The Online Poker Sector - An Overview of Regulation and Markets

8/14/2019 The Online Poker Sector - An Overview of Regulation and Markets

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WHITE PAPER

The Online Poker SectorAn Overview of Regulation and Markets

PRESENTED BYIGamingNews

COMPILED, DESIGNED AND EDITED BYChristopher A. Krafcik | Editor | IGamingNews

ST. CHARLES, MISSOURIMAY 2009

CLARION GAMING

205 S. MAIN STREET | ST. CHARLES, MO. 63301 | UNITED STATES OF AMERICAWWW.CLARIONGAMING.COM


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IGAMINGNEWS WHITE PAPER |Who We Are

IGamingNews is a subscription-based electronic news, research and informationservice that has covered the Internet gambling industry for nearly a decade.

We count among our clients publicly traded and privately held Internet gamblingoperators; software suppliers; financial services companies; equity analysts; legalfirms; entrepreneurs; marketing firms; national and provincial lotteries;consultants of various dispensations; and government regulators.

IGAMINGNEWSis

Publisher | Mark BalestraE: [email protected]

Editor | Christopher A. KrafcikE: [email protected]

Staff Writer | Jeanette KozlowskiE: [email protected]

Digital Advertising Executive | Holly RauchE: [email protected]

T:+ 1 636 946 0820F: + 1 636 946 0566

On the Web: http://www.igamingnews.com


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IGAMINGNEWS WHITE PAPER | What People Say About Us

IGamingNews was the first daily Internet newspaper for the gamblingindustry. With so much happening in this diverse, vibrant industry, they keepyou up to date with events every day, their stories are well-researched andaccurate and the entire team is dedicated to serving the industry.

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IGamingNews has been an invaluable source of industry information to mefor nearly ten years. Covering an enormous range of global gambling topics, itis the first thing I receive in my mailbox every morning and it is the leadingdaily industry news service.

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Javaid Aziz | Former Chief Executive, CryptoLogic

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who is interested in investing in the I-gaming sector.

Todd J. Eilers | Equity Analyst, Roth Capital Partners


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IGAMINGNEWS WHITE PAPER | Table of Contents

Introduction + + + + + + + + + + + + + + + + + + + + 5

Regulatory News - - - - - - - - - - - - - - - - - - - - - - - - - 7

Regulatory Spotlight + + + + + + + + + + + + + + + + 13

Deals: Done and Rumored - - - - - - - - - - - - - - - - - - 17

Exposed + + + + + + + + + + + + + + + + + + + + + + 21


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IGAMINGNEWS WHITE PAPER | Introduction

Data consultancies and analysts agree the Internet poker market is growing,though it is controlled by a small number of operators targeting the UnitedStates.

Currently, there are around 600 poker Web sites and 38 poker networksoperating from different licensing jurisdictions around the world.1

In the 2009 calendar year, Global Betting and Gaming Consultants, a dataconsultancy, expect online poker will grow 10.8 percent, year over year, to $3.9billion in gross gambling yield.

By geographic segment, Europe is projected to grow 15.5 percent to $1.82 billion,and North America, a more modest 7 percent to $1.65 billion. If GBGC estimateshold, 2009 will be the first year Europe generates more in gross gambling yield,

for poker, than North America.2

In May 2009, when this introduction was written, PokerStars, an operatorlicensed on the Isle of Man, controlled around 36 percent of the world's pokertraffic.3Its nearest competitor, FullTilt, which is licensed in the MohawkTerritory of Kahnawake, controlled approximately 16 percent.

Both companies target the United States, where a number of prohibitive state andfederal laws target online poker directly or indirectly.

Rounding out the top five, now, are the European firms Playtech Ltd.,

PartyGaming and Bwin Interactive Entertainment A.G., which control 9.6percent, 6.9 percent and 4.2 percent of the traffic, respectively.

None of these companies takes play from the United States. All are publiclytraded.

As the data consultancy H2 Gambling Capital has put forward, IGamingNewsalso believes the Unlawful Internet Gambling Enforcement Act (UIGEA), aUnited States law which took effect in October 2006, could reshape the currentdistribution of player traffic among operators in the near-to-medium term.

