Betting on Wireless Gambling
By Heidi Kriz, Tue Apr 17 00:00:00 GMT 2001

Are we ready for mobile gambling - to make money through mobile devices?


Gambling. It could be the worldís second oldest diversion, after...well, you know. And it shows no sign of going away anytime soon.

Neither does the Internet. So it made a lot of sense, and a pretty penny, to marry the two, gambling, and the Internet, into one, ultra-convenient package, with online gambling. And now, to make things even more convenenient, here comes gambling on the move, whenever, wherever, with wireless or mobile gambling.

So whoís inclined to pay to play? Just about everybody it seems. Internet- based gambling seems to know no cultural boundaries of popularity. Asia, Europe and North America have all embraced Internet gambling, according to industry observers. As for wireless gambling, the next natural step, itís penetration will mostly be contingent upon the market penetration of wireless web users in general.

M-gambling predicted to trot the globe


That market is huge already in many parts of the world: According to a study by International Data Corp., in Europe, there is already an estimated 60 million wireless web users; in Asia, 100 million. The U.S. is a little behind these figures but is expected to bring up the rear very quickly. International Data Corp predicts that by the year 2004, there will be close to 1.3 billion web-enabled cellular phones globally. And Motorola predicts that by that same year, more consumers will be accessing the Internet from a wireless device, than a wired one.

Combine those numbers with the runaway popularity of gambling, and youíve got an (ahem) winner of a revenue model for a medium that has otherwise been met with wariness by a lot of consumers for other web-based purchases.

The numbers


The wireless industry is already very optimistic about projected e-commerce revenues , wired and unwired. According to the wireless research firm, Ovum, e-commerce revenues worldwide are expected to hit $1.3 trillion (U.S dollars) for the year 2003. Out of that total, Ovum says that revenues for wireless e-commerce services are supposed to reach $83 billion worldwide for 2003 - about a six percent piece of the total pie.

But how much of that slice can the mobile gambling industry hope to snare? Well consider this: right now, casinos that operate out of the Carribbean constitute 75 percent of the online gambling market. The estimated revenues of that market are currently $2.6 billion. According to Andrew Bennett, Vice President of gaming research at Merrrill Lynch in London, right now, Americans make up 65 percent of the online gaming market. But as the focus shifts from gambling over PCís to mobile devices, Bennett thinks that the Americansí share of that market will drop to 45 percent by the year 2005, with Europe taking over 35 percent of the market, and Asia at about 20 percent.

M-gambling takes on Hong Kong races


For years, the legendary Hong Kong Jockey Club has had a chokehold on the cityís gambling. This is because the only legal forms of gambling allowed in Hong Kong are bets on horse racing, and a lottery called Mark Six. Last year the club pulled in horse racing bets that amounted to $1500 US for every man, woman, and child in Hong Kong.

But the populationís extraordinary gambling habit has found a new outlet - Internet gambling sites based overseas. This new pastime has already taken a big bite out of the revenue pie that the Jockey Club counted on in the past. So, while the Jockey Club waits to get itís own Internet betting site up and running, it is fighting back - with mobile gambling.

The Jockey Club has partnered with several local mobile phone companies to create "Telebet accounts." These special accounts allow customers to place instant bets, transferring money between their regular bank accounts and their Telebet accounts. Customers are offered wireless broadcasts of racing reports and commentaries, betting odds and the latest racing and Mark Six Lottery results.

The battle for the Hong Kong citizensí gambling habit is a serious one - last year, betting on Hong Kong brought in over $10.5 billion dollars (US). The Hong Kong Jockey Club is hoping to maintain its domination with the help of the increasing popularity of mobile-gambling.

Americans bitten by gambling bug, too


But Asians are hardly alone in their fondness for gambling. In spite of very byzantine gambling regulations that vary from state to state, Americans are passionate about gambling.

"80 percent of people in the US say that theyíve placed a bet in their lifetime," says Steve Hlas, CEO of GreyhoundChannel LLC, a company that specializes in Internet-based gambling on racing - includes harness, horse and greyhound racing.

According to Hlas, wagers in the US on racing totaled approximately $20 billion dollars last year.

Eager to expand on this massive market, Hlasís company is busy developing a wireless gambling system, in partnership with wireless technology company Mobileum, in Pleasanton, California, to produce a harmonious convergence between wireless technology and wireless gambling services.

"We saw that online gambling had legs, that it traveled well," says Hlas.

