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The Online Poker Sector

An Overview of Regulation and Markets

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MAY 2009
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IGAMINGNEWS WHITE PAPER | Who We Are
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operators; software suppliers; financial services companies; equity analysts; legal
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consultants of various dispensations; and government regulators.

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E: Chris.Krafcik@ClarionGaming.com

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E: Jeanette.Kozlowski@ClarionGaming.com

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IGAMINGNEWS WHITE PAPER | Table of Contents

Introduction + + + + + + + + + + + + + + + + + + + + 5

Regulatory News - - - - - - - - - - - - - - - - - - - - - - - - - 7

Regulatory Spotlight + + + + + + + + + + + + + + + + 13

Deals: Done and Rumored - - - - - - - - - - - - - - - - - - 17

Exposed + + + + + + + + + + + + + + + + + + + + + + 21
IGAMINGNEWS WHITE PAPER | Introduction
Data consultancies and analysts agree the Internet poker market is growing,
though it is controlled by a small number of operators targeting the United
States.

Currently, there are around 600 poker Web sites and 38 poker networks
operating from different licensing jurisdictions around the world.1

In the 2009 calendar year, Global Betting and Gaming Consultants, a data
consultancy, expect online poker will grow 10.8 percent, year over year, to $3.9
billion in gross gambling yield.

By geographic segment, Europe is projected to grow 15.5 percent to $1.82 billion,

and North America, a more modest 7 percent to $1.65 billion. If GBGC estimates
hold, 2009 will be the first year Europe generates more in gross gambling yield,
for poker, than North America.2

In May 2009, when this introduction was written, PokerStars, an operator

licensed on the Isle of Man, controlled around 36 percent of the world's poker
traffic.3 Its nearest competitor, FullTilt, which is licensed in the Mohawk
Territory of Kahnawake, controlled approximately 16 percent.

Both companies target the United States, where a number of prohibitive state and
federal laws target online poker directly or indirectly.

Rounding out the top five, now, are the European firms Playtech Ltd.,
PartyGaming and Bwin Interactive Entertainment A.G., which control 9.6
percent, 6.9 percent and 4.2 percent of the traffic, respectively.

None of these companies takes play from the United States. All are publicly
traded.

As the data consultancy H2 Gambling Capital has put forward, IGamingNews

also believes the Unlawful Internet Gambling Enforcement Act (UIGEA), a
United States law which took effect in October 2006, could reshape the current
distribution of player traffic among operators in the near-to-medium term.

Generally speaking, the UIGEA makes illegal the processing of online gambling
money transactions; after considerable delay, its final regulations were issued in

1 Latest estimate of PokerScout, a Web site that tracks online poker traffic in real time.
2 Since the 2004 calendar year.
3 The author arrived at this figure by adding the respective seven-day averages of

PokerScout.com's top 20 sites, then dividing each seven-day average by the seven-day-average
sum.
November 2008. Financial institutions covered by the law were given until
December 2009 to comply with the regulations.4

Should those institutions begin enforcing the UIGEA from late 2009, business for
PokerStars, FullTilt and other United States-facing poker operators could be
disrupted, though the magnitude of that disruption remains difficult -- if not
impossible -- to assess.

Assessing the law's impact on traffic distribution, arguably, has become even
more difficult in light of a new federal bill that, if enacted, would push the
UIGEA's compliance deadline back to December 2010.5

In Europe, meanwhile, it is expected a number of poker operators -- especially

those for whom player liquidity levels have declined in recent years -- will begin
to consolidate.

Despite this expectation, however, only a very small number of deals have been
consummated in the 12 months to May 2009.

4 Mark Hichar, The UIGEA Regs | A Lawyer's Analysis, IGAMINGNEWS, Nov. 17. 2008,

<http://www.igamingnews.com>.
5 Christopher A. Krafcik, Frank Delivers New Bills, IGAMINGNEWS, May 6, 2009,

<http://www.igamingnews.com>.
IGAMINGNEWS WHITE PAPER | Regulatory News
In 2009, a number of jurisdictions around the world have elected to include
Internet poker in legislative proposals.

