A group of Pennsylvania lawmakers have introduced a bill that would ban social casino games from being offered by casinos in the state. No progress on budget, but a bill on social casino games While little progress on Pennsylvanias budget has been made since a soft deadline was missed at the start of the month, legislators continue to introduce bills that have nothing to do with balancing the budget, trimming the state deficit, or bridging the divide between Democratic governor Tom Wolf and the Republican legislature. The new bill from Representative Eddie Pashinski (D-Luzerne) fits into that category. While regulation of online gambling and other changes to gaming law had been on the table before the budget impasse, gaming issues have largely stayed off the radar this month. The bill (text here, tracking here) is a short one, and simply amends Pennsylvania gaming law to include the following passage: The bill has eight co-sponsors and was referred to the House Committee on Gaming Oversight on Monday. Why target social gaming? Pashinksi revealed his intent for the bill in a co-sponsorship memo he released in April: Its not the first time that a legislator has taken this stance on social gaming. The conservative forces behind the Restoration of Americas Wire Act a bill that would ban internet gambling have previously thought about including social casino games in the legislation. Social gaming is big business. Late last year, Eilers Research estimated that the industry generated $2.7 billion in revenue. Bills chances moving forward? The bill does have two Republican co-sponsors, but Pashinski is a Democrat. It seems unlikely in the short term, that the bill could gain much traction in the Republican-controlled legislature. The legislature has bigger fish to fry than dealing with this bill, which casinos probably would like to weigh in on via a committee hearing. The bill also came a day before Penn National announced it would expand staff for online gaming (paywall). The GO committee has no upcoming meetings, and unless this somehow gets attached to an overarching budget bill, its chances for this legislative session seem to be virtually nil.
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1 The top-line look at slots in PA
2 The worrying trend for PA slots continues
3 PA slots, casino by casino Pennsylvania slot machine revenue ticked downward again in March, the sixth consecutive month that has happened on a year-over-year basis for the states 12 casinos. The top-line look at slots in PA The Pennsylvania Gaming Control Board released the most recent numbers for PA casinos when it comes to slots. According to the report, combined gross revenue from slot machines was .6 percent lower than it was in March of 2016, down to $210 million. Thats compared to March 2016, when gross revenue clocked in at $211.3 million. The downtick cannot be explained away by the calendar, as March in both years had the same number of weekends. The worrying trend for PA slots continues The gaming revenue picture for the state shows that growth has plateaued at best, and is contracting at worst. Slot revenue for the entire year basically held steady in 2016, and in fact was down just slightly (.2 percent.). Slot revenue has seen a year-over-year decrease every month since September; thats the last time the state saw an uptick in slot revenue. Overall gaming revenue has been down for the past five months. The state will need to see gains at table games to buck that trend in March. (Those figures come out later in the month.) The new numbers come as the state considers whether to add a new Category 1 casino. Lawmakers are also considering a slew of new gaming measures, including the possibility of adding PA online casinos to the mix. PA slots, casino by casino On an individual casino basis, it was a mixed bag, unsurprisingly. Five of the casinos saw revenue increase three percent or more:
Valley Forge (+6.3 percent)
Hollywood Casino at Penn National (+3.4 percent)
SugarHouse (+3.4 percent)
Rivers (+3.2 percent)
Lady Luck Nemacolin (+3.2 percent) The states two biggest casinos Parx and Sands Bethlehem each saw YoY decreases of less than a percent. Hardest hit were Mohegan Sun Pocono and Presque Isle Downs and Casino, which were both down about seven percent. Image credit: Flavia8 / Shutterstock.com
Pennsylvania Casino Numbers gambling revenue dropped for the fifth straight month, the latest sign that all is not rosy for gaming in the Keystone state. The top-line PA casino numbers The numbers werent great for almost any casino in the state, for both table games and slot machines. Total gaming revenue in February dropped almost $10 million ($268.4 million to $258.6 million) from the same month last year, a decrease of 3.6 percent. Only two of the states 12 casinos saw growth from last year: The trend for PA casinos Of course 2016 was a leap year, as the Pennsylvania Gaming Control Board noted, with an extra day in February. Some of the revenue drop can be attributed to that. But the months in both years had the same number of weekends, when casinos generate most of their revenue. Even if the missing day was the problem for some of the revenue drop, at best the numbers show a slight contracting or at best plateauing market February was not even the worst year-on-year drop in recent months. Heres a look at the previous six months for total gaming revenue:
