The Irish gaming market is confusing at best… through this special report InterGame hears from companies that know it best to find out what the real situation is

The lawyer’s point of view… Joe Kelly of A&L Goodbody

Ireland is one step closer to removing its antiquated laws on gambling from the statute book and replacing them with a new and modern code, which will, for the first time, regulate online gaming, betting and lotteries.
Although the reform of Ireland’s gambling laws has been on and off the Irish government’s agenda for several years, it would appear that definite progress is now being made, with draft legislation expected before the end of 2010.

The most recent initiative to regulate the sector in Ireland can be traced back to May 2009, when Dermot Ahern, Ireland’s Minister for Justice, Equality and Law Reform, publically announced that his department was undertaking a major review of gambling, the objective being "to provide the government with options for a new and comprehensive legal and organisational framework governing the gambling architecture in the state." In order to carry out the review, Minister Ahern established a dedicated section within his Department, operating under the (misleadingly limited) title of the Casino Gaming Control Section.

It was originally thought that the remit of the Casino Gaming Control Section would be restricted to the regulation of land-based casinos. However, the Casino Gaming Control Section soon realised that a more radical overhaul, rather than piecemeal reform, would be required in order to properly fit together all of the necessary parts of a modern regulatory framework. Terrestrial and online gaming, betting and lotteries are all under review, as is the government’s own divided approach to regulation, whereby betting has traditionally been regulated by the Department of Finance and the Department of Justice, Equality and Law Reform has been responsible for gaming and lotteries. It is anticipated that the legislation governing each of these sectors will be repealed and replaced with a comprehensive code regulating the entire gambling industry.

Approximately 11 months after the Justice Minister’s announcement, policy proposals have been formulated by the Casino Gaming Control Section. These proposals, which will underpin Ireland’s new gambling architecture, were drawn up following an extensive consultation process, in which members of the public and stakeholders in the industry were invited to submit their ideas on reform. Detailed submissions were made by many stakeholders and it is understood that these have been incorporated into the policy proposals shortly due for publication, once the government cabinet has signed off on them.

Existing regime

Irish law on gaming and lotteries is principally contained in the Gaming and Lotteries Act, 1956. The 1956 Act, which has not been substantially amended since its enactment, is reflective of the period during which it was drafted, making specific provision for gaming at circuses, carnivals and travelling shows. The word "casino" does not appear in the text of the 1956 Act, and unsurprisingly, the Act does not deal with online gaming or lottery activities in any shape or form. Nevertheless, the restrictions and prohibitions in the 1956 Act are broadly drafted.

Section 4 of the 1956 Act prohibits the promotion or the provision of facilities for "unlawful gaming". The definition of "unlawful gaming" includes all games played for stakes, whether they are games of skill or games of chance, in which the chances of all players are not equal, or in which the promoter or banker profits from the stakes, otherwise than as winnings from the result of play.

Section 21 of the 1956 Act requires that all lotteries run in Ireland (with the exception of the National Lottery) are licensed pursuant to that Act. Lottery licences are obtained either from the Irish police or the District Court, depending on the value of the prize. The maximum prize which can be offered on foot of a lottery licence is €20,000. It is an express provision of a lottery licence issued pursuant to the 1956 Act that the lottery must be for some charitable or philanthropic purpose, and that the promoter must not derive a personal profit from it. On the face of it, this rules out running a commercial lottery or bingo from Ireland. That said, the lottery licensee is permitted to apply up to 40 per cent of the gross proceeds of the lottery for the expenses of running and promoting it providing some scope for promoters to obtain a reasonable return from lotteries run in Ireland.

The starting position in relation to betting is that all betting in Ireland is prohibited, unless regulated pursuant to the Betting Act, 1931. Although the 1931 Act has been amended more frequently than the 1956 Act, it still only regulates retail bookmakers, and does not expressly deal with online betting. Notably, section 33 of the 1931 Act as originally enacted, prohibited betting with persons outside Ireland, an obvious block to Irish punters placing bets online. However, section 33 was repealed in its entirety over 10 years ago by section 18 of the Horse and Greyhound Racing Act, 2001.

