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Saturday, October 22, 2005

Casino cruising

The Oosterdam, a luxurious Dutch cruise ship, slipped out of the southern Californian harbour of San Diego last night with 725 of the world's best poker players, including 20 Britons, on board.

Over the coming week, as the 950ft, 85,000 tonne ship cruises at a top speed of 24 knots to the Mexican Riviera and back, the players will compete for prizes worth more than $7.2m (£3.8m).

The event is being billed as the "world's largest 'limit' Texas Hold 'Em tournament; Texas Hold 'Em is the most popular form of on-line poker and "limit" means that the players are restricted by how much they can raise another player during a hand. The players, most of whom have qualified in preliminary tournaments on the internet, will challenge for a minimum first prize of $1.5m (£789,000).

The cruise has been organised by PartyGaming, one of the most phenomenal business success stories of recent times and the company which has helped poker shed its sleazy image of being enjoyed only by steely-eyed card sharps playing all-night sessions in smoke-filled drinking dens.

Today, partly due to the enthusiasm for the game from the likes of Sarah Jessica Parker, the actress from Sex and the City, poker has a new cool and sophisticated image - as well as providing the potential to make millions, even billions, for those who are capitalising on its popularity.

Worthless history

Four years ago, PartyGaming launched an internet poker website offering gamblers around the world the chance to bet anonymously and safely in a friendly on-line environment for almost any stakes they wish. The company makes its profits from its "rake" from the pot - a maximum 2 per cent deduction of all the wagers placed during a hand.

PartyGaming has grown from a company employing a handful of staff in 2001 to one which today employs 1,000 people and which last year made a profit before interest, tax and depreciation of more than $350m (£184m).

This summer PartyGaming is expected to float on the London Stock Exchange - and analysts are predicting that it will be worth a remarkable £3bn.

Most companies planning a stock market listing are keen to get as much publicity as possible. PartyGaming's four co-owners prefer to let the company's results do their talking while they remain in the shadows, and based in Gibraltar, where the Government has a relaxed attitude to gambling regulations.

For the past four years, the founders of the company - two American and two Indian entrepreneurs - have fiercely guarded their privacy. They rarely give interviews and three of the four refuse to release photographs of themselves while their names are conspicuously absent from the website, PartyPoker.com.

So who are the three men and one woman, all in their 30s, behind what is arguably the greatest business success story of the 21st century? And what do they each, in poker parlance, bring to the table?

If her past is any guide to the future, Ruth Parasol can expect to make a fortune in future from sloth, gluttony, envy, pride, and wrath. To date, she has centred her business interests on two of the seven deadly sins - lust and greed - and they have provided her with riches beyond the dreams of most people.

Online adult dino

Her decision to invest in the "adult entertainment industry" in the US in the 1990s earned her millions of pounds. She set up premium rate adult chat lines and pornographic websites before severing all her links with the industry in 1997 in order to switch to on-line gambling.

Parasol, a lawyer, is credited with being the inspiration behind PartyPoker.com, the world's largest poker room.

Parasol, like her three co-owners, is not a poker player. She is married to Russ de Leon, a fellow American and a Harvard law school graduate, who is also a co-owner of PartyGaming. The couple, who have two children, act as consultants for the company and deal with the legal side of the business.

Meanwhile, Anurag Dikshit, a graduate from the Indian Institute of Technology, is the computer expert in the company and the second co-founder. Dikshit, who is married with one child, devised the original software for PartyPoker.com and currently works as its group operations director.

The fourth co-owner is Vikrant Bhargava, 32, who went to the Indian Institute of Technology at the same time as Dikshit, and has a background in banking. He joined Party-Gaming in 2000 to handle the marketing side of the business. Bhargava, a married man with two children, said that when he joined the company it was involved in on-line gambling, but it already had aspirations to become involved in on-line poker.

"Early on we identified online poker as a cool business - something that we thought had real potential. The first on-line poker room went up in 1998 but in May 2000 we went to a poker conference in Montreal to learn more about the industry. We came back from Canada convinced that this was an area we should look at more closely."

