Online Gaming News Weekly Review – 06/13

EU OFFICIALS TO INTERVIEW U.S. POLITICIANS
UIGEA probe moves another step forward

European Union officials involved in the probe into the protectionist policies in online gambling of the United States are to interview senior members of the Bush Administration in July. The European Commission had previously sent questionnaires to several House and Senate committees and U.S. agencies (see previous InfoPowa reports) seeking information on the Unlawful Internet Gambling Enforcement Act, which is at the centre of the enquiry and prohibits financial transactions with Internet gambling companies.

Despite an earlier World Trade Organisation dispute compensation deal with the 27 nation European Union, the issue remains a contentious one, with the Remote Gaming Association, which represents most of the big names in the UK online gambling business, pressing for more EU action on the controversial UIGEA law, which has severely damaged many Internet gambling firms.

The Washington publication, The Hill covered the issue extensively this week in an article reporting the meeting of US Administration and European Union officials next month, reporting that the talks could herald a trade challenge to US policy by the European trading bloc.

The Association explained that the UIGEA has cost its members hundreds of millions of dollars in lost stock value and business.

For example, The Hill reports, the Gibraltar-based Internet gambling company Party Gaming had a market capitalisation value of $10 billion in January 2006 and saw it reduced to $2.4 billion after the new U.S. law was implemented. Using current conversion rates, that would amount to around a $7.6 billion reduction in stock value.

“For the publicly listed companies, the immediate effect [of the law] was to wipe hundreds of millions of dollars off their share values,” RGA CEO Clive Hawkswood told The Hill. The RGA executive added that his members have been additionally harmed by the ongoing threat of enforcement actions by the U.S. Department of Justice, quoting the example of the still detained David Carruthers of the now defunct BetonSports.

The RGA position is that it is unjust for American authorities to go after its members for services their companies may have offered in the U.S. before the UIGEA was signed into law in October 2006. They argue that it was not clear that offering online betting services in the U.S. was illegal before the law was approved, as evidenced by the fact that several companies offered such services there.

From the Department of Justice’s perspective, however, the response to that is that online gambling was always illegal in terms of the outdated Wire Act of 1960, and that the 2006 law was only an enforcement measure to prevent financial institutions from making payments.

The Hill goes on to quote Dr. Joseph Kelly, a well known US legal academic on the subject, who refers to recent talks by leading Internet gambling companies to negotiate their way out of US prosecutions for pre-UIGEA activities. Corporate spokesmen at Party Gaming, one of these companies, have recently declined to comment on a report that a settlement on these terms is close.

Hawkswood told The Hill that these reports were premature at best, and predicted it would not affect the EU investigation.

The result of the EU questionnaires and the meeting with Bush Administration officials could lead to renewed World Trade Organisation action, The Hill surmises. U.S. trade officials have however emphasised that the EU effort is still only an investigation.

Hawkswood was confident that the EU investigation would find sufficient evidence to launch an action, but suggested that this may not be the preferred route. “We would be very surprised if they did not conclude that there was still a case to answer,” said Hawkswood, who added it would be the EU’s preference to reach a negotiated settlement.

The protectionist nature of the UIGEA is illustrated by the freedom of Americans to indulge in Internet betting on horse racing, fantasy sports and lotteries – all the subject of legislative carve-outs, and the RGA points out that this means its members are suffering from selective enforcement by the US authorities.

“The fact that the Department of Justice continues to threaten enforcement action against EU companies while apparently taking no action against U.S. companies, such as those offering horserace betting, is an additional concern because the EU has identified that as discriminatory action which constitutes an unfair trade barrier,” Hawkswood told The Hill.

FRENCH RELEASE MORE DETAIL ON MARKET OPENING
Licences for French operations could be issued around mid-2009

Following his meeting on the opening up of the French gambling market last week with European Commission head Charlie McCreevy (see previous InfoPowa report), Budget Minister Eric Woerth has released more detail on the French draft proposals.

France is the subject of a final warning from the EC that could find it before a European Court of Justice judge unless there is a change of direction in its monopolistic gambling policies.

“Being realistic, we’re beginning a controlled opening up of online betting, which we have presented to the European Commission,” Woerth told the Reuters news agency, adding that France will begin issuing licences for online betting operators from the second half of 2009.

The minister said that there was no alternative but to open the French gambling market: “Proceedings against France for our monopoly as regards online betting have been open since June 2007. In these circumstances, either we dig in our heels or we change our position,” he said.

The minister said he would be following the draft proposals with more detailed arrangements for McCreevy’s opinion in September prior to submitting these to parliament, but until then the Commissioner would not make his final decision on halting or suspending legal proceedings.

The French government wished to keep its share of revenues from gambling, Woerth said, estimating these at around Euros 5.3 billion ($8.27 billion). He told reporters that a law would be presented in the French parliament after the summer break and a regulatory authority established by the beginning of next year.

