Mobile Gaming

The Internet has altered the method by which gambling occurs, and this transformation is starting to have an effect on how people gamble. Online games do not need any traditional retailers, and retailing does not offer anything the Internet cannot provide, except that the consumer can physically see and feel the product.

The global online gaming market has experienced rapid growth since its establishment in the 1990's but remains relatively immature. Although estimates as to the current size and growth rates of the global online gaming market vary considerably, it is estimated that the market generated revenue of approximately $7.0 billion in 2004, representing just over three per cent of the total global gaming market. In 2004, casino and bingo games represented approximately 29 per cent of the online gaming market, and poker represented approximately 13 per cent.

The next step in the evolution of iGaming is mobile, and the online gaming operator must seriously consider being an early adopter of Mobile Gaming Technology. 

Analyzing the market by ”product“ shows that wagering generally in betting exchanges and sportsbooks dominates at 38 percent with online casinos handling 23 percent of the action and online poker close behind at 22 percent. Skill Gaming and Bingo hold 2 percent and 5 percent respectively with online lotteries in a growth phase expected to surge from a current 10 percent to 27 percent by 2010.

Sub-market delivery channels include the remote gaming market (mobile or m-gaming) at 15 percent with growth to 27 percent likely by 2010, and interactive TV at 3 percent with surprisingly slow growth to only 5 percent over the same period.

The remote gaming market has been growing at a rate of 35% over the past 4 years and was estimated to be worth over $7 billion in 2004, the vast majority of which was internet-based. The mobile section of the gaming market only accounted for $5 million in 2004. However, industry analysts such as CCA, Juniper Research and Screen Digest estimate this will grow to $100 million in 2005 and to $1 billion by 2006.

Projected Market Value Stats:

The report from telecoms analysts Juniper Research reveals that mobile lotteries will be the largest money-spinners, with gross revenues of nearly US$7.9bn worldwide by 2009, followed by sports betting (US$6.9bn) and casino-style gaming (US$4.5bn).

The rapid expansion of the mobile marketplace and the potential profitability associated with the Internet gambling business has attracted an increasing number of operators. 

Given the number of iGaming operators, one might think that the Internet mobile gambling market would be highly competitive.  However, a significant portion of the companies in this fledgling industry can be characterized as small players who possess limited credibility; are inadequately financed; operate with a single technology and typically have limited contacts in the international arena. It is generally projected by the industry that many of these companies will fall by the wayside with only a limited number of dominant players remaining.

The closest competitor in the video gaming industry would be JAMDAT mobile; ostensibly the number one provider of mobile gaming technology in the world, which was recently bought out by EA (Electronic Arts).  A good British comparison of a mobile gaming company would be Hands-On Mobile (formerly (M) Forma).  One company to watch would also be Cantor Gaming as a choice for wireless LAN gaming in Las Vegas.

By being an early adopter of mobile technology, the online gaming operator will gain valuable insight and experience into the operational and marketing aspects of running mobile gaming.  Since it is commonly believed that accessing the internet through mobile hardware will become the norm in the near future, the online gaming operator must learn how to be successful while the sub-industry in still in its infancy.

With the impending explosion of wireless gaming in the coming years, the time is now to carve out a position in this incredibly large and fast-growth market.  There is a ”window of opportunity“ here which must be exploited fast.  While there are risks, operators may largely overcome such risks and, in doing so, create a sizable increase in revenues with associated significant market capitalization and superior returns to investors.

Souces:

Juniper Research

Informa Telecoms and Media

Online Poker and the Future

Commentary - Patrick Smyth

Everyone wants to know where online poker is heading.

The short answer is that online poker is just going to be another IGaming product; although we may see a huge pop if China adopts the game.

Here’s the longer answer – Poker has pretty much inundated the mainstream North American marketplace, and the growth that we have been seeing cannot withstand the pace it has.  Europe is not as big a market as everyone thought, with the Scandinavian countries being the best market for online poker already being saturated.