United States | State Level

California

In early 2009, a bill called the California Online Poker Law Enforcement
Compliance and Consumer Protection Act was submitted to the state's Legislative
Analyst.

In its current form, the bill instructs the California State Gambling Commission,
in conjunction with the state Department of Justice, to draft and adopt
regulations for the implementation of an online intrastate poker network.

It is likely, however, that the bill will be amended should it pass through the
Legislature.

As of May 2009, the bill remains without a sponsor in the state Legislature, but is
being supported by its citizen sponsor, a grassroots advocacy group called the
Poker Voters of America.

Five American legal commentators polled by IGamingNews in mid-April named

California as the likely front-runner to regulate and license online poker.

Additional Coverage in IGamingNews

Calif. Poker Bill Unveiled

IGamingNews has obtained a copy of a highly anticipated bill -- the California Online
Poker Law Enforcement Compliance and Consumer Protection Act -- that would see
online poker regulated on an intrastate basis in the Golden State.

Insights | State by State

IGamingNews asked the United States' top Internet gambling lawyers about which states
they think will be the first to regulate some form of Internet gambling.

Florida

An appropriations bill in the Florida Senate, SB 682, was amended on April 16,
2009, with language calling for the state to conduct a study on Internet poker.

That amendment read:

The Office of Program Policy Analysis and Government Accountability shall

perform a study and make recommendations to the Legislature by December 1,
2009, regarding the enactment of laws to provide for protection and remedies
from existing and unregulated online poker activities, which currently lack
oversight and consumer protection.

SB 682 died in session before receiving a vote.

Before the legislative session concluded on May 1, however, the Internet poker
study language was added to a House bill, HB 425.

As of May 8, HB 425 had been enrolled -- meaning it had passed both chambers
of the state Legislature -- but had yet to be signed by Governor Charlie Christ.

Additional Coverage in IGamingNews

Fla. Senate Bill Amended with Internet Poker Study Language

The Florida Legislature was abuzz last week with developments regarding Internet and
video poker.

Fla. Senate Bill Still without a Vote

Florida Senate Bill 682, which calls for a study of Internet poker to be presented in
December, has again been moved to special order calendar.

Fla. Internet Poker Study Awaits Governor's Signature

A Florida bill with Internet poker study language attached has passed through the state's
Legislature and awaits Governor Charlie Christ's signature.

United States | Federal Level

Barney Frank

Barney Frank is the chair of the House Financial Services Committee and, in
recent years, has emerged a powerful ally of the Internet gambling industry.

In April 2007, he introduced a bill called the Internet Gambling Regulation and
Enforcement Act, which, if successful, would have seen online gambling legalized
and regulated in the United States.

The bill garnered just 48 co-sponsors, the majority of whom, like Mr. Frank, were
Democrats.

A similar version of that bill was reintroduced in May 2009.

Additional Coverage in IGamingNews

Frank Expects to Introduce Bill Next Week

Analysts are hopeful that the Democratic-controlled Congress will help grease the rails
for Barney Frank's expected bill.
 U.S. Land Operators Not Champing at Online Bit, Analyst Says
Should Barney Frank’s Internet gambling legislation be introduced, then enacted, one
American gaming analyst doesn’t expect most members of the United States’ land-based
gambling industry to jump immediately at the opportunity to launch online.

In Afterglow of Obama Inauguration, Caution Is the Word, Lobbyists Say

Two United States I-gaming lobbyists say the jury remains out on how and whether the
new Obama administration will engage with the historically thorny issue of Internet
gambling.

Lobbying

Lobbying remains an art delicately practiced in the United States, with land-
based casinos, racing interests, religious conservatives, sports leagues, the
banking industry and I-gaming advocacy groups all pushing Internet-gambling-
related agendas.

In the fourth quarter of 2008, according to government filings, the Interactive

Gaming Council, whose members include Microgaming Software Systems Ltd.
and 888 Holdings, spent $667,705 lobbying various Internet gambling bills.

A long-time Internet gambling opponent, the National Football League, spent an

estimated $53,333, while the Family Research Council, also an opponent, spent
approximately $1,400.

