Casino & Gaming International: Issue 6 by Casino & Gaming International

2007 ISSUE 1

WELCOME

ACTION, REACTION, RENEWAL: GAME ON Publishing Director Jamie Kean Email: jamie.kean@casinoandgaming.net Editor Stephen Lawton Email: stephen.lawton@casinoandgaming.net Publishing Services Manager Caroline Maguire Email: caroline.maguire@casinoandgaming.net Distribution Manager Tracie Birch Email: tracie.birch@casinoandgaming.net Business Development Manager Stuart Jameson Email: stuart.jameson@casinoandgaming.net Advertising Mike McGlynn, Sales Director Email: mike.mcglynn@casinoandgaming.net Ray Blunt, Sales Manager Email: ray.blunt@casinoandgaming.net Daniel Lewis, Sales Executive Email: daniel.lewis@casinoandgaming.net

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ot exactly the climax to 2006 that online gaming interests had in mind, but with the golden age of unfettered access to the US market abruptly curtailed for the time being, some fundamentals are inevitably taking shape as this year begins. For every action there is a reaction: the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA) has concentrated minds on altered priorities, bringing entrepreneurial edge and strategic coherence to bear. The innovative backbone to this provided by technology platforms has long been there to engender new market potential, so such upheavals – and this is not the first – tends ultimately to accelerate rather than stunt renewal. That is all to the good. The prohibition-v-regulation divergence has now been catapulted centre stage and has the merit of being far from the final word on the subject. Rather than being settled for the time being, it has pointed more starkly than ever before to the dangers inherent in not exploring the conditions and the controlling mechanisms required to mitigate any socially adverse industry activity prior to final legal judgement. Whether US legislation now risks encouraging precisely what it apparently seeks to prevent may depend on whether the commission into Internet gambling, backed by the American Gaming Association, moves forward to test the case this year. Certainly, the implementation of the UK’s Gambling Act later this year will provide an important, if not seminal and reinforcing focus. In one respect it is an irony, as ‘Viewpoint’ articles in this issue imply. UIGEA hit just at a point in time when multi-player involvement looks increasingly to community and not individual activity, as is the case in many other non-gambling domains. Operators are beginning to cater to specific cultural dimensions and the increasing mobility and interactive range of gaming expectations and delivery aids this process. Successful and safe rapid development, via carefully attuned applications and products, are a much more acceptable business path in this evolving environment. The confidence that stems from that situation, with online player protection and responsible trade association practices, is what can become the trademark for commercial growth. Acting on gaming integration patterns, and the jurisdictional, international standards required to steer its global impact as cross-sector and cross-border dependencies emerge in regional arenas, is where the big concerns now lie. It is vital to ensure that the industry’s gradual emergence into the ‘mainstream’ consciousness proceeds on the basis of highly explainable and accountable operational conditions. Given the experiences of other sectors of the economy, this will continue to be doubly necessary almost as though something has to be proved above and beyond. But as things stand, there is a real risk of losing sight of the degree to which there has already been significant change in a relatively short period of time. The domino effect of countries adopting gambling liberalisation around the world makes this all the more urgent and that means there will be that much more attention paid to operators’ performance. As the gap between casino resort sophistication and prevalent remote, interactive and mobile gaming narrows down, so together, both financial and social factors will come under closer scrutiny. But the development of the casino industry and associated complexes and resorts establishing it as a major international influence today, suggests the groundwork for overcoming the pernicious vice idea ought eventually to be transferable and standard setting. US representation is increasingly suggestive of this. Michael Green: “Where Senator Pat McCarran once said that no Nevadan could hope for higher office with the stigma of gaming associated with him, a Nevadan, Harry Reid, is now the US Senate majority leader and casino executives like Steve Wynn have been major presidential donors.” Leisure, entertainment and gaming are an essentially integrating industry. The idea of gambling as a stigma becoming an historical curiosity, and legitimate an activity as, say, the insurance business, is not entirely unattainable. CGI

Stephen Lawton is editor of Casino & Gaming International

Casino & Gaming International ■ 1

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CONTENTS

FEATURES 9

CREATING THE RIGHT MESSAGE AND SUPPORTING PROPORTIONATE REGULATION BY CLIVE HAWKSWOOD

EXPLORING GAMBLING PRACTICES IN WORK AND EDUCATIONAL ENVIRONMENTS BY MARK GRIFFITHS

POLITICS, PREJUDICE AND THE PRESS: GAMBLING REGULATION IN HISTORICAL PERSPECTIVE BY JULIAN

37 43

A TALE OF TWO DEVELOPMENT PATHS

HARRIS

BY GREGORY ANDERSON

SNEAKY ELECTION PLOY PUTS VULNERABLE AT RISK BY RICK SMITH AND KEITH FURLONG

A FAR CRY FROM DICING WITH ROMAN SLAVERY BY MICHAEL HETTICH, HENDRIK SCHÖTTLE AND WULF HAMBACH

CENTRE OF THE CASINO UNIVERSE FROM BOOTLEGGING TO WALL STREET BY MICHAEL GREEN Casino & Gaming International ■ 3

