Service Marketing Aspects Associated with the Allure of E-Gambling PDF
Preview Service Marketing Aspects Associated with the Allure of E-Gambling
Service Marketing Aspects Associated with the Allure of E-Gambling Alan D. Smith William T. Rupp ABSTRACT.Arecentoutletforgamblingthathasevolvedwiththead- ventofe-commerceisInternetgambling.Internetgamblinghasbecomea verypopularoutletforbettingonallsportsorplayingonlinecasinogames. Withtheeaseofuseandincreasingaccessibility,agamblerdoesnoteven needtoleavetheirhometoplacebetsorplaythecasinogames,oftenwith financially devastating results. Other important questions concerning the service marketing of this type of interactive entertainment exists as well. Whatarethemoralimplicationsofoperatingthesegamblingwebsites,and whattypeofgamblerarethesewebsitestargeting?Intermsofservicemar- keting,theonlineindustryexcelsincustomerservicebyofferingmanyof the interactive entertainment industries’ finest technologies and promo- tionalcampaignsthroughofferingoutstandinginterfaces,varietyofgames and online chat with other players. However, with Internet gambling, di- lemmas to the following exist at the individual, firm, and society levels. Thesedilemmasalsoaffectthefutureofthegamblingindustryasawhole, and Internet gambling in particular. These quandaries include regulatory questionsforgovernment,howuseofcreditcardfundsforgamblingpur- poses has effected the banking/finance industry, and enticement of gam- blingtothepotentialgamblingaddict.Modelsoftheseeffectsareincluded. [ArticlecopiesavailableforafeefromTheHaworthDocumentDeliverySer- vice: 1-800-HAWORTH. E-mail address: <[email protected]> Website:<http://www.HaworthPress.com>©2005byTheHaworthPress,Inc. All rights reserved.] Alan D. Smith is affiliated with the Department of Management and Marketing, Robert Morris University, Pittsburgh, PA 15219-3099. William T. Rupp is affiliated with Stephens College of Business, University of Montevallo,Montevallo, AL 35115. Services Marketing Quarterly, Vol. 26(3) 2005 http://www.haworthpress.com/web/SMQ © 2005 by The Haworth Press, Inc. All rights reserved. Digital Object Identifier: 10.1300/J396v26n03_06 83 84 SERVICES MARKETING QUARTERLY KEYWORDS.Customerservice,e-commerce,e-gambling,interactive entertainment industry, Internet gambling, service marketing, online gambling INTRODUCTION Nature of Gambling as an E-commerce Business Theprimarybenefitofonlineshoppingcustomerconvenienceisbe- ing directly undermined by a lack of real-time purchase assistance for buyers.Infact,thegrowthofe-commerceactivityhasnotbeenpropor- tionately associated with potential sales. Many firms cite that online purchasesareafractionoftheitemsleftinvideoshoppingcarts,result- inginhugerevenueslosttoe-commercecompanies.E-commercecom- panieswillhavetosupplycustomerserviceequivalenttothatprovided bytraditionalretailersinordertogainmarketshareandincreaseprofits. Thecaseinpointisthee-gamblingindustry.Gamblinghasbeenaround sincethebeginningofcivilization.Asaresultofthisdesiretogamble, manyvarietiesofgamblingandoutletsforgamblinghaveevolvedover the years. In general, gamblers have more choice then ever in offline/online casinos. A recent outlet for gambling that has evolved with the advent of the Internet is online gambling. For example, gam- blerscanengageintax-freewageringintheirhomeand/orofficewith- outthehassleofcurrencyexchangeproblems.Somemayarguethatthe online gambling industries make it to easy for customers to engage in such activities. However, as an industry, it is noted for offering out- standing service in order to entice potential customers into online casinos. Popularity of Online Gambling Online gambling is becoming a very popular outlet for betting on all sportsorplayingonlinecasinogames,sinceitisbasedontheincreasing familiarityassociatedwithe-commerceandcomputergames.Withnew cyber-casinosjustamouse-clickaway,Internetgamblingsitesaregain- ingpopularityandareincreasinglyfoundontheInternetandoffercasino gamessuchasvideopoker,videoslotmachines,backgammon,androu- lette.SomefeelthatonlinegamblingmaybetheInternetgamblingisthe next step in the emergent interactive entertainment industry. For exam- ple,onlinegambling(http://www.online--gambling.org/)haslistedtheir Alan D. Smith and William T. Rupp 85 recommended online gambling casinos by software, which casinos that offerthebestselectionofgames,highestpayoutpercentageandbestcus- tomer support. The listings of software titles are numerous and include: Boss Media, Cryptologic, Microgaming, OddsOn, Playtech, and