Weekend Read: Poker Brings the Media and Gambling Industries Closer

Authored by Jay Baage on September 29, 2006 - 9:36am.

Internationally televised tournaments like “The World Series of Poker” and “High Stakes Poker” are creating new stars and a whole new media industry surrounding it. It is currently all being fueled by Internet gambling, either directly or indirectly. The British magazine Gambling.com just landed former Esquire Senior Designer Stuart Tolley as Art Director. The September/October issue features Hollywood actor Eric Bana in his first interview, since filming completed of the poker movie, Lucky You (opens March 13, 2007). In the movie, Bana plays a pro poker player pitted against his estranged father, played by Robert Duvall.

Another upcoming movie riding on the poker-craze is X-Men: The Last Stand-creator Zak Penn’s improvisational comedy The Grand, featuring an ensemble cast that includes Woody Harrelson, Ray Liotta, Ray Romano, Jason Alexander, Cheryl Hines and Werner Herzog.

Movie Sponsorships

Hollywood has long known that a high stakes poker table is a perfect setting for drama and excitement, but now the Internet gambling industry is sponsoring it with some big money. One example is poker website Aces.com’s investment in a direct-to-video poker flick, aptly named, Aces the Movie.

Aces.com’s manager Rene Quesada views it as an investment in building up the buzz about poker and driving traffic to the website: “It's a culture. With so many people playing poker online now, it’s a lifestyle that millions dream about.”

$12 Billion Per Year Industry

Internet gambling, including poker, currently a $12 billion dollar industry, is licensed and regulated in over 80 countries and jurisdictions, and in 2005, had estimated revenues from online poker alone of $200 million per month, according to Catania Consulting, a consulting firm that specializes in gaming matters.

Clearly, there is huge consumer demand and a lot of money at stake. Today, eight U.S. states have laws prohibiting Internet gambling: Washington, Nevada, Illinois, Indiana, Louisiana, South Dakota, Michigan and Oregon. Federal law also bans sports bets over the phone, even if the business is from overseas. Millions of American players bet an estimated $6 billion per year online, according to industry figures.

Unclear Rules

The rules governing online gambling is still unclear in the US, which really is in no one's interest. A high-profile example of this is that Peter Dicks, the former chairman of the British-based company Sportingbet PLC, was arrested at Kennedy International Airport on Sept. 6 after customs officials discovered that he was wanted by Louisiana state police, where he was charged with illegal online gambling.

The reason is that U.S. bets account for about two-thirds of the $20.7 million profits at British-based Sportingbet, which reported revenues of more than $519 million from the Americas in the nine months ending last April 30.

Offshore Internet gambling, however, is not a crime in New York. Today, Friday Governor George Pataki said the state law only permitted extradition if the accused person was physically present in the place where he is accused of breaking the law. According to the Associated Press, a judge cleared a former British betting-company executive to return to London on Friday after New York's governor declined to sign a warrant extraditing him to Louisiana.

"The governor does support the effort to restrict illegal offshore gaming but he does not have the legal authority to extradite Mr. Dicks," said Pataki spokeswoman Jessica Scaperotti.

Second Arrest Pending

Dicks was the second executive from a British gaming company to be detained in the United States in recent months. Former BetOnSports PLC Chief Executive Officer David Carruthers was arrested on federal charges in July at a Dallas airport.

According to the AP, Carruthers remains under house arrest in the St. Louis area awaiting trial on federal charges from the U.S. attorney's office in St. Louis based on the 1961 Wire Act.

Earlier this week, a large British-based gambling company, William Hill, announced that it has stopped accepting online poker and casino bets from U.S. customers.

Bill In Congress

Currently there is a bill in congress that is trying to ban Internet gambling in the US altogether. This legislation runs directly counter to what is happening in the marketplace, domestically and abroad.

Legal gambling options in the US have been steadily rising through recent years with increasing numbers of state lotteries, Indian gaming resorts, and riverboat gambling. What’s more the horse-racing industry already benefits from a privileged legal loophole. Leading online horse-racing site YouBet.com states that only eleven states prohibit their respective residents from placing wagers on their site.

Ban or General Set of Rules

A ban, rather than a general set of rules, will have consequences for the US economy in general and the media industry in particular, since major media companies from Disney (ESPN) to Sony (GSN) are getting more and more invested in content related to gambling, especially poker.

Already, the US is losing a lot of business as well as tax income to countries that allow certain forms of gambling and these companies choose to be listed on the financial markets of London and other parts of the world, rather than on the NYSE or Nasdaq. The US is also damaging its reputation of supporting free markets with its recent strong-armed arrests of two CEO’s of international online gambling companies.

PartyGaming on London Stock Exchange

Frank Catania, president and principal of Catania Consulting, points out that last year, PartyGaming.com, a leading Internet gaming company and owners of PartyPoker, went public on the London Stock Exchange and was immediately listed on the prestigious FTSE 100 Index. With an initial stock market value in excess of $8 billion, rising to over $12 billion within one month, but falling back to more normal trading during 2006.

There are, of course, some major societal concerns related to gambling that need to be addressed. They include gambling addiction, problems with minors playing, as well as money laundering. However, I am optimistic that those issues can be successfully addressed and adequately controlled, if solutions to these issues are seriously pursued. In fact, technology solutions and services would represent another niche growth sector for the industry.

Bollywood Is Joining The Party

In the meantime, for those of you seeking investment opportunities in media, how about considering gambling companies that are investing in emerging markets? At the forefront of this potential boom right now is Asia. For example, the Asian Poker Classic, a $1 million guaranteed no-limit Hold'em event, will be the first professional poker tournament ever held in India, in Goa from March 1-4 2007. The Indian media industry is already involved with the event - a slew of Bollywood celebrities will also attend and play in the tournament, which should draw players from around the world.

Aces.com’s All Time Poker Movies:
Aces the Movie (2006)
The Cincinnati Kid (1965)
Rounders (1998)
Big Hand for a Little Lady (1966)
Kaleidoscope (1966)
Maverick (1994)
The Gambler (1980)
California Split (1974)
The Sting (1973)
High Roller - The Stu Ungar Story (2003)

Related Links:
http://www2.warnerbros.com/luckyyou
http://www.acesthemovie.com
http://www.imdb.com/title/tt0427998
http://www.thehill.com/thehill/export/TheHill/Comment/OpEd/092706_oped2.html
http://www.asianpokerclassic.com
http://www.worldseriesofpoker.com