Why the Chinese were right to suspend online lottery sales

Why the Chinese were right to suspend online lottery sales

Monday, July 4, 2016 Posted by Andy McCarron
China's Internet Plus strategy is driving smartphone usage

One of the authorised promoters of lottery products in China believes that last year’s suspension of online lottery sales will be good for the sector in the long run, although it anticipates that the ban may be lifted soon.

DJI Holdings, a UK-listed company with plans to list on NASDAQ this year, has had cause to find new revenue streams during the suspension, but CEO Darren Mercer envisages a positive outcome.

He explained: “The Group views this continued suspension as an important step to control unauthorised online lottery sales and to ensure healthy development of the online lottery market in China.  DJI believes such measures will have long-term beneficial effects on the industry.

“The Group continues to engage actively with all relevant authorities regarding this temporary situation and has taken steps in the intervening period to position the business to continue to be a major player in the lottery industry in the immediate and foreseeable future.”

An official joint notice from Ministry of Finance, Ministry of Civil Affairs and the General Administration of Sports of the People's Republic of China. Last year saw provincial lottery centres suspend their online sales from 1 March, despite the high levels of revenues the channel was bringing in.

DJI chairman Lord Benjamin Mancroft said that the lottery industry maintains a ‘firm expectation’ that the central government will lift the suspension soon and eventually start to ‘vigorously promote’ online sales as a public welfare project.

Lord Mancroft pointed out that recent investment in lottery operations by major Chinese corporations, not least the purchase of a controlling stake in Hong Kong listed lottery operator AG Tech by Alibaba and Ant Financial, indicate the confidence of sector operators in the opportunity for growth in the lottery market in China. Indeed – DJI has also launched a conditional placing to raise £29m to invest in its technology.

He added: “The Board of DJI remains hopeful but patient as it awaits the return of a better regulated lottery landscape.”

One of the areas that DJI is looking at is mobile as the Chinese government has implemented an ‘Internet Plus’ strategy to integrate traditional industries with digital capabilities, promoting e-commerce in all sectors and equipping consumers to access all the information they need with the roll-out of broadband and 4G, particularly in rural areas.

According to DJI, this shift is being accelerated by the steady migration of individuals from the countryside to China's urban centres, which in any event have higher levels of smartphone ownership. The government aims to increase the urbanised population by 60% by 2020.

Mobile users in China downloaded 38 billion apps in 2015 and their average daily phone usage grew from 1.67 hours to 2.36 hours. More than two-thirds of mobile users use apps every day, with some apps used up to 78 times, particularly those for 'life' activities - social networking, watching videos, playing games, news, location services and booking services.

DJI has also signed a partnership through NewNet with Xinhuatong, the preferred partner of Xinhua to provide payment facilitation and lottery promotion via the Xinhua News Mobile App - the official news app of China's national news agency.  

Totally Gaming Says: “There is a huge opportunity for a boost in lottery sales in China as online says reportedly made up 22% of all revenues before the government put a stop to it all. The lottery industry does seem very bullish about the fact that the suspension will be lifted soon though, as evidenced from all the recent investment in suppliers to the market.”

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