Global Gaming Cover
The release of PwC's new annual report "Global Gaming Outlook: The casino and online gaming market to 2015" explores the changes and challenges in mature markets, the upcoming opportunities in new and developing jurisdictions, as well as the legislation, regulation, and potential impacts brewing in the online gaming arena.
Casino gaming through to 2015
According to our projections the global casino gaming revenue across the United States, EMEA (Europe, Middle East and Africa), Asia Pacific, Latin America and Canada will grow at 9.2 per cent compound annual rate during the next five years, rising from US$117.6 billion in 2010 to US$182.8 billion in 2015.
Spending in the US will rise by 5.0 per cent from US$57.5 billion in 2010 to US$73.3 billion in 2015. However, we'll see dramatic growth in Asia Pacific with a projected 18.3 per cent increase compounded annually to US$79.3 billion in 2015, overtaking the US in 2013 to become the largest region for casino gaming in the world.
Revenues in EMEA will reach US$18.3 billion in 2015 up from US$16.3 billion in 2010, an average annual increase of 2.4 per cent compounded annually. The weak economic conditions and the impact of adverse regulatory developments in some countries will curtail growth. The much smaller Latin American market will see growth of 8.1 per cent compounded annually from US$3.8 billion in 2010 rising to US$5.6 billion in 2015. Canada will grow from US$5.7 billion in 2010 to US$6.2 billion in 2015, a 1.8 per cent compound annual rate.
Marcel Fenez, Global Entertainment & Media Leader, PwC, said:
"We talk about the global economy, but this has never been more evident than in casino gaming. The turbulent global financial markets have curtailed consumer spending in some of the major markets for casino gaming. But we've seen huge growth in Asia as the affluent middle classes seek new forms of entertainment, and gaming's intense balance of risk and reward has a special appeal for many people. "
Asia Pacific – the growth engine
As we forecast, Asia Pacific will see aggressive growth during our forecast period with Macau being the jewel in the gaming crown. This growth will be driven by three main factors: continuing economic growth which will increase disposable income and the emergence of a prosperous middle-class; a deep attachment to casino gaming and other forms of gambling in many of the societies in the region; and the growing opportunities for consumers to take part in casino gaming as new centres are established and new facilities open up in existing markets.
Singapore's dramatic emergence as a casino gaming centre is a prime example of new territories entering the market. Revenues have surged from zero in 2009, to US$4.4 billion in 2011 and a predicted US$7.2 billion by 2015. The improvement in transport links to key casino gaming markets and the easing of regulations is also contributing to the increase in revenues. The Philippines already has a stable casino gaming market and new casinos in that country will propel growth. If regulatory approval is given in Japan, it's likely that integrated casino resorts will be built in three locations.
As the Asia Pacific region continues to flourish and offer a more local gaming experience for Asian gamers, some high roller customers that would otherwise travel to the US will be diverted by these overseas attractions. The impact will be on US gaming centres, like Nevada, which have a higher reliance on foreign tourists to drive revenues.
Online gaming is happening across the world, made up of fragmented pockets of legal and illegal spending, where the size of the market is difficult to measure accurately. The regulatory complexities, which are often unclear and open to different interpretations, still vary widely between countries and even between various forms of online and mobile gaming.
Most of the legal online gaming in the world occurs in EMEA, which includes the world's largest legal online gaming market, the UK, which legalized it in 2005. A growing number of countries within the European Union (EU) are setting up regulatory regimes for online gaming, particularly poker and betting on horse racing and/or other sports. But they are finding that this is more complex and taking longer than they expected as any national regimes in the EU need to be consistent with EU law. The UK too is looking at changing regulation to capture tax revenues which are currently being lost to offshore jurisdictions such as Gibraltar and Malta.
The future of online
We believe that there are four key change drivers which will shape the industry over the coming years:
• Harnessing cross-border liquidity: national or state-based regulation of online gaming will continue to evolve. In every operating jurisdiction, there remains the question as to the number of available players and whether this number is sufficient to sustain a viable and growing market. The best long-term solution to support growth in revenues and tax receipts is to allow cross-border gaming so that liquidity flows between different territories with the right regulatory framework in place to allow this.
• Setting realistic taxation levels: though the thought of additional online gaming tax revenues is attractive, the setting of levels of taxation by Governments for both operators and customers, needs balancing. If the right level of taxation is not established, growth could be stunted in some of the higher-tax territories and the risk of losing out on revenues is greater.
• Varying approaches to different online gaming disciplines: the different approaches being adopted for the different forms of gaming will shape both the regulation and growth of various forms of online gaming in different markets. We believe when legalized in the US, online poker players will be allowed to operate on an inter-state basis, and that this will happen in the next few years. Online betting on horse racing will also grow and US lotteries will continue to spread across state borders. This regulatory change will represent a watershed for legalized cross-border online gaming in the US, marking the start of a new era. One segment where different territories are likely to diverge most strongly is sports betting. There's already a strong market in Europe but concerns in the US mean that little headway is likely to be made in the online environment.
• Combining online gaming and social networking: social networking will be a key driver of activity and growth in the online gaming world, as it represents a natural extension to users of digital and mobile technology. Social networking's role in driving online gaming is especially significant because of its high levels and ease of remote access.
2015 and beyond
By 2015 the financial balance of power in the global casino gaming industry will have undergone a fundamental shift to the east with Asia Pacific having overtaken the US in 2013 as the biggest regional market in terms of revenues. This change will be accompanied by a dramatic evolution in several aspects of the industry as online gaming becomes an increasingly regulated mainstream activity with revenues and usage taking off in many markets.
With online gaming being complementary to bricks and mortar revenues, there will be more than enough room in the market for both online and physical gaming services, provided each offers a compelling experience for the consumer. The building of casinos in new and emerging jurisdictions, however, will challenge established casinos in mature markets such as Atlantic City, as customers seek gaming opportunities closer to home.
Mary Lynn Palenik, Director, Gaming Research & Analysis, PwC added:
"Whether you look at the physical casino market or online gaming opportunities, the overriding challenge is the same. In this ever increasing digital world where consumers can access vast quantities of information and experiences from wherever they are (without the need to travel to another location), the gaming industry will face tough competition for their fair share of consumer discretionary spending."