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Online Gambling Thrives As U.S. Government Fiddles

By Rob Spiegel
Oct 12, 1999 12:00 AM PT

According to a Frost & Sullivan research report, Internet gambling continues to expand as the U.S. government sits on the sidelines.

Online Gambling Thrives As U.S. Government Fiddles

The report, "World Online Gambling Markets," examines the industry for its growth and its vulnerabilities to government regulation and competitive changes.

Internet gambling generated $834.5 million (US$) in 1998, an increase of more than 100 percent over 1997 revenues. Moreover, analysts expect online gambling software and operations to continue to grow sharply over the next five years.

Good News For Gambling Concerns

Despite the high profile, the researchers report that gambling operators and software developers see little legal threat because the laws prohibiting online gambling are effectively unenforceable. Therefore, they say, gambling operators are marching forward in the face of the legal uncertainties and into the arms of exploding markets in Europe and Asia.

Additionally, gambling operations are feeling the positive effects of Java-based software enhancements that allow players to gamble directly from a Web browser without downloading software. As gamers get more sophisticated and demanding, gambling outfits are meeting the challenge with graphic accelerators and bandwidth availability that raise the quality of graphics on browser-based games.

Potential Changes

The report contends that the legal questions and enforcement uncertainties continue in the online gambling world because there is no regulatory body to bring it out of the shadows. However, it continues, any intervention by the U.S. government would come with a whole other set of repercussions.

"If the U.S. government opts to regulate Internet gambling," said the Frost & Sullivan's report author, "it will open the floodgates to the Harrah's and Caesar's of the world to establish online operations and essentially drive the lesser-known operations out of the market."

The report goes on to suggest that some operators may survive competition from the major offline operators if they can deliver quality features, large game selections, sportsbooks bets, foreign language sites, good payout rates and timely payouts. The report analyzes online gambling operations by geography, sportsbooks versus casino wagers, and net revenues, offering forecast and percentages of revenues derived from revenue-sharing contracts for software developers.

About Frost & Sullivan

Headquartered in Mountain View, California, Frost & Sullivan is an international marketing consulting and training company that monitors the information technology industry for market trends, market measurements and strategies.


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