Nevada and Delaware signed on online poker compact last week. This compact (read: agreement) means that residents of these states can play online poker against each other. So, online poker operators in both of these states can accept players from either state. The USA Today story on this agreement can be found here.
This is a good thing, but it really isn't sufficient to make Nevada or Delaware online poker a big money maker. Why? Because the populations of these states are just too small. Nevada has approximately 2.75 million people and Delaware has approximately 917,000 people. This is barely 1% of the 316 million people in the USA. For Nevada and Delaware to really get critical mass, they need to have deals with more states. I don't see that happening. If I was a governor of a larger state, I wouldn't necessarily compact with Delaware or Nevada because I won't get as much value from them as they get from me.
If you take the population of Nevada (rank 35 of 50) and add the populations of every state that is smaller, which includes Delaware (rank 45 of 50), you barely break 20 million. Now 20 million isn't necessarily bad, but you have to have those 15 states working together and agreeing on the deal to get to an aggregate 20 million population. To put that into perspective, that number is just slightly larger than the population of Florida (rank 4 of 50), which has a population of approximately 19.5 million.
Nevada and Delaware have to somehow get agreements with larger states to feed off of their larger populations before the larger states get wise. I don't think that will happen. I foresee something different. I predict that the four largest states will eventually work together and craft a compact just among themselves. Those states are California (38.3 million), Texas (26.5 million), New York (19.6 million) and Florida (19.5 million). Add that up and you have approximately 104 million, almost one-third of the entire US population. THAT is a good number and you only need four states to work together.
Illinois and Pennsylvania are both a bit above 12 million in population, but that is a big drop from over 19 million. If I were those four states, I would just work together and perhaps add Illinois and Pennsylvania, which would put the total size of the "Big 6" network at just under 130 million. This is a large enough number that would be sufficient to have a good population of online poker players. Then, that group could then cut deals with other countries.
With online poker, size DOES matter. California, Texas, New York and Florida have it - Nevada and Delaware don't.
Showing posts with label online. Show all posts
Showing posts with label online. Show all posts
Monday, March 10, 2014
Saturday, February 22, 2014
Nevada Gambling Hypocrisy On Parade
Here are a couple of recent stories that highlight the hypocrisy that arises when you deal with an industry that has a strong regulatory component. These stories are in addition to my recent post regarding casino heavy hitters fighting each other over expanded gambling, which you can see here.
The first story details the news that Nevada's senators (one Democrat, one Republican) are teaming up to introduce a bill to outlaw all online gambling in the US except for poker. Why? Because they are trying to stop the "wild West" of gambling. You see, yes they are doing this to protect their Nevada casinos, but you shouldn't only think of their more noble motives of protecting YOU from evil gambling. As you of course may realize, Nevada only offers good and pure gambling...so that's OK and should be protected.
This bill is going to be bi-partisan because, let's be clear, the Democrat, Harry Reid, isn't very popular among Republicans, which is probably an understatement. He needs his fellow Nevada senator, a Republican, to help weasel this bill through. Of course, the bill would also have to get through the House of Representatives, but one step at a time.
My view is that this bill shouldn't get through the Senate, but it indeed may. When? After the November elections during Congress' lame duck session. This bill will be inserted into another bill that due to its content would be deemed a "must pass" bill. Think of something like a bill to authorize the budget for the armed forces, or removing a tax impediment for disabled elderly people. No one will stop those bills, so Harry Reid as Senate Majority Leader will add this bill to that one and force people to vote for this or they will be viewed as hating old people, the military, etc. Watch for the news on this bill to go very quiet until after the election, then watch these lame duck bills come up in November and December. The article on this bill can be found here.
Now, where's the hypocrisy? Well the Nevada view that their gambling is good and everyone else's is bad is hypocritical, but let's add in the other story to buttress the hypocrisy. This story discusses how Nevada regulators are allowing slot players to use prepaid access cards. Now similar means are used for sportsbook and poker players, but doing this with slots isn't exactly the same. It would take some time for a sportsbook player to place their wagers, similar with a player in a poker game. Slot machines are fast. You can get a new spin about every 6 seconds if you're fast enough. Also, sports betting and poker have a skill component, where a slot machine does not.
Here's a quote from the article:
"Here’s how it would work: A player who wants to use an access card in a slot machine would first have to register at a casino with identification that verifies a player’s address and date of birth. Registration would also tie a player to a casino’s loyalty card. Players could then load the cards at their banks by transferring funds from a checking or savings account. Harry Hagerty, president and chief financial officer of Sightline, said his company’s agreement with banks puts limitations on the amount of money that a player could load to an access card — a maximum of $2,000 a day, $4,500 a week and $10,000 a month, and the most a player could put on a card at any time is $25,000. Regulators also said a player wouldn’t be able to use the card for at least 15 minutes after transferring the funds."
Wow, very responsible of Nevada to make sure the maximum on a card is $25,000 and they have a whole FIFTEEN MINUTE cooling off period. (sarcasm alert)
Here's the Nevada hypocrisy. One the one hand, they want to make it easier for people to spend their money on slot machines, ahem, THEIR slot machines, which they must think is a good thing. On the other hand, they are seeking to pass a federal law to outlaw online slot machines, because those are generally not Nevada slot machines, which of course must be assumed to be bad.
So, in essence, NO NO NO don't put your money in those non-Nevada slot machines because they are bad and evil because they are electronic and online and you could go through your money very fast. Put your money in our slot machines because we're pure and decent and we limit the money you have on your prepaid card to $25,000 dollars! Right, I stand corrected thinking about this...no hypocrisy here! (sarcasm alert)
The first story details the news that Nevada's senators (one Democrat, one Republican) are teaming up to introduce a bill to outlaw all online gambling in the US except for poker. Why? Because they are trying to stop the "wild West" of gambling. You see, yes they are doing this to protect their Nevada casinos, but you shouldn't only think of their more noble motives of protecting YOU from evil gambling. As you of course may realize, Nevada only offers good and pure gambling...so that's OK and should be protected.
