Perhaps you remember your initial thought upon encountering an online casino software vendor at one of the trade shows in the mid 1990s. It might have been something like: Who in their right mind would gamble online?
Turns out that was the wrong question. It should have been: Will the internet eventually be so irresistibly convenient—for shopping, paying bills and every other transaction-based activity—that no matter how scary the concerns about credit card security, identity theft, and yes, being cheated, droves of people all over the world will just go, “Sure, why not?”
Today we know the answers to both those questions, despite a decent number of incidents that could have supported the skeptic’s stand. And although the traditional casino industry took almost as long as the governments that regulate it to figure it all out, the day has finally arrived when we are seeing a mass entrance to the online sector by established land-based casino brands.
While the U.S. waits for legislation to overturn the ill-conceived UIGEA debacle, casino operators in other lands are stealing a march on most of their colonial counterparts. There are two basic models of online operation being pursued by land-based casinos. One follows the borderless nature of the internet itself, whereby a business is free to go after customers anywhere in the world. The other is a more constrained approach, dictated by legislation, that narrows the client pool to the legal residents or citizens of a given nation. And as expected, there are those who have decided to stake out positions somewhere between the two extremes.
Finland: The RAY Organization
In Finland, all live gaming is under the auspices of the monopoly operator RAY, an acronym for what in Finnish stands for “Slot Machine Association.” The quasi-governmental company was created in 1938 with the stated goal of raising funds through gaming operations to support Finnish health and welfare organizations. RAY operates the Grand Casino Helsinki and 20,000 slot machines across 24 gaming clubs, 50 arcades and other venues, as well as 350 low-stakes table games in restaurants. Total revenue from the company’s activities in 2009 was €651 million, of which €381 million went directly to the target organizations.
In February 2010 the Finnish government finalized an amendment to RAY’s gaming license that would enable the company to establish an online casino and poker room. The games would only be open to Finnish residents and citizens, as has been the case with Finland’s online lottery and sports betting site from national lottery operator Oy Veikkaus, which has been functioning since 1997.
By limiting participation to its own citizens and residents, the Finnish gaming and lottery organizations have managed so far to maintain their monopolies’ legitimacy in the eyes of the European Union. The RAY site is scheduled to go live in mid-October 2010.
Because RAY is so well known within Finnish culture, the operator intends to make full use of the strength of the brand. On an annual basis, 38 percent of the nation’s 5.25 million residents play a RAY slot machine. For the online product, RAY intends to offer games customized to benefit from the success of the brand.
To open an account, players need to have a permanent address in Finland and a Finnish bank account. The information will be cross-checked with the national population registration center, and the same TUPAS ID service verification method used by banks for online banking procedures will be employed. Use of these methods will ensure that a player has only one account and one screen name. It will also guarantee that all players are at least 18 years old.
In August, RAY agreed with the company Playscan A.B. to use the Playscan player self-analysis tool on the site. Developed by Swedish monopoly operator Svenska Spel for use with its own online poker room, Playscan allows a user to become more aware of his or her behavior when immersed in online gaming. Working with mental, cognitive and predictive data, the tool provides a safety net for the player and gives the operator a channel by which to communicate directly with the consumer, should a potential problem be indicated. Altough it is in use elsewhere with online poker, RAY will be the first operator to also employ Playscan with an online casino.
The inclusion of a tool like Playscan goes hand-in-hand with the objective of the RAY site. The government has allowed RAY to offer online gaming in the hopes it can channel already-active online gamblers away from the numerous commercial offerings available on the international market, which will be technically off-limits for Finns.
To offer more incentive to patronize the home team, RAY intends to make use of its five distribution channels—Grand Casino Helsinki, gaming clubs, slots around the country, restaurant gaming and now online gaming—for cross-promotional activities. One obvious example will be to offer online satellites to poker tournaments, for which the finals will be held at Grand Casino Helsinki.
In the mid 1990s, before the online explosion, Finland was one of the first European countries to offer American-style poker in the casino. Helsinki became a twice-yearly stop for international players on what at the time was a very limited tournament circuit. As a result, the game developed a strong following among the Finns.
The RAY casino and poker sites will both be using the software and technology platform from Playtech. These include casino games utilizing Playtech’s EdGE gaming platform and a mobile capability. On the poker site, players will compete only against other Finns on an exclusive local network.
Estonia: Olympic Entertainment Group
Estonia-based Olympic Entertainment Group saw wild expansion in the mid 2000s, when it seemed a new Olympic casino or slot casino was opening somewhere in Eastern Europe every month. The plan called for OEG to be active in 10 countries by 2010. However, after opening properties in eight countries, the recession, tweaks in legislation and the outright closing of the Ukraine market forced a rethink of the immediate future.
So it was no surprise that when Estonia commenced with a regulated online gaming market at the start of 2010, OEG became one of the first companies to enter the local business.
Today the company has 63 venues operating under the Olympic brand in seven countries. It stands to reason, then, that the online offering would make use of such a well-known, successful name.
The Estonian law was not established to provide the nation’s citizenry with its own local gaming network. Olympic-Online is free to approach customers anywhere. However, for now the company is concentrating on its traditional home market of the Baltic lands plus Scandinavia, where the Olympic brand is also well known. The idea is to establish a local market first, before venturing out into the wider world market.
OEG has implemented some successful cross-promotions between its network of live poker rooms and Olympic-Online. The intention is to expand cross-promotional activity into the casino segment. Among the features anticipated is a combining of online and live casino loyalty programs, which would enable the marketing department to evaluate online players who are also active in the live venues, and vice-versa. The group’s casinos are already seeing first-time visitors coming from the online site to take part in live events.
