International edition
September 26, 2020

By Alfredo Lazcano, a lawyer specialized in the gaming industry

The next generation of online gaming for which Mexico is ready

The next generation of online gaming for which Mexico is ready
"Worldwide COVID-19 health, social and economic disruption will definitively unleash a wide range of novel online gaming and social entertainment offerings –and Mexico is ready to assume the Latin American leadership in this new era."
Mexico | 06/11/2020

The legal expert says in his column that the COVID-19 pandemic is taking certain verticals of online gaming to the next level, and the Mexican jurisdiction is prepared for it.

Alfredo Lazcano is a Mexican Lawyer at Lazcano Sámano, S.C., legal experts in the Gaming, Fintech and Media Industries.

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t’s no secret that people’s need to be distracted in the midst of their lockdowns and social distancing around the globe has fueled Internet activities overall. Likewise, the economic contraction caused by this health contingency is undoubtedly triggering new online spending behaviors.

In my opinion, we are in the presence of a unique business opportunity for those companies within our industry that have the technology and the capacity to operate all kinds of entry-fee games, such as: eSports, poker tournaments, Daily Fantasy Sports, video games, real and virtual sports based games, games of chance, social games, as well as any other pay-per-play interactive games and online gaming platforms.

Most people in our sector believe that online gaming products whose profitability model is based on entry-fees or digital advertising, instead of traditional bets, are worthless. Considering the reality that we are living; they are absolutely wrong.

Indeed, according to Newzoo’s 2020 Global Games Market Report, a reliable source for gaming insights and analytics, the worldwide video game market is forecast to be worth $159.3 billion dollars this year. Approximately 48% of said gaming revenues come from mobile devices.

To put this in perspective, such amount is almost three times music industry income, which in 2019 was around $57 billion dollars. In other words, mobile games alone are already generating more profit than the music industry.

Gaming professionals who are not paying attention to the aforesaid trends could be losing sight of a great opportunity to detonate an exponential growth to their businesses, how? Through innovation and creativity.

Whether we like it or not, we are facing a paradigm shift that is being accelerated by COVID-19. Why? Because, ironically, older generations are learning something that younger generations have known for some time: the newest forms of online games can be a fun and entertaining way to maintain social contact at a distance.

In other words, online gaming no longer has to be a solitary hobby, but can actually be a way to remotely socialize and interact with family, friends and other people.

Fortunately, Mexico’s legal framework is ready to deal with this relatively new online gaming phenomenon. This is good news because Mexico is a huge country with approximately 130 million people; thus, it is the second largest Latin American market after Brazil, and it is the country with the largest number of Spanish speakers in the world.

Indeed, as of the first day of June 2020, an amendment to the Mexican VAT Law approved in December 2019 entered into force. This amendment consists in the creation of a whole new section aimed to regulate digital services provided by foreign residents without establishments in Mexico.

Among the digital services contemplated in the VAT Law, we can find the “downloading or accessing of games, including games of chance, as well as other multimedia content and multiplayer environments”. Even though that Mexico has a special legislation which governs traditional land-based casinos and remote betting, this is an opportunity for foreign operators to enter the Mexican market with other alternative cutting-edge online gaming verticals, or to expand their current offer under a different approach, on the assumption that the provision of digital gaming services is carried out within the framework of compliance with the VAT Law.

eSports, poker tournaments, Daily Fantasy Sports, video games, real and virtual sports-based games, games of chance and social games are just some examples of the many types of games foreign operators can offer to Mexican players, under the VAT Law, and without a specific gambling license.

The design and development of new forms of games seems almost mandatory for those who are part of the gaming industry, not only because this might be one of their ways towards recovery from the current crisis, but also because the future appears to be closer than ever.

As we explained before, younger generations already used to play videogames with friends who are located miles away from them, and even with people who don’t know in person. Nowadays, with lockdown and social distancing, children and adults of any age are being pushed, if not forced, to socialize and entertain remotely to remain “connected” with the outside world.

In conclusion, worldwide COVID-19 health, social and economic disruption will definitively unleash a wide range of novel online gaming and social entertainment offerings –and Mexico is ready to assume the Latin American leadership in this new era.