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pwc.
com/e&mPlayingtowinTheoutlookfortheglobalcasinoandonlinegamingmarketto2014PwC2UseofdatawithinthisreportThisdocumentisprovidedbyPwCforgeneralguidanceonlyanddoesnotconstitutetheprovisionoflegaladvice,accountingservices,investmentadvice,orprofessionalconsultingofanykind.
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Playingtowin1ContentsIntroduction:aboutthisstudy2Executivesummary:keytrends4PartI:Casinogaming6Globaloverview7UnitedStates8EMEA12AsiaPacific16LatinAmerica20Canada22PartII:Onlinegaming24Aworldofuncertainty25Regulation:theemergenceof"walledgardens"26Emergingchangedrivers32Theglobalmarketin2014—regionbyregion34Conclusion362PwCWelcometoPwC'sglobalpoint-of-viewstudydedicatedtothecasinogamingindustryandtheonlinegamingsector.
Inpublishingthisreport,wearereflectingtheincreasinglyglobalizednatureofthecasinogamingmarket,whilealsoacknowledgingthecontinuinglocalnatureofgaminghabitsandregulation.
Howthispoint-of-viewpaperisstructuredTheindustryanalysisinthispaperisdividedintotwosections.
Thefirstpart—whichmakesupthemajorityofthereport—coverstraditionalcasinogaming.
Thisconsistsofbettingactivitiesconductedwithincasinos,includingland-basedcasinos,riverboats,docksidecasinos,tribalcasinos,slotparlors,racinos(slotsatracetracks)andcruiseships,togetherwithrevenuesfromgamingmachinesinotherlocations.
Ouranalysisofdevelopmentsintheindustryissupportedbyforecastsforglobalspendingthrough2014.
Spendingtotalsrepresentgrossgamingrevenue,whichisthehousewin,ortheamountwageredminustheamountreturnedtoplayersaswinnings.
Thesecondpartofthepaperexaminestrendanddevelopmentsintheonlinegamingmarketineachregion,andtheevolutionoftherespectivemarketsacrosstheworld.
Weclosethesectionbydescribingourvisionforthestateofevolutionofeachregionby2014.
IntroductionAboutthisstudyGrandLisboaCasino,Macau3PlayingtowinAstheaccompanyinginformationpanelexplains,ouranalysisandstatisticaldataontheglobalandregionalcasinogamingmarketsarecontainedinSectionIofthisreport.
InSectionIIwegiveourviewsontrendsandfuturedevelopmentsintheonlinegamingmarkets.
However,owingtothelegalandregulatoryuncertaintiesthatsurroundtheseactivitiesinmanycountriesacrosstheworld,thisanalysisdoesnotincludehistoricalorprojecteddataforonlinegamingrevenues.
BalancingrevenuesandcostsAlthoughourfinancialforecastsinthispublication—likethoseintheE&MOutlook—focussolelyonrevenues,wealsoacknowledgethecostimplicationsofvariousdevelopments.
Asnewandmoreattractivecasinogamingfacilities—oftenincludingaccommodationandotherleisurechoices—arebuiltinexistingandnewgamingcentersaroundtheworld,theinvestmentrequiredfromthecompaniesbehindthesedevelopmentsismassive.
Whileeachnewcasinodevelopmentmaygeneratenewincrementalrevenues,thereisinevitablyadegreeofcannibalizationofrevenuesfromexistingcasinos.
Thiseffecthasbeenespeciallyclearduringthepasttwoyears,giventheimpactoftherecessiononconsumers'discretionaryspending.
Asaresultthereisalwaysariskthattheadditionalrevenuesfromnewdevelopmentsormarketplacesmaynotbebigenoughtojustifytheinvestmentinvolved.
Atthesametime,gaminghaswidersocialandeconomicimplications.
Theprofile,goodwill,andtourismrevenuesgeneratedbycasinogamingcanbringmajorbenefitstocitiesandentirecountries,whichiswhygovernmentsaresokeentoencourageandattractthem.
Thepotentialfortaxrevenuesisafurtherattraction—andthisconsiderationrepresentsoneofthemaindriversbehindthegrowingwillingnessofnationalandstategovernmentsworldwidetolegalizeandlicenseonlinegamingoperators.
AnewapproachAgainstthefast-changingbackgroundoftheglobalcasinogamingmarket,weatPwChaveadoptedanewapproachtocommunicatingourinsightsandresearchontheindustry.
Until2008,weincludedaCasinoGamingchapterinourannualPwCGlobalEntertainment&MediaOutlook("E&MOutlook"),whichforecastsfuturespendingtrendsacross13segmentsoftheE&Mindustry.
In2010,wehavedecidedtobuildonthestatisticalrigoroftheE&MOutlookandcombineitwithourglobalthoughtleadershipinthecasinogamingmarkettopreparethisstudy.
Thisfreshapproachenablesustoachievetwoobjectives.
Thefirstistopresentourperspectivesontheopportunities,challengesandtrendsfacingparticipantsinthecasinogamingmarketworldwide,andtoanalyzehowthesefactorswillplayoutoverthecomingyears.
Thesecondistounderpinthisindustryanalysiswithrevenueforecastsforeachsegmentandregionoftheglobalgamingmarketthrough2014,providingthereaderwithhardstatisticaldataagainstwhichtoplanresponsestothetrendshighlightedinthedocument.
UniqueappealThereisahighdegreetowhichcasinogamingwillalwaysbelocal.
Theuniqueandwidelydifferingatmospheresand"feel"ofcasinosinLasVegas,MacauorLondon'sMayfairareakeyelementoftheirappeal.
Asonlinegaminggainsmomentum,itwillbeinterestingtoseehowmuchofacompetitiveimpactithasontraditionalcasinos.
Thereisalsoapointofviewthatsayspeoplewhostartplayingonlinemaywanttostartplayinginaphysicalenvironment,especiallywithpoker—asseenbysomecasinosintheUK.
Inthispublication,weseektoilluminatethefuturepathforallstakeholdersinthecasinogamingindustry,whereverintheworldtheymaybebasedoroperating.
Whetheryouareanoperatorintendingtoenteranewgamingjurisdictionandwantingtounderstandthenewmarket'srevenuepotential,aregulatorinanewlyformedgamingjurisdictionneedingtoevaluatethesuitabilityofpotentiallicensees,oranonlinesocialnetworkassessingthefutureopportunitiesinonlinegaming,thisstudyisforyou.
Wehopeyoufinditbothinformativeandvaluable.
MarcelFenezGlobalLeader,Entertainment&MediaPartI:CasinogamingPwC4ExecutivesummaryKeytrendsAsanindustry,casinogaminghasalwaysbeenauniquesourceofentertainmentforitscustomers,and—alltoooften—afocusofgovernments'regulatoryspotlight.
Asahighlydiscretionaryelementofconsumerspending,itisalsoexposedtochangesineconomicconfidenceandconditions.
Today,alltheselong-standingattributesarereflectedinarangeofchallengesandopportunitiesfacingboththeindustry'sestablishedplayersandalsothosecontemplatingenteringthemarket.
AsolidbutunevenrecoveryNottheleastofthesechallengesisthecontinuingglobaleconomicuncertainty.
Recentexperienceconfirmsthatthecasinogamingindustryisnotimmunetorecessions.
Whilethe2.
8percentdeclineintotalglobalspendingoncasinogamingin2009appearsatfirstsighttobeafairlyresilientperformance,theglobalfiguremasksaslumpof12.
2percentin2009inEMEA,andof3.
4percentintheUS.
Whatismore,spendingintheUSandEMEAhasfallenforthethreesuccessiveyearsupto2010,andwilltrendupwardonlymodestlyin2011.
Incontrast,AsiaPacific—whichovertookEMEAin2008astheworld'ssecond—largestregionforcasinogamingrevenues—hashardlypausedforbreath,registeringamodestslowdowninspendinggrowthto7.
4percentin2009,beforereboundingbackintodouble-digitswithgrowthofnearly50percentin2010.
ThemuchsmallerLatinAmericanmarkethasalsostayedinpositiveterritoryintermsofgrowth.
Asimilarlystarkcontrastingrowthrateswillbeevidentduringtherecoveryphasethatisnowunderway.
Globally,spendingisshowingasteadyrecovery,growingat9.
3percentcompoundedannuallythrough2014.
AsiaPacificwillgrowatacompoundannualgrowthrate(CAGR)of23.
6percent,dramaticallyoutpacingtheUS,EMEA,andCanada.
Asaresult,theAsiaPacificcasinogamingmarket—whichwasjustoverone—third,or34.
3percentthesizeoftheUSin2008—willbeequivalentto92percentofUSspendingin2014.
LatinAmericawillalsoachievedouble-digitCAGRoverthefiveyears,at12.
8percentcompoundedannually.
Inassessingtheoutlookforgrowthacrosstheworld,itisimportanttotakeintoaccountthelikelihoodthatsupplysidechangeswilltendtooverpowercyclicaleffects.
RecentexamplesofthisincludetheeffectofchangesinvisarestrictionsonthemarketinMacau,andtheopeningofmajorresortcasinosinSingapore.
However,intheabsenceofsignificantchangesonthesupplyside,thencyclicaleffectswillcomethroughstrongly,asseenwithUScasinosinthepastthreeyears.
AfurtherfactorcloudingtheissueinEuropeissmokingbans.
Thesewereintroducedintomanycountriesduring2007–2008,andhaveundoubtedlyhadanegativeimpactoverandabovetheeffectsoftherecession.
NewmarketsandfacilitiesopeningupSuchconsiderationsaside,AsiaPacific'sdifferentiatedgrowthoutlookreflectsthreemainfactors.
Inevitably,thefirstistheroleofeconomicgrowthindrivingdisposableincomesandtheemergenceofaprosperousmiddleclass.
Thesecondisthedeepattachmenttocasinogamingandotherformsofgamblinginmanysocietiesintheregion—anattachmentthatconsumersincreasinglyhavetheresourcestoindulge.
Thethirdfactoristhegrowingopportunitytotakepartincasinogaming,asnewcentersareestablishedPlayingtowin5andasnewfacilitiesareopenedupinexistingcenters,oftenfollowingadelayduringtheeconomicdownturn.
PrimeexamplesofnewterritoriesenteringthemarketincludeSingapore'srapidemergenceasacasinogamingcenter,surgingfromastandingstartin2010torevenuestotalingmorethan$8billionin2014.
Meanwhile,inthelong-establishedgamingcenterofMacau,workonSandsChinaLtd'sextensiontotheVenetianMacaucomplexandonthenewGalaxyMacauresorthasrestarted,withcompletionofbothcurrentlyscheduledfor2011.
AndinthePhilippines,thecompletionofthe$15billionManilaBayresortin2013willhelpspendingin2010–2014toreachanimpressiveCAGRof17.
6percent.
ThedramaticimpactofnewcasinogamingopportunitiesonspendingisequallyevidentinanumberofmarketsoutsideAsiaPacific.
InSpain,thedelayedGranScalaprojectisnowbackontrack,anditscompletionin2013willdramaticallyexpandthemarketinSpain,by2014,resultinginafive-yearCAGRof70.
7percent.
Similarly,newcasinoopeningsinChilein2010willboostthemarketby39.
7percentinasingleyear.
AndinCanada,anewParagonGamingcasinoopeningin2013willcombinewithimprovedeconomicconditionstoliftthecasinogamingmarkettodouble-digitgrowthduringthatyear.
GrowingcomplexitiesforoperatorsandregulatorsThroughoutthecasinogamingindustry,itisclearthatbetteropportunitiestriggerspending.
Butwhocanclaimthebiggestshareofgrowth—andhowExpansioninsomesegmentscanintensifycompetitivepressuresforothers.
IntheUS,forexample,regionalcasinosarecannibalizingspendinginAtlanticCity,whererevenuesin2014willstillbebelowthe2009level.
Acrosstheworld,shiftingdemandandrisingconsumerexpectationsareforcinggamingoperationstofindwaystodifferentiatethemselvesfromthecompetition.
Thisdrivesinnovation,andever-largerandmorecompellingofferings.
TheMGMResortsInternational'sCityCenterinLasVegasisthelargestprivatelyfundedconstructionprojectinthehistoryoftheUnitedStates.
