Editorial: The Best and Worst of 2001

It was a year of ups and downs, a year to remember, the year I-gaming turned the corner, a year that will define this industry. . . Aw heck let's give the cliché machine a rest and get to the point. Following is the IGN editorial staff's rendition of the best and worst of interactive gambling in 2001:

The Best and Worst of 2001 At a Glance Region on the Rise: Europe Region on the Decline: the Caribbean Worst Policy: U.S. Congress Best Marketing Campaign: Golden Palace Most Creative Marketing Campaign: Golden Palace Worst Marketing Campaign: Bentley Communications Most Sorely Missed: Brian Sandoval Most Resilient: World Gaming/Starnet Most Innovative Product: Gamecast Best New Gaming Concept: Games of Skill Best Hiring: Michael Aymong Best Acquisition: Gocorp Biggest Splash: Playboy Most Intriguing Figure: Peter Bernhard Missing in Action: Jon Kyl Excellence in Enforcement: Visa and MasterCard Worst of Enforcement: Wayne County Sheriff's Department Company of the Year: Access Gaming Systems

A well established base for terrestrial gambling businesses, the United Kingdom is fit to take Australia's place as the world's most attractive interactive gambling jurisdiction. The abolishment of the country's 9 percent betting duty in 2001 made it the place to be for bookmakers, and the expected establishment of a regulatory system for online casino gambling presents the best option yet for the world's elite gaming operators. But don't be so quick to overlook the rest of Europe. If the European Union can work out a solid policy for cross-border gambling, jurisdictions throughout the continent will thrive in this industry. A few, particularly Holland, have already begun to make their moves.

Sleeper: Australia

Australia's federal government has turned cold on Internet gambling, but don't forget that the country's state governments have set up a superb system for regulating online casinos. The Howard government isn't likely to change its position, but the past has taught us to expect the unexpected Down Under.

The increase in European activity is bad news, of course, for jurisdictions throughout the Caribbean basin. For four years the absence of First World involvement allowed countries like Antigua and Costa Rica to flourish in the Internet gambling industry. The majority of operators still reside in this region, but that could change soon. The arrival of more recognized brands means that the days for many of the region's operators are numbered, and those recognized companies will be operating in places like the Isle of Man, Alderney and eventually England. Antigua and Barbuda, the leading jurisdiction during the early years of Internet gambling, had a particularly difficult year, as a number of operators picked up and left following the adoption of stricter policies, among them a 3 percent tax on gross profits.

Congressional efforts to prohibit Internet gambling in the United States were barely carrying a pulse by the end of summer, but America's war on terrorism saved the day not a moment too soon. One would assume that not even the country's most unscrupulous politicians would turn a tragedy as devastating as the Sept. 11 attacks into a political opportunity, but in October U.S. Reps. Michael Oxley, R-Ohio and Rep. John LaFalce, D-NY, did the unthinkable. The two congressmen, along with a handful of supporters, revitalized the prohibition movement by attempting to target online gambling services as vehicles for funding terrorism and took action by proposing Rep. James Leach's, R-Iowa, Unlawful Internet Gambling Funding Prohibition Act as a provision under the federal Financial Anti-Terrorism Act of 2001. With the patriotism taking over as the new hot button on Capitol Hill, five years of using the versatile, highly effective "protect our children" strategy came to a close, and the "fight terrorism" campaign was born. The Leach provision was ultimately dropped from the bill, but it has already surfaced again as free- standing legislation with a fresh new rallying cry.

Honorable Mention: Australian Parliament

The Australian federal government's unprecedented decision to strip the power of legislating gambling issues from the states cost a handful of the country's gaming businesses, which had already received state approval to operate online, tens of millions of dollars. It also cost the country millions of potential tax dollars. Even more nauseating is the fact that the entire movement was driven by pressure on the government to do something about its problem gambling epidemic, of which the rising popularity of poker machines is clearly the primary cause. Online gambling, a much easier target, was thus a scapegoat.

Among hundreds of competitors clawing and scratching for any chance to reach a mainstream American audience, seasoned Internet casino Golden Palace emerged with the coup of the year when it landed a regular spot Howard Stern's radio show.

Honorable Mention: Jackpot Madness

Gaming software supplier Microgaming pulled miles ahead of the pack in 2001 as the Internet's leading progressive games provider, and its success was due largely to ongoing promotions at JackpotMadness.com, a portal site that showcases the games and their winners.

Golden Palace landed a second punch in the marketing corner when boxer Bernard Hopkins fought for the middleweight championship on HBO dawning "GoldenPalace.com" big and bold across his back. It might not have been the most effective promotion of the year, but it was certainly the most memorable and it scored major points in the creativity department.