The absence of a regulatory framework for casinos has not deterred operators from offering land-based casino type activities in Ireland. Notwithstanding the widely drafted prohibition of "unlawful gaming" contained in Section 4 of the 1956 Acts, casinos have been operating in Ireland for a number of years in the guise of "private members clubs". They do so by relying on an "exception" to the prohibition on gaming on licensed premises (i.e. premises licensed for the sale of intoxicating liquor), which is contained in section 9 (1) of the 1956 Act.

Section 9 (2) of the 1956 Act permits licensees of premises licensed for the sale of intoxication liquor to let their "private friends" play cards for stakes in a part of the premises not generally used for the sale of alcohol, provided that the "friends" of the licensee are being entertained at the licensee’s expense. Although this "exception" was directed at publicans who organise card games for their friends, it is relied on by the operators of private members clubs as providing a legal basis upon which they can offer casino activities to the members of the club. The argument is that to the extent that "unlawful gaming" (within the meaning of the 1956 Act) is taking place, it is taking place between "private friends" and therefore falls outside the legislation.

In practice, the land-based casinos operating as private members clubs, ask members of the public who wish to enter the casinos, to complete a membership application form and to provide proof of identity. Members are then registered and are issued with a membership card, which allows entry into the casino club. The registration process can usually be completed on the spot, and there is no requirement for the member to wait for their membership to be approved. The reality is that anyone can become a member of a casino club and there is no requirement for the member to ever visit that particular club again.

Notwithstanding the legal greyness of the "exception", "private members clubs" have operated in Ireland for many years, with minimal interruption from the authorities. Significantly, a former Irish Minister for Justice expressed the view in Parliament that private members clubs, effectively operating as casinos, were not in breach of the law.

What the future holds: the content of Ireland’s new gambling code

Once the policy proposals are signed off and published by government and published, there will be some time for debate, following which the next step will be to draft legislation to replace the 1931 and 1956 Acts.

Parliamentary opposition parties have been largely supportive of the reform agenda. The installation of FOBTs in retail betting shops has been an issue, which has excited some controversy in recent times, but the government’s commitment not to legislate for FOBTs in bookmaking shops has defused that controversy.

Although it is thought that Ireland will adopt many of the features of the UK Gambling Act, 2005, it is anticipated that the primary legislation won’t be a bulky as its UK counterpart, and that much of the new law will be encapsulated in secondary legislation or in regulations. This would seem to be a sensible approach, particularly in relation to regulation of the online sector, as it will make Ireland’s gambling code more amenable to being updated to reflect technological changes and market shifts.

In the case of online gambling, it is speculated that a two-tier licensing regime will be created, whereby all operators offering services into Ireland will require some form of Irish licence. The licence application procedure for operators licensed in certain "white-listed" jurisdictions will be less involved than that for first time licence applicants.

As for casinos, the way forward will almost certainly be regulation, and not prohibition. Although the content of the regulatory framework is not yet clear, it is anticipated that the new legislation will create a strict licensing regime, with the stringency of licensing criteria being directly referable to the size of the casino operation.

The "window of opportunity" for Ireland

The widely acclaimed Report of the Casino Regulation Committee on Regulating Gaming in Ireland, which was published in July 2008, pointed to a "window of opportunity" being open for Ireland vis-à-vis the regulation of remote gaming. The committee expressed a view that if Ireland managed (within a limited timescale), to address the regulatory challenges posed by remote gaming and to provide a socially responsible and secure arena for the development of remote gaming based in Ireland, it could position itself as a gaming friendly centre of excellence, therefore attracting a reasonable portion of this dynamic industry, and yielding significant synergistic benefits, as well as employment opportunities.

Time is ticking on, and it remains to be seen whether the "window of opportunity" is still open. However, whatever about attracting new operators to set up on Irish shores, the value of the existing market is of itself significant. Valuations differ: Horse Racing Ireland, the organisation responsible for overall administration and development of the Irish horseracing industry, put a value of €1.7bn on the remote market.

However, it has been widely reported that a recent PriceWaterHouse Coopers paper, commissioned by Irish bookmaker Paddy Power, concludes that it is worth significantly less, with online sports betting being worth €668m and telephone betting €239m in 2009.