Paradise poker

When PartyPoker.com was launched in August 2001, Paradise Poker dominated the on-line poker world. A year later, however, PartyPoker.com had won over 15 per cent of the world's on-line poker business and within three years - the end of 2004 - it had a staggering 55 per cent of the market.

"We were in the right place at the right time and we did a few things well," said Bhargava. "But none of us could ever have predicted what has happened to the business - it has grown faster than we ever thought possible. We have never had a dull day - it's been exciting and fun all the way."

In 2000, there were just a few thousand registered players. Today PartyPoker.com and its linked websites have 5m registered players who are able to play around the clock. At peak times, 75,000 people play on the site.

"We had a unique launch plan where we hired a cruise ship for 100 players and we promised that one of them would leave the ship a week later with a £1m first prize. That generated huge interest," said Bhargava. "People like Party.Poker.com because it is fun, easy, it involves skill and people can play for whatever stakes they want to - high or low. Unlike poker played at a table, you don't have to sit down and have someone blowing smoke in your face. When you play, you can chat on-line to other players or you can play poker in silence."

In 2003, PartyGaming switched its headquarters from the Dominican Republic to Gibraltar. Today, 100 staff work from an non-descript first-floor office on Gibraltar and a further 900 staff work in India, where the customer service department is based.

Today the future for PartyGaming looks rosy. In January this year, it announced it had retained the two investment banks, Dresdner Kleinwort Wasserstein and Investec, to look at its "strategic options". A float on the London Stock Exchange is not the only option open to PartyGaming. A rival poker internet company may launch a bid for the company: last year Sportingbet paid $297m (£156m) for its rival website Paradise Poker, a move which saw its share price double. However, few, if any, rivals could afford to buy PartyGaming outright.

Floating casino

If, as expected, the float takes place this summer, its bankers are predicting that the company will leap into the FTSE100 Index.

Some analysts, however, think the £3bn estimate of the company's worth may be too high. They predict increased competition as other companies, including Betfair, the betting exchange and the British gambling success story of the last decade, set up their own poker websites.

Iain Wilkie, a partner with Ernst & Young, the accountants, who has worked in the gaming sector for 10 years, said: "PartyGaming has a fantastic customer database, knows how to operate on-line gambling securely and knows how to attract and keep customers with a variety of games. But its ultimate worth may depend on how much of its revenue comes out of the US market."

What Wilkie is referring to is the paradox that the US is the world's largest online gaming market, even though the legality of internet gambling is unclear. No licences have been granted for internet gambling by the US authorities and there is speculation that they may try to regulate offshore online companies in the future.

Whatever PartyGaming's future holds, 725 poker players on board the Oosterdam were last night hoping to become a dollar millionaire in the next week. They include Martin Sandler, 42, a lawyer with a City investment bank, who has been practising his skills for the past month on PartyPoker.com. He said: "I get an immense amount of satisfaction from outwitting my opponents - and winning money. I am going to give it my best shot."

Wednesday, October 19, 2005

The poker story

When Chris Moneymaker won the televised 2003 World Series of Poker after first wagering $39 in an online tournament, wannabe pro gamblers across the country turned to their own computers in hopes of repeating history. Greg "Fossilman" Raymer did just that in the 2004 championship game. Like Moneymaker, Raymer earned his ticket to the big time -- and millions in winnings -- by entering an online tournament. In fact, four of the top 10 finishers in the 2004 series were players from PokerStars.com.

If you play online, you could be going up against the likes of Moneymaker. Despite turning pro and writing a book about his experience, he says he still plays at least once a week at PokerStars. "I generally look for the games with the highest average pots and choose those," he says.

Luckily for you, more typical competitors are Darren and Hilary, online poker players who favor low-stakes games and have yet to score major winnings despite playing for a couple years: Hilary says she's about broken even, while Darren says he's lost all of the money he's wagered so far. But he considers it money well spent.

"I've probably logged a couple hundred hours and spent a couple hundred bucks," Darren says. "A buck an hour is pretty good entertainment for the money in my book."

