Project Planning/Getting the License – First and Fast, or Later and Last

Competition for gaming licenses is fierce.  The gaming industry has witnessed licensing battles in Pennsylvania, and those gearing up in Massachusetts and Florida.  With licenses in limited supply, applicants must show why their project is the best.   They have to engage the public and turn public officials into vocal advocates.  Government officials increasingly focus not just on the potential gaming revenues of a project, but on the total impacts of a development on surrounding communities and the state as a whole.

productsNew06AUrban planners and local planning departments exist to review and mitigate these impacts.   Paying early attention to the local planning process can help to head off potential opposition, prevent costly mistakes, and give license applicants a leg up on the competition.  One significant aspect of effective front-end planning is thoughtful and complete review of the zoning and land use issues involved in the project.

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Japan’s Gaming Prospects Heat Up

For years now, many have eagerly speculated that Japan will pass legislation allowing casinos to be opened within the nation. This year, more than in previous years, it looks like Japan may pass such legislation. With things heating up in the Asian gaming market, e.g., in South Korea and The Philippines, and with the 2020 Summer Olympics in Tokyo creeping up, there seems to be more than a hint of urgency to green-light casino development in Japan.

Despite having several forms of legal gaming, such as pachinko, lottery, and race betting, Vegas-style games are not currently permitted in Japan. The opposition to casinos in Japan has cited problem gambling and opportunities for increased organized crime activity as concerns. However, promises of multi-billion dollar foreign investments and the allure of a mechanism for economic recovery may outweigh those concerns this time around. Prime Minister Shinzo Abe has voiced his support for legalizing casinos as a potential means by which to revive the economy, forming part of his “Abenomics” strategy.

This summer, unless snagged by procedural issues, Parliament is expected to pass legislation  for four casino resort licenses. Diet member Takeshi Iwaya of the Liberal Democratic Party leads the push for resort gaming in Japan and has multi-party support. At least one casino is expected for Tokyo, and another in Osaka. We believe that Japan could become one of the most lucrative gaming markets in the world (behind Macau). With the passage of this legislation, Japan will likely become the stage for one of the fiercest battles for casino licenses the world has ever witnessed.


Contributed by:

Anthony Mumphrey, III, Principal
anthony@tmg-consulting.net or 504.569.9239 x 22

and

Nicholas Farrae
Senior Analyst, Economics & Gaming
nicholasfarrae@tmg-consulting.net or 504.569.9239 x 31

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 Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

The Future of Internet Gaming in the U.S.: Notes from iGaming North America Conference

The bricks-and-mortar gaming industry wants in, the States want in, Native American Tribes want in, service providers want in . . . the list goes on.  But, what is actually on the horizon for Internet Gaming?  In the search for answers, I recently attended and participated in iGaming North America.  This is the first post in a series where I will discuss the future of Internet Gaming. (more…)

Upcoming Conferences

TMG Staff are active in their respective fields, regularly participating in industry conferences and continuing education programs.  Over the next few months, TMG staff will be coordinating, sponsoring, presenting at, or attending:

  • Louisiana Chapter of the American Planning Association 2012 State Conference: January 25-27, Lake Charles, LA
  • iGaming North America: March 4-6; Las Vegas, NV
  • Regional Modeling for Improving Public and Private Policy: March 12, Baton Rouge, LA
  • PARKING!  Can We Do Better for our Communities and Our Businesses?, presented by ULI Louisiana and TMG Consulting: March 13, New Orleans, LA
  • American Council of Engineering Companies Annual Conference and Legislative Summit: April 15-18, Washington, DC
  • Southern Gaming Summit:  May 8-10, Biloxi, MS
  • Airport Minority Advisory Council (AMAC) Diversity Conference: June 9-12, St. Louis, MO
  • ACEC/L Technical Visit and Study Tour: June 19-23, Panama Canal, Panama

Internet Gaming in the U.S.—Past, Present, & Future

In a previous blog entry titled, ‘Status of Internet Gaming in the U.S.,’ we gave you our version of Cliff’s Notes on what has been happening at the state level with regard to Internet gaming.  This time, we will explore the events that led up to the DOJ’s December 23 opinion, and afterwards, explore the DOJ opinion’s potential ramifications nationwide.

