A surprising partnership unveiled today could produce a major force in the online marketplace.
Sun International Hotels Limited has announced that Station Casinos, Inc. will purchase a 50 percent interest in SunOnline Ltd., a wholly owned subsidiary of Sun.
SunOnline Ltd. was awarded one of three initial online gaming licenses granted by the Isle of Man last September and was the first of the three licensees to launch a live online casino (www.CasinoAtlantis.com). Sun International Hotels owns and operates the Atlantis hotel and resort complex, which is complete with a casino, in the Bahamas.
Station, meanwhile, operates six land-based gaming operations in the Las Vegas area. The majority of the company's facilities are geared toward drawing in players from local Las Vegas residents. Station has been able to corner the "locals" market and carve out a niche because of creative and unique marketing and customized service for those players.
Tony Fontaine, vice president of complex business solutions for Station Casinos, conceded that his company probably wasn't at the top of most observers' list of Vegas-based casino companies most likely to venture online.
"We beat everyone to the punch," he said, referring to MGM Mirage, which is one of the other original Isle of Man licensees but has yet to launch a site.
As part of the deal, Fontaine said, Station will start working with Sun to develop a strong online brand for Station, but the main focus of the partnership will be for both sides to merge their strongest characteristics.
Tobin Prior, the chief executive of SunOnline, agreed with Fontaine, saying that having companies with two different focuses will wind up benefiting each in the deal. He also said there won't be any big or visible changes right away to the Casino Atlantis Web site.
"The site has only been up for a month, and we want to keep it up as the leading site," he said. "What it really means is that you have got a big Vegas operator who really understands its market, getting together with an international operator with a lot of flare."
Fontaine expects both sides to take advantage of the other's strong points as well.
"It is still very early in the process, but we realize there are a lot of synergies between us and Sun International," he said. "They are good at doing global and international market, and we have a proven core competency of retention in the locals market and that is a pretty good combination."
Each company will have equal board representation, and SunOnline will be the exclusive vehicle for both Sun and Station to pursue the Internet wagering business.
Prior said the deal in no way is geared to give Sun an edge on the U.S. market. The site currently restricts bets from American players. Prior said the legal issues in the U.S. remained too complicated and risky to even make it worthwhile for Sun.
He did say, though, that the deal is a clear signal to changing attitude toward online gaming among traditional land-based operators.
"I think that a lot of operators are realizing that the space is developing and see the legitimate component of it," he said. "They think they should be there and now they are figuring out ways to tackle that issue and get into the space. We feel there are a lot of synergies between our two companies that we believe it is worth tackling together."
Fontaine said the process will begin quickly, but there's no rush for Station to get online in the immediate future.
"We have a lot of work to do," he said. "We want to do a lot of the things that Station does. We focus on the locals market, which is all about customer retention, and we will be looking at how to utilize the marketing expertise that we have."
Fontaine said the deal made sense for Station to align with Sun because they then could "hit the ground running" and not have to worry about spending a lot of time going through the regulations and licensing jurisdictions process that a new licensee has to endure.
The main focus for Fontaine's crew will now be converting their strong land-based marketing and retention skills to the Internet.
"Those things will be an evolutionary process," he said. "A lot of our proprietary bonus schemes that we use in our casinos don't exist in technology in the online marketplace. So those are things that we will have to develop."
Fontaine said he's confident that, once those unique systems can be developed for the Internet, the Sun/Station sites will be clearly differentiated on the Web.
Fontaine also said that closing the sale was drawn out due to Nevada's stringent regulatory approach.
"Anytime you talk about a Nevada licensee going into an Internet-based gaming business you can bet that we have done a lot of due diligence," he said. "That doesn't happen overnight."