Tweet
There has been a lot of talk recently about the decline or demise of the gambling industry. All sorts of articles on financial crackdowns, legal crackdowns, fear over being persecuted for being labeled a gambler. Believe it or not, the industry is actually very closely following the economic model taught in college classrooms all over the world. The phases are Emerging, Growth, Shakeout, Maturity and Decline. It is rather obvious what phase the industry is in right now; however, each phase and how the industry handled it are critical to the future.
The emerging phase of the industry is characterized by innovators and early adopters. Translated into regular English-the people who come up with the ideas, strongly believe in them, and find the means to make a start. In the case of Internet gambling these would be those first to move offshore, including those integral in setting up rudimentary systems dominated by shaky telephone operations and out-of-date equipment. Little documentation is kept of the development as everyone is just trying to get things to work. There isn't much rivalry because everyone is looking at the process as an education. Books like World Sports Exchange, WWTS, CRIS, etc. etc. were all there from the start. Those indicted in 1998 (including Jay Cohen) were integral in laying the groundwork for where the industry lies today. Most companies aren't making much money in this phase, they have spent a lot to develop, purchase equipment, hire knowledgeable staff, etc. The first few years for those books that are now "pillars" of the industry were no doubt somewhat rocky.
During the Growth phase of the industry (which ended for the Internet gaming world about a year and a half or so ago) companies start to see a return on their initial research and development. Money is made by everyone. The barriers to entry (the amount of money needed to set-up, compete, etc) are very low at this point and competition is still very low and people are jumping on the bandwagon left and right. The mid to late nineties seems to exemplify this stage of the Internet industry. You had all sorts of software, all sorts of operations, everyone thinking they could pick up, move to a great Caribbean island and start a casino and sports book and make a ton of money. Starnet started offering turn key operations, as did Unified Gaming and several others. Software companies started spring up left and right. Q&X, Esports, Softtech, some without names!..the list goes on and on.
Product quality starts to become important during the growth phase of an industry because customers start looking at all their options. This is where the gimmicks, free pagers, free satellite dishes, T-shirts, bonuses and so on come in. Everyone is scrambling for the gold and they put very little thought into how it would affect the bottom line down the road. Only those who were smart enough to use strategic planning and sound financial analysis would persevere. Not everyone makes it through this phase as many customers have now unfortunately found out.
Of course, the growth phase attracted a lot of attention, even from those that most offshore gambling operations want to avoid. The U.S. government pricked an ear and started to pay attention. They have long sought to outlaw gaming and here it was growing at an uncontrollable rate on the Internet. Their very own creation is now being used for activities they condemn. Indictments were handed out. Lives were changed forever.
And here we are. The present "state of the industry" as it has been termed. Growth cannot continue forever. Too many competitors jump into the mix and they all do not have the knowledge or the financial means necessary to sustain themselves. Even with a customer base they have underestimated the actual meaning of a 4% average hold in sports betting, customer fraud, operating overhead, etc. Too many bookies deeming themselves businessmen. The bonuses used for marketing attracted the greedy looking for handouts and the companies underestimated just how much all these "free" incentives cost. So much for the partying, condo buying, ego boosting lifestyle--it's the shakeout phase. Big or "deep" pockets can and will weather this phase. Smaller ones will not.
A lot of people are struggling now. A shaky football season (how could THAT ever happen two years in a row??) led to many to close up shop and run for the hills. Some people get paid, some people do not, many long-time, admired persons in the industry are labeled crooks when they bailed as the going got tough. Greed overcomes sense in a lot of cases, and in an industry that is often filled with persons not known for honor or integrity, greed will often be their downfall. We have Aces Gold/Sportsmarket. Once proclaimed as one of the best in the industry, their reign of power is marred forever. Not to mention countless others, probably some the mainstream haven't even heard about have caved because of a lack of planning, good cash management, and the inability to relate their business to the activities in the rest of the world.
This doesn't mean new operations won't continue to pop up, but those entering are going to be more careful, more educated and ready to tackle the high barriers to entry that are now present in the industry. The provider of basic services have caught on that they have a "niche" market. One that is unique and that has a limited way to get the services it needs. Satellite telephone service and bandwidth is outrageously expensive. Software often costs much more than even customized packages for large Fortune 500 corporations. So much for a few phones, an Internet connection and some computers. Now you've got all the concerns of a regular business to consider.
The next step is Maturity. Things start to sort themselves out and settle down. Prices will become competitive for services and the marketing strategies will become more innovative. Legislation affects all of this for the Internet gaming industry; however, the industry will probably follow the usual cycle. The strong, well funded, well managed operations will survive and only those properly prepared will survive should they choose to enter and compete. Since the industry depends largely on technology, it will always be evolving and moving at a faster pace than say the textiles industry; however, it is clear that since gambling has been around as long as mankind, that the industry is here to stay. Even though there is financial chaos right now, the industry will adapt and find a way to have customers safely fund their accounts. They can take a step back and evaluate their security procedures and prepare for the new wave of cyber-hackers invading. It will only better preserve both security and privacy for the future.
Although boring to most, it was interesting to take a look at how the Internet gambling industry-an area that took a long time to gain recognition as an "industry"-followed the model that has held for many years regarding the progression of companies and industries. It shows that the Internet gambling industry can and should be looked at as any other profit driven industry. Given proper regulation and guidance it could prove profitable for all involved.
