January 20, 2022

Tech Industry Sets Its Sights on Gambling

Silicon Valley is betting that online gambling is its next billion-dollar business, with developers across the industry turning casual games into occasions for adults to wager.

At the moment these games are aimed overseas, where attitudes toward gambling are more relaxed and online betting is generally legal, and extremely lucrative. But game companies, from small teams to Facebook and Zynga, have their eye on the ultimate prize: the rich American market, where most types of real-money online wagers have been cleared by the Justice Department.

Two states, Nevada and Delaware, are already laying the groundwork for virtual gambling. Within months they will most likely be joined by New Jersey.

Bills have also been introduced in Mississippi, Iowa, California and other states, driven by the realization that online gambling could bring in streams of tax revenue. In Iowa alone, online gambling proponents estimated that 150,000 residents were playing poker illegally.

Legislative progress, though, is slow. Opponents include an influential casino industry wary of competition and the traditional antigambling factions, who oppose it on moral grounds.

Silicon Valley is hardly discouraged. Companies here believe that online gambling will soon become as simple as buying an e-book or streaming a movie, and that the convenience of being able to bet from your couch, surrounded by virtual friends, will offset the lack of glittering ambience found in a real-world casino. Think you can get a field of corn in FarmVille, the popular Facebook game, to grow faster than your brother-in-law’s? Five bucks says you cannot.

“Gambling in the U.S. is controlled by a few land-based casinos and some powerful Indian casinos,” said Chris Griffin, chief executive of Betable, a London gambling start-up that handles the gaming licenses and betting mechanics of the business for developers. “What potentially becomes an interesting counterweight is all of a sudden thousands of developers in Silicon Valley making money overseas and wanting to turn their efforts inward and make money in the U.S.”

Betable has set up shop in San Francisco, where 15 studios are now using its back-end platform. “This is the next evolution in games, and kind of ground zero for the developer community,” Mr. Griffin said.

Overseas, online betting is generating an estimated $32 billion in annual revenue — nearly the size of the United States casino market. Juniper Research estimates that betting on mobile devices alone will be a $100 billion worldwide industry by 2017.

“Everyone is really anticipating this becoming a huge business,” said Chris DeWolfe, a co-founder of the pioneering social site Myspace, who is throwing his energies into a gaming studio with a gambling component backed by, among others, the personal investment funds of Jeff Bezos, Amazon’s founder, and Eric E. Schmidt, Google’s executive chairman.

As companies eagerly wait for the American market to open up, they are introducing betting games in Britain, where Apple has tweaked the iPhone software to accommodate them. Facebook began allowing online gambling for British users last summer with Jackpotjoy, a bingo site; deals with other developers followed in December and this month.

Zynga, the company that developed FarmVille, Mafia Wars, Words With Friends and many other popular casual games, is advertising the imminent release of its first betting games in Britain. “All your favorite Zynga game characters will be there, except this time they’ll have real money prizes to offer you,” an ad says. “Play online casino games for pennies and live the dream!”

Mr. DeWolfe’s studio, SGN, is also on the verge of starting its first real-money games in Britain. “Those companies that have a critical mass of users that are interested in playing real-money games are going to be incredibly valuable,” he said.

Mark Pincus, the chief executive of Zynga, said the company was just following the market. “There is no question there is great interest from all kinds of people in games of chance, whether it is for real money or virtual rewards,” he said. Zynga, which has missed revenue expectations in the last year, is making gambling a centerpiece of its new strategy. It has just applied to Nevada for a gambling license.

Casual gaming first blossomed on Facebook’s Web site, where players could readily corral friends into their games. It is now being rethought for mobile devices, so people can play in brief snippets as they wait for a bus or a sandwich.

Some games mimic the slots and poker found in casinos; others emphasize considerably more creativity. The vast majority of casual game players play at no charge. A small number buy virtual objects in the game to speed their play or increase their status.

Tech executives expect an equally small number to play for real money but believe they will bet heavily, making them much more valuable to the gaming companies. By Betable’s estimate, the lifetime value of a casual player is $2 versus $1,800 for a real-money player.