Safest sites

In order to do so, you'll need to fund your account. Most major credit cards no longer allow you to fund a poker account with their cards, McDonald says. Instead, you'll likely need to use a third-party payment service such as NeTeller. You can fund a NeTeller account with a Visa credit card, wire transfer or electronic check from your bank and then fund your poker account from your NeTeller account. Darren has gone one step further by setting up a separate, low-dollar checking account to fund his third-party payment service. This way, if someone finds a way to compromise his account, he can contain the damage.

Many sites offer bonuses to lure new players. If you deposit $100 in your poker account, a site offering a 25% bonus will give you $25, for example. But don't forget to read the fine print. Many sites require you to play a certain number of hands before granting you your bonus.

Once you're set up, you can choose from games that are tournaments, where you pay one set amount at the beginning and play multiple hands until your chips are gone (or you've won), or ring games, where you place minimum bets with each hand. A 50-cent/$1 game means the first person obligated to bet (called the "blind") has to bet a minimum of 50 cents, and the second blind has to bet $1. These very low-stakes games can be a good way to test the waters before venturing into a $4/$8 game, for example.

Sites make money by skimming a little off each pot. This is called the "rake," and a typical amount is probably 5%, McDonald says. So if you win a $40 pot at a site with a 5% rake, your payout would be $38. You can see PartyPoker's rake schedule here.

Tuesday, October 18, 2005

Trumps addictions

Donald Trump, Steve Wynn, Sol Kerzner, eat your hearts out. This is what a gambling tycoon of the internet age looks like. Vikrant Bhargava is a 32-year-old electrical engineer from Rajasthan who confesses he has never played a hand of poker in a real casino.

Poker, though, may be about to make him a fortune: Bhargava's 15% stake in PartyGaming, the company behind the world's most popular poker website, is worth roughly £450m, according to some City calculations.

Whatever Bhargava is worth, Anurag Dikshit, his old chum from the Indian Institute of Technology in Delhi, is worth more. Dikshit was a founder of PartyGaming in 1998 and owns about 40% of it. That equates to roughly £1.25bn on the same unofficial City valuations. Dikshit (pronounced Dixit) is a mere 33.

He is also, for the time being, shy of the media, which is why it falls to Bhargava, as marketing director, to conduct PartyGaming's first proper press interview. This tentative shuffle towards the public glare is prompted by the fact that PartyGaming, owner of the extraordinarily successful Party Poker website, is in the middle of a strategic review that may lead to a flotation in London.

Investment bankers have been appointed and the outside world is getting a glimpse of the scale of profits being made by internet gambling companies. PartyGaming, according to the insiders, made profits of about $350m (£183m) last year and is on course to reach $500m to $600m this year. That might make the business worth $6bn, or a little over £3bn, enough to qualify for the FTSE 100 index. Four years ago it hadn't even launched Party Poker.

Billion dollar stake

There is one big caveat to this tale of good fortune. The legality of internet gambling in the US is a point on which the operators and the US department of justice cannot agree. So before Bhargava, Dikshit and their colleagues can turn any part of their theoretical fortunes into cash, the investment community has to be convinced that the business is not vulnerable to being closed down overnight in the US, its biggest market.

The signs are good. Sportingbet, a quoted British company, paid £169m last year for one of PartyGaming's rivals, Paradise Poker, and has seen its share price surge 150% since then, as investors wake up to the global online poker revolution.

Bhargava says more than 70,000 people play on Party Poker simultaneously at peak hours; two years ago, the figure was fewer than 2,000. Party Poker makes its money by taking a small slice from each pot - the rake, in the jargon. A dollar here and dollar there add up, particularly when your website runs round the clock.

Unlike Amazon and the other US internet pioneers, PartyGaming was not an original idea. "In early 2000 everybody was talking about Paradise Poker and we saw them and thought 'they're making money, so can we,' " says Bhargava.

The strategy was to launch with a bang - a tournament with a first prize of $1m. At the time, such sums could only be won in the very biggest tournaments in bricks-and-mortar casinos, such as the annual World Series of Poker in Las Vegas, where the entry fee for the main event is $10,000.

Word verification casino

PartyGaming's idea was to play a series of online mini-tournaments with small buy-ins, then whittle down the qualifiers to 100 and put them on a cruise ship in the Caribbean to fight it out for the big money. It was an idea in the best traditions of Vegas itself - make it bigger and brasher than anything else.