A key event was the announcement by the Travel Channel in April of 2006 said that ratings for its "World Poker Tour" had fallen 36 percent in the last two years. If Television audiences are dropping, then it’s because there are too many other channels providing poker shows or interest is waning. 

The larger sites are dominating in such a way that some of the smaller sites and networks are seeing their revenues drop.  It’s a simple case that the little guys cannot compete with sites that have millions to spend per month on branding through mainstream media.

And as the smaller companies start to see their numbers dwindle, fewer players are likely to compete on these sites.  A site needs a minimum of 5000 players at any given time to be appealing.  That means that the same site must have at least 50,000 active depositing players.  Given that it costs anywhere from $200 to $300 per player acquisition in the Americas, then a start-up would have to spend $10 million  (Incidentally, this was the number that was recently bantered at a coffee house in Costa Rica between experienced IGaming executives as the minimum needed to start up any IGaming operation).

Today, 80% of players are likely to only stick around for 90 days before heading to a new site, so that means online tables must continually advertise and market on the best media channels available.  

There are now a number of smaller poker sites who are now in dire straits and will fail.  And given the dropping values of their databases, it makes sense for the larger companies not to buy them out, but rather commit more funds into marketing.

So what is the growth of online poker for 2006 industry-wide?   It’s fair to assume that we will see at least 75% growth over 2005.  In 2007, the growth will slow to 25% over 2006’s growth.

Of course, these numbers do not include Asia.

Sheldon Adelson commented in Fortune Magazine on October 17, 2005 that, ”For Westerners, gambling is about entertainment and probabilities.  For the Chinese, it's a battle with Destiny.“

Asians have a propensity for gambling.  As an example, a recent article suggested that Macau's gross gaming revenue is already almost on the same level as that of the famous Strip, the 6.5 kilometer string of hotels and casinos in Las Vegas. Official figures show that last year, Macau's casinos had revenue of about $5.6 billion, compared with the $6 billion the Las Vegas Strip casinos made.

Macau has some way to go before catching up to Las Vegas as a whole. The total gaming revenue for Las Vegas, including areas such as Clark County and the Boulder Strip, was $9.7 billion.  Macau has reached its current level with less than half as many gaming tables, and only six percent of the slot machines, found in Las Vegas.

Mary Ellen Olson, an analyst in Hong Kong for credit rating agency Standard and Poor's, says the number of mass market gaming tables and slot machines in Macau is also growing quickly and Macau could soon overtake Las Vegas as the biggest gaming market in the world. She predicts that the city's annual gaming revenue could exceed $10 billion within the next five years.

However, there are two major issues at play besides the often bantered legal questions.

The 'major' Asian countries – China, Japan, Korea and India – currently represent almost 25 per cent of the world's internet population, with 168.1 million users. Combined, these four countries have a larger internet user base than the US, which has 152 million users, the largest of any single country. China comes in second, with 74.7 million users, followed by Japan with 52.1 million.

And while we all know these metrics and projected growth rates like the back of our hands, comments from eMarketer Senior Analyst James Belcher ring home some of the difficulties that operators face.  He said, ”In spite of an overall red-hot economy, getting e-commerce to grow inside China has been slow going.  The country is physically huge, and even Chinese Internet users are not great believers in credit cards. As a result, the simple act of paying for goods is not easy. Getting them delivered is no mean trick, either.“

That comment doesn’t seem to cut mustard with the fact that at the end of 2005, 16 million of the 25.5 million online video gamers in China paid subscription fees totaling in the hundreds of millions of dollars. And China's online video gaming population of 25.5 million will grow to 61 million in 2010, according to a report from market analysis firm In-Stat.  

Online games are among most widely used internet services in China.

So, paid subscriptions are common and these are usually done with prepaid cards or direct cash payments through the Internet Cafes. 

The best payment methods for IGaming are yet to be seen, however, prepaid telephones are extremely popular and the most sensible route would be to mirror something along those lines.  And e-wallets may do extremely well in the Chinese market, and will also be prevalent as an option for funding accounts.