Article source: http://www.nytimes.com/2013/02/18/technology/tech-industry-sets-its-sights-on-gambling.html?partner=rss&emc=rss

I.M.F. Says Europe Has Made Progress in Addressing Crisis

PARIS — The European Union has made progress in addressing its financial crisis, the International Monetary Fund said Thursday, but warned that member states would have to follow through on their commitments to end uncertainty about the future of the euro and of the bloc itself.

“Significant progress has been made in recent months in laying the groundwork for strengthening the E.U.’s financial sector,” the fund said, summarizing the results of a new study, adding: “the details of the agreed frameworks need to be put in place to avoid delays in reaching consensus on key issues.”

The sovereign debt crisis, which began in late 2009 with Greece’s acknowledgement that it had been fabricating data on its public finances, has cost Europe billions of euros in lost growth and has devastated labor markets in some countries. Soaring financing costs have led Greece, Ireland and Portugal to seek bailouts. Spain and Italy had appeared to be reaching their own crisis points this year before the European Central Bank calmed the market by promising to do whatever was necessary to defend the euro.

At the national level, the response has been to cut spending and to raise taxes. At the European level, member states have begun steps toward greater integration, including through a banking union administered by the E.C.B., with common rules for large institutions. The banking plan, though receiving only lukewarm support from Britain and Sweden, appears to be going forward, at least for members of the 17-nation euro zone.

The agreement last week by European leaders on a single supervisory mechanism for banks under the E.C.B. “is a strong achievement,” the I.M.F. said. “It needs to be followed up with a structure that has as few gaps as possible,” especially with regard to harmonizing national rules with the new regulations.

Additionally, “actions toward a single resolution authority with common backstops, a deposit guarantee scheme, and a single rulebook, will also be essential,” by mid-2013 at the latest, the report found.

In an apparent criticism of European stress tests for banks that gave some institutions clean bills of health in spite of market concerns, the I.M.F. also called for stricter oversight.

“European stress testing needs to go beyond microprudential solvency, and increasingly serve to identify other vulnerabilities, such as liquidity risks and structural weaknesses,” the report said. “Confidence in the results of stress tests can be enhanced by an asset quality review, harmonized definitions of nonperforming loans, and standardized loan classification, while maintaining a high level of disclosure.”

The I.M.F. also called on Europe to take measures to separate bank risk from sovereign risk, including by making the European Stability Mechanism, the new euro zone bailout fund, able to move quickly to recapitalize banks.

And it said the potential cost to the public from bank failures could be reduced by creating banking authorities with the power to impose “bail-ins” on banks — in effect forcing bondholders to share losses in the event of a failure.

Article source: http://www.nytimes.com/2012/12/21/business/global/imf-says-europe-has-made-progress-in-addressing-crisis.html?partner=rss&emc=rss

Euro Crisis Pits Germany and U.S. in Tactical Fight

Chancellor Angela Merkel of Germany defied skeptics and laid the groundwork for a deeper union that she said rights the mistakes of the euro’s birth and puts integration on a stable path for the long term. In the process, she forced German fiscal discipline on Europe as the prescription for combating the ills that afflict the region.

Yet even as the cogs of the European agreement were being fitted into place, President Obama warned in his most explicit comments on the matter to date that the European — read, German — focus on long-term political and economic change was well and good. But any changes, he said, risked coming undone if leaders did not react quickly and powerfully enough to the market forces threatening the euro’s survival in the coming months.

At the heart of the debate is the question of how far governments must bend to the power of markets. Mr. Obama sees retaining the stability of markets and the confidence of investors as a primary goal of government and a prerequisite for achieving any major changes in public policy. Mrs. Merkel views the financial industry with profound skepticism and argues, in almost moralistic fashion, that real change is impossible unless lenders and borrowers pay a high price for their mistakes.

“It’s a battle of ideas,” said Almut Möller, a European Union expert at the German Council on Foreign Relations. “There is a different understanding of how to set up a sustainable economy in a globalizing world. Here there is a major rift.”

