – that is on a par with online. That gives a strong indication that horizons are continuing to expand.

>>

all me optimistic. Call me romantic. Call me what you will. But as I consider the year ahead, I can see several reasons to be hopeful about the opportunities for the mobile casino industry.

By its very nature, mobile gambling has always been an enterprising sector. Innovation has been seen time and time again, from the first Java-based games for the earliest handsets to the payment systems that enable consumers to bet real money and win real jackpots. It is only through innovation in terms of technology like handsets and games, and services such as payment and customer support that we are able to evolve as an industry and deliver better mobile casino experiences to our customers.

Milestones from the last twelve months include the continued roll-out of games as web-applications for smartphones with advanced web browsers such as the iPhone. It is now possible to offer a user experience on these advanced handsets that provides a gaming experience – in terms of visual graphics and game-play – that is on a par with online. Web-app games now form a key part of our evolving games strategy alongside traditional Java games, all underpinned with a complete back-office, service and support solution.

We have also become the first specialised mobile gambling provider to earn the software accreditation seal from the independent player protection and standards organisation eCOGRA in 2009. It was a major step forward for the industry, acknowledging the standards, processes, methodologies and services that support our mobile casino services.

Looking forward, there is good reason for optimism in the mobile casino market in the year ahead. There is nothing like the promise of a new market to get the industry buzzing. As a

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wave of reform sweeps across Europe, we are seeing excitement build around newly regulated markets. The global economic recession as well as local incidents such as the earthquake that struck central Italy in April 2009 has left governments desperately needing to raise revenues.

Seeing the UK benefit from a booming egaming market has led governments across Europe to move to reform their own local policies on gambling. Markets such as Italy and France are now following the UK’s lead and are in the process of regulating, and Belgium is expected to follow soon after.

At the same time, countries such as Spain, Denmark and Switzerland are indicating that they will also legislate soon.

The industry, as you would expect, is responding. Online and mobile gaming providers, such as ourselves, are readying themselves with the development of egaming solutions that are created specifically for those markets, reflecting local market regulations, conditions and demands. The key players are doing everything they can with the present legal uncertainty to prepare their technology and solutions, and are eagerly awaiting clarification on what the legalised environment will look like. Strategic partnerships are being signed. The market is ready to go. We’re just waiting for the green light.

Italy is certainly a key market which is currently in the process of legalising the egambling industry and for the Italians the prospects for mobile gambling are just as strong as they are for online. Mobile penetration is, in fact, far higher than the European average, meaning that there is a larger pool of potential tech and mobile savvy customers than in many other countries. Indeed, I have just returned from the ENADA show in Rimini which showcases the Italian amusement and gaming industry, and you can really sense the appetite and huge interest in mobile gaming.

Then there is Belgium – another country making some encouraging noises. New Belgian gaming legislation (The Gaming Law) has been passed and we expect that the market will be active by January, 2011. While land-based casinos are likely to want to seize the chance to extend their brand into egaming space, they do not necessarily possess the experience and know-how of launching and operating this related but unique business. They will require a customised solution that includes the marketing skills and technology in order to successfully run an interactive casino.

With the appropriate partner and egaming solution, they can make this significant leap to extend their brand and maximise their profits.

Starting an egaming business in a new market is a challenge in its own right, but then there is an additional layer of complication that results from being recently regulated and where the egaming laws are new and untested. In this situation, we cannot understate the importance of expert consultancy and regulatory insight, tailoring a service for each client and each country. Well-known brands can be leveraged in new markets to launch a mobile or online casino, even if they have no experience in the industry, but it is nevertheless clear that new mobile or online casino operators will need to fall back on the experience and skills of their partners and suppliers if they are to make a smooth transition and to start making revenues fast.

We are also seeing developments in eastern Europe and have made provisions for growth in this region. We implemented the first secured WAP mobile billing solution for the eastern European market in January 2010 to enable a new 78 I Casino & Gaming International

brand, to launch and operate a mobile casino in this region.