Despite the discrepancies in different valuations, in the current economic climate, any of these figures make a compelling case for speeding up the conversion of policy proposals into enacted law, which provides for a properly regulated licensing regime. Economic imperative aside, Ireland needs to regulate its gaming sector having regard to developments in other member states of the European Union, and having regard to recent decisions of the European Court of Justice, including the Liga Portuguesa / Bwin case.

An international perspective… Future Gaming

Future Gaming celebrates its 10th year in the Irish amusement and gaming market this year. Having started out supplying the casinos and gaming arcades with slot accounting systems, the manufacturer went on to provide mystery jackpot systems and in the last three years has been delivering its latest products SmartCash, a cashless module, and eFloor casino management system.

During its time in the market, Future Gaming has seen a huge increase in the number of gaming machines on the floor that are seriously pushing out the amusement business. As a result of that the gaming operation has come out of hiding and into the spotlight. As for trends in the market, Future Gaming has noticed the old poker machines are continuously being replaced with casino machines featuring up-to-date technology - a good move towards the introduction of serious legislation procedures such as game certification and centralised machine revenue auditing.

The global recession has obviously affected the Irish gaming market and according to Future Gaming all of its customers have had some sort of complaint, with most seeing a reduction in turnover by 30 per cent during 2009. As well as this, because the official gaming status in Ireland is considered a ‘grey area’ most of the largest suppliers haven’t been very involved in the market - leaving space for independent and unprofessional approaches towards supporting the industry. However, Future Gaming does feel that as legislation is introduced the market will see a dramatic improvement in this and the market will open up.

"It is hard to predict what will happen in Ireland," said Future Gaming’s managing director Dejan Tomic, "but our aim is to move towards cashless and player tracking operation, which should bring a completely new view on what player service at the floor is all about with benefits for both the players and operators.

"Legislation in countries with regulated gambling makes for a better selection of machines as they need to comply with certain operational laws. If introduced in Ireland, this will no doubt force many smaller operators to close, but the quality will generally improve and move from the family business structure to the more corporate type that follows world standardised rules of gaming operation.

The newcomer… Intergames

Active in the market for just over a year Intergames has seen the first-hand effects of the global recession in Ireland.

Having recently introduced Gary Platt x-tended player seats and a three-player automated roulette table - Futura, which features a progressive game, according to Bernard Mozina the operators are active and keen to establish new relations with new manufacturers bringing fresh ideas, but are, at the same time, waiting impatiently for the crisis to end.

"Operators in the market are currently being pretty prudent and everyone is trying to get as much possible from their existing equipment," said Mozina. "However, the major players in the industry are working with each other in order to survive and are supporting the introduction of new gaming regulation - they want to see responsible gaming and this is a very significant step for the market.

"We have established good relationships with many new customers in Ireland and we are looking forward to bringing them good long-term results. The industry in Ireland is moving forward and the fact they are now evaluating taxes and responsible gaming is very important."

##image2##

The neighbour… Carnaby Gaming

Involved in the Irish market since 1999, UK-based Carnaby Gaming supplies slot machines, mystery jackpot systems and, from time to time, second hand equipment. During this time a lot has changed in the market and according to Derek Lynch, who has personally been involved in the market for over 40 years, gone are the days of back street establishments where not much thought was put into the look of the location. Operators are now taking a much more professional approach and locations are more comfortable with a strong emphasis on customer loyalty.

"In recent years the trend has been towards casino type establishments with lots of poker rooms being set up," said Lynch. "The recession has hit everyone but gaming sometimes does better in a recession as people tend to stay local for entertainment. So while gaming has been affected I don’t think it has been as badly affected as other industries.

"The coin-op/gaming industry has always been resourceful and always seems to come up with ways to help operators," continued Lynch. "Operators are strongly focused on customer service and loyalty - mystery jackpot systems are key in giving cash back to customer independent of machine payout."

Carnaby Gaming has recently introduced the Olympic Medalist five-reel slot machine to the Irish market, which is proving very popular with orders currently out stripping supply. Also new is the mystery jackpot system, which uses a 19ins LCD screen on top of each machine displaying incrementing jackpots.