IGamingNews expects lobbying spend to have risen considerably in the first and
second quarters of the 2009 calendar year, given the expected introduction of
Barney Frank's new bill. Figures have yet to be released.

Additional Coverage in IGamingNews

$2.5 Million Spent Lobbying I-Gaming Policy in Fourth Quarter

Approximately 30 parties spent an estimated $2.5 billion lobbying United States Internet
gambling policy in the fourth quarter of 2008.

Bush Aide Accused of Lobbying UIGEA

According to a letter obtained by IGamingNews, United States Representative Steve
Cohen is asking whether a top presidential adviser appointed this year, who lobbied
against Internet gambling before his appointment, was involved in pushing to finalize
the proposed UIGEA regulations on behalf of a former lobbying client.

France

Eric Woerth, the French budget minister, in early March unveiled a proposal that
would see portions of the country's online gambling market opened to
commercial competition.
France generates about 5 billion euros each year from licensed gambling
operations, which include horse betting, sports betting, casino gambling and
lotteries, a person briefed on Mr. Woerth's proposal told IGamingNews.

Under the new proposal, which was presented to the French Cabinet in late
March, three sectors will be liberalized: parimutuel horse betting, fixed odds
sports betting and online poker.

The person said these sectors will be opened, in part, because they're popular, but
also because the government considers them to be the least addictive forms of
wagering. Not surprisingly, operating online slots, casino table games like
roulette, and spread betting will not be allowed.

The betting duty has been tentatively set at 7.5 percent, and, for poker, a 2
percent tax on buy-ins.

The license application process is expected to begin in the second half of 2009,
with the first licenses set to be issued on Jan. 1, 2010.

Ahead of any new regulation taking effect, online betting operators like Bwin
Interactive Entertainment A.G., Betclick and Unibet have been aggressively
inking marketing-partnership deals.

Additional Coverage in IGamingNews

French Regulatory Proposal Unveiled, Tax Regime Draws Criticism

As promised, France has released a draft proposal that would liberalize its hitherto
monopolistic gambling market, but online gambling industry observers are already
raising eyebrows at the government's proposed tax regime.

I.M. Round Table | French Regulatory Proposal

Anouk Hattab-Abrahams of the Brussels law firm Ulys and Lorien Pilling, head of
research at Global Betting and Gaming Consultants, dissect and debate the new French
regulatory proposal in an online chat moderated by IGamingNews' Jeanette Kozlowski.

French Marketing Race Hotting Up

With France's online betting and poker markets soon to be liberalized, it appears the
country's media companies and football clubs are already lining up to sign deals with
gaming operators ahead of the January 2010 opening.

French Budget Minister Brokers Advertising Truce

It appears the French budget minister has managed to stop the influx of online gambling
advertising from foreign operators by securing agreements with those operators and,
surprisingly, the French gambling monopolies.
Denmark
The Danish Ministry of Taxation announced in April that the country's hitherto
monopolistic gambling market will be partially liberalized.

A press release on the ministry's Web site indicated that under forthcoming legal
reform, licenses will be made available for online poker, casino games and sports
betting.

"The objective of a partial gambling liberalization is to ensure better protection of

players, avoid economic crime through gambling and ensure continued revenue
for distribution to non-profit causes," the ministry said.

Under existing legislation, Danske Spil A/S, the national lottery, is the sole
Internet gambling concessionaire. It went online in 2003 and offers a number of
its offline games in electronic format.

Additional Coverage in IGamingNews

Danish Monopoly Broken | A Lawyer's Analysis

Henrik Norsk Hoffman, an attorney with the law firm Lett in Denmark, answered
questions by telephone about the Danish Ministry of Taxation's announcement that
sectors of the country's monopolistic gambling market will be liberalized.

Denmark's Hidden Jewel

TV2, a state-owned broadcaster in Denmark, has become the country's first domestic
company to provide online skill games with real-money wagering. No hostile response is
expected from the government or the gambling monopoly, Danske Spil, because games
of skill are not covered by national gambling laws.

Switzerland
The Swiss Department of Justice and Police in April said the country should relax
its existing restrictions on Internet gambling and issue licenses to a limited
number of operators.

