Cubswin
09-30-2004, 03:55 PM
Gaming goes global: All bets are on link (http://www.economist.com/business/displayStory.cfm?story_id=3242391)
Sept 30, 2004
AMERICA did not invent gambling: but with its casinos, rightly celebrated for their ever more gloriously grotesque architectural excesses, it perfected an especially effective way of separating willing consumers from their cash. After a decade of spectacular financial growth, the industry there is trying to consolidate. And not content with dominating gambling in their home market, America's biggest firms are already planning to export their methods around the world.
Helping them is gambling's new-found respectability, as well as governments' increasing interest in deregulating businesses that have typically been tightly controlled. But the big American companies also face a threat. Internet gambling has been growing with astonishing speed, even though it remains illegal for American consumers. This is a double-edged sword for the big firms. The ban on internet betting at home protects their profits in so far as American consumers can be stopped from betting in cyberspace. But far better protection would come from offering the service and using their superior brands to mop up even more business. And unless they can grab a share of the cyber-betting outside America, their expansion might fail to produce the spectacular returns on which they are counting.
The global capital of gambling is Las Vegas and a visit there reveals how the industry has evolved. These days fruit machines and roulette tables seem almost like an after-thought. Tourists take their pick of attractions—from strolls through ersatz versions of ancient Rome, medieval England or old New York—in the form of massive themed hotels. Luxury-goods shops abound. Some casinos get less than half of their revenues directly from betting.
Gambling has been Las Vegas's money-spinner since Bugsy Siegel built the first casino in the 1940s. An attempt in the 1990s to attract vacationing families by installing rollercoasters, crčches and Disneyland-style attractions failed badly. Now, Las Vegas pitches itself to adults. The latest draw is the “ultralounge”, a bid to revive the lounge-lizard culture of the 1960s.
After September 11th, the city was badly hit by a drop in tourism. But it rebounded strongly, capturing a growing share of America's tourism and convention trade. And it increasingly offers high, as well as low, culture. The Bellagio's art gallery, just steps from the slot machines, is currently showing Monet paintings from Boston's Museum of Fine Arts. The Guggenheim Museum has an annexe at the Venetian. Steven Wynn, who built the Mirage and Bellagio hotels, is likely to hang his Picassos and Modiglianis in a new development due to open next spring.
Las Vegas achieved iconic status by offering a mild taste of naughtiness in a country that often lacks it. The slogan for a new ad campaign sums it up: “What happens in Vegas, stays in Vegas.” Money certainly stays. Casino gambling provided nearly $800m in tax payments to the state of Nevada last year.
Other states have followed Nevada's lead: gambling in America has more than doubled over the past decade. Turnover in casinos grew from $11.2 billion in 1993 to $27 billion last year. Turnover from all forms of gambling reached almost $73 billion last year (see chart 1).
Recently gambling has even taken on a sense of cool, as poker tournaments featuring Hollywood stars have been some of the highest-rated programmes on cable television. In August, WPT Enterprises, which runs the World Poker Tour, successfully floated on the NASDAQ stockmarket.
But bigger companies control the industry. A recent brace of mergers will, if antitrust regulators allow, create two giants. In early June MGM Mirage—itself the product of a merger in 2000 between Kirk Kirkorian's MGM Grand and Mr Wynn's Mirage Resorts—bid for Mandalay Resort Group, a rival. Together, the two firms control nearly half the hotel rooms in Las Vegas. In July Harrah's Entertainment, a casino chain catering more for the mass market, made a bid for Caesars Entertainment. The latter has one of the best-known brands in the industry, but has been lumbered with debt taken on to finance a long-overdue overhaul of its ageing Las Vegas resort, Caesars Palace.
If regulators give the nod, both of the two big firms will have powerful capital bases from which to expand in Las Vegas and beyond. On September 27th Caesars and Harrah's announced that they had each sold two of their casinos for a total of $1.24 billion. The deal was part of their efforts to convince regulators to approve their merger.
