Internet Gaming

Impact of Internet GamingOn Land Based Casinos

Presentation to the CANADIAN GAMING SUMMIT April 18 – 20, 2011, Vancouver, British Columbia

By Kirk Goodtrack, B.A., LL.B., LL.M.

Forecasted I-Gaming Revenue

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• An estimated $1 Billion is wagered annually by Canadians on gambling websites. An estimated:– $400 million comes from Ontario;– $100 million comes from British Columbia; – $80 million comes from Quebec; – $50 million comes from the Atlantic provinces;– $40 million comes from Saskatchewan

• Some estimate I-Gaming will continue to grow by $2 Billion worldwide each year

Factors Favour Growth

• According to Stats Canada, 80% (or 21.7MM) of Canadians 16 years and older in 2009 used the Internet for personal reasons, up from 73% in 2007;– Internet use increased in every province between 2007-2009;– The highest rates were in Calgary & Saskatoon – being 89%;– In 2009, 98% of people aged 16 to 24 went online, up slightly

from 96% in 2007. Of those aged 45 or older, 66% went online during 2009, up from 56% in 2007.

– Use of the Internet in 2009 was equal – Men (81%) & women (80%)

• Growth in high-speed & wireless connections– In 2009, 92% accessed internet with a high-speed connection, up

from 88% in 2007.– In 2009, 53% of home users were connected to the Internet by cable

and 33% by telephone. Other types of home connections, mostly wireless, increased to 23% in 2009 from 13% in 2007.

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• Land-based operators will pursue I-Gaming to extend their sales in total, even though some of it will undoubtedly substitute for their land-based sales.– Nevada approved Caesars Entertainment-888 partnership.

So others, like Party Gaming - Bwin, can come back. – Land based Gaming companies began announcing

partnerships with Online Gaming companies;– However on April 15 2011, U.S. Justice Department

announced it was blocking players in the U.S. from accessing online poker sites, accusing 11 people of bank fraud and of illegally operating gambling websites;

Land Based Gaming are Partnering

Factors Favour Growth - Conclusion

• The link between greater accessibility and increased gambling activity seems a reasonable and obvious assumption;

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Towards a Competitive Regime –An Optimal Regulatory Framework

• A regulatory system that is too onerous means that the cost of doing business may become a barrier. The challenge is an optimal set of regulations that addresses:

– How Canada will address illegal operators;– Protection of personal information;– Integrity of Games;– The prevention of access by minors;– Money Laundering and other Criminal Activity;

• The key is to discourage your residents from visiting off shore gaming sites, and inspire confidence on home-based gaming sites;

• Gambling products must be as attractive, as easily accessible and as inexpensive as the products offered from overseas jurisdictions;

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• Until the Criminal Code is amended with effective enforcement measures to deal with operators operating abroad and taking wager from its residents, any provincial online model will have to win the support of its residents through competition;

• Some proponents argue that the unregulated online Gaming Industry is so large that the only solution to introducing a regulatory environment is a pan-Canadian network similar to Lotto 6/49;

Pan-Canadian Network

Cannibalize or Expand the Market?

• The following are typically given as examples:– Don't have to pay for plane tickets, hotels and meals;– Players are comfortable (seat is always available), can eat smoke, or drink

anytime, or, enjoy smoke/alcohol free environment;– No other players watching your every move;– Online Casinos often offer better payout percentages than land-based

casinos because they need to bring in new members;– Electronic billing systems are being streamlined making financial

transactions easier;

• Some argue that Internet Gaming will expand the market as oppose cannibalize it.

– World Poker Series has increased casino poker rooms. It has made poker into a social experience;

– Sporting events can be watched on television, yet this has not reduced attendance at live sporting events. Indeed, it stimulated interest in sport, and broadened the consumer market;

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Online and Land based Compared

• Online casinos and land based casinos each have unique and powerful advantages weighing in their favour. While they share some similarities, they are really quite different;– The sights, sounds of cheers echoing, roar of players – the

atmosphere of land based cannot be replicated with I-Gaming.

– On the other hand, playing from your own home is perhaps the biggest benefit of gambling online. No need for a babysitter, travel, and you can do other things while you play;

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• Canadians wager an est. $1B annually. The goal has often been described as capturing these revenues. The issue is to understand the extent online gaming will impact land based casinos revenues;

• Each province will have to decide whether it wishes to pursue a Pan-Canada network or pursue their own individual provincial model. An optimal set of regulations will have to be created that addresses:– How Canada will address illegal operators;– Protection of personal information;– Integrity of Games;– The prevention of access by minors;– Money Laundering and other Criminal Activity;

Impact of Online to Land based Gaming –Conclusions

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• Gambling products must be as attractive, as easily accessible and as inexpensive as the products offered from overseas jurisdictions;– PlayNow.com raised the maximum amount players could wager, to

C$9,999 per week (aimed at attracting high rollers who usually play on international platforms such as PokerStars and Full Tilt Poker);

• Land based casinos have a lot of experience and they know their players very well – positioning them well to launch online gambling. Moreover they can offer innovative and secure games. The trend will likely be a convergence between online and land based playing experience. They have to be linked, so the customers can play in casinos and then they can play at home on the internet;

Impact of Online to Land based Gaming –Conclusions

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• The online gaming products will have to allow players to experience the thrill and tension of playing in a real casino, whenever they cannot get to the casino;

• A land based casino’s online branded presence can strengthen its brand name and deliver incremental revenues, without cannibalizing its existing revenues;

• In fact, the goal will be to attract new players to the ‘bricks and mortar’ venues

Impact of Online to Land based Gaming –Conclusions

GOODTRACK LAWBARRISTER & SOLICITOR

494 HOFFER DRIVE REGINA, SK.,

S4N 7A1

PHONE: 306.546.0566FAX: 306.546.0569

THANK YOU!

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