The second point is will they play Poker online?  Although a good number of top ranked professional poker players are of Asian descent, poker is not a game commonly played in China.  

MMORPG* type games are extremely popular, and they entail combatants opposing each other in one-on-one and in group situations.  In fact, the government of China has had to limit the hours that people play and the minimum age at Internet cafes; a very popular place to go online.

There is neither published research nor published focus groups into online poker adoption in China, but if you extrapolate the popularity of MMORP’s and gambling as a common pursuit, then you can logically map out  the potential. 

The wisdom from the ‘Industry“, is that poker will be a huge hit in places like China and that its popularity will eclipse that of North America.

Sheldon Adelson also noted, ”In a Caesar salad, the anchovy is the first thing to get chopped up.  That's what we foreigners are in China: the anchovy.“

Let’s hope the companies that make the first moves into China are able to step up to the challenge.

///////////////////////////////////////

*  MMORPG  = massively multiplayer online role-playing game.  A massively multiplayer online role-playing game is an online computer role-playing game (RPG) in which a large number of players interact with one another in a virtual world. As in all RPGs, players assume the role of a fictional character (traditionally in a fantasy setting) and take control over most of that character's actions. MMORPGs are distinguished from single-player or small multi-player RPGs by the game's persistent world, usually hosted by the game's publisher, which continues to exist and evolve while the player is away from the game.

MMORPGs are immensely popular, with several commercial games reporting millions of subscribers. South Korea boasts the highest subscription numbers, with millions of users registered with the more popular games; see list of MMORPGs for a list of the most prominent MMORPGs.Gaming Investment Commentary

G2E and CAC

Last Fall there were three back-to-back gaming conferences in Las Vegas; the biggest being the Global Gaming Exposition or G2E.  There were some things, that we in the industry have heard about for a while, that are now coming to fruition.

Server based technology really made its debut.

Where one-armed bandits have always been standalone devices with a single game hard-wired into their circuitry and rotors, the industry is getting set to unroll a new generation of machines in which the games will be stored on back-office servers and downloaded at the whim of gamblers. Most importantly, the odds are downloaded from a central server location, not determined by internal machine algorithm any more.

Essentially, slot machines and video poker machines will become simple screens with no internal guts that may be changed on the fly at any time by casino officials looking to put the more in-demand games on casino floors when players want them.  So if the Pamela Anderson version of slots is getting more play than the Monopoly version, the floor boss simply switches on more versions of Pam.  This is much easier than physically rolling out different machines every day.

For casinos that currently have to devote significant man hours to maintaining individual slot machines suffering from broken or jammed rotors or to change out games during slow periods late at night, server based games are likely to be a boon for efficiency.

And RFID chips finally started to make sense beyond the security aspects.

For those not in the know, Radio Frequency IDentification (RFID) is a method of storing and remotely retrieving data using devices called RFID tags or transponders. An RFID tag is a small object that can be attached to or incorporated into a product, animal, or person. RFID tags contain antennas to enable them to receive and respond to radio-frequency queries from an RFID transceiver. Passive tags require no internal power source, whereas active tags require a power source. (Source – Wikipedia)

This means that casino chips can have RFID tags embedded inside them.

Instead of depending on the Pit Boss to watch how much people bet, the chips can monitor a person’s betting habits, win or loss.  This information can be integrated with a person’s ‘player card’ and with the casino’s proprietary CRM software tools.  This in turn allows the casino to ‘mine’ their player databases better, and award players based on actual dollars spent rather than a Pit Boss’ eyeball version.  (There are times when I know the Pit Boss has missed my bets)

And of course, RFID chips make counterfeiting very difficult and extremely hard for dishonest casino employees to pilfer. 

Seven years ago I sat with a group of my team whose job it was to develop marketing strategies for online casinos.  One of the biggest things going against us was that people had a Luddite view of online gaming.  Only now, technology has made the game in

Are Pro Sports Leagues Supporting Internet Gambling?  