Generally speaking, the UIGEA makes illegal the processing of online gamblingmoney transactions; after considerable delay, its final regulations were issued in

1Latest estimate of PokerScout, a Web site that tracks online poker traffic in real time.2Since the 2004 calendar year.3The author arrived at this figure by adding the respective seven-day averages ofPokerScout.com's top 20 sites, then dividing each seven-day average by the seven-day-averagesum.


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November 2008. Financial institutions covered by the law were given untilDecember 2009 to comply with the regulations.4

Should those institutions begin enforcing the UIGEA from late 2009, business forPokerStars, FullTilt and other United States-facing poker operators could be

disrupted, though the magnitude of that disruption remains difficult -- if notimpossible -- to assess.

Assessing the law's impact on traffic distribution, arguably, has become evenmore difficult in light of a new federal bill that, if enacted, would push theUIGEA's compliance deadline back to December 2010.5

In Europe, meanwhile, it is expected a number of poker operators -- especiallythose for whom player liquidity levels have declined in recent years -- will beginto consolidate.

Despite this expectation, however, only a very small number of deals have beenconsummated in the 12 months to May 2009.

4Mark Hichar,The UIGEA Regs | A Lawyer's Analysis, IGAMINGNEWS, Nov. 17. 2008,.5Christopher A. Krafcik,Frank Delivers New Bills, IGAMINGNEWS, May 6, 2009,.


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IGAMINGNEWS WHITE PAPER | Regulatory News

In 2009, a number of jurisdictions around the world have elected to includeInternet poker in legislative proposals.

United States | State Level

California

In early 2009, a bill called the California Online Poker Law EnforcementCompliance and Consumer Protection Act was submitted to the state's LegislativeAnalyst.

In its current form, the bill instructs the California State Gambling Commission,in conjunction with the state Department of Justice, to draft and adoptregulations for the implementation of an online intrastate poker network.

It is likely, however, that the bill will be amended should it pass through theLegislature.

As of May 2009, the bill remains without a sponsor in the state Legislature, but isbeing supported by its citizen sponsor, a grassroots advocacy group called thePoker Voters of America.

Five American legal commentators polled by IGamingNews in mid-April namedCalifornia as the likely front-runner to regulate and license online poker.

Additional Coverage in IGamingNews

Calif. Poker Bill UnveiledIGamingNews has obtained a copy of a highly anticipated bill -- the California OnlinePoker Law Enforcement Compliance and Consumer Protection Act -- that would see

online poker regulated on an intrastate basis in the Golden State.

Insights | State by StateIGamingNews asked the United States' top Internet gambling lawyers about which states

they think will be the first to regulate some form of Internet gambling.

Florida

An appropriations bill in the Florida Senate, SB 682, was amended on April 16,2009, with language calling for the state to conduct a study on Internet poker.

That amendment read:

The Office of Program Policy Analysis and Government Accountability shallperform a study and make recommendations to the Legislature by December 1,


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2009, regarding the enactment of laws to provide for protection and remediesfrom existing and unregulated online poker activities, which currently lackoversight and consumer protection.

SB 682 died in session before receiving a vote.

Before the legislative session concluded on May 1, however, the Internet pokerstudy language was added to a House bill, HB 425.

As of May 8, HB 425 had been enrolled -- meaning it had passed both chambersof the state Legislature -- but had yet to be signed by Governor Charlie Christ.


Fla. Senate Bill Amended with Internet Poker Study LanguageThe Florida Legislature was abuzz last week with developments regarding Internet and

video poker.

Fla. Senate Bill Still without a VoteFlorida Senate Bill 682, which calls for a study of Internet poker to be presented in

December, has again been moved to special order calendar.

Fla. Internet Poker Study Awaits Governor's SignatureA Florida bill with Internet poker study language attached has passed through the state's

Legislature and awaits Governor Charlie Christ's signature.

United States | Federal Level

Barney Frank

Barney Frank is the chair of the House Financial Services Committee and, inrecent years, has emerged a powerful ally of the Internet gambling industry.

In April 2007, he introduced a bill called the Internet Gambling Regulation andEnforcement Act, which, if successful, would have seen online gambling legalizedand regulated in the United States.

The bill garnered just 48 co-sponsors, the majority of whom, like Mr. Frank, wereDemocrats.

A similar version of that bill was reintroduced in May 2009.


Frank Expects to Introduce Bill Next WeekAnalysts are hopeful that the Democratic-controlled Congress will help grease the rails

for Barney Frank's expected bill.


