Finally Convergence

20 September 2001
Following several weeks of speculation, MGM Mirage made it clear today that Las Vegas's major land-based casino corporations are not going to wait for the green light from Nevada to offer real-money casino gambling over the Internet. Along with Littlewoods Leisure and Sun International, the company has been granted an Internet casino license by the government of the Isle of Man.

The license acquisition makes MGM Mirage the first major U.S.-based casino operator to officially establish a presence in the Internet gambling industry. Bill Hornbuckle, president and CEO of subsidiary MGM Mirage Online, said that the company's online casino could go live within the next nine to 12 months.

To many industry observers, MGM potentially has a lot to lose, as its online venture could create conflicts in the States. The company has holdings in several American jurisdictions, each property representing hundreds of millions of dollars in annual revenue.

Hornbuckle said that the company, in an effort to make sure that it doesn't jeopardize its land-based investments, has been in constant contact with regulatory officials in jurisdictions where it operates. He acknowledged, however, that the company could face a potential hearing with Louisiana's gaming commission. Further, several U.S. regulators have asked to take a look at MGM Mirage's system before it's launched.

MGM Mirage Chairman and CEO Terri Lanni agreed that the company has to proceed cautiously. "We are honored by being one of the first companies to be granted a license and we will move forward deliberately but cautiously," he said. "We intend to work closely with the Isle of Man government and domestic regulatory authorities to develop a safe, secure and enjoyable Internet gaming system which provides satisfactory assurances that Internet wagers are only accepted from jurisdictions in which such activity is legal, that underage gaming is prevented, and that access to problem gamblers is limited."

As part of this effort, Lanni also persuaded American Gaming Association President Frank Fahrenkopf to consider a code of conduct for online gaming companies. "MGM Mirage intends to take a leadership role in developing the appropriate path to safe, responsible and enjoyable interactive gaming and is actively working with the American Gaming Association to develop a code of conduct for Internet gaming sites," Lanni said.

Fahrenkopf could not be reached for comment about the proposed code.

MGM Mirage already operates a free-play gaming site, which was developed by Wager Works, a spin-off of Silicon Gaming Inc. Hornbuckle said that Wager Works would be part of the new e-casino, although MGM Mirage is still considering additional partners to develop technology for the site's front and back ends. Those decisions will probably be made within the next 60 days.

Additionally, the company is extending its land-based experience even further through the development of an online sportsbook, either on its own or through a joint venture.

The company will be targeting its online offerings primarily at the U.K. market, Hornbuckle said, and the company is doing marketing studies there to better direct its efforts in acquiring new clientele.

The second of today's license winners is Sun International Hotels Limited, which is in the Bahamas and has properties dotted around the globe. Its virtual casino will be an online version of its famous Bahamas property, Atlantis, and will be powered by Boss Media's software.

Sun Chairman and CEO Sol Kerzner said that, with holdings in multiple jurisdictions, the company recognized that it can't take a cavalier approach online. That's why, he said, they sought an Isle of Man license.

"We are committed to operating in credible regulatory environments and aim to set new industry standards for compliance leadership in online gambling.," Kerzner said. "This license is a great platform to do just that."

Sun's move online will be made under the SunOnline name, a division to be headed by CEO Tobin Prior.

The third new licensee, Littlewoods Leisure of Liverpool, will probably launch its casino by the end of October. The new site will be powered by software from CryptoLogic Inc. of Canada.

Each of the three companies paid £80,000 for a five-year license and posted £2 million in bond.

The applicants had to meet strict compliance procedures, including police, treasury and data protections checks on key personnel, as well as the companies. In addition, the Isle of Man Gambling Control Commission must approve each company's games and the underpinning software. The government will also enforce strict money laundering standards, including "know your customers" practices, paralleling the Isle of Man's strict financial regulations.

Eleven companies from around the world petitioned the Isle of Man's Manx government for an online casino license. Manx officials predicted that nine more licenses will be issued by the end of the year. Next month the Isle of Man's parliament, Tynwald, is expected to approve additional licenses, which could be handed out as early as mid-November.

Manx officials won't release the names of the other applicants, although several companies, including American corporation Park Place Entertainment as well as Stanley Leisure plc and Action Online, are rumored to be on the list.