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Bear Stearns: Online Gaming Continues to Thrive

15 March 2001

NEW YORK--(Press Release)--March 15, 2001--The popularity of online gaming continues to soar, opening the door for what could be an extremely profitable industry. According to a new report from Bear Stearns called ``E-Gaming Revisited--At Odds With The World'' online gaming sites have more than doubled in the last year. ``This is becoming a real opportunity,'' said Marc Falcone, Bear Stearns gaming analyst.

``There is a great deal of potential and it is evidenced by the number of sites that are sprouting up.'' The analyst estimates that there are between 1,200-1,400 gaming websites, up from 600-700 a year ago. The sites offer all types of gaming activity, including lottery-style games, horseracing, sports wagering and virtual casino games. ``These sites are getting pretty sophisticated. They have high tech graphics, live video and they allow you to play some of the same games you would find on the casino floor,'' Falcone said.

The Bear Stearns report also attempts to identify the Internet gaming population using data obtained from comScore Networks and Nielsen Netratings. According to the report, the online gaming population's income bracket is skewed slightly lower than the overall Internet population yet they have a higher propensity to spend more on general e-commerce transactions.

Will The US Ante Up?

Due to the regulatory uncertainty that exists in the United States, many online gaming sites have emerged in other countries. Operators have sought out gambling-friendly havens such as Antigua, Bermuda, Costa Rica, the United Kingdom and South Africa. The United States government has yet to give clear signs how they will deal with the issue of online gambling.

Currently, legislative proposals to ban online gaming have stalled in Congress and there does not seem to be any great push to revive them. ``I get the impression most legislators realize how difficult it would be to ban online gambling from every computer in the United States. I think they would be much more successful at shaping a regulatory landscape,'' Falcone said.

US Companies Ready To Pounce

If and when the United States allows casinos to take to the web, some established gaming companies plan on being ready. Two well-known casinos, MGM Mirage and Harrah's Entertainment, have entered into agreements with established online gaming companies to develop play-for-fun sites. Both sites hope to build brand recognition and customer loyalty by allowing customers to tour casino properties and play many of the games from the comfort of their own homes.

``It is a smart move,'' said Falcone. ``They are building a large customer base that they should easily be able to tap if the regulatory environment becomes more accommodating.'' In addition, the sites encourage visits to the actual casinos by allowing customers to book hotel rooms and order show tickets online.

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