In March 2007, the Federal Council -- Switzerland's seven-member head of state

-- instructed the Justice Department to prepare a report examining whether the
country should ease a prohibition on Internet casino and poker services.

That report -- loosely translated as "Consideration of whether to relax the ban on

using an electronic communications network for the operation of gambling" --
was completed on March 31, 2009.

Among other things, the report recommends that future license holders limit
their offering to Swiss residents, exclusively, and that gambling licenses for other
mediums -- including interactive television, telephone and mobile telephones --
should not be issued.
George Häberling, an attorney the law firm Häberling in Switzerland, told
IGamingNews he expects as few as two licenses to be issued given the online
market there is valued at between 30 and 40 million Swiss francs in gross gaming
revenue.

Mr. Häberling expects members of the country's land-based casino industry may
form joint ventures and bid for the licenses.

He said it will be three years before legislation is implemented.

Additional Coverage in IGamingNews

Swiss Regulatory Proposal | A Lawyer's Analysis

George Häberling, an attorney the law firm Häberling in Switzerland, answered
questions by telephone about the country's intention to introduce a limited online
gambling license regime.
IGAMINGNEWS WHITE PAPER | Regulatory Spotlight
As expected, new United States regulatory legislation was introduced in May.

Frank Delivers New Bills

By CHRISTOPHER A. KRAFCIK
Published: Wed., May 6, 2009

Internet gambling's most powerful congressional ally on Wednesday introduced

two bills that, respectively, would see I-gaming regulated in the United States and
the UIGEA's compliance deadline pushed back.

Barney Frank, chairman of the House Financial Services Committee, unveiled

both bills this morning at a press conference in Washington, D.C.

"My fundamental reasons for doing this are that the government should not
interfere with people's liberty unless there's a good reason," Mr. Frank said at the
conference.

The first bill, the Internet Gambling Regulation, Consumer Protection, and
Enforcement Act, is a follow-up to Mr. Frank's April 2007 bill called the Internet
Gambling Regulation Enforcement Act.

It would establish a regulatory regime in the United States, with the Secretary of
the Treasury to act as licensing authority.

A lobbyist close to the process in Washington, who requested anonymity, told

IGamingNews Wednesday the 2009 bill departs from the 2007 bill in that it
prohibits any sports-wagering activity that violates the Professional and Amateur
Sports Protection Act.

The sports protection act -- or PASPA, as the law is sometimes called -- was
enacted in 1992 and effectively prohibits sports betting in all but four states.

"Congressmen Frank's new bill uses a PASPA standard -- it prohibits any wager
that would violate PASPA -- but I believe the intent is that it would not allow
licensees to accept Internet wagers on sports," the lobbyist said.

In IGamingNews' fourth-quarter report on federal lobbying spend, professional

and amateur sports leagues -- long opponents of Internet gambling -- spent an
estimated $75,500 lobbying Internet-gambling-related legislation.

Mr. Frank's new regulatory bill will also face opposition from social conservative
groups like the Family Research Council, a Christian organization, and Focus on
the Family.
"It's a sad day when a public servant like Representative Frank works so hard to
willfully legislate harm to families under the pretense of freedom," Chad Hills, an
analyst for Focus on the Family, told IGamingNews last year in response to one of
Mr. Frank's previous bills.

In Congress, Republican resistance is expected to be stiff -- Mr. Frank's 2007 bill

received just 48 co-sponsors, the majority of whom were Democrats. Republicans
Peter T. King of New York and Ron Paul of Texas, however, will be supporting the
bill.

Spencer T. Bachus, the ranking Republican member of the financial services

committee, has already come out against the new regulatory bill.

"Illegal off-shore Internet gambling sites are a criminal enterprise and allowing
them to operate unfettered in the United States would present a clear danger to
our youth," Mr. Bachus, who was an author of the UIGEA, said in a prepared
statement Wednesday.

Mr. Frank's regulatory bill is not without its supporters, however.

Michael Waxman, spokesman for the Safe and Secure Internet Gambling
Initiative, a backer of Mr. Frank's legislation that doesn't lobby Congress, called
Mr. Frank's decision to continue advocating for Internet gambling "encouraging."

