AiG: I-Gaming in Macau Faces Uncertain Future

28 February 2008

The regulatory panel that discussed the outlook for Asian gaming jurisdictions on the final morning of the AiG Congress in Macau was arguably the most important session of the whole conference.

As has been seen in other markets around the world, having the best products, the most effective marketing campaigns and the most recognized brand all count for nothing if a government chooses to create legislation that is not favorable to remote operators.

With the panel consisting of lawyers from Macau, Singapore and Australia, as well as Andre Wilsenach from Alderney’s Gambling Control Commission, it was able to look at the situation in a variety of Asia-Pacific jurisdictions.

At this conference last year there was much excitement generated by the announcement that the Macau Gambling Commission anticipated having remote gaming legislation prepared by the end of 2007. One year on and this has not yet come to fruition, and Pedro Cortes, a partner with Goncalves Pereira Rato Ling Vong & Cunha, believes the more time that passes, the more Macau risks losing this opportunity to create such legislation.

A key factor in Macau’s development of remote gambling legislation is the special administrative region’s political relationship with mainland China. The question remains as to whether Macau can really implement legislation in this sector without the approval of the mainland authorities.

Andre Wilsenach raised the possibility that any remote gambling legislation in Macau might be solely for the existing land-based casinos and drew parallels with a similar situation in South Africa.

Just as in South Africa, the casinos are a powerful force in the local economy. Given the current boom in business, it would appear unlikely that Macau’s casinos would push for online regulation if there was any hint that such a move could cause political difficulties that might affect their traditional land-based business.

Jamie Nettleton of Addisons put forward an idea of a test period in Macau, whereby online gaming was regulated but was not initially allowed for inhabitants of either Macau or mainland China.

Several Asian governments’ concerns about gambling -- both on and offline -- seem to relate to the activity's control. Rajesh Sreenivasan of Rajah & Tann speculated that the perception might be that physical casinos are somehow easier to regulate and control than the less tangible online versions.

Wilsenach pointed out, however, that when players enter a casino with large quantities of cash, complying with anti-money laundering requirements can be just as difficult for land-based casinos. Indeed, online operators are often more stringent about KYC issues and age verification precisely because they cannot see their customers.

Turning the attention to Singapore, Sreenivasan suggested that because Singaporeans were such avid online gamers, it made more sense to regulate the activity rather than pretend it does not exist. Highlighting the tax revenues that are currently being lost might be one argument to use in trying to persuade the authorities. But their attention at the moment seems to be centred on the "integrated resorts" -- aka casinos.

Nettleton said that the task of creating legislation of any kind is a time-consuming and complicated one. It may be the case that the resources are simply not available in many jurisdictions to devote to the development of online gambling laws. The will to create legislation is perhaps secondary to the resources available to develop it.

In the audience discussion that followed, a representative from First Cagayan -- the corporation behind the online gambling jurisdiction in the Philippines -- said she was not aware of another Asian jurisdiction preparing to adopt similar regulation in the next five years. While this puts First Cagayan in a strong position, if accurate, it is not such good news for the wider industry.

After this somewhat disheartening outlook, there was more encouraging news from one of the afternoon sessions, which covered some of the activities that are permitted in the Philippines and mainland China.

PhilWeb's Dennis Valdes introduced his audience to what he termed the "bricks-and-clicks" business model that operates in the Philippines.

PAGCOR (Philippine Amusement and Gaming Corporation), the government-owned regulator, runs a network e-gaming Internet cafes where customers can play a variety of casino and slot games online. In 2007 these 76 cafes had a turnover of $700 million.

Valdes listed some of the positive aspects of these cafes over pure online operations:

  • All transactions are cash -- no payment or chargeback issues

  • Age verification is good because cafe staff see the players

  • There are fewer web security issues

  • Customers trust the PAGCOR logo on the cafes -- perhaps more so than on a Web site?

He did admit, however, that running the cafes does bring higher costs than a Web site alone. But this particular business model works well in a country where few people own their own computer and where credit card penetration in the population is relatively low.

CY Foundation CEO Sam Woelm used three case studies to outline the potential of online tournaments in China.

Woelm concluded that although Chinese players were used to "free-to-enter" tournaments, CY Foundation’s experience was that they were prepared to pay an entry fee if the prizes are sufficient. He also stressed the need to obtain the correct approval and licences at both a national and provincial level before running such tournaments.

Finally, Desmond Chu of Jupiter Entertainment looked specifically at Mahjong tournaments and how a mixture of online qualifiers and offline events is an effective strategy in this sector. The online qualifiers help to popularize the event and give it a mass reach with its low buy-ins, while offline finals add the element of a "competitive showdown" for the big prize.

After Wednesday’s announcement about Mahjong Time’s collaboration with the World Series of Mahjong, Chu revealed a further strategic partnership in the sector between Jupiter’s 3Q1MJ online mahjong brand, the China Mahjong Federation and the Mahjong Super Cup.

Over the course of the three days the AiG Congress has covered a comprehensive array of topics relating to the Asian markets. For many delegates it will have opened their eyes to new opportunities but, equally, will have left them under no illusions that Asia will give up its potential rewards with ease.

Lorien is a research analyst with Global Betting and Gaming Consultants, and currently resides on the Isle of Man. Prior to this, he spent three years at a leading United Kingdom gambling firm, providing regulatory and market research for its various international e-gaming ventures.