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CURRENT TRENDS IN GAMBLING INDUSTRIES WORLDWIDE

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Title: CURRENT TRENDS IN GAMBLING INDUSTRIES WORLDWIDE


1
CURRENT TRENDS IN GAMBLING INDUSTRIES WORLDWIDE
  • William R. Eadington
  • University of Nevada, Reno
  • September 15, 2005
  • www.unr.edu/gaming

2
LOTTERIES VS. CASINOS
  • Parallel Universes
  • Minneapolis vs. Las Vegas
  • Objectives Revenue for the State v. Profit
    Maximization
  • Mass Distribution Networks vs. Site Specific
    Venues
  • Dream Buying vs. Adrenaline Rush
  • Interface areas Keno, VLTs, Megabucks
  • Semantic difficulties Gross sales vs. Gross
    Gaming Revenues Retention rates vs. House
    Advantage Online Gaming

3
COMMERCIAL GAMING IN AMERICA, 2004
  • Casinos (Non-Indian) 30.6 billion
  • Casinos (Indian) 19.4 billion
  • Lottery 21.4 billion
  • Pari-mutuels 3.7 billion
  • Card rooms, charity, bingo, other 3.6 billion
  • Internet gaming (global) 4.2 billion
  • TOTAL IN 2004 78.6 billion
  • TOTAL IN 1982 10.2 billion
  • (0.8 of aggregate personal income)
  • not counting internet gaming

4
(Billions)
Bingos, card rooms, charities
Pari-mutuels
Casinos
Lottery VLTs
Tribal Casinos
5
ECONOMIC AND SOCIAL BENEFIT/COST RANKINGS OF
TYPES OF GAMING
  • Some Gaming Sectors or Forms are more benevolent
    than others. Possible ranking
  • Traditional Lotteries, bingos (Soft gaming)
  • Destination resort casinos
  • Urban or suburban casinos
  • Convenience gambling Gaming devices in bars and
    taverns, VLTs, slots arcades
  • Ultra-convenient gambling inter-active
    television or internet gaming, mobile phone
    wagering

6
THE GAMBLING WORLD WITH AN EMPHASIS ON CASINOS
AND CASINO-STYLE GAMING
7
ECONOMICS OF CASINOS AND CASINO-STYLE GAMING
  • Latent demand that is realized with casino
    legalization
  • Very strong economies of scale
  • Importance of convenience, location
  • Social backlash is hard to avoid unless gaming is
    a strong export
  • Reluctance to let market forces determine the
    size of the industry
  • Much competition for economic rents gt Political
    until it reaches maturity

8
TOP CASINO MARKETS IN UNITED STATES
9
IMPORTANT TRENDS AND RECENT EVENTS WITH CASINOS
IN THE UNITED STATES
  • Private sector is the major benefactor
  • Governments are often important revenue sharers
  • Most gaming markets are mature (stable)
  • Exceptions Las Vegas, Racinos, parts of
    California Indian gaming
  • Some new legalization, expansion
  • Pennsylvania (2004), Florida (2005), Maine
    (2005) attempts in Maryland, Texas,
    Massachusetts
  • Limited presence of convenience gaming
  • Nevada, Montana, South Carolina (extinct), South
    Dakota, Oregon, West Virginia
  • Less political backlash compared to Canada, other
    countries (so far)

10
LAS VEGAS
11
LAS VEGAS MAJOR DEVELOPMENTS
  • Strong current economic performance, increasing
    diversity of the entertainment product
  • Mergers of major gaming companies MGM Mirage
    Mandalay Bay and Harrahs Caesars
  • Opening of Wynn Las Vegas (April, 2005) at a
    CapEx of 2.7 billion
  • Development projects Venetians Palazzo, Wynn
    Encore MGM Mirages CityCenter, other high rise
    residential
  • The Strip will increasingly become a place to
    live rather than just to visit gtManhattan
    West

12
(No Transcript)
13
CASINO MARKETS ELSEWHERE IN THE UNITED STATES
  • Most markets have achieved maturity
  • Limited growth in gaming revenues
  • Limited new capital investments
  • Consolidation and diversification are important
    trends
  • Increase loyalty, enhance revenues, control costs
  • Hotels, Convention sales, Restaurants,
    Entertainment, Leasing retail space are all
    becoming profit centers with casinos

