A jagged boulder jutting awkwardly out of the arid Andalusian landscape, the Rock of Gibraltar is no larger than the mountains in its close proximity, yet it proudly dominates its surroundings with all the majesty you would expect from so famous a landmark. Gibraltar's history can be traced back to Neanderthal times, but control of the "key" to the Mediterranean had passed through Phoenician, Carthaginian, and Roman hands (amongst others) before its Moorish conquest in 711 A.D. The Moors enjoyed Gibraltar's strategic importance for more than 750 years before ceding control of Gibraltar to Spain. However, Gibraltar's modern history began in 1704 when, taken by an Anglo-Dutch force and through the subsequent signing of the Treaty of Utrecht, British sovereignty over the Rock began.
In 2004, Gibraltarians proudly celebrated their tercentenary of British rule, but it has been a turbulent 300 years for the inhabitants of this controversial Rock. A series of sieges blighted Gibraltar's population during the early years of British rule, and in more recent times, the closure of the land border to Spain in 1969 virtually isolated Gibraltar from the rest of Europe. When the border reopened in 1988, the British Ministry of Defence was practically sustaining Gibraltar's economy, accounting for 70 percent of its income and being by far its biggest employer. However, the dockyard could no longer keep the civilian population in employment, and Gibraltar was forced to adapt, drawing the attention of respected international firms through an accommodative legal framework and tax regime. These factors, together with the Mediterranean climate, have all contributed to making Gibraltar an unlikely front-runner in the world of online gaming.
It all began around 1999 when UK-based bookmakers Ladbrokes and Victor Chandler set up shop in Gibraltar in order to bypass UK betting taxes on "sportsbook"-type betting. The British government soon scrapped these taxes, but Gibraltar remained competitive, offering these firms many good reasons to stay put. Factors such as Gibraltar's much improved telecommunication infrastructure added to its appeal, attracting companies like Cassava (888.com) and PartyGaming, who shifted their operations to Gibraltar in 2002 and 2003, respectively. Approximately 18 months ago, Mansion became the latest online gaming group to base itself on the Rock. According to its website, it saw Gibraltar as a global e-commerce hub that it chose for its strategic centrality, infrastructure, and commitment to finance and betting industries. Whilst Gibraltar, with its English-speaking workforce, had a lot to offer these gaming firms, the marriage of convenience worked both ways. Increased tax revenues were gratefully received by the local government, as were the improved employment prospects on offer to Gibraltarians.
Despite the obvious advantages to their presence, many Gibraltarians were sceptical about whether these firms could sustain Gibraltar's economy in the long term. The U.S. Congress' passing of the SAFE Port Act in the early hours of Sept. 30 last year was to test their apprehensions. PartyGaming was one of the firms most badly affected by its passing. The Gibraltar-based company, which earned 77 percent of its income from U.S. customers in the first half of 2006, saw its share price drop 58 percent the day after the Act was signed into law. Similarly affected were 888.com, which operates in Gibraltar as Cassava Enterprises and employs around 400 people locally. The company admitted that having to pull out of the U.S. would have a "material adverse impact" on its business, since it relied on the U.S. for about half of its revenue.
Whilst Gibraltar's Chief Minister Peter Caruana believed these developments would "not [be] hugely challenging to Gibraltar economically," the effects were soon to be felt on the UK overseas territory. On Oct. 23, Cassava employees were collectively addressed by Senior Vice President Eran Gonen, who informed them that "following changes within the online gaming industry in the U.S. … there will be a reduction in the scale of operations, leading to a decrease in the number of employees throughout the organisation," with redundancy arrangements finalised at the end of 2006. PartyGaming's CEO Mitch Garber was more upbeat in a statement to the Gibraltar press. He heralded this as a "new and distinct era," arguing that the changes would have a "positive impact" on his firm. However optimistic, he refused to rule out job losses, merely saying that they would not be in proportion to the loss of revenue that the drop out of the U.S. market would cause. He was true to his word. On Nov. 6, the company announced that it would axe up to 20 percent of its Gibraltar-based employees, nowhere near the net loss of revenue that will be felt as a result of the bill.
Whilst both of these firms have significantly lightened their workforces, sources within the Gibraltar gaming industry remain upbeat about the future. Firms like Victor Chandler and Ladbrokes, which had no exposure to the U.S., were handed excellent consolidation opportunities by their competitors' woes. Recent talk of Ladbrokes' possible takeover of 888.com is a case in point. Unaffected gaming companies happily picked up the pieces as far as axed employees were concerned. Despite recent problems, people in Gibraltar still appreciate that online gaming is a growth industry with untapped markets, offering many opportunities for future expansion. Gibraltar has a long history of resilience in the face of adversity, and is aiming to strengthen its position as one of the leading centres of online gaming. Companies of "reputable standing" with a "proven track record in gaming" are still welcome to apply for a license to operate in this UK overseas territory. So, whilst it is hard to predict what the future holds for e-gaming globally, one thing is certain: Gibraltar's doors remain open to the next generation of Internet gaming firms.
Tristan Cano lives and writes about the gaming industry in Gibraltar.