"Gambling can be like killing time," says Pontus Lindwall, the CEO of Netentertainment, that presides over many online gaming sites, such as CherryCasino.com.

"Since itís natural that youíre not always near a computer, it makes the medium of wireless the perfect medium for Internet gambling. Whenever you have a few minutes on your hand, like waiting at the airport, or online somewhere, or even in traffic, you can occupy those minutes with a couple of bets or games," says Lindwall.

Netentertainment, says Lindwall, started looking into moving their services into the wireless space over two years ago. They could see the writing on the wall. But there were some technical glitches in need of smoothing out.

"In the early days of WAP, you practically had to have a masters of Science degree to program your mobile phone to use the protocol," chuckles Lindwall.

There are other obstacles that need to be cleared up as well, says Lindwall. He points out that currently, in spite of their European-based headquarters, CherryCasinoís wireless gambling market is about 90 percent North American.

That is because the pay structures for wireless services in Europe are still largely based on minutes used by the consumer.

"In Sweden, for example, we pay 25 cents (US) per minute. When youíre gambling, say, playing one of the games we offer, like blackjack or poker, an hour can pass without you even noticing. The way the pay structure works here now, you can easily pay more for the phone bill than to gamble!" says Lindwall. "We have to get to the point in Europe where you donít pay by the minute, but by the information or data transmitted, in the case of mobile gambling and gaming."

Lindwall thinks that intitially, mobile gaming and gambling will be more readily embraced in North America and Asia, versus Europe.

His theory about this is that Europeans have a different behavioral history with credit cards than North Americans do. For now, they feel less secure using their cards over their mobile devices, because in "Europe, you generally have to sign something before a transaction is processed. North Americans are more used to paying with their credit cards over the Internet," he says.

The games that customers will be able to play over their mobile devices will include typical "casino style" games like blackjack, poker and slots. Lindwall predicts that within 18-24 months, tricky aspects of the technological and protocol demands of mobile gambling - like graphics, sound and displays on mobile and PDA devices - will be largely resolved, with the advent of 3G and 4G mobile devices.

The law


What has yet to be sorted out - and will probably take a longer time to unfold - is the contours of the legal landscape where mobile gambling is concerned.

According to a report released last year by industry analysts Bear Stearns, called "E-Gaming Revisited," the nations around the world primarily involved in e-gaming are still in a state of flux when it comes to e-gaming regulations and laws. The report concludes that so far, the U.K. and Antigua are the most permissive legislatively, when it comes to e-gaming.

In fact, this is true for gaming and gambling in general. In the U.K., for example, bookmaking on any event is legal. And traditional British bookmakers like William Hill and Ladbrokes have already launched betting services for phones that utilize the Wireless Application Protocol (WAP).

In America, bookmaking on sports is illegal. But you can book bets on racing - which includes greyhound, horse and harness racing. The catch is, you have to place the bet at the location of the race.

But, you are allowed to place what are called "para-mutual" bets, which are not bets against the house, from state to state in the U.S, as long as that form of betting is allowed in each state involved in the bet. So, in other words, you can place a bet on a race happening right now in Florida, by making a phone call from your home in Oregon. Which means that you can do this over your mobile phone, or device, as well.

Race and event betting are the favorites


Steve Hlas thinks that the mobile space is best suited for race and event betting - even more than casino games.

"Casino games donít marry well with wireless. So far, the graphics and technology just canít compete on mobiles with that of a web browser,"says Hlas

But with bet making, Hlas points out, all you really need is real-time access to data about the races, and the ability to make a bet in a timely fashion - all of which can be provided by the web-enabled 3G mobile phones and devices, and the appropriate software. US Offtrack betting is currently developing such a service in conjunction with gaming software company Mobileum, in Pleasanton, Calfornia.

Hlas points out that, in spite of the $20 billion a year, race-betting business in the US, there is still a stigma attached to it. So there is another great benefit of mobile gambling, he says - the relative anonymity and secrecy of it.

Of course, that privacy creates a whole new set of problems for law enforcement agencies and the taxation. For online gambling, some sites currently use Internet protocol addresses to determine a usersís tax jurisdiction, some call for userís bank addresses, and others require social security numbers.

But mobile phones that donít implement a user ID progam will be very hard to trace and check - in particular when it comes to under-age customers trying to place a bet.

Industry analysts say it will be about two to three years before goverments and technology providers around the world can agree on a consensus for a verifiable ID system, and encryption.

Heidi Kriz is a San Francisco-based freelance writer whose work has appeared in Wired, Red Herring, and PC Computing.