CONTENTS

FEATURES 65

CLASSIC, GRAND AND REBORN: RECREATING A SUMPTUOUS HISTORIC LANDMARK INTERVIEW WITH GEORGE S. RIDGWAY

FRENCH LICK RIVERBOAT CASINO CELEBRATES TRADITION AND MODERN GAMING INTERVIEW WITH CHRIS LEININGER

CUTTING NO CORNERS: INVESTING IN THE PAST FOR THE FUTURE INTERVIEW WITH STEPHEN L. FERGUSON

CAN THERE BE CLARITY & CONSENSUS ON COMPLEX ISSUES? BY PAUL BUCHANAN

TIME TO CHANGE THE GAME PLAN

ON WITH THE GAME

A UNIQUE MULTI-CHANNEL SOLUTION

MACAU’S CASINO EXPANSION AND GROWING LABOUR PRESSURES BY SOO-MAY CHENG

BY JOHAN BERG

BY ROGER RAATGEVER

BY FRANK DEECKE

Casino & Gaming International ■ 5

REMOTE GAMING & RESPONSIBLE PRACTICE

CREATING THE RIGHT MESSAGE AND SUPPORTING PROPORTIONATE REGULATION BY CLIVE HAWKSWOOD

The remote gambling industry has come a long way in a relatively short period of time and there is now much for us to be proud of. So is it really too much to ask that we start getting some credit for how well run most of the industry is, what great products it offers, the socially responsible approaches that are now adopted so widely, and how much it contributes to economies around the globe. In short, is it really too much to hope that at some point we can stop being treated as a political football?

ambling is different. In many cultures it is at the very least treated with suspicion. In some, relatively few, cases there are gamblers who develop problems. The gambling industry has a responsibility towards them and, indeed, towards all of its customers. Gambling is part of the leisure sector, but never really perceived in the same light as running a restaurant, theatre, or cinema. We know that. We accept the reality of the situation, but is it really too much to ask that we start getting some credit for how well run most of the industry is, what great products it offers, the socially responsible approaches that are now adopted so widely, and how much it contributes to economies around the globe. In short, is it really too much to hope that at some point we can stop being treated as a political football? Remote, particularly online, gambling is currently flavour of the month with politicians, an assortment of moral crusaders, and a media which doggedly remains ignorant of, or not really interested in, the facts. Some of them are barely within waving distance of the truth, but it does our cause no good to bemoan bias or inaccuracy in the views expressed by opinion formers or the media. What we have to do is redress the balance. Unfortunately, that is easier said than done if for no other reason than such views might be deeply entrenched, generated by self interest, or quite simply because those making them just do not really care. They have little contact with the world of gambling and would probably like to keep it that way. However, within those limitations the industry just has to keep chipping away at the flawed arguments used by its opponents and deploying its best case to inform the vast

Casino & Gaming International â&#x2013; 9

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majority of people, who do not really have strong opinions one way or the other. It is a process that is always going to be full of frustrations, but the prize on offer means that we just have to work our way through and around them. With politicians that often means being patient. Every part of society feels that its concerns and interests are the most important and politicians are assailed on all sides. Irrespective of their personal backgrounds, all politicians must be generalists. By and large they know a little about a lot of issues. It would be unreasonable to expect anything else of them even though their lack of knowledge does not always preclude them from making public statements if they are briefed to do so by particular interest groups or by a particular constituent whose circumstances grab their attention. Both of these can be problematic. The former is often a faith group or problem gambling group that will instantly have credibility with a politician, particularly if they have a pre-existing relationship that may have been developed over something completely unrelated to gambling. In getting the politician to become involved they are pushing at an open door and, because it is nominally a welfare issue, there is unlikely to be any downside politically. Backing them is a safe call. It is all too easy to see why politicians are less likely to trumpet the industry’s position even when it has a good story to tell. 10 ■ Casino & Gaming International

The latter, involving an individual, can be just as damaging. No matter how unrepresentative it might be, a horror story about someone who has got into terrible problems with gambling debts is going to ring alarm bells and elicit immediate sympathy from their political representatives and the media. No matter what the industry says or does it is almost impossible to counter those sorts of images. Of course we have to try, but in the long term the best way to negate the impact of those kinds of stories is to have them seen in context and that means gradually educating opinion formers and repeatedly nailing down the right messages. Those messages can include many points that the industry might regard as self evident, but experience shows that they may not be to the wider public. There is a tendency when under attack to adopt a siege mentality and that can be dangerous because it can stop us hearing and understanding what has prompted those attacks. That is the time to step back and try as best we can to see us as others see us. If we do not appreciate their concerns, whether they are valid or not, we will never be able to respond to them successfully. With that as a fair place to start then some of the key messages readily present themselves and they include that: ■ ■

we accept that a small minority of gamblers and those associated with them suffer because of their gambling; the industry is working to minimise the risks;

REMOTE GAMING & RESPONSIBLE PRACTICE

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protections for the consumer can only properly be ensured through sensible, proportionate regulation; ■ in the absence of regulation people will inevitably still gamble, but without the safety net that regulation brings with it; and ■ consumer protection issues must be kept in perspective – the world is not coming to an end because of gambling; it is overwhelmingly fair, harmless and crime free. What we then have to do, and have been doing, is to look for the best opportunities to change the underlying perceptions of those, outside of the industry, who are going to make decisions that will affect it. Sometimes, for instance, when legislation is brought forward then groups of politicians have to develop a greater understanding in particular areas and this can provide a chance to get alongside, educate them, and counter any misperceptions that they might have. The remote gambling industry has its faults and weaknesses, but what industry or enterprise does not? We cannot shy away from those because they provide the ammunition for the anti-gambling lobby. We have to confront them head on and say quite clearly that actually the remote gambling industry has come a long way in a relatively short period and that there is now much for us to be proud of. Let’s take the example of age verification. At the risk of making myself unpopular with certain people, I would say that there is no system in existence that will guarantee 100 percent that it prevents a child from gambling or indeed that stops them from doing anything else. It is an example of where our critics feel that we have an Achilles Heel, but where we do not have to be so defensive. Like so many of these things it is the art of the possible and, again, what is proportionate. Without rehearsing all of the arguments here, we can say that: ■ ■ ■

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although you wouldn’t know it from some of the media hype, there is no evidence that children are clamouring to gamble online; there is also limited evidence that shows they can manage to do so even if they do want to; despite that the industry has grasped the nettle and made great strides in the verification systems that have been developed, often by third parties because the industry has made it known that was what it wanted and so there was a market for it; internationally the data that is needed to identify whether someone is a child is patchy, but drawing on various other sources of information it is often possible to determine it with a good degree of certainty; and

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if this is truly an issue of great importance for governments then why have they traditionally been so slow to open up new sources of data that would help us?

