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IN-DEPTH 1 May 2018
Japan: Land of the rising fun
The potential offered by Japan’s gaming market seems only to be matched by the hurdles it has encountered in trying to get off the ground. Akiyoshi Tsuruoka, General Manager and Chief Editor of Gaming Capital Management reviews the story so far
By Gambling Insider

There is already a huge gaming market in Japan, with racing, lottery, sports betting and Pachinko being particularly enjoyed by consumers.

However, due to globalisation, the Japanese economy is dealing with the outsourcing of manufacturing operations, leading to companies moving their operations overseas. This wave of recession has also put pressure on the entertainment and gambling industry, which in turn has also suffered from corruption.

The Japanese government is eager to develop inbound tourism as one of solutions for this economic crisis, and one of their strategies is to promote Integrated Resorts (IR) that contain casinos. Back in December 2016, the Japanese parliament (Diet) passed the Integrated Resorts Promotion Bill 2016 as a key tourism policy.

IRs which contain large scale convention centres and hotels are expected to be an essential part of improving Japan’s standing as a tourism destination. The government has now officially set a target for the number of foreign tourists as 400k in 2020 and 600k in 2030 respectively, and the policy on IRs will be a key driver in achieving these figures.

An IR promotion committee has been established in the cabinet by Prime Minister Abe, and practical work has already begun to formulate the second IR Implementation Bill.

Abe commented in the launch meeting: “Japanese IRs will be resorts that operate integrally with entertainment facilities for family, MICE and convention centres.

“We will build an attractive and highly competitive tourism market based on stays and repeat visits by making the best use of our Japanese tradition, culture and art.”

The committee meeting will discuss how the gaming market should be regulated, and will outline the approved geographic IR locations. They will also outline limitations on entry into the facilities, as well as countermeasures for money laundering and taxation schemes, amongst other aspects.

Experts from a range of fields such as legal, financial, political science and economics participated in the committee meetings to discuss the various disputed points regarding institutional design. This August, they completed the public consultation process through public hearings at nine locations across the nation.

However, the issue of player protection and addiction has been a spectre in the background. The public has previously criticised the gambling industry’s approach to dealing with problem gambling around Pachinko machines, race betting and lottery, and this has been a key focus for the deliberations in the Diet. Another important area for discussion has been the ability to exclude at-risk players through self or family exclusion, security for online betting, treatment for gambling addicts and an education programme for existing gambling businesses in Japan.

In addition to social problems, money laundering and protecting the safety of younger generations is also a consideration. To this end, the government will enforce an entrance fee and limit access to casino floors, as well as regulate the makeup of facilities such as the size of the casino floor. However, this intention to levy fees and limit gaming space has caused some consternation amongst potential IR investors as they see it as a major factor that will curtail their profit-making potential.

The original driving force behind promoting IRs was to boost inbound tourism, local business and benefit from the economic effects of job creation and tax income, so it makes perfect sense to have the discussion about maximising economic benefits at the same time as creating the institutional framework.

There are pros and cons in the national IR policy, and the countermeasures against problem gambling will be critical to paving the way for IRs. Therefore the IR caucus cross-party alliance is willing to develop another bill dealing with gambling addiction separately from the IR bill. Meanwhile, Prime Minister Shinzo Abe dissolved the House of Representatives on 28 September, so the deliberation of the schedule will be carried over to the next ordinary Diet session.

The IR implementation bill will probably be submitted during the ordinary session of the Diet this year to be deliberated in April or May when the national budget debate is finished.

In addition, in order to respond to public concerns, Abe’s party will submit the gambling addiction bill independently from the IR bill, and seeks to time for deliberation of IR bill right after passing dependence gambling addiction basic bill in the case parliament extend a session until August in 2018 as necessary.

After the IR bill is passed and regulatory authorities are established, the next step will be for the government to designate special economic zones for the new IRs, where local government rules will apply.

The designated local government will select a private operator, which will be given a licence as a private company in charge of development, from the urban design planning and environment assessments to the construction of the IR.

