Mass-Media Gaming in Society and Industry Supported by British Government

Gaming’s New-World-Order?

 

Market Analysis 2003-2005

 

 

GameWays

Los Angeles: +1 (310) 453-2200     London: +44- 0709-239-0935

 

British Pop Gaming – Optimizing for Export?

The U.S.A., long-considered marketer-par-excellence of leisure gaming and the birthplace of the Internet, continues to support a policy of  “Prohibition”-style domestic laws in an attempt to restrict tele-gaming (i.e., remote-access phone, PC, digital-appliance, etc.) within its borders.  Since the vast majority of Internet gaming conducted by Americans already originates extra-jurisdictionally – from largely unverifiable, unaccountable, and un-taxable (by the US state and federal governments) operators, this strategy does little to advance US federal and state interests to harness safe, online gambling supply or the potential benefits it could receive there from in it’s quest for passive tax revenues. 

Some other national governments are more responsive to reverse this 7-year, extra-jurisdictional drain of business by legalizing and regulating chance gaming online. Most countries’ current e-gaming policies restrict e-gaming operation to incumbent monopolist agencies, e.g., the French PMU, the Austrian Lottery.  Limiting playership to domestic residents only, heretofore few Western state-run gaming agency’s strategies have aimed to poach customers’ across-borders for their recreational gaming expenditures, so profitably for the off-shore tax-havens that have.

 

But Britain, whose Sir Francis Drake interrupted pirate gold shipments from the Caribbean Sea 400 years ago, may once again be taking aim at the pirates’ broadside.  In the process, they bring the global gaming industry to the crossroads of remaking gaming – perhaps in Britain’s own image. Notice a trademark similarity to two generations ago, when British culture refined America’s taboo invention of rhythm and blues and then sold it back to the world as its own, improved brand of entertainment.  Well, Britain’s back – with a thorough plan to remake its own domestic gaming as one of the foremost in the world. 

 

As part of the process to create order from the evolved quagmire of 40-years of gaming media provisions, the UK Government’s proposed Gaming Reform incorporates a laissez-faire endorsement of e-gaming. While most traditional gaming industry’s focus has been on the promise of recreating Atlantic City in Blackpool, members of Nevada’s licensed Establishment, long-forced to wait out unlicensed e-gaming, are taking a second-look at the promise of opportunities afforded through Britain’s promoting the licensing and regulation of online-casinos directed at domestic and (discretionarily) international (including North American and Asian) customers.

 

Why Britain?

British popular culture is notably more game-active than most others’.  “British TV is representative of it’s culture’s puzzle-solving pre-disposition,” according to culture guru Peter York at the Edinburgh TV Festival. “This is particularly evident in our proliferation of reality game shows.”

The game-show format-creation industry traditionally attributed to Holland’s Endemol (“Big Brother”) has become dominated by British companies, both for domestic and international markets. This trend was also noticeable at the Cannes International TV & Media Festival, where the Marina, formerly reserved for celebrities, now features an abundance of British companies’ game-show formats.  Remarked ReedMidem’s Raphaële Vallauri, ““While the Internet may have been invented in America, Europe may have been the more pensive, added higher-style, and now Britain seems quite effective at harnessing it for game play.”

 

What effects will sanctioning e-gaming create?

While countries empower their existing gaming monopolies to expand online, the repercussions of e-gaming legalization may be most dramatic upon domestic society and the global industry from the current steps taking place in Great Britain. The UK Government has had a tradition of upholding competition to its’ owned-and-run gaming (e.g., on-course pari-mutuel racing) through licensing and taxing commercial gaming (e.g., bookmaking, sports pools).  The concessions to gaming companies for lost-business resulting from the establishment of the UK National Lottery are part of the genesis of the proposed reformation. The bold-step towards legitimization of privatized online-gambling will serve to create unprecedented, competitive challenges and opportunities within the marketplace, i.e., challenges to regulators in creating fair-policy while fostering growth, and secondly, challenges and opportunities to commercial gaming enterprises in an attempt to “mass-consumer-ize” online gaming within a regulated environment. 

