City Cracks Down on Gaming (Moscow)
Moscow Times April 6, 2006
City Cracks Down on Gaming
By Yuriy Humber
Staff Writer
Vladimir Filonov / MT
A Moscow official says 500 gaming spots will close in the next two months.
Moscow could see its rows of gaming parlors and casinos thin to well under 800 establishments by the start of the summer as city authorities crack down on a business they say has become largely unregulated and irresponsible.
Deputy Mayor Iosif Ordzhonikidze vowed late Tuesday to close 500 gaming salons in the city in the next two months, continuing authorities’ purge of the industry, which has halved the number of gaming spots to around 1,300 in less than six months.
Ordzhonikidze said as much as 80 percent of the city’s gaming spots were operating illegally at the end of last year when new legislation on the industry was passed. He reiterated that despite a $90 million annual loss to the municipal budget from potential tax revenues and more than 150,000 resultant job cuts, City Hall would see its tough policy succeed. “Gaming establishments will be totally eradicated within 25 meters of metro stations, as well as from the streets, stores and temporary pavilions,” Ordzhonikidze told state-controlled TVC television Tuesday evening.
The crackdown could be a major blow to the industry, which grew quickly after license registration was relaxed in 2002. In a December research note, Renaissance Capital estimated the industry could be worth $7.5 billion nationwide in 2007.
Major gaming companies, such as Ritzio Entertainment Group, Jackpot and Storm International saw profits soar, while the sector grew 34 percent in cash terms to $5.6 billion in 2004, according to Renaissance Capital.
In December last year, banking sources told Reuters that Ritzio would seek a London share listing in 2006. On Wednesday, analysts were divided over whether the city’s tough stance would affect Ritzio’s plans, while some questioned if a flotation would go ahead at all. Ritzio declined to comment on Wednesday.
Last November, city authorities passed a law to regulate gaming. The law states that gaming halls must be at least 80 square meters in size and casinos 400 square meters. Gaming machines are not allowed near metro stations or educational establishments or on federal property — including airports and rail and bus stations — a spokesman for the deputy mayor’s office, Alexander Konygin, said Wednesday.
“Since 2002, when the regional authorities lost their power to issue gaming licenses, gaming machines have sprung up like mushrooms in the rain, just everywhere — drugstores, toilets, metro underpasses, in front of supermarkets,” Konygin said.
From November to March, city authorities inventoried all of Moscow’s gaming establishments, counting 2,640 spots offering more than 60,000 gaming options. Up to 80 percent of establishments violated November’s law, and of those more than half have already closed or upgraded their facilities in line with the municipal law, Konygin said.
“No one is talking about closing down the business. We would just like it to run in an orderly fashion. All gaming salon owners have been given time to adjust to the new rules,” he said.
Konygin added that the city authorities met with representatives of top gaming firms last year, giving prior warning of upcoming changes. City Hall will also work with the industry to help find jobs for those affected by the changes, he said.
Renaissance Capital analyst Pavel Mamai saw City Hall’s move as largely positive, since it would weed out small and often rogue operators from the market, making gaming more civilized and the sector more mature.
The reaction in the gaming industry was more subdued. “The need to regulate the industry has definitely manifested itself,” said Yevgeny Larchenko, marketing manager with St. Petersburg’s Premier casino club.
However, instead of working out the proper position the business should occupy in society, the authorities have acted heavy-handedly to gain swift results, he said.