Real- timeGaming.Asaservice-marketingcasestudy,e-gamblingisanexcel- lent example of promoting customer service in an online industry. Internet gambling sites also offer a large variety of betting services for collegeandprofessionalsports,horseracing,autoracing,andrelatedser- vices.Inaddition,onlinegamblingcasinostypicallyoffercashbonusesto enticenewplayersbyallowingthemtothecasinowithlessriskoflosing money. The gambling bonus is real cash added to their accounts and is availableafterasetnumberofplays.Manye-commerceenterprisescould learnafewlessonsofservicemarketingtechniquesfromtheonlinegam- blingindustry. In general, the general population sees the e-gambling industry in muchdarkerterms.Onlinegamblingistrulyseenasaglobalproblem. Theindustrymakesitaninterestingtargetforscholarlystudy,sinceitis characterizedbythetwoextremesofsuperiorInternet-basedcustomer service and a moral hazard. For example, visits by Australian Internet users to online gambling sites remained consistent throughout 2001 (based on a study for the Australian Casino Association) and this oc- curred despite the introduction in June 2001 of the Australian federal government’sInteractiveGamblingAct2001.Thispoliticallycharged piece of legislation, which was designed to ban casino-type gambling ontheInternet,simplyhaveforcedAustraliangamblerstooffshoreca- sino websites (Creed, 2002). Interestingly, the Interactive Gambling Act 2001 directly prohibits the provision of casino-type gambling to AustraliansfromAustralia-basedonlinecasinos,althoughonlinehorse racingandlotterywageringsitesareexempted.Inaddition,Australian casinos are allowed to provide Internet gambling to overseas Internet users. Specifically in the U.S., a Congressional panel voted to update the Wire Act of 1961 that bans interstate wagering to include online gambling(“Congressionalpanelvotes...”2002).Infact,theHouseJu- diciary subcommittee voted unanimously on the proposal to make the ActalsoapplytotheInternetandothermoderncommunicationsaswell as telephone lines. More significantly, these amendments to the bill wouldalsoallowU.S.federalagentstoobtainacourtorderrequiringa credit card company to cut off transactions with a gambling website based outside of the U.S. 86 SERVICES MARKETING QUARTERLY Internet Gambling Dilemmas However,withInternetgamblingfollowsanumberofinterestingdi- lemmas that directly impact individuals, companies, and society as a whole.Thesedilemmasmightalsoaffectthefutureofthegamblingin- dustry as a commerce endeavor and Internet gambling in particular. These dilemmas include the following: 1. Thefederalandsomestategovernmentsaretryingtofindwaysto acquirethelosttaxrevenuesfromtheInternetsitesbyattempting to enact appropriate laws. Since most of these Internet gambling sitesoperateoutsideoftheU.S.,theseInternetgamblingwebsites andtheirassociatedcompaniesdonotcurrentlypaytaxdollarsto theirfederalandlocal/stategovernments.However,muchoftheir customerbaseislocatedintheU.S.Althoughthereisasignificant rise in global gambling networks, the associated gambling debts thatthesecustomersarelosing,bothdomesticallyandabroad,are causingsignificantlossofpotentialtaxrevenues.Itisarguedthat the loss of those tax revenues hurts the ability of many govern- mental agencies from fulfilling their obligations to their citizens. 2. Many creditcardcompaniesareattemptingtocurtailrecentsub- stantiallosses by banningtheiruse on Internetgamblingsites. A significant number of Internet gamblers use their credit cards fundsasgamblingfundsasaconveniencetocovertheirgambling debt.Unfortunately,thespeedofsuchdevicesasvideogambling hasbeenmadeimmenselyquickerandmoreconveniencethanin thepast.Frequentlyisthecasewhensomeofthesegamblersrun up major debts on their cards from the use of Internet gambling sites,andarethenunabletopaybackthedebtanddefaultonthe creditcard.Thesecreditcardcompaniesmusteithergotocourtto try to gain back some or all of their lost funds, or simply lose all thegambledfunds.Thesemeasuresbythecreditcardcompanies cost considerablemoneyand effort, and theselost funds seemto beontheincrease,notonthedecline.Thisincreasestheborrow- ingratesforthesecardsandeventuallyhurtsallthoseindividuals that use credit in a responsible manner. 