It will be difficult to know for weeks, or maybe even in months, which approach is right. But it is clear that the stakes are high, with the health of the world economy, the European Union and perhaps Mr. Obama’s presidential hopes hanging in the balance. Economists have fretted for months that forcing austerity plans on Europe’s troubled economies — while a good long-term solution — could lead to deep recessions in the short term, compromising any chance for effective change.

On a political level, Mrs. Merkel could look back on last week’s meeting of leaders in Brussels and declare, “We have succeeded.” Where her mentor, former Chancellor Helmut Kohl, failed, Mrs. Merkel managed to push through enforceable oversight of government spending that would allow the European Court of Justice to strike down national laws that violate fiscal discipline.

Initial market reaction to the Brussels meeting was positive, but that has happened before as deal after deal has been struck between European leaders. Skeptics say that, economically, Mrs. Merkel, the hard-line austerity queen of Europe, has won a hollow victory, one that will fall apart like every other solution that was proclaimed as lasting but proved to be fleeting.

“If the new arrangement turns out to be too toothless to enforce the rules, we’ll be back to square one,” said Thomas Klau, a political analyst and head of the Paris office of the European Council on Foreign Relations.

Just ahead of Mrs. Merkel’s unexpectedly robust success, Mr. Obama issued his unheeded warning from across the Atlantic. “There’s a short-term crisis that has to be resolved,” he said, “to make sure that markets have confidence that Europe stands behind the euro.”

Mr. Obama is fiercely proud of the record he achieved in keeping not just the United States but also the entire world out of an acute financial meltdown after 2008, presiding over enormous stimulus spending in tandem with unrestrained support from the Federal Reserve. The president and his allies now say that in doing so, they may well have prevented the world from falling into another Great Depression.

By ignoring the short-term threat, American officials say, Mrs. Merkel is unwittingly courting the very threat they so narrowly managed to keep at bay. Strong governments can borrow cheaply, mainstream economists on both sides of the Atlantic argue, and have an obligation to intervene more aggressively than they would in normal times to make up for the slump in private demand.

Article source: http://feeds.nytimes.com/click.phdo?i=2dc9822db22798ae9bf2b2009cbbcda4

U.S. Pressures Europe to Act With Force on Debt Crisis

In phone calls and meetings over the last week, President Obama urged Mrs. Merkel and President Nicolas Sarkozy of France to take coordinated measures to prevent Greece’s debt woes from spreading to its neighbors. The American pressure will be on display again Friday and this weekend at a gathering of the world’s finance ministers in Washington.

Yet administration officials played down the likelihood of concerted action emerging from these meetings of the International Monetary Fund and the World Bank. At best, they said, the ministers might lay the groundwork for a bolder response in November, when leaders of the Group of 20 industrialized nations meet in Cannes, France.

The lack of global action comes even amid the growing recognition that Europe’s debt crisis is now perhaps the largest shadow hanging over the global economy. Although trade with Europe represents only a small share of the American economy, Europe’s problems have repeatedly rattled Wall Street over the last year and a half, eroding confidence and exacerbating fears of businesses and consumers.

“The biggest single risk to the United States today is that the European situation will spiral out of control,” said Edwin M. Truman, a former Treasury official who is now at the Peterson Institute for International Economics. “Europe is not going to save the U.S. economy, but it could be the straw that breaks it.”

Kenneth Rogoff, a Harvard economist who has written about the history of financial crises, puts Europe’s effect on the United States in blunt political terms. “The downside scenario is awful,” he said, “and if it happens before the U.S. election, it would turn a toss-up election into one in which the president is a huge underdog.

“The administration’s hope is that the Europeans will kick the can down the road far enough that it gets past the election,” said Mr. Rogoff, who has advised Mr. Obama and Republicans.

The administration has trained much of its attention on the figure who may have the greatest ability to influence the outcome in Europe: the German chancellor. Since he took office Mr. Obama has met or spoken with Mrs. Merkel 28 times  — a pace befitting someone who may have as much influence on his fortunes as his rivals in Washington.