This follows a successful brand launch in the Ukrainian market in June 2009, which is an example of how we continue to apply our technology and expertise to unlock a new and lucrative market for our clients. We know that our mobile casino clients and new operators are on the lookout for markets offering new opportunities. While the industry will inevitably battle for market share in France and Italy, eastern Europe – with its great size and promise – will surely not be overlooked.

Beyond new markets, we are also seeing an opportunity to apply our technology in new ways. We have been looking for an opportunity to showcase the quality of mobile casino games, technology and entertainment that consumers can enjoy. By giving the mass market a first taste of the mobile casino world, we are confident that we will drive interest and awareness in mobile casino play. All the signs are promising.

In an industry as innovative and fast-moving as ours, it’s rare that there isn’t an opportunity on the horizon. But opportunity alone is worthless. I’m confident that 2010 will be a year for us, our partners and even our competitors to seize those opportunities. CGI

MATTI ZINDER Matti Zinder is the founder and CEO of Spiral Solutions Ltd., a full-service interactive marketing, advertising and technology development firm established in 1999. In 2003 he established Spin3, a division of Spiral Solutions, which to date is credited with developing and rolling out one of the leading mobile gaming solutions worldwide. Spin3 has been nominated as the Best 'Made for Mobile' Game system at the Mobile Entertainment Forum 2005 and at the World 3GSM conference 2006. He was named one of the 50 most important individuals in mobile content worldwide by a respected and leading wireless industry publication. Prior to founding Spiral Solutions, Matti served as the Director of Marketing/East Asia at Elbit Defense Systems, a global defence electronics company and as Vice President of Marketing at eSafe Technologies/Aladdin, a NASDAQ listed company. He holds degrees in Chinese and Far Eastern studies and Business Administration from the Hebrew University in Jerusalem. Matti Zinder is proficient in a number of languages, including Mandarin Chinese, Hebrew and Arabic.

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The 9th Annual European iGaming Congress and Expo

19-21 October 2010 Bella Center, Copenhagen

35 of the Power 50 • Over 140 CEOs • 1500 attendees 35+ sessions • 110+ speakers • 70 exhibition stands The chance to meet every important iGaming professional in the industry …the numbers speak for themselves!

EiG is your one ‘must-attend’ conference of the year, whatever you want to achieve in iGaming.

“EiG was not like a needle in a haystack, it was more like a haystack full of needles.”

Moshe Adir, Vegas Kings Following up the biggest, busiest and most successful EiG ever – we bring you even more improvements, more value for your money, and more chance to do big business.

New for EiG 2010: • An advanced pre-conference networking tool to give you full visibility on who is attending, allow you to arrange your meetings before you arrive at EiG and plan your time more effectively • Shuttle busses to bring you to and from the Bella Centre via the official hotels so that you can save on your taxi trips and fares • Longer expo hours including an extra half day, so that you can maximise your networking and meeting times and fit more into your packed schedule • A second official party on Day One (in addition to the Expo drinks reception and Official Day Two party) so you can meet more additional contacts in one central place – in other words, you can network every single day of EiG from waking to sleep, even outside of the official EiG conference hours • There will be more refreshments served throughout the conference so you can quench your thirst whenever necessary – we know its thirsty work making money!

Visit www.eigexpo.com for more information or contact our team at +44 (0)207 370 8579

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11-13 May 2010 Palais des congrès, Montreal, Canada

Secure your brand leadership and claim market share in the most lucrative gaming market there is!

A regulated United States gaming market could be worth US$13.4bn by its fifth regulated year* and is the biggest prize in iGaming world, so the stakes are high and everyone is interested. Companies as diverse as Harrah’s, Churchill Downs, Betfair, PurePlay, PokerStars already have a foothold in the USA. Don’t stay behind!

Prepare your business for the end of UIGEA at the legendary iGaming Conference and Expo…

GIGSE is back in 2010 to help you: s Meet all the key local stakeholders and forward thinking businesses – lobbyists, casinos, affiliates and more – that can facilitate your quick and successful entry into the American gaming market

s Understand how, where and when regulations will permit iGaming – federal and state perspectives – so you can track progress and more accurately plan your strategy for different scenarios

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s Witness the rebirth of the most lucrative gaming market in the world. If it happens tomorrow, would you want to have missed it?!