This bill is going to be bi-partisan because, let's be clear, the Democrat, Harry Reid, isn't very popular among Republicans, which is probably an understatement. He needs his fellow Nevada senator, a Republican, to help weasel this bill through. Of course, the bill would also have to get through the House of Representatives, but one step at a time.
My view is that this bill shouldn't get through the Senate, but it indeed may. When? After the November elections during Congress' lame duck session. This bill will be inserted into another bill that due to its content would be deemed a "must pass" bill. Think of something like a bill to authorize the budget for the armed forces, or removing a tax impediment for disabled elderly people. No one will stop those bills, so Harry Reid as Senate Majority Leader will add this bill to that one and force people to vote for this or they will be viewed as hating old people, the military, etc. Watch for the news on this bill to go very quiet until after the election, then watch these lame duck bills come up in November and December. The article on this bill can be found here.
Now, where's the hypocrisy? Well the Nevada view that their gambling is good and everyone else's is bad is hypocritical, but let's add in the other story to buttress the hypocrisy. This story discusses how Nevada regulators are allowing slot players to use prepaid access cards. Now similar means are used for sportsbook and poker players, but doing this with slots isn't exactly the same. It would take some time for a sportsbook player to place their wagers, similar with a player in a poker game. Slot machines are fast. You can get a new spin about every 6 seconds if you're fast enough. Also, sports betting and poker have a skill component, where a slot machine does not.
Here's a quote from the article:
"Here’s how it would work: A player who wants to use an access card in a slot machine would first have to register at a casino with identification that verifies a player’s address and date of birth. Registration would also tie a player to a casino’s loyalty card. Players could then load the cards at their banks by transferring funds from a checking or savings account. Harry Hagerty, president and chief financial officer of Sightline, said his company’s agreement with banks puts limitations on the amount of money that a player could load to an access card — a maximum of $2,000 a day, $4,500 a week and $10,000 a month, and the most a player could put on a card at any time is $25,000. Regulators also said a player wouldn’t be able to use the card for at least 15 minutes after transferring the funds."
Wow, very responsible of Nevada to make sure the maximum on a card is $25,000 and they have a whole FIFTEEN MINUTE cooling off period. (sarcasm alert)
Here's the Nevada hypocrisy. One the one hand, they want to make it easier for people to spend their money on slot machines, ahem, THEIR slot machines, which they must think is a good thing. On the other hand, they are seeking to pass a federal law to outlaw online slot machines, because those are generally not Nevada slot machines, which of course must be assumed to be bad.
So, in essence, NO NO NO don't put your money in those non-Nevada slot machines because they are bad and evil because they are electronic and online and you could go through your money very fast. Put your money in our slot machines because we're pure and decent and we limit the money you have on your prepaid card to $25,000 dollars! Right, I stand corrected thinking about this...no hypocrisy here! (sarcasm alert)
Thursday, January 16, 2014
Analyst Reports Modest I-Gaming Revenue for USA
Contrary to some of the larger estimates of I-Gaming revenue in the US, an analyst has put forward some more modest numbers. The story reported here, states that internet gaming will only generate $1.9 billion in revenue by 2020, not the $7 to $12 billion in revenue estimated by others. You can click the hyperlink above to find out who was estimating the higher numbers.
This lower estimate by Eilers Research makes some points that I personally agree with, which helps buttress the more modest projections. The main assumption for the lower estimates is the assumption that if the states do authorize online gaming, it will be poker only. Now, it is almost a certainty that the first online gaming activity authorized would be poker, with other casino games being added later. But I agree with the analyst that poker might only be the ONLY online gambling activity authorized.
If that indeed is what happens, all is not lost. Poker would be authorized online, and operators can add casino games in a social gaming/subscription mode. Social casino game play in the US can be a generator of revenue - see the activities of all the major slot vendors, particularly IGT's DoubleDown Casino on Facebook.
One assumption that is made by Eilers Research that I am not in total agreement with is that I-Gaming will not cannibalize the land-based casinos. I will agree if only poker is authorized and other casino gaming will be of the social gaming kind. Of course, online poker to an extent will cannibalize land-based card rooms. If full-blown casino gaming is allowed by a state, that will cannibalize some of the casino business.
This lower estimate by Eilers Research makes some points that I personally agree with, which helps buttress the more modest projections. The main assumption for the lower estimates is the assumption that if the states do authorize online gaming, it will be poker only. Now, it is almost a certainty that the first online gaming activity authorized would be poker, with other casino games being added later. But I agree with the analyst that poker might only be the ONLY online gambling activity authorized.
If that indeed is what happens, all is not lost. Poker would be authorized online, and operators can add casino games in a social gaming/subscription mode. Social casino game play in the US can be a generator of revenue - see the activities of all the major slot vendors, particularly IGT's DoubleDown Casino on Facebook.
One assumption that is made by Eilers Research that I am not in total agreement with is that I-Gaming will not cannibalize the land-based casinos. I will agree if only poker is authorized and other casino gaming will be of the social gaming kind. Of course, online poker to an extent will cannibalize land-based card rooms. If full-blown casino gaming is allowed by a state, that will cannibalize some of the casino business.
Friday, August 23, 2013
Late Legislation To Legalize Online Gambling in California
A couple of bills in the California legislature are still hanging around even though there are only a few weeks left in this year's legislative session. Stranger things have happened than having bills that haven't gone through the full legislative review process get passed in the mad rush to get the end of session work completed.
In this case, although it is possible one or both of these bills are approved, I am not overly enthusiastic about their chances. Personally, I am in favor of online gambling, but I much prefer the bills to be fully vetted and edited, with all stakeholders and opinion-holders having their full say in the matter.
Here's an editorial from a local newspaper that shares the same sentiment. I agree. In California, the tribes have huge leverage and influence. And the tribes are not monolithic in their perspectives. The tribes do compete against each other, which extends to the political arena. In general, if all the tribes are not in consensus, the likely and easiest answer is no.
In this case, although it is possible one or both of these bills are approved, I am not overly enthusiastic about their chances. Personally, I am in favor of online gambling, but I much prefer the bills to be fully vetted and edited, with all stakeholders and opinion-holders having their full say in the matter.
