Online Gambling Business - Good In Parts
Published: Wednesday, October 04, 2006 Online-Casinos.com
ONLINE GAMBLING BUSINESS - GOOD IN PARTS
US law continues to impact online gambling businesses
With the US legislative debacle almost through its second day, online gambling companies continued to report on the effect the loss of US business is likely to have on corporate fortunes.
GigaMedia Ltd., a Taiwan developer of gambling software that bought the Canadian turnkey provider Grand Virtual some time ago, rebounded just over 4 percent Tuesday after the company said it does not have any U.S. revenues, presumably due to an already existing ban on accepting action from US players. The stock lost 12 percent on Monday.
"GigaMedia would like to clarify that it has been and remains a pure play international business with no U.S. source revenue," the company said in a statement. "We therefore anticipate no adverse financial impact from the new legislation."
GigaMedia added 42 cents, or 4.3 percent, to $10.26 in recent trading on the NASDAQ. The stock has ranged from $1.74 to $12.55 in the past year.
Australian (and soon to list in the UK) gambling group Betcorp slumped 56 per cent after the company admitted the law would have a "material adverse effect" on profits.
Shares in Lasseters, which operates three online casinos, dived 51 percent, with reports that US clients could account for as much as 80 percent of income.
Consolidator and owner of the Palace group of online casinos, Fairground Holdings advised that as of Tuesday afternoon "....none of our properties will be taking bets from players in the following states: Illinois, Indiana, Louisiana, Nevada, Oregon, South Dakota, Washington and Wisonsin. We will continue to allow players to play from the remaining states." It is understood the named states all have anti-online gambling state laws in place.
Respected British bookie group BetFred.com, which hosts an Internet poker room, sportsbook and casino, is taking a different approach, closing all accounts the company believes "originate in the USA." Account holders were sent an e-mail with a phone number to call to claim their remaining balance from their accounts on Tuesday morning.
PartyGaming will allow Americans to play real money games until the new law comes into effect, and even after it does free money games will be open to Americans indefinitely. "Customers will continue to have access to their accounts at any time," said John Shepherd, Director of Corporate Communications for PartyGaming. "Withdrawals from PartyAccounts are not prohibited by the Act."
Among the major turnkey providers, Playtech Ltd stated that 50 percent of its revenues were derived from US sources. The company commented in a statement:
"The Board of Playtech Ltd, the AIM-listed international designer, developer and licensor of software to the gaming industry, notes the decision by Congress in the USA to enact the "Unlawful Internet Gambling Enforcement Act 2006.
"The Board of Playtech states that it continues to receive legal advice regarding the impact of this legislation. Whilst Playtech is not an operator of online gaming nor a payment processor, the Board accepts that if this legislation becomes effective there would be a material impact on certain of its licensees and therefore on Playtech's revenues.
"However, in the first half of 2006 more than 50 percent of Playtech's revenues were derived from non-US players, a figure that is steadily increasing as the Company continues to add more new non-US facing licensees.
"Playtech is actively growing its revenue base in Asia, Europe and South America where the Board believes it has substantial business development opportunities. Playtech's current new business and development pipeline, including commissioned products, is entirely focused on these non-US markets as are all new licensees."
Cryptologic was one of the first major companies to issue a statement on Monday (see earlier Online-Casinos.com/InfoPowa reports) emphasising its mainly European revenues and the fact that it will be moving its head office from Toronto to Ireland shortly.
CryptoLogic's President and Chief Executive, Lewis Rose said that the company's licensees using subsidiary company Wagerlogic software would obey the new US laws.
The Swedish-based Boss Media group is primarily a European provider and is to an extent less affected by the US development. In a statement, the Swedish company commented today:
"As the bill on banned Internet gambling payment processing services in the United States turns into formal law, Boss Media AB will immediately take action to block American players resident in the United States from accessing any such services and software provided by Boss Media.
"A ban on Internet gambling payment processing in the United States will affect Boss Media's net sales and earnings. When Boss Media published its interim report for the period January to June 2006, the company stated that the operating margin (EBIT margin), adjusted for non-recurring items, was expected to be no less than 15 percent for 2006. If the bill prohibiting Internet gambling payment processing in the United States is passed shortly, the operating margin, adjusted for non-recurring items, is expected to be 10 to 15 percent for 2006."
Estimates on the value of the US online gambling market component in the $13 billion global industry are that it is worth around $7 billion with a compounded growth rate of some 21 percent per annum. Clearly this will slow substantially in the event of an American shut-down.
