A recent Media Entertainment Consulting Network (MECN) survey offers some insight into the mindset of an industry beset by a hazy legal and regulatory ethos, plummeting stock prices and internal divisiveness.
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"I have to say that there is no way around the challenges we are facing. They are very serious."
- Martin Oelbermann
MECN
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MECN, a gambling, TV advertising and online gambling research firm, polled industry pundits, retail, casino and online gambling execs, state lottery representatives and others to assess the impact of David Carruthers' arrest and the resultant challenges--current and future--facing the industry.
"I have to say that there is no way around the challenges we are facing," said Martin Oelbermann, MECN partner, who presented the results of the survey at this year's European I-Gaming Congress and Expo. "They are very serious."
Oelbermann was careful to point out that the survey was conducted in the days following Carruthers' arrest, and did not take into account the series of shakeups that rattled the industry between August and October. The laundry list included the arrest of former Sportingbet non-executive chairman Peter Dicks by United States authorities, the arrest of bwin co-CEOs Norbert Teufelberger and Manfred Bodner by French authorities, and the enactment of prohibitive Internet gambling legislation in the U.S.
The respondents evinced an eerie measure of presentiment regarding certain of the survey's items.
When MECN asked survey takers about the immediate effects of the Carruthers arrest and the "current threats," 77 percent responded that "planned online gambling initial public offerings (IPOs) will be cancelled or postponed;" 60 percent forecasted "reduced traveling activities of executives;" 52 percent saw the "continued fall of share prices;" and 50 percent thought that the U.S. would "block residents from betting/gambling."
As if on cue, PokerStars in October cancelled plans for its 2007 flotation; limited travel was announced by many in the I-gaming industry between July and October; stocks crashed as an estimated $7 billion was wiped off the market the day after the U.S. legislation passed through the Senate; and a host of operators pulled the plug on their U.S.-facing operations.
When asked "Could you imagine that other jurisdictions (e.g. in Europe, in Asia, etc.) could follow the U.S. example and arrest CEOs crossing their borders," a large portion of respondents, 44 percent, said "No." Fifty-six percent, however, said "Yes" or "Maybe."
"Pretty good assessment by our industry experts," Oelbermann said. "We have the bwin arrests in September, we have the official warnings from German authorities, and we have those countries like Sweden and Greece. I don't want to go into detail, but I wouldn't plan my vacation there if I'm an online gambling operator at the moment."
Oelbermann was alarmed, though, by the way respondents regarded online bingo. Out of the online sports betting, online casino, online poker, online lottery, and online skill game industries, just 3 percent of those surveyed judged online bingo as likely to be affected.
"What came to [MECN] as a surprise was online bingo," Oelbermann said, "because online bingo in my point of view is online gambling and should be, or is probably, included on the bill. But somehow the industry respondents as well as the legal side are not having an eye on online bingo. Maybe it's a small market in France, but in Spain and the U.K., it is an essential industry. It went kind of under the scope of many people in the industry."
After these remarks, Oelbermann used the remainder of his time to discuss forward-looking options for the industry.
Survey takers were asked: "What will be the best medium-term strategies and which revenue sources could have an increasing relevance in the future?"
Over other options, 79 percent were in favor of expansion to new, less restrictive jurisdictions, while 72 percent favored seeking new, non-gambling-related business models, specifically causal or skill gaming.
Oelbermann was emphatic about the turn to casual gaming as a real, lucrative venture for I-gaming companies.
"To sum it all up, I think that many online gambling companies will turn to casual gaming," he said. "Casual gaming is a [peer-to-peer (P2P)] business model--same as online poker, as betting exchanges or as online auctions found at e-bay. So, there's one thing that is always true for casual gaming and all the other P2P models: The first movers, the first guys going into the market, will be the big winners. If you decide to enter the casual gaming or skill gaming sector, do it next week. If it's one year, then forget it; you will not be among the big winners because this is a P2P network model and follows a strict logic."
According to Oelbermann, the outcome of casual gaming is determined by skill or know-how, and is therefore legally less problematic than casual gambling, the outcome of which is determined by chance.
"You can say, 'Okay, that is theory,'" he said. "But when you look at the events happening over the last weeks, you see . . . 888, PartyGaming and other operators adding casual gaming to their portfolio."
As the session concluded, Oelbermann offered mixed predictions for an industry he believes is still maturing.
"I think we are likely to see a divided online gambling industry in the future," he said. "As I see it, we have an increasingly professional online gambling business. Every year, we see more professional businessmen at [EiG]. This industry is growing up; it's maturing. I think the industry will be divided between companies that are regulated, responsible and publicly traded. They have three options: lobbying; casual gaming; and expansion into less restrictive jurisdictions. They can fight via the World Trade Organization or the European Court of Justice."