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View Full Version : Has UIGEA created a big marketing opportunity?


Lou Krieger
10-12-2006, 04:46 PM
I posted this to my blog and decided to post it here as well, to see whether others see things the same way I do............


With enactment of the Unlawful Internet Gaming Enforcement Act of 2006 the world of online gaming turned upside down.

Until enactment, the online gaming industry was undergoing a rapid period of consolidation. That's not unusual. In fact, it's commonplace in maturing industries. Just look at how many car manufacturers there were at the dawn of the automotive age, or how many computer makers were around 15 to 20 years ago.

As an industry matures, the big and the strong eat the smaller and weaker competitors. But with enactment of UIGEA and the pull-out of industry leader party Gaming from the field, it's the smaller, more nimble poker rooms that look like they'll benefit by sticking in the US market and going after Party's abandoned customers.

The poker analogy is all too obvious. Whenever a pot is checked twice, you're almost guaranteed to win it simply by betting when it's your turn to act. It's called an "orphaned pot." And those formerly playing on Party are
"orphaned customers."

The quick, the sleek, the nimble, the savvy marketers who can act quickly stand a good chance of picking up all those former Party Poker players who now have no place to go, but are still looking to play poker somewhere in cyberspace.

While all of the online sites are talking about Asia being the next big market to open up, there's an open market right here in the United States, with plenty of players who are not being served. And while some operators are leaving the US market, others are probably salivating at the chance to go after any abandoned customers. It wouldn't surprise me one bit if the topic of Party's abandoned players is the subject of much discussion at the a-gaming conference that's going on right now in Barcelona.

While the Unlawful Internet Gaming Enforcement Act of 2006 is already an unmitigated disaster in terms of eviscerating wealth that's been built up through investment in publicly traded sites, in terms of violating US treaty obligations with the World Trade Organization, and in terms of trampling on an individual's right to do what he wants with the money he's earned, an unintended consequence of this law seems to be the creation of what figures to be a marketing opportunity of land-rush proportions.

There will be winners and losers in the shakeout that follows enactment of UIGEA, and none of us can accurately predict the results right now. What we can be sure of are interesting times, and a new landscape that might look
much different than the one we had all grown accustomed to.
________
Lou Krieger

Sniper
10-12-2006, 04:54 PM
LONDON, Oct 12 (Reuters) - A looming U.S. ban on Internet gambling is already scaring off London-listed operators, but the industry will continue to thrive in the hands of private operators in locations like Costa Rica, Antigua and Curacao.

The fear of extradition to the United States has forced UK executives to turn away from their most lucrative market, some selling their U.S. operations to counterparts in and around the Caribbean which have less amenable extradition treaties with the United States.

Sportingbet's (SBT.L) Chief Executive Nigel Payne this week reassured Antiguans the company would not downsize its operations there and is in talks to sell its U.S.-focused business to a private firm.

Leisure & Gaming's (L&G) (LNG.L) U.S.-facing operations VIP and Nine.com are also likely to end up in private hands, with sale talks underway

Analyst Tejinder Randhawa at Evolution Securities said the industry was splitting into two camps: the European-listed companies and those elsewhere looking to exploit the U.S. ban.

"The market will not go cold-dead overnight," he said. "There are huge opportunities, and all the private offshore operators are licking their lips."

U.S. Congress passed a bill to outlaw online gambling this month, with President George W. Bush expected to sign it into law on Friday. Many UK companies immediately announced plans to pull out, wiping $7 billion off their shares.

"U.S. gambling is untenable for London-listed companies, but these U.S. operations are all viable and profitable businesses that have a future," said a source close to L&G.

The U.S. ban will also make it illegal for banks and credit card companies to process payments to online gaming companies. "But no doubt there will be operators that spring up to handle the payments," said Randhawa.

About 170 Websites have declared their intention to stop accepting U.S. players, the vast majority since Congress passed the act, according to gaming Web site Casino City, which expects 10 to 15 percent of the world's 2,700 or so gaming websites to eventually block U.S. customers.


NO PROBLEMS ADAPTING


By contrast, privately-owned operators in and around the Caribbean, which moved there years ago to avoid prosecution in the United States, are unfazed by the laws.

Calvin Ayre, the billionaire founder of Costa Rica-based Bodog.com, told Reuters: "We're confident that we've structured our business in such a way that we'll have no problems adapting .. If anything, the pending legislation has validated our broad-based digital entertainment model and our decision to stay private."

Executives from both BETonSPORTS (BSS.L) and Sportingbet have been arrested this year on illegal gambling charges filed by individual U.S. states while travelling through the country.

Most UK gambling executives now avoid going there, but they also fear extradition to the United States if they break U.S. federal law after the ban.

The vulnerability of British executives was illustrated by the recent extradition of the "Natwest Three" bankers involved in the Enron case.

The three were extradited without British government intervention under a 2004 treaty originally designed to speed up extradition of terror suspects.

"All the UK government has done is open its doors and say to the Americans: come and get anybody you like," BETonSPORTS non-executive director Robin Glentoran was recently quoted saying in a newspaper interview.

But while Sportingbet, Leisure & Gaming and several others look set to offload their U.S. operations into private hands, some will retain them even if those operations are suspended.

Unlike most, 888 Plc (888.L) owns its gambling software and might have trouble splitting away the U.S. players together with the hundreds of support staff needed to service them, gambling sources said. 888 declined to comment.

Sector leader PartyGaming (PRTY.L) is still keeping its cards close to its chest, but spokesman John Shepherd said the ban risks forcing the Internet gambling industry underground.

"The protection afforded to millions of Americans by responsible companies is just about to be stripped away," he told the GamCare conference this week.

adios
10-12-2006, 05:13 PM
What's really going to be interesting is watching what tthe sites do that are losing a lot of U.S. business voluntarily. They're going to be sick when they see their competitors gain market share at their expense. Heck my crystal ball is just as cracked as anyone else's is so I'll go out on a limb and state that Party Gaming won't sit idle too long and watch this happen. I really don't care if Party Gaming ever allows U.S. players in money games again (Party has treated me fine btw) so it's not wishful thinking on my part. Just can't believe that a company can throw that many customers overboard that easily.

Legend27
10-12-2006, 05:29 PM
It's only fitting that Party Poker's downfall was cause by Party Gaming. It was so obvious I didn't see it coming.

JPFisher55
10-12-2006, 06:59 PM
It will be even more interesting when after the bill is signed within a month or two, litigation is filed and a federal judge enjoins enforcement for an indefinite time period.
I wonder how all the shareholders of these publicly traded companies will feel then. I will play at the website of a publically traded internet poker site, but I don't think that I will buy any LSE stock.

busguy
10-12-2006, 07:12 PM
[ QUOTE ]
It's only fitting that Party Poker's downfall was cause by Party Gaming. It was so obvious, they didn't see it coming.

[/ QUOTE ]

FYP

XraySpeX
10-12-2006, 07:31 PM
yesterday for the first time ever I saw a bodog advertisement on TV. The used to advertise party poker ALL the time.

I think you are totally correct that the smaller poker sites are salivating over all of the players that are soon to be without a place to play.

XraySpeX

Inthacup
10-12-2006, 08:02 PM
Bodog (and FOUNDER CALVIN AYRE!) have been aggressively advertising for a while. You must not watch much TV.