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U.S. Land Operators Not Champing at Online Bit, Analyst SaysShould Barney Franks Internet gambling legislation be introduced, then enacted, one

American gaming analyst doesnt expect most members of the United States land-basedgambling industry to jump immediately at the opportunity to launch online.

In Afterglow of Obama Inauguration, Caution Is the Word, Lobbyists Say

Two United States I-gaming lobbyists say the jury remains out on how and whether thenew Obama administration will engage with the historically thorny issue of Internet

gambling.

Lobbying

Lobbying remains an art delicately practiced in the United States, with land-based casinos, racing interests, religious conservatives, sports leagues, thebanking industry and I-gaming advocacy groups all pushing Internet-gambling-related agendas.

In the fourth quarter of 2008, according to government filings, the InteractiveGaming Council, whose members include Microgaming Software Systems Ltd.and 888 Holdings, spent $667,705 lobbying various Internet gambling bills.

A long-time Internet gambling opponent, the National Football League, spent anestimated $53,333, while the Family Research Council, also an opponent, spentapproximately $1,400.

IGamingNews expects lobbying spend to have risen considerably in the first andsecond quarters of the 2009 calendar year, given the expected introduction ofBarney Frank's new bill. Figures have yet to be released.


$2.5 Million Spent Lobbying I-Gaming Policy in Fourth QuarterApproximately 30 parties spent an estimated $2.5 billion lobbying United States Internet

gambling policy in the fourth quarter of 2008.

Bush Aide Accused of Lobbying UIGEAAccording to a letter obtained by IGamingNews, United States Representative SteveCohen is asking whether a top presidential adviser appointed this year, who lobbied

against Internet gambling before his appointment, was involved in pushing to finalizethe proposed UIGEA regulations on behalf of a former lobbying client.

France

Eric Woerth, the French budget minister, in early March unveiled a proposal thatwould see portions of the country's online gambling market opened tocommercial competition.


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France generates about 5 billion euros each year from licensed gamblingoperations, which include horse betting, sports betting, casino gambling andlotteries, a person briefed on Mr. Woerth's proposal told IGamingNews.

Under the new proposal, which was presented to the French Cabinet in late

March, three sectors will be liberalized: parimutuel horse betting, fixed oddssports betting and online poker.

The person said these sectors will be opened, in part, because they're popular, butalso because the government considers them to be the least addictive forms ofwagering. Not surprisingly, operating online slots, casino table games likeroulette, and spread betting will not be allowed.

The betting duty has been tentatively set at 7.5 percent, and, for poker, a 2percent tax on buy-ins.

The license application process is expected to begin in the second half of 2009,with the first licenses set to be issued on Jan. 1, 2010.

Ahead of any new regulation taking effect, online betting operators like BwinInteractive Entertainment A.G., Betclick and Unibet have been aggressivelyinking marketing-partnership deals.


French Regulatory Proposal Unveiled, Tax Regime Draws CriticismAs promised, France has released a draft proposal that would liberalize its hithertomonopolistic gambling market, but online gambling industry observers are already

raising eyebrows at the government's proposed tax regime.

I.M. Round Table | French Regulatory ProposalAnouk Hattab-Abrahams of the Brussels law firm Ulys and Lorien Pilling, head of

research at Global Betting and Gaming Consultants, dissect and debate the new Frenchregulatory proposal in an online chat moderated by IGamingNews' Jeanette Kozlowski.

French Marketing Race Hotting UpWith France's online betting and poker markets soon to be liberalized, it appears thecountry's media companies and football clubs are already lining up to sign deals with

gaming operators ahead of the January 2010 opening.

French Budget Minister Brokers Advertising TruceIt appears the French budget minister has managed to stop the influx of online gambling

advertising from foreign operators by securing agreements with those operators and,surprisingly, the French gambling monopolies.


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Denmark

The Danish Ministry of Taxation announced in April that the country's hithertomonopolistic gambling market will be partially liberalized.

A press release on the ministry's Web site indicated that under forthcoming legalreform, licenses will be made available for online poker, casino games and sportsbetting.

"The objective of a partial gambling liberalization is to ensure better protection ofplayers, avoid economic crime through gambling and ensure continued revenuefor distribution to non-profit causes," the ministry said.

Under existing legislation, Danske Spil A/S, the national lottery, is the soleInternet gambling concessionaire. It went online in 2003 and offers a number ofits offline games in electronic format.


