MGM poised to take lion’s share of ’Net bets

September 10, 2002 8:39 AM
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   Betting on the Net, MGM Mirage is poised to grab the lion’s share of the online gaming business.

    “They’re positioning themselves to be dominant in both the brick-and-mortar world and in the interactive world,’’ says Richard Fitzpatrick, CEO of the Las Vegas-based Interactive Gaming Institute.

    “It’s a highly fragmented market, but MGM can use its brand equity and promotions to drive customers to its land-based casinos,’’ adds Michael Tew, Internet gaming analyst for Bear Stearns. “They’ve got a high-quality management team and they’ll have a meaningful presence.’’

   Unfazed by recent rulings that have threatened to burst web wagering’s bubble, MGM Mirage CEO Terry Lanni is moving forward to launch the company’s Isle of Man online casino site early next year, and perhaps earlier, sources tell GamingToday.

   MGM’s team is headed by Bill Hornbuckle, the former MGM Grand hotel-casino president who now serves as president and chief operating officer of MGM Mirage Online, and chief information officer Glenn Bonner.

    “MGM Mirage is a premier brand in the gaming industry,’’ Hornbuckle told a recent iGaming World conference. “I am looking forward to our future online success.’’

   He will issue a status report next week when he delivers the keynote address on Internet gaming at the Global Gaming Expo.

   MGM’s prospects hinge in part on its partnership with WagerWorks. Headed by Andrew Pascal, the San Francisco-based tech firm recently secured exclusive online gaming rights from Sony Pictures and Freemantle Media for several top game titles, including Wheel of Fortune, The Price is Right, Jeopardy and Triple Play Poker.

   WagerWorks, which recently helped launch HardRockGaming.com, began its relationship with the Las Vegas gaming giant by developing a free play-for-prizes site for the company.

    “Our whole approach with the play-for-prize community was to learn a lot,” Pascal said, while noting that MGM Mirage received substantial commercial benefits by driving players to its Web site and building player loyalty.

   This enabled WagerWorks to develop a platform that served six MGM Mirage casinos tied to the play-for-prize site. And Pascal said that was the entrée for the pay-for-play arena.

   Lanni conservatively estimates that 250 non-U.S. companies already in the online gaming business are generating $1.5 billion in revenue -- an ante he expects to rise to $10 billion by 2005.

   “If properly licensed, regulated, and taxed,” Lanni said, “cash-based Internet gaming has the potential to become a multibillion-dollar opportunity for the gaming industry worldwide.’’

   There are steep hurdles to profitability, however. The U.S. Department of Justice recently reaffirmed its interpretation that the 1962 Wire Act prohibits all online wagering. Credit card companies have taken a similarly dim view, refusing to pay U.S.-originated gaming debts.

   Like MGM, WagerWorks isn’t betting on Uncle Sam anytime soon. “We have no plans to take U.S. wagers. It would be all gravy [if it’s legalized],’’ said WagerWorks vice president Paul Mathews, whose firm is moving “full-steam ahead” on age and border control programs to ensure that all wagering is legitimate.

   On Monday, MGM Mirage Online selected Quova’s GeoPoint to provide geolocation services to ensure regulatory and jurisdictional compliance. Quova President and CEO Marie Alexander called MGM’s move “a powerful endorsement.’’

 

Tew says MGM Mirage’s initial Internet investment of $20 million isn’t a huge risk for a conglomerate with annual revenues of $4 billion. In any event, he adds, the potential payoffs “won’t be a huge contributor to the bottom line.’’

   Nevertheless, Fitzpatrick credits Lanni and fellow MGM exec Dan Wade for having a vision of the future. “If hadn’t been for them, Nevada wouldn’t have passed the legislation [allowing it in-state],’’ he said. “The leadership on this has come right from the top.’’

   While MGM Mirage has clearly taken the inside track, Fitzpatrick notes that the Venetian’s newly formed online initiative, headed by Rob Gorman, is “coming quickly.’’ He adds that Harrah’s under tech-savvy Gary Loveman will also make some noise.

   For now, though, MGM is clearly No. 1, Fitzpatrick said. “They took the courageous position to break the mold as see what they could do while others decided to sit back and watch.’’