ONLINE GAMBLING INDUSTRY GATHERS IN BARCELONA

2 October 2007

Optimism and a large turnout for industry event


The sixth annual European i-Gaming Congress and Expo got underway at the spacious
Barcelona Diagonal Conference Centre today (Tuesday) with some impressive attendance statistics: 80 expert speakers, 60 top industry exhibitors and over 1 000 pre-registered delegates from 40 different nations...figures destined to grow judging by the number of late attendance delegates standing in line to register this morning.

Welcoming delegates, Sue Schneider joint CEO of organisers Clarion Gaming noted the encouragingly large numbers of first-time attendees and the more upbeat mood as a resilient industry bounced back from the chilling effect of the US Unlawful Internet Gambling Enforcement Act late last year. She pointed out that the international markets in South America, Asia and Europe still offered great opportunities.

Word from David Carruthers

Schneider's address included a poignant note on the plight of ex-CEO st BetonSports David Carruthers, still under house arrest and untried 15 months or more after his arrest on illegal gambling allegations last year whilst transitting the US.

In an open letter to delegates, Carruthers wished them well and commented that although he could not discuss his pending case for obvious reasons, he remains healthy and confident that his innocence will be proved.

He emphasised that now more than ever before it was imperative for the industry to embrace good governance, integrity and professionalism. Strong and united leadership working against protectionism and legal inconsistency was now important.

The indications are that Carruthers will not have his day in court until early spring 2008.

The keynote address was by 888 Holdings CEO Gigi Levy who opined that the phenomenal annual double digit growth of the industry and rapid technology developments meant that operators have hitherto been focused on the present instead of paying more attention to evolving trends that had been largely overlooked.

The Internet gambling industry had rightly been identified as the most successful of the online businesses to come out of the Internet, with good levels of expertise developed in marketing and technology, but there had been missed opportunities to capitalise early on trends that could have added even more impetus to development and business success.

Missed opportunities

"You could say we were too successful, too fast and enjoyed too much growth," he observed in identifying major trends that can still yield rewards and which his company is now actively pursuing. These were:

Localisation - Not merely translating the original site into other languages, but a thorough reflection of the culture and natural preferences of diverse target audiences was necessary to achieve real and lasting success. Industry statistics had shown that in cost vs. benefit terms, for every dollar invested in proper localisation, ten could be recouped.

And those audiences were not necessarily confined to their home countries - there were 2.5 million Turks in Germany; 2.2 million Buddhists in Europe; a significant percentage of Hispanic people in the USA and a staggering 40 million Chinese outside China.

Segmentation - Understanding and developing tactics to reach different age groups, religions, languages and cultures in order to increase business was necessary. The advent of a significant number of computer savvy 50-somethings was an example - people with more time and money for entertainment and leisure activities. And those people are living longer and want entertainment.

Communities: Despite having an ideal set-up of technical capability and an audience with a shared interest, the industry had allowed the considerable power of true community activity to pass it by, leaving the field of user generated content open to later developments like Face Book, MySpace and You Tube which now dominate the space.

Instead of uploading poker results and action to You Tube, players should have competitive online gambling interest sites to showcase their content, he said.

Recent research findings in the US confirmed the power of community, with 43 percent of US respondents saying that they felt as committed to online friends as those in real life as relationships developed.

Virtual World: As Second Life has demonstrated, there is massive potential in the Virtual World, with which the industry is a good technology fit. And World of Warcraft boasts over a million subscribers willing to pay for their entertainment.

Personalisation: Mega companies like Amazon have shown that the technology our industry deploys so well can be used in highly accurate personalisation strategies that offer other products in which a client may be interested by tracking preferences and likely associates and activities.

Premium Luxury: There are significant numbers of exceptionally well off people looking for true value on which to spend their cash and where expense is no problem - yet the industry has yet to offer a real premium service.

Time compression: The Internet took almost 10 years to reach 100 million users, and successive waves of technology have steadily compressed that timeline, making it ever more important to identify and act on trends going forward.

The rewards can be substantial, Levy observed: Up to GBP 233 billion a year on entertainment or 'fun' and GBP 468 billion a year on lifestyle activities and purchases.

"Operators need to be openminded; detect trends fast and exploit them in a business sense; identify gaps in the customer experience that can be filled to improve the relationship and the experience; adopt best practice procedures from other industries and be prepared to constantly innovate," he said. "We need to be able to constantly offer a better and more innovative experience to the customer than other diversions and entertainments."

Little progress on harmonisation

The question of whether harmonisation of law, standards and even taxation was an attainable dream in Europe occupied the attentions of the next panel at the conference, as attorney Julian Harris moderated a discussion involving Alderney regulator Andre Wilsenach, Betfair's head of compliance Roger Parks and an adviser to the Norwegian government ministry of Churches and Culture, Rolf Francis Sims.

Wilsenach probably summed up the rather depressing lack of progress by saying that the issue was more a nightmare than a dream, with little real support for the concept in an industry rife with state monopolies. Although the International Association of Gaming Regulators was trying to get a dialogue going on common standards the reception had in general been lukewarm.

Wilenach commented that ironically, one of the strongest inducements for jurisdcitions to reveal their regulatory measures and policies was the recent UK government white list on advertising, which required advertisers outside the UK who wished to advertise to be licensed in an acceptable jurisdiction.

