Which way will the AIM go?
The herd of I-gaming companies rushing to float on the LSE Alternative Investments Market thinned considerably following PartyGaming's infamous Dooms Day report in September, but many in the industry still believe that IPOs are the way to go. That leaves two questions for the coming year: 1) How many floats will there be in 2006? 2) Will the investment community continue to show confidence in I-gaming stocks?
The New British Landscape
It looks as though a regulatory scheme for I-gaming won't be in place until 2007, but there are plenty of issues to be worked out in the meantime. Most notable, the industry tentatively awaits the Treasury's decision on how to tax interactive gambling services. Further, the commission is tasked with drawing up regulations, and will most likely have to contend with the various controversies that always accompany the expansion of gambling.
Jurisdictions all over the world are cracking down on what they consider to be illegal online gambling. The United States Department of Justice has always been a leader in this area, but a number of other countries--including China, Italy and Israel--were active in 2005 as well. Where else will actions be taken? More importantly, will these efforts be bans on all forms of Internet gambling or will they seek to protect citizens and business partaking in what is considered legal Internet gambling?
Betting Exchanges Down Under
Betfair finally got the green light to operate in Tasmania, but racing interests in Australia are intent on fighting them to the bitter end. If they launch as expected, there are three things to watch: 1) Just how much of a splash will the PBL/Betfair partnership make and how will it impact the Australian betting industry? 2) Will Australia's corporate bookmakers seek betting exchange licenses? 3) Will the TABs continue to fight legalized exchange betting or will they operate their own exchanges?
The WTO Ruling and US Policy
Circle April 3 on your calendar as the day this one begins to unfold. That's the deadline for the United States to come into compliance with the World Trade Organization's General Agreement on Trade in Services, as ruled by the Dispute Settlement Body and upheld by the Appellate Body. The United States trade representative in the case believes that the country will be in compliance if it reverses a law allowing race betting operations to take bets online, but doing so won't be an easy task. The saga will unfold in one of three ways: an all-encompassing U.S. prohibition on Internet gambling; the United States opening its doors to foreign online gambling operations; or the United States not meeting the WTO's compliance criteria and agreeing to disagree with the WTO on this matter.
The UK National Lottery Bidding Process
This will be fun to watch. The new license period does not commence until 2009, but already the race has begun for the rights to be the next U.K. National Lottery operator. The bidding war last time around brought everything a controversy lover could want and more, and this one could deliver as well. A number of very high-profile companies appear to be lining up to bid, and The National Lottery Commission is already being criticized establishing a bidding process that favors Camelot, the incumbent operator. Things won't truly heat up until 2007, but '06 will have its share of fireworks. Look for each bidder's propensity to boost sales via interactive media to play a major role in the decision process. More than likely the prevailing factor will be politics.
We say this every year, but will 2006 be the year for bingo? Businesses with interactive bingo products are looking to the poker phenomenon with reason to believe their industry could be next.
We don't say this every year, but will 2006 be the year for mahjong? Probably not, but '07 and '08 have breakout potential. In 2006, look for this niche to grow aggressively and look for companies with mahjong products to position themselves for the "mahjong boom" to come. It's the most popular game in a country of more than 1 billion people--a country who's Internet population is growing by leaps and bounds. It has the potential to be huge.
The Kyl 2006 Campaign
Jon Kyl, the grandfather of the I-gaming prohibition movement in the United States, is up for reelection in November 2006, and unlike in previous years, this year he has competition. His popularity is slipping in his home state of Arizona, and he'll have to fight to retain his spot in the Senate. Don't think for a moment, though, that someone else won't take the prohibition torch and run with it if Kyl loses, and there's a very good chance that whoever takes over is more capable than Kyl of getting things done.
We know it will happen, but how will it play out? Expect bigger companies to get their hands in the pot, expect new powerhouses to emerge through mergers and expect the market leaders to be buyers so that they stay bigger than the competition. The focus will likely again be in the poker industry, and the big prize entering 2006 is PokerStars, which just put itself on the block. It would be a great acquisition for a Europe-faced company (betandwin? Ladbrokes?) looking to capture the U.S. market.
The Wish List
For the first time in six years, I won't be making any predictions for the coming year. I've given up for the time being because not one of my many predictions over the years has come true--not my prediction that Camelot would send a lucky lottery winner to the moon via Richard Branson's Virgin Airline . . . or my prediction that the White House press secretary would address the media with a Golden Palace tattoo on his forehead . . . or my prediction that Australia's betting industry would hire Iraq's former information minister as a spokesperson to address attempts to legalize exchange betting . . . or any other prediction. So replacing my predictions is this very simple wish list-- devised for purely selfish purposes--for the industry.
I wish for me to go public on the LSE Alternative Investments Market with the intention of raising capital for future acquisitions (car, TV, etc.). And if my projected £500 float only raises, say, £50,000, then so be it. This wish is a revised version of my unfulfilled dream of raising $50 million by creating a B2B Internet gambling solutions provider through a reverse merger with a belly-up British Columbian mining company.
I wish for the media (myself included) to resist the urge to spew painfully cliché headlines like "The Empire Strikes Back" or "The Party's Over" or "Boss Is in Charge."
I wish for the barriers to entry for the I-gaming space to go up again. For a while, it seemed as though the days of uninformed, under-funded and often not-quite-squeaky clean entrepreneurs coming out of the woodwork to buy into the I-gaming space were over. But the poker boom has apparently brought them back out, and I hope the doors close soon. I will not miss the days of taking phone calls from go-getters wanting to know how $50k and a whole lot of ingenuity can turn them into the next PartyPoker.
I wish (especially on behalf of IGN publisher Sue Schneider) that Jon Kyl will stop misquoting Harvard Professor Howard Shaffer as saying that online gambling is the crack cocaine of gambling. Shaeffer never said this and has acknowledged on multiple occasions that he never said this, yet Kyl continues to use the reference on a regular basis.
I wish someone would launch a poker room catering specifically to hapless players like myself and diligently enforcing a policy in which those who know what the hell they are doing are not allowed to partake.
I wish I could find something in my closet worthy of selling to Golden Palace on eBay for tens of thousands of dollars.