Without hopefully over-egging it this does come back to a question of proportionality. Yes, it is wrong for children to gamble. Yes, we do our best to identify those children that try to gamble. Yes, we try to minimise levels of problem gambling, we support problem gambling charities and provide tools to help customers to help them manage their gambling behaviours. But, and it is a big but, we need to be on our guard to ensure that these issues do not come to dominate the agenda completely. There are worrying signs of this in the UK even though, rightly or wrongly, it is seen internationally as a bastion of the free-market with an admirable propensity towards the regulation rather than the prohibition of remote gambling. The Gambling Act 2005, which is due to come into force in September 2007, had three guiding principles which, if I can paraphrase, are to keep crime out of gambling; to ensure that gambling is conducted in a fair and open manner; and to protect the young and vulnerable. They are all worthy goals that we can easily support and throughout the genesis and development of this legislation they all had equal status. And then, slowly but surely, the objective of protecting the young and vulnerable became first among equals. There was then an amendment in Parliament that cemented its elevated status and since that time it has dominated the thinking of everyone at the Gambling Commission. Some might say almost to the exclusion of everything else. It would be impossible and downright wrong to suggest that it wasn’t worthy of the fullest consideration, but surely it should not be considered some form of sacrilege to at least question how we have reached a situation where it is deemed less important to protect the 99 percent of gamblers who gamble without problems (ie by focussing on the fairness of games and ensuring that people are paid out promptly and correctly if they win) than to safeguard the interests of the one percent or so who do have problems controlling their gambling. Unfortunately, politics has won the day over objectivity. The motivation behind this could be the understandable one of protecting the equivalent of the weakest parts of society. It could be a blatant attempt to hold back competition or it could just be misguided. In all likelihood it is probably a mixture of each depending on where it is happening. It is a growing threat to the industry, not because it is wrong in principle, but because it is disturbing the balance of good regulation. The more sensitised that regulators and

>> In just about every industrialised nation thousands of people die on the roads every year. And yet, as far as I am aware nobody has seriously called for cars to be prohibited, even in the USA where they are by any definition more dangerous than the growth in online gambling which, as we know, has so alarmed Congress. Instead, the norm is for regulators to respond by demanding licensing, seat belts, air bags and the like. In other words, pragmatic and reasonable regulation has been applied >> Casino & Gaming International ■ 11

REMOTE GAMING & RESPONSIBLE PRACTICE

governments become to this issue the more likely they are to respond disproportionately to any event or concern that is raised. As a trade association the RGA has to challenge this when it happens and we do. No doubt we try the patience of officials, politicians and regulators sometimes but that is an unavoidable by-product of challenging what all too quickly is becoming the status quo. Although we are completely behind the concept of responsible gambling and have proactively taken action like producing codes of practice on social responsibility and age verification, and on 29th November 2006 we held a Responsible Gambling Awareness Day, it does not mean that we should not make ourselves heard if regulators are quite simply going too far. Having talked about perspective it is worth coming back again to age verification and problem gambling. Both are complex and it is wise to avoid oversimplifying either of them if for no other reason than there is a danger in concentrating on the quantity of those involved rather than the quality, if that is the right word, of the difficulties they face. So for each, rather than look at them in isolation, we can perhaps put them into some kind of context by looking outside of our own little enclave and drawing comparisons with some other parts of the economy and society. Firstly, there is age verification. The categories may vary slightly from jurisdiction to jurisdiction, but there are a whole range of adult-only products including drugs, cigarettes, adult films and games, weapons, and alcohol that are available online. At various times I have spoken to members of many different police forces and law enforcement agencies about the supply of these products and asked which gave them most concern. Gambling has never once been mentioned. Not a single time. Weapons and illicit drugs always come top. If anything else is mentioned at all it is alcohol and pornography. Even allowing that this is only anecdotal, common sense tells me that this is likely to be the response whenever and wherever this question is raised. Notwithstanding that I would bet that not one of those other service suppliers has better age verification systems in place (if they have any) than the members of the RGA. So in the real world we have an adult product that is seen as being less damaging than the others to children, but we have the best protections. There is no criticism implied of those other adult products. It is merely indicating that by comparison we should be praised for what we have done instead of being beaten around the head because some think we ought to be able to do more. Secondly, problem gambling. I have to preface this with an absolute assurance that I accept that for the people who get into severe difficulties because they cannot control their gambling then their lives can become a total misery. The industry, regulators, and treatment providers must work collectively to prevent people reaching that stage and to help them if they do. However, no society or activity is without risk. Tragedies occur in every walk of life. It is pointless going through lots of examples as any daily newspaper will carry stories of injuries and deaths related to alcohol, drugs or tobacco. At the other end of the spectrum there are regular tales of serious injury linked to household accidents. The conclusion is that no society can absolutely protect its citizens from every risk. Instead governments try to provide legal and regulatory frameworks that are designed to limit the potential damage 12 â&#x2013; Casino & Gaming International

