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Analyst: Online Gaming Potential Cut by Credit Card Ban

26 June 2002

NEW YORK--(Press Release)-- -Internet gaming companies could see their growth potential cut in half over the next year as major banks refuse to accept online gaming transactions, according to a new study by Bear Stearns senior managing director and gaming analyst Jason Ader. Growth rates in the industry could be sliced in 2003 from 43% to 20%, or to roughly $4.2 billion in total industry-wide revenues.

"This is a real challenge for e-gaming companies," said Ader. "Credit card transactions are their life blood, without them it will be tough for the sites to thrive."

Many large credit card issuers, such as Bank of America, Fleet, Direct Merchants Bank, MBNA, and Chase Manhattan Bank have already begun to block Internet gaming transactions. More recently, Citibank, which controls approximately 12% of the US credit card industry also joined in.

These moves by banks, as well as an unprecedented amount of negative sentiment toward the Internet gaming industry on both a state and federal level, could have several implications for the fast-growing e-gaming sector. According to Ader, market contraction, an accelerated shift to international markets and possible consolidation could all result. "While we have not yet scaled back our overall industry estimates, we may look to do so if we do not see a fundamental shift in operator business models in the near-term," concluded Ader, the author of two major Internet gaming research publications, including "E-Gaming: Endangered Species or Rising Star?" and "E-Gaming Revisited: At Odds With the World."

Founded in 1923, Bear, Stearns & Co. Inc. is a leading worldwide investment banking and securities trading and brokerage firm, and the major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC). With approximately $31.1 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide. The company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales, trading and research, private client services, derivatives, foreign exchange and futures sales and trading, asset management and custody services. Through Bear, Stearns Securities Corp., it offers prime broker and broker dealer services, including securities lending. Headquartered in New York City, the company has approximately 10,500 employees worldwide.

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