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A Gamble or a Sure Bet?
© 2010 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Japan. • Entrance of land-based casino operators: Looking for incremental revenue. and South Korea—still prohibit many forms of gambling over the Internet. regulators. Another key opportunity may lie in the regions where online gaming is now legal. attorneys. For example. software and technology companies. puts the size of the global online gaming market at about US$21 billion. KPMG firms are now starting to see a shift in online gaming regulations in Europe. while casino giant Harrah’s and gaming technology leader IGT are also taking steps in this direction. . some KPMG firms are seeing an increase in M&A activity related to online gaming. and Denmark.K. • Business-to-business expansion: Established gaming sites are looking to license their software and services platforms to establish new revenue streams and gain market presence. While it is difficult to predict political and legislative action.S. companies like U. Communications and Entertainment © 2010 KPMG International Cooperative (“KPMG International”).Foreword For thousands of years. people have been playing games of chance or wagering on the outcomes of various games and events. Today. Sincerely. Member firms of the KPMG network of independent firms are affiliated with KPMG International. • Emerging platforms: Gaming is moving to the same mobile and social platforms that are exploding for casual games. as we see beginning to occur in France. Many operators. All rights reserved. media. payment solution providers. game parlors. many markets that now ban online gaming could easily change their laws as a means of authorizing what is now an underground economy and increasing tax revenues—something that the current recession may be making more urgent. Other important trends include: • Industry consolidation: As is the case in many maturing markets. bookmakers and—increasingly—online. KPMG International provides no client services. hitting US$30 billion by 2012. China.-based Rank have already moved into the online space to complement their traditional casino and bingo services. We are pleased to present this overview of the state of the global online gaming sector and some of its major players. a leading supplier of data and market intelligence on the global gambling industry. Market prospects could abound in the coming years.. H2 Gambling Capital. a Swiss entity. and investors alike are all keenly watching how this industry will develop. considering that some of the biggest potential markets—such as the U. that activity often takes place at casinos. Gary Matuszak Global Chair Information. Italy. This is a dynamic and rapidly changing business. state monopolies may now be giving way to privately owned websites. The online gaming market represents one of the fastest growing segments of the gambling industry. But that may be just a drop in the ocean. facing unquestionable consumer demand.
each with its own business models and technology. Despite potential political and legislative restrictions. “ The market for global interactive gaming will grow about 42% to US$30 billion in 2012 from US$21.2 billion in 2008. a Swiss entity. This is significantly faster than the 15 percent growth that H2 forecasts for the gambling industry as a whole over the same period. the market. one of the most widely quoted sources of online gaming statistics. 1 2 eGaming Report. gamble on slots or play cards. which already produces more than US$20 billion in worldwide revenue. and may be less risky than other casino games. KPMG International provides no client services. One attraction of the online gaming market is its very high rate of growth. horse races. changing the model of the gambling industry as many consumers turn to the Internet to bet on sports. says the market for global interactive gaming will grow about 42 percent to US$30 billion in 2012 from US$21. the provider often takes a commission from wagers. • Online lottery: Online versions of frequently government-sponsored lotteries.2 O NLINE GAMING: A GAMBLE OR A SURE BET? A Gamble or a Sure Bet? The online gaming business is progressively moving into markets around the world. © 2010 KPMG International Cooperative (“KPMG International”).2 billion in 2008. • Online bingo: A web-based version of the ages-old game. • Online poker: Like land-based (or traditional) poker. Member firms of the KPMG network of independent firms are affiliated with KPMG International. H2 Gambling Capital. They include: • Sports betting: Betting on sporting events such as games. . H2 Gambling Capital. etc. dog races. July 2009 ” Ibid.1 may be ready to grow further as new geographic regions open up and many governments become more receptive to Internet-based gaming. All rights reserved. • Casino games: Games of chance such as slot machines or roulette that operate the same as in a traditional casino.2 The online gaming market is composed of a number of different types of games.
