08
Oct
Like a worried bunch of Chicken Little’s, the economic commentaries have been busily scaring the world’s markets with the doleful cry ‘China is slowing, China is slowing’ as more evidence emerges that the country’s economy is stuttering.
In truth, the markets have good reason to fret. A slowdown in China translates into outright recession elsewhere as demand for commodities and raw materials drops off and the emerging markets have all suffered the ill effects from the Chinese economic malaise.
So how is this affecting the gaming markets in each of the BRIC markets of Brazil, Russia, India and back at the epicentre China? Well, that very much depends on what market you are talking about, and in particular whether you are focusing on the regulated markets in each country, such as it is, or the offshore-licensed market.
As far as China itself is concerned, it is hard to see any visible effect as yet. When it comes to official gambling in Hong Kong, for instance, the news from the opening of the Hong Kong Jockey Club’s (HKJC) horseracing season showed both crowd numbers and betting turnover holding up well. For the first night, a near record of 72,000 fans showed up with betting turnover hitting a record of HK$1.15bn (£98m).
Harder to divine, of course, is the offshore-licensed market largely operating out of the Philippines. One of the only proxies we have here is the results from Playtech and like the HKJC turnover figures, they are yet to show any signs of stress (though analysts will be looking closely at the growth regionally in the upcoming third-quarter trading statement). But as Nick Batram, analyst at Peel Hunt suggests, here as well as with regards to grey online betting “it would be interesting to see whether those investors in the Chinese stock market were also gambling elsewhere”.
Macau would be the most obvious stopping off point for further correlation signals, and the recent falls in revenue in the gambling enclave would provide strong testimony if it weren’t for the fact that this is almost wholly a by-product of the – not altogether unrelated – corruption crackdown currently being direct by Beijing.
As Batram says: “The reality is that when you talk about the impact of economic recessions on a variety of markets you will be talking about different demographics, in differing countries and with differing products.”
Elsewhere in BRICs-land, there are similarly unclear indications of there being any recessionary impact, particularly when it comes to the business of overseas-licensed operators.
The economic slowdown in Russia is just one of a legion of troubles facing the gaming operators in Russia. As opposed to China which is dealing with a slowdown in growth, Russia has been facing an outright recession for much of the last two years caused by the collapse in the value of the currency.
But Lee Richardson, Founder of Gaming Economics and someone with both clients and contacts working in the Russian market, suggests they are yet to see any impact from the economic hard times afflicting Russia. “From what I have heard they have seen no ill effects of the recession in Russia, in terms of revenue,” he says. “It certainly seems a fairly recession-proof product there. There has also been no impact from the political situation.”
One aspect of the situation in Russia – and elsewhere in the former Soviet republics – that is having an effect on the online gambling space is the currency crisis, and what this might mean for the uptake of crypto-currencies.
“Bitcoin for egaming in Russia is strong and getting stronger,” says Richardson. “That is at least partly the rouble effect, I would say. Anywhere in that region where there is a currency crisis, crypto-currencies are gaining favour.”
The desire to devolve further from state control is understandable, particularly when it comes to gambling regulation in Russia. As Richardson suggests, the country’s record when it comes to the oversight of gambling it patchy at best. “They just play by different rules,” he suggests. “There is a regulatory process in Western Europe, but Russia doesn’t appear to have that overall approach. It is utterly different.”
Instead of any clear path we have a confusion of rumours and counter-rumours regarding both poker and sports-betting regulation but little real prospect of any actual concrete proposals.
The outcome is somewhat similar to the situation in the remaining BRIC nations of Brazil and India. In Brazil, despite recent proposed legislation that would have seen both a lottery and fixed-odds betting licenses issued, the politics of legalising gambling would appear to have scuppered the move. This despite the obvious need for tax revenues and what one would imagine would be the popular aim of using the proceeds to fund the development of football in the country. Similarly in India, despite (or perhaps because of) the obvious popularity of sports-betting the Indian state has yet to look at regulation.
The tangled history of gambling regulation across all the BRICs countries goes to prove that gambling in whatever format remains as much of a political hot potato as ever.
Though as Batram points out, “no politician has ever lost votes by proposing to raise gambling taxes”, having to institute regulation of the activity before the tax and duty benefits are evident is a trickier political high-wire act to negotiate.