Interestingly, Sims confirmed recent news reports that the Norwegian government was considering its own version of the UIGEA, the groundswell of political opinion in the country being that online gambling, which is illegal in the country, was a bad thing. Sims claimed that Norwegian banks supported such a move, and made a provocative comment that the choice to gamble was not a right.

Clearly the harmonisation issue is a politically sensitive one closely integrated with the attitudes of various European states that ostensibly seek to protect their citizens from problem gambling by themselves running state monopolised gambling organisations such as Norske Tipping in Sim's country.

Sims predicted an increasingly bumpy ride over the next 2 or more years, saying that he felt the European Court of Justice was uncomfortable with the role thrust on it by European Commission attempts to open up the gambling monopolies.

His comments clearly indicated a very negative attitude in the Norwegian corridors of power. "It would be political suicide for any government minister to suggest legalising gambling," he concluded.

Betfair's Roger Parks took an opposite view on monopolies, opining that through technology and expertise, properly regulated and reputable businesses could contain underage and problem gambling more effectively than government monopolies.

There was an inherent conflict in the prospect of governments benefiting from monopolies set up allegedly to protect the vulnerable, whilst marketing gambling services to its citizens.

Questions from the floor indicated a fundamental disagreement with Norwegian policy. "You want to have your cake and eat it," was one comment, whilst another opined that Europe was more interested in protecting monopolies than in developing conherent standards.

CEOs discussion wide ranging

The European states' penchant for gambling monopolies surfaced again in the next session - a panel of chief executive officers that included Petter Nylander of Unibet, Jez San of PKR 3D Poker, Andy McIver of Sportingbet and Ron Martin from Neteller.

Martin made the understatement of the morning when he said that the past year had been unexpectedly unchallenging for Neteller and not much fun. The brand had been damaged and repair work was in progress he revealed.

Because of the unique and dangerous circumstances in which the company found itself in the issue with the US Department of Justice, it had been constrained in what it could do and say, and this had had an adverse effect on how it was perceived. However, the payouts to American players was largely completed, the negotiations completed and the company was moving forward with optimism and sound fundamental strengths.

San revealed that the advent of the UIGEA dissuaded his company from offering services to US players when it launched. The 3D and content rich nature of the poker offering had ensured that it was encountering very little competition and growth had been spectacular, with the company breaking even in the first year.

Nylander believed strongly that the industry will win the fight against European monopolies, but it was likely to be a tough marathon before this was achieved. He saw many positive signs in EU attitudes and the preparedness to tackle recalcitrant member states.

A confident McIver addressed the question of whether the industry could have had more impact in a lobbying sense if it had acted with more cohesion, pointing out that sometimes going it alone was more productive than management by committee initiatives. He emphasised the importance of fighting corruption in sport, and was upbeat on the results of the recent UK Gambling Commission study on Gambling Prevalence which showed that despite the huge growth in online gambling, problem gambling levels remained largely unchanged, contradicting the opinions often put forward by industry opponents that online gambling was a major cause for concern. He succinctly pointed out that in fact a principal area of concern on problem gambling had turned out to be the government's national lottery!

He nevertheless added that the results of the study should provide a powerful incentive for the industry to maintain its high level of achievment in keeping problem gambling under control going forward.

There seemed to be general agreement that the Asian market presented unique problems, evidenced by the many less than successful attempts to penetrate it over the past three years. Martin remained optimistic of Neteller's efforts, although he commented that financial systems were still immature, and similar shortcomings were present in South America.

Nevertheless, geographic diversification were important, and emerging European markets were also worth pursuing.

Nylander opined that it may still be too early for significant Asian returns, but that emerging European markets presented some good opportunities.

San echoed Gigi Levy's comments on the importance of community, which he feels strengthens the product, adding that forums, avatars and more realistic and immersive 3D poker games were the way forward.

The complicated state of US law

The always fascinating subject of American state and federal law as applied to online gambling was next on the agenda, with US gaming lawyer and respected author Martin Owens and the more recent personality arrival Edward Leyden of iMEGA in the hot seats.

Owens ran over the 'curious' nature of state vs.federal law in the United States, detailing the complexities and inconsistencies and the apparent predilection of the enforcement authorities to harass and intimidate vulnerable targets rather than focusing on issues of US law that remain unresolved.

He predicted increased demand by individual states for some involvement in Internet gambling and the revenues it can raise. "Internet gambling is not dead in America," he asserted.

Trade association iMEGA's president Edward Leyden said that his organisation represented the wide interests of entertainment that included online gambling, insisting on the fundamental right for adults to engage in entertainment that may include online gambling.

He went on to give an impassioned summary of his organisation's activities to date, primarily in taking the federal government to court on the UIGEA.

He praised Judge Mary L Cooper who is currently hearing the case and will make a ruling on iMEGA's application for a restraining order on the UIGEA within the next 30 days as an erudite, fair and technology oriented official with conscientious attention to detail.

"Following the hearing last week, and without presuming to prejudge the issue, we came away feeling very confident in a fair and knowledgeable result from Judge Cooper," he said before going on to discuss the just-published UIGEA regulatory proposals on which the government has invited comment by December 12 (see previous InfoPowa report)

Of the 52 pages published, only 16 deal with the actual regulations - the remainder was explanatory and indicated an attempt by the drafters to produce a fair and balanced document under difficult circumstances.

Leyden reminded the audience that many of the Congressmen voting on a security bill to which the UIGEA was attached at 2.30 am on the cusp of a Congressional recess late last year had not known what the attachment comprised.

And in other news.......

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