Online Gambling Thrives Despite Legal Questions

Software developers and online gambling operators are continuing to churn out more games and features despite debates over the legal status of Internet gambling, according to research by Frost & Sullivan.

Frost & Sullivan’s report “World Online Gambling Markets” found the online gambling market generated $834.5 million in 1998, an increase of more than 100 percent over 1997. The research also predicts healthy growth for the sector through 2005.

According to the research, software developers and game operators maintain that laws prohibiting online gambling will be effectively unenforceable and that people who wish to gamble online will do so regardless. Consequently, market participants are moving forward despite legal uncertainties.

The key market opportunities revolve around the Internet. As the number of Internet users swells, the pool of potential online gamblers will expand as well. To power growth, gambling software developers and operators are focusing on international markets such as Europe and Asia, where the fastest Internet user growth is occurring.

New gamblers are being attracted to the Internet by improving technology. The development of Java-based software allows players to gamble straight from a Web browser without having to wait for a lengthy download. The widespread availability of graphic accelerators and increasing bandwidth raises the sophistication of graphics on browser-based games to a new level.

Frost & Sullivan’s research also identified several threats to the online gambling industry, including the enforcement of laws prohibiting online gambling. The absence of a formal regulatory body has led to a lack of credibility for the industry. The possible entrance of traditional land-based casinos to the online market also poses a threat.

If the US government opts to regulate Internet gambling, this would allow established offline casinos such as Harrah’s and Caesar’s to drive lesser-known competition out of the market, the research found. Market participants will be able to compete based on their reputation, quality, price, features, available games, availability of sportsbooks, foreign language sites, payout rate, “comp programs” and timely payouts to winners.

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