5 Taken together. have been shifting their online gaming regulations to open up markets to non-native competitors. Bills to end the online gaming restrictions have since been introduced3. 2007 Retrieved .shtml. although few expect any bill to sail through the legislative process. November 8.html “Online Gambling Moves Need Traditional Backing.gov/generalinfo/Foia/Reg%20GG-UIGEA-Comments. legislators have been discussing a bill that would end the state monopoly on online gaming. these activities suggest a public policy debate that could still evolve and in so doing regulate and tax online gaming.S. from http://www. Italy. But the issue of Internet gambling hasn’t ended there. Many European countries. . 2009. Perhaps even more attractive are Asian countries where online gaming is still outlawed.pokernewsdaily. for instance. land-based casinos and global online gaming enterprises are actively preparing6 for and betting on that very outcome. 3 “Frank Introduces Internet Gambling Regulation and Enforcement Act of 2007” Press Release. eGaming Review. soccer and poker. other geographic regions may hold more short-term. however it does limit land-based casino gambling activities to Macau.federalreserve.gov/apps/list/press/financialsvcs_dem/press042607 .com/node/36950.gamblingcompliance. KPMG International provides no client services. may be an alluring gambling market. April 26. Financial Times. one of Europe’s largest gaming markets. . promise for the online gaming industry. http://www..S. April 14. All rights reserved. the U.7 has also been reforming its gambling laws.ONLINE GAMING: A GAMBLE OR A SURE BET? 3 Key Trends Potential of the U.house. may have online gamblers.4 Separately. an enormous market for online multiplayer games such as World of Warcraft. http://www.pdf.S. and prohibits online gaming altogether. and even long-term. 2009 ” Retrieved from http://www. http://www. Member firms of the KPMG network of independent firms are affiliated with KPMG International. allowing privately owned websites to offer wagers on horse racing.com/uigea-regulations-officially-delayed-six-\“.com/2009/05/06/ gambling-barney-frank-markets-equities-online.S. market Online gaming growth continues worldwide as the potentially richest marketplace remains largely unrealized. In France.months-6701/ “Harrah’s Hire Ex-Party Boss for Online Push” GamblingCompliance Ltd. but where traditional gambling is often thought to be part of the culture.forbes. Deregulation of other markets While the U. U. however gambling online remains illegal in Korea as well. Many companies abandoned the American market in 2006 with the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) that year. China is an exploding market for Internet games. October 2009 ” 4 5 6 7 © 2010 KPMG International Cooperative (“KPMG International”). “Market Data Focus: Italy. Treasury Department and Federal Reserve Board announced in November 2009 that they were delaying enforcement of the UIGEA for six months. a Swiss entity. Retrieved from . Korea.
in 2008 purchased Million-2-1. “The online gambler is often a loner. Million-2-1 also has a consumer-facing Internet games portal called Kerching that offers online casino.com/content/base. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Then in August.10 In September 2009. SMS games and cell phone java slots games in legal territories. a Swiss entity.4 O NLINE GAMING: A GAMBLE OR A SURE BET? “ — Joseph M. Rank. a business law professor at the State College of New York (SUNY) in Buffalo and co-editor of the Gaming Law Review. Poker News Daily.11 We predict new rounds of merger and acquisition activity. much of this effort is likely to be for incremental revenue. . Harrah’s Interactive Entertainment entered into a long-term deal with Dragonfish. November 2009 10 IGT website. Harrah’s (which owns the World Series of Poker) brought in the former CEO of online poker site PartyGaming to head Harrah’s Interactive Entertainment. In early 2009.asp?pid=58 11 “ bwin to Buy Italian Gamer for Up to 115 Mln Eur. a new company that will handle its online operations. IGT. All rights reserved. the business-to-business technology arm of gaming site 888 Holdings. Industry consolidation Online gaming growth rates have also helped to drive market consolidation. for example.” says Joseph M. both among traditional gaming companies reaching into virtual markets and existing virtual leaders taking over smaller niche competitors.8 Moreover.”9 The online gambler is often a loner. bingo. MGM Mirage and Las Vegas Sands—have been looking into online gaming as a way to increase their market share and reach consumers who might not be willing to come to their physical casinos. Kelly. September 12. bwin purchased one of Italy’s largest online poker sites. Reuters. the leading maker of gaming machines. https://www. a developer of mobile/cell phone gaming technology. “He is not the kind of person who would go to Las Vegas and play blackjack or craps. Kelly Entrance of traditional “land-based” casinos Many major casino players—including Harrah’s. coming from people who don’t ordinarily go to casinos. KPMG International provides no client services. Gioco Digitale. poker.igt. 2009 ” Interview with Forbes Insights. 2009 ” 8 9 © 2010 KPMG International Cooperative (“KPMG International”). “Harrah’s Interactive Signs Development Deal with 888 Holdings. September 14. to power the Harrah’s site. For example. as larger players in the gaming sector have looked to fill out their capabilities or reach into new markets.
