Net Bet Blog

How many years will it take for governments to realise that regulation just doesn't work.

GamingLawEU do a good job of summarising the economic disaster that is the last 4 years of regulation in Germany. What is interesting are the economic losses you might not first expect - those to the actual monopoly that the regulations were intended to protect.

With Germany facing GVC up over 7% today I wonder if the publication of this article was partially to blame (for this good news for GVC holders). BWIN holders and other EU betting sites such as SBT and PRTY will find this summary of interest.

The writing style is odd to say the least and as always with posts on this site make little sense on first reading. I suspect law is something that does not translate well.

Germany: A turbulent regulatory framework [GamingLawEU]

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Less than four months later, a report on the State Treaty on Gambling in the newspaper Kieler Nachrichten was fittingly titled “Gambling: Is the State the loser?”. This is because even now a massive reduction in gambling turnover for the first quarter of 2008 must be recorded for the state-run providers. The news met with a divided response among the members of the parliamentary parties in government. “What we feared would happen is now actually happening”, declared the member of parliament for the CDU, Hans-Jörn Arp, who had been fighting vehemently against the State Treaty. For the Chairman of the State’s FDP parliamentary party, Wolfgang Kubicki, it is a “financial catastrophe”.

On the figures:

Gross earnings of the gambling houses are down 10 per cent, Oddset’s turnover collapsed by up to 50 per cent. For the KENO-bet, the reduction amounted to 30 per cent, Lotto on Wednesday and on Saturday each had to record losses of approx. 11 per cent of their turnover. Thus, altogether about 8 million Euro of turnover have been lost since January”, said Mr. Kubicki after inspecting the parliamentary query (Drucksache 16/2007) at the end of April 2008.

The insanity of having to block internet access to local products because of addiction problems is laughable as Germany are continuing to play happily on Maltese and other sites meaning the state lotteries are losing even more. Sheer stupidity.

As the internet offers up until recently were blocked in Bavaria and most of the other Federal States in 2007, the lottery administration calculates that turnover will be down by approx. 50 million Euro for the last year. According to the Court of Auditor’s estimate, this alone would lead to reduced income (net proceeds and lottery tax) for the State of Bavaria amounting to 20 million Euro. A few days ago, Lotto Bayern resumed its offers through the internet. The justification provided in this context of the alleged fight against addiction will not be very credible against this background.

The article concludes:

Conclusion

The first 100 days of the State Treaty on Gambling have been disillusioning for the advocates of the gambling monopoly. This is because in reality we are rather seeing the beginning of the end of this short-lived law. We may even see BWin banners in the Allianz Arena during the next Bundesliga season, instead of lottery “information” provided by the state.

This eventuality was entirely predictable. Where were the economists when this law was passed?

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Netbetblog favourite PKR.com (see top banner) are launching a magazine to go with their 3D fun poker site.



A brave move. Print is always costly. Poker players are a fickle bunch and will play at the best site and will rarely be swayed by glossy pictures even if the 3D players they depict in the magazine are sure to be busty and wearing low cut dresses.

As a PKR player (find me under NetBet and say hello) I should receive this as a regular player.

Is this a good idea? I think it is. This is a way for PKR to appeal to their strengths and that is the visuals. Their banners stand out as you can see and this is what they need to market and sell. The magazine is a clever way of doing this. Good move.

UK's Dennis Publishing will produce new quarterly publication [Online Casinos]

The fast-growing 3D online poker firm PKR has hired Dennis Communications, the customer publishing arm of Dennis Publishing, to produce a quarterly print magazine for its players. The first issue of the magazine will be published in June 2008.

The PKR.com publication will be distributed free of charge to an international selection of PKR.com customers and will be targeted specifically at advanced poker players; the management team at PKR are keeping the title under wraps until launch.

Bespoke content will include advanced poker strategy and advice, poker news, PKR.com promotions and relevant player reviews.

A six-figure sum and year long contract was negotiated for the deal with Dennis Communications that will see PKR.com in print for the first time. PKR.com officials said the company has seen remarkable growth since launch and it was felt that now was the perfect time to go one step further in rewarding loyal customers and offering a new way to interact with the brand.

