Casino & Gaming International: Issue 23

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Casino & Gaming International

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WELCOME

RAISING THE STAKES

Publisher Jamie Kean Email: jamie.kean@casinoandgaming.net Editor Stephen Lawton Email: stephen.lawton@casinoandgaming.net Publishing Services Manager Tracie Birch Email: tracie.birch@casinoandgaming.net Advertising Susan Coleman Email: susan.coleman@casinoandgaming.net Subscriptions Daniel Lewis Email: daniel.lewis@casinoandgaming.net Business Development Manager Mike McGlynn Email: mike.mcglynn@casinoandgaming.net Editorial Contributors Vahe Baloulian, Heather Baker, Andrew Beveridge Frank Fahrenkopf, Jnr., David Flower, Phil Fraser Mark Griffiths, Clive Hawkswood, Garth Kimber Philip Parry, Roelant Prins, Roger Raatgever Archie Watt, Matti Zinder

Woodland Place, Hurricane Way Wickford Business Park, Wickford Essex SS11 8YB. United Kingdom Telephone: +44 (0) 845 653 0219 Facsimile: +44 (0) 845 653 0219 Annual Subscription (4 issues): £107 United Kingdom £117 Europe & Middle East £127 USA & Canada £137 Rest of the World Please make cheques payable to ‘CGI Global Media Limited’ and send to: CGI Global Media Limited, Subscriptions Dept, Woodland Place, Hurricane Way, Wickford Business Park, Wickford, Essex SS11 8YB. United Kingdom.

Photography © 2011 CGI Global Media Limited and it’s licensors.

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Disclaimer The views and opinions expressed in Casino & Gaming International magazine do not necessarily represent the views of the editor, editorial assistants, or of CGI Global Media Ltd. © 2011 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.

he United States Department of Justice (DOJ) has struck again, this time with unsealed indictments served against PokerStars, FullTilt, Absolute Poker and UltimateBet. After the experience of BetonSports, Neteller and PartyGaming previously, it would seem few operators in the gaming industry could not know the worst that might be in store for them. Momentum in the market inevitably establishes a dominant clutch of companies effectively putting them up in neon lights; and few have achieved the prominence, popularity or player network range like PokerStars (licensed Isle of Man) and FullTilt (licensed Alderney) in the online poker world. And at root the crucial bone of contention remains that of establishing recognition for poker as a game of skill over chance.

Alternatively, the only safe way to avoid putting heads above the parapet would be to err on the side of caution by abandoning or avoiding US operations altogether, pending the long awaited federal change to online regulation which, it is generally agreed, will occur even though legalisation may now have been shunted back three years or more. However this action proceeds, it must generate much unease as this intermittent pattern of heavy intervention to enforce the Unlawful Internet Gambling Enforcement Act remains the primary approach to ‘managing’ exclusion from the global online gambling industry. But such actions are likely to increase and galvanise responsible debate on regulation.

A number of states are continuing to shift position. Iowa’s Senate has just approved a gambling bill which, in part, may bode well for the deferred online poker debate next year; and even though the path continues to be generally tortuous considering that, for instance, New Jersey’s governor recently vetoed his Senate majority backed bill, the case for regulation gains more credibility with every effort. In Nevada where a gambling bill is currently under consideration, PokerStars are said to have been conspicuous lobbyists and that has lead to political questions about financial influence. But it pales beside the tax, jobs and capital investment potential that would come from regulating online poker alone.

According to Randall Sayre, the former Nevada Gaming Control Board member made Gaming Regulator of the Year in 2009 by International Masters of Gaming Law: “We can stand on the beach and let it wash over us, or we can recognise the potential economic opportunity for the state.” While the Former Nevada assembly Speaker Richard Perkins said: “I see Internet gaming as the next extension of how Nevada reinvents itself. This is the growth vehicle for the gaming industry worldwide.” Both worked with PokerStars to back the Nevada bill.

Significant in the initial DOJ fallout had been the Steve Wynn-PokerStars and Fertitta-FullTilt agreements – designed to kick off after regulation has been achieved – but which have now been nullified in the wake of the DOJ’s actions. The Las Vegas Sun quoted Wynn’s statement on 24th March: “After much study, we are convinced that the lack of regulation of Internet gaming within the US must change. We must recognise that this activity is occurring and that law enforcement does not have the tools to stop it.

As a company that has safely conducted gaming in the US for more than 40 years, we believe that the same can be done for poker on the Internet.” Whether the intention of such major casino owners to work for the change was a red rag to a bull precipitating the DOJ’s action is unclear, but the principal of the alliance so far remains intact since Caesars Entertainment concluded an arrangement with Gibraltar-licensed 888 Holdings at the same time as Wynn. The difference is 888 has no US exposure.

In Vahe Baloulian’s view expressed shortly before the DOJ acted: “The situation has changed dramatically. Now there is a rush by land-based casinos to take their place under the online gaming sun. The most dramatic change is happening in the US where we see a flurry of bills and deals, all driving towards legalisation and ultimately the entrance of land-based operators into the real-money online gaming realm.” And he emphasises the positive consequences: “Innovation will result from fusion of the land-based and online expertise and will consequently open new markets, which until now have been ignored…I don’t think we’ve even scratched the surface yet. There is an enormous potential out there…[T]he convergence of land-based and online sectors will create a new category of players. They will direct us to new growth opportunities.” (p34)

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ISBN 190200335 7 www.casinoandgaming.net

Stephen Lawton, Editor.

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CONTENTS

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FEATURES 7

OPTING TO REGULATE: EVOLUTION OF A MAINSTREAM SHIFT BY ANDREW BEVERIDGE

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eGAMING OPERATORS: MORE RESPONSIBLE THAN BANKS? BY ARCHIE WATT

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KEEPING THE SHIP CLEAR OF ICEBERGS

BY CLIVE HAWKSWOOD

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ADJUSTING TO A ‘NEW NORMAL’ AND INVESTING IN THE FUTURE BY FRANK FAHRENKOPF, JNR.

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SCRATCHING THE SURFACE OF WHAT IS POSSIBLE INTERVIEW WITH VAHE BALOULIAN

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DATA DEMAND: KEEPING ONE STEP AHEAD OF THE GAME INTERVIEW WITH PHILIP PARRY

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NEXT GEN SERVICE: KNOWING ME, KNOWING YOU…

BY ROELANT PRINS

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ACHIEVING LOCALISATION THROUGH TRUST, RESPECT AND KNOWLEDGE BY HEATHER BAKER

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STAYING OUT FRONT: SUSTAINING THE ADVANTAGE THROUGH INNOVATION BY ROGER RAATGEVER

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AN IMMENSE OPPORTUNITY BEYOND THE POINT OF NO RETURN INTERVIEW WITH MATTI ZINDER

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AVOIDING PITFALLS, MEETING EXPECTATIONS AND ENSURING PERFORMANCE BY DAVID FLOWER

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BRAND BOMBARDMENT: OF PREMIERSHIP, PURSES AND PROMOTIONS BY PHIL FRASER

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GROWTH, STABILITY AND COMMITMENT IN AN ENLIGHTENED EGAMING HOME INTERVIEW WITH GARTH KIMBER

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GAMBLING, LUCK AND SUPERSTITION: A BRIEF PSYCHOLOGICAL OVERVIEW BY MARK GRIFFITHS

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OPTING TO REGULATE: EVOLUTION OF A MAINSTREAM SHIFT

BY ANDREW BEVERIDGE

The widespread move by many nations towards more open online gambling regulatory regimes has triggered a corresponding interest among operators wishing to favourably position themselves for all eventualities. With the trend of licensing and regulation of online gambling sweeping powerfully through Europe – and one that has considerable potential in North America, challenging scenarios are being presented calling for greater levels of attention to the detail of operational practice.

>>

he evolution of online gambling into a mainstream betting activity increasingly governed at national levels has rarely looked as promising as it has during the past two years.

A growing number of governments, both national and provincial or state, are opting to licence and regulate, opening up markets rather than maintaining old-fashioned state monopolies or outright bans.

In North America and in Europe, the more open model perhaps set in 2005 by the United Kingdom with the formation of the UK Gambling Commission has found increasing favour, although differences of culture, politics and legislative history continue to inform national decisions.

Industry experts attribute the general policy shift to a variety of causes, ranging from the need for recessionhammered governments to raise additional tax revenues to the determination of the European Commission to ensure that EU member states are compliant with the principles of free movement of goods and services between members of the Union.

Others claim that the reality of trying to stifle a crossborder pastime that is so popular at the consumer level; so advanced and dynamic in a technological sense; and so lucrative for successful companies and governments alike, has at last begun to dawn on the politicians.

Whatever the causes, or combinations thereof, there can be little doubt that online gambling is undergoing a paradigm shift; with strong indications that its continuing development will, in the case of committed and competitive companies, increasingly entail compliance with regulations

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and standards.

While these may vary somewhat from nation to nation, the fundamentals are likely to remain, demanding professionalism on the part of operators’ intent on occupying the best positions in an industry that has always been tough and competitive.

That sense of professionalism and a desire to be prepared to meet the highest standards are powerful motives that have resulted in many major Internet gambling companies, and for that matter developing jurisdictions, engaging with eCOGRA. Even before our official launch as an independent notfor-profit organisation in 2003, we embarked on extensive research exercises with top international experts to determine best practice standards applicable to the industry and the many different disciplines and skills required to thrive in the Internet gambling business.

Since then we have honed these requisites by operational experience, and broadened the scope to keep pace with an expanding and maturing industry and the exceptionally dynamic technologies that drive it to ever higher levels.

Online gambling today comprises more wagering genres, delivered via more diverse technology channels than ever before, and we have found a ready market for the professional services offered by our IT and audit specialists in software testing, the maintenance of standards, responsible gambling and disputes resolution and business counselling.

In my opinion this demand for both relevant standards and expertise in implementing and maintaining same can only become more pronounced in the changed regulatory environment that is now happening across Europe and North America in particular.

In Europe, there is renewed hope that some degree of regulatory harmonisation might still be achieved.

Last year EU ministers acknowledged for the first time that a purely national approach is insufficient to deal with online gambling. A spokesman for the European Gaming and Betting Association (EGBA) noted that this may pave the way for increased cooperation at the European level.

The "Council Conclusions on the Framework for Gambling and Betting in the Member States of the European Union" detailed the policy discussion surrounding online gambling, and represents the first unanimous position that member states have reached since they began debating online gambling in the Council in 2008.

EGBA feels this provides impetus to the European Commission´s Green Paper consultation, with Secretary General, Sigrid LignÊ, opining: "The importance of these conclusions for online gambling in the EU cannot be underestimated. The Member States expressly support an in-depth discussion on online gambling in the Internal Market as proposed by Commissioner Barnier.

"For the first time they have also unanimously agreed to work on very practical measures to improve cross-border cooperation," Ligne said.

The member states agreed on a number of actions that national regulatory authorities could undertake that will improve cooperation. These include cooperation on 8 I Casino & Gaming International

consumer protection, sports integrity, minimising unnecessary administrative burdens and the sharing of best practice in relation to responsible gambling measures.

It may be helpful to take a snapshot of national regulatory developments that have occurred recently.

FRANCE In France the old state-dominated monopolies are now largely a thing of the past following the partial liberalisation of the market mid-year 2010. The result is that top companies have prepared to meet the strict licensing requirements of regulator ARJEL, with many entering into partnerships with French entities and obtaining licenses.

Others with reservations about the tax levels and other problems have decided not to apply, but have nevertheless showed respect for the new French approach by withdrawing their services from that market.

The French move to a more compliant stance headed

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off a European Commission that was clearly growing impatient with a reluctance to change on the part of several EU members, at the same time giving French punters a wider and more French-focused choice of venues and genres.

Companies like Pari Mutuel Urbain (PMU) and the La Français de Jeux, which had pretty much had the field to themselves, appear to have risen to the occasion and are competing aggressively….and competition is rarely a bad thing when it comes to the consumer.

The old defence for monopolies – that these are necessary to protect the player – have been to some extent eroded by developments and European Court of Justice rulings, which call for such claims to be justified, and will not allow them to stand if they are not matched by a nation’s conduct – for example vigorously promoting gambling whilst claiming that national monopolies are necessary to prevent gambling problems. And any

suggestion of a discriminatory approach is closely examined.

Online sportsbetting and poker are now allowed in France, with hopes that casino activity will be permitted at some point.

Whilst the regulations are typically French-centric, the situation is a significant improvement on the former exclusive system that triggered complaints and litigation from companies in other EU nations.

If anything, the liberalisation has boosted results for the former monopolies; recent numbers released by La Francaise des Jeux revealed an almost doubling in sports betting revenues in 2010.

The company reported that Internet sports betting revenues reached an unprecedented €91m (2009: €43m) equating to an increase of 111.6 percent, coupled with a market share that has quadrupled since the opening of trading on 8th June.

FINLAND The situation in Finland is less satisfactory, with three statesanctioned operators holding what amounts to monopolies in slots machine action (RAY), lottery and sports betting (Veikkaus) and horseracing (Fintoto).

The dominance of the Finnish gambling landscape by these three entities has led to complaints that the market would be more fairly and efficiently served if some outside competition was allowed, but the Government appears to have set its mind against a more liberal approach.

The current arrangement is perhaps ripe for European Commission study and possibly intervention if the EU principles are to be fully respected.

AUSTRIA Political sleight-of-hand may have been at work in Austria last year, when the Austrian Government came under fire, accused of trying to shield state monopoly Casinos Austria and Austrian company Novomatic from foreign competition.

Although the Government made amendment proposals to its Gambling Act in 2008, it has been argued that the country’s legislation remains discriminatory against foreign operators.

An executive of the country’s gaming machine trade body – the Automatenverband – is on record as saying that legislative proposals were aimed specifically at “reducing the number of possible applications" for a licence by foreign operators.

The law included the requirement that any foreign operator be licensed in its own country, and for that country's official regulator to guarantee "comparable supervision and control." The clause gave rise to criticism that it could be used to exclude foreign companies on grounds of non-recognition of another jurisdiction, and that it was discriminatory in favour of Austrian applicants.

ITALY Italy has gone from zero to hero in a remarkable about-face in recent years, and is now one of the great success stories in online gambling regulation, a process controlled by national regulator AAMS. Casino & Gaming International I 9

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The country went from trying to strangle online gambling through ISP bans and other draconian tactics, to taking an enlightened and informed course that has resulted in the development of an impressively large, vibrant and well ordered market that has attracted many top domestic and foreign companies.

As in France, the regulatory regime has given Italian Internet gamblers better protection and wider choice, at the same time lifting the threat of European Commission sanctions and the possibility of being dragged into the European Court of Justice.

Prior to the change of direction, the Italian Olympic Committee and the National Horse Breeders Enhancement Society had dominated the market in a protectionist system that was both disproportionate and discriminatory against other EU nations.

Online poker and sports betting is thriving, and the international industry is keenly anticipating the opening up of casino gambling and cash poker, too.

BRITAIN Among the pioneers in taking a more measured and

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enlightened approach to online gambling, the British industry is controlled by the Gambling Commission, with a finely honed set of standards and regulations that has resulted in a largely orderly industry. There have been few, if any problems, regarding old and unrealised fears such as dramatically increased problem gambling, organised crime or money laundering.

The UK market has shown steady growth, with the independent market research company Nielsen revealing in September last year that visits to online gaming sites grew at a faster rate than social media sites such as Facebook. An additional 3.2 million people had visited an online gaming site in 2010 (a 40 percent increase over the previous year) compared to the extra 2.2 million who accessed social networking sites, the monitoring company reported.

Unfortunately, a tough taxation approach has probably discouraged more Internet gambling groups from submitting to UK regulation. In the competitive world of online gambling, such companies tend to domicile in more tax-friendly locations such as the Isle of Man, Malta, Gibraltar, Alderney and even far-off Antigua, which – for

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>> INDUSTRY EXPERTS ATTRIBUTE THE GENERAL POLICY SHIFT TO A VARIETY OF CAUSES, RANGING FROM THE NEED FOR RECESSION-HAMMERED GOVERNMENTS TO RAISE ADDITIONAL TAX REVENUES TO THE DETERMINATION OF THE EUROPEAN COMMISSION TO ENSURE THAT EU MEMBER STATES ARE COMPLIANT WITH THE PRINCIPLES OF FREE MOVEMENT OF GOODS AND SERVICES BETWEEN MEMBERS OF THE UNION.OTHERS CLAIM THAT THE REALITY OF TRYING TO STIFLE A CROSSBORDER PASTIME THAT IS SO POPULAR AT THE CONSUMER LEVEL; SO ADVANCED AND DYNAMIC IN A TECHNOLOGICAL SENSE; AND SO LUCRATIVE FOR SUCCESSFUL COMPANIES AND GOVERNMENTS ALIKE, HAS AT LAST BEGUN TO DAWN ON THE POLITICIANS. << now anyway - retain the privilege of advertising their products in the UK, but do not suffer the burden of punitive taxes and levies.

GERMANY The Germans have so far been reluctant to abandon the monopolistic model, although there are signs that this attitude is softening in some states. The nation’s sixteen states have by treaty tried to keep the market to themselves, even attempting to stop German operators from accepting bets from German residents with tough measures that include ISP and financial transaction blocking provisions.

In general, online gambling in Germany has been illegal since 2008, but is nevertheless widely used by German nationals via external websites. In a survey last year, Gold Media estimated that €7.3bn of the €7.8bn staked in Germany in 2009, or 94 percent of the total, went to ‘offshore’ online gambling.

The European Commission has repeatedly informed the Germans that it considers their monopolistic approach to be non-compliant, but the Germans have been to some extent encouraged by an ECJ ruling that nations can exclude operators from other EU countries if it is in the (local) public interest.

However, with state-sanctioned companies continuing to promote gambling to Germans, this approach looks ever more discriminatory, disproportionate and protectionist….and online companies continue to access the German player, who seeks the best games and bets.

The sixteen-state gambling Treaty in Germany comes to an end on 1st January 2012, a possibility that has triggered much speculation.

In December 2010 the states met in an attempt to find consensus on the way forward, but were unable to do so.

There seems to be agreement on maintaining the lottery monopoly, but there were clearly divisions regarding other gambling genres, with some states – mainly RhinelandPalatinate and North Rhine-Westphalia hoping to continue a blanket monopoly on sports betting, but at least five others, including progressive governments like Schleswig Holstein and Saxony, keen to liberalise and exploit the online gambling opportunity.

Schleswig-Holstein has been especially forthright,

intimating that online sports betting, casino and poker licenses could be made available to suitable private operators in 2011, ready for the introduction of a regulatory dispensation once the German Treaty expires.

The latest available information suggests that the Schleswig-Holstein Parliament, unlike the other 15 states, is to debate a draft bill soon which is apparently based on the Danish model and carries a 20 percent of gross profit tax rate.

Given the disparate views of the German states, it appears likely that each will adopt an individual approach to online gambling come 2012. The success of progressive states like Schleswig-Holstein will likely influence the direction in which other states go in what could well be a chaotic phase for the German industry.

Online gambling groups like Carmen Media, Bwin Interactive and others have kept the pressure on with litigation, generating judicial opinions on the monopolistic nature of the Treaty. In Bavaria, for example, a court found that monopolistic domination of gambling is only permissible in EU law (on grounds of the public interest) if the market as a whole were organised in such a way as to control addiction. The European Commission had expressed the hope that the result of the discussions among state premiers would lead to "...reforms that will be consistent with EU law."

Given the impressive size and wealth of the German market, these developments were being keenly watched by online gambling companies, and again the issue of preparedness to move has been a key element in many management strategies.

[On 7th April, as we went to press, the 16 state premiers finally met. They agreed to open up the sports betting market to private operators by issuing seven German-wide licences for an initial five-year period from 2012. However, there are a number of stringent regulatory provisos, above all a 16.66 percent turnover tax on all wagers. From here, once the states have finalised the draft Interstate Treaty, agreement then has to be reached on the Treaty, set for 9th June. Ratification is then down to the decision of all 16 states’ parliaments – a process that may well not complete until 2012. - Editor]

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DENMARK Changes to the previously monopolistic Danish gambling laws scheduled to go into effect on 1st January 2010 have been pushed back to April 2011 or later. The delay is in part due to the need to process and analyse a large number of licence applications.

However, the Danes are facing a more serious problem following complaints from the nation’s land gambling operators that the proposed 20 percent tax rate on Internet gambling discriminates against land operators, who pay considerably more at 41 percent.

Following the complaints, the European Commission in December announced that an investigation would be made into the 2010 Danish Gambling Tax Act, which allegedly creates a differentiated tax regime between land-based operators, and online and betting operators.

Other complaints from the wider industry relate to the mandatory requirement in the new law that applicants cease all online gambling activity involving Danish players until such time as their licenses are issued; this has been widely perceived as giving selected Danish licensees an unfair head start in the liberalised market.

The delay is not the first on Denmark’s rocky road to a more even-handed gambling dispensation, with previous delays last year occasioned by non-compliance in areas like account securities and controls as offered by other EU jurisdictions, and Danish insistence that pool betting for horse racing remains restricted.

Other points of contention included the introduction of ISP and financial transactions blocking.

Unlike France and Italy it does not appear as if the Danes are going to insist on dedicated online poker networks; locally-licensed Internet poker sites will be able to connect with existing international networks, providing better player liquidity to both Danish players and operators.

Although the historic monopoly Danske Spil will maintain control over the lottery, scratch card, keno, and Internet bingo sectors, two different categories of licence – sports betting and casino/poker games are envisaged.

NORWAY Norway is taking a harder line on Internet gambling via its Payment Act, a relatively recent law targeted on unauthorised online gambling which takes a similar line to the Unlawful Internet Gambling Enforcement Act in the United States, punishing local financial institutions that process transactions between Norwegian accounts and unlicensed Internet gaming sites.

Such a strategy depends largely on the cooperation of an overworked financial services industry.

In Norway it has since 2008 been illegal to gamble online unless at a Norwegian licensed site...and that means only two state monopolistic organisations - Norsk Tipping and Rikstoto.

Such harsh measures are unusual for a European nation, but went into effect in mid-2010, threatening Norwegian-based financial institutions with prosecution if transactions with unauthorised online gambling sites are facilitated, and including ISP blocking provisions.

Although Norway is not yet part of the European Union 12 I Casino & Gaming International

it is a member of European Free Trade Association (EFTA) and the European Community and should therefore support the accepted principles of free movement of goods and services. As far back as 2008, EFTA opined that the then proposed Norwegian measures constituted an “…unjustified restriction of the freedoms of the internal market for gambling services.”

Instead of heeding the advice, the Norwegian government has used the hoary old argument that it has restricted its licensing in the interests of fighting gambling addiction, crime and fraud.

SWEDEN Online gaming is permitted in Sweden, but has traditionally been restricted to state monopoly Svenska Spel, which offers lotteries, casino games, bingo, poker and sports and horse wagering via both Internet and mobile channels.

Although foreign operators – even those from EU

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nations â&#x20AC;&#x201C; are currently excluded from participating in the Swedish market, European Commission pressure appears to have wrought useful changes in Swedish thinking.

The Government is currently in the process of creating new online regulatory legislation, seeking a middle path that will allow it to retain its lucrative dominance in most forms of Internet gambling, but allowing competitors into the sports betting sector by applying for licensing in 2011.

The tussle to bring Sweden into compliance has been ongoing for several years and has featured bitter litigation as the Government sought to prosecute local media in order to prevent foreign advertising by Svenska Spel competitors.

There is also the apparent dichotomy of a nation that has for years professed to enforce a monopoly on moral grounds, yet in recent times has expressed ambitions to export its gambling skills as a commercial venture.

ROMANIA This eastern European country has twice had to re-draft its proposed gambling laws, which include online gambling provisions, following adverse European Commission opinions.

In the latest attempt, matters are at a standstill until at least1st April following the submission of a fresh draft addressing European Commission complaints that the original was non-compliant with EU law.

In October last year the Commission issued a detailed opinion against a Romanian draft legislation dating from July 2010 and seeking to regulate online gaming and betting.

