Online and land-based gambling worlds collide at GIGSE

MONTREAL -- The Global iGaming Summit & Expo (GIGSE) returned Tuesday after a two-year hiatus, gathering online and land-based gambling industry professionals for a "Pre-Conference Workshop" to discuss the future of the industry in North America.

The first day of the conference drew a couple nice crowd of industry professionals to the Palais des congrès de Montreal, where delegates listened to an impressive roster of speakers who offered valuable insight into what may be in store in the future for the industry should the United States regulate the Internet gambling market at either the state or federal level.

According to Michael Pollack, the managing director of the Spectrum Gaming Group and the chairman of the event, it's not a question of if, but rather when the U.S. Internet gambling industry will be regulated. Pollack drew parallels to radio and television, saying that Major League Baseball initially opposed broadcasting baseball on the radio and the film industry opposed television. Both industries, Pollack said, were concerned that the technological innovations would cannibalize their audience and prevent people from going to the games or the movies.

"In both cases it went from complete rejection to complete embrace," said Pollack. "It's a continuum. Technology did not alter the social aspects of spectator sports or movie theaters. Clearly, we believe that technology will not alter the social aspects of visiting brick and mortar casinos. As it did in the case of radio, as it did in the case of television, the Internet will become the principle marketing for land-based casinos, and a very cost effective one at that."

The mere presence of brick and mortar casino executives at the conference speaks to the shifting views in the market. When the conference was last held the American Gaming Association opposed Internet gambling, and land-based operators were in the vast minority of attendees – if they attended at all.

But if land-based casinos want to get into the online market, time may be running out – at least in the case of poker. While the current regulatory environment prevents brick and mortar casinos from providing U.S. players with a place to play online, the industry is seeing a rapid shift from a diverse array of places to play to a few industry giants.

Before the Unlawful Internet Gambling Enforcement Act passed in 2006, PartyPoker was the industry leader, holding 25 percent of the worldwide market share. Today, PokerStars comprises 40 percent of the market, while Full Tilt Poker has 20 percent.

The magnitude of the differences between PokerStars and Full Tilt and the rest of the online poker market was easy to see during a presentation by Malcolm Graham, the CEO of PKR, a 3D online poker room that does not accept U.S. players. Graham displayed a slide that showed how the average number of players on poker networks has changed over time, but excluded PokerStars and Full Tilt because "they're so far at the top of the chart, it would be virtually impossible to see what's happening at the bottom of the chart."

"If nothing changes, PokerStars will be the Google of the Internet poker world," said Dann Grevlos, president of Nextenterprise. "It will be more and more difficult for land-based and other licensees across the country to get involved and get those customers if we wait too long."

With two bills that would regulate Internet gambling receiving attention in the House of Representatives, and five states (California, Florida, Iowa, New Hampshire and New Jersey) seriously considering legislation that would regulate intrastate Internet poker, the biggest remaining question is will regulation occur first at the state or federal level.

"I don't think it should be up to the federal government; I think the federal government could screw up anything," said Frank Catania, president of Catania Consulting Group and formerly the director of the New Jersey Division of Gaming Enforcement. "I think that the states should have the right to decide on their own… Intrastate is in my opinion the way to go."

Pollock agreed that regulating at the federal level will present hurdles that many people haven't considered.

"You're trying to overlay federal regulations on an industry that has evolved on a state-by-state basis," said Pollock. "No one has fully been able to get their arms around how precisely that is going to shake out, and when it does happen, who are going to be the winners and who are going to be the losers as a result?"

Over the next two days, delegates at GIGSE will look to find the answers to that question and many more regarding future of the Internet gambling industry in North America.