Saturday, March 08, 2003
Copyright © Las Vegas Review-Journal

Venetian's online move fuels e-gaming debate

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The announcement Friday that the parent company of The Venetian has been licensed to operate an offshore Internet casino is rekindling an industrywide debate over the future of online gaming.

In reaction to the announcement, both a Wall Street analyst and spokesman from a second major Las Vegas gaming operator said The Venetian's move could renew interest in the nascent regulated online gaming industry.

But others, including a pair of local gaming operators who recently backed off plans to enter the online segment, contend The Venetian's action won't have a significant impact until regulators resolve questions surrounding the legality of Internet wagering.

Las Vegas Sands said its subsidiary, Venetian Interactive, was awarded interactive gaming and electronic betting center licenses Feb. 26 by the Gambling Control Commission of Alderney, a semi-independent island in the English Channel.

Deutsche Banc casino analyst Andrew Zarnett called The Venetian's licensing efforts a strategic step to position the company to compete in the online market should regulations prohibiting the practice be lifted. The U.S. attorney general believes interstate Internet gaming is illegal in the United States.

"This is more of a `getting their feet wet' move than a rollout," Zarnett said. "The Venetian viewed this as a very small cost to get involved in a position that could one day be a significant and profitable business should things change (among regulators)."

Still, the licensing was well-received at gaming rival MGM Mirage. Since October that company has operated its own Internet casino on the Isle of Man, which like Alderney is home to a highly regulated Internet gaming jurisdiction.

MGM Mirage spokesman Alan Feldman said his company remains committed to developing Internet gaming technologies that would satisfy the demands of regulators around the world, including the United States, and welcomed the addition of another respected gaming operator.

"We would really love to see online gaming break out of this mold of poorly regulated or under-regulated environments and into operations that are seen both by consumers and regulators as legitimate operations of integrity," Feldman said. "Having another major company that's recognized and licensed getting into this is generally a good thing.

"Maybe some of the legwork we've done thus far The Venetian will use to their benefit, but one way or another, we hope it's to the benefit of the entire category."

Michael Tew, gaming analyst for Bear, Stearns & Co., expects The Venetian's entry will do just that.

"The Venetian entering this business certainly brings a lot of credibility," Tew said.

Tew also believes the presence of two rival operators could persuade Park Place Entertainment to reignite its now-stalled efforts to obtain an online gaming license on the Isle of Man.

But Park Place spokesman Robert Stewart said Friday his company now has no such plans.

"The legal, economic and regulatory issues surrounding online gaming are getting more, rather than less, complex, and we continue to take a conservative approach," Stewart said. "At the moment, we don't see a compelling reason to enter the (online) marketplace."

Stewart added Park Place hasn't ruled out involvement with online gaming ventures and will continue to evaluate market conditions, the regulatory environment and online gaming technologies.

A fourth Las Vegas gaming company, Station Casinos, in January set aside its plans to invest in an Isle of Man online gaming enterprise. The Venetian's action will not alter that position, said Lesley Pittman, Station vice president of corporate and government relations.

"There's just so much regulatory and congressional uncertainty with the online gaming front that we're holding off on any development in that arena," Pittman said.

Station Chief Financial Officer Glenn Christenson said in January the company expects to take a $5 million charge against first-quarter 2003 earnings stemming from its online retreat.

The Venetian's Internet gaming activities will be handled in affiliation with SSP Gaming, a wholly owned subsidiary of SSP Solutions, a publicly traded Internet security company based in Irvine, Calif.

The companies have not finalized plans to operate the site but hope to do so within the next several months, David Friedman, assistant to the chairman of the board, Las Vegas Sands, said in a statement.