Odds favour Isle of Man in e-gambling

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Odds favour Isle of Man in e-gambling

By Andrew Bounds
Financial Times UK
Published: November 2 2009

The geography of the gambling industry is changing. It is moving from the high street to the internet and from onshore to off, with a small speck of land in the Irish Sea becoming pivotal.

The Isle of Man, with a population of 81,000 off the north-west English coast, has in recent years joined Gibraltar, Malta, Macao and Curacao among the locations where the industry thrives thanks to low taxes, good infrastructure and flexible regulation.

The island owes allegiance to the English crown but makes its own regulations and tax laws.

Its first foray into the betting market was cut short by the US crackdown on online gambling in 2006. Many US-focused operators went home after Washington barred its citizens from online sites.

Now a new wave has arrived. The Isle of Man is looking to diversify its economy away from financial services and is luring companies with a flexible regime and government support, as well as skilled support services such as lawyers and accountants.

Chris Corlett, chief executive of the island’s Department of Trade and Industry, said: “E-gaming has had continual growth. Many organisations are seeing growth of 30 per cent plus annually as well as investment from Asia.

“What e-gaming has done is brought substantial investment in infrastructure that no jurisdiction this size in the world has. Not only do we have the financial and professional community, there is that crucial infrastructure they need.”

In five years, the e-gambling sector has created 500 jobs at an average salary of £52,000 – a significant amount in a workforce of 42,000. It is forecast to grow 30 per cent annually over the next two years.

The big attractions of the Isle of Man for gambling businesses are zero corporation tax and a betting duty of just 1.5 per cent of profits, against 15 per cent in the UK.

The island’s betting regulator has licensed 20 companies and a further 18 are going through the process.

Garth Kimber, who promotes the sector at the DTI, said: “We should create 160 more jobs this year and generate more than £6m in licence fees and duties.”

He said that the island’s government helps promote the industry worldwide and is always open to making its life easier.

“Legislative change is important because it is a fast-moving industry. We want to avoid regulations that exclude new games.”

As an example, he cites SBOBet, which wanted to run live streamed casino games from its operations base in the Philippines. The regulator spent a week in the country monitoring how it worked before ruling that it was not vulnerable to fraud and recommending that the government change the law to permit it.

However, Mr Kimber says that regulation is tougher than in many jurisdictions. To gain a betting licence from the Gambling Supervision Commission, costing £35,000, a company must set up an entity on the Isle of Man, recruit local directors and do its banking on the island.

Mr Corlett says that the island’s sector includes software providers such as Microgaming and Playtech as well as gaming companies themselves.

“We have concentrated on attracting reputable companies. Playtech, SBOBet, 888Bet, these are very much the premiership of gaming. They enhance the Isle of Man’s reputation,” he says.

“Many will be looking to realise value at some time. It is very difficult to seek a sale or IPO if you have a dubious reputation.”

The island is on the Organisation for Economic Co-operation and Development white list of tax havens that co-operate with international investigations.

There are two undersea broadband telecommunications cables and bandwidth prices are dropping. Some £30m has been invested over the past three years in four data centres and Manx Telecom, the incumbent telecoms operator, benefits from ownership by Spain’s Telefónica.

Bill Mummery, chief executive of SBOBet, the Asian sportsbook that arrived on the island last year, says government commitment is key to its attraction.

SBOBet is typical of how the industry is changing. Whereas horseracing is the staple of many UK bookmakers, 90 per cent of SBO’s business is football. It also features “inrunning” betting, which allows customers to lay bets during a game.

He said that the recession has helped the company. “The last thing people are going to cut is their subscription to Sky Sports. They might have stopped going out but they will instead spend £5 or £10 betting on the game.”

“In the gaming world, an Isle of Man licence is a major asset,” he said. The group is to build a new headquarters there and will one day seek an flotation.