“ ONLINE GAMING: A GAMBLE OR A SURE BET? 5 In France. All rights reserved. © 2010 KPMG International Cooperative (“KPMG International”). soccer and poker. Member firms of the KPMG network of independent firms are affiliated with KPMG International. . legislators have been discussing a bill that would end the state monopoly on online gaming. allowing privately owned websites to offer wagers on horse racing. a Swiss entity. KPMG International provides no client services.
market. March 2009 Bingo in the Digital Age: Global Market Assessment and Forecasts. estimated to generate over £220m of revenue in 2008 (by gross win). Other markets ripe for expansion are likely to include Spain and select markets in Eastern Europe. was quoted as saying: “The social networking phenomenon has run parallel to the development of the bingo product. eGaming Review Bingo Report ‘09 ” Bingo in the Digital Age: Global Market Assessment and Forecasts’. Screen Digest.K. is the largest.13 The Screen Digest study notes that the U. a Swiss entity. mobile gaming will enable bettors (or punters) to place bets at an event or at a bar or pub while watching a game. While sports books have long taken advantage of sports-related subscription services to provide updates and scores. with growing broadband penetration. and online gaming companies are closely watching this growth for even more social games such as bingo. a trend towards regulatory relaxation and the current economic downturn driving demand for in-home entertainment. online bingo has become the fastest growing sector of the online gaming market and offers huge potential for further growth. In a recent special report on Internet bingo in eGaming Review. wireless Internet via 3G networks.S. and picture and video messaging. and its potential size may be huge. other global markets also hold tremendous promise. . senior vice president for Internet bingo software developer Parlay Entertainment. Emerging regions such as India and Latin America are likely to be the next major markets to come into view for the industry.14 Growth of mobile gaming With consumers increasingly comfortable using their mobile phones for products and services such as mobile banking.6 O NLINE GAMING: A GAMBLE OR A SURE BET? Bingo: online gaming with a social twist Social gaming—games hosted on social networks such as Facebook that are meant to be enjoyed and played with friends—has taken off in the past year. easy access to mobile applications.”12 According to a study by media analyst Screen Digest. mobile gaming is likely not too far behind. and safe and secure payments through a native banking system are three of the key factors that could support this growth. increased promotional activity. Live streaming of sporting events via faster 3G connections has the potential to further enhance this market. Peter Trinz. March 2009 © 2010 KPMG International Cooperative (“KPMG International”). should legal issues be resolved. KPMG International provides no client services. Emerging markets While online gaming has taken off in Europe and holds potential for the U. Bingo is a social game and people now feel very comfortable interacting on the Internet. the mobile gaming market may still be fairly untapped. Screen Digest. 12 13 14 “A New Dimension. Asia and Latin America. A solid infrastructure of broadband Internet connectivity. most mature and most competitive online bingo market globally. Member firms of the KPMG network of independent firms are affiliated with KPMG International. For example. All rights reserved.
keeping U. Both Visa and Mastercard have toughened their stance on allowing e-gaming transactions to be coded as other kinds of online commerce. and online gaming providers with obligations.15 These restrictions were put in place in anticipation of UIGEA law going into effect in June.” 15 “Visa declining U. The constituents of trust are broad and range from the potential for fraud or players using software to beat the system. eGaming Review. Compliance with such regulations is also a relevant constituent of trust between the provider and their acquired and retained customer base. These laws provide customers with rights. credit card companies have recently tightened restrictions on the use of credit cards for e-gaming transactions. market. to security issues that cause players to be concerned for their online information.ONLINE GAMING: A GAMBLE OR A SURE BET? 7 Risks It would be remiss to discuss the online gaming industry without taking a look at a few of the possible risks—or challenges—that could have an impact on companies that are targeting this marketplace.S. while existing customers may be fickle and easily switch to a provider which they perceive as more trustworthy. In addition. and it may take many years for markets to actually open up to licensed competitors even after laws pass.S. Reputation and privacy concerns Prospective online gaming customers remain sensitive to any perception that a provider cannot in some way be trusted. when the U. egaming payments too.S. Feburary 5. in many cases these efforts move slowly. customers from using their cards to gamble online. 2010.S. 2010 ” . The management of personal data gathered by an online gaming provider is subject to regulation by various EU privacy laws that are growing considerably in importance. many online gaming companies that had been hoping for the best were quickly crippled or forced out of business. A movement in this area could suddenly decimate some players. For example. Legislation While much global legislative action focuses on liberalizing online gaming regulations. to honor. passed the UIGEA in 2006. Payment crackdowns Also in the U. there is still potential for legislation that is intended to reduce or eliminate online gambling.
