Inside Asian Gaming

Dec 2007 | INSIDE ASIAN GAMING 17 In Focus cially on the consumption side. UK-based Global Betting and Gaming Consultants (GBGC) estimates that between 2006 and 2007, online gambling by location of player rose 11% in Asia and the Middle East (from 9% of the world total in 2006 to 10% of the total in 2007). GBGC thinks the gross revenue of the global online gaming market in 2007 will reach US$15.2 billion, a 4.1% increase on 2006 when revenue was estimated at US$14.6 billion. Although the universe for all online gam- ing is expanding, consumers currently face a dizzying array of options, with scores of platforms and hundreds of content provid- ers all jockeying for attention in cyberspace. This applies just as much to online poker as it does to other games. Playtech’s Tom Hall says there are four big players in terms of poker platforms, in- cluding his own company’s network, iPoker. Mr Hall says:“After the big four, the share of revenues drops away pretty sharply.I think that as the market matures we will definitely see consolidation in the online poker market and online gaming in general.” Strong skill factor An economic commentator recently joked that the world’s biggest casino is the Shanghai stock market, but picking good stocks is down to skill as well as luck. The same can be said for making the most of a poker hand. Celina Lin, a Melbourne resident of Chi- nese ethnic origin, is ranked 12th in Australia by a poker player community website called PocketFives.com. She graduated to the APPT Macau tournament after starting to play poker three years ago. A modest Ms Lin claims “I had no idea how it worked, but after half an hour I was up about A$500. “It was really interesting and I enjoyed the experience, so I began studying and playing online poker. I love how much maths goes into it. There are a lot of things to consider. Lots of people say they would rather have luck over skill in this game, but over the long run, definitely skill is going to prevail,” she says. The skill factor in poker also potentially takes it beyond the realm of gambling and into the world of sport. From New South Wales in Australia to the Russian Federation, jurisdictions have ruled that for tax pur- poses at least, winnings from poker should be treated as sport earnings rather than as gambling. This could have a major impact on the business model for the activity in Asian casinos. Unlike baccarat, where in Macau 40% of gross revenues go straight to the govern- ment, in the APPT Macau poker tournament, the organiser’s ‘rake’ to cover overheads was just 6%. So with 352 players each pay- ing US$2,500 to buy in to the event, the US$880,000 pot had only US$52,800 de- ducted, allowing the players to share the remainder—US$827,200—as prize money. That does not leave much left over for the tournament organiser. As Inside Asian Gam- ing went to press, Mr Haas was still negoti- ating with television companies for rights to show the video production he recorded at the Macau event as a way of creating a sup- porting revenue stream. In online poker, the house rake is often considerably less than 6%. Online operators are usually domiciled in tax-free locations remote from the player markets.The excep- tion is the Philippines, which has gone as far as re-inventing itself as Asia’s de facto headquarters for online gaming, issuing government licences for an annual fee in an effort to create administrative jobs and gain a competitive advantage from its rela- tively well-educated and English-speaking workforce. PAGCOR, the country’s monop- oly government-run casino operator-cum- regulator, has also licensed poker play in its land-based casinos. Not all bricks and mortar casino jurisdic- tions have been as accommodating to poker as Macau and the Philippines. Singapore has been responding to inquiries from poker tournament organisers by asking for 25% of the prize pool—a figure Mr Haas regards as “untenable”. He says:“For me to have an event in Sin- gapore right now, which I definitely want to do, the players would have to sacrifice 25% of the prize pool to the Singapore govern- ment. They categorize poker tournaments like sports betting or lotteries and require the standard betting duty rate of 25% of the amount of total bets to be paid as tax. Mr Haas explains that “after I add the 6% tournament fee players will lose 31% of the prize pool before their prize money gets paid out. Poker players do their expected value calculations. They want to know what the prize pool is, what they’re buying into. These are very sophisticated players who do all the mathematics on the value of attend- ing a tournament. If I have to take a 31% cut out of that, that’s offering players a negative expected value. They won’t want to come— it’s not marketable.” A sophisticated set Poker players—particularly tournament players—tend to have a much more sophis- ticated understanding of the businessmodel of their game than the average casino player. When was the last time you heard the aver- age baccarat player in Macau discussing the house win percentage? Baccarat is not so much about skill as about group solidarity, as players grapple with fate and battle the house.In poker,play- ers try to outthink and outplay each other, and the typically western value of robust in- dividualism comes to the fore. This could be why poker seems to be particularly popular among a younger generation of Asian play-