Annual Top Trends in Gaming

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Since 2005, Spectrum Gaming Group has been identifying the most significant trends gaming for the coming year. We work with our sister companies, Spectrum Asia, based in Bangkok, and Spectrum Gaming Capital, based in New York City, to track and understand these trends throughout the year for the benefit of our work with private- and public-sector clients.

Gaming Trends

2019
  1. An increasing number of jurisdictions around the world will seek to authorize integrated resorts – largely through a competitive bidding process – as the most effective means of leveraging gaming as an economic tool to help achieve their policy goals. Related to that, Japan will appoint a gaming oversight board and promulgate IR regulations, and prefectures will position themselves to attract and be selected for IR sites by the national government.
  2. In Asia, the online gaming industry – including the streaming of casino games to China from the Philippines and Cambodia – will begin to face scrutiny from China and from international regulators. Concurrently, we expect changes to the Asian junket industry as some junkets position themselves as casino operators and others go out of business as the reliance on junkets diminishes in Macau and Macau continues to evolve as a mass and premium-mass market.
  3. Sports-betting legislation will continue to proliferate in the United States and gain momentum, as we expect at least nine state governments and lotteries to begin the process of authorizing legal sports betting, spurred by various forces, including the fiscal needs of states. Concurrently, the relatively slow acceptance and expansion of online gaming in the US will speed up in 2019, fueled in part by the proliferation of sports betting in a digital format, as well as by the need for legislatures to plug budget deficits.
  4. The interest of lotteries to expand into both igaming and sports betting will grow significantly, creating competitive tensions in jurisdictions that have both lotteries and either tribal or commercial casinos, requiring legislatures to address such conflicts through new policies that provide limits as to the online channels and offerings that lotteries and casinos can pursue.
  5. Private companies and organizations that have not previously been involved in any form of legal gaming, such as sports bars and restaurants, will seek to offer sports and/or online wagering, largely choosing to become lottery retailers, as they follow the lead of lotteries into this burgeoning field. More states will respond to fiscal pressures by expanding their gaming offerings through additional licenses, lottery expansions, retail gaming and other means, prompting existing land-based casino licensees to push back, as they view such expansions as detrimental to their operations and to the value of their existing licenses.
  6. Lotteries that seek to offer mobile and online sports betting will be pressured to adopt regulatory policies that have to date largely been limited to gaming operators, including more robust, comprehensive licensing of retailers, as well as rules governing areas ranging from internal-control submissions to responsible-gaming policies and other areas.
  7. States and tribal governments that have existing compacts that did not contemplate online or sports betting will face increasing pressure to overcome their reluctance to open compact negotiations to address these areas.
  8. European and Asian B2B sports-betting and online gaming providers will seek entry points into the US market, with many facing challenges due to previous online ventures into gray and black markets. This will prompt legislators and regulators to develop clear, uniform definitions as to what constitutes a gray or black market. Concurrently, as online and sports betting expand in the US, regulators and legislators will be pressed to restrict and regulate advertising and related rules, following similar plans under consideration by some major European jurisdictions — including Italy and the United Kingdom.
  9. More gaming and pari-mutuel operators, from large integrated resorts to small race tracks, will seek esports offerings, in part to better leverage under-utilized space, and in part, to address an aging slot demographic. Offerings will range from offering esports as an amenity to ultimately offering esports as a wagering opportunity.
  10. M&A activity is likely to ramp up in US casino operations, as online gaming consolidation in general will continue, as sports book/online platforms and operators will be on the radar for US operators and suppliers. Related to that, we expect European players to be hunting for US acquisitions as well.
2018
  1. Through legislative and/or judicial action, more states and tribes across the U.S. will look for ways to legalize sports betting, as well as iGaming, while political struggles will ensue between those who seek federal oversight of sports betting versus those who seek to keep all forms of gaming within the purview of state and tribal governments.
  2. After a decade of debate and missed opportunity, casino gaming in Japan is expected to be legalized in 2018. A battle is then anticipated over the following one to two years between international operators and domestic corporations for one of the three expected licenses.
  3. As forecast by Spectrum last year, Macau has generated much stronger GGR across the board ($16.7 billion, or 15% growth YOY through the first half of 2017). However, as the crackdown on corruption in China continues into its sixth year and new property openings are scheduled for 2018, there are still challenges ahead for the market.
  4. Gaming operators will focus on legalization opportunities in the critical jurisdiction of Brazil, as up to 35 casinos could be authorized under new legislation.
  5. Skill-based gaming will ramp up, with new product offerings from both the traditional equipment suppliers and skill-based leaders Gamblit and GameCo.
  6. U.S. states that already legalized casinos will attempt various means to plug budget deficits, including the addition of retail gaming, i.e., electronic gaming devices in liquor-licensed establishments and truck stops.
  7. Online gaming in Europe will come under greater compliance pressure, leading to further consolidation of operation and supply, while affiliate marketing will endure greater scrutiny.
  8. A second major wave of new property openings (from small-scale to full integrated resorts) is expected in Asia (most notably Macau, South Korea, Philippines, Cambodia and Vietnam) in 2018. Spectrum does not foresee that the broader regional gaming market will become oversaturated as a result of these changes.
  9. Emerging markets in Africa, Asia and parts of Europe will look to the integrated-resort model as a means of growing their tourism industries and generating tax revenue.
