Technology speeds plans for Internet gambling

Monday, May 6, 2002 | 11:08 a.m.

The company developing MGM MIRAGE's off-shore Internet gambling site plans to demonstrate to regulators how it will be able to verify a player's identification, age and location in an effort to press ahead in the development of cybercasinos.

Paul Mathews, vice president of government affairs for WagerWorks Inc., San Francisco, said the company doesn't have a timetable for demonstrating the technology to regulators in the United States and abroad, but that it would occur before the launch of MGM MIRAGE's Internet casino.

MGM MIRAGE was licensed for Internet gambling in September on the Isle of Man, an island nation off the coast of Great Britain. The company was the first major Las Vegas gambling corporation to obtain an off-shore license. Company officials say the site will be open for business as soon as technological and regulatory issues are cleared, which could occur by the end of the year.

WagerWorks was a participant in a Friday panel discussion on the advancement of Internet gaming within the casino industry at the four-day Millennium Hospitality Summit at The Venetian and The Rio hotel-casinos. Andrew Pascal, president and chief executive officer of WagerWorks, was a panelist at the event, sponsored in part by the Cornell University School of Hotel Administration.

"We have the means for ID verification, age validation and geo-verification," said Pascal, enumerating solutions to some of the biggest issues lawmakers and regulators have had to Internet gambling.

The company has developed a system that uses a rules-based scoring engine that validates a player's identity by comparing information given at registration with numerous data sources available on the Internet. The company believes its solution addresses regulatory and business and market concerns.

Internet gambling is not legal in the United States, but most of the players at off-shore casinos play from personal computers in the United States. The industry is expected to grow to $4 billion this year and to $6 billion by 2003 after generating $2.2 billion in 2000, according to industry experts.

By comparison, Nevada's gaming industry generated $9.6 billion in 2000.

Panelist Marc Falcone, an analyst with Bear Stearns, said casino companies no longer fear that Internet casinos will syphon off business from their brick and mortar casinos.

Bill Hornbuckle, executive vice president of MGM MIRAGE and head of the company's Internet gambling efforts, said the company looks at the Internet venture as an extension of the company's brand and just as riverboats and Indian casinos have not decimated traditional casinos, Internet gambling won't have a negative impact on existing business.

"All it is is a screen," Hornbuckle said. "We expect little to no erosion of our core market."

But casino companies also recognize that their online competition will come from beyond traditional casino companies. Panelist Anthony Cabot, a partner with the Las Vegas law firm of Lionel Sawyer & Collins, said entertainment companies will become Internet casino competitors as will the software divisions of companies like Sony and Sega.

Hornbuckle said his company expects to be a key player in the industry because it is tuned in to entertainment.

"If you understand the entertainment industry, it opens a lot of doors," Hornbuckle said. "We feel we bring a lot of expertise," which will separate the company from the so-called "gray market" companies that operate off shore, but don't have the gaming expertise of established casino companies.

Panelists also said if lawmakers legalize Internet gambling, they expect horse track operators to become active players in the online casino industry.

Falcone said track operators aren't likely to make the same mistake they made when initially rejected racing simulcasts.

"They didn't embrace television as it developed," Falcone said of the tracks. "But many think that developing a following among the savvy Internet crowd is just what tracks need to drive the people back to the sport."

He said while interest in big races such as the Kentucky Derby and the Breeders Cup has grown, overall attendance at race tracks has been down.

Pascal said Internet casinos operating offshore already have begun using marketing tactics similar to the ones used by traditional casinos, including offering premiums for the amount of time spent playing.