Over the years, various federal actions have addressed the issue of Internet and interstate gaming directly.  Below is a brief description of the major ones.

  • The Interstate Wire Wager Act (Federal Wire Act) of 1961:
    • Made it illegal to make wagers on telecommunication systems across state and national borders.
    • Previously interpreted by the DOJ to apply to all forms of online wagering
    • The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006:
      • Explicitly prohibited businesses to collect revenue from Internet wagering.
      • Immediately scared many Internet gaming operators out of the United States…but not all.
      • Department of Justice Memorandum Opinion regarding Online Lottery Programs (issued in December 2011):
        • Provided a new interpretation of the Interstate Wire Wager Act of 1961
          • Interstate transmissions of wire communications that do not relate to a ‘sporting event or contest’ fall outside the reach of the Wire Act.”

Internet gaming has been around almost as long as the World Wide Web has.  Until 2006, the federal government had no legislation that addressed Internet gaming directly, but it did interpret the Federal Wire Act to prohibit online wagering.  Based largely out of concern that the potential for money laundering was to great in the booming online poker industry, various members of the federal government in the early to mid 2000’s pushed for new legislation which targeted Internet gaming specifically.  The result of this effort was The Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006.

After being passed, the UIGEA shook up the Internet gaming industry.  The new legislation made it illegal for businesses to collect revenue from online wagering.  Several Internet gaming operators fled the U.S. market…but not all.  Some online poker operators believed, through unconventional methods, that they had found legal workarounds to the UIGEA and became giants with continued operations in the U.S. during the later part of the 2000’s.

Fast-forward to April 15, 2011— PokerStars, Full Tilt Poker, and Absolute Poker became household names shortly following the event known as ‘Black Friday.’    Without warning, the DOJ issued a formal complaint against the previously mentioned online poker operators based on the Illegal Gambling Business Act of 1955 and the UIGEA of 2006.  Black Friday knocked the wind out the entire industry.  Several of the founders of the three online poker companies were arrested and key assets such as domain names and bank accounts were seized by authorities.  In complete contrast, and shortly preceding Black Friday, speculation and reports about brick-and-mortar casino partnerships with online operators had been headline gaming industry news.

Two people charged with the DOJ’s Black Friday complaint have already made plea bargains and face sentencing later this year.  To date, the DOJ’s December 23 opinion has not affected the charges levied against the founders of PokerStars, Full Tilt Poker, and Absolute Poker.

As previously mentioned, the DOJ issued a Memorandum Opinion on December 23, 2011 which reversed its previous interpretation of the Federal Wire Act.  The opinion was released as a response to petitions from New York and Illinois’ lotteries seeking permission to sell lottery tickets online.  Prior to the December 23 opinion, the DOJ’s interpretation of the Wire Act would have prohibited online lottery ticket sales.  As of the issuance of this opinion, the DOJ finds that the Wire Act only applies to sports betting, effectively finding it lawful for states to run in-state online lotteries.

If Black Friday knocked the wind out of the Internet gaming industry, the DOJ’s Opinion rejuvenated it.  States, vendors, tech companies, and several other constituents are scrambling now at what they view as a window of opportunity.  As described in our previous blog on Internet gaming, many states are working on implementing their own Internet gaming legislation and programs via their lotteries.  Since interstate wagering already exists in lottery programs like the Powerball, interstate online poker could be legally feasible.

It remains unclear what advantage, if any, the DOJ Opinion provides to Native American tribes looking to get in on the action.  In February 2012, the United States Senate Committee on Indian Affairs will meet to discuss the implications of the DOJ’s Opinion for tribes.