Danish Monopoly Broken | A Lawyer's AnalysisHenrik Norsk Hoffman, an attorney with the law firm Lett in Denmark, answered

questions by telephone about the Danish Ministry of Taxation's announcement thatsectors of the country's monopolistic gambling market will be liberalized.

Denmark's Hidden JewelTV2, a state-owned broadcaster in Denmark, has become the country's first domestic

company to provide online skill games with real-money wagering. No hostile response isexpected from the government or the gambling monopoly, Danske Spil, because games

of skill are not covered by national gambling laws.

Switzerland

The Swiss Department of Justice and Police in April said the country should relaxits existing restrictions on Internet gambling and issue licenses to a limitednumber of operators.

In March 2007, the Federal Council -- Switzerland's seven-member head of state-- instructed the Justice Department to prepare a report examining whether thecountry should ease a prohibition on Internet casino and poker services.

That report -- loosely translated as "Consideration of whether to relax the ban onusing an electronic communications network for the operation of gambling" --was completed on March 31, 2009.

Among other things, the report recommends that future license holders limittheir offering to Swiss residents, exclusively, and that gambling licenses for othermediums -- including interactive television, telephone and mobile telephones --should not be issued.


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George Hberling, an attorney the law firm Hberling in Switzerland, toldIGamingNews he expects as few as two licenses to be issued given the onlinemarket there is valued at between 30 and 40 million Swiss francs in gross gamingrevenue.

Mr. Hberling expects members of the country's land-based casino industry mayform joint ventures and bid for the licenses.

He said it will be three years before legislation is implemented.


Swiss Regulatory Proposal | A Lawyer's AnalysisGeorge Hberling, an attorney the law firm Hberling in Switzerland, answered

questions by telephone about the country's intention to introduce a limited onlinegambling license regime.


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IGAMINGNEWS WHITE PAPER | Regulatory Spotlight

As expected, new United States regulatory legislation was introduced in May.

Frank Delivers New Bills

By CHRISTOPHER A. KRAFCIKPublished: Wed., May 6, 2009

Internet gambling's most powerful congressional ally on Wednesday introducedtwo bills that, respectively, would see I-gaming regulated in the United States andthe UIGEA's compliance deadline pushed back.

Barney Frank, chairman of the House Financial Services Committee, unveiledboth bills this morning at a press conference in Washington, D.C.

"My fundamental reasons for doing this are that the government should notinterfere with people's liberty unless there's a good reason," Mr. Frank said at theconference.

The first bill, the Internet Gambling Regulation, Consumer Protection, andEnforcement Act, is a follow-up to Mr. Frank's April 2007 bill called the InternetGambling Regulation Enforcement Act.

It would establish a regulatory regime in the United States, with the Secretary ofthe Treasury to act as licensing authority.

A lobbyist close to the process in Washington, who requested anonymity, toldIGamingNews Wednesday the 2009 bill departs from the 2007 bill in that itprohibits any sports-wagering activity that violates the Professional and AmateurSports Protection Act.

The sports protection act -- or PASPA, as the law is sometimes called -- wasenacted in 1992 and effectively prohibits sports betting in all but four states.

"Congressmen Frank's new bill uses a PASPA standard -- it prohibits any wagerthat would violate PASPA -- but I believe the intent is that it would not allowlicensees to accept Internet wagers on sports," the lobbyist said.

In IGamingNews' fourth-quarter report on federal lobbying spend, professionaland amateur sports leagues -- long opponents of Internet gambling -- spent anestimated $75,500 lobbying Internet-gambling-related legislation.

Mr. Frank's new regulatory bill will also face opposition from social conservativegroups like the Family Research Council, a Christian organization, and Focus onthe Family.


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"It's a sad day when a public servant like Representative Frank works so hard towillfully legislate harm to families under the pretense of freedom," Chad Hills, ananalyst for Focus on the Family, told IGamingNews last year in response to one ofMr. Frank's previous bills.

In Congress, Republican resistance is expected to be stiff -- Mr. Frank's 2007 billreceived just 48 co-sponsors, the majority of whom were Democrats. RepublicansPeter T. King of New York and Ron Paul of Texas, however, will be supporting thebill.

Spencer T. Bachus, the ranking Republican member of the financial servicescommittee, has already come out against the new regulatory bill.

