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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.
puts the size of the global online gaming market at about US$21 billion. Italy. media. Other important trends include: • Industry consolidation: As is the case in many maturing markets. Market prospects could abound in the coming years. facing unquestionable consumer demand. While it is difficult to predict political and legislative action. For example. payment solution providers. Another key opportunity may lie in the regions where online gaming is now legal. This is a dynamic and rapidly changing business. • 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. attorneys. KPMG firms are now starting to see a shift in online gaming regulations in Europe. and Denmark. while casino giant Harrah’s and gaming technology leader IGT are also taking steps in this direction. • Entrance of land-based casino operators: Looking for incremental revenue. and South Korea—still prohibit many forms of gambling over the Internet. hitting US$30 billion by 2012. a Swiss entity. that activity often takes place at casinos. The online gaming market represents one of the fastest growing segments of the gambling industry. software and technology companies. Today. some KPMG firms are seeing an increase in M&A activity related to online gaming. Communications and Entertainment © 2010 KPMG International Cooperative (“KPMG International”). game parlors. Gary Matuszak Global Chair Information. . Japan. Sincerely. But that may be just a drop in the ocean. considering that some of the biggest potential markets—such as the U. • Emerging platforms: Gaming is moving to the same mobile and social platforms that are exploding for casual games.K. state monopolies may now be giving way to privately owned websites. China. and investors alike are all keenly watching how this industry will develop. Member firms of the KPMG network of independent firms are affiliated with KPMG International. bookmakers and—increasingly—online. Many operators.S. KPMG International provides no client services..-based Rank have already moved into the online space to complement their traditional casino and bingo services. H2 Gambling Capital. All rights reserved.Foreword For thousands of years. a leading supplier of data and market intelligence on the global gambling industry. people have been playing games of chance or wagering on the outcomes of various games and events. regulators. as we see beginning to occur in France. companies like U. We are pleased to present this overview of the state of the global online gaming sector and some of its major players. 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.
2 The online gaming market is composed of a number of different types of games. each with its own business models and technology. © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved. the provider often takes a commission from wagers.2 billion in 2008. the market. H2 Gambling Capital. “ The market for global interactive gaming will grow about 42% to US$30 billion in 2012 from US$21. 1 2 eGaming Report. horse races. dog races. one of the most widely quoted sources of online gaming statistics. gamble on slots or play cards. changing the model of the gambling industry as many consumers turn to the Internet to bet on sports. • Online poker: Like land-based (or traditional) poker. • Online bingo: A web-based version of the ages-old game. H2 Gambling Capital. Despite potential political and legislative restrictions. One attraction of the online gaming market is its very high rate of growth. says the market for global interactive gaming will grow about 42 percent to US$30 billion in 2012 from US$21. and may be less risky than other casino games. July 2009 ” Ibid.2 billion in 2008. Member firms of the KPMG network of independent firms are affiliated with KPMG International. etc. . They include: • Sports betting: Betting on sporting events such as games. This is significantly faster than the 15 percent growth that H2 forecasts for the gambling industry as a whole over the same period.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. KPMG International provides no client services.1 may be ready to grow further as new geographic regions open up and many governments become more receptive to Internet-based gaming. • Casino games: Games of chance such as slot machines or roulette that operate the same as in a traditional casino. a Swiss entity. which already produces more than US$20 billion in worldwide revenue. • Online lottery: Online versions of frequently government-sponsored lotteries.
