News Web

Financial Times: Caesars bets on online gambling market

At 9.19am Pacific Daylight Time on Thursday, somewhere in Nevada, a resident or visitor to the state logged on to a computer or a tablet to play World Series of Poker online for the first time for real money.

For Caesars, the operator of the WSOP brand – which in the land-based world of gambling has been an annual Las Vegas tournament since 1970 – the money to be made from this particular player and others in the months following the launch is of trifling concern.

Of more relevance is the symbolism of the moment. Caesars has become the first large Las Vegas casino operator to take a dime out of online gambling.

Outlawed by Congress seven years ago, online gambling is finally gaining a legal foothold in the US, albeit in limited form. State by state, legislators are passing regulations allowing for online poker, casino and bingo. Sports betting remains off the table.

Nevada has led the way, followed by Delaware, though their small populations make it tough for online operators to make money. But New Jersey is set to go online in the next few months, and New York, Pennsylvania, Illinois and California are actively planning for regulation.

The US online gambling market could be worth $7.4bn in gross winnings by 2017, according to consultants H2 Gaming Capital, on the assumption that 17 states will have regulated online gambling.

It is not just the politicians who have been slow to come round to its acceptance, and only then because of the tax revenue benefits.

Some of the big casino moguls have proved ambivalent at best, hostile at worst, regarding online gambling as an errant, untrustworthy offspring that would damage the revenues of their casino palaces.

To Sheldon Adelson, online gambling represents nothing less than a threat to society – “a toxin which all good people ought to resist” – as the chief executive of Las Vegas Sands wrote in Forbes magazine in June.

Steve Wynn, in a hurry to expand his mega-casino Wynn Resorts empire across North America and Macau, has an ambivalent attitude to online gambling.

“I don’t know how to make the experience on a computer screen 17 inches in diameter particularly unforgettable,” he said on a typically colourful analysts’ call in April. He quickly added that his company would some day have to find the formula.

But Caesars, under chief executive Gary Loveman, is throwing itself at the task, and Nevada’s 2.8m population is about to bombarded with a publicity onslaught.

“It’s going to look like a tsunami in a bath tub,” said Mitch Garber, the former chief executive of PartyGaming recruited by Mr Loveman six years ago to set up and run the group’s online strategy.

A potentially bigger market is the 39m visitors who descend on Las Vegas each year. Airport advertising, billboards on the Strip, wraparound posters at Caesars’ hotels, hotel room keys and Do Not Disturb signs will all aim to persuade visitors about the attractions of WSOP online.

Their online gambling experience may only be limited to the length of their Vegas holiday, but lobbyists for online gambling think this will still be worthwhile.

“It will get more Americans exposed to playing online and maybe they will put pressure on their own state legislators,” said John Pappas of the Poker Players’ Alliance.

The launch of WSOP online is a moment to savour, too, for the European industry. Congress’s decisive ban in 2006 led to the exodus of European operators from the US, among them London-listed 888 Holdings.

Now, 888, founded by the Israeli brothers Avi and Aaron Shaken, is back in the US. 888 technology is powering the WSOP website for Caesars, which like other US land-based casino groups lacks the back-end online gambling knowhow developed by the Europeans.

“This is a magic moment for 888,” said chief executive Brian Mattingley. “We have a control room in Tel Aviv where people are watching the first deposits from the US coming in live.”

Those deposits are unlikely to be significant to 888’s revenues until 2015. By then, the industry may have a better idea whether Mr Adelson’s suspicions about online gambling cannibalising the land-based operators are well founded.

Mr Garber recalls the pre-2006 days when online specialists such as PartyGaming and 888 were enriched by the popularity of internet poker among Americans.

“We know Americans want to play poker online,” he said. “For us, this is a laboratory for others to watch and hopefully learn from it and follow it. Most of our competitors see online as a competitive part of the future and will be rooting for our success.”

By Roger Blitz, Leisure Industries Correspondent