************************
Michael Rosen is a freelance writer. The opinions expressed do not necessarily reflect the opinions of bettorsworld.com
The emerging phase of the industry is characterized by innovators and early adopters. Translated into regular English-the people who come up with the ideas, strongly believe in them, and find the means to make a start. In the case of Internet gambling these would be those first to move offshore, including those integral in setting up rudimentary systems dominated by shaky telephone operations and out-of-date equipment. Little documentation is kept of the development as everyone is just trying to get things to work. There isn't much rivalry because everyone is looking at the process as an education. Books like World Sports Exchange, WWTS, CRIS, etc. etc. were all there from the start. Those indicted in 1998 (including Jay Cohen) were integral in laying the groundwork for where the industry lies today. Most companies aren't making much money in this phase, they have spent a lot to develop, purchase equipment, hire knowledgeable staff, etc. The first few years for those books that are now "pillars" of the industry were no doubt somewhat rocky.
During the Growth phase of the industry (which ended for the Internet gaming world about a year and a half or so ago) companies start to see a return on their initial research and development. Money is made by everyone. The barriers to entry (the amount of money needed to set-up, compete, etc) are very low at this point and competition is still very low and people are jumping on the bandwagon left and right. The mid to late nineties seems to exemplify this stage of the Internet industry. You had all sorts of software, all sorts of operations, everyone thinking they could pick up, move to a great Caribbean island and start a casino and sports book and make a ton of money. Starnet started offering turn key operations, as did Unified Gaming and several others. Software companies started spring up left and right. Q&X, Esports, Softtech, some without names!..the list goes on and on.
Product quality starts to become important during the growth phase of an industry because customers start looking at all their options. This is where the gimmicks, free pagers, free satellite dishes, T-shirts, bonuses and so on come in. Everyone is scrambling for the gold and they put very little thought into how it would affect the bottom line down the road. Only those who were smart enough to use strategic planning and sound financial analysis would persevere. Not everyone makes it through this phase as many customers have now unfortunately found out.
Of course, the growth phase attracted a lot of attention, even from those that most offshore gambling operations want to avoid. The U.S. government pricked an ear and started to pay attention. They have long sought to outlaw gaming and here it was growing at an uncontrollable rate on the Internet. Their very own creation is now being used for activities they condemn. Indictments were handed out. Lives were changed forever.
And here we are. The present "state of the industry" as it has been termed. Growth cannot continue forever. Too many competitors jump into the mix and they all do not have the knowledge or the financial means necessary to sustain themselves. Even with a customer base they have underestimated the actual meaning of a 4% average hold in sports betting, customer fraud, operating overhead, etc. Too many bookies deeming themselves businessmen. The bonuses used for marketing attracted the greedy looking for handouts and the companies underestimated just how much all these "free" incentives cost. So much for the partying, condo buying, ego boosting lifestyle--it's the shakeout phase. Big or "deep" pockets can and will weather this phase. Smaller ones will not.
A lot of people are struggling now. A shaky football season (how could THAT ever happen two years in a row??) led to many to close up shop and run for the hills. Some people get paid, some people do not, many long-time, admired persons in the industry are labeled crooks when they bailed as the going got tough. Greed overcomes sense in a lot of cases, and in an industry that is often filled with persons not known for honor or integrity, greed will often be their downfall. We have Aces Gold/Sportsmarket. Once proclaimed as one of the best in the industry, their reign of power is marred forever. Not to mention countless others, probably some the mainstream haven't even heard about have caved because of a lack of planning, good cash management, and the inability to relate their business to the activities in the rest of the world.
This doesn't mean new operations won't continue to pop up, but those entering are going to be more careful, more educated and ready to tackle the high barriers to entry that are now present in the industry. The provider of basic services have caught on that they have a "niche" market. One that is unique and that has a limited way to get the services it needs. Satellite telephone service and bandwidth is outrageously expensive. Software often costs much more than even customized packages for large Fortune 500 corporations. So much for a few phones, an Internet connection and some computers. Now you've got all the concerns of a regular business to consider.
The next step is Maturity. Things start to sort themselves out and settle down. Prices will become competitive for services and the marketing strategies will become more innovative. Legislation affects all of this for the Internet gaming industry; however, the industry will probably follow the usual cycle. The strong, well funded, well managed operations will survive and only those properly prepared will survive should they choose to enter and compete. Since the industry depends largely on technology, it will always be evolving and moving at a faster pace than say the textiles industry; however, it is clear that since gambling has been around as long as mankind, that the industry is here to stay. Even though there is financial chaos right now, the industry will adapt and find a way to have customers safely fund their accounts. They can take a step back and evaluate their security procedures and prepare for the new wave of cyber-hackers invading. It will only better preserve both security and privacy for the future.
Although boring to most, it was interesting to take a look at how the Internet gambling industry-an area that took a long time to gain recognition as an "industry"-followed the model that has held for many years regarding the progression of companies and industries. It shows that the Internet gambling industry can and should be looked at as any other profit driven industry. Given proper regulation and guidance it could prove profitable for all involved.
************************
Michael Rosen is a freelance writer. The opinions expressed do not necessarily reflect the opinions of bettorsworld.com
Comment