The DOJ did not offer a new interpretation of the UIGEA in its December 23 opinion, nor has its complaint levied against those online poker operators been rescinded.  Nonetheless, several entrepreneurs, social media companies, existing Internet gaming operators and vendors, and other similar entities are creating a buzz as they search for a fit in the states’ race to bring Internet gaming to their jurisdiction.

As exciting as all of this is, there are still a lot of uncertainties.  What will become of the UIGEA, and how will this affect state Internet gaming programs?  Will the federal government pass their own legislation to regulate Internet gaming nationwide in the near future?  In our next blog on Internet gaming, we will discuss what has been going on at the vendor level in lieu of the excitement the DOJ’s Opinion has created.

Contributed by:

Nicholas Farrae

Analyst, Economics & Gaming

nicholasfarrae@tmg-consulting.net  or 504.569.9239 x 31

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Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

At What Point Is the Casino Gaming Market Saturated?

As states such as Massachusetts, Florida, New York, New Hampshire, and Maryland enter or expand their presence in the casino gaming market, we have to ask ourselves the question: at what point will the market be saturated?

State by state, casino gaming has been legalized in the U.S.  In years where state and personal budgets are tight, the pace of legalization accelerates as lawmakers search for sources of jobs and for revenues to fund state services and programs.  With each state that has entered the fray, gaming revenues have risen.  The growing American population and the growing acceptance of gaming have fueled the casinos nationwide.  However, established gaming centers such as Atlantic City have suffered, as the majority of the nation’s population is now within a drive or short flight of a casino.

Over the past 8 years or so, I have been analyzing gaming markets across the U.S.  Most recently, I’ve been assessing the potential for expanded gaming in Florida and the Northeast/Mid-Atlantic/New England markets.  What I’m seeing and forecasting is this:  the marketplace can absorb the casinos that are currently proposed, but too much additional supply above and beyond these proposals could saturate the market.  The additions of proposed supply will certainly make competition tougher and will likely have a negative impact on existing gaming operators that don’t step up to the plate.  This competition will be great for gamers – they’ll have more options, and will be able to pick and choose where to spend their gaming dollars.

All of this makes the jobs of those in the gaming industry harder, but potentially more rewarding.  The vast potential for gaming in the United States has not been tapped completely, and smart players in the game will benefit.  In addition to building and operating facilities that gamers will like, gaming firms must consider location.  Capturing gaming dollars will largely be a function of finding the right location – build too far from the population or too close to competition, and revenues could suffer; build in an inaccessible location or one that the community is not in favor of, and no one will come; ignore the potential for synergy with other entertainment options (including other casinos!) and you might be turning away revenues.  Thorough analysis, site evaluation, and thoughtful site selection can help make the difference between building a casino that performs on-par with the market, or one that not only is a market leader, but has the ability to grow the market.

So, the answer to the question of saturation isn’t that simple.  Are we at saturation?  No.  Are we getting close?  Mabye?  Will smart gaming operators be able to grow the market?  We’ve seen it before, why not again?

Contributed by:

Suzanne P. Leckert

Director of Gaming, Feasibility & Land Use Analysis

suzanneleckert@tmg-consulting.net  or (504)569-9239 x 33

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

The Outlook for Asian Gaming

Attention has been given to the rise of Asia’s booming gaming market in recent years, with some analysts even projecting it to surpass all other regional gaming markets before the decade’s end.  The success of Macau and Singapore has inspired other parts of Asia to either enhance their existing gaming industry to a world-class standard or to establish their own destination gaming markets.

The Philippines and Vietnam, both countries with existing gaming facilities, have passed legislation to support a destination resort casino market.  South Korea may follow their lead.  In other parts of Asia without Las Vegas-style games, such as Japan and Taiwan, things have been heating up with legislators and other constituents seriously considering gaming’s benefits.