eCOGRA oversees fair gaming. including sports betting. acting essentially as a player advocate where online gaming is lawful. Little. an independent standards authority for the online gaming industry. has one of the most established online gaming industries. All rights reserved. Currently.8 O NLINE GAMING: A GAMBLE OR A SURE BET? User experience In addition to reputation and security concerns. lottery and online casinos. many other countries are currently preparing for a control-led opening of their markets. If access to personal credit cards becomes more difficult in the U. with annual revenue forecast to reach 8 billion euro by 2012. there could still be pain ahead for its online sector. groups such e-Commerce Online Gambling Regulation and Assurance (eCOGRA). Geographic Sectors Europe According to a recent study by Arthur D.16 Following the examples of the U. Unlike “land-based” casinos. a Swiss entity.19 16 17 18 19 “Online Gambling: All In?” Arthur D. 2009. Gambling Compliance. The charge-off rate on bad debts by credit card firms jumped significantly in Q3 2009.K. One of the biggest challenges in Europe may be the allowance of cross-border online gaming. The firms have been raising fees and interest rates in response to bad debts from customers in the recent recession. and under pressure from the European Commission.17 which may have the consequence of creating a “balkanized” environment of multiple regulations. where players can physically see the way the games operate or cards are dealt. Little. poker.7 percent in 2004 to an estimated 12. the business model can fall down. growing from 3.K. . GBGC Analysis report prepared for KPMG. February. September. gambling market. in 2010. With an online gaming market estimated at GB£1.18 One area of concern that leading international gaming consultants GBGC (Global Betting & Gaming Consultants) has for the Internet gaming sector is that of credit cards. the U. 2010 © 2010 KPMG International Cooperative (“KPMG International”). the online gaming market is opening throughout Europe. 2009 ” GBGC Interactive Gambling Report. KPMG International provides no client services. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Aware of these concerns.48 billion. player protection and responsible operator conduct. The online gaming sector has also seen a steadily increasing share of the total U. have emerged. online gamers must be assured that they have a fair chance to win. and Italy. bingo.K. The credit card is the oxygen of Internet gambling—if customers cannot transfer funds.K. online and digital forms of these games require greater faith. and that operators are conducting themselves properly. many countries have focused gaming reform activity within their own borders.1 percent in 2009. 2009 “Market Barriers: A European Online Gambling Study.
market for online casinos and poker could be worth as much as US$12 billion. eGaming Review.S.S.25 “ billion. Citibank and other U. eGaming. the U. Should winnings actually flow through a U. Currently.22 and Paddy Power signed a five-year deal with French operator Pari Mutuel Urbain (PMU). PartyGaming is reported to be entering the market in 2010 through a business-to-business partnership. eGaming Review. All rights reserved. compared to a rate of around 18 to 20 percent in the U. allowing more providers to be licensed. 2009 ” “U. June 30. October 2009 ” “Online Gambling: All In?” Arthur D. eGaming Review. Playtech.S. 2009. one of the country’s two state-backed gaming and betting providers.S. and the country’s industry is expected to generate just under €18. online gaming is outlawed in the U. 2009 ” “Goldman Sachs: PartyGaming. Allied Systems Inc. and 25 percent in countries such as Sweden. Member firms of the KPMG network of independent firms are affiliated with KPMG International. the consequences could be unpleasant for all concerned. under the UIGEA. June 10.000 online poker players. although there is an onshore requirement. In June.. its online gaming market is relatively small.S.S. and were held at Wells Fargo. Still. banks and credit card companies from processing charges to and from online casinos.24 The consequence of the gaming ban in the U. demonstrates the draw that the regulated market has. federal authorities froze bank accounts worth US$34 million representing 27.K. but it is also the market with some of the greatest challenges.S. The gaming markets in France and Spain. 2009 ” © 2010 KPMG International Cooperative (“KPMG International”). no home-grown legal financial infrastructure—opens the way to money-laundering and brings disreputable money handlers into the mix. banks.S. market for online casinos and poker could be worth as much as US$12 20 21 22 23 24 25 “Market Data Focus: Italy. and Account Services. bwin to Surve on Legal U. Deals Blow to Online Poker Players.ONLINE GAMING: A GAMBLE OR A SURE BET? 9 Italy represents a huge gaming market. The accounts were managed by two service companies. financial institution. are expected to open up in 2010. 888. Legalization’s proponents say today’s similar dynamic— lots of enthusiastic bettors. PokerStars recently established an onshore presence in Italy. The Wall Street Journal. U. meanwhile. for instance. which prohibits U. and bwin Interactive Entertainment’s acquisition of a leading Italian poker site. . eGaming Review. has been to create a 21st Century equivalent of Prohibition.7 billion in 2009. Little. 2009 “PartyGaming to Enter French Market with B2B Deal.21 In France (which like Italy has an onshore requirement).S. 2009 ” “New Paddy Power B2B Arm Signs Landmark Deal with France’s PMU.23 North America The United States may have the most potential as a lucrative market for online gaming. The U.S. August 28. online gaming losses are expected to make up just 5 percent of total gaming losses in Italy this year. KPMG International provides no client services. Gioco Digitale. But should online gaming be legalized. November 12.20 Italy has been liberalizing its onshore Internet poker and gaming regulations. a Swiss entity. according to Goldman Sachs.