Andonlinegamingofferingsaregrowingapace,asquickly,andinsomecases,faster,than—theenablinglegislationandregulatoryframeworks.
Toaddressthemarketchallengeswhilesustainingandgrowingtheirdailyoperations,gamingownersandoperatorsmustinteractwithmanyorganizationsinboththepublicandprivatesectors—rangingfrominvestmentbanks,analysts,andcommerciallendinginstitutions,togoverningbodiesandlicensingagenciesthatregulateandmonitortheiroperations.
Complexissuesalsoconfrontgamingregulators:howtomonitorandsafeguardenterprisesthatprovidegamingtaxrevenues,whilealsopreservingtheintegrityofthegamingenvironmentandthereputationofallpartiesinvolved.
Intheemergingareaofonlinegamingservices,theregulatorycomplexitiesandsensitivitiesareevengreater.
Inourview,thecurrentlypredominantapproachofin-countryorin-stateregulationandlicensingofonlinewillbesteadilyerodedduringthenextfiveyears,undertheimpactofrisingdemandforcross-bordergamingandliquidityfordisciplinessuchaspoker.
InEuropewearelikelytoseecontinuedlocalcountryregulation,butwithpoolingofpoker.
Whilepan-Europeanregulationononlinegamingmayeventuallybeagreed,thisisunlikelytohappenwithinthenextfiveyears.
Overall,ourresearchsuggeststhat—inmanyways—theindustryin2014willbesimilartotoday's,characterizedbylargeandprestigiousdestinationdevelopments.
Butinotherwaysitwillhavechangeddramatically,withanongoingshiftinspendingtowardsAsiaPacificandprobablytowardsonlinegaming,andtherapidemergenceofnewcenterssuchasSingapore(seechartsbelow).
Putsimply,towinoutincasinogaming,itisvitaltounderstandwhatyourcustomerswant.
Thatsuccessfactorwillnotchangeatall.
Towards2014US57%EMEA17%LatinAmerica0%AsiaPacific22%Canada4%US43%EMEA13%LatinAmerica0%AsiaPacific41%Canada3%20092014PartI:CasinogamingRegionalshareofglobalcasinogamingmarketPwC6PartI:CasinogamingAriaResortandCasino,LasVegasPlayingtowin7Accordingtoourprojections,globalcasinogamingrevenueacrosstheUnitedStates,EMEA(Europe,MiddleEast,Africa),AsiaPacific,LatinAmerica,andCanadawillgrowata9.
3percentcompoundannualrateduringthenextfiveyears,risingfrom$100.
5billionin2009to$156.
8billionin2014.
TheUnitedStateswillincreaseby3.
6percentcompoundedannually,from$57.
2billionin2009to$68.
3billionin2014.
However,itwillremainthelargestregionaheadofAsiaPacific,whichwillbethefastest-growingregionwithaprojected23.
6percentincreasecompoundedannuallyto$62.
9billionin2014from$21.
8billionin2009.
InEMEA,casinogamingrevenueswillriseto$19.
7billionin2014from$17.
3billionin2009,acompoundaverageannualincreaseof2.
6percent,withSpainreportingtheregion'sgreatestpercentagegrowth.
GrowthinCanadawillbespurredbyamajornewcasinoopeningin2013.
ThiswillhelpspendingtogrowonapercentagebasismuchmorequicklythanintheUS,advancingfrom$3.
7billionin2009to$5.
1billionin2014,a6.
7percentcompoundannualrate.
InLatinAmerica,annualgrowthwillaverage12.
8percentfromaverysmallrevenuebaseof$425millionin2009,risingto$776millionin2014.
GlobalCasinoGamingMarketbyRegion(US$Millions)Region20052006200720082009201020112012201320142010–14CAGRUnitedStates52,87857,50060,22959,23857,24056,50058,03060,51064,18568,300%Change9.
48.
74.
7(1.
6)(3.
4)(1.
3)2.
74.
36.
16.
43.
6EMEA19,33419,96420,24119,64917,25916,18616,45217,08018,21919,651%Change14.
33.
31.
4(2.
9)(12.
2)(6.
2)1.
63.
86.
77.
92.
6AsiaPacific10,92612,77416,72120,34321,84532,30541,25948,79056,37362,927%Change7.
016.
930.
921.
77.
447.
927.
718.
315.
511.
623.
6LatinAmerica306336377407425528594649711776%Change7.
49.
812.
28.
04.
424.
212.
59.
39.
69.
112.
8Canada3,1173,2393,5023,7643,7123,8354,0454,3164,7715,143%Change7.
93.
98.
17.
5(1.
4)3.
35.
56.
710.
57.
86.
7Total86,56193,813101,070103,401100,481109,354120,380131,345144,259156,797%Change10.
18.
47.
72.
3(2.
8)8.
810.
110.
410.
79.
39.
3Sources:PwC,WilkofskyGruenAssociatesGlobaloverviewPartI:CasinogamingTheeconomicrecessionresultedindeclinesingamingrevenuesintheUSin2008,2009and2010,withthebiggestfallbeinga3.
4percentdecreasein2009.
Improvedeconomicconditionswilltriggerarecoveryfromlate2011,butUSgamingrevenueswillnotreturnto2007levelsuntil2012.
Mid-single-digitincreasesareexpectedfor2013–2014.
Totalgamingrevenueswillincreaseto$68.
3billionin2014from$57.
2billionin2009,a3.
6percentcompoundannualincrease,makingtheUStheslowest-growingregionduringtheforecastperiod.
Regionalcasinoshelduprelativelywellin2009,buoyedbygrowthinracetrackcasinos,andwillbethefastest-growingcategoryduringthenextfiveyears.
Thisgrowthinregionalcasinos'revenueswilllargelyresultfromtheirgainingmarketshareattheexpenseofAtlanticCity,whichwillbetheonlycategorywhereweexpectrevenuesin2014tobelowerthanin2009.
Nevadawillrecoverfromdouble-digitdeclinesin2008and2009torealizegrowthof4.
1percentcompoundedannuallyduringthefiveyears.
UnitedStatesMarketoverviewCasinogamingmarket(US$millions)UnitedStates2005200620072008200920102011201220132014Nevada11,65012,62212,84911,44310,2479,95010,30010,95011,70012,500AtlanticCity5,0185,2184,9204,5453,9433,5503,3303,2603,2853,350Tribalcasinos22,51025,08026,10026,70026,50026,00026,40027,00028,50030,250Regionalcasinos13,70014,58016,36016,55016,55017,00018,00019,30020,70022,200Total52,87857,50060,22959,23857,24056,50058,03060,51064,18568,300Sources:AmericanGamingAssociation,NationalIndianGamingCommission,NevadaGamingCommission,NewJerseyCasinoControlCommission,PwC,WilkofskyGruenAssociatesCasinogamingmarketgrowth(%)UnitedStates20052006200720082009201020112012201320142010–14CAGRNevada10.
38.
31.
8(10.
9)(10.
5)(2.
9)3.
56.
36.
86.
84.
1AtlanticCity4.
44.
0(5.
7)(7.
6)(13.
2)(10.
0)(6.
2)(2.
1)0.
82.
0(3.
2)Tribalcasinos16.
011.
44.
12.
3(0.
7)(1.
9)1.
52.
35.
66.
12.
7Regionalcasinos1.
06.
412.
21.
20.
02.
75.
97.
27.
37.
26.
1Total9.
48.
74.
7(1.
6)(3.
4)(1.
3)2.
74.
36.
16.
43.
6Sources:AmericanGamingAssociation,NationalIndianGamingCommission,NevadaGamingCommission,NewJerseyCasinoControlCommission,PwC,WilkofskyGruenAssociates8Playingtowin:Theoutlookfortheglobalcasinoandonlinegamingmarketto2014Playingtowin9UnitedStatesNevadaInitsoverallrevenuemix,Nevada—whichincludesLasVegas,aswellassmallercenterssuchasLaughlinandReno—reliesonforeignplayersmorethanothercasinosintheUnitedStates.
Asaresult,thedropinforeigntourismdrivenbytheglobalfinancialcrisistriggereddouble-digitdeclinesinrevenuesin2008and2009.
ThedownturninLasVegasfirstbecameevidentin2007,asthecrisisintheUShousingmarketsawvisitorsfromelsewhereintheUScutbacktheirspendingonvisits.
Asaresult,anumberofcasinoprojectsinLasVegashavebeenputonhold,andhotelshavebeenforcedtocutratesandmakespecialdiscountofferstoattractvisitors.
Whilevisitationnumbersarenowedgingup,theaveragespendperheadiswellbelowitspeakin2006.
LasVegasiscurrentlyhunkereddownforarelativelygradualrecovery,sinceexperienceshowsthatanupturninvacationstocasinogamingcenterstendstolagabout12–18monthsbehindareboundintheeconomy.
Atthesametime,significantnewcapacityhas,andwill,continuetooccurinLasVegas.
ThisincludesMGMResortInternational's$8.
5billionCityCenterdevelopment,whichopenedinDecember2009andincludesa165,000-square-footcasino;andCosmopolitanofLasVegas,duetoopeninDecember2010witha75,000-square-footcasino.
Astheglobaleconomyrecovers,andinternationalvisitorsreturnalongsidedomesticvisitors,NevadacontinuestobebetterplacedtocapitalizeintheupturnthanAtlanticCity,sinceNevadaislessaffectedbycompetitionfromregionalcasinos.
ThismeansNevadashouldbeabletoabsorbthenewcapacityandstarttorebound,oncetheeconomiesanddisposableincomeimproves.
Atthetimeofwritingin2010,themarketinNevadaappearstobebottomingout,withthegradualriseinvisitstoLasVegashavinghelpedtoslowdownthedeclineingamingrevenues.
WeexpectNevadarevenuestodeclineby2.
9percentfor2010asawholeandthentobegintorecoverinlate2011,withmid-single-digitgainsprojectedfor2012–2014.
Overthefive-yearforecastperiod,theNevadamarketwillincreaseata4.
1percentcompoundannualrateto$12.
5billionin2014from$10.
2billionin2009.
Nevadacasinogamingrevenue(US$millions)Nevada20052006200720082009201020112012201320142010–14CAGRSlots7,7688,3068,4517,7366,8236,5506,7507,1507,6008,100%Change9.
46.
91.
7–8.
5–11.
8–4.
03.
15.
96.
36.
63.
5Tablegames3,8824,3164,3983,7073,4243,4003,5503,8004,1004,400%Change12.
111.
21.
9–15.
7–7.
6–0.
74.
47.
07.
97.
35.
1Total11,65012,62212,84911,44310,2479,95010,30010,95011,70012,500%Change10.
38.
31.
8–10.
9–10.
5–2.
93.
56.
36.
86.
84.
1Sources:NevadaGamingCommission,PwC,WilkofskyGruenAssociatesPartI:CasinogamingPwC10OfallthesegmentsoftheUScasinogamingindustry,theAtlanticCitymarketisthemostatriskfromtheimpactsofthecurrentdownturnandintensifyingcompetitivepressuresfromregionalcasinos.
ThesefactorssawAtlanticCitycasinorevenuesslumpby13.
2percentin2009,meaningtheyhavedeclinedbyacumulative24.
4percentfrom2006to2009.
Inourview,AtlanticCityrevenueswillnotstarttogrowagainuntil2013,andin2014theywillstillbewellbelowtheir2006peak.
RisingcompetitionfromPennsylvania,andmorerecentlyfromYonkers,hascutintotheareaswhereAtlanticCitytypicallyattractsvisitors.
Inparticular,competingracetrackcasinosareimpactingAtlanticCity'sslotrevenues,whichfellby28.
4percentbetween2006and2009.
Pennsylvaniahasintroducedtablegamesatitscasinos,whichhavefurtheraffectedAtlanticCity'smarket,aswillthependingopeningofAqueductanditsfullcontingentof4,500videoslotmachines.
InevitablytherecessionhasalsohitotherUScasinogamingcenters,hasalsocontributedtotheacceleratingdeclinesinAtlanticCityduringthepasttwoyears.
Earlyresultsin2010indicatethatrevenuesarestillonpacetofallatdouble-digitrates,andweestimateafallofexactly10percentfortheyear.
