SILICON VALLEY – Gamblers will lose $3 billion to online casinos this year. Their losses should top $6 billion by 2003. With that kind of money at stake, it’s not surprising that the biggest U.S. casino operators are positioning themselves to rake in some of the chips.
Wagering over the Internet is illegal in this country, but that hasn’t stopped Harrah’s (nyse: HET – news – people), MGM Mirage (nyse: MGG – news – people) and Park Place Entertainment (nyse: PPE – news – people) from preparing for the day it’s legalized. Park Place has invested in online gambling operations abroad, while Harrah’s and MGM have teamed with some small Internet gaming concerns and set up “play-for-fun” features on their Web sites that could some day be converted to cash operations.
Although Americans make up an estimated 90% of the world’s online gamblers, their money is flowing straight to the online arms of casinos in England and Australia, or to American-run Internet companies based in tropical hideaways offshore. Sites like Vivendi’s (nyse: V – news – people) Uproar.com are legal in this country because players don’t pay to play. Lasseters Casino, the first Australian company to win an online gaming license, is one of the world’s most-visited online gambling sites with over 2 million unique users each month. And last week, Macau casino mogul Stanley Ho launched an online gambling site called DrHo.com, which offers baccarat, roulette and other games.
By now, predictions about the Internet changing industries sound pretty stale. Furthermore, revenue from legal gambling in the U.S.–$59 billion in 1999–still dwarf the predicted $3 billion in revenue from online gambling. But when America’s ban on online gaming falls, as most industry analysts predict it eventually will, expect the big Las Vegas players to get involved. Vices like gambling and pornography have a special appeal in the semi-private world of cyberspace.
Even more intriguing is the practice, pioneered in Europe, of gamblers using wireless devices such as cell phones to make real-time bets on sporting events. The appeal is obvious to bettors and bookmakers alike. Bettors see the results of sporting events, so they know the game isn’t rigged. Plus, they can bet on every aspect of the game, from a kickoff to the final play. Antigua-based gambling site Sportsbook.com took advantage of the idea during the Super Bowl this year, when it allowed users to place bets on more than 350 separate actions in the game.
Offshore Internet betting services are already cutting into the $100 million annual profits of Nevada’s legal sports betting operations, according to Saint Charles, Mo.-based River City Group. European betting sites including Ladbrokes, Sportal and Eurobet already allow users to easily bet away their money with a Web-enabled cell phone or handheld computer. In the U.S., however, legal murkiness and less-sophisticated wireless technology have stymied such convenient Internet betting.
“[The United States] is really in infancy,” says Sue Schneider, chairman of the Canada-based trade association Interactive Gaming Council. “Ultimately, the big operators will get involved.”
The big casinos insist that Internet gambling sites aren’t cutting into their business–even as they position their own Web sites to take cash if the practice becomes legal.
“It’s a matter of time” before online gambling becomes legal, says Andrew Pafcal, president and chief executive of WagerWorks, which is partially owned by MGM Mirage (nyse: MGG – news – people). San Francisco-based WagerWorks is developing a play-for-prizes feature for MGM Mirage’s Web site.
“Online gaming represents a great opportunity for the big casinos,” Pafcal said. He thinks that the nearly 1,000 small Internet gaming sites operating abroad are “not a threat” to the big players in Las Vegas. As Pafcal points out, having a well-known brand name is a crucial asset when you’re taking money from gamblers over the Web. And the entrance of big-name casinos could attract a well-heeled crowd to what is now a seedy-sounding pastime.
The big casinos say they’re monitoring developments in the world of online gambling closely, but aren’t about to do anything that could jeopardize their gaming licenses. They want to set up a regulatory system that could make legalized online gambling more palatable to the U.S. Once the legal situation changes, however, analysts say current Internet betting sites should fold their cards and go home–because whether in Vegas or in cyberspace, the house always wins.