Online sports lottery operator 500.com has reported zero revenue for the second quarter in a row thanks to China’s ongoing suspension of online lottery sales.
On Thursday, the Shenzhen-based 500.com again reported ‘nil’ in the categories of revenue and earnings in the three months ending Sept. 30. The inactivity resulted in an operating loss of RMB 79.2m (US $12.4m) compared to a RMB 39.3m profit in the same period a year ago.
In February, Beijing officials ordered a ‘temporary’ suspension of online lottery sales after a surprise audit revealed widespread corruption at provincial lottery administration centers. The suspension, which took effect March 1, shows no sign of ending soon.
China’s Ministry of Finance never officially authorized online lottery sales but 500.com was one of two companies authorized to take part in an online lottery pilot program. On Thursday, 500.com CEO Zhengming Pan reiterated the company’s position that the Ministry has offered no indication that it intends to revoke or amend this authorization once the ‘temporary’ suspension is lifted.
However, 500.com can’t afford to wait too long for Beijing to act. While the cost of doing (no) business has decreased dramatically, so have the company’s reserves. At the end of June, 500.com had RMB 1.13b in cash and equivalents, which fell to RMB 652m by Sept. 30, meaning the company could be flat broke by the end of the year if current trends continue.
On Wednesday, the Ministry of Finance announced that China’s total lottery sales totaled RMB 29.1b in September, down 9.8% year-on-year. Welfare lottery sales fell 11.3% to RMB 15.5b while sports lottery sales declined 8.1% to RMB 13.6b. For the first nine months of 2015, overall lottery sales are down 2.7% to RMB 272b.
‘CHALLENGING’ LOTTERY MARKET PUSHES MELCOLOT INTO THE RED
Lottery operator Melcolot is also suffering, posting a HKD 26m ($3.3m) loss in the first three quarters of 2015. The subsidiary of Lawrence Ho’s Melco International Development reported revenue falling 9.5% to HKD 34m as declines in sports lottery terminal sales offset a 91% gain in lottery services and solutions revenue.
Melcolot said the ongoing rejigging of China’s lottery regulatory landscape meant the market would “remain challenging” for the foreseeable future but the changes “will undoubtedly bring new opportunities for the Group to use our competitive strength to capitalize on.” In the meantime, Melcolot continues its attempts to diversify its business, most notably by pursuing a casino license in Spain.