ThetoughconditionsarepromptingconsolidationandchangesincasinoownershipinAtlanticCity,asoperatorsstruggletoraisecapitaltomaketheimprovementsneededtocompeteeffectivelyagainsttheregionalcasinos.
TheNewJerseyadministrationisalsokeentosupporttheindustryinAtlanticCity,asitisanimportantsourceofemploymentandtaxreceipts.
Proposalscurrentlybeingdiscussedrangefromtaxbreakstobailoutsofstrickenoperations.
However,oneofthemosthigh-profilechangesinownershipwasduenottothedownturnbuttootherexternalfactors,whenMGMResortsInternationalagreedinMarch2010tosurrenderitsqualificationforacasinolicenseinAtlanticCity,andplaceits50percentinterestintheBorgataHotelCasino&Spaintoadivestituretrust.
ThesettlementfollowedareportbyGamingEnforcementtotheCasinoControlCommissionaboutMGMResortsInternational'sjointventurewithHongKongbusinesswomanPansyHo,whosefamilywasallegedtohavelinkstoorganizedcrimeinChina.
TheoutlookforAtlanticCityremainsrelativelybleakcomparedtotheUScasinogamingindustryasawhole.
Improvedeconomicconditionsshouldeliminateoneofthemajornegativefactorsaffectingthemarket,andweexpectmoderatingdecreasesin2011and2012.
By2013–2014,revenuesshouldbegintopickupatmodestratesfromamuchlowerbase,buoyedbyanexpandingeconomy.
Nevertheless,wedonotbelieveAtlanticCitywillrecoverthegroundithaslostoverthepastfouryears.
Revenuesin2014willremain35.
8percentlowerthanin2006.
Forthefive-yearforecastperiodasawhole,weareprojectinga3.
2percentcompoundannualdecline,from$3.
9billionin2009to$3.
4billionin2014.
UnitedStatesAtlanticCityAtlanticCitycasinorevenue(US$millions)AtlanticCity20052006200720082009201020112012201320142010–14CAGRSlots3,6743,8043,4643,1332,7222,4502,3002,2502,2602,300%Change3.
33.
5(8.
9)(9.
6)(13.
1)(10.
0)(6.
1)(2.
2)0.
41.
8(3.
3)Tablegames1,3441,4141,4561,4121,2211,1001,0301,0101,0251,050%Change7.
55.
23.
0(3.
0)(13.
5)(9.
9)(6.
4)(1.
9)1.
52.
4(3.
0)Total5,0185,2184,9204,5453,9433,5503,3303,2603,2853,350%Change4.
44.
0(5.
7)(7.
6)(13.
2)(10.
0)(6.
2)(2.
1)0.
82.
0(3.
2)Sources:NewJerseyCasinoControlCommission,PwC,WilkofskyGruenAssociatesPlayingtowin11Regionalcasinoswillbethefastest-growingsegmentoftheUScasinogamingmarketoverthenextfiveyears,astheirinvestmentinnewandimprovedofferingsandfacilitiescontinuetoattractrisingvisitornumbersandrevenues.
Asaresult,regionalcasinoswillcontinuetogainmarketsharefromAtlanticCityand,toalesserdegree,fromtribalcasinos.
Aseconomicconditionsimprove,weexpectregionalcasinorevenuestoincreaseatratesinexcessof7percentannuallyduring2012–2014.
Fortheforecastperiodasawhole,regionalcasinorevenueswillriseto$22.
2billionin2014from$16.
6billionin2009,a6.
1percentcompoundannualincrease.
However,regionalcasinoshavenotbeenimmunetothewiderslowdown.
Whilethelaunchofracetrackcasinos—or"racinos"—andcasinosinPennsylvanialedtoadouble-digitincreasein2007,growththenslowedto1.
2percentin2008andthemarketwasflatin2009.
However,aresilientmarketinPennsylvania,theintroductionofslotmachinesatYonkersRaceway,andthefull-year'soperationsoftwonewracetrackcasinosinIndianaoffsettheimpactoftherecessiononregionalcasinorevenuesin2009.
Yonkersgenerated$540millioninrevenuesin2009.
Goingforward,revenueswillbesupportedbyfurtherinvestmentandnewopenings.
September2010sawtheopeningofMaryland'sfirstcasino,the$89millionHollywoodCasinoPerryville,with1,500videolotteryterminalsand1,000slotmachines.
Inthesamemonth,NewYorkstatecomptrollerThomasDiNapoligavethego-aheadforNewYorkCity'sfirstcasino,anewgamblingparlorattheAqueductRacetrackinQueens,tobedevelopedbyGentingBhdofMalaysia.
TheResortsWorldNewYorkdevelopmentisplannedtoopeninthefirsthalfof2011.
Furthermarketdevelopmentsincludethe2010introductionoftablegamesatslot-onlycasinosinPennsylvaniaandDelaware,whichfollowedWestVirginiawheretablegameswereaddedin2008,expandingthemarket.
RhodeIslandhasgivenapprovalfortwoprivatecasinostoopentothepublic,whichshouldexpanditsrevenues.
InadditiontoNewJersey,PennsylvaniaandCaliforniaalsoareconsideringlegalizingsportswageringforlocalresidents.
Itremainstobeseenifsuchlegislationmovesforwardand—ifitdoes—whetheritwillbeallowedtostand.
TheIndianGamingRegulatoryActof1988permitsstatesthatallowgamingactivitiestoauthorizetribestooperatecasinosonNativeAmericanreservations.
Newcasinosfueledgrowthatdouble-digitannualratesthrough2006.
Sincethen,feweropenings,aslowereconomy,andincreasedcompetitionfromregionalcasinosledtoslowedgrowthin2007–2008.
In2009,revenuesfellby0.
7percent.
Weexpectanadditionaldeclineof1.
9percentintribalcasinorevenuesin2010,andthenarecoveryastheeconomyimproves.
However,wedonotexpectareturntothedouble-digitincreasesthatcharacterizedthefirsthalfofthedecade.
Themarketwillnolongerbeboostedbynewcasinos,andexistingcasinosarefacingintensifyingcompetitionfromnewandexpandingregionalandracetrackcasinos.
Overallrevenuesattribalcasinoswillincreasefrom$26.
5billionin2009to$30.
3billionin2014,a2.
7percentcompoundannualincrease.
ThisgrowthratewilllagwellbehindtheUScasinogamingmarketasawhole,butaheadofAtlanticCity.
Inadditiontotheimpactoftheeconomicconditions,theopeningofYonkerscutintoslotrevenuesatMoheganSunandFoxwoods,whicharelocatedinConnecticut,andwhichdrawfromtheNewYorkCityarea.
ThecompetitivepressureisbeingfurtherincreasedbytheopeningoftheHollywoodCasinoPerryvilleinMarylandinSeptember2010,andbytheopeninginthefirsthalfof2011ofGenting'snewgamblingparlorattheAqueductRacetrackinQueens.
UnitedStatesRegionalcasinosUnitedStatesTribalcasinosPartI:CasinogamingPwC12ThecasinogamingmarketinEMEAwasthehardesthitofanyregionin2009,withtheeconomicdownturndrivingrevenuesdownby12.
2percentinthatyear.
ThiswasafarsharperfallthantheUS's3.
4percent,andmayhavebeeninfluencedbytheimpactofthesmokingbansintroducedinseveralcountries.
Alsocontributingtothesharpdecreasein2009wastheclosingofcasinosinRussia.
In2011,EMEA'srevenueswillbegintoreboundandwillexpandatmid-to-highsingle-digitsduring2013–14.
Overall,weprojectthatcasinogamingrevenuesinEMEAwillincreaseataprojected2.
6percentcompoundannualrateto$19.
7billionin2014from$17.
3billionin2009.
Thisgrowthratewillbetheslowestofanyregionandwellbehindthedouble-digitcompoundannualincreasesinAsiaPacificandLatinAmerica.
AsiaPacific'sfastergrowthsawitovertakeEMEAin2008astheworld'ssecond-biggestregion.
EMEA'scasinogamingmarketisdominatedbyWesternEurope,whichaccountedfor76.
1percentoftotalEMEArevenuesin2009.
Duringthenextfiveyears,acombinationofimprovedeconomicconditionsandnewofferswillsustaincasinogaminggrowth.
Thefastest-growingmarketinEMEAoverthenextfiveyears,albeitinacountrythatonlygenerates5.
8%oftotalWesternEuropegamingrevenues,willbeSpain,whichwillaccountfor34percentoftheregion'stotalgrowthduringthatperiod.
Europe,MiddleEast,Africa(EMEA)MarketoverviewCasinogamingmarket(US$millions)EMEA20052006200720082009201020112012201320142010–14CAGRCasinogaming19,33419,96420,24119,64917,25916,18616,45217,08018,21919,651%Change14.
33.
31.
4(2.
9)(12.
2)(6.
2)1.
63.
86.
77.
92.
6Ataverage2009exchangerates.
Sources:PwC,WilkofskyGruenAssociates12Playingtowin:Theoutlookfortheglobalcasinoandonlinegamingmarketto2014Playingtowin13EMEAMajornationalmarketsFranceisthelargestmarketinEMEA,at$4billionin2009.
ThemarketinFrancehasbeendeclininggentlyin2008–2010,butastrongereconomywillleadtoaresumptionofgrowth,beginningin2011.
GermanyandtheUnitedKingdomarethenextlargestmarketsinWesternEuropeat$2.
1billionand$1.
2billion,respectively.
Germanywasflatin2009whiletheUKreboundedwitha3.
6percentadvancefollowinga7.
9percentdeclinein2008.
Africa'sonlysignificantgamingmarketisinSouthAfrica,wheretherearerelativelyfewlicensestobeissued.
Partlyasaresult,thereisalikelihoodthatsmallerpropertieswillundergoconsolidationthroughmergersandacquisitions.
Furthergamingoperations—againonarelativelysmallscale—willdevelopgraduallyintherestofAfrica.
OneofthemostdramaticdevelopmentsinEMEAin2009and2010wasthecollapseintheRussianmarket,whichwasessentiallyshutdownbyregulatorychangesinthelatterhalfof2009,astheremainingcasinooperationswereclosedandnonewonesopened.
Newcasinosarebeginningtoopenin2010,butspendingin2014willstillbelessthan10percentofitslevelin2005.
PartI:CasinogamingPwC14Casinogamingmarket(US$millions)EMEA20052006200720082009201020112012201320142010–14CAGRWesternEuropeAustria5425986376466336216236376536741.
3Belgium3553753964134094064144314484662.
6Denmark2332522652692652632652732812911.
9Finland7928629029119059019139349629951.
9France3,6223,6983,9344,0103,9653,9093,9574,0794,2014,3451.
8Germany1,9052,0092,0582,0722,0732,0552,0812,1382,2042,2801.
9Greece8489591,0771,029869737695674681716(3.
8)IrelandNANANANANANANANANANA-Italy117121122118114111110110111113(0.
2)Netherlands9471,0041,0529738297657517798208690.
9Norway6336567057117016977107357607882.
4Portugal475761656565707581865.
8Spain767678706057586341786970.
7Sweden1351441611701691661691721771821.
5Switzerland8058769409148628488578849179491.
9UnitedKingdom1,2711,2561,2711,1701,2121,1931,2091,2481,3101,4043.
0WesternEuropeTotal12,32812,94313,65913,54113,13112,79412,88213,23214,02315,0272.
7CentralandEasternEuropeCzechRepublic11111111110.
0Hungary4324765055234944945145535806094.
3Poland5397701,0201,1081,0891,0911,1261,1821,2451,3063.
7RomaniaNANANANANANANANANANA-Russia5,0064,5753,6762,918943157189236314471(13.
0)TurkeyCentralandEasternEuropeTotal5,9785,8225,2024,5502,5271,7431,8301,9722,1402,387(1.
1)MiddleEast/AfricaIsraelNANANANANANANANANANA-SaudiArabia/panArabSouthAfrica1,0281,1991,3801,5581,6011,6491,7401,8762,0562,2376.
9MiddleEast/AfricaTotal1,0281,1991,3801,5581,6011,6491,7401,8762,0562,2376.
9EMEATotal19,33419,96420,24119,64917,25916,18616,45217,08018,21919,6512.
6Ataverage2009exchangerates.