Casinos can be found in most countries, but the mass-market variety was pioneered in America. Contemporary attitudes towards gambling were set in the 1960s when the state of New Hampshire launched a lottery and brought in far more money than anyone had predicted. Today, 39 American states run lotteries, while 34 allow casinos. Only Hawaii and Utah ban gambling altogether. Moreover, states are still trying to join the party. The District of Columbia, the nation's capital, is considering allowing slot machines, and Pennsylvania wants to put them at its racecourses. California has just entered into a “compact”, or treaty, with a native-American tribe near San Francisco to take a cut of what is likely to become one of the country's biggest casinos. Its projected $100m a year in taxes will help plug the state's yawning deficit.
The pips are squeaking
Success for gambling in America has bred challenges. The first is that several of the states that so welcomed casino operators are now squeezing them through higher taxes. That has been increasingly true as the states have begun to face up to big fiscal deficits created in recent years. In Illinois, top-rate taxes on casino profits now run at 70%. Michigan recently increased its tax rate from 18% to 24%.
The second threat is of saturation. Most Americans who want to gamble in a modern casino can do so within just a few hours' drive from home. The North American market is “mature”, reckons MGM Mirage, and Las Vegas is a case in point—analysts have long worried about over-supply there.
With higher taxes and a saturated home market, it is small wonder that American operators are looking hungrily at opportunities overseas. They are encouraged by the fact that other countries are preparing to follow America's lead. Britain is making some of the biggest strides towards freer gambling. It has already liberalised its betting laws by reducing taxes on sports and horse-racing wagers. It is also in the process of finalising a bill to allow Las Vegas-style casino resorts in its big cities. And the country also wants to become home to fast-growing internet-gambling companies, now typically based offshore.
In Asia, Macau is inviting foreign competition for its dreary, locally owned casinos, and has already given licences to three Las Vegas companies. Mr Wynn is planning one. Sheldon Adelson, founder of Las Vegas Sands, whose Venetian Resort offers as good an imitation of the Bridge of Sighs as one is likely to find in America, opened Sands Macau earlier this year. More gambling licences are likely to be issued in future. And other Asian countries, from Singapore to Japan, are looking to emulate Macau.
Why are so many governments loosening the laws that have long constrained one of the world's oldest businesses? Gambling is an especially attractive service to tax. There is huge demand for it, and punters are mostly insensitive to price. Except for the small number truly addicted to gambling, people gamble voluntarily, but pay taxes only unwillingly. Introducing new forms of gambling—allowing, say, a lottery where sports betting is available—can often increase the overall demand for both types of punts.
Indeed, although casinos are the most visible part of the gambling industry, they are not the most important. Globally, gambling operating revenues—broadly the amount staked (minus the winnings returned to punters in the case of casino games and machines)—were $433 billion last year according to Global Betting and Gaming Consultants. Lotteries, which are mostly state sponsored, are the biggest single sector. Wagering on horse racing is close behind, although growing weakly. However, for gambling businesses, the trick is to follow punters into new markets that can grow. The biggest growth rates are in casino-style betting outside America and, increasingly, in cyberspace.
A baize patchwork
Gambling is also a big business in Europe, but there it is fragmented and disorganised, characterised mainly by a few fruit machines in bars and amusement arcades. Monaco is an upmarket haven for rich punters. France has 160 “casinos”, but these are mostly small clubs away from the big cities. Europe's biggest casino is now in Estoril, Portugal. Each year Europe's gamblers place bets equivalent to 5% of the continent's GDP, almost one-third of which stays in the industry's pockets.
Britain's casino business is small. In London, most casinos are “clubs” attached to hotels. Punters must wait 24 hours before becoming a member. The poshest places, such as Aspinall's and the Ritz, are said to depend on a few rich foreigners for most of their turnover.
If its long-anticipated gambling bill becomes law next year, as seems likely, Britain's gambling industry will be shaken up. Plans for casinos in places such as Blackpool, a faded Victorian-era resort, as well as in city centres from Birmingham to Glasgow, are already afoot. London's Millennium Dome has been mooted as the site of a casino to be built by Sol Kerzner, founder of South Africa's Sun City.
