A Glance at 2003

31 December 2002

The Payment Crisis - Finding an adequate replacement for credit-card payments remains I-gaming's No. 1 concern, and still, there is no end in site. The vicious circle goes like this: The payment processing crisis is hurting operators' revenues; declining revenues has led to attrition, which has resulted in an every-man-for-himself scenario; The self-serving culture has decreased the likelihood of cooperation among operators, which is necessary to overcome the crisis. If there's going to be an Internet-based solution, the circle will have to be broken. Don't be surprised if the answer lies in mobile commerce.

Prohibition 2003 - Once again, we enter a new year with prohibition on the minds of U.S. legislators, but never before have they had as much momentum as they have approaching this next legislative session. Strange things can happen on Capitol Hill, but at the moment Reps. James Leach and Michael Oxley appear to be on their way to getting the support they need to move the bill. If prohibition is ever going to happen, next year will likely be the year. But, how much teeth will the final act have?

Border Control - Geo-location technology will ultimately dictate which way arguments over cross-border gambling go. If it's up to speed, look for more I-gaming policies related to the blocking of play from certain jurisdictions. In the past, cross-border gambling has made for some colorful debates, but as evidenced by dialog coming out of Europe and Australia, things could get downright ugly in the near future.

Nevada - In late 2002, regulators in Nevada turned their attention toward an intrastate I-gaming model. Entering the new year, it's tough to say which way this one will go. Some say the state's operators aren't terribly interested in pursuing an intrastate system. It will be a hot issue early in 2003.

Tier 2's Golden Age - This is the heyday for Alderney, the Isle of Man and other offshore European I-gaming jurisdictions. Big-name international operators have set up shop in these locations, thanks to well constructed licensing regimes, and as long as England and the United States are not options, I-gaming will provide a boost for their economies. But, don't forget what happened when the United Kingdom welcomed back its offshore bookmakers; the Golden Age will come to a close when England opens its doors to online casinos. For the next year, though, offshore is where the action will be. Expect to see new jurisdictions adopting I-gaming and more big-name operators to secure offshore licenses.

The Business - As projected, the growth of I-gaming slowed considerably in 2002, and it'll be a rough go for much of 2003 as well. The future is still promising, and there's still a lot of room for growth, but until uncertain policy and the payment processing freeze are overcome, that growth will be stunted. Simply put, things could get worse before they get better.

The Corporate Climate - An inevitable stage for a maturing industry, consolidation is upon us, particularly in the sports betting sector, and it has only just begun. Look for the trend to extend beyond operators in 2003. We could see a merger or two among the industry's major software suppliers. The flow of new operators seeking software licensing deals has slowed to a trickle, and diversification could be the key to survival.

P2P - Person-to-person gambling undoubtedly made its mark in 2002. The sector will define itself in 2003. Expect more action on the policy side as regulators determine the best approaches toward assessing, categorizing and taxing this new phenomenon. The racing industry will continue to voice its displeasure with P2P as well. The P2P business model is clearly shifting to technology licensing and affiliate agreements, and traditional books will be signing on in droves. Someone, somewhere, however, will step up to challenge Betfair.com, which controls 90 percent of the P2P industry.

Additional Developments to Watch:

  • U.S. federal and state bills to consider studying the regulation of I-gaming.
  • Efforts in New Jersey to regulate Internet casinos.
  • More case law related to Greece's electronic games prohibition law.
  • Continued Internet gambling-related arrests at cyber cafes in Asia.
  • The progress of Europe's multinational lottery.
  • I-gaming in the U.S. Virgin Islands.
  • The expansion of online gambling in Germany.

On a personal level I'll be watching to see if any of my Christmas wishes come true:

  • A universal payment solution for interactive gambling.
  • Congressmen who listen to Barney Frank.
  • The refocusing of efforts exhausted in suing credit card companies over gambling debts on finding help for the plaintiffs.
  • A functional voodoo doll that works exclusively on people who create spam and pop-up windows.
  • One-thousandth of Betfair's daily turnover... so I can retire.
  • State-of-the-art air conditioning in Alice Springs (the location of The River City Group's next conference).

Finally, as per tradition, predictions for the coming year:

  • Miss Cleo, the famous 1-900 psychic, will get off the hook on fraud charges by agreeing to community service; her assignment will be aiding the U.S. Justice Department. With Miss Cleo's paranormal assistance, a state attorney general will learn that executives from six credit-card-issuing banks had thoughts about Internet gambling and slap the banks with $500,000 fines. Without flinching, the banks happily pay up; four of the six throw in an extra $250,000 for good measure.
  • Golden Palace casino will launch an aggressive advertising campaign in Japan by sponsoring one of the world's greatest heavyweight sumo wrestlers. The wrestler will display a henna tattoo promoting Golden Palace on his back during a championship match. It will be a disaster, however, as the words "VISIT GOLDEN PALACE LIVE" will be partially hidden by rolls of back fat and thus illegible. Making matters worse, the back fat folds in such a manner that the tattoo reads "IS GOD ALIVE," and the wrestler is disqualified and suspended for attempting to incite a riot (as per a federation code enacted in the wake the Miss World riots).
  • PayPal, the world's most popular third-party payment processor, will make a killing next year thanks to the sale of numerous online casinos on eBay. The money train will screech to a halt, though, when a buyer charges back the $1.75 million purchase of an online bingo parlor.
  • A class claiming to be descendents of the lost island of Atlantis will sue Kerzner International over rights to the "Atlantis" brand. Anxious to go another direction anyway, the company will settle and rename its land-based and online casinos "Isle of Man Casino" and "Isle of Man Online" respectively. Unfortunately, the name change will ruffle a whole new set of feathers, and the company will be sued again, this time by women's rights crusader Martha Burk, who demands they offer "Isle of Woman" casinos as well.
  • Backers of an I-gaming ban in the United States will finally gain the undivided support of President George Bush, and the scenario will be one for the ages. Bush will ill advisably fall prey to the infamous Nigerian "help me transfer my funds" e-mail hoax. Shocked when he learns he's been had, he will choke on the handful of animal crackers he just crammed into his month. When reaching for milk to wash them down he'll notice U.S. Rep. Bob Goodlatte's picture on the side of the milk carton and recall that Bob is Congress's self-proclaimed Internet expert. He'll track down Goodlatte and ask him for his advice on handling the situation, and Goodlatte will convince him that Internet gambling is the root of the ugliness. Incidentally, they will concur that terrorists are ultimately behind it. Later that week, Bush will issue a statement along the lines of: "Any informational highway threatening American children is a vital seriosity as far as I'm concerned. The majority of young Americans today are youths and without them there wouldn't be any children. And without any children what do you have? The fact is you don't. That's why this Administration says no to Internet gambling."
  • A community college student in Ohio will postulate a fascinating theory similar to that of the "six degrees of separation" theory, which states that any two people in the world can be linked through six or fewer stages of circumstance or acquaintance. The project will begin as a research paper on Internet gambling, but will be sidetracked when the student stumbles upon the "Four Degrees of Youbet"--that is, any person in the world can be linked, in four or fewer stages, to a current or former officer or board member of interactive race wagering firm Youbet.

Mark Balestra

Mark Balestra is the Managing Director at BolaVerde Media Group. He previously worked at Clarion Gaming and the River City Group where he was the publisher of iGamingNews. He lives in St. Louis, Missouri.