  10. With its emergence from bankruptcy, Caesars Entertainment will become a renewed force in global gaming expansion and consolidation.
2017
  1. Significant expansion opportunities are expected to arise as legislation is crafted in Brazil, India and Japan.
  2. Lotteries and casinos will both seek online opportunities — sometimes with competing efforts in the same states and countries, creating competitive challenges that legislators and regulators must sort out.
  3. Casinos will leverage their under-utilized square footage to create special attractions for Millennials, including lounges, entertainment, and skill-based gaming options.
  4. States will attempt to overcome stagnating gaming receipts by proposing new forms of, or locations for, gaming such as retail gaming (i.e., a limited number of electronic gaming devices in liquor-licensed establishments), satellite casinos, and slots at airports.
  5. Proponents of legalized sports betting — including the American Gaming Association, state associations and individual operators — will push their agenda more forcefully as state budgets continue to be strained, and as major sports leagues seek to capture a substantial new revenue stream.
  6. Macau will again become a growth story as gross gaming revenues continue to climb and new integrated resorts open. The mass market will dominate and VIP play will decline to less than 50 percent of GGR for the first time since Macau reverted back to China.
  7. The trend toward private management and, in some instances, private ownership of lotteries will accelerate in various countries and US states.
  8. State legislatures will face pressure to reduce gaming tax rates, as well as to amend or streamline regulations, in response to increasing competition and the potential for saturation in various markets.
  9. More casinos in Las Vegas and Atlantic City will stage eSports events and contests, while Atlantic City will attempt to reposition itself as an eSports hub.
  10. The South will be a focus of casino opportunities, as the potential for legalization and expansion is debated in Alabama, Florida, Georgia and Louisiana.
2016
  1. States weighing legalization, expansion or current performance of 1. With the exception of the Las Vegas market, casino expansion occurring in the Northeast US demonstrates that bricks-and-mortar casinos parallel the gravity-effect of the retail industry in that convenience trumps all else with respect to demand and visitation to regional casinos, further saturating that market. As revenues stagnate or decline, gaming operators in various states will seek tax relief and other remedies.
  2. The legal and regulatory issues involving daily fantasy sports will continue to be prominent in statehouses across the country while the DFS industry moves to implement a self-regulation model in response to challenges to its legality.
  3. State lotteries, seeking grow revenues in the crowded gambling space, will push to sell their games online � and develop games specifically suited for online sales and play.
  4. Atlantic City which faces the likelihood of a 10th straight year of declining gaming revenue will have more clarity by year end, as the future of Revel, Showboat and Drumpf Taj Mahal properties become known and the State of New Jersey tries again to authorize a vote in casinos in the northern part of the state.
  5. More states, seeking to recover or enhance gambling receipts, will follow the lead of Illinois by considering retail gaming, which is the installation of a limited number of electronic gaming devices in authorized establishments.
  6. Junkets and VIP room operators in Macau will be under increased revenue pressure until they change their business model and comply with Chinese laws and procedures for high-value patron play. With four new properties expected to open in 2016 (Parisian, Wynn, MGM, Louis XIII), all eyes will be focused on whether this new supply can grow the Macau market � with revenues expected to stabilize at US$26 billion � or be another factor contributing to its constraint.
  7. Gaming operators will begin to focus their attention on how to attract millennials as an emerging generation of consumers.
  8. The US Treasury Financial Crimes Enforcement Network (FinCEN), Financial Intelligence Units and international law enforcement will continue to aggressively combat money laundering in casinos.
  9. Financial institutions will continue to monitor their casino clients to ensure full compliance with agreements made with banking regulators in the United States and Europe.
  10. Gaming expansion will continue throughout Australia and Southeast Asia, but it remains unlikely that Japan will legalize casino gaming in 2016.
2015
  1. States weighing legalization, expansion or current performance of casinos will have to deal with the impacts of market saturation within and beyond their borders. The national pie will grow slowly, but many markets will continue to be flat or declining.
  2. Asia will continue to be the focal point in global gaming, as governments and developers armed with nine- and ten-figure checks seek to tap the lucrative Asian market, from Vladivostok to Saipan to Cambodia.
  3. Las Vegas will continue to show strength, as it benefits from increasing international visitation, from added non-gaming major attractions such as the High Roller, and from the anticipation under-development major projects such as Genting�s Resorts World Las Vegas and the MGM-AEG arena.
  4. Atlantic City will move toward stability with fewer casino operators and a renewed focus on non-gaming resort development, assisted by state aid. The city will continue to be displayed as an example of the dangers of dependency on gambling revenues.
  5. Macau will continue to be challenged in the near term due to the Chinese crackdown on corruption, and in the longer term due to increased competition in Southeast Asia.
  6. There will be continued expansion efforts in the Northeast US, with movement closer to population centers that will result in more market share shift than new growth, continuing to pressure older markets such as Atlantic City, Delaware and Connecticut.
  7. Flat and declining growth in regional markets will continue to be a driver of M&A activity, spurred also by activist investors.
  8. US and international law enforcement agencies will continue to enhance compliance and enforcement efforts regarding money laundering in financial institutions, casinos in particular.
  9. Tribal gaming will continue to expand, innovate, and increasingly compete on an equal footing with commercial casinos while continuing to push the envelope with off-reservation casinos and Internet wagering.
  10. The convergence of gaming will continue, with casinos, lotteries, i-gaming, social games, pari-mutuel, and bingo offering products that cross into the others traditional space.
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