The minister said the level of taxation for online gaming firms operating in France had not yet been set pending consultation with interested parties in order to “…set up something that works, especially with regard to the issue of financial returns towards sport”. The principle applied would possibly be a levy across the sports betting industry.

The controversial issue of sponsorship of sports teams by operators – several major French prosecutions have centred on this – will also be addressed with the relevant parties.

Woerth confirmed the predictions of industry observers when he revealed that the French were proposing to allow only parimutuel betting when it came to the horseracing sector; a system in which the total sum bet on a race is placed in a pool and the final prize is not set until all bets are placed.

“For other forms of sports betting, we will hold discussions with leagues and federations. There, we will not have parimutuel betting but fixed odds betting,” he said, referring to a system in which the prize is agreed before bets are placed.

“We also want to open up casino games like poker, roulette or black jack,” he said.

French licensing will include provision for the protection of minors and would include stringent requirements to guard against problem gambling, together with restrictions on advertising and controls against money laundering. Technology that enables the control of all electronic data and financial transactions and the levying of taxes will be implemented.

The licences will be awarded by industry sectors in the sports betting, casino or poker games category and will be valid for a five year period. Operators that are licensed in other European states will be able to apply for a licence in France.

The European Court of Justice has ruled that gaming firms registered in one EU state must be allowed to operate across the 27-nation bloc unless there is an overriding national public interest not to do so. The French politicians and authorities have hitherto resisted this EU requirement, confining gambling to its two monopolies, the PMU for horse racing and Francaise des Jeux for lotteries.

There will be little immediate change on the French scene as regards online gambling, it appears. Woerth said that operators would be expected to respect current legislation in force.

“To be clear, online games remain forbidden, along with any advertising related to them,” he explained. “The behaviour of operators during this time will be sure to be taken into account by the relevant authorities when the time comes to award the licences”, Woerth said, adding a warning that “unauthorised” sites would be prosecuted vigorously once the licensing regime had been established.

AGA SPLASHES ON LOBBYING IN Q1/2008
Internet gambling featured in moves to influence political opinion

The trade association that represents most of the major U.S. land gambling companies, the American Gaming Association invested just on $800 000 in political lobbying in the first quarter of 2008, reports Associated Press.

Prominent in the AGA’s interests was online gambling, with indications that a move toward online gambling may be in progress, with a proposal for a federal study to examine the implications of licensing, regulating and taxing the Internet gambling business, and a separate proposal that would license companies that accept online bets.

The Association also lobbied on a measure intended to attract more tourists to the U.S., and rules governing the taxation of employee tips.

Congress and the Treasury Department were the main targets of lobbying efforts in the first three months of the year, according to a mandatory declaration form filed April 18 with the House clerk’s office.

BINGO PALACE – PARLAY ENTERTAINMENT ACCREDITED BY ALDERNEY JURISDICTION
Parlay licensee granted e-gaming licence

The Parlay Entertainment-powered Bingo Palace.co.uk has been granted an eGambling license by the Alderney Gambling Control Commission. BingoPalace.co.uk is an online bingo brand operated by Azul Europe.

As part of Bingo Palace’s licensing process, the acceptance of Parlay software for operation within Alderney – a UK ‘white listed’ jurisdiction – has been achieved after rigorous testing. Parlay already holds gaming licenses and certifications in Malta, the United Kingdom and the Isle of Man.

Commenting on the achievement, Peter Trinz, Senior VP for Parlay Entertainment said: “We’re pleased that Parlay’s software has been approved for operation within Alderney, which is quickly becoming home to some of the world’s best gaming brands. Azul Europe is already well established with its Bingo Palace brand, and their new home in Alderney will give players in the UK the confidence that goes along with a safe, secured and trusted jurisdiction.

“Remote gambling operators can now run Parlay software in any one of Europe’s top tier white listed jurisdictions.”

Some of the world’s best-known online bingo brands use Parlay Bingo solutions, including Virgin, Yahoo!, Paddy Power, Bet24, NetPlay TV and Bingos.co.uk, as well as bingo network partners St. Minver and Chartwell Technology.

BRIT FSA APPROVAL FOR PAYSAFECARD
e-Processor has pan European expansion plans

The respected British Financial Services Authority has awarded an e-money licence to online payment services provider Paysafecard.

The licence covers activities across the European Union, giving the firm greater independence from banking institutions and assisting it in realising ambitions for a rapid expansion across Europe.

Paysafecard currently offers its services in 10 markets but is hoping to spread its expertise and services further afield. In February this year the company launched in Switzerland, Holland and Belgium.

Michael Mueller, chief executive of the Paysafecard, said: “For us as an internationally operating company, the e-money licence is an enormous step forward. We will optimise our value chain and gain greater autonomy in the market through the licence. Obtaining it is one of the biggest milestones in the eight-year history of our company.”

