Seen It All

As eGaming continues to progress into new stages of its lifecycle, Michael Tobin of Continent 8 Technologies discusses the current challenges and opportunities that await the industry.
 
Continent 8 Technologies began in 1999, just as the Internet Age began to crescendo. Since then, I’ve seen many notable changes, particularly in the eGaming industry. Participating in numerous conferences around the globe and forming ongoing relationships with eGaming’s most senior executives, I’ve watched the industry develop and grow – evolving from an upstart entrepreneurial base to a maturing, corporate mainstream industry. Every year, in fact, has seen memorable events and important developments – be they technological, commercial, or legal – that the industry has had to digest and incorporate. I remember, for example, seeing the first official gambling apps for smartphones, breaking news of the UIEGA and “Black Friday” indictments, and rumours of mergers, acquisitions and public offerings that soon became reality. This year has been no different, with the geography of eGaming changing faster than ever before.
 
In Europe, we’ve seen a ripple effect of countries lowering their defences and tentatively embracing eGaming. Regulatory bodies have been formed, licences awarded, and operators and service providers alike have been clamouring for realistic tax generating models that will provide opportunities for all.
 
On the other side of the Atlantic, one of the biggest surprises involved the US Department of Justice, who, in December 2011, stated that the Wire Act only applied to sports betting. This has led to some of the most encouraging movements we’ve seen to date in the US. Nevada, for example, is actively working to open up intrastate online poker, and with other states considering similar gaming legislation, the US seems to be gradually coming around to the idea of establishing a framework for the eGaming industry – something we all hope it sees through.
 
But there is a flipside to these new opportunities, particularly in Europe. What will happen with established jurisdictions? Where will these new laws leave Malta, the Isle of Man, or Gibraltar, for instance? What happens to these reputable jurisdictional pioneers? It is my opinion that their value increases, particularly to operators serious about their eGaming future. Operators spend an enormous amount of money on their product offerings, marketing, and brand identity. They don’t need to worry about the costs and logistics of uprooting vital IT and technology infrastructures, as well as the thought of meeting additional regulation and licensing requirements. From a logical business perspective alone, an operator will not want to have all their eggs in one basket when it comes to IT infrastructure and data centres – just think of disaster recovery requirements. If your entire IT infrastructure is in one jurisdiction, it increases operational risk because of a single point of failure. Jurisdictions don’t want to see operators fail and they will work closely with the industry to adopt policies, practices, and procedures that will be mutually beneficial. After all, the presence of eGaming operators has proven very profitable for these original, trail-blazing locations, creating and sustaining jobs and considerable economic development.
 
With so many European countries launching initiatives, the future direction of new regulatory bodies and legislation has been challenging to manage. Even countries that aren’t new to the eGaming industry have proposed revamped policies to meet current economic and political needs. The UK, for example, has decided to implement a point of consumption tax within two years.
 
Recently, French, Italian, Spanish, and Portuguese regulators attended a meeting in Barcelona to formulate plans for a shared regulatory framework, which would also see countries pool liquidity for certain products. Their objective was summed up in one statement: to “make possible an operational co-operation aimed at laying the foundations for a better protection of the ends provided for by the legislation and for exchanges on the licensing criteria in each jurisdiction.” What will this mean for operators looking to enter these new markets? At Continent 8, we’re making it our mission to be current and up to date with the latest jurisdictional changes and requirements. In some cases, jurisdictions have sought our opinion and advice on managing cross border infrastructure and multi-jurisdictional licensing. In the process, we have become a trusted fiduciary to regulators and an innovative and reliable technical partner to their licensees.
 
The US is an exciting opportunity for many, but it’s clear to most in the industry that eGaming success in North America will be challenging. Aside from being new to regulated eGaming, Americans have enjoyed an uneasy relationship with gambling for many years. Federal eGaming bills will remain largely untouched in an election year, confining such development to individual states, which will form a convoluted patchwork of opinions and approaches towards the sector. You can, for example run a successful casino in Nevada, but attempting the same thing in bordering Utah would lead to serious sanctions. Operators that have not already made the move to the US will therefore have to wait and see what opportunities open up, creating business partnerships that can help establish a working and practical infrastructure.
 
And, as I’m increasingly finding is the case these days, you can’t go five minutes without discussing the opportunities of social gaming. With the infrastructure already in place (widespread social media networks are now a part of everyday life) as well as established social ‘play-for-free’ operators who have generated impressive returns, social gaming has inevitably found its way into the crosshairs of the eGaming industry. As more operators invest in social arms to their businesses, rumours of Zynga exploring real-money wagering products, and Facebook recently launching its first gambling product, the revenue possibilities are mouth watering.
 
This largely comes down to the simplicity of the social setup; as it stands, many operators make huge sums on the small percentage of players who choose to purchase additional chips or tokens(5% of 10 million daily users spending £3 to £5 a time represents a healthy revenue stream). But as eGaming moves in, social gaming has also attracted some unwanted attention. Calls for social games to be regulated are starting to gain volume, with William Hill CEO Ralph Topping recently calling on John Penrose, the UK government minister responsible for gambling regulation, to bring in age controls for these games. And, as operators start to develop larger amounts of revenue, it won’t be long until they gain the attention of the taxman, which means facing the same restrictive taxation models and heady licence fees as the eGaming industry.
 
Still, whatever happens with social gaming, the next few years promise to be a lucrative and exciting time. Since Continent 8’s founding, we have been involved in many discussions and debates with the various stakeholders in the eGaming industry. As a data centre and network provider, our technology expertise is the key infrastructure on which the industry resides. We’re proud to have a presence in many established jurisdictions, but we’re also mindful of the changes ahead. The name of the game with this technology based industry comes down to innovation – participants that rest on their laurels don’t last long. They need to keep moving, rolling with the punches, eyeing new expansion avenues and possible locations. And who helps them do that? Experienced service providers like ourselves, who can identify changes and opportunities before they happen. We have our eye on the horizon, but our feet on the ground. We’re always ready.
 
Article appeared in eGaming Review Jurisdictions Report 2012

 

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