Copyright 2004 Sunday Business Group
The Business

November 7, 2004

HEADLINE: POKER WEBSITES RING CHANGES TO RAKE IN JACKPOT

BYLINE: Ben Wright

BODY:
    The new super-casinos are not the only force changing the face of UK gambling.

    The popularity of online poker around the world has increased hugely since the first websites were set up in the late 1990s and there are now roughly 200 poker sites in operation.

    Although estimates as to the size of the online poker market vary, Sportingbet, the world's largest online betting group, which has just bought ParadisePoker.com, believes that an average of 37,675 people play online poker for real money every day.

    The popularity of poker, already the most played card game in the world, has increased significantly over the past three years with the advent of television shows such as the World Poker Tour, Celebrity Poker Club and Late Night Poker.
These programmes, which use cameras under the table to show the players' cards allowing viewers to follow the action, have drawn thousands of new players to the game.

    Online poker sites have provided a ready and convenient forum for these new players to chance their hand at the game without having to go through the rigmarole of joining and travelling to a casino.

    The exotic cyber-locations of the games may be fake - often appearing complete with digital palm trees, cigarette smoke and cocktails - but the actual location of the site operators are no less bizarre. ParadisePoker.com operates from Costa Rica and is licensed in the Kahnawake Mohawk reserve near Montreal in Canada.

    This elaborate set up allows the sites to attract American gamblers, who comprise about 75% of all online poker players, despite the fact that gambling in most US states, even over the internet, is illegal. The US authorities have tried to make it more difficult for Americans to bet online on overseas sites, but some of the restrictions it imposes were recently overturned by the Caribbean island of Antigua at the World Trade Organisation. A liberalisation of the US gambling restrictions would prove a huge boon to online operators.

    Poker sites typically offer continuous availability of active tables for general play, known as "ring games", and also tournament play on both a single-table and multi-table basis.

    The sites earn their money by taking a small percentage of the winner's pot, which is known as the rake. In tournament play, each player pays an entry fee and a single jackpot is awarded to the winner instead of the rake.

    The online poker operator therefore has no principal risk as it acts only as the host of the poker games and takes its rake and tournament entry fees regardless of which players win or lose.

    The market is believed to be worth approximately $ 1.2bn (£648m, E948m) to $ 1.5bn based on the daily rake earned by all the different sites. This has mushroomed from last year when the daily rake was about $ 400m in August 2003.

    But poker only represents a fraction of all the betting that takes place online. Turnover for Sportingbet in the 16 months to the end of July this year was £1.4bn and it now accepts more than eight bets every second of every day.
The company offers bets on 56 different football leagues from the UK Premiership to the Czech Division One.

    This steady revolution in the way that punters place their bets is the real threat to the bricks-and-mortar bookies rather than the new super-casinos that will be created by the UK's gaming bill. Investors in the shares of online gambling sites are clearly no mugs.

    BEN WRIGHT

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