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Wednesday, January 16, 2013

US Legalized Internet Gambling: A Money Losing Business Model?

There are high commercial expectations associated with the anticipated legalization of online gambling in the United States. However, taking an objective look at proposed legislation and the way it is evolving puts into  question if any legitimate online gambling business will make a profit in US online gambling. 

Much of the current active  US legislation is focused on a state by state  licensing and gambling model and not on a federal or country wide model. The US politicians crafting these bills have leaned heavily on the experience in the European online gambling market were, under the pressure of a prolonged recession, each country has either enacted their own online gambling regime or are contemplating it.  

The results of the dismantling of the .com model in Europe are not pretty. Many online gambling businesses have given up realizing that the cost of launching and operating a unique gambling operation for each country does not make commercial sense. Some that have tried it have failed and are now out of business entirely.   

Certainly, European countries (France, Spain, Italy, etc.) that have gone the route of the .country online gambling models are receiving licensing fees from the surviving gambling operators within their countries. However, it is questionable if those fees compensate for the lose of  tax revenue from  gambling companies and employees of these companies that resided in these same countries prior to the new legislation. After all, how many people that worked in Gibraltar actually lived in Spain? How many people working in Malta actually spend time and money in Italy, etc?

In point of fact politicians are not necessarily very good business people. Just look at what happened in Washington recently and they way the politicians handled the fiscal cliff!  

If you are contemplating launching an  online gambling company in the US market I suggest your management team conduct a comprehensive economic and business evaluation to determine the economic viability of that decision. To quote a famous New Jersey resident, Tony Soprano, after this evaluation you may just say "Forget About It".   

Kevin Flood is the CEO of Gameinlane, Inc. Gameinlane works with companies in the social, Internet gambling and land based casino sectors developing game content and online gaming strategies. Kevin is a frequent speaker at social game, Internet gambling and casino events and conferences in Asia, Europe and the US. Kevin is currently working with organizations to determine their acquisition and merger strategy as it relates to the growing interdependence of the various game content and delivery platforms.

1 comment:

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