Inside Straight -- News

Private Poker Games on Danish Agenda
The Conservative Party in Denmark is proposing to make private poker tournaments legal again, after the Supreme Court previously made them illegal, ruling that poker is more chance than skill.

The new proposal seeks to make such live games legal as long as the maximum entrance fee is DKK300 (approximately €40).

Tom Behnke, the party’s political affairs spokesperson, said, “You should be allowed to have a fun evening with friends at a poker tournament without feeling like a criminal.”

Online poker was granted permission to exist in Denmark in April, but only if such organizations acquired a state gaming license.

Online Poker to Grow 7.8 Percent
Gambling analyst James Hollins of Daniel Stewart & Co. has published his gambling industry sector note giving an overview of the first half of 2009 and looking forward to what the rest of the year will bring for companies in the sector, including poker operators.

“Gambling has proved resilient in [the first half of] 2009,” says the report. “Shares prices have outperformed the market and we expect further strength. We are forecasting continued solid gambling trading during the second half of 2009, notably in sports betting.

“Poker is likely to remain difficult given the ongoing strength, liquidity, and marketing budgets of the U.S.-facing operators. The improving sterling against the dollar should alleviate some of the competitive pressure.”

Daniel Stewart & Co.’s key buys are bwin, Sportingbet, Unibet, and Playtech, with bwin and Playtech expected to perform well due to the continued expansion of their respective poker networks Ongame and iPoker.

The company forecasts poker growth rates of greater than 7.8 percent in 2009 to around $4 billion in gross gambling win, and greater than 14.0 percent in 2010.

The report also reiterates the company’s belief that the online poker industry is about to enter a period of consolidation.

Everest Poker for Sale as Revenue Down
Gigamedia, the publicly-quoted parent company of Everest Poker, has confirmed it is in advanced discussions with two parties for the sale or strategic partnership relating to its poker and casino offerings.

It also reported a decrease in poker revenue for the first quarter of 2009 of 27 percent compared to the first quarter of 2008.

The $21.6 million earned from poker between January and March 2009 was also down 10 percent on the last quarter of 2008. The company said this was mainly due to the adverse economic climate in Europe, and the depreciation of the euro against the U.S. dollar.

Active depositing real money players held firm on the previous quarter, totaling 183,000, while 45,000 new depositing real money players represented growth of three percent on the last quarter of 2008.

Average monthly revenue per active paying account fell around 10 percent in the first quarter of 2009 compared to the last quarter of 2008.

CEO of Gigamedia, Arthur Wang, said, “In the first quarter, our Everest software business faced greater than expected challenges from the macroeconomic downturn and the weakness of the euro — slowing our business in Europe. We have responded with a set of cost reductions and efficiencies which will protect the financial strength of the business, as well as prepare for a return to growth as a leaner, tighter organization.

“The good news: we believe we have hit bottom in this cyclical downturn and that the second half will see renewed strength in Europe. And in Asia, we are looking at our best year ever, with strong top and bottom-line growth.”

PartyGaming Shares to Prosper?
Analyst Daniel Stewart & Co. has said PartyGaming shares could reach 500 pence during 2010, from 252 pence (at the time of writing), with potential upside coming in the form of legislative, trading, consolidation, and external catalysts.

The investment note released by the company said, “PartyGaming’s embedded value is underpinned by a leading poker brand and network, as well as a sizeable and improving casino product and sports/bingo capabilities. This limits downside stock risk.

“We are increasing our price target by 33 percent from 254 pence to 339 pence and moving our recommendation from ‘Hold’ to ‘Buy’.

“The key area of potential upside is the U.S.. PartyGaming touched a valuation of $12 billion during its U.S. heyday, with expected group earnings before interest, taxes, depreciation, and amortisation in 2006 of $750 million. This was prior to the frighteningly negative impact of the introduction of the Unlawful Internet Gambling Enforcement Act on 13 October 2006.

“While we would not contest that PartyGaming has the opportunity to regain such a formidable U.S.-facing online poker market share (over 50 percent back in 2006) on re-entry into the market, we believe that it can drive material profit upside from a legalized opening up of the U.S. market.”

In April, the company settled with the U.S. Department of Justice for $105 million, a move widely seen as paving the way for future re-entry to the U.S. market.

Elsewhere, Goldman Sachs has said it believes the hard line stance taken by the U.S. over online gambling including poker is likely to change, and predicts the market for online poker and casino is worth up to $12 billion.

“We believe it is logical to assume that the U.S. market will eventually regulate — given the potential implications for U.S. tax take, if nothing else,” the company said in an investment note.

EU Calls on U.S. to Drop Gambling Ban
The European Commission has urged the U.S. to enter discussions with it over the current online gambling ban, insisting the ban contravenes global trade rules.

The U.S. introduced the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006, a move which European-based companies such as PartyGaming and Sportingbet says has cost them up to $100 billion.

The EU believes the ban creates an unfair playing field with companies such as Harrah’s and the Las Vegas Sands Group able to operate in Europe while similar European-based companies are prevented from accessing the $4 billion per year U.S. market.

With world trade currently in free fall, the Commission does not wish to provoke the U.S but said it could resort to seeking compensation through the World Trade Organization in the long-running dispute.

New International Poker Governing Body Established
The International Poker Federation (IPF) was launched in June comprising seven founding members. The IPF has elected the highly regarded poker writer Anthony Holden as its first president and states its aim is to “free poker from the cruel and unfair restraints of gambling legislation across the globe”.

Holden, author of Big Deal, said, “The Federation will begin by helping to make an international case for poker as a ‘mind-sport’. We have already had encouraging conversations with the International Mind Sports Association, based in Paris, who organise the Mind Sports Games alongside the Olympics every four years. If we can achieve membership, it will help the game become legal everywhere and start eliminating the restraints some countries are imposing on the game.”

The IPF was established in the home of the International Olympic Committee, Lausanne, Switzerland by:
• Danish Poker Federation (Denmark)
• Fédération Française des Joueurs de Poker (France)
• Stichting Nederlandse PokerBond (Holland)
• UK Poker Federation (UK)
• Russian Sport Poker Federation (Russia)
• Ukrainian Poker Federation (Ukraine)
• Associacao Brazileira de Poker (Brazil)

The organization is already in discussions with 20 other countries to join the IPF. It plans to pull together a sophisticated database of legislative and financial developments affecting poker around the globe, and hopes to standardize tournament rules internationally.