Inside Asian Gaming

19 Market Outlook Director, Asia Pacific. Understanding convergence includes understanding that gambling is behav- iourally and culturally based, rather than just product-based, adds Mr Naik. “You can talk about pricing, you can talk about affiliates,you can talk about marketing spend, you can talk about everything else. But if you’re in this market and you’re not addressing convergence you’re not really doing strategy,”he asserts. In the West, it took 50 years for the personal entertainment market to move from family and neighbours gathering around a single TV, to multi-set, multi- platform, multimedia households. It took another decade for delivery technology to converge to a single media platform in the form of mobile handset-cum-computer. Today, entertainment increasingly comes not from the communal experience of sharing a television, a games console or a card tablewithpeople in the same room,but from consuming it remotely or competing against unseen online opponents. In Asia, that change has happened in the space of five years. Mr Crouse says it’s important not to overstate the current state of technology in the mobile handset market, as it can set up expectations among consumers and investors that online gaming companies may find hard to fulfil. “When you think of convergence, technologytendstobethefirstthingyouthink of. Online gaming started out with gaming companies doing downloadable applications onto computers and to browsers. “Now,in Asia,we have very strongmobile penetration. The mobile is the primary end user device for gaming in Asia, but it’s difficult to get a successful user experience. For example, I recently played a ten-player poker game on a small mobile device and it’s not a very user- friendly experience. Companies that only target themobile audiencewill probably find it is quite a while before there are significant improvements in screen size, etc.” UK-based Global Betting and Gaming Consultants estimates that even when including rich, wired up North America and Europe, global online gaming turnover accounted for about US$15.2 billion in 2007—only around 5% of global gaming revenues. China has an estimated 210 million regular Internet users–a penetration rate of 16%.Thisislowbydevelopedworldstandards, although still up fourfold compared to mid-2002. Many of China’s Net surfers are using communal terminals though, either in Internet cafes or in workplaces. Only 50.4 million consumers are currently accessing the Web via mobile handsets, according to the China Internet Network Information Center (CNNIC), a non-profit organisation set up under the Ministry of Information Industry of the People’s Republic of China. The online spending power of Internet- enabled mobile users is likely to be disproportionate to their numbers. They have constant access to those handsets, while the remaining 159.6 million Internet users have to share just 78million connected computers, according to CNNIC statistics. As Mr Naik suggests, though, the Asian middle class is growing quickly. In China, the lower middle class (those with an average annual income of RMB 25,001toRMB 40,000) is l i k e l y to grow to 290million by 2011,according to a recent report from management consulting company McKinsey,which also estimates the current number of middle class Indians with incomes between US$4,380 and US$21,890 stands at 50 million, and will leap to 583 million by 2025. Asia’s gaming disposition For cultural reasons related to ideas about luck and good fortune that can seem strange to Westerners from Judeo- Christian cultures, these middle class Asians are overwhelmingly disposed to gamble, says Mr Naik. And once they get online and away from the traditional pastimes of the land- based casinos, what the new consumers are prepared to gamble on is almost limitless, he suggests.Role-playing PC-based community games akin to the Warcraft series first seen in the West in the mid-1990s are being formatted for online mobile play. Ken Crouse says it may be some time, though, before role playing games specifically designed for the small screen take off. “People are not going to make big investments in developing RPG specifically for mobile play if they’re not sure how things are going to go on the regulatory front,”says Mr Crouse. “That’s why companies are taking role playing games already out there and turning them into gambling games. The challenge is that large companies do not want to get into hot water so they do not want their games played for money.” T h i s