Inside Asian Gaming

INSIDE ASIAN GAMING | January 2008 14 T he collapse of the US online gam- ing market due to hostile pressure from the US government has fo- cused the industry’s energy on the na- scent Asian market. It sits like a young apple on the end of a branch, just wait- ing to be nurtured by the fertiliser of freshly laid Internet broadband connec- tions and watered by the spending power of newly issued credit and debit cards. Under the current buoyant economic conditions in the region, with improving infrastructure, rising GDP and development of financial ser- vices, the Asian online gaming apple should soon be ripe for plucking. “There’s a direct correlation between Internet pen- etration—in particular broadband penetration—and the amount of online gaming in a market. You can see this very clearly,” says Tom Hall, Business Development Director of Play- tech (PTEC), the worlds largest gaming software developer, and Vice Chairman of Asianlogic (ALOG), both of which are listed on London’s Alternative Investment Market. “Certain countries in Asia, such as Japan, Korea, Singapore and Hong Kong, have always been quite advanced as far as Internet pen- etration is concerned, and the rest of Asia is swiftly catching up. Asian consumers have traditionally been more focused on online sports betting, which now represents more than 80% of the online market, followed by online casinos and then a long way behind P2P games— player-to-player or peer-to-peer as it’s also sometimes known,” ex- plains Mr Hall. “In Asia, online gaming is still less than 1% of total gaming. So for Asia just to catch up with the rest of world in terms of online activity (where the ratio is normally 95% land based gaming and 5% online gaming), the market could grow five times,”he adds. Fresh offer Mr Hall thinks the gaming offer to Asian online players will need to be distinctive to build business in the region. “In the West, 90% of all online poker games are Texas Hold ‘em. In Asia, they are going to have to have a wider offering longer term. I think that will need to include Texas Hold ‘em, a mahjong game, and one or more of the Chinese or South East Asian card games, to be successful.” Playtech describes itself as the world’s leading provider of the en- abling software that allows established online brands such as bet365. com to operate virtual casinos and virtual poker rooms. Playtech also operates an Internet platform called iPoker—a network allowing on- line poker rooms to work together to build market capacity. “It’s known in online poker as liquidity,” says Mr Hall. “In simple terms, the more players you have concurrently on your network, the easier it is for players to find a game at what- ever level they want to play and therefore the operator has a better chance of making money.” Safe harbour Playtech says it made US$65 million profit last year. Most of the companies that buy access to its software are currently making the bulk of their on- line gaming revenue outside Asia. The UK and its 10-15 million regular online punters is one of the most important online betting markets in the absence of the United States, though Mr Hall says the two biggest online poker companies— PokerStars and Full Tilt Poker— still take bets from the US. Par- tyPoker, the number three, and Playtech’s own network iPoker, the number four, do not. As a company publicly-listed in the UK, Playtech does not ac- cept wagers in any form from US players as it has no desire to fall foul of the long reach of US federal law enforcement. That’s exactly what happened to Da- vid Carruthers, the former chief executive of London-listed BetOnSports.com. He is currently un- der house arrest in the US after being detained in Dallas,Texas in July 2006 while changing planes on a flight to Costa Rica. He was held on federal charges of racketeering and mail and wire fraud linked to allegations that the company had accepted bets from US citizens in defiance of a federal ban. Mr Carruthers denies the charges and has so far declined to plea bargain. His sympathisers, including Marc Lesnick, organiser of the recent Casino Affiliate Convention (CAC) at The Venetian in Macau, have hailed him as a champion of free trade. Mr Lesnick reportedly plans to give him an honorary award if and when he is freed from the US justice system. Mr Carruthers’ detractors say he brought trouble on himself by goading the US authorities to reverse the ban by claiming it is irratio- nal and unenforceable. The heads-down brigade suggest he would have done better to say nothing and quietly get on with making money, though how effective that strategy would have been against determined US legislators is open to debate. Hit hard “Among the online poker operators,by far the biggest historically at their peak were PartyPoker or Party Gaming as they were known in the UK.They had a market cap of about £7 billion [US$13.8 billion]. They had up to 70,000 concurrent players with 20,000 of them play- ing for real rather than for fun,” says Mr Hall. “Most of their players were from the US, so when the ban came in they had to stop taking bets from the US because they were a public company. As a result, their business initially dropped off by 80% to 90%.” The effective closure to foreign companies of the US market in online gaming under the Unlawful Internet Gambling Enforcement Act passed by the US Congress in October 2006 makes Asia the obvious area for online growth. There are though some potential bumps in the road, as the regulatory future of online betting in Asia is by no means clear or guaranteed—particularly in China. The online indus- try’s ‘hear no evil, speak no evil’ tendency when it comes to regula- tion appears to have struck camp in the US and marched on to Asia. Online Gaming