21 December 2010London, 7 Dec 2010 - Launched today is a new report from PwC, Playing to Win, which looks at the trends in both the casino and online gaming industries. Our analysis on the industry is supported by forecasts for global spending through to 2014 (by which we mean gross gaming revenue, ie: the amount wagered minus the amount returned to players as winnings).
Overall the global casino and online gaming industries have weathered the financial storms but some areas have seen more dramatic declines in revenue than others. What is clear though, is that the shift of power within the global sector is moving from the West to the East.
By 2014, the global gaming industry will, in many ways, be similar to today’s industry – still dominated by large and prestigious gaming developments. But alongside this continued investment there will be dramatic shifts as online gaming revenues take off in many markets and the spending power moves from west to east, and specifically to Asia Pacific. However, we still expect the US to be the biggest regional gaming market in 2014 accounting for 44% of all global revenues compared to 40% in Asia Pacific.
Casino gaming has not been immune to the recent recession. A 2.8% decline in total global spending in 2009 masks a slump of 12.2% in Europe, Middle East and Africa (EMEA) during this period and a 3.4% drop in spending in the US.
In contrast, Asia Pacific, which overtook Europe, Middle East and Africa (EMEA) in 2008 as the world’s second largest region for casino gaming, has hardly paused for breath, showing only a modest slowdown in growth to 7.4 % in 2009, before rebounding back to growth of nearly 50% in 2010. The smaller Latin America market also saw growth and was less impacted by the recession.
Globally spending is growing steadily at 9.3% compounded annually through 2014. Asia Pacific will grow at a compound annual growth rate (CAGR) of 23.6%, well outpacing the US, EMEA and Canada. And by 2014 we expect the Asia Pacific market to be equivalent to 92% of US spending with spending in Latin America to also achieving double-digit CAGR over the next five years at 12.8% compounded annually.
In EMEA, the smoking ban (imposed in many of the countries across the region) along with the global recession, has contributed to falling demand in the region.
Marcel Fenez, Global Entertainment & Media Leader said:
“Across the world the world the shift in demand and rising consumer expectations is forcing gaming operators to find ways of differentiating themselves from the competition. This is driving innovation and the need for ever more compelling offerings, and forcing them to interact with organisations across both the public and private sectors to deal with the complex issues this industry faces.”
The regulatory complexities are greater around the online space than in the casino sector and will continue to shape the industry going forward. At the moment, even within a particular jurisdiction, the legal and regulatory position is unclear and open to different interpretation, which creates uncertainty and confusion for consumers and market participants alike. The regulations in force also differ markedly between the various forms of online and mobile gaming which broadly fall into six disciplines: poker; casino gaming; betting on horse races; betting on other sports, such as soccer and baseball; online bingo and online lotteries. And in some cases offerings are now growing so quickly that they are outpacing the development of new legislation and regulatory frameworks.
David Trunkfield, UK Gaming leader added:
“We believe that there will have to be an easing of the current restrictions. Consumers will engage in online gaming whether it’s legal or illegal and by legalising the industry, governments would recoup valuable tax revenues which are much needed following the impact of the financial crises on public sector finances.”
One approach that has emerged through this confusion is the “walled garden” approach. This involves regulatory authorities introducing a regime that legalises specific types of online gaming services within their own territory, as long as they are provided by operators licensed within that country or state and only to people resident there.
Though welcomed by some of the industry, others such as some of the US casino operators are opposed, as they say that the legalisation of online gaming will impact their revenues and shift players away from the physical venues where they have invested substantial amounts of money.
EMEA is currently the world centre for online gaming with the UK having the largest legal market with one of the most open online gaming market regimes of any country. However, this openness has caused a different problem. The UK has seen the emergence of offshore gaming bases in places such as Malta and Gibraltar who are targeting the UK market but limiting the tax payable to the UK Government. A consultation process is now underway to see if the UK should adopt the “walled garden” approach rather than continue with the current regime.
“We believe that the next five years will see an evolution rather than a revolution in the global gaming industry”, commented Trunkfield. “But as evolutions go it will be rapid and pervasive and far more sweeping than the change seen in the past decade.”
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