But the bonanza in Britain may not be as big as some hope. The government has pulled back from a full-scale free-for-all. It wants to limit the number of big-win slot machines—thanks to the terrible odds that they offer, these provide fat profits to operators. The government has two worries. The first is that such slot machines are highly addictive. The second is that their widespread introduction in new casinos would threaten the businesses of existing smaller operators, which rely on machines that have limited payouts. Despite the government's hesitations, MGM Mirage thinks that around 10% of its global profits could come from Britain by the end of the decade, up from almost nothing today.
Other European gambling Meccas are preparing to compete. Monaco has discussed the possibility of building a new (offshore) casino resort with Mr Wynn. Casinos in Nice have spruced themselves up. Their willingness to do so is not entirely unconnected to a factor that is affecting the entire industry and that threatens America's long-term dominance: the rise of internet gambling.
More bets than butts?
Arguably, only the pornography business is as well-suited to cyberspace as gambling. There are already around 1,500 gambling websites, offering everything from casino games, sports betting and punts on America's presidential election. Up from $1 billion in 1999, the turnover of internet gambling is poised to rise to $10 billion by the end of this decade, according to a recent report sponsored by the British government. Leighton Vaughan Williams, director of the Betting Research Unit at Nottingham Trent University, says that governments have realised that maintaining domestic prohibitions on gambling only loses tax revenues as consumers use internet services based elsewhere.
A new type of online gambling, betting exchanges, has done especially well. Unlike traditional bookmakers, which bear the risk of balancing their own odds to earn a profit, these companies, led by Britain's Betfair, match gambles between two individuals, thus keeping none of the risk themselves. But their success has created controversy. Punters on betting exchanges have the ability to “lay” odds, which allows them to profit from a losing horse or football team. Recently, British police rounded up dozens of suspects in a race-fixing investigation. Ironically, the transaction trail provided by websites is a help to those trying to catch fraudsters.
The biggest challenge to the online gambling business is that it is still illegal in America, even though Americans already bet millions of dollars in cyberspace. Online betting firms have based themselves offshore, in places as far-flung as Antigua, Gibraltar and Costa Rica. The American government tries to interfere by sending out regulatory feelers to such places. Recently, however, Antigua won a WTO case by arguing that America's law interfered with the Caribbean island's freedom to trade. Britain has a declared goal of becoming one of the leading locations for internet-gambling businesses, using low gambling-tax rates and effective regulation as lures for site operators. One online bookmaker, betonsports, recently listed its shares in London.
Another technology that has quickly made a mark allows gambling via video screens. New machines make mechanical one-armed bandits seem old hat, but that has spurred innovation. International Game Technology, one of the biggest makers of the threatened machines, is crafting new ways to keep the coins coming in. Slot machines increasingly offer access to huge jackpot pools spread over a whole country. The firm develops new themes, working in much the same way as a film studio.
In Europe, where machines in smaller entertainment centres are common, video gambling is a challenge. Eduardo Antoja, of Euromat, a fruit-machine trade association, says that video games have made young people less attracted to traditional casino machines. He says that the industry will begin to offer more multi-player games and social games to fend off the threat faced by a big wave of new casinos. The European Union is trying to harmonise its laws, but that will take years.
Land-based gambling has more to worry about than just the internet. Sky, a British satellite-television provider, saw a huge increase to 12m in the bets placed through its interactive handsets during its 2002-03 financial year and is relying on betting to help make up for the slowdown of its main business. Mobile phones are likely to be the next new vehicle for betting. 3G services will allow casino-gambling games with attractive graphics and colour. Before too long, almost everyone will be able to have a taste of Las Vegas at the press of a button.
Or will they? As outlets multiply, so do concerns about the negative effects of easy access to gambling. The internet has stoked anxieties that children will be targeted. According to GamCare (a British “responsible gambling” organisation), only seven of 37 gambling websites recently tested stopped a 16-year-old from registering online. Thanks to the increasing availability of debit cards to children as young as 11, vetting the age of online punters is obviously not easy.