Over the past couple of months there has been much debate centered on gambling related items such as the NHL Gambling Probe and the introduction of legislation to ban Internet Gambling.

Rep. James A. Leach, a Republican from Iowa, cited in the Wall Street Journal on April 4th, 2006 in the article, ”Should Online Gambling Be Banned?“, said the following; ”It is no accident that supporters of the legislation I have introduced range from every major sporting organization -- the NFL, MLB, NHL, NBA, NCAA“

So in essence they are saying that these professional leagues do not support Internet Gambling.

Yet you don’t see the MLB, NHL, NCAA, NFL or NBA threatening litigation with the sovereign government of British Columbia, Canada? 

The British Columbia Lottery Corporation allows residents to wager on a number of sports.  In fact, you can bet the spread, odds, over/under and even a version of a parlay wager on multiple sports’ offereings.

Here’s the best.  They ran a promotion for ‘March Madness’ until April 3 where they promoted the following text, ”It's all about hoops: 64 teams, 61 games, March 16 - April 3. Bet on all the big games with Sports Action Oddset and Point Spread below.“

Check it out for yourself at https://playnow.bclc.com/BCCF/forwardIndexSportsAction.do 

So, are the Pro Leagues and NCAA against Internet Gambling or aren’t they? 

Rep. Leach also states that, ”Brick-and-Mortar casinos have the means to keep kids and problem gamblers away. But not an Internet casino.“

Yet here you have the Government of British Columbia seemingly able to monitor the web, whilst states like Illinois and New York are now seriously looking at offering their lotteries online to their residents.

In a letter dated February 1, 2006 to Congress, representatives from the major sports leagues indicated the following:

”Sports gambling threatens the character of team sports.  Our games stand for the values of clean and healthy competition, and rewarding teamwork, preparation and honest effort.  When sports gambling is prevalent, the games begin to represent a ”quick fix,“ the desire to get something for nothing, and even corruption.  Allowing rampant sports gambling can cause a cynical and suspicious perception of athletic events, in place of the traditional American values they should represent.“

Yet the Major League Baseball league just introduced The Red Sox Instant Ticket, which will be on sale beginning April 11.  It is the result of an agreement between the Lottery and Scientific Games, the largest instant ticket producer in the world. Scientific Games' licensing subsidiary, MDI Entertainment, recently entered into a relationship with MLB to offer league and team logos to lotteries for use on instant tickets. The Massachusetts Lottery is the nation's first to produce an instant ticket under this new agreement.

So then, it seems MLB does support gambling in the USA.

The Los Angeles Clippers of the NBA are currently sponsored by ActionPoker.com, and the writer was witness to a game where the announcer promoted the online poker site while scrolling court-side banners featured the URL.  ActionPoker.com is owned by Las Vegas From Home Inc. (TSX VENTURE:LVH)(OTC BB:LVFHF.OB((Berlin:LVH.BE)(FWB:LVH)

And at an official NBA site (http://www.nba.com/clippers/news/actionpoker_offer_060130.html, ActionPoker.com is giving contestants the chance to win Clippers courtside seats or a trip to Las Vegas. All one has to do is log onto ActionPoker.com, enter in the code 1ACTION and start playing.  Full details are at http://www.actionpoker.com/form/clippers.html 

Poker isn’t really gambling though.  It’s more like an American pastime.

The best…the absolute best example of blatant pushing of gambling was witnessed by the author at a Kings game on March 18th, 2006 at Staple Center.

In the February 1 Pro Sports letter to Congress, the following was also written, ”This encourages widespread gambling by minors and young adults..“

One assumes that the Pro Leagues don’t want to introduce minors to gambling.

During a break from play during the hockey game, a young boy of about 10 years old was given the chance to participate in a game.  His face was shown live on the big screen and was in full view of the countless children in attendance.