The adverse nature of the opinion meant Romania could not adopt the draft and would have to address specific issues in a fresh notification.

online gambling, implemented in early January 2011.

The 'new' licensing scheme covers everything but leaves the national lottery structures unchanged as a state monopoly. It created a Gaming Commission to regulate both land and Internet gambling and lays down conditions for licensing which include a requirement that enabling technology for Internet licensees must be based in Belgium, and that foreign operators must become licensed Belgian land gambling operators if they wish to be considered.

The legislation appears to strongly favour existing Belgian land-based operators....and there are only a limited number of licenses available.

The Belgian Government's rationale for these restrictions is the protection of the public interest, namely consumer protection and tackling fraud and crime.

Perhaps predictably, the regime has been roundly criticised by non-Belgian companies and trade associations, with complaints filed with the European Commission on the grounds that the Belgians are trampling on EU principles of

Analysts at the time said that the draft had failed due to: G The discriminatory prohibition of marketing and advertising activities for EU licensed companies which are not authorised in Romania G The requirement for EU licensed online betting companies to have their servers in Romania G The requirement for EU licensed online companies to be established in Romania G The unjustified exclusion of online pool betting while all other forms of online gambling would be allowed.

BALTIC STATES The Baltic states of Estonia, Latvia and Lithuania are burgeoning regulated markets that have comparatively recently reviewed online gambling and introduced regulations, albeit falling short of full liberalisation in European terms.

Lithuanian gambling laws give state lottery company Olifeja the sole right to offer online gambling services in the country, with the exception of internet sports betting, provided through three sportsbooks: Topsport, Orakulas and Omnibet. However, the Government appears to be opening up the industry to more competition.

Recent developments in the country include a threeyear deal with Intralot that will reportedly see internet choices expanded significantly, upgrading Olifeja's platform and adding games.

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Lithuania is therefore apparently moving away from a past that included attempts to ISP-block sites, which discouraged many operators from seeking a licence. The new laws should make it viable for licensed EU bookmakers to offer bets and casino games online.

In Latvia, home to some impressive online gambling software companies, the pastime has been legal since 2003, with a 10 percent interactive betting tax that has not discouraged players or companies like Playtech from launching Live Dealer action based in the country, or some 160 operational sites from springing up.

Estonia has also changed course from a rather insular and parochial approach to one displaying a more liberal attitude to Internet gambling that should see enlightened regulations and a consequently bigger range of international operators going after licensing in 2011.

HOLLAND The Netherlands has proved to be another contentious region, clinging to a state monopolistic system until comparatively recently that has generated legal actions and bitter recriminations, along with censure from the European Commission.

The Dutch courts appear to have traditionally sided with the monopolistic policies of the government, and the European Court of Justice has provided some surprises, for example in notable actions such as those brought by Ladbrokes and Betfair last year.

Here the second chamber of the ECJ upheld the right of the Dutch state to exclude both companies from the Dutch market, on the grounds that their exclusion correctly formed part of a broader range of legislation designed to curtail problem gambling.

"National legislation, such as that at issue in the main proceedings, which seeks to curb addiction to games of chance and to combat fraud, and which in fact contributes to the achievement of those objectives, can be regarded as limiting betting activities in a consistent and systematic manner even where the holder(s) of an exclusive licence are entitled to make what they are offering on the market attractive by introducing new games and by means of advertising,” the judgment read in part.

“It is for the national court to determine whether unlawful gaming activities constitute a problem in the Member State concerned which might be solved by the expansion of authorised and regulated activities, and whether that expansion is on such a scale as to make it impossible to reconcile with the objective of curbing such addiction.”

However, the Court stressed that when it comes to national licensing schemes, the principles of equal treatment and the consequent obligation of transparency are applicable.

The good news is that a new Dutch Government has indicated that it might introduce an online gambling licensing regime in 2012, liberalising the online gambling market; the situation remains unclear as the politicians debate the case for and against.

The European Gaming and Betting Association, a trade body that numbers most of the major European betting 14 I Casino & Gaming International

groups among its members, recently commented that it is confident that reform of the gambling laws will take place in the Netherlands.

Secretary General Sigrid Ligné commented: “Beyond the legal considerations, you also have to look at the reality of the market. There is a consumer demand for online gaming in the Netherlands, like there is all over Europe.

“Increasingly, EU Member States like Italy, Denmark and France realise that online gaming is a popular leisure activity and are opening their markets to competition. EGBA urges the Dutch authorities to also start regulating the market."

BELGIUM The Belgians have also opted to regulate online gambling, albeit in a less than full liberalised manner. Over a year ago the Lower Chamber of the Belgian Parliament approved changes that included the legalisation and licensing of

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>> THE US SITUATION THEREFORE APPEARS TO BE UNLIKELY TO CHANGE AT A FEDERAL LEVEL IN THE FORESEEABLE FUTURE, BUT THERE IS SIGNIFICANT POTENTIAL IN THE MOVES BY SOME INDIVIDUAL STATES TO ACHIEVE CONTROLLED INTRASTATE LEGALISATION…AND THAT COULD HAVE A DOMINO-LIKE EFFECT ON OTHER, OPEN-MINDED LEGISLATURES. ONE THING IS CERTAIN VERY LARGE NUMBERS OF AMERICANS WOULD PREFER TO HAVE THE FACILITY OF SAFE AND LEGAL INTERNET GAMBLING AT THEIR DISPOSAL, CREATING A SIGNIFICANT DEMAND FOR THESE SERVICES, AND PRESENTING SOME OF THE MOST POTENTIALLY REWARDING BUSINESS OPPORTUNITIES ON THE PLANET…THE LICENSING AND REGULATION OF ONLINE GAMBLING IS A TREND THAT IS SWEEPING POWERFULLY THROUGH EUROPE AND ONE THAT HAS CONSIDERABLE POTENTIAL IN NORTH AMERICA. << free movement of goods and services, and nondiscrimination.

Belgium, like Cyprus, is relying on an ECJ ruling last year in which Portugal prevailed against Bwin. It was upheld that the Portuguese monopoly on Internet gambling complied with EU law, although the court did refer to the absence of harmonisation at the EU level and the risks of fraud and crime, which it perceived to be higher in the case of online gambling.

In subsequent rulings, it appears that the ECJ believes there is no obligation under EU law for member states to mutually recognise gambling licenses issued by other national regulators.

Whether the arbitrary approach of the Belgian Government will escape the consequences of disregarding an EC opinion remains to be seen.

IRELAND The parlous state of the Irish economy may be at least part of its motivation for a new initiative aimed at regulating online gambling, according to recent media reports.

In early December 2010 finance minister Brian Lenihan announced the extension of the Irish one percent betting tax to all bets placed via the Internet by domestic 'punters' the same level of betting duty as applies in high street betting shops.

The move caused an outcry, because previously the tax has only been applied to bets placed in land betting shops

by Irish gamblers. Betting tax did not apply to bets placed

by Irish people either online or over the telephone with offshore entities.

The move confirmed to many industry observers that the Irish government is serious about bringing online gambling under a more consistent and widely applied national regulatory regime, and developments are being watched carefully.

PORTUGAL The monopolisation of gambling in Portugal (all games of chance are through the state-operated Santa Casa group) was the subject of an important European Court of Justice Casino & Gaming International I 15

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case last year, when the monopoly was challenged by Bwin Interactive.

The Portuguese objected to Bwin's online sports bookrelated activity interacting with Portuguese gamblers, which included sports sponsorship elements. Fines were imposed on both Bwin and the national football league in respect of the sponsorship activity, and that led inevitably to legal action in the Portuguese courts, which deferred to the ECJ. When the court found for the Portuguese it surprised many in the industry, apparently confirming perceptions that monopolies were legal in terms of EU law, but of course that was an over-simplified view.

In essence the Court found that there can be circumstances in which local (national) laws can take precedence over European Union law, particularly where these served reasonable and justifiable national imperatives, such as preventing addiction and implementing strict regimes to guard against crime. The argument was that as a major state body Santa Clara was in a better position to guard against these perceived evils.

The Portuguese decision has had far-reaching implications for online gambling, with other monopolies seizing upon it to defend their own positions, and the island government of Cyprus citing it as supporting the Government's decision to ban online gambling altogether.

SPAIN After some tentative moves at the autonomous provincial level in years past, the Spanish government now appears committed to a more collective national licensing and control regime for internet gambling.

Late last year draft proposals were debated and then minister for the economy Elena Salgado announced that the drafting stage of a new regulatory regime had been largely accomplished, with estimates that taxes from a legalised online gambling industry could deliver another €200m per annum to government coffers. Following approval by the country’s Cabinet ministers, the proposals are now before the Spanish Cortez (parliament).

The bill apparently proposes two different taxation levels; one for online sportsbetting, and another for other forms of internet gambling, including online poker and casino games. Differing opinions still need to be ironed out, but the process appears to be moving forward, albeit with several delays.

Taxation on general Internet gambling has been based on gross gaming revenue, but in the case of sports betting, where much of the debate has taken place, the rate suggested has been a flat 10 percent of turnover.

This has raised the hackles of trade associations and operators, who have warned of the dangers it poses to tens of millions in sponsorship and advertising Euros, and the limits it may place on the ability of Spanish licensed operators to effectively compete.

Trade associations like EGBA, the RGA and Spain's AEDAPI have all called for further consultation on the sports betting tax issue.

Tax disagreements to one side, it is thought that the regulations will create a controlling commission, prohibit Spanish citizens from accessing unlicensed online casinos 16 I Casino & Gaming International

and prevent advertising from unauthorised operators.

Punitive fines are envisaged for unlicensed operators accessing the market and it appears likely that the new regime will push the envelope in trying to protect Spanish licensees whilst staying within EU law…but the proposals will have to pass European Commission inspection.

There are reported moves afoot to privatise the state monopoly Loterias y Apuestas del Estado (LAE).

Spain is a market with massive potential, and developments are being closely watched by industry analysts.

CANADA One of the most startling developments in online gambling in recent times was the decision by three major Canadian provincial governments to embark on a regulatory Internet gambling journey under the control of provincial lottery authorities.

British Columbia was the first to go online with its Playnow site, which has proved to be successful after a rather rocky start. Controlled by the British Columbia Lottery Corporation, the initiative has the potential to make a major contribution to provincial coffers and deploys strict regulations and high standards of player protection.

Loto Quebec has since followed with its Espacejeux.com site, and the most populous Canadian province, Ontario, is due to enter the market in 2012.

Ontario, however, remains undecided as to whether to offer a provincial government-run gaming site, or retain one or more private partners to operate online gaming on the government's behalf.

Provincial finance minister Dwight Duncan claimed last year that Ontario loses approximately $400m per year to offshore websites.

USA The elephant in the room in any discussion on Internet gambling is invariably the United States of America, where a tangle of federal and state politics and laws, and the attitude of some enforcement agencies make for a generally confusing environment.

Despite this, the per capita disposable income of its gamblers, their familiarity with modern technology and the well developed internet infrastructure and payment systems make it the Holy Grail for operators.

Given the entrepreneurial spirit and competitive drive that so characterises Americans, it is surprising that they have fallen so far behind Europe in accepting the realities of internet gambling and setting about controlling it in a practical fashion.

Unfortunately, it has thus far proved to be a less than industry-friendly milieu, with arguments over domain seizures, the interpretation of federal and state laws, arrests and trials of operators and e-cash processors and bans on financial transactions with internet gambling companies.

In 2006 things took a turn for the worst with the clever but ruthless passage through Congress of the Unlawful Internet Gambling Enforcement Act, which outlaws financial transactions with ‘illegal’ online gambling companies and has brought about significant financial losses and the exit of

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many leading companies from the US market.

US Internet gamblers are not generally targeted by the laws, although in Washington state they are less fortunate and are treated as Class C felons (prosecutions have not generally been pursued).

The Wire Act, an archaic piece of legislation dating back to the ‘sixties and intended to stop sports betting over telephones, is often touted by enforcement officials as applying to the Internet, generating considerable legal argument.

Major land gambling groups appear split on whether to support online gambling legalisation or not, but the influential trade group American Gaming Association has come out in support of the concept, provided stringent measures are taken to guard against crime and exclude problem and underaged gamblers.

The consensus appears to be that any regulatory regime will most likely favour American entities, but several major European companies have recently negotiated expensive ‘clean slate’ legal settlements with the American authorities anyway.

Repeated attempts at federal level, the latest two by Congressman Barney Frank and Senator Harry Reid late last year, have failed to complete the course in the face of fierce opposition from more conservative politicians, but at state level there are several promising moves to regulate and license, confining activity within the boundaries of said states.

The individual states of the Union jealously guard their constitutional rights to autonomy in respect of laws that govern their residents, and this may be the most practical way forward; if some states lead the way, others may follow, and develop reciprocal ties with neighbours.

The most promising of these progressive states is currently New Jersey, home to the struggling gambling mecca Atlantic City, where state Senator Ray Lesniak has been successful in pushing through – with impressive bipartisan support – a bill legalising all forms of intrastate online gambling, and another that authorises the state to hold a referendum among residents to gauge acceptance of legalised online sports betting.

Sen. Lesniak says that legalised, online gambling has the potential to generate approximately $210m to $250m in annual gross revenues for the state.

The legislation was through both Assembly and Senate, and awaited the Governor’s signature. Governor Christie could either veto the law, in which case a two thirds vote by the lawmakers would be required to overturn his veto; sign the bill into law; or ignore it. The latter course would have been ill-advised, as in that case after 45 days the bill automatically enters the law books. In the event, Governor Christie vetoed the bill.

There is also the spectre of federal government opposition in a legal and political sense, which could hold up progress. Many analysts believe that with a

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Republican-dominated House of Assembly in Washington DC, there is less chance of federal legalisation being approved in 2011/2012.

The New Jersey law would have licenced existing land casino operators in Atlantic City to run intrastate online gambling under strict regulations and standards administered by a controlling board. All enabling technology would have to have been located in the state.

Florida, Maryland and California – the latter mainly in regard to online poker – have also shown an interest in intrastate, legalised Internet gambling, although there are competing proposals that are slowing initiatives down in California as different lobbies seek to corner the high-value market. This is thought to be worth an estimated US$300m each year, generated by some two million Californian punters.

In Florida an intrastate bill to legalise and regulate online poker is already on the legislative table, and the state is studying the benefits of legalisation.

Originally filed by Representative Joseph Abruzzo last March, HB77, the Internet Poker Consumer Protection and Revenue Generation Act of 2011, was re-introduced in the state House by Abruzzo on 16th December 2010, with a proposed effective date of 1st July 2011.

The bill has comprehensive provisions against money laundering and underage and problem gambling and exploits a provision in the UIGEA that allows individual states to retain autonomy in controlling gambling legislation.

HB77 allows for Internet hub operators to run intrastate online poker sites, with the state controlling operator licenses and stringent regulations. Operators will have to have a business licence in Florida, and preferably in one or more US states.

Operators credibly licensed in other nations would be considered with strict pre-conditions and a steep application fee of $500, 000 is envisaged, payable to the state's PariMutuel Wagering Trust Fund of the Department of Business and Professional Regulations. There is also a $1, 000 annual licence fee for successful applicants....and of course state taxes.

Operational restrictions include a minimum age limit of 21 years for players, and operators will have to satisfy the regulator that the software and games on offer are fair and consistent.

Nevada, with its vast resources and experience in land gambling, and federal approval to offer sports betting, is an obvious possibility for an intrastate legalisation initiative.

Back in 2001 the state passed a statute that permitted online gambling under strictly controlled conditions overseen by the Nevada Gaming Commission.

Although the passage of the law lifted hopes and spirits in the industry, it came to nothing when state legislators feared it might conflict with the less enlightened approach of federal US law.

Nevertheless, the influential veteran politician Harry Reid represents the state and is now clearly in favour of at least online poker, raising the possibility that this powerful competitor and home to many a giant land gambling groups could be a competitor.

The US situation therefore appears to be unlikely to 18 I Casino & Gaming International

change at a federal level in the foreseeable future, but there is significant potential in the moves by some individual states to achieve controlled intrastate legalisation…and that could have a domino-like effect on other, open-minded legislatures.

One thing is certain - very large numbers of Americans would prefer to have the facility of safe and legal Internet gambling at their disposal, creating a significant demand for these services, and presenting some of the most potentially rewarding business opportunities on the planet.

From the foregoing examples, it can be seen that the licensing and regulation of online gambling is a trend that is sweeping powerfully through Europe and one that has considerable potential in North America.

It presents a challenging scenario that calls for greater levels of attention to the detail of operational practice, ensuring that every facet of an online gambling enterprise is finely attuned to best international business practice and the highest standards of customer care, fair and responsible gambling, anti-money laundering and the prevention of Internet crime generally.

That’s a tall and specialised order, and one which organisations like eCOGRA are well equipped to respond to in assisting and advising operators. CGI

ANDREW BEVERIDGE Andrew qualified as a Chartered Accountant after completing articles at Coopers & Lybrand in Johannesburg.

He spent six years abroad, working for major international banks in London and Hong Kong, including HSBC and ING Barings, and then completed a full time MBA at Edinburgh University.

Andrew's online experience started in 1996 with MultiChoice, an international supplier of Pay-TV and interactive services. He played a major role in the start-up of MWeb, South Africa's largest ISP, and then joined the management team of International Gaming Networks, the MultiChoice division created to develop interactive gaming technology across Internet and digital TV platforms. Other responsibilities included the implementation of the SuperBet's (South Africa's largest sports betting operation) risk management controls and procedures, and business development for the sports betting operation. Andrew then assumed responsibility for a company called LiveBet Online (Pty) Ltd, which, together with eCompany Ltd, was then able to develop a successful online and telephone lottery and sports betting platform that has been successfully implemented at various UK, European and South African sports betting operations. Accreditation remains open to all software companies and their operators. For more information, go to www.ecogra.org.

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eGAMING OPERATORS: MORE RESPONSIBLE THAN BANKS?

BY ARCHIE WATT

Arguably, online operators have more controls in place than most of the banks.

Maybe in the current climate that is perhaps more readily recognised, but the fact is as the highly profitable egaming sector evolves and consolidates, there has been – despite the patchwork range of regulatory environments – a growing shift toward stringent regulation and, ultimately, peace of mind for the compliant operator.

>>

t present, in many parts of the world, the sector itself is not widely understood and education is required to show where egaming fits into the regulatory environment as a whole. As with the financial services sector, the egaming industry is also sitting on large deposits of customer money at any one time and customers want that money back.

In “blue chip” jurisdictions such as Gibraltar and the Isle of Man, the role of the regulator is to allow companies to make best use of that money but also to ensure that it is returned to customers in due course. Gaming is a leisure activity and successful operators are those that combine provision of enjoyment to the player with the means of making money for themselves.

At present, there is a patchwork of regulation with some places better than others. The UK is an example of having a good regulatory framework although what they forgot to do was put in place the necessary tax structures to go with it.

The offshore jurisdictions have not made the same mistakes.

Instead, they have brought in a far more comprehensive, understandable and enforceable regulatory regime than in other jurisdictions. One of the early exponents of online gaming was Kahnawake, in North America. There are a number of “bricks and mortar” casinos on their territory and they naturally evolved into the online sector, initially to provide sports betting options for people living in the US, although since 2006 this has been prohibited to US citizens. Prior to this however, anyone in the world could go online to play legally on a website which was in a properly licensed jurisdiction.

A

RANGE OF REGULATIONS In some respects controversially, France and Italy have gone Casino & Gaming International I 19

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down their own routes on regulation, where to provide services to their citizens the operator has to be licensed in that jurisdiction. This is completely contrary to the approach of jurisdictions such as the UK, Gibraltar and the Isle of Man. Consequently, there is a growing fragmentation on regulation requirements in Europe and the rest of the world which means that operators have to separate out their business models, with all the resultant complexities, according to whether they are dealing in France, Italy, Denmark or Spain.

There is a whole range of legislation that operators in the sector have to comply with to ensure that money laundering doesn’t take place. These include the Third European Union Directive (2005), Money Laundering Regulations 2007, Proceeds of Crime Act 2002 and the Terrorism Act 2000.

Contrary to what some governments believe, in reputable jurisdictions it is hard to see how online gaming sites could be operated by money launderers. If such a situation was suspected by regulators in those jurisdictions they would be immediately stopped and further legal action taken. Attempts at money laundering are spotted very quickly by responsible organisations and if an operator suspects a crime then he has a responsibility and requirement to report it. If they don’t then it could mean going to jail. So it is in an operator’s interest to have well constructed and well regulated procedures in place to protect them and prevent illegal money coming into their organisations.

WHY HAVE THESE REGULATIONS IN PLACE? Above all, for operators, it helps provide peace of mind for their players. If you have got a badge on a site from a location they recognise, that’s good enough for them. They assume there are processes in place to protect them, that there is a regulator sitting on top of them making sure that it is a safe and secure place to play.

However, in my view, regulations are normally drawn up as a response to state monopolies that run lotteries. Since online gaming sites have started to grow, those state monopolies have been losing money hand over fist to online gaming operators.

Why? Because online operators have provided far better returns to their players. Press reports and statements attributed to state lotteries in court cases appear to claim that they are the only groups who can prevent fraud. The message they give out is that no fraud happens on a state lottery. Consequently, online operators have to fight very hard against that perception.

An example is the European Court of Justice hearing on an appeal by the Portuguese authorities against Bwin for sponsoring local football. The reason the state lottery gave was that it was to prevent fraud and that the subtext of this was that Bwin wasn’t preventing fraud. But it was in the interest of Bwin to prevent fraud. Fraud costs Bwin money, so why would they want to encourage someone to defraud them? This was not the case.

It is also in the interests of online operators to know who their customers are. If you were a sports book, you would have to know that the player has the money to pay you if they lose.

You would also want to know if the player was part of a betting ring because if he was then the sports books would lose money. Equally, it is important to know whether someone is involved in terrorist activity. Knowing your customers is a key part of regulation. It is also a requirement to know if people are old enough to play and to block them if they are not. All these sites have procedures in place to prevent and protect against under age play.

20 I Casino & Gaming International

HOW CAN THE RULES BE APPLIED? With hundreds of thousands of bets taking place daily on their sites, how is it possible for operators to know that customers are who they say they are? To ease this, most organisations use a four-stage automated application process to verify players.

ON REGISTRATION There are third party operators who can look into customer validation, often using Government websites and databases.

Although this is all rather “big brotherish” it is done to make sure only the right people are getting access to the system and to play fairly. If we aren’t who we say we are or where we say we are, then that is going to get caught.

ON DEPOSIT If you have a bank card BIN number from the UK but claim to be from somewhere else then immediately a warning would be sent to the operator’s site which could block the application before it is submitted.

ON WIN If it is found that someone is winning consistently it might be because they are lucky but they might also be in collusion with someone on the operator’s site. An example is a poker operator where a friend of the online player worked for the operator and was able to tell the player the identity of the cards on the table.

The individual’s identity was traced and they were caught.

ON WITHDRAWAL To guarantee compliance with money laundering legislation, many operators institute processes that ensure that all payouts of over $2,000 are recorded and checks on an individual’s identity are also carried out. Online operators arguably have more controls in place than most of the banks. They have to be more and more sophisticated as the level of knowledge of potential fraudsters grows. To comfort those with little or no previous experience of the egaming sector, it is a well regulated and well run industry. But for those with experience, you can be comforted that your views and your hopes and beliefs are being fulfilled. CGI

ARCHIE WATT As one of the industry’s foremost IT experts, Archie Watt joined KPMG Isle of Man in July 2010 from KPMG London, where he was working for the Information, Communication and Entertainment practice, with a particular focus on online gaming clients. He has worked for KPMG since 2006 and before that with BDO in London, where he worked on the public listings of 888, Playtech and PartyGaming amongst others. He recently co-authored the KPMG report ‘Online Gaming: A Gamble or a Sure Bet?’

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011

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KEEPING THE SHIP CLEAR OF ICEBERGS

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BY CLIVE HAWKSWOOD

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Achieving change in Europe toward a common regulatory system for remote gambling has been tough going. While member states remain uneven and in some cases enforce heavy tax conditions, there is undoubtedly clear water a few years away. Even so, to reach that it has become a matter of avoiding as many icebergs as possible. The prospects may remain daunting, but that is at least now possible.