"Illegal off-shore Internet gambling sites are a criminal enterprise and allowingthem to operate unfettered in the United States would present a clear danger toour youth," Mr. Bachus, who was an author of the UIGEA, said in a preparedstatement Wednesday.

Mr. Frank's regulatory bill is not without its supporters, however.

Michael Waxman, spokesman for the Safe and Secure Internet GamblingInitiative, a backer of Mr. Frank's legislation that doesn't lobby Congress, calledMr. Frank's decision to continue advocating for Internet gambling "encouraging."

In an e-mail to IGamingNews, Clive Hawkswood, chief executive of the UnitedKingdom's Remote Gambling Association, an industry trade group whosemembers include PartyGaming, commended Mr. Frank for "seeking to steer theship in the right direction."

The Poker Player's Alliance, a player advocacy group that lobbies Congress, saidin a prepared statement that it was "grateful for Chairman Frank's leadership,"adding it would be activating its "grassroots army made up of over one millionmembers to help him drive legislation."

But the American Gaming Association, the country's most powerful gamblinglobby, told IGamingNews Wednesday it remains neutral on Internet gambling"because of the divergent views of its members."

The commercial gambling sector, as expected, was measured in responding to the

new regulatory bill.

Brian H. Hadfield, chief executive of CryptoLogic Ltd., the Nasdaq-listed softwaredeveloper, told IGamingNews Wednesday: "While its difficult to speculate onexactly how we would act until we see the legislation and any subsequentregulation, what I can say is that CryptoLogic has always advocated a regulatedenvironment -- and so we welcome Barney Franks direction."


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International Game Technology, the Nevada-based gambling technology supplierwho owns WagerWorks, and 888 Holdings, a Gibraltar operator, did not returnphone calls and e-mails by press time Wednesday. Betfair declined comment.

Legal experts, meanwhile, expect the bill, in some form, will pass the House, but

that the Senate may be a tougher sell.

"The Senate majority leader from Nevada, Harry Reid, is powerful, and you've gotto convince him," Joseph M. Kelley, a business law professor at State Universityof New York, Buffalo, told IGamingNews Wednesday. "Right now, he seems tohave not come out in favor of regulation."

In the House, there are 256 Democrats, 178 Republicans and one vacancy, and inthe Senate, there are 59 Democrats, 40 Republicans and one unresolved seat.

It is thought that a piece of legislation identical to Mr. Frank's regulatory bill willbe introduced in the Senate, and Mr. Kelley speculated that Senator RobertMenendez, Democrat of New Jersey, could sponsor it. (Mr. Menendez, recall,introduced the Skill Games Licensing and Control Act in September 2008.)

The Washington lobbyist expects Mr. Frank's regulatory bill to "go through somepermutations," but believes chances for Senate passage are good.

Mr. Frank said he hoped to move on the legislation before congressional break inAugust.

"We have a couple of other things on the agenda as you might've noticed, likeregulating the financial structure of the country," Mr. Frank joked with respect to

the ongoing financial crisis.

UIGEAD e l a y

Mr. Frank's second bill, the Reasonable Prudence in Regulation Act, would delaythe UIGEA compliance deadline by one year to December 2010.

Regulations for the UIGEA took effect in January 2009, but non-exemptparticipants in designated payment systems -- including automatedclearinghouse systems -- were given until this December to comply with thoseregulations.

"I think Congressmen Frank believes that once his licensing bill is enacted, thenthe standard for UIGEA should be to block payments to people who aren'tlicensed," said the Washington lobbyist, when asked about Mr. Frank'smotivations for introducing the bill. "So he wants to hold off on the compliancewith the existing regulations until there's a chance to enact a licensing regime andmake that the basis of enforcement."


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The bill is understood to be supported by both Internet gambling and bankinginterests, though the American Bankers Association, a trade group that lobbiesCongress, did not return a phone call by press time Wednesday.

Mr. Frank's most successful bill to date, the Payment Systems Protection Act,

sought to clarify what the UIGEA intended by "unlawful Internet gambling." Itwas approved in a 30-to-19 vote by the financial services committee in September2008 but died in session.

The Taxman C o m e t h

Representative James T. McDermott, Democrat of Illinois, on Wednesdayintroduced the Internet Gambling Regulation and Tax Enforcement Act of 2009,the tax companion to Mr. Frank's new regulatory bill.