August 2016 $260.9 million (-4.3%)
September 2016 $260.9 million (+2.9%)
October 2016 $263.0 million (-0.9%)
November 2016 $249.6 million (-1.4%)
December 2016: $257.2 million (-4.6%)
January 2017: $255.9 million (-1.2%) The more worrying part of the equation was that both table games and slots were down in February. In some recent months, increasing table-game revenue has helped save the state from a more serious drop. That was not the case in February, as even table revenue was down about three percent. Winners and mostly losers in PA The only casino throwing a party for its February numbers was likely Sands Bethlehem. Sands numbers were up about $1.5 million, or about 3.4 percent. That put it very close to No. 1 in revenue currently held down by Parx Casino which saw revenue drop about $2 million. The increase for Sands is despite the fact that the parent company, Las Vegas Sands, appears to be plotting its exit from the PA market, attempting to sell the property to MGM Resorts International. Category 3 casino Lady Luck Nemacolin was the only other casino to have a positive month, up more than seven percent. Otherwise, it was a figurative bloodbath for PA casinos. Pretty much everyone else saw sizable decreases in revenue. The worst of those was SugarHouse, Mohegan Sun Pocono and Harrahs Philadelphia. The Philadelphia-area casinos in particular must be worried, as a fourth casino is likely to be built in the coming years. Is help coming for PA casinos? State lawmakers are in the middle of considering a number of gambling expansions in the state, some of which would help the bottom line of the casinos. Chief among those are provisions for PA online casinos. The legalization in dewapoker of online gambling would help both in terms of raw revenue and with activating new or lapsed casino customers. For now, however, casinos are left to fret over the fact that gambling numbers are on a consistent downward trend.
Nearly all Pennsylvania casinos, and a number of key legislators, are principally united in support of online gaming. But those hoping to cross the regulatory bridge must first contend with an imposing foe: Sheldon Adelson. And backed by the casino magnates estimated $28 billion fortune, an oppositional campaign is already underway in the state. Adelson, Sands exerting influence in Harrisburg Sands Bethlehem boss Mark Juliano testified recently at a hearing of Senator Kim Wards Community, Economic and Recreational Development Committee. Echoing Adelsons opposition, Juliano sharply criticized regulatory efforts. Today, proposals are being considered which will erode the successful progress we have made in Pennsylvania, said Juliano, who also cautioned against allowing off-track betting and tavern gambling in the state. Approving these proposals will undermine the operators who have built destinations and will place thousands of jobs at risk. Juliano said the additional options would counteract 11 years of operator investment in the states brick-and-mortar casinos. He noted Sands, which purchased and converted factory space once owned by the iconic Bethlehem Steel Corporation, has since poured almost $900 million into developing its Pennsylvania facilities. Internet gambling is a job killer that seeks to move jobs from casinos in Pennsylvania to server farms in foreign countries, he said. Regulation, Juliano told legislators, would hurt the businesses that many in Harrisburg say they want to help. A powerful force in Harrisburg, Sands Bethlehem currently commands a market share of 15.9 percent among Pennsylvania casinos, second only to the 16.4 percent share posted by Bensalem-based Parx. Earlier this year, a poll funded by Adelson was blasted by State Representative John Payne, an online gaming advocate and chair of the Pennsylvania House Gaming Oversight Committee. The entire poll is designed and orchestrated to give the answers they want, said Payne, who sponsored a bill to regulate online play. Adelson-backed lobby active in Pennsylvania The Coalition to Stop Internet Gambling, a lobbying group funded by Adelson, recently lauded efforts from Pennsylvania legislator Mario Scavello to thwart regulation. A ban was floated by Scavello, then a member of the Pennsylvania House, in 2014. The bill proposed by Scavello, who is now a Senator representing the states 40th district, would have explicitly outlawed online gaming in Pennsylvania, punishing participants with fines and possible jail time. Polls, however, indicated a resounding lack of support for the bill, and Scavellos proposal soon lost traction. CSIG made headlines last week after deluging Luzerne County with anti-online gaming mailers. Internet gambling is bad for workers and bad for families, read the CSIG-branded literature, which encouraged citizens to contact Representative Aaron Kaufer with concerns. Kaufer confirmed last week that he had received several such phone calls. On its website, CSIG assails virtual casino operators as irresponsible and reckless. Online gaming, the group says, could be co-opted for nefarious purposes. Internet gaming will reduce participation at brick and mortar casinos, with a commensurate impact on jobs in lodging, restaurant, entertainment and retail industries, the group claimed. CSIG lists a