>> as ss!

t’s been a busy few months on the European scene and it shows no sign of letting up in the foreseeable future. Both Spain and Greece are progressing their new remote gambling legislation, whilst policymakers in Germany, Holland and other states are moving ever closer to joining them. I shall cover the main aspects of these important developments later in this piece, as any coverage of European gambling must first of all centre on the much heralded arrival of the EU remote gambling consultation.

I

THE GREEN PAPER ARRIVES After much publicity, anticipation and leaked copies, the European Commission’s Green Paper on Online Gambling finally went public on 24th March. Its publication has been fraught with delay and marked by the lobbying of stakeholders.

Having spent some considerable time and resources on the delivery of the document, which no doubt will be exacerbated with additional discussion and debate after the 31st July consultation deadline, attention will inevitably shift to what action the Commission may or may not recommend.

At this stage we can only guess as to what that might be, but there must be an expectation that they will not just leave the report (and the thousands of pages of response it will prompt) to gather dust on some reinforced set of shelves in Brussels.

What we do know is that the stated objective of the document is to provide ‘an extensive consultation on all relevant public policy challenges and possible Internal Market issues resulting from the rapid development of both licit and unauthorised online gambling.’ In achieving this it Casino & Gaming International I 23

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>> JF VILOTTE, THE HEAD OF ARJEL, FRANCE’S GAMBLING REGULATOR, RECENTLY GAVE EVIDENCE TO THE FRENCH SENATE FINANCE COMMITTEE ON THE SUCCESS OR OTHERWISE OF THE NEW REGIME. THERE SEEMED TO BE AT LEAST A GRUDGING ACCEPTANCE THAT THE TAX REGIME WAS NOT WORKING AS HOPED FOR (PERHAPS THIS IS NOT SURPRISING GIVEN THE CRIPPLING TAX BURDEN FOR OPERATORS WITH TAX LEVELS APPROACHING 50 PERCENT OF GROSS GAMING REVENUE) AND THAT WHILE RUNNING A PROFITABLE POKER BUSINESS WAS NOT EASY, RUNNING A PROFITABLE SPORTS BOOK WAS ALMOST IMPOSSIBLE. << has, as would be expected, sections aimed at obtaining information on the market’s size, regulation and questions exploring consumer protection issues (e.g. addiction and underage gambling).

However, given the relative lack of proactive enforcement of the Treaties and the principles of the Internal Market by the Commission in relation to remote gambling in recent years, it has to be a concern to licensed private gambling operators that this is by no means central to the Green Paper, and it also contains a questionable level of attention to sports-related matters.

With regard to the former, the Commission is still commenting on draft laws that are notified to it but, in effect, since work began on the Green Paper it has stopped taking action on the various infringement proceedings it had previously launched against those Member States whose legislation it deemed to be in breach of EU law. This lack of interest is surprising considering the number of pending infringement proceedings, the constant flow of referrals to the Court of Justice of the European Union (CJEU), the formal complaints from the gambling industry and the Commission’s role as guardian of the Treaties.

It also begs the question of whether the Commission might be coming to this issue too late in the day given the increasing activity in Member States. With a number of jurisdictions having already licensed remote gambling, others in the process of drawing up legislation, or having given a clear indication that this is on the agenda, there must be a danger that this whole process could end up as a rather time-consuming administrative procedure when the real action is taking place at Member State level rather than in Brussels.

To put this in perspective, by the time the consultation is over and the Commission has considered the responses we are likely to be towards the end of this year, or early 2012. By that point the UK, France, Denmark, Belgium, Spain and Greece could all have remote gambling legislation in place (the first three already have, whilst the latter two are in the Parliamentary stages), with Germany and Holland (amongst others) in the process of completing the necessary national legislative action.

So in 2012 the European Commission might suggest some ways forward but, whatever they choose, concrete action is likely to be several years later. By then it could easily be the case that most if not all members of the EU will have their own regimes in place and that good 24 I Casino & Gaming International

regulatory practice is being shared to the extent that there will already be conformity in many key areas.

That said, both France and Belgium have particularly unenviable laws which stifle competition, investment from private operators and consumer value and choice. Both are subject to legal challenges and prove that the existence of licensing legislation is not always positive. Consequently, there remains an important role for the Commission in the protection and promotion of trade and economic growth within the European Union.

The RGA is clear that we must avoid a situation whereby jurisdictions can hide behind the Green Paper process, and whatever work might flow from it, to implement regulations that quite clearly cannot be in compliance with the rules of the Internal Market.

Unfortunately, some of the language in the Green Paper bears the hallmarks of protectionists’ intervention and the lobbying of the powerful sports’ sector. The former to protect their market share from the type of competition that benefits all other areas of business, and the latter to generate fresh revenues from the betting industry.

We can expect the usual unfounded allegations to be presented and alarmist cards to be dealt during the consultation by those that want to stymie the growth of the online gambling industry. The European Parliament’s own proceedings will be of particular interest in this debate and we can only hope that it is conducted with more focus and evidenced-based discussion than has previously been the case.

It should not, therefore, be a surprise that the RGA has only given a ‘qualified’ welcome to the European Commission’s Green Paper process.

SPAIN Importantly, the Spanish draft remote gambling bill, which has now entered Parliament, includes a change to a 25 percent gross profits tax (GPT) from the originally proposed five percent turnover tax for betting and gaming.

The RGA and its members lobbied hard for this change, arguing that the basis of a turnover tax was simply not viable economically for remote gambling operators (see France as an example) in a global and highly competitive market place where GPT has become the norm.

The presentation of a report to the Spanish authorities on our behalf by KPMG, demonstrating the clear economic and regulatory benefits from a GPT regime (as opposed to

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a turnover tax), appears to have been an important contributory factor in achieving this aim. Albeit, that the 25 percent GPT presently proposed is somewhat high in comparison with other remote licensing jurisdictions. We have therefore turned our attention to lobbying policymakers to reduce the rate to a more attractive and workable level, amongst other issues such as opposing an impractical ban on potential licences accepting custom from Spanish citizens in the lead-up to the introduction of the new law.

As for the legislative process, the amendment period has ended and the bill has entered the ‘report’ phase. This essentially means that an answer to the amendments is due to be prepared by the government along with a report on the bill. The detailed debate on an article-by-article basis will then follow, with additional amendments from the political groups (to which we will continue to have dialogue with and promote our position) aimed at reaching agreement over the summer.

GREECE It’s been a similar story in Greece, where the authorities initially proposed a 6 percent turnover tax. As in Spain, we employed KPMG to produce a detailed report demonstrating the benefits of GPT and again that seems

have assisted the authorities in understanding that a turnover tax is simply not viable. A fiscal regime of that type would simply not see the kind of large-scale investment in the Greek market by operators that would render it a success in both economic and regulatory terms.

Greece has also amended its draft law to incorporate a GPT, although it is even higher than Spain’s at 30 percent, which is significantly above the rates employed in other jurisdictions and we will continue to point out that this will deter potential licensees and investment. Unlike Spain, Greece also proposes a burdensome 10 percent player tax amongst other issues, such as an aim to achieve significant revenues from the sale of licences to help pay off the considerable debts the country owes since the bailout of its economy by the international community, most notably the European Union.

In the meantime, the Greek authorities have notified their gambling bill to the European Commission – to ensure that it is in compliance with EU law - and sought to invoke an emergency procedure in order to avoid the standstill period (during which interested parties are able to comment on the law). Officials at the Commission will have to decide whether to accept the application and the timetable will not be clear until then.

Greece is seeking to justify this accelerated approach

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by arguing that ‘illegal’ online gambling is already taking place and that this is a cause of ‘public disorder’ so they need to act quickly. There is a provision in EU regulations to adopt the emergency procedures where ‘citizens’ safety’ is at risk. However, it is hard to believe that it was designed for this kind of situation and we have written to the Commission to urge them to decline the request on the basis that the bill needs the full period to ensure it is fully and properly scrutinized.

GERMANY Also open to question is the direction of German’s internal discussions on a replacement for the monopoly enforcing Interstate Treaty which is due to expire in 2012.

Discussions between the 16 states which have control of gambling law had been divided between those that wanted to open the market to private operators and those that opposed it. In early April it was reported that the various Lander Prime Ministers had finally agreed a compromise deal to be finalised in early June.

The initial indications are that the regime will provide for seven licences available for a seven-year ‘experimental’ phase, will limit the availability of ‘in-play’ betting, restrict online casino games to those holding an offline licence and include a quite unworkable turnover tax scenario of 16.66 percent. It has to be questioned if this framework will provide a sufficient fiscal and regulatory regime to stem the flow of German citizens gambling with remote operators licensed in other jurisdictions or can be viewed as compliant with EU law. It will need to be notified to the European Commission in due course and if it proceeds in its current form we would expect to see it challenged in the courts.

It may, however, prove a rather redundant argument in practical terms (if not in principle) as the state of Schleswig-Holstein has already notified its own remote gambling legislation to the European Commission. By comparison it includes a 20 percent Gross Profits Tax and unlimited licences. This opens the possibility that operators could obtain licences there and be able to offer gambling services across Germany. Again, legal certainty is a commodity in short supply.

FRANCE Both JF Lamour (the rapporteur of the French gambling law at the Assemblée nationale) and Francois Trucy (the rapporteur of the French gambling law in the Sénat) are drafting assessment reports regarding the implementation of the remote gambling law which was introduced last summer. Lamour’s report should be published shortly and Trucy’s report in September and these documents will suggest recommendations in the context of the law’s review.

Interestingly, JF Vilotte, the head of ARJEL, France’s gambling regulator, recently gave evidence to the French Senate Finance Committee on the success or otherwise of the new regime. There seemed to be at least a grudging acceptance that the tax regime was not working as hoped for (perhaps this is not surprising given the crippling tax burden for operators with tax levels approaching 50 percent of gross gaming revenue) and that while running a 26 I Casino & Gaming International

profitable poker business was not easy, running a profitable sports book was almost impossible.

Disappointingly, the Budget Minister, François Baroin, recently commented that he is not in favour of amendments to the tax regime before the Head of State election (May 2012). Instead, he advised that the issues that could be considered during the review process are more likely to be the: protection of minors, fight against addiction, fight against money laundering, impact of the law on sport and on horse races, fight against “illegal operators”, and corruption in sport. He further commented that offline betting and gaming will not be open to competition and will remain a monopoly area.

Unfortunately, significant change in France does not appear imminent with operators referring to the country as having the ‘worst online gambling laws in Europe.’

OTHER COUNTRIES The new Netherlands coalition government has announced that it intends to licence remote gambling operators from 2012 and a draft online gaming bill is expected to be submitted to Parliament in the coming months. We are still awaiting the UK Government’s delayed decision on remote gambling following its consultation last year. It will need to justify any restrictive changes to the existing regime.

The publication of the British Gambling Prevalence Survey in February showed an inconclusive rise in the problem gambling rate in the two methodologies used (from 0.5-07 percent and 0.6-0.9 percent), termed ‘at the margin of statistical significance’ by the authors, and importantly did not appear show an issue for online in this area.

As you can see, all-in-all, it’s a rather challenging period in Europe, with both market opportunities and threats for private operators.

There is undoubtedly clear water a few years away and our job until then is to reinforce the industry ship and avoid as many icebergs as possible. CGI

CLIVE HAWKSWOOD Clive Hawkswood has been Chief Executive of the Remote Gambling Association (RGA) since its establishment in August 2005 following the merger of the Association of Remote Gambling Operators (ARGO) and the interactive, Gambling, Gaming & Betting Association (iGGBA). Before that he was the General Secretary of ARGO. Clive was formerly head of the Betting & Racing Branch at the British Department for Culture, Media & Sport (DCMS). Prior to that, he was at the Home Office, spending time in both the Gambling Section and the Horseracing Policy Team. Earlier in his career he spent several years working in the bookmaking industry. He is also a Director of the Responsibility in Gambling Trust (RIGT), the British charity that raises and allocates fundsfor problem gambling related research, education, and treatment.

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ADJUSTING TO A ‘NEW NORMAL’ AND INVESTING IN THE FUTURE

BY FRANK FAHRENKOPF, JNR.

While Asia gaming growth hits the stratosphere the US gaming industry has undoubtedly suffered, but Casino revenues have begun to settle as business strategies have adjusted with tentative signs now of growth ahead.

And the long drawn-out process of recognition for online gaming regulation, despite legislative setbacks, has nevertheless been pressing forward.

It may therefore be difficult to predict what this year will bring, but the industry is exploring new territory and making the most of the “new normal” in which it finds itself.

>>

any economists declared the recession in the United States over more than a year ago, yet consumers and businesses across the country are still feeling the impact of a struggling economy. The US gaming industry is no exception. Gross gaming revenues illustrate a stagnant start to the New Year, with a decline of about one percent in the first quarter of 2011.

With several years of economic uncertainty and the prospects of a bumpy road ahead, the gaming industry has adjusted its business strategies to operate in a “new normal.”

Gaming executives continue to make tough choices and implement new strategies to persevere, including the tailoring of casino offerings to appeal to a thriftier, more financiallyconscious customer.

There is evidence of that perseverance in the 2010 economic impact data released earlier this month as part of the American Gaming Association’s annual State of the States report. According to the report, gross gaming revenues in the 22 commercial casino states in the US totaled $34.60bn in 2010, a nearly one percent increase from 2009 figures.

While these numbers certainly are not spectacular, they represent a significant improvement from the revenue trends of the past few years. With revenue declines of 4.7 percent from 2007 to 2008 and 5.5 percent from 2008 to 2009, 2010’s modest increase indicates the industry likely has hit bottom. As the first quarter figures for 2011 portend, it could be quite some time before a full recovery can be realised, but the improvement is nonetheless significant.

There were more interesting findings out of the 2011 State of the States report, including new information on the demographics and behaviors of casino visitors. In fact, new survey data reveals that casino visitors increasingly are more than just gamblers: 16 percent of visitors say they rarely or never

M

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>> WHILE THERE CERTAINLY IS THE DESIRE AMONG MANY MEMBERS OF THE US COMMERCIAL CASINO INDUSTRY TO SEE AN INTERNET GAMBLING BILL MOVE FORWARD, THE REALITY IS THAT PASSAGE OF ANY BILL WILL BE DIFFICULT TO ACHIEVE GIVEN THE CURRENT CONGRESSIONAL LANDSCAPE. AN EMBOLDENED REPUBLICAN MAJORITY IN THE HOUSE, COMBINED WITH DIMINISHED DEMOCRAT NUMBERS IN THE HOUSE, MEANS IT WILL BE TOUGH SLEDDING FOR ANY INTERNET GAMBLING BILL TO AMASS THE SUPPORT NEEDED FOR PASSAGE. ADD TO THAT THE FACT THAT SEVERAL MAJOR NATIONAL ISSUES – THE FEDERAL BUDGET, THE DEBT CEILING, ETC. – ARE CURRENTLY CROWDING THE LEGISLATIVE DOCKET, AND THE SITUATION BECOMES ALL THE MORE DIFFICULT. << gamble when visiting a casino, citing their favourite experiences as the restaurants, live entertainment and shopping offered by a growing number of casinos. Casino patrons also find good value for their entertainment dollar; when compared to other activities they enjoy, 77 percent of our visitors say they get a good return on their investment when they visit a casino property.

In addition to the value the industry offers its patrons, communities across the country recognise the value the industry brings to the economy. A solid majority (62 percent) of residents living in casino communities say casinos are beneficial during recessionary times because of the tax revenue, tourism and jobs they create. The numbers are well known - US commercial casinos employ approximately 350,000 people and the industry contributes more than $7.5bn in direct gaming taxes to state and local governments each year.

Elected leaders at the state level have also taken note. As state governments wrestle to balance budgets, they are looking for new ways to create jobs and meet budget shortfalls. These leaders are turning to industries like gaming that are proven partners in communities across the country.

Last year, Maryland opened the doors to its first casino, and, despite a stagnant economy, in February, the state’s two casinos brought in $12.1m in revenue, a 12 percent increase over the previous month. That means both job security and increased tax revenue for the state.

But the benefits of gaming go beyond direct job creation and tax revenues to include innovative ideas for community development. The groundbreaking for Ohio’s first casino took place last year and is expected to open its doors in 2012. In Cincinnati and Cleveland, two of the four Ohio cities set to welcome casinos soon, the industry has established innovative partnerships to help local businesses grow. For example, outside of the planned Horseshoe casino in Cincinnati, the city’s Casino Area Infrastructure project is working to develop a pedestrian-oriented environment to promote economic development and connectivity in the neighborhoods surrounding the casino.

As the industry continues to work to bring valued entertainment and jobs to states and communities across the country, the American Gaming Association also is working to preserve and protect its interests at the federal level.

Last fall’s midterm elections were the costliest and arguably the most contentious in US history, but they brought our industry a great deal of encouraging news. The re-election 28 I Casino & Gaming International

of Senator Harry Reid to a fifth term ensured that a key gaming industry ally remains among the most influential leaders in Washington. In addition, legislative measures that were passed in the states have the potential to translate into valuable business opportunities for gaming.

The midterm elections also reinforced the fact that the gaming industry has a lot of work to do in Washington. In January, the 112th Congress convened with 112 freshman members (96 in the US House of Representatives and 16 in the US Senate) who began the year as part of the strongest Republican block since 1994. Further dramatic changes in Congress are expected as we look ahead to the upcoming 2012 elections.

In this fresh-faced congressional environment, the AGA is working to build strong relationships with our newly elected leaders. Many of these members know little about the gaming industry, which creates a unique opportunity for us to share information about the industry’s contributions. The AGA’s proactive engagement in Washington, and that of our industry’s leaders, is a critical underpinning to our success – in fact, it is vital to securing a seat at the table during any congressional negotiations that could have an impact on our industry.

US federal policy can have a significant effect on the gaming industry and its workforce. Just like any other business, gaming is impacted by shifts in national policy and, in the coming year, a number of important issues will be pushed to the top of the legislative agenda. The AGA remains the commercial gaming industry’s eyes and ears in Washington, and we continue to work to amplify our voice on Capitol Hill.

The growth and evolution of the industry during the past several decades means its impact reaches far into local economies well beyond gaming communities. The constituents of a much broader set of elected officials are dependent on the jobs and economic benefits generated by the gaming industry.

In an effort to more effectively communicate the value of the commercial casino industry to the US economy, the AGA has commissioned a research project to be completed this summer that will assess the economic impacts of the industry throughout the country.

In addition to analysing the obvious economic impacts of employment, tax revenues and purchases in communities where commercial casinos operate, the study also will identify industries and communities where gaming purchases through suppliers and vendors have the most significance. The AGA aims to use this data to establish stronger relationships with

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influential stakeholders around the country and to illustrate the gaming industry’s positive impact on communities, regardless of whether there are casinos or gaming companies physically present. Educating members of Congress from gaming and non-gaming states about the impact of the industry in their districts also will be paramount.

Another hot topic for gaming in Washington is the potential legalisation of online poker. As it has been widely covered and I have written in these pages before, the AGA shifted its position on Internet gambling last year. It is now clear that the technology exists to properly regulate Internet gambling with appropriate law-enforcement oversight, and to provide appropriate consumer protections for individuals gambling online. But existing laws do not adequately protect the estimated 15 million Americans who gamble online every day. A properly regulated legal framework for Internet gambling is the best way to ensure online gaming is fair and properly regulated.

Federal oversight of online gaming is turning heads on Capitol Hill; it has received more attention in Washington this past year than perhaps in any year prior. US Rep. Barney Frank’s (D-MA) bill to legalise and regulate online poker made it out of the House Financial Services committee last year, but did not make it to the floor before the end of the session.

Some members of Congress considered an effort to legalise online poker during the final days of the 111th Congress, but a bill never was introduced. During this still-young legislative session, Rep. John Campbell (R-CA) already has introduced a bill identical to the Frank bill discussed in the previous session.

While there certainly is the desire among many members of the US commercial casino industry to see an Internet gambling bill move forward, the reality is that passage of any bill will be difficult to achieve given the current Congressional

landscape. An emboldened Republican majority in the House, combined with diminished Democrat numbers in the House, means it will be tough sledding for any Internet gambling bill to amass the support needed for passage. Add to that the fact that several major national issues – the federal budget, the debt ceiling, etc. – are currently crowding the legislative docket, and the situation becomes all the more difficult.

A handful of states also are looking at the potential legalisation of intrastate online gambling. A bill to do just that passed in the state legislature in New Jersey earlier this year but was vetoed by the governor. Efforts in Nevada, Iowa, California, Hawaii and Florida also are in the mix, though at press time none had significantly moved forward.

Beyond Internet gambling, the gaming topic generating the most significant buzz throughout the gaming world is the continued stratospheric growth of casino gambling in Asia.

Macau now boasts a gaming market that is almost four times as large as that of Las Vegas. Casino revenue in Macau soared 58 percent in 2010 to a record $23.51bn.

Since 2000, Macau has seen dramatic growth in almost every measurable category: from the number of casinos, which has more than tripled, to the number of hotel rooms, which has more than doubled. During that same time period, gaming revenues have increased six-fold and the number of table games available for customers has increased 10-fold.

Gaming in the region provides significant tax revenues, capital-investments and jobs that the government relies on to support the social welfare of its citizens. Incredibly, two-thirds of the government’s annual revenue stream comes from gaming, and the industry accounted for one-third of the country’s GDP in 2009.

Macau’s success has not come without challenges, however. With the island at nearly full employment,

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government requirements to hire locals to work on and in the casinos have caused some projects to be delayed. In fact, Las Vegas Sands was forced to continuously delay development of their $4bn resort casino, the Sands Macao, due to a shortage of construction workers.

In addition to staffing their casino properties, Macau also faces challenges in regards to workers’ rights. This past fall, the Chinese Government passed a law prohibiting migrant workers from immediately changing jobs. The law deeply concerns local migrant worker associations and could add to the current challenge of filling industry positions to support further development in the region.

It is possible that the industry’s explosive development in Macau could slow in the coming years. Land suitable and zoned on the Macau peninsula and Cotai is extremely limited, and the Chinese government has shown hesitance to issue additional land permits to casino developers. A cap on the number of gaming tables allowed also has the potential to slow growth in the future.

A potential government crackdown on junket operators also could impact revenues. Macau’s reliance on junket operators to bring VIPs to the island recently has sparked some concern in the investment community. Junket operators account for nearly 85 percent of VIP revenues and 60 percent of all gross gaming revenues. Investors recently have commented that the reliance on junkets makes Macau casinos more susceptible to organised crime and are tied to high volatility, and that it could contribute to low franchise value because the customer relationships lie with the junket operators, not with the casino. Earlier this year, we saw this concern over liquidity due to VIP junkets manifest in the sell-off of shares of Wynn Macau Ltd. after its stock price fell 5.9 percent.

Still, despite all these challenges, analysts predict another year of growth in Macau, albeit perhaps at a slower rate than was witnessed in 2010.

While 2010 was an exciting year for gaming in Macau, the opening of Singapore’s two resort casinos took the top spot as perhaps the global gaming industry’s most substantial development last year. The addition of gaming in the country has proven extremely successful, and today Singapore is home to the most profitable casinos in the world.

Singapore’s two casinos attracted nearly 12 million visitors in 2010, and the casinos brought in $2.8bn in gross gaming revenues.

Singapore’s success certainly has exceeded even the most optimistic expectations. Its gaming market will likely overtake Las Vegas as the world’s second-largest gaming center as early as this year. There are several reasons for this exponential growth: low gaming taxes, high stakes players and attractive integrated resorts.

Singapore’s tax rates are the lowest in the world, yet the government still took in more than $1bn in gaming taxes, goods and services tax, and income tax combined from the two properties.

Singapore’s casinos rely heavily on the high stakes players – customers spend more per table there than the average gambler in Las Vegas, Melbourne or Macau. And despite the Government’s requirement of an entry fee charged to locals, Singaporeans make up one-third of casino visitors.

