Bwin

Online bet firms hedge on ads

LONDON When Werder Bremen, a German professional soccer team, lined up recently for a home game against Borussia Mönchengladbach, the players trotted out in jerseys emblazoned with the words "We Win!"

The boast might have seemed prescient - Werder won, 3- 0 - but it had nothing to do with the score. It was a veiled reference to Werder's sponsor, the Austrian online gambling company Bwin, whose logo has been banned in some parts of Germany, including Bremen. When Werder hits the road and plays in areas where the authorities have been more tolerant, its players sport the Bwin logo.

Werder's wardrobe adjustments reflect the chaos in marketing circles caused by a trans-Atlantic crackdown on online gambling. Recent French and German moves to curb online betting, followed by the passage in the U.S. Congress of an effective ban on such activity in the United States, have had an immediate and stark effect on Internet gambling companies' efforts to develop their brands through sponsorship, advertising and other marketing initiatives.

"The first consequence is that marketing budgets will be lowered," said Konrad Sveceny, a Bwin spokesman. "That, of course, has effects on agency partners and other businesses."

Companies like Bwin have collectively spent hundreds of millions of dollars on marketing over the last few years, helping to turn Internet gambling into a business worth an estimated $12 billion annually. Online gambling companies have sponsored dozens of soccer teams across Europe, poker tournaments in America and betting pools in Asia. Their ads have proliferated on London billboards and taxis and have become mainstays of cable television in the United States.

But the U.S. measure banning credit card transactions and online payments with betting sites, which President George W. Bush is expected to sign into law, could cause much of the spending in America to dry up, analysts say.

"I think it's probably going to shut down Internet gambling advertising in the U.S. totally," said Joseph Lewczak, a partner at the law firm of Davis & Gilbert in New York who has advised advertising and media clients on working with online gambling companies.

The U.S. Justice Department has maintained for years that online gambling is illegal. Even before the congressional action, it had been trying to curb related advertising, leading media outlets like Google, Yahoo and Esquire magazine to stop running ads for Internet gambling companies.

But some companies found a way to keep advertising by what Lewczak called the "dot-net workaround." PartyGaming, for instance, has promoted sites like PartyPoker.net, which runs simulated games where no real money changes hands. Enough people found their way from there to the company's pay-to-play sites, like PartyPoker.com, to turn PartyGaming into the most popular online gambling service in America.

PartyGaming has said it will stop accepting bets from Americans as soon as Bush signs the bill. Given that more than three-quarters of the company's revenue has come from the United States, company executives say PartyGaming will have to redirect, and perhaps sharply reduce, its $300 million global marketing budget.

Executives of PartyGaming and other companies affected by the pending U.S. ban have said they plan to step up their presence in Europe, Asia and other growing markets.

But in many European and Asian countries, governments have prevented private competitors from advertising, at least in traditional media, in what online operators see as an effort to protect state- sponsored gambling monopolies.

As of next autumn, online gambling companies are expected to be allowed to advertise on television in Britain, which has been nearly alone among Western governments in moving to legalize Internet betting. Elsewhere, many restrictions remain in place, and recent developments have clouded the picture for marketers.

The two top executives of Vienna- based Bwin Interactive Entertainment were arrested in France last month as they headed to a news conference to announce a sponsorship deal with AS Monaco, a soccer team that plays in the top French league. Though later released, they were charged with violating French law, which reserves gambling for two state-sponsored companies.

In turn, the soccer league ordered AS Monaco and several other teams to drop multimillion-euro sponsorship agreements with online gambling companies. One of the teams, Toulouse, borrowed a tactic from Werder Bremen, sending its players out for a match against Olympique Marseille with shirts reading "???.com," a cheeky reference to the team's sponsor, the online gambling site 888.com, owned by 888 Holdings.

Norbert Teufelberger, co-chief executive of Bwin, said during a recent conference call that teams had been adopting the modified logos because sponsors in some cases have had to commit for an entire season. But most of Bwin's sponsorship deals have short notice periods for cancellation, he added.

In Germany, the situation is even more muddled. As in France, government-sponsored companies technically hold a monopoly over gambling, but enforcement has been left largely to individual states. Bwin has been operating under gambling licenses that were granted by the East German government shortly before it ceased to exist. With a marketing budget of $50 million a year in Germany, Bwin has attracted 300,000 customers to its online sports bookmaking service in that country.

Bwin has been running TV ads in Germany featuring retired sports stars like the German tennis great Boris Becker, even as courts in several states have ordered Bwin-sponsored soccer teams to remove the company's logo from their uniforms.

In Bavaria, the authorities have taken things a step further, showing up at a soccer field in the town of Starnberg, south of Munich, to order an amateur senior-league team to stop wearing Bwin-branded jerseys.

Bwin says it is counting on regulatory and legal developments at the European Union to level the playing field for private-sector gambling companies. The European Commission has already started an investigation of several member states' policies regarding online gambling, and has said it may announce action against them as soon as this month.

Bwin continues to advertise on television in Germany. Martin Arendts, a lawyer in Grünwald, near Munich, said that more than 2,000 criminal, civil and administrative cases involving online gambling were wending their way through the German legal system. Previous court decisions have left enough gray areas for gambling advertisers to find some breathing space, he noted.

Meanwhile, Bwin is helping more than 14,000 amateur soccer teams throughout Germany imitate the pros at clubs like Werder Bremen by providing cut-price uniforms. Upon request, the company will send out a kit to cover up the Bwin logos on jerseys, Sveceny said.

source: iht.com