Editorial: The Mighty Gap

23 October 2006

While the fifth annual European I-Gaming Congress & Expo was an overall success, the conference portion of the event ended on a bit of a sour note, with a panel of I-gaming CEOs failing to see eye-to-eye on how to deal with the new U.S. ban.

An overriding theme throughout the discussion, which featured Eduardo Agami of SBG Global, John Anderson of 888, Mitch Garber of PartyGaming, Lewis Rose of CryptoLogic and moderator Sue Schneider of River City Group, was the "gap" separating what can and cannot be done legally in the United States and how I-gaming operators work with it. But of much greater concern, as expressed through Garber's sentiments throughout the talk, is the "gap" spanning the Atlantic Ocean.

It is the gap between the well established off-shore private companies and the headline-grabbing London-traded companies (many of which, incidentally, got off the ground and/or are currently operating on the bastard side of the ocean).

It is the gap between the willing (those who are maintaining their U.S.-facing operations) and the unable (those whose responsibility to shareholders has forced them to cut off their U.S. players)

It is the gap between the once mighty titans of the I-gaming industry (e.g. PartyGaming) and the new kings of the hill (e.g. PokerStars).

And sadly, it is the gap that separates two industry factions that badly need to work together toward overcoming the most crippling blow to date among 10 years of constant political threats to the industry.

The message delivered by Schneider in the opening session of the conference--that the need for industry leaders to form a single voice is greater now than ever before--has been lost on some of those who last week instantly transitioned from haves to have-nots with the stroke of the presidential pen.

And if the panelists in the closing session are an accurate representation of the industry, the "gap" is of cosmic proportions.

Garber--a man faced with an empire vanishing before his eyes--placed blame on the private operators, which is particularly discouraging considering his company's stature in the mainstream as the face of the industry, and voiced his disgust with companies that are swooping in to capitalize on the business turned away by PartyGaming and other companies who have abruptly stopped taking U.S. play.

Before I criticize Garber's statements, let me just say that I am fully aware that PartyGaming has played a vital role in staving off prohibition over the past decade; it has certainly been among the industry's greatest soldiers in the long battle. Frankly, the industry should be thankful for what it has done.

Nevertheless, it is also my view that the finger pointing was unjustified.

"If you're going to take U.S. money, and you want to work on this, you have to put your money up, because we financed everyone 'til today," Garber said. "Now, I think there's going to be a shift in responsibility, while we continue to take responsibility."

This is quite a public sentiment coming only 36 hours after his company's founders toasted with the founders of U.S-facing privately held operators at a special dinner arranged for "pioneers" of the industry.

Agami, meanwhile, came to Barcelona with the intention of reaching out to fellow I-gaming operators, hoping to collaborate against the ban, but I got the feeling from talking to several of his competitors that quite a few individual operators are less than enthusiastic about working together.

For years, the European faction (which now includes PartyGaming) has refused to acknowledge legitimacy among its western counterparts--an elitism that has prevented the two groups from establishing unity. Yet, the businesses on the western side of the Atlantic are somehow the ones that failed the industry.

Few of the morbidly fascinated train wreck witnesses who follow the industry's blue chip companies in the British media are apt to know that the founders of the PartyGaming empire trace their roots to the western faction, that they established one of the first ever online casinos in Starluck and that they were the industry's original true masters of affiliate marketing. Nor are they likely aware that a privileged group of leading online casinos (some of them public) gladly took on the burden of funding an opposition when they squeezed sports books out of the Interactive Gaming Council, effectively turning away hundreds of thousands of dollars earmarked for lobbying the U.S. Congress (presumably because there was little hope for legalized online sports betting in the United States, and, therefore, the non-sports betting operators didn't want to go down with the ship).

Is there hope for synergy?

Perhaps. In a more literal sense, a physical gap existed on the speakers' platform between Garber and Agami, who might as well have been sitting in separate rooms. And how appropriate is it that between them--plugging the gap, so to speak--sat Anderson, who has experienced the view from both sides of the ocean? Anderson, like Garber, is at the helm of a blue chip London-traded I-gaming business that grew to prominence as a privately held, Caribbean-based operator. Unlike Garber, Anderson did not show any animosity on Friday toward those in the industry who are not backing down from offering its services to U.S. players. He draws from experience as the head of a public behemoth (the 888 of today) as well as the former head of a private, offshore company (the 888 of yesterday, then known as Casino-On-Net) and could serve as a bridge between the London-listed companies and their western competitors. That depends on a lot of things (the willingness of his peers to close the gap and what role he chooses to take in January, when he steps down as CEO, to name a couple), but his recent appointment as chair of the IGC could be a positive step.

I also hold out hope that the line drawn in the sand by Garber is just necessary posturing to satisfy shareholders. It's virtually impossible at times to determine whether statements made by company executives come from the heart or are simply being put out there for public consumption. Were the true sentiments of PartyGaming what was put on display at the pioneers' dinner two nights prior to the CEO panel or did they come from the man with harsh words for a faction of the industry to which his company can trace its roots?

Finally, because one can only assume that slightly fewer people read Interactive Gaming News than those who read the British papers, I would like to at least before our intimate readership clarify one common misunderstanding: By many accounts, the pre-prohibition success of the I-gaming industry was the product of PartyGaming's arrival on the scene. PartyGaming did not make the industry; the industry made PartyGaming. And while Party won the jackpot with its well earned dominance in the online poker market, if it wasn't them, it would have been someone else.

In a way, this is an exciting time (no, seriously, it is) for many in the industry. The playing field has been leveled, albeit decimated as well, now that the heavyweights have fallen. The unfortunate short-term result is that the doors of opportunity are wide open for unregulated, un-checked gambling operations. It's going to get uglier before things look up, but the long-term prospects are good. Everyone knows this industry will grow, and I believe the upswing will be led by regulated, transparent reputable operators. I also believe that the pioneering companies (Sportingbet, PartyGaming, 888 etc.), or at least merged, restructured or spun off variations of them, will be in the mix.

Let's just hope that those involved in the rebuilding process have learned from their mistakes.

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.