other geographic regions may hold more short-term. KPMG International provides no client services. October 2009 ” 4 5 6 7 © 2010 KPMG International Cooperative (“KPMG International”). an enormous market for online multiplayer games such as World of Warcraft. Korea. Many European countries. China is an exploding market for Internet games. Perhaps even more attractive are Asian countries where online gaming is still outlawed. market Online gaming growth continues worldwide as the potentially richest marketplace remains largely unrealized. 3 “Frank Introduces Internet Gambling Regulation and Enforcement Act of 2007” Press Release. Financial Times. .federalreserve. 2009 ” Retrieved from http://www. have been shifting their online gaming regulations to open up markets to non-native competitors.com/uigea-regulations-officially-delayed-six-\“. however it does limit land-based casino gambling activities to Macau.5 Taken together.S. and prohibits online gaming altogether. soccer and poker.gov/generalinfo/Foia/Reg%20GG-UIGEA-Comments.gamblingcompliance.pokernewsdaily. these activities suggest a public policy debate that could still evolve and in so doing regulate and tax online gaming. Treasury Department and Federal Reserve Board announced in November 2009 that they were delaying enforcement of the UIGEA for six months. promise for the online gaming industry. eGaming Review.S. Member firms of the KPMG network of independent firms are affiliated with KPMG International.pdf. from http://www. one of Europe’s largest gaming markets. legislators have been discussing a bill that would end the state monopoly on online gaming. April 26. Deregulation of other markets While the U. although few expect any bill to sail through the legislative process. In France.house. http://www. however gambling online remains illegal in Korea as well.com/2009/05/06/ gambling-barney-frank-markets-equities-online.gov/apps/list/press/financialsvcs_dem/press042607 . land-based casinos and global online gaming enterprises are actively preparing6 for and betting on that very outcome.forbes.com/node/36950.html “Online Gambling Moves Need Traditional Backing.S. the U.shtml..4 Separately.S. All rights reserved. November 8. But the issue of Internet gambling hasn’t ended there. 2009. U.7 has also been reforming its gambling laws. Bills to end the online gaming restrictions have since been introduced3. Retrieved from .months-6701/ “Harrah’s Hire Ex-Party Boss for Online Push” GamblingCompliance Ltd. 2007 Retrieved . . Many companies abandoned the American market in 2006 with the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) that year. may have online gamblers. but where traditional gambling is often thought to be part of the culture. may be an alluring gambling market. a Swiss entity. for instance. April 14.ONLINE GAMING: A GAMBLE OR A SURE BET? 3 Key Trends Potential of the U. http://www. Italy. “Market Data Focus: Italy. http://www. allowing privately owned websites to offer wagers on horse racing. and even long-term.
as larger players in the gaming sector have looked to fill out their capabilities or reach into new markets. in 2008 purchased Million-2-1. a Swiss entity. SMS games and cell phone java slots games in legal territories.”9 The online gambler is often a loner. Million-2-1 also has a consumer-facing Internet games portal called Kerching that offers online casino. . Then in August. a business law professor at the State College of New York (SUNY) in Buffalo and co-editor of the Gaming Law Review. Kelly Entrance of traditional “land-based” casinos Many major casino players—including Harrah’s. a developer of mobile/cell phone gaming technology. for example.asp?pid=58 11 “ bwin to Buy Italian Gamer for Up to 115 Mln Eur. November 2009 10 IGT website.8 Moreover. Rank.” says Joseph M. All rights reserved. 2009 ” 8 9 © 2010 KPMG International Cooperative (“KPMG International”).10 In September 2009. Poker News Daily. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Harrah’s Interactive Entertainment entered into a long-term deal with Dragonfish. For example. In early 2009. “He is not the kind of person who would go to Las Vegas and play blackjack or craps.com/content/base. to power the Harrah’s site. Gioco Digitale. Kelly. a new company that will handle its online operations. the business-to-business technology arm of gaming site 888 Holdings. Industry consolidation Online gaming growth rates have also helped to drive market consolidation. IGT. Reuters. KPMG International provides no client services.4 O NLINE GAMING: A GAMBLE OR A SURE BET? “ — Joseph M. poker. bwin purchased one of Italy’s largest online poker sites. 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. “Harrah’s Interactive Signs Development Deal with 888 Holdings. the leading maker of gaming machines. both among traditional gaming companies reaching into virtual markets and existing virtual leaders taking over smaller niche competitors. 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. much of this effort is likely to be for incremental revenue.11 We predict new rounds of merger and acquisition activity.igt. September 14. https://www. “The online gambler is often a loner. September 12. bingo. 2009 ” Interview with Forbes Insights. coming from people who don’t ordinarily go to casinos.
