The Future of Europe

Simon Burridge, CEO of Virgin Games, looks at the future of online poker in Europe and asks will regulation create more problems than it solves? Burridge will be speaking at the European iGaming Conference and Expo in Copenhagen on the 19th of October.

InsidePoker Business: To what extent does the future of European poker depend on regulated markets?

Simon Burridge: The short answer is a lot. The march of individual jurisdictions to regulate all online poker within its territory is creating real problems for liquidity levels in non-regulated markets, as Europe, seemingly, moves to the segmentation of the market into 27 mini internet markets. Moreover, judging from the recent European Court of Justice's decision to back De Lotto's monopoly in the Netherlands and to uphold Sweden's ban on marketing by non-licensed sites, operators who fight against the monopolies aren't having much success.

IPB: Who stands to benefit most?

SB: Ironically, it is the Poker Stars and Full Tilts of this world that have continued throughout to take bets from the US in a flagrant breach of its laws who are best placed to capitalize from this move towards individually ring-fenced regulation. However, the situation, being what it is, growth in European poker looks likely to depend on the regulation of more and more markets across Europe. The Italian experience, after all, has shown that the combination of regulated online gambling with mass media marketing can generate significant growth in the total market.

IPB: To what extent is the non-regulated European poker sector in decline?

SB: The knock-on effect of ring-fenced regulation is shrinking liquidity pools for the non-regulated markets. At some stage, a tipping point will be reached and, as we know, the availability of places to play at price points they are happy with is a basic requirement of any poker network. No one, after all, wants to go to an empty night club. This is being further compounded by the heightened costs of doing business in Europe now that Europe is being divided up into any number of distinct jurisdictions with the need for separate licenses, huge marketing budgets, separate infrastructures etc. This has inevitably led to the closure of a number of the smaller operators and a move towards consolidation amongst the larger ones, of which the most notable and recent was the merger between Bwin and Party Gaming. Less liquidity, fewer operators and a decline in overall levels of play all threaten the future viability of the non-regulated European sector.

IPB: Are cross border networks between regulated markets a realistic proposition in Europe or will tax issues get in the way?

SB: The recent move toward regulation has, whatever anyone says, absolutely not been driven by the need to offer consumers greater protection. It is, in these straightened economic times, about the need of European national governments to raise new money or, where existing monopolies are threatened, to safeguard and defend an important income stream. The recent decisions from the European Court of Justice have, moreover, created precedents which, according to gaming lawyer, Quirino Mancini of SCM Partners, make it clear that each member state has the right to regulate all e-gaming activity within its border in any way it chooses. Meanwhile, the principles of EU law have been completely overtaken by the assertion of the political will of certain jurisdictions and, without some form of consensus on tax harmonisation, there is very little prospect of cross border networks becoming the norm.

IPB: Do you not think it will happen?

SB: As with Lotteries in the US, going it alone as a jurisdiction is only going to work if the inherent liquidity inside one's borders is enough. As the smaller jurisdictions move to regulate, it is highly probable that they will band together to ensure the liquidity is sufficient in much the same way as the smaller US states combined their lotteries to form Power Ball so and so be able to compete on size of jackpot.  

IPB: Where do you think these moves may come?

SB: Estonia, for example, is currently awarding licences with no intention to impose a closed border network. Denmark is likely to follow along with Austria and numerous other countries that on their own cannot offer enough liquidity to make a closed network an enticing proposition to players. At least in some countries, Governments are aware that tax revenue depends on players actually playing. If these countries are successful in establishing a cross border network, then other larger countries such as the UK and Spain may choose to follow this route as opposed to the French / Italy model, but, for the time being, I wouldn't bet on it.

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