number of allies in Pennsylvania, including the Pennsylvania Pastors Network, led by former Representative Sam Rohrer. Former senator spearheading campaign Serving as CSIG co-chair is former Arkansas Senator Blanche Lincoln, who appeared last month in the pages of Harrisburgs Patriot-News. In an op-ed column, Lincoln reiterated a number of key CSIG talking points. Could your child access these games? Lincoln wrote. Would they want to try it? Would they want to see what its like to gamble, with your money? Lincoln has also speculated that virtual casinos could be used for criminal purposes. The FBI has said already that there is a definite threat there. It could be used for fraud and money laundering, she said last year. Lincolns lobbying firm, Lincoln Policy Group, was originally contracted by Adelson in 2014 as part of an all hands on deck push by the billionaire to outlaw online gaming. Lobbying efforts continue elsewhere Even in New Jersey, where no Adelson casinos currently operate, the 81-year-old resort magnate nonetheless attempted to influence online gaming policy in the state through personal ties to Governor Chris Christie. Adelson also remains involved in efforts to outlaw online gaming at a federal level. South Carolina Senator and 2016 presidential hopeful Lindsey Graham, a key Adelson ally in Washington, recently introduced a bill to overturn the United States Department of Justices interpretation of the Federal Wire Act, the 2011 decision which paved the way for legalized online gaming in the country. Grahams bill was written, in part, by Adelson lobbyists. Since announcing his presidential bid, Graham has made opposition to online gaming a campaign centerpiece. Adelson has reciprocated with avid support for Graham, having donating to his past senatorial campaigns and, more recently, hosting fundraisers on behalf of a Graham Political Action Committee. During the 2012 Republican primaries, Adelson and his family injected $20 million into the coffers of a foundering Newt Gingrich campaign, a move which substantially influenced the electoral landscape.
The Pennsylvania House Gaming Oversight Committee passed a resolution (HR 619) on Tuesday that calls on Congress to repeal the Professional and Amateur Sports Protection Act (PASPA). The resolution was introduced by Representative Robert F. Matzie PASPA is a federal law that prohibits states from legalizing sports betting, with the exception of Nevada, Oregon, Montana, and Delaware. The repeal of PASPA would, according to a press statement distributed on Monday, allow Pennsylvania and all states that authorize, license and regulate casino gaming to legalize sports betting through its licensed facilities. What happened with the PA sports betting resolution In the press announcement, Gaming Oversight chairman John Payne announced the committee would hold the vote on Tuesday morning. The resolution passed the Gaming Oversight Committee, and is now listed as reported as committed. Largely a symbolic vote, the resolution is unlikely to spur Congress to act on PASPA. However, if more states follow suit, and/or if New Jersey manages to triumph in its sports betting case, Congress hand may be forced on this increasingly talked about issue, particularly with the somewhat connected DFS debates that are raging across the country. For instance, last year Congressman Frank Pallone (D-NJ) called on Congress to hold hearings on daily fantasy sports, which many believe stem from Pallones support for the repeal/gutting of PASPA. A repeal would allow his state to offer legalized sports betting at its casinos and racetracks. In a statement on his website Pallone connected the dots from DFS to sports betting and the need for consistency and clarity: The Professional and Amateur Sports Protection Act of 1992 (PASPA) prohibits sports betting nationally, except in states in states that legalized sports betting prior to passage of PASPA. Online sports betting and online gambling are also prohibited under Federal law. However, the Unlawful Internet Gambling Enforcement Act (UIGEA) specifically exempts fantasy sports games that meet certain criteria thanks to a loophole that has become known as the fantasy sports carve out. This loophole has blurred the lines between betting conducted through fantasy sports sites and online gambling. What resolutions are meant to do Similar resolutions are passed all the time, in statehouses across the country, on any number of issues. They are largely designed to be symbolic, to bring attention to a particular issue, to commission a study, or in some cases let federal representatives and senators know that the people back home are watching their votes; state level resolutions are more or less official opinions. For instance, last March, Payne introduced HR 140, a resolution urging Congress to defeat any bill that would ban online gambling. In 2014 it was Representative Mike Sturla who introduced a resolution, HR 1095, that called on Congress to defeat S. 2159 and H.R. 4301, which prohibit states from authorizing and conducting Internet gaming. In October of 2014, the New Jersey Tourism, Gaming and the Arts Assembly Committee passed a similar anti-Restoration of Americas Wire Act resolution which like Pennsylvanias resolution, urged Congress to oppose the two RAWA bills: SB 2159 and HR 4301.
