Free-play poker sites attracting players, making money

Craig Billings is president and CEO of a Las Vegas company that runs Internet poker rooms.

But he’s not in the gambling business.

His players don’t pay to play, and they don’t win or lose money. It’s all for fun.

Not that Billings isn’t making money. People spend a lot of time on online poker sites, so there’s advertising to sell. And organizations want Billings to create these online poker rooms for their websites, to drive traffic their way.

Billings is among a growing number of American entrepreneurs latching onto a legal means to capitalize on the popularity of online poker, which the federal government has declared illegal.

Executives of major casino companies are crossing their fingers that Congress will approve legislation opening the door to a potential gold mine in Internet gambling profits now going overseas.

Billings, a former investment banker with Goldman Sachs who worked with online gambling companies in Britain, is apathetic about the prospect of an Internet gambling gold rush in the United States.

His 8-year-old company, Zen Entertainment, develops Internet poker rooms for such clients as Ultimate Fighting Championship, World Wrestling Entertainment and the Hustler casino in Los Angeles. Such companies enjoy tapping the world of poker’s devoted, who are mostly young and male.

Most of Zen’s profits come from selling ads that appear in the online poker rooms during play.

Average playing time is about 70 minutes per session and more than 10 hours per month, “substantially more than most brands experience with random visits to their websites,” Billings said.

Free-to-play poker websites have existed for many years, mostly as offshoots of real-money gambling sites based overseas.

Interest in free-play sites has grown since last month’s federal indictment of the three largest real-money poker sites, Billings said.

Recent entrants Zynga and DoubleDown Interactive already have attracted millions of players to free online casino games on social media sites such as Facebook. Zynga hosts Texas hold ’em poker games while DoubleDown offers digital versions of blackjack, roulette, video poker and slots.

Other providers of free games are gambling companies hoping to build a customer base should Internet gambling be legalized in the future.

Last year, Las Vegas casino giant Caesars Entertainment introduced a free-play online poker site in the United States based on its popular World Series of Poker casino tournament. The company, which has lobbied heavily for Congress to approve Internet gambling, simultaneously opened a real-money World Series of Poker site in Britain and has since opened a Caesars brand online casino there. Caesars is working with partners to introduce real-money poker sites in France and Italy. The company also offers free poker games on Facebook. All of these initiatives stem from the 2009 launch of a new business division, Caesars Interactive Entertainment, based in Montreal.

Bwin.party Digital Entertainment, a British online gambling company, operates a free-to-play poker site in the United States in conjunction with its World Poker Tour brand of poker tournaments. The site, which offers free poker games, charges customers a $19.95-a-month subscription fee for a chance to win cash prizes, entry fees to casino poker tournaments and Las Vegas travel discounts, among other perks.

“Recently lost your poker home? No worries ... Come join ours where it is legal, safe and risk-free poker,” reads an online ad for the company’s “ClubWPT” program.

The world’s largest slot machine manufacturer, International Game Technology, recently relocated its online and mobile gambling division to a larger facility in San Francisco in anticipation of global growth as more governments consider the legalization of Internet wagering. The company this month offered about $115 million for an online poker company based in Sweden. Like some of its competitors, IGT offers free-to-play versions of its games on the Internet, including software consumers can download onto their iPhones.

For all of these recent maneuvers, major land-based casinos in the United States haven’t bothered developing free-to-play Web versions of their casinos — viewed by gambling giants as costly ventures of indeterminate worth.

Casinos have been reluctant to commit to free play sites because they were holding out hope that Internet gambling would soon become legal, Billings said.

Last month’s indictments not only clarified the feds’ commitment to bring down real-money sites but spurred interest in free-play sites from American casinos that view them as a longer-term, legal alternative, he said.

“You are going to see a lot more companies dipping their toe in the water,” he said.

Several companies have approached state regulators in recent months for guidance on how to stay above the law when operating free-play casinos, Gaming Control Board Chairman Mark Lipparelli said.

Lipparelli wouldn’t name the companies or comment on the legality of any specific business plan.

So as not to run afoul of gambling laws, such websites must offer casino games that are free to play, and consumers must have equal access to prizes and perks regardless of whether they pay a subscription fee or other charge, he said. Companies that try to closely link fees to contests can get into trouble for operating an illegal gambling business, he said.

ClubWPT and Zen Entertainment, which also advertises subscription fees for certain high-value prizes, appear to follow the letter of the law in their fine print, which states that there’s no purchase necessary to win the prizes.

Such promotions, Billings said, are essentially sweepstakes like the kinds offered by fast food chains and mail order companies in several states. Rather than buying magazines or burgers, consumers can simply mail in a contest entry, he said.

Billings joined Zen after nearly two years as IGT’s head of corporate development. But he’s OK with his new status outside the gambling realm.

His company’s websites have attracted 700,000 visitors, with 25,000 people playing free poker on a regular basis.

“Many players don’t like to put money at risk. We totally understand that,” Billings said.