Online Gambling Ban Will Hurt U.S. Advertising Market

Authored by Jay Baage on October 9, 2006 - 11:02am.

The flagship of the online gaming boom – PartyGaming - is being removed from the blue-chip FTSE100 index on Wednesday. Moreover, UK-listed gambling firm World Gaming has put its shares on hold, because the proposed US ban on internet gambling threatens to dry up a vital source of revenue for the company. The decision - effective immediately - comes after "fundamental uncertainty over [the firm's] ability to continue trading", World Gaming said. Like other gambling firms, it relies heavily on revenue from US customers.

One of the first actions that Online Gambling firms are expected to do to cope with their new challenges are to cut down on advertising. "The first consequence is that marketing budgets will be lowered," said Konrad Sveceny, a spokesman for Bwin, an online gambling company, to International Herald Tribune.

The U.S. measure of banning credit card transactions and online payments with betting sites, which President George W. Bush is expected to sign into law, could cause much of the spending in America to dry up. PartyGaming, World Gaming and Bwin spend hundreds of millions of dollars in advertising in the US. Given that more than three-quarters of PartyGaming’s revenue has come from the United States, company executives said that they will have to redirect, and perhaps sharply reduce, its $300 million global marketing budget. In effect, PartyGaming will stop marketing in the US on cable channels such as Disney-owned ESPN, and instead step up their presence in Europe, Asia and other growing markets.

"I think it's probably going to shut down Internet gambling advertising in the U.S. totally," said Joseph Lewczak, a partner at the law firm of Davis & Gilbert in New York who has advised advertising and media clients on working with online gambling companies, to International Herald Tribune.