The spread of traditional land-based casinos also inevitably causes controversy. There is some evidence that rates of suicide, bankruptcy and domestic violence all rise when casinos arrive in a city. However, a study in 1999 by an American commission set up to assess the impact of gambling found little evidence of any rise in these social ills when casino gambling is legalised. One reason is that it is hard to separate the impact of other factors, such as the state of the economy.
A harder perception to fight is that casinos, like lotteries, exploit the poor. In recent years they have been launched most often in the poorer bits of America. In the 1990s the fading rust-belt cities just south of Chicago brought in riverboats to create jobs that offset some of those lost by the ailing steel industry. To an extent that has worked: new jobs have certainly come. However, it is hard to tell how many people end up paying their wages back in the form of gambling losses.
Not so cheap thrills
Perhaps the biggest controversy attaches to “rapid-play” machines that give punters the chance to chase their losses, often using credit cards to rack up surprising debts in a matter of minutes. Australia has one of the highest rates of problem gamblers in the world, at around 2.2% of the adult population. That is due in part to a proliferation of gambling in pubs and social clubs, with a heavy emphasis on rapid-play fruit machines. Other countries are likely to try to limit the machines' spread.
But America's gambling industry is not exactly quaking in its boots. Years of learning how to defend itself at home have turned it into a formidable lobbying force. It points out, for example, that just over 1% of the adult population in any country will be prone to gambling addiction. It has donated millions to addiction clinics and other causes.
The effort has been so successful that the industry has largely shed its once dodgy reputation. But can it repeat its domestic success as it goes global? Deregulation favours it, as do the casino companies' obvious business skills. However, competition and a proliferation of outlets will drive down returns. How the big companies respond to that will decide their future more than anything else. In the short term, they will concentrate on establishing themselves and their brands using terrestrial casino outlets beyond America. But in time, further consolidation involving the internet seems inevitable. The question is how long new entrants have before the next shake-up begins. Odds, anyone?
http://www.economist.com/images/20041002/CSF678.gif
http://www.economist.com/images/20041002/CSF680.gif
Sept 30, 2004
AMERICA did not invent gambling: but with its casinos, rightly celebrated for their ever more gloriously grotesque architectural excesses, it perfected an especially effective way of separating willing consumers from their cash. After a decade of spectacular financial growth, the industry there is trying to consolidate. And not content with dominating gambling in their home market, America's biggest firms are already planning to export their methods around the world.
Helping them is gambling's new-found respectability, as well as governments' increasing interest in deregulating businesses that have typically been tightly controlled. But the big American companies also face a threat. Internet gambling has been growing with astonishing speed, even though it remains illegal for American consumers. This is a double-edged sword for the big firms. The ban on internet betting at home protects their profits in so far as American consumers can be stopped from betting in cyberspace. But far better protection would come from offering the service and using their superior brands to mop up even more business. And unless they can grab a share of the cyber-betting outside America, their expansion might fail to produce the spectacular returns on which they are counting.
The global capital of gambling is Las Vegas and a visit there reveals how the industry has evolved. These days fruit machines and roulette tables seem almost like an after-thought. Tourists take their pick of attractions—from strolls through ersatz versions of ancient Rome, medieval England or old New York—in the form of massive themed hotels. Luxury-goods shops abound. Some casinos get less than half of their revenues directly from betting.
Gambling has been Las Vegas's money-spinner since Bugsy Siegel built the first casino in the 1940s. An attempt in the 1990s to attract vacationing families by installing rollercoasters, crčches and Disneyland-style attractions failed badly. Now, Las Vegas pitches itself to adults. The latest draw is the “ultralounge”, a bid to revive the lounge-lizard culture of the 1960s.
After September 11th, the city was badly hit by a drop in tourism. But it rebounded strongly, capturing a growing share of America's tourism and convention trade. And it increasingly offers high, as well as low, culture. The Bellagio's art gallery, just steps from the slot machines, is currently showing Monet paintings from Boston's Museum of Fine Arts. The Guggenheim Museum has an annexe at the Venetian. Steven Wynn, who built the Mirage and Bellagio hotels, is likely to hang his Picassos and Modiglianis in a new development due to open next spring.
