Philippine gaming operator DigiPlus is considering acquiring shares in Melco's City of Dreams Manila. This move occurs against the backdrop of the Philippine government's intensified regulation of the online gaming industry, sparking industry attention to the transformation strategies of gaming enterprises.
Acquisition Background and Regulatory Environment
In September this year, local media in the Philippines reported that DigiPlus became a potential buyer for shares in City of Dreams Manila. This news appeared during a period when the Philippine government was implementing strict measures on the online gaming industry, including dismantling billboards, restricting payment channels, and conducting Senate investigations. Melco announced the sale of the resort's equity seven months ago as part of its light-asset strategy.
Industry Regulation and Market Changes
Since July, the Philippine government has strengthened its regulation of the online gaming industry. E-wallets were required to remove gambling links, leading to an approximately 50% decrease in industry betting amounts. Additionally, gambling advertisements on high-rise buildings were completely dismantled, and the Senate held hearings on reassessing the legality of online gambling. These measures have impacted the business and stock prices of major operators like DigiPlus.
Acquisition Motives and Strategic Considerations
Analysts believe that DigiPlus's consideration of acquiring shares in City of Dreams may be to cope with regulatory pressures on online operations. City of Dreams Manila, designed by Zaha Hadid, features six hotel towers. Belle Corp holds 50% of the property's equity, contributing $21 million in profits in the first half of the year. By acquiring a physical resort, DigiPlus may seek to mitigate some online business regulatory risks and explore new business models.
Potential Risks and Challenges
The acquisition faces multiple challenges. The visitor rate to Philippine land casinos has decreased by 18% year-on-year, mainly due to a sluggish core tourist market from China and Korea. Maintaining the operation of City of Dreams is expected to require an additional investment of about $100 million annually. Moreover, the transaction itself is uncertain, with DigiPlus only indicating to the Philippine Stock Exchange that it is "evaluating potential acquisitions" without disclosing specific details.
Industry Impact and Transformation Trends
DigiPlus's acquisition considerations reflect the overall transformation pressure on the Philippine online gaming industry. This industry, once predicted to reach $1 billion in license fee revenue by 2025, now faces dual pressures from regulation and public opinion. Operators are adopting different strategies to cope, including obtaining physical licenses or relocating businesses to regions with more lenient regulations.
Future Outlook and Uncertainties
The Manila gaming industry faces many uncertainties. Factors such as the progress of DigiPlus's acquisition negotiations, the return time of Chinese and Korean tourists, the profitability of physical operations, and the synergy between online and offline businesses will all affect the industry's future development. In the context of continuously adjusted government regulatory policies, gaming enterprises need to continuously adapt to the new market environment.
