Despite the obvious advantages to their presence, many Gibraltarians were sceptical about whether online gaming firms could sustain Gibraltar's economy in the long-term. The US Congress's passing of the
SAFE Port Act in the early hours of September 30 last year was to test their apprehensions.
PartyGaming (Party Poker) was one of the firms most severely affected by the passing of this Act. The Gibraltar-based company, which earned 77 percent of its income from US 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 staff locally. The company admitted that having to pull out of the US would have a 'material adverse impact' on its business since it relied on the US 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 23 October, Cassava employees were collectively addressed by Senior Vice President Eran Gonen, who informed them that "following changes within the on-line gaming industry in the USA … 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 their 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 US market would cause. He was true to his word. On November 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 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 US, 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 for sure, Gibraltar's doors remain open to the next generation of Internet gaming firms.
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