In recent years, the e-games industry has become a significant driving force in the Philippine gaming industry.
According to data from the Philippine Amusement and Gaming Corporation (PAGCOR), since 2023, e-games have seen significant revenue growth in the gaming industry, with an increasing contribution each year.
"The e-games industry has become a major driver of the local gaming industry in the Philippines," said Alejandro Tengco, Chairman and CEO of PAGCOR.
In November this year, PAGCOR announced that its third-quarter revenue increased by 37.5% year-on-year, reaching 94.6 billion pesos, mainly due to the significant expansion in the e-games sector: revenue from the e-games segment climbed from 6.3 billion pesos in the same period in 2023 to 35.7 billion pesos! This is nearly a six-fold increase from the 6.3 billion pesos in the same period last year.
Tengco stated, "By the end of the year, the licensing fee revenue from the e-games segment is expected to reach 78 billion pesos, which will provide strong support for achieving the annual revenue target of 100 billion pesos."
This astonishing growth has made the e-games segment increasingly important in the Philippine gaming landscape.
PAGCOR attributes this to a series of policy adjustments, including gradually reducing rates and attracting operators from the gray market to join the legal market.
Meanwhile, the Philippine government's gradual prohibition of Philippine Offshore Gaming Operators (POGO) has also provided an opportunity for the e-games industry to fill the economic gap.
In July 2024, Philippine President Marcos announced in his third State of the Nation Address in 2024 that POGO will be completely banned by the end of the year to address the negative impacts of illegal gambling on society and the economy. According to the analysis by the Philippine Department of Finance, the POGO industry had a net cost to the economy of 99.52 billion pesos in 2021, becoming a burden on economic development.
To mitigate the economic losses caused by the POGO ban, some Philippine officials proposed opening up E-sabong (cockfighting gambling) and Lotto Bilyonaryo, but these were rejected. The Budget Minister also stated that government efficiency and taxes could compensate for the anticipated revenue losses.
However, to compensate for the tax and revenue losses that may be caused by the POGO ban, the Philippine government still chose to prioritize several measures in the gaming sector:
1. Policy Optimization: PAGCOR is gradually reducing e-games rates to attract more operators into the legal market.
2. Promoting Legal Gambling: By reducing license fees and simplifying processes, encouraging illegal operators to legalize. In 2024, the number of e-games licenses issued by PAGCOR increased by 13.57% compared to 2023, and the number of licensed service providers nearly tripled.
3. Industry Innovation: Encouraging businesses to invest in technological upgrades to meet the growing demand for online gambling, thereby enhancing the overall competitiveness of the industry.
Impact of Reduced E-Games Rates
Facing billions of dollars in revenue losses, the Philippine government is "sharpening its knives." PAGCOR has launched a series of "rate reduction" moves: starting from January 1, 2025, the e-games rate will be reduced from 35% to 30%, and the rate for integrated resorts' e-games will even be reduced to 25%. It's worth noting that before 2023, this rate was over 50%!
This "rate reduction" action has had an immediate effect:
Firstly, the number of market entities has increased significantly. Tengco revealed that PAGCOR has now issued 1,188 various gambling licenses, an increase of 13.57% compared to 2023. Even more notably, the number of certified gambling service providers has skyrocketed from 49 in 2023 to 174, more than doubling.
This move not only attracts local investment but may also attract international operators to enter the Philippine market, thereby further increasing the revenue of the legal market.
Secondly, the revenue target was achieved ahead of schedule. "In fact, the e-games industry surpassed the full-year revenue target of 100 billion pesos for 2024 last September," Tengco proudly stated.
With more operators joining and business growth after the rate reduction, future industry revenue is expected to further increase.
More importantly, this policy is bringing the underground market into the light. Tengco stated, "By reducing rates, PAGCOR is creating a more attractive regulatory environment, encouraging unregistered online gambling operators to turn to the legal market." Reducing rates provides a more attractive regulatory environment for unregistered online gambling operators.
Several operators previously in the gray area have obtained legal licenses and joined the mainstream market, and this trend is expected to continue.
Lastly, the rate reduction may lead to more small and medium-sized operators entering the market, enhancing market vitality while also intensifying industry competition. This will force existing businesses to continuously innovate to improve service quality and user experience.
The Impact of the POGO Ban and the Complementary Role of E-Games
Although the POGO ban may have a short-term impact on the revenue of the Philippine gaming industry, the strong performance of the e-games industry provides a possibility to fill this gap! Judging by the development speed that could complete the annual target in just nine months, with policy optimization and industry development, the revenue of the e-games industry will continue to climb and is very likely to gradually surpass physical casinos in the coming years!
Overall, by reducing e-games rates, the Philippine government has successfully created a healthier growth environment for the industry and effectively addressed the economic impacts that the POGO ban might cause.
With the support of the government and market demand, the e-games industry may become an important pillar of the Philippine gaming industry!