The success of the industry in Singapore is due in part to the deft use of the “integrated resorts” model, illustrated by the two thriving casino resort properties. The Resorts World Sentosa property attracted visitors last year with its focus on family and entertainment, integrating the casino resort with a 30 I Casino & Gaming International

Universal Studios theme park. And the Marina Bay Sands business and convention facilities, combined with theatres and shops, make it stand out as one of the most attractive convention and trade show venues in the region, if not the world.

Beyond Macau and Singapore, several multi-billion dollar casino development projects in Asia are due for completion within the next two years. The openings of the first phase of Bagong Nayong Pilipino Manila Bay Entertainment City in the Philippines and the MGM Grand Ho Tram in Vietnam will put those countries on the map as global gaming destinations. In Cambodia and Laos, gaming is expanding to record levels. And Sri Lanka will implement legal gaming next year.

These expanding markets in Asia, and the critical issues the industry faces in the region, will be thoroughly canvassed during the upcoming trade show and conference, G2E Asia 2011. The conference is scheduled to take place at the Venetian Macao in Macau from June 7 – 9. The AGA, in partnership with Reed Exhibitions, has once again established a programme that offers a unique experience for each attendee – from the show floor featuring the latest gaming products and services, to conference sessions that will illuminate the many issues impacting gaming in Asia. The programme offers gaming executives and buyers from Asia and around the world fresh perspectives on critical forces driving the industry’s future, comprehensive access to the latest gaming and non-gaming amenities, and information on trends and new products and services.

This year, on G2E Asia’s fifth anniversary, attendees will have the opportunity to explore the top issues in Asia, including the operation of VIP junkets, new and enhanced ways to provide better security in casinos, and the best strategies for hiring and retaining top-notch casino staff. The conference session, Song of Singapore: One Year Later, will provide a full analysis of the success of the country’s two integrated resorts. Regulators, gaming CEOs and investors will discuss their experience with the immense growth of gaming in the region.

G2E Asia will provide gaming executives from around the world with a unique opportunity to network with other industry elite in the world’s largest gaming destination. As we’ve seen Macau grow exponentially, and have admired the success of Singapore, we look to the lessons told by their success stories to take the gaming industry into the future.

While it may be difficult to predict what the coming year will bring for the gaming industry in the US, Asia and around the world, we are well prepared to move forward to explore new territory and to make the most of the “new normal” in which we find ourselves. CGI FRANK FAHRENKOPF, JNR. Frank J. Fahrenkopf, Jr. is President and CEO of the American Gaming Association (AGA) in Washington, DC. In his role as chief executive of the AGA, Fahrenkopf is the national advocate for the commercial casino entertainment 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.

INN

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G2E brings them all together.

NEW DATE. NEW LOCATION. STILL AT THE CENTER OF GAMING.

OCTOBER 4-6, 2011 THE SANDS EXPO AND CONVENTION CENTER LAS VEGAS, NEVADA October 3—iGaming Congress, Security & Surveillance Institute, Leadership Academy, G2E Advanced Gaming Institute

www.globalgamingexpo.com

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SCRATCHING THE SURFACE OF WHAT IS POSSIBLE

INTERVIEW WITH VAHE BALOULIAN

The growth of remote gaming is considered by many to be embryonic, with a vast horizon still lying before it.

One of the important developments since the first flourish of online gaming has been the recent shift of land-based casino owners toward this market. And perhaps the high profile and prevalent nature of poker across the industry is one of the best observed examples of how remote and venue based play demonstrates this emerging dynamic; an impact that is also driven by the trend to regulation.

>>

GI: Several years ago you were forthright in your concern at the lack of recognition for online gaming among land-based casino operators. What is your view of the changes since?

C

VB: The situation has changed dramatically. Now there is a rush by land-based casinos to stake their place under the online gaming sun. The most dramatic change is happening in the US, where we see a flurry of bills and deals, all driving towards legalisation and ultimately the entrance of land-based operators into the real-money online gaming realm. Even Steve Wynn, whose negative stance towards igaming I’ve mentioned previously in CGI, has changed his position and will apparently be pushing for federal legislation in the US. I also expect MGM Resorts, one of the earliest proponents of online gaming who actually did operate a real-money online casino from 2001 until 2003 from the Isle of Man (PlayMGMMirage.com), to become more active in this area, especially given their dire need for more revenue streams.

CGI: Although late in the day, is the recent shift of key casino operators to embrace interactive gaming a positive development for the future?

VB: It is absolutely positive. It really does not matter to me why the land-based operators are shifting their position now.

Whether it is the economic downturn or an understanding that they can’t anymore ignore the online gaming reality, I am happy that the industry is finally waking up. It definitely didn’t make sense to wait for so many years and their absence from the igaming scene negatively affected the entire gaming industry.

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CGI: With much of the expertise being externally sourced initially, do you expect that to boost innovation and market potential?

VB: It is very important to enter the online market well prepared, but I would argue that the land-based operators should build their igaming operations within their companies.

Instead of outsourcing, they should hire the igaming talent and truly fuse land-based gaming expertise with that of online. By doing this properly, the land-based operators will create a new gaming space which will be attractive to those players who never migrated online, not because they are not Internet savvy, but because the online offering for them lacked the feeling of maturity and professionalism that is conveyed by the land-based operation. Slapping a wellknown brand on an inferior product or co-branding with a good but already familiar one will not do the trick. There is plenty of evidence that brands and money alone may not be the key to success.

Innovation will result from fusion of the land-based and online expertise and will consequently open new markets, which until now have been ignored.

CGI: Is casino operators’ involvement therefore set to reshape the igaming industry along with sharpening competition?

VB: The casino operators’ involvement will actually enrich the igaming industry. We are in a situation where both igaming and land-based have a lot to learn from each other. This, of course, will sharpen the competition, making the entire

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sector a lot more attractive to the players, but not to the point where pure online operators will cease to exist simply because land-based companies entered the game. Smart operators will use this new competitive environment to learn and relentlessly improve their product and relationship with the players. Arrogant operators will, as always, use the economy, currency fluctuations, competition, etc., to defend and justify their failures.

CGI: You have always stressed that while regulation is necessary it is vital to think in a pioneering manner on the road to achieving regulation. You no doubt still consider that essential?

VB: Of course it is essential. To do something new, I should either want to or be forced to. In order to achieve the “want to,” I need to be educated about it. Education sometimes involves risks I should be willing to take. That’s what pioneers do, in my opinion. However, I’ve learned that once a pioneer is not always a pioneer. Those who achieved success by taking risks often choose to keep their success by avoiding new risks. Sometimes it works, but more often it doesn’t because while the risk takers may mellow, the rules of achieving success stay the same.

CGI: But what significance will legalising Internet gaming in the US have for you?

VB: The US market is extremely important commercially and is very interesting and challenging. Red Planet, aside from being a poker software supplier, also specialises in turnkey

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>> PEOPLE NOW DON’T EVEN THINK ABOUT ARGUING THAT ONLINE POKER WILL NOT WORK. THOSE WHO ARE NEW TO THE INDUSTRY MAY NOT KNOW THAT THIS WAS A MAJOR ARGUMENT IN THE MID-1990S. CONSUMER EXPERIENCE CHANGED DRASTICALLY, ESPECIALLY IN REGARDS TO TECHNOLOGY. THE INDUSTRIAL-STRENGTH POKER SOFTWARE NOW IS SCALABLE, MULTI-CURRENCY AND MULTI-LANGUAGE CAPABLE, HAS MYRIADS OF FEATURES, AND SO ON. HOWEVER, I’M AFRAID THAT WITH THE GROWTH AND SUBSEQUENT CORPORATISATION OF THE OPERATORS, THE PLAYERS OFTEN ARE TREATED AS COMMODITIES AND GOODS. THE HUMAN TOUCH HAS MOSTLY DISAPPEARED. << setup, operation and management of online poker rooms and networks, and provides igaming-tailored customer service and negotiation training. I think there will be a lot of opportunities for us to share our expertise with the new online operators in the US. Also, we currently operate the play-for-free California Poker Network. Legalisation will open a lot of opportunities with this unit as well.

CGI: And liberalisation in Europe, what impact is that having on your operation?

VB: France is our focus at this moment. We are planning to launch a network there. I believe there is a great potential in this country, which for certain reasons is missed by many of the current operators. Greece and Spain, especially with the changes concerning the taxation in the draft law there, are also of interest to us. We specialise in turning underperforming poker operations around; therefore, launching a new network is a natural extension of our activities. Having said this, I hope that liberalisation will bring about the disappearance of ringfenced markets, allowing poker players to have as much chance to play against each other as they have been communicating across borders on social networking or dating sites.

CGI: Is the Poker tournament effect of driving large amounts of traffic to gambling websites something you expect to grow and strengthen Poker?

VB: A lot of new players get poker education through tournaments and either graduate to cash play, continue mastering their tournament skills or do both. I also see a trend where new players start with cash games simply because they don’t have the patience required for playing the online tournaments. This is especially true in countries with the socalled “macho mentality.”

I think that the tournaments will continue attracting new players to poker and also acting as a feeder for both online and land-based cash games. Just look at the ISPT (International Stadiums Poker Tour). If they succeed with their scheme, we will see over 30,000 players in a stadium simultaneously participating in a combination of an online and an offline event.

CGI: With more and more Poker tournaments appearing that are backed by online gaming companies this must be an advantage in the promotion of your technology and expertise?

VB: Given that online poker operators have been financing land-based tournaments and supplying players to them, it should not come as surprise that land-based casino executives detected the potential and reach of online poker. This is a part of the education I was talking about. Those who did it early enough were in the “want to” group and started their online operations without undue delays. Those who didn’t get the message soon enough are now “forced to” jump on the speeding igaming train. In both cases, there is certainly a need for technology and expertise which we and other igaming firms provide.

CGI: Poker played remotely or in face-to-face tournaments may be optional but it has its clear differences for players.

How would you characterise the balance between the two currently?

VB: Nobody has changed the live poker scene quite like the online players did. It’s not just the field of players that has grown but the quality has gone up quite a lot as well. The game is a lot tougher now. And this is very good for the game.

Some may argue that the sheer number of players in the tournaments turns poker into a game of luck rather than skill and I would somewhat agree. However, the bigger number of players encourages the development of new strategies, theories, and overall affects the game in a positive way. Those who complain about the “Internet kids” simply fail to recognise that the game has moved on and they are still stuck in the past.

CGI: Since the launch of online poker in the mid-1990s in what way has the consumer’s experience of it changed?

VB: First of all, people now don’t even think about arguing that online poker will not work. Those who are new to the industry may not know that this was a major argument in the mid1990s. Consumer experience changed drastically, especially in regards to technology. The industrial-strength poker software now is scalable, multi-currency and multi-language capable, has myriads of features, and so on. However, I’m afraid that with the growth and subsequent corporatisation of the operators, the players often are treated as commodities and goods. The human touch has mostly disappeared.

CGI: It has also been recognised that there are essentially few distinctions between Poker Networks. Is that your observation?

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VB: Absolutely not. Networks, like individuals, have common features and characteristics. It’s easy to group them together; the same can be done with any business. Regardless, networks are not created with the goal of being like everyone else. Most of the poker networks have their unique make up, approach, culture, DNA of sorts that differentiates them.

Copycats have always been around but that does not mean that we should overlook and disrespect results of the efforts that poker networks make to be and stay unique.

CGI: Perhaps online poker is becoming too corporate and bland?

VB: Not only online poker but the entire igaming industry is becoming too corporate. I am with those who think that IPOs were not a very good idea for the industry. In some cases, it nearly destroyed very good companies, and in other cases, it just made them inflexible and bland. Another reason is that a lot of executives with no emotional attachment to our industry were brought in to run these public entities. Gaming is not telecom. It requires a lot more affection. If you don’t love what you do, it shows.

CGI: In your view do you expect continuing integration between poker, casino and slots to embrace sportsbetting and beyond – perhaps more than just side games?

VB: In many cases this integration has already happened. We now have gaming portals offering every possible product and not just as side games. I don’t think this model fits every organisation but many will find out by trying. Whether you outsource or run it yourself, to derive serious profit, you need to have a good understanding of the product you’re offering.

VB: It’s important to not to go overboard regarding this matter. For example, one of my customers was so concerned with fraud he would close off access to safe players because someone from their country caused an alert. Now that’s just like throwing out the baby with the bathwater. There are many good tools on the market that can be used to minimise the risk and these, combined with an endless learning process and sharp risk managers, can considerably curtail the fraud rate. Fraudsters are very inventive and practical and so the professionals should be charged with rendering their efforts useless. Technology alone won’t do the job.

CGI: Has opening up in Las Vegas proved to be a valuable move, especially considering the efforts to overcome the UIGEA? VB: Although lately we concentrated a lot more on California, opening in Las Vegas allowed us to weigh up the market from within. We opened before the economic downturn and one of the major deals we had in the works bit the dust along with our potential client. Nevertheless, I don’t give up on Las Vegas. It’s been a good school for me for many years and I am sure we’ll find the right model to succeed there as well.

CGI: Remote gaming is set for many years of growth, but what sense do you have of where that might be going next?

S TO

VB: I don’t think we’ve even scratched the surface yet. There is an enormous potential out there. As I said earlier, the convergence of land-based and online sectors will create a new category of players. They will direct us to new growth opportunities. The trick is to learn to listen to them.

CGI: Much is being explored in the potential of social media platforms and that is something close to your interests too?

VB: Social media offers very powerful tools and we are constantly exploring their potential. Right now, one can play in our poker rooms through major social networking sites.

This is of course only a straightforward use of these media.

There is a lot more that can be harvested from the social media field. Using it, we enhance our relationship with the players, educate, learn from, and cooperate with them. It’s a great platform for crowdsourcing, finding solutions to our challenges and figuring out what’s next.

CGI: What CRM fundamentals have you followed in pursuit of your success?

VB: CRM as technology concerns me much less than CRM as human interaction. Tools are out there and can be brought into play by anyone. The most difficult part is to build that R – relationship. I have always been a proponent of spending time and resources on creating a lasting connection with players. Operators should learn to respect, and, I am not hesitant to say, love their players. Not only because it is the players who make our business possible but also because they enjoy what we love to create.

CGI: For all operators minimising risk and fraud is a must.

What is your approach to this?

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VAHE BALOULIAN Vahe Baloulian is CEO of Red Planet Marketing GmbH (www.redplanetgaming.com), technology and consulting company based in Vienna, Austria and Las Vegas, USA. Red Planet provides uniquely flexible solutions to own and operate online gaming cardrooms/networks and specializes in turning struggling poker networks into profitable ones.

Sport

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Bingo ★ Casino ★ Affiliates ★ Lotteries ★ Poker

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translations you can trust

eTeams (International) Ltd., Main Street, Scariff, Co. Clare, Ireland Contact: Caroline Evans

T: +353 61 921 121

F: +353 61 921 693

www.eteams.ie

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translations you can trust

Translation Specialists

On-Line Gaming Bingo Casino Lottery Poker Slots Sports Betting Legal Marketing Websites Software Payment Solutions Mobile Gaming

For background information on the company, please visit our website www.eteams.ie or telephone Caroline Evans on +353 61 921 121 eTeams International Ltd., Main Street, Scariff, Co. Clare, Ireland T: +353 61 921 121

F: +353 61 921 693

info@eteams.ie

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SPORTS BETTING

DATA DEMAND: KEEPING ONE STEP AHEAD OF THE GAME

INTERVIEW WITH PHILIP PARRY

ting

ons

site 1

Over the past decade the way information is accessed has changed dramatically, with the sports betting industryâ&#x20AC;&#x2122;s insatiable demand and expectations for consuming data continuing to place innovation challenges on sports data suppliers. As live betting has rapidly emerged the need for speed in the online betting world intensifies alongside the trend toward a broader range of content with greater emphasis on localisation. With sports betting operators constantly seeking a leading edge, the innovative capabilities of sports data supply is under constant pressure to deliver.

>>

C

GI: To get a sense of the background, how does current sports data coverage and analysis compare with its recent beginnings?

PP: To give an idea of how things have moved forward over the past 11 years. In the early days the benchmark was perhaps just for the latest score on the top leagues manually refreshing every couple of minutes. Today, users want to consume so much more live content on every sport such as live point-by-point plays in tennis or make transfers to their Fantasy Team all viewed live on an iPhone and posted to their Facebook profile whilst out shopping on a Saturday afternoon!

As the way we access information has changed massively over the last decade so has the demand and expectation from clients and users for consuming sports data and it shows no sign of stopping!

When in 2000 Enetpulse was founded, it was with the vision of collating live sports information into a central resource. At that time there wasn't really one complete service for the transmission of live sports data and the advent of online sports betting meant the demand for live updates was clearly there from players.

CGI: Is there a significantly new development in your recently launched GameCentre concept â&#x20AC;&#x201C; what are its benefits?

PP : GameCenter was launched in January 2011 and is one of a trio of new product releases from us so far in 2011. The delivery of GameCenter took six months development from conception to completion and we view it as the next evolution of the live score experience. GameCenter is a multi-sport hosted solution which presents a graphical and interactive user Casino & Gaming International I 41

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interface for any sporting event. Within GameCenter we localise all the live game data, animate key incidents and deliver user bet stimulation via real-time live tips.

Over and above the live content I think the key benefit to GameCenter is that whilst it's a hosted product served up by us, the reality for clients and users is that no two GameCenters are identical. The product was built with flexibility and differentiation in mind as several other suppliers only permit logo and colour scheme change based on a singular template. GameCenter already goes several levels deeper in terms of customisation and this allows us to create a bespoke and multi-lingual solution for any client very quickly. We've already delivered GameCentre to over 50 new and existing clients in the past three months and we are delighted by the demand and reception from the industry.

CGI: Since March last year you have been in partnership with Sports Direct. What strengths does this combine?

PP : Yes, we partnered with Sports Direct INC, a North American-focused sports data company in March 2010. The strategic partnership came about due to the clear synergies between our operations as well as the appetite for US sports information increasing in Europe and interest in sports such as football (soccer) increasing in North America. Whilst we both remain as two fully independent companies the relationship allows us both to react to the differing needs for sports content in all locations.

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CGI: How is the alliance developing across the three Continents?

PP : The alliance has permitted both operations to continue to focus on what we do best in our own respective markets but on a global scale we can team up and deliver a â&#x20AC;&#x153;best of breedâ&#x20AC;? solution for any clientâ&#x20AC;&#x2122;s specific needs regardless of location. The combination of market leading European and Asian sports focused data from us and the US sports content from them ensures we're a one-stop sports data shop!

CGI: Has the idea of a global sports information alliance demonstrated an approach others are following?

PP : With so much sport now available across the time zones and increasing accessibility to view it, the barriers have been removed for users to consume sports content. This in turn drives user interest and demand for information on sports that perhaps beforehand were not viewed as regionally important or particularly interesting.

We cover such a variety of sports from Athletics to Weightlifting and whilst we naturally focus on core sports such as Football, Tennis and Basketball there are also regional needs and requests to consider which is where the alliance really comes in. For example, the delivery of handball data to the UK market would still today have limited appeal, but if we look at Denmark it's arguably their national sport so as a business we have to be in a position to cater for the needs of

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the global mainstream and also the niche requirements of each local market where relationships and service do matter.

So our global alliance offers us great flexibility and I wouldn't be surprised if it's replicated by other sports data companies in the future.

CGI: With the sports data widget service, what are the advantages of avoiding the need for technical integration?

PP : Our Sports Data Widget service was launched in January 2011 with the vision of allowing clients to access any aspect of our content in a quick and controlled manner. We identified that the integration of raw sports data via an XML feed can on occasions take significant resource and increased lead times. Whilst XML data has the advantage of ultimately giving the client full control on how they wish to work with the data, we saw an increasing number of requests for more localised elements of our content. For example, a widget could be a stand-alone live scoreboard, standings table, bet stimulating Live Tips, a player profile or even an odds comparison overview. Each widget is fully hosted and managed by us and allows clients to embed highly relevant content into specific areas of their site such as the markets coupon, the bet slip or even to create a match preview. The speed at which we can now deliver our data via individually branded widgets is also particularly attractive to clients.

CGI: Do you detect any emerging changes to the odds position in the industry that may significantly affect operators and players?

PP : I think we're now seeing less true odds compilation from bookmakers with many operators both new and established taking feeds of other bookmakersâ&#x20AC;&#x2122; prices, automating trading and adding margins to suit their business. Sites like Betfair have undoubtedly had a major impact on how bookmakers price/risk manage their markets and players and I feel this has contributed to leading the industry down a path towards standardised pricing with value and choice ultimately ebbing away for punters.

Those that mark-up and stand their own compiled prices I think will eventually win out as they remain in control of their risk management based on their own playersâ&#x20AC;&#x2122; activity.

Odds are the foundation on which any sportsbook is built but as industry consolidation accelerates and emerging markets begin to regulate we may see a conscious move by certain operators to limit or no longer publish their odds data as the value of doing so may begin to decrease. Companies that take in external odds data feeds for pricing are becoming increasingly reliant on its availability and it would only take a few leading operators to stop publishing their odds content for it to create a major impact.

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>> ODDS ARE THE FOUNDATION ON WHICH ANY SPORTSBOOK IS BUILT BUT AS INDUSTRY CONSOLIDATION ACCELERATES AND EMERGING MARKETS BEGIN TO REGULATE WE MAY SEE A CONSCIOUS MOVE BY CERTAIN OPERATORS TO LIMIT OR NO LONGER PUBLISH THEIR ODDS DATA AS THE VALUE OF DOING SO MAY BEGIN TO DECREASE. COMPANIES THAT TAKE IN EXTERNAL ODDS DATA FEEDS FOR PRICING ARE BECOMING INCREASINGLY RELIANT ON ITS AVAILABILITY AND IT WOULD ONLY TAKE A FEW LEADING OPERATORS TO STOP PUBLISHING THEIR ODDS CONTENT FOR IT TO CREATE A MAJOR IMPACT. << CGI: How efficiently do live stats for bookmakers work when combining live event specific content with their own inrunning betting console or scoreboard?

PP : The Live Stats product is an extension of the standard live score experience and uses a combination of scoring, live commentary and detailed stats such as possession, shots on goal, corners and cards to build a graphical picture for the user on what's happening right now for their game of choice.

When our Live Stats or GameCentre is combined as part of a bookmakers own in-running betting console or scoreboard we are permitting users to make a more informed choice as they can understand what is happening in a game in areas other than just the current score. The Live Stats content in turn drives a higher propensity to wager and adds stickiness as the user doesn't need to leave the bookmakers site to find the information they need at that precise moment.

As the range and diversity of the in-running offering has increased rapidly so has the demand for content and undoubtedly we've had to increase our coverage in this area to meet that demand. The recent launch of GameCenter and widgets are designed primarily for the live scoreboard purpose and several leading operators will launch with our service in Q2 this year.

CGI: Do the requirements for a live stats service vary greatly and is there an ideal format in your view?

PP : We see demand for Live Stats content coming from a range of sources such as sportsbooks looking for rich inrunning content as well as a variety of media including online newspapers and TV stations. The way we try and differentiate ourselves with Live Stats is to offer options within our data packages so clients can either take the full solution or elements of the content they need. Live Stats is currently available for all the major football leagues and tournaments and special events like Euro 2012 and the Olympics. We are also working on several other sports as we know the demand for more in-depth live and statistical content is there.

In terms of an ideal format, I think the key is spending time with the client before the project starts so together we can identify the optimum way in which to present live content for them. Our experience of working with such a diverse group of companies over the last 11 years allows us great visibility on what generally works and what doesn't. I'm definitely not convinced there is a “one size fits all” approach to presenting sports data which is why GameCenter and Widgets were recently created off the back of Live Stats to cater for the individual needs of each client.

44 I Casino & Gaming International

CGI: What aspect of the data supply do you consider most at risk from interruption?

PP : Away from the technical challenges that face any online business the data supply is without doubt the foundation on which our company is built as a business. It's all well and good having great data but if you can't deliver it then you have a major problem and so do your clients. We go to great lengths to minimise or eradicate any interruption of service which starts with us being in complete control of the information flow at all times. For example, we develop everything in-house; perform all sports content updates inhouse, as well as continually refining and investing in our technical infrastructure. In addition, we actively limit third party relationships and especially those which may have a potential impact on our ability to deliver to clients.