“Our customers will benefit from the peace of mind [of knowing] that, unlike the banks, we are obliged to maintain 100 percent cash cover of deposits,” said David Hunter, a member of Paysafecard management. “While our geographic expansion allows us to greatly help the 400 million Europeans who currently don’t have a card with which to buy online.”

DEAL OR NO DEAL FOR PKR
Latest move by the dynamic PKR team is a partnership with Endemol

Fresh from launching a slew of new poker promotions and an online casino, PKR.com has now partnered with production house Endemol UK to create a licensed 3D-, PKR online-version of the popular television game show Deal or no Deal.

Endemol UK is one of the UK’s largest independent entertainment producers, and its Deal or No Deal television show has built a massive following since it first launched in 2005 and currently airing in over 60 countries worldwide.

PKR’s CEO, Malcolm Graham says the company has always believed that the future of online gaming lies in developing products that have the potential to become mainstream entertainment brands.

“We believe that combining one of Britain’s best-loved television shows with our unique style of next-generation gameplay has helped move the online gaming industry a step closer to this goal,” he said.

“Online Deal or No Deal games have already proven to be exceptionally popular, and we’ve very excited about PKR’s version,” commented Jurian van der Meer, head of products at Endemol UK. “Presenting the game in such an engaging, immersive and highly realistic way will have a strong appeal for millions of Deal or No Deal television viewers.”

TURKISH AUTHORITIES RELEASE SOME OF SPORTINGBET’S ASSOCIATES
11 released, 28 to go to trial in Superbahis case

After almost a week of silence, the Turkish authorities have released information on the fate of 39 people – 2 of them Sportingbet employees from the UK – arrested last week in a police swoop on the local Sportingbet subsidiary Superbahis.com and associated companies.

The Cyprus Observer reported over the weekend that 11 of those arrested in a police operation that had Superbahis under observation for some time had been released, and 28 others – presumably including the two UK employees – committed to trial on charges that they had set up a gambling website.

Turkish authorities alleged that the investigation had established that there were substantial revenues generated from ‘illegal’ online gambling and that these transactions were facilitated by transfers between banks in Britain, Ireland, Switzerland and northern Cyprus.

In a series of coordinated raids in various locations, 39 people were originally taken into custody in several Turkish cities.
70 computers, 7 hard disks, 1 155 CDs/DVDs, 33 memory cards, 134 bank credit card and deposit books with documents together with 1 191.40 grams of gold, 368 800 Turkish Lira, US$10 371 and Euros 4 550 were all confiscated as evidence.

The banking accounts of 16 people have been investigated by the Turkish Board for Financial Crimes Investigation (MASAK) and were allegedly confirmed as having received money illegally, resulting in a freezing injunction.

The Observer reported that one Baris Kum, who committed suicide two years ago after gambling away family monies, had been using the website. His family has apparently launched a civil suit against the Turkish management.

LEAPFROG BINGO NETWORK LAUNCHES NEW OFFERING
Megabingo game room will link to three major bingo websites

Online bingo fans have a new venue to visit this week following the launch of the Leapfrog Gaming network’s “MegaBingo” game room. Three well established bingo websites – King Jackpot, Bingo Liner UK and Bingo Café UK – are linked to the new facility.

Leapfrog claims that the MegaBingo game room will host the first ever networked bingo game, with generous guaranteed prizes of up to GBP 10 000 weekly. The first guaranteed online game will be played on Saturday, 14th June, 2008 at 11pm, with a prize set at GBP 2 500, and a jackpot of GBP 10 000. Players will be able to purchase a minimum of 3 tickets, at GBP 1 per ticket.

Leapfrog Bingo have added two new games to their selection of Side Games, which can be played while seated at the bingo table. The games are both 3 reel slots, branded Cash Fiesta and Crack The Safe, and featuring wild symbols which multiply wins up to nine times.

BRITISH MOBILE GAMBLING FIRM ACQUIRED BY IGT
Founder Chris Sheffield stays on as IGT enters mobile gaming market

The md of IGT in Britain, Robert White, has announced the acquisition of Manchester-based mobile gaming company Million-2-1 after a two year partnership with the firm, marking IGT-UK’s entry into the mobile gaming market. The consideration paid by IGT was not disclosed.

Founder Chris Sheffield will remain with the company, taking up a new position of Director and General Manager of the combined remote gaming business. His responsibilities will include managing the interests of IGT-UK in interactive digital television, mobile gaming and Internet gaming markets.

Million-2-1 has specialised in mobile interactive competition, lottery and SMS games and has recently commenced development of Java-based mobile versions of a number of the Barcrest group’s slot machine games.

