Environmental Analysis of the Melbourne Gaming Industry - Report Example

Environmental Analysis of the Melbourne Gaming Industry I. Introduction Melbourne, located south-east around Port Philip Bay, has a population of approximately 3.74 million in 2006, therefore considered as the second most populous city in Australia. It’s considered as the major centre of commerce, industry and cultural activity. Tourism in Melbourne is an important industry with approximately 7.6 million domestic visitors and 1.88 million international visitors in 2004. Melbourne attracts a large numbers of tourists, particularly young backpackers. The gaming industry alone is responsible for all legal forms of gambling such as football pools, lotteries, casino gaming and gaming machines. The Australian Bureau of Statistic (ABS) for 2004/2005 revealed that the major contributor to this industry is through gaming machines. This accounted for almost 56.3% of the total net takings of the industry. Followed by casinos with 16.7%, off-course TAB takings with 13.4% and the remaining 9.3% is for other forms of gambling. One of the famous gaming industries in Melbourne is Crown Casino and Entertainment Complex. It is a casino and entertainment precinct on the south bank of the Yarra River, attracting on average nearly 200,000 visitors daily. II. Industry Analysis This chapter is devoted to the analysis of the general and competitive environment of the gaming industry in Melbourne. In the gaming industry, the products or services offered are the interactive entertainment in the form of games. The function that it serves is to entertain through various arrays of games to choose from. The channels of distribution are through physical facilities, internet and distributorship. A. Overall Australian Gaming Industry Description 1. Size Through its more than two decades of existence, Melbourne, Australia’s Gaming Industry has developed significantly in size. According to Hill (2006), game developers based in Australia now employ more than a thousand workforces at forty studios or business entities operating in the gambling service industry comprising of lottery, casinos, and others. Gaming industry in this city is currently enormous and growing at a fast rate. It has shown to meet the city’s expectation in revenue term. Its fast growth is continuing and helping its economy and tourism. It is predicted that this growth will continue over the coming years. It is in the games sector where the largest growth is forecast. Currently, the game industry outsells the film industry. They expected it will be maintained for at least three years. Gaming industry products/services are differentiated. There are high exit barriers. Fixed costs are high, too. There are high capital start-up costs in the form of license fee, purchasing of gambling equipments, security equipments and the necessary technological systems. One must consider the choice of a venue, the acquiring of license, the purchasing of table games and gaming machines as well as other operating costs. These are some of the forces that determine the strength of competition among existing competitors. 2. Worth Gaming industry is generating millions of dollars in the city. According to the GfK Australia, entertainment computer gaming has shown an overall market increase of thirty per cent in the last semester (January to June 2007). For games and gaming consoles alone, there were more than 5.5 million games and almost half a million, respectively, sold since January 1, 2007. Hardware sales reached to almost one hundred fifty million dollars while games worth $264 million were generated from January to June 2007 (Australian Gaming Industry: Billion Dollar Baby, 2007). 3. Consumer Group The Duty of Care is the consumer group working for the benefits and concerns of the gaming industry consumers (O'Shanassy, 2007). The gaming industry consumer groups of Melbourne are being protected by the gaming industry and the government through the Ministry of Gaming with their rights through the city ordinances and consumer protection and fair trading laws in the country. The major customers of the industry are the young buyers as well as the old buyers. These are powerful customers since they comprise the majority of the market segments. Their purchasing capability gives them power. 4. Core Business The core business in the Melbourne gaming industry is to provide updated and state-of-the-art gaming for the citizens of the city as well as its tourist. The stakeholders in this industry are working hand in hand for the advancement of this industry, especially since this is generating billions of dollars for the city. 5. Key benefits Through the years, the gaming industry offers numerous benefits. One important benefit is in terms of its economic help to the city. Another importance contribution of the industry is in terms of employment generation. A number of companies are investing in this industry by putting up and enhancing businesses that contribute a lot in the economy of Melbourne. 6. Competitors The major competitors are the entertainment products such as film video and music clips. However, in terms of the gaming market shares, it is reported to have majority of the market share. This is due to the wide market covering the young and mature market segments. The industry is consolidated. 7. Suppliers to the Industry The powerful major suppliers to the industry are the software creators and hardware manufacturers. They are powerful since new innovations in the gaming industry are under their control; this is what gives them power. 