“Well, it should bring some of that betting revenue back onshore, including those in the Caribbean,” intimated Clive Hawkswood of the Department of Media, Culture and Sport, who’s crafting the new code, referring to the UK gaming brands who’ve gone offshore. “But it’s also an anti-organized crime measure – truly accountable gaming. This solves Washington’s concerns about reported consumer fraud and money laundering in the Caribbean in a way that Washington hasn’t. We’ll vet them before we license them- and many won’t pass.“

How deep will this vetting reach? Will it be as extensive as Nevada’s?  And how stringent should their licensing standards be?  For example, while American regulators might argue that any ‘bootlegger’ who, in the face of a violation of law, or without a clear legality, operating during an absence of prosecution ought to be precluded from state sanctioning as a form of penal enforcement, in Britain, no law prohibited offshore operation and thus would not be considered a violation.  Will British standards establish a de facto “morality whitewash” for some unscrupulous, consumer-frauds who’ve flaunted their ill-gotten gains - while thumbing their noses at the state, the legitimate industry, and most reprehensibly, at the consumers potentially defrauded?

 

Who Will The Public Choose to Gamble With and Why?

Online established brands have captured mind-share and market-share in face of the cautious traditional casino operators, the UK’s betting shop titans are attempting to flex their muscle, with William Hill and Coral/Eurobet flush with $1 billion of investment capital apiece.  But will they purchase new customers, or the companies that currently have them?  What value do which brands have in the new e-gaming space?  What value does a U.S. resort casino name carry in international markets?

 

These issues were addressed in the seminar “Marketing and Advertising Opportunities for the Casino, Gaming, and Betting Industries,” coordinated by Samantha Byrne and Suki Scade of the ATE Conferences Division in London. The UK government, in the process of revamping gaming legislation and administration in a formidable effort by the Department of Culture, Media and Sport, is attempting to create a mostly-level-playing-field for commercial gaming.

 

DCMS Gambling Review Project Manager, David Bawden is wrestling to create regulation that, in his words, “strikes a balance between promotion of a leisure product and protection of the vulnerable.” In their attempt to address global-online gaming revenue opportunities for the government through taxing commercial casino interests (while the National Lottery wrestles with the World Lottery Association’s provisos against cross-jurisdictional online sales), lawmakers must also remain sensitive to matters of European Law. 

 

“The laws applicable to the promotion of gambling services are in a mess,” according to speaker Giles Crown, senior communications lawyer with the London office of Lewis Silkin. “ For example, it is permissible to sell lottery tickets for European Union lotteries online in the UK, but such lotteries cannot be promoted in this country.”  While the government pursues a complete revision of gaming administration and regulation, commercial gaming and its support industries (including product development, marketing, and distribution) wrestle to establish gaming products and marketing to compete with the largely - unregulated, offshore interactive industry.

 

 

 

 


What effects will regulation have on the marketplace?

 

The market’s analyst / prognosticators illuminate several perspectives. Market-research firm Datamonitor estimates that “the US is the largest online gambling market with a 2001 value of $262 million. In 2006 this market is forecast to reach a value of $411 million.[i]  The UK online gambling market reached a 2001 value of £34 million. In 2006 the market is forecast to reach a value of £93 million.”  They believe much of that will come as a by-product of the overall growth of games on the Internet.  They forecast that the number of online gamers in Europe and the US will grow from over 13 million in 2001 to more than 111 million in 2005.

 

Online gambling revenues by genre: 2000-2005

Source: Datamonitor

 

With an increase of $100 million within 5-years, the UK’s total domestic online market will only total the amount of the net increase of the US market of around $149 million.  Where will all that money come from and go to be gambled? 

The “Global Gaming Report” published by Global Betting and Gaming Consultants infers that a lot of it will come from the category of currently illegal gambling.  “The evidence suggests that just over half of illegal gambling takes place within Asia and Middle East and is the result of the level of prohibition and the lack of betting and gaming opportunities across the region.  However, the rate is also particularly high in North America where the lack of legalised gambling opportunities, particularly sports betting and gaming machines, continues to leave the door open for illegal operators in a number of states. 

