eGaming thrives amid competition

Published in: Latest Intelligence  

Internet cafe operator PhilWeb looks to other emerging markets and new products for future growth. The company works with state company Philippine Amusement and Gaming Corp. to run almost 400 “e-Games cafés”, specialized internet cafés just for online casino gambling and sports betting, usually operating around the clock.

“Customers in Asia are not playing from home or the office in the same manner that they would be in Europe because they do not have internet or a credit card,” says Dennis Valdes, president. According to Valdes, an average 50,000 people a day visit the cafés,  spending 2,000 -4,000 pesos ($48-$96) in cash a visit.

"It’s not [a] huge [amount], but because it's very affordable, it just becomes part of a person’s entertainment budget,” Valdes says. “It’s the same amount of money they would spend if they had a very nice dinner in a restaurant.”

The net profits of PhilWeb, controlled by businessman Roberto Ongpin, who served as a trade and industry minister under Ferdinand Marcos, rose 20.3 percent last year to 1.1 billion pesos as revenues rose 26.5 percent to 1.48 billion pesos.

Pagcor operates most of the e-Games cafés, while a PhilWeb subsidiary operates 15 and other independent companies operate the rest. Slot games are the most popular, followed by baccarat and video poker, but there are hundreds of choices offered.

Further expansion of the e-Games café network is constrained by the need for local and Pagcor approval and a requirement that sites be at least 200 meters from any school or place of worship. So the company, which also operates an SMS-based raffle game, is focusing on increasing revenues at its existing sites, moving into production of its own gaming machines and taking the business overseas.

To build revenues at home, the company is expanding its customer loyalty program so that players signing up for a card receive rewards for their playing volume. “The gamer in the Philippines has a large number of ways for how they would spend their disposable income,” says Valdes. Besides casinos, “There’s horse racing, cock fighting, poker clubs and bingo halls.” But every gambler usually favors one place in particular, he says.

Those preferences will face some disruption with the arrival of grander casinos to the Philippines thanks to Pagcor’s Entertainment City development in Manila Bay, which kicked off this spring with the opening of Solaire Casino, according to Rodney Hall, vice president of the Philippine unit of casino services group Silver Heritage Ltd.

“Customers have seen… what Solaire offers its customers and they are now thinking to themselves that they should expect better machines, games, restaurants,” he said.

While the e-Games cafés target a more modest customer base, PhilWeb is reinvesting in redecorating its outlets to look more like casinos, covering windows and adding plush sofas and free drinks. “PhilWeb has been making quite a big effort in refurbishing,” says Hall.

The overhauls should give PhilWeb an opening to install machines from its new e-Magine Gaming Corp. business. The Genesis terminal comes with built-in readers to accept bills, tickets and cards but the venture increases the company’s competition with Inter-active Entertainment Solutions Technologies Inc., which supplies arcade-style gambling machines to Pagcor.

Valdes sees overseas markets as PhilWeb’s best opportunity for growth and he aims for it to generate most of its revenues abroad. It generated 9 percent of revenue offshore last year as it gained traction in its first three foreign markets, Guam, East Timor and Cambodia, with scratch cards and other lottery games.

“It’s not easy to enter a country,” says Valdes. “It takes a lot of groundwork and convincing of ministers that it is a valid business and that the state will derive revenue from it. We spend a lot of time introducing ourselves.”

In its annual report, the company said: “Scratch cards have been an excellent foot-in-the-door strategy for PhilWeb as we expand overseas. While most regulatory environments are cautious about granting gaming licenses, they are more open to the fairly innocuous, low-key scratch card operations. Once sales ramp up and we start delivering regular revenues to the governments of the countries we operate in, regulators become more receptive to grant electronic gaming licenses.”

Indeed, the company is trying to open its overseas first e-Games café in Dili this month with 86 terminals, including the first deployment of e-Magine machines. The company is also introducing higher value lottery scratch cards and an instant mobile raffle game in East Timor, where it sold 4.6 million scratch cards last year. It hopes to open more cafés along the country’s border with Indonesia.

“Timor Leste is such a young and fresh country,” says Valdes, using the country’s official name. “In Dili, there’s only one mall, one movie theater. There are restaurants, but not a proper night club.”

The company is also pursuing a license that would allow it to open e-Games cafés in Laos along the Thai border. Other markets it is targeting include Palau, Nepal, Mongolia, Sri Lanka and Myanmar though it has also received inquiries from Africa. 

One challenge is that many unlicensed equivalents of PhilWeb’s e-Games cafés are widespread in many places in Southeast Asia, especially Malaysia. “These illegal businesses are thriving anywhere there is a buck to be made,” Valdes says. “We’re so short staffed in terms of management and time that we’re just focusing on developing Asia.”