Join the most important new and ‘old’ players in the market for an exciting, winner-takes-all conference: Over 250 attendees, 2 days, 18 sessions, 30+ speakers and legendary networking events guarantee this is an exciting, winner-takes-all conference to be part of!

Contact Ewa Bakun, Content and Programme Manager, Clarion Gaming for more information: ewa.bakun@clariongaming.com, +44 (0)207 730 8567. *According to H2 Gambling Capital

Register now at WWW.GIGSE.COM quoting promotional code GIGCGI1

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SOCIAL RESPONSIBILITY

PROBLEM GAMBLING IN EUROPE: WHAT DO WE KNOW?

BY MARK GRIFFITHS

Gambling is a relatively new emerging field of education and research. So while there is growing research worldwide on problem gambling, at a societal level, the economic and social impacts of gambling, its role in public policy and its public health implications, are as yet under-researched. Systematic research strategies and programmes underpinned by independent decision-making about information needs and priorities, transparent processes, stakeholder input and widespread dissemination of research results are needed not only across Europe, but also worldwide.

>>

ast year I was commissioned by Apex Communications and Stanley Bet International to provide a European country-by-country analysis of the known empirical evidence of what we know about gambling and problem gambling. My report was launched in Brussels at the European Parliament in November 2009 and in what follows I have outlined some of the main findings and conclusions. No primary references are cited in this article primarily because of space constraints but also because the full 86-page report is meticulously referenced and is freely available by writing to me at mark.griffiths@ntu.ac.uk for a full copy. The key for all the acronyms of the screening instruments cited in this article can be found at the bottom of Table 1.

In Europe, gambling is a diverse concept that incorporates a range of activities undertaken in a variety of settings and giving rise to differing sets of behaviours and perceptions among participants and observers. In absolute terms, European member states with the largest populations are the greatest gamblers.

In terms of Gross Gambling Revenues (GGR), Great Britain has the highest at ?11bn (i.e., amounts staked less money returned to players). This is followed by Germany (?8.4bn), France (?7.6bn), Italy (?6.2bn) and Spain (?4.9 billion). However, the size of population does not have much to do with propensity to gamble. The highest gambling countries by GGR are Ireland (?279 per year per person), Finland (?239), Luxembourg (?194), Great Britain (?181), and Sweden (?176). All of these (bar Great Britain) have small to medium size populations among the member states.

Across most jurisdictions, Lotto is the most popular adult game in most countries. However, results on the most popular

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game among adolescents differed somewhat between countries. For example, although private card games and games of personal skill with family and friends were popular, the trend seemed to be that wherever commercial games (such as the lottery or slot machines) were widely available, adolescents increased their participation even though in most jurisdictions they may not be legally permitted to play these games. This pattern was revealed in adolescent studies in Great Britain, Finland, Iceland and Norway.

European research has consistently shown that problem gambling can negatively affect significant areas of a person's life, including their health, employment, finances, and interpersonal relationships. In addition, there are significant co-morbidities with problem gambling, including depression, alcoholism, and obsessive-compulsive behaviours. These comorbidities may exacerbate, or be exacerbated by, problem gambling. The report also noted that the availability of opportunities to gamble and the incidence of problem gambling within a community are known to be linked, although the relationship is complex.

The terms 'problem gambling' and 'pathological gambling' (often used interchangeably but in fact operationally different) have been used by many researchers, bodies, and organisations, to describe gambling that compromises, disrupts or damages family, personal or recreational pursuits. The two most widely used screening instruments worldwide are the Diagnostic and Statistical Manual of Mental Disorders, 4th Edition (DSM-IV) for pathological gambling, and the South Oaks Gambling Screen (SOGS).

There have been criticisms of both the DSM-IV and the SOGS. In part, these criticisms stem from an acknowledgment that both screens were designed for use in clinical settings, and not among the general population, within which large numbers of individuals with varying degrees of problems reside. A number of alternative screens have been developed, and these are increasingly being used internationally. One such screen is the Canadian Problem Gambling Index (CPGI), which was developed in Canada and has been used in that country, the US, UK and Australia.

