The global casino and online gaming industries have weathered the financial storms but some areas have seen more dramatic declines in revenue than others. In South Africa, gross gaming revenue in the year to March 2010 increased by a mere 1,5%, reflecting the recession which began back in 2009.
Across the country KZN performed the best at 4,5%, followed by Gauteng at 2,3%. The Western Cape experienced a 4,5% decline over the same period on the back of a 2% decline in the previous reporting period. Gauteng continues to account for 43% of the national gaming market.
These are some of the highlights from PwC’s newly launched report, Playing to Win, which looks at the trends in both the casino and online gaming industries.
“Our analysis of the industry is supported by forecasts for global spending through to 2014 (by which we mean gross gaming revenue, i.e.: the amount wagered minus the amount returned to players as winnings),” says Nikki Forster PwC’s hospitality & haming leader.
It is clear that the shift of power within the global sector is moving from the west to the east.
By 2014, the global gaming industry will still be dominated by large and prestigious gaming developments. However, there will be dramatic shifts as online gaming revenues take-off in many markets and the spending power moves from West to East, specifically to Asia Pacific. The US is expected to be the biggest regional gaming market by 2014 accounting for 44%of all global revenues compared to 40% in Asia Pacific.
Casino gaming has not been immune to the recent recession. The industry experienced a 2,8% decline in total global spending in 2009, masking a slump of 12,2% in Europe, the Middle East & Africa (EMEA) and a 3,4% drop in spending in the US.
Results from the provincial gambling boards for the remainder of 2010 show a similar picture. In Gauteng, slots revenue rose by a mere 2,9% in the first nine months of 2010 compared to the same period in 2009, with a limited impact (5% increase) from the Soccer World Cup (SWC). Similarly the tables market in Gauteng grew by 3,4%. The impact of SWC was much greater with year-on-year increases in excess of 40% during this period and, even 135% around the time of the final, due in part to direct marketing and soccer/casino packages on offer.
If the SWC is factored out, tables revenue actually declined by 5,8% during 2010, largely attributed to the loss of the big gamblers.
The picture was similar in other provinces, with the Western Cape growing its slots by 1,8% in the period to October 2010 or 1% if adjusted for the SWC. Table revenues also suffered, declining 0,3% or 3,5% excluding SWC. KZN performed marginally better with year-on-year increases of 5,7% for slots but with a decline of 1,5% in tables revenue.
In contrast, Asia Pacific, which overtook Europe, Middle East and Africa (EMEA) in 2008, as the world’s second largest region for casino gaming, has hardly paused for breath, showing only a modest slowdown in growth to 7,4% in 2009, before rebounding back to growth of nearly 50% in 2010. The smaller Latin American market also experienced growth and was less impacted by the recession.
“Global spending is growing steadily at 9,3% compounded annually through 2014. Asia Pacific will grow at a compound annual growth rate (CAGR) of 23,6%, outpacing the US, EMEA and Canada. By 2014 we expect the Asia Pacific market to be equivalent to 92% of US spending with spending in Latin America to also achieving double-digit CAGR over the next five years at 12,8% compounded annually,” adds Vorster.
South Africa’s gaming revenues are expected to grow at 6,9%, reflecting a recovery from recession. With only one further casino expected to come online during this period, growth will come from attracting gamblers back into the casinos.
The regulatory complexities are greater around the online space than in the casino sector and will continue to shape the industry going forward. At the moment, even within a particular jurisdiction, the legal and regulatory position is unclear and open to different interpretations, which creates uncertainty and confusion for consumers and market participants alike.
Current regulations differ between the various forms of online and mobile gaming which fall into six broad disciplines: poker; casino gaming; betting on horse races; betting on other sports, such as soccer and baseball; online bingo and online lotteries. In some case offerings are now growing so quickly that they are outpacing the development of new legislation and regulatory frameworks.
In South Africa, online gambling is currently illegal, following a ruling in the North Gauteng High Court in August 2010, a judgement that has caused much controversy. The judgement seeks to extend the ruling to include internet service providers and financial institutions providing funding to punters and those persons facilitating the advertisement of online gaming. One operator, based outside South Africa has successfully sought leave to appeal the judgement and continues to operate until such time as the appeal is heard. The gambling board has threatened to seize all revenues made in this interim period.
The ruling does not impact the sports betting industry in South Africa. Local bookmakers with local licences will still be able to operate. This industry already has strict regulations in place from their local gambling boards, including what software must be used. Sports betting, accounts for approximately 10% of all forms of gambling in South Africa.
“We believe that there will have to be an easing of the current restrictions. Consumers will engage in online gaming whether it’s legal or illegal and by legalising the industry, governments would recoup valuable tax revenues which are much needed following the impact of the financial crises on public sector finances,” says Forster.