3. Thetollonsocietythatonlinegamblinghastakenmaybestagger- inginseveralaspects.Manycustomershaveentrenchedtheirlives aroundthesewebsitesandhaveignoredwhatandwastednumerous resources and time on these at least partially addictive websites. Manyadultshavelostalloftheirsavings,endangeredpersonalre- Alan D. Smith and William T. Rupp 87 lationships, and lost employment in order to gamble on these websites. Also, many children and young adults have become ad- dicted to these websites due to their easy access and video game-likesetup.Gamblingisaseriousaddictionthathaslong-term consequencesonnotonlythelifeofthegambler,butalsothelives ofthosearoundthem.Unfortunately,onlinegamblingdeliverysys- temsmayamplifythesenegativeaspectsofthisaddiction. In recent months, Internet gambling has been receiving widespread coverageinthepopularpress.Thereisgrowingconcernthatthistypeof gambling is luring a new gambler (particularly a younger and more naïveindividual).Governmentsatalllevelsshouldbetryingtodecide the legality of this type of gambling in at least a cost/benefit analysis fashion to their societies. As previously mentioned, some credit card distributors are attempting to ban the use of their cards for these websites.Thesetopicsandtheircontinueddiscussionwilldeterminethe futureoftheInternetgamblingindustryandthepotentialusersandtheir associatebuyerbehaviorpatterns.Table1summarizessomeofthema- jor themes in this fairly heated discussion concerning the negative as- pects of online gambling. Future E-commerce Implications Associated with E-gambling DoestheInternetgamblingindustryhaveastrongfuture,oristhisa passing fad? Many casinos, corporations, and independent entrepre- neurshavebillionsofdollarsinvestedinthisindustryandbelievethatit isthenextgreatwaytogeneraterevenue.Thecustomerservicepromo- TABLE 1. Exploring the Negative Effects on a Number of Levels in Society EFFECTS OF/ON INTERNET GAMBLING INDIVIDUALS Lose all savings/overspend limits of budget, no longer have interest in family/friends, ignore school/work, commit crime to subsidize habit--stability of social and family structures. COMPANIES Lose millions of dollars from gamblers who default on debts, lawsuits against delinquent gamblers, funds to protect industry from gambling websites. GOVERNMENT Funds to battle websites through courts and legislation for reasons of tax dodging, fraud, and lack of control by government agencies. DILEMMAS Should government, business, and society accept this industry as it stands, alter the industry, or ban it from existence? 88 SERVICES MARKETING QUARTERLY tions and service marketing campaigns are often quite extensive and wellplanned.Also,manygamblersusethesewebsitesonadailybasis and truly enjoy the availabilityand accessibilitythe Internet offers–an addictive form of interactive entertainment. Of course, in order to ac- cessthesewebsitesfromtheresidence,potentialcustomersneedonlya workingPCandInternetaccess;perhapsarestrictionthatmodernbusi- nesses may overcome for some potential users by providing free Internet access. Unfortunately, addictive behaviors may be drawn to andthriveinthispersonalenvironment,sinceitisveryeasytogamble withoutdistraction.Withtheeaseofuseandincreasingaccessibility,a gamblerdoesnotevenneedtoleavetheirhometoplacebetsorplaythe casino games, often with financially devastating results. Moral Hazard Questions Other important questions concerning the service marketing of this typeofinteractiveentertainmentexistsaswell.Whatarethemoralim- plicationsofoperatingthesegamblingwebsites,andwhattypeofgam- blerarethesewebsitestargeting?Muchofthecurrentgamblingpublic hasusedthe“triedandtrue”methodsofthepast.Usingbookies(illegal bet takers), legal betting establishments (such as Ladbrokes for horse- racing), casinos, and telephone-betting services are common methods for placing wagers that have been in existence for many years. How- ever,theseoutletsforwageringhavenotnecessarilyattractedtheyoun- gerorhomeboundgambler.TheInternetgamblingsitesareattractiveto the younger, Internet savvy user since the websites look and play like computergamesthathavelittleornoconsequencesfortheirexperimen- tation.However,Internetgamblingcoststheplayermoneytoplayeach and every time and can become addictive. Other interesting moral hazard questions include: should the gam- blingindustry(Internetgamblingwebsitesinparticular)beheldrespon- sible for the addicts they cause from their product, much like the tobacco industry is experiencing in the court systems today? Should those business owners who are profiting from these websites also aid gamblerstoconqueringtheiraddictionscausedbythesewebsites?The U.S.governmenthasheldthetobaccoindustryaccountableforthead- dictioncausedbythetobaccoindustry’sproduct.Thetobaccoindustry is