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November 26, 2014

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DAILY MEMO: Gaming:

Harrah’s thinks it can gain from online gambling

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

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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.

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