In an e-mail to IGamingNews, Clive Hawkswood, chief executive of the United

Kingdom's Remote Gambling Association, an industry trade group whose
members include PartyGaming, commended Mr. Frank for "seeking to steer the
ship in the right direction."

The Poker Player's Alliance, a player advocacy group that lobbies Congress, said
in a prepared statement that it was "grateful for Chairman Frank's leadership,"
adding it would be activating its "grassroots army made up of over one million
members to help him drive legislation."

But the American Gaming Association, the country's most powerful gambling
lobby, told IGamingNews Wednesday it remains neutral on Internet gambling
"because of the divergent views of its members."

The commercial gambling sector, as expected, was measured in responding to the

new regulatory bill.

Brian H. Hadfield, chief executive of CryptoLogic Ltd., the Nasdaq-listed software

developer, told IGamingNews Wednesday: "While it’s difficult to speculate on
exactly how we would act until we see the legislation and any subsequent
regulation, what I can say is that CryptoLogic has always advocated a regulated
environment -- and so we welcome Barney Frank’s direction."
International Game Technology, the Nevada-based gambling technology supplier
who owns WagerWorks, and 888 Holdings, a Gibraltar operator, did not return
phone calls and e-mails by press time Wednesday. Betfair declined comment.

Legal experts, meanwhile, expect the bill, in some form, will pass the House, but
that the Senate may be a tougher sell.

"The Senate majority leader from Nevada, Harry Reid, is powerful, and you've got
to convince him," Joseph M. Kelley, a business law professor at State University
of New York, Buffalo, told IGamingNews Wednesday. "Right now, he seems to
have not come out in favor of regulation."

In the House, there are 256 Democrats, 178 Republicans and one vacancy, and in
the Senate, there are 59 Democrats, 40 Republicans and one unresolved seat.

It is thought that a piece of legislation identical to Mr. Frank's regulatory bill will
be introduced in the Senate, and Mr. Kelley speculated that Senator Robert
Menendez, Democrat of New Jersey, could sponsor it. (Mr. Menendez, recall,
introduced the Skill Games Licensing and Control Act in September 2008.)

The Washington lobbyist expects Mr. Frank's regulatory bill to "go through some
permutations," but believes chances for Senate passage are good.

Mr. Frank said he hoped to move on the legislation before congressional break in
August.

"We have a couple of other things on the agenda as you might've noticed, like
regulating the financial structure of the country," Mr. Frank joked with respect to
the ongoing financial crisis.

UIGEA D e l a y

Mr. Frank's second bill, the Reasonable Prudence in Regulation Act, would delay
the UIGEA compliance deadline by one year to December 2010.

Regulations for the UIGEA took effect in January 2009, but non-exempt
participants in designated payment systems -- including automated
clearinghouse systems -- were given until this December to comply with those
regulations.

"I think Congressmen Frank believes that once his licensing bill is enacted, then
the standard for UIGEA should be to block payments to people who aren't
licensed," said the Washington lobbyist, when asked about Mr. Frank's
motivations for introducing the bill. "So he wants to hold off on the compliance
with the existing regulations until there's a chance to enact a licensing regime and
make that the basis of enforcement."
The bill is understood to be supported by both Internet gambling and banking
interests, though the American Bankers Association, a trade group that lobbies
Congress, did not return a phone call by press time Wednesday.

Mr. Frank's most successful bill to date, the Payment Systems Protection Act,
sought to clarify what the UIGEA intended by "unlawful Internet gambling." It
was approved in a 30-to-19 vote by the financial services committee in September
2008 but died in session.

The Taxman C o m e t h

Representative James T. McDermott, Democrat of Illinois, on Wednesday

introduced the Internet Gambling Regulation and Tax Enforcement Act of 2009,
the tax companion to Mr. Frank's new regulatory bill.

The tax enforcement act is a follow-up to Mr. McDermott's 2007 bill by the same
name and proposes a 2 percent tax on customer deposits to be paid monthly.

A recent analysis performed by PricewaterhouseCoopers for UC Group, a London

payment processor that lobbies Congress, suggested Internet gambling could
generate as much as $52 billion in tax revenue over the next decade.