paying essentially billions for healthcare and addiction education to the public due to damage caused by tobacco. Should the gambling in- dustry could be held accountable for the addiction they encourage in gamblers and be sanctioned for their actions? Internet gambling sites Alan D. Smith and William T. Rupp 89 areverycontroversialandhaveinherentproblemsandmirrorthemyr- iadofproblemsthathaveplaguetheInternetsinceitsinceptiondueto itsnewnessandlackoflegalcontrols.But,theyarealsofinanciallyvery successfulandgrowing,aswellashallmarkedbyofferingoutstanding customer service. Looking at some of the corporate issues might give e-commerceresearchersaninsightintothefutureimplicationsoftheir continued growth, as demonstrated in Figure 1. Figure1illustratesthetypicalrouteavailabletotheInternetgambler toreachanonlinegamblingwebsite.Therouteisverydirect,onlyneed- ing a computer with Internet access to visit gambling websites. How- ever, there are several legaland financialobstaclesthatare attempting tosloworstopthateasyaccess.Theseobstaclestypicallyinclude,with veryquestionablesuccess:Governmentalregulations,creditcardcom- panyregulationsregardinguseofcardsforgamblingpurposes,andthe stigma of gambling in society. Hence, gambling has potentially very negativeeffectsthatnotonlyincludegovernmentandbusinessimpacts intermsoflosttaxes,increasefinancialburdenontaxpayers,andother sourcesofrevenue,butsocietyasawhole.Measurestostemthenega- tiveeffectsofInternetgamblingtraditionallyhasbeenenactedbygov- ernment, since government has the most direct power to slow or stop this form of gambling. By enacting strong laws, government agencies maymonitorandcloseInternetgamblingsitesbeforetheycausefurther damagetotheindividualgambler,otherlegitimatebusinesses,andsoci- ety/family structures. Unfortunately, as previously suggested by the Australianexamplecitedearlier,governmentbodiesmayhavevarying degrees of success. The service marketing aspects associated with Internet gambling also has a number of parallels to increase e-com- merce business traffic. FIGURE1.AnOverviewoftheSocialForcesFacingtheRelationshipBetween the Gambler and the Gambling Industry Social Regulators Concerns GAMBLERS Gambling Companies CreditCard Companies 90 SERVICES MARKETING QUARTERLY EXAMINATION OF THE COMPLEX FORCES OPERATING IN AN ONLINE GAMBLING ENVIRONMENT Regulatory Conflicts Ingeneral,governmentsatalllevelsareinaquandaryabouthowto handleInternetgambling.Globally,governmentssuchasChinaand,in particular,theMuslimcountrieshaveoutlawedgamblingofanyform, while governmentslikeAustraliaand the U.S. have singled out online gamblingactivitieswithintheirboundaries.Punishmentsforgambling may be very severe in some of these countries and sometimes involve literatelyinvolvelossoflimborlife.OthergovernmentssuchasHong Kong, Australia, the United Kingdom, France, and Italy have taken stepstorestrictactivitiesofunauthorizedoffshoregamblingoperations. However,intheU.S.,therearemanydifferentopinionsandpositionsof howInternetgamblingmaybehandled.Forexample,in2000,$2.2bil- lionin revenues was earnedworldwide from Internetgambling(Ham- mer,2001).Thisisagiantindustrythatisgrowingyearlyandcannotbe shut down easily. Although many federal, state and international gov- ernmentshaveplacedrestrictionsonInternetgambling,ithasverylim- itedsuccessandmayonlycausedtheoperationstomoveunderground intherealmofillegalactivities–whichmayevenincreaseitsappealand allure to the younger and/or less experienced crowd. However, many othercountriesarenotonlyallowingInternetgamblingtobelegal,but are encouraging the site owners to set up their operations from these countries (please see Figure 2). Figure 2 illustrates a force field ap- FIGURE 2. A Force Field Approach to Model the Forces Moving For and Against Online Gambling Opportunities Both Domestically and Globally Figure2 Gambler MaySoon LNeegvaaldIan FeSdtaetrealLLaawwss WireAct InBTehLeeUga.Sl. InternationalLawsLawWaived Unmonitored InSome States InternetGamblingSite Alan D. Smith and William T. Rupp 91 proachtomodeltheforcesmovingforandagainstonlinegamblingop- portunities. AsdemonstratedinFigure2,thereareanumberofforcesmovingthe acceptability of e-gambling as an n e-commerce venture in several di- rections. Many of these countries currently only require a business li- censeandabackgroundcheck(Beauprez,2002).Also,intheU.S.,the state of Nevada still allows Internet gambling to be legal, while many otherstatesaresimplynotmonitoringInternetgamblingand/orthelaw is