MGM, Boyd make deal with poker site
31 October 2011
VEGAS INC archives
Two Las Vegas brick-and-mortar casino companies are racing to align themselves with poker websites in the hopes of becoming industry leaders when — and if — online gambling is legalized in the United States.
MGM Resorts International and Boyd Gaming on Monday became the latest entrants into the online gaming club when they announced a joint alliance with online poker whale bwin.party digital entertainment. The company owns PartyPoker, one of the biggest online poker sites, and the World Poker Tour and is the world’s largest publicly traded online gambling enterprise.
If Congress legalizes online poker in the United States, a move MGM Resorts and Boyd are pushing for, the three companies’ relationship would be twofold. First, MGM, Boyd and bwin.party would create a new brand under the bwin.party umbrella to offer online poker to U.S.-based players. Boyd would receive a 10 percent stake in the business, MGM a 25 percent share and bwin.party a 65 percent share. In addition, each casino company would develop a poker website under its own brand using bwin.party’s technology.
The fact that the companies are venturing onto the web isn’t surprising; casino companies across the nation are laying groundwork for the legalization of online poker. That they are doing it together is.
“In the world of Internet poker, the keys to successful operation are extraordinary technology, regulatory oversight, operational control, which we think exists in partnership with bwin, and liquidity, which is improved by bringing two partners together,” MGM Chairman and CEO Jim Murren said. “Specific to Boyd, this is a company we have known for 50 years. We have been partners on multiple occasions, and we have a high degree of mutual respect.”
“This isn’t about excluding anyone,” Murren added. “This is about including people who have the same reputation, integrity and investment in gaming.”
Boyd and MGM previously partnered in the Borgata, Atlantic City’s largest hotel-casino.
The companies decided to pair with bwin.party because of its record of economic success and legal compliance in Europe, the executives said. The company is licensed in Gibraltar, France and Italy and has run legal poker websites in numerous countries for more than a decade.
“This agreement will allow us to partner with the world’s most experienced and prestigious online operator,” Boyd President and CEO Keith Smith said.
Still, any partnership is a gamble. Legalization of online poker is far from a done deal, and an ill-conceived alliance could doom a company before wagers are placed.
Fertitta Interactive, for example, entered into a relationship with Full Tilt Poker earlier this year, shortly before the online gaming giant was named in an indictment accusing it of laundering billions of dollars to circumvent the Unlawful Internet Gambling Enforcement Act. Fertitta Interactive has since hedged its bets and last week bought California online gaming company CyberArts Licensing.
Caesars Entertainment received permission this year from the Nevada Gaming Commission to partner with online gaming firm 888 Holdings in Great Britain, and South Point this month launched a free-play online poker site to establish a presence for when real-money poker is allowed.
Congress appears to be moving toward a consensus in favor of legalizing online poker, but a regulatory framework is still a ways off. In the meantime, millions of Americans continue to gamble illegally on black-market sites.
Most casino heads say they prefer a federal solution rather than a state-specific one because it would remove ambiguity and likely be more strict. They lobby Nevada’s Congressional delegation on the topic frequently.
“They understand that should Internet poker be legal and should we be able to create a business model, we could create thousands of jobs here in Nevada and establish a strong economic model when we need it most,” Murren said.
Legalization probably won’t happen until 2013, analysts at Union Gaming Research, an independent gaming analysis firm, predict. But if and when it does, it will be a lucrative change for the new MGM-Boyd-bwin.party collaboration. Union Gaming anticipates the brand would capture 20 percent of the $5 billion annual online poker industry, generating $300 million in operating cash for the joint venture.
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