The tax enforcement act is a follow-up to Mr. McDermott's 2007 bill by the samename and proposes a 2 percent tax on customer deposits to be paid monthly.

A recent analysis performed by PricewaterhouseCoopers for UC Group, a Londonpayment processor that lobbies Congress, suggested Internet gambling couldgenerate as much as $52 billion in tax revenue over the next decade.

We are losing billions of dollars in federal and state taxes every year because aprior Administration and its supporters drove legitimate U.S. online gamblingoff-shore by passing an ill-conceived late-night amendment in Congress that hasdone nothing except make Americans more vulnerable to scams when they wageronline and cost us billions in lost revenue, Mr. McDermott said in a preparedstatement Wednesday.


The Frank Bill | A Lawyer's AnalysisMark Hichar, an attorney with the law firm Edwards Angell Palmer & Dodge, analyzesBarney Frank's new bill, the Internet Gambling Regulation, Consumer Protection, and

Enforcement Act.


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IGAMINGNEWS WHITE PAPER | Deals: Done and Rumored

A non-exhaustive list of recent M&A transactions, rumors and b-to-b deals inthe online poker space.

Microgaming ||L a d b r o k e s

Ladbrokes, which, previously, had operated a standalone poker room on softwarefrom Microgaming Software Systems Ltd., announced in August 2008 that itwould join the Microgaming poker network from the 2009 fiscal year.

William Hill || P l a y t e c h

In October 2008 William Hill purchased online gaming, marketing andcustomer-service assets from Playtech Ltd., significantly expanding the breadth

of its Internet business.

That transaction saw created a new joint venture called William Hill Online, inwhich William Hill currently holds 71 percent, with Playtech holding the balance.

As part of the October deal, William Hill also announced the migration of itscasino and poker propositions to Playtech's software platform and poker

network, respectively.

The poker migration was completed ahead of schedule, and William Hill said inApril 2009 that its main casino would be moved from CryptoLogic Ltd.'s software

to Playtech's later this year.

CryptoLogic ||G t e c h

CryptoLogic Ltd. announced in November 2008 that it would outsource its pokeroperation to Gtech Corporation's International Poker Network.

The move came as little surprise because CryptoLogic's poker network had beentrending downward since 2006. That year, the United States enacted theUnlawful Internet Gambling Enforcement Act and Betfair, a major licensee, leftto form its own poker network.

CryptoLogic finished migrating its licensees to Gtech's network in March.

Absolute Poker ||U l t I m a t e B e t

UltimateBet and Absolute Poker, the disgraced online poker operators, inNovember 2008 launched a new, joint poker network called Cereus.


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Microgaming ||P l a y w I z e

In December 2008 Microgaming Software Systems Ltd. emerged the buyer ofPlaywize's three-dimensional poker technology, and the Isle of Man companytold IGamingNews then that a number of its 47 poker licensees had expressed

interest in the software.

PartyGaming ||C I r s a

Making good on a fourth-quarter promise to "overdeliver and surprise,"PartyGaming in February 2009 announced a three-year deal with Spain's Cirsa

Gaming Corporation, a terrestrial operator with ties to the Latin and SouthAmerican markets.

Little color on the deal was given, but the two companies are to explore onlinegaming opportunities in Spanish-speaking markets. The deal would appear

timely for both operators, with Spain's ruling Socialist Worker's Party underintensifying pressure to introduce national Internet gambling regulation.

Playtech ||C a s I n o G r a n M a d r I d

Playtech Ltd. in March 2009 did a casino and poker licensing deal with the land-based Spanish operator, Casino Gran Madrid.

PartyGaming ||H a r r a h ' s

In April 2009 word leaked via the London press that Mitchell A. Garber, theformer chief executive of PartyGaming, had been appointed by Harrah's

Entertainment Inc. to run a new online subsidiary.

Both companies declined comment when contacted by IGamingNews, but Mr.Garber's as yet confirmed appointment has perpetuated rumor of a tie-up

between PartyGaming and the casino giant.

PartyGaming ||G I g a M e d I a

In April 2009 PartyGaming and GigaMedia Ltd. declined comment toIGamingNews after rumor surfaced the two companies were in bid talks.

Arthur M. Wang, chief executive of GigaMedia, said in March that his companywas in talks with a number of parties regarding a possible merger or sale.