Las Vegas achieved iconic status by offering a mild taste of naughtiness in a country that often lacks it. The slogan for a new ad campaign sums it up: “What happens in Vegas, stays in Vegas.” Money certainly stays. Casino gambling provided nearly $800m in tax payments to the state of Nevada last year.
Other states have followed Nevada's lead: gambling in America has more than doubled over the past decade. Turnover in casinos grew from $11.2 billion in 1993 to $27 billion last year. Turnover from all forms of gambling reached almost $73 billion last year (see chart 1).
Recently gambling has even taken on a sense of cool, as poker tournaments featuring Hollywood stars have been some of the highest-rated programmes on cable television. In August, WPT Enterprises, which runs the World Poker Tour, successfully floated on the NASDAQ stockmarket.
But bigger companies control the industry. A recent brace of mergers will, if antitrust regulators allow, create two giants. In early June MGM Mirage—itself the product of a merger in 2000 between Kirk Kirkorian's MGM Grand and Mr Wynn's Mirage Resorts—bid for Mandalay Resort Group, a rival. Together, the two firms control nearly half the hotel rooms in Las Vegas. In July Harrah's Entertainment, a casino chain catering more for the mass market, made a bid for Caesars Entertainment. The latter has one of the best-known brands in the industry, but has been lumbered with debt taken on to finance a long-overdue overhaul of its ageing Las Vegas resort, Caesars Palace.
If regulators give the nod, both of the two big firms will have powerful capital bases from which to expand in Las Vegas and beyond. On September 27th Caesars and Harrah's announced that they had each sold two of their casinos for a total of $1.24 billion. The deal was part of their efforts to convince regulators to approve their merger.
Casinos can be found in most countries, but the mass-market variety was pioneered in America. Contemporary attitudes towards gambling were set in the 1960s when the state of New Hampshire launched a lottery and brought in far more money than anyone had predicted. Today, 39 American states run lotteries, while 34 allow casinos. Only Hawaii and Utah ban gambling altogether. Moreover, states are still trying to join the party. The District of Columbia, the nation's capital, is considering allowing slot machines, and Pennsylvania wants to put them at its racecourses. California has just entered into a “compact”, or treaty, with a native-American tribe near San Francisco to take a cut of what is likely to become one of the country's biggest casinos. Its projected $100m a year in taxes will help plug the state's yawning deficit.
The pips are squeaking
Success for gambling in America has bred challenges. The first is that several of the states that so welcomed casino operators are now squeezing them through higher taxes. That has been increasingly true as the states have begun to face up to big fiscal deficits created in recent years. In Illinois, top-rate taxes on casino profits now run at 70%. Michigan recently increased its tax rate from 18% to 24%.
The second threat is of saturation. Most Americans who want to gamble in a modern casino can do so within just a few hours' drive from home. The North American market is “mature”, reckons MGM Mirage, and Las Vegas is a case in point—analysts have long worried about over-supply there.
With higher taxes and a saturated home market, it is small wonder that American operators are looking hungrily at opportunities overseas. They are encouraged by the fact that other countries are preparing to follow America's lead. Britain is making some of the biggest strides towards freer gambling. It has already liberalised its betting laws by reducing taxes on sports and horse-racing wagers. It is also in the process of finalising a bill to allow Las Vegas-style casino resorts in its big cities. And the country also wants to become home to fast-growing internet-gambling companies, now typically based offshore.
In Asia, Macau is inviting foreign competition for its dreary, locally owned casinos, and has already given licences to three Las Vegas companies. Mr Wynn is planning one. Sheldon Adelson, founder of Las Vegas Sands, whose Venetian Resort offers as good an imitation of the Bridge of Sighs as one is likely to find in America, opened Sands Macau earlier this year. More gambling licences are likely to be issued in future. And other Asian countries, from Singapore to Japan, are looking to emulate Macau.
