white paper - future of digital gaming

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A White Paper By LocusPlay 29 December 2015 Digital lotteries are taking over the world of traditional lotteries. Before convincing all lot- teries to go digital, this paper seeks to explain why going digital is a logical choice, along with a brief history and forecast of the digital lottery world. There are several main points of this paper: going digital in the long run decreases costs and increases security, technology has many advantages over manual operations, and finally, the world market is inevitably turning digital (with emphasis on Asian, Latin American and African markets). Let’s look at why and how this is happening. Fixed Cost vs. Variable Cost The nature of technological advancements is such that many companies find it more cost effective to go digital. Going digital typically allow for less expensive software updates and easy reinstallation as opposed to sometimes costly replacement and fixing of infrastructure. All tools and infrastructure used in manual opera- tions, whether they are lottery ticket dispensing machines, handwritten tickets and miscellaneous smaller items such as ink, paper and other devices vanish almost entirely. Digital platforms are also more easily connected through a secure central sys- tem. Electronically stored information has the added benefit of being easily backed-up and sortable versus manual operations which may be harder to lose (except in the case of natural disaster or intentional destroying) but otherwise more painstaking to hold on to and store. Going digital is also more space effective, as a server can easily store many terabytes of data while paper records can rapidly accumulate and consume storage space. Thus the costs of going digital usual- ly are one-time, averaging out in the long run to be much less than manual operations and in- frastructure that may require installation and repair, along with higher potential for rapid depreciation. Going digital typically mitigates most of these costs, though not entirely (as technology also evolves much quicker while at the same time being easier to update). Going Paperless In a report by Cisco, going paperless was listed as large expense businesses can “easily cut”1. In tra- ditionally paper-based businesses such as lotteries, going digital can save businesses a huge sum of money, with figures differing based on size and scope the business. Lotteries that are completely manual for example, will save money on paper, printing supplies, ink, and logistics while incurring the additional cost of installing digital software. Though receipts will still be printed, the costs should drop as going digital tends to standardise efficiently. The cost of software of all kinds has been dropping for years and as technology be- comes increasingly advanced it will only drop fur- ther. locusplay www.LocusPlay.com Future of Digital Gaming A WHITE PAPER BY LOCUSPLAY

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A White Paper By LocusPlay

29 December 2015

Digital lotteries are taking over the world of traditional lotteries. Before convincing all lot-teries to go digital, this paper seeks to explain why going digital is a logical choice, along with a brief history and forecast of the digital lottery world.

There are several main points of this paper: going digital in the long run decreases costs and increases security, technology has many advantages over manual operations, and finally, the world market is inevitably turning digital (with emphasis on Asian, Latin American and African markets). Let’s look at why and how this is happening.

Fixed Cost vs. Variable Cost

The nature of technological advancements is such that many companies find it more cost effective to go digital. Going digital typically allow for less expensive software updates and easy reinstallation as opposed to sometimes costly replacement and fixing of infrastructure.

All tools and infrastructure used in manual opera-tions, whether they are lottery ticket dispensing machines, handwritten tickets and miscellaneous smaller items such as ink, paper and other devices vanish almost entirely. Digital platforms are also more easily connected through a secure central sys-tem. Electronically stored information has the added benefit of being easily backed-up and sortable versus manual operations which may be harder to lose (except in the case of natural disaster or intentional destroying) but otherwise more painstaking to hold on to and store.

Going digital is also more space effective, as a server can easily store many terabytes of data while paper records can rapidly accumulate and consume storage space. Thus the costs of going digital usual-ly are one-time, averaging out in the long run to be much less than manual operations and in-frastructure that may require installation and repair, along with higher potential for rapid depreciation. Going digital typically mitigates most of these costs, though not entirely (as technology also evolves much quicker while at the same time being easier to update).

Going Paperless

In a report by Cisco, going paperless was listed as large expense businesses can “easily cut”1. In tra-ditionally paper-based businesses such as lotteries, going digital can save businesses a huge sum of money, with figures differing based on size and scope the business. Lotteries that are completely manual for example, will save money on paper, printing supplies, ink, and logistics while incurring the additional cost of installing digital software. Though receipts will still be printed, the costs should drop as going digital tends to standardise efficiently. The cost of software of all kinds has been dropping for years and as technology be-comes increasingly advanced it will only drop fur-ther.

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www.LocusPlay.com

Future of Digital GamingA WHITE PAPER BY LOCUSPLAY

A White Paper By LocusPlay

Another important and less quantifiable benefit of going digital is increased record-keeping and secu-rity. Digital systems have a capacity to store and index information; in terms of lotteries, not only will records be safe but also easier to organise and manage. Thus the increased safety and lowered costs (especially over the long run, as software in-stallation occurs once where paper is a constant cost) contribute to a push for digitalisation.