14
AFTERMATH OF HURRICANE KATRINA ON GULFPORT AND
BILOXI, MISSISSIPPI, AND NEW ORLEANS
15
KIDS QUEST FACILITY, GRAND CASINO GULFPORT
16
CANADA CURRENT STATUS AND ISSUES
  • Government ownership gt Captures substantial
    Economic Rents for Provinces
  • Much greater presence of convenience gaming than
    in USA gt VLTs (all provinces but Ontario)
  • Much more controversy over problem gambling
  • Government ownership is a vulnerability
  • Conflicts of objectives
  • Regulator and owner or owner/operator
  • Revenues or Mitigation, i.e. Ontario
  • Trends toward diversification Plans to rebuild
    Casino de Montreal with Cirque de Soliel

17
FALLSVIEW CASINO, NIAGARA FALLS, ONTARIO
18
THE GLOBAL VIEW ADDRESSING LEGAL CHALLENGES TO
PROTECTED MONOPOLIES OR TO INCONSISTENT LAWS
  • Two major parallel developments
  • European Union The Gambelli Case and similar
    legal challenges
  • The World Trade Organization The Antigua Case in
    challenging the United States prohibitions
    against commercial internet gambling

19
GAMBELLI COMMON PRINCIPLES
  • Harmonization implies free and fair competition
    unless there is a compelling reason for a member
    state to protect its citizens from social harm
  • Proportionality implies that the extent of
    protections offered need to be related to the
    economic power of monopolies claimed via
    Subsidiarity
  • The challenge is in finding appropriate social
    protections to allow the continuation of monopoly
    power and capture of economic rents

20
ANTIGUA V. THE UNITED STATES COMMON PRINCIPLES
  • Under the General Agreement on Trade and
    Services, the United States agrees to follow the
    principles of Market Access and National
    Treatment
  • Exceptions come in the form of protection of
    Public Morals
  • April 2005 finding of WTO court suggested
    inconsistency in the Interstate Horse Racing Act
    (2000)
  • Can technical corrections keep the United States
    from having to remove its prohibitions?

21
OTHER IMPORTANT FACTORS
  • Growing popularity of internet gambling among
    customers in the United States
  • Unwillingness of policy-makers to impose
    penalties on consumers
  • Grey area gambling products (Fantasy Football)
  • Difficulty of enforcement
  • Interest in the United States in using the
    Internet as a delivery system for such products
    as lottery
  • Success of recent launches of British internet
    gaming companies
  • Party Gaming at 4.7 billion next is BetFair

22
THE UNITED KINGDOM
23
THE UNITED KINGDOM THE BEST LAID PLANS…
  • Recognized need to modify Gaming Act 1968 (1999)
  • Obsolete and eccentric law impacts of new
    technology
  • Budd Commission and the Government Response (2001
    and 2002)
  • Principles of competition, anti-protection, and
    treating problem gambling as an externality
  • Scrutiny Committee and attempts to reshape
    outcome (2003 and 2004)
  • Many Small versus Few Big Limit the ratios
    of slots to tables
  • Political backlash
  • Outcome Only one super-casinos (1,250 slot
    machines) and 16 other large and small casinos

24
LESSONS TO BE LEARNED
  • Even with careful study and analysis, it is
    sometimes very hard to control the process and
    the ultimate outcome
  • It is hard to persuade the general public that
    casinos should be offered in a free market
    environment
  • At least with regard to gaming, the British are
    evolutionary, not revolutionary

25
OBSERVATIONS ON CASINOS IN EUROPE
  • Aversion to the American style of casino gaming
  • Existing casinos smaller, protected, less
    diversified
  • British aversion to Super Casinos
  • Gaming industries often protected monopolies
  • Justified by good causes, social controls
  • Significant proliferation of convenience gaming
  • Likely to become increasingly problematic
  • Possibility of Changes in the competitive
    environment
  • European Union gt Harmonization
  • Small country developments gt Domino effects
  • Changing patterns of mobility in Europe the
    cheap airline phenomenon

26
AUSTRALIA/NEW ZEALAND MATURE MARKETS BACKLASH
  • Consolidation and diversification
  • Preserving profitability, capturing value
  • Strong sense that gambling has been allowed to
    become too prevalent
  • 3.5 of API spent on gambling
  • Harm Minimisation strategies being debated and
    adopted, regardless of evidence of effectiveness
  • Politicians must act to improve public concerns

27
ASIA THE EMERGING GROWTH MARKET
  • End of Prohibition and the Pursuit of Opportunity
  • High level of enthusiasm from Asian customers
  • Macao Moving from an Outlaw industry to Las
    Vegas of Asia
  • Singapore Enhancing the attractiveness of a
    prosperous but boring city, and controlling the
    social impacts
  • Korea Opening the doors to casino gaming by
    citizens
  • Japan, Thailand, Taiwan, India, China Watching
    others and trying to decide what to do

