[StarnetGypsy]

Family-friendly kneecappers on the way

By Burke Hansen in San Francisco
Published Wednesday 1st August 2007 18:18 GMT

The slow encroachment of American internet behemoths on the European
gambling market crept onward again last week, with a partnership
between German gambling company FLUXX and AOL to market a sportsbook
in the UK.

The two companies already have a similar arrangement offering
lotteries in Germany, which dates from 2003 and which apparently is
one of the most successful ecommerce products offered by AOL Germany.

Many in the European igaming industry bemoaned the passage of the
Unlawful Internet Gambling Enforcement Act (UIGEA) as much for its
long term impact as a weapon of American economic domination as for
its hypocrisy and short term impact on operations, travel, revenue,
etc. It was widely viewed as a kind of Trojan horse that would allow
American gambling giants such as MGM-Mirage to engorge themselves on
undervalued and financially weakened European competitors.

The actual fallout has been somewhat different. Sands did partner up
with Cantor, but the real Trojan horse seems to be the powerhouse
portals such as Yahoo! and AOL, which at least have the potential to
leverage enormous site traffic, deep pockets and established casual
gaming platforms with nearly universal brand recognition into
dominant positions in an overly fragmented internet gambling market.
Yahoo! has been offering money poker games on its UK website for
several months now.

AOL is taking it one step further. Debates about poker and skill
gaming aside, the one form of gambling explicitly verboten under the
Wire Act is bookmaking, that old standby of the American mob. As
such, the new partnership will not take action from American players.
But it is clear that major American media companies see online gaming
in all its guises as a lucrative new frontier, albeit one they don't
broadcast to stateside media. The Cheney administration will not be
around forever, and everyone wants a discreet foothold.

Sportsbooks have their own unique skill sets and ethical issues,
which is why AOL chose to partner up with an experienced handicapper.
Unlike roulette or slots, where the house knows that over the long
term it will collect a certain percentage as rake, if a sportsbook
makes an error in judgment, it can take a serious hit. Sportsbooks
haven't really changed from the green visor era - it really is people
in a back room going over past statistics, as it always was. As the
NBA is painfully aware, problems with the human element may extend to
the game itself.

It could well be that media conglomerates have more to offer the
online gambling world than "bricks and mortar" casinos do.
Partnerships can turn into acquisitions once a company feels it has
sufficient expertise in a new endeavor, and the online gambling
industry is ripe for consolidation.

Of course, this is AOL we're talking about, the company that
squandered $200 bil in market capitalization after its last tie-up.
Maybe the European gambling firms don't have much to worry about
after all.