CGI: In a highly intense market to what extent is the pressure for constant innovation critical to success?

PP : Within the sports data market constant innovation is needed but the fundamentals of speed, quality, accuracy and delivery of the data will always remain. After 11 years of operation I would like to say that we have both the ability to refine and improve what we do and don't do so well but also possess the vision to innovate and think “outside the box” as we've done this year already with our new GameCenter, Live Tips and Widget services.

Just like any business we keep an eye on the competition and when something new comes along you naturally feel a bit of pressure but I have to say we're comfortable with our strategy. If you have the conviction that what you're doing is correct and you want to stay ahead of the game that means taking on the challenge and in some cases the risk of being the innovator to see the reward. I'm definitely not a fan of simply being another sheep following the flock.

CGI: Can you explain some of the ways you are able to improve site content and conversion?

PP : In terms of sports betting content and conversion I feel it's important for operators to remember each user is an individual. More focus should be given towards profiling each player’s wagering activity, flow across the site and then serving up complimentary data along their journey. The aim should be to enrich that individual player’s online experience and propensity to wager during each visit.

Our latest product release Live Tips, which is a stats based bet stimulation service was created with solely with the

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player and conversion in mind. We “ask punters a question” by delivering a continuous supply of real-time bet prompts that are linked directly to any pre-game or in-play market. We plant the seed in the players mind with targeted percentagebased tips and it is then the choice of the player to react.

CGI: Some see speed of product offering as the crucial determinant and is it therefore becoming a matter of who offers most and fastest?

PP : Speed of data is key but I would not say the only determinant to being successful; it really does depend on the purpose of the data and how it is being consumed by the client or end user. For example, if the data is to be used for live betting purposes then speed of updates are paramount but if we're looking at a media outlet such as an online newspaper that need for speed is less and focuses more on the editorial depth and richness of the data.

The “more you cover and the quicker you are” theory works to a certain extent but accuracy, reliability and support are in my opinion equally important. We don't see the value of sending a score update in two seconds behind the live action if it's then repeatedly changed and corrected 30 seconds later. We focus on delivering the correct data at a speed acceptable for the purpose of each individual client.

On a technical level we have invested heavily over the past couple of years in areas such as re-checks and verification signals so the client has complete peace of mind in the data they are receiving is correct first time, every time.

CGI: Is it the case that this market is consolidating with product innovation and service development as the new drivers?

PP : I definitely think consolidation within the sports data industry will occur and I think we are seeing signs of this happening already. However, just like any industry there is always room for an established operation to bring something new to the table or a fresh player coming along the rails proclaiming the next big thing. In a competitive industry, continual product innovation is required but the mechanics of sports data will not really change.

live updates from the Tiddlywinks World Championship will be the next big thing, you never know! Once we decide to follow a new sport or discipline our focus is on quality and going as deep as we can in terms of coverage to satisfy the needs of our clients. If we receive a request for something we don't cover then we'll do our best to follow it to the required level but it's always viewed against the balance of reliability and accuracy. We deliver what we're confident we can deliver 24/7 without interruption.

CGI: From your perspective what longer term prospects or trends do you see for the sports data market and of your position within it?

PP : We have been on quite a journey over the past 11 years and I've been fortunate to have been involved in assisting their business development for the last 3.5 years. I've seen many significant changes in the sports data market with areas such as live betting being a “game-changer” for sportsbooks.

This need for speed has definitely increased in the online betting world. Alternative channels such as fantasy sports and mobile particularly excite us and in the last 12 months we've released app-store approved solutions for iPhone, iPad and Android, not something we envisaged a few years back!

As for the future, I would like to think that we will continue to play a major role in the future direction of the sports data market. We will likely see increasing levels of partnerships or affiliations to individual sports or leagues as federations may potentially seek to licence and monetise data. This in turn could force the industry down a recognised supplier route and accelerate any consolidation process as sports data suppliers look to team up and secure their ability to deliver content. One thing is for sure, when working, talking and dealing with sports everyday – the future is never going to be boring! CGI

CGI: With the vast range of options now available is innovation reaching saturation point or opening up yet more product opportunities?

PP : No, I don't feel we've reached anywhere near saturation point and the sports data industry remains embryonic and highly innovative. The manner in which data is accessed and consumed is continually changing so for us it's about ensuring we try and keep one step ahead of the game. If you look at the social media outlets or mobile these channels were not around a few years ago and whilst you could argue it's the same data being used in a different way it has opened up a whole new and exciting avenue for the industry which we've embraced.

CGI: Are there other sports you seek to include in the range you currently do not cover?

PP : As answered previously, we offer coverage on over 60 sports so we are limited to what more we can follow. Perhaps

PHILIP PARRY Phil Parry, Business Development Manager, joined Enetpulse in 2007 and combined his passion for sports betting and data. Phil has been involved in egaming since 2002 having previously worked for MGM Mirage and betinternet.com in the role of Marketing Manager. Enetpulse remains a private Danish company based in Copenhagen and from the humble beginnings of the founder and just two staff following only football the company has evolved to offer detailed coverage on over 60 sports, delivering data to over 150 clients and employ over 100 people with 24/7 operational teams across Europe and Asia.

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CONTROL THE NUMBERS. SLEEP BETTER. AccountIQ offers streamlined multi-currency processing and intelligent, fully automated reconciliation, enabling you to seamlessly match and monitor your entire transaction flow.

So whatever transactions are performed by you or your customers, you will quickly identify at an early stage the potential mismatches, mistakes and losses that so often cause unnecessary cost and inefficiency.

AccountIQ, however, is a comprehensive product that will allow you to adjust routines and fix errors before they start causing concern. Prevention is the cure – and its effectiveness is quickly demonstrated!

Not only does the product help you identify any problems, since it is fully automated it also helps substantially reduce the time you would normally spend reconciling your transactions and accounts.

On this basis, in our view, you are likely to see the benefits of AccountIQ translated into enhanced ROI within the very first year.

But that’s not all. This system will bring added value to your organisation by offering unique reporting functionality or fee controls toward your PSP or acquiring bank.

Control the numbers and your cost reductions, performance and efficiency will follow.

And no doubt you’ll sleep better as a consequence.

If you want to know more about our AccountIQ product and how we can help you reconcile your transactions, contact: Devcode: Josef Darmark, Product Manager Tel: +46 8 231080 Email: accountiq@devcode.se

www.devcode .se

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PAYMENT SYSTEMS

NEXT GEN SERVICE: KNOWING ME, KNOWING YOU…

BY ROELANT PRINS

Online gaming operators are increasingly mindful of the sharpening payments environment, so it is essential for providers to be fully aware of what is happening around the world whilst keeping abreast of local market developments. In essence, being up to speed with gaming industry trends, regulatory and compliancy issues, while ensuring the efficiency, flexibility and integrity of the payment process, is central to meeting the many and varied requirements of gaming operators going forward.

>>

ack in 2006 we saw an opportunity for a truly next generation Internet payment service. In a market dominated by ‘first generation’ players typically servicing the needs ecommerce merchants had about a decade ago, an opportunity existed for a fresh market entrant.

The way we saw it, it was no longer enough to just support a large number of payment methods. No matter how secure or stable. The ecommerce merchants of today are looking at ways to optimise all their payment processes, whilst also doing as much as they can to push their payment conversion rates to their limits. They are striving for total efficiency and complete control over every aspect of their online operations.

By focusing on offering higher conversion rates, cost savings as a result of lower pricing and operational efficiency, and truly global coverage, we believed we could answer this call to arms. Our platform contains a payment process stripped down to a single page to lower abandonment; a system that enables single-click payments on hosted payment pages for ease of use for returning customers; and advanced skinning technology that allows for customisation. Ultimately, the platform was built to deliver one clear goal – to maximise online conversion.

In the beginning, competing wasn’t easy. We have an experienced team at Adyen (many of whom had previously been involved in the founding and funding of Bibit in 1997), but were in a position where we had to prove ourselves in multiple market sectors and multiple geographies. In addition to the likes of North America and Europe, the platform was designed to appeal to the rapidly emerging markets of East Asia and Latin America, where strong fiscal policies and growing middle classes with money in their pockets had

B

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injected large sums of money into the local economies.

The platform’s inherent flexibility also suited it to a variety of ecommerce sectors: Travel, dating, retail and – most importantly in this instance – online gaming. Each market came with its own idiosyncrasies and its own challenges.

THE THREE C’S Our first forays into online gaming quickly taught us the importance of the three C’s: convenience, control and choice.

For online gaming operators, similar to many ecommerce merchants, it is vital to ensure that the customer feels totally secure, and the extent to which this is felt is largely attributable to how an operator presents their site, what technology they are using to power it, and the way payment pages are presented. Everything must function effectively and efficiently.

The Internet has become increasingly social with blogs and forums now commonplace. Online gaming is no different. Any bad experiences on a gaming site are likely to be shared among the gaming community almost instantly.

The highest possible levels of service are crucial to the attraction and retention of customers, and payment processes are absolutely fundamental to this. After all, accepting and processing payments is what fills the coffers. If the merchant isn’t converting web traffic into profitable revenue then they are going to find it hard to survive in a

highly competitive market.

Our platform has had to adapt to these demands. It was clear that there were a number of different considerations taken by gaming operators before deploying a new payment system and that, aside from competitive pricing, they look for long term strategic payment partners that can provide expertise in a number of different ways: DEFINING LOCAL MARKETS In most cases, gaming websites are available internationally.

This means that although business strategy is focused on generating and localising content for certain core markets, there needs to be a consideration for a quantity of traffic that will be received from other parts of the world. This requires translation of payment pages and the availability of trusted payment methods. The failure to meet these demands will almost certainly lead to lost custom.

Merchants look to payment service providers to offer a wide range of payment options, with the capability to add new ones when required without the hassle of negotiating every time the platform has to be adjusted or extended.

The lure of a payment provider that can provide this functionality and flexibility with one contract and one, easy technical integration has proved to be a very attractive solution to this problem.

AVOIDING FRAUDULENT TRAFFIC Being an online gaming merchant has many benefits (mainly

It’s our 10 0th you’d exp pec new challe eng because we reputation n. T stayed the e s mergers, no change in n o solutions and The basis o and try an before we processing Our solutio needs, and territories.

Payment Provider), Direct De flexible.

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After all establishe around th guide yo process a no time.

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PAYMENT SERVICE PROVIDED It’s our 10th anniversary!!! It’s been an exciting time and as you’d expect in a fast changing industry, it’s always full of new challenges. But we’re obviously doing something right because we’ve continued to grow in both size and reputation. Through all the years though, some things have stayed the same. There have been no name changes, no mergers, no senior management changes and absolutely no change in our commitment to offer the best processing solutions and unrivalled customer service.

The basis of our success is quite simple; we listen to our clients and try and understand their business and its unique needs before we rush in with a solution. The result is a payment processing system that does exactly what you need it to do.

Our solutions are specifically tailored to each client’s business needs, and designed to grow with the business as it enters new territories. Lateral Payment Solutions’ secure, multi-currency Payment Gateway encompasses PSP (Payment Service Provider), MSP (Merchant Service Provider), BACS, SEPA and Direct Debit Bureau solutions that are truly scalable and flexible.

After all these years, we have a particularly wellestablished relationship with a number of Acquiring Banks around the world. We’re very well placed to help and guide you through the Merchant Account application process and get you set up online and taking payments in no time.

If you’re after complete online security and proven fraud screening, secure data storage, advanced reporting tools and a team of dedicated people who are always available to help, you need to talk to us. And don’t worry if you don’t get round to it today, the good thing with Lateral Payment Solutions is that you know we’ll always be here tomorrow.

Give us a call on +44 (0) 20 8545 8840 or e-mail sales@lpsmail.com, and together we’ll create a payment processing package for you that’s worthy of a celebration.

Credit & Debit Card Processing PSP & MSP Solutions BACS & Direct Debits Sophisticated Real-time & Off–line Transaction Analysis Proven Automated Fraud Engine Level 1 Service Provider PCI Compliant Personal, Efficient Merchant Support Pay-ins & Pay-outs

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PAYMENT SYSTEMS

financial) but it does come with a significant down side - its attraction to fraudsters. Credit card company figures have shown that a vast majority of consumers are reimbursed when their cards have been defrauded, while a majority of ecommerce merchants have to handle the cost of fraud themselves. It’s no surprise then that one of the gaming operator’s most demanded services have been fraud detection and protection technology.

Fraud affects gaming merchants in lots of nasty ways, but most significantly in the form of chargebacks. This is a double hit, as it not only results in the loss of a product or service but also heavy fines and account closures. An inability to accurately gauge a transaction’s legitimacy can often lead to merchants being too tight on the fraud controls, and rejecting transactions that were not actually fraudulent.

Gaming operators look to payment providers not just to recognize that fraud is taking place, but also stop future instances occurring. It is the operator who is ultimately liable for ensuring that all transactions are legitimate, so they are the ones who need to be taking proper precautions to prevent it.

To understand what Internet fraud is, who the perpetrators are and how they operate is not easy, but it has to be mastered. Once a website, no matter what sector, opens up to local markets, it’s inevitable that it will also open up a range of security threats that have the potential to hit profit margins. Whether it’s a lost or stolen card, bonus abuse or CNP fraud, merchants need to have anti-fraud measures in place.

A strategic payment partner is one that takes all the necessary steps to ensure that these merchants are protected, and to this end, our platform has had to be tweaked. These can be simple features such as rules engines and behavioral purchasing pattern mapping to identify emerging fraud patterns, or more sophisticated measures that track customer behavior on websites.

COMPLIANCY In addition to the exhaustive range of fraud tools now available to the merchants, steps have been taken by the credit card companies to ensure that there are now stricter rules and regulations to protect the merchants and their clients from fraud, theft and hacking. In order to have secure card storage, merchants have to be compliant with the Payment Card Industry Security Standard or PCI DSS for short. These are standards that govern all merchants and organisations that store, process or transmit card holder data.

For the merchant, achieving and maintaining compliancy is time-consuming and costly. A better option has been to use a payment provider’s data storage, which offers protection to gaming merchants by storing the database of customer card information with a PCI-certified payment provider who will also have high levels of security. This not only relieves the merchant from the considerable burden storing classified information, but also protects the core of their business.

OPTIMISING AND MAXIMISING CONVERSION Although gaming operators may have ticked the boxes for offering a global payment network with complete fraud protection, they are still preoccupied with actually convincing the customer to “leave the money on the table”.

Payment pages require constant optimisation to ensure 50 I Casino & Gaming International

maximum conversion, and the operators look to the payment providers to offer expertise and support to make sure this can be achieved. This can be as simple as making a customer enter the first line of their address manually, or passing the information on to the system via the merchant’s backend.

Simple, but it can be the difference between a sale and a drop-out.

Operators look to payment providers to give advice on new innovations. For example, customers may want to take advantage of ewallets that allow customers to simply enter a username and password to make an instant payment. Making the payment process as swift as possible ensures that a good relationship is built with the customer and also guarantees that retention rates remain high.

One of the key lessons we have learned when dealing with gaming operators is the importance of listening to our customers, keeping an eye out for new trends and responding to their needs. Never the other way around.

FUTURE CHALLENGES Online gaming operators have faced a lot of challenges, and one of the biggest has been the tightening payments landscape. This isn’t going to change. It is absolutely crucial that we, the payment service providers – just like the operators – remain fully aware of what is happening around the world whilst also keeping abreast of what is happening at the local market level. Keeping up-to-date with local gaming regulatory issues, ensuring that we remain compliant and able to communicate a secure payment service will determine the extent to which we are a successful strategic payment partner.

It is also going to be important to continue closely monitoring the customer transaction process. Where are they coming from? What card or payment method are they using?

How can we improve our intelligent routing technology to ensure that we are giving our customers the best possible chance of converting a payment?

As the bigger payment service providers have become increasingly inflexible, it is crucial for the independent providers to continue offering unique solutions that can meet the very unique requirements of the operators. Inevitably there will be more payment methods and different ways to deposit funds and innovations within the online gaming community. Keeping on top of these will be the key to staying ahead of the game. CGI

ROELANT PRINS Roelant Prins is Chief Commercial Officer at Adyen. Having started his career as a consultant Roelant began working in the online payments industry in early 2000. He has held various management roles in sales and business development for organisations specialising in payment solutions and international ecommerce. Prior to joining Adyen as CCO, Roelant lived in London and worked in the Royal Bank of Scotland Group's payment division, managing the team responsible for corporate sales in the UK. www.adyen.com

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ACHIEVING LOCALISATION THROUGH TRUST, RESPECT AND KNOWLEDGE

BY HEATHER BAKER

From global to local applied in equal measure is a familiar enough concept today. The practicalities and means of achieving localisation in particular, however, have usually required very careful groundwork. Often it means recreating a business model from scratch if there is to be any hope of developing a serious market presence. This is becoming a significant factor for operators as the gaming industry, along with regulatory progress, embraces the world.

>>

s the online gaming market continues to grow, with more operators than ever before launching new games and technologies, the importance of localising content has never been more apparent. As operators go head-to-head to acquire new players (and retain existing ones) they are putting themselves in their customersâ&#x20AC;&#x2122; shoes to gain a competitive advantage.

Most people prefer any product or service that is delivered in their own language and Internet gamers are no different.

They feel more comfortable visiting an online casino that is run in their native tongue and in a style that is suitable for their culture. Therefore, any online operator that wants to dominate a market needs to take steps to truly understand that market, and make sure its products or services are appealing and appropriate.

Localisation requires more than just the services of Google Translate. Enormous consideration needs to go into the technical, legal and marketing elements of translating a product.

If done correctly, this can make a game more user friendly and fun, while also demonstrating a respect for and understanding of the culture. This plays a key role in building the all-important trust and credibility that is required to develop a following of loyal clients and increase net gaming revenue.

A

THE LOCALISATION STRATEGY A common mistake made by online operators is to develop a localisation strategy after the software has been designed, and then attempt to retro-fit it when a new market is identified. This is an expensive, time consuming and usually unsuccessful approach. An effective localisation strategy needs to be created early on, and frequently even informs a websiteâ&#x20AC;&#x2122;s development.

This is a significant undertaking, which usually involves Casino & Gaming International I 51

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>> A COMMON MISTAKE MADE BY ONLINE OPERATORS IS TO DEVELOP A LOCALISATION STRATEGY AFTER THE SOFTWARE HAS BEEN DESIGNED, AND THEN ATTEMPT TO RETRO-FIT IT WHEN A NEW MARKET IS IDENTIFIED. THIS IS AN EXPENSIVE, TIME CONSUMING AND USUALLY UNSUCCESSFUL APPROACH. AN EFFECTIVE LOCALISATION STRATEGY NEEDS TO BE CREATED EARLY ON, AND FREQUENTLY EVEN INFORMS A WEBSITE’S DEVELOPMENT. THIS IS A SIGNIFICANT UNDERTAKING, WHICH USUALLY INVOLVES ENGAGING A LOCALISATION CONSULTANT WHO CAN PROVIDE SUPPORT AND COMPREHENSIVE ADVICE ON THE LOCAL MARKET. << engaging a localisation consultant who can provide support and comprehensive advice on the local market.

This will go well beyond language and linguistic nuance to incorporate everything from understanding cultural differences, adapting rules to suit local laws and regulations, developing a payment processing system that takes into account different currencies and preferred payment methods, and being prepared to adapt to the myriad of subtle distinctions and unfamiliar parameters that can set your site apart.

Of course, this process needs to include language, with care taken when sayings, idioms and metaphors that worked in one context are to be applied to another.

Casino localisation also extends beyond the realm of the web. Quality off-line support needs to be provided on a local phone number by native speakers so that players feel comfortable seeking this type of help. This again contributes to that all-important trust and credibility building – a key element of player retention. This is the reason we recently opened a head office on the Isle of Man with full support capabilities included.

A similar strategy has also been adopted by one of Russia’s largest online sports betting companies, Marathonbet.

It has expanded to the northernmost Channel Island of Alderney, as part of its strategy to target the UK market, as it too understands the importance of establishing a local hub in the region of expansion. We recently secured a software supplier certificate from the Alderney Gambling Control Commission (AGCC), and subsequently supplied software to Marathonbet. Our belief in the importance of localisation during software development was one of Marathonbet’s key purchasing criteria, and means we can now supply our product for the sports betting giant to confidently incorporate into their UK offering.

The fact that our turnkey solutions are specifically designed for the UK market will be crucial for future trade with the UK’s egambling business community and a vital selling point.

TECHNICALLY SPEAKING A localisation strategy needs to take into account certain technical considerations:

Support Foreign Characters: Accents, umlauts, tildes, circumflexes – foreign languages that use characters that are not present in the English alphabet, or 52 I Casino & Gaming International

those that are based on non-Latin alphabets, pose a host of problems when it comes to localisation. It is therefore essential to ensure that software supports the special characters of the languages you intend to have the software translated into. This is further evidence of the value of planning for localisation during the software development phase, as adapting to fonts that do not support the required characters is a major issue.

Allow Breathing Space: It is a simple piece of design planning that could save a lot of time in future - it is very important to leave extra space for translated terms, particularly for button labels and menu items.

Take for example the word "Quit". This would become "Abbrechen" when translated into German, expanding from four to nine characters. Developers should therefore either allow for sufficient extra space or make these interface elements dynamically resizable.

Get Tested: Foreign versions of a game should be tested by native speakers of that language, whether through a subsidiary in the target country, freelancers who do on-site testing, or a specialised testing company. The testing should be done on computers running the appropriate foreign version of the operating system and using the correct keyboards for the target languages. The feedback from these testing sessions becomes invaluable in avoiding embarrassing mistakes, and ensuring that games work first time when launched into new markets.

Localise As An Integral Part Of Development: As mentioned above, localisation is sometimes an afterthought, which can cause major cost overruns, often requiring complex and complete code rewrites. The involvement importance of a localisation specialist cannot be emphasised enough when crucial decisions such as interface design are being made.

Consider Grammatical Inconsistencies: We know that the grammatical structures of English cannot simply be replicated in a foreign language. English sentence structures lend themselves more to a "building block approach" involving multiple clauses. A sentence with variables such as "Click here to open the [file]/[folder]/[directory]" might require the article "the" to be translated differently depending on the gender of the variable and the language of translation. For some languages, the whole structure of the sentence would

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need to be changed. It is therefore imperative that programmers consult a translator before hard coding sentence structures in text strings – especially when these structures can have a huge influence on the subsequent website’s search engine optimisation and Google ranking.

CULTURAL SENSITIVITY Cultural sensitivity is another essential consideration. This wide-ranging issue covers everything from the structures of phone numbers or addresses (not everyone uses a post code, for instance) to ethnic stereotyping. There could also be requirements to adapt certain parts of the game to conform to different communications systems, measurement units, currencies or legal traditions. Even such seemingly universal elements as icons might be culture-bound (will, for example, users in your target culture, recognise an American mailbox?).

Politics can also play a role – recently, a Microsoft game was banned in China because of a map depicting Tibet as an independent country.

Another cultural aspect for expanding online operators to consider is local authority in any new region. As a Belarusian company we are already regulated by our country’s online regulators, but we obviously appreciate that these may not be recognised in a new jurisdiction. One of the most important aspects of expansion is to gain regional trust – as soon as we were granted our license to operate from the Isle of Man, we immediately sought accreditation from the most reputable online gambling trade body in the UK – the Remote Gambling Association. These memberships inspire confidence and assure your audience that a company is tightly bound to recognised local codes of compliance.

BUDGETING FOR LOCALISATION One of the most common reasons behind a failure to localise properly is cost. Often seen as a luxury rather than a necessity, localisation is pushed to the bottom of the CFO’s list of priorities. This is a short-sighted approach. Localisation is fundamental to building trust and attracting new players.

Failure to do so leads to an offering that is viewed as substandard - this results in increased Cost Per Acquisition (CPA) and decreased Life Time Value (LTV) – the latter being an excellent way of assessing long-term customer satisfaction.