In their most recent call, on Monday, Mr. Obama implored Mrs. Merkel to throw more financial firepower at the crisis. The conversation delved into technical details, as well as the risk of financial contagion, a senior administration official said.

Mrs. Merkel faces daunting political obstacles — which Mr. Obama fully recognizes, this official said — in persuading the German public to spend hundreds of billions of euros to bail out Greece and potentially other Mediterranean countries.

While the United States is offering lessons drawn from its own crisis in 2008, Treasury Secretary Timothy F. Geithner and other officials are treading carefully to avoid antagonizing Europeans who complain the United States has no business lecturing them. When Mr. Geithner attended a meeting of European finance ministers last week in Wroclaw, Poland, a handful of officials from smaller countries took shots at him afterward, but American officials said the meeting was more productive behind closed doors.

The administration’s lobbying effort takes two main forms. One is to press the argument, supported by many economists, that Germany benefits enormously from preserving the euro in its current form rather than abandoning it or standing by as it unravels.

By combining its Deutschmark with the currencies of poorer countries, like Greece, Germany has been able to have a cheaper currency than it would on its own and to export far more than it otherwise might. And exports, which account for a larger share of the German economy than the American economy, have been the main engine of Germany’s recovery.

Article source: http://www.nytimes.com/2011/09/24/business/us-pressures-europe-to-act-with-force-on-debt-crisis.html?partner=rss&emc=rss

Euro Zone Seeks Deal on Greece by Thursday

Herman Van Rompuy, the European Council president, announced that the meeting would be held Thursday, six days later than originally expected — a reflection of the problems involved in reaching a deal.

Negotiations on the bailout have proved to be highly complex. Some diplomats have predicted that a plan that forces private investors to share the burden, as demanded by Germany, could prove more costly to taxpayers than a plan that does not.

During the 18-month Greek debt crisis, Germany has consistently played for time when faced with crucial decisions. With bailouts for Greece and other euro zone nations unpopular with the German public, Mrs. Merkel has appeared able to act only when confronted by a looming crisis.

This time she resisted a call from Mr. Van Rompuy for any meeting before sufficient groundwork had been laid to achieve a result, arguing that moving prematurely would further destabilize the financial markets.

Initially penciled in for Friday, the meeting was put off until Monday or Tuesday. But in an announcement made Friday on Twitter, Mr. Van Rompuy said he had decided to call a meeting of euro area leaders for noon on Thursday.

“Our agenda will be the financial stability of the euro area as a whole and the future financing of the Greek program,” he said. “I have asked the preparatory work to be brought forward inter alia by the finance ministries.”

Officials will be asked in the meantime to address the central outstanding issue: the extent to which private investors will be asked to share the cost of the rescue.

The European Central Bank has consistently opposed any plan that would be considered a selective default by the credit rating agencies, worrying that such an outcome would increase the risk of the debt crisis spreading from Europe’s periphery to its softer core countries, notably Spain and Italy.

Germany and the Netherlands, however, have insisted that the banks and other financial institutions must bear part of the pain to win public support.

According to officials briefed on the discussions, the conflict has created a variety of problems, not least being the possibility that if European banks sustained significant losses on their holdings of Greek bonds, they might need to be bailed out by taxpayers.

“The consequence of this is more money,” said one European Union diplomat who was not authorized to speak publicly.

Nevertheless, the uneasy compromise that is emerging will probably require private investors to take losses, said one official briefed on the discussions.

Germany had demanded that condition in exchange for its agreement that debtor countries be allowed to lighten their burdens by reducing their interest rates, lengthening the maturities of their loans and allowing the European bailout fund to finance the buyback of bonds on the secondary market.

Those measures are now seen as an important way of allowing Greece, Ireland and Portugal to escape from recession and return to growth.

Article source: http://feeds.nytimes.com/click.phdo?i=a148f28a71ccbe0d6ba63fdd8f87aeb2