Paul’s Blog June 14, 2010

The iPad is transforming the platform, and really the whole basis for, the entertainment/video gaming industry. Major new features like a gyroscope, a new chipset, a better screen, a better antenna and a better camera, are increasing the tools that developers use to build their games. The real impact, though, is that it is a mobile consumer device that is more similar to a computer than a cell phone. That means longer user sessions, a more engaged player, and higher revenues. When adequate bandwidth is combined with these attributes, a new world of “augmented reality” games will raise the bar even further.

Internet gaming is just the baseline for where our industry will be in the very near future. The operators who will dominate 5 years from now are figuring out how to integrate the stimulating thrill of wagering with all these other elements of recreational gaming. The desire to compete, to socialize, to experience vicariously the dangers and challenges of an intrepid adventurer or the lives of our pop icons, will merge with technological innovations like large screen mobility and “augmented reality”. The games being developed for the iPad and other emerging platforms will completely change the game experience that our players are accustomed to. Lotteries have the inside track because of the regulatory barrier that surrounds the wagering component. But just think about what Google, Sony, Apple, Viacom, could do if, it may just be a question of when, regulatory changes create a crack in that barrier to market entry. Even if that never happens, why not act as though it were imminent? Why not be among the operators who are leading the charge to meet the demands of this new generation of gamers who, much more than any previous generation, was raised with a love for games.

The UK's Department for Culture, Media and Sport is exploring the possibility of increasing taxes on foreign internet gaming operators. That will not only increase badly needed revenues, it will also level the playing field for domestic UK operators who are compelled to pay higher taxes. France is now licensing many foreign-based gaming operators. European countries appear to be rapidly moving towards a working regulatory and tax enforcement system. I think we can expect the rationalization of market regulation and the empowering of nation-states to force foreign operators to pay taxes to unleash a wave of government-sponsored expansion into internet gaming and electronic games. This is very good news for companies specializing in business to government partnerships. The competency of working hand-in-glove with government constituents and regulators is acquired over years of experience. The companies which have developed the knowledge, products, and systems to comply with the most demanding standards will do well in this next wave of expansion.

Expansion of the Macau gambling industry continues to explode. The first few months of 2010 have seen revenues jump between 50% and 90%, and analysts expect that trend will continue throughout the year. This trend is helped by the Chinese government relaxing visa restrictions. This is probably also good news for the destination gaming resorts being built in Singapore, Cambodia, Malaysia, and other parts of southeast Asia. We can see the way that the electronic gaming market is being built out all around the world. Where a country, like the Ukraine, tries to prohibit gaming, the public just travels to a neighboring jurisdiction where it is legal. Of course, that phenomenon is driving expansion of electronic games in the U.S. as well.

The demand that supports the expansion of electronic games will undoubtedly drive an even more rapid expansion of Internet gaming, if for no other reason than the capital investments are so much smaller and the logistics of promotion and market adaption are so much simpler. Governments everywhere really need to get their minds around the fact that the Internet gaming industry is screaming for regulation. Europe is showing us the way. Virtually every concern about age and location verification has been addressed. Operators in Scandinavia and Canada have proven conclusively, over years of experience with no incidents of security compromise to speak of, that Internet gaming can be implemented to meet all those regulatory requirements. The only breaches of security have happened precisely because the operators were not regulated by the government of the “consumptive” country. That is to say, it is the government where the games are being played (as opposed to where the operator is based) that need to have the right to exercise regulatory, and tax collection, oversight of the operator. That is essentially what has been decided in the landmark Court cases in Europe and is the basic concept that supports the long-term health and growth potential of the Internet gaming industry.

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PHILIPPE VLAEMMINCK
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Thank you to all of you who presented, served on a panel discussion, and participated at Smart-Tech. This was PGRI’s fourth annual event in NYC and has become a great venue for lotteries to delve into the most relevant issues of the hour, and we so appreciate the privilege of hosting it and visiting with you. The next issue of PGRI Magazine will include an in-depth analysis of the issues we explored. Too, the conference was video-recorded and will be made freely available to everyone on www.PGRItalks.com. We’ve received much positive feedback and hope that everyone accomplished their objectives. Our next event will be held at the Trump Miami Beach Hotel on November 4, 5, 6, and 7^th. Lottery Expo Miami is especially exciting for the participation from our colleagues in Latin America. The North America track is on Tuesday, the LatAm track on Thursday, and we all come together on Wednesday. Thanks to the support of our commercial partners and sponsors, the hosted receptions held every night of the conference have become a wonderful venue to talk with industry leaders from all around the world. Please check in at www.PublicGaming.org for PGRI conference updates. Thank you again - We look forward to seeing you again. Please e-mail me (pjason@publicgaming.com) with any questions, feedback, guidance, or comments of any kind. Smart-Tech 2013 was held April 8, 9, 10, 2013 at the Helmsley Park Lane, New York.