Business of Sport: Online Gaming Industry Heads to Britain

Right-wing American politicians and religious leaders denounced it for undermining the family, dashing dreams and fraying the fabric of society. In Britain, cash-hungry sports welcomed its largesse in the sponsorship market.

This week the existence of the online gaming industry has come under threat after a law was passed in the United States to outlaw internet gambling and poker games. Shares went into freefall, with some £4bn wiped off values within hours of the legislation being passed, analysts comparing the sector's plight to the collapse of the dotcom boom.

Companies that grew on a wave of optimism about expansion in the US face either ruin or at least some form of contraction, with many trying to refocus their activities on the UK, Europe and relatively untapped Asian markets. As the companies quit the US, analysts expect a wave of consolidation.

The crisis has caused alarm at football clubs and among sports administrators. The online gaming industry helped bring in £15m for Premiership clubs last season. It was also seen as a saviour by snooker, after tobacco sponsorship was banned.

"There has almost been a stampede into sport sponsorship by the internet companies, trying to create global exposure for their business," said Nigel Currie, director of the sports marketing agency brand Rapport. "Shirt sponsorship in the Premier League increased from £55m to £70m last season and it was pretty much on the back of the impact of the internet betting companies."

Middlesbrough were sponsored by 888.com before the gambling giant Mansion's attempts to succeed Vodafone at Manchester United transformed the picture. Although United signed up with America's largest insurance company, AIG, the involvement of the internet betting company swelled the price from £9m to £15m a year. Mansion switched to Tottenham Hotspur in a deal reported to be worth £8.5m per season, about four times the sum the club received from its previous sponsors, Thomson Holidays. With 32Red sponsoring Aston Villa and Bet24 sponsoring Blackburn, the internet companies have become a "hugely important factor" in the wealth of the Premiership, according to Currie, who is also chairman of the European Sponsorship Association.

He believes the fallout from this week's move by US legislators could have a long-term impact on the UK market. "Everyone piled in very quickly because they needed to get their messages to key territories," he said. "It could evaporate in the future."

A spokesman for 32Red said 92% of its business took place outside the US and its two-year deal with Aston Villa is unlikely to be affected. At 888.com, senior executives are still taking stock - the new law effectively wiped out 50% of its business, although the company is less exposed to the US market than many of its online rivals, such as PartyGaming and Sportingbet. It has been re-focusing its activities towards Europe and Asia, signing shirt deals with Seville and Toulouse.

The company's chief executive has warned of substantial cost controls, but its marketing director, Matt Robinson, insisted: "It is too early to say what the impact will be. A lot of questions need to be answered. America and Europe are totally different - the US is a law unto itself and it is safe to assume we won't be sponsoring any Nascar teams in the near future."

Over 30 years, tobacco companies poured £100m into British sport, but a ban on such sponsorship last year led to Embassy being replaced as the sponsors of the World Snooker Championships by 888.com in a multi-million pound, five-year deal offering vital exposure in the Asian market, where snooker has a growing following, particularly in China.

"It is a pivotal deal for us," said Ivan Hirschowitz, World Snooker's spokesman. "Losing tobacco was unarguably a major financial blow and 888.com's sponsorship is a good deal for snooker. They are in for the long haul."