. allowing privately owned websites to offer wagers on horse racing.“ ONLINE GAMING: A GAMBLE OR A SURE BET? 5 In France. KPMG International provides no client services. All rights reserved. soccer and poker. legislators have been discussing a bill that would end the state monopoly on online gaming. a Swiss entity. © 2010 KPMG International Cooperative (“KPMG International”). Member firms of the KPMG network of independent firms are affiliated with KPMG International.
a trend towards regulatory relaxation and the current economic downturn driving demand for in-home entertainment. with growing broadband penetration. A solid infrastructure of broadband Internet connectivity. Bingo is a social game and people now feel very comfortable interacting on the Internet. senior vice president for Internet bingo software developer Parlay Entertainment. 12 13 14 “A New Dimension. Emerging markets While online gaming has taken off in Europe and holds potential for the U. and online gaming companies are closely watching this growth for even more social games such as bingo.K. Live streaming of sporting events via faster 3G connections has the potential to further enhance this market. mobile gaming is likely not too far behind.13 The Screen Digest study notes that the U.S. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Peter Trinz. easy access to mobile applications.”12 According to a study by media analyst Screen Digest. All rights reserved. market. mobile gaming will enable bettors (or punters) to place bets at an event or at a bar or pub while watching a game. online bingo has become the fastest growing sector of the online gaming market and offers huge potential for further growth. For example. and picture and video messaging. March 2009 Bingo in the Digital Age: Global Market Assessment and Forecasts. other global markets also hold tremendous promise. was quoted as saying: “The social networking phenomenon has run parallel to the development of the bingo product. Emerging regions such as India and Latin America are likely to be the next major markets to come into view for the industry. increased promotional activity. 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. Screen Digest. and safe and secure payments through a native banking system are three of the key factors that could support this growth. March 2009 © 2010 KPMG International Cooperative (“KPMG International”). . and its potential size may be huge. wireless Internet via 3G networks. eGaming Review Bingo Report ‘09 ” Bingo in the Digital Age: Global Market Assessment and Forecasts’. Asia and Latin America. While sports books have long taken advantage of sports-related subscription services to provide updates and scores. a Swiss entity. KPMG International provides no client services. Screen Digest. In a recent special report on Internet bingo in eGaming Review. is the largest.14 Growth of mobile gaming With consumers increasingly comfortable using their mobile phones for products and services such as mobile banking. should legal issues be resolved.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. most mature and most competitive online bingo market globally. the mobile gaming market may still be fairly untapped.
customers from using their cards to gamble online. Compliance with such regulations is also a relevant constituent of trust between the provider and their acquired and retained customer base.S.S. many online gaming companies that had been hoping for the best were quickly crippled or forced out of business. when the U. In addition.15 These restrictions were put in place in anticipation of UIGEA law going into effect in June. Feburary 5. passed the UIGEA in 2006. to honor. eGaming Review.S. and it may take many years for markets to actually open up to licensed competitors even after laws pass.S.” 15 “Visa declining U. keeping U. The constituents of trust are broad and range from the potential for fraud or players using software to beat the system. Payment crackdowns Also in the U. Both Visa and Mastercard have toughened their stance on allowing e-gaming transactions to be coded as other kinds of online commerce. These laws provide customers with rights. Legislation While much global legislative action focuses on liberalizing online gaming regulations. egaming payments too. market. while existing customers may be fickle and easily switch to a provider which they perceive as more trustworthy. and online gaming providers with obligations. 2010. Reputation and privacy concerns Prospective online gaming customers remain sensitive to any perception that a provider cannot in some way be trusted. 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. in many cases these efforts move slowly. 2010 ” . A movement in this area could suddenly decimate some players. For example. credit card companies have recently tightened restrictions on the use of credit cards for e-gaming transactions. 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. there is still potential for legislation that is intended to reduce or eliminate online gambling.
