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gambled. The development of Internet gambling, which brings the means
to gamble into the home, vastly increases the number of outlets and it
follows that substantially more money will be bet.
The International Gaming and Wagering Business estimates that Internet
gaming turnover will grow from US$5 billion in 1998 to US$25 billion by
the year 2000. 24 Internet gambling will partially involve substitution of
the Internet as a medium (see below) however it will also bring new
people to the Internet. The Productivity Commission has noted that it
would be attractive to those who:
• live in remote locations or are housebound;
• are concerned about safety at gambling venues;
• do not like the atmosphere of the venue, such as smoke or noise;
• are intimidated by other gamblers at gaming tables, or
• are already heavy users of the Internet.
Cost savings
Online gambling makes it possible for a whole new realm of business
people to enter the gambling business. Whereas it costs hundreds of
millions to set up a casino, an online gambling business can equip itself
for US$135 000. Internet Casinos Incorporated was developed for
US$1.5 million and employs 17 people.
New costs
It is commonly argued that Internet gambling will have a severe impact
upon gambling tax. From an industry value added perspective, it would
be providing a service at a lower cost, so this would be an enhancement,
not elimination of value. However the Productivity Commission does not
accept the case that tax revenue will be hurt. It argues that Australia is
likely to gain as much income as it loses. Although Australian online
gambling companies are taxed at a lower rate, the growth in the market
should bring an increase in tax revenue overall.
The success of online gambling will be determined by the confidence of
gamblers in the ability of the domain to provide security of payment.
Online gambling sites will therefore be likely to incur costs from suppliers
of Internet services to ensure the site is adequately secure to meet the
concerns of customers.
Industry structure and new business models
There will inevitably be some leakage from existing gambling providers to
the Internet. Gamblers who bet on racing by phone or purchase lottery
tickets may find that the Internet is more convenient. Sports betting is a
relatively new form of gambling and suited to the Internet and home
based gambling. Its growth will be a new market, although it may take
some business away from the traditional sports events like horse racing,
trotting and greyhounds.
Research into why people gamble at clubs and casinos finds that about
half do so to socialise, and about ten per cent for the atmosphere. Other
reasons cited—the thrill of winning, favourite activity or passing the
time—could as easily be met online.
24 PC Report p. 17.11.
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