28
MACAO THE NEW GOLD RUSH
29
MACAO THE LARGEST GAMING VENUE IN THE WORLD
  • New Law passed in 2002
  • 2004 Gross Gaming Revenues at over 5 billion
    2005 GGRs over 6 billion
  • GGRs are 98 table games 90 baccarat, 70
    private room VIP play (problematic for
    regulators)
  • Growth rate of 20
  • By 2006-2007, major new casinos by Wynn Resorts,
    The Venetian, MGM, Melcor, Galaxy, others

30
THE SANDS
31
INTERIOR OF THE SANDS
32
SINGAPORE
33
SINGAPORE THE BEST CURRENT OPPORTUNITY IN THE
WORLD
  • Modern city-state of 4 million, high per capita
    income, honest government
  • Government concerned about mitigating unintended
    adverse consequences Entrance fees of
    S100/S2,000 for Singaporeans limited local
    marketing limited local credit
  • Two casinos to be given exclusive franchises in
    Singapore Primary interest in Integrated Resort
  • Non-gaming amenities important
  • Low to moderate tax rate (15 range 5 for VIPs)
  • Originally 19 bidders now short-listed to 12
  • Give out Marina Bay license, then Sentosa Island
  • Short list 4 or 5 companies require them to
    submit bid on land lease choose the highest

34
ADDRESSING BACKLASH FROM CONCERNS OVER PROBLEM
GAMBLING
  • Important concern in many jurisdictions, with
    parallels drawn between gambling and alcohol
    abuse, drug abuse, and tobacco
  • Greater pressure when heavy locals gambling,
    government ownership, ugly gambling
  • Risk of politically driven constraints that may
    not address the issues Symbolic regulation

35
CURRENT UNDERSTANDING OF PROBLEM PATHOLOGICAL
GAMBLING
  • Prevalence studies suggest 1 probable
    pathological and 5 probable problem
  • Within a casino or gaming venue, the proportion
    of customers who are PP is likely quite a bit
    higher than these averages
  • Depends on locals v. tourists as customer base
  • Proportion of revenues from PP gamblers is
    estimated as high as 30 (Australia, Canada)
  • Unsure what causes of PP gambling are
  • Used to be seen as a sin, then as a vice.
  • Now it is increasingly viewed as a disease
  • Illusion of control, personality disorder,
    impulse control, physiological, degenerative
    disease

36
STRATEGIES TO ADDRESS PROBLEM GAMBLING
  • Ignore the problem and try to manage the
    political consequences
  • Treat this as a public relations exercise
  • Harm Minimization Place constraints on gaming
    operators or facilities that purportedly will
    mitigate PP gambling
  • Reverse technologies, inconvenience all customers
  • Identify and Isolate Use various schemes to
    limit or deny access to gaming venues to those
    who are self-abusive
  • Consistent with self-exclusion and with
    involuntary exclusion
  • Work toward a concept of gambling licenses as a
    revocable privilege for customers

37
OTHER AREAS OF IMPORTANCE PROBLEM GAMBLING
  • In many jurisdictions, this has become the most
    important policy challenge
  • Problem seems to become more severe with gaming
    devices permitted outside of casinos
  • Severe backlash in Australia, New Zealand,
    Canada, North Carolina
  • Strategies for containment Education,
    treatment, research
  • Casino strategies Signage, support helping
    groups, self-banning, involuntary exclusions

38
UNDERLYING PRINCIPLES FOR GOOD STRATEGIES TO DEAL
WITH PROBLEM GAMBLING
  • Evidence-based approaches
  • Need for resource allocation for research,
    education, and treatment programs
  • Support is increasingly coming from economic
    benefactors, i.e. Canadian provincial
    governments, State of Nevada

39
MAJOR CHALLENGES FOR GAMING INDUSTRIES EVERYWHERE
(INCLUDING LOTTERIES)
  • Find an appropriate balance of how much gambling
    should be present in society
  • Establish regulatory and legal structures that
    are politically stable and respected by the
    public
  • Address the issues of problem gambling in a
    pro-active and effective way

40
EXPLORING THE FUTURE OF GAMBLING AND COMMERCIAL
GAMING
  • Attend the University of Nevada Renos 13th
    International Conference on Gambling and Risk
    Taking, Lake Tahoe, Nevada, May 22-26, 2006
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