NEWS
2
2021
Oct.
Industry News
Industry News
CQ9 2021 Q3 Market Outlook
Turbulence in Asia
In contrast to booming European and American markets, Asian markets have entered a period of the worst turmoil this year. This can mainly be attributed to the determination of the Chinese government to crack down on illegal financial activities, which has disrupted numerous cash flow channels that Chinese gamers rely on and changed the whole outlook of the gaming industry in Macao.
The decision of the Philippine government to levy taxes on online gaming has polarized observers. Some people believe that the Philippines will rely even more strongly on online gaming and will offer greater support to the industry in the future. Others argue that gaming will no longer be viewed as the main solution to the domestic economic crisis but rather as the main culprit of illegal recruitment and kidnapping activities. The current market disturbances in the Philippines, a hotspot of the Asian gaming industry, indicate that major upheavals are imminent in this market. In the following passages, we will discuss major events that occurred this quarter and offer our views on future trends and developments.
New hurdles – China bans cryptocurrency transactions
After issuing a national-level call in late May to crack down on bitcoin mining and transactions, the People’s Bank of China shut the door on cryptocurrency transactions by declaring that “all virtual currency transactions are illegal financial activities.” Violators face criminal prosecution.
Upheaval in the land-based casino industry – former glory gone forever?!
Due to the fact that the licenses of six casinos in Macao will expire in June 2022, the Macao Government has initiated a 45-day “public consultation” process for the industry. The government has pointed out that it will rely on government representatives to promote non-gaming items. In view of the tightening controls on various industries imposed by the Chinese government in recent years, there is a general concern that the gambling industry in Macao will bear the brunt of the authorities’ crackdown on illegal financial activities associated with gambling.
Lingering impact of the pandemic - tax revenues derived from land-based casinos dropped by 82% in 2020
Due to the impact of the COVID-19 pandemic, land-based casinos in Korea faced various restrictions and temporary closures between 2020 and 2021. Since the country was affected by a severe outbreak at the beginning of the year, cash revenues of the Korean gambling industry dropped by 64.5% YoY. The number of visitors plummeted by 71.3% in the same period.
New policy - Taxation of online gaming companies to aid the healthcare sector in the Philippines
In September, Rodrigo Duterte, incumbent president of the Philippines, signed the new online gaming tax act, which imposes a 5% tax on the gross gaming revenue of online gaming operators (POGO). Incomes of 600,000 Pesos (11,900 USD) or above earned by POGO employees are subject to a 25% withholding tax. Pursuant to the new law, 60% of the total tax revenue derived from POGOs will be utilized to enforce the “Universal Health Care Bill.”
Vietnam – an Asian market with sustained growth
A five-year market survey report released this quarter indicates that the average revenue of the Vietnamese gaming industry in this five-year period amounted to US$ 3 billion. In 2020, time spent gaming online by gamers increased by over 50%, while the online gaming participation rate rose by over 20%. Expenditures of online gaming users soared by a whopping 575%. These figures bear witness to the ongoing substantial growth pattern of the Vietnamese online gaming market.
Views and insights of CQ9
Recent turbulence in the Asian gaming market have indeed resulted in a gloomier outlook for the industry. Therefore, we have adopted a more conservative stance with a strong emphasis on steady business operations in the Southeast Asian region. However, we also believe that large-scale industry transformations merely signal a transition period. Clearly defined policies and implementation guidelines adopted by national governments provide a valuable reference for problem-solution approaches of the industry.
The rise of diversified applications in the field of blockchain and non-fungible tokens (NFT) in recent years has revolutionized our concepts of money, value, and price. Virtual currencies only represent the tip of the iceberg of these developments. Even if “virtual currencies” disappear, they will be replaced by an even greater number of “transaction-based” crypto payment solutions. This process is already in progress. Negative impacts generated by speculative behavior, excessive optimism, and unrealistic concepts are undeniable, but, in stark contrast to the dot-com bubble in 2000, governments all over the world are currently engaged in the active development of centralized blockchain applications. This signals a rising acceptance and willingness to accommodate this technology. The conservative and uncompromising attitude toward the gaming sector currently exhibited by different nations will undoubtedly accelerate updates and iterations by the industry in the context of these trends. We all must prepare ourselves for the advent of a new era in the field of gaming.