PKR.com marketing director, Simon Prodger said, “Teaming up with Dennis Communications on this project marries well into what our brand represents. PKR.com has been a great success in the digital world, and we are pleased to offer our online players more content with this new print magazine. This partnership is a good opportunity to enhance the relationship our brand has already formed with our loyal players and to build on the success of our online output.”

Tim Farthing, Commercial Director at Dennis Communications commented, “Dennis Publishing have already established themselves as the world’s leading gambling publisher, owning numerous titles such as Inside Poker and Poker Player. This perfectly places Dennis Communications to bring PKR.com into the print spectrum as we have a long and successful working relationship with them. “



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Party Gaming (PRTY) might be getting closer to the elusive US deal with regulators.

Even reading the article depresses me. PRTY should not even be in this position. Neteller's "deal" cost the many many millions of pounds ($136 million) and for what? All the get is the promise of no future prosecution. So what about these other "private" companies - when do they get fined and imprisoned? You can bet none of the executives will be going to Disneyland any time soon.

Any deal would cost PRTY dearly and what would them get in return? How can Poker Stars and Full Tilt become two of the largest poker rooms in the world by taking US players whilst PRTY have to sit on the sidelines.

The only other benefit is that PRTY will be able to enter the US IF there is future regulation. This could be years by which point pokerstars could be the only game in town - the price? Many millions.

Worth paying....... a tough one but probably.

PARTY GAMING DEAL WITH U.S. AUTHORITIES IN SIGHT?

CEO confident of a resolution before end of 2008

London-listed online gambling group Party Gaming plc could achieve a settlement of its U.S. position with Department of Justice officials before the year is out, Chief Executive Officer Mitch Garber told business reporters this week. Garber, who leaves Party Gaming on 1st May 2009, said his departure would not impact such a settlement.

The company, which exited the United States market following the enactment of the Unlawful Internet Gambling Enforcement Act in late 2006, has been in negotiations with the U.S. authorities for some months, apparently seeking a settlement on its pre-UIGEA activities which would obviate any risk of retrospective prosecution. Such a settlement would considerably strengthen the company by removing uncertainties flowing from the American legal situation.

According to AFX News, Forbes and other media reportage, Garber told reporters that discussions on the issue were progressing in a constructive manner, generating confidence that a resolution could be reached this (2008) year.

"It's very hard to predict. There's some fluidity to it. We're in the midst of a process and our attorneys tell us it is moving in the right direction and at the right speed," Garber said.

The reports recall the Neteller plc case, where the Isle of Man-based e-cash processor paid a $136 million settlement to avoid further prosecution arising from its involvement in U.S. online gambling transactions pre-UIGEA, and recalls that Gibraltar-based gambling group 888.com has also reportedly initiated talks with the US authorities.

The lack of a level playing field is frustrating for shareholders of EU based companies.

Sportingbet.com(SBT) released a trading statement yesterday.

Sportingbet is one of the best known European online betting companies and is quoted on AIM. It is one of the sites that this blog supports and uses (see side banners). Sportingbet.com pride themselves on giving punters the best odds and a wide selection of bets which they certainly do.

It is no surprise therefore they they have issued an upbeat trading statement. What is more impressive however is the managements desire and ability to cut jobs to improve profitability. Internet gaming is scalable and after a company is well positioned it is probably correct to cut some of the high salaries but usually difficult to implement. Sportingbet.com are to be congratulated.

Q3 Trading Update [ADVFN]

Sportingbet Plc will, on 4 June 2008, announce its third quarter results for the
three months ending on 30 April 2008. The results for the period will report an
operating profit (before exceptional items, fair value adjustment and
amortisation) of not less than #7.0m (2007: #3.0m). This equates to an operating
profit for the nine months year to date of #18.7m (2007: #6.4m from continuing
operations). The Board is pleased with the trading results of the business
through both the third quarter and year to date, in particular, with the Group's
core sports betting business.