“IGT-UK is delighted to announce this acquisition, which, in conjunction with the recently announced Cyberview deal, marks a significant step forward in our strategy to develop new markets and new routes to market for our market-leading game content,” White commented.

Referring to Million-2-1, he added that the time was now right for IGT-UK and Million-2-1 to join forces to capitalise on the exciting growth opportunities in remote gaming markets.

Sheffield said: “We are tremendously excited at joining such a successful and innovative international business. This is a “dream come true deal” for our business and will allow real focus on developing and marketing new products for the Internet and mobile phone, using the powerful combination of new technologies plus great gaming concepts from both IGT-UK and Million-2-1.”

MARCHONG JOINS MIRADA GAMING
Experienced Ladbrokes and 365 Media online gambling exec on the move

The Spain and England based Mirada Gaming company has announced the appointment of Paul Marchong as director of gaming properties. Marchong was previously commercial and project development manager for 365 Media.

Mirada chief executive and co-founder Jose-Luis Vazquez said: “Paul has vast experience, and we are confident that he is the person to lead the expansion of our gaming business into new markets.”

Marchong was educated at Leicester University where he received a degree in Economics, following this with a Masters in the Science of Management at Boston University. He has worked in the online gambling industry for the past decade, starting with Ladbrokes and later moving to a management position in Boylesport’s Online Gaming Service.

This was followed by a post with 365 Media as Commercial & Project Development Manager. He has extensive Interactive and Live Studio Betting experience.

Mirada plc is a publicly-quoted digital consumer engagement specialist, newly created by the merger of interactive media, marketing and gaming specialist YooMedia and the Spanish interactive technologies and television company, Fresh Interactive Technologies co-founded by Vazquez in 2000.

Mirada is structured into 4 businesses:

Mirada media – Digital TV and Broadcast
Mirada gaming – Multiplatform Gaming
Mirada touch – Interactive and mobile marketing and advertising
Mirada connect – Remote payments and transactions

It operates in the following locations:

London Head office, UK & Northern Europe sales office, Wapping Studios
Madrid Southern Europe and Latam sales office & software and technology development centre
Exeter Software and technology development centre

GERMAN ONLINE GAMBLING NUMBERS UP
2.2 millions Germans gamble online, Forsa study finds

The German research body Forsa reports that some 2.2 million Germans regularly gamble online, with over 700 000 accessing the lotto over the Internet and around 430 000 playing online poker.

Forsa’s study for ICT and Bitkom also discovered that 500 000 Germans bet online on sports events, with 96 percent of those betting on Bundesliga matches and every sixth gambler gambling on large football events.

Research and Markets numbers in its survey “The German Betting Market in Transition: Enormous Growth or Return to the Old Model?” indicates that the German betting market will grow from currently Euro 2.2 billion annually to about Euro 5 billion by 2010.

FRAUD RAMPANT ON THE WEB
A million fraud attacks stopped in Q1 of 2008…and that’s by just one company!

The fraud protection and device reputation authority Iovation reported the startling news this week that it has been instrumental in its customers killing more than a million online fraud attempts in the first half of 2008.

The company has processed more than one billion device reputation queries this year, and reported that in the first quarter of 2008 alone it helped customers block over 900 000 fraudulent and abusive activities coming from 230 different countries.

“As eCommerce continues to grow at a rapid pace, Iovation is seeing similar growth trends in the amount of online fraud and abuse that is occurring across multiple industries,” says Scott Olson, vice president of marketing. “During the first quarter, we saw consistent geographic devices and accounts targeting specific verticals.”

Iovation identifies physical Internet-enabled devices and accounts with histories of fraud and abuse activity, sharing its Device Reputation Authority network of over 60 million unique device reputations across multiple networks to protect online businesses from all forms of online fraud and abuse.

Geographically, of the countries that Iovation tracked in Q1, Israel topped the list of the highest percentage of denied transactions at 15 percent. The Philippines and Belgium rounded out the top three countries with the highest online fraud rates at 8 percent and 7 percent.

The company also reported industry-specific geographic fraud trends based on device reputation queries it performed in Q1. Those findings included:

* For customers in Internet Gambling, Panama had the highest percentage of denied transactions at 6 percent. Costa Rica and Canada followed with 3 percent and 2 percent, respectively. These were relatively low rates of fraud.

* For customers in the Massively Multiplayer Online Gaming (MMO) space, devices coming from Israel had the highest percentage of denied transactions at 34 percent. Mexico and Australia followed with 19 percent and 13 percent, respectively.

* For customers in the Online Social Networking sector, devices coming from Belgium had the highest percentage of denied transactions at 15 percent. The Philippines and Nigeria followed with 11 percent and 7 percent.

* For Online Retail customers, devices coming from Ghana had the highest percentage of denied transactions at 20 percent. Vietnam and Lebanon followed with fraud rates of 14 percent and 7 percent.