While most states are plowing ahead with bills that would regulate the daily fantasy sports industry, Pennsylvania has been taking a more measured approach. But that doesnt mean the state is ignoring the burgeoning industry. Whats going on with DFS in PA? At one point, it looked like Pennsylvania would actually move faster than most states on DFS regulation. But chatter about a planned bill that would treat DFS much like land-based casinos and online gambling never turned into actual legislation. Since a hearing in November, no new legislation has surfaced other than a bill that plans to study DFS as a gambling product. That bill was signed by the governor, and it requires the Pennsylvania Gaming Control Board to put together a report. The results of that report will be available May 25 in a House Gaming Oversight Committee meeting. Depending on the what is contained in that report, we may see DFS regulation come up this spring in the legislature. In a related matter, the House also moved forward a resolution calling on Congress to repeal the federal ban on sports betting. What might DFS regulation look like in PA? While a lot of states are considering regulation that is relatively light in nature, Pennsylvania would seem to be a safe bet to take a stricter regulatory approach. Why?
Treating DFS like gambling has been the backdrop of all discussions in the state so far.
New York and New Jersey have floated bills that handle the industry much like gaming operators. What legislation ends up looking like is a variable, but it seems a safe bet that PA might take its cues from its neighbors. Will DraftKings and FanDuel be in PA? This is potentially a big question in PA. If Pennsylvania calls DFS gambling, major DFS operators DraftKings and FanDuel, along with the Fantasy Sports Trade Association, have indicated they would oppose such a bill in New Jersey. However, Pennsylvania is a big market, and its unclear whether they would give it up just because of a skill or chance language debate, should a gambling-style bill becomes law. Saying DFS is gambling in one state, however, can bring up problems in another. The bigger question might lie in the licensure fees and the taxation schemes set forth in PA. DraftKings and FanDuel appear to be willing to pay any somewhat reasonable amount, even if that means smaller operators get shut out. Roman Vukolov / Shutterstock.com
1 The top-line look at slots in PA
2 The PA slot numbers for December
3 Winners and losers for PA casinos Pennsylvania slot machine revenue was down slightly for 2016 after the state gaming commission released full-year numbers. The top-line look at slots in PA After the Pennsylvania Gaming Control Board posted December slot numbers, we have a look at all of 2016s revenue. Those numbers didnt look that great for the state, as slots were actually down slightly, year over year. Total slot revenue came for PAs 12 casinos came in at $2.36 billion. That is actually 0.23 percent less than the casinos took in in 2015, or about $5 million. While that may not seem that concerning, slot machine revenue growth had already plateaued in the state well before this. The best calendar year for PA slot revenue was 2012, when casinos generated $2.47 billion in revenue. Tax revenue for the state from slots this past year topped $1.25 billion. The PA slot numbers for December The story was the same in December as it had been in many months: a significant drop in slot revenue YoY. December saw slots give back ground in December of 2016 as compared to the same month in 2015, to the tune of more than six percent. It had been a rough year for slots for much of 2016, as table game revenues have helped offset poor months on the slot machine front. Table game revenue is usually released in the middle of the month, which will give us the full 2016 picture for casino revenue. Winners and losers for PA casinos The year was a mixed bag for individual casinos. Some saw major gains in slots, while others fell back. Winners include:
SugarHouse Casino, up $7 million, or about four percent, YoY
Parx Casino, up $11 million (2.8 percent)
Sands Bethlehem, up $5.5 million (1.8 percent) The gains by the two Philadelphia-area casinos hurt the third in the region, Harrahs Philadelphia. Casinos that had a bad year on the slots front:
Harrahs, down $11.5 million (-5.3 percent)
Rivers Casino, down $12 million (-4.3 percent)
Hollywood Casino at Penn National, down $6 million (-2.6 percent)
1 Unregulated odds are part of the problem
2 Gamblers can lose out without protection of law