ComprisesAlgeria,Bahrain,Egypt,Jordan,Kuwait,Lebanon,Libya,Morocco,Oman,Qatar,Syria,andtheUnitedArabEmirates.
Sources:CasinosAustria,EuropeanGamingOrganization,GamingBoardforGreatBritain,GamingBoardofHungary,HollandCasino,LotteriInspektionen,NationalGamblingBoardofSouthAfrica,NetherlandsGamingControlBoard,NorwegianGamingFoundationAuthority,SpainMinistryofInterior,SwissGamingCommission,PwC,WilkofskyGruenAssociatesPlayingtowin15Theprincipaldriversofthe12.
2percentdeclineinoverallEMEAcasinogamingrevenuesin2009werea14.
8percentdecreaseintheNetherlands,andaslumpoftwo-thirdsinrevenuesinRussia.
ExcludingRussiaandtheNetherlands,casinogamingfellbyonly1.
7percent.
Forthefive-yearforecastperiod,casinogamingrevenueinEMEAwillexpandfrom$17.
3billionin2009to$19.
7billionin2014,a2.
6percentcompoundannualincrease.
InRussia,alawenactedin2006limitedcasinoactivitytofourzonesasfromJuly2009.
ThesezoneswereestablishedincertaindistrictsintheKrasnodar,Rostov,Kaliningrad,andSiberiaregions.
Whentheexistingcasinosclosedinmid-2009,therewerenonewcasinosinthenewzones,andcasinogamingdroppedtozeroduringthelatterhalfof2009.
Newcasinosbeganopeninginearly2010inthenewareas,butattendancewaslowandtheareasarenotnearmajorpopulationcenters.
OracleCasino,thefirstnewcasinoinRussia,planstobuildahotelandconvertthelocationtoadestinationresort.
WeprojectthatrevenuesinRussiawillfallbyanadditional83.
4percentin2010,beforestartingtoexpandfromadramaticallylowerbase.
RussiaandItalywillbetheonlycountrieswhereweexpectrevenuesin2014tobelowerthanin2009.
InSpain,thedelayedGranScalaprojectisnowbackontrack.
Theproject,whichwillconsistofcasinohotels,aracecourseandthemeparks,promisestobethelargestentertainmentandleisurecomplexinEurope.
Theprojectisnowexpectedtobecompletedin2013andweexpectitwillleadtoajumpinrevenuesto$869millionin2014fromonly$60millionin2009.
IntheUnitedKingdom,theGamblingActof2005didnotprovidetheboosttothemarketthatwasoriginallyanticipated,asthefinalversiondidnotprovidefortheregional"super-casinos"thatwereoriginallyproposed.
Casinorevenuesin2009werelowerthanin2005.
Aseconomicconditionsimprove,weexpectthemarkettorebound,butinitiallyonlyatlow-single-digitrates.
However,withupto16newlargecasinosscheduledtoopen,manyoftheminnewareaswherenocasinoshavepreviouslybeenpermitted,theUKmarketwillexperienceasignificantboostaround2013–2014.
Casinorevenuesin2014willbe16percenthigherthanin2009.
InGreece,gamingmachineswerebannedin2003.
ThisbanwaschallengedbytheEU,andin2010thegovernmentannounceditisremovingthebanaspartofitsinitiativetogeneratemoretaxreceiptsfromgaming.
However,weexpectspendinginGreecetodeclineby3.
8percent,compoundedannuallybetween2009and2014,partlyreflectingGreece'seconomicandfiscalproblems.
EMEAKeydevelopmentsandtrendsPartI:CasinogamingPwC16AsiaPacificwillbethefastest-growingregionforcasinogamingspendingoverthecomingfiveyears.
HavingovertakenEMEAin2008,theregionwillendtheforecastperiodclosetotheUS,andsettoovertakeitatsomepointinthefuture.
TherecessioncutintogrowthinAsiaPacificinthefirsthalfof2009,andrevenuegrowthslowedto7.
4percentfor2009asawhole,followingdouble-digitannualgrowthoverthe2006–2008period.
ThemaindriveroftheslowergrowthwasrestrictionsputinplacebytheChineseonvisastovisitMacau,whichisbyfarthebiggestmarketinAsia.
However,areboundinspendinginthesecondhalfof2009—supportedbyanapparenteasingofthevisarestrictions—hasbeensustainedinto2010.
TheopeningofmajorcasinosinSingaporecombinedwiththestrongreboundinMacaoisresultinginasurgeof47.
9percentin2010.
WeexpecttheAsiaPacificmarkettoresumeitsdouble-digitincreasesduringthenextfiveyears,andtoaverage23.
6percentcompoundedannually,expandingto$62.
9billionin2014from$21.
8billionin2009.
AsiaPacificMarketoverviewCasinoGamingMarket(US$millions)AsiaPacific20052006200720082009201020112012201320142010–14CAGRCasinoGaming10,92612,77416,72120,34321,84532,30541,25948,79056,37362,927%Change7.
016.
930.
921.
77.
447.
927.
718.
315.
511.
623.
6Ataverage2009exchangerates.
Sources:PwC,WilkofskyGruenAssociates16Playingtowin:Theoutlookfortheglobalcasinoandonlinegamingmarketto2014Playingtowin17AsiaPacificMajornationalandterritorymarketsTogether,AsiaPacific'sthreelargestmarkets—Macau,AustraliaandSouthKorea—accountedfor92percentoftheregion'stotalcasinogamingrevenuesin2009.
Macauistheregion'slargestmarketat$15billionin2009.
MacaupassedNevadain2008tobecomethelargestcasinogamingareaintheworld.
By2014,Macauwilltotal$45.
1billion,morethanthreetimesthesizeoftheNevadamarket.
Australiahasthesecond-largestmarketinAsiaPacificat$2.
7billionin2009.
RecentspendinggrowthinAustraliahasbeenrestrictedbyacombinationofpooreconomicconditions,risinginterestrates,andcompetitionfromthenewcasinosrecentlyopenedinSingapore.
ThecompetitivepressureswillbefurtherincreasedbytheexpectedopeningsinMacauin2011,andareespeciallyaffectingthe"highroller"endofthemarket,wherecustomersarebeingdrawntothenewerestablishmentselsewhereinAsiaPacificandtoonlinegamingofferings.
Weprojectgrowthduringthenextfiveyearstoaverageonly3.
2percentcompoundedannuallyto$3.
2billionin2014.
SouthKoreaisthirdintermsofmarketsizeat$2.
4billion.
Anewgamingcenterexpectedin2012willprovidealifttotheKoreanmarket,andweprojectincreasesduringthenextfiveyearstoaverage7.
0percentcompoundedannuallyto$3.
4billionin2014,overtakingAustraliain2013.
Withtheopeningofnewcasinosin2010,SingaporewillbecomeasignificantgamingcenterandwillquicklyovertakeSouthKorea,withrevenuesrisingto$8.
3billionin2014.
ThePhilippinesalreadyhasavibrantmarket,andnewcasinosinthatcountrywillpropelspendingata17.
6percentcompoundannualrateto$1.
2billionin2014,makingthatcountryamajorgamingareaaswell.
CasinoGamingMarket(US$millions)AsiaPacific20052006200720082009201020112012201320142010–14CAGRAustralia2,0522,2302,4882,6402,6972,7692,8472,9443,0503,1593.
2HongKongNANANANANANANANANANA-IndiaNANANANANANANANANANA-IndonesiaNANANANANANANANANANA-Japan107-Macau5,7697,09410,40113,62714,95522,44528,37934,18439,98945,14924.
7Malaysia7227587928358779209621,0051,0471,0894.
4NewZealand2953082933003003033123373623915.
4PakistanPhilippines4314705155495416076797901,0371,21517.
6Singapore2,7505,4796,5727,5628,318-SouthKorea1,6101,8602,1722,3252,4012,4302,5122,8523,2043,3607.
0TaiwanThailandVietnam4754606774818910612213913.
4Total10,92612,77416,72120,34321,84532,30541,25948,79056,37362,92723.
6Ataverage2009exchangerates.
Sources:AustralianProductivityCommission,MacauGamingInspectionandCoordinationBureau,NewZealandDepartmentofInternalAffairs,PhilippineAmusementandGamingCorporation,PwC,WilkofskyGruenAssociatesPartI:CasinogamingPwC18Aswenotedintheintroductiontothispaper,theongoingshiftinglobalcasinogamingspendingtowardsAsiaPacificreflectsthreefactors:risingdisposableincomes;adeepculturalattachmenttocasinogaming;andthegrowingopportunitiestoparticipate,asnewcentersandgamingfacilitiesareopenedup.
InMacau,anumberofmajorLasVegas-stylecasinohotelshaveopenedduringthepastfiveyears,furtherraisingitsprofileandstatusasamajorgamingdestinationcenter.
Revenuesmorethandoubledbetween2005and2008.
In2009,however,adeclineintourism,theeconomicdownturn,andnewvisacontrolsonvisitorsfrommainlandPRCledtoadecreaseinrevenuesinthefirsthalfoftheyear.
Themarketreboundedinthesecondhalf,andposteda9.
7percentincreasefortheyearasawhole.
ConstructionoftheSandsChinacomplexinthereclaimedCotairegionwashaltedin2008becauseofthecreditsqueeze.
In2010,$1.
7billioninfinancingfromGoldmanSachsandUBShasrestartedthe$4billionproject,whichiscurrentlyscheduledtoopeninlate2011.
Meanwhile,themarketinMacauisnowboomingagainandrevenuesareexpectedtoincreaseby50.
1percentin2010.
Wethenanticipatecontinueddouble-digitincreasesthroughouttheforecastperiod.
AsiaPacificKeydevelopmentsandtrendsMarinaBaySands,SingaporePlayingtowin19InAustralia,thegovernmenthasrejectedanumberofrecommendationsfromtheProductivityCommissiontoopenupthemarket,andisplanninginsteadtoimposenewrestrictionstotackleexcessivegambling.
Singaporehasmadeadramaticentrytothecasinogamingmarket,withResortsWorldSentosa,a$4.
4billionresort,openinginFebruary2010andthe$5.
5billionMarinaBaySandswhichopenedinApril.
Singapore'stourismindustryisbooming,andweprojectcasinorevenuestototal$2.
8billionin2010.
In2011,withafullyear'soperationforbothresorts,weexpectrevenuestoreach$5.
5billion,growingto$8.
3billionby2014asnewhotelsareadded.
InSouthKorea,JejuIslandwasawardedFreeInternationalCitystatus—thesamestatusasinSingaporeandHongKong—andplanstoconverttheareatoacasinocenter,helpingtoboostrevenuesinthefuture.
InthePhilippinestherehavebeenseveralmajordevelopments,ledbyAndrewTanandStarCruisesopeningthe$700millionResortsWorldManilain2009.
StarCruiseshasmorethantwomillioncustomers,andwillbringpeopleinonitscruiselines.
StarCruisesalsohasgamingoperationsonitscruisesandgeneratesapproximately$200millionannuallyingamingrevenues.
Additionally,a$15billioncasinoresortcomplexplannedforManilaBayisexpectedtoovercomeitscurrentdelaysandopenin2013.
Thegovernmentisconsideringprivatizingcasinos,breakingthemonopolyofthePhilippineAmusementandGamingCorporation(PAGCOR),whichiscurrentlythesolefranchiseownerwitha41-casinochain.
AmongothercountriesinAsiaPacific,Malaysiahasasignificantgamingmarketwithrevenuesof$877million,ledbyGentingHighlands,whichhasmorethan3,000gamingmachinesandmorethan400tablegames.
WeexpecttheMalaysianmarkettoexpandto$1.
1billionby2014.
InVietnam,USoperatorMGMResortsInternationalexpectstoopenaseasideresortsouth-eastofHoChiMinhCityin2012.
Thecomplexwillhave550rooms,initiallyfor500slotmachinesand90gamingtables,andultimatelytwicethosetotals.
InIndia,thereareslotmachinecasinosintheGoaregion,andtablegamesareavailableoncruiseshipsinGoa.
However,robustinformationonthesizeofthemarketinIndiaisnotavailable.
Japanisconsideringlegalizingcasinos,withanexpectationthatthefirstcasinosmightopensometimearound2014–2015.
InTaiwan,votersin2009rejectedaninitiativetoestablishcasinosontheislandofPenghu.