*For customers in the Financial Services sector, which denied 0.30 percent of their worldwide transactions in Q1, the Netherlands had the highest percentage of denied transactions at 1.66 percent. Germany and the UK followed with 1.24 percent and 1.04 percent, respectively.

REPUBLICAN OR DEMOCRAT – WHICH IS BEST FOR ONLINE GAMBLING?
Internet gambling companies may get a fairer shake from Obama

With Barack Obama now the uncontested presidential candidate for the Democrats, speculation is turning toward whether he would be a better proposition for the online gambling industry in the USA than his opponent, Republican John McCain.

The Sports Memo.com website carried an interesting article on the subject this week, considering the track records of both men, and pointing out that McCain has opposed the legalisation of sportsbetting on college athletics, even in Nevada.

The site quotes material from ESPN in support of its assessment as follows:

“McCain wants to eliminate what he sees as the most troubling aspects of legalized gambling in the United States. He has led the fight to ban gambling on college sports, a battle the Nevada casinos have won (so far), in part by suggesting that he would make Super Bowl and NCAA pools illegal.

“And McCain would ban Internet gambling – not because it’s addictive, but because players typically have no way of knowing whether they are in fair games.”

Sports Memo carries an cautionary quote from Senator McCain, presumably speaking to ESPN: “I’ll give you a little straight talk. There’s going to have to be another scandal, and there probably will be.” That’s McCain: waiting for the next, inevitable burst of bad news to come along, to present an opportunity not only to excoriate wrongdoers but to corral the powerful into doing right. To take another step toward saving sports.”

Looked at from the Democrat angle, Sports Memo opines that the legalisation of online sports betting is not a big issue in the Obama camp, and he has not gone on record supporting it. But he has at least not actively attacked it, either. He’s a poker player who has supported the idea of an independent study of the online gambling industry to assess its impact and how it could be regulated to protect players.

Sports Memo also quotes US law academic Professor I. Nelson Rose, who is an authority on Internet gambling legal matters and opines: “When the Democrats took control of the Senate, Harry Reid, senator from Nevada, became majority leader. Therefore, land-based casinos, which want a study and law allowing them to operate Internet casinos, can get those, if the President is a Democrat. If John McCain wins…nothing will change.

“Assuming Barack Obama … wins, the Democrats will keep control of Congress and there will be a change in the federal law. It might come as early as 2009. More likely, it won’t be until 2010, or even later.

“For political cover, there could be an objective, scientific study done first [as supported by the American Gaming Association], that proves that Internet gambling can be kept safe from hackers, protecting the “vulnerables” (children and compulsive gamblers), and that states that don’t want to allow can be blocked.”

See the full report: http://www.sportsmemo.com/handicappers/ted/articles/1751/?SESSIDPHP=7eb0343a3eb65e07935294d1fea023f7

RESPONSIBLE GAMBLING ALERT
Online operators would do well to watch a developing class action in Canada

Online gambling operators could regard a developing class action in Toronto, Canada as a wake-up call when it comes to enforcing responsible gambling provisions. The class action is against land casinos, but the implications for online operators are clear.

Thousands of problem gamblers in the Canadian city have launched a $3.5 billion class action lawsuit, saying they were allowed into land casinos operated by the Ontario provincial government despite signing up for a program that should have denied them entry.

Legal representative Jerome Morris told CBC News the suit is designed to help addicted gamblers who have lost large sums of money. It claims OLG has not done enough to enforce its ban on those who have registered for it. Ontario has settled nine individual self-exclusion cases but never a class action suit.
The Canadian Broadcasting Corporation reports that the suit was filed earlier this week in Toronto, claiming the Ontario Lottery and Gaming Corp. did not fully enforce a “self exclusion” program that allows problem gamblers to ban themselves from casinos.

Those who sign up for the program are photographed and their personal information is on file at all of the province’s casinos.

According to the CBC, gamblers who had signed up for the program said it was not working, including one who returned frequently for years after signing up for a self exclusion.

UK BINGO PLAYERS SPEND BIG
Brit bingo websites are generating serious revenues despite the credit crunch

The online bingo information and monitoring website BingoPort.co.uk reports this week that UK Internet bingo players are spending well over GBP 600 million each year on bingo tickets.

The site claims that Sun Bingo maintains its position as the number one online bingo site in the UK, with a 19 percent market share based on the value of bingo tickets sold and prizes distributed back to players.

“We’ve seen unprecedented growth in the online bingo industry here in the UK in the past year,” said BingoPort.co.uk md and co-founder, Scott Logan. “The fact that online bingo players are purchasing bingo tickets in the realm of GBP 600 million annually is truly amazing considering the credit crunch, but not surprising considering the licensing of the online gaming industry in the UK.”