“We are losing billions of dollars in federal and state taxes every year because a
prior Administration and its supporters drove legitimate U.S. online gambling
off-shore by passing an ill-conceived late-night amendment in Congress that has
done nothing except make Americans more vulnerable to scams when they wager
online and cost us billions in lost revenue,” Mr. McDermott said in a prepared
statement Wednesday.

Additional Coverage in IGamingNews

The Frank Bill | A Lawyer's Analysis

Mark Hichar, an attorney with the law firm Edwards Angell Palmer & Dodge, analyzes
Barney Frank's new bill, the Internet Gambling Regulation, Consumer Protection, and
Enforcement Act.
IGAMINGNEWS WHITE PAPER | Deals: Done and Rumored
A non-exhaustive list of recent M&A transactions, rumors and b-to-b deals in
the online poker space.

Microgaming || L a d b r o k e s

Ladbrokes, which, previously, had operated a standalone poker room on software

from Microgaming Software Systems Ltd., announced in August 2008 that it
would join the Microgaming poker network from the 2009 fiscal year.

William Hill || P l a y t e c h

In October 2008 William Hill purchased online gaming, marketing and

customer-service assets from Playtech Ltd., significantly expanding the breadth
of its Internet business.

That transaction saw created a new joint venture called William Hill Online, in
which William Hill currently holds 71 percent, with Playtech holding the balance.

As part of the October deal, William Hill also announced the migration of its
casino and poker propositions to Playtech's software platform and poker
network, respectively.

The poker migration was completed ahead of schedule, and William Hill said in
April 2009 that its main casino would be moved from CryptoLogic Ltd.'s software
to Playtech's later this year.

CryptoLogic || G t e c h

CryptoLogic Ltd. announced in November 2008 that it would outsource its poker
operation to Gtech Corporation's International Poker Network.

The move came as little surprise because CryptoLogic's poker network had been
trending downward since 2006. That year, the United States enacted the
Unlawful Internet Gambling Enforcement Act and Betfair, a major licensee, left
to form its own poker network.

CryptoLogic finished migrating its licensees to Gtech's network in March.

Absolute Poker || U l t I m a t e B e t

UltimateBet and Absolute Poker, the disgraced online poker operators, in

November 2008 launched a new, joint poker network called Cereus.
Microgaming || P l a y w I z e

In December 2008 Microgaming Software Systems Ltd. emerged the buyer of

Playwize's three-dimensional poker technology, and the Isle of Man company
told IGamingNews then that a number of its 47 poker licensees had expressed
interest in the software.

PartyGaming || C I r s a

Making good on a fourth-quarter promise to "overdeliver and surprise,"

PartyGaming in February 2009 announced a three-year deal with Spain's Cirsa
Gaming Corporation, a terrestrial operator with ties to the Latin and South
American markets.

Little color on the deal was given, but the two companies are to explore online
gaming opportunities in Spanish-speaking markets. The deal would appear
timely for both operators, with Spain's ruling Socialist Worker's Party under
intensifying pressure to introduce national Internet gambling regulation.

Playtech || C a s I n o G r a n M a d r I d

Playtech Ltd. in March 2009 did a casino and poker licensing deal with the land-
based Spanish operator, Casino Gran Madrid.

PartyGaming || H a r r a h ' s

In April 2009 word leaked via the London press that Mitchell A. Garber, the
former chief executive of PartyGaming, had been appointed by Harrah's
Entertainment Inc. to run a new online subsidiary.

Both companies declined comment when contacted by IGamingNews, but Mr.

Garber's as yet confirmed appointment has perpetuated rumor of a tie-up
between PartyGaming and the casino giant.

PartyGaming || G I g a M e d I a

In April 2009 PartyGaming and GigaMedia Ltd. declined comment to

IGamingNews after rumor surfaced the two companies were in bid talks.

Arthur M. Wang, chief executive of GigaMedia, said in March that his company
was in talks with a number of parties regarding a possible merger or sale.

