Online Gambling Threatens SA Land Casino Interests

online-vs-land-casinsosAn opinion piece written by Investec Securities chief economist, Brain Kantor for Business Report quotes the strategist as saying that that one of the biggest threats facing established gambling enterprises in South Africa is online gambling. Kantor writes that the cost of providing gambling on the internet by operators is “close to zero” and the offering is “infinitely scalable”. He writes that, by comparison, running a terrestrial casino or a racing club is extremely costly as people need to be employed and a physical structure is required.

“Lower costs of production of any good or service usually means lower prices as firms compete for a larger market share with better terms – and in the case of gambling, this might well mean better terms or bigger potential prizes for gamblers,” notes the report.

These facts provide online gambling with a greater competitive advantage over land gambling providers. Internet gambling sites attract customers from all over the world at a very low cost, and therefore offer better odds and higher payouts.

Another factor that may affect South African land casino interests is the potential proliferation of electronic bingo terminals, which, says Kantor “are slot machines in practice.”

These machines offer an added competitive advantage to South African gamblers as they promise unlimited payouts, in stark contrast to the limited payout slot machines licensed at casinos. “Limiting payouts restricts the competition of conventional casino based slot machines for gambling revenue with casinos, the tote and the National Lottery,” reads the report. “Unlimited, or less limited payouts, have an attraction to many casino or horse racing gambling whose objective is the big win.”

The Business Report’s op-ed message is quite clear: the value of any potential casino or racing club in South Africa is under the threat of the growing number of electronic bingo terminals and legal access to online gambling. Kantor says that the threat from new technology and the uncertainty about how the South African gambling landscape will look like in the foreseeable future is essentially influencing the value attached to casinos and licenses.

The article, entitled Gambling World Anything but Ordinary, discusses at great length the different “threats” faced by the local gambling industry, with particular focus on the exclusive Cape Town casino license currently under discussion.

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