while recognising that, in the final instance, it is impossible to legislate for personal choice and the responsibilities that go with that. To illustrate the point, it is worth reflecting on the approach taken to motor cars. In just about every industrialised nation thousands of people die on the roads every year. And yet, as far as I am aware nobody has seriously called for cars to be prohibited, even in the USA where they are by any definition more dangerous than the growth in online gambling which, as we know, has so alarmed Congress. Instead, the norm is for regulators to respond by demanding licensing, seat belts, air bags and the like. In other words, pragmatic and reasonable regulation has been applied. It is not intended to be a provocative statement, but gambling, by any objective criteria, quite simply does not fall into the same risk class as driving, to name but one, and yet in many ways we are being regulated even more tightly. It is a bizarre situation. Does that mean that we should not care about problem gamblers or children? To which the answer is: of course not and it would be foolish to suggest that. What it should mean is that we accept our responsibilities and we help to deal with the problems, but that those in positions of authority should keep the risks in proper perspective and the regulations proportionate. At the moment there is a real danger that they will not and that is one of the biggest threats that the industry will face over the next few years. That will be doubly so if that kind of thinking underpins any form of agreed international standards. The industry needs to be alive to this. More and more jurisdictions are reviewing their gambling laws and online gambling is frequently uppermost in their minds. If collectively they go down the wrong path there may be no way to bring them back. Our job is to throw some proper light on the road so that they will take the right turns and make the right decisions. We do not want or need preferential treatment, but we must demand objectivity. We know it will be an uphill struggle, but it can be done. CGI CLIVE HAWKSWOOD Clive Hawkswood has been Chief Executive of the Remote Gambling Association (RGA) since its establishment in August 2005 following the merger of the Association of Remote Gambling Operators (ARGO) and the interactive, Gambling, Gaming & Betting Association (iGGBA). Before that he was the General Secretary of ARGO. Clive was formerly head of the Betting & Racing Branch at the British Department for Culture, Media & Sport (DCMS). Prior to that, he was at the Home Office, spending time in both the Gambling Section and the Horseracing Policy Team. Earlier in his career he spent several years working in the bookmaking industry. He is also a Director of the Responsibility in Gambling Trust (RIGT), the British charity that raises and allocates funds for problem gambling related research, education, and treatment.

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GAMES, TECHNOLOGIES, NETWORKS AND LICENSING DEALS – JUST SOME OF THE DRIVERS FOR 2007 There are interesting and exciting times ahead for the industry. New Asian markets offer great opportunity, localised games and bespoke technologies will continue to emerge and there will be a new maturity within the industry as consolidation sets in. Recent events overseas have led to a renewed focus on European markets too. Microgaming is not alone in feeling that European markets are going to respond well to the renewed focus on developing and expanding them. Microgaming rebranded its operations last year in the expectation that the industry’s days of mini-brands had reached their peak. We couldn’t have been more right, even if events moved faster than the industry predicted. Now a wave of consolidation is underway that will serve to aid regulatory perceptions and boost player confidence. For casino, the momentum in this sector is still unremitting with Microgaming continuing to lead the way in games development. We delivered on a promise of four new releases every month in 2006 and aim to continue this unmatched roll out schedule into 2007. 2007 may also prove to be the year of the network. As the focus on maintaining player liquidity intensifies, Microgaming is well placed to take advantage. Microgaming’s Progressive Jackpot Network is the biggest, best paying and most famous online jackpot network around - paying out over $220m in jackpots to over 6,500 players around the world. The Microgaming Poker Network brings players together from all over the globe, offering the opportunity to play at a multitude of card tables and participate in one of the most aggressive tournament schedules on the web. The beauty of the network is that every room maintains its own distinctive look and feel, enabling operators to build brand loyalty and retain 100% ownership of their players – simple really. Licensing deals are another area that will play an important role in broadening appeal this year as they continue to provide the industry with a more mainstream ‘entertainment’ feel - we are an entertainment industry after all. Licensed properties, such as the Microgaming’s massively successful Lara Croft tie will prove crucial to player acquisition and rest assured Microgaming has some exciting announcements in the pipeline. In summary, the outlook is positive. Whether we are talking new markets, localised games development, bespoke technologies or headline grabbing licensing deals, when it comes to Microgaming at least, 2007 is going to be very much a case of ‘Watch this Space’.

SKILLS TRANSFER

EXPLORING GAMBLING PRACTICES IN WORK AND EDUCATIONAL ENVIRONMENTS BY MARK GRIFFITHS

The question arises to what extent gambling techniques and theories can actually enhance the educational and transferable skills process as appropriately applied? Could a set of programmes be built into the process as a tacit preventative measure at the vulnerable stages of early life? At present, we do not really know the answer to these questions but it is certainly feasible. The question remains of whether it is desirable. This article therefore examines many of the alleged skills used in gambling situations and attempts to apply them to the workplace.