Asia’s gaming fever mirrors that of the United States.  In recent years, several states in the U.S. implemented gaming legislation or expanded existing games.  Some U.S. gaming markets could even be described as saturated.  In the Mid-Atlantic region for example, gaming facilities in Delaware, Pennsylvania, New Jersey, New York, West Virginia and Maryland are in heavy competition for the same regional patrons and tourists.  Delaware and Pennsylvania added table games to their facilities, at least partially pressured by a congesting regional market.

The key difference between the pervasion of gaming throughout Asia and the United States is demand.  According to Credit-Suisse’s Global Wealth Report 2011 there are about 949.7 million people living throughout North, Central, and South America.  Throughout the entire Asia-Pacific region (includes China and India) there about 4.25 billion people.  The population of the Americas is not even a quarter of the population of the Asia-Pacific region.  Trying to imagine how much gaming product it would take to saturate the Asia-Pacific region is staggering.

A huge driver behind the success of Macau and Singapore’s gaming markets has been Chinese tourism.  Chinese policy changes opened up its outbound tourism market and greatly increased the proportion of Chinese visitors to all visitors in several regional markets.  Singapore for example, drew about 5.6% of its total visitors in 2000 from China.  In 2010, Chinese visitors to Singapore represented about 10.3% of all visitors to the country.

Asian gaming markets have another thing going their way—Asia is becoming wealthier.  Based on projections made by Credit-Suisse and detailed in their World Wealth Report 2011, wealth in the Asia-Pacific region (including China and India) is increasing at a greater rate than the world’s two wealthiest regions (Northern America and Europe) and the world’s average.  As the average wealth of individuals increases throughout the Asia-Pacific region, more and more people will have the means to indulge in leisure activities and travel—increasing regional demand for destination resort casinos.

With such trends in wealth, tourism, and population it is little wonder that destination gaming has been such a success in Asia in recent times.  It is also no surprise that many other Asian countries want in on the action, and that they are not trying to follow the ‘Las Vegas Model,’ but either the ‘Singapore’ or ‘Macau Model.’

Contributed by:

Nicholas Farrae

Analyst, Economics and Gaming

nicholasfarrae@tmg-consulting.net  or (504) 569-9239 x 31

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

G2E Conference Summary: Key Takeaways

At this year’s Global Gaming Exhibition and Conference, TMG staff attended over twenty conference sessions, covering issues such as gaming on the Internet, U.S. and Asian gaming expansions, operations models for revenue maximization, player tracking and marketing programs, and the state of financing for gaming projects.  This blog post includes a few key takeaways from such discussions.

Capital Investment in Gaming

Throughout the conference sessions and our discussions with gaming executives, it became apparent that capital is currently available for existing gaming operators.  However, during this recovery period, debt leverage needs to be lower for commercial lenders to be comfortable.  Across the board, the scale of capital investments is expected to remain lower than in pre-recession times.

Social Media

Simplifying the myriad of communications and streamlining the social media experience for conference attendees was the G2E Mobile“App”.  Developed with Konami, the mobile device application put the entire conference in your hand.  Conference organizers were able to send direct messages to attendees, as well as to live-stream all conference mentions in the Twitter universe.  The integration of the conference with social media such as Twitter was reflective of the gaming industry as a whole, as smartphones now allow casinos a way to send real time offers to their patrons.  In his Conference Keynote, James Murren, CEO of MGM Resorts International urged the gaming industry to monetize social media now.

New Forecasting Models to Improve Operations

One of the more interesting sessions at this year’s G2E was led by Chris Anderson of the Cornell School of Hotel Administration.  He and the other panelists pointed out that revenue management begins with a simple demand model that only focuses on inventory (RNA) and demand for the day, but does not consider length of stay.  However, length of stay is a very important variable in a casino revenue management model because the implications of a guest staying at a casino hotel are not one-dimensional.  More complicated revenue management models consider length of stay, constrained and unconstrained demand, and market mortality (guests not captured).  The revenue management model best suited for casinos is one that allows for maximum gross operating profit on a per room available basis.  Achieving this type of modeling is possible, yet it requires investment in IT and databasing, and can only be achieved in incremental steps from more simple revenue management models.