In early 2010. One bill. November 16 2009 ” 29 Canadian Gaming Business magazine. February 23. Some individual states also have been considering legislation separately. 2010 .ca. Loto-Quebec will work with B. These provincial agencies are expected to offer online gaming by the end of the year30. . 2009. while other provinces such as Ontario.26 Neither bill progressed in 2009 or in early 2010. KPMG International provides no client services. a Swiss entity. California. US$90 “Internet Gaming Comeback?” Global Gaming Business. except for sports betting. has been looking to liberalize its own online gaming laws. was considering a bill enabling intrastate online poker. p.—both of which already offer limited online gaming—to develop a common electronic platform across their jurisdictions. Member firms of the KPMG network of independent firms are affiliated with KPMG International. August 21. All gaming in Canada must be ’conducted and managed’ by a provincial government or agency. Loto-Quebec received cabinet approval to enter the online gaming business.27 Legislators in Florida were presented with a study from a lobbying group showing that legalizing online poker could raise US$90 million annually in taxes. Florida Told. 6. as well as legalize interactive horse racing. All rights reserved. October. introduced by Financial Services Committee Chairman Barney Frank. others have been presented with studies suggesting how online gaming could boost tax revenue. are expected to follow suit. November 12. 2009 “California Legal Online Poker Bill to Be Delayed. February 3. Lottery Corp. 30 “Loto-Quebec to Get Into Online Gambling Business. 26 27 © 2010 KPMG International Cooperative (“KPMG International”). Senator Warns. with an online gaming market estimated at CDN$1 billion29. as well as to achieve the volume of players that will be required to make online poker viable. has 66 co-sponsors as of March 2010 and would license and regulate all Internet gaming.1 0 ONLINE GAMING: A GAMBLE OR A SURE BET? “ Legislators in Florida were presented with a study from a lobbying group showing that legalizing online poker could raise There have been proposals in Congress to legalize forms of online gaming. however. for example. 2009 ” 28 “Legal Online Poker Could Raise $90M a Year.28 Canada. and Atlantic Lottery Corp. 2010 ” 31 “Ontario may follow other provinces and allow online gambling: McGuinty” The Canadian Press. eGaming Review. although the bill has since run into delays. eGaming Review.C.31 million annually in taxes. CTV. A Senate bill from Senator Robert Menendez would license only non-banking interactive poker and other skill games.
eCommerce Journal.34 Japan currently bans most forms of gambling. are very popular in Japan’s leisure industry. June 9. September 2009 ” “Online Gambling Sites Mushrooming. has been cracking down significantly on online gaming. opening up this high GDP market of 128 million people. Today. Korea Times. a Potential Gold Mine for Online Gambling. meanwhile. Japan Productivity Center 36 “Japan. according to a report in Korea Times. The ruling Liberal Democratic Party in Japan has been reported to be communicating with some of the largest online gaming operators to discuss casinos in that country. 2008 ” 35 White Paper on Leisure Industry 2009. KPMG International provides no client services.33 To combat this. . Yet there has been some movement to lift this prohibition. Korea Times. Certain gaming machines. both remain closed to online gaming. South Korea. In China. they do not currently grant concessions for online gaming. the country’s Ministry of Culture. both remain closed to online gaming. the history of gambling can be traced back several thousand years. Unauthorized gaming sites are available—a popular one is Hangame—but winners have had to cash out by using illegal money dealers. which is still illegal in the country. But casino gaming is limited to Macau—which has now overtaken Las Vegas as the biggest gaming city in the world today.32 However while Macau’s laws cover land-based casinos. Global Gaming Business. as well as in Hong Kong and Macau. All rights reserved. February 13. 2008 ” 34 “Habitual Online Item Buyers Face Sanctions. 2009 ” 32 33 © 2010 KPMG International Cooperative (“KPMG International”). legal lotteries are available in most Chinese cities. June 25. with the exception of lotteries and bets on racing. Sports and Tourism.35 although landbased casinos and online gaming are not permitted.36 “ Asia The two largest prospective markets in —China and South Korea. Member firms of the KPMG network of independent firms are affiliated with KPMG International. proposed a bill that charges people trading “excessive” amounts of cyber money with gambling. “Unlocking the World of Chinese Gambling. a Swiss entity.ONLINE GAMING: A GAMBLE OR A SURE BET? 11 Asia Pacific and India The two largest prospective markets in Asia—China and South Korea. such as Sega Sammy’s pachinko and pachislot.
