we assess the current trends that will shape the business landscape of the future

With the iGaming market entering something of a growth spurt in its adolescence, we assess the current trends that will shape the business landscape of the future. We start with convergence and, particularly,’s joint venture with US land-based brands MGM and Boyd Gaming.

ONE OF THE offshoots of regulation, the defining driver of growth and change in the gaming sector, is the convergence of industry operators seeking to gain footholds in markets whereby they either lack a presence; or where partnering can become more competitive. This is very much the case with the iGaming industry, and it is apparent on both sides of the Atlantic.

In Europe, we have seen the first mega¬merger between two of the industry’s largest companies, bwin and PartyGaming, to form Digital Entertainment. We have also seen M&A activity bring together the likes of Sportingbet and Centrebet, Playtech and Mobenga, IGT and Entraction, and Betsson and Betsafe. We have also seen Ladbrokes fail in attempts to bolster its online division through acquisitions of both 888 and more recently, Sportingbet.

However, it is’s joint venture with MGM and Boyd Gaming in the United States that could signal the start of a new convergence of online expertise and land- based gaming brands. The abandoned deals between PokerStars and Wynn and Full Tilt and Fertitta predated this deal but fell apart following Black Friday. They do, however, highlight the appetite of the terrestrial industry to gain the expertise of the online sector.

For, this is a key deal and on the surface, it appears to be a well structured proposition for a market that continues to confuse and frustrate with regards to its regulatory intent. The B2C element of this venture is built to cope with both federal and state-by-state regulatory models and will see the respective establishments of jointly owned companies ‘Federal NewCo’ and/or ‘State NewCo’ depending on the regulatory framework adopted in the US. The share ownership will see owning 65 percent, MGM 25 percent, and Boyd Gaming ten percent.

The B2C aspect of the JV solely concerns online poker, which reflects the likely route to regulation in the US, with both state and federal legislative efforts mainly targeting poker because of the proportion of the game that is reliant on skill rather than chance.

Interestingly, as we’ve become accustomed to hearing from US land- based casinos, both MGM and Boyd have shown their hand with regards to their preferred method of regulation. Jim Murren, Chairman and CEO of MGM said, “MGM has long been supportive of federal legislation to strengthen UIGEA and provide the needed regulations and consumer protections for online poker. MGM is proud to have as our partner as they have the assets and experience that, combined with our brands, can ensure a secure, fair and entertaining online poker experience.”

Similarly, Keith Smith, President and CEO of Boyd Gaming added, “We believe the right approach to offering legal online poker in the United States is through a federal regulatory structure that ensures the games are conducted with the greatest possible integrity and security. Should Congress enact legislation to legalise Internet poker, this agreement will allow us to partner with the world’s most experienced and prestigious online operator to offer a secure, fair and entertaining experience for players in the United States.”

As we can see, both companies are very keen to stress that they believe that the regulation of Internet poker should be a federal issue (or rather, they would prefer it to be), without ever touching on the significant likelihood that any initial opening of the market will be at the state level. This could be attributed to the land-based industry’s concern as to ‘fair competition’, should the incumbent online powerhouses be allowed in to the market. Indeed, some lobbying efforts have called for any federal regulation to include an exclusion period of five years to allow the terrestrial casinos a head-start over their would-be online competitors.

But whilst there is momentum at the federal level, some argue that the political agenda surrounding next year’s presidential elections and the nauseating state of the economy, both domestic (significantly) and internationally, will divert what attention there is on the future of regulated gaming away to more pressing matters.

In any case, should the desired federal legislation be enacted, the joint venture would offer online poker to US players via the World Poker Tour and Party Poker brands with providing the software and support. In addition to the B2C element of the deal, will also enter into two separate 15-year B2B agreements with both MGM and Boyd that will allow each to offer real money online poker under their own brands using’s technology platform.

“Our strategy has been designed to address any and all legislative outcomes, whether federal or state-by-state,” was the jointly released company line from Jim Ryan and Norbert Teufelberger, the co- CEOs of “We are particularly excited to be working with MGM and Boyd. Combining their significant assets and regulatory expertise with the strength of our PartyPoker and World Poker Tour brands, all supported by our in-house technology, makes us perfectly positioned for any future opening of the US online poker market.”

Indeed it does, and the dual regulatory framework that is built into this JV is likely to prove crucial once the US does, eventually, open its doors.

This is a pivotal deal and only time will tell if it triggers similar joint ventures over the coming 12 months. It would be a significant surprise if it didn’t. 2012 will be just as active as 2011 for M&A, but it is the convergence of online and land-based brands that may yet prove the defining model of the near-term future.