A card was drawn and he had to decide if the next card drawn was going to be of a higher value or lower value.  If he chose correctly, he won a prize and an additional card draw.  He won a couple of prizes before getting knocked out by an ‘unlucky’ draw.

That’s called Hi-Lo.  It’s gambling.

So now we even have the NHL complicit in teaching youngsters how to gamble. 

So what is it guys and gals? 

The BCLC, MLB, NHL, NCAA, NFL & NBA were all contacted for their comments.   None replied.

The Legalities of Gaming from an Operator’s Standpoint

Commentary - Patrick Smyth

Introduction

Governments moving towards a more prohibitive or more permissive stance in any country will have a definite impact on the growth of Internet gaming in that particular market – albeit that prohibitive policies will prove difficult to enforce. The details of the legal situation are discussed in detail later in this plan, but we would highlight again three particular markets to watch on this front:

The US is the ”big one“ for potential near-to-medium term growth, if it were to become more permissive, assuming that the massive 50+% of today’s online gambling market that already originates from the US could be significantly bigger if it became (indisputably) legal to offer online gambling to US residents. 

A scenario in which the US becomes more prohibitive would probably cause a near-term decline in US-derived revenues (depending on what measures were implemented), but we do not see a credible way of enforcing a prohibition in the longer term, in the context of other jurisdictions being willing to regulate the industry. That said, an issue with the legislation is whether it enables advertising and sponsorship as getting increasingly harder or easier. If the US legal situation remains as the status quo, we still see considerable momentum in the growth of gambling revenue from US punters....

To see the rest of this article, please contact us at info@gamingpublic.com

Gaming Investment Commentary

China and the future

As Chris Moneymaker ushered in a new era of online poker two years ago, last weeks IPO of Baidu.com may be the catalyst that propels the importance of ecommerce in China to new heights.

This little tidbit was quoted to me by a good friend last week – ”If they're going to send us shoes, furniture, textiles and so on, we give them something in return. We give them little pieces of paper that are called U.S. dollars,“ Warren Buffett explained. ”Sometimes they buy U.S. treasuries, but other times they're going buy our assets.“

China now has stacks of dollars and wants to spend that capital buying American goods and services.  Combine that with the growth of the Internet in China, and we have the potential for an investment situation that may be second-to-none. 

So why is China so great?

During the late Eighties, I attended the University of British Columbia and majored in International Relations. (Ed note - The other I.R.)  One of the centers of focus for me was China – how it evolved and its geo-political potential.  The most important thing that stayed with me was a belief that China has never really been a communist state in the ideological way that Marx espoused, but is more like a Confusionist society that needed its hand held during the past half century of modernization.   Now the hierarchy is finally allowing China to bloom and compete on a global scale.

In his book The Next Global Stage, author Kenichi Ohmae argues that one of the reasons for the growth of burgeoning industrial clusters can be traced to then-premier Zhu Rongji who granted unprecedented autonomy over economic policy to mayors and local bosses.  ”The mayors were told they had to grow by 7% per year or they would be fired.  But they were also given freedom to import technology, capital and corporations from the rest of the world.  They were allowed to forget about politics and embrace the local economy.“

So now you have a country (China), which in 2002 had more direct investment flow into it than into the United States.  And you have a growing techno-savvy population that created 146 new cities with populations exceeding 1 million from 1990 to 2000. 

Now let’s touch on the online numbers.

First let’s look at the basics:

(*) For Statistics purpose Honk Kong and Macao population is reported separately

Even with its minimal penetration rate, China already ranks second in the world in total Internet users. According to eMarketer, during the 2004-2008 period, the US Internet population will grow at a 2.6% annual rate.   In contrast, China's Internet population will grow during the 2004-2008 period by over 14.3% on an annual basis.

That means in 2008, China will have close to 176 million people online.  And I personally think that this number does not take into consideration that there are already 350 million Chinese with mobile phones who spend an average of $10 a month on their cellular services. 