Gaming on the Internet

Existing land-based casino operators see iGaming as an opportunity to create a new experience that immerses patrons into an experience that could not be had before.  Further, it initiates people who are unfamiliar with casino gaming, potentially leading to new customers at bricks and mortar casinos.  According to MGM Resorts International’s James Murren, the “next big thing” in the gaming industry will be the collision of casino gaming and video gaming experiences.

Gaming on the Internet is set to be commoditized, and governments will have to think competitively when setting tax rates.  If operators are taxed too highly in one jurisdiction, they will have the ability to move to one with more favorable rates.  In the end, the cost of taxes will be passed on to the customer.

For more, please see the previous G2E Conference Summary blog post: iGaming Congress. 

Contributed by:

Nicholas Farrae

Analyst, Economics & Gaming

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

G2E Conference Summary: iGaming Congress

This year’s G2E was as exciting and enlightening as any before it.  As an industry, gaming has been steadily recovering from the dramatic declines of 2008 and 2009, and new growth opportunities are presenting themselves.  Possibly the greatest potential for growth exists in the igaming sector. This blog post is a quick summary of the discussions and conclusions of igaming and legal experts on this emerging market.

How Big is the Market?

The worldwide online gaming market is currently around $32 billion annually, with approximately $13 billion generated in Europe, $9 billion from Asia, and the remainder from North America and the rest of the world.  Legalization in the United States will undoubtedly grow the total pot, but there is no widespread agreement on what those revenues will be.  Some experts have estimated that the U.S. poker market could result in tax revenues of $6-15 billion annually, creating 60,000 jobs in our economy.

Path to Legalization

Online gaming is flourishing worldwide, however poker is the most palatable game for legalization in the United States right now.  Much as last year, industry experts disagree on the route for its legalization – whether it will happen on the federal level, or whether individual states will take action first.  Were online gaming legalized on the federal level, a new regulatory body would likely have to be created.  If it were legalized on a state-by-state basis, existing gaming commissions cold oversee the operators.  This year’s panelists and experts believe that New Jersey will have online casino gaming soon, not just poker, and that Iowa could be the next state to legalize Internet poker.

Who Will Get Licenses?

Much discussion at this year’s G2E centered on who the potential licenses will go to – to those companies based outside of the U.S., or those that are U.S. based.  The general consensus was that U.S. based companies have a greater chance for licenses, but that European-based companies will play a key role in providing software and support for the legal sites.

What Can Licensees Expect?

Gaming operators and legislators are currently in negotiations on the details of any bills, but the gaming companies represented at G2E expect to pay around a 16% tax on net deposits or similar fees in exchange for the ability to advertise their sites.

Contributed by:

Suzanne P. Leckert

Director of Gaming, Feasibility & Land Use Analysis

suzanneleckert@tmg-consulting.net

Next G2E blog post:  Summary of new opportunities for land-based gaming in the U.S. and Asia

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

Upcoming Conferences

TMG Staff are active in their respective fields, regularly participating in industry conferences and continuing education programs.  Over the next few months, TMG staff will be attending:

  • American Public Transportation Association (APTA) Annual Meeting & EXPO 2011: October 2-5, 2011; New Orleans, LA
  • Global Gaming Expo 2011 (G2E):  October 3-6, Las Vegas, NV
  • Lorman Education Series “Public Contracts and Procurement Regulations”: October 14, 2011,  Kenner, LA
  • American Council of Engineering Companies Fall Conference: October 19-22, Las Vegas, NV
  • New England Gaming Summit: November 14-15, Mashantucket, CT
  • CCAA 35th Annual Conference on the Caribbean and Central America: November 30-December 2, New Orleans, LA

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.