DAILY MEMO: Gaming:

Harrah’s thinks it can gain from online gambling

Rest of bricks-and-mortar industry is divided on issue of legalization

Monday, June 22, 2009 | 2 a.m.

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Headlines from the Vegas gaming industry

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For a time, big American casinos were making noises about wanting to expand gambling in cyberspace, as a way to extend their brands.

And why not? The evidence was that Internet gambling sites actually boosted business for bricks-and-mortar casinos, especially poker rooms. The Internet had nurtured a whole generation of new — and anonymous — poker players who wanted to prove their competitive skills at real tables where they could win fame and fortune.

But not everyone is on the bandwagon for Internet gambling legalization. For years, members of the American Gaming Association, which lobbies on a federal level and has closely watched the debate over online gambling, have been split on the question.

The association’s two largest members, Harrah’s Entertainment and MGM Mirage, support some form of legalization.

Several members of the gaming association oppose the legalization and regulation of Web casinos, including Steve Wynn, who believes that Internet gambling can’t be adequately policed and could embarrass the industry.

As a result, the association has been forced to adopt a neutral position on the issue.

Many newspapers have published stories about people draining their life savings in casinos — a crisis many people can’t relate to because they either avoid casinos or view them as destinations for occasional excursions or well-deserved pleasure breaks.

But hidden from view are the gambling binges at home computers, a scarier prospect for many people — including politicians and regulators.

Harrah’s, the most vocal supporter of Internet gambling in recent months, also stands to benefit the most from legalization.

Harrah’s owns the World Series of Poker, a multiweek tournament in Las Vegas that has morphed into a global tournament franchise not unlike a major sports league. Days before the 40th annual World Series of Poker kicked off in Las Vegas last month, Harrah’s launched a subsidiary in Montreal to capitalize on the spread of Internet gambling.

Harrah’s Interactive Entertainment, led by Mitch Garber, the former CEO of online gambling giant PartyGaming, aims to develop the World Series brand around the world and explore Internet gambling opportunities in Europe, where certain countries have legalized online betting operations or haven’t criminalized them.

Harrah’s owns the largest customer list in the casino business, with millions of members. Amid a recession, the company’s Total Rewards database continues to grow through World Series of Poker-branded tournaments at casinos nationwide and World Series of Poker Europe in London, which attracts players from across Europe. U.S. law prevents Harrah’s from recognizing poker players who win entry fees to the World Series through satellite tournaments offered by gambling Web sites. The company’s European tournament, sponsored by Betfair, a London-based online gambling company, has no such restrictions.

Through poker, Harrah’s is amassing a global and enviable reach outpacing its peers.

Although many casino companies view state legalization efforts with equal parts excitement and trepidation, Harrah’s has embraced expansion efforts in the United States and is the most aggressive proponent of casino gambling as a mainstream American pastime. CEO Gary Loveman, who has expressed a desire to open as many casinos as the American population can support, isn’t representative of the American Gaming Association, much less the casino industry, with mostly small, local casinos.

Nor does Massachusetts Rep. Barney Frank’s bill to have the feds regulate Internet gambling, which Harrah’s is backing, have broad support in Las Vegas.

Strip giant MGM Mirage, for one, prefers to leave regulation up to state governments.

Small casino operators know that Internet gambling has boosted their poker business and could raise needed tax money if regulated. They also realize the challenge of competing with a dominant brand like the World Series of Poker.

Discussion: 8 comments so far…

By rodtig

6/22/09 at 7:46 a.m.

Suggest removal

Online agmbling will eventually put Las Vegas out of business just as opening casinos in other countries has hurt international travel here.Harrahs and MGM are struggling to gain profits they had 2 and 3 yars ago and are fishing for anything.They are self destructing themselves and this community.Patients is a virtue and they need to focus on customer service which is really gone down.Customer service is what will bring Vegas back.They need to remember how it all began and go back to the customer.Instead of cutting jobs to save money they need to increase service to bring back the guests who have been here.
Corperate giants always forget who and what feeds them.
Mr.Wynn I believe still has that philosophy and will prevail and suceed through this resession along with Boyd Gammming.Corperate giants have destroyed the gamming industry and really what it stood for. Customer service Customer service Oh yes they smooze the high rollers that come here but there are 1 in a 1000 of those if you look at the total numbers.The little gambler is the on that makes the casino a sucess.MGM Harrahs needs to either get a grip or get out.
I believe Customer service is the key and if you walk into a Harrahs owned or operated are run down old carpet old worn out tables and their employees are not happy.
Look at Wynn and Encore for goodness sake they put Harrahs to shame.I walk into Ballys Paris ect run down. Help the economy corperate giants and start upgrading what you have.Oh but thats simple and when it comes to corperate giants nothing is easy.
By DCThomas

6/22/09 at 8:26 a.m.

