Who Benefits from Internet Gambling - Report Example

Who Benefits from Internet Gambling? An Analysis Now , online gambling offers convinience of playing from anywhere either through the laptap or through the mobile phones. Nations like U.K , Malta , and Gibraltor have used the online gambling for enhancing their tax income ,it also offers both direct and indirect jobs to the host nation’s economy , and it faciliates the growth of software , mobile , brandband services industries . Thus , it offers a sizeable taxation income which helps to boost the GDPs of the host nations . This research essay will analyse who benefit from the Internet gambling and how they are benefited and how benefits are being reaped by the software , mobile , brandband and internet industries because of Internet banking. Introduction The Internet gambling now facilitates any individual to take part in gambling right from their residences, offices or any other place of their preference at any time as they play in the casinos. Further, Internet gambling offer some new forms of gambling like tournaments, betting exchanges, poker, spread betting, which may not be available in traditional casinos. Thus, now, consumer is deriving benefits from the Internet gambling as it offers to him the convenience of playing gambling. U.K, Malta and Gibraltar are the nations from EU jurisdictions, offer the maximum number of e-gambling companies, which account for the lion’s share of online gambling on the international level as the majority of the players in online gambling are from customers from outside the EU. The Internet gambling offers various advantages to the host nation’s economy adding considerable tax income , employment opportunities and business opportunities to Internet service providers , mobile companies , software developers , website developers , etc.(Gainsbury 2012: 3). This research study will make an in-depth analysis of the benefits offered by the Internet gambling to various stakeholders of the host nations. Who Benefits from Internet Gambling? An Analysis As per Goodman (1995), internet gambling offers significant wealth, regenerate local economies and offer more employment opportunities. As of now, online gambling industry is a $35 billion global industry. (Goodman 1995:28). In 2013, Gibraltar enjoyed $ 80 million in tax revenues from online gambling industries, and it created around 2600 jobs for the economy. (Bernews 2014). As per Wall Street Journal, in U.S.A, only Delaware Nevada and New Jersey permit online gambling as of now. Further, it is to be noted that the international online-gambling revenue, pushed by online betting in Europe, in 2012 attained an estimated figure of $35.4 bn, which is 500 times higher than the Las Vegas strip annual income from Casinos (Berzon 2013). U.K is said to have a liberalised structure for online gambling and also is having flexible gambling procedures, which facilitated the online sports betting more friendly and easier. Betting exchange namely Betfair (www.betfair.com) is the foremost Internet gambling service provider in U.K which is expanding fastly and has about 90% share of the globe’s online gambling revenue. Many online gambling websites are being operated from U.K like Bwin.party, William Hill, Ladbrokes, NetPlayTV, 888, 32 Red & Probability. However, these online gambling sites comprehend about legal issues with online gambling and respect respective national laws that have banned such online gambling in their jurisdictions. For example, Betfair.com does not solicit orders from the U.S.A as majority of the states in that country has banned online gambling. Further , the U.K based online gambling services have to function within the stricter rules of the 2005 Gambling Act that describes about ‘ remote gambling’ or ‘online gambling’ on various issues like advertising and licensing. Further, it is to be noted that on moral grounds, EU is having authority to ban cross-border online gambling in the member states. (Gay, Charlesworth& Esen 2007:484). How U.K Government is deriving real benefits from online gambling U.K government has introduced a new tax regime whereby the present remote gaming, pool betting and betting duty rates has been increased to 15% which are being applied on a point of consumption basis on the gross profits of such betting company whereas such duty is being levied presently on point of supply basis as the majority of the online gambling operators are from outside U.K jurisdiction. By doing this, U.K government is likely to collect additional revenue of £ 300 bn per annum as taxes from the online game service providers, whether they are operating from UK or outside U.K. (News.sky.com 2013). The Internet game service providers are definitely reaping many benefits. For instance, 888 Holdings is a London- listed company, which reported group revenue of $94 million in the 3rd quarter of 2013, and its shares were quoted 164.4p and its market value of shares was quoted around £575 millions. 888 Holdings is of the view that 2014 would be brighter as a number of states in U.S.A have eased the ban on Internet gambling. 