The information I collated on gambling and problem gambling in each country broadly fell into one of three categories (see Table 1 for a very brief overview of main findings in each country). These were: * Countries that have carried out national surveys on gambling and/or problem gambling of varying representativeness, quality and empirical rigour (i.e., Belgium, Denmark, Estonia, Finland, Germany, Great Britain, The Netherlands, Lithuania, Sweden and Switzerland). * Countries that have carried out research on gambling and/or problem gambling of varying representativeness, quality and rigour but at a regional and/or local level rather than a national level (i.e., Austria, France, Hungary, Romania, Russia, Slovakia, Slovenia and Spain). * Countries were almost nothing is known empirically about gambling and/or problem gambling (i.e., Bulgaria, Cyprus, Czech republic, Greece, Ireland, Latvia, Luxembourg, Malta, Poland and Portugal).

It was concluded that problem gambling rates in Europe appeared to be similar to rates found elsewhere outside of Europe (typically 0.5-2 percent), although a few countries 82 I Casino & Gaming International

(e.g., Estonia, Finland, Switzerland) had problem gambling prevalence rates of above three percent. The most recent national population based study on adults in the United States suggests that current problem gambling prevalence rates ranged from 1.3 percent (based on a DSM-IV screen) to 1.9 percent (based on SOGS).

However, there is a problem with comparing these prevalence figures to European findings as the prevalence rate of problem and pathological gambling varies considerably between instruments. The majority of the studies in North America have used the SOGS, but the SOGS and its derivatives tend to yield higher prevalence rates than DSM-IV derived measures.

A conservative solution is to compare the results from problem gambling surveys with other surveys that have used the same or similar type of screening instruments (e.g., different instruments based on the DSM-IV criteria).

Relatively few studies in Europe report current prevalence rates for probable pathological gambling but the results from these studies suggest broadly similar rates (Iceland, Sweden, Norway, Great Britain and Denmark). For example, the current prevalence rates of probable pathological gambling (i.e., those individuals endorsing five or items out of ten on the DSM-IV) in Britain, Sweden and Norway was 0.3 percent, in Iceland 0.6 percent and in Denmark 0.1 percent.

Results from studies in different European countries suggest that problem gambling among adolescents is considerably higher than among adults. This has also been reported in numerous North American studies. Although problem gambling among adolescent samples tends to be higher than in adult samples, many of the participants used in these studies are either local surveys and/or use opportunistic or non-representative samples. However, in countries where there have been large samples with good representation (e.g., Great Britain), the problem gambling prevalence rate among adolescents is at least four to five times higher than in the adult population.

The use of DSM-IV-J/DSM-IV-MR-J instruments in youth studies in North America, Australia and Europe vary widely. For example, the most recent prevalence rates of adolescent problem gambling (where four or more items out of ten items are endorsed on the DSM-IV-MR-J), is two percent in England and Wales, nine percent in Scotland, 3.4 percent to 4.7 percent in Canada, and 4.4 percent Australia.

Similar prevalence rates have though been reported in Spain, Iceland and Norway.

In terms of problem gambling by type of gambling there appeared to be some consistent trends across European jurisdictions. The most recent national prevalence survey in Germany showed that of all the problem gamblers, slot machines were the most problematic with over 20 percent of all problem gamblers reporting that electronic gaming machines (EGMs) was their primary type of gambling (nine percent gambling machines; seven percent casino slot machines; five percent amusement with prizes machines).

Other prevalence studies in Europe have reported that problem gamblers were most likely to be EGM players including Estonia, Holland, Norway, Sweden, and Switzerland. Other studies have also found similar results with adolescents reporting that the main type of problem gambling among adolescents is related to EGM play in several countries, including Great Britain, Iceland, and Lithuania.