Wireless subscription growth rates of 10%-15% per year translate into significant jumps in both the number of subscribers and in the overall penetration rate. By contrast, in Hong Kong, where penetration now has topped 100% since 2003, growth has slowed to a trickle.

With the development of 4G** technology, in less than three years we might be looking at a half billion Chinese citizens as potential customers in the ecommerce space.

”China is not the biggest market — not yet — but it clearly has the most promise,“ Jeffrey Grau, eMarketer Senior Analyst remarked in a report on the mushrooming Chinese Internet  this year. ”A new middle class is emerging eager to consume the myriad products and services that are available online and not just those offered by Chinese e-tailers.“

iResearch, a Chinese market research firm, estimates that China's e-commerce market will be worth $6.5 billion by 2007, nearly a six-fold increase over 2004.

Six hundred percent growth in three years is something to think about.

===

** 4G is high-speed mobile wireless access with a very high data transmission speed, of the same order of magnitude as a local area network connection with up to 20 megabytes per second.

LAS VEGAS ENTERS iGAMING

RE: America’s MGM Mirage and Britain’s Ladbrokes, two of the world’s largest gambling groups, have started exploratory takeover talks with internet rivals

Implications

Analysis

Many in the industry have long suspected that the US based B & M casinos may have been behind the recent legislation designed to ‘stop’ internet gambling in the USA.   I don’t believe that to be true, but I do subscribe to the notion that Native Casinos and the Horse Racing Industry lobbied hard for the passage.

That law was designed to protect the State lotteries, Indians and pari mutual industry, and effectively legalized online gambling for those specific groups while banning it for offshore based companies.

The ‘offshore’ companies include PartyGaming Plc; a one time member of the FTSE 100.  Anyone who is remotely aware of what it takes to reach that status understands the scrutiny that Party had to go through.

Not exactly the type of organization that Bill Frist and John Kyl described to the public when describing the perils of iGaming.

The MGM and others believe firmly that there will be internet gambling legislation and regulation in the coming years, and the American Gambling Association has come out in favor of a study.  Combined with the UK’s move to begin licensing online casinos in 2007, and many US based B & M operators must surely be jockeying for early positions in the iGaming market.

And now that many London-based companies have had their share prices destroyed by the Bill, they have become ripe for acquisition.

 Gaming Investment Commentary

Las Vegas Poker

Living in Beverly Hills accords that you are bound to see movie and television stars on a daily basis. It’s not uncommon for me to go to the Sports club LA and see the likes of Jessica Simpson on the treadmill or David Spade in the weight area. Yes, the little guy works his sets very seriously. In general, the public recognize ‘stars’ as those who are actively involved in television, film and music.

Last week I went to an invite-only party at the Wynn Casino sponsored by Full Tilt and witnessed a brand new type of ‘star’ emerge - the Professional Poker Player.

The well-heeled soiree featured a charity poker game in which the common person was able to play against the likes of Howard Lederer, Phil Ivey, and Erick Lindgren. There were even some other celebrities including Penn Jillette and Omarosa of the Apprentice fame.

And of course, there was Jennifer Tilly, the winner of the Ladies-Only No Limit Texas Hold 'Em event at the World Series of Poker, becoming the first celebrity to win an open (as opposed to celebrity-only) WSOP tournament and earn a World Series bracelet. She beat out exactly 600 other women to take the championship.

Now is she a ‘movie star’ or a ‘poker star’?

I decided not to play and hung out with Chris Ferguson and Phil Gordon; both of whom I have known for some time and who have been in the limelight long enough to be cool about what this newfound celebrity means.

After the games, it was on to the charity auction where people paid upwards of $10,000 for framed, autographed shirts from ‘poker stars’. It was like watching footage of a Beatles’ Concert…something truly amazing.

The next day at the WSOP, I witnessed the phenomena. Everywhere these ‘stars’ went, they were followed by adoring fans looking to be seen near them, get an autograph (no doubt for eBay) or snap a photo.