Here's an editorial from a local newspaper that shares the same sentiment. I agree. In California, the tribes have huge leverage and influence. And the tribes are not monolithic in their perspectives. The tribes do compete against each other, which extends to the political arena. In general, if all the tribes are not in consensus, the likely and easiest answer is no.
Tuesday, July 30, 2013
Zynga Avoiding US Gambling Market
MarketWatch.com has a story commending Zynga for not pursuing the US gambling business, but instead focusing on its core social game business. I agree. Zynga (acutally any non-big US gambling company) is going to have a tough time competing against the big incumbent US gambling firms like Caesar's, Wynn, Las Vegas Sands, etc. Zynga's core business has plateaued and is declining, so Zynga's push to rehabilitate that business makes more sense than trying to compete against savvy veteran US gambling operators on their turf.
That doesn't mean that Zynga can't look at social gambling or other legal variants of casino games or other gambling games in the US, just that it's probably better to avoid bona fide wagering opportunities in the US, that will require high licensing fees and defeating well financed competition for licenses that will be granted on a state by state basis.
What Zynga can do is look at unique social gambling concepts preferably protected by intellectual property that can be scaled across the US. That would be a much cheaper alternative that would give Zynga new social gaming/social gambling revenue streams, a national go-to-market path, without having to compete for licenses against very well financed and experienced gambling operators.
That doesn't mean that Zynga can't look at social gambling or other legal variants of casino games or other gambling games in the US, just that it's probably better to avoid bona fide wagering opportunities in the US, that will require high licensing fees and defeating well financed competition for licenses that will be granted on a state by state basis.
What Zynga can do is look at unique social gambling concepts preferably protected by intellectual property that can be scaled across the US. That would be a much cheaper alternative that would give Zynga new social gaming/social gambling revenue streams, a national go-to-market path, without having to compete for licenses against very well financed and experienced gambling operators.
Saturday, June 8, 2013
Federal Online Poker Legislation Reintroduced
New York Representative Peter King has reintroduced legislation attempting to federally regulate online poker. This version is likely different than the version pushed by Senate Majority Leader Harry Reid of Nevada. His preference is to have federal regulation and licensing, but biased toward the large Nevada casino companies being the only companies to be able to provide the games.
My view is that if the legislation can't be crafted to lock in the big Nevada casino companies as being the only online poker operators nationally, no federal bill will pass. The fallback for the large operators will be a state by state approach, where the size of their checkbook will buy the licenses, keeping out competition, particularly foreign operators.
Foreign operators would be better served by trying to enter the US market by finding unique US-based opportunities to be their beachhead and not take on the large Nevada gaming companies head on.
The renewed efforts do show that online gaming and gambling is becoming more mainstream and as governments look for more sources of revenue, gambling suddenly becomes palatable.
The story can be found here.
My view is that if the legislation can't be crafted to lock in the big Nevada casino companies as being the only online poker operators nationally, no federal bill will pass. The fallback for the large operators will be a state by state approach, where the size of their checkbook will buy the licenses, keeping out competition, particularly foreign operators.
Foreign operators would be better served by trying to enter the US market by finding unique US-based opportunities to be their beachhead and not take on the large Nevada gaming companies head on.
The renewed efforts do show that online gaming and gambling is becoming more mainstream and as governments look for more sources of revenue, gambling suddenly becomes palatable.
The story can be found here.
Tuesday, November 20, 2012
Online Poker Lobbying Group in California Quits
The reality that online poker is NOT coming to California soon finally reached consensus with a lobbying group specifically created to push for legalization. The California Online Poker Association announced its winding down earlier this month, reported by GGBiGames.com.
The politics of the various tribes sunk the opportunity. The tribes have a great deal of influence in California politics, particularly when it comes to gaming. Since the tribes were not in alignment, online poker wasn't going anywhere. Something eventually will come along, but probably not until enough other states move forward and California is faced with falling behind and losing revenue.
The politics of the various tribes sunk the opportunity. The tribes have a great deal of influence in California politics, particularly when it comes to gaming. Since the tribes were not in alignment, online poker wasn't going anywhere. Something eventually will come along, but probably not until enough other states move forward and California is faced with falling behind and losing revenue.
Thursday, August 2, 2012
Zynga Posts Tender for Real Money Poker Platform
Casino Affiliate Programs commented on eGaming Review's story regarding Zynga soliciting for a real money online poker platform. Zynga's interest in this area is not new. Read the previous post concerning Zynga. This is a good move for them as they have been very much tied to social/fun gaming and of course almost completely tied to Facebook. They need to diversify their revenue streams.
The issue is now ripe as the DOJ several months back, clarified their position regarding the Wire Act and online gambling OTHER than sports betting. A post discussing that development can be found here.
Zynga's stock price has fallen a great deal since the IPO, and last month there was a management shakeup where the COO was stripped of game development oversight. Even competitors are throwing public darts Zynga's way. An executive from Electronic Arts is claiming that Zynga "dropped to their knees." Ouch. Here's the link to the article from Escapist Magazine.
Zynga needs revenue and new sources of that revenue. Online poker is a step in that direction. They've just released the tender. However, they do have a current poker platform that allows players to compete for virtual chips. That game has millions of users, so they are partially down the path.
The issue is now ripe as the DOJ several months back, clarified their position regarding the Wire Act and online gambling OTHER than sports betting. A post discussing that development can be found here.
Zynga's stock price has fallen a great deal since the IPO, and last month there was a management shakeup where the COO was stripped of game development oversight. Even competitors are throwing public darts Zynga's way. An executive from Electronic Arts is claiming that Zynga "dropped to their knees." Ouch. Here's the link to the article from Escapist Magazine.
Zynga needs revenue and new sources of that revenue. Online poker is a step in that direction. They've just released the tender. However, they do have a current poker platform that allows players to compete for virtual chips. That game has millions of users, so they are partially down the path.
Saturday, July 14, 2012
Poll Finds Californians In Favor of Sports Betting
Hot off the presses, a poll by the Field Research Corporation found that by a wide margin, Californians were in favor of legalizing sports betting and by a much smaller margin were in favor of legalizing online poker. This poll was likely commissioned as there are a couple of bills working their way through the legislative process to legalize these exact things. The sports betting bill is much further along in the process, having passed the Senate and is now in the Assembly Appropriations Committee, already having passed the Assembly Government Organization Committee. A recent post on the sports betting bill can be found here.