888. Holdings is already having operations in Nevada along with markets in New Jersey and in Delaware. It is to be noted that in 2006, U.S Congress banned the Internet betting, which was a blow to Internet gaming companies like 888 Holdings. However, now, the majority of the tax –deficit states in U.S.A has started to relax rules thereby ushering new opportunities for players from Europe with hands-on expertise in this segment. (Reuters.com 2013). How Malta is benefited from Internet Gambling? Malta , which is a small island , as being a member of the European Union is being referred as “ Europe’s Gambling Hub” which has attracted more than hundreds of gambling companies, mainly because of its favourable tax regime. Malta is able to attract a huge number of Internet gambling companies with more than 500 registered online gambling companies by 2008. Further, as of year 2008, Malta’s share of income from gambling which is referred as Gross Gaming Revenue “(GGR) which was quoted to be around 7.82% of Malta’s GDP of 2008. This was in excess of the EU’s average GDP which was reported at just 0.68% of GDP in 2008. (Camilleri 2013). Graph -1 Malta’s GGR as a % of National GDP (2008). Source : (Camilleri 2013). According to EU’s green paper , in EU , the online gambling industry is a fast -growing industry with about more than 15,000 players in the market and more than € 6 bn as revenue as of 2008, and it is anticipated to grow more than 200% by 2013 (Camilleri 2013). U.K’s Online Gambling Industries Annual Revenue- an Analysis As per recent statistics, as of 2012, the U.K’s online gambling sector is worth about £2 bn. ‘In-play ‘betting is the chief sector in the online gambling sector which dominates the industry in U.K. For instance, football betting through online has soared by 69% in the year 2011-2012 thereby making most profitable after horse racing. Among the online gambling service providers , William Hill is said to be enjoying the lion’s share of online gambling market in U.K as it enjoys about 19% of the U.K market share whereas other players in U.K like Paddy Power , Ladbrokes and Bet365 are enjoying about just 11% each as evidenced by the following graph. (Chariton 2013). Graph 2- Online Gambling and Betting, U.K. 2012 Source: (Chariton 2013). As regards to search made in the Internet for the online gambling sites , again Wills Hill remains to be the leader as others are not so close to it. (Chariton 2013). Graph 3- Google Search Estimation Tool Source: (Chariton 2013). One another sector which sees a good growth due to online gambling industry is the mobile phone industry of the U.K. Both the manufacturers of mobile phones, and the service providers are being benefitted from the growth of online gambling industry in U.K. (Chariton 2013). Large number of consumers in U.K are turning to their mobile devices to gamble as there is considerable growth in the in-play betting, and also an increasing trend towards using tablets and phones as second screens. With the sports betting, which witnessed the highest growth during 2012, as the number of searches conducted through mobile devises soared by 75%. As per research study carried over by Mintel/ GMI, about 29% of the neitzens used a smartphone for online gambling. This demonstrates that mobile phone and tablet industry is one among the benefiter of online gambling industry in U.K. (Chariton 2013). Thus, the online gambling market prolongs to witness the growth thereby surpassing £ 2 billion benchmark (predicted revenues) as of 2012 symbolising an 80% soar over 2008 figures. Graph-4 U.Ks Annual Online Gambling Revenue between 2008 & 2012 Source: (Chariton 2013). In U.K, sports betting prolong to dictate almost 200% the size of. As of 2012, the sport betting occupies about 45%, Bingo occupies 17%, Poker occupies 15% and Casino occupies 23% of the market share of gambling industry. Bingo’s achieved a tremendous 155% growth thereby making it 3rd largest sectors whereas Poker has grown only just 8% during 2012. The sports betting market witnessed £ 1 bn mark in 2012 with growth of more than 102% since 2008 (Chariton 2013). How Malta is benefited from Internet Gambling? Malta , which is a small island , as being a member of the European Union is being referred as “ Europe’s Gambling Hub” which has attracted more than hundreds of gambling companies, mainly because of its favourable tax regime. Malta is able to attract a huge number of Internet gambling companies with more than 500 registered online gambling companies by 2008. Further, as of year 2008, Malta’s share of income from gambling which is referred as Gross Gaming Revenue “(GGR) which was quoted to be around 7.82% of Malta’s GDP of 2008. This was in excess of the EU’s average GDP which was reported at just 0.68% of GDP in 2008 (Camilleri 2011). According to EU’s green paper , in EU , the online gambling industry is a fast -growing industry with about more than 15,000 players in the market and more than € 6 bn as revenue as of 2008 and it is anticipated to grow more than 200% by 2013 (Camilleri 2011). Online Gambling Industry in EU Sports betting offer a lion’s share of revenue for online gambling company and for instance, Bwin, the famous online sport betting gambling service provider reported € 408 mn in revenue in 2008. With an anticipated annual eight percent growth rate, income from sports betting is anticipated to attain € 2.3 bn in Europe in 2012. (Herbaux 2009:2). Graph 5 From the above graph, we can understand that European Union online gambling industry has grown substantially from just €1 bn in 2002 to €8 bn in 2012 within a span of a decade. (Herbaux 2009:2). The online gambling industry in EU is generating high income from the Far East. It is said that Ladbrokes and William Hill of U.K have clients in over 170 nations around the world, and these service providers offer their online gambling services in eleven languages. Expekt.com is operating from Malta is said to have customers from more than 