The upshot is that every penny supposedly ‘saved’ on localisation, can easily be a pound lost in future revenues.

The greatest challenge for casino operators when it comes to localisation is that almost everything they have learned about their home markets — what works, what does not and why; how to approach the target audience; what to offer them; how to design the call to action – all of this hard-won knowledge is, for the most part, irrelevant in other regions of the world. The successful companies are ones that recognise this, and takes steps to build their knowledge of other markets before launching their offerings. CGI HEATHER BAKER Heather Baker has worked in the finance and gambling sectors for the past ten years as a specialist media consultant, drawing on a solid background in corporate journalism and PR having been a feature writer for the South African Times, Associate of the CIPR and vice-chair of PRCA's SME Committee. Currently an MBA student at the London Business School, Heather has been helping new companies from all over the world commence operations in the UK since 2008, and has represented Viaden Gaming as its spokesperson since the company's UK launch earlier this year. Viaden Gaming develops cutting-edge professional online casino software for clients worldwide. Founded in 2001, Viaden Gaming is a member of the International Chamber of Commerce (ICC) and the Remote Gambling Association. Viaden's European headquarters are located in the Isle of Man and the company also has a base on Channel Island, Alderney. www.viaden.com Casino & Gaming International I 53

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Professional

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STAYING OUT FRONT: SUSTAINING THE ADVANTAGE THROUGH INNOVATION

BY ROGER RAATGEVER

Operators seeking to preserve the competitive edge through innovation in an environment of consolidation, sharpening competitiveness and operator-provider crossover, have to be flexible and adaptive at all levels. As heightened customer expectations put the resulting products constantly to the test, it has never been more important to ensure that all the stops are pulled out in the quest to become the perpetual industry leader.

>>

ince we developed the first online casino software in 1994, Microgaming has focused on delivering some of the most innovative software in the marketplace and over 15 years later shows no sign of slowing down. Today, it still leads the charge in bringing the very latest technology to the gaming sector.

The world of online gaming moves fast – and we like to move faster. We have kept ahead of the field by consistently investing resources in developing our technical offering and creating the best new games and smartest gaming management around. One of the most important factors for our business is that we are a technology company and this allows us to be highly focused in terms of the products and services offered.

We are, of course, aware that the market is changing; with increased levels of consolidation and the boundaries between operators and providers becoming increasingly blurred, we are determined to remain true to our core strengths. At the moment there seems to be a trend to become a one-stop-shop for online gaming. It is easy to see why firms become distracted by the opportunities that exist in the gaming sector, but as a technology company we prefer to ‘stick to the knitting’, which definitely works for us and is reflected in the fact that in 2010 we signed 28 operators and our growth rates still out-perform the industry.

By remaining true to this ethos, we are confident we will enhance our position within the industry value chain, at a time when others are losing their identities and ultimately reducing their long term value in the

S

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>> THE GROWING IMPORTANCE OF REGULATED MARKETS IS RADICALLY CHANGING THE EGAMING LANDSCAPE AND OUR FLEXIBILITY AND EXPERIENCE IS AN ASSET WHEN IT COMES TO EXPLORING THESE EXCITING NEW TERRITORIES. THE INDUSTRY ALREADY LOOKS VERY DIFFERENT TO THE ONE WE OPERATED IN A DECADE AGO, BUT WE ARE WELL PLACED TO TAKE ADVANTAGE OF THE OPPORTUNITIES THAT ARE COMING OUR WAY. << marketplace. I believe that the level of consolidation we are seeing at the moment will lead to the emergence of only a few key global players in the industry, which we as a true technology provider will remain part of.

Mobile is a good example of an area of investment that is starting to become a powerful driver of growth and we expect to see real strides made on this platform over the next few years. We recognised the importance of mobile years ago and knew that the explosion was coming; investing in these new technologies has been crucial in consolidating our position, through our partnership with Spin3, as a true market leader in this field.

Our belief and investment in this area has given us a unique market position and a massive head start in the mobile gaming sector. In 2009 Spin3 was the first mobile gaming provider to earn the software accreditation seal from eCOGRA. Since then it has won numerous industry awards, a testament to the success of this partnership in bringing ever-advancing mobile gaming technologies to market.

For a long time now, mobile has been touted as the ‘one to watch’, but we genuinely believe we are now approaching a tipping point that will see this exciting new platform begin to deliver on some of these promises.

INNOVATION Over the past few years we have developed a reputation as a leader and innovator in the world of software development. As well as boasting the broadest portfolio in the industry (over 500 game titles and more than 1,000 game variants); it has led the way in bringing industry firsts to market across all its product channels.

We are always hungry for industry firsts and are constantly looking to develop innovative and unique offerings across all of our product channels. We pride ourselves on being first to market with exciting launches and over the past few years we have introduced genuinely unique concepts, such as community and customisable slots, cinematic spins and the creation of the world’s first online slot tournament millionaire. We have the most varied poker tournament schedules on the web, and our Progressive Jackpot Network is truly world-leading; it still boasts the largest online jackpot win in history at €6.37m, paid out in a single payment.

Innovation has enabled us to keep ahead of the game and stand out from an ever increasing crowd of 56 I Casino & Gaming International

providers, but more importantly it has meant that we do not have to compete on price. Online gaming software is unique, dynamic, complex and differentiated. We are well placed to invest heavily in new technology meaning we can continue to lead the industry through innovation and technological differentiation which we can preserve.

We pride ourselves in delivering the most entertaining and exciting gaming content in the industry; we nurture every single game and each one has on average one year of development time prior to launch.

However, for a game to succeed it’s not just about delivering a visually entertaining front end, it needs to be built on solid foundations with superior back-office tools. With an integrated back-office engine, operators are able to extend state-of-the-art functionality to meet their own requirements, enabling them to measure, manage and ultimately drive revenue. This is a critical factor in driving sustainable lifetime player values.

With the choices in our sector you need to choose a partner with heritage, but this has to be underpinned by what their software platform can do. The fact that we offer its operators the best gaming platform and backoffice tools in the world means that we will always stand out from the crowd. Ultimately innovation is at the heart of what we do and this all stems from the enormous level of industry experience and superbly talented people attracted to the company; we consider our team to be our number one asset and this is what keeps us ahead of the curve.

FLEXIBILITY This is a very exciting time for the egaming industry. The market is constantly evolving and with it the profile of our customers; we have to be extremely flexible and have to continue to adapt our offering to reflect this.

The industry has seen new breeds of customers emerge as the industry has matured; with these come new opportunities for technology, especially flexible technology which can be primary or complimentary to existing product offerings.

We have reacted to the recent demand for product flexibility by developing QuickFire, a supremely versatile gaming solution that allows operators to access our content through a simple integration process. Once the initial integration has been completed, operators have

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>> THIS IS A VERY EXCITING TIME FOR THE EGAMING INDUSTRY. THE MARKET IS CONSTANTLY EVOLVING AND WITH IT THE PROFILE OF OUR CUSTOMERS; WE HAVE TO BE EXTREMELY FLEXIBLE AND HAVE TO CONTINUE TO ADAPT OUR OFFERING TO REFLECT THIS. THE INDUSTRY HAS SEEN NEW BREEDS OF CUSTOMERS EMERGE AS THE INDUSTRY HAS MATURED; WITH THESE COME NEW OPPORTUNITIES FOR TECHNOLOGY, ESPECIALLY FLEXIBLE TECHNOLOGY WHICH CAN BE PRIMARY OR COMPLIMENTARY TO EXISTING PRODUCT OFFERINGS. << access to the largest online Progressive Jackpot Network, monthly new game releases and access to blockbuster slots and licensed products such as Thunderstruck II, Hitman™, Lara Croft: Tomb Raider™ and Hellboy™.

The growing importance of regulated markets is radically changing the egaming landscape and our flexibility and experience is an asset when it comes to exploring these exciting new territories. The industry already looks very different to the one we operated in a decade ago, but we are well placed to take advantage of the opportunities that are coming our way.

Increasingly, we are more flexible in the way we do business, whether this means strategic partnerships or making sure we are in the first wave of entrants into newly regulated markets. We are confident that we have the right resources and alliances to support our operational partners in making the necessary innovations, adaptations and conversions to react to changes in regulation.

HERITAGE With over a decade and a half creating software for online casinos and over 60 years of industry experience across our management team, we are a true veteran of the e-gaming sector. With the market being shaken up by regulation and consolidation, this experience will be critical when it comes to navigating these challenges.

It’s worth remembering that this is still a very young industry and reputation and performance are still absolutely critical when it comes to attracting and retaining operators. Even when we started in 1994, our belief was that we needed to establish ourselves as an organisation that offers a fair and transparent service, which would stand us in good stead with our customers.

Our involvement in forming eGOGRA is testament to these beliefs, which over time has expanded well beyond its original remit and now covers a huge range of operating and software companies.

Our rich history of ground-breaking innovation, a world-class team of executives, portfolio of unrivalled products, and emphasis on providing unparalleled service to our operators, means we are well positioned to maximise its reach into newly regulated markets.

Having built solid foundations in more established markets and in-roads in newly regulated markets, our heritage will allow us to bring new technology and

expertise to operators and partners who want a brand and product they can rely on.

THE FUTURE In terms of technological developments within the industry, there is a lot to look forward to in 2011. It is an extremely competitive industry, so I can not divulge too much regarding our planned launches for the year, but key themes within the industry include 3D games, social networking, and of course convergence through platforms such as mobile and the burgeoning tablet market.

Technology is key to the industry’s future and its products will continue to help the industry evolve. We will continue to lead the industry through innovation; this is a competitive advantage that we can preserve. As a private company we are extremely agile; we assess the industry landscape and react quickly to market trends.

We are extremely excited about what lies ahead and look forward to embracing the opportunities that arise.

CGI

ROGER RAATGEVER Roger Raatgever is the longest serving CEO in the online gaming industry.

Having joined Microgaming almost a decade ago, Roger has been instrumental in leading the company and cementing its position as the world's largest online gaming software provider. Following his graduation from university where he majored in Marketing and Economics, Roger qualified as a Chartered Accountant in 1997. He then held successful positions in the franchising industry and also in corporate finance. He moved to the Isle of Man in 2001 and was a driving force in establishing the Microgaming headquarters, which now employs over 80 people on the Island and a talent pool of over 1,200 people worldwide.

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In all key technology, business and regulatory respects, mobile gaming is now firmly established. With its growing versatility, enriched formats and immersive capabilities, this is – for operators, governments and players alike – a compelling opportunity.

>>

C

GI: Convenience, privacy and ubiquity are considered the three drivers of mobile gaming.

You see that going from strength to strength?

MZ : Convenience, privacy and ubiquity are absolutely necessary for the mobile gambling industry to exist and prosper. But are they key drivers? Are they causes of a change in attitude and consumer behaviour, and the reason for so much renewed optimism for mobile gambling? I am not convinced. While they are seriously important factors – you could almost call them prerequisites – for the existence of the industry, they are not specific to gambling. Rather they are trends that have seen the growth in mobile content in general.

A number of distinct trends have driven the growth of mobile gambling over recent years. Our industry could not, for example, exist without regulation that creates the necessary legal framework for our enterprise. European countries that had previously been tepid or openly opposed to egaming are now looking at the industry in a new light.

The change in attitude has seen the governments in France and Italy pass progressive legislation that establishes an egaming industry in those regions. And countries like Denmark, Spain and Germany are not far behind. This is significant not only because it enables us to legally exist, it helps legitimise the industry in the eyes of consumers, and establish the industry as viable, credible and, most importantly for the governments that are introducing new regulation, taxable.

Consider also the handsets that you carry at all times of day and night. The days of the basic feature phones are over. We now live in the world of iPhones and AndroidCasino & Gaming International I 59

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based smartphones. The screens are large, colourful and interactive. The mobile Internet over 3G, WiFi and other means (depending on where you find yourself) is commonplace. We now have handsets that inspire people to consider their phones as sources of entertainment; they are no longer merely functional. And these handsets finally support a richer, immersive and more pleasurable mobile gambling experience.

At the same time, we have the perfect delivery system through downloadable apps and app stores, and tried and tested platforms for m-commerce. While convenience, privacy and ubiquity are on the rise and continue to play their part, I’d argue that these more explosive trends are in the driving seat.

MZ : The pace of change, especially over the past 6 and 12 months, has been dramatic. And we see no reason for this to slow. We now have the right environment for mobile gambling to prosper, we have consumer demand and, just as importantly, we have the buy-in of the industry. Mobile is now a vibrant and increasingly popular part of the egaming mix. As egaming brands see the revenues the mobile channel can deliver – remembering that this is just the start of things to come – we have reached a point of no return.

CGI: Mobile gaming has been resilient to international economic difficulties. Is that in part down to operators seeking new markets?

MZ : At the moment, we don’t truly know. The amounts wagered seem similar in size but we are still comparing data. What is encouraging is that the overall growth shows no sign of slowing. We are riding a strong growth curve – with increased penetration, new demographics groups and accessibility – and the outlook is very bright.

MZ : The economic difficulties were certainly transformational for mobile gambling. Compared to other industries which suffered terribly, the gambling industry fared pretty well. But the idea that the mobile gambling industry is in some way “recession proof” is not something that I subscribe to. We had to work hard; to diversify and explore new opportunities for growth. We were certainly fortunate that key business and technology trends were emerging that helped our cause – including the emergence of new regulation and markets – around this time. Our resilience lay in part with the strong demand.

We had the presence and the distribution channels necessary to meet this demand. And we haven’t looked back.

CGI: Although mobile gaming growth has been steady rather than explosive, isn’t there a change of pace now emerging?

60 I Casino & Gaming International

CGI: In terms of wagers how do you expect smartphones and tablets to fare in relation to bricks and mortar sportsbooks and PCs?

CGI: The biggest market share of mobile gambling is betting but do you expect that to be balanced by growth in lottery and casino gambling?

MZ : Mobile sportsbooks are perfectly suited to the mobile platform and consumers are playing in their droves. In contrast, mobile lotteries have been slower to become established. But there’s a reason that lotteries remain so entrenched in our lives. I have no doubt that, in the fullness of time, mobile lotteries will prove to be hugely successful and on a par with mobile casino gambling. I don’t see the three competing for customers. As distinctly different forms of entertainment, a growth in mobile lottery or casino gambling will only benefit the sports betting. They are very friendly bedfellows.

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>> THE GROWTH IN DOWNLOADABLE APPS AS A MEANS OF DELIVERING CONTENT IS A MAJOR BREAKTHROUGH, WITH APP STORES FROM APPLE AND GOOGLE IN PARTICULAR ACTING AS A KEY DISTRIBUTION CHANNEL. THERE IS AN EASE OF DOWNLOADING GAMES AND CONTENT THAT HAD BEEN ONE FACTOR THAT HAS HELD BACK THE INDUSTRY IN THE PAST. ANY MOBILE GAMING PROVIDER THAT DOESN’T UTILISE APP STORES WOULD BE MISSING OUT ON THE OPPORTUNITY TO GET THEIR GAMES AND CONTENT IN THE SINGLE MOST VISITED AND EFFECTIVE SHOP WINDOW IN TOWN. << CGI: If the traditional lottery industry is at a crossroads what do you consider the right way forward?

MZ : Lotteries today have to work harder than ever to attract players. Lotteries need to become more relevant and accessible for the modern player, and to access a broader audience of players. It is hard to find a case against interactive lottery services as the future for traditional lotteries. If they want to arrest the decline, they will embrace online and mobile.

CGI: Mobile lotteries in Chinese, Latin American and African markets are strong. Have your experiences met your expectations so far?

MZ : These markets are still developing and, as such, it is still too early to say. We are looking at these markets very closely, but lotteries are a highly regulated and conservative market. It will take time for them to accept the mobile channel - but changes are definitely underway.

In time, mobile lotteries will become the dominant channel in these markets. Of that I am certain.

CGI: Why are you confident the Ukrainian market you are now entering will be receptive to mobile gaming growth?

MZ : Ukraine has all the characteristics required for a highgrowth emerging market. There is high-demand for mobile gambling – fuelled by a strong metropolitan telecommunications infrastructure, advanced handsets and people who are hungry for mobile content.

Growth to-date has been steady, and I’m sure this will continue.

CGI: This signifies a wider eastern European expansion from there?

MZ : Not necessarily. We will continue to review and assess each market individually, based on key indicators and parameters. The growth in Ukraine has been great to see, but only time will tell where our next big move will come.

Following regulation in Italy there are a number of markets that offer terrific appeal. Holland and Spain are certainly markets to watch.

CGI: France is a particular jurisdiction to watch, and following regulatory changes do you consider this a key European market?

MZ : Absolutely. France is a key element in our European strategy. While it is closed to mobile gambling, we are active in the market through Spiral Solutions France – a subsidiary we established in June last year. We will continue to monitor it closely for opportunities and developments.

France is also significant for the influence it holds.

Other markets considering regulation will look towards France as an example of how to establish a compliant, legitimate and prosperous egaming market.

CGI: You see regulation as a key to further expansion of the industry?

MZ : Regulation is an ongoing trend that has altered the shape of the industry forever. We’ve passed way beyond the point of no-return. The movement that has begun is taking place across Europe and will continue beyond its borders. Regulation is the key.

CGI: What has been achieved with Spin3’s Pulse Interactive partnership?

MZ : Our partnership with Pulse Interactive is progressing fast. Its extensive experience in the US state lottery market is proving invaluable as we meet with federal and state lottery providers and show them how mobile can extend their reach and grow new revenues. For now, watch this space – I hope to be able to provide more details very soon.

CGI: Is your first sportsbook app having an impact?

MZ : It’s a really exciting time. We have released a beta version to selected players and the responses have been outstanding, with very strong feedback on the usability features, live betting, integrated games and other unique features. We expect to launch commercially within the next few weeks.

CGI: Are apps becoming a vital aspect of attracting players?

MZ : The growth in downloadable apps as a means of delivering content is a major breakthrough, with app stores from Apple and Google in particular acting as a key distribution channel. There is an ease of downloading games and content that had been one factor that has held back the industry in the past. Any mobile gaming provider Casino & Gaming International I 61

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certainly intend to continue to expand the integration of social features into our products in the future.

CGI: What effect do poker tournaments have on player interest in mobile gaming?

MZ : It’s a question we get asked all the time. At the moment we are less focused on the poker side, as we see stronger potential in other games and applications.

Currently, we do not see a connection between poker tournaments and our mobile applications.

CGI: Security and protection for players with greater mobile use is something you regard as paramount?

MZ : Absolutely. This is a key factor in gaining the credibility and acceptance of our players. We apply cutting-edge security measures and methods to our systems and they have been tested extensively by independent third parties, including eCOGRA. This is an area we have invested heavily in and will continue to do so in the future.

CGI: In a nutshell what is the defining innovation for the near future of mobile gaming?

that doesn’t utilise app stores would be missing out on the opportunity to get their games and content in the single most visited and effective shop window in town.

MZ : From a technology perspective, it is the mobile handsets and operating systems. From a business side, the app stores provide the perfect distribution channel and new banking methods ensure that money can flow quickly, and securely. Thanks to these innovations and more, the mobile opportunity is massive and clear to see.

CGI: There are very recent innovations such as tracking betting patterns. Is the analytical tools area in your sights?

MZ : We have a very powerful back office Business Intelligence (BI) and analytics module which is part of our overall mobile gaming platform. We believe they sit together, and do not intend to develop purpose-build BI tools as a standalone product line.

CGI: But handling increasing quantities of data efficiently is a key concern?

MZ : Yes that’s right. This is true for every egaming operation. The ability to effectively, securely and quickly process huge amounts of data is a basic requirement; and a key success factor for any egaming business. If you do not handle customer data effectively - or worse securely you won’t be in business for long.

CGI: Social gaming no doubt has a particular potential you expect to unfold in the immediate years ahead?

MZ : Yes. In fact, we already have a social element through a Facebook connect link - to one of our mobile applications available on the app store. It’s a really interesting area and one that the industry is keeping a keen eye on. People are increasingly connected and keen to share their lives on social networks like Facebook. We 62 I Casino & Gaming International

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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AVOIDING PITFALLS, MEETING EXPECTATIONS AND ENSURING PERFORMANCE

BY DAVID FLOWER

Many an operators’ road to success has been achieved by recognising early on the need to avoid a number of fundamental mistakes. In the sharply competitive mobile gaming industry operators are highly conscious of how thoroughness, knowledge and a wellhoned business antenna achieve the desired results. As ever, the primary consideration is the customer, and ensuring their expectations are met – and custom retained – is critical to any strategy for business growth.

>>

little over ten years ago very basic Web browsers began to appear on mobile phones. These primitive browsers, combined with the lack of suitably formatted mobile content held back the adoption of the mobile web. Fast-forward a decade and the mobile revolution is truly moving ahead. According to Morgan Stanley, the volume of mobile users will outstrip the number of desktop Internet users by 2014. And by 2011, Nielsen expects the US market will own more smartphones – with advanced browsers and connectivity – than ordinary feature phones.

More specifically to the gaming sector, a study released

by Nielsen in September 2010 found that online gambling in the United Kingdom alone rose by 40 percent in the last year.

The numbers show that there have been about 3.2 million more people in Britain who have logged onto Internet gambling sites in the past year, than there were the year before.

Mobile gaming has changed the way people think about this increasingly popular pastime. According to Daniel Ashdown, a research analyst with Juniper Research, mobile gaming has a widening demographic both in terms of age and gender, and given the ubiquity of the mobile phone, has a very healthy future. Only a short time ago to participate you had to physically go to the casino, the race track or the high street betting shop. Today’s mobile Web has changed all that: you can place bets on a poker game, play the odds at a sporting event or even spin the virtual roulette wheel race from wherever you happen to be.

A recent interview (Sunday Times Magazine, 3rd April 2011) with Paddy Power, the face of Ireland’s eponymous bookmaking chain, underlined just how far the online gaming industry has come. Paddy Power is Ireland’s biggest

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ecommerce company and last year it became the first bookmaker in the world to have its own iPhone app. On its first day, it was the most downloaded free app in Ireland and by day three it was the fifth highest in the UK. Latest figures show that in 2010 nearly £100m was bet with Paddy Power that, according to Mr Power, means that in a very short time mobile betting is doing to online betting what online betting did to traditional betting.

This view is echoed by Sabin Books, chief marketing officer at BETNOW. He was recently quoted as saying “mobiles are a constant companion and as such there’s no doubt in my mind that mobile betting will take a significant share of bookmaker’s turnover in the near future, particularly for in-play betting.”

The rapid adoption of the mobile Web and connected applications is driven by the proliferation of smartphones (by the end of 2011 Nielsen expects to see more smartphones in the US than feature phones), unlimited data plans for fast 3G networks and high quality mobile optimised content. Yet device proliferation, conflicting standards, limited tools and lack of established best practices combine to produce an environment where delivering great mobile experiences is at best, difficult.

But as mobile opportunities increase, so do customer expectations. Unfortunately, many companies racing ahead with the mobile revolution are stumbling across a number of obstacles along the way to their goal: a consistent mobile web presence that satisfies customers and encourages business growth.

This article addresses the top five mobile web experience mistakes you may face on the road to success – and a model for ensuring performance to keep your business in the running.

64 I Casino & Gaming International

1. YOUR CUSTOMERS ARE FROM MARS, BUT YOU’RE FROM VENUS Do you know your mobile customers – really? Without genuine insight you might be tempted, for example, to offer mobile users the regular website that works well with you Internet customers. But most smart and feature phones cannot support the complex, high-bandwidth Flash and Ajax applications at the heart of your site. Further, your feature and content rich website can pose a range of usability, navigation or even screen real estate issues on hand-held devices.

Should you rely on your regular site, offer an optimised mobile website or create a mobile application? In order to arrive at the right answer – and craft the most effective solution – you need to know: G

G

G

G

G

G

What devices do your customers use? Blackberries? iPhones? Droids? Something else?

What networks are they on? What speed do they deliver?

What are their usage patterns? Can you anticipate the peaks?

What about locations? Can you deliver a consistent performance from Bangkok to Bangalore?