On the other side of that coin, while encouraging live players to play online, OEG is exercising caution. Those players are being carefully selected and the results closely monitored, to avoid growing the online business at the expense of live gaming. At the moment, Olympic is offering online casino games and poker, both via the internet and on mobile devices.
The Estonian online gaming regulations require detailed player authorization requirements. In the Baltic lands—Estonia, Latvia and Lithuania—there is an I.D. card- based authorization. OEG also makes use of other governmental databases to help with player authorization. An additional identifying option is being developed, one which uses banks as third-party verifiers.
For players from outside the Baltics, a copy of a standard, internationally accepted I.D. document must be provided. Players can also register for an online account at any of the Olympic casinos in their country.
Like the RAY site in Finland just across the Baltic Sea, the Olympic-Online site is powered by Playtech. However, in contrast to the closed national poker network of the Finnish operator, Olympic-Online legally allows its account holders to compete against players from around the world, on Playtech’s iPoker Network.
OEG is pursuing a two-pronged strategy with its move into online gaming. One objective is to give the traditionally large number of casino visitors from outside Estonia the opportunity to play with Olympic after they have returned home. Another is to use the online product to complement the live casino offering in existing markets and to make inroads into new markets, particularly in Estonia’s neighbors.
United Kingdom: The Rank Group Plc
The Rank Group is one of the largest operators of land-based casinos in the U.K. Within its Grosvenor Casino division, Rank operates 25 casinos under the Grosvenor name and 12 under its entertainment-oriented G Casino brand. In 2009 the division delivered £220 million in revenue. The group’s Mecca Bingo division is also one of the largest in the U.K., with 103 clubs and revenue of £233 million in 2009.
Rank Interactive Gaming began online operations in late 2001 with a product initially marketed to the group’s five million Mecca Bingo members. The site offered users a mix of lottery and slot games and featured the U.K.’s largest single-game jackpot at £500,000. In 2003, Rank acquired the already-successful Blue Square online sports betting and telephone betting business for £65 million in unsecured convertible loan stock, and combined that business with its existing operations. In 2009 Rank Interactive, offering casino, bingo, sports betting and poker to its 200,000-plus account holders, contributed £50.8 million in revenue to the group.
The individual sites operating under Rank Interactive are allowed by law to accept clients from any jurisdiction. The sites offer gaming in Spanish, French, German, Danish and Swedish as well as English. But the division’s primary focus is on the U.K. market, which is where the casinos and bingo clubs of Grosvenor and Mecca can lend the strength of their brands to the marketing effort.
The existence of the physical clubs, with their databases already filled with member information, presents opportunities for acquiring new clients for the online sites. Rank takes the view that its land-based customers already enjoy visiting the casinos and bingo clubs, so the job is to make the virtual gaming experience as close as possible to that of the real world. There are currently individual, specific sites for each of the two casino brands, the bingo clubs and the sports book.
The company’s research has shown that customers feel more comfortable when they find the same games online as those they are used to playing live. To accomplish that, Rank works with its game suppliers to ensure that customers visiting the online sites will find the exact same games that they play in the clubs, and vice versa. The eventual goal is to give the online site such a familiar feel that players coming from, say, the G Casino member pool will feel like they are at their favorite G Casino when playing at gcasino.com.
All of the Rank Interactive sites are based on the Playtech platform, with poker players being part of the iPoker Network. Security verification and payment processing is provided by Orbis. With security and fair play such huge concerns for online players, Rank feels that being a well-established and reputable land-based brand is a strong endorsement for its online brands of the same name.
Rank is looking for the online gaming business to provide a significant portion of group revenue in the future. Internal research at Rank has revealed that 20 percent of its land-based casino clients also play online. However, only a small percentage of that group play at the Rank Interactive online casinos, owing to the numerous providers of online gaming from which to choose.
The 20 percent of clients already playing online offer a direct opportunity for marketing. But even more interesting are those among the 80 percent who do not yet play online. The goal at Rank Interactive is to discover a way to tap into that customer base and, using basic business practices, be a tough competitor in a crowded sector.
France: All Hands on Deck
The introduction of a highly regulated, single-nation online gaming market in France this past summer has drawn a lot of competitors vying for their share of some 50 million eligible consumers. Although only poker, sports betting and horse racing are allowed by the legislation, the French regulatory authority known as Arjel had already agreed to 38 permits for 30 operators by mid-September.
The French land-based casino industry has responded as well, in the hope that they can replace at least some of the lost revenue of the recent past. In the last three years, French casinos have seen their collective revenue fall by 20 percent. Now, as in the early 1990s when the industry was saved by the introduction of slot machines, operators are counting on a new product—online poker—to help restore some luster to the industry.
The four main casino operators in France—Groupe Partouche, Lucien Barriere, Joa and Tranchant—were quick to enter the fray. In early September they were joined by the two-property operator Casino de Golfe and a group of 40 independent casinos united under the acronym SFJI, which translates to the “French Online Gaming Club.”
Casinos in France have been allowed to provide live poker only since 2007. Ironically, it was the ever-increasing strength of a then-unregulated online poker market that forced/inspired the casinos to move in that direction in the first place.
In the past, marketing activities by online poker operators included obtaining a land-based tournament venue and filling it with players who had qualified online. When the television cameras joined the scene, the authorities took notice and pulled the plug. But the flood of new faces inside the floundering French casinos apparently made an impression on someone. As a result, operators are expected to pick up where the market left off, using their online sites to bring players into their physical casinos.
Poker will provide marketers with some opportunities to practice exploiting the online/land-based synergies. That practice will come in handy when Arjel eventually decides to open the market to online casino operators as well.