Gaming Market Insights Series #1: China

Since the early days of human civilization, making decisions and determining fates by the casting of lots have been integral with societal development. However the first recorded lottery did not take place until 1466 in Bruges, Belgium where actual “jackpot” or real money was allocated to lottery players. Looking at the sizzling growth of lottery business, we can easily spot out China among the largest markets, which contribute to 284.3 billion USD revenue of the whole industry in 2014. As global lottery has been leaping up at a compound annual growth rate (CAGR) of 4.3% over ten years, this exciting industry is about to bloom on the globe as well as in key markets such as China.

LOTTERY HISTORY IN CHINA

Specifically in China, the lottery history dates back as early as between 205 and 187 B.C under the Han Dynasty with the genesis of a lottery game called Keno today. The revenue of lottery was funded for a number of governmental projects and arguably UNESCO World Heritage Site — the Great Wall of China received the largest financial resource from the feudal government’s lottery pot.

It was not until June 1987 when China embarked on the first nationwide lottery to raise money for a social welfare system. It was reported by Beijing newspapers that people had to queue up to get tickets at branches of the Agricultural bank and the Industrial and Commercial Bank in Beijing — the very first city in China where lottery tickets were on sale, showcasing the public enthusiasm for the first social lottery case in China.

MODERN PICTURE OF CHINESE LOTTERY

Currently there are two legitimate state-owned entities who are authorised to issue lotteries in China. Both welfare lottery issuance organization (China Welfare Lottery Issuance and Administration Centre) and sports lottery issuance organization (China Sports Lottery Administration Centre) were established under the Ministry of Civil Affairs and State General Administration of Sports of the State Council. Such state-approved organizations are responsible for the issuance and sales of welfare and sports lotteries respectively in China.

As one of the most widely participated and most popular segments in gambling industry of China, lottery segment accounts for the majority of the national gambling revenue. Unlike other gaming products, in China lottery plays an important role in improving social security, the undertakings of handicapped persons, urban and rural medical services etc. Consequently lottery revenue moments impose serious impacts on those welfare sectors.

LOTTERY SALES MOVEMENT

Graphe 1: Sales and growth breakdown of Welfare and Sports lottery in China for the first 6 months of 2016 — Source: Ministry of Finance of China (unit: RMB)

By game types, in the first 6 months of this year, Lotto became the most popular lottery game in China. Otherwise Keno’s performance was not as expected as it decreased by 48.8% vs. the same period last year and contributed 0.1% of total sales of welfare lottery. Total sales of Sports lottery in the first 6 months of 2016 contributed to strong growth momentum for the whole SMG (Single Match Games) segment, totalling $5.29 billion USD (35.328 billion RMB) at 23.4% YoY growth.

Graph 2: China lottery sales from 2013 to 1H 2016 (Unit: billion USD)

The chart depicts Chinese Lottery Sales between 2013 and first half of 2016. The lottery sales however does not demonstrate consistent movement. It steadily went up over the years from 21.43 billion USD in 2014 to 28.71 billion USD in Sport Lottery and from 28.49 billion USD to 33.52 billion USD in Welfare lottery respectively. The combined annual sales grew at 80.2 percent in 2014 vs. last year primarily thanks to the 20th FIFA World Cup 2014 taking place in Brazil.

Despite strong uptake in 2014, total sales of Sport lottery and Welfare lottery slightly declined by 2015. Notably, the impact of a ban on online lottery sales in February 2015 led to decrease of total sales of Sport lottery by 22.3%. Welfare lottery also suffered the same scenario and experienced a 3.9% sales drop. Only in the first half of this year the sales of Sport lottery and Welfare lottery was 14.23 billion USD and 15.77 billion USD respectively, more or less on par with the first half of 2015.

FUTURE OUTLOOK

China lottery business will continue to be dominated by the two exclusive state-owned sports and welfare lottery issuance entities. Thanks to strong global demands and a number of lining up sports and entertainment events, lottery sales in China are forecast to continue their strong growth momentum in the future. Despite such vibrant landscape, the market entry still looks far-fetched for both local and international players who want to tap in this gigantic market.

ABOUT REPORT PUBLISHER

The report is prepared by CARDANO Labo — the leading blockchain research and development startup focusing on blockchain-empowered financial and entertainment services. We are keen on bringing this technology to a broader audience where people will have better access and opportunities to enjoy their lives through unprecedented technical solutions.

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Contact:

English Nicole Nguyen (thanhnth@cardano-labo.com)

Japanese Muuto Morikawa(muuto.morikawa@cardano-labo.com)

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