Honorable Mention: Intertops with its regularly featured colorful propositions (celebrity convictions, break-ups etc.), William Hill with its Webcast goldfish races, and Blue Square with its Webcast snail races.

Bentley Communications Corp., a relative newcomer to the I-gaming business, showed what it's made of late in the year when it launched a marketing campaign heavily targeting college students. In a statement made December 6, the company said it was targeting the college market as part of its master plan to become "the premier entertainment and gaming online destination"--an ill-advised strategy during a period when betting at colleges is such a sensitive issue. The promotion lends itself as valuable ammunition to U.S. legislators campaigning to ban Internet gambling. The creation of several college-branded Web sites, including BostonUCasino, HarvardCasino, StanfordCasino, UofAlabamaCasino and UofMichiganCasino, won't exactly win them any merits in the ethics department either.

Honorable Mention: BetOnSports.com's series of bets relating to how and when the United States would retaliate to the Sept. 11 terrorist attacks.

Nevada turned the corner in 2001 by adopting an approach for regulating Internet gambling, and it never would have happened if it weren't for the efforts of former Nevada Gaming Commission Chairman Brian Sandoval. As the state's highest ranked regulator, Sandoval welcomed the idea of exploring online gambling and played a key role in convincing the state's legislature that regulation was a more sensible approach than prohibition. Sandoval stepped down from his position as chairman in July, and very little has been done to continue the legalization process since then. Regulated online gambling obviously will not exist in Nevada if it doesn't have the support of the commission, and Sandoval's successor, Peter Bernhard, has yet to take a position on the matter.

Starnet Communications International was in a world of hurt coming out of 2000. Its survival in 2001 hinged on its ability to overcome a number of monumental problems resulting in hefty legal fees and a severely damaged reputation. The company had yet to recover from its troubles of 1999, which included the raiding of its offices by the Royal Canadian Mounted Police, a major legal battle with one of its biggest licensees, the crashing of its stock and the subsequent class action lawsuits filed by investors. Along with being strapped with legal fees, it was heavily criticized for its origins in the adult industry and its careless issuing of way too many software licenses--some to operators unequipped to succeed in the business, some to operators with shady backgrounds. Rumors of Starnet's links to organized crime didn't help either.

But, not only did the company survive the year, it managed to get back on the horse and position itself for a positive year in 2002. After relocating from Antigua to the United Kingdom, the company finally released its long overdue upgraded software under the leadership of newly hired CEO Michael Aymong. Then, one by one, it settled all of its lawsuits, leaving it with no strings attached to the misfortunes of 1999. With many of its adversities finally put to rest, the company began building a new stable of licensees and introduced a new wireless gaming platform. Revenues were down late in the year due to a sharp drop in royalties following the Sept. 11 attacks and payments made to settle its lawsuits, but Internet gambling's modern-day Rasputin appears to be closer than ever to bringing itself back to prominence.

Candidates for 2002: Boss Media

The Sweden-based gaming software supplier had a bad year in the books, which resulted in its stock price heading for the deep south, but it primed itself for a strong 2002 by signing a few key land-based gaming operators.

Most of Las Vegas's mega-resorts will wait for a new set of rules in Nevada before they get involved with interactive gambling , but Station Casinos has gotten a leg up by developing a system that's legal under current law. In 2001 the company's newly formed interactive gambling subsidiary, GameCast Live, introduced its "Gamecast" remote gambling technology. Using the system, players can access slot machines on casino floors through touch-screen terminals placed in guestrooms, entertainment venues, bars and sports books. The intranet-based technology , which is awaiting regulatory approval in Nevada, can also be easily adapted for Internet play if and when it's allowed by the state.

Candidates for 2002: ?

Any access-blocking/border control or biometrics solution determined to be adequate by regulators in the United States or United Kingdom would be a top candidate to take in the honors in 2002, as would any e-commerce solution that puts an end to the industry's payment crisis.

For years we've faced the reality that truly exciting new concepts in gaming are few and far between; the wheel has been reinvented thousands of times. But with the Internet comes expanded possibilities. In 2000, for example, we saw the arrival of person-to-person wagering. Making their mark in 2001 were games of skill--that is, games that cost money to play and reward players with cash prizes, but are based primarily on skill instead of chance. A handful of new sites have arrived on the scene showcasing Internet-based skill-games tournaments featuring the likes of chess and backgammon. On the surface, it's merely a neat concept that will find its niche, but when you consider that games of chance are clearly prohibited in the United States and games of skill stand a chance of escaping the "gambling" classaification, the new genre could present a viable alternative to traditional Internet gambling.

Honorable Mention: Virtual horse racing, wireless casino games.

