The casinos and gaming sector will be analyzed taking companies that offer gambling and betting facilities as players. The key buyers will be taken as individual customers, and machines, equipment and license providers, property owners, developers and real estate companies, interior design and furnishings companies, architects, management and training service providers, marketing companies, industry consultants and ICT manufacturers as the key suppliers.
The casinos and gaming sector consists of forms of online and traditional betting. The existence of addictive forms of gambling behavior indicates that some consumers are not making rational economic decisions and become dependent on gambling in their everyday lives. Such patterns are evident in many Asia-Pacific regions, and weaken buyer power accordingly.
On the other hand, gambling is recently feeling the effects of the economic downturn - even though it has long been thought to be "recession-proof". Within this sector, size matters and a handful of suppliers dominate. Participants benefit from regulatory barriers to entry, keeping this business relatively isolated.
Recent economic downturn is affecting gambling and casino sector with a long losing streak that is bound to last a lot longer, and the suppliers of slot machines, video poker, lotteries and other games face being dragged along for the unwelcome ride. Recently, the laws concerning online gambling have been more relaxed as governments see gambling as potential source of income that could contribute towards fighting the global economic crisis.
With online gambling being illegal, the revenues are lost as government receives no taxes from such activities even if they are conducted illegally. Almost any leisure activity can act as a substitute for gaming and casinos. As a result, the threat from substitutes is assessed as very strong.
Amongst the gambling facilities operators there are also national players present and restriction exist preventing international operators from entering the sector, thus protecting local players and limiting rivalry level somewhat.
The casinos and gaming sector consists of all forms of online and traditional betting. Due to good growth and the popularity of different gambling activities within Asia-Pacific means, the number of buyers is large and still increasing (i.e. although Japanese market has been in decline, the average Japanese adult per year loses gambling more the average American; Singapore, which dropped its gambling ban in 2005, sees casinos as an important part of a broader effort to promote itself as a getaway for tourists; and Macau overtook the Las Vegas Strip as the world’s Number 1 gaming market).
Attitudes and approaches to gambling are different across the world. Whilst many Europeans treat gambling as entertainment, inhabitants in the Asia-Pacific region often view gambling in utilitarian terms; as a way to make money. The number of buyers is huge and still increasing. The wide variety of potential customers weakens buyer power in this sector considerably.
Activities within this sector are non-essential leisure activities. Consequently, it would be expected that such activities are not vital to buyers. However, this issue is complicated by gambling addictions. The existence of addictive forms of gambling behavior indicates that some consumers are not making rational economic decisions and become dependent on gambling in their everyday lives. Such patterns are evident in many Asia-Pacific regions, and weaken buyer power accordingly.
On the other hand, gambling is recently feeling the effects of the economic downturn - even though it has long been thought to be "recession-proof", which may lead to stronger buyer power reducing buyers' number. Market players can differentiate between activities in a number of ways - e.g. type of gambling (lottery/gaming machine/poker/black jack/sports betting etc.) and through the way in which activities are distributed (online/casinos etc.). There are also different payoff's margins.
Loyalty to a particular market player is unlikely to be high, although the presence of membership requirements in many casinos can ensure that customers are retained. Switching costs for consumers vary according to the type of gambling taking place.
For example, many casinos require annual membership fees, which generate switching costs should consumers change to a different casino before the annual membership expires. However, generally switching costs remain minimal, strengthening buyer power.
The growth of disposable income levels has increased buyer power further. Overall, there is a moderate degree of buyer power within the Asia-Pacific casinos and gaming sector.
Inputs to this sector vary according to the player. Generally, due to the fact, that this sector offers a hospitality service, and largely depends on the quality of service provided, skilled employees are required. Real estate rents or leases are often required, as are gaming machines.
Within this sector size matters and a handful of companies dominate. Participants benefit from regulatory barriers to entry that keep this business relatively isolated. These equipment, machinery, and services companies may lack the name recognition of the large casino operators, but when one enters a casino, visits a racetrack, or plays a state lottery, there's an odds-on chance they will bet on something made and sold by International Game Technology (IGT) WMS Industries (WMS), or Shuffle Master. Currently these incumbents have been joined by others, including foreign firms entering new markets and since the gaming industry is highly important to their survival, supplier power is weakened this way. Larger suppliers decided to diversify geographically to reduce dependence on just one particular market, however most manufacturers of gaming machines tend to specialize in this sector.
The recent economic downturn is affecting gambling and casino sector with a long losing streak that is bound to last a lot longer, and the suppliers of slot machines, video poker, lotteries and other games face being dragged along for the unwelcome ride. When casinos do well, they replace and repair games more often. When casinos slump, they don't move as fast in making replacements.