The poll results were clear. Any way you cut the population, a majority favored legalizing sports betting. Republicans, Democrats, Independents, every age group and every geographic location is in favor. Here is a snippet of the overall results:
Group / Favor / Oppose / No Opinion
Republicans 49/45/6
Democrats 64/31/5
Other 58/31/11
Male 61/34/5
Female 54/37/9
18-39 70/24/6
40-64 53/39/8
65 + 48/45/7
All 58/35/7
This is huge. For any politician putting his/her finger in the wind, this makes no doubt about the will of the people of California - GIVE THEM SPORTS BETTING! Oh, and by the way, the question was worded to ask if the person was in favor of sports betting AND having the state tax its proceeds. So, not just sports betting, but sports betting and taxing it. I would be shocked if the sports betting bill did not pass and get signed into law, setting up California to join New Jersey in a showdown with the unconstitutional federal PASPA law. That being said, there are a couple of bills in Congress that would ease the PASPA restrictions, so that states could add sports betting in the next few years if they desired.
The results for legalizing online poker weren't quite as decisive, with a slight overall majority in favor. The results for sports betting were far more positive - again, a majority of every demographic breakdown in favor.
The details on the poll results can be found here.
The poll results were clear. Any way you cut the population, a majority favored legalizing sports betting. Republicans, Democrats, Independents, every age group and every geographic location is in favor. Here is a snippet of the overall results:
Group / Favor / Oppose / No Opinion
Republicans 49/45/6
Democrats 64/31/5
Other 58/31/11
Male 61/34/5
Female 54/37/9
18-39 70/24/6
40-64 53/39/8
65 + 48/45/7
All 58/35/7
This is huge. For any politician putting his/her finger in the wind, this makes no doubt about the will of the people of California - GIVE THEM SPORTS BETTING! Oh, and by the way, the question was worded to ask if the person was in favor of sports betting AND having the state tax its proceeds. So, not just sports betting, but sports betting and taxing it. I would be shocked if the sports betting bill did not pass and get signed into law, setting up California to join New Jersey in a showdown with the unconstitutional federal PASPA law. That being said, there are a couple of bills in Congress that would ease the PASPA restrictions, so that states could add sports betting in the next few years if they desired.
The results for legalizing online poker weren't quite as decisive, with a slight overall majority in favor. The results for sports betting were far more positive - again, a majority of every demographic breakdown in favor.
The details on the poll results can be found here.
Sunday, April 22, 2012
Expansion of Online Gambling in USA Will Lead with Poker
Casino Journal magazine discussed the efforts to exploit online poker as a lead product in the establishment of the regulated internet gaming market in the US. The article was part of the April 2012 issue. With the recent DOJ policy change on online gambling's coverage under the Wire Act, which I posted on here, poker is going to follow the expansion of internet lottery as state lotteries are already expanding their operations online.
The Innovation Group published an estimate of historical and projected growth of online gambling in the US that was published along with the article. The chart is below:
They are estimating a growth rate of over 29% given liberalization in the US. I don't know if that growth rate can be achieved, but if those numbers are simply a return to what used to occur (or would have occurred) in the US if the UIGEA did not exist, then perhaps yes, these numbers are reasonable. My view is that the growth rate will be lower for two reasons:
The Innovation Group published an estimate of historical and projected growth of online gambling in the US that was published along with the article. The chart is below:
 |
| Source: Doocey, P. (2012, April) Chipping AWAY, Casino Journal, 20-27, and The Innovation Group. |
- Liberalization will take a longer time coming than anticipated, and
- The economic recovery will continue to be very slow and lethargic.
Thursday, April 5, 2012
US Department of Justice Changes Stance Regarding Online Gambling
This major change from the US Department of Justice (DOJ) came out just before Christmas last year, but it is important to review just how big that change was. What the DOJ declared in its new opinion was that it practically reversed itself with regard to its position that all online gambling was illegal pursuant to the Wire Act. Its new position is much more rational and based on the law, which is that the Wire Act prohibits interstate sports betting.
Now the Interstate Horseracing Act took care of the issue with horse race wagering, but the prohibition on interstate betting on other sports is still in place. As an aside, interstate betting on dog racing also uses the Interstate Horseracing Act as authorization, but I don't think dog racing was specifically mentioned as an authorized activity. However, no one has been called to account for accepting wagers on dog races across state lines as far as I know.
What does this new opinion do? This opinion really benefits the states and allows them to offer things like internet poker and casino games within their states as the risk of inadvertent communications moving across a state boundary is no longer a legal threat. For the states specifically, the gambling game that is going to be exploited right away is lottery. Interstate lottery ticket sales are going to expand. After that, intrastate internet gambling on poker and casino games will come online, then those games will expand to interstate operations.
The window for Congress to have some federal control of activity historically the province of the states has passed, with the exception of sports betting. That also may be something that will come to an end with the recent passage of a sports betting bill in New Jersey, setting up a potential legal challenge to the federal Professional and Amateur Sports Protection Act (PASPA), which prohibits sports betting in all states but a grandfathered few. Professor Nelson Rose has a great view of the constitutionality of PASPA. He states, "I expect courts will strike down PASPA. Imagine a federal law that allowed only some states to have movie theaters with sound - it just wouldn't hold up." [1]
Now could a new administration reverse this DOJ opinion? Sure, but I don't think so. If states are moving forward with their efforts to expand gambling as a means of raising tax revenues, it would be politically difficult for a new administration to stamp out that activity without leaning on a very weak read of the Wire Act and facing off against multiple states in federal court. Once the horse has left the barn, not easy to get it back in.
Internet gambling is coming to the US, led by the states on a state by state basis. It's about time.
Citations:
[1] Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 31.
References:
Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 30-31.
Now the Interstate Horseracing Act took care of the issue with horse race wagering, but the prohibition on interstate betting on other sports is still in place. As an aside, interstate betting on dog racing also uses the Interstate Horseracing Act as authorization, but I don't think dog racing was specifically mentioned as an authorized activity. However, no one has been called to account for accepting wagers on dog races across state lines as far as I know.