Why are so many governments loosening the laws that have long constrained one of the world's oldest businesses? Gambling is an especially attractive service to tax. There is huge demand for it, and punters are mostly insensitive to price. Except for the small number truly addicted to gambling, people gamble voluntarily, but pay taxes only unwillingly. Introducing new forms of gambling—allowing, say, a lottery where sports betting is available—can often increase the overall demand for both types of punts.
Indeed, although casinos are the most visible part of the gambling industry, they are not the most important. Globally, gambling operating revenues—broadly the amount staked (minus the winnings returned to punters in the case of casino games and machines)—were $433 billion last year according to Global Betting and Gaming Consultants. Lotteries, which are mostly state sponsored, are the biggest single sector. Wagering on horse racing is close behind, although growing weakly. However, for gambling businesses, the trick is to follow punters into new markets that can grow. The biggest growth rates are in casino-style betting outside America and, increasingly, in cyberspace.
A baize patchwork
Gambling is also a big business in Europe, but there it is fragmented and disorganised, characterised mainly by a few fruit machines in bars and amusement arcades. Monaco is an upmarket haven for rich punters. France has 160 “casinos”, but these are mostly small clubs away from the big cities. Europe's biggest casino is now in Estoril, Portugal. Each year Europe's gamblers place bets equivalent to 5% of the continent's GDP, almost one-third of which stays in the industry's pockets.
Britain's casino business is small. In London, most casinos are “clubs” attached to hotels. Punters must wait 24 hours before becoming a member. The poshest places, such as Aspinall's and the Ritz, are said to depend on a few rich foreigners for most of their turnover.
If its long-anticipated gambling bill becomes law next year, as seems likely, Britain's gambling industry will be shaken up. Plans for casinos in places such as Blackpool, a faded Victorian-era resort, as well as in city centres from Birmingham to Glasgow, are already afoot. London's Millennium Dome has been mooted as the site of a casino to be built by Sol Kerzner, founder of South Africa's Sun City.
But the bonanza in Britain may not be as big as some hope. The government has pulled back from a full-scale free-for-all. It wants to limit the number of big-win slot machines—thanks to the terrible odds that they offer, these provide fat profits to operators. The government has two worries. The first is that such slot machines are highly addictive. The second is that their widespread introduction in new casinos would threaten the businesses of existing smaller operators, which rely on machines that have limited payouts. Despite the government's hesitations, MGM Mirage thinks that around 10% of its global profits could come from Britain by the end of the decade, up from almost nothing today.
Other European gambling Meccas are preparing to compete. Monaco has discussed the possibility of building a new (offshore) casino resort with Mr Wynn. Casinos in Nice have spruced themselves up. Their willingness to do so is not entirely unconnected to a factor that is affecting the entire industry and that threatens America's long-term dominance: the rise of internet gambling.
More bets than butts?
Arguably, only the pornography business is as well-suited to cyberspace as gambling. There are already around 1,500 gambling websites, offering everything from casino games, sports betting and punts on America's presidential election. Up from $1 billion in 1999, the turnover of internet gambling is poised to rise to $10 billion by the end of this decade, according to a recent report sponsored by the British government. Leighton Vaughan Williams, director of the Betting Research Unit at Nottingham Trent University, says that governments have realised that maintaining domestic prohibitions on gambling only loses tax revenues as consumers use internet services based elsewhere.
A new type of online gambling, betting exchanges, has done especially well. Unlike traditional bookmakers, which bear the risk of balancing their own odds to earn a profit, these companies, led by Britain's Betfair, match gambles between two individuals, thus keeping none of the risk themselves. But their success has created controversy. Punters on betting exchanges have the ability to “lay” odds, which allows them to profit from a losing horse or football team. Recently, British police rounded up dozens of suspects in a race-fixing investigation. Ironically, the transaction trail provided by websites is a help to those trying to catch fraudsters.