Suggest removal

Harrah's is an example of genius and dunceness in one tent. It was genius to extend their brands to riverboat and Indian casinos, thus training new customers and accumulating a loyalty list dwarfing all others. People who thought of Vegas as a mobbed up den of whores and cheating casinos, became comfortable with the friendly game of blackjack, or learning not to play the Big 6 at craps and pretty soon were booking trips to the new family friendly Vegas Steve Wynn envisioned.

When 9/11 put a damper on air travel, those satellite casinos did well and continue to expand even during this depression. (Well, I'm depressed.)

But it's also true that Ceasar's aside, many of the Harrah's properties in Vegas are seeming a little less than fit for a queen or king. I'll leave that to the locals to shed more light upon.

The WSOP track for brand and player development was another brilliant play, well executed. And online legalization will extend the player base and rewards lists even more. So those operators who think of Las Vegas as a tourist attraction need to wake up and smell the cigarette smoke. True, it's the big apple of gambling, but gambling is now a global business extending financial tendrils where-ever people want to have fun.

The biggest threat is that Harrah's will quickly become the 800 pound gorilla in the industry, and by the time the lesser brands come around, it will take a lot more money to break into the big time online business than it does now.

"What Happens Outside Of Vegas Eventually Comes to Vegas." At least when it comes to gambling. Mahjong anyone?
By skerlahdee

6/22/09 at 9:26 p.m.

Suggest removal

Online gaming creates potential customers for Vegas IMO. Vegas will always be Big League, IF it's managed properly. Maybe selling ownership of condos and time shares will work, maybe expanded online gaming will work. I don't know. I wish I had a crystal ball.
By MrMuckets

6/23/09 at 6:24 a.m.

Suggest removal

It happened to Greg Raymer. It can happen to you.
You have a good day in the casino so you and your money are going back to your hotel room when suddenly you are accosted by two armed men. They say give it up and you do to save your life.
On line casinos and poker rooms with electronic funds transfer are much safer than brick and mortar operations.
By muddapucker

6/23/09 at 11:12 a.m.

Suggest removal

Online gambling will not help Las Vegas.

Ask Harrah's and they will tell you that they are a corporation and their loyalty is to their stockholders, not to Las Vegas.

All Harrah's wants is the house edge. Its a cash cow with no dealers, food service workers, hotel workers, ticket writers etc. No employee problems or costs. Apply 5% to billions without accompanying operating costs and you can understand why Harrah's is for it.

People can just stay home and lose their money instead of coming to Vegas. Most people lose when they come to Vegas. Most people will lose at home.

How much can they lose and still come to Vegas and lose some more...? The money will probably be gone before they can buy their plane ticket.
By Rocco

6/23/09 at 1:11 p.m.

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muddapucker .... good point it has happened to me........all set to go lost too much called the trip off... if the indians ever get craps and a sports books its all over...becuase they are now really starting to take care of the customers
By LVSwany

6/23/09 at 1:39 p.m.

Suggest removal

It's true that the Las Vegas casinos have forgotten about customer service, and that is due to bean counters who have forgotten that "loss leaders" are needed to bring people in to the casino floor. If you only spend $5.99 on a nice steak (instead of the $15.99 or more now), that $10 will end up in a slot or on a table somehow. If you come to Vegas to gamble, then that $10 can add a lot to your entertainment value. The more entertainment you experience, the more likely you are to return.

Now on to the real subject of this discussion. The numbers have proven that online poker is a great success for the casino industry here in Vegas. The World Series of Poker (WSOP) numbers jumped from the year Chris Moneymaker won (2003), with only 839 entries, to 2576 entries in 2004. That was a 300% increase in entries, and it doubled again in 2005. Why? Because of online poker, and because people don't just want to sit at home and play. They want to face their opponent and rub a loss in their face. This increased Harrah's revenue over $2 Million alone just on one event, and as most know, the WSOP holds just over 50 events during this event.

Online poker in general should be left up to the person playing and not the US government deciding they know what best for me (or us), and try to ban online gambling.

I can use my credit card or ATM card at any casino in Vegas, but I am not allowed to gamble at an online site I trust and never had an issue with. I thought double standards or favoring a group was illegal in the USA.

Because of the US actions, the WSOP attendance fell just over 25% in 2007, when the stated online gambling was illegal. I do not have the means, but someone (or a group) needs to stand up and challenge the legality of this bill that was passed. This is a FREE country (I use that term loosely), and how I choose to spend my hard earned money should be left for me to decide. I might agree that credit cards should not be permitted, but I should always be allowed to use my debit card on what I choose.

So the numbers prove (at least in poker), that online gambling does not hurt Vegas. In fact, people do not really want to sit at home and gamble all the time. They enjoy the camaraderie of others - so Viva Las Vegas!
By ted516

6/23/09 at 2:16 p.m.

Suggest removal

Online gaming will definitely help Vegas, it will open a whole new market of people. People will get a taste of gambling and then want to visit Vegas. No online casino is going to stop people from wanting to come here, if anything it will want to make them visit even more