By NATARIO McKENZIE
Tribune Business Reporter
and NEIL HARTNELL
Tribune Business Editor
The Minister of Tourism yesterday pledged to address the web shop industry’s ‘market saturation’ concerns when he meets its members next Wednesday, adding: “We want to give them a fair opportunity to succeed.”
Obie Wilchcombe, responding to the Bahamas Gaming House Operators Association’s (BGHAA) call for a 10-year moratorium on all new web shop licenses, said the Government wanted sector operators to “sustain” their operations and employment.
“I’m going to meet with the Association next week Wednesday, during which time I intend to listen to the arguments they’ve presented in relation to a 10-year moratorium and not to issue another licence,” Mr Wilchcombe, who has ministerial responsibility for gaming, told Tribune Business.
“We will see how best we can arrive at a consensus that we can all work with.”
The existing web shop operators, seven of whom received their full licenses last week, fear that permitting the entrance of another player will overcrowd or saturate the market - especially given that the zoning requirements for the industry, which are intended to stop the proliferation of web shops throughout Bahamian communities, have yet to be addressed.
Should such a scenario occur, the existing web shop chains fear they will be unable to earn an adequate return on their investment, especially given the additional costs and taxes they have had to bear as the price of being legalised.
Mr Wilchcombe, though, pointed out yesterday that eight licenses was the number “agreed” between the Government and web shop industry as part of the process to legalise, regulate and tax the sector.
He added that the opening had been created by Asue Draw + Spin’s decision not to proceed with obtaining a full license.
“They may be concerned about their returns, the market not being as supportive as they thought, and bringing another in might affect their ability to survive,” Mr Wilchcombe said.
“We know how business people are going to seek the leverage they want. They want to have the market.”
The Gaming House Operators Association’s call for a moratorium on new licenses is likely to surprise many observers, especially the 10-year length, and the fact that it was previously agreed that eight licences would be issued.
Some will view the Association’s position as anti-competitive, and a sign they want to have the multi-million dollar market for themselves and keep out new entrants.
However, it may also be a signal that the regulated environment is not working out as anticipated, and that the additional compliance and taxation costs have imposed a heavier-then-expected burden.
The move to a legalised, regulated web shop gaming environment has already been responsible for industry consolidation, with Island Luck acquiring a majority 65 per cent stake in Bahama Dreams, and Asue Draw + Spin seeking an exit route.
Gaming house operators are required to pay 11 per cent of their taxable revenue or 25 per cent of earnings before interest, taxes, depreciation and amortisation (EBITDA), depending on which one is greater. They have also paid $40 million in ‘back taxes’.
“We do want to ensure that we control the proliferation of gaming houses, and to ensure that all of the houses in the business are able to work, sustain their operations and continue to provide employ for the hundreds of Bahamians working in the industry,” Mr Wilchcombe told Tribune Business.
“We don’t want to have too many houses and have a situation where some have to close because they can’t meet their obligations. We want to give them a fair opportunity to succeed.”
The Gaming House Operators Association also argued that allowing a new entrant into the industry at this time would be unfair given that they would not share the burden of starting up the industry.
Mr Wilchcombe responded: “They were the trailblazers, the pioneers. That’s the price you pay for being the pioneers. We did that to normalise the industry, and to accepted global standards and best practices.”
The Minister also branded as “a reasonable argument” the suggestion by FML Group of Companies chief, Craig Flowers, that each licensed web shop chain be allowed a maximum of 20 New Providence stores to start with, and just 10 agent stores.
However, hinting that self-interest may be behind Mr Flowers’ suggestion, Mr Wilchcombe said other web shop chains may feel differently.
“He has less than 20,” the Minister said of FML’s locations. “The question is how the others will feel. Island Luck has 50-60. We’re going to have to get them to agree to a number.”
The Gaming Board recently confirmed in a statement that the existing gaming house licensees have been inspected and certified by independent international agencies, and officially granted licenses.
FML Web Shop, A Sure Win, Chances Games, Paradise Games, Island Luck, Percy’s at the Island Game, Asue Draw + Spin, and Bahama Dreams were all granted conditional gaming house licenses last October.