The figures take into account gameplay data gathered from BingoPort.co.uk’s bingo site monitoring service, which tracks all of the major online bingo operators in the United Kingdom around the clock.

“This is the most accurate estimate to date of the size of the online bingo industry in this country,” said Logan. “As the only company so comprehensively monitoring this data, we are able to gain a unique insight into the industry that isn’t possible otherwise, especially since most online bingo operators are not public companies and are reluctant to release information about their turnover.”

BingoPort.co.uk also released details of the market size of the industry leaders based on the value of bingo tickets and game prizes. It is estimated that the number one UK online bingo site, with 19 percent of the UK turnover, is Sun Bingo. This is followed by Gala Bingo (16 percent), Foxy Bingo (13 percent), Jackpot Joy (10 percent) and Mecca Bingo (7 percent).

Logan notes that the number and variety of promotions run by operators has increased dramatically over the past year as the online bingo clubs compete to gain and maintain market share. “There is no doubt that the leaders, such as Sun Bingo and Gala Bingo, have gained much of their market share on the back of their strong brand names. However, it is their ongoing jackpots and promotions that keep players coming back and help them maintain their positions,” he says.

BingoPort.co.uk also provides industry related services including competitor analysis, business planning and consultation.

WILLIAM HILL PLANS MAJOR EXPANSION IN ONLINE SPORTSBETTING New online sports betting platform planned for November as CEO focuses on the Internet

One of Britain’s largest gambling groups, William Hill plc has ambitious plans to raise its Internet sportsbetting gross win by 50 percent with the introduction of a new software platform in November 2008.

20 percent of Hill’s gross win already comes from Internet activity, but CEO Ralph Topping told Reuters reporters this week that he aims to increase this to 25-30 percent as soon as the new platform, designed by UK software provider Orbis, is launched on November 27.

“That kind of growth is there for us to aim for but we’ll set formal targets early next year,” Topping said.

William Hill’s online sportsbook business has struggled over the last year from intensifying competition and serious technology problems. The company attempted to implement a major upgrade of its internet betting operations in-house (see previous InfoPowa report) but was forced to scrap the project last year, writing down GBP 22 million.

Topping, who was previously the company’s Internet director but took up the position of chief executive in February, was at pains to emphasise his commitment to expanding the online business, which he feels was neglected in the past. The firm has successfully halted the decline in its sportsbook operations and is now achieving double digit percentage growth, thanks partly to the introduction of 30 new games, backed by a fresh advertising campaign, Topping said.

“There is a new sense of direction. For too long, we regarded ourselves as bookmakers with a bolt-on activity called gaming. There is a substantial opportunity for growth on the Internet,” he said. Topping indicated that part of that opportunity could be realised through acquisitions. The online gaming industry is regarded as fragmented by analysts and its immaturity makes it prime for consolidation.

“There will be consolidation within the industry. It is inevitable as companies like 888 are only 10 or 12 years old. If William Hill is involved, it will be within the criteria that we won’t pay foolish prices and there has to be a good return for investors,” Topping said.

PLAYTECH FAVOURED BY LEADING ANALYST
J.P. Morgan initiates coverage of online gambling software developer with a bullish prediction

Good news for investors in the online gambling software developer and turnkey provider Playtech plc this week is that leading analyst firm J.P. Morgan has initiated coverage of the company with an “overweight” rating and positive predictions for its future. The target price is set to 700p.

In a research note published yesterday, the analyst company opines that Playtech is likely to generate above-average revenue growth in 2008/2009, with the online gaming industry potentially delivering double-digit revenue growth for the same period.

Playtech is expected to benefit going forward from a rise in its share of online gaming in the gambling market and its leading position in the industry, the analysts add.

The company is likely to generate a revenue/EPS Compound Annual Growth Rate (CAGR) of 46 percent to 49 percent for Full Year 07 to Full Year 09, aided by its robust cash generation, JP Morgan predicts.

Playtech was incepted in 1999 by Israeli businessman Teddy Sagi. The United Kingdom based company floated early in 2006 on on the London Stock Exchange under the symbol PTEC for approximately GBP 550 million at a flotation price of 257p. The company’s current CEO is Mor Weizer.

After the passage of the UIGEA the company’s stock suffered a one-day fall of over 40 percent despite having withdrawn from the US market. It subsequently recovered the losses to stand at near its 52-week peak in February 2007. The firm has excluded all US players from its properties.

Last week Numis Securities raised its rating on Playtech to ‘buy’ from ‘add’ and raised its price target to 561p from 510p, citing the online gambling software provider’s strong start to 2008. The company has benefited from contract wins, product launches and accelerated new game development, Numis said.

BETBROKERS IN TROUBLE
Bets rejected due to funding shortage

The London-listed online betting firm Betbrokers has confirmed that it is turning down bets due to a funding shortage, British business media reported this week.