PartI:CasinogamingResortsWorldSentosa,SingaporePwC20LatinAmericahasthesmallestregionalcasinogamingmarketbyawidemargin.
However,itwillbethesecond-fastestgrowingoverthenextfiveyears,expandingat12.
8percentcompoundedannually.
AlongwithAsia,LatinAmericaistheonlyregionnottohavesufferedadeclineinrevenuesin2009,whenitsrevenuegrowthslowedto4.
4percentfrom8.
0percentin2008and12.
2percentin2007.
However,spendinggrowthinLatinAmericawillquicklyreboundto24.
2percentin2010,thefastestintheworldduringthatyear.
Growthwillmoderateslightlyfromthere,toaverage12.
8percentcompoundedannuallyduringtheforecastperiodasawhole,from$425millionin2009to$776millionin2014.
LatinAmericaMarketoverviewCasinogamingmarket(US$millions)LatinAmerica20052006200720082009201020112012201320142010–14CAGRCasinogaming306336377407425528594649711776%Change7.
49.
812.
28.
04.
424.
212.
59.
39.
69.
112.
8Ataverage2009exchangerates.
Sources:PwC,WilkofskyGruenAssociates20Playingtowin:Theoutlookfortheglobalcasinoandonlinegamingmarketto2014Playingtowin21LatinAmericaMajornationalmarketsChilewasthelargestmarketinLatinAmericain2009at$224million,followedbyArgentinaat$190million.
Casinoswereintroducedin2006inMexicoandgenerated$10millioninrevenuesin2009.
Venezuelatotaled$1millionfromitscasinoonMargaritaIsland.
Brazilhasbingo,lotteries,andbettingparlors,butprohibitscasinosandslotmachines.
Casinogamingmarket(US$millions)LatinAmerica20052006200720082009201020112012201320142010–14CAGRArgentina1391551711821902022192392652929.
0BrazilChile16617920121522431335839042245615.
3ColombiaNANANANANANANANANANA-Mexico-14910111518222621.
1Venezuela111112222214.
9Total30633637740742552859464971177612.
8Ataverage2009exchangerates.
Sources:PwC,WilkofskyGruenAssociatesNewcasinosboostedChile'smarketduring2006–2008,althoughgrowthslowedin2009astheeconomyweakened.
Threecasinosopeningin2010willleadtoa39.
7percentincrease,andwillcontributetoa15.
3percentcompoundannualincreasethrough2014.
InMexico,severalsmallcasinosandslotroomsopenedalongtheRioGrandetoattractvisitorsfromTexas,whichdoesnothavecasinos.
Inadditiontocivilianresidents,TexashasanumberofmilitaryinstallationsnotfarfromtheborderandwithindrivingdistanceofcasinosinMexico.
Althoughstillsmallatonly$10million,weexpectmoreopeningsinthecomingyearstoboostthemarketto$26millionby2014.
InVenezuela,thegovernmentdecidedseveralyearsagotonolongerissuegaminglicenses.
Theindustryhasbeenstaticandwillremainso,althoughweexpectrevenuestoincreasefrom$1millionto$2millionin2010.
LatinAmericaKeydevelopmentsandtrendsPartI:CasinogamingPwC22Canadahasasubstantialandthrivingcasinogamingmarket.
Revenuesfellby1.
4percentin2009asthegamingmarketwasaffectedbytherecession.
Butgrowthwillresumein2010,whereasthemuchlargerneighboringUSmarketwillnotstarttorecoveruntil2011.
LiketheUS,Canadahasregionalandtribalcasinos.
Supportedbyamajornewcasinoopeningin2013,weexpectthemarketduringthenextfiveyearstogrowby6.
7percentcompoundedannually,from$3.
7billionin2009to$5.
1billionin2014.
CanadaMarketoverviewCasinogamingmarket(US$millions)Canada20052006200720082009201020112012201320142010–14CAGRCasinogaming3,1173,2393,5023,7643,7123,8354,0454,3164,7715,143%Change7.
93.
98.
17.
5–1.
43.
35.
56.
710.
57.
86.
7Ataverage2009exchangerates.
Sources:OntarioCasinoCorporation,PwC,WilkofskyGruenAssociates22Playingtowin:Theoutlookfortheglobalcasinoandonlinegamingmarketto2014Playingtowin23CanadaKeydevelopmentsandtrendsNewcasinosthatopenedinprioryearscontributedtogrowthinspendingthrough2008,buttherewasnosuchboostin2009andtherecessionledtoadecline.
NotableopeningsinprioryearsincludedtheTsuuT'inaFirstNationCasinoinCalgary,acasinoopenedbytheStoneyNationinAlberta,andarenovatedCaesarsWindsor,formerlyCasinoWindsor,inWindsor.
Goingforward,growthwillbeboostedbyimprovingeconomicconditionsandanewcasinofromParagonGaming,whichisexpectedtoopenin2013.
Itwillbea600,000-square-feetentertainmentcomplexwithmorethan100,000squarefeetofcasinospace.
ThecasinowillbeattachedtotheBCPlacestadium,andParagonwillcloseitsEdgewaterCasinowhenthenewcasinoopens.
PartI:CasinogamingCasinodeMontréal,QuebecPwC24PartII:OnlinegamingPlayingtowin25Thesize,growth,andcompetitivedynamicsoftheglobalonlinegamingmarketareprimarilyshapedbytheprevailingregulatoryregimes,whichvarywidelybetweencountriesandevenbetweendifferentregionswithincountries.
Theregulationsinforcealsodiffermarkedlybetweenthevariousformsofonlineandmobilegaming,whichcanbebroadlycategorizedintosixdisciplines:poker;casinogaming;bettingonhorseraces;bettingonothersports,suchassoccerandbaseball;onlinebingo;andonlinelotteries.
Inmanycasesthelegalandregulatorypositionofonlinegaming,evenwithinaparticularjurisdiction,isunclearandopentodifferentinterpretations,creatinguncertaintyforconsumersandmarketparticipantsalike.
TheseuncertaintiesarepartlyduetothefactthatmuchoftheapplicablelegislationpredatestheInternet,soitsapplicationtoonlineservicesisinevitablyopentodebateandchallenge.
Forexample,multipleambiguitiessurroundtheimpactoftheU.
S.
FederalWireActof1961,whichoutlawstheplacingofsportsbetsoverthetelephone.
Currently,theUSFifthCircuitCourtofAppealshasruledthattheWireActappliesonlytosportsbettingandnotothertypesofonlinegambling—aninterpretationonwhichtheSupremeCourthasyettorule.
SomehavearguedthattelephonebettingdoesnotapplytotheInternetatall,andthatthelegislationdoesnotaddressintrastateactivity.
Thereisalsoambiguityaboutwhethertribalcasinoscanoperateonlinesites.
BalancingconsumerprotectionandtaxtakeWhenonlinegamingfirstemergedintheearly2000s,manycountriestooktheviewthatonlinegamingcouldnotberegulatedeffectively.
Theirresultinglegislativeinactivitycontributedtotoday'sprevailinglegaluncertainty.
AsidefromahandfulofterritoriessuchastheUK,whichlegalizedmanyformsofonlinegaminginthe2005GamblingAct,mostnationalandstategovernmentsacrosstheworldwereinitiallywaryoflegalizingonlinegamingwithintheirterritories.
However,withtheonsetoftheglobalfinancialcrisisanditsresultingnegativeimpactonpublicsectorfinances,therehasbeenasignificantchangeinattitude.
Withgovernmentsnoweagertoreplenishtheircoffers,theirattentionhasbeencaughtbythepotentialoflegalizedandlicensedonlinegamingservicesasavaluablesourceoftaxrevenues.
Thereisalsoastrongargumentthatsinceconsumerswillengageinillegalonlinegaminganyway,itisbettertolicenseandtaxitthantoallowtherevenuestogotounlicensedoperators.
Also,farmoreeffectivetechnologiesarenowavailablethanafewyearsagotomaintainonlinesecurityandverifythelocationandageofpeopletakingpartinonlinegaming.
Thesedevelopmentsareallencouragingnationalandstategovernmentstointroducetheirownlicensingregimes.
AworldofuncertaintyPartII:OnlinegamingPwC26Incombination,thesetrendshavecontributedtotheemergenceofaregulatoryapproachthatwehavetermedthe"walledgarden"(seeinformationpanel).
Insimpleterms,thisinvolvestheregulatoryauthoritiesintroducingaregimethatlegalizestheprovisionofspecifictypesofonlinegamingserviceswithintheirownterritory,solongastheseareprovidedbyoperatorslicensedwithinthecountryorstate,andonlytopeopleresidentthere.
Companiesthatarelicensedlocallyarealsorequiredtopaytaxlocallyontheirrevenues.
Themovetowardwalledgardeniscurrentlygainingmomentum,bothinEuropeandtheUS.
Approachestoenforcementalsovary,andhaveprovedcontroversialinmanycases.
Themosthigh-profileactionswereseenin2006,whentheUSauthoritiestooktoarrestingexecutivesofoverseasonlinegamingcompaniesastheypassedthroughUSairports.
Manyoftheselawsuitsarenowbeingsettledinreadinessfortheimminentlegalizationofsomeactivities.
Moregenerally,theauthoritiescanenforcebansbytryingtopreventpeoplefromplayingonunauthorizedgamingsites,eitherbyputtingpressureonInternetserviceproviders(ISPs)toblockaccess,orbyrequiringbankstorefusecardtransactionsinthesites.
Bansonsponsorshipandadvertisingonsitesareafurtheroption.
However,suchmovesareoftenseenasaninfringementofpersonalliberty,andtheresponsevariesbycountry.
WhileFrenchconsumersappearrelaxedaboutthestaterequiringISPstoblockaccess,similarmovesinScandinaviatriggeredamajorconsumerbacklash.
RegulationTheemergenceof"walledgardens"Whatisa"walledgarden"Theconceptofthe"walledgarden"emergedduringtheearlydaysoftheInternet,asawayofdescribingtheeffortsbyseveralserviceproviderstocreateandcontrolring-fencedareasoftheInternetfortheirusers.
Theideawasthatuserscanroamfreelywithinthe"garden,"butcannotgooutsideit.
Ultimately,thisapproachprovedunsustainable.
Inthecontextoftheregulationofonlinegaming,"walledgarden"describesasituationwheretheauthoritiesinaparticularterritoryseektolicense,regulate,andtaxonlinegamingbetweenprovidersandplayerswithintheirownborders,withoutallowingcross-borderactivity.
Liketheeffortstocreatering-fencedareasoftheInternet,webelieveitisaninterimstagethatwillultimatelybesupersededbyinter-countryandinterstateserviceswhereliquidityispooledandtaxsharedinsomewaybetweendifferenttaxauthorities.
However,itseemsunlikelythatcountrieswillharmonizewhatformsofgamingarepermittedandpoolingliquidityisaparamountconsiderationonlyforpoker.
Playingtowin27RegulatorytrendsintheUSIntheUS,themovetowards"walledgarden"regulationofonlinegamingisbeingseenatthestatelevel,asvariousstatesseektoestablishtheirownlicensingandtaxregimes.
ThereisapopularmisconceptioninmanyotherpartsoftheworldthatallformsofonlinegamingareoutlawedintheUS,butinfacttherealprohibitionisoninterstategaming,andthelegalpositionwithinstatesvarieswidelybetweenthefivedisciplinesofcasino,horsebetting,othersportsbetting,poker,andlottery.
Forexample,onlinebettingonhorseracingislegalin16statesattheintrastatelevel(butnotacrossstateborders).
AndFederallegislationtolegalizeandregulateonlinepokerisexpectedtoreachthestatutebookwithinthenexttwotothreeyears.
Astheaccompanyingsidebarexplains,theUS'scurrentpositionononlinegaminghasfallenfouloftheWTO,triggeringthepaymentTheUS'sUIGEA:contraveningWTOInOctober2006,theUSUnlawfulInternetGamblingEnforcementAct(UIGEA)madeitillegalforbanksandotherinstitutionstotransferfundstooffshoregamingsites,causingvisitstooffshoregamingwebsitesbyUScitizenstoplunge.
