Pressure Mounting for Sports Books

Alan Weinrib has had a front-row seat to the interactive betting industry for more than five years and feels the sector is facing some major challenges right now.

In 1997, Weinrib was president of one of the first Internet-based sports books, Easybets.com, and now works as a consultant for various interactive gaming companies.

For the last four years, Weinrib assisted Nerex.com on both payment solutions and hosting issues. Nerex.com is a U.K.-based company that focuses on technical solutions for the Internet.

During the last year, the company, with the help of Weinrib, started hosting and specializing in interactive gaming companies. In recent months, Weinrib said new start-up sports betting sites that use Nerex for hosting and other business transactions have been closing at a rate of 40-50 percent per month.

The silver lining, according to Weinrib, is that the worst is probably behind the industry.

"It probably isn't going to get worse," he said. "When I first started in this business with Easybets, sites were failing at a greater clip. We have reached a stage in the industry where we are going to get a lot of consolidation, and I think the more of that there is between the good and legitimate sports books, the better for the industry."

Nerex.com has been hosting gaming sites for more than a year, and Weinrib said he has little historic data to compare the current failure rates with those of startup sites. But he feels the biggest reason for the high rates of failure is a lack of knowledge from operators.

"Guys are being sold sites and aren't being given the full facts about the costs of marketing," he said. "Those who are looking for a global player base realistically are looking at a minimum of a half-million (dollar) marketing startup and $100,000 a month for the next six months."

However, not all new sites need to spend that kind of money, Weinrib said. Some owners are able to get into the industry with a good client base and market to a very specific niche. Those operators, though, usually have to spend large sums on software and hardware costs.

Once operators get in to the industry, they have often spent most of their capital and have little left over for marketing.

"I don't think it is a matter of them not willing to spend, I just don't think a lot of them have it to spend after they get set up," he said. "It is causing a very serious situation."

The biggest problem that anyone has starting out in the industry is getting credibility, he said.

Software suppliers are focused on selling software, Weinrib said, and aren't in the market of educating operators. To help alleviate the problems facing the industry, Weinrib would like to see an association designed specifically for sports books where the betting consumer would know a site was legitimate if it carried the group's seal of approval.

He feels that every time a new site goes out of business, legitimate sites have to work even harder to save face for the industry.

The seal would tell players that the site is operating in a secure location and governed by a code of ethics that is established through the association. Most importantly, he said, there would be rules governing sports betting that would be universal.

"Right now, so many sports books have so many different rules on so many different things that nobody really knows where they are," he said.

A simple bet on a soccer match can get rather confusing with all the different options that exist now, Weinrib said. Some bookmakers say the match must be completed for bets to stand, while others say the match must only be started for bets to stand. Still others say once the second half has started, all bets are off.

"There are so many different rules that they really need to be universal," he said. "The punters out there need to know when they are dealing with a company that carries a certain symbol that there are universal rules."

If bookmakers can form a unified front, both players and operators will have much to gain, Weinrib said. He tried similar efforts when the industry was in its infancy, and he said there was zero interest from operators to take part. Now that there has been some maturation for operators and sites, Weinrib said he would like to revisit the possibility.

"This isn't just protection for the punter, but protection for the bookmaker too," he said. "A list could be circulated among them of credit card abusers, guys who play the system and those that are defrauding sports books."

Weinrib said there are various trade organizations that exist, the Interactive Gaming Council chief among them, but none really exist that are focused on looking at the betting industry from the punters' point of view.

"It isn't a guarantee that they are going to get paid," he said. "But they will know they are licensed in a jurisdiction that does due diligence and that they abide by a code of ethics."

As more and more sites consolidate, Weinrib feels a natural weeding out process will make interactive betting a stronger industry. Until then, though, operators will be forced to make it through the current challenges facing them.