Gaming VC ||U n k n o w n S o u t h A m e r I c a n O p e r a t o r

In April 2009 Gaming VC announced it could acquire a South American sportsbetting and gaming business it did not identify.


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IGAMINGNEWS WHITE PAPER | Market Spotlight

The phrase "exceeding expectations" has been touted by most entrants of thenewly liberalized Italian online poker market. In May 2009, Graham Wood, anIGamingNews contributor and consultant with specialist knowledge of Italian

gaming, reported on the country's sensational growth trends.

Led by Poker, Italian Growth Story Continues

By GRAHAM WOODPublished: Thurs., May 7, 2009

In Italy the populations passion for gambling appears to show no bounds asrecords continue to be broken.

The first quarter of 2009 saw turnover on all forms of gaming average 150 million

euros per day, and the first data for April reveal no slowdown in spending.

Italys slot machines alone generated 6 billion euros in turnover whilescratchcards continued to attract interest, with the range of Gratta e Vinciproducts clocking up 2.6 billion euros in the first three months of 2009. Spendingon traditional Lotto, meanwhile, came in at 1.4 billion euros during the sameperiod.

Sports betting hit new records. The amount staked was up to 1.1 billion euros inthe first quarter and, for the month of April, grew 20 percent to over 400 millioneuros versus the previous-year period.

It appears, though, that Italian punters are beginning to wise up. The percentagepayout rose to over 82 percent (meaning bookmakers profit margins shrunk tobelow 18 percent). Nevertheless, those figures are substantially higher than thepercentage operators tend to retain in other markets.

Online poker continues to fuel increases in turnover -- both directly andindirectly -- but online gaming of all forms has increased substantially of late: aresult of new punters being attracted to poker, then crossing over to otherproducts.

This phenomenon is certain to go on. In the wake of a recent earthquake in

L'Aquila, the government announced plans to raise tax revenue through furtherliberalization of the gaming sector. The income will be used to fundreconstruction projects in affected areas.

Significantly, cash games are to be introduced to Italian poker rooms, the sportsbetting product is due to become more competitive and online bingo is due to beintroduced before long.


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In the first three months of 2009, online-gaming spend totaled 850 millioneuros, with average daily turnover increasing as the quarter progressed.

March spend topped the previous months with a daily figure of 10.2 millioneuros per day -- 5.2 million euros of which came from poker. And between

January and March, poker brought in 467 million euros.

Sports betting turnover was just short of 330 million euros during the three-month period. Online scratchcards, meanwhile, proved to be more popular thanhorseracing, with spending on the games reaching 22.7 million euros comparedto 22 million euros on racing.

As expected, the domestic market leaders in the online poker market arebeginning to lose market share since the arrival of some of the overseas industryheavyweights.

But Gioco Digitale S.A. is still maintaining its lead despite a sharp fall in itsturnover in April. Total tournament fees for the month were down over 12percent to 51.3 million euros, but still accounted for 27.9 percent of Aprils totalof 184.7 million euros.

The specialist operator Microgame, which provides a white label service tosmaller Italian operators and a number of larger concerns like Globet andBetshop, managed to consolidate its market share. The dozens of poker rooms onthe network produced 47.8 million euros in tournament fees during April, up 67percent on Marchs figure, yielding a share of 25.8 percent.

The big winner in the poker market was PokerStars, which, having built up a

substantial customer before gaining licensure, was able to hit the ground runningwhen it launched the real-money product in March.

By April, PokerStars had managed to secure fourth place in the market (behindLottomatica S.p.A.) by generating over 16 million euros, or 8.7 percent of themonthly total.


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IGAMINGNEWS WHITE PAPER | Exposed

A non-exhaustive list of the industry's publicly traded players and theirexposure to poker, taken as a percentage of total revenue, during the 2008 fiscalyear.

PartyGaming ||5 8 p e r c e n t

GigaMedia ||5 4 . 9 p e r c e n t

888 Holdings ||3 0 . 1 p e r c e n t

Playtech || 2 6 . 9 p e r c e n t

CryptoLogic || 2 2 . 6 p e r c e n t

Bwin || 2 2 . 4 p e r c e n t

Unibet || 2 1 p e r c e n t

Betsson || 1 9 p e r c e n t

Sportingbet || 1 5 p e r c e n t

Ladbrokes || 2.5 p e r c e n t

Documents

The Online Poker Sector - An Overview of Regulation and Markets