There must have been fifteen hundred players vying for a spot in the championship when I scanned over the main play-room. And there were another few thousand in the trade show where various companies displayed their wares.

It was set up to entice players to buy everything from t-shirts and special ”no emotion sunglasses“. And it seemed that anyone who had even made it to a final table at a sanctioned poker event has his own, ”Learn to play poker“ school.

And does a specially formulated poker-skin cream really help you bluff?

Basically it looked like a flea market with expensive swag.

But the minions couldn’t get enough of the stuff, and fans were flocking by the thousands.

ESPN and FOX sports cameras were everywhere. When did poker become a sport? Oh well, the call bowling, darts and curling sports, so why not?

There were also reporters representing every publication from the New York Times and CNN to MSNBC and financial reviews. These are big publications, and they're following poker not only as a sport, but also as a potential investment for savvy investors to consider for their portfolios.

But I guess you haven’t reached star status until you are splashed all over the National Enquirer. I can only image a headline of the future, ”Phil Ivey’s headset actually covering his alien ears.“

So are these no professional poker players really ‘stars’ in the sense of the word?

The gawking fans sure think so.

You decide.

By the way, the highlight of my 16 hour trip to Vegas last week was when a certain ‘poker star’ walked up to me and asked if I wanted a picture of him with me. It was very difficult for me not to laugh. After all, I see Uma Thurman once a week at Starbucks.

Now, she's a STAR.

Gaming Investment Commentary

Lack of Professionals in Industry

Last week, my father sent me a couple of clippings from newspapers in Dublin and London addressing the potential valuation of the Party Poker IPO on the London Stock Exchange along with a note suggesting that my University Education may not have been in vain after all!

He, like so many investors out there, did not consider online gaming to be a solid business until very recently with the advent of listings such as NETeller, SportingBet, Gaming Transactions and CryptoLogic. 

Schools have also been slow to react.

I was pleased, however, when I read of a new MBA program with a specialization in Casino Resort Management being offered by the University of Ljubljana in Slovenia in conjunction with the University of Nevada, Reno.

Imagine the possibilities?  Perhaps a doctorate in ”Online Casino Management“…

Is there a chance that I will be called Dr. Smyth in the coming years? 

Europeans have never really taken the concept of formal education in the casino business seriously, and does this have to do with the growth of online gaming in Europe and its acceptance?

While we have had casino management courses available at the University of Nevada for sometime, these courses are more associate type degrees

In addition to the Gaming Management Certificate Program, University of Nevada, Reno offers residential management programs and seminars, national short courses, an international executive development program and an undergraduate degree with a major in gaming management.  And top industry leaders working in conjunction with UNR have developed the successful Gaming Management Professional Development Program, created exclusively for and responsive to the needs of the gaming industry in Nevada.

And the University of Tulane in Mississippi does not offer a four-year major in this program. However, students can earn a Baccalaureate Degree in a selected field and earn a minor or Associate Degree in Casino Resort Management. 

All brick and mortar stuff though.

There is hope though.  The rise and role of video games has not been lost on some postsecondary institutions with a small but growing number of traditional colleges and universities, along with art institutes and for-profit career colleges, now offering on-campus degree and certificate programs in video gaming.

Entrepreneurial institutions are also tapping the video game industry for dollars. For example, in March 2004, Electronic Arts donated $8 million to the University of Southern California to ”advance [USC’s] efforts in game design and innovation.“ The Electronic Arts money will support academic programs in interactive media and also fund an endowed faculty chair.

And my Alma Matter, the University of British Columbia, offers a certificate in Internet Marketing.

That’s about as close to online as we have right now though.

Schools are always the most conservative of institutions and won’t easily accept changes to their curriculum.  It’s only a matter of time before courses are offered in Internet Gaming Management, design and so forth. 

In the meantime, I have learned to accept the jabs of out school peers who think that running a gaming operation doesn’t take an education. 