Commenting on the Irish player, Lynch told InterGame: "Ireland has a very localised type of player with more traditional types of games working well. With the advent of the wider European community Ireland did see an influx of eastern European players who tended to play the newer type of video reel games but since the recession some of these players have returned to their home countries. This has left a bit of a void but some of the younger players are now taking up some of the slack."

Looking forward, Carnaby Gaming plans to introduce more entertaining themed mystery jackpots as well as a wider range of reel-based slot machines. With regard to legislation, Lynch commented: "A lot of people would like it to stay as it is and be left to get on with what they are doing. Legislation in Ireland has been changing for the last 50 years but it has not happened yet - maybe this time it will, who knows…"

##image3##

The amusement manufacturer… SB Machines

SB Machines has been closely involved with the Irish market for over 15 years and during that time has been a key exhibitor at the annual AmEx show. Specialists in Italian coin-op kiddie rides, which are renowned the world over for quality and innovation, SB Machines has also had phenomenal success distributing the products of Belgian company VDW International in Ireland.

Considering the size of the market, SB has been impressed with the numbers of machines such as Magic Safe, its successor Big 7 and the Da Vinci pusher, it has sold to Irish operators. These machines constitute a significant investment, which its customers in Ireland are not afraid to make when they see something special.

"We have watched the rapid growth of the economy especially since Ireland joined the euro zone in 2002," said SB Machines’ Paulo Sidolli. "This led to a huge investment in the country’s infrastructure with new roads being built and the creation of new shopping centres and leisure destinations.

"Naturally this had a knock-on effect on our industry as existing arcades and FECs increased in size and new locations sprang up. More recently there has been some stagnation in the market as the Celtic Tiger has been hit by the global recession."

Commenting on trends within the amusement sector in Ireland, Sidolli told InterGame that operators are very discerning and sophisticated in their tastes. "They like to invest in more complex rides and will upgrade regularly," he said. "Irish operators work hard and will rotate their rides on a regular basis to ensure maximum revenues. It would be unusual to find an old or tatty ride in an Irish location - operators are professional and will either scrap or part exchange an ageing ride."

The Irish market is not subject to specific legislation concerning the location of kiddie rides and as long as the operator is reputable and fully insured, they can be placed in most public areas. There is also greater flexibility governing prize vending in Ireland and according to Sidolli, this has led to massive popularity of products such as Magic Safe, Stacker, Time Buster and Barber Cut.

During these recessionary times it is important for the coin-op industry to work together and support each other and at SB Machines the company works hard to provide a superb level of service to its Irish customers with back-up seven days a week.

SB Machines is a small family business based on personal relationships built up over time. "I think our Irish customers also appreciate our level of product knowledge. We take time to hand pick the rides and machines we supply and we know them intimately. We know our customers’ businesses in Ireland inside out - not just the decision makers, but the key members of staff - so my job is not selling but suggesting the best solutions for their businesses."

Commenting on the effect of the recession in Ireland Sidolli told InterGame it has hit the country hard and the amusement sector has not escaped unscathed. "Costs are up across the board and people have less money to spend on leisure," he said. "Despite this, there is still business to be had in Ireland as we noted at the recent show in Dublin. It is a matter of survival of the fittest and Irish operators know that good quality equipment will always take money in the right locations. Our machines provide family entertainment for a very small outlay - just one or two euros."

New rides from SB Machines for the Irish market include Smiley Train, manufactured by Franchini - the train moves around a circular track with both forward and reverse movement and it has been SB Machines’ most popular new ride in Ireland this season. Also new is Hello Kitty Happy Car manufactured by Cogan and Apollo manufactured by Motoi - the successor to the hugely successful Hot Air Balloon, one of SB’s biggest sellers of recent years.

Looking forward Sidolli believes the Irish amusement sector will continue to grow, albeit at a slightly reduced level. "We are well aware of our customers’ budgetary constraints governing new purchases," he said. "Therefore we will continue to try and offer them solutions tailored to their individual businesses whether that be longer payment terms or risk sharing instead of sale or return. SB Machines is not about the hard sell - it is about providing solutions and exciting machines, developed with the individual in mind."

First published May 2010