What does this new opinion do? This opinion really benefits the states and allows them to offer things like internet poker and casino games within their states as the risk of inadvertent communications moving across a state boundary is no longer a legal threat. For the states specifically, the gambling game that is going to be exploited right away is lottery. Interstate lottery ticket sales are going to expand. After that, intrastate internet gambling on poker and casino games will come online, then those games will expand to interstate operations.
The window for Congress to have some federal control of activity historically the province of the states has passed, with the exception of sports betting. That also may be something that will come to an end with the recent passage of a sports betting bill in New Jersey, setting up a potential legal challenge to the federal Professional and Amateur Sports Protection Act (PASPA), which prohibits sports betting in all states but a grandfathered few. Professor Nelson Rose has a great view of the constitutionality of PASPA. He states, "I expect courts will strike down PASPA. Imagine a federal law that allowed only some states to have movie theaters with sound - it just wouldn't hold up." [1]
Now could a new administration reverse this DOJ opinion? Sure, but I don't think so. If states are moving forward with their efforts to expand gambling as a means of raising tax revenues, it would be politically difficult for a new administration to stamp out that activity without leaning on a very weak read of the Wire Act and facing off against multiple states in federal court. Once the horse has left the barn, not easy to get it back in.
Internet gambling is coming to the US, led by the states on a state by state basis. It's about time.
Citations:
[1] Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 31.
References:
Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 30-31.
Saturday, February 25, 2012
Gaming Genres Continue to Blend
The APCW is reporting in its latest video (embedded below) the trend of the merging of skill gaming and wagering, particularly social gaming and online gambling. The Zynga story, which I have posted previously here, is mentioned as well as information that Caesars Entertainment is looking at expanding into social games. I strongly encourage the reader to regularly check out the APCW site and its videos, which are quite informative and entertaining.
Over time, expect some of the most successful gaming companies to offer a mix of skill games and wagering games, to perhaps even include sports betting. The advent of large scale online sports betting in the United States will likely be the last to come, but the trend is for expanded, rather than restricted gambling.
As reported in an earlier post, gaming can be explained pictorially as a spectrum of offerings, from simple card and board games played for fun, to casino games played for money. It should not be a surprise that gaming companies are opening themselves to the full possibilities of gaming that they can offer.
Over time, expect some of the most successful gaming companies to offer a mix of skill games and wagering games, to perhaps even include sports betting. The advent of large scale online sports betting in the United States will likely be the last to come, but the trend is for expanded, rather than restricted gambling.
As reported in an earlier post, gaming can be explained pictorially as a spectrum of offerings, from simple card and board games played for fun, to casino games played for money. It should not be a surprise that gaming companies are opening themselves to the full possibilities of gaming that they can offer.
Tuesday, January 31, 2012
BigLead Sports Blog Sold to USA Today
BigLead Sports, now a property of USA Today, published the top online sports property rankings per number of unique visitors, for December 2011. Which is nice for BigLead Sports, they rank at number 6, at 19.38 million uniques. Very nice. Separately reported by the Fantasy Sports Trade Association in its most recent newsletter, is that the USA Today/Big Lead transaction was valued at $30 million. That may or not be nice. Probably nice, though, for the shareholders of BigLead, which allow them to exit.
Let's look at the comScore ranking and then discuss the valuation of the BigLead property and why or why not the valuation may be reasonable:
Top 15 Online Sports Sites (December 2011)
Unique Users (USA) (000s)
Source: www.comScore.com
1. Yahoo 53,239
2. ESPN 43,252
3. Fox Sports 37,836
4. NFL 26,286
5. Sports Illustrated 20,132
6. BigLead Sports 19,384
7. CBS Sports 18,097
8. USA Today 15,646
9. NBC Sports 14,891
10. SB Nation 9,694
11. BleacherReport 9,178
12. Sporting News 8,798
13. MLB 7,132
14. Stack Media 5,832
15. JUMPTV 4,197
So, was the $30 million price for BigLead Sports a good one? Let's take a look. This site could be described as a blog and aggregator. It has some unique content, but it also pulls in selected material from other sites, to include other owned "partner" sites. It appears to rely on an advertising model as its primary revenue driver. Given the high number of monthly unique visitors, that isn't such a bad idea.
OK, so is the price fair? The assumed valuation for BigLead is $30,000,000 / 19,384,000 or $1.54 per unique visitor. If that is now the going rate for a sports website, that might put a downward bias on the value of similar properties. If the evaluated property had significant additional revenue streams, typical of pay-to-play fantasy sports websites, then $1.54 per unique visitor would have to be augmented by a more common metric associated with gaming sites, such as annual revenue per user or a multiple of gross gaming revenue. Overall, fairly well done by BigLead Sports as they started a blog in 2006 and just under 6 years later have a $30 million exit.
Let's look at the comScore ranking and then discuss the valuation of the BigLead property and why or why not the valuation may be reasonable:
Top 15 Online Sports Sites (December 2011)
Unique Users (USA) (000s)
Source: www.comScore.com
1. Yahoo 53,239
2. ESPN 43,252
3. Fox Sports 37,836
4. NFL 26,286
5. Sports Illustrated 20,132
6. BigLead Sports 19,384
7. CBS Sports 18,097
8. USA Today 15,646
9. NBC Sports 14,891
10. SB Nation 9,694
11. BleacherReport 9,178
12. Sporting News 8,798
13. MLB 7,132
14. Stack Media 5,832
15. JUMPTV 4,197
So, was the $30 million price for BigLead Sports a good one? Let's take a look. This site could be described as a blog and aggregator. It has some unique content, but it also pulls in selected material from other sites, to include other owned "partner" sites. It appears to rely on an advertising model as its primary revenue driver. Given the high number of monthly unique visitors, that isn't such a bad idea.
