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AOL gets into the online bookie business

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An AOL sportsbook? Watch out, NBA.

The slow encroachment of American internet behemoths on the European gambling market crept onward again last week, with a partnership between German gambling company FLUXX and AOL to market a sportsbook in the UK.

The two companies already have a similar arrangement offering lotteries in Germany, which dates from 2003 and which apparently is one of the most successful ecommerce products offered by AOL Germany.

Many in the European igaming industry bemoaned the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) as much for its long term impact as a weapon of American economic domination as for its hypocrisy and short term impact on operations, travel, revenue, etc. It was widely viewed as a kind of Trojan horse that would allow American gambling giants such as MGM-Mirage to engorge themselves on undervalued and financially weakened European competitors.

The actual fallout has been somewhat different. Sands did partner up with Cantor, but the real Trojan horse seems to be the powerhouse portals such as Yahoo! and AOL, which at least have the potential to leverage enormous site traffic, deep pockets and established casual gaming platforms with nearly universal brand recognition into dominant positions in an overly fragmented internet gambling market. Yahoo! has been offering money poker games on its UK website for several months now.

AOL is taking it one step further. Debates about poker and skill gaming aside, the one form of gambling explicitly verboten under the Wire Act is bookmaking, that old standby of the American mob. As such, the new partnership will not take action from American players. But it is clear that major American media companies see online gaming in all its guises as a lucrative new frontier, albeit one they don't broadcast to stateside media. The Cheney administration will not be around forever, and everyone wants a discreet foothold.

Sportsbooks have their own unique skill sets and ethical issues, which is why AOL chose to partner up with an experienced handicapper. Unlike roulette or slots, where the house knows that over the long term it will collect a certain percentage as rake, if a sportsbook makes an error in judgment, it can take a serious hit. Sportsbooks haven't really changed from the green visor era - it really is people in a back room going over past statistics, as it always was. As the NBA is painfully aware, problems with the human element may extend to the game itself.

It could well be that media conglomerates have more to offer the online gambling world than "bricks and mortar" casinos do. Partnerships can turn into acquisitions once a company feels it has sufficient expertise in a new endeavor, and the online gambling industry is ripe for consolidation.

Of course, this is AOL we're talking about, the company that squandered $200bn in market capitalization after its last tie-up. Maybe the European gambling firms don't have much to worry about after all.®

Burke Hansen, attorney at large, heads a San Francisco law office

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