Online gaming cuts into Europe's win - Saturday 12th of March 2005
Portugal's 222-year-old national lottery, which last suspended business during the French army's 1807 invasion of Lisbon, faces a new threat from northern Europe: Internet sports betting.
State-owned gambling monopoly Santa Casa da Misericordia, ("The Sacred House of Mercy"), says competition from online bookies Sportingbet Plc and Stanleybet Plc, and BetandWin.com Interactive Entertainment AG threatens the lottery's annual 1.1 billion-euro ($1.48 billion) revenue stream. Its entire profit of 350 million euros is donated to charity.
State-licensed gambling companies in Portugal, Spain, Italy and Greece take in 5.78 billion euros annually from lotteries and sports betting and use the profits for charities, athletic leagues and services. The rise of online bookies has triggered a surge in their share prices, as well as the arrest of betting agents in Italy and threats of litigation in Greece on grounds the companies aren't licensed to operate there.
"Historically, gambling games have been run by the state," says Fernando Paes Afonso, 41, president of the Lisbon-based Santa Casa, which offers chance lotteries and betting on soccer games. "The dot-coms are trying to change that."
The $16.6 billion European Internet-betting market will grow by 9.6 percent over the next two years, while traditional gambling will decline by 3.5 percent, according to West Bromwich, England-based Global Betting & Gaming Consultants. The company says the number of sports-gambling sites worldwide has surged sixfold in the past five years, to 607.
At least 150 sites are trying to lure European team fans away from gambling shops and soccer pools, the consulting firm says. The online companies, with offices in places such as the U.K., Austria and Gibraltar, compete with the local gambling monopolies, though they are outside the jurisdiction of national regulators.
The Internet companies have lured new customers by offering free bets for first-time customers and 1 euro minimum stakes.
"Over-the-counter bookmakers in mainland Europe aren't aggressive or sophisticated," says Simon Holliday, 38, a partner at Global Betting & Gaming Consultants. "That's one of the reasons the Internet is eating into their business."
Millions of soccer fans throughout southern Europe bet on national league games involving teams such as Real Madrid, Juventus and Panathinaikos by filling out paper coupons sold at street kiosks.
Those who correctly guess all results receive payouts reaching as much as 200,000 euros depending on the number of winning entries. Fixed-odds bettors can double their money on the result of a single game with small odds and make more on long-shot bets.
"There's a huge opportunity out there," says Manfred Bodner, 42, joint chief executive officer of Vienna-based BetandWin, which says it gets 67 percent of its revenue from soccer betting. "The market is growing all the time."
According to NetRatings Inc., a company owned by Haarlem, Netherlands-based VNU NV that measures online audiences on a monthly basis, 36 percent of Spaniards use the Internet. That compares with 59 percent of the U.K. population, while 53 percent of Italians are online. Only one in four Greeks currently use the Web, according to Athens-based market-research company VPRC.
Shares in online sports-betting companies have surged, while those of enterprises that operate gambling shops have declined.
BetandWin shares more than doubled to 66 euros in the 12 months to March 16, while Sportingbet's shares more than quadrupled to 289 pence. The share price of Liverpool, England- based Stanley Leisure Plc, the parent company of Stanleybet, declined 8.3 percent to 416.25 pence as the company paid out higher-than-expected winnings on horse-racing and soccer bets in its 634 betting shops.
Sportingbet's second-quarter net income jumped 84 percent to 15.6 million pounds ($30 million) from a year earlier following its purchase of an online poker game operator, the company said Feb. 22. BetandWin's fourth-quarter sales more than doubled to 314.2 million euros from a year earlier. Stanley Leisure said fiscal first-half net income in the six months through October rose to 16.2 million pounds from 13.4 million pounds a year earlier.
Konrad Sveceny, a sports-betting analyst at Vienna-based Erste Bank der oesterreichischen Sparkassen AG, says online companies are attracting bettors because smaller overheads allow them to offer bigger payouts.
"Internet betting will continue to be a boom market because of technological advances," says Sveceny, 35. Among them: betting through mobile phones. Erste Bank gives BetandWin's stock a "buy" rating.
London-based Sportingbet says the number of its European customers surged 71 percent to 450,000 in the year through last July. Kenneth Alexander, managing director for Europe, declined to forecast client-growth figures.
To attract gamblers, online bookie Stanleybet hired owners of cafes, bars and gas stations to work as agents for the company, says Financial Director Adrian Morris. The agents place bets for computer-shy players and pay out winnings on the spot.
In March 2001, 137 of Stanleybet's Italian agents were arrested for operating in the country without a license. Italy's Supreme Court ruled last May that the company shouldn't be granted a license to do business in the country because betting was associated with credit-card fraud and money laundering.
Norman Leese, the company's director of development, says the agents were fined by judges. He declined to say how much the fines were or if Stanleybet paid the penalties. Stanleybet said in a statement last July that it had 334 agents in Italy and has others in countries the company declined to name.
European Union authorities probably won't issue a definitive ruling on the status of online betting within the next year, says Peter Knight, 29, a lawyer at London-based Norton Rose who specializes in European gambling law.
"The European Court of Justice appears to want to take a hands-off approach," Knight says, referring to the court's November 2003 decision to return the case to Italy's judicial system. He adds that governments wouldn't be able to shut down Internet-gambling firms simply because they compete with state- licensed agencies.
Still, Opap SA, a publicly traded company that runs lotteries, soccer pools and scratch games in Greece, says local newspapers and magazines withdrew ads for online bookmakers after the company threatened to sue publishers for supporting unlicensed sports betting. The company earns 2.5 billion euros annually from Greek gamblers.
"They are hurting our interests," says Christos Melas, investor relations officer at Opap. "We're doing everything we can to stop their exposure." Athens-based Opap's license to control gambling games in Greece through 2020 has attracted investors. Its shares have surged 71 percent in the past 12 months to close at 23.56 euros on March 16.
BetandWin's Bodner says soccer match-fixing scandals in Germany and Portugal may slow revenue growth if confidence in sports betting is hurt by corruption revelations.
In Germany, referee Robert Hoyzer admitted in a January public statement to having fixed at least four matches in return for money from organized-crime figures. Hoyzer, who was released on bail Feb. 25, was banned by the German soccer federation and is cooperating with investigators. German state-run betting operator Oddset may have lost as much as 1 million euros as a result of those four fixed matches.
In Portugal, judges are investigating more than 20 referees and soccer officials in the "Golden Whistle" probe into soccer corruption. Police raided 60 homes and offices last April, and have yet to bring charges against any individual.
BetandWin recently canceled bets placed on Slovakian soccer games from bank accounts in Croatia that it deemed suspicious. Last year the company co-founded the European Betting Association, a Brussels-based lobby group that operates under a code of conduct to help police fight crime.
"We are far better equipped to stop match-fixing," Bodner says, adding it has more employees devoted to combating crime than state-run companies. Oddset employs 15 people at its headquarters in Munich, while BetandWin has 190 in its three offices in Vienna, Gibraltar and in Neugersdorf, Germany.
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