 

 

 

 

 

According to GBGC analyst and partner Simon Holliday, 

1) “As existing (retail gaming) customers discover the advantages of utilising the Internet and other interactive channels as an additional means by which to gamble, and

2) a new generation of gamblers grow up accustomed to using a broad range of interactive channels for all aspects of their consumption, as well as

3) additional customers enter the market because of the easier level of accessibility that interactive gambling provides”

 

 

 Legal Vs Illegal Gambling in Terms of GGY by Region 2000

Source: GBGC Analysis

 

 

“…it is anticipated that continued deregulation/ globalisation of the industry and the further development of the Internet as a market channel will continue to erode illegal gambling.  In the process the (general) legal market would receive a boost in GGY of approximately £10 billion (US$15 billion/€16 billion) just as a result of current illegal activity moving into the legal market. We expect interactive revenues to increase from amounting to 1.7 per cent of total industry gaming sales during this year, then grow to 2.6 per cent during 2005, and reach 3.7 per cent by the final year of the decade, by which time it will generate GGY of approximately US$8.7 billion/£5.9 billion/€9.3 billion.


New World Marketing Order
 
Data Factoids:

 

There’s a Lot of Noise Out There

•Online advertising by Internet casinos grew by 170 percent from 911 million impressions in December 2000 to 2.5 billion impressions in December 2001. (Jupiter Media Metrix)

  1. •Online casino advertising is now the fifth largest online advertising category, up from eleventh largest a year ago
  2. •Gambling related keywords are one of the two most competitive Search Engine categories and one of the more expensive pay per click keywords
  3. •Intrusive marketing tools: pop-ups, pop-unders, exit pages and SPAM
  4. •Emphasis on acquisition rather than retention

 

What sort of an effort will it take to effectively persuade gamblers to abandon existing, offshore registered casino accounts for accounts with High Street gaming brands?  Which sort of brand marketing will motivate demand – existing and new? 

 

 

 

 

Branding on the Web Takes Hold

 

  1. •Increasing customer acquisition costs for pure play operators
  2. •The average customer needs to see a name 22 times before they can recall it and type it into a blank field of a web browser (Red Herring Magazine)
  3. •Decline of ‘surfing’
  4. •Nearly 52 percent of Internet users arrived at sites by direct navigation and bookmarks, compared to about 46 percent only a year ago, (StatMarket, February 2002)
  5. •More and more Internet users know where they want to go without assistance or guidance.[ii]

 


How will traditional, legal gambling expenditures be affected by Britain’s online regulatory plans? 

 

One of the drafters of Britain’s new online gambling policy, the DCMS’s Clive Hawkswood, speaking in Toronto at the Global Interactive Gaming Summit felt, “I don’t feel online gambling detracts from what a gambler would spend on a holiday (vacation).”  He likens the effect of online gambling to the effect miniature-golf courses have on golfing - it attracts new customers and advances the activity overall. “Gaming’s ready to look towards the future of it’s customer base - younger people and greater numbers of women.”

 

 

 

 

These newer customer segments are more receptive to online brand marketing, another emerging dynamic from Britain’ s reformation of gaming- marketing and advertising.   According to Peter Gamble, Group Account Director for McAnn-Erickson, Manchester,  “Consumers respond to 7 universal marketing drivers: brand awareness; emotional bond; product news; activation; loyalty; product experience; and buzz.  Establishing the brand has changed; the call to action has changed – don’t just remember our casino brand next time you plan your leisure trip – here’s our new proposition: Activate! Come gamble now!”

 

Merrill Lynch London’s Gaming Analyst Andrew Burnett adds insightfully, “Are we approaching a scenario where the City (Britain’s Wall Street) will provide legitimization for existing offshore casinos as acquisition targets in a new round of mergers and acquisitions by cash-rich dot-com traded companies?”  Who knows what effect this prospective consolidation will have on the advertising experience - and the consumer experience – for the worse or for the better?

 

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Author’s Info: GameWays brings 10-years’ experience in the evolving British gaming industry. GameWays’ new-media expertise has been featured in “U.S. News and World Report,” and various new-media industry trade-journals. A part of the evolution of new-media gaming, GameWays has contributed to catalyzing renowned gaming developments, such as initiating TV’s “TVG- America’s Horse Racing Network, and establishing America’s first legal, interactive online gaming – in Nevada. You may contact Scott Jacobs for questions and consulting online at gameways@yahoo.com, from Britain on +44-709-239-0935,  or from the U.S. at +1(310) 453-2200.


[i] Datamonitor.com - Online Games and Gambling Report (edition 4) Published 30 April 2001.

[ii] Ibid