Betting on Bits

The Economist, April 9, 1994

It was bound to happen: gambling is heading for the information highway. In October Gaming Entertainment Television (GET), a cable-TV station based in Pittsburgh, is to start broadcasting horseracing, poker and $1m-jackpot bingo, all of which will allow interactive gambling. At the same time, Sony's Game Show Channel, based in Los Angeles, is promising interactive versions of "Wheel of Fortune" and "The Price is Right". There is a market: 6m Americans play (by mailing in cards) the ordinary TV version of "The Price is Right". The two networks are taking opposite tacks. The Game Show Channel will be financed by advertising rather than gambling: interactivity is simply a wheeze to push up its ratings. In its fir phase it will allow viewers to play for free (ie, without betting real money) and will offer small prizes to those who win. Eventually, however, it may permit real betting too.

The strategy of GET, whose investors are betting $55m on the venture, is the other way around. Gambling, not advertising, will earn the money. In order to play, viewers will have to make a wager on the telephone or through a pay-per-view charge. To comply with Federal Communications Commission (FCC) rules against broadcasting games of "chance", the network will offer programmes that the regulators consider to be based on "skill". One of these is picking winning horses (which suggest that FCC commissioners rarely visit the racetrack). In the case of bingo, the channel gets round the rules by giving betting cards away free -- but only to viewers who pay a monthly charge.

GET's rivals worry that big profits from interactive gambling could attract unwelcome government attention. Nelson Goldberg, its president, is unmoved. He predicts that interactive gambling will be one of multimedia's most profitable applications -- far more lucrative than sending video-on-demand along the information highway, for instance. After all, Americans spent some $340 billion on gambling in 1993. They spent a meagre $5 billion at the cinema.

by David S. Bennahum