38 Australians spent an estimated AU$790 million on offshore gambling sites in 2008. which currently bans online gaming. it is estimated that country’s betting market is worth about US$60 37 38 39 “Betfair and William Hill Target India. All rights reserved. “Lifting of Oz eGaming Ban Set to Spur Further Growth. a Swiss entity. as well as local Indian operators.39 “ billion. In late 2009.37 Online gaming may soon take place in Australia as well. . foreign operators were submitting bids for the first online gaming licenses in India. October 26. KPMG International provides no client services. 2009 ” © 2010 KPMG International Cooperative (“KPMG International”). The Independent. October 26. it is estimated that country’s betting market is worth about US$60 billion. foreign operators were submitting bids for the first online gaming licenses in India. Reports said the goal was to have the betting services running in time for the football (soccer) World Cup in April 2010. Betfair and bwin. The Productivity Commission endorsed the idea of allowing operators to offer online poker and casino products to Australian residents. In October 2009. eGaming Review. Bidders were said to include William Hill. with at least three licenses to be granted in the Himalayan state of Sikkim. eGaming Review. Member firms of the KPMG network of independent firms are affiliated with KPMG International. the government’s independent advisory body on gaming policy recommended lifting the 2001 Interactive Gambling Act.1 2 ONLINE GAMING: A GAMBLE OR A SURE BET? In late 2009. October 27 2009 ” . 2009 ” “Lifting of Oz eGaming Ban Set to Spur Further Growth. subject to a strict regime of consumer protection.
42 It is estimated that the Mexican gaming market may be worth some US$4. meanwhile.43 Until now the gaming business has been dominated by the government-run National Lottery.mx) of the online casinos. and 2004 legislation allowed online gaming. Argentina. a Swiss entity. All rights reserved. while 888 has a partnership with Tower Torneos. September 2007 ” 40 41 © 2010 KPMG International Cooperative (“KPMG International”). and may have one of the strongest foundations for online gaming: a solid base of regular Internet users and a cultural history of gambling. especially on football (soccer). all controlled by the federal government. with 192 million people. and has a shirt-sponsorship deal with Buenos Aires-based football team Boca Juniors. for example. Through Mexican sites (ending in . it is possible to access international sites of companies such as bwin. February 4.40 Brazil has the potential on the surface to become a huge online gaming market. eGaming Review. KPMG International provides no client services. Intercontinental Global and others. Online gaming is expected to become one of the most lucrative niches of the business.yogonet. In Argentina. www. September 2007 ” 43 “Online Gambling in Mexico: A Safe Bet. October 2008 ” “Sleeping Giant.yogonet. bwin. Companies are currently trying to push the envelope in terms of gaining a national presence through advertising and sponsorships. Member firms of the KPMG network of independent firms are affiliated with KPMG International. is the most highly populated country in Latin America. www. gambling and betting licenses are provincial. with about 200 permits awarded in 2006. however it is currently prohibited and no online betting legislation exists.6 billion. operates through a license from the Provincia de Misiones. not national. as is sports betting. . may be the sleeping giant for online gaming of Latin America. Brazil currently operates different types of lotteries. most of them to Apuestas Internacionales. Bingo games are also popular. eGaming Review.com. 2008 ” 42 “Online Gambling in Mexico: A Safe Bet.com.41 Another potentially lucrative market is Mexico. bwin recently started advertising with a large national publisher. a subsidiary of the TV giant Televisa.ONLINE GAMING: A GAMBLE OR A SURE BET? 13 Latin America Brazil. “Brazil’s Gambling Potential. Mexico’s 1947 Federal Gaming and Raffles Law regulated gambling.