TheUS'spositionononlinegamingputsitatoddswiththeWorldTradeOrganization(WTO),whichruledin2005thatbecausetheUSpermitsonlinehorsebettingforoperatorsauthorizedbystategovernments,itcannotdiscriminateagainstforeignonlinegamingoperators.
TheUSlawwaschallengedattheWTObyAntiguaandBarbudaandthenbytheEUonthegroundsthatitwasdiscriminatory.
TheWTOruledinfavorofAntiguaandBarbudaandtheEU,butthecompensationprovidedbytheUSinvolvedsectorsotherthangaming.
ofcompensationtosomeotherjurisdictions.
Duringthepastthreeyears,anumberofbillshavebeenintroducedinCongresstomodifyUIGEA,legalizeskillgamesandtolicense,regulate,andtaxonlinewagering,butnolegislationhasyetbeenenacted.
Theseissueshavereemergedatthestatelevelin2010,asseveralstatesarelookingtogeneratetaxrevenuesfromonlinewageringbycreatingtheirownintrastatelicensingregimes—mirroringthemovetowards"walledgardens"beingseenatthenationallevelinEMEA.
Forexample,theNewJerseystategovernmentisconsideringlegalizingonlinesportswageringatAtlanticCitycasinos.
However,AtlanticCitycasinosareopposedtothelegislationbecausetheybelieveoffshoreoperationswouldbetheprincipalbeneficiaries.
PennsylvaniaandCaliforniaalsoareconsideringlegalizingin-stateonlinewagering.
Alongsidethemovesbystatestodevelopin-statelicensingregimes,thetribalcasinosarealsolookingtobreakintotheonlinegamingmarket—althoughtheirabilitytodosomaybeweakenedbythefactthattheyarenolongerspeakingwithasinglevoice.
Sometribalcasinoshaveclaimedthattheirlicensetooperatemeanstheyaretheonlyentitieswhocanlegallyofferonlinepoker.
OthershaveopposedCalifornia'sproposalstolegalizeonlinegamingonthebasisthatthiswouldamounttoanillegalviolationofthestate'scompactswithvarioustribes.
Andstillothersarelookingtoteamupwithstatecardclubstoshareonlinegamingrevenues,orarearguingforparitywithcommercialcasinosinanynewregime.
PartII:OnlinegamingPwC28RegulatorytrendsinEMEAMostofthelegalonlinegamingintheworldcurrentlyoccursinEMEA,andtheUKhasthelargestlegalmarket,reflectingthefactthatithasoneofthemostopenonlinegamingregimesofanycountry.
WhileothercountriesinEMEAarenotmovingtotheextremepositiontakenbytheUK,wearecurrentlyseeingawaveof"walledgarden"regimesbeingintroducedbycountriesacrossEurope.
Forexample,onlinewageringwaslegalizedinItalyin2007,andonlineskillgames—principallyonlinepoker—werepermittedfrom2008.
A2010draftdecreeauthorizedanadditional200onlinelicenses,withapplicantsbeingpermittedtolocateinanycountryintheEuropeanEconomicArea,althoughcompanieswillstillberequiredtopayItaliangamingtaxes.
Thisapproach—combinedwithrelativelylowtaxesforoperators—sawrevenuesinItaly'slegalonlinegamingmarketmorethandoublein2008,andmorethandoubleagainin2009.
Goingforward,weexpecttheproliferationofonlinelicensesandrapidgrowthinonlinepokertocontinuetopropeltheonlinegamingmarketinItaly.
InFrance,thefirstwaveof11companieswereawardedlicensesforonlinegamingfrommid-2010,followedbyfurtherwavestakingthenumberoflicensedoperatorstomorethan30.
Thismovehasbrokenthestate'smonopolyasproviderofonlinegaming,whichwaspreviouslylimitedtolotteriesandhorseracing.
WhileanumberofoperatorsenteredtheFrenchonlinepokermarketandspentsubstantialamountsonmarketing,thecurrentrelativelyhightaxesimposedbythegovernmentmakeitdifficulttoturnaprofit.
AnumberofotherEuropeancountriesarealsoconsideringlegalizingorregulatingonlinegamingwiththegoalofincreasingtheirtaxreceipts.
InBelgium,legislationwillallowonlinegamingin2011,butlicenseeswillberequiredtoobtainanofflinegaminglicensebeforetheycangetanInternetlicense.
Irelandhasannounceditwillintroduceregulatedonlinegamingasameanstogenerateadditionaltaxrevenues.
InAustria,onlinewageringislegalthroughlicensedsites,butthesesitesareonlyallowedtoacceptwagersfromAustrians.
AndintheCzechRepublic,theFinanceMinistryin2009allowedregulatedonlinewagering,whichwillhelpdomesticoperatorscompetewithforeigncompaniesthathaveunregulatedaccesstothemarket.
In2010,proposedlegislationwillbanforeignonlinegamingcompaniesfromadvertisingintheCzechRepublic.
Meanwhile,Greeceplanstoregulateonlinegaminginanefforttobolstertaxreceipts,andlegalonlinewageringisexpectedtobeavailablein2011.
InNorway,alawwasenactedinearly2010,whichbanstheprocessingofonlinegamingtransactionsbyunlicensedoperators.
AndinDenmark,onlinegamingwassupposedtohavebecomeavailableinJuly2010,butwillbedelayed.
TheenablinglegislationmustberesubmittedtotheECbecauseofacomplaintbyland-basedcasinosthatfaceamuchhighertaxratethanisproposedbyonlineproviders.
Theexpectationisthatthenewregimewillcomeintoforceinmid-2011.
Significantly,withmanycountriesthathaveformerlyoutlawedormonopolizedonlinegaming,movingtowardsa"walledgarden"approach,theUKisshowingsignsofconvergingPlayingtowin29Cross-borderblockingallowedintheEUIngeneral,therulesoftheEuropeanUnionprotecttherightofbusinessesoperatinglegallyinoneEUcountrytodobusinessesintheothers.
Thisprovisionhasbeenusedbyonlinegamingoperatorsactive—forexample—intheUK,toclaimtherighttooperateinotherEUstates.
However,a2010rulingbytheEuropeanCourtofJusticeallowsEUcountriestobanforeignonlinegamingsites,effectivelysupportingthe"walledgarden"approachtoregulation.
TherulingstemmedfromaninjunctionintheNetherlandsthatpreventedLadbrokesfromtakingbetsfrompeopleintheNetherlandsbecauseLadbrokeswasnotlicensedinthatcountry.
TheCourtruledthatitispermissibletobanactivitiesifthepurposeistocombatfraudorprotectconsumers,eventhoughsuchbanswouldotherwiseappeartoviolateEUrulesguaranteeingopenmarkets.
withthembyretreatingslightlyfromitsformerlyhighlyopenregime.
PlayersbasedintheUKcancurrentlyplayononlinegamingwebsitesthatarelocatedinacountrywheretheycanlegallyoperate(containedontheUK's"whitelist")andarefreetotransfertheirfundstothosewebsites.
WebsitesofferingfixedoddsbettinggamessuchasrouletteandslotscanbelicensedtorunintheUK,andthe2005GamblingActpermitswebsitesofferingonlinecasinogamessuchaspokerandblackjacktooperateintheUK.
However,theUKhasfoundthatitsopenregimemeansonlinegamingcompaniestendtotargettheUKmarketfromoffshorebasessuchasGibraltarandMalta,therebylimitingthetaxtaketotheUKgovernment.
TheUK'sDepartmentforCulture,MediaandSporthasproducedaconsultationpaperaskingwhetheroperatorsthatareactiveintheUKmarketshouldberequiredtogainadirectlicensefromtheUKgovernment.
ThissuggeststhattheUKmayalsobeheadingtowardsmoreofa"walledgarden"approach,albeitfromtheoppositedirectionfrommostothercountriesinEMEA.
Moregenerally,itisimportanttonotethatthetrendtowardslegalizingonlinegamingisnotuniformacrossEMEA,withanumberofcountrieshavingtakenstepstobanorlimitonlinegaming.
Germany,forexample,bannedonlinegamingthroughprivateprovidersin2007,thoughthisbanwillbeupforreviewin2011.
InPoland,legislationwasintroducedtobanonlinegamingandlimitgamingtoland-basedcasinos.
Russiaprohibitedonlinegamingin2006.
InTurkey,onlinegamingisastate-ownedoperation,butisprohibitedthroughotherproviders.
AndinIsrael,a2005rulingorderedonlinegamingoperationstocloseandrequiredcreditcardcompaniestonotauthorizepaymentstoonlinegamingsites.
However,in2007,Play65,anonlinebackgammonsite,waspermittedtooperate.
SouthAfricawasexpectedtolegalizeonlinewageringseveralyearsago,buttherehavebeendelaysinthelegislation.
However,thereissomeexpectationthatonlinewageringmaybelegalizedin2011,dependingontherecommendationsissuedbythecurrentGamblingReviewCommission.
InAugust2010,courtsforcedforeignoperatorstostoptakingbetsfromSouthAfricancitizens,andbanksandcreditcardcompanieshaveblockedSouthAfricansfromusingtheircreditcardsononlinegamingsites.
Oneoftheonlineoperatorshasobtainedleavetoappealagainstthisdecision,andhencehascontinuedtooperate.
TheGamingBoardhasindicatedthatifthisappealisunsuccessful,itwillseizeprofitsthecompanyhasmadesince20August.
PartII:OnlinegamingPwC30RegulatorytrendsinAsiaPacificAlthoughparticipationinonlinegamingiswidespreadacrossAsiaPacific,itisillegalinvirtuallyallcountries.
ExceptforsportsbetsthatcanbemadeonlineinAustralia,thePhilippinesistheonlycountrywhereonlineandmobilegamingispermitted.
InthePRC,onlinegamingisnotpermittedbutisestimatedtobewidespread,andthegovernmentissteppingupitseffortstoenforceonlinegamingrestrictions.
Japanisestimatedtohaveoneoftheworld'slargestonlinegamingmarkets,withmorethan10millionpeoplewageringatonlinecasinos,despitethefactthatInternetgamingisbannedinJapanandtherearenoonlineJapanesecasinos.
InIndia,onlinegamingisbannedinMaharashtra,butthereisnospecificlegislationinotherregions.
IndiaisconsideringlegalizingonlinegamingintheGoaregion,withanonlinelotteryratherthanonlinepokerorcasinogaming.
OnlinegamingisprohibitedinMalaysiaandtherearenoonlinelicensesinSouthKorea.
InAustralia,theInteractiveGamblingActof2001madeitillegaltoprovideonlinegamingservicestopeopleinAustralia,althoughitisnotillegalforAustralianstoplaypokerorcasinogamesonline.
Onlinesportsbettingthroughlicensedservicesispermitted,butAustralianprovidersarepermittedtoofferonlinewageringonlyonhorseracing.
InOctober2009,agovernment-commissionedstudybytheProductivityCommissiondeterminedthatthebanleadstosignificantonlinewageringatoffshoresitesandapossibleincreaseinproblemgambling,whilesacrificingcommercialopportunitiesandtaxrevenuesinAustralia.
Onthisbasis,thecommissionrecommendedthatoperatorsbepermittedtoofferonlinepokerandonlinecasinogamestoAustralianresidents.
In2010,however,thegovernmentrejectedthisrecommendationonthegroundsthattherisksofanincreasedincidenceofproblemthroughlegalizationwouldoutweighthecommercialandtaxbenefits.
InthePhilippines,onlinegamingwaslegalizedin2000withPhilippineAmusementandGamingCorporation(PAGCOR)asthesoleoperator.
In2002,thegovernmentgrantedalicensetoPhilwebtooperateonlinecasinos.
Inadditiontooperatingonlinecasinos,PhilwebprovidesInternetgamingtechnology.
PAGCORhasopeneduptheonlinegamingmarkettoe-gamingcafésthatareoperatedonafranchisedbasis.
Legalonlinegamingconsistsofsportsbettingandonlinecasinosthatfeaturetablegames,videopoker,othergamesandslots.
Inlate2009,anewonlinegamingsitewascreatedtohelpPAGCORmaintainitsmonopolybyattractingplayerswithalocalalternativewhootherwisemightplayonoverseassites.
Playingtowin31RegulatorytrendsinCanadaLiketheUS,Canadahasseensignificantactionatthestatelevel,focusedonregulatingandtaxingonlinegaming,reflectingthemovestowardswalledgardeninboththeUSandEMEA.