n gambling there seems to be almost never ending commercial opportunities arising from rapid technological changes and the interactive effects of that on the international stage with regulatory, social and economic implications. I have written a fair amount in the computer game literature highlighting the positive benefits that can be gained by playing videogames including the health and educational benefits. For instance, this includes young people learning about economic concepts by playing games like Sim City, the use of videogames as training aids (e.g. simulators), as distracter tasks in pain management, and as an aid in occupational therapy.1-3 Given such examples, there is perhaps an argument for incorporating the concepts, techniques, and methods of gambling into certain educational and workplace environments. An obvious example is the use of gambling to teach probability to children at school. Using real life examples as a way of educating people about mathematics is seen to be “a good thing.” However, I do recall the economist Professor Ian Stewart claiming that the National Lottery was a tribute to public innumeracy! The management of chance and odds in an educational context is clearly not new and we know there is a basis implied in playing the stock market – something older school children as young entrepreneurs are sometimes encouraged to do. The question arises to what extent gambling techniques and theories can actually enhance the educational and transferable skills process as appropriately applied? Could a set of programmes be built into the process as a tacit preventative measure at the vulnerable stages of early life? At present, we do not really know the answer to these questions but it is certainly feasible. The question remains of whether it

Casino & Gaming International ■ 17

SKILLS TRANSFER

is desirable. This article therefore examines many of the alleged skills used in gambling situations and attempts to apply them to the workplace.

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GAMBLERS AS ROLE MODELS IN THE WORKPLACE Whether it is an act of problem solving in a work meeting or a major corporate decision, we act in the hope that we will achieve the desired result, even if it is unknown before we start. To some extent, this sounds like gambling. A 2005 book by Harvard academics Howard Stevenson and Eileen Shapiro called Make Your Own Luck argued that the best gamblers serve as an ideal role model in how to get on in the workplace4. They argued that the best gamblers are those that use “predictive intelligence” in their day-to-day lives. These are the types of gamblers who in the face of uncertainty know how to bring about the desired outcome by assessing the decisions they make on the basis of relative impact and uncertainty. Using these two variables (i.e., the degree of certainty and the impact), Stevenson and Shapiro created a “gambler’s prediction map” of four zones based on these two factors. The first of these is the ‘wallpaper zone’ in which decisionmaking has high certainty and high impact and is (they argue) like wallpaper because it is often ignored but can be very powerful. This is a classic low risk, high return gamble. The ‘wild card zone’ is where decision-making has high uncertainty but high impact and is the classic high-risk gamble with huge rewards if it comes off. The “ant colony zone” is where decision-making has high certainty but low impact and is so-called because when ants act together they can still have a positive effect. This is the low risk but moderate pay back gamble. The worst scenario for decisionmaking is in the ‘strategic rat zone’ where there is both high uncertainty and low impact that in effect is putting all your money on an absolute no-hoper. By using various strategies in the right zones, gamblers with good predictive intelligence will come out winners in all walks of life. So what are these winning strategies? In a nutshell, winning gamblers: ■

Identify big goals: Winners imagine the future they

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want to create and formulate a strategy that will help them achieve their goals. Weigh the upside/downside: Winners calculate the possible upsides and downsides to decide if the risk is worth taking in the first place. They know all the rules of the venture they are getting themselves into. Jump bets: Winners are able to change plans at the appropriate moment. They may have to decide very quickly whether to stay or shift from their chosen path. Gamblers with high ‘predictive intelligence’ jump before all the available information is to hand so that they can grab the opportunities that they think will not be there later down the line. Have an implicit strategy: Winners make sure that it is their actions (and not just words) get them to where they want to go. They focus on the micro-details as well as the macro-goal. Create a real alternative: Winners make sure they have a back-up plan in case their main strategic decisionmaking plan goes wrong. Use prediction maps: Winners need to forecast all the major potential influences in their chosen strategy by assessing the relative impact and uncertainty of the situation. Risk splits: Where possible, winners calculate how to reduce or spread risk to others and consider all possible outcome scenarios. Know what’s the ‘it’ they’re betting on? Winners know in advance what they are going to do, why and what the expected outcome is likely to be. This helps clarify whether the decision is the right one in the first place. Assess possible domino effects: Winners know what actions they will take in the future based on the ones they are making now. They can assess very quickly if they will be locked into a series of follow-on bets as a result of their decision. Know when it’s game over: At the simplest level, winners know when to call it quits.

The message is simple. Good gamblers with high predictive intelligence possess many life skills that in the right

SKILLS TRANSFER

circumstances can be transferred to the workplace. The following section extends some of this thinking and looks at one very particular form of gambling – namely poker.

LEARNING FROM LUCK Gamblers are one of life’s great believers in luck. There is also much to be learned from the psychology of luck and applying it to situations outside the gambling context. Professor Richard Wiseman at the University of Hertfordshire has spent many years studying luck and believes he’s discovered four principles of luck and knows how to help people improve their good fortune5. The results of this work reveal that people are not born lucky. Instead, lucky people are unconsciously using four basic principles to create good fortune in their lives. Wiseman’s research has involved him in being with those who define themselves as either lucky or unlucky, and examining the reasons why. Wiseman started by asking randomly chosen UK shoppers whether they had been lucky or unlucky in several different areas of their lives including their careers, relationships, home life, health, and financial matters. Of those he surveyed, 50 percent considered themselves lucky and 16 percent unlucky. Those lucky or unlucky in one area were more likely to report the same in other areas. Most experienced either consistent good or bad fortune. Professor Wiseman therefore that concluded luck could not simply be the outcome of chance events. So what do lucky people do that is different from unlucky people? ■ Lucky people maximise chance opportunities. They are skilled at creating, noticing and acting upon chance opportunities. They do this in various ways, including networking, adopting a relaxed attitude to life and by being open to new experiences. ■ Lucky people listen to lucky hunches. They make effective decisions by listening to their intuition and gut feelings. For example, they take steps to actively boost their intuitive abilities by meditating and clearing their mind of other thoughts. ■ Lucky people expect good fortune. They are certain that the future is going to be full of good fortune. These expectations become self-fulfilling prophecies by helping lucky people persist in the face of failure, and shape their interactions with others in a positive way. ■ Lucky people turn bad luck into good. They employ various psychological techniques to cope with, and often even thrive upon, the ill fortune that comes their way. For example, they spontaneously imagine how things could have been worse, do not dwell on the ill fortune, and take control of the situation. Research has also shown that lucky people use body language and facial expressions that other people find attractive. For instance, they smile twice as much as the unlucky, and engage in more eye contact6. In addition, they