And tickle myself to sleep as our industry looks towards a USD$10 Billion flotation this summer with more on the horizon.

Gaming Investment Commentary

Online Poker Growth

While I was in Canada last week on my extended business trip, I was fortunate enough to spend a couple of nights with friends in Whistler, BC.

The Village has grown substantially from the late seventies when it was nothing more than a gas station and three or four runs on the mountain.

What was of interest to online investors was something that I experienced first hand the second night.  We had just finished dinner, and the six of us there decided to play a little poker.  Two hours into the game, another bloke arrived and asked to be dealt in.

I asked him where he had been and he said he had being playing in a poker tournament down the street and had come in 3rd place in a field of 30.

That was pretty good I thought.

He then mentioned that because of his win, he had qualified to go to the finals.  It turns out that there were initially 300 entrants in the qualifiers.

This was astounding to me. 

Whistler is a small town of 9000 permanent residents.   According to the locals, there are probably closer to 5000 permanent residents during the month of May as many go on vacation during the off peak months of April and May.   Factor in that 15% of the population is under the legal age of majority, and you’re looking at about 3650 adults who would be able to participate.

So, with a cap of 300 entrants, you have to presume that there was more interest.  Even with that cap, almost 1 in 10 residents were entered.  That’s 10% of the population.

Start doing the math and consider the numbers of people online, and the room for growth; especially in areas where the internet has not yet reached the saturation points like North America. 

And, as reported by the UK Register: ”In the two years since online poker first tempted punters, the industry has grown from $100,000 in gross rake per day in January 2002 to between a staggering global $2m and $2.5m. While online gaming itself continues to grow at a dramatic pace, the online poker industry has more than tripled in the past year according to statistics provided by PokerPulse.com“

We read the statistics, and we all see the television ads.  But to see the popularity of the game in real life was something else. 

Gaming Investment Commentary

Advertising costs rise

It’s been a very interesting week or so in the online gaming industry, and it was an old episode of James Burke’s ”Connections“ that I used to make the correlation between advertising and online gaming.

Three major events occurred over the past couple of weeks.  The first was the announcement that advertising rates have shot up at an incredible rate.  On-line advertising revenue in the US last year exceeded $9.6 billion, up almost 33% on 2003 and beating the previous revenue record in 2000 by nearly 20%, according to a report released by the Interactive Advertising Bureau and Price Waterhouse Coopers. 

Forrester upped the ante, estimating that total US online advertising and marketing spending this year will reach $14.7 billion.

The second major event was that Gaming Corporation PLC announced that it was buying Gambling.com, the search portal for online gaming sites for approximately $20million. Gaming Corp said it would pay $15.3m in cash and $4.7m in new shares for Newbold, owner of Gambling.com.

And who can forget when CryptoLogic bought WinnerOnline.com some years ago, or that FUN Technologies just bought DonBest.com?

Finally, Men's lifestyle magazine Esquire was recently hit by an onslaught of subpoenas in response to their publication of online poker advertisements for online sportsbook and gaming company Bodog. Subpoenas were sent to Esquire's publisher, Kevin O'Malley in addition to a number of magazine staff members. Pulling the ads would translate into major financial losses for Esquire. The magazine began advertising for online gambling companies in the first place, in order to buffer a three-year drop in the number of ad pages

What do these three events have in common?

It’s simple.  The costs of advertising online are rising, gaming advertising portals are worth a premium and offline advertising opportunities continue to shrink.  Since IGaming depends so heavily on marketing, we should expect to see some margins shrivel for some operators. 

Those corporations who have invested wisely in purchasing or building secondary advertising revenue sources have set themselves up to withstand the increase in the costs of online advertising.   Not only can they brand themselves for a reduced cost on their own portals, but they can charge a premium to other operators who desperately are looking for ad placement.

Last week I spoke of a 30% growth in the iGaming Industry.  And I stand by it.  It’s just a matter of figuring out which of the Companies in that space will benefit directly from secondary revenues, and which ones will lose out.