• Online gaming site that also operates Casino-on-Net and Pacific Poker • Its B2B division. • Online gaming company best known for its PartyPoker online poker room • Has made a number of recent acquisitions. and others. • Licenses gaming software.C. Taiwan US$183. poker. • Recently launched a mobile gaming product with Swedish mobile developer Mobenga • Strength is said to be in Asia • Has sponsorship deals with five teams in the English Premier League. provides technology. unless otherwise noted Gala Coral Lenders Said to Eye Cash Infusion.C. now a subsidiary of Italy’s Lottomatica • GTECH G2. a casino software solution. U. Austria €303 million (2009) €403 million (2008) Cryptologic Dublin. • Operates in multiple formats. ePayment services and managed services through partnership deals with other gaming sites • Dragonfish has a deal with Harrah’s Interactive Entertainment to provide its online gaming services. including casinos. 2009. bingo halls. Ireland US$61. a Swiss entity.com and Bet365.1 million active customers in 2008. Hong Kong.K. Miniver. NV. GoldenPalace. All rights reserved.172 million (2008) Microgaming Paddy Power Isle of Man Dublin. New York Times.. U. bingo and backgammon • Sites use the OpenBet system from Orbis Technology. Finsoft and Dynamite Idea—focused on providing software and services in the Internet and sports betting market. an Australian sports betting company. including World Poker Tour and Cashcade (online bingo) • B2B division uses its software to create and operate bingo and casino eGaming services targeting the UK market. and online gaming. now expanding in the U.5 million (2008) Gala-Coral Essex. its online gaming arm. Taiwan. Gibraltar. and Macau. 32Red. GigaMedia and PartyGaming. • Recently agreed to a £175m capital as part of a debt restructuring45. KPMG International provides no client services. 2010 © 2010 KPMG International Cooperative (“KPMG International”). • Software developer for online gaming industry • Online casino operators using its software include Ladbrokes. and Million-2-1. .700 retail betting shops in the U. and Chelsea F. • Provides software and managed services for the online gaming industry • In joint venture with William Hill for William Hill Online • Other companies using Playtech software include PartyGaming.6M (2008) GTECH (Lottomatica) Providence. Ireland N/A (privately held) €283 million (2008) US$472 million (2008) PartyGaming Gibraltar Playtech Isle of Man €111 million (2008) 44 45 Source: All information from company websites and annual reports. retail betting shops (in the U. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Spain and Belgium • Operates online casino sites offering sportbooks. manufacture. and Italy). • Operates 2. including Liverpool F. RI. Ireland. Italy and Argentina and an e-money license for the UK • Claimed 2.K. support services and payment processing • Revised strategy in 2009 to focus on Internet casino. games development and licensing to top gaming/ entertainment brands • Companies using Cryptologic solutions include 888. Dragonfish. including China. U. Privately held GigaMedia Taipei. is comprised of four subsidiaries—Boss Media. primarily in continental Europe • Also offers platform of casual (non-gambling) games in Asian markets. £1. BSkyB. and marketing of electronic gaming equipment and network systems • Operates two online gaming subsidiaries: WagerWorks. Vienna.K. • Provider of gaming software and services to the online gaming industry.K. as well as Internet casino and poker • Holds sports betting and casino licenses in Austria.K.K. Betfair. casino games. • Global gaming company specializing in the design.K. • Largest betting company in the U. St. • Largest online gaming company focused primarily on sports betting. which does mobile/cell phone gaming.1 4 ONLINE GAMING: A GAMBLE OR A SURE BET? Some of the Key Industry Players44 Name 188Bet Headquarters Isle of Man Annual revenues (year) Privately held Notes • Online sportsbook provider owned by Cube Ltd. and Europe • Non-retail (online) activities now generate 70 percent of its operating profit • Acquired a controlling stake in Sportbet. February 16. USA Game Technology (IGT) Ladbrokes Middlesex. • Ireland’s largest bookmaker. Fortune Lounge Group.058 million (2008) US$935M (2009) International Reno. USA €2. • Internet betting exchange that also operates a poker product and game arcade • Claimed its 2 millionth customer in April. 888 Holdings Gibraltar US$256 million (2008) Betfair bwin London. • Leading operator of lottery systems.
