Over the last two decades, gaming has evolved into a major global leisure time industry. Anchored by the casino and resort sector, a growing number of companies have offered shares to the public that enable investors to participate in the entire chain of business that together constitutes the global gaming industry.
Currently, the industry divides into several key sectors. These are:
- Casinos and Resorts,
- Betting Establishments,
- Horse Racing,
- Lottery Operators,
- Online Gaming, and
- Equipment and Technology.
As the gaming industry has expanded in the United States and elsewhere, gross annual revenues have grown at a consistent pace, doubling over the past ten years. The following chart shows growth of the US casino and gaming industries in gross gambling revenues (the amount wagered less the return to players). Gross gaming revenues includes horse racing, lotteries and betting establishments, as well as casinos. Gross gaming revenues does not include income related to gaming operations, such as hotels, food and beverage services and entertainment.
Source: American Gaming Association
Gaming Industry OverviewWorldwide casino gaming revenues are expected to reach over $100 billion in 2009, according to a report by PricewaterhouseCoopers. The report entitled, ‘Global Entertainment and Media Outlook: 2005-2009 predicts that the United States will maintain its top ranking as the largest casino market reaching approximately $64 billion in revenues in 2009, but notes that Asia, especially with the development of Macau, will be the fastest growing market moving from $8.8 billion in 2004 to near $18.5 billion in 2009. As these markets continue to develop, casino and gaming companies are evolving and diversifying their growth strategies to reap the rewards of industry expansion.
Property Development
A key driver of growth for many casinos entails the continued development of new and existing properties in both domestic and foreign markets. This strategy has been recently pursued by large casino and resort operators in the U.S., who have entered bids to open casinos in countries such as the Bahamas, Spain, Slovenia, and Singapore. As more jurisdictions modify restrictive rules governing the gaming industry, further market expansion is anticipated.
Mergers and Acquisitions
The casino gaming environment continues to see consolidation as a method for overall expansion. Various recent acquisitions have demonstrated the potential benefits associated with acquisitions within this arena to include access to larger customer bases, broader market presence and new channels for revenue growth.
Innovation in Gaming Technology
Technological innovation has played a key role in the evolution of casinos and has contributed to the growing popularity of the gaming sector. The two key drivers to the growing participation in casino gaming are a resurgence in table game popularity and the introduction of multiple content delivery systems. Younger gamers want a more dynamic gaming opportunity at a table game, which is driving new technology development. Of particular interest has been the potential for wireless technology to be introduced into the casino environment following Nevada’s recently adopted regulations enabling the use of wireless gaming devices within public areas of casinos. While details outlining acceptable technology have yet to be determined, it is understood that security systems will be implemented to ensure that these wireless devices cannot be used outside of casino boundaries and that they are capable of preventing the use by minors. This legislation opens the doors for casinos, game developers and players as it provides for new revenue channels, and new gaming experiences.
Macau and Asia
One of the key drivers behind growth in the global Gaming Industry is centered in Macau, where gaming has been legal since the 1850's. Today, gaming dominates the city's economy, as US and Chinese casino operators make major investments to develop new casino complexes and to modernize existing ones. This is changing Macau’s long-time name as the “Monte Carlo of the Orient” the “Las Vegas of the Orient.”
The first casino monopoly concession in Macau was granted to the Tai Xing Company in 1937. The company was, however, too conservative to fully exploit the economic potential of gaming. In 1961, the government granted the Sociedade de Turismo e Diversoes de Macau (STDM) the monopoly rights to all forms of gaming. The licence was extended in 1986 for another 15 years but expired at the end of 2001
Source: Macau Gaming and Inspection Bureau
In 2002, the Macau government ended the monopoly system and 3 (later 6) casino operating concessions (and subconcessions) were granted to Sociedade de Jogos de Macau (SJM, an 80% owned subsidiary of STDM), Wynn Resorts (Macau), Las Vegas Sands, Galaxy Casino, the partnership of Pansy Ho and MGM, and the partnership of Melco and PBL. Today, there are sixteen casinos operated by the STDM, and they are still crucial to the casino industry in Macau, but in Macau 2004, the opening of the Sands ushered in the new era.
Though many forms of gaming are legal there, such as blackjack, baccarat, roulette, boule, Sic bo, Fan Tan, keno and tiger machines (slot machines), the most popular game is baccarat, with VIP high-roller baccarat generating more than 70% of total gaming revenue in 2004. Poker is not yet offered in any of Macau's casinos.
Online GamingAs the gaming arena has extended from brick and mortar onto mobile and online platforms, the audience and level of worldwide participation continues to grow. According to Juniper Research, mobile casino services are expected to generate worldwide revenues reaching $4.6 billion by 2009, with mobile gaming as a whole (casino, lottery, and betting) is anticipated to generate revenues in excess of $19 billion by the same year.
Several key factors are driving the growth of the online and mobile gaming market, including the increase in the availability and adoption of broadband connections and the rising popularity and reliability of mobile Internet access. Broadband is a key market driver for both online and mobile games as it allows more information to be delivered at a faster rate. Online gaming will continue to grow because games are easier and more satisfying to play with a broadband connection. As mentioned above, another key market driver is mobile wireless Internet. Another key market driver is smart phones that combine the functions of a cellular phone and handheld computer in a single device.
The rise in market share of online and mobile gaming has occurred despite obvious legislative uncertainty. Legislative progress has been made in some jurisdictions, exemplified by the UK’s move towards regulation. The British Gaming Commission was set up to regulate the new gaming regime introduced by the Gaming Act 2005, and has the opportunity to develop a regulatory system that could set the standard for the world.
Many companies that have established themselves as an online casino or poker presence are extending their position to take advantage of the growing adoption of mobile technology and portable entertainment. The onset of new technologies allows operators to develop multi-platform experiences with 24-hour global accessibility.
Economic Impact of GamingAfter a two-year study of legalized gaming in the United States, the congressionally mandated National Gaming Impact Study Commission found numerous benefits of casino gaming. The following are conclusions reached by the congressionally funded research: - 'As it has grown, it [gaming] has become more than simply an entertainment past-time: the gaming industry has emerged as an economic mainstay in many communities and plays an increasingly prominent role in state and even regional economies.
- 'Research conducted on behalf of the commission confirms the testimony of ... casino workers and government officials that casino gaming creates jobs and reduces the level of unemployment and government assistance in communities that have legalized it.'
- 'Gaming appears to have net economic benefits for economically depressed communities.'
- '... a new casino of even limited attractiveness, placed in a market that is not already saturated, will yield positive economic benefits on net to its host economy.'
- 'Those communities closest to casinos experienced a 12% to 17% drop in welfare payments, unemployment rates and unemployment insurance.'
- 'The Commission also heard from a number of local officials in jurisdictions where casinos are located. Among those who informed the commissioners with their testimony were Elgin, Illinois Mayor Kevin Kelly, Mayor Scott King from Gary Indiana, as well as mayors from Bettendorf, Iowa and Alton, Illinois. The Commission also heard from Mayors A.J. Holloway, Bobby Williams, Bob Short and Eddy Favre of Biloxi, Tunica, Gulfport and Bay St. Louis, Mississippi respectively. Without exception these elected officials expressed support for gaming and recited instances of increased revenues for their cities. They also discussed community improvements made possible since the advent of gaming in their communities and reviewed the general betterment of life for the citizenry in their cities and towns.'
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