Mobile Gambling Set to Bring Huge Revenue—and Potential Problems

The mobile gambling market is expected to bloom at the rate of 26 percent annually up to 2012, said Warwick Bartlett, lead partner of Global Betting and Gaming Consultants. Asia will represent 67 percent of the total market, the U.K. 11 percent, and the rest of Europe 22 percent, he said. Gross revenue from mobile gambling services could exceed three billion dollars by 2012, said Juniper Research analyst Windsor Holden, adding he’s “fairly bullish on how the market will develop worldwide.”

Current handsets and the iPhone are functional and sophisticated, and their better screens and keyboards make mobile betting easier, Bartlett said. In addition, there’s a “critical mass” of phones on the market now capable of downloading and playing games using an Internet connection, said a spokeswoman for British gambling operator Probability plc, which offers casino, bingo, slots, horse-racing and other games on mobiles.

Traditional gambling companies are looking to reach new consumer segments, with majors such as Ladbrokes, William Hill and Bet 365 investing in mobile gambling, said Bartlett. In addition, software makers “listened to their customers” and now offer easier-to-navigate products, he said.

The key driver behind mobile gambling is convenience, said Holden. Mobile phone ownership is ubiquitous, so bets can be placed or lottery tickets bought anywhere, anytime, unlike with PCs, he said. Against that, however, are several “not inconsiderable hurdles,” he said. “Where the mobile really falls down against the desktop PC is at the user interface: it can be difficult to access the services and to navigate them.” Other problems are network failure while a bet is being placed and in some cases the high cost of data services on mobile phones, he said.

“Discretion” is another benefit of mobile gambling, said the Probability spokeswoman. “Your mobile is probably the only device you have, other than your toothbrush, which you don’t share with anyone,” she said.

But the Remote Gambling Association said mobile gambling is just another form of distance betting. The increasing convergence of technologies and sophistication of handheld devices “means there is less and less difference between mobile gaming and gaming on a PC,” Chief Executive Clive Hawkswood said.

European Rules Foster Mgambling

Now “stone-dead” in the U.S., mobile gambling has received a boost in Europe from U.K. and EU laws, said Holden. The U.K. Gambling Act 2005, which took effect last August, was “particularly beneficial” to the market because it revoked an earlier provision requiring lottery providers to set aside 65 percent of ticket sales for prizes and contributions to good causes, he said. The new law reduces the amount given to good causes to a minimum of 20 percent, with no statutory minimum for prizes, he said.

Because operators under the previous system demanded 30 percent of ticket sales revenue for billing lottery tickets by SMS, service providers were left with just five percent of ticket sales, Holden said. Under the 20-percent rule, service providers can keep a larger stake -- perhaps as much as 15 percent -- making the gambling service more attractive to operators, he said. Some companies have opted to offer sponsored prizes such as cars instead of cash prizes, enabling them to keep a higher proportion of ticket sales and making the venture even more profitable, he said.

EU legislation, and in particular the services directive, could also bolster mobile gambling, said Holden. Last June, the European Commission (EC) formally asked France and Sweden to change their laws to end roadblocks preventing the free movement of sports betting services across borders, he said. The EC is also looking into possible restrictions on such services in Greece, he said.

On January 31, the EC launched probes into another aspect of Swedish gambling law and German legislation. The latest Swedish inquiry focuses on a measure barring online poker games and tournaments offered by operators regulated and licensed in other EU countries, the EC said. The German inquiry, which is examining new provisions banning online games of chance, limiting advertising on the Internet and elsewhere, and prohibiting banks from processing payments related to unauthorized gambling, may violate internal market rules, the EC said.

Addiction, Underage Gambling Key Problems

With nearly 100 percent penetration of mobile phones in Europe, “social responsibility is a key issue,” Bartlett said. Industry “must be mindful” that a large proportion of mobile users are under 18 and that “know-your-customer software is vitally important,” he said. On the fixed Internet, parents are responsible for blocking access to sites they consider unsuitable for young children, Holden said. “Mobile is a different kettle of fish,” as many under 18 own handsets, he said. Any gambling services must be “hidden behind an age verification system.”

Mobile gambling also raises “very real concerns of addiction,” said Holden. “To be fair,” he said, most companies recognize that and have measures in place to address it, such as getting certificates from the (U.K.) National Association for Gambling Care Educational Resources and Training. The organization didn’t respond to a request for comment.

Mobile operator O2 offers betting, lottery and gaming services only to age-verified users, a spokesman said. Gambling services provided by third parties are also allowed but must be similarly restricted, he said. Age verification requirements “show our commitment to preventing underage gambling,” he said.

The digital content market, including gambling, is growing rapidly but is “still small in comparison to the overall communications market,” the O2 spokesman said. The company’s general approach to content is to ensure it’s not obtrusive but is of benefit and importance to the user, he said. “We see mobile gaming as a value-added service, but only if used responsibly,” the spokesman said.

Probability uses “rigorous” age and identity verification systems to ensure children aren’t playing, its spokeswoman said. No one is allowed to ante up unless the company checks against independent sources that he or she is over 18, she said. The only way to beat the system is to “commit a pretty serious identity theft,” she said. With over 300,000 customers to date, there has never been a case of under-18 gambling the spokeswoman said.

The Next Big Thing?

Mobile gambling creates loyalty and revenue for mobile operators to offer great content, the Probability spokeswoman said. Operators make money from Probability gambling services either as revenue share partners or by paying for advertising and promotion on their mobile portals, she said. Neither business model existed a year ago, but Probability now has access to all the U.K. networks except O2, she said.

The company has pioneered a new service that builds an application in the iPhone browser, allowing it to offer gambling to any iPhone user without Apple’s permission, the spokeswoman said. The iPhone “represents the future shape of mobiles,” she said. Is Apple likely to squawk about the service? “I don’t think the company is that fussed about whether Apple is unhappy or not,” the Probability spokeswoman said.