K. Greece. a Swiss entity. and 12 percent from poker.K. • Betting site that operates in the U. • Major chain of betting shops that operates primarily in the U.000 players are said be playing real money “ring games” daily. • Online sportsbook and casino operator • Has operations in Asia (licensed by First Cagayan Leisure & Resort Corp. © 2010 KPMG International Cooperative (“KPMG International”). Spain. Japan ¥429. U. • Manufacturer of pachinko and pachislot machines • Amusement machines. Rank Group SBOBet Maidenhead. All rights reserved. PCs and toys. U.195 million (2009) Sportingbet London. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Spain and Belgium.K.ONLINE GAMING: A GAMBLE OR A SURE BET? 15 Name PokerStars Headquarters Isle of Man Annual revenues (year) Privately held Notes • Said to be the world’s largest online poker room • Sponsors a wide range of online and offline poker tournaments. including the World Championship of Online Poker • Some 20. U.K. and Ireland • Online efforts—William Hill Online—are through venture with software developer Playtech. in the Philippines) and Europe (licensed by the Isla of Man) • Uses video streaming technology to offer “live dealer” games online.K. £163 million (2009) £963 million (2008) William Hill London.. and Australia • Operates Paradise Poker brand online poker site • 64 percent of revenues come from sports.K. Turkey. KPMG International provides no client services. including network-enabled trading card games • Amusement centre operations and arcade machines • Home video game software business. 24 percent from casino and games. including content for mobile phones. Germany. • Operates bingo services and casinos in the U. . Philippines Isle of Man £522..2 million (2009) Privately held Sega Sammy Tokyo. with complementary online gaming services • Has direct operations in U.K.
a Swiss entity.au Edwin Fung KPMG in China +86 10 8508 7032 edwin.cn © 2010 KPMG International Cooperative (“KPMG International”).uk Neil Duggan KPMG in Gibraltar +350 200 48600 nduggan@kpmg. KPMG professionals can also advise on reducing costs. . KPMG An experienced team. and Entertainment KPMG in the U.com. In addition to helping our firms’ clients with these concerns. casinos and other land-based gambling operators.com European region Mark Summerfield KPMG in the U.1 6 ONLINE GAMING: A GAMBLE OR A SURE BET? Conclusion As the popularity of both gambling and online entertainment continues to grow. improving controls. Member firms of the KPMG network of independent firms are affiliated with KPMG International.com Maureen Migliazzo Global Executive Information.com. Middle East. information and security risks and issues. Coupled with the enormous potential of the industry—in the event that major markets such as the U. Communications. or Asia-Pacific allow online gambling and supporting activities—it is not surprising to see that the online segment of the gambling industry is by far one of its fastest growing divisions and piquing the interest of the industry’s largest players.S.S. Europe.co. Even despite the unpredictable political and legislative hurdles and roadblocks in many countries. Global Chair Information.K.ca Asia Pacific region Kieran Lane KPMG in Australia +61 (2) 9335 7514 email@example.com@kpmg. Contacts Global Contacts Gary Matuszak Partner. KPMG’s global network of Information.gi Russell Kelly KPMG in Isle of Man +44 1624 681013 russellkelly@kpmg. Companies and investors in this industry face many firstname.lastname@example.org. All rights reserved. +1 650 404 4858 gmatuszak@kpmg. KPMG International provides no client services. +1 650 404 4425 mmigliazzo@kpmg. Africa and Asia-Pacific. Communications & Entertainment (ICE) professionals work with our firms’ clients in the online gaming and related sectors throughout the Americas. and industry newcomers and investors alike. +1 650 404 5240 wloo@kpmg. Communications. and Entertainment KPMG in the U. related suppliers. protecting intellectual property. the online gaming market is without a doubt an attractive area of expansion for software developers. a global network. online gaming seems to have taken a strong enough foothold in some markets such as Europe that investment into this sector may have less risk than it appears. +44 20 7311 3055 mark.S.im Americas region Wade Loo KPMG in the U.S.com Silvia Montefiore KPMG in Canada +1 416 228 7211 smontefiore@kpmg. and meeting the myriad of challenges of the digital economy.
gbgc. acquisition and advisory services to online gaming companies ranging in size from private enterprises to companies listed on the U. Mark has worked with gaming companies for 14 years. a Swiss entity.About the Authors Mark Summerfield is Global Head of KPMG’s Gaming practice based in London. Forbes Insights (www. China and Singapore for eight years.K. Wade Loo is a technology audit partner based in the U. Elaine Pratt. firm’s Silicon Valley office. More recently his team has delivered assurance. stock exchange. Member firms of the KPMG network of independent firms are affiliated with KPMG International.com/forbesinsights) and Global Betting & Gaming Consultants (www. Contributors We would like to acknowledge the contribution of Archie Watt. He has a wealth of experience as lead partner for various global technology corporations and a global business perspective having worked in KPMG firms in Japan.com) who assisted in the development of this report. . © 2010 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services.K. All rights reserved.forbes.S. U.
No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties. Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity. KPMG International provides no client services.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Publication name: Online Gaming Publication number: 1001505 Publication date: March 2010 Printed on recycled material .kpmg. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Designed by Evalueserve. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved. nor does KPMG International have any such authority to obligate or bind any member firm. a Swiss entity. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”). Although we endeavor to provide accurate and timely information.