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TABLE 1: SUMMARY OF COUNTRY-BY-COUNTRY DATA ON GAMBLING AND PROBLEM GAMBLING

Countr y Austria

Ga mb ling preva lence Not known

Belgium

60% (past year)

Bulgaria Cyprus Czech Republic Denmark

Not known Not known Not known [Not reported]

Estonia

75% (past year)

Finland

74% (past year)

France Germany

50% (approx – past year) 39% (past year)

Great Britain

68% (past year)

Greece

Not known

Hungary

19% (monthly)

Iceland

69% (past year)

Ireland

59% (past year lottery) 80% (past year) Not known 30% (lifetime)

Italy Latvia Lithuania Luxembourg Malta The Netherlands

Not known 54% (18-24 year olds - past year) 87% (lifetime)

Norway

[Not reported]

Poland Portugal Romania Russia

60% (lottery past year) Not known Not known 75% (past year)

Slovakia

Not known

Slovenia Spain

Not known [Not reported]

Sweden Switzerland

[Not reported] [Not reported]

Mo st pop ular gamb ling activities Lotteries Slot machines Lotteries Scratchcards Not known Not known Not known [Not reported] Lotteries Slot machines Lotteries Scratchcards Horse racing Lotteries/Rapido Lotteries Scratchcards Lotteries Scratchcards Sports betting Lotteries Lotteries Lottery Scratchcards Lotteries Sports betting Lotteries Not known Sports betting Slot machines Not known Lottery Scratchcards Lottery Scratchcards Lotteries Football pools Lotteries Slot machines Casinos Lotteries Casinos Slot machines Lotteries Casinos Slot machines Lotteries Lotteries Lotteries

Prob lem ga mb ling preva lence Not known

Instru ment -

Qualit y of d ata Poor

2% (past year)

DSM-IV

Medium

Not known Not known Not known 1.7% (lifetime) 0.7% (lifetime) 6.5% (past year)

SOGS-RA NODS SOGS

Poor Poor Poor Medium

5.5% (past year)

SOGS-R

Good

Not known

-

Poor

1.2% (past year)

DSM-IV

Good

0.6% (past year) 0.5% (past year) Not known

DSM-IV CPGI -

Good

7% (“heavy gamblers”) 1.1% (past year)

-

Poor

DSM-IV

Good

Not known

-

Poor

Not known Not known Not assessed

[None used]

Poor Poor Poor

Not known Not known

-

Poor Poor

2.5% (lifetime)

SOGS

Good

1.4% (lifetime)

NODS

Medium

Not known

-

Poor

Not known Not known Not known

-

Poor Poor Poor

Not known

-

Poor

Not known 0.9%-2.5% (Lifetime) 2.0% (past year) 3.3% (lifetime)

Various

Poor Medium

Medium

Poor

(localised)

SOGS-R SOGS

Medium Poor

Key: CPGI = Canadian Problem Gambling Index; DSM-IV = Diagnostic and Statistical Manual, Fourth Edition; DSM-IV-J = DSM-IV Junior Version; DSM-IV-MR-J; DSM-IV Junior Multiple Response Version; NODS = National Opinion Research Center DSM Screen For Problem Gambling; SOGS = South Oaks Gambling Screen; SOGS-R = Revised South Oaks Gambling Screen.

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SOCIAL RESPONSIBILITY

Internationally, a growing proportion of problem gamblers contacting helplines or assessing treatment are identifying EGMs as their primary form of gambling. This finding has been confirmed in Europe where many countries reported that problem EGM gamblers were most likely to seek treatment and/or contact national gambling helplines including 60 percent of gamblers seeking help in Belgium, 72 percent in Denmark, 93 percent in Estonia, 66 percent in Finland, 49.5 percent in France, 83 percent in Germany, 45 percent in Great Britain, 75 percent in Spain, and 35 percent in Sweden. Although no figures were provided, it was also reported that the 'vast majority' of all those attending various treatment programmes in Slovakia were EGM gamblers. In Switzerland, it was reported that of all the 2,443 casino selfexclusions, over three-quarters (78 percent) were for slot machine gamblers.

