Despite online gaming crackdown– or because of it–casinos booming

When President Duterte assumed power in mid-2016, the prospects for the Philippine gaming industry looked uncertain.

Within weeks of taking the reins of government, the mercurial chief executive effectively killed the business prospects of Philweb Corp.—a publicly listed firm that operated the largest network of electronic gaming outlets in the country —by ordering the Philippine Amusement and Gaming Corp. (Pagcor) not to renew the firm’s license.

And while the President never hit out against the growing local casinos directly, fears were rife among industry insiders that he would set his sights on the booming businesses of the multibillion-dollar casino complexes along Manila Bay next.

But the numbers and dates from the third quarter of 2016— that very same period when uncertainty over the local gaming business was at its peak—tell a different story.

According to data from Pag- cor, the gross gaming revenues of the entire Philippine casino industry in the third quarter of of last year actually rose, instead of falling as everyone was fearing.

Pagcor data showed that for July to September in 2016, total industry revenue reached P39.774 billion, representing an 11.3-percent increase over the P35.727 billion reported during the same period last year.

Broken down, the revenue numbers for the third quarter included P34.168 billion from casino businesses, both private and gov- ernment-run, which compared favorably against the P30.411 billion reported by the industry in the same period last year.

Surprisingly, even the electronic games sector, which was the subject of the President’s attacks, also reported better numbers. According to Pagcor, gross revenue from electronic gaming sites in the third quarter reached P5.576 billion, which represents a modest 4.9-percent increase from the same period a year ago.

This positive performance of the electronic gaming sector came even as Philweb’s revenue contributions during the period were halved owing to the government’s crackdown and subsequent non-renewal of its license. The slack was taken up by a spike in revenues of electronic bingo games and sports betting, Pagcor data showed.

The country’s gaming industry includes three main developments. These are City of Dreams Manila, run by a subsidiary of Melco Crown Entertainment Ltd.; Resorts World Manila, owned and operated by Travellers International Hotel Group Inc., a venture between Philippine-based Alliance Global Group Inc and Genting Hong Kong Ltd; and Solaire Resort and Casino, controlled by Bloomberry Resorts Corp.

The fourth—the $2-billion Okada Manila integrated casino resort of Japanese gaming tycoon Kazuo Okada—is set to open its doors formally next month.

In an interview with the Inquirer, Pagcor Chair Andrea Domingo expressed optimism about the prospects of the gaming industry in 2017, saying the external challenges it faced in recent years had already been successfully weathered.

“This year looks like a good year for us because the Asian market has stabilized,” she said, explaining that casino revenue in Macau—the bellwether for gaming in the region—had started to stabilize in recent months.

Macau’s gaming industry is heavily dependent on players from China, and was hit hard by the Chinese government’s crackdown against corruption, some of the proceeds of which were suspected to be fueling the casinos of the former Por- tuguese colony.

A substantial number of socalled “high rollers” who play in Philippine casinos are, likewise, based in Macau.

“And these revenues will increase further when Okada Manila opens formally in February,” Domingo said.

But what really excites the Pagcor chief going forward is the agency’s new Philippine Offshore Gaming Operators (Pogo) category, which Domingo launched last year to help the government regulate the nascent but potentially large online gaming industry that caters to foreign players.

She explained that her office had received “numerous requests” from gaming operators in the United States and Europe for licenses that would allow them to set up operations in the Philippines to cater to the large demand of gamers wanting to place bets online.

“We have granted 35 licenses to local operators, but we still have many expressions of interest from abroad,” Domingo said, explaining the potential of this new gaming category to create additional jobs for Filipinos while simultaneously generating income for the government.

Depending on how the sector would develop with the first batch of licensees which received their Pagcor permits last year, she said the regulator’s focus would be on drawing in more foreign operators to set up businesses in the Philippines.

The Pagcor chief is particularly interested in the multibillion dollar gaming subcategory of online sports betting, the unregulated component of which is estimated to reach $40 billion globally.

“If we can manage to get even just a small portion of that business, it would be big for us,” she said.

“We want to focus on foreign markets,” Domingo added. “Pagcor gains through licensing fees, and the Bureau of Internal Revenue also gains by collecting income taxes from these operators. Most importantly, they create value locally because of the local talent that they hire and the leases they have to pay for their operations.”

This year looks like a good year for us because the Asian market has stabilized Andrea Domingo Pagcor Chair