AiG: Optimism toward Growth Meets Uncertainty toward Regulation

27 February 2008

Francis Lui gave delegates cause for optimism in his keynote speech on the opening morning of the main AiG Conference in Macau. He said that China is fast becoming a nation of increasingly sophisticated consumers who want the very best entertainment experiences.

Lui, deputy chairman of the Galaxy Entertainment Group, also thought that the gaming market in China will open up to a limited number of respected operators, who are prepared to work with the regulators.

But he tempered this optimism with a note of caution, explaining that companies must be sensitive to changes in regulators’ sentiments toward gaming and must also accept their duties to responsible gambling practices.

Shailesh Naik, marketing director of Cryptologic in Asia, told his audience he believed that there was a "huge and perfect storm" coming for the I-gaming sector in the region, created by a combination of factors:

  • Growing mobile phone and PC penetration

  • Increasing access to broadband Internet

  • A socio-economic "middle class" growing by 100 million people every decade (bringing with it the disposable wealth and material desires)

In outlining possible business strategies for entering Asia, Naik stressed that convergence would be an inevitable factor -- be it convergence of technology, products, companies, or players -- and highlighted his own company’s recent partnerships and acquisitions. This was evidence of its long-term commitment to Asia and he warned against the short-term approach of, as he put it, LOYS-GAMAYC: look over your shoulder-get as much as you can.

Ifafa’s Hsu Hwa-Min also believed that I-gaming operators should be laying down the foundations of their Asian business now as part of a long-term approach to the market. Speaking in the panel discussion on adapting games for the Asian market, he examined online opportunities for baccarat. The game makes up over 80 percent of the gaming floor space in Macau and is loved by Chinese punters because of its fast and fair nature.

Another panelist, Alan Du of Z Entertainment Network (ZEN), looked at the reason why revenues from real-money online mahjong have so far failed to match those of online poker, despite the fact that online mahjong attracts more players. He cited several reasons why mahjong lags behind, including:

  • Lack of effective payment solutions

  • Immature anti-collusion software (compared to poker)

  • Lack of standardized rules

ZEN has been developing a tournament format for mahjong and attracted almost 5,000 players to its online Grand Tournament run over the Chinese New Year.

Many in the I-gaming industry believe that mahjong holds the key to Asia and the forum of AiG was used to announce some significant developments in the market:

  • Cryptologic has continued its moves into Asian-related gaming by making a significant investment in online mahjong provider Mahjong Time

  • Mahjong Time is to collaborate with World Mahjong Limited to be the official online software and platform provider for the second annual World Series of Mahjong

The second World Series of Mahjong will take place in September and have a prize pool $1 million. Qualifying satellite tournaments will be held online at Mahjong Time as well as in Taiwan, Australia, Canada and the United States.

The conference’s afternoon program offered two separate streams, one covering payments and fraud, the other on sports betting and lotteries.

The impact of football results on an Asian-facing sportsbook was one of the main issues tackled in the sports betting session. Betgenius’ Mark Locke used his presentation to look at how operators might build on the popularity of football in Asia by offering live in-running betting.

He argued that changing attitudes toward risk, margin erosion and rising costs will create demand for improved technological solutions in this field. This will automate more of the processes involved in risk management and will, therefore, change the emphasis on what the core activities of a sportsbook operator are -- it will be less about setting odds and more about marketing and promoting the brand, he said.

The final session of the day saw Tony Tong, CEO of PacificNet, give a detailed account of the current state of the lottery market in China. The Welfare and Sports Lotteries are the only two legal forms of gambling in the country but comprehensive national regulation for these products has yet to be finalized. There is some expectation that it might be published this year, laying down strict guidelines for their operation and level of service requirements.

But the lottery market is in a state of uncertainty at the moment. Internet sales of lottery have been suspended, there are government concerns over the popular Video Lottery Terminal (VLT) products and there is a prohibition on the marketing of leaflets that advertise the lotteries’ prize pools. Quite when some -- or all -- of these issues will be resolved is open to conjecture.

As delegates gathered for the evening’s cocktail reception, some of the morning’s initial optimism may have lessened somewhat as they listened to the various issues and challenges affecting the region’s markets over the course of the day.

Thursday’s sessions include discussions on the topic of gambling regulation in Asia. Whether it will do anything to restore that optimism remains to be seen.

Related Links
Asian I-Gaming Congress & Expo (AiG) 2008

Lorien is a research analyst with Global Betting and Gaming Consultants, and currently resides on the Isle of Man. Prior to this, he spent three years at a leading United Kingdom gambling firm, providing regulatory and market research for its various international e-gaming ventures.