TECHNOLOGY REPORTER
TORONTO -- From hard-core Texas Holdem poker players to "solitaire
moms," on-line gambling enthusiasts have created a burgeoning industry
that's set to rival Hollywood box office revenue in the next year and
has begun to capture the imagination of major mainstream investors.
"This is starting to become a significant sector within the gambling
industry," said Todd Coupland, managing director of Canadian equity
research at CIBC World Markets Inc., which hosted an investment
conference yesterday to highlight opportunities in the sector. "The
investor community is looking for ways to take advantage."
Management from nine gambling companies presented statistics and
forecasts trumpeting the "explosive" growth of the industry, sounding
similar at times to pitches made to the investment community several
years ago by dot-com startups.
Unlike the suspect business models that characterized the dot-com wave,
however, many of the strategies of on-line gambling companies are
already proving profitable, Mr. Coupland said.
Costs in the industry tend to be relatively fixed, which means
companies can boost their profit exponentially once they acquire a
critical mass of customers.
"One of the exciting things is that this is an industry with growth and
profitability. This is not dot-com days," said Lorne Abony, chief
executive officer of Fun Technologies PLC, whose shares have nearly
doubled in price since listing on the Toronto Stock Exchange last
October.
Fun Technologies, which is based in Toronto and sells on-line betting
technology and sports information, recently reported a loss of
£1.3-million ($2.5-million U.S.) on sales of £496,000 for the nine
months ended Sept. 30. Analysts expect the company to show an operating
profit this year.
The on-line gambling industry will grow by a factor of 10 over the next
decade, said Mr. Abony, who was co-founder and president of Petopia,
one of the high-profile startups of the dot-com age that tried to sell
pet supplies on-line before it was bought by Petco Animal Supplies Inc.
in November, 2000.
Mr. Abony is far from alone in his bullish estimates. On-line gambling
sites generated $8-billion of revenue worldwide last year, representing
3 per cent of the overall gambling market, according to Christiansen
Capital Advisors LLC, a New York firm specializing in analysis of the
professional gambling industry.
Total revenue will rise to $10.4-billion this year and hit
$12.6-billion in 2006, producing an annual growth rate of about 23 per
cent, Christiansen Capital said.
A recent move by the British government to regulate on-line gambling,
together with a rash of consolidation, is helping the industry mature,
some industry executives said.
The next development phase will see several companies emerge with
leading brands, said Oscar Niebor, managing director of Virgin Games,
which offers games ranging from bingo to roulette and is privately
owned by Sir Richard Branson's Virgin Group PLC.
Companies are still trying to work out the best way to make money from
their customers and to keep them coming back to their sites. Virgin is
looking at numerous promotional efforts, including offering free air
miles that could be used on Virgin Atlantic Airways, Mr. Niebor said.
The on-line gambling industry is also looking at expanding onto mobile handsets.
"The way we use our leisure time is in increasingly in short units,
increasingly outside of the home, and increasingly using technology,"
said Lee Richardson, CEO of Chartwell Technology Inc., which sells
gambling systems to on-line operators.
To date, it's been difficult to offer on-line gambling on smart phones
because of the fast pace at which device manufacturers are introducing
new products. But the gambling industry is close to formalizing
standards, which will mean games will eventually work equally well on a
variety of devices, he said.
On-line sampler
Fun Technologies PLC is one of several companies in the burgeoning
on-line gambling industry that offers person-to-person skill-gaming,
exchange-betting, and sports information services.
Skill gaming
Includes any games where the outcome is not based entirely on luck,
such as chess, checkers and solitaire. Fun says it has more than seven
million registered users on its skill gaming website, SkillJam.com. The
site offers cash games and competitive tournaments as well as free
games for users to improve their skills.
Sports information
Fun's recent acquisition, Don Best Sports, publishes real-time wagering
odds on the Internet. Subscribers pay as much as $550 a month for the
service's qualitative analysis of sporting events, which allows them to
make a more educated wager and gives them the ability to monitor
changes in wagering odds.
Exchange betting
Fun provides person-to-person exchange-betting technology to licensed
gaming operators in regulated markets around the world, such as Betmart
and betbull. The technology allows users to place bets directly with
others and removes the need for the traditional bookmaker in the middle.
