Online Gambling Industry Predictions for 2007
It's still early but in the first few weeks of 2007, the online gambling industry has been turned completely upside down. Not all is bad in the world of web betting however. We've formed our own predictions based on years of experience dealing with this industry.
1. Europe will sustain, Asia will not
Everybody is talking about Asia. That's fine and dandy but the Asian market has crippled the likes of BetCorp, Sportingbet and Golden Palace in recent years. Golden Palace is one of the world's largest online casino operators and they pulled out completely.
While Asians love to gamble and the population is unsurpassed, Western operators cannot seem to get beyond the currency issues, language barriers and - unless these companies set up a full service shop in the region - there tends to be heavy exposure to fraud. By default, most Western based online gambling firms will be operating there "from a distance".
There is a reason why the Ladbrokes of the world haven't exactly branched out in Asia.
Europe is a different story and the continent is starting to embrace online gambling. Many suggest Great Britain's population cannot sustain a blossoming internet gambling industry. We say otherwise. There's a bookmaker on every block in London. If a company were to focus all its attention on say one single county in the States with a sizeable population, it would probably succeed. Many of today's online gambling firms are way too close-minded to understand this.
It will take work but competition is good and smart, well-run, focused companies will be able to excel in the European market. Unfortunately, most of the current US-focused online gambling firms will not be able to survive in Europe. Look at PaddyPower.com's website and compare it to something like SBGGlobal.com (US facing) and you'll see what we mean. Nothing against SBG Global but their marketing savvy is just not in line with today's fast paced evolving industry.
2. Las Vegas Enters the World of Online Gambling
It's already happening. Vegas has begun recruiting people from the online gambling industry. Unfortunately, a few self-righteous politicians took it upon themselves to throw a kink in Vegas's plans by attaching a measure to curb some forms of online gambling to a vital port security act. It was a travesty the way this transpired and Gambling911.com still finds it amazing that the likes of Jon Kyl (R - Arizona) have not been investigated for this outrageous act, which really does impede on US national security.
Nevada representatives were steadfast against this law and spoke out during the final Congressional session to no avail.
Nevada Senator Harry Reid is running the Senate so we can expect a Vegas move into online gambling to happen sooner than later and probably this year.
For that to happen we'll have to see certain exceptions take place with the law that passed in October. The most likely scenario will be that online poker gets exempt. Vegas will be pushing for that. Likewise, language applying to the banking institutions will probably have to be relaxed somewhat.
With the World Trade Organization and European Union claiming "US Protectionism" it's doubtful that we'll see a new law requiring that only a choice few licensed Nevada-based entities (a la MGM) will be able to legally take bets from US citizens. And because of this, we don't see Vegas or anyone else for that matter, getting into online sports betting. Poker provides a happy medium, however.
The good news for today's online poker rooms is that they already have a head's up on Vegas. A few of the big boys (i.e. PokerStars, PartyPoker, Full Tilt) could eventually be bought out by Vegas properties. These companies can compete with the MGMs and Harrahs of the world the same way that Paddy Power and Bet365 compete with the likes of William Hill and Ladbrokes in England. It's all about variety and the bigger a company is, the more vanilla their offerings tend to be.
It was just over a year ago that the so-called "industry experts" predicted "consolidation" and we laughed in their faces. Some consolidation occurred and it was disastrous to say the least.
The same prediction was issued about the airline industry during the mid-90s. Only the big 5 would survive. Over the past few years the so-called big 5 have barely gotten by while new carriers continue cutting into their market share.
"Offshores" as they are called can compete with Vegas as a result of lower overhead but it's going to take more than the "luck" and "being in the right place at the right time" we have witnessed over the last decade. Any Calvin Ayre or Ruth Parasol clones lurking out there?
Our sources disclose the following:
"Las Vegas is actively moving into the i-Gaming industry, and has begun recruiting from this industry for their EU entities in anticipation of their sponsored legislation to regulate at the federal level in the US. In the interim, this quiet behemoth is successfully pursuing a strategy that will ensure dominance and total market share.
"This will be done by moving out the current competitors - public companies can raise serious capital and create competition - this has been stopped.
"Kill the offshores - competing with companies in low tax, low overhead environments, with the ability to offer lavish incentives (bonus) must be eliminated.
"Create overwhelming distrust with anyone offshore - eventual opening of the market once regulation is in place will mean that offshores will be permitted. Create distrust and consumer loss in order to mitigate these competitors - witness an impending total loss for clients of NETeller.
"Classic US international business policy here...sadly, we as an industry aren't organized to deal with this through lobbying and PR following the PartyGaming, and SBT's exit from the market and the blatant activity of Mr. Abramoff."
3. New eProcessors
In the short term we will be seeing more eProcessors popping up that allow US gamblers to bet online but some of these (probably many of these in fact) will not be the most reputable and it is the online gambling operators that will take the biggest hit. We've seen this in the past and that is part of the reason why so many of these online gambling companies chose to rely so heavily on NETeller.
4. Mainstream Media Embraces Online Gambling
While the American people may lose interest in the "War on Internet Gambling" after only a few days, the mainstream media is not and most of the major publications have written about the industry in a positive light while condemning actions of those entities opposing online gambling.
5. Internet Gambling Support Companies Will be Hard Hit
PR firms, web portals, handicapping sites that rely heavily on what at one time seemed an endless flow of money coming in from online gambling sites, have been taking a direct hit over the past few months, culminating in January with NETeller, MyCitadel and PinnacleSports pulling out of the US market.
For the sports betting industry, PinnacleSports leaving represented a tremendous blow to many affiliate sites that relied heavily on Pinnacle's exceptional customer conversion rate.
The NETeller situation has practically crippled some enterprises to the point where they will have a tough time recovering.
Sites like Casino City, which is better poised than most of the competition to overcome this industry transition stage, admit to seeing dwindling ad dollars come in.
Even Gambling911.com has had to look towards Europe to supplement ad dollars, which we were in a better position to do so than many in this industry since nearly half our readers come from outside the US.
The next six months will be hard on everybody and most of today's industry players simply will not survive or will otherwise witness severe downsizing, but there is a light at the end of the tunnel for gamblers, industry support ventures, operators and even some US state governments looking to get a piece of this billion dollar industry.
We encourage you to join the Poker Players Alliance in order to have a voice
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Christopher Costigan, Gambling911.com
Originally published February 5, 2007 9:21 pm ET
