A recent report from one of the most respected advertising websites points out the potential for online gaming advertising in the United States, but fails to accurately look at the issue in its current status.
The online site Ad Age and writer Alexandra Bruell took up the topic earlier this week in an article entitled “Jackpot! Online Casinos To Drop Billions On Ads.” Bruell discussed the issue with Simon Holliday, the director of H2 Gambling Capital, and the figured dropped in the conversation would have most advertising agencies salivating at the possibilities. According to Bruell, Holliday reports that “somewhere between $3.5 and $4 billion could be spent by the internet gaming sector” on marketing over the next five years. To put that number in a comparison, Bruell states that automotive giant General Motors spent approximately the same amount on advertising in the United States in 2011.
This marketing would be a key to creating a strong online gaming market in the United States, Holliday says to Bruell. “It is probable that 25% to 30% of company net revenues will be spent on advertising and marketing budgets in the initial years,” Holliday opines while issuing his prediction on the potential U. S. online gaming market. Holliday estimates a U. S. gaming market would crack the $1 billion mark in 2014 and reach over $13 billion after a decade.
There are a few issues with the Bruell article that may be a cause for pause by digital media and marketing agencies, the beneficiaries of what Bruell and Holliday are proposing. First, Bruell states that the decision in December 2011 by the U. S. Department of Justice regarding the Wire Act of 1961 – that the law only applied to sports betting – granted the states full autonomy to open up online casinos. In fact, the DoJ decision didn’t authorize such a stance; it simply removed the obstruction of a federal law from implication into a state decision on such matters, leaving Congress to decide on further laws regarding online gaming and poker legislation.
Bruell also points out that Nevada has passed statutes “legalizing online gambling.” In reality, the new Nevada regulations only open the doors to online poker, a much smaller segment of the market that full-fledged online casinos but still an attractive option for Nevada gaming operators.
Bruell also says that “industry executives” that are unnamed say that ten more states will “likely” pass their own laws in the “near future.” At this time, the only other state than Nevada that has passed legislation is Delaware (for full-fledged online casino gaming, it must be noted). Such states as California and New Jersey have seen the process of regulating only online poker (not full casino games) reach a stalemate in their respective legislative bodies while states such as Florida, Mississippi and Iowa have failed to pass online poker measures and Utah has fully opted out of any online gaming, be it statewide or national.
The final error in Bruell’s report is the current state of online gaming regulation in the United States. Although there are moves to bring online poker to the American public, federal regulations are looking to keep internet gaming to just poker, which would reduce the potential revenues overall. The current bills in Congress (Rep. Joe Barton’s bill in the House and the yet-introduced Reid/Kyl bill in the Senate) both would expressly limit American online gaming action to poker, outlawing other casino games such as blackjack, slots and keno from the internet. Nevada’s online poker regulation is for the express purpose of poker (no other online casino games are currently allowed) and other states that have introduced legislation strictly look at poker rather than the more-lucrative casino market.
The battle between “state by state” regulation and federal oversight of any potential online gaming or poker outlet could also have an effect on the veracity of advertising agencies. Bruell points out that advertising companies must purchase licenses in states where they are pushing casino advertising. Bruell reports that one advertising agency has dropped $500,000 to secure the proper licensing, a hefty fee for some companies but apparently worth the risk. It is unclear whether, under federal regulation of the industry, whether these licenses would be necessary.
The Bruell report, although rife with inaccuracies, does point out how lucrative a potential online poker market could be in the United States, albeit not as large as full-scale online casinos. Even without full internet casino gaming, advertising agencies would still get “on the bandwagon” for at least state-by-state online poker and would probably rush to a federally regulated landscape.
