Uncertainties about Internet gambling regulation in Europe and the performance of individual companies saw the value of the iGBGC Index (Global Betting and Gaming Consultants’ index of the leading Interactive gambling companies by gambling market capitalisation ) – fall by 7.7% over the year to 2 January 2012.
Indeed, the performance of the iGBGC Index would have been substantially worse were it not for the US Department of Justice’s (DOJ) legal opinion on the Wire Act and its applicability to non-sports wagering over the Internet in the last week of December 2011.
The reaction to the DOJ’s legal opinion gave a boost to certain e-gaming companies’ shares. Without this boost late in December the decline over the year would have been 15.7% instead.
The effect of the DOJ’s Wire Act opinion on the iGBGC Index was substantial. The iGBGC index grew by 16.8 points in a single day, its largest daily increase in 18 months.
Six of the iGBGC companies have seen their share price fall during 2011. Sportingbet showed the largest fall of 47.3%. During 2011 Sportingbet sold off its business in one of its key markets – Turkey – and was subject to takeover talks with Ladbrokes, which came to nothing.
Betting exchange operator Betfair saw its shares fall by 21.9% and a number of issues have afflicted the firm during the last 12 months:
• Uncertainty as to how it will operate in Europe, with several newly regulated markets not permitting betting exchanges in the first phases of regulation;
• The loss of a number of executives and managers;
• A few high-profile technical issues resulting in bets being voided or Tote bets not reaching the pool.
Of the four companies whose share prices rose over the year, Swedish firm Betsson grew the most, 30.3% YoY.
Historically, the iGBGC has outperformed the GBGC 50 Index (largely composed of land-based gambling companies).
Both indices were based at 100 in January 2005. By January 2010 the iGBGC Index had reached 307.4, whilst the GBGC 50 was below its starting level at 85.7.
But in recent years the GBGC 50 has been outperforming its online counterpart, growing by 41.1% in 2010, and declining by 2.2% in 2011. Over the same two years the iGBGC fell by 12.4% and 7.7%.
Lorien Pilling, GBGC’s Research Director, explained, “The move to domestic Internet gambling regulation in Europe is certainly putting the e-gaming business model under pressure. The original model was founded on the pillars of low tax, high payout to customers, and a single operating licence.”
“In 2012 European operators are facing higher tax, resulting in lower customer payouts, and the increased costs of multiple licences. Several firms in the iGBGC Index will be hoping for substantial developments in the US this year to help them out.”