So I’ve been thinking about the rise in certain commodity prices, most notably, oil, gas and gold. Much of the financial news centers around the effect of rising energy prices on consumers, the transport and travel industries, etc. The price of gold is often used as a surrogate for inflation or currency devaluation. It occurs that to me that if you were to track the price of these commodities, in the major currencies, USD, Sterling, Euros and Yen you’ll see how a great year for gold in one country, might be a mediocre year in a different currency/country. I’m gathering the data, you’ll see it here soon.
Unless you’ve been living in a cave for the past few years, you’ve probably noticed a huge increase in the interest in poker and in particular, Texas Holdem poker. This boom has occurred online with sites like party poker, on TV with the World Poker Tour and of course the first name in poker: The World Series of poker. The 2005 World Series, was the largest poker event in history. The No Limit Hold’em Final had 5619 entries that generated over $52 million in prize money and $5.2 million in fees and untold publicity to Harrahs. Joseph Hachem, was the winner of $7.5 million grand prize. Overall 45 world series events from June 2nd to July 13th generated roughly $100 million in prize money.
Even more impressive than than the boom in casino poker, is the huge size of the online poker market. It is expected to generate over $3 billion in revenues. At any moment of time, 10’s of thousands of people, mainly males, from all parts of the worlds at rooms including Party Poker, Poker Stars, and others. What’s even more interesting is that most of the money, upto 80% comes from US players; while the US Attorney General (and most state counterparts) have declared online gambling illegal. Unlike casino games or bingo, Poker is considered a game of skill in many state. But we’re not hear to talk about poker or it’s legality, so if you want more on poker and online poker in particular, i found this site helpful All Poker Rooms. In particular you might want to read The rules of Texas Holdem or if you’re like me, and can’t ever remember whether flush beats straights, check out Winning Poker Hands, if you are unfamiliar with the game of Texas Holdem.
Now, that you’ve got the big picture, the real question becomes, what is the impact of poker or more generally gambling on an economy. It was years ago that i heard one TV talking heads, labeled the US culture “the casino economy”. I don’t think their entire theory was exponded in the sound bite, but for me, it was a great description of the stock market/Internet hype bubble that popped in 2000 and the executives that scammed shareholders of Worldcom, Enron, Tyco and many others, steal the jackpot for themselves. This casino mentality has transferred to the current, now slowing, real estate boom. The US culture and economy has become a world of nods and winks, were thieves steel by falsifing info, lying on appraisals and wild conflicts of interest around every corner. While this may not be unique to the USA, it was “The Story” in the US, after the “Internet Bubble” and before the most recent story “Outsourcing”.
In particular, what is the effect of offshore operators, attracting players that might otherwise play locally at state licensed and taxed casinos? Just using the figures (i got them from Marketing Sherpa) the figures i quoted earlier, the online gambling industry is generating $8 billion to $10 billion in revenues each year. Probably drawing away US gamblers who might otherwise play at casinos that pay local taxes. Let’s assume that at least $2 Billion to $3 Billion would have paid taxes in the country where the player live. That’s $10 for every american. Given that the online industry, employs people offshore, it’s really the equivalent of outsource our gambling to lower cost offshore providers. This year alone, rapidly growing India will supply nearly $20 Billion of services for a number countries in wealthier/industrialized world.
I guess my point is that market forces generate an advantage in “Offshoring”, whether it be outsourced-offshore IT services or offshore gambling, because the offshore operator has some combination of cost or regulatory advantage. For IT and Accounting services their advantage is nearly all based on price. Online gambling benefits from both the regulatory advantages of being offshore and the cost advantage being virtual. It is this cost advantage ( being VIRTUAL ) that Las Vegas and the US Indians cannot overcome, without a change in the political climae. While most US business being outsourced is being outsourced based soley on wage differencial, online gambling is being “outsourced” offshore, because the US government refused to allow online gaming or even to allow each state to make it’s choice.
Is there anything wrong with gaming going online or offshore? I’m not really seeking to identify right and wrong, but the same governments that have refused to allow licensed online gambling also lose tax revenues to Offshore/Online operators, every day. So as US gamblers send their money offshore, states lose millions a day in taxes while the US gambling industry loses even more revenue and customers. The best way to stem the tide of online gambling taking money offshore is to all US based/regulated gaming online (each state should decide) and US operators compete with there trusted brands against the offshore operators.