It will take at least half a year for a basic proposal, and then a further one or two years will be needed to authorise construction. Therefore, 2025 is the earliest date for a fully operational IR providing construction takes the estimated two or three years.
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IN-DEPTH 4 September 2019
Virtual reality: Creating next-gen experiences for players

Singular CEO George Shamugia discusses a new revenue stream for casino operators

The competition in online gaming is intensifying, with players becoming more and more demanding. In some markets, single-customer acquisition costs can reach up to €400 ($440) alongside growing churn rates. Furthermore, the online gaming sector struggles to attract one of the most lucrative groups of players – millennials. The experience provided by casinos no longer appeals to the younger generation.

On  the other hand, the video gaming industry perfectly understands the needs of millennials and by introducing elements of luck in their games offers the best of both worlds. With the launch of loot box systems and Grand Theft Auto’s in-game casino, we have seen their first successful steps in targeting the online gaming sector. GTA V online, with 33 million active players, recently opened an in-game casino, where players gamble real money on games such as poker, roulette, slots, etc. As a result, churn users returned and GTA Online reached the highest number of active players since its launch in 2013.

The online gaming industry has almost fully utilised the potential of the mobile medium. The time has come to look for new, innovative ways of delivering a next-gen experience to customers.

The potential of VR

Could the next big thing for online gaming be a fully fledged virtual reality (VR) casino delivering an immersive experience and limitless new opportunities?

Although not widely adopted yet, VR has a sizable number of customers. Analysts predict it’s poised for explosive growth to become mainstream in about five years. According to market intelligence firms, the VR market will be worth $117bn by 2022, and according to Juniper Research bets made through VR will reach $520 billion by 2021. Upcoming 5G mobile network technology will propel VR’s mass adoption by allowing the development of fully portable untethered and affordable VR headsets.

Different level of social interaction

The captivating nature of gambling comes from its social aspect. Unfortunately, personal interaction is widely missing from online gambling sites. VR technology creates multiple opportunities to bring back and even enhance that social moment. The ability to connect with other players is one of the main reasons behind Fortnite’s popularity. This form of co-experience is the next generation of entertainment. Research conducted by Facebook has found participants spend more time on VR compared to any other medium. This directly translates into increased profits for casinos.

Pokerstars has made efforts in this direction by implementing Voice UI. Instead of using hand controllers to make a call, pass, or raise, players give voice commands.

Another opportunity for bringing in the social element are the players’ avatars. They enable players to build their identity reflected in the avatars’ appearance, but also the avatar's social, competitive and community status. For instance, players are willing to pay real money for virtual drinks at the bar. Operators can offer these social touchpoints for free to VIP customers as an act of appreciation.

VR also brings a new dimension to customer support. Customer support can also be represented with avatars to assist the player in person. The social moment increases the LTV of players and contributes towards lower churn rates.

Rethinking game design

VR is a way more capable medium than a 2D mobile or desktop screen. Instead of copying the existing online experience, games must be redesigned from the ground up for a competitive advantage with VR. For example, a VR slot game can become fully immersive by teleporting the user into the slots’ world of Ancient Egypt. Next, enrich the experience with high-fidelity graphics, realistic spatial sounds and animations. When betting on virtual race cars, the user can be teleported inside the car he/she made a bet on and experience the race firsthand.

New revenue streams

VR casino lobbies create new revenue stream opportunities: ad placement of brands on the venue walls, company logos decorating the bar etc. This kind of branding is not intrusive in the VR space and feels natural from the user's perspective. VR also gives users the ability to change venues from a Las Vegas casino today, to Macau or even Mars casino, the very next day. The dynamic and diverse experience increases retention rates.

The majority of profits for online gaming operators come from their high-roller players. Although they represent a small subset of active players, an operator can launch a separate VR casino brand for them. Providing exclusive VR gaming experiences to high rollers/VIPs, the operator can minimise churn and maximise VR efforts for these player demographics.

The catch with VR is to focus on quality, rather than scale. The target audience might be limited yet, once these players experience it, they will become ambassadors for your offering.

Surely, the opportunities and possibilities offered by the VR medium truly exceed anything offered by mobile and desktop. VR is a new frontier not just for gaming but for every industry, and it’s exciting to see where it takes the industry and what kind of innovation it brings upon us.

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