What is the context of their use? Are they in a hurry (if it’s in-play betting – probably), are they in the stadium watching a game, are they waiting in a queue…?

More importantly can customers complete key transactions such as placing a bet, while they’re on the move, with one free hand, in areas with spotty Internet connectivity?

Customers are going to access your mobile service in the real

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>> MOBILE USERS EXPECT TO MAKE SACRIFICES – IN CONTENT DEPTH AND ITS PRESENTATION – IN EXCHANGE FOR ANY PLACE, ANY TIME CONVENIENCE. BUT THE ONE THING THEY WON’T SACRIFICE IS SPEED: 58 PERCENT OF MOBILE PHONE USERS EXPECT WEBSITES TO LOAD AS QUICKLY ON THEIR PHONES AS ON THEIR DESKTOPS. WHILE THE DESKTOP USER MAY BE CONTENT TO SURF THE WEB, MOBILE USERS TYPICALLY USE THEIR DEVICES FOR TIME-SENSITIVE NEEDS, SUCH AS (IN THE CONTEXT OF GAMING) CHECKING BETTING ODDS, OR JOINING A LIVE POKER GAME. TIME SENSITIVITY SETS THE EXPECTATION AND IF YOU FAIL TO MEET IT, YOU’LL PAY A STEEP PRICE. << world – their world. You have to understand what that world is before you offer a mobile website, application or SMS initiative that can succeed within it.

achieve. Victor Chandler’s mobile website is a great example: the site uses a simple layout that ensures the ‘priority’ elements of its site fit on a single mobile screen.

2. YOUR MOBILE CONTENT IS OUT OF SIGHT – AND OUT OF MIND As in, if your customers can’t find your mobile website, you’ve lost their business. For starters this means automated redirects that recognises mobile users and instantly leads them to the appropriate mobile content. And then when they reach the site ensure that you are providing content and functionality that supports what your customers are trying to

3. YOU’RE NOT READY FOR PRIME TIME It’s not good enough to be prepared for ‘ordinary’ business conditions. After all the expense of driving traffic and promoting your mobile service, you have to be ready for peak traffic conditions when interest – and expectations are at their height.

When your mobile site is overwhelmed by extraordinary activity, potential customers face unbearably slow load times

Your donation DOES make a difference!

“I spent my first two years at university betting and playing fruit machines. I was out of control. I used to go to the Money Shop and sign cheques for £50 cash that I did not have in my bank. I would sneak around hoping friends and family would not see me gambling. I was fully aware of the shame I felt at my problem.

When I finally graduated and secured a job my starting wage was £24,000. I was £25,000 in debt by this point on credit cards alone. I probably owed a further £25,000 on college and student loans etc. I managed to secure a job on a very good salary and made a good bonus every year for the last three years. But I lost £30,000 in three months. That was when I found GamCare.

I'm so glad I did - it was nice to find many others with similar problems and good to share experiences. In many ways, it has saved me from hitting rock bottom.

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Please show your support and help us raise £5million by April 2012.

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>> A RECENT INTERVIEW WITH PADDY POWER, THE FACE OF IRELAND’S EPONYMOUS BOOKMAKING CHAIN, UNDERLINED JUST HOW FAR THE ONLINE GAMING INDUSTRY HAS COME. PADDY POWER IS IRELAND’S BIGGEST ECOMMERCE COMPANY AND LAST YEAR IT BECAME THE FIRST BOOKMAKER IN THE WORLD TO HAVE ITS OWN IPHONE APP. ON ITS FIRST DAY, IT WAS THE MOST DOWNLOADED FREE APP IN IRELAND AND BY DAY THREE IT WAS THE FIFTH HIGHEST IN THE UK. LATEST FIGURES SHOW THAT IN 2010 NEARLY £100M WAS BET WITH PADDY POWER THAT, ACCORDING TO MR POWER, MEANS THAT IN A VERY SHORT TIME MOBILE BETTING IS DOING TO ONLINE BETTING WHAT ONLINE BETTING DID TO TRADITIONAL BETTING. << and a very unwelcome message: “We’re currently experiencing high traffic volume. As a result we’re not able to process your request. Please try again.” Will they? Not likely.

Recent research revealed that 50 percent of mobile web users had had a problem when accessing a website via a mobile device. And of that number, 40 percent said they would likely visit a competitor’s website instead. Can you afford for them to do that? What if they don’t come back?

4. YOU’RE FALLING SHORT, WAY SHORT, OF EXPECTATIONS Mobile users expect to make sacrifices – in content depth and its presentation – in exchange for any place, any time convenience. But the one thing they won’t sacrifice is speed: 58 percent of mobile phone users expect websites to load as quickly on their phones as on their desktops.

While the desktop user may be content to surf the Web, mobile users typically use their devices for time-sensitive needs, such as (in the context of gaming) checking betting odds, or joining a live poker game. Time sensitivity sets the expectation and if you fail to meet it, you’ll pay a steep price.

While performance issues may be complex, the consequences are simple: there’s an unmistakeable correlation between increases in mobile service load times and increases in end-user abandonment.

With social media as a readily available, virtual loudspeaker disappointed customers are not content to suffer silently. Instead, they’ll happily share their frustrations with (literally) millions of other social media users, slamming your brand and your revenues.

5. YOU DON’T SEE YOUR MOBILE SERVICE FROM YOUR CUSTOMER’S PERSPECTIVE It’s too easy to feel warm and cosy behind the comforts of your firewall where everything from Web servers to load balancers appear to be running okay; but that’s not how your customers see things at all. The service they receive (or not) comes as the end of a complex mobile Web application delivery chain that includes major ISPs, third party services, content delivery networks, local ISPs, mobile carriers, mobile devices and more. Problems at any point in this chain will result in frustrations your customers may experience.

As many as two-thirds of all performance failures occur outside the firewall. Yet no matter where the problems arise, the blame – and the consequence – will fall on you. That’s 66 I Casino & Gaming International

why you need to ask the kind of questions that expose your mobile performance the way your customers experience it: G What do customers want from your mobile service?

G Where do customers access your service?

G How do customers use your service?

Unless performance is addressed the mobile Web runs the risk of becoming much like the traditional Web of 10 years ago – slow and unreliable; a nascent opportunity with vast potential yet to be fulfilled. Businesses looking to exploit the full marketing power of the mobile Web must leverage best practices and put performance management squarely at the top of their to-do lists. CGI

DAVID FLOWER David Flower is vice president of Compuware's newly created APM division, which combines the company's leadership in application performance management with Gomez's web application performance network. David's remit is to implement corporate strategy, build new business, develop staff to meet future challenges, and ensures that Compuware's APM division remains competitive in the marketplace.

David joined Gomez in March 2007 prior to it being acquired by Compuware Corporation in 2009. As Vice President of Gomez's EMEA operation he extended Gomez's size and market leadership in the region. David was previously Group Vice President, International Operations at MapInfo Corporation, where he was responsible for 400 staff and revenues of $85m. During his tenure with MapInfo, he was directly responsible for growing EMEA revenue to $60m per annum, from less than $3m when he joined the organisation. Prior to his 12 years with MapInfo, Flower was the UK Commercial Manager for Lotus Development (now IBM) and held director-level positions with Ventura Software Inc. (Xerox Corp.).

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BRAND BOMBARDMENT: OF PREMIERSHIP, PURSES AND PROMOTIONS

BY PHIL FRASER

With online bingo entering the nation’s consciousness as an ‘acceptable’ leisure choice due to a wide range of brands appearing on the mass market medium that is TV advertising, the bigger online sites are competing with other entertainment. Meanwhile, bingo players in general are becoming more switched on to the network model in particular. Given that social interaction has always been there in the online bingo market, this is now moving to Facebook and Twitter. How this will all develop is being eagerly observed.

>>

hen looking at the current online bingo market there are in excess of 320 different brands out there. Whilst putting this article together I was trying to think about another consumer market that also had in excess of 300 different choices. Could you imagine 300 different types of breakfast cereal on offer at the supermarket? Or 300 types of detergent? Even the car market, which probably has more than 300 different types of vehicle on offer, does not have 300 brands available. Is such a situation either comparable or indeed economically viable anywhere in the commercial world? I then fell upon the comparison of the UK's national obsession; football (or soccer for those that are reading this in the US).

In the UK there are 92 professional clubs in the top four divisions. At the top of the pile are world recognised clubs ('brands') like Manchester United, Chelsea, Arsenal and until recently Liverpool, followed by other internationally renown clubs (Tottenham, Manchester City, Aston Villa etc) all the way down to the smaller, local clubs such as Hereford, Torquay etc. Underneath these there is an enormous pyramid of professional, semi professional and amateur clubs. As we descend these levels we reach ever smaller clubs. To get to the point where we are comparing around 300 'brands' (ie football clubs) you need to go down to level eight of this pyramid, to something known as the 'Evo-Stik League First Division North'.

Whilst researching this piece, the team at the bottom of this league were called Leigh Genesis. You have probably never heard of them until now. Leigh Genesis had just lost their last home game 0-8 in front of a crowd of 58 people. Is it happens Leigh is in Greater Manchester and their ground is just 16 miles away from Old Trafford, home

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>> WITH ONLINE BINGO NOW ENTERING THE NATION'S CONSCIOUSNESS AS AN 'ACCEPTABLE' OPTION AS A LEISURE CHOICE DUE TO A WIDE RANGE OF BRANDS APPEARING ON THE MASS MARKET MEDIUM THAT IS TV ADVERTISING, THE BIGGER ONLINE SITES ARE INDEED COMPETING WITH OTHER ENTERTAINMENT. WITH THIS IN MIND ONE CAN ARGUE THAT, FOR THE BIGGER SITES, THERE MAY BE NO OTHER WAY OTHER THAN 'UP' FOR THIS SECTION OF THE MARKET. IT MAY WELL BE THE CASE THAT THE BIG GET BIGGER AND THE SMALL GET SMALLER. << of Manchester United. Taking this example back to the online bingo market, here we see we have two 'brands' (football clubs v online bingo sites) competing in the same marketplace (football v online bingo) selling the same product ('come and watch us play' v 'visit our site and play online bingo) and geographically in the same location (Greater Manchester v the internet).

The question however is "Are Leigh and Manchester United actually 'competing' with each other?" Well, you may argue that the 58 people that turned up at Leigh's Crilly Park may have considered going down the road to watch Premiership football, but conversely the 70,000 that turned up at Old Trafford probably don't even know of the existence of Leigh Genesis, never mind consider going to the match.

So what has this got to do with the UK online bingo market? My point is that, as with football, in online bingo there are huge brands and there are tiny brands. An online bingo player who plays at the 'big boys' sites may not even be aware of the myriad of tiny skin sites that fill the marketplace. For Manchester United, Chelsea, Arsenal, Liverpool read Tombola, Sun, Foxy, Jackpot Joy. For Leigh...well you can take your pick from the literally hundreds of 'me too' skins on the various white label networks that now exist.

My personal view is that the bingo market now splits into 'premiership' brands competing with each other, medium size 'championship' brands (a mix of big brands that should be doing better and smaller brands doing well) competing with each other and then 'the rest'. The big brands have the budgets to appear on TV, the standalone size to generate huge jackpots and the structure to offer top quality player support and promotions. The skins and white labels have no capability to offer any differentiation and thus merge into a mass of grey mediocrity.

And with the online bingo target audience universe, in my opinion, fast approaching saturation point, how long before there aren't enough players to maintain the major brands? Having said that, it probably isn't the number of players that will 'max out' but the funds they have to play with. Many online bingo players play at a multitude of sites. There cannot be that many 'online bingo virgins' still out there, can there? Therefore, the advertising and marketing that we now see from the major brands strategically has to be a mix of recruitment and retention, fighting now over the share of purse of existing players rather than bringing in new players.

In 2010 we saw the closure of a brand that launched with big budgets in a comparative blaze of glory. Amuso came to the market with a good product, and a point of 68 I Casino & Gaming International

differentiation. Less than a year after it opened, it closed. I think we are going to see more sites like Amuso fail within the first 12 months as the squeeze on players' pockets from more and more competition becomes tighter and tighter. And the major operators are also adding to that squeeze by launching more additions to their own brands.

Last year saw the owners of Wink Bingo launch two products (RedBus and Tasty), Cashcade launching Rollover Bingo to add to Foxy Zero and Cheeky, Moon Bingo launching Polo Bingo and Gossip Bingo and the owners of Costa Bingo launching Sing Bingo last year and City Bingo this year. That's just a small selection. The battle at the top is for share of purse: "if you don't want to play at our brand then why not play at our sister site rather than a competitor's".

Add to this the continued flow of new sites on Dragonfish and Cozy Games' networks, the introduction of the Bingo Entertainment Network to the UK market and the growing influence of the re-emerging Parlay Network and 2011 is going to be just as competitive, if not more so, than the previous years.

Bingo players in general are becoming more switched on to what's happening, specifically the network model.

Social interaction, through the chat rooms, forums and chat like MSN Messenger, has always been there in the online bingo market. This is now moving to Facebook and Twitter and the word of mouth that once fed the industry is likely to become the downfall of many a brand in the not too distant future. If products don't differentiate or offer entertainment and value then they will just wither away.

Although during the era of free Bingo from 2009 to 2010 it was initially successful, the model has now become swamped with 'bottom feeders' that are simply looking for free bingo, with no intention of depositing money. This now makes the model more difficult to make profitable.

The free bingo market is catered for by products like FreeBingo.co.uk (http://www.freebingo.co.uk), which have a different model and encourage free play. The 'free play as a recruitment tool' model seems to have lost its position as flavour of the month to be usurped by a mix of good old fashioned deposit bonus (often dressed up as free money) and, for the bigger sites, innovative promotions like 'win a car'(Sun Bingo, Moon Bingo, Wink Bingo).

In 2011 we will continue to see sites launch, both straight into 'the Premiership' if they have the correct backing, or limping into the Evo-Stik League First Division North, unseen and uncared for. Both with survive, but on different budgets, forecasts and profits. As with football, the battle at the top of the Premiership will be fought on

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>> BINGO PLAYERS IN GENERAL ARE BECOMING MORE SWITCHED ON TO WHAT'S HAPPENING, SPECIFICALLY THE NETWORK MODEL. SOCIAL INTERACTION, THROUGH THE CHAT ROOMS, FORUMS AND CHAT LIKE MSN MESSENGER, HAS ALWAYS BEEN THERE IN THE ONLINE BINGO MARKET. THIS IS NOW MOVING TO FACEBOOK AND TWITTER AND THE WORD OF MOUTH THAT ONCE FED THE INDUSTRY IS LIKELY TO BECOME THE DOWNFALL OF MANY A BRAND IN THE NOT TOO DISTANT FUTURE. IF PRODUCTS DON'T DIFFERENTIATE OR OFFER ENTERTAINMENT AND VALUE THEN THEY WILL JUST WITHER AWAY. << TV with big budgets, hopefully with flair and entertainment, along with a smattering of glamour and glitz.

Maybe the finger of blame for this saturation should be pointed at the software providers and the network operators. Almost on a weekly basis new online bingo sites are launching into the market, mainly on existing network propositions. This brings nothing new to the market for the player, apart from maybe a different coloured logo in the top right hand corner of the page.

Many of these new sites are under-funded and under marketed, relying too heavily on the 'no cost' model of affiliate marketing.

However, with there being a seemingly virtually nil cost barrier to entry, there is nothing to stop new entrants joining an already over-crowded market place. And with a business model built on an investment of zero entry cost and zero marketing cost, one has to ask 'well why not?' In defence, the software providers and network operators will argue that there will be a Darwinian survival of the fittest, whilst hoping one of these start ups will become the next brand to 'cut the network umbilical cord' and launch on their own. The real decision will be made by the playing public. If they see entertainment, fun and differentiation they may well add any new site to their 'repertoire' of bingo sites, with it taking a share of purse from another site. If on the other hand they see repetition and regurgitation they will reject such sites.

To continue the football analogy, let's move away from the relegation battle and go back to the top of the league.

It is here that the focus is, and will be for the foreseeable future, the aforementioned "entertainment, fun and differentiation", with much of the focus being on the final point, differentiation. Yes many sites use the same software but the way they implement it, the way they market it and the way that they add to it is what will make players play, and stay. In a previous article I stated that the game of bingo's strength was its simplicity but also it's weakness - there's not a lot you can do to the game of bingo to 'sex it up' or change it. 90 ball, 75 ball, 80 ball and even 30 ball. One line, two lines, three lines, coveralls, patterns. Once you have been through these alternatives there isn't a great deal more that you can do the game. So it will be 'other stuff' that brings differentiation; additional games, guaranteed jackpots, player promotions and prizes, brand positioning & strategy, CRM. The list goes on and on.

But 'brands' like Chelsea, Arsenal, Manchester United

et al don't only see themselves as competing with each other for the fan's pound (or in most cases the fan's ÂŁ100); they see themselves as competing in the wider entertainment market. Ok, you won't hear someone on a Saturday morning saying 'shall I go to Puccini at the Royal Albert Hall or Millwall at The Den', but the money spent at football is now seen to come out of a family's entertainment budget. The same is true with online bingo.

With online bingo now entering the nation's consciousness as an 'acceptable' option as a leisure choice due to a wide range of brands appearing on the mass market medium that is TV advertising, the bigger online sites are indeed competing with other entertainment. With this in mind one can argue that, for the bigger sites, there may be no other way other than 'up' for this section of the market. It may well be the case that the big get bigger and the small get smaller. Once again, the comparison with football is perfect.

Looking forward to the rest of 2011 and beyond the expansion of the market, both in terms of pace and breadth will depend on a number of factors, including but not limited to i) ongoing software development within the online bingo industry, ii) brands (and specifically mega brands) that may or may not enter the market - Tesco Online Bingo anyone?), iii) integration with social media channels iv) changes in the online bingo delivery vehicle ibingo on the ipad?), v) alternative leisure and/or soft gambling opportunities that may arise, and vi) the birth or death of mobile gaming. CGI

PHIL FRASER Phil Fraser has been involved in the online bingo industry since its very early days of 2000. He has long been recognised as a leading expert in the online bingo market and chairs the annual 'Bullet Business' Bingo Conference. Phil has spoken at many online gaming conferences around the world as well as appearing on BBC radio. He is a respected commentator on online bingo, with many articles appearing in both print and online. WhichBingo: www.whichbingo.co.uk.

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GROWTH, STABILITY AND COMMITMENT IN AN ENLIGHTENED EGAMING HOME INTERVIEW WITH GARTH KIMBER

g

The attractions of egaming in the Isle of Man, particularly through experience of host industry commitment, are clear to operators. From financial considerations through to technological and service infrastructure development, the Island has become an established, enlightened and enterprising location for some of the best known egaming companies, including Microgaming and Playtech.

>>

C

GI: What egaming growth trend has the Isle of Man sustained since it embarked on building this sector?

GK: The Island’s egaming sector has grown steadily over the last 4-5 years both in numbers of licences and also in nonlicensable and peripheral gaming sector business. We view all elements of the industry as important in building a sustainable industry so we have worked hard at building more than just a licensing jurisdiction.

Presently we still see double digit growth in jobs, on Island spend and licensing and duty revenue to Government year on year. It obviously becomes harder to sustain a high rate of growth as the sector grows but we are not seeing a slow down and have a record number of companies in the licensing process at the present time.

CGI: As the eGaming share of the Island’s economy advances there is an effect on other industries?

GK: The egaming sector is still a relatively small part of the Island’s economy (up to five percent) but is still significant not least because of egaming businesses spending money on other services within the economy. In addition to the more obvious services provided by data centres and software houses many professional services companies in legal, accountancy, recruitment, corporate services and insurance for example have added egaming to their portfolios.

This diversification not only gives the services new opportunities locally but enables the Island to offer these them to egaming businesses based elsewhere in the world.

m

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CGI: How do you view the level of egaming business presence on the Isle of Man to date?

GK: I am very encouraged by the number of businesses wanting to set up a genuine presence on the Island and often find that this happens gradually after they have had firsthand experience of what the Island has to offer. Delivering on our promise has played a big part in securing large scale presence and commitment from market leaders such as Pokerstars, 188BET and Microgaming for example.

CGI: Has there been a significant impact on jobs and investment?

GK: Spend in the local economy was approximated at £125m in 2009 and we estimate there is currently the equivalent of approx 600 full-time jobs in egaming which is out of a working population of just over 40,000 people. Both figures are significant and are predicted to continue growing.

CGI: As consolidation of the egaming industry continues are you finding it easier to engage and attract new cutting edge egaming technology companies?

GK: Never a day goes by when we don’t come across a new development, whether it is in terms of the games available or the technology providing them. The Island has worked hard at positioning itself as somewhere easy to do business which is now resulting in interest from those reinventing models and pushing boundaries. Companies such as Viaden Media and Mahjong Logic have found us to be commercially responsive with regulation to protect but not restrict.

CGI: With a developing infrastructure does the technology base increasingly provide an easily adaptive environment for newcomers?

GK: We have a concentration of some of the industry’s leading technology and data hosting expertise in the Isle of Man which has been invaluable in continuing to meet the requirements of this dynamic industry. The Island has been a test bed for emerging technologies in the past and continues to keep a step ahead. One of the latest developments we are seeing is the demand for Cloud Hosting which throws up new challenges in terms of regulating by location. We’ve been able to work together with the local technology providers and the Gambling Supervision Commission to come up with a solution which enables companies to benefit from this new approach but also to keep the regulator comfortable.

CGI: Does this help the Island to push technology boundaries and to be seen as a centre for new ideas, products and business development?

GK: With a number of gaming software companies based on the Island we are definitely a centre for innovation. Microgaming and Playtech are obviously well known but smaller companies such as Viaden and Cayetano Technologies are also developing new games and new methods of delivering them to players.

CGI: Do Corporate Service Providers (CSPs) have a significant role in egaming development?

72 I Casino & Gaming International

GK: We have a number of Corporate Service Providers in the Island who are experienced in working with egaming businesses and they do play an important role, particularly in providing services related to licence applications and getting a business up and running. We have some excellent CSPs and individuals locally who take a long term view of the opportunity presented by egaming and who work in collaboration with such businesses to help them spread their wings on the Island over a period of time.

CGI: Have recent initiatives regarding education and training proved valuable?

GK: The delivery of the Foundation Course in eGaming was about supporting local employers to find the staff they need and improving profile and understanding of the industry amongst the local workforce; it’s been very successful on both fronts.

Several attendees of the course have now secured work in egaming locally and the feedback gained from both the delegates and the participating gaming employers has been overwhelmingly positive.

This holistic approach to developing the industry is indicative of the Government’s general approach to business development.

CGI: Is the strategy to encourage egaming companies to be permanently based on the Island winning through?

GK: It is, and the reason is that we work closely with industry partners to ensure that wherever possible the Island’s environment closely matches the needs of egaming businesses. It’s equally important though to appreciate and be honest about those aspects that maybe better serviced elsewhere. Several companies, Microgaming and more recently Celton Manx (SBO Bet) for example, have found the Island a desirable location for their purpose built headquarters. There are also companies who have a much smaller presence on Island, sometimes with just the minimum regulatory requirements but their contribution to the industry and economy is valued and we actively support them too in growing their businesses.

CGI: To what extent does company interest in the Isle of Man actually follow through?

GK: Setting aside the enquiries from individuals with ‘next big thing’ but unfortunately no experience in egaming and no money......I’d estimate that 80 percent of the businesses who visit the Island go on to make a commitment to setting up here.

CGI: Would you say the regulatory and egaming developments in Europe are an opportunity but also a challenge to the Island?

GK: Definitely, a challenge because no-one really knows what will happen next and it’s all very slow which can prevent large corporations from wanting to make any big decisions until uncertainty is resolved. An opportunity, because we have a proven track record in working with other jurisdictions globally – it’s what we are good at and we genuinely see a role for the

At a • • • • • • • • •

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W th th Es

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Isle of Man in providing a high level of consistent and experienced regulation.

CGI: And does White Listing continue to offer a decisive value for companies on the Isle of Man? GK: Access to the UK market via their White List continues to be an important decision making factor for licensing in the Isle of Man but is becoming less so as companies look to tap into less saturated markets globally.