World Gaming plc took a crack at ending its revolving-door-of-leadership routine by appointing Michael Aymong as its CEO in May and it appears that they've finally gotten it right. In a relatively short amount of time Aymong has achieved the monumental feat of bringing stability to a company that had been in a wicked tailspin for two years. Under his leadership, the company has gained an international presence and put an end to several pending lawsuits against it. He also managed to finally get the company's long-overdue upgraded casino software up and running.

Publicly traded Gocorp Limited found itself in what appeared to be a no-win situation coming into 2001. The company was left high and dry in December of 2000 when it was forced to shut down its Queensland-based AusVegas.com online casino, a $30 million endeavor, but a merger with competitor Lasseters Holdings Limited of the Northern Territory turned out to be the perfect solution. Through the deal, the two company's were able to combine their player bases under Lasseters' online casino, which was still operating under a grandfather clause. In addition to salvaging Gocorp's online casino business, the deal enabled Lasseters to finally achieve a much sought-after public status.

Honorable Mention: SportsBook

Alderney-based sports betting group Sportingbet, solidified its status as one of the world's few online-only sports betting powerhouses by acquiring one of its major competitors, SportsBook, in July.

As expected, bigger and better brands found their way into the Internet gambling business in 2001, and the current king of hill, which introduced three online gambling services during the year, is Playboy. Chairman and CEO Christie Hefner vowed to make Playboy the biggest name in online gambling and she delivered via the launching and marketing of PlayboySportsbook.com, PlayboyRacingUSA.com and PlayBoyCasino.com in 2001.

Honorable Mention: Aspinalls, Stanley Ho, Sun International.

Candidates for 2002: MGM Mirage, Crown Online, Magna Entertainment.

How does Peter Bernhard feel about Internet gambling? Three months into his tenure as the chairman of the Nevada Gaming Commission, this is still a mystery. The future for Interactive gambling in Nevada could be wonderful if the chips continue to fall in place, but it all depends on whether the state's policy makers and regulators continue to show some initiative. Coming into 2002, the prospect for continued progress lies under the shadow of a huge question mark propped up by none other than Bernhard. His predecessor, Brian Sandoval, proved to be key in getting the state to consider regulated Internet gambling. Bernhard will have to pick up where Sandoval left off if the legalization movement is to be a success. The thing is, no one knows where Bernhard stands. The issue hasn't been taken up since he took his chair, and he has only commented to the extent of expressing that he isn't knowledgeable enough on the subject to take a position.

Honorable Mention: Kerry Packer, Sir Alan Budd, Stanley Ho.

Where in the world is Jon Kyl? The Arizona Senator spent five years at the forefront of the prohibition movement in America, but fell completely out of the spotlight in 2001. While his House counterparts, Rep. Goodlatte, Rep. Leach, and Rep. LaFalce, led the charge, Kyl rather eerily remained out of the picture throughout the year.

Honorable Mention: Camelot, I-Gaming in South Africa, GamblingSoftware.com.

Despite the efforts of the Jon Kyls and Robert Goodlattes of the world, everyone knows that you can't stop Internet gambling, but Visa and MasterCard proved in 2001 that you sure can slow it down. With policies in which Internet gambling transactions are flagged and denied, the credit card networks proved that the best way to hurt the Internet gambling business is severing operators' abilities to transfer money to and from their customers. For once there's an anti-Internet gambling policy that's enforceable. . . . for now, at least.

The Wayne County, Mich., Sheriff's department set up a bogus online sports book for the Super Bowl with the intent of luring eager bettors into partaking in the service and then warning them upon signing up that what they were doing was illegal. The concept was marginally altruistic, but its implementation was offensive Web designing at its worst. The unencrypted site, which didn't feature very many options that sports bettors are accustomed to (for instance, the ability to specify the amount wagered), was a disappointing front that looked more like a Geocities personal homepage than a sports book.

Honorable Mention: The New Jersey Justice Department

New Jersey's Division of Gaming Enforcement and the Division of Consumer Affairs filed civil actions against 11 online casino operators accused of accepting bets from New Jersey residents. As of the end of the year, most--if not all--of the casinos named in the complaints hadn't yet been served.

While many of Australia's interactive gambling companies spent 2001 reeling from the effects of the country's newly enacted prohibition law, Internet lottery and casino technology provider Access Gaming managed to prosper through diversification. To compensate for the company's Australian business shrinking by 70 percent, its European business grew by 70 percent, and it is now clearly one of Europe's elite interactive gaming technology suppliers. With an impressive lineup of government and private clients, including Holland Casino, Lasseters Online, Austrian Lotteries, the French national lottery, Germany's Westlotto and RAL Limited, the company is poised for great success in both the lottery and casino markets.

Honorable Mention: Ladbrokes, Next Generation Gaming, Sportingbet.com, European Gaming & Entertainment Technology Ltd.

Companies to Watch in 2002: Quova, Orbis, Global Interactive Gaming. mistrust bik. -->