(Click Here for the Latest Online Poker News Stories)
Copyright 2005 AFX News Limited
AFX - Asia
March 10, 2005 Thursday 5:05 PM GMT
HEADLINE: Wall Street web stocks - Sportingbet
CEO looks to consolidate
If online poker becomes
legalized in the U.S., Sportingbet's CEO expects regulation to
ignite consolidation in the online gambling industry.
Whether online poker
becomes legal or not, Sportingbet plans on being a 'consolidator
and not consolidated' in 2005, said Nigel Payne, Sportingbet CEO.
Sportingbet owns Paradise Poker, one of the most popular poker
sites in the world in one of the fastest growing and lucrative
online businesses. Payne said that in 2005, online poker revenue
and profits will overtake the total revenue earned in all casinos
are the world. Since Sportingbet purchased Paradise Poker, shares
of Sportingbet have rocketed 200 percent.
Payne also attended a hearing on the legalization of online
poker held by the North Dakota state Senate earlier this week.
He spoke to MarketWatch about what took place at the hearing,
and whether he's more or less confident that a bill would pass
to legalize online poker in North Dakota.
See interview with Sportingbet's Payne.
Here are some highlights of the interview with slight editing.
Payne: We're not more or less confident because the issues that
are before the North Dakotan legislature are largely unresolved.
There was some progress made. We are an industry crying out for
regulation. There are around the world about 2 million people
who play poker online. That's expected to grow by 400 percent
over the next three years. To put this into context, Paradise
Poker every day plays over 1 million games a day. That's equivalent
to 10 games per second.
MW: Opponents say that online poker is difficult to regulate and
it's addictive. What are your arguments against those issues?
Payne: There are four issues that people use to say it's difficult
to regulate. We need to protect children. We need to make sure
that minors can't bet. We need to protect against potential for
addiction, people betting too often. There's a theoretical ability
to launder money. We also have to deal with the possibility of
collusion with two players against each other. Those that don't
support regulation say those four things cannot be effectively
controlled There is a software system that can verify who you
are and how old you are. You can prove your adulthood. The child-protection
service has warranted the system.
MW: How much in taxes can North Dakota collect from online
poker? How quickly can the bill become a law?
Payne: If we were to relocate to North Dakota, we'd pay $8 million
to $10 million in taxes. The Senate has to approve the bill. If
that happens, the bill will clear those houses. However, this
has to go before a vote of the people. That's some time in November
2005 or June 2006.
MW: Who will pay the taxes?
Payne: The North Dakota legislature proposes a user fee of $10.
That charge is levied on the operator.
MW: How much revenue will Paradise Poker bring in this year? And,
what are the margins on that?
Payne: Paradise Poker is expected to generate $100 million in
gross sales, bottom-line profit of $60 million. Of that $60 million,
two-thirds comes from the U.S., but a third from rest of the world.
The rest of world is fastest-growing percentage of the market
MW: Sportingbet purchased Paradise Poker for $300 million. Will
you be acquiring more companies?
Payne: Most definitely. The industry will consolidate. And,
Sportingbet will be a consolidator and not a consolidated. We're
not shy of acquiring businesses that focus in the U.S. market.
We are expressly legal. There are 84 jurisdictions around the
world that regulate this industry. To the best of my knowledge
they all allow bets to be taken from U.S. citizens.
MW: If online poker is illegal in the U.S., how are you able to
run your business here?
Payne: I refute the fact that online poker is illegal in the
U.S. The only piece of legislation is the Wire Act. Poker does
not fall under the wire act, I'm not aware of legislation that
determines poker to be illegal. If people are playing online poker
with my business, those transactions are being managed and handled
in countries that allow it. To make it illegal, you have to be
violating some law. The courts have held that it's not illegal
under the Wire Act.
MW: If the entire online poker business was regulated in the U.S.,
how much revenue would the U.S. collect in taxes?
Payne: If the entire online gambling biz was regulated in the
U.S. we would receive $2 billion in taxes per year. That money
exists already. It's a redistribution of income that other people
- offshore banks, credit card companies -- are keeping that the
U.S. could keep for itself.
MW: If online poker became legal in the U.S., how would this change
Payne: In the U.K., there are 25 major brands. In America there
are literally 1,000. Why are there 1,000 in America? It's quite
simply because America is not regulated. If America was regulated,
those who are not running their business to the standard would
be squeezed out. There would be fewer operators, more taxes generated,
and you'd have a regulated industry. Basic premise is one of scale.
If I'm running my business for one dollar, or 1 million, the cost
of operating my business is the same. Scale is important. Organic
growth of 30 percent compounded per annum. Most of the gross profit
of the business you acquire falls straight to the bottom line.
It's extremely earnings enhancing.
MW: PartyGaming, the parent company of PartyPoker.com, is expected
to go public this spring. You were quoted as saying that there
were nine companies that you knew of that are lining up to go
public. Can you give us some names?
Payne: I think the number is up to 15. PartyGaming is to list
around May/June. Quite a few will follow in the U.K. One of the
most important reasons for that is that the U.K. regulates the
industry. If you're licensed in the U.K., you can do what you're
MW: Thanks, Nigel
Market movers on bubble anniversary
Shares of Google fell nearly 2 percent to $178; Yahoo lost 2
percent to $31.71; eBay lost 2 percent to $39.20.
You can receive Bambi Francisco's weekly commentary via e-mail
This story was supplied by MarketWatch. For further information
(Click Here for the Latest Online Poker News Stories)