Gaming VC || U n k n o w n S o u t h A m e r I c a n O p e r a t o r

In April 2009 Gaming VC announced it could acquire a South American sports

betting and gaming business it did not identify.
IGAMINGNEWS WHITE PAPER | Market Spotlight
The phrase "exceeding expectations" has been touted by most entrants of the
newly liberalized Italian online poker market. In May 2009, Graham Wood, an
IGamingNews contributor and consultant with specialist knowledge of Italian
gaming, reported on the country's sensational growth trends.

Led by Poker, Italian Growth Story Continues

By GRAHAM WOOD
Published: Thurs., May 7, 2009

In Italy the population’s passion for gambling appears to show no bounds as

records continue to be broken.

The first quarter of 2009 saw turnover on all forms of gaming average 150 million
euros per day, and the first data for April reveal no slowdown in spending.

Italy’s slot machines alone generated 6 billion euros in turnover while

scratchcards continued to attract interest, with the range of Gratta e Vinci
products clocking up 2.6 billion euros in the first three months of 2009. Spending
on traditional Lotto, meanwhile, came in at 1.4 billion euros during the same
period.

Sports betting hit new records. The amount staked was up to 1.1 billion euros in
the first quarter and, for the month of April, grew 20 percent to over 400 million
euros versus the previous-year period.

It appears, though, that Italian punters are beginning to wise up. The percentage
payout rose to over 82 percent (meaning bookmakers’ profit margins shrunk to
below 18 percent). Nevertheless, those figures are substantially higher than the
percentage operators tend to retain in other markets.

Online poker continues to fuel increases in turnover -- both directly and

indirectly -- but online gaming of all forms has increased substantially of late: a
result of new punters being attracted to poker, then crossing over to other
products.

This phenomenon is certain to go on. In the wake of a recent earthquake in

L'Aquila, the government announced plans to raise tax revenue through further
liberalization of the gaming sector. The income will be used to fund
reconstruction projects in affected areas.

Significantly, cash games are to be introduced to Italian poker rooms, the sports
betting product is due to become more competitive and online bingo is due to be
introduced before long.
In the first three months of 2009, online-gaming spend totaled 850 million
euros, with average daily turnover increasing as the quarter progressed.

March spend topped the previous month’s with a daily figure of 10.2 million
euros per day -- 5.2 million euros of which came from poker. And between
January and March, poker brought in 467 million euros.

Sports betting turnover was just short of 330 million euros during the three-
month period. Online scratchcards, meanwhile, proved to be more popular than
horseracing, with spending on the games reaching 22.7 million euros compared
to 22 million euros on racing.

As expected, the domestic market leaders in the online poker market are
beginning to lose market share since the arrival of some of the overseas industry
heavyweights.

But Gioco Digitale S.A. is still maintaining its lead despite a sharp fall in its
turnover in April. Total tournament fees for the month were down over 12
percent to 51.3 million euros, but still accounted for 27.9 percent of April’s total
of 184.7 million euros.

The specialist operator Microgame, which provides a white label service to

smaller Italian operators and a number of larger concerns like Globet and
Betshop, managed to consolidate its market share. The dozens of poker rooms on
the network produced 47.8 million euros in tournament fees during April, up 67
percent on March’s figure, yielding a share of 25.8 percent.

The big winner in the poker market was PokerStars, which, having built up a
substantial customer before gaining licensure, was able to hit the ground running
when it launched the real-money product in March.

By April, PokerStars had managed to secure fourth place in the market (behind
Lottomatica S.p.A.) by generating over 16 million euros, or 8.7 percent of the
monthly total.
IGAMINGNEWS WHITE PAPER | Exposed
A non-exhaustive list of the industry's publicly traded players and their
exposure to poker, taken as a percentage of total revenue, during the 2008 fiscal
year.

PartyGaming || 5 8 p e r c e n t

GigaMedia || 5 4 . 9 p e r c e n t

888 Holdings || 3 0 . 1 p e r c e n t

Playtech || 2 6 . 9 p e r c e n t

CryptoLogic || 2 2 . 6 p e r c e n t

Bwin || 2 2 . 4 p e r c e n t

Unibet || 2 1 p e r c e n t

Betsson || 1 9 p e r c e n t

Sportingbet || 1 5 p e r c e n t

Ladbrokes || 2.5 p e r c e n t