are more likely to have a broad network of friends and take advantage of favourable opportunities. Lucky people view misfortune as short-lived and overcome it quickly. In short, self-fulfilling prophecies appear to affect lives. Those who expect to fail may not even try. Lucky people try to achieve their goals even when the odds are against them. Luck is not a magical ability or a gift from the gods. It is a mind-set, a way of perceiving and dealing with life. This is something that gamblers should know and try to apply to their day-to-day gambling activity.

POKER AND TRANSFERABLE SKILLS Quite recently, my research unit was approached by an online gambling company to examine the skills involved in playing poker (both on and offline) and to assess to what extent the skills involved had any transferability to real life educational and workplace situations. This provided an interesting challenge as much of our unit’s work concerns the potential dangers of excessive gambling and social responsibility. In a paper written with my colleagues Adrian Parke and Jonathan Parke, we argued that playing poker has the potential to help develop a whole range of different transferable skills particularly in a workplace situation.7 We claimed that poker gambling could offer lessons for success, even in non-mathematical lines of work. For instance, being given an assignment or a particular team to manage might be akin to playing with the cards that you have. Playing with the cards you have is a winning strategy in poker. And top poker players are insatiable in their desire to win. Being this focused is an important leadership skill in the workplace. Then there’s the art of deception, not normally seen as a desirable skill, but in poker it’s all part of the game. In many workplace situations the ability to get away with white lies, to save face or be diplomatic, or to smooth over or disguise mistakes and errors, is a big advantage. We also claimed that both online and offline poker requires much skill to succeed and that winning requires many integrated skills and abilities. Below is a list of some of the traits and skills we speculated are needed to be a successful poker player and the characteristics needed to be a good poker player. We argued that all of these can be utilised in other contexts to bring about success in other areas of peoples’ lives, particularly in the area of employability and future success within that job. ■

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Critical evaluative skills - The ability to appraise information and situations realistically and to anticipate problems and difficulties is paramount in poker. To critically evaluate your own playing decisions yourself (“did I play that right?”) and of others is commonplace. These are also essential skills in the workplace – particularly in management. Numerical skills – The ability to handle and interpret

>> The ability to continually learn and not to rest on your laurels is a valuable skill in poker (as it is obviously in almost all areas of one’s lives). In poker, being humble enough to learn from those more experienced and to take others’ expertise into future games, is akin to other learning experiences in other environments – including the workplace. In poker, such learning can bring about objectivity >> 20 ■ Casino & Gaming International

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WILL EUROPE EXPLODE? A commentary by Paul Sinclair, CEO, International Lottery in Liechtenstein Foundation (ILLF) January 2007

It has always been clear, and at no time more than now, that the internet gaming industry is certainly no place for timid or faint-hearted souls. Eerily fitting, for the superstitious and for those who offer games of chance (not mutually exclusive groups), that the turning point for the United States was Friday the 13th – the date in October 2006 when president Bush signed the Unlawful Internet Gambling Enforcement Act (UIGEA) into law. A memorable event, not least for the reason that the industry was gathered at EIG in Barcelona at the time. Mixed reactions of tempered disbelief, reflections on forsaken markets, nostalgic predictions of a return to the “old school” way of business and anticipation of new opportunities abounded; opportunities for the private companies to quietly pick up the slack. The plethora of mergers was predictable, but as the dust begins to settle, the question emerges of how the opportunities in Europe will evolve. The responses from the European Governments have been encouraging indeed. The European Commission’s sphere of influence pails in comparison to the powerful sweeping autonomy of the governing body of the US Federation – there will be no European UIGEA. Despite the limited clout of the EC, thanks to a few strong leaders in the industry, the pressure being brought to bear on the European Governments is beginning to show signs of paying dividends. The response from the Governments is largely to consider regulation as the sensible option. Regulation across Europe is the most likely path, with the United Kingdom leading the rally. Italy rattled the industry cages with the infamous blockade, and, in an apparent turnaround, recently invited applications for licenses, and now Spain is emerging as a home for a European offering. Yes, the European market will explode. The survivors will be those who get their hands on the Government licenses out on offer within the white-listed countries drawn from the European Economic Area (EEA) including the countries of the EU and the EFTA countries of Liechtenstein, Iceland and Norway. In Liechtenstein, the internet lottery is operated by a Government-controlled charitable Foundation. The Foundation took the first ever internet gaming transaction in 1995 and represents the International Federation of Red Cross and Red Crescent Societies (see http://www.ifrc.org/helpnow/lotto.asp). Jackpots are insured by a Lloyds of London Broker. The members of the Liechtenstein Government who are involved with the Foundation are forward-thinking, and the Foundation is considering relationships with other forward-thinking organisations with access to European markets, once these companies have been approved. With over 10 years experience on the internet, the GoLotto Brand outstrips any other Government-controlled offering. Backed by competitive, company-friendly taxation levels, in a politically stable, clearly regulated and financially respected environment linked to the Swiss currency, together with a country-wide fiber optic backbone providing communications way above international standard and being geographically centrally located, Liechtenstein’s longestablished lottery law provides a strongly regulated, first-world jurisdictional environment for the lottery and the first-mover advantage over alternative pan-European internet lottery options. Paul Sinclair, CEO of The International Lottery in Liechtenstein Foundation (ILLF) since February 2006, joined in 2000 as Information Technology Manager. Paul graduated from the University of Natal (South Africa) with a Science Degree in Mathematics. Paul formed his own company, IPC Systems, in South Africa in 1992 offering software solutions, specializing in Manufacturing Process Control. Paul has an innovative style and a clear vision for lotteries, which combined with his experience in Information Technology and knowledge of the gaming industry provides ILLF with extensive operations and gaming leadership.

