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The proposed changes requiring primary legislation and the fact that a new government will take office after the UK general election this year means no new regulatory licensing or regulatory regime in the UK is likely to emerge until 2011 at the earliest.

A consultation period during will also give operators both in the UK and overseas the opportunity to contribute their views on the plans to DCMS over the course of this year.
Landmark European Court of Justice (ECJ) judgments in cases between private operators vs state-enforced monopolies are also due in the Netherlands, where Betfair and Ladbrokes are challenging De Lotto’s right to act as the EU Member State’s sole legal supplier of online gaming, sports betting and lottery products, and in Germany, between Carmen Media Group and the regional government of Schleswig-Holstein.

Private operators will be hoping that Bwin co-chief executive Norbert Teufelberger’s prediction in his column for eGR late last year that the ECJ’s support last year of Portuguese betting and lottery monopoly Santa Casa da Misericordia was just a temporary setback for private operators in the EU holds true.

As Harris points out (see box out on p38) much of the outcome for private operators in the ECJ judgments due in 2010 will hinge on the Court’s interpretation of the proportionality issue, for instance how much restriction of private operators’ right to offer services between Member States is justified in order to safeguard consumers from perceived risks such as fraud and money laundering. These judgments will have hugely important implications for both private operators and state monopolies in Europe.

But with concrete market openings ahead in France and Italy, and developments in California suggesting the US could start opening on a state-by-state basis during 2010, this year promises to deliver more than last in terms of actual regulated entry into valuable egaming markets. But the inherent uncertainty of the terms and timing of legislation means the sector will necessarily be circling all promised opportunities on this front over the year ahead with cautious optimism.

Bolt-ons or power marriages?
Given the flurry of acquisitions across the sector towards the end of last year, it’s perhaps unsurprising that the third and final factor eGR sees playing a critical role for the online gaming industry in 2010 is consolidation.
While the consolidation play perhaps took longer to emerge than widely predicted, given the sector's early stage of development and strength in the recession relative to others, this finally started to unfold in September with Bwin’s buy of Italian poker site Gioco Digitale.

December saw Greek lottery systems provider Intralot buy a 35% stake in poker software provider CyberArts, ostensibly in preparation to tender for the contract to provide the poker operating platform in California, should the state legislature pass an enabling bill in 2010.
Betclic, Bet-At-Home and Expekt parent company Mangas Gaming also moved for Everest Gaming, lending it liquidity and positioning in the French and German poker markets.

In the casino provider space, Playtech fought off rumoured competition from Dragonfish to land games and open platform provider Gaming Technology Solutions (GTS) for an initial €10.8m (see analysis on p28). Finally, Dragonfish moved for Wink Bingo in a deal valuing the business at up to £60m, giving 888 around 9% of the UK bingo market, according to the group's chief executive Gigi Levy.

US horse racing also got in on the act in November, racecourse owner and betting operator Churchill Downs buying online wagering site YouBet with the acquirer stating the main reason for the deal as enabling it to benefit from growth in online betting on US thoroughbred racing, currently accounting for less than 14% of all horse race wagering activity in the territory.

Following these deals and with the sector showing demonstrable growth, analysts are predicting further bolt-on deals in both the B2B and B2C spaces aimed at driving revenue and earnings growth.

But sector analyst Nick Batram of KBC Peel Hunt suggests the huge complexities around long-mooted industry-transforming deals, including Bwin-PartyGaming, PartyGaming-Ladbrokes, Ladbrokes-888, counts against these transactions happening during 2010.
Batram says: “The scale of these challenges should not be underestimated. It is possible that we will see a major deal in 2010, but we should not expect a feeding frenzy of large-scale transactions.”

However, Batram adds that a spur to these deals happening this year may come from actual, rather than promised regulation in the US. “This could see significant deal activity if land-based companies were to seek to acquire online expertise,” says Batram. US casino groups Boyd and MGM Mirage are known to be supportive of internet gaming, if licensed and regulated at the state level.

And while the sector faces the same difficulties as other sectors in accessing debt markets, promising news came in the form of PartyGaming’s announcement in its December trading update that it had secured a £35m three-year bank facility on favourable terms of 6%.

In addition to enabling Party to perform a potential cash-and-shares acquisition of up to £80m, this also represented a vote of confidence in the gaming sector based on its proven ability over the last year to demonstrate growth amidst challenging conditions.

2010 and beyond

Thus while this summer’s football World Cup looks set to provide a welcome fillip to sector revenues and a focus for the growth and penetration of sports betting into new verticals, constituencies and geographies, how the two crucial underlying trends of regulation and consolidation transform the sector by year’s end is far harder to call.
But as last month’s overview of the industry’s first ten years proved, the industry has consistently proved itself resilient and fleet of foot in adapting to the shifting foundations on which it sometimes has to do business. There’s little reason to think 2010 will be any different.