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Copyright 2005 Associated Newspapers Ltd.
Mail on Sunday (London)
February 27, 2005
HEADLINE: Online
poker 'a gamble too far'
BYLINE: SARAH BRIDGE
BODY:
ONLINE poker sites
have expanded dramatically in recent years, but analysts are warning
that they may prove a gamble too far and become the next dotcom
bubble.
The number of people playing poker both online and face to face
is soaring due to televised celebrity tournaments and poker games
on soaps such as Coronation Street and The Archers, but experts
say the rise in numbers is unsustainable.
'The bubble is going to burst at some point,' said Mark Griffiths,
professor of gambling studies at Nottingham Trent University.
More than 1.5 million people play
poker online in Britain, betting millions of pounds and fuelling
incredible valuations for poker companies.
The world's largest site, PartyPoker.com, is considering floating
on the stock market for Pounds 3 billion, making it bigger than
British Airways, and rival site 888.com is weighing up a float.
British company SportingBet is now worth Pounds 1 billion compared
with just Pounds 164 million last year, and existing betting giants
such as Ladbrokes and William Hill are seeing profits boom thanks
to online poker.
Because American companies are effectively banned from offering
poker online US law
covering online gaming is in dispute British firms have a head
start against major US casino operators such as MGM Mirage, Caesars
Palace and Harrah's.
But billion-pound valuations may be swept aside by a wave of
consolidation.
'It is the Amazon or eBay effect,' said one commentator. 'There
will be one site so big that everyone else will be sucked under.'
Tamar Yaniv of PokerStars.com, the world's second-largest site:
'There are definitelytoo many players in the market at the moment.
The next two years will be survival of the fittest.' Greg Feehely
of broker Altium Capital predicts that the market will grow by
60 per cent this year. He said 'It could double in size but we
are erring on the side of caution as the rates of growth are totally
unsustainable in the medium term. There will be consolidation
at some point.'
Unlike traditional bookmakers who can suffer at the hands of
lucky punters, there is little risk in setting up these companies
because they take their cut from the bets.
Feehely said: 'Poker sites are attracting players by advertising
million-pound pots at no risk to themselves.' The risk, he says,
is that the rate of growth could slow dramatically. 'Poker
is the hot thing at the moment, but who knows in the future? Any
slowdown will not be like the dotcom bubble. Dotcoms never made
any money. These companies are generating cash and profits by
the bucketload.' However, Michael Mainelli of the Centre for the
Study of Financial Innovation warns that the boom might not be
all it seems.
'It is very difficult to get reliable figures and it has the
air of a fad,' he says. 'Player numbers are likely to level off
in a couple of years because it takes up a lot of time compared
with laying bets on a betting exchange.
And,' he warns, 'there is a fair amount of automation in the
industry.' Which means when you believe you are playing against
a real person, it is actually a computer.
Says Mainelli: 'You are never going to win against the house.'
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