In contrast to booming European and American markets, Asian markets have entered a period of the worst turmoil this year. This can mainly be attributed to the determination of the Chinese government to crack down on illegal financial activities, which has disrupted numerous cash flow channels that Chinese gamers rely on and changed the whole outlook of the gaming industry in Macao.
The decision of the Philippine government to levy taxes on online gaming has polarized observers. Some people believe that the Philippines will rely even more strongly on online gaming and will offer greater support to the industry in the future. Others argue that gaming will no longer be viewed as the main solution to the domestic economic crisis but rather as the main culprit of illegal recruitment and kidnapping activities. The current market disturbances in the Philippines, a hotspot of the Asian gaming industry, indicate that major upheavals are imminent in this market. In the following passages, we will discuss major events that occurred this quarter and offer our views on future trends and developments.
New hurdles – China bans cryptocurrency transactions
After issuing a national-level call in late May to crack down on bitcoin mining and transactions, the People’s Bank of China shut the door on cryptocurrency transactions by declaring that “all virtual currency transactions are illegal financial activities.” Violators face criminal prosecution.
Upheaval in the land-based casino industry – former glory gone forever?!
Due to the fact that the licenses of six casinos in Macao will expire in June 2022, the Macao Government has initiated a 45-day “public consultation” process for the industry. The government has pointed out that it will rely on government representatives to promote non-gaming items. In view of the tightening controls on various industries imposed by the Chinese government in recent years, there is a general concern that the gambling industry in Macao will bear the brunt of the authorities’ crackdown on illegal financial activities associated with gambling.
Lingering impact of the pandemic - tax revenues derived from land-based casinos dropped by 82% in 2020
Due to the impact of the COVID-19 pandemic, land-based casinos in Korea faced various restrictions and temporary closures between 2020 and 2021. Since the country was affected by a severe outbreak at the beginning of the year, cash revenues of the Korean gambling industry dropped by 64.5% YoY. The number of visitors plummeted by 71.3% in the same period.
New policy - Taxation of online gaming companies to aid the healthcare sector in the Philippines
In September, Rodrigo Duterte, incumbent president of the Philippines, signed the new online gaming tax act, which imposes a 5% tax on the gross gaming revenue of online gaming operators (POGO). Incomes of 600,000 Pesos (11,900 USD) or above earned by POGO employees are subject to a 25% withholding tax. Pursuant to the new law, 60% of the total tax revenue derived from POGOs will be utilized to enforce the “Universal Health Care Bill.”
Vietnam – an Asian market with sustained growth
A five-year market survey report released this quarter indicates that the average revenue of the Vietnamese gaming industry in this five-year period amounted to US$ 3 billion. In 2020, time spent gaming online by gamers increased by over 50%, while the online gaming participation rate rose by over 20%. Expenditures of online gaming users soared by a whopping 575%. These figures bear witness to the ongoing substantial growth pattern of the Vietnamese online gaming market.
Views and insights of CQ9
Recent turbulence in the Asian gaming market have indeed resulted in a gloomier outlook for the industry. Therefore, we have adopted a more conservative stance with a strong emphasis on steady business operations in the Southeast Asian region. However, we also believe that large-scale industry transformations merely signal a transition period. Clearly defined policies and implementation guidelines adopted by national governments provide a valuable reference for problem-solution approaches of the industry.
The rise of diversified applications in the field of blockchain and non-fungible tokens (NFT) in recent years has revolutionized our concepts of money, value, and price. Virtual currencies only represent the tip of the iceberg of these developments. Even if “virtual currencies” disappear, they will be replaced by an even greater number of “transaction-based” crypto payment solutions. This process is already in progress. Negative impacts generated by speculative behavior, excessive optimism, and unrealistic concepts are undeniable, but, in stark contrast to the dot-com bubble in 2000, governments all over the world are currently engaged in the active development of centralized blockchain applications. This signals a rising acceptance and willingness to accommodate this technology. The conservative and uncompromising attitude toward the gaming sector currently exhibited by different nations will undoubtedly accelerate updates and iterations by the industry in the context of these trends. We all must prepare ourselves for the advent of a new era in the field of gaming.