has one of the most established online gaming industries.48 billion. The online gaming sector has also seen a steadily increasing share of the total U. KPMG International provides no client services. Currently. Member firms of the KPMG network of independent firms are affiliated with KPMG International. February. many countries have focused gaming reform activity within their own borders. All rights reserved. 2009 ” GBGC Interactive Gambling Report. Little. online gamers must be assured that they have a fair chance to win. online and digital forms of these games require greater faith.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.19 16 17 18 19 “Online Gambling: All In?” Arthur D. The charge-off rate on bad debts by credit card firms jumped significantly in Q3 2009. poker. where players can physically see the way the games operate or cards are dealt. 2010 © 2010 KPMG International Cooperative (“KPMG International”). player protection and responsible operator conduct. GBGC Analysis report prepared for KPMG.8 O NLINE GAMING: A GAMBLE OR A SURE BET? User experience In addition to reputation and security concerns.K. If access to personal credit cards becomes more difficult in the U.1 percent in 2009. gambling market. The firms have been raising fees and interest rates in response to bad debts from customers in the recent recession. an independent standards authority for the online gaming industry. Geographic Sectors Europe According to a recent study by Arthur D. in 2010. with annual revenue forecast to reach 8 billion euro by 2012. September. including sports betting. have emerged. 2009. 2009 “Market Barriers: A European Online Gambling Study.17 which may have the consequence of creating a “balkanized” environment of multiple regulations. groups such e-Commerce Online Gambling Regulation and Assurance (eCOGRA). Gambling Compliance. Aware of these concerns. eCOGRA oversees fair gaming. growing from 3.K. The credit card is the oxygen of Internet gambling—if customers cannot transfer funds. One of the biggest challenges in Europe may be the allowance of cross-border online gaming. there could still be pain ahead for its online sector. the business model can fall down. many other countries are currently preparing for a control-led opening of their markets. the online gaming market is opening throughout Europe.7 percent in 2004 to an estimated 12. and Italy.16 Following the examples of the U. With an online gaming market estimated at GB£1.K.K. . Unlike “land-based” casinos. lottery and online casinos. and that operators are conducting themselves properly. a Swiss entity. Little. and under pressure from the European Commission. the U. acting essentially as a player advocate where online gaming is lawful. bingo.
2009 ” © 2010 KPMG International Cooperative (“KPMG International”). 2009 ” “New Paddy Power B2B Arm Signs Landmark Deal with France’s PMU. according to Goldman Sachs. its online gaming market is relatively small. for instance. PartyGaming is reported to be entering the market in 2010 through a business-to-business partnership. The gaming markets in France and Spain. June 10.. which prohibits U. allowing more providers to be licensed.22 and Paddy Power signed a five-year deal with French operator Pari Mutuel Urbain (PMU).000 online poker players. Should winnings actually flow through a U. In June.21 In France (which like Italy has an onshore requirement). 2009 “PartyGaming to Enter French Market with B2B Deal. PokerStars recently established an onshore presence in Italy. August 28. The accounts were managed by two service companies. Citibank and other U. online gaming is outlawed in the U. financial institution. and were held at Wells Fargo.25 “ billion. the U. a Swiss entity. compared to a rate of around 18 to 20 percent in the U. 888. bwin to Surve on Legal U. Gioco Digitale.24 The consequence of the gaming ban in the U.S. eGaming Review. Deals Blow to Online Poker Players. Still. market for online casinos and poker could be worth as much as US$12 billion. But should online gaming be legalized. one of the country’s two state-backed gaming and betting providers. Little. under the UIGEA.S. and 25 percent in countries such as Sweden. eGaming.7 billion in 2009. Member firms of the KPMG network of independent firms are affiliated with KPMG International.S.S.S. Legalization’s proponents say today’s similar dynamic— lots of enthusiastic bettors. November 12.S. October 2009 ” “Online Gambling: All In?” Arthur D. but it is also the market with some of the greatest challenges. The Wall Street Journal. 2009.S. Playtech. eGaming Review. no home-grown legal financial infrastructure—opens the way to money-laundering and brings disreputable money handlers into the mix. Currently. eGaming Review. and Account Services.S. meanwhile. eGaming Review. 2009 ” “U. 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 the country’s industry is expected to generate just under €18. demonstrates the draw that the regulated market has.23 North America The United States may have the most potential as a lucrative market for online gaming. banks. June 30. All rights reserved. has been to create a 21st Century equivalent of Prohibition. online gaming losses are expected to make up just 5 percent of total gaming losses in Italy this year.S.S.ONLINE GAMING: A GAMBLE OR A SURE BET? 9 Italy represents a huge gaming market. U. the consequences could be unpleasant for all concerned. banks and credit card companies from processing charges to and from online casinos. federal authorities froze bank accounts worth US$34 million representing 27. 2009 ” “Goldman Sachs: PartyGaming.20 Italy has been liberalizing its onshore Internet poker and gaming regulations. .K. and bwin Interactive Entertainment’s acquisition of a leading Italian poker site. The U. are expected to open up in 2010. although there is an onshore requirement. KPMG International provides no client services. Allied Systems Inc.
