Editorial: Coming (Back) to America

18 June 2007

Over the last 10 months, I-gaming industry observers have seen companies, big and small, turned upside-down. After the September 2006 passage of the U.S. Unlawful Internet Gambling Enforcement Act (UIGEA), the U.S. market--for years, the fickle lifeblood of the industry--all but disappeared.

However, things are starting to happen for the industry in the United States. Several proactive, pro-gambling lawmakers have introduced legislation that may reverse the effects of the UIGEA, and a non-profit group has filed an injunction against the prohibitive law.

The industry appears to be battling its way back into the U.S. market.

So, without further adieu, my thoughts (and shameless commentary) on three sessions at this year's Global Interactive Gaming Summit and Expo (GIGSE) I found to be timely and valuable, especially in relation to state of the industry today.

Media/Industry Synergy

In her first presentation before the I-gaming industry, Suzette Parmley of the Philadelphia Inquirier pleaded her case with the audience, trying to get them to understand that if they don't talk to the press the public perception of Internet gambling will prevail. And that public perception--that online gambling leads to great social harm and addiction--is reported by the press. It's all cyclical.

Parmley discussed the limitations of her job, especially when it comes to reporting on the I-gaming industry, which she has only been doing for about a year. Over the last year, however, I-gaming has been tracked by a growing number of major dailies, as it is an industry that influences major industries like banking and finance, she said.

Parmley said she has noticed--and I can corroborate this as a reporter--a strong reluctance within the industry to come forth and speak to the media.

Unfortunately, she said, reticence creates an unbalanced story. Now more than ever, the industry needs to be forthcoming with the press for accuracy's sake, Parmley added.

"When I write about (gambling), my job is not to make a judgment, it's just to cover the facts," she said.

Internet gambling is one of the trickiest industries to cover, even for me, a reporter embedded in the industry. And while I am in a unique position, and may have an easier time getting interviews with industry reps, I still run into the same problems as Parmley. Writing a news story is a cooperative effort.

Parmley said after the event that a number of company representatives from various parts of the world complimented her presentation and said they gained a better understanding of the difficulties and complexities of reporting on the I-gaming industry under this current climate of fear.

"One source actually agreed to be quoted in the piece after hearing my presentation," Parmley said. "So, one benefited the other."

Parmley said to expect more media coverage as the industry continues to grow and secure for itself a bigger piece of the world pie.

Payments on the Horizon

John Williams Jr. of Securus Consulting Group quickly walked the audience through the advent of electronic payment processing systems and described its potential for growth.

Quoting research by Global Insight, growth in electronic payments in the United States has added $6.5 trillion to real-consumer spending over the last two decades, Williams said. In terms of cumulative gain, the e-payments industry has added almost $10 trillion, a growth increase of 5 percent per year or the equivalent of 1.3 million new jobs, he said.

Now, the question is how does this growth relate to the I-gaming industry and especially the legislative changes that have turned the industry on its head over the last eight months, particularly in the United States?

The inability to use electronic payment mechanisms in the United States is largely influenced by the banking industry now looking to regulate the Internet gambling industry, Williams said.

He added that major credit card companies, such as Visa, MasterCard and American Express, have not expressed any desire to participate in controlling the I-gaming industry.

"It's a game of liability," he added. "Visa, MasterCard and American Express are all controlled by the banks. Banks measure productivity as it relates to liability."

We've all borne witness to the problem--what's the solution?

"Visa is getting ready for an IPO," he said. "Visa is moving away from the banks and I think as a result you will see the creation of a lot of other payment mechanisms that are new and are very different than the ones that exist today, such as stored value technologies, PIN-based systems--systems very akin to Neteller or FirePay that will be utilities because you will then see a major company who is proactive and is trying to exploit the software stores that it maintains. Because of that, you'll see very similar systems that once were not able to facilitate these transactions, in the gaming space particularly, that will then be useful utilities."

Science vs. Survey

The most illuminating session that I attended was "What Science Can Do for You: Using Research to Understand the Potential Health Risks of Online Gaming." Instead of perpetuating fear about gambling addiction, information from the session validated, at least for me, the anti-prohibition movement in the United States.

Richard LaBrie, associate director for research and data analysis at the Division on Addictions, Cambridge Health Alliance, presented some of the results of an Internet gambling study conducted by Harvard Medical School (HMS) in partnership with online sports-betting company bwin.

The study is the first public study to measure actual online gambling behavior, LaBrie said. Until now, nothing has been done to really study online gaming. Most research has been "junk science" (surveys, self-reporting), he said, which doesn't paint an accurate picture.

Researchers looked at eight months of recorded gambling transactions from 40,499 bwin customers (all of whom registered in February 2005). Looking at both fixed-odds and live-action bets, the results were less than staggering.

Of the 40,499 participants, only 1 percent exhibited problem gambling behavior, and it was minor at best. LaBrie likened their spending habits to buying "maybe a good bottle of wine a day."

Out of 244 days (8 months), the top 1 percent gambled online 219 days, and the average bet per day was 42 euros ($56). They were also found to have wagered a total of 21,807 euros for the duration of the study, but only lost 3,914 euros (18 percent).

The bulk of the participants--those categorized as having median betting behaviors--bet an average of 2.5 times per day at 4 euros per bet. Furthermore this group bet online only 116 of the 244 days and wagered a total of 148 euros.

The numbers do not appear to support the fear.

Granted, LaBrie was by no means endorsing Internet gambling, nor was he speaking against it. His was a neutral position, one of science. However, I have covered a lot of studies on Internet gambling and the results of his study were the most enlightening statistics I have heard thus far.

And there's no shame in having a good bottle of wine.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.