OK, so is the price fair? The assumed valuation for BigLead is $30,000,000 / 19,384,000 or $1.54 per unique visitor. If that is now the going rate for a sports website, that might put a downward bias on the value of similar properties. If the evaluated property had significant additional revenue streams, typical of pay-to-play fantasy sports websites, then $1.54 per unique visitor would have to be augmented by a more common metric associated with gaming sites, such as annual revenue per user or a multiple of gross gaming revenue. Overall, fairly well done by BigLead Sports as they started a blog in 2006 and just under 6 years later have a $30 million exit.
Saturday, January 21, 2012
Zynga Exploring Online Gambling
Wall Street Journal's MarketWatch reports that the the Facebook-focused social games provider Zynga is talking to potential partners with regard to expanding into bona fide online gambling. This follows last month's reversal by the Department of Justice on its position regarding the Wire Act. Until this reversal, the government's position was that the Wire Act prohibited all online gambling. Now, their position is that the Wire Act prohibits only online sports betting, which is actually in line with how the law was written.
Zynga, which is now traded publicly under stock ticker (NASDAQ: ZNGA), does provide an online poker game, which players compete for virtual chips, rather than actual money. According to the story, 7 million play this game daily. Zynga is wise to at least look at this possibility, as it is possible that their social games may not have much consumer growth left. In addition, they may be looking to spread out and not be as dependent on Facebook as a customer channel.
As explained in an earlier blog post, the gaming spectrum can be broken down into three component areas: entertainment, skill and wagering. Zynga operates now primarily in the entertainment area, with their poker for fun offering moving into the skill area. If as a public company, they now need to keep Wall Street analysts' lust for growth satisfied, a move into the wagering area may be required.
The issue for Zynga is if their brand is too tightly coupled to fun, social gaming and they would not be successful competing against true gambling brands such as Caesar's, Wynn and Las Vegas Sands. In addition, online gambling is likely to be approved on a state by state basis, with each only offering a few licenses. Zynga would have to compete with established gaming brands as well as tribes, for these scarce licenses. These licenses quite possibly may fetch triple-digit millions each. Zynga may be well served to try and locate unique gaming opportunities that will allow them nationwide exposure quickly, without having to battle on a per state basis. Also, if such gaming opportunities can be independent of Facebook, that would allow Zynga a direct channel to customers without having to pay the expensive Facebook "toll."
Zynga, which is now traded publicly under stock ticker (NASDAQ: ZNGA), does provide an online poker game, which players compete for virtual chips, rather than actual money. According to the story, 7 million play this game daily. Zynga is wise to at least look at this possibility, as it is possible that their social games may not have much consumer growth left. In addition, they may be looking to spread out and not be as dependent on Facebook as a customer channel.
As explained in an earlier blog post, the gaming spectrum can be broken down into three component areas: entertainment, skill and wagering. Zynga operates now primarily in the entertainment area, with their poker for fun offering moving into the skill area. If as a public company, they now need to keep Wall Street analysts' lust for growth satisfied, a move into the wagering area may be required.
The issue for Zynga is if their brand is too tightly coupled to fun, social gaming and they would not be successful competing against true gambling brands such as Caesar's, Wynn and Las Vegas Sands. In addition, online gambling is likely to be approved on a state by state basis, with each only offering a few licenses. Zynga would have to compete with established gaming brands as well as tribes, for these scarce licenses. These licenses quite possibly may fetch triple-digit millions each. Zynga may be well served to try and locate unique gaming opportunities that will allow them nationwide exposure quickly, without having to battle on a per state basis. Also, if such gaming opportunities can be independent of Facebook, that would allow Zynga a direct channel to customers without having to pay the expensive Facebook "toll."
Sunday, March 27, 2011
Wynn and Caesars Online Poker Push
In a sign that the major brick and mortar casino operators in the US are making the move toward internet gambling, both Wynn Resorts and Caesars Entertainment lock up deals with internet gaming companies. Wynn announced a partnership with PokerStars and Caesars received Nevada Gaming Commission approval of a relationship with subsidiaries of 888 Holdings.
There shouldn't be any doubt that the trend in the US is that in the not too distant future, internet poker will be legalized. From that point, only a few years will pass and I anticipate full internet gambling (with the exception of sports betting) will be legal. If New Jersey prevails in its lawsuit against the US Government over the constitutionality of PASPA, sports betting could also become legal. This won't happen overnight, but the big US players are getting ready.
The Wynn Resorts story can be found here and the Caesars Entertainment story can be found here.
There shouldn't be any doubt that the trend in the US is that in the not too distant future, internet poker will be legalized. From that point, only a few years will pass and I anticipate full internet gambling (with the exception of sports betting) will be legal. If New Jersey prevails in its lawsuit against the US Government over the constitutionality of PASPA, sports betting could also become legal. This won't happen overnight, but the big US players are getting ready.
The Wynn Resorts story can be found here and the Caesars Entertainment story can be found here.
Saturday, November 28, 2009
Gaming Companies Cautious About Internet Gambling Legislation in the US
Rep. Barney Frank is proceeding with moving HR 2267 forward, hoping to replace the Unlawful Internet Gambling Enforcement Act (UIGEA) with a licensing and regulatory structure for online gambling. However, companies that would benefit are keeping a cautious stance and avoiding becoming too public in the discussion.
A Wall Street Journal report discusses the public positions and opinions of three gaming companies that would benefit from liberalization of internet gambling within the US. The consensus opinion is that if this moves forward, it is likely to happen no sooner than a year from now, near the end of this congressional session.
From discussion panels at the Global Gaming Expo, their consensus is that if any game is legalized online, it would be poker, followed by traditional casino games. No one is foreseeing the expanded legalization of sports betting online in the US anytime soon. However, given the estimates that only 1% of sports betting in the US is legal ($2.5B in Nevada casinos), that implies that $250B in illegal sports betting occurs each year. That's a lot of money not being regulated and taxed. I don't think many can make the logical argument that keeping something illegal is somehow going to make that $250 billion of illegal sports wagers disappear. It's still going to occur.
As a trend, the approach to legalize poker and other games of skill, then move to legalize other traditional casino games and slots makes sense. Don't make too much of a change at one time. Start with these games, learn how the regulatory structure responds, improve the process and then consider expanding the available games. Ultimately, people should be able to spend their money for the entertainment they desire, as long as it doesn't impact others. The US the last I checked was supposed to still be a free country, with a constitution that recognized the people's God-given rights to life, liberty and the pursuit of happiness.