Digital operations will also allow multiple points of entry for consumers – that is, because of the less limiting nature of mobile and online platforms, more consumers will be able to play lottery games. Even handheld, mobile point-of-sale devices are different from traditional practices, where receipts and tickets are handwritten and often illegible or hard to keep track of. The digitisation of applica-tions thus allows for an expansion of a consumer base through easy channels; instead of customers having to form lines to play lotteries and purchase tickets, they can simply play from the comfort of their own home, while only requiring a mobile de-vice. In some cases, such as with USSD betting systems, an internet connection is not even neces-sary.

Digital Trends in Asian and Latin American Markets, focus on Car-ibbean

Apart from the general listed benefits of going digi-tal, many markets have caught on or are ahead of the curve. The micro-scale benefits of going digital will contribute the world macroeconomic view of going digital, as seen in global market trends. Phone usage specifically has increased from 7% of all gamers downloading mobile games to 18% from 2008 till 2011 (Parks Associates). The upward trend in online and mobile gaming continues in various regions including EMEA (Europe, Middle East and Asia), Asia Pacific, with smaller players in Latin America, Canada, and finally the United States with about half of the world market (as of 2010). According to Pricewaterhouse Cooper, in 2015 this will change to the Asia Pacific region driving growth and capturing 43.4% of the world market, up from 29.2% in 2010, while taking away

several percentage points of the global market share from the United States and less so from EMEA.

The Asia Pacific region’s growth in gambling mar-kets will create a need to pivot geographically to Asia and cater to that market specifically. Potential in this market includes China and South Korea, which are the largest markets for gambling in the region and are both also closed to online gaming. The potential for deregulation of these markets will greatly increase the Asia Pacific region’s market share, as legal lotteries (manual only) are found in most Chinese cities and Hong Kong, although ac-cording to a whitepaper by KPMG, casino gaming is both extremely popular and exclusive to Macau 2. Japan prohibits most forms of gambling with the exception of horse racing and lotteries. Despite the heavy regulation of gaming faced by these markets, Asia Pacific (and India) markets are still expected to become the world’s largest player by 2015.

Deregulation will only increase this potential. As transportation infrastructure such as trains im-proves so as to better connect regions of Asia where gambling is prohibited to regions where it is legal (such as China and Hong Kong to Macau), expect these numbers to only increase. Pricewater-house Cooper projects that the online market will be “steadily eroded” from 2010-2015 due to clearly rising demand. The main concern of most govern-ment regulation is the rise of monopolies; once this fear is mitigated with legislation markets should become more accessible. Projected numbers by PwC say that gambling will grow at 9.2%, from $117.6B to $182.8B in 2015.

Projection of digital lottery world based on large markets

Smaller countries with projected growth include New Zealand, Malaysia and Vietnam in the Asia Pacific region (Pricewaterhouse Cooper), though primarily for casino-based gambling. However, casino-based gambling can easily be seen as a gateway to online and digital gaming, as the tech-nology has already reached these markets.

The trend can clearly be seen in markets such as the UK where a sharp increase in all bets placed over the past few years were online. As Asia Pacif-ic markets deregulate and expand the gaming in-dustries, look to see countries with functional gov-ernance and a steady population of gamers already in place turn to digital gaming. Another promising trend is the “harmless” nature of lotteries – while games such as poker and sports betting may be deregulated after the other gaming markets due to their negative public perceptions, the playing of lotteries is typically much more widely accepted.

Markets such as Japan which otherwise prohibit gaming allow lotteries, and it is only a matter of time before they go digital. Markets such as the Caribbean or South America in particular which rely heavily on tourism, will also see an increase in online gaming as both local users gain access to better mobile devices and tourists will be attracted to the regions due to their gaming opportunities. Thus it will be in both the region’s best interests to increase online gaming opportunities.

Conclusion

Clearly the world is leaning towards a digitalized future. As barriers such as heavy regulation fall and markets open up, expect to see online lotteries in abundance. Regions of interest include the Asia Pacific and Latin America, which even without deregulation of online gambling markets are ex-pected to grow considerably in the future. In order to unlock the potential of a lottery business, man-agers must look for ways to tap into emerging mar-kets; it appears that the way to do this would be through now converting to a digital platform in or-der to minimize costs and keeping an eye on mar-kets of interest.

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1. http://www.cisco.com/web/solutions/smb/need_to/the_path_to_paperless.html

2. http://www.kpmg.com/EU/en/Documents/On-line-Gaming.pdf

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