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Emily D. Swoboda
 

Checking in on Sports Betting

7 September 2007

Some would argue that U.S. government targeted the online sports betting industry when it passed the Unlawful Internet Gambling Enforcement Act (UIGEA). On the other hand, sports betting was already illegal in the United States by virtue of the Wire Act of 1961.

Oct. 13, when the UIGEA was signed into law, the U.S. market lost many sports betting companies, including Sportingbet, Leisure and Gaming and bwin. Some companies pulled out in early October in anticipation of the enactment.

IGN has checked in on these and other sports betting companies to see how they have recovered their losses, if at all.

Sportingbet announced on Oct. 12 that it was selling its U.S.-facing operations to a U.S. company called Jazette Enterprises. The sale price of $1 would reportedly wipe out $13.2 million of debt off Sportingbet's books and spare the company an estimated $14 million in closing-related expenses.

Sportingbet lost 60 percent of its business when it left the U.S. market, but it has managed to recover at least some of its losses, according to its own financial reports.

In its Q3 results for the three months to April 30, 2007, Sportingbet reported turnover of £291.1 million, compared with £229.4 million in the same period in 2006. Sports betting turnover in Europe was £156.3 million (2006: £131.0 million), earning a gross profit of £15.1 million (2006: £10.6 million).

Leisure & Gaming's (LNG) CEO Alistair Assheton announced Oct. 13 that he would lead a management buyout of the company's U.S. operations for $1, saving the company from $6 million in shutdown costs.

In its annual report, released in May 2007, LNG reported a turnover of $31.6 million for the period of Jan. 1 to March 12, 2007, an increase of 101 percent over the same period in 2006.

Austrian gaming company bwin announced Oct. 13 that it had halted its U.S.-facing operations, which accounted for just over 20 percent of bwin's total gross gaming revenues in the second quarter of 2006.

In its H1 2007 results, bwin reported a decrease in gross sports betting revenues from 41.6 million euros (Q2 2006) to 37.4 million euros.

Some Are Moving Forward

Like other sectors in the market, sports betting companies have had to adapt to the changes brought on by the new U.S. policy.

Online gambling company 888.com, which exited the United States on Oct. 17, in July hinted at a possible deal with Blue Square to launch a Europe-facing sports betting service.

And Ladbrokes, which has announced China-facing ambitions, has clarified recently that their plans would be directed toward establishing a sports betting operation in Macau.

Company finance director Brian Wallace was quoted as saying: "It is an extraordinary growth story, but we're not looking to open casinos in Macau--the real thrust for us in that region is sports betting."

Some Are Stalling or Dying

Some companies have not fared so well.

Australian online betting company Betcorp Limited gave up 85 percent of its revenue when it pulled out of the U.S. market on Oct. 17, 2006. Six days later the company announced its intentions to sell its Canada- and Antigua-based operations to online gambling and entertainment company Bodog for $9 million. Bodog still operates in the United States. The sale was approved by the company's shareholders on Nov. 15.

Following the proposed sale to Bodog, Betcorp voluntarily de-listed from the Australian Stock Exchange. On Nov. 23, 2006, the company de-listed from the Alternative Investments Market (AIM) on the London Stock Exchange, rendering it a privately held company with no assets in gaming.

And Malta-based operator Interactive Gaming Holdings (IGH) in August 2007 was forced to suspend not only its shares on AIM, but its betting operations have been put on hold indefinitely after failing to secure the $400,000 loan it needed to stay afloat.

An Insider's Opinion

Alex Czajkowski of Sportsbook.com, which still serves U.S. customers, said the sports betting industry is doing just fine, regardless of the changes in U.S. policy.

"Americans have an insatiable appetite for betting, casino and poker," Czajkowski said. "They love it. There is no stopping an American who wants to bet on his sports or sit down at a poker table online or play blackjack online. They will do whatever it takes to get their money in and play their games."

Nonetheless, he concedes that the legislation did cause an upheaval in the industry and in his company.

"It would be an understatement to say the UIGEA has had a huge impact on the industry," Czajkowski said. "It's had an impact on us. People deposit a little bit less. Because of the pressures from the Act we've had some turnover in our channels for deposit and for paying our customers. We had some real challenges over the summer; in particular, getting money to our customers. And that creates a little bit of uncertainty from the player's perspective when you see slightly lower deposit volumes and slightly lower turnover, but not devastatingly so…I'm quite confident we will see a resurgence, provided things stay as they are. "

Checking in on Sports Betting is republished from iGamingNews.com.
Emily D. Swoboda
Emily D. Swoboda