Should regulations be instituted to keep minors from wagering? Absolutely. Should programs be in place to help problem gamblers? Sure. Reputable online gambling firms in other countries have been doing this for years. There isn't a reason that the same kind of protections wouldn't be effective here. There has been online wagering on horse racing in the US for almost 10 years and they don't seem to have an issue with gambling from minors or from problem gamblers.
A Wall Street Journal report discusses the public positions and opinions of three gaming companies that would benefit from liberalization of internet gambling within the US. The consensus opinion is that if this moves forward, it is likely to happen no sooner than a year from now, near the end of this congressional session.
From discussion panels at the Global Gaming Expo, their consensus is that if any game is legalized online, it would be poker, followed by traditional casino games. No one is foreseeing the expanded legalization of sports betting online in the US anytime soon. However, given the estimates that only 1% of sports betting in the US is legal ($2.5B in Nevada casinos), that implies that $250B in illegal sports betting occurs each year. That's a lot of money not being regulated and taxed. I don't think many can make the logical argument that keeping something illegal is somehow going to make that $250 billion of illegal sports wagers disappear. It's still going to occur.
As a trend, the approach to legalize poker and other games of skill, then move to legalize other traditional casino games and slots makes sense. Don't make too much of a change at one time. Start with these games, learn how the regulatory structure responds, improve the process and then consider expanding the available games. Ultimately, people should be able to spend their money for the entertainment they desire, as long as it doesn't impact others. The US the last I checked was supposed to still be a free country, with a constitution that recognized the people's God-given rights to life, liberty and the pursuit of happiness.
Should regulations be instituted to keep minors from wagering? Absolutely. Should programs be in place to help problem gamblers? Sure. Reputable online gambling firms in other countries have been doing this for years. There isn't a reason that the same kind of protections wouldn't be effective here. There has been online wagering on horse racing in the US for almost 10 years and they don't seem to have an issue with gambling from minors or from problem gamblers.
Saturday, November 7, 2009
Further Evidence Smoking Bans Harmful To Gambling Revenues
Several months ago, I posted on the topic of smoking bans playing into the hands of online gambling operators, to the detriment of land-based casino operations. The data from Illinois showed gambling revenues down approximately 20% after the smoking ban took effect. Montana has recently implemented a similar ban and the gambling revenue impacts are similar. According to the story by MontanaNewsStation.com, gambling revenues across the state are down 16% to 18%, just after one month. This is in line with the experience from Illinois casinos.
In my original post, I made the point that online gambling venues may benefit as if someone could smoke in their home and gamble might be a more attractive option than traveling to a smoke-free casino. Play the same games at home and smoke if you want.
In Montana, the competition can be online gambling, but a more clearly defined alternative is the tribally-owned casino in Montana. Tribally-owned casinos are exempt from the smoking ban as reported by the Flathead Beacon. According to a related story by the Great Falls Tribune, "some businesses on the state's Indian Reservations, which are not subject to the Montana Clean Indoor Air Act, are now marketing to people who like to have a cigarette with their cup of coffee, meal or adult beverage or while gambling - indoors."
What Montana has done in addition to eliminating smoking in more indoor venues is actually provide a sustainable competitive advantage to the state's tribal casinos, to the detriment of the other gaming competition. That likely wasn't an objective.
Most legislative bodies are chock full of lawyers. But like most lawyers, there is one law that they haven't been schooled in and continually run afoul of - the law of unintended consequences.
In my original post, I made the point that online gambling venues may benefit as if someone could smoke in their home and gamble might be a more attractive option than traveling to a smoke-free casino. Play the same games at home and smoke if you want.
In Montana, the competition can be online gambling, but a more clearly defined alternative is the tribally-owned casino in Montana. Tribally-owned casinos are exempt from the smoking ban as reported by the Flathead Beacon. According to a related story by the Great Falls Tribune, "some businesses on the state's Indian Reservations, which are not subject to the Montana Clean Indoor Air Act, are now marketing to people who like to have a cigarette with their cup of coffee, meal or adult beverage or while gambling - indoors."
What Montana has done in addition to eliminating smoking in more indoor venues is actually provide a sustainable competitive advantage to the state's tribal casinos, to the detriment of the other gaming competition. That likely wasn't an objective.
Most legislative bodies are chock full of lawyers. But like most lawyers, there is one law that they haven't been schooled in and continually run afoul of - the law of unintended consequences.
Thursday, July 9, 2009
Some Advantages of Online Casinos
The convenience of online casinos is well known. Where else can, in theory, you can hang out in your pajamas and play slots, blackjack or poker? Or, if you're the boss, play the same at work (I do not recommend this if you are NOT the boss). What you don't get online is the true feel of the crowd and the gaming experience. But that may actually be an advantage.
The Casino Journal reports that casinos and bingo parlors in several provinces in Argentina have been closed due to fears over the Swine Flu. Apparently that government has just publicly declared a health emergency for the month of July, due to the flu. Those brick and mortar operations are closed, not generating a dime of revenue. Online casinos are still open! Can you get sick from a person sitting next to you in an online poker game? Not likely. Advantage online casino!
That's not all. GamingIntelligence.com cites a news item from the Remote Gambling Association, referencing a study from MHA Consulting of money laundering in online gambling operations. The essence of the study that "the absence of cases and examples of money laundering and terrorist financing within the remote gambling industry indicated that the risks were low, highlighting a strong commitment within the industry to prevent and detect any occurrences, to comply with the various legislative and regulatory requirements, and to co-operate with the authorities."
In addition, "online gambling is not a likely accessible avenue for money laundering because the identities of the gamblers are known, the financial transactions between the bettors and operators are all in electronic format, and all of the wagering is recorded." Again, advantage online casino!
If you wanted to launder money in small amounts over a period of time, you likely could do that anonymously in a brick and mortar casino. If you didn't sign up for a Players Club card, used cash, and kept your wagers under a few thousand per day, it is possible that you would not attract much attention, particularly if you did not frequent the same property.
