From The internet stock news letter today.(e-mail)
internetstocknews.com
IN THE EYE OF THE E-GAMING STORM
By Mike Ogburn
Ever watch a Cape Canaveral shuttle launch delayed by an untimely,
ill-placed hurricane?
With any luck, the storm passes over and the crew rockets into outer space;
with bad mojo, the weather cancels the mission and sends NASA running for
cover.
This week, a Senate subcommittee began hearing testimony on the amended Kyl
Bill, a piece of legislation that hangs over the Internet gaming industry
like a black cloud. Until there is resolution on this legislative front,
the projected take-off of the I-gaming industry remains in jeopardy.
In its current form, the Kyl Bill deletes a provision penalizing casual
bettors and instead targets only online casino and sports book operators
with fines and jail sentences. Since gambling web sites operate out of
foreign countries, the ability to prosecute such legislation is a longshot
at best. However, Kyl-like legislation will create an "illegal" stigma for
I-gaming that could keep the industry grounded.
A more likely outcome is passage of watered-down legislation that will slow
e-gaming's ascent to something more akin to an F-15 take-off. After all,
the shadow cast by Kyl Bill version 1.0, introduced in 1998 (where it
stalled in Congress), didn't prevent the industry from generating in excess
of $500 million in revenues last year.
If, on the other hand, a third scenario occurs - in which legislation
legalizing the industry (while giving the government its cut) is approved,
look out. Internet gaming is already projected to be a $10 billion industry
by 2002 (Financial Times) and possibly twice as big by the turn of the
century (PC Computing). Make it legal in North America and I-gaming will
reach those numbers by year's end.
The industry has exploded from a dozen online gambling sites two years ago
to more than 300 today. In a December issue of Internet Stock NewsT,
several e-gaming companies were profiled in an article that questioned
whether this mostly "bulletin board" sector was a good bet. Three months
later, 10 of the 13 companies are trading higher, some by as much as
ten-fold.
Four of the companies - Cryptologic (CRY.TO), Starnet Communications (OTC:
SNMM), GIC Global Intertainment (OTC: GGNC) and Internet Gaming
Communication (OTC: SBET) - are profitable. Several are fully-reporting,
and at least one - Starnet - has applied for full NASDAQ listing.
The industry, once mocked because of its low barriers for entry (all one
needs is $20,000-$200,000 for software, a web site and an offshore casino
base), is quietly becoming big business. The richest man in Australia,
media mogul and billionaire Kerry Packer, is reportedly talking to
Microsoft about creating an e-gaming dynasty. And some U.S. land-based
gaming giants are only waiting for the legislative storm clouds to pass
before jumping into the game.
Why roll the dice before the "all-clear" is sounded?
Because gambling is a trillion-dollar business that happens to be a perfect
fit for the Internet. The customer gets casino action at his fingertips and
can makes sports wagers without a bookie. The I-gamers get the casino,
sportsbook and racetrack "take" minus the brick and mortar (and personnel)
overhead. And the I-gaming software developers rake in such high margins
and royalties that some are looking at triple digit earnings growth.
The potential payoff - to 300 companies and counting - is apparently worth
the risk. And gaining market share now is paramount to Net success.
In the next few weeks, a gale of political grandstanding and hyperbole will
likely slam the industry from all sides. Rep. Kyl already calls I-gaming
the "crack cocaine of gambling for adolescents."
However, keep in mind how many times a "David" - armed only with weapons
such as free speech, free trade and a free Internet - has taken down a
Goliath.
The storm is coming, but the countdown has already begun
|