"We put 100 people with their partners on a cruise ship to play in a live final," says Bhargava. "We said live, as opposed to online, even though we were an online site, because that was the only way people could really believe that a new company had paid out $1m in first prize. It was good PR and showed the credibility of our company."

It was expensive PR too. Party Gaming lost about $500,000 on the event but the first PartyPokerMillion was the making of the company. "Credibility of online poker rooms in those days was not the highest," admits Bhargava. "So for players to see that a company had put up money when it was obvious that they were losing money on that particular event was a big thing."

Party time gambling

Party Poker has not looked back since. Its next break was the explosion of poker on television in the US, a phenomenon that almost has to be witnessed at first hand to be appreciated. Sports bars will regularly show television coverage of poker tournaments, with under-the-table cameras revealing players' cards, allowing the viewer to know when the innocent-looking guy in seat seven is running a monster bluff.

Hollywood celebrities have jumped on the bandwagon, with the likes of Ben Affleck and Nicole Kidman playing in a tournament that generated a television audience of 13 million. Party Poker's coup was to sign Mike Sexton as its public face. Think of Sexton as a Gary Lineker of televised US poker. Clearly he could not plug the site on TV but Party hammers home its association elsewhere.

"The World Poker Tour going live on TV in April 2003 brought poker from people's kitchen tables into their living rooms," says Bhargava. "People were discussing it at work and so on, and wanting to play the game having seen the TV programme, and we got the word out that if you do participate in an event like this you can do so online. We saw our market share go from up 20% to 50% in a fairly short period."

Barghava internet

Bhargava also applied internet marketing techniques, such as offering incentives to outsiders who recruited new players to the site. These affiliates could be existing players, other websites or even online poker bloggers, of which there are hundreds. "We have learned what works online," he says. "These techniques could have been used for selling books online or whatever. We put it to use in poker."

So what of the key issue of the legal status? No poker website dares to base itself in the US, where the Wire Act, forbidding gambling across state lines, is potentially a frightening piece of legislation. Party Poker bases itself in Gibraltar, which is also the home of the online operations of the British bookmakers Ladbrokes and Victor Chandler. It also has a 1,000-strong call centre in Hyderabad in India.

Bhargava's view is that the Wire Act applies to sporting events, not poker, which is deeply embedded in the culture of US colleges and the military. Setting foot in the US holds no fears. "I go to the US very frequently," he says. "I am an Indian passport holder and have a 10-year multiple-entry visa to the US."

Online casino hackers

One of the aims of the UK gambling bill, currently facing a race to be passed before the election, is to bring online operators on shore, where they can be more closely regulated. Bhargava is rigidly non-committal about the merits of the bill: he sees the advantage of being recognised as a proper industry in a G7 country but is making no promises. He does, though, make one important admission. "We pay very little tax in Gibraltar but would tax prevent us coming on shore? No. Taxes are not driving the issue. Regulation is something that would play a far more important role."

A further worry in the investment community is that online gambling sites might be unwitting participants in money laundering. After all, billions of dollars are being waged in cyberspace. Bhargava argues that rigorous checks are made but that the basic impracticality of laundering money this way should also reassure outsiders and regulators; so, too, that PartyGaming uses respectable international institutions for its banking.

"People keep talking about it, therefore we look at it," he says. "But ask yourself whether it is really possible to launder money this way. Look at what the average value is for deposits. It is very small. What's the maximum? It's not too large. If you send a wire for $50,000 or £50,000, we would not accept it because you do not need $50,000 to play poker.

"People need a $50, $100, $150 deposit to play; $500 can last a player a long time. So would it really be an efficient way of laundering money? Probably not. There must be easier ways than making lots of micro-transactions."

Hacking online casinos

He says "maybe a few hundred," players have been banned by Party Poker, mostly for attempted collusion, something that is relatively easy for the software to spot. A bigger danger has been attempted extortion by hackers trying to crash the website. Such attacks have usually been preceded by demands to send money to obscure bank accounts in Russia.