So for a player at an online casino, you get convenience, some protection from disease transmission and knowledge that the site has the capability to hinder the improper use of the facility for money laundering for nefarious purposes. All that and entertainment! Woo Hoo!
The Casino Journal reports that casinos and bingo parlors in several provinces in Argentina have been closed due to fears over the Swine Flu. Apparently that government has just publicly declared a health emergency for the month of July, due to the flu. Those brick and mortar operations are closed, not generating a dime of revenue. Online casinos are still open! Can you get sick from a person sitting next to you in an online poker game? Not likely. Advantage online casino!
That's not all. GamingIntelligence.com cites a news item from the Remote Gambling Association, referencing a study from MHA Consulting of money laundering in online gambling operations. The essence of the study that "the absence of cases and examples of money laundering and terrorist financing within the remote gambling industry indicated that the risks were low, highlighting a strong commitment within the industry to prevent and detect any occurrences, to comply with the various legislative and regulatory requirements, and to co-operate with the authorities."
In addition, "online gambling is not a likely accessible avenue for money laundering because the identities of the gamblers are known, the financial transactions between the bettors and operators are all in electronic format, and all of the wagering is recorded." Again, advantage online casino!
If you wanted to launder money in small amounts over a period of time, you likely could do that anonymously in a brick and mortar casino. If you didn't sign up for a Players Club card, used cash, and kept your wagers under a few thousand per day, it is possible that you would not attract much attention, particularly if you did not frequent the same property.
So for a player at an online casino, you get convenience, some protection from disease transmission and knowledge that the site has the capability to hinder the improper use of the facility for money laundering for nefarious purposes. All that and entertainment! Woo Hoo!
Monday, June 29, 2009
Goldman Sachs Predicts US to Legalize Online Gambling, a $12 Billion Market
As reported by EGamingReview, a Goldman Sachs report predicts that the US will legalize online gambling, creating a $12 billion market. Not that this market doesn't already exist, but now the revenues can be captured (and taxed) legally.
The article focuses on poker and other casino games, and is silent on sports betting. That is where the REALLY large revenue lies. There have been old estimates from law enforcement that up to $1 billion is wagered illegally each week during the NFL season. That doesn't include any other sport, Super Bowl, March Madness, etc. Given the current politics, legalizing online poker and casino games is the easiest first step, not that you should diminish the prospect of legalizing a $12 billion market!
This prediction that online gambling will be legalized isn't that much of a stretch given the Democrats control both houses of Congress and the White House. There are polls and studies that support legalization. A post that discusses a poll supporting legalized online gambling can be found here. A post that reports on the university study recommending legalizing online gambling can be found here. In addition, this blog has other posts regarding this topic.
The article focuses on poker and other casino games, and is silent on sports betting. That is where the REALLY large revenue lies. There have been old estimates from law enforcement that up to $1 billion is wagered illegally each week during the NFL season. That doesn't include any other sport, Super Bowl, March Madness, etc. Given the current politics, legalizing online poker and casino games is the easiest first step, not that you should diminish the prospect of legalizing a $12 billion market!
This prediction that online gambling will be legalized isn't that much of a stretch given the Democrats control both houses of Congress and the White House. There are polls and studies that support legalization. A post that discusses a poll supporting legalized online gambling can be found here. A post that reports on the university study recommending legalizing online gambling can be found here. In addition, this blog has other posts regarding this topic.
Wednesday, June 24, 2009
Mozambique Improves Gambling Climate
AllAfrica.com is reporting that last week, Mozambican parliament, the Assembly of the Republic, on Wednesday voted to relax restrictions on gambling. The law will now allow casinos to be built pretty well anywhere in the country, updating the previous law that put certain areas out of bounds.
The new guideline for land-based casinos is that instead of a minimum room requirement (250), the casino must be built in association with one or more hotels with at least a four star ranking. So, align the casinos with quality properties, not just those of a certain size. The older minimum room requirement is actually similar to what still is on the books in Nevada.
Mozambique also legalized online gambling! Here we are in the US, with the UIGEA, which Congress is attempting to overturn, and Mozambique sees the situation clearly, and moves to improve their economy by allowing regulated wagering, even online.
They changed their regulatory structure by transferring the oversight of casino operations to their Tourism Ministry, while the former oversight organization, the Finance Ministry, still oversees the money aspects. That is probably a good move if the Tourism Ministry can ensure the proper licensing of casinos and key employees. In the US, the states usually have a separate department devoted solely to gaming regulation.
There is hope in the US to overturn the UIGEA in the political and the legal arena. There is currently a legal challenge to the UIGEA in the courts, which may hear oral argument in the near future. In Congress, US Congressman Barney Frank's bill to legalize online gambling, HR 2267, is gaining co-sponsors, bringing the total up to 30. The Online Casino Reports article is here.
With the change of presidential administration, and with Democrats in control of both houses of Congress, the chances have improved much, but the bill is still in its infancy and has not yet passed any committees.
The new guideline for land-based casinos is that instead of a minimum room requirement (250), the casino must be built in association with one or more hotels with at least a four star ranking. So, align the casinos with quality properties, not just those of a certain size. The older minimum room requirement is actually similar to what still is on the books in Nevada.
Mozambique also legalized online gambling! Here we are in the US, with the UIGEA, which Congress is attempting to overturn, and Mozambique sees the situation clearly, and moves to improve their economy by allowing regulated wagering, even online.
They changed their regulatory structure by transferring the oversight of casino operations to their Tourism Ministry, while the former oversight organization, the Finance Ministry, still oversees the money aspects. That is probably a good move if the Tourism Ministry can ensure the proper licensing of casinos and key employees. In the US, the states usually have a separate department devoted solely to gaming regulation.
There is hope in the US to overturn the UIGEA in the political and the legal arena. There is currently a legal challenge to the UIGEA in the courts, which may hear oral argument in the near future. In Congress, US Congressman Barney Frank's bill to legalize online gambling, HR 2267, is gaining co-sponsors, bringing the total up to 30. The Online Casino Reports article is here.
With the change of presidential administration, and with Democrats in control of both houses of Congress, the chances have improved much, but the bill is still in its infancy and has not yet passed any committees.
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