CGI: Have payment options been of value to Isle of Man licensed egaming companies operating in other jurisdictions, especially Asia?

GK: Difficulties with payments is a constant challenge for most gaming businesses and it’s something which we hear about time and time again from companies based in Asia and Central/South America. Banks in general are reticent about egaming but being licensed in a high quality jurisdiction helps a lot! Although banking and payment services are already available to companies licensed in the Isle of Man we are constantly working at increasing the choice of services available for our gaming businesses. We play an active role in developing understanding in banking of how well some of these businesses are run and regulated, which is a major part of the battle.

and Inspectorate have always operated separately, even from different buildings. The new regulation furthers this by making the GSC a Statutory Board working to its own mandate rather than that of a Government Department, which was previously Treasury.

There won’t be any fundamental changes to the way that regulation is performed; however, it further demonstrates the highest standards of independent regulation in the Isle of Man. The Development Team continue to work closely with the GSC in order to ensure that the overall aims and objectives are in line with economic strategy; and that the benefits for Isle of Man-based companies are realised without compromising on regulation.

CGI: What expectations for egaming on the Island do you have looking ahead and for the health of the Island’s economy in general?

GK: We are very fortunate in the Isle of Man to have weathered better than most economies recently; the Island is yet to record recession and continues to show positive growth in most areas of its diverse economy and in egaming particularly. Last year was our busiest year yet in terms of licensing and assuming that we can overcome the challenges of European regulation, I’m confident that we’ll continue to grow the number of licensed gaming businesses based on Island and more significantly other areas of the sector too.

CGI

CGI: In your opinion has the Island’s reputation over time helped to diminish the ‘tax haven’ perceptions that particularly emerge in adverse economic times?

GK: I sincerely hope so as we work hard to ensure people understand that whilst we have a low tax economy, our systems and working methods are in line with many larger economies. We have a large number of Tax Information Exchange Agreements (TIEAs), are White Listed by the OECD and in the gaming area, are constantly talking and working with other regulators.

CGI: Equally, good standards and quality is important to your licensing criteria and thereby encouraging responsible entrepreneurs?

GK: The Isle of Man has long stood for quality. With AAA ratings from both Standard & Poor and Moodys, and White List status from the OECD, it’s paramount that we apply equally robust regulation to whatever industry we’re dealing with. Protecting customers is key and it’s in this area particularly that our approach to egaming sets us apart from many other jurisdictions. Whilst we welcome entrepreneurs and new ideas our GSC will always be looking at the game and the business model from the customer’s point of view. As Internet fraud grows, more and more customers are going to be looking for a mark of regulation or seal of approval that they can trust. The Isle of Man can give this comfort.

CGI: Why is the 2010 Gambling Supervision Act’s reinforcing of DED and GSC separation considered a positive move?

GK: The Development Team (Department of Economic Development) and the Gambling Supervision Commission 74 I Casino & Gaming International

GARTH KIMBER As the 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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GAMBLING, LUCK AND SUPERSTITION: A BRIEF PSYCHOLOGICAL OVERVIEW

BY MARK GRIFFITHS

For what is generally accepted as almost endemic to many a gamblers' disposition - the ideas, practices and responses that combine gambling, luck and superstition - there has been surprisingly little scientific research in this field. As an indication of what can be undertaken subsequently, an intriguing picture emerges of how this affects players' character and motivations as gamblers according to the type of gambling engaged, including its relationship to chance and skill.

>>

ambling, luck and superstition have long been inextricably intertwined yet there has been surprisingly little empirical research. Luck has a mysterious quality and the degree to which people believe in it has profound personal, political, and financial outcomes (Griffiths, 2006).

Historically, luck was considered a gift of the gods, to be given or withheld at their whim. Despite the relative lack of research, there are countless everyday examples of the association between gambling and luck including the use of lucky charms to the expression of lucky phrases. In fact, it could perhaps be argued that there are not many gamblers who don't subscribe to some sort of belief in fortune.

Nowadays, despite statistical laws governing coin tossing, dice throwing, or the spin of the roulette wheel, many gamblers still believe the odds can be overcome by having â&#x20AC;&#x153;Lady Luckâ&#x20AC;? on their side.

So why is that the case? At a very basic level, regular gamblers simply want a winning edge. For this reason they may often enhance their personal power through the use of amulets, charms, and even ritual spells to bring favour to their chosen behaviour. Charms, amulets, and talismans abound in virtually all civilisations ancient and modern, testifying to the long history of the human effort to control chance by magical and symbolic means.

As already noted, the science and psychology of luck have received relatively little empirical attention. Over 20 years ago, Wagenaar and Keren (1988) noted that the notion of causelessness is so alien to us that, in the absence of a known cause, we tend to attribute events to imaginary causes like luck and chance. Being lucky and winning while gambling is often perceived as very similar.

G

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Furthermore, in the minds of many people, luck and chance often seem to act as real causes. Such notions are defined in terms of absence of knowledge on which the prediction of future events could be based. The throw of a dice, the spin of a slot machine or roulette wheel, are considered to be chance events because there is insufficient knowledge to predict the outcome – not because they have no physical causes.

Probability is another way of expressing the absence of prediction knowledge. It suggests that chance operates as a fair and balanced distributor that produces all possible outcomes with equal frequencies in the long and short run.

This promotes the ‘gambler’s fallacy’ in which people expect the laws of probability in a large population to be represented in much smaller populations. This has been investigated under many different guises from a psychological perspective including the representativeness principle (Kahneman & Tversky, 1972), the law of small numbers (Tversky & Kahneman, 1971), the sequential response bias (Wagenaar, 1972), and subjective randomness (Wagenaar, 1970).

When people experience long winning or losing streaks while gambling they then evoke what they believe to be a second causal factor – luck. While luck tends to even itself out over the long run, people naturally focus on the short run and on their fluctuations. Because gambling involves randomness, people will often blame or chalk up their luck to some random event that coincided with how they fared at a certain gambling session. A lucky person is someone who wins many times in succession. The same will happen when it is a gambler’s lucky day with their lucky number, lucky colour, lucky table and/or lucky dealer. Most of these ‘lucky’ events are little more than ‘illusory correlations’ such as noticing that the last three winning visits to the casino were all when the gambler wore a particular item of clothing or it was on a particular day of the week (Griffiths, 1994).

In short, “good luck” brings longer sequences of winning and “bad luck’ brings longer sequences of losing.

People tend to assume that these winning or losing streaks are operating independent of chance. Taken from this perspective, luck and chance are two different but occasionally interfering causal factors that influence events.

Research carried out in the 1980s by Wagenaar and his colleagues (Wagenaar, Keren & Pleit-Kuiper, 1984; Keren & Wagenaar, 1985; Wagenaar & Keren, 1988) consistently showed that luck and chance were not the same thing. When gamblers were asked to assess the degree to which the outcome of a gamble is determined by chance and skill they found it almost impossible until a third dimension of luck was introduced. For instance, Wagenaar and colleagues studies’ have asked participants to assess how much chance, skill, and luck is involved in casino gambling and football score prediction. The same question was also asked in a more recent study of bingo playing by Griffiths and Bingham (2005). The results of the three studies are presented in Table 1.

Wagenaar and Keren (1988) concluded that casino gambling is perceived as involving more luck than the prediction of football scores. Their research also indicated that people believe luck cannot be forced. A person has to wait for luck to happen suggesting that it is similar to chance.

However, a person must utilise their luck wisely when they get it (e.g., the person must be aware that it is their lucky day) suggesting that it can also be similar to skill. The special 76 I Casino & Gaming International

Table 1: How much skill, chance and luck are involved in casino gambling, football score prediction and bingo?

Casino Gambling

Chance

Skill

Luck

Participants

18%

37%

45%

22

27%

44%

29%

104

27%

0%

73%

412

[Keren & Wagenaar, 1985)

Football Score Prediction [Keren & Wagenaar, 1987]

Bingo [Griffiths & Bingham, 2005]

nature of luck explains why it is difficult to attribute gambling outcomes to chance or skill only.

Once people believe that an abstract concept such as luck can (in principle) influence behaviour, gambling situations provide all the conditions for strong luck perceptions. The fundamental difference between chance and luck is that chance is determined by outside factors over which a person has no control, whereas luck may provide at least the illusion of control (Langer, 1975). In essence, the difference may be interpreted as a reflection of the amount of perceived control. People cannot influence their luck directly, but given a certain disposition of luck, a person may have the ability to utilise it.

LUCK AND GAMBLING In our everyday experience it can seem that some people “have all the luck” and others appear to be jinxed. Lucky people manage to be in the right place at the right time, meet the right people, and go from one success to another. An infamous story reported by Galaxine.com (2003) highlights that luck is often about being in the right place at the right time. It recounts the story about the waitress at a Las Vegas casino who won $35m during her lunch break. She won the largest slot jackpot payout ever, after playing for about 15 minutes. However, only three months later, her car was hit by a drunk driver who had 17 previous arrests for drunk driving.

She was seriously injured and her older sister was killed in the accident. This time she was in the wrong place at the wrong time.

Wiseman (2003) believes he’s discovered four principles of luck and knows how to help people improve their good fortune (see Figure 1). The results of this work reveal that people are not born lucky. Instead, lucky people are unconsciously using four basic principles to create good fortune in their lives. These can also be applied to gambling situations. Wiseman’s research has involved him being with those who define themselves as either lucky or unlucky, and examining the reasons why. Wiseman started by asking randomly chosen UK shoppers whether they had been lucky or unlucky in several different areas of their lives including their careers, relationships, home life, health and financial matters. Of these participants, 50 percent considered themselves lucky and 16 percent unlucky. Those lucky or unlucky in one area were more likely to report the same in other areas. Most experienced either consistent good or bad fortune. Wiseman therefore concluded that luck cannot simply be the outcome of chance events.

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>> ONCE PEOPLE BELIEVE THAT AN ABSTRACT CONCEPT SUCH AS LUCK CAN (IN PRINCIPLE) INFLUENCE BEHAVIOUR, GAMBLING SITUATIONS PROVIDE ALL THE CONDITIONS FOR STRONG LUCK PERCEPTIONS. THE FUNDAMENTAL DIFFERENCE BETWEEN CHANCE AND LUCK IS THAT CHANCE IS DETERMINED BY OUTSIDE FACTORS OVER WHICH A PERSON HAS NO CONTROL, WHEREAS LUCK MAY PROVIDE AT LEAST THE ILLUSION OF CONTROL. IN ESSENCE, THE DIFFERENCE MAY BE INTERPRETED AS A REFLECTION OF THE AMOUNT OF PERCEIVED CONTROL. PEOPLE CANNOT INFLUENCE THEIR LUCK DIRECTLY, BUT GIVEN A CERTAIN DISPOSITION OF LUCK, A PERSON MAY HAVE THE ABILITY TO UTILISE IT. << Figure 1: The four principles of lucky people (Wiseman, 2003) Principle One: Maximise Chance Opportunities Lucky people are skilled at creating, noticing and acting upon chance opportunities. They do this in various ways, including networking, adopting a relaxed attitude to life and by being open to new experiences.

Principle Two: Listening to Lucky Hunches Lucky people make effective decisions by listening to their intuition and gut feelings. In addition, they take steps to actively boost their intuitive abilities by, for example, meditating and clearing their mind of other thoughts.

Principle Three: Expect Good Fortune Lucky people are certain that the future is going to be full of good fortune. These expectations become selffulfilling prophecies by helping lucky people persist in the face of failure, and shape their interactions with others in a positive way.

Principle Four: Turn Bad Luck to Good Lucky people employ various psychological techniques to cope with, and often even thrive upon, the ill fortune that comes their way. For example, they spontaneously imagine how things could have been worse, do not dwell on the ill fortune, and take control of the situation.

So can “lucky” people win at gambling without trying?

Wiseman tested this proposition by getting 700 people to gamble on the UK National Lottery. The “lucky” participants were twice as confident of winning as the “unlucky” ones.

Results showed that only 36 participants actually won any money, and these were split evenly between the two groups.

On average, all participants lost about £2.50. Wiseman showed that being lucky doesn’t change the laws of probability.

Being in the right place at the right time is actually about being in the right state of mind. It’s been claimed that lucky people use body language and facial expressions that other people find attractive. For instance, lucky people smile twice as much as the unlucky, and engage in more eye contact. In addition, they are more likely have a broad network of friends and take advantage of favourable opportunities (Griffiths,

2006). As Wiseman (2003) demonstrated, they can’t beat the odds playing the lottery, but lucky people do expect good fortune.

Lucky people view misfortune as short-lived and overcome it quickly. In short, self-fulfilling prophecies appear to affect lives. Those who expect to fail may not even try.

Lucky people try to achieve their goals even when the odds are against them. Unlucky people are more superstitious and twice as likely to believe that black cats, breaking a mirror, and the number ‘13’ are bad omens (Griffiths, 2006). Luck is simply a mind-set and a way of perceiving and dealing with life. Wiseman (2003) concluded that luck is not a magical ability or a gift from the gods. It is a mind-set, a way of perceiving and dealing with life.

Gamblers are great believers in luck. Wagenaar (1988) found that gamblers are so wedded to their belief in luck that in some circumstances they refuse to improve their odds. For instance, in the game of blackjack, there is a well-known optimal strategy for not losing. But in order to win over the long run, a gambler must count the cards that have been played and calculate whether more high or low cards are left in the deck. More high cards favour the player, so gamblers should increase their bets; more low cards favour the house, so gamblers should decrease their bets. However, Wagenaar’s research demonstrated that the vast majority of players do not do this.

Many gamblers also appear to be superstitious and possess a variety of erroneous beliefs; for instance, that other players can influence their luck in the game. They appear to reject the mathematics of probability and chance with almost mantra like thoughts such as “This is my lucky day,” “My luck has to change,” and “This number has to win.” Griffiths’ research has consistently shown that slot machine players have favourite slot machines (e.g., Griffiths, 2002). In North America, there are anecdotal reports by casino operators who complain that hard core slot machine players urinate into the plastic coin cups or onto the floor rather than leave a machine they are convinced is about to pay out a jackpot.

Finally, an experimental study by Wohl and Enzle (2003) compared people who had just experienced a near big win with people who had just experienced a near big loss to see which type would be more likely to continue gambling. They found that the answer depended on whichever gamblers felt personally luckier. Players who experienced a near big loss on a wheel-of-fortune wagered significantly more money on the outcome of a subsequent game of roulette than did those players who experienced a near big win. They concluded Casino & Gaming International I 77

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>> CAN “LUCKY” PEOPLE WIN AT GAMBLING WITHOUT TRYING? THIS PROPOSITION WAS TESTED BY GETTING 700 PEOPLE TO GAMBLE ON THE UK NATIONAL LOTTERY. THE “LUCKY” PARTICIPANTS WERE TWICE AS CONFIDENT OF WINNING AS THE “UNLUCKY” ONES. RESULTS SHOWED THAT ONLY 36 PARTICIPANTS ACTUALLY WON ANY MONEY, AND THESE WERE SPLIT EVENLY BETWEEN THE TWO GROUPS. ON AVERAGE, ALL PARTICIPANTS LOST ABOUT £2.50. WISEMAN SHOWED THAT BEING LUCKY DOESN’T CHANGE THE LAWS OF PROBABILITY. << that people who nearly lost everything (but didn’t) felt luckier than those who nearly had a big win and that this was an inducement to persist in subsequent gambling.

SUPERSTITION AND GAMBLING According to Vyse (1997), the fallibility of human reason is the greatest single source of superstitious belief. Sometimes referred to as a belief in ‘magic’, superstition can cover many spheres, such as lucky or unlucky actions, events, numbers and/or sayings, including a belief in astrology, the occult, the paranormal or ghosts (Jahoda, 1971). However, perhaps a working definition within our Western society is that of Thalbourne (1997) who said superstition could be “a belief that a given action can bring good luck or bad luck when there are no rational or generally acceptable grounds for such a belief” (p.221).

It has been suggested that approximately one-third of the UK population are superstitious (Campbell, 1996). The most often reported superstitious behaviours are (i) avoiding walking under ladders, (ii) touching wood and (iii) throwing salt over one’s shoulder (Campbell, 1996). There is also a stereotypical view that there are certain groups within society who tend to hold more superstitious beliefs than what may be considered the norm. These include those involved with sport, the acting profession, miners, fishermen and – of course – gamblers. Many studies have been undertaken using self-report methods. However, participants may be unwilling to publicly admit to their private beliefs due to a fear of being ridiculed or considered irrational.

This contradiction between what individuals say and do has been investigated by Campbell (1996). He concluded that the majority of the population have ‘half-beliefs’. He suggests that people are basically rational and do not really believe in the effects of superstition. However, in times of uncertainty, stress, or perceived helplessness, they seek to regain personal control over events by means of superstitious belief.

One explanation for how we learn these superstitious beliefs has been suggested by Skinner’s (1948) work with pigeons. While waiting to be fed, Skinner’s pigeons adopted some peculiar behaviours. The birds appeared to see a causal relationship between receiving the food and their own preceding behaviour. However, it was merely coincidental conditioning. There are many analogies in the human world particularly among gamblers. For instance, if a gambler blows on the dice during a game of craps and subsequently wins, the superstitious belief is reinforced through the reward of winning (this is another example of an ‘illusory correlation’).

Another explanation is that as children we are socialised into believing in magic and superstitious beliefs. Although many 78 I Casino & Gaming International

of these beliefs dissipate over time, children also learn by watching and modelling their behaviour on that of others.

Therefore, if their parents or peers touch wood, carry lucky charms and do not walk under ladders, then children are more likely to imitate that behaviour and some of these beliefs may be carried forward to later life (Vyse, 1997).

Darke and Freedman (1997) suggest that lucky events are, by definition, determined entirely by chance. However, they go on to imply that although most people would agree with this statement on an intellectual level, many do not appear to behave in accordance with this belief. As mentioned above, Wagenaar (1988) proposed that in the absence of a known cause we tend to attribute events to abstract causes like luck and chance. He differentiated between luck and chance and suggested that luck is more related to an unexpected positive result whereas chance is related to surprising coincidences (Wagenaar, 1988).

Weiner (1986) suggests that luck may be thought of as the property of a person, whereas chance is thought to be concerned with unpredictability. Gamblers appear to exhibit a belief that they have control over their own luck. They may knock on wood to avoid bad luck or carry an object such as a rabbit’s foot for good luck (Darke & Freedman, 1997). Langer (1983) argued that a belief in luck and superstition cannot only account for causal explanations when playing games of chance, but may also provide the desired element of personal control.

So are gamblers superstitious? Given the common sense view that gamblers are, there is surprisingly little empirical research. A study by Griffiths and Bingham (2005) examined the beliefs that bingo players have regarding superstition and luck, and how these beliefs are related to their gambling behaviour. A self-completion questionnaire was devised and the study was carried out in a large bingo hall in Nottingham.

Their sample comprised 412 bingo players (approximately four-fifths being female). Significant relationships were found in many areas. Many players reported beliefs in luck and superstition, however, a greater percentage of players reported having ‘everyday’ superstitious beliefs, rather than those concerned with bingo.

More specifically, it was reported that 81 percent of bingo players had at least one superstitious belief. Such beliefs included not opening an umbrella indoors (49 percent), not walking under ladders (55 percent), not putting new shoes on a table (60 percent), touching wood (50 percent) and not passing someone else on the stairs.

However, only 10 percent of the sample claimed they were superstitious while playing bingo (with a further 13 percent claiming they were “sometimes” superstitious while playing).

This was reflected in such behaviours and beliefs as having a

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lucky night of the week (5 percent), having a lucky friend (4 percent), having a lucky mascot (6 percent), sitting in the same seat for luck (21 percent), believing certain numbers are lucky or unlucky (13 percent), and changing pens or ‘dobbers’ to change bad luck (29 percent). Furthermore, 27 percent of players believed in winning and losing streaks, 25 percent always or almost always read their horoscopes, and 57 percent believed in fate (i.e., that life is already mapped out for them). Superstitious beliefs were also associated with astrological beliefs. In general, those who were believers in astrology were more likely to be superstitious than nonastrological believers.

When compared with lighter spending bingo players (i.e., those who spent less than £20 per week on bingo), heavy spending bingo players were more likely to believe in fate, be more superstitious while playing bingo, be more likely to have a lucky friend, be more likely to have a lucky seat, and be more likely to believe that some numbers are lucky/unlucky although none of these were significant at the 1 percent level. When compared with light spenders, heavy spending bingo players were significantly more likely to be superstitious, believe that the number ‘13’ is unlucky, have a lucky friend, sit in the same seat for luck, and believe in astrology.

The percentage of players reporting superstitious beliefs

when playing bingo was much less by both sexes than the percentage reporting everyday superstitions. This possibly seemed surprising after the initial findings that the majority of players considered bingo to be ‘a game of luck’ and the high percentage holding everyday superstitions. However, it may simply mean that contrary to previous opinion (Langer, 1983; Darke & Freedman, 1997), many do not try to control that luck, or at least not by means of superstitious belief.

However, it may have been the case that players did not consider that going on the same night with the same friends, or sitting in the same seat were associated with luck, but merely part of a ‘familiar’ social routine.

The fact that a higher percentage of players reported having the superstitious belief concerning the ‘different pens’ possibly implies that the other beliefs chosen were not an ideal representative sample. However, very few players offered alternative suggestions when asked on the questionnaire to give examples of ‘other’ superstitious beliefs. King (1990) suggested that players’ use of superstitious strategies in order to win implies skill and thus having some degree of control over the outcome of the game. However, in this case, bingo players did not report using these superstitious strategies. This could imply that it is more ‘instant’ beliefs that players have, rather than anything ‘concrete’ or ‘pre-planned’. They may not often consider

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whether they are superstitious or not, and the fact that they were asked suggests the demand characteristics may have actually effected how they replied.

Only one significant result regarding superstitious beliefs when playing bingo was found, that a greater percentage of heavy spenders stated that they always sat in the same seat for luck. Although not significant, 35 percent of heavy spenders – as opposed to 18 percent of light spenders – reported that they were, at least sometimes, superstitious when playing bingo. It was also found that a lesser percentage of the heavy spenders stated they had superstitious beliefs when playing bingo. It is clear that a large percentage of players reported beliefs in luck and superstition. However, findings were varied with a far greater percentage of players reporting everyday superstitious beliefs than those concerned with bingo. Whether or not players believed they had control over luck cannot be conclusively stated and having superstitious beliefs is perhaps simply part of the thrill.

This article highlights that there has been very little empirical research into gambling, luck and superstition and that there is much scope for future research. Gambling, luck and superstition do seem to be inextricably linked but research indicates that luck and chance are not the same.

Furthermore, those that describe themselves as lucky people are no more likely to win while gambling than those who describe themselves as unlucky. CGI REFERENCES Campbell, C. (1996). Half-belief and the paradox of ritual instrumental activism: a theory of modern superstition. British Journal of Sociology, 47, 151-166.

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Langer, E.J. (1983). The Psychology of Control. London: Sage.

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Thalbourne, M.A. (1997). Paranormal belief and superstition: How large is the association? Journal of the American Society for Psychical Research, 91, 221-226.

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Wagenaar, W.A. (1972). Sequential Response Bias: A Study of Choice and Chance. Rotterdam, The Netherlands: Bronderoffset NV. Wagenaar, W.A. (1988). Paradoxes of Gambling Behavior. London: Erlbaum.

Wagenaar, W.A. & Keren, G. (1988). Chance and luck are not the same. Journal of Behavioral Decision Making, 1, 65-75.

Wagenaar, W.A., Keren, G. & Pleit-Kuiper, A. (1984). He multiple objectives of gamblers. Acta Psychologica, 56, 167-178.

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Wiseman, R. (2003). The Luck Factor. New York: Hyperion.

Wohl, M.J.A. & Enzle, M.E. (2003). The effects of near wins and near losses on self-perceived personal luck and subsequent gambling behavior. Journal of Experimental Social Psychology, 39, 184–191

MARK GRIFFTHS 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.

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