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Internet Gambling Is Not a Safe Bet for Sports Sites
By Terry Lefton
Jun 05 2001 02:32 PM PDT
Nevada's Legislature has voted to legalize Net bets - a boon for the likes of ESPN.com or SportsLine. But league ties may act as spoiler.
ANALYSIS According to the U.S. Department of Justice, the federal Wire Act prohibits Internet gambling. Nonetheless, Nevada's Legislature voted Monday to permit casinos to offer just that.
The state's decision could be just what the beleaguered online sports industry needs. With even the top sites unable to turn a profit, ESPN and SportsLine have been looking to innovations such as outsized ads, direct-marketing initiatives and subscriptions as routes to profitability. Given those alternatives, sports gambling looks a lot like salvation.
"It is a 100 percent e-commerce silver bullet,'' said Mark Mariani, president of sales and marketing at CBS/SportsLine.com. "But I think it will take three to five years' time and effort for the cultural shifts necessary to allow the big American sites to get into this business in a big way – and maybe not even then."
At rival ESPN, having Disney as a corporate parent pushes the deadline out even farther. "It's unlikely to ever be our silver bullet, but someone could certainly build a good business around it," said John Skipper, senior VP and general manager of the ESPN Internet Group.
Although they see the opportunity, the largest sports sites are affiliated with leagues, which will not countenance gambling on their events – even the legal kind of gambling.
"The NFL is not going to do business with anyone that allows gambling. Leagues get more antsy about gambling than anything else," said Tom Worcester, who was the VP of sales and corporate partnerships at Quokka prior to that site's demise. Before that, Worcester was the sponsorship VP at Major League Baseball, a sport that is even more sensitive on the topic of gambling than football is. For its part, the NCAA has been lobbying Nevada legislators to prohibit all gambling on college sports.
In clearing the path for legalized online gambling, the Nevada Legislature said that those involved will have to ensure that no out-of-state bets could be placed. That clause blocked all but well-heeled institutions, such as established casinos, from entering the market.
Hotel casinos with unrestricted gambling licenses could apply to conduct Internet gambling, posting the $500,000 fee when applying for initial two-year licenses and $250,000 per annum thereafter. In addition, manufacturers of equipment associated with a gambling device have to pay a $100,000 licensing fee.
Legal challenges from the Justice Department aside, the bill has yet to be signed by Gov. Kenny Guinn. Moreover, the state Gaming Control Board and state Gaming Commission must write and adopt rules governing the new form of gambling.
Last year, people wagered an estimated $2.3 billion in Nevada on sports, legally, placing about one-third of that amount on college athletics.
However, legal betting represents less than 1 percent of the estimated $350 billion that is bet on sports nationwide. Experts estimate that revenues from Internet gambling – largely conducted, to date, by offshore companies because of the U.S. ban – reached $1.5 billion last year and could reach $6 billion by 2003.
"Gambling will continue to be an underlying force surrounding the delivery of online sports content," said industry analyst and former SportsLine employee Chris Todd. "But I do not see any major legislative or public opinion changes on the horizon that will alter the present format within the foreseeable future."
By Terry Lefton
Jun 05 2001 02:32 PM PDT
Nevada's Legislature has voted to legalize Net bets - a boon for the likes of ESPN.com or SportsLine. But league ties may act as spoiler.
ANALYSIS According to the U.S. Department of Justice, the federal Wire Act prohibits Internet gambling. Nonetheless, Nevada's Legislature voted Monday to permit casinos to offer just that.
The state's decision could be just what the beleaguered online sports industry needs. With even the top sites unable to turn a profit, ESPN and SportsLine have been looking to innovations such as outsized ads, direct-marketing initiatives and subscriptions as routes to profitability. Given those alternatives, sports gambling looks a lot like salvation.
"It is a 100 percent e-commerce silver bullet,'' said Mark Mariani, president of sales and marketing at CBS/SportsLine.com. "But I think it will take three to five years' time and effort for the cultural shifts necessary to allow the big American sites to get into this business in a big way – and maybe not even then."
At rival ESPN, having Disney as a corporate parent pushes the deadline out even farther. "It's unlikely to ever be our silver bullet, but someone could certainly build a good business around it," said John Skipper, senior VP and general manager of the ESPN Internet Group.
Although they see the opportunity, the largest sports sites are affiliated with leagues, which will not countenance gambling on their events – even the legal kind of gambling.
"The NFL is not going to do business with anyone that allows gambling. Leagues get more antsy about gambling than anything else," said Tom Worcester, who was the VP of sales and corporate partnerships at Quokka prior to that site's demise. Before that, Worcester was the sponsorship VP at Major League Baseball, a sport that is even more sensitive on the topic of gambling than football is. For its part, the NCAA has been lobbying Nevada legislators to prohibit all gambling on college sports.
In clearing the path for legalized online gambling, the Nevada Legislature said that those involved will have to ensure that no out-of-state bets could be placed. That clause blocked all but well-heeled institutions, such as established casinos, from entering the market.
Hotel casinos with unrestricted gambling licenses could apply to conduct Internet gambling, posting the $500,000 fee when applying for initial two-year licenses and $250,000 per annum thereafter. In addition, manufacturers of equipment associated with a gambling device have to pay a $100,000 licensing fee.
Legal challenges from the Justice Department aside, the bill has yet to be signed by Gov. Kenny Guinn. Moreover, the state Gaming Control Board and state Gaming Commission must write and adopt rules governing the new form of gambling.
Last year, people wagered an estimated $2.3 billion in Nevada on sports, legally, placing about one-third of that amount on college athletics.
However, legal betting represents less than 1 percent of the estimated $350 billion that is bet on sports nationwide. Experts estimate that revenues from Internet gambling – largely conducted, to date, by offshore companies because of the U.S. ban – reached $1.5 billion last year and could reach $6 billion by 2003.
"Gambling will continue to be an underlying force surrounding the delivery of online sports content," said industry analyst and former SportsLine employee Chris Todd. "But I do not see any major legislative or public opinion changes on the horizon that will alter the present format within the foreseeable future."
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