Following a successful period of "bedding-in" of the Group's operational moves
to Guernsey and Dublin, the Board has now entered the last phase of its proposed
strategic downsizing exercise, concentrating on its PLC head office function in
London.

As such, it is currently proposed that a number of redundancies may occur in the
head office function. This proposal will be the subject of consultation with
potentially affected staff over the coming weeks.

As part of a senior management review connected to this exercise, it has been
decided that there is no longer a requirement for a Chief Operating Officer
within the senior executive structure, and that the role will therefore become
redundant. The duties associated with the role will be absorbed by the remaining
senior executives of the Company and the role will not be replaced.
Consequently, it has been agreed that Dave Hobday, Chief Operating Officer, will
leave Sportingbet Plc shortly on a date to be agreed, and at the Company's
request, Dave Hobday has resigned from the Board with immediate effect.

An impressive statement all round. I still think that Sportingbet.com is a potential takeover target from BWIN meaning that SBT is cheap on fundamentals and should include a possible bid premium.

These are examples are sportingbet brands. The poker brand was one of the big boys before the US regulations that slaughtered SBT's share price. There is a slow and steady recovery underway.







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Freakonomics's main protagonists, Steve Levitt and his faithful journalist sidekick Steve Dubner has a certain penchant for Poker and has made a number of posts on the subject.

As a economist poker player (albeit a bad one) this is a particularly interesting topic.

Phil Gordon Answers Your Poker Questions [Freakonomics]

This first quote sums up my view to an extent:

In his answers below, he discusses (among other things) variance, sunglasses, and why he’s not a gambler by nature, but rather “a strategic investor.”

This relates to poker being a game of skill that encompasses many of the attributes a trained economist should have - certainly those at my University.

Q: Do you gamble much on non-skill games or games that have a house edge?

A: No. I’m not a “gambler” by nature — I consider myself a “strategic investor.” In fact, what we do at the poker table isn’t very different than what investment professionals do — we just get our results every two minutes instead of every few months or years.

Q: How do math and psychology cross in poker? For example, if the book says a certain hand is a loser 60 percent of the time, how would this change if you know your opponent likes to raise with weak hands at this point, and if you suspect he is bluffing?

A: There are times in poker where making a correct decision is almost completely mathematical. For instance, if a player moves all-in after the flop and you have a flush draw or a straight draw, you can be 99 percent sure that if you make your hand, it will be good.

At that point, just making a simple pot odds calculation will lead you to a winning decision and psychology has nothing to do with it.

But, that being said, poker is the great game that it is because psychology plays such an important part in the game. Knowing your opponent, putting them on hands, and figuring out their state of mind and exploitable tendencies makes all the difference.

Clearly this is an important aspect of my decision to play poker. I assume by reading this blog that you also fit into this camp :-)

Q: Why do so many highly-intelligent people with advanced degrees decide to play poker?

A: It is a fascinating game that is impossible to master. The money isn’t bad either.

On this blog we also cover the UIGEA in detail. At least Phil Gordon agrees with me on this one using an identical phrase to boot.

Q: I hear a lot about compulsive gambling and gambling addiction which makes me wonder if the Safe Port Act, by causing online poker play to drop off, may not have been such a bad thing. What’s your opinion about the Act?

A: I think that the U.I.G.E.A. (the provision of the Safe Port Act that deals with internet poker) was a complete travesty.

First, it places an impossible burden on the financial institutions. Second, 85 percent of the U.S. adult population thinks that they should have the right to gamble on the internet if they want to. Third, what the hell does port security have to do with internet poker? Why do we allow politicians to do this?

888.com issues a management statement earlier today. Revenue growth was healthy at 38% driven by 888ladies the Bingo offering as 888 attempt to diversify away from their core offerings.

888 is an interesting company with a great and well known brand. They also have a large war chest of over $100million to make acquisitions.

If I were advising the management I would suggest spending this sooner rather than later and could suggest a couple of excellent targets for around that price.