Founded 4 years ago by Wayne Lochner the internet gambling business places bets for anonymous high rollers and has among its directors highly experienced businessman Derek Tullett and Eddie Jordan, the former Formula One motor racing team boss.

Lochner, the chairman and chief executive, told The Times that the company was not struggling for survival, but he conceded that, in order to take all the bets that its customers wanted to place, it needed to raise another GBP 1 million to GBP 2 million of extra capital.

“We’re not going to close down,” Lochner told The Times. “We’re the victims of our own success. We are being offered more business than we can currently execute. We have to find a way of increasing our capital so we can clear the transactions.”

The market value of the company, which describes itself as a “retail and wholesale brokerage for the sports betting industry” has collapsed from GBP 31.7 million to GBP 1.5 million since its flotation in November 2006. About 60 percent of its business comes from bookmakers seeking to hedge their bets as part of risk limitation strategies, with the balance coming from wealthy punters who use Betbrokers to shop around for the best price on large bets.

Lochner said that the GBP 495 000 raised in March via a loan note had helped, but was not enough to cope with recent trading activity. He said that, with Daniel Stewart, his financial advisers, he was looking at options for raising fresh capital, including tapping directors and Betbrokers’ roster of well-known sporting “ambassadors”, including Lester Piggott, the former jockey and Vinnie Jones, Nasser Hussein and Barry McGuigan.

Lochner, whose last company, Affinity Internet Holdings, collapsed in 2003 after the dot-com bubble burst, said that the funding situation could be resolved “in the next few days”.

In a trading update, Betbrokers said that the average deal size in May had fallen from GBP 1 370 to GBP 424 on a year-on-year basis as the company was “forced to turn down a majority of bets due to a lack of available funds in the clearing house”. Traded volumes during the month fell from GBP 4.47 million to GBP 2.27 million, but it still expects to make a full-year profit.

Betbrokers shares plunged 23 percent to 0.5p. Asked whether he might take the company private if the shares failed to recover, Lochner replied: “It’s not on the table right now.”

MAJOR ONLINE GAMBLING TRIAL STARTS IN CHINA
Twenty accuseds and over a billion in wagers alleged in Internet gambling ring case

The Chinese media are reporting on what is alleged to be the country’s biggest online gambling bust this week as the trial of 20 gambling ring employees commences in the Kunming Intermediate People’s Court in Yunnan Province.

Wagers totalling 8.68 billion yuan (around $1.24 billion) were allegedly taken from a player base of 5 198 by the ring between August 2006 and March 2007, prosecutors told the judges, claiming that the ring profted by over 200 million yuan.

The prosecution claims that two brothers from Hong Kong, identified as Tan Zhiwei and Tan Zhiman were originally involved in setting up a gambling organisation in Myanmar (Burma) and then branched out into Internet betting, setting up a number of online gambling websites with servers in Guangzhou and Dongguan in Guangdong Province. The resulting network employed over 2 000 people in a variety of departments, it is alleged.

There were operational managers, IT workers and support staff, together with associates who opened hundreds of bank accounts to conceal the profits. One of the 20 defendants, Kang Zhenglong, is a former official with the Ruili branch of the China Industrial and Commercial Bank, and allegedly opened several hundred bank accounts for the gambling group.

The trial is ongoing.

Q2 RECORD REVENUES FOR CHARTWELL
US$7 million in revenues for Canadian online gambling software firm

Chartwell Technology, the Canadian Internet gambling software provider has reported revenue growth of 26 percent in Q2:2008, with US$7 million in revenues setting a new company record.

The company announced its unaudited financial results for the three and six months ended April 30, 2008.

Q2 highlights included:

* Corporate revenue record for a quarter at $7.0 million, a 26 percent increase from the second quarter in 2007 and an 21 percent increase from Q1:2008.

* Net income of $1.1 million compared to $0.1 million in the second quarter of 2007.

* Cash flow from operations, before working capital adjustments, of $2.0 million as compared to $0.8 million in the second quarter in 2007 – a 143 percent increase

* EBITDA of $2.2 million as compared to $0.6 million in the second quarter of 2007, a 237 percent increase

Three months ended April 30, 2008

Revenue for the second quarter 2008 was $7.0 million (Q2:2008 – $5.6 million). The year over year increase of 26 percent was from consistent growth in casino license fees of 15 percent and an 88 percent increase in poker license fee revenue. In addition to the increased license fees, Chartwell now includes revenue from Elite Club Management N.V. (ECM), the acquisition of which was completed early in the quarter.

The total software development and support, sales and marketing and general and administrative expenses combined were comparable to the same period in 2007, despite the additional staff and overhead costs associated with ECM. Net earnings for the second quarter were $1.1 million. Company spokesmen claimed that the substantial increases in EBITDA and cash flow from operations demonstrates the strong earning power from established operations while Chartwell continues to invest in new products and services to meet demand.

