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5 Things To Look Out For In The eGaming Market in 2016

Edmund Ingham, @haggerstontimes
12.15.15
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Online gaming got big in 2015 and it's pretty safe to assume that it will be even bigger next year. Take a look at the five areas I have selected where e-gaming battles will be won and lost during 2016, and please feel free to add your own comments and opinions below.

1. The move to mobile – mobile gaming is expected to reach 16.6% of the total e-gaming market in 2015 and the industry is expected to reach 8.5 billion mobile connections by 2017, 50% of which will be from Asia pacific. This will be driven in part by social gaming and in part by the fact that mobile gaming is set to overtake console gaming in terms of revenue, bringing home $30 billion plus this year according to estimates. Console gaming revenues have fallen to around $26.9 billion. It seems games like Angry Birds and Candy Crush, which has been downloaded more than 500m times are more suited to the modern consumer lifestyle; expect gaming companies to attack this space next year.
More research suggests 164 million people worldwide will use mobile devices to gamble in 2018 with the strongest growth expected in North America. Revenues from mobile gaming could exceed $100 billion in 2017 as new developments in the industry such as in-play betting which is easier to do using mobile than on desktop or over the telephone reduces the numbers of people using these "legacy" services. Gambling operators will be looking to secure 50% of their revenues from mobile over the next 1-3 years.
2. The battles over regulatory policy continue – To put it bluntly, the legal and taxation framework around online gaming pretty much anywhere you look is in a mess, and nowhere more so than in Europe, where the largest legal online gaming market in the world can be found in the UK. Understanding the current state of play will help us to draw conclusions about 2016.


Whilst the European Commission promotes the free movement of services across Europe and is trying to open up national and state owned markets, the European Court of Justice recently ruled that EU countries could ban online gaming sites operating from offshore; this is known as "cross border blocking". Around nine countries in the EU run a single state monopoly provider and find themselves under pressure to create cross border liquidity from the EC.
Research suggests Italy will soon become the largest legal online market having made online games of skill legal in 2007 and online casinos in 2011. Italy insists that online sites must be licensed in Italy and uses filters to block offshore sites in contravention of EC guidelines.

In Greece the EC rejected 2011 legislation that stipulated all sites must have a guarantee from a Greek bank and be registered within Greece. Online gaming remains illegal in Germany, has only recently been legalised in the Netherlands and is permitted, albeit heavily regulated with taxes for overseas bets and gaming duties, in Spain.

Governments are waking up to the fact that legal gaming sites can bring in money through taxation; in the UK operators pay a 15% tax if they are registered there whereas those registered offshore pay significantly less tax. This looks likely to change. Then there is the question of whether to tax gamblers at source or to tax gaming companies on the profits they make, or both. Excessive taxation can obliterate the profit margins of gaming sites and present an unattractive market for an offshore or an onshore enterprise. Taxation at source is unpopular with consumers but Germany in particular will look to do this should they decide to make e-gaming legal.
In the US the situation is in a similar state of flux with different states bickering with local law enforcement about what constitutes approved versus unapproved betting.

There's no doubt that, across the world, gaming companies and law makers have struggled to come to terms with how to police the inexorable rise of online gaming, missing out on profits and lagging behind their illegal competitors who are proving to be more adaptable.

3. Explosion of the Social Gaming Market – social networking is becoming an increasingly important driver of growth and activity in the global gaming markets. Sites like Second Life successfully ran virtual casinos and lottery games during the early noughties but closed their doors to gamblers in 2007 as regulators began to circle. In the future social networking platforms are expected to play a big role in the rise of skills based games and fantasy sports leagues such as Fan Duel; users will be able to share the results of their sports betting as well as making side bets with friends.
Affiliate sites also play a big role in driving traffic to e-gaming sites. Sites such as Betting Expert where tipsters can make bets and enter competitions to see who's predictions are best as well as educational sites for newcomers to casino games like Crapsgeeks and Roulettegeeks. Social gaming is expected to reach a market size of $4.7bn by the end of 2015. These kind of sites can flourish in geographies where real-money online gambling is restricted.

3. The rise of the virtual reality casino – "Virtual reality is definitely one of the hottest topics within the tech and gaming industry at the moment" says Henrik Dam Honore, Head of Pilot Plant at Better Collective. "At the recent WebSummit 2015 in Dublin a lot of focus was on the topic and just seeing the amount of start-ups building their business around VR is staggering."

Recently the first VR casino launched their product (Casino VR) and more will soon follow. "It's quite amazing how all of this is happening even before there is an actual product available on the market that can give a good VR experience. Everyone is waiting for Facebook's Oculus Rift to go on the market some time in Q1 2016."

"The first wave of VR will be focused on games and movies and it will be from here that most people will start to get familiar with using VR. But I believe that soon after we will see other areas like education, sports and definitely igaming coming to the masses."
"Sometime not too far in the future we will think back and wonder how strange it was for us to be sitting in front of screens, or pulling up our phone from the pocket to watch something, when we at this point will be able to see just what we wish - right in front of us."
Head of Markets & Products, Adam Bielinski, thinks the onset of Virtual Reality could be the biggest single development in the igaming industry during 2016, typified by one particular product.
"The Virtual Casino product presented mid-year by Slots Million operator. I think that would be the future of online gambling. Virtual Reality seems to appear in many industries and the moment it would appear in every house is just the matter of few years away. The next step would to be have live casino dealers within a virtual casino."
"I am looking forward to see how the Virtual Casino will develop. How fast players can get used to wearing VR glasses and enjoying playing different slots."
Fears about the Global Economy – when a recession hits it's often the luxury goods or the unnecessary purchases that consumers cut spending on first which puts an industry like online gaming at risk. Consumer confidence dictates to an extent whether a person is likely to gamble or not so the state of the global economy is of crucial importance to the continued success and growth of online gaming. In 2009 immediately after the collapse of the global financial market casino gaming spending in EMEA dropped by 12%, and by 3.5% in the US.
There is a trend towards higher growth in the East and the Asia Pacific regions amongst both bricks and mortar and online gambling and this is likely to become even more pronounced if fears of a double dip recession are confirmed. Another impact of a global economic downturn could be to switch more users on to mobile or online devices and digital media, perhaps gambling more often but with smaller wagers, with less of the ostentation of a bricks and mortar casino.
There's a lot to consider from a financial as well as an entertainment perspective when it comes to predicting what the future might hold for casinos but there are some certainties it seems – the industry will continue to grow and develop and as it solves one set of problems it is likely to be confronted by more. As long as profit margins aren't eroded too steeply experiencing the full gamut of VR or social features as they become available will be a thrilling experience for many online gamers.

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