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Gaming Guru

Lorien Pilling
 

AiG Recap: Future for I-gaming in Asia Still in Question

5 March 2008

Back in February 2007 the I-gaming industry was still looking for a new direction after the closure of the US market. At that stage Asia was already being mentioned in some quarters as the region to replace the lost revenues. Twelve months later, the fact that the 2008 Asian I-gaming Congress boasted the highest attendance in its six-year history (with more than half of delegates coming from outside of Asia) served to confirm the industry's determination to explore the opportunities in this market.

Apart from a few excursions into Vietnam and the Philippines, the majority of the sessions concentrated on China. Inevitably, the phrases '1.3 billion people', '200 million Internet users' and 'huge potential' featured all too often across the three days. Although they are all probably accurate, simply repeating them over and over again will do nothing to help solve the underlying problems of entering the Chinese market.

An insight into the regulatory environment of this market was given in the session on China's lottery sector, which is the only state-approved activity on the mainland. Operators should take careful note of some of the sudden decisions the authorities have taken recently regarding lottery operations.

First, the Ministry of Finance ordered the cessation of all Internet lottery sales as national and provincial governments try to decide who has authority over these operations. Second, it removed the most popular games from the video lottery terminals (VLTs), which were the main cause of lottery revenue increases in 2007.

A combination of regulatory uncertainty that affects even approved lottery products and an apparent governmental nervousness about any game that becomes too popular does not sound like a set of conditions to inspire business confidence.

One speaker in a separate session, however, did try to see some advantages in the current business climate in China. At this time of growth and entrepreneurialism he suggested an approach of 'ask for forgiveness, not for permission.' Presumably his thinking was as follows: as permission is unlikely to be granted, go ahead and run the business anyway. If it comes to the attention of the authorities, ask for forgiveness, perhaps pleading ignorance of any regulation too for good measure.
This is certainly a brazen strategy and it was difficult to assess quite how seriously he was suggesting it. It might have some merit for a new start-up, but it is difficult to see the board of listed company clamouring to embrace such an approach.

But what is true is that business models will have to be adapted for different Asian markets. It was noticeable in several presentations that a mix of online and offline activities seemed to be a successful model. Examples included PAGCOR's gaming cyber-cafes in the Philippines and CY Foundation's organization of online tournaments in Internet cafes in various Chinese cities.

This mixed online/offline strategy is subtly different to the one currently employed by online gaming companies in European markets. Online poker firms are used to organizing offline poker tournaments with big prize pools and seats for online qualifiers. But these tournaments tend to serve as marketing devices, acting as a showpiece event that can perhaps gain some television coverage and promote the brand.

In the Asian case studies, however, the offline elements were key revenue generating activities. Will pure online gaming companies be prepared to get involved with the 'messier' models of running numerous small scale offline tournaments or the management of a network of Internet cafes/entertainment centres?

The importance of mahjong's role in successfully establishing a hold in Asia was also the subject of much discussion. Mahjong can be played online and offline in China because of its official designation as a sport (as opposed to a gambling game). Indeed, the conference was used to announce a couple of partnerships between online operators and tournament organizers.

Mahjong was frequently referred to as the 'Asian poker' -- not for any particular similarities between the two games, but for the pivotal role it has to play in developing the I-gaming market across the region. But Desmond Chu (Jupiter Entertainment Asia) did an excellent job of explaining why there are still crucial differences between mahjong's situation at the moment and that of poker a few years ago.

First, there is fragmentation in the mahjong tournament sector. Chu listed the World Series of Mahjong (World Mahjong Limited), Mahjong Super Cup, World Series of Mahjong (Gigamedia), World Mahjong Tour, and the Mahjong World Tour.

In addition, there is great variety in the rules used to play mahjong in different parts of Asia. There have been attempts to create a standard set of rules but it does not yet compare with the widespread take-up of Texas Hold'em in the poker sphere.

Poker's boom was also fuelled partly by television coverage which brought the game to wider prominence. Mahjong does not enjoy the same coverage in Asia, partly for legal reasons. But there are developments afoot to try and increase coverage and 13 one-hour episodes have been made of World Mahjong Limited's 2007 World Series of Mahjong.

All of the above factors have conspired to make it difficult to create celebrities of the winners of the various big tournaments. Poker was blessed with characters with interesting stories that attracted wider attention. So far, mahjong has yet to emulate poker by finding a similar tournament winner.

In some respects, the Venetian Macao was, perhaps, not the most appropriate venue for the Asian I-gaming Congress. The Venetian is a glamorous, hedonistic wonderland of gaming and entertainment; a little piece of Venice in the South China Sea to make Marco Polo feel at home.

But rather than being seduced by such realms of fantasy, what the I-gaming industry really needed at the conference was a large dose of harsh, down-to-earth realism.

The overriding conclusion drawn from the three days is of the complex web of regulatory, operational and technical difficulties that has to be solved in the Asian markets. Whilst the rewards for the companies that find effective solutions will be great, there will be a lot who find themselves badly burned by the Chinese dragon.

AiG Recap: Future for I-gaming in Asia Still in Question is republished from GamingMeets.com.
Lorien Pilling
Lorien Pilling