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The Future of Digital Gambling: The Impact of Regulation, the Rise of Online Services and the Evolving Competitive Environment
Scripp Business Insights, March 2010, Pages: 156
The digital gambling market – encompassing online, mobile and digital TV-based services – continues to grow, accounting for an increasing proportion over overall gaming revenues. The current state of the global economy is placing significant pressure on gambling industry revenue potential, prompting many providers to deliver innovative services to boost both awareness and customer loyalty. Furthermore, strict regulation with regards to the provision of online services will continue to restrict market potential.
Competition is fierce across the industry, with operators investing heavily in their platforms to deliver compelling services to their consumers. With operational scale vital, M&A activity will be ongoing, while acquiring (and retaining) customers will continue to be the key strategic focus for most operators. In addition, operators will increasingly seek to exploit wider opportunities across the digital gambling space, including the development of mobile and digital gambling services.
This report examines developments across the rapidly evolving digital gambling sector. It underlines the challenges facing companies operating across this space, considers the potential opportunities available, provides market sizing and forecasting by sector and geography, and provides actionable insight with regards how to best approach this fast-changing market.
Key features of this report
- Overview of the industry trends, technological evolution and changing business models that have driven development of the digital gambling market.
- Gambling market revenue forecasts to 2013 (including conditional pre- and post-UIGEA forecasts), covering the overall gambling market by region and product type, with breakdowns for online, mobile and digital TV services.
- Market projections for related communications and entertainment products and services including consumer broadband, mobile telephony and smartphone shipments.
- Identification of the key challenges facing the key participants targeting digital gambling opportunities, including actionable insight into how to best approach this rapidly evolving opportunity.
Scope of this report
- Gain a comprehensive understanding of how market trends are impacting on the potential of digital gambling services, and the impact such developments will have on operator business models and strategies.
- Understand how the competitive environment is changing, specifically how regulatory issues continue to disrupt industry progress and market consolidation is on the cards.
- Quantify the digital gambling market opportunity, gaining an insight into the revenue potential of online, mobile and digital TV gambling services.
Key Market Issues
- A combination of technological and societal developments have boosted the potential of the online gambling sector, with growth in this sector of the market now outstripping that of the overall (e.g. retail + digital) gambling market. Broadband proliferation has enabled the rollout of real-time gambling, seen by many across the gambling sector as one of the most significant sources of potential online revenue growth over the coming years.
- Regulation of the EU and US online gaming markets is seen as the key issue facing the industry; the laws governing online gambling will determine the future growth potential of the market more than any other factor. The regulatory framework within each jurisdiction is constantly evolving; while some countries have moved towards explicitly allowing legalized online gambling operations, others, have moved in the opposite direction.
- Despite continuing consumer demand for digital gambling services, the global economic slowdown is likely to have a negative impact on market growth over the next 2-3 years.
- Scale is essential in the online gambling sector, with larger firms able to provide both a broader range of services and higher prize funds to attract customers. A core aim of most major online operators is to build strong presence across all gambling verticals; betting, poker, casino and, increasingly, bingo. Acquiring expertise beyond areas of core competence is a key driver of M&A activity.
Key findings from this report
- The introduction of UIGEA in 2006 was a hammer blow to the fortunes of the online gambling sector; an estimated $4 billion was wiped from online gambling share prices almost overnight, while major public online gambling firms were forced to abandon their US-facing operations.
- The US is under pressure from various angles to ease its anti-gambling stance. However, even if the US market becomes regulated, there are no clear indications with regards to whether overseas operators will be able to offer services.
- Many online gambling firms are placing particular attention in delivering services which appeal to women in order to exploit opportunities across the huge potential market.
- Live (or in-play) betting is the key growth driver for the sector, enabling punters to bet on events in real-time as they progress. To develop a more compelling live betting offering, operators are investing heavily in sports broadcast rights.
Key questions answered
- What are the major trends shaping development of the digital gambling market?
- Which factors are likely to restrict the potential of digital gambling services and why?
- To what extent is regulation holding back market progress?
- Which operators are best placed to exploit emerging market opportunities?
- How will the market for digital gambling services evolve, and which future trends will impact on developments over the course of the next 2-3 years?