Software development and support expenses were $2.8 million and $5.1 million in the three and six months ending April 30, 2008 respectively, compared to $2.4 million and $4.8 million for the same period of fiscal 2007.

For the three and six months ended April 30, 2008, sales and marketing expenses decreased by 16 percent and 18 percent to $600 000 and $1.3 million from $700 000 and $1.6 million in the same periods of 2007.

“The second quarter was an excellent one for Chartwell” said Alan Richter, CFO of Chartwell. “We’ve added licensees, deployed 13 new casino games and completed development on four more. We have made additional investments in the services we provide to our customers, and we are accomplishing all of this while controlling our expenses and thereby improving all of our key financial metrics.”

Chartwell continued to maintain a strong balance sheet through positive cash flow and maintaining positive working capital. At April 30, 2008 the Company had $18.8 million of cash and short-term investments compared to $15.1 million at October 31, 2007.

EUROPEAN POKER TOUR PROGRAM RELEASED BY POKERSTARS
French action is back in nine stop schedule

The 5th Pokerstars European Poker Tour will this year start in Barcelona in September and end in May 2009 with a Grand Final in Monte Carlo, according to the schedule released by the company this week. And the good news is that a French stop has been reintroduced to the nine stop program.

“The new EPT season includes all the events which have made the past four seasons such a triumph with record fields across Europe and record prize pools,” said EPT chief executive John Duthie. “We have set very high standards and aim to improve on this still further in Season 5.”

The schedule is:

September 10-14, 2008 : Barcelona Open : buy-in Euro 8 250

October 1-5, 2008 : London : buy-in GBP 5 400

November 15-19, 2008 : Polish Open : buy-in PLN 21 000

December 9-13, 2008 : Prague : buy-in Euro 5 250

January 20-24, 2009 : Deauville, France : buy-in Euro 5 300

February 17-21, 2009 : Scandinavian Open : buy-in DKR 52 250

March 10-14, 2009 : German Open : buy-in Euro 5 250

April 18-23, 2009 : San Remo : buy-in Euro 5 250

April 29-May 3, 2009 : Monte Carlo Grand Final : buy-in Euro 10 600

The Tour generated a total prize pool of almost Euro 40 million last time, with 5 902 players (1 682 of them PokerStars online qualifiers) and the biggest prize pool ever generated outside of Las Vegas and Monte Carlo, Duthie revealed.

Glen Chorny, from Ontario, Canada, won the last Grand Final (see previous InfoPowa report) beating a record 842 players to win more than $3 million after winning his seat online at PokerStars.

“We anticipate the EPT making an even bigger impact in Season 5, attracting more players from all around the world and even larger prize pools,” Duthie said.

Online satellites for the Barcelona leg in Season 5 begin on July 7.

FINDING THE LEGAL LOOPHOLE
26 year old entrepreneur claims a way to get around US legal constraints

Webpreneur Victor Palmer (26) from College Station, Texas claims he has a business model that enables his Centsports.com website to circumvent US online gambling constraints, and it’s interesting enough to have attracted the reportage of Forbes business magazine.

Forbes summarises his model as: “Give people money and let them place any bet they’d like. If they win, they get to keep the spoils; if they lose, give them more money to play with.”

In the Palmer concept, the three elements that make online gambling legally risky are avoided – “prize, chance and consideration.” Because Centsports.com users don’t bet their own cash, no “consideration” is involved, and thus it is legal. Palmer quipped to the Forbes reporter: “Congress assumes if you’re dumb enough to give away money, then go for it.”

Each user starts off with 10 cents in his or her account, provided by Centsports. From there, they can bet on any event for which Las Vegas bookmakers set a line. Once users accumulate $20 in winnings – the equivalent of doubling ‘their’ money eight times – they can cash out a minimum of $10 and receive a check in the mail. Losers risk nothing and are immediately restaked with fresh dimes.

Cashing out is not exactly straight forward. Users compete with each other to snag their winnings from a community pot, with big winners having preference. Users can also earn money by referring friends to Centsports.com for an incentive bonus of 5 percent of any winnings their friends make.

Palmer’s main revenues will come not from the gambling action, but from advertisers like Skype, Pizza Hut and the National Basketball Association anxious to connect with Palmer’s claimed 200 000 player base, assembled on a miniscule marketing budget that finances the 10 cent player freebies and some touting on YouTube. Unless Palmer speaks with a forked tongue, that player base has doubled every month so far.

The young entrepreneur has apparently done his homework. He graduated from Lubbock Christian University at age 16 with a BSc in math, went on to win a Masters in physics at Texas Tech University and in 2006 achieved a Ph.D. in computer science from Texas A&M.