26 Neither bill progressed in 2009 or in early 2010.31 million annually in taxes. and Atlantic Lottery Corp. eGaming Review. except for sports betting. KPMG International provides no client services. February 23. has 66 co-sponsors as of March 2010 and would license and regulate all Internet gaming. These provincial agencies are expected to offer online gaming by the end of the year30. In early 2010. One bill.C. Florida Told. 2010 . Member firms of the KPMG network of independent firms are affiliated with KPMG International. A Senate bill from Senator Robert Menendez would license only non-banking interactive poker and other skill games. Senator Warns.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.ca. others have been presented with studies suggesting how online gaming could boost tax revenue. February 3. 2010 ” 31 “Ontario may follow other provinces and allow online gambling: McGuinty” The Canadian Press. Some individual states also have been considering legislation separately. 26 27 © 2010 KPMG International Cooperative (“KPMG International”). August 21. US$90 “Internet Gaming Comeback?” Global Gaming Business. eGaming Review. 2009 “California Legal Online Poker Bill to Be Delayed. 2009 ” 28 “Legal Online Poker Could Raise $90M a Year. . as well as legalize interactive horse racing. although the bill has since run into delays. All gaming in Canada must be ’conducted and managed’ by a provincial government or agency. has been looking to liberalize its own online gaming laws.—both of which already offer limited online gaming—to develop a common electronic platform across their jurisdictions. Loto-Quebec will work with B. a Swiss entity. October. California. 30 “Loto-Quebec to Get Into Online Gambling Business. 2009. for example. as well as to achieve the volume of players that will be required to make online poker viable. November 12. introduced by Financial Services Committee Chairman Barney Frank. p. 6. Loto-Quebec received cabinet approval to enter the online gaming business. with an online gaming market estimated at CDN$1 billion29. November 16 2009 ” 29 Canadian Gaming Business magazine.28 Canada. was considering a bill enabling intrastate online poker. Lottery Corp. All rights reserved. while other provinces such as Ontario. however. CTV.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. are expected to follow suit.
a Swiss entity. Today. Yet there has been some movement to lift this prohibition. Certain gaming machines. Unauthorized gaming sites are available—a popular one is Hangame—but winners have had to cash out by using illegal money dealers. 2009 ” 32 33 © 2010 KPMG International Cooperative (“KPMG International”).33 To combat this. KPMG International provides no client services. a Potential Gold Mine for Online Gambling. opening up this high GDP market of 128 million people. June 9. both remain closed to online gaming. February 13. has been cracking down significantly on online gaming. 2008 ” 35 White Paper on Leisure Industry 2009. Korea Times. .ONLINE GAMING: A GAMBLE OR A SURE BET? 11 Asia Pacific and India The two largest prospective markets in Asia—China and South Korea. as well as in Hong Kong and Macau. But casino gaming is limited to Macau—which has now overtaken Las Vegas as the biggest gaming city in the world today. In China. Global Gaming Business. 2008 ” 34 “Habitual Online Item Buyers Face Sanctions.32 However while Macau’s laws cover land-based casinos. 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. eCommerce Journal. with the exception of lotteries and bets on racing.34 Japan currently bans most forms of gambling. such as Sega Sammy’s pachinko and pachislot. Member firms of the KPMG network of independent firms are affiliated with KPMG International. All rights reserved. they do not currently grant concessions for online gaming.36 “ Asia The two largest prospective markets in —China and South Korea. which is still illegal in the country. June 25. proposed a bill that charges people trading “excessive” amounts of cyber money with gambling. the country’s Ministry of Culture. are very popular in Japan’s leisure industry. Sports and Tourism. the history of gambling can be traced back several thousand years. legal lotteries are available in most Chinese cities. South Korea. meanwhile. Japan Productivity Center 36 “Japan. according to a report in Korea Times.35 although landbased casinos and online gaming are not permitted. Korea Times. “Unlocking the World of Chinese Gambling. September 2009 ” “Online Gambling Sites Mushrooming. both remain closed to online gaming.
