Exclusivity No Longer a Given for SAGE

14 June 2002

The Philippines' gambling authority is swaying back and forth in its handling of a dispute over the exclusive rights to online gaming in that country.

Sports and Games Entertainment Corporation (SAGE) has held the exclusive rights to online gambling and sports betting in the island in the South China Sea for four years. The contract runs until 2005, but the group's status as an exclusive licensee could be in jeopardy.

The Philippine Amusement and Gaming Corp (Pagcor), a government-run organization that oversees all gambling activities, is assessing whether SAGE will maintain its exclusivity, or whether it will open up the market to PhilWeb Corp., a competing interest.

BusinessWorld reported last week that PhilWeb, formerly PhilWeb.com Inc., is negotiating with several local sports betting operators to meet the target launch date of its Internet gaming operations and consequently enable the group to obtain a slice of the US$4 billion global industry.

One foreseen obstacle for PhilWeb is that it is required to secure a franchise from Pagcor to enter the Internet gaming and sports betting arena.

Obtaining the license could prove difficult, as the administration has stated that no new licenses should be granted to gambling operators.

Chedorlomer Lagabong of Pagcor told BusinessWorld SAGE was stripped of its exclusive right due to its failure to immediately put up an online betting system after getting Pagcor's approval in 1998.

She added that SAGE could not stop Pagcor from permitting PhilWeb to operate an online casino and sports betting service because the "exclusivity" provision in the contract has been rescinded.

SAGE's president and CEO, Patrick Deakin, sees it quite differently. "They wanted to remove our exclusive rights, and we did not agree," Deakin explained. "They cited the delay in the establishment of a facility, which was not our fault. Our application with Pagcor (for a space at the Casino Filipino in ParaƱaque, southern Metro Manila) has been pending for more than a year. We are still exclusive as far as we are concerned."

Deakin said the decision was unacceptable and insisted that Pagcor could not entertain other proponents until 2005.

Pagcor claims that in February, then-Pagcor president Rafael Francisco informed SAGE of the board decision to revoke the exclusive license, citing the delays in the delivery of its commitments as the reason.

"The Internet gaming market is huge and it would be self defeating to limit operations to just one company," Lagabong said.

A SAGE official stated that if the PhilWeb begins operating without the state gaming firm's nod, SAGE would sue PhilWeb executives

"We will work to protect our license. It cost us a lot of money to develop our system. We, as the pioneer, poured in substantial investments and we will not allow others to copy what we have worked hard for," Deakin said.

Instead of encroaching on SAGE's license, Deakin proposed possibly forging a partnership, which, he said, could prove beneficial to both SAGE and PhilWeb's 3,000 dealers nationwide.