3 VGTs would cannibalize PA casinos? A Pennsylvania law enforcement raid of bars resulted in a big haul of illegal gambling cash and outlawed video gaming terminals and slots. Last week, according to Pennsylvania news station FOX 43, the Pennsylvania State Police Bureau of Liquor Control Enforcement raided 48 watering holes across four counties. About $177,000 was seized. The ongoing operations of illegal gambling devices and illegal video gaming terminals, while often viewed as a victimless crime, result in lost tax revenue for Pennsylvanians and victimize households of citizens whose family members have gambling addictions, said BLCE Director Major Scott T. Miller. The Pennsylvania Office of the Attorney General will aid in prosecuting the cases, the article says. The raid came shortly before a legislative hearing into the legalization of VGTs at private establishments in the state. Unregulated odds are part of the problem The slots and video gaming terminals seized posed a problem not only for law enforcement, but also for the people gambling at the various illegal machines. As Fox 43 points out, the owners of the machines can set the odds on the machines or set the machine to take in a certain amount of money. In the latter case, it can remove odds from the gambling equation. This puts gamblers in a compromised position, as they dont know exactly how poor their odds are before they play. However, thats not the only problem gamblers or bars face when operating illegal slots and VGTs. Gamblers can lose out without protection of law Theres no guarantee a bar would even have to pay a customer who won money on its machine. And what legal recourse would the gambler have if the establishment refused to pay up? None. Thats the case of proponents of legalizing VGTs in PA more from Penn Live on Mondays hearing on VGTs: In Pennsylvania, the Small Games of Chance Act governs the legality of gambling machines. According to the SGCA, Pennsylvania allows licensed gaming at racinos, the Pennsylvania lottery and bingo games that meet state requirements and local regulations. The BLCE executed a similar bust in 2016, FOX 43 reported, in which it seized 706 illegal video gambling machines and nearly $170,000 in cash. VGTs would cannibalize PA casinos? The discussion about VGTs in PA comes in the context of the state trying to generate more revenue from the gaming industry. One of the possibilities is the legalization of PA online casinos. While online gambling would actually help land-based casinos, should it be legalized, there will almost certainly be some cannibalization of existing revenue with VGTs. The argument of VGT proponents is that the activity is going on anyway, so the state should license it and protect consumers. That, of course, sounds a lot like the argument for legal and regulated iGaming. Of course, its actually possible for law enforcement to do raids of bars in PA like the one above. Stopping unregulated online gambling has proven to be nearly impossible in the US.
When it comes to gambling reforms and expansion, virtually everything is on the table in Pennsylvania. If you can gamble on it, or put a gambling device somewhere, the Pennsylvania legislature has discussed it in 2015. Slot machines at off-track betting parlors; slot machines at airports; changes to the video lottery terminal laws for bars and taverns; online gambling; skill-based gambling; and daily fantasy sports and even the legalization of sports betting are being considered. Bringing DFS to brick-and-mortar casinos Republican Representative George Dunbar has filed a bill that would allow Pennsylvania casinos to offer fantasy sports on property. Dunbars bill seeks to codify the states law to make fantasy sports held at brick-and-mortar casinos expressly legal. Theres nothing under our gaming law that allows them to collect money and distribute money on a fantasy sports tournament. Although it would not be illegal, its not codified under our gaming laws, Dunbar told PennLive.com. All the bill would do is say, You can do this if you want to, to hold daily tournaments and attract people if you want to. What Dunbar is proposing is not the legalization and regulation of the DFS industry as we know it (DraftKings and FanDuel), but merely a law that would allow casinos to offer fantasy sports contests as a way to draw people into the casinos and a new marketing tool to hopefully capture a younger demographic. Sports betting stop me if youve heard this plan before Representative Nick Kotik, who co-sponsored an online gambling bill (HB 649) with Representative John Payne earlier this year, has decided to take on a much heavier lift, introducing a bill that would legalize sports betting in the Keystone State. Even though Kotik is the Democratic chair of the House Gaming Oversight Committee, the bill is unlikely to gain much traction, and even if it does, its unlikely to survive the inevitable legal challenges that have derailed New Jerseys efforts to legalize sports betting. These challenges will come from sports leagues and the NCAA, who have fought (and beat) New Jersey every step of the way. However, if Pennsylvania simply makes this push, and California too, it may force the federal government to revisit the