However, there is still some opportunity for the gambling technology industry out there. There are still regions where different forms of gambling are not yet available. Opening the sector for new forms of gambling - i.e. casinos in Taiwan or Singapore, creates new possibilities for business expansion. Overall, the supplier power is moderate
The casinos and gaming sector operates differently from country to country, according to regulatory and legislative barriers, which often reflect the cultural acceptance of gambling in a particular country.
For example, Macao is the only place in China where gambling is legal, and it is only in recent years that many ordinary Chinese people has been able to get permission to visit the city. As such, the area is booming and is often described as 'Asia's Las Vegas'.
Lottery business may constitute a lucrative form of gambling operations as according to reports by China's Ministry of Finance, China's total lottery sales revenue has been enjoying rapid growth. The laws in Japan do not allow any form of casinos operated in Japan. The only gambling activities that are allowed are: horse racing, pachinko, and the state lottery and neither of those carry the attraction of online casinos.
Although Japanese market has been in decline, the average Japanese adult per year loses gambling more the average American. Also, Japan's lottery industry shows that it is generally little affected by changes in the economy. Japan's ruling party is considering legislation to legalize casino gambling as the Japanese public is becoming more tolerant of gaming and realizes the benefits of legalization, such as an increasing tourism market. At present Pachinko (a pinball game) substitutes gambling in casinos.
It skirts Japan's gambling ban because players exchange prizes for cash outside pachinko parlors. Entering gambling sector in India may also be hampered. Gambling in India is limited. One casino exists in Goa - the CasinoGoa. Other than lotteries, legal gambling in India is limited to betting on horse racing. In South Korea, ca. 17 casinos exist, however new entrants may be discouraged by the government's plans to limit total annual revenue of the gambling industry, including horse racing, lottery tickets and casinos, to 0.58 percent of gross domestic product, according to South Korea's National Gaming Control Commission.
Despite the global downturn, industry growth for Australia's casino sector should remain relatively stable in the next few years. Singapore lifted a 40-year ban on casinos in 2005. It hopes to open $3.2bn Marina Bay Sands, being built by Las Vegas Sands, in 2009, and Genting's $3.1bn Resorts World in 2010. The outlying islands of Taiwan will now be open to legal land-based gambling. However, its mainland will remain inaccessible to companies such as MGM Grand and the Las Vegas Sands Corporation.
Due to the fact that regulations concerning online gambling have been relaxed recently in many regions, operators of gambling Web sites view Asia-Pacific as the Promised Land. Previously, difficulties in moving money in and out of many countries and a lack of reliable telecommunications infrastructure and ready access to the Internet by potential customers prevented the sector from taking off in the late 1990s, when the more-developed and affluent U.S. and European arenas were growing rapidly.
Recently, the laws have been more relaxed as governments see gambling as a potential source of income that could contribute towards fighting the global economic crisis. With online gambling being illegal, the revenues are lost as government receives no taxes from such activities even if they are conducted illegally - i.e. The Gibraltar-licensed Virtual Holdings Ltd., which operates the Casino-on-Net, 888.com and PacificPoker Web sites, takes wagers from Hong Kong residents but advises them to "check the legality of online gambling in the jurisdiction where they are located" before betting.
Generally, entry to this sector can be achieved on a smaller scale through the development of online gambling sites. Setting up such sites does not require huge overheads and is not labor-intensive.
However, a new company would require fairly large amounts of capital to set up casinos employ staff and acquire gaming equipment.
The willingness of customers to switch from one gaming company to another and easy access to suppliers are conducive to the entry of new players. The likelihood of new entrants remains moderate overall in this region.
For the casinos and gaming sector as a whole, almost any leisure activity can act as a substitute, which can be taken up with minimal switching costs and may also be cheaper than gaming for consumers. Aside from cost advantages, some customers may value social aspects of using gaming facilities; however the threat of substitutes in this sector is strong.
The Asia-Pacific casinos and gaming sector has a significant number of companies. Many of these incumbents are large. Amongst the gambling facilities operators there are also national players present, i.e. Japan's government-run horseracing industry or national lotteries in other Asia-Pacific countries. In some countries, restrictions exist preventing international operators from entering the sector, thus protecting local players and limiting rivalry level somewhat.
For many, gaming is the sole or principal activity, meaning that it is vital that they maintain gaming revenues. Some companies, however, have a more diverse offering - for example, casinos may be incorporated into a more general leisure facility, such as a hotel - which tends to moderate the degree of rivalry and make exit from the sector easier.
Online casinos and gaming operations display lower levels of rivalry. Such companies can appeal to a global market and do not have the problem of huge overheads. Overall, rivalry within this sector is assessed as moderate...
DM 04-15-10
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