In late 2009.38 Australians spent an estimated AU$790 million on offshore gambling sites in 2008. October 26. 2009 ” © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved.39 “ billion. it is estimated that country’s betting market is worth about US$60 37 38 39 “Betfair and William Hill Target India. “Lifting of Oz eGaming Ban Set to Spur Further Growth.1 2 ONLINE GAMING: A GAMBLE OR A SURE BET? In late 2009. The Independent. The Productivity Commission endorsed the idea of allowing operators to offer online poker and casino products to Australian residents. . as well as local Indian operators.37 Online gaming may soon take place in Australia as well. foreign operators were submitting bids for the first online gaming licenses in India. eGaming Review. October 26. a Swiss entity. subject to a strict regime of consumer protection. the government’s independent advisory body on gaming policy recommended lifting the 2001 Interactive Gambling Act. it is estimated that country’s betting market is worth about US$60 billion. Betfair and bwin. Bidders were said to include William Hill. which currently bans online gaming. Reports said the goal was to have the betting services running in time for the football (soccer) World Cup in April 2010. 2009 ” “Lifting of Oz eGaming Ban Set to Spur Further Growth. October 27 2009 ” . with at least three licenses to be granted in the Himalayan state of Sikkim. foreign operators were submitting bids for the first online gaming licenses in India. KPMG International provides no client services. Member firms of the KPMG network of independent firms are affiliated with KPMG International. eGaming Review. In October 2009.
and has a shirt-sponsorship deal with Buenos Aires-based football team Boca Juniors.yogonet. most of them to Apuestas Internacionales. a subsidiary of the TV giant Televisa. KPMG International provides no client services. “Brazil’s Gambling Potential.40 Brazil has the potential on the surface to become a huge online gaming market. for example.mx) of the online casinos. eGaming Review. Argentina. www. Online gaming is expected to become one of the most lucrative niches of the business.yogonet.43 Until now the gaming business has been dominated by the government-run National Lottery. is the most highly populated country in Latin America. especially on football (soccer). All rights reserved. a Swiss entity. October 2008 ” “Sleeping Giant. Companies are currently trying to push the envelope in terms of gaining a national presence through advertising and sponsorships. Through Mexican sites (ending in . may be the sleeping giant for online gaming of Latin America. Member firms of the KPMG network of independent firms are affiliated with KPMG International. . all controlled by the federal government.com.ONLINE GAMING: A GAMBLE OR A SURE BET? 13 Latin America Brazil. meanwhile. and 2004 legislation allowed online gaming. Bingo games are also popular. with about 200 permits awarded in 2006. February 4. 2008 ” 42 “Online Gambling in Mexico: A Safe Bet. Mexico’s 1947 Federal Gaming and Raffles Law regulated gambling. gambling and betting licenses are provincial. bwin recently started advertising with a large national publisher. it is possible to access international sites of companies such as bwin. September 2007 ” 43 “Online Gambling in Mexico: A Safe Bet. Brazil currently operates different types of lotteries. and may have one of the strongest foundations for online gaming: a solid base of regular Internet users and a cultural history of gambling. however it is currently prohibited and no online betting legislation exists. Intercontinental Global and others. not national. operates through a license from the Provincia de Misiones.41 Another potentially lucrative market is Mexico. while 888 has a partnership with Tower Torneos. bwin. eGaming Review.42 It is estimated that the Mexican gaming market may be worth some US$4. as is sports betting. www. with 192 million people.com. September 2007 ” 40 41 © 2010 KPMG International Cooperative (“KPMG International”). In Argentina.6 billion.
