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EiG day two; Austerity, Viagra and Roulette

18th October 2012 8:03 am GMT
EiG filled up Wednesday and everyone I spoke to seemed to be doing great business. It was busier and the hum of conversation was much louder.There seemed to be clearer heads than at many a conference. Most of the companies you would expect to be throwing parties were not - with the obvious exception of Cable & Wireless. So perhaps austerity really does work! Less hangovers, more deals. Someone tell the French! And the Greeks and… Ahem…. I really couldn't cope with another day of head-scratching about how the hell you make money out of social gaming so headed for the regulatory forum, where a truly stellar selection of the world's greatest regulators had been assembled. Retiring Nevada Gaming Control Board chairman Mark Lipparelli was forced to wait patiently while Birgitte Sand of the Danish Gambling Authority gatecrashed the party to give a five-minute advert for IAGR (International Association of Gaming Regulators). Yes, it's pronounced like viagra, which was confusing when she first told me in her Danish accent that she was going to do a five minute advert for viagra…I laughed awkwardly and put it down to her quirky sense of humour. When Lipparelli finally took to the mic, he was pleasingly focused. The gist was that federal ain't gonna happen, so we're going down a state-by-state route. That scenario is "sub-optimal", said Lipparelli. "It is not the best way forward for the industry. With the exception of the most populous states of California, Texas, Florida and New York, smaller states' ability to support igaming is questionable. And I include Nevada in that." So states have to start cooperating. And this was the crux of his presentation. He proceeded to outline all the obstacles that will stop states from cooperating. Firstly, different states will give their licences to different entities. Nevada has decided on large casinos while racetracks, cardrooms and technology companies are all lobbying for licences in California. Elsewhere lotteries may be running online monopolies. Can Nevada allow its casinos to share liquidity with a lottery and will XYZ lottery state do the reverse? Secondly, Nevada is asking for a modest fee of $500,000 up front then $250,000 a year therafter while California is asking for $30m. Thirdly, everyone pretty much agrees on poker and that is where cooperation is most needed to boost liquidity but there is a lot more to igaming, which other states might want to legalise. Taxation is a fairly simple hurdle to leap, reckoned Lipparelli, as states should just be able to agree on a point of consumption tax. But if that is an easy hurdle to jump then differing technical standards provide a "pretty serious threat to state-by-state efficiency". He admitted: "In Nevada we probably went overboard with particularly conservative  standards but the idea was to start conservatively and then gradually pull back." "It will take a long time to work through these five challenges," he concluded. He believes that 10 to 15 states will have legislation within the next two years but it will be three before states will begin cooperating. So we're into the waiting game once again. There were also some good questions from the floor about how to get licensed and who will get licensed. "There have been people who have applied for licensing who have some issues to explain," revealed Lipparelli. "There are some corporate structures that will not look the same way as they do now." That should get the gossips gossiping.A quick dash next door revealed a panel of social media types looking quizzically at their incomprehensible moderator so it was back to the heavy regulatory stuff. Except it is not so heavy when you have panellists as witty and intelligent as the likes of Sand, Italy's Francesco Rodano and Peter Naessens of Belgium. The first topic was the size of the black markets in their respective countries. There had been some debate about the size of the French black market at the end of the previous panel but these regulators were happy to reveal as much as they knew. Sand said the black market was now smaller than the legal market: "We have succeeded in making the legal market more attractive." Naessens said Belgium had 300,000 registered users with its licensed entities - which seems remarkably small - and about 500,000 users of illegal sites. "We know the illegal market is there and it is attractive but it is diminishing," said Naessens. Carlos Hernandez Rivera of Spain said there were 200 illegal sites and half of them have now closed down. "The only way is to block the illegal market is to regulate the legal site so it is as competitive as illegal sites. You need to give customers the experience they want," commented Rodano. Italy's illegal slot market is about 75 per cent of the whole, he said, and about 40 per cent of the sports betting market is illegal because there are restrictions on the legal product. Poker on the other hand is nearly 90 per cent legal. "We are working on the regulations to make them more flexible," stated Rodano. Next followed a brief discussion about the benefits of cooperation. Rodano and Hernandez Rivera said that they could be in a position to share liquidity across their borders by next year but admitted it was early days in the discussions aimed at making it happen. However, there is the will and the regulations are structured in a way that will allow them to do it. A final question about regulating social gaming revealed it to be a topic they are all grappling with. The general view, expressed by the UK Gambling Commission's Paul Morris, is that if it looks like gambling then it probably will be regulated. Naessens and Hernandez Rivera revealed they would happily block access to Facebook if they deemed it to be contravening current gambling laws. In Belgium's case that would just be offering games of chance, which could cover most social casino games (with or without real money winnings). That would cause an almighty stink. Quote of the day also came from Naessens, who listed off a number of things his organisation was trying to defend against; examples included fraud, money laundering, underage gambling etc. "We are not defending a blind trust in the freedom of private enterprises," he concluded firmly. While these regulators are not to be trifled with they are not unapproachable and operators should feel happy discussing any issue or concern. All want to make their regulations better. They just have different means to the same end. Much of the afternoon was given over to the increasingly popular StartUp LaunchPad - EiG's very own Dragon's Den. The Dragons, er, panel of esteemed investors and founders were hugely impressed with the quality of the five start-ups. Indeed the professionalism of the presentations was light years ahead of some nervy entrepreneurs from previous years. The panel of experts were split on their favourites. Mark Blandford was intrigued by Sofun's reinvention of sports betting for the French market. "Sofun is a great example of localising a game to meet a specific market need. It appears to have found a way of leaping the tax barrier," he said. Tombola CEO Phil Cronin agreed on Sofun but also liked the look of LocusPlay, a lottery platform that can be rolled out quickly in regions with lower bandwidth availability. Velo Partners' Evan Hoff was also impressed by the potential for LocusPlay to tap into an enormous market but probably favoured Colossus Bets and its high-prize pools product. Venatus Interactive MD Edward Pfeiffenberger was seduced by the five-hour integration times of GoPlay's B2B social solution but also liked Living Sports and its RouletteCricket and RouletteFootball games. Indeed, it was Living Sports that emerged triumphant with 35 per cent of the popular vote. This UK-based company has just five employees but has already sold its product to Blue Square and Ladbrokes. It is a similar concept to Passoker, the LaunchPad winner from two years ago, which merged poker with in-play sports betting. Passoker has gone on to sell its product to BetVictor and William Hill so you may well be hearing a lot more from Living Sports and its Roulette games. CEO Dave Tharp said that RouletteDarts, RouletteRugby and RouletteBaseball are coming soon. He said the company was growing in Latin America via deals with Coca-Cola, ESPN and MoviStar. Its biggest audience is in India….this is a company that is hitting some interesting sweet spots. Which was a nice point to end on. The number of delegates at Barcelona Airport with me suggest Thursday will be another quiet day. But Wednesday? Wednesday was good.sah@gamingintelligence.com
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