227 nations offering their services in 19 languages with a main focus on the Scandinavian market. (Herbaux 2009:2). On seeing the success of online gambling in U.K and Italy, many European nations now want to open their market for a controlled online gambling industry. As the citizens from various EU nations are now playing online gambling with the U.K, Malta and Gibraltar service providers, these nations are losing the taxation income. Thus, opening up the market for these nations means not only for societal value addition but also due to economic compulsion. By opening up their economies to the online gambling, it is estimated the European Gross Gambling Revenue is estimated to soar at 13% per annum up to 2012, thereby increasing the current revenue of € 5 billion to about € 8 million in the near future. (Herbaux 2009:2). Employment opportunities created by online gambling industry Online game industry relies heavily upon the services industry for attracting foreign direct investments. Majority of online gambling destinations like Malta, Gibraltar, and U.K always has an offshore financial services centre, the real advantage that offshore companies bring to these economies. Thus, online gambling industry adds additional revenues to these economies. Through the provisions of the law, the offshore jurisdictions make these companies to locate resources and their assets in these jurisdictions and due to this, they are managing to usher a new economy. (Gaming Standards Association 2012:13). The following chart shows how online gambling industry creates various associated industries in connection with gambling so that good employment opportunities are always created. The offshore laws always stipulate that gambling industry should locate their banking, accounting and merchant services with their local suppliers. Further, the online gambling company has to mandatorily locate the server in these offshore jurisdictions. and this creates the job opportunities in bandwidth, and datacenters. Moreover, online gambling needs a high internet bandwidth and this helps the local economy having better Internet connectivity at a much lower price. According to Malta, as of June 2012, the online gambling industry has provided job opportunities to more than 5000 individuals’ direct employment and for another 2000 indirect employment. (Gaming Standards Association 2012:13). Graph -6 Source: (Gaming Standards Association 2012:13). The darker side of online gambling There are many instances of online gambling sites failing to pay winnings to their clients thereby cheating players by hosting unfair games or wantonly failing to refund the customer’s deposits. There are instances where the employees of online gambling sites deceiving players and stealing customer credit card details and identities and selling them illegally to fraudusters. Some online gambling sites declared bankruptcy thereby leaving their custoerms money unpaid. For instance , both Untimatebet and Absolute Poker declared bankruptcy thereby pushing the player with little chance in getting the refund of the money deposited with them. There are some instances where the online gambling website is being established with main intention of stealing customer’s personal data. Though , in above cases , the respective government might have earned sizeable tax revenues from these fraudulent sites but the ultimate losers are the gullible Internet customers as security breaches are destabilising the reputation of specific game sites and thus online gambling industry should initiate steps to enhance customer trust and protection of their privacy. (Gainsbury 2012:76). Conclusion Online gambling industry acts as a key economic driver to the host nation as it offers sizeable taxation income from the income of the online gaming industry. It offers more employment to the citizens of the host nations. Online gaming industry offers the business opportunity for gaming operators, corporate service providers, Internet service providers, merchant service providers, certification and auditing, software development, back office service providers, live gaming studios, call centers and mobile phone industries. Thus , the popularity of online gambling is ascending in the recent years , the online gambling market is without any doubt acts as an attractive province for expansion for land-based and casinos’ operators , software developers , associated suppliers , mobile industries , bandwidth suppliers , investors ,etc. List of References Bernews.com.PLP Suggest Online Gaming to Boost Revenue. [online] available from < http://bernews.com/2014/03/plp-suggest-online-gaming-to-boost-revenue/> [10 March 2014] Berzon, A. (2013). Online Gambling Bets on Return to U.S. [online] available from < http://online.wsj.com/news/articles/SB10001424127887324787004578493011807051422> [10 March 2014] Camilleri, I. (25March, 2011) Malta is Europe’s Gambling Hub- Brussels. [online] available from http://www.timesofmalta.com/articles/view/20110325/local/malta-is-europe-s-gambling-hub-brussels.356481 > [accessed on 11 March 2014] Chariton, G. (25 March 2013). UK’s online Gambling Sector worth £2 bn in 2012: Stats. [online] available from https://econsultancy.com/blog/62407-uk-s-online-gambling-sector-worth-2bn-in-2012-stats > [accessed on 11 March 2014] Gainsbury, S. (2012). Internet Gambling: Current Research Findings and Implications. New York : Springer Gaming Standards Association. (2012). Online Gambling. Exploring Strategies for GSA. 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