32Red. GoldenPalace. unless otherwise noted Gala Coral Lenders Said to Eye Cash Infusion. Gibraltar.058 million (2008) US$935M (2009) International Reno. USA Game Technology (IGT) Ladbrokes Middlesex. • Operates in multiple formats. and marketing of electronic gaming equipment and network systems • Operates two online gaming subsidiaries: WagerWorks. as well as Internet casino and poker • Holds sports betting and casino licenses in Austria.172 million (2008) Microgaming Paddy Power Isle of Man Dublin. . U. now a subsidiary of Italy’s Lottomatica • GTECH G2. and Italy). • Licenses gaming software. primarily in continental Europe • Also offers platform of casual (non-gambling) games in Asian markets. • Online gaming company best known for its PartyPoker online poker room • Has made a number of recent acquisitions. 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. 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. February 16. • Operates 2. and Chelsea F. its online gaming arm.. U. RI. NV. support services and payment processing • Revised strategy in 2009 to focus on Internet casino. Finsoft and Dynamite Idea—focused on providing software and services in the Internet and sports betting market. All rights reserved. Member firms of the KPMG network of independent firms are affiliated with KPMG International.K. • 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.C. KPMG International provides no client services. provides technology. Ireland. Fortune Lounge Group. now expanding in the U. bingo and backgammon • Sites use the OpenBet system from Orbis Technology. • Ireland’s largest bookmaker. is comprised of four subsidiaries—Boss Media. Hong Kong.C.K. BSkyB. and Europe • Non-retail (online) activities now generate 70 percent of its operating profit • Acquired a controlling stake in Sportbet. Betfair. and Macau. USA €2. • Provider of gaming software and services to the online gaming industry. • Largest betting company in the U.K. Dragonfish.K.700 retail betting shops in the U. £1. and online gaming. 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.K. manufacture. Miniver. and others. • Recently agreed to a £175m capital as part of a debt restructuring45. including casinos. including Liverpool F. casino games. poker. • Leading operator of lottery systems. an Australian sports betting company. a Swiss entity. retail betting shops (in the U. including China. • Internet betting exchange that also operates a poker product and game arcade • Claimed its 2 millionth customer in April. • 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. GigaMedia and PartyGaming.5 million (2008) Gala-Coral Essex.K.6M (2008) GTECH (Lottomatica) Providence.1 million active customers in 2008. Taiwan. • Largest online gaming company focused primarily on sports betting. Privately held GigaMedia Taipei.com and Bet365. a casino software solution. • Online gaming site that also operates Casino-on-Net and Pacific Poker • Its B2B division.K. U. 888 Holdings Gibraltar US$256 million (2008) Betfair bwin London. Ireland US$61. bingo halls.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. 2009. Taiwan US$183. Vienna. New York Times. St. • Global gaming company specializing in the design. Austria €303 million (2009) €403 million (2008) Cryptologic Dublin. which does mobile/cell phone gaming. • Software developer for online gaming industry • Online casino operators using its software include Ladbrokes. 2010 © 2010 KPMG International Cooperative (“KPMG International”). Spain and Belgium • Operates online casino sites offering sportbooks. and Million-2-1. Italy and Argentina and an e-money license for the UK • Claimed 2. games development and licensing to top gaming/ entertainment brands • Companies using Cryptologic solutions include 888.
Japan ¥429.000 players are said be playing real money “ring games” daily. Greece. KPMG International provides no client services. Rank Group SBOBet Maidenhead.K. • Major chain of betting shops that operates primarily in the U. Germany. and Australia • Operates Paradise Poker brand online poker site • 64 percent of revenues come from sports. with complementary online gaming services • Has direct operations in U.2 million (2009) Privately held Sega Sammy Tokyo. including network-enabled trading card games • Amusement centre operations and arcade machines • Home video game software business. • Manufacturer of pachinko and pachislot machines • Amusement machines.K. in the Philippines) and Europe (licensed by the Isla of Man) • Uses video streaming technology to offer “live dealer” games online. Turkey.K. Philippines Isle of Man £522. U. including the World Championship of Online Poker • Some 20. 24 percent from casino and games..K. • Online sportsbook and casino operator • Has operations in Asia (licensed by First Cagayan Leisure & Resort Corp.. • Operates bingo services and casinos in the U. Spain and Belgium. . and Ireland • Online efforts—William Hill Online—are through venture with software developer Playtech.K. © 2010 KPMG International Cooperative (“KPMG International”).195 million (2009) Sportingbet London. • Betting site that operates in the U.K. including content for mobile phones. and 12 percent from poker. PCs and toys. Spain. Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity.K. U. £163 million (2009) £963 million (2008) William Hill London.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. All rights reserved. U.