Professional and Amateur Sports Protection Act of 1992 (PASPA) that forbids states from legalizing sports betting, which they already seem to be considering. Online gambling still a possibility Pennsylvanias 2016 budget was due on July 1, and while delays arent unusual in the process, were now approaching a final past-due warning, as the state blew past the deadline nearly 90 days ago. Reports vary when it comes to online gamblings chance of being part of the final budget deal, as some see it as a key bargaining chip, while others have stated that the issue has barely been brought up. All American Poker Network CEO David Licht is one person who thinks iGaming is still very much on the table, as he believes some of the brick-and-mortar casinos are using online gambling as leverage for some of the other gaming reforms that have been discussed, from adding slots at OTB locations to changes to Category 3 licenses. At the end of the day, $100 million in revenue is a hard thing to ignore, Licht said about iGaming expansion being part of the final budget. The architect of HB 649, and the driving force behind Pennsylvanias iGaming expansion efforts, Representative John Payne, also believes iGaming still has a good shot of passing in the budget. I still feel very comfortable that some forms of gaming will be part of the final budget package, Payne said in an interview with WGAL News 8. Upshot What gaming reforms are actually on the table during the ongoing budget discussions is anyones guess, but there are no shortage of possibilities the legislature and the governor could consider. Some seem feasible like online gambling, Category 3 license holders, and perhaps adding daily fantasy sports at Pennsylvanias casinos. Others like slot machines at airports and sports betting seem like a long shot.
Penn National Gaming is working towards launching a fantasy sports product, according to recent comments from the Pennsylvania-based gaming company. Penn National + fantasy = ? PNG executives were asked about their expectations and timeline getting into fantasy sports during a Q&A session in the companys second-quarter earnings call. Few solid details were given, but we did learn a little about their plans. Chris Sheffield, senior vice president and marketing director for iGaming, discussed Penn Nationals plans briefly: Tim Wilmott, president of PNG, also weighed in: A request for comment from Penn National about its future fantasy sports offering was not answered. So what would PNGs fantasy product look like? Fantasy sports were very briefly mentioned in PNGs Q1 earnings call We still see opportunity to expand our presence with customers in different forms of gaming, be it social, be it fantasy, be it commercial Wilmott said earlier in the year. For Q2, we got more details than before, and from the sounds of it, there are more concrete plans now being put into action by PNG. Penn National, of course, is not just a Pennsylvania gaming operator, with a presence in 16 states. It is also in the process of acquiring the Tropicana in Las Vegas. So what exactly would a DFS product from PNG look like, and how would it be implemented? Currently, most DFS sites operate online in a vast majority of the jurisdictions in the United States; in the case of the two largest operators FanDuel and DraftKings thats 45 states. Pennsylvania is a state where DFS is generally considered legal; a gaming license is not required, currently, to operate. From Wilmotts comments, it sounds like a PNG DFS offering would be at least similar to the offerings at the likes of FanDuel and DraftKings, where users select fantasy players for one-day and compete against one another for cash prizes. At least in Pennsylvania, it appears unlikely that the DFS product would be offered on site; a bill was introduced earlier this year allowing brick-and-mortar casinos to offer on-site fantasy sports. That legislation, however, made no progress. Whats the next move for Penn National? It sounds like Penn National is happy to take it slow in getting into the DFS market, and to leverage its current relationships with casino customers. With the NFL season just around the corner, a launch in 2015 seems unlikely. However, whenever it decides to launch, it will likely be getting into an already crowded market. In addition to the big two of FanDuel and DraftKings:
Yahoo launched a product this summer.
CBS went live this week with its own DFS platform at SportsLine.com just this week.
Amaya is set to launch its own product via PokerStars sometime this year. And thats in addition to a number of next-tier and smaller DFS operators. Certainly, PNG could speed up its entry into the market by acquiring one of the smaller sites and leverage it as its own DFS platform. What is next for PNG and fantasy? Well probably have to wait until later this year to find out. Photo by Ed Yourdon used under license CC BY-SA 2.0