"In early 2004 many sites in online gaming space went down and we went down multiple times," he says. "Since then we have been attacked a few times but we now have systems in place to fend it off."

PartyGaming, as it inches closer to the mainstream investment community, faces another issue of credibility - the fact that Ruth Parasol, another founder and owner of 20% of the shares, made her first fortune in internet pornography. Her husband, Russ DeLeon, also has a stake of the same size, so they are important figures. Parasol, a California lawyer, left the porn business a decade ago but Bhargava also knows the subject cannot be avoided.

Poker online

"I have known Ruth since early 2000; she has definitively severed her ties with these sorts of people," he says. "That is all history. It's her previous life. If we had characters of that sort associated with the company, I would not be here and 99.9% of the people in our organisation would not be here. I have grown up in an environment where honesty and integrity are extremely important to what we do."

That view, one suspects, will be accepted by investors, especially as PartyGaming is now hiring executives with public-company experience. For example, Richard Segal, the respected former boss of Odeon cinemas, has been installed as chief executive. David Abdoo, Carlton's former company secretary, is also on board.

Those appointments suggest PartyGaming is not simply looking to sell itself to the highest bidder but has ambitions to keep growing. A flotation would give it a currency to buy rivals, and Cassava Enterprises, owner of the 888.com online casino, has been touted as a possibility; Cassava even operates from the same building in Gibraltar.

Even without a deal, the possibilities for PartyGaming, if it can retain its 50% market share in poker, are enormous. China, the land of the world's most enthusiastic gamblers, is an enormous medium-term target. This extraordinary growth story may yet have a long way to go.

Casava internet gambling

Cassava Enterprises, one of the world's biggest internet gambling companies, has hired CSFB to prepare a flotation of 888.com, valuing its online poker room at up to $1.6bn (£836m). The flotation is expected in the second half of the year.

The move comes just weeks after PartyGaming, owner of Party-Poker, the world's biggest poker site, said it had hired Dresdner Kleinwort Wasserstein and Investec to look at a London offering, with a valuation of more than £3bn.

TV poker

World Poker Tour founder Steve Lipscomb has seen his brainchild become a ratings hit. Now he has to beat the imitators

Steve Lipscomb may not have ventured into TV poker with the strongest hand, but so far he's winning the jackpot. The former stand-up comic and lawyer started with a simple idea for turning a static card game into televised entertainment. He didn't invent the technique that lets viewers see players' cards or forge a deal with the hottest TV network. Yet his World Poker Tour series, launched in March, 2003, has become a ratings smash on the Travel Channel and a trendsetter in the industry.

Bet it all

Lipscomb's secret: He turned poker into a slickly produced reality show. Viewers can follow the action, get close to the wacky characters populating poker rooms, pick up tips, or enjoy a chuckle from the sardonic commentary on the sidelines. "It's dazzling, like you're on a movie set," says Antonio Esfandiari, 26, who won $1.4 million in a WPT tournament last season.

Certainly, Lipscomb has had other aces in the hole. One is his chairman and primary investor, Lyle Berman, CEO of Minnetonka (Minn.)-based casino operator Lakes Entertainment (LACO ), which owns 80% of WPT. Berman, a veteran poker player who was a driving force in the growth of gambling on Native American reservations, met Lipscomb in late 2001 at a World Series of Poker event. He liked Lipscomb's business plan and was taken by his unrelenting enthusiasm.

UPPING THE ANTE. Lake's initial $4 million investment allowed Lipscomb to lock in key tournaments at more than a dozen of the country's hottest casinos. "If someone like Steve were to come to us now, I'm not sure we would give him exclusive rights," says Vikrant Bhargava, general manager of PartyPoker.com, which has its annual multimillion-dollar event aired on WPT. As Ian Valentine, senior vice-president for programming at GSN (formerly the Game Show Network), notes: "Lipscomb has essentially locked up a set of events that people have to play at."