Here are the highlights:

Management Statement [ADVFN]

Highlights

* Net Gaming Revenue ("NGR") up 38% to US$64 million (Q1 2007: US$47 million)

* Total Operating Income up 41% to US$66 million (Q1 2007: US$47 million)

* NGR from casino up 35% to US$35 million (Q1 2007: US$26 million)

* NGR from poker up 5% to US$22 million (Q1 2007: US$21 million)

* 27% increase in real money registered customer accounts to 4.9 million
as at 31 March 2008

* Further growth at start of Q2 driven primarily by casino and bingo

Key performance Indicators

Q1 2008

* NGR up 38% to US$64 million (Q1 2007: US$47 million) and 3% above the
previous quarter

* Total Operating Income up 41% to US$66 million (Q1 2007: US$47
million), a 2% increase above previous quarter

* Net Gaming Revenue from casino up 35% to US$35 million (Q1 2007: US$26
million), in line with the previous quarter given the exceptionally high
Casino performance in Q4 2007

* Net Gaming Revenue from poker up 5% to US$22 million (Q1 2007: US$21
million) and 2% increase above previous quarter

* Net Gaming Revenue from Emerging Offering reached US$8 million (Q1 2007: nil)
and 23% increase above previous quarter

* Number of active customers in casino and poker reached 213,115 an increase
of 3.5% compared to Q1 2007 and 2% above previous quarter

* Number of Casino active customers reached 77,370 an increase of 9%
compared to Q1 2007 and 5% above previous quarter

* Number of Poker active customers reached 170,988 an increase of 2%
compared to Q1 2007 and 0.3% increase above previous quarter

* Quarterly NGR per active Casino and Poker customer reached US$267, an
increase of 17% compared to Q1 2007 a 1% decline from previous quarter as a
result of slightly faster increase in active players than NGR increase during
the period

* Casino quarterly NGR per active customer reached US$453, an increase of 23%
compared to Q1 2007 and a 5% decline from previous quarter as a result of
the exceptionally high Q4 2007

* Poker quarterly NGR per active customer reached US$128, an increase of
3% compared to Q1 2007 and 2% above previous quarter

* As at 31 March 2008, 888 had 4.9 million real money registered customer
accounts, representing an increase of 27% in real money customer
accounts since 31 March 2007

There are a number of interesting observations for sector watchers who I imagine regular readers of netbetblog must be.

This is the issue of declining or slowing Poker revenues. This is an issue we need to get to the bottom of. Is it just 888.com? No it isn't. PRTY have seen similar numbers.

True PKR are doing well (the favorite of this blog - search for Netbet on PKR and lets have a game of poker). Equally, Pokerstars and TitanPoker are using their US honed marketing intelligence to clean up (but they are also seeing slowing revenue growth).

Is the boom over? Have all the fish been cleaned out leaving only sharks to feed on each other?

I am still optimistic - internet penetration can only grow and poker is the best game in town.

I have set up a new PKR campaign for beginners. Remember it costs nothing to join and practice tables are completely free. If you do play for cash search for me as "netbet" and say hello when you find me. I am a big fish learning the game so I am sure you will have fun taking my money.

The lowest bonus on offer which is perfect for beginners is the $50 fixed. Trust me - this is all you need.

CODE: netbetpoker - enter this after downloading the software. Simply click below.



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Neteller (NLR) has been leveraging its NETBANX product well recently and today's RNS show how far this has come. Whatever happens to the online gaming revenues NLR will always have a market thanks to NETBANX although revenues remain small in comparison (for now).

These sort of deals enhance NLR's credibility and global reach. A good move.

Netbanx agrmnt with easyBus [ADVFN]

Group continues global payments and industry diversification strategy

Wednesday 7th May 2008 - The NETELLER Group (LSE: NLR), the independent global
online payments business, has deployed a new internationalised version of its
NETBANX payments gateway service to merchants, including new merchant easyBus,
the airport transfer operator which is part of the easyGroup, founded by
Stelios.

The new international version means that customers can easily pay online in
their own currency and language, using local or global payment cards or other
local payment options. This improves choice for consumers, as well as giving
them a better rate of currency exchange. For merchants, this means they can
improve customer loyalty, customers are less likely to abandon a purchase, and
merchants share revenues generated from in-stream foreign exchange.

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