European regulation

The defining issue facing the industry at present is that of regulation and nowhere is it evolving faster than in Europe. By the start of 2012, we can expect Spain, Denmark and Hungary to join the likes of France, Italy and the UK in adopting domestic regulation of their online gaming markets, opening varying aspects of their markets to international competition. There is also progress in Germany in the form of Schleswig Holstein, the country’s northernmost state, which intends to open its regional market to international competition on January 1, possibly ploughing a route for Germany’s other Lander to follow, should they abandon (which seems unlikely) their amendments to the State Treaty which could still put them on a collision course with the EU Commission. iGaming Business' recently released European Legal Outlook, available with the magazine's November/December issue.

What it points to is a European iGaming market that will operate under a fragmented licensing model where companies will need to hold licences in each individual country in which they seek to do business. This will now also apply, it would appear, to the UK where recently announced reforms to the iGaming licensing regime will see the country follow in the footsteps of the markets regulating around it. Should all Member States eventually adopt similar licensing models, then it would require operators with any form of international aspirations to hold 27 different licences just to operate across Europe, as opposed to the single licence they have been hitherto operating under granted by their offshore domiciles (Malta, Gibraltar and the Isle of Man, amongst others). Multiple licensing and the associated application fees, annual fees and, of course, tax required for each country will make European compliance a multi-million pound investment for operators.

The implications of the development of this regulatory framework are widespread, and will affect the way that companies operate, market, and their very identities as we see converging gaming assets building for longevity in the market. This all seeps down into the affiliate marketing sector and will impact how affiliates are used in certain markets, and who they market (converged entities or country-specific offshoots/rebrands).

These ramifications will only increase as each new European market adopts a regulatory model for remote gaming, and there are no signs of new potential markets wandering too far from this new European blueprint of regulation - the current UK model stands alone in this respect.

Yet, despite the burdensome tax thresholds, application and licensing costs and stringent policies affecting competition, products and social responsibility, regulation is, after all, what the industry has been seeking since its outset; to remove the danger that lurks in the unregulated ‘grey’ markets.

The modification of regulations and even attitudes to iGaming represents progress and that can only be a good thing for an industry that is keen to mature out of adolescence.

More of the same from the USA

While the European landscape is hurriedly developing regulation for the iGaming market, then the US is pedestrian by comparison. That is not to say that progress hasn’t been made, but it seems that efforts at both federal and state levels come to grinding halt when politics becomes judge and jury. Delays to proposed advancements in federal legislation have caused many to disregard the (short-term) chances of a nationwide model, as other concerns such as the economy and a 2012 presidential election will significantly demote the regulation of online gambling down the political agenda.

State legislation has been similarly protracted. None of the hope that had accumulated at the end of 2010 carried through into 2011, meaning that we are to no nearer state regulation than we are federal. Even the one success story, the District of Columbia, which is only a provincial regulation, has encountered delays and is still to ‘go live’, even with its proposed “Internet Demonstration Games” (free play).

New Jersey seemed to be the state most likely to pass enabling regulation, until its governor diverted the decision to a public referendum. However, the referendum’s outcome in November saw voters, 64 percent of them, vote in favour of bringing sportsbetting to the state’s racetracks and casinos, should the current federal ban (with the exception of four states) be declared unconstitutional.

We continue to hope for positive news on America’s regulation and as Nick Batram, Analyst at independent broking house, Peel Hunt, put it, “UIGEA came as a shock and, ultimately, we expect positive legislation when people least expect it.”

Mobile sportsbetting

If 2on was the year that mobile gaming finally got its act together, then 2012 should be the year when it fully takes off. The culmination of various factors such as Smartphone and tablet technologies, device suitability, functionality and mobile billing have lifted the mobile gaming sector out of its barren spell of underachievement to the point where many now see the platform as the future for sportsbetting.

Indeed, the in-play betting phenomenon’s suitability to mobile means that this marriage alone can be attributed to much of the early growth of the sector. Yet, companies still have to better utilise their presence on the mobile web and not transfer desktop strategies to the small screen.

The opportunities for tablet betting are obvious for sportsbetting companies who adopt in-play betting markets, and the tablet’s ‘at home in front of the TV’ usage makes it the perfect match-day betting device. We expect to see the onward growth of mobile sportsbetting well into 2012 beyond.

“2012 will be just as active as 2011 for M&A, but it is the convergence of online and land-based brands that may yet prove the defining model of the near-term future. ”
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