SKILLS TRANSFER

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numerical and statistical information is an important skill in many areas of employability. In poker, there are many levels of numerical skill such as the micro management of funds – every penny is important; or with the cards themselves. Not many jobs require mathematical whizkids but many decision-making judgements can be based on the balance of probability or the ability to interpret data summaries. Pragmatism skills – The ability to make the best of a non-ideal situation and to work with within pre-set constraints is a valuable skill in poker. For example, accepting what you cannot change (your cards) and playing with what you have. Pragmatism is also an undervalued skill within the workplace – most probably because it is more of an inherent skill rather than something that is learned. Succeeding in almost any job will require good use of pragmatism. Interpersonal skills – Knowledge of the mechanisms of social communication and the potential sources of interpersonal conflict can be the difference between a good and great poker player. Being able to identify an opponent’s ‘tell’ can pay huge (financial) dividends. Having good interpersonal awareness is not the same as being socially skilled (although it contributes). Interpersonal skills contribute to emotional intelligence, i.e., how to respond in to different people in different situations. Interpersonal awareness skills in the workplace can make a difference in understanding and dealing with interpersonal problems. They may also help in telling whether colleagues are lying or trying to be economical with the truth. Problem solving skills – The ability to identify different strategies and approaches is of great benefit when playing poker. Problem solving skills in the workplace are paramount to anyone wanting to be successful in their career, especially when tied in with pragmatism skills. Goal orientation skills – The ability to set goals and to formulate strategies to achieve those goals can be of benefit while playing poker. Being hungry and insatiable in the desire to achieve (i.e., winning) is a common characteristic of good poker players. Having goals gives people a purpose to what they are doing and this is very valuable in the workplace. It allows people to measure their success in some way just as the poker player does when winning or losing. Learning skills – The ability to continually learn and not to rest on your laurels is a valuable skill in poker (as it is obviously in almost all areas of one’s lives). In poker, being humble enough to learn from those more experienced and to take others’ expertise into future games, is akin to other learning experiences in other environments – including the workplace. In poker, such learning can bring about objectivity. For instance, poker players should not act in haste but ponder and deliberate responses objectively. In essence this is continuing professional development. It doesn’t matter what walk of life you find yourself in, learning from others is paramount. Higher order analytic and strategic skills – The ability to extract general principles from immediate or concrete situations and to formulate appropriate strategies can be paramount while playing poker. For example, good poker players know not to let the cards

24 ■ Casino & Gaming International

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get them frustrated or not to engage in fighting battles they can’t win. There are clear parallels in the workplace including office politics. Flexibility skills – The ability to adapt to any situation or to be opportunistic when a situation presents itself underlies skills in flexibility. In poker, adapting to your environment (e.g., who are you playing against, how big is your stack) is something that comes with playing experience. The ability to look from several points of view is not something that can necessarily be taught but is certainly a valuable skill to an employer. Face management/deception skills – The ability to knowingly deceive someone is not normally seen as a desirable skill but in poker is all part of the game. Good acting ability needed to demonstrate ‘poker face’, bluffs etc. The telling of non-verbal ‘white lies’ is important here. In some situations in the workplace, such skill will be of great importance. Telling white lies to keep face or be diplomatic are good examples. There are also many situations that employers have to bluff in order to succeed (e.g., in giving a presentation to the board, or being interviewed for a dream job). Whilst such skills are not encouraged, they can certainly be of great benefit to the employee. Self-awareness skills – The ability to play to your strengths and acknowledge your weaknesses are common traits in many walks of life. In poker such skills can be very important. For example, remembering bad luck doesn’t always last and good luck definitely doesn’t last. Poker players also know that there is no room for apathy or complacency (in winning and/or losing streaks). In the workplace, self-awareness skills will help you succeed in areas of strength, and help you delegate in areas of weakness. Another related skill that experienced poker players acquire is to realise their boundaries. This is applicable to several areas. Firstly they must choose a game that suits their bankroll. Put simply, they should not play in a table where they are forced to play their blinds based on pot odds. Secondly, they should play at a level where they can keep their head above water (i.e., players should walk before they can run). A cheaper way to gain experience from the experienced players rather than ‘sitting’ with them is to simply observe the profitable players at the high stakes table by viewing their games. The final parameter is for a player to know when they are beat. Conceding defeat in a battle does not equate to losing a war. The war in poker consists of hundreds of battles. For a player to use all their “ammunition” in a battle they are unlikely to win is bad strategy. Self-control skills – The ability to act with a cool head under pressure and to show that you have the nerve and the mettle to cope under adversity is critical in good poker playing. Quite clearly in the workplace, many team leaders and managers will need such skills in order to get the most out of themselves and/or their team. Such skills are also important in terms of stress management. Work ethic skills – For a poker player to be profitable they need to view the game as a financial exchange rather than a social entertainment activity. This includes micro-management of their “stack.” In other words they should not play loosely simply because they have the chip lead. They shouldn’t differentiate pots based on the