However,Canadahasalreadybeguntoprogressbeyondthewalledgardenstage,andissomewayaheadoftheUSinenablingthenewstateregimesjoinuptoallowinterstateonlinegaming.
Through2009,onlinegamingsiteswerenotpermittedtooperateinCanada,althoughCanadianswereallowedtoplacebetsonoffshoresites.
Inearly2010,BritishColumbiabecamethefirstprovincetoofferonlinegaming,amassing140,000registeredplayersbyJuly2010.
TheBritishColumbiaLotteryCorporationisamajordomesticsiteandPlayNowisaleadingoffshoresite.
BritishColumbiahasnowformedapartnershipwithQuebecandNovaScotiatoofferonlinegaming.
Canadahasalsoseenasignificantstepforwardintermsofonlineofferingsfromtribalcasinos.
TheKahnawakeGamingCommission—whichlicensesandregulatesonlinecasinos,onlinepokerrooms,andonlinesportsbooksitesintheMohawkTerritoryofKahnawake—recentlysignedamemorandumofunderstandingwithAntiguaandBarbuda,whichwillallowlicenseesinonejurisdictiontooperateintheother.
MohawkInternetTechnologies,whichoperatestheserversusedbyonlinecasinosinKahnawake,willgetmorebusinesswhilelicenseesinAntiguaandBarbudawillhaveaccesstomoreadvancedtechnologies.
RegulatorytrendsinLatinAmericaInLatinAmerica,Chileiscurrentlytheonlycountrywithalegalonlinegamingmarket,althoughitissoonexpectedtobejoinedbyArgentina.
OnlinepokerisverypopularinChile—therearealreadymorethan50onlinecasinos,withmoreexpectedtobelaunchedinthenextfewyears.
Argentinaisplanningtolegalizeonlinegamingin2011,withonlinebingolikelytobeapopularoffering,giventhatbingoisthecurrentlythelargestgamingcategoryinArgentina.
PartII:OnlinegamingPwC321.
Cross-borderliquidityInPwC'sview,thetrendtowards"walledgarden"regulationofonlinegamingthatisevidentbothinEMEA(especiallyWesternEurope)andtheUSwillcontinuetoevolveandchangeoverthecomingyears.
IntheUS,therearealreadysignificanttensionsbetweenthegeographicalbasisoftheintrastateregulationthatstatesaretryingtosetup,andtheinherentlylocation-independentnatureofInternetservices.
AndinEurope,whilethecreationofring-fencednationalmarketsforservicessuchaspokermaybepracticableinlargercountries,the"walledgardens"willcomeundergrowingpressuretointerconnectandshareliquidityoncecountrieswithsmallerpopulationsstarttoimplementlegalizedandlicensedonlinegaming.
Thekeyissueineachcaseisthecriticalmassofthenumberofavailableplayerswithinthejurisdiction,andwhetherthisissufficienttosustainaviableandgrowingmarket.
InItaly,withapopulationof60million,oreveninCaliforniawith37million,eventhemostdemandingpokerplayershouldbeabletofindenoughpeopletoplayagainst.
Butoncethesmallerterritories—suchasDenmarkwitha5.
5millionpopulation,orthesimilarlylesspopulousUSstates—starttolegalizeservices,thereisadistinctpossibilitythattherewillnotbeenoughplayerswithinthelocaljurisdictiontosustaingrowth.
Inthesecircumstances,theonlywaytotapintosufficientliquiditywouldbetoallowcross-bordergamingandliquidityflowsbetweendifferentterritories.
Clearly,thisdoesnotsiteasilywiththenationalandstate-level"walledgarden"approach.
Whileitmightbestraightforwardenoughforanoperatortogaintherequiredlicensesinmultiplejurisdictions,thecross-borderflowsofliquidity,revenues,andprofitcouldcreatesignificantoperational,financial,andtaxationchallenges,bothforoperatorsandgovernments.
However,ourviewisthatongoinggrowthindemandandspendingmeansitwillbeintheinterestsofallparties—notleastthegovernmentsseekingtaxrevenues—toreachagreementontheseissues.
Thereareprecedentsforthesemovestowardscross-borderpooling.
InCanada,aswementionedearlier,statesarealreadylinkingupforonlinegaming,withBritishColumbiaformingapartnershipwithQuebecandNovaScotiatooffertheseservices.
IntheUS,anumberoftheformerlystate-specificlotteriesinNewYorkandthesurroundingstateshaveclubbedGiventhefragmentedmarketstructurewehavedescribed,itisclearthatthereiscurrentlynosuchthingasacoherentglobalonlinegamingmarket.
Rather,themarketismadeupoffragmentedanddiscretepocketsoflegalandillegalspending,whosesizecanbeguessedatorestimatedbutnottrackedormeasuredaccurately.
However,webelievethissituationisunsustainable,andthatfurtherchangeisbothinevitableandalreadyunderway.
Wewillnowexaminefourkeychangedriversthatwebelievewillshapetheindustryoverthecomingyears.
WewillthensetoutourviewofwhattheonlinegamingmarketsintheUS,EMEA,AsiaPacific,LatinAmericaandCanadawilllooklikeinfiveyears'time.
EmergingchangedriversPlayingtowin33togethertocreatethe"Powerball"multistatelottery.
AndIllinoisandNewYorkarebothpressingtolaunchonlinegamingattheinterstatelevel,buoyedbytheirsuccesswithlotteries.
Meanwhile,Europehasthesuccessfulpan-EuropeanEuroMillonslottery,launchedinFebruary2004byFranaisedesJeuxinFrance,LoteríasyApuestasdelEstadoinSpain,andCamelotoftheUK.
2.
TaxationlevelsAswehavepointedout,theopportunitytogeneratetaxrevenuesisoneofthemainattractionsforgovernmentstolegalizeandlicenseonlinegamingserviceswithintheirborder.
However,insettingthelevelsoftaxationbothofoperatorsandcustomers,theyneedtobekeenlyawareoftheneedtobalancetaxtakeandmarketgrowth.
InFrance,despitethelegalizationoftheonlinepokermarketandtheentryofseveralwell-establishedoperators,thelevelsoftaxationhavecontributedtodisappointinglevelsofprofitability.
Insomecases,governmentsmaybedeliberatelyusinghightaxationasaformofprohibitiontomakeproductsandserviceslessattractive,asinthetobaccomarket.
Butwhatevertheintention,theeffectinsuchcasesistolimitthegrowthinthelegalizedmarketandeffectivelyrestrictthetaxtake.
Ifandwhentheonlinegamingmarketbecomestrulycross-border,hightaxationinsomejurisdictionscouldseeliquiditymigrate,stuntingthemarket'sdevelopmentwithinthebordersofhigher-taxterritories,whileitgrowstronglyelsewhere.
3.
DifferentonlinegamingdisciplinesVaryingattitudestothedifferingformsofgamblingwillshapeboththeregulationandgrowthofvariousformsofonlinegamingindifferentmarkets.
Forexample,poker'sstatusasaskill-basedgamedeeplyembeddedinAmericanculturallifeandhistorymeansthatUSsocietyregardsitasthemostsociallyacceptableofthevariousonlinegamingserviceswithmassappeal.
Partlyforthisreason,webelievethatonlinepokerproviderswillbeallowedtooperateonaninterstatebasisintheUSwithinthenexttwotothreeyears.
Inourview,thisregulatorychangewillrepresentawatershedforlegalizedcross-borderonlinegaming,markingthestartofanewera.
Onlinebettingonhorseracing—alreadythrivingatstatelevel—willalsogrowstrongly,albeitatagentlerpacethanpoker.
AndUSlotterieswillcontinuetospreadacrossstateborders,fueledbyadvancessuchasnationwideonlinesalesoftickets,moresweepstakes,andonlinescratch-cards.
Incontrast,giventheircompleteabsenceofskill,onlinetablegameshavelittlechanceofbeinglegalizedintheUSintheforeseeablefuture.
Onesegmentwheredifferentterritoriesarelikelytodivergemoststronglyissportsbetting.
Already,EuropeanmarketssuchastheUK,havebuoyantmarketsinonlinebettingonmajorsportsincludingsoccerandcricket.
However,intheUS,theconcernsfeltbysportsbodiessuchastheNFLmeansbettingonsportsresultsisunlikelytomakemuchheadwayintheonlineenvironment.
4.
SocialnetworkingGoingforward,socialnetworkingwillbeanimportantdriverofactivityandgrowthinonlinegamingworldwide.
Therapidtake-upofonlineservicesbythemillennialdemographicgroupshasalsoseenthemmanifestgrowinginterestinusingthesenetworksasanenvironmentforgaming.
AnearlysignofthispotentialwastheexplosioningamingontheSecondLifesocialnetworkingandvirtualrealitysite,whichforawhileplayedhosttohundredsofvirtualcasinos,lotterygames,andotherformsofgambling.
BecauseSecondLife'sin-gamecurrencycouldbeexchangedforrealmoney,thesegamingactivitiesbecameafocusforregulators.
Inmid-2007,toavoidregulatoryaction,thesitetookthedrasticstepofbanningvirtualgambling.
Butbythenthepotentiallylucrativealignmentbetweensocialnetworkingandonlinegaminghadbeenfullydemonstrated.
Socialnetworking'sroleindrivingonlinegamingservicescouldbeespeciallysignificantbecauseofitshighlevelsofmobileusage.
Skill-basedgamesand"fantasy"sportsleagues—wherefansselectteamsofplayersfromdifferentteamsandthencollectpointsbasedonthoseindividuals'performances—couldbeespeciallyattractiveonsocialnetworkingplatforms.
OnesignofthepotentialisthatZyngaalreadyhasseveralmillionFacebookusersplayingitspokergame,whichisnotforcash.
PartII:OnlinegamingPwC34Throughouttheforecastperiod,ongoinguncertaintyanddiversityaroundtheregulationandlegalityofonlinegamingindifferentterritorieswillmakeitdifficulttodefineandtrackrevenuesacrossacoherentglobalmarket.
However,regulationwillcontinuetoevolveandprogressinmostcountries,asgovernmentsseektoimproveconsumerprotectionandreaptaxrevenuesfromonlinegamingspendingandprofits.
IntheUSandEMEA(especiallytheEU),thisevolutionwillinitiallytaketheformofthecreationoftheregulatory"walledgardens"wehavedescribedatthestate(US)andnational(EU)levels.
However,by2012–2013therewillbegrowingmomentumbehindmovestopoolonlinegamingliquidityandalignregulationacrossborders,especiallyinskill-basedgamessuchaspoker.
ThesetrendswilltakemuchlongertoemergeinAsiaandLatinAmerica,givenAsiangovernments'generallygreaterdesiretocontrolbothgamblingandInternetactivity,andtheonlinegamesindustry'searlystageofdevelopmentinLatinAmerica.
Hereisasummaryofwhatwethinktheonlinegamingindustrywilllooklikeineachregionin2014:UnitedStatesTheexpectedFederallegalizationofinterstateonlinepokergamesin2012–2013willservetolegitimizetheonlinegamingmarketingeneral,boostusage,andactasacatalystfordevelopmentsinotheronlinegamingdisciplines.
Asdifferentstates'regulatory"walledgardens"forpokerstarttointegrateandstandardize,onlinebettingonhorseracingwillexpandbeyondthestateswherecurrentlylegal,andembarkonasimilarregulatorypath.
ThegrowthresultingfromthesetrendswillseeablendofnewonshoreandoffshoreprovidersentertheUSmarket.
TheseentrantswillincludetheUS'smajor"bricks-and-mortar"casinooperators,whicharealreadyreadyingtheirplansfortheonlinemarket.
Asnotedabove,socialnetworkingsiteswillbeakeydistributionplatformforonlinegamingservices,resultingincollaborativepartnershipsbetweengamingbrandsandsocialnetworkstocapitalizeonthisopportunity.
Lotterieswillalsoexpandtheirreachandscalethroughgrowinginterstatecollaborationandonlinepooling,combinedwithnewonlineofferings.
However,otheronlinecasinogameswillremainoutlawedthroughouttheforecastperiod,andsportsbettingwillcontinuetobetightlycontrolledbythesportsleaguesthemselves,probablypreventingtheentryofnewoperatorsintothemarket.
