Entertainment firms studying Internet gaming

Kevin Ferguson

Friday, Sept. 28, 2001 | 10:12 a.m.

There's no question that entertainment and media companies see lucrative opportunities in the Internet gambling industry and are exploring ways to tap into the growing market.

But some analysts say its more likely that companies like Viacom/CBS or the FOX network parent's company, News Corp., would strike a strategic relationship with a casino operator rather than acquire one.

That way these entertainment and media firms can avoid undergoing the scrutiny of the regulatory and licensing process that entails long and tedious background checks of all their sizable executive teams, said Sebastian Sinclair, an Internet gaming analyst for Christansen Capital Advisors.

"A lot of entertainment companies have looked at (a possible casino) acquisition but backed away from it when they looked into the licensing procedure," Sinclair said.

Marc Falcone, a gaming analyst for New York-based investment firm Bear Stearns, said Internet gambling could serve as a powerful marketing tool for leveraging its various TV, radio, and publishing outlets.

Aside from News Corp. and Viacom/CBS, software giant Microsoft Corp. and Virgin Group, which owns the Virgin Megastores, have been exploring ways to enterthe e-gaming industry, Sinclair said.

Playboy Enterprises has already taken giant leaps into the business with various ventures in Europe.

Its subsidiary Playboy.com Inc. has partnered with British sportsbook giant Ladbroke eGaming Ltd. to form PlayboySportsBook.com, a sports wagering site that operates in Gibraltar.

Playboy.com has also partnered with Penn National Gaming Inc. in co-developing PlayboyRacingUSA.com, a pari-mutual site for horse racing. Under the partnership, Penn National is responsible for the day-to-day operationsand overhead, which includes software, management and customer support.

Meanwhile, Playboy provides marketing, branding, design and content.

"Our approach has been to partner with companies that are leaders in their field and have the expertise and a gaming license in a favorable tax environment," said Christie Hefner, chairwoman and chief executive of Playboy Enterprises.

Playboy.com also operates PlayboyCasino.com, a site also based in Gibraltar.

Playboy.com had 10,000 visitors the day the site was launched in 1994. Now, it averages 4.4 million unique visitors per month from web users in 163 countries, Hefner said.

Playboy's websites provide a channel to promote all of Playboy's businesses from its magazine to its cable television channel to its various souvenirs.

"The brand is like a theme park and the products are like souvenirs," Hefner said.

And what the Internet and e-gaming provides, she said, is a channel for Playboy fans to interact with each other -- like in a multi-player poker game, while driving revenue to the company.

"We always see (Playboy) as an experience, rather than a product," Hefner said.