Dice nightmare

Now, WPT Enterprises (WPTE ) -- the company its buoyant 43-year-old founder took public last August -- is playing for even higher stakes. The success of the series, which launched its third season on Mar. 2, has spawned numerous competitors at networks such as ESPN (DIS ) and NBC (GE ) that boast greater reach and cachet than the Travel Channel (see BW Online, 3/10/05, "Kings, Queens, and Jokers"). That makes it tougher for WPT to maintain its dominance and puts consumers at risk of poker overload in the face of ubiquitous coverage. No wonder Lipscomb is racing to move beyond WPT's $10 million- to $12 million-a-year TV deal and make money from greater global distribution, online betting, a new Professional Poker Tour series, and licensing deals.

After all, the time appears right to make multiple bets on the game. It's hot with college kids and celebrities, and it's the fastest-growing segment of the $10 billion Internet gambling industry. Many of the country's top casinos, which once treated poker as the poor country cousin to craps and roulette, now report double-digit growth in the number of poker tables. Nielsen Media Research recorded 1.1 million viewers for WPT's Mar. 2 show -- impressive for a channel that reaches only 79 million households and is tough to find on the dial.

Money night

LOGGING ON. Meanwhile, the World Series of Poker drew a record 2,576 players last year, vs. about 830 in 2003, each needing $10,000 to participate in the main event. While officials continue to fret over what some see as the sinful nature of poker, and the Justice Dept. continues to crack down on Internet gambling, advertisers seem to be getting comfortable with gambling shows. "Poker has become good fun entertainment," says Peter McLoughlin, a spokesman for Anheuser Busch (BUD ).

Few are more convinced of poker's potential than Lipscomb, an ambitious middle child from Knoxville, Tenn., whose Southern Baptist grandmother taught him the finer points of the game at age 8. He has already sold the show in 57 countries and hopes to see that tally reach 200 in the next few years. His outfit is licensing everything from playing cards and $500 poker sets to slot machines and video poker games.

But the big bet comes in the next few months, when WPT will move into online gaming with offshore partner Wagerworks, in part to work around the crackdown by federal officials on U.S. residents making bets on the Net. WPT Chief Financial Officer Todd Steele says the business "has the potential to be critical to our revenues."

Lipscomb recognizes that 2005 is the year that WPT has to prove it's not just lucky but, as he puts it, "real and long-term." For starters, he needs to keep ramping up revenues. On Mar. 8, WPT posted full-year earnings of $681,000 on sales of $17.6 million, vs. a loss of $351,000 on sales of $4.3 million in 2003.

Gold star casino

GOLD STANDARD. . Those results may not seem like much, but Nicholas Danna of Birmingham (Ala.)-based brokerage Sterne, Agee & Leach has a buy rating on the stock because he thinks 2004 is the first chapter in what's likely to be a lucrative marque. "This is the company that branded poker," says Danna. Lipscomb is trying to stack the odds this season, with a prize pool of more than $70 million and flashier sets and graphics.

But the table is getting crowded. Among the shows competing for eyeballs are Bravo's Celebrity Poker Showdown, Poker Superstars on Fox Sports Network (NWS ), GSN's Poker Royale: Battle of the Sexes, and the National Heads-Up Poker Championship on NBC. Then there are startups such as Casino & Gaming Television and Edge TV. But the biggest threat is ESPN, which airs the popular World Series of Poker. It's expanding coverage of the game and even has a fictional poker series, Tilt, on the way.

For Lipscomb, the Holy Grail is to have the WPT become what the NBA and PGA are to their sports -- the gold standard for players and fans. With an estimated 50 million poker players in the U.S. alone, it's likely that TV poker is here to stay. But Lipscomb and his World Poker Tour have a ways to go before they convert some big pots into a straight-flush global franchise.

Monday, October 17, 2005

online poker prompts interest

UK bookmaker Ladbrokes recently revealed that profits from its online gaming division were up 50% to over £21 million, apparently boosted by explosive growth in online poker, which is soon expected to overtake revenue from traditional sports betting.

Meanwhile online betting and casino site Sportingbet announced record profits for the last six months, up 85% to £26 million on a turnover of £825 million, driven by an £8 million profit on turnover of £12.5 million in the Paradise Poker division it acquired last year. With over 800,000 registered poker players and as many games played each day, growth has exceeded expectations.

Analysts will also be looking at the annual results for British bookmaker William Hill, which recently launched its own TV channel, featuring interactive casino games such as roulette.