Theglobalonlinegamingmarketin2014RegionbyregionPlayingtowin35EMEADevelopmentofthelegalizedandlicensedonlinegamingmarketinEMEAwillbeledbyWesternEuropeandSouthAfrica,withprogresselsewhererestrictedbyculturalfactorsintheMiddleEast,andconcernsoverorganizedcrimeinCentralandEasternEurope.
AssmallerEUnationsbegintointroducetheirownin-countrylicensingandtaxregimesoverthenexttwotothreeyears,particularlyforpoker,operatorswillwanttobuildcriticalmasstomakemoneyfromnewservices.
Asaresult,pressureforinterstateliquiditypoolingwillgrow,stimulatingbilateralagreementsbetweencountriesandgreaterregulatoryinvolvementatEClevel.
However,therequirementforeachoperatoractiveinacountrytosubmittolocallicensingandtaxationwillremain.
Onlinegamesofchancewillremainlargelyunlicensedandexcludedfromtheregulatoryregime,asintheUS,buttheEUmarketwilldifferinthatonlinesportsbettingwillbecomeincreasinglyprevalentacrossborders.
FollowingtheexampleofthesuccessfulEuroMillionslottery,onlineaccesstointer-countrylotterieswillalsogrow.
AsiaPacificThefactthatonlinegamingiscurrentlyillegalinvirtuallyallcountriesinAsiaPacificexceptAustraliaandthePhilippinesmeansthatwidespreaddevelopmentoflegal,licensedservicesacrosstheregionisstillsomewayoff.
Whiletheillegalonlinegamingmarketisclearlybuoyant,thelicensedmarketwillstillbefairlysmallin2014,withmanygovernmentsfocusingmoreonenforcingexistingregulationsthancreatingnewones.
ThelegalmarketwillbelargelylimitedtotheexistingmarketinAustraliaandthePhilippines,andahandfulofstate-level"walledgarden"marketsinIndia.
LatinAmericaThelegalonlinegamesmarketinLatinAmericawillstillbeatanembryonicstagein2014,ledbyChileandArgentina.
Inmanycountries,therestrictionsongrowthimposedbynationalregulationwillbecompoundedbylow—butrising—penetrationoffixedandmobilebroadbandservices.
Themarketinindividualcountrieswillbeshapedbylocalculturalfactors,suchasChileans'loveforpokerandArgentina'slikingforbingo.
CanadaCanadawillremainsomewhataheadoftheUSinjoiningupthestate-level"walledgarden"regulationsintoacoherentnationalregime,withinterstatecollaborationexpandingmorequicklythansouthoftheborder.
ThegrowthresultingfromthesetrendswillattractnewonshoreandoffshoreprovidersintotheCanadianmarket,whichwillbeseentosomeextentasatest-bedforofferingsandmodelsthatmaylaterbeappliedintheUSwhenregulationsallow.
AlongsideindigenousCanadianoperators,theentrantstotheCanadianonlinegamingmarketarelikelytoincludebricks-and-mortarcasinocompaniesfromtheUS.
PartII:OnlinegamingPwC36SpendingheadingEast…AswecommentedinourExecutiveSummary,theglobalgamingindustryin2014willbesimilarinmanywaystotoday's,stilldominatedbylargeandprestigiousdestinationdevelopments.
However,thecontinuedinvestmentinmajorresortswillbeaccompaniedbydramaticevolutioninseveralaspectsoftheindustry,asspendingshiftseastwardstowardsAsiaPacific,andasonlinegamingrevenuestakeoffinmanymarkets.
Itisimportanttokeepthespeedandscaleoftheseshiftsinperspective—aneedthatismirroredinothersegmentsoftheEntertainment&Media(E&M)industry.
TheprojectionsinourPwCGlobalE&MOutlook2010–2014indicatethatspendingonE&MwillgrowmuchfasterinAsiaPacificthaninEMEAandNorthAmericainthenextfewyears.
However,despitebeingoutpacedingrowthterms,thosetwolong-establishedmarketswillstillbesignificantlylargerthanAsiaPacificin2014.
Similarly,inthegamingsector,despitetheongoingshiftinspendingtowardsAsiaPacific,drivenbyrisingpersonalwealthandtheemergenceofnewcenterssuchasSingapore,theUSwillstillbethebiggestregionalgamingmarketin2014,accountingfor44percentofglobalrevenuescomparedtoAsiaPacific's40percent.
…andgoingdigital—butonlygraduallyTheGlobalE&MOutlook2010–2014alsoprojectsthatE&M'songoingglobalmigrationtodigitalformatsandconsumptionwillcontinueapace,withdigitalE&Mspendingrisingat12.
1percentcompoundedannuallythrough2014,comparedwith2.
6percentfornon-digital.
However,despitethisshift,non-digitalrevenueswillstillaccountforsometwo-thirdsoftotalE&Mrevenuesgloballyin2014.
Inthegamingindustry,thepaceandscaleofthemigrationtoonlinespendingisclearlymuchmoredifficulttocall,giventhefragmentedregulatorylandscape,thevaryingspeedsatwhichregulationischangingindifferentjurisdictions,andthecurrentuncertaintyinmanycountriesovertheboundariesbetweenlegalandillegalservices.
Forthesereasons,wehavenotattemptedtoprovidehardrevenueforecastsforonlinegaming.
However,ourexpectationisthatonlinegamingwillstillaccountforarelativelyminorproportionoftheglobalgamingindustryasawholein2014,withmuchonlinespendingbeingincrementaltothephysicalgamingindustry,ratherthansubstitutional.
Totryandensurethisisthecase,physicalgaminglocationsareenhancingtheiroffer,includingbuildingmoreattractivecasinofacilitieswithbetteraccommodationandawiderrangeofleisurechoices,furtherdifferentiatingtheexperienceofphysicalgamingfromitsonlinecounterpart.
Inourview,theimpactofrisingonlinegamingspendingmaywellbefeltmorekeenlyamongalternativeleisurechoicessuchasvideo-on-demandthanamongphysicalcasinos.
ConclusionAnindustryfacingevolution-notrevolutionPlayingtowin37TheemergenceofcompetitivenewpowerhousesInparallelwiththeincreasingspendinginAsiaPacificandonline,athirdcleartrendoverthefive-yearforecastperiodwillbetheriseofnewgamingdestinationstochallengetheestablishedcenters,asmoregovernmentsseektocapitalizeongaming'spotentialtogeneratetaxrevenuesandtourismdollars.
Twosignsofwhatisachievable—inverydifferentmarkets—aretheprojectedrapidexpansionofSingaporeandtheanticipateddoublingofthegamingspendinginChilebetween2009and2014.
Therenewedpost-downturninvestmentinnewresortfacilitiesinestablishedgamingcentersunderlinesthedegreetowhichexistinglocationswilltakesuchthreatsseriouslyoverthecomingyears.
EconomicfactorsAlongsidethesechangingcompetitivedynamics,thekeyimponderablefactoristheglobaleconomiccycle.
AswehighlightedinourExecutiveSummary,supplysidechangesbygovernmentsandoperatorsdohavethepowertomorethanoffsettheimpactofchangesintheeconomicenvironment:witnessthefactthatnewandimprovedofferingsfromregionalcasinosintheUSenabledthemtomaintaintheirrevenuesunchangedin2009,ayearwhentheoverallUSmarketfellby3.
4percent,andwhenAtlanticCityplungedby13.
2percent.
However,thefactremainsthattheeconomicdownturndidcauseglobalspendingtodeclineby2.
8percentin2009,withmuchlargerfallsinEMEAandtheUS,andthepostponementofinvestmentandconstructionworkonanumberofmajordevelopments.
Arenewedonsetofeconomicdifficultiescouldtriggerasimilarlynegativeimpactonconfidenceandspendinginsomemarkets,especiallygiventheplansfordeepcutsinpublicspendinginmanycountries.
Atthetimeofwritingthejuryisstillout,withadouble-diprecessioninEuropeandtheUSregardedasapossibility,butnotastronglikelihood.
Ifadoubledipweretocomeabout,theimpactcouldwellbetoseethebalanceofglobalspendingshiftmorerapidlytoAsiaPacificby2014.
Consumerchange:thebiggestchallengeGoingforward,theultimatedeterminantofindustrygrowth—bothoverthefive-yearforecastperiodandbeyond—willbetheindustry'sabilitytocontinuetoproduceanofferingandexperiencethatpeoplewanttospendmoneyon.
Inmarketsacrosstheworld,theproliferationofdigitalchannelsandservicesisdrivinganexplosionintheentertainmentchoicesavailabletoconsumers,rangingfrom3DmoviestomobileTVtomassivelymultiplayeronlinegames(MMOGs).
Theintenseexperienceofriskandrewardofferedbygamingclearlygivesitaspecificanduniqueappealformanypeople.
Buttomonetizethisappeal,thewiderofferingandcontextinwhichgamingisdeliveredmustcontinuetomatchconsumers'changingtastes,needs,andlifestylebehaviors.
Withthisinmind,webelievethatthesinglebiggestchallengefacingtheindustrywillbestayingclosetoitsconsumers—atalllevelsofspending—andensuringtheexperienceremainssufficientlycompellingtooverrideotherpotentialchoices.
Thiswillrequireanongoingdialoguewithcustomers,andinnovationtokeepupwiththeirneeds.
Thechallengesareincreasedbythefactthatconsumertastesvarywidelyindifferentmarketsandsegments—afactorthatisincreasinglyevidentinothersegmentssuchasmobileentertainment.
True,itislikelythattherewillalwaysbeaplaceforthemassivedestinationcenterssuchasLasVegasandMacau.
Butthegrowingabilitytosegmentthecustomerbaseandpersonalizetheofferingtotargetspecificgroupsmaydrivetheemergenceofnewandasyetunthoughtofnicheofferings,andincreasingconvergenceandcollaborationwithothermedia.
Developmentssuchassocialnetworking,interactiveTVwithtransactionalcapabilities,MMOGs,andmobilebroadbandallbringmajorimplications,andnotjustforonlinegamingservices.
Withinregulatorylimits,suchchannelscanalsobeused-astheyareinotherindustries-tobuildandsustaincommunitiesofinterestaroundphysicalcasinos,andenhancethegamingexperience.
Overall,webelievethenextfiveyearswillseeanevolutionratherthanrevolutionintheglobalgamingindustry.
Butasevolutionsgo,itwillberapidandpervasive—certainlymoresweepingthanthechangeseenduringthepastdecade,whichhasbeenslowedinthepastthreeyearsbytheeconomicdownturn.
Whilethegaminglandscapeof2014willberecognizablefromtoday's,itwillhavemanymore—andmorevaried—topographicalfeatures.
PwC38PwCcanhelpPwCfirmsprovideindustry-focusedassurance,taxandadvisoryservicestoenhancevaluefortheirclients.
Morethan161,000peoplein154countriesinfirmsacrossthePwCnetworksharetheirthinking,experienceandsolutionstodevelopfreshperspectivesandpracticaladvice.
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Playingtowin39EditorialcontributorsGlobalMarcelFenezGloballeader,Entertainment&Mediamarcel.
fenez@hk.
pwc.
comAustraliaMeganBrownlowmegan.
brownlow@au.
pwc.
comLouiseKinglouise.
king@au.
pwc.
comDavidWiadrowskidavid.
wiadrowski@au.
pwc.
comCanadaTraceyJenningstracey.
l.
jennings@ca.
pwc.
comHongKongAdrianKHYeungadrian.
kh.
yeung@hk.
pwc.
comSingaporeGregUnsworthgreg.
unsworth@sg.
pwc.
comSouthAfricaPietroCalicchiopietro.
calicchio@za.
pwc.
comNikkiForsternikki.
forster@za.
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comUSAMichaelGFrenchmichael.
g.
french@us.
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comFrederickHipwellfrederick.
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comSharonLewissharon.
lewis@us.
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comMaryLynnPalenikmary.
lynn.
palenik@us.
pwc.
comKirkAThorellkirk.
a.
thorell@us.
pwc.
comUKDavidTrunkfielddavid.
trunkfield@uk.
pwc.
comJohnMWatersjohn.
m.
waters@uk.
pwc.
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