The biggest challenge to the online gambling business is that it is still illegal in America, even though Americans already bet millions of dollars in cyberspace. Online betting firms have based themselves offshore, in places as far-flung as Antigua, Gibraltar and Costa Rica. The American government tries to interfere by sending out regulatory feelers to such places. Recently, however, Antigua won a WTO case by arguing that America's law interfered with the Caribbean island's freedom to trade. Britain has a declared goal of becoming one of the leading locations for internet-gambling businesses, using low gambling-tax rates and effective regulation as lures for site operators. One online bookmaker, betonsports, recently listed its shares in London.
Another technology that has quickly made a mark allows gambling via video screens. New machines make mechanical one-armed bandits seem old hat, but that has spurred innovation. International Game Technology, one of the biggest makers of the threatened machines, is crafting new ways to keep the coins coming in. Slot machines increasingly offer access to huge jackpot pools spread over a whole country. The firm develops new themes, working in much the same way as a film studio.
In Europe, where machines in smaller entertainment centres are common, video gambling is a challenge. Eduardo Antoja, of Euromat, a fruit-machine trade association, says that video games have made young people less attracted to traditional casino machines. He says that the industry will begin to offer more multi-player games and social games to fend off the threat faced by a big wave of new casinos. The European Union is trying to harmonise its laws, but that will take years.
Land-based gambling has more to worry about than just the internet. Sky, a British satellite-television provider, saw a huge increase to 12m in the bets placed through its interactive handsets during its 2002-03 financial year and is relying on betting to help make up for the slowdown of its main business. Mobile phones are likely to be the next new vehicle for betting. 3G services will allow casino-gambling games with attractive graphics and colour. Before too long, almost everyone will be able to have a taste of Las Vegas at the press of a button.
Or will they? As outlets multiply, so do concerns about the negative effects of easy access to gambling. The internet has stoked anxieties that children will be targeted. According to GamCare (a British “responsible gambling” organisation), only seven of 37 gambling websites recently tested stopped a 16-year-old from registering online. Thanks to the increasing availability of debit cards to children as young as 11, vetting the age of online punters is obviously not easy.
The spread of traditional land-based casinos also inevitably causes controversy. There is some evidence that rates of suicide, bankruptcy and domestic violence all rise when casinos arrive in a city. However, a study in 1999 by an American commission set up to assess the impact of gambling found little evidence of any rise in these social ills when casino gambling is legalised. One reason is that it is hard to separate the impact of other factors, such as the state of the economy.
A harder perception to fight is that casinos, like lotteries, exploit the poor. In recent years they have been launched most often in the poorer bits of America. In the 1990s the fading rust-belt cities just south of Chicago brought in riverboats to create jobs that offset some of those lost by the ailing steel industry. To an extent that has worked: new jobs have certainly come. However, it is hard to tell how many people end up paying their wages back in the form of gambling losses.
Not so cheap thrills
Perhaps the biggest controversy attaches to “rapid-play” machines that give punters the chance to chase their losses, often using credit cards to rack up surprising debts in a matter of minutes. Australia has one of the highest rates of problem gamblers in the world, at around 2.2% of the adult population. That is due in part to a proliferation of gambling in pubs and social clubs, with a heavy emphasis on rapid-play fruit machines. Other countries are likely to try to limit the machines' spread.
But America's gambling industry is not exactly quaking in its boots. Years of learning how to defend itself at home have turned it into a formidable lobbying force. It points out, for example, that just over 1% of the adult population in any country will be prone to gambling addiction. It has donated millions to addiction clinics and other causes.
The effort has been so successful that the industry has largely shed its once dodgy reputation. But can it repeat its domestic success as it goes global? Deregulation favours it, as do the casino companies' obvious business skills. However, competition and a proliferation of outlets will drive down returns. How the big companies respond to that will decide their future more than anything else. In the short term, they will concentrate on establishing themselves and their brands using terrestrial casino outlets beyond America. But in time, further consolidation involving the internet seems inevitable. The question is how long new entrants have before the next shake-up begins. Odds, anyone?
http://www.economist.com/images/20041002/CSF678.gif
http://www.economist.com/images/20041002/CSF680.gif