According to an article in The Sunday Times “the holy grail for interactive betting groups is gambling via television”. The one page story in the business section concludes “It cannot be long before the technology develops sufficiently to allow interactive poker on television”.

The technology is not necessarily the limitation, at least in the UK, where the Sky platform is already littered with gaming and gambling opportunities.

This often comes as a something of a surprise to visitors from America, where the legal position is more complex, although they appear to have gambling down to a fine art in Las Vegas.

However, there is growing interest in the opportunities for what has been called “cash-skill gaming”, where prizes are offered for games of skill, including backgammon, quizzes and puzzles, which are apparently legal in most states.

Profits racing ahead

Online UK bookmaker Sportingbet has seen its profits almost double - thanks in part to a good performance from newly-acquired Paradise Poker.

Pre-tax profits rose to £15.7m in the six months to January, from £8.4m in the same period a year earlier.

The group said Paradise Poker gave its business a lift, boosting turnover by £12.5m, and contributing £8m to its overall operating profits of £26m.

It also announced plans to pay a maiden dividend at the end of the full year.


Registered customers soared 85.1% to 2.27 million - but would have risen just 17.1% without Paradise Poker's custom, the group said.

The company snapped up the internet poker site for an initial payment of £298m in October.

Chief executive Nigel Payne added that the group had performed strongly in the first three weeks of the third quarter.

"Sports betting volume continued to grow at an encouraging rate and Sportingbet's casino, gaming and poker revenue streams performed well," he said.

He also told reporters that Sportingbet's strong performance had prompted some analysts to raise their profits forecast for the financial year from their original estimates of £49m to between £52m and £54m.

Sunday, October 16, 2005

US blackjack online

The U.S. Department of Justice was successful yesterday in getting Casino City's case dismissed by the U.S. District Court for the Middle District of Louisiana. The case is one that many in the I-gaming industry hoped would re-establish advertising for Internet gaming services in the American market.

Casino City in August filed a motion for declaratory judgment regarding its right to carry advertising for Internet gambling services. Proponents of the right to advertise for offshore gambling operations were hoping that the court would return a verdict stating that the DOJ's application of aiding and abetting charges to advertisers violates the First Amendment of the U.S. Constitution. The court instead found that "Casino City has failed to establish an actual case or controversy because it is clear it does not have standing to file this suit under the facts of this case."

The court has come to the conclusion that Casino City has failed to demonstrate that it faces a "realistic danger of sustaining direct injury." First, "Casino City has failed to allege its intended activities constitute those which are prohibited by statute." The court emphasizes the fact that Casino City has argued that its activities are legal "because it does not accept proceeds which come from illegal bets, deposits, or wagers placed by persons located in the U.S."

Btdino blackout

Because Casino City asserts that it neither engages in illegal activity nor plans to engage in illegal activity, the court has ruled that Casino City faces no legitimate threat of prosecution and therefore lacks standing to bring a case to court.

The court is also unconvinced that Casino City should fear prosecution based on earlier actions of the Department of Justice. In June 2003, the DOJ sent a letter to the National Association of Broadcasters (NAB) warning that companies that advertised for offshore gambling operations could be guilty of aiding and abetting an illegal activity (i.e. offering gambling services to U.S. citizens). The court highlights the fact that Casino City did not receive this letter.

The court also points out that although several subpoenas were issued to advertisers and other I-gaming related companies, Casino City did not receive a subpoena. According to the ruling, "The record simply fails to support a finding that Casino City is in any way subject to threat of investigation or an actual investigation." The ruling also states that the court is not persuaded that Casino City faces an imminent threat of prosecution because over one year has passed since the DOJ sent the letter and subpoenas.

Casino city

Ironically, the ruling is practically a green light for Casino City to continue doing the advertising that it does, but it does nothing to clarify the ability of larger media advertisers--such as members of the NAB--to advertise for offshore gambling providers.

Casino City believes the court has erred and intends to appeal the ruling. "We have every intention of filing an appeal," Patrick O'Brien, a lawyer for Casino City said. "We think the case was wrongly decided on the law and we expect to win on the appeal."