8. Significant Entry Barriers Significant entry barriers exist. There are various forms of barriers to entry in the Australian Gaming Industry in terms of government legislation. In order to obtain a license to install gaming machines in hotels, clubs and pubs, these business organizations would have to submit their application to the Victorian Commission for Gambling Regulation (VCGR). They are effective in protecting existing competitors. This results to enhancing profits. There close substitutes for industry products and services in the gaming industry such as films, clips, concerts and others. These provide pressure on price charged in this industry. B. Analysis of the Industry’s Competitive and Broad Environments The gambling industry in Melbourne is made up of 3 major providers of equipment and services namely; Tabcorp, Crown and Tattersalls. Because of these three entrepreneurs, small hotel and private clubs emerged in the place. There were also 831 electronic gaming machines licensed as of June 2006 based on the data of Victorian Commission for Gambling Regulation (VCGR). For the bingo centres, there are 20 bingo centres listed by the VCGR. There are also a lot of venues to buy lotteries and some other games such as races. C. Key Strategic Issues that Face Organizations in the Australian Gaming Industry The expansion of gambling in Victoria has changed significantly the face of Melbourne. Gambling revenue now makes up 12% of the state revenue. This expansion of gambling revenue encouraged governments to exploit the gambler through the endorsement and encouragement of the industry. In 1996/97 State governments collected $3.5 billion from gambling taxes. One third of this amount comes from just 200,000 gambling addicts and their families. Long term gambling initiatives require expansive marketing to maintain public interest. Gambling has been expanding driven by a sophisticated marketing strategy which encourages people to gamble. It is reported that low income earners contribute to gambling revenue, disproportionably. As this kind of earners is encouraged to gamble by regular media programs, the regressive nature of taxation on gambling will increase. Social setting and culture of many were changed by the rapid expansion of gambling in the State. Lots of advertising agenda were subjected to people who promote gambling as “healthy family entertainment,” which in contrary, are a danger to people, especially, those with low incomes. Because of the pressing financial issues in the state, the Victorian government has taken the opportunity to expand gambling. It argued that revenue for gambling taxes is necessary, for it provides the necessary capital expenditure needed to provide services for the people. The basic strategies of competitors are extensive promotion and series of selling missions aimed at generating sales. They are quite successful in their chosen products or services. The gaming industry products/services are global. Organizations in the Australian Gaming Industry are now faced with the fast growth of the export gaming industry. These organizations have to cope with the increasing demand. Based on the research by Hill (2006), the industry is generating exports worth more than $100 million each year. The apparent advantages to being involved in more than one nation are higher. Higher revenues will be generated as a result of this. The industry is regulated. These regulations have influence on industry competitiveness. The Melbourne gaming industry competitiveness was enhanced since the passage of several acts pertaining to gaming. For instance, Seyfort (2003) mentions that statutory review of the interactive gaming acts may lead to regulation of credit card use on online gambling sites, gaming machines controls, and others. Likewise, these regulations resulted to effectiveness of the prevailing tax rate of gross profits of companies involved in the gaming industry which contribute to the improving economy. III. External Stakeholders and the Broad Environment External factors affecting the growth of gaming industries in Melbourne include customers. These are young as well as old buyers; usually visitors that spend their leisure times in casinos and other gaming establishments. They contribute a lot in increasing the industries profits. The gaming industry relies mostly on Brisbane’s tourism. The more visitors there are, the higher the profit of the business. Another external factor that affects the gaming industry is their suppliers. This is composed of software creators and hardware manufacturers. The suppliers greatly control how the businesses would run. The quality of their produce would greatly affect how the games are played and this determines the satisfaction of the customers. If there is a problem with the supplier, the industry’s production will definitely decrease. The last external factor affecting the gaming industry would be the competitors. The major competitors of the industry include entertainment products such as film, video and music clips. This would divert the customers’ attention in playing in casinos and gaming centres. These competitors were provided good promotions. In the view of the broad environment, it consists of global and domestic forces such as socio-cultural trends, technological trends, political and economic trends. The gaming industry in Melbourne would have not much socio-cultural problems because they are in the centre of tourism in Australia. They are given lots of opportunities to promote their business and therefore increase their profits. The industry’s location is very much suited for this kind of business. An example of a technological force that could affect the gaming industry would be the availability broadband internets. It would have the same effect as that of the competitors like the entertainment products. Political trends and economic trends, on the other hand, have a great influence on the gaming industry. Both of them determine how the industry would prosper. Certain government bills and laws would decide how the business would run. Examples would be the risk of higher taxes and open markets. As for the economic perspective, they happen to have a directly proportional relationship. If the economy goes up, there is a big chance that the industry would also increase its profit. References Chienne. Australian Gaming Industry: Billion Dollar Baby. Internode Games Network, 30 Jul 2007. Internode Systems Pty. Ltd. Hill, Jason. Game industry at the crossroads. Game Reviews, September 7, 2006, theage.com. Jupp, James, Dr. 1999. Academy Symposium: The Snowy Mountains Scheme and Multicultural Australia. O'Shanassy, Lana. 2007. Gaming Machine Consumers May Lose Consumer Protection Rights, Brack's Government Seeks Legal Opinion. Better Internet Bureau. Seyfort, Anthony. 2003. Recent Regulatory Developments in Australia's Gaming and Wagering Industries. Gaming Law Review, vol. 7, no. 4. Mary Ann Liebert, Inc.. Walsh, Robert. 2006. The Rise of Australian Gaming. Read More

 

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