EiG: Emerging Markets and Snarky Lawyers

25 September 2008

Any delegates who couldn't face the world after overindulging at the opulent conference party on Wednesday night missed out on an informative final day of EiG 2008.

In the emerging market track the various speakers broadened the audience's outlook in markets like Asia, Eastern Europe and Latin America. Nigel Bland, head of leisure and gaming M&A at Deloitte & Touche, began by tackling the question of why emerging markets are of interest and what criteria should be used to assess their potential.

Perhaps the most obvious answer as to why an operator would want to enter a new market is "to make more money," but Mr. Bland subtly qualified this phrase as "making more money than elsewhere." Slow growth in the operator's home market might be another reason for looking to new countries, although the Mr. Bland did not agree with the idea that there was no growth left in the more established Western European markets.

To illustrate this he pointed to figures from Unibet´s 2008 interim presentation which still forecast growth of 78 percent in its "maturing markets" in Western Europe between 2007 and 2010, and 164 percent in its "growth markets" of Southern Europe over the same time period. Online gambling currently only accounts for around 5 percent of the total gambling market by revenues, so there is certainly a lot of potential for growth in what is still a young sector.

In assessing emerging markets Mr. Bland put forward four hurdles that must be successfully overcome if a market is to have long-term value for an operator: legality, liquidity (a critical mass of players), the right product, and protection (both of the brand and in terms of fraud).

In conclusion he suggested that it might be the right move to enter a market if an operator can:

  • clear the four hurdles listed above

  • have an edge in the market (perhaps through the product on offer)

  • plan appropriately

  • create sustainable revenues over the long-term (as opposed to the short-term smash-and-grab approach)

    Several of these themes were picked up in Tihana Jurican´s analysis of various Eastern European markets. Ms. Jurican, an analyst with Global Betting and Gaming Consultants, said several countries in the region -- Poland, Slovakia and Hungary among them -- have become members of the European Union relatively recently and it is interesting to see how each has approached the issue of trying to make its laws compatible with European Union law.

    European Union membership also brings greater prosperity to a new member state. This in turn indirectly influences factors like broadband penetration and credit card ownership, which were highlighted as some of the indicators to look at when considering a new market.

    Moving further afield, Tony Tong, the chief executive of PacificNet Inc., covered the possibilities in Asia. This was Mr. Tong´s second appearance at EiG and he again used his presentation to give fascinating insight into specific areas of the industry in the region. Last year he covered the region´s most popular games and on this occasion he discussed the complex topic of junket (gaming promoters) operators in Macau and the growth of online casinos being developed by land-based casinos in the likes of Laos and Cambodia.

    He also suggested that the recent visa restrictions on visitors from mainland China to Macau was spurring a growth in both underground land-based casinos on the mainland and online casinos, as Chinese players sought to get their gambling entertainment elsewhere.

    In the closing plenary session the panel gave their thoughts on the last three days of discussion and debate. It was noted by the panel that whenever EiG is taking place something newsworthy always seems to come out of the United States in the same week -- this year it was the developments in Kentucky. Fingers crossed for what next year´s news event might be!

    Anthony R. Coles, a partner with Jeffrey Green Russell, remarked on the vibrancy and enthusiasm he had witnessed over the course of the conference and just hoped there would be no delayed reaction to recent global economic events. But based on his experience he did think that the gambling industry tends to do "reasonably well" in difficult economic circumstances.

    On a similar note Sue Schneider, a former chief executive of Clarion Gaming, was also concerned that the I-gaming sector proved to be more resilient to the current economic climate than Las Vegas.

    Consolidation was a key theme over the course of EiG 2008 and Leigh Nissim, a managing director of St. Minver, argued that consolidation was already taking place in the industry and wondered what the extent of any future consolidation would really be. The industry is one that seems to attract entrepreneurs and future regulation of markets will inevitably lead to new companies and products.

    The final thoughts from the panelists were: the industry needs greater coordination in its efforts to argue for better regulation and policy (Ms. Schneider); remember the industry is really all about the players (Mr. Nissim); and instruct your lawyers more and pay them more quickly (a snarky Mr. Coles).

  • 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.