But even if Casino City gets a reverse decision on issue of standing, it still faces another massive hurdle: The court also declared yesterday that Casino City has no claim for a First Amendment violation.

Casino City has argued that the overseas companies for which it advertises are lawful, but the court points out that it does not allege that it is legal for those companies to accept wagers from United States bettors. The court notes that the Wire Act prohibits the use of the Internet to transmit betting information and states that it is illegal to aid and abet "the commission of any offense against the United States." The first prong of the Central Hudson Test, which is called into play for First Amendment advertising cases, states that there is no right to advertise illegal activity.

Online card games

THAT Ruth Parasol should have made separate fortunes from pornographic websites and online gambling is no coincidence. Although companies such as Amazon, eBay and Google have been hugely successful, the most profitable areas of the internet are devoted to lust and greed.

Ms Parasol, a lawyer from California in her late thirties, is one of a small number of US and Indian investors who can expect to crystallise mind-boggling paper fortunes when they float PartyGaming, the online poker and casino company, on the London Stock Exchange later this year.

Although PartyGaming says an initial public offering (IPO) is just one of several “strategic options” it has asked Dresdner Kleinwort Wasserstein and Investec to investigate, most commentators reckon it will seek to cash in on the online gambling boom by pursuing an IPO.

Valuing PartyGaming, whose PartyPoker site accounts for more than 50 per cent of the online poker market, is difficult. However, with analysts predicting a market capitalisation of anywhere between $5 billion (£2.7 billion) and $6 billion, the business seems certain to enter the blue-chip FTSE 100 index.

According to a report from Global Betting and Gaming Consultants, worldwide turnover on interactive gambling reached almost $70 billion in 2003 — up from $16.5 billion in 2000 — generating a gross gambling yield for operators of about $5.6 billion. By 2010, it expects turnover to pass $100 billion and the yield to hit $11.3 billion.

Winning online

Lain Wilkie, a partner in Ernst & Young, says that gambling had undergone a transformation, losing much of the stigma that was once attached to it. “Most countries have some form of state lottery and people seem to be comfortable playing them,” he says.

“The growth of internet betting is down to a growing social acceptance of gambling combined with a technological revolution that has extended the distribution network away from the traditional world of betting shops and bingo clubs.”

Within the online gambling boom, poker is by far the fastest growing sector. According to some estimates, more than £50 million is being wagered a day at the virtual poker table, compared with just £6 million two years ago. In Britain, about £4 million a day is bet on internet poker.

PartyPoker, which takes a percentage of the total amount staked by punters, known as a “rake”, reported 2004 earnings before interest, tax, depreciation and amortisation (ebitda) of more than $350 million, although this year that figure is expected to grow to at least $500 million to $600 million.

There are several factors behind poker’s growth, including the huge popularity of TV poker tournaments such as Late Night Poker, Celebrity Poker Club and World Poker Tour. Celebrity poker fans, such as Sarah Jessica Parker, from Sex and the City, and the use of Caprice, the model, to host televised games, have helped the game to shake off its sleazy image.

Casinos sleazy image

But while many card clubs are still viewed as male-dominated and intimidating gambling dens, virtual poker allows a wide range of players — including more and more women — to participate from the safety of home, avoiding having to handle some of the psychological elements of a real-life game.

A survey published last week by uSwitch.com, the comparison organisation, claimed that 30 to 40 per cent of online gambers in Britain are female. This compares with just 5 per cent of players at casinos and betting shops.

John O’Reilly, managing director of Ladbrokes’ e-gaming and telephone betting arm, says: “Poker is seeing huge growth because it’s a game of skill that appeals to the twenty-somethings who like to follow the latest fashion. It’s become very trendy and fashionable.”

One of the biggest factors behind the growth of websites such as PartyPoker.com and PokerRoom.com, a rival set up in 1999 by two poker-mad Swedish businessmen, is the success of an appropriately named amateur player from Tennessee in his twenties called Chris Moneymaker.

Two years ago and just four years after learning how to play poker, Mr Moneymaker played in the World Series of Poker in Las Vegas after qualifying through a $40 online event. He went on to win the main tournament, pocketing $2.5 million.