waived. Even as the federal government attempts to curb or ban Internetgambling,thereisstillachancethatthegovernmentwillmake gambling legal, although recent actions have made that prospect un- likelyfortheshortterm(“Congressionalpanelvotes...”2002).Ifthe U.S.governmentmayfindlegitimatemethodstogaintaxdollarsfrom Internet gambling, some feel they might decide to remove their initial objectionsandlegalizethisformofgambling.Thebattlebetweengov- ernmentpartiesabouthowtoregulateInternetgamblinghasslowedthe legalprocess.Untilthesepartiesmaycometoadecisionaboutregula- tion processes, these websites will continue to operate in the U.S. out- side the legal arena. Figure 2 illustrates some ways that the Internet gambler may avoid roadblocks to the Internet gambling sites even though roadblocks to use of the websites by government are in place. Legal Efforts in the Online Gambling Field Thereareanumberoffederal,state,andinternationallawsinplaceto deteroperationofthesewebsites.Anotherlegalmethodofdeterrenceto useofthesewebsitesistheWireAct,aspreviouslydiscussed.However, Internet gambling site owners are still able to circumvent these road- blocks since some states (including Nevada) are either allowing these websitestooperatelegallyorhavedecidednottopursuelegalactionof those websites operating in their states. The federal government is still decidingaboutwaystoeitherfighttheoperationofthesewebsitesinthe U.S.orlegalizethemforpurposesofrevenuecollection.Forexample,the U.S. Justice Department is attempting to prohibit states from allowing Internetgambling.“Assetforthinpriorcongressionaltestimony,theDe- partmentofJusticebelievesthatfederallawprohibitsgamblingoverthe Internet,includingcasino-stylegambling,”assuggestedbyAssistantAt- torneyGeneralMichaelChertoff(Simpson,2002).Historically,in1961, theU.S.CongresspassedtheWireAct.TheWireActprohibitsindividu- als from utilizing telephone facilities to receive bets. The Wire Act criminalizestheuseofawirecommunicationfacilityforthetransmission 92 SERVICES MARKETING QUARTERLY ininterstateorforeigncommerceofbetsorwagersorinformationassist- ing in the placing of bets or wagers on any sporting event or contest (Hammer, 2001). Enforcement of this act has used for prosecution of Internetgamblingsiteownerswhohandlebetsfromacrossstate(orinter- national) lines (Vuong, 2002). This bill is perhaps the strongest tool the federal government has in its arsenal for prosecuting Internet gambling site owners and has been recently upheld to include all forms of online gambling. However,severaljudgesseemtobeinclinedtogiverelativelylighter sentencestothoseconvictedunderthelaw,sincethereisacurrentsoci- etaldebateontheabilityofthegovernmenttoenforceandtheethicsas- sociated with such legislation of moral behavior. There are other reasonsthatthelegalsystemmayfeelthisisaninsignificantcrimeand arenotwillingtogivestiffsentences,duetothenewnessofthetechnol- ogyandthelackoflegalprecedents.Forexample,therecentbanonthe callingoftelemarketersintheU.S.(over50millionhavesignedupon the www.donotcall.gov website) underscores the constitutionality of suchlaws.Anotherreasonmaybethatthelaw(WireAct)wasenacted beforetheadventofInternetgamblingandmanydonotnecessarilyfeel that this law directly pertains to Internet gambling (Hammer, 2001). Specific bans against Internet gambling at the federal level have not beenpasseduntilrecently.Oneopponentofthepassingofthisspecific lawisHouseMajorityWhipTomDeLay,RepublicanfromTexas.Rep- resentative Bob Goodlatte, a Republican from Virginia, suggested, Congressman DeLay wanted to ensure that all interested parties work together on a ban that would not infringe on state rights (Batt, 2002). Embracing Online Gambling Even as the federal government is attempting to ban Internet gam- bling, other states, as well as countries, are in favor of such websites. England and Costa Rica are embracing such websites (Vuong, 2002) andtheincometheybring.SincetheU.S.istryingtobanInternetgam- bling,manycompaniesoperatetheirgamblingwebsitesoutoftheU.S. While$2.2billioninrevenuesisderivedfromInternetgambling,most websitesaresetupoutoftheU.S.Thismeansmostofthetaxrevenue fromInternetgamblingisalsosent“offshore.”U.S.lawmakersappear tobestrugglingwiththisdecision,butregardlessofthelegalramifica- tions,Internetgamblingwillcontinuetobeagrowingproblemifother moral and rule of reason educational attempts are ignored in the U.S. Manybusinesses,aswellasweb-enabledcustomers,feelthattheU.S.
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