Morning Brief | Recession Touching Poker Industry

For many of us, the financial climate of late has been unsettling. But as certain members of the gambling industry adopt "recession-resilient" as their new mantra, poker, we think, is among the first I-gaming industry sectors feeling the pinch.

In recent weeks, we reported that Chan Poker, Duplicate Poker, Playwize, and Lasseters have shut down. As executives like Ed Ware of 32Red, Kenny Alexander of GamingVC Holdings, Ralph Topping of William Hill and Brian Hadfield of CryptoLogic Ltd. have told IGN this year, poker has well and truly been a challenge.

A quick look at the top 20 Web sites and networks on PokerScout.com reveals that PokerStars and FullTilt together control nearly 50 percent of the traffic. The next most powerful European tandem, Playtech Ltd. and PartyGaming, control just 18.4 percent, combined.

Furthermore, data from H2 Gambling Capital show that PokerStars, by traffic, is more popular now than PartyGaming was before the Unlawful Internet Gambling Enforcement Act took effect in October 2006.

While poker news flow has been decidedly acrid, poker bears may have reason yet to be quietly bullish on, of all places, the American market.

The American Gaming Association, perhaps the country's most powerful gambling lobby, is mulling whether to change its position on Internet gambling from neutral to supportive. We also think (but have yet to confirm) that Harrah's Entertainment Inc. -- one of the AGA's most influential members -- was behind a recent Senate bill that would create a federal regulatory regime for Internet poker.

With FleetStreetGames, another poker operator, suggesting it may close by Oct. 31, poker certainly appears to be losing further momentum amid liquidity disparities between North America and Europe as well as wider economic pressures.

Poker uptake in emerging markets may be a ways off, as in Latin America and Asia players are still learning the game. These regions also have Internet penetration rates below, or slightly above, the world average of 21.9 percent. This compared to North America and Europe, which boast Internet penetration rates of 73.6 percent and 48.1 percent, respectively.

Italy, a market in which many operators including Boss Media A.B. and Playtech have launched recently, is curious, but forecasts are not paradigm busters. Ring games are still out, and lawyers there have told us that corporate clients deem the 3 percent turnover-based tax on skill games prohibitive.

Although other sectors of the I-gaming industry may hold fast during this downturn, poker's woes, we think, are sure to continue.

More on this story to come later this week.