SKILLS TRANSFER

level of action or entertainment value. A ‘pot won is a pot won’ and each one is important. Poker is a zero sum game – the pot won must not be graded only by how much it increases the player’s stack, but how it affects their chip position with your opponents. A stack is primarily built by grinding out small wins consistently rather than erratic, high risk plays. Again, there are many analogies here with how to get on in the workplace by working consistently at the job rather than high risk work bingeing. Many of these skills are transferable to other arenas and are the kinds of abilities and traits that will help people achieve in the workplace and aid promotion. Diplomatic use of ‘white lies’ can aid employees in a variety of situations and can help smooth over (or disguise) mistakes and errors. The next few sections examine some very specific issues in relation to playing poker and transferable skills.

ONLINE VERSUS OFFLINE POKER PLAYING Online and offline poker are not synonymous. A very useful tool in poker is to “read” a player through their body language and their verbalisations. In online poker, the gambler is denied this advantage therefore, they must seek to manipulate opponents by the tools at their disposal. The key is to take your weakness (i.e., not being able to physically see other players) and turn it into an advantage (i.e., use nontransparency to the player’s advantage). Online poker permits gamblers to create a false identity. Gamblers could portray the façade of being a young attractive novice female player when in fact they are actually very experienced recognised professionals. The key to a ‘hustle’ or manipulating other players in poker is by gamblers projecting a character and hiding their identity. Essentially, it is about representing a façade, whether it is for one hand or even the whole game. Gamblers can adopt any ‘character’ they wish to suit any game which they engage in. Perhaps in the case of playing with novices it may be profitable for gamblers to portray themselves as experienced professionals in order to intimidate players into submission. Using the Internet relay chat (IRC) band provided, it is easier for a gambler to develop their persona. The tone and pitch of what a gambler says is not revealed in text, so fundamentally they are acting with their most unemotional ‘poker face’. Put simply, they can exude confidence as they go all in on a bluff, when in reality their hands might be shaking and they may be sweating. The key to winning is by inducing emotional reactions from other players. With knowledge of their opponent, it is possible to ‘tailor’ interactions to induce the desired response. Online social interaction at the poker table is not confined to adversarial chastising. It is possible to develop amiable relationships between players. Online poker – particularly at low stakes tables – is often more about entertainment than making profits. In poker, it is not necessary to reveal your hand if nobody calls (i.e., pays to see it). Without seeing cards it is more difficult to understand player behaviour. However, at more sociable tables, people will reveal what they had to opposing players, if nothing else but to indulge the observers. Creating false ‘alliances’ is a way gamblers have of ascertaining more information about their opponents and improving their ability to ‘read’ them.

CONCLUSION Hopefully this short article has provided some speculations and ideas as to how and why gambling can be educational and may help in the development of transferable skills particularly in the workplace environment. In short, gambling, and more specifically poker, may help in the development of such skills as critical evaluation, problem solving, numeracy, pragmatism, goal orientation, selfawareness, self-control, flexibility, interpersonal awareness, and management. Much of poker’s appeal is due to the fact that, unlike many other forms of gambling, the scope to influence the outcome is vast. Put simply, it is primarily a game of skill. Although some of the skills necessary can be inherent (such as emotional intelligence, i.e., the ability to process emotional information, particularly as it involves the perception, assimilation, understanding, and management of emotion), many of the more idiosyncratic skills are only acquired through experience. As a result, a successful poker player will always be seeking to improve by being critical of their own play and assimilating a behavioural repertoire of opponents playing styles. In essence, this appears to be a good analogy for improving performance in the workplace. CGI

REFERENCES 1 2

3 4 5 6

Griffiths, M.D. (2002). The educational benefits of videogames Education and Health, 20, 47-51. Griffiths, M.D. (2005). The therapeutic value of videogames. In J. Goldstein & J. Raessens (Eds.), Handbook of Computer Game Studies. pp. 161-171. Boston: MIT Press. Griffiths, M.D. (2005). Video games and health. British Medical Journal, 331, 122-123. Shapiro, E. & Stevenson, H.H. (2005). Make Your Own Luck: 12 Practical Steps To Taking Smarter Risks In Business. New York: Portfolio. Wiseman, R. (2003). The Luck Factor. London: Century. Lowenstein, J.M. (2004). The science of luck. Located at: http://www.calacademy.org/calwild/2004winter/ stories/counterpoints.html Parke, A., Griffiths, M., & Parke, J. (2005) Can playing poker be good for you? Poker as a transferable skill. Journal of Gambling Issues, 14.

MARK GRIFFITHS Dr. Mark Griffiths is Professor of Gambling Studies at the Nottingham Trent University. He is internationally known for his work into gambling and gaming and was the first recipient of the John Rosecrance Research Prize for Outstanding scholarly contributions to the field of gambling research in 1994, winner if the 1998 CELEJ Prize for best paper on gambling and the 2003 winner of the International Excellence Award for outstanding contributions to the prevention of problem gambling and the practice of responsible gambling. He has published over 150 refereed research papers, two books, numerous book chapters and over 350 other articles. In 2004 he was awarded the Joseph Lister Award for Social Sciences by the British Association for the Advancement of Science for being one of the UKs outstanding scientific communicators.

Casino & Gaming International ■ 25

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UK: ORIGINS OF GAMBLING

POLITICS, PREJUDICE AND THE PRESS: GAMBLING REGULATION IN HISTORICAL