a Swiss entity.S.uk Neil Duggan KPMG in Gibraltar +350 200 48600 email@example.com Russell Kelly KPMG in Isle of Man +44 1624 681013 russellkelly@kpmg. 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.fung@kpmg. 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. and meeting the myriad of challenges of the digital economy. Contacts Global Contacts Gary Matuszak Partner. Europe. Global Chair Information.1 6 ONLINE GAMING: A GAMBLE OR A SURE BET? Conclusion As the popularity of both gambling and online entertainment continues to grow. KPMG International provides no client services.S. Companies and investors in this industry face many financial. In addition to helping our firms’ clients with these concerns. Coupled with the enormous potential of the industry—in the event that major markets such as the U. Africa and Asia-Pacific. Communications & Entertainment (ICE) professionals work with our firms’ clients in the online gaming and related sectors throughout the Americas. Even despite the unpredictable political and legislative hurdles and roadblocks in many countries. protecting intellectual property. KPMG’s global network of Information. +1 650 404 4858 firstname.lastname@example.org. casinos and other land-based gambling operators. Member firms of the KPMG network of independent firms are affiliated with KPMG International. and industry newcomers and investors alike. KPMG An experienced team. Communications. improving controls. +44 20 7311 3055 mark.com. and Entertainment KPMG in the U. the online gaming market is without a doubt an attractive area of expansion for software developers. information and security risks and issues.ca Asia Pacific region Kieran Lane KPMG in Australia +61 (2) 9335 7514 email@example.com Silvia Montefiore KPMG in Canada +1 416 228 7211 firstname.lastname@example.org European region Mark Summerfield KPMG in the U. related suppliers.com. KPMG professionals can also advise on reducing costs.S. +1 650 404 5240 email@example.com Edwin Fung KPMG in China +86 10 8508 7032 edwin. and Entertainment KPMG in the U. +1 650 404 4425 mmigliazzo@kpmg.S.im Americas region Wade Loo KPMG in the U.co.com Maureen Migliazzo Global Executive Information. Communications.K. a global network.summerfield@kpmg. Middle East. .cn © 2010 KPMG International Cooperative (“KPMG International”). All rights reserved.
K.S. Mark has worked with gaming companies for 14 years. . stock exchange. U. Wade Loo is a technology audit partner based in the U.About the Authors Mark Summerfield is Global Head of KPMG’s Gaming practice based in London. Contributors We would like to acknowledge the contribution of Archie Watt. More recently his team has delivered assurance.gbgc. Member firms of the KPMG network of independent firms are affiliated with KPMG International.com/forbesinsights) and Global Betting & Gaming Consultants (www. All rights reserved. China and Singapore for eight years. firm’s Silicon Valley office. Forbes Insights (www.K. a Swiss entity.forbes. © 2010 KPMG International Cooperative (“KPMG International”). Elaine Pratt. 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. KPMG International provides no client services.com) who assisted in the development of this report. acquisition and advisory services to online gaming companies ranging in size from private enterprises to companies listed on the U.
© 2010 KPMG International Cooperative (“KPMG International”). All rights reserved.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. a Swiss entity. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties.kpmg. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Publication name: Online Gaming Publication number: 1001505 Publication date: March 2010 Printed on recycled material . 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. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. nor does KPMG International have any such authority to obligate or bind any member firm. KPMG International provides no client services. a Swiss entity. Designed by Evalueserve. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”). Although we endeavor to provide accurate and timely information.