Literature reviews carried out in Australia and Great Britain (see resources listed in the 'Further reading' section at the end of this article) have concluded that gaming machines are more likely to lead to problem gambling than other forms of gambling. These reviews also suggest that a range of structural characteristics impact on gambling behaviour.

Relevant primary structural characteristics include the core technology of the EGM, i.e., the reinforcement schedule which determines the number and scale of reinforcement intervals (e.g., payout intervals) and conditions players to game operation, as well as the configuration of line betting (single v multiple lines), credit value (as virtual representation of money), the reel symbol ratio, accompanying bank note acceptors and spin speed (i.e., event frequency). Secondary characteristics include lighting, colour and sound effects (e.g., music, verbal interaction, sound of winning coins), machine theme, etc. The complex interrelationships between these structural characteristics produce interactive effects that may shape gambling behaviour, including the production of harm as measured by problem gambling segments.

Available research demonstrated that material change to structural characteristics can in some circumstances lead to transformation of gambling behaviour (see 'Further reading').

Reviews of the literature reveal that the number of correlates or potential risk factors of problem gambling are numerous, and it is possible that different combinations of a number of factors may explain the development of problem gambling for different individuals. Results from crosssectional studies can be useful in terms of estimating the potential importance of such factors, although experimental and/or longitudinal studies are necessary for causal explanations.

In general, the European data show that problem gamblers invest more time, money and usually participate in a larger number of games than non-problem gamblers.

Problem gambling also seems to be more strongly associated with certain types of gambling than others. Research findings indicate that continuous games with an element of skill or perceived skill are more strongly associated to problem gambling than other types of games. Because of the lack of good data across Europe as a whole, there is a lack of correlation between levels of problem gambling and the type of market that gambling activity occurs in.

My report ended by saying that gambling is a relatively new emerging field of education and research. Some may argue that the existing knowledge base for the formulation of evidence-based policies is small (especially when compared 84 I Casino & Gaming International

with other potentially addictive behaviours). Although there is growing research worldwide on problem gambling, at a societal level, the economic and social impacts of gambling, its role in public policy and its public health implications, are under-researched. Systematic research strategies and programmes underpinned by independent decision-making about information needs and priorities, transparent processes, stakeholder input and widespread dissemination of research results are needed not only across Europe, but also worldwide. CGI FURTHER READING Abbott, M., Volberg, R., Bellringer, M. & Reith, G. (2004). A Review of Research on Aspects of Problem Gambling.

Auckland University of Technology, Gambling Research Centre. London: Responsibility in Gambling Trust.

Griffiths, M.D. (2008). Impact of high stake, high prize gaming machines on problem gaming. Birmingham: Gambling Commission.

Meyer, G., Hayer, T. & Griffiths, M.D. (2009). Problem Gaming in Europe: Challenges, Prevention, and Interventions. New York: Springer.

Livingstone, C. & Woolley, R. (2008). The relevance and role of gaming machine games and game features on the play of problem gamblers. Report prepared for Independent Gambling Authority South Australia.

Parke, J. & Griffiths, M.D. (2007). The role of structural characteristics in gambling. In G. Smith, D. Hodgins & R. Williams (Eds.), Research and Measurement Issues in Gambling Studies. pp.211-243. New York: Elsevier.

MARK GRIFFITHS Dr Mark Griffiths is a Chartered Psychologist and Professor of Gambling Studies at the Nottingham Trent University, and Director of the International Gaming Research Unit. He has spent over two decades in the field is internationally known for his work into gaming and gambling. He has published over 250 refereed research papers, three books, 65 book chapters and over 1000 other articles. He has served on numerous national and international committees and gambling charities (e.g. National Chair of GamCare, Society for the Study of Gambling, Gamblers Anonymous General Services Board, National Council on Gambling). He has won ten national and international awards for his work including the John Rosecrance Prize (1994), CELEJ Prize (1998), Joseph Lister Prize (2004) and the US National Council on Problem Gambling Research Award (2009).

He also does a lot of freelance journalism and has appeared on over 2000 radio and television programmes.

2010 Issue 2

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2010 Issue 2

20/5/10

12:05

Page 86

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