- How important will digital services be to the overall gambling revenue mix by 2013?
The Future of Digital Gambling
Market context: an uncertain future
Competitor strategies: the rise of online services
Leading players: strategic overview
The future of digital gambling
Chapter 1 Introduction
Who is this report for?
Gross gaming revenue
Digital pay-TV (DTV)
Internet Protocol TV (IPTV)
Chapter 2 Market context: an uncertain future
Defining the digital gambling market
Digital gambling market drivers
Online services drive industry growth
Broadband market development drives online gambling opportunities
Higher speeds bring new opportunities
Online is the key area of focus for operators
Regulatory uncertainty restricts progress
Regulation and legislation provides significant challenges
UIGEA has had a profound impact
A regulated US online gambling market on the cards?
Intrastate online gambling services set to emerge
The European regulatory environment remains uncertain
Asia-Pacific will remain a challenging market for overseas operators
A more open and regulated sector will develop
Global economic conditions provide cause for concern
Problem gaming and match-fixing scandals remain major issues
Age verification requires greater focus
Chapter 3 Competitor strategies: the rise of online services
Competition comes from multiple angles
Monopoly operators retain a strong position
The importance of scale
Mergers and acquisition activity gather pace
Customer acquisition and retention strategies remain pivotal
Promotion activities focus on building brand awareness
Customer retention is just as vital as attracting new users
Attracting new demographic groups should be a key focus
Online gambling service evolution
Betting industry developments
Live betting comes to the fore
Betting exchanges offer consumers more options than ever before
Events betting offers strong growth potential
European online poker operators struggle against US competitors
A changing strategic focus?
Poker networks will continue to play a pivotal role
Beyond the online market
Mobile opportunities increase
Rising 3G penetration boosts demand for mobile applications
Device evolution boosts mobile content potential
Major hurdles remain
Digital TV services offer strong potential
Chapter 4 Leading players: strategic overview
Portuguese ECJ setback could be a sign of things to come
Betting services remain a core area of focus
Acquisitions add greater poker expertise
Betting exchange debate continues to rage
Acquisitions offer new scope and potential
Settlement with US authorities wipes the slate clean
Cashcade acquisition offers a strong foundation for bingo success
B2B opportunities increase
Playtech deal significantly boosts online presence
Offshore move could save £10m per year
Optimism surrounding non-European operations
Football sponsorship builds brand awareness
Offshore move brings financial benefits
New sportsbook brings enhanced functionality
Italian online service gathers pace
B2B activities provide strong potential
Acquisitions deliver a strong position in the fast-growing online bingo market
Acquisitions boost product coverage
Initial incursion into the B2B market
PMU partnership provides a strong B2B foundation
Australian investments broaden geographic reach
Significant privately-held operators
Chapter 5 The future of digital gambling
Future digital gambling market trends
Regulatory obstacles will remain, with B2B services becoming paramount
Media firms will play an increasingly significant role
Innovative services needed to boost uptake
Mobile and digital TV services will be the next major growth area
Social networking offers potential
Online services drive gambling market growth
Asia offers strong growth potential
Digital services will generate 10% of overall gambling revenue by 2013
Europe will continue to lead the way in the online gambling arena
Betting will continue to account for the largest share of online revenues
US regulation could provide a $6.8bn boost to the online market
List of Figures
Figure 2.1: Global consumer Internet subscribers (000s), 2007-2012
Figure 2.2: Consumer Internet subscribers by region (000s), 2008
Figure 2.3: Internet subscribers by region (000s), 2012
Figure 2.4: Share prices hit hard by UIGEA (% change since December 2005)
Figure 3.5: Football shirt sponsorships becomes a key marketing tool
Figure 3.6: Demographic comparison of gambling sites users: age
Figure 3.7: Demographic comparison of gambling sites users: gender
Figure 3.8: Share of online betting traffic referred by Oddschecker.com by provider (%), August 2009 – January 2010
Figure 3.9: 3G share of worldwide mobile phone subscriptions & revenues (%), 2005-2013
Figure 3.10: Worldwide mobile connections and revenues, 2007-2013
Figure 3.11: Smartphone shipments by region (000s), 2008-2014
Figure 4.12: Bwin revenue by sector (€000s), 2005-2008
Figure 4.13: Bwin revenues, regional share (%), 2005-2008
Figure 4.14: Betfair financials (£000s), 2005-2009
Figure 4.15: PartyGaming revenue by sector ($m), 2005-2009
Figure 4.16: PartyGaming revenue sector share (%), 2005-2009
Figure 4.17: William Hill revenue by sector (£m), 2004-2009
Figure 4.18: Sportingbet revenue by sector (£m), 2007-2009
Figure 4.19: Sportingbet revenue regional share (%), 2007-2009
Figure 4.20: Ladbrokes net revenue by sector (£m), 2003-2009
Figure 4.21: Ladbrokes online revenue sector share (%), 2007-2009
Figure 4.22: 888 Holdings revenues by sector ($m), 2004-2009
Figure 4.23: 888 Holdings revenues, regional share (%), 2004-2008
Figure 4.24: Unibet revenue by sector (£m), 2005-2009
Figure 4.25: Unibet revenue regional share, 2005-2009
Figure 4.26: Paddy Power revenue by sector (€m), 2004-2009
Figure 5.27: Worldwide gambling market by region ($bn), 2008-2013
Figure 5.28: Worldwide gambling market by sub-sector ($bn), 2008-2013
Figure 5.29: Worldwide digital gambling market by sub-sector ($bn), 2008-2013
Figure 5.30: Worldwide online gambling market by region ($bn), 2008-2013
Figure 5.31: Worldwide online gambling market by gambling type ($bn), 2008-2013
Figure 5.32: Worldwide digital gambling market ($bn), 2008-2013: the impact of potential future US market regulation
List of Tables
Table 2.1: Global consumer Internet subscribers (000s), 2007-2012
Table 2.2: Consumer Internet subscribers by region (000s), 2008
Table 2.3: Forecast consumer Internet subscribers by region (000s), 2012
Table 2.4: Share prices hit hard by UIGEA (% change since December 2005)
Table 3.5: Share of online betting traffic referred by Oddschecker.com by provider (%), August 2009 – January 2010
Table 3.6: 3G share of worldwide mobile phone subscriptions & revenues (%), 2004-13
Table 3.7: Worldwide mobile connections and revenues, 2007-2013
Table 3.8: Worldwide smartphone shipments by region (m), 2008-2014
Table 4.9: Leading digital gambling operators by revenue ($m)
Table 4.10: Bwin snapshot
Table 4.11: Bwin revenue by sector (€000s), 2005-2008
Table 4.12: Betfair snapshot
Table 4.13: Betfair financials (£000s), 2005-2009
Table 4.14: PartyGaming snapshot
Table 4.15: PartyGaming revenue by sector ($m), 2005-2009
Table 4.16: William Hill snapshot
Table 4.17: William Hill revenue by sector (£m), 2004-2009
Table 4.18: Sportingbet snapshot
Table 4.19: Sportingbet revenue by sector (£m), 2007-2009
Table 4.20: Ladbrokes snapshot
Table 4.21: Ladbrokes revenue by sector, 2003-2009
Table 4.22: 888 Holdings snapshot
Table 4.23: 888 Holdings revenues by sector ($m), 2004-2009
Table 4.24: 888 Holdings revenues, regional share (%), 2004-2008
Table 4.25: Unibet snapshot
Table 4.26: Unibet revenue by sector (£m), 2005-2009
Table 4.27: Paddy Power snapshot
Table 4.28: Paddy Power revenue by sector (€m), 2004-2009
Table 5.29: Worldwide gambling market by region ($bn), 2008-2013
Table 5.30: Worldwide gambling market by sub-sector ($bn), 2008-2013
Table 5.31: Worldwide digital gambling market by sub-sector ($bn), 2008-2013
Table 5.32: Worldwide online gambling market by region ($bn), 2008-2013
Table 5.33: Worldwide online gambling market by gambling type ($bn), 2008-2013
Table 5.34: Worldwide digital gambling market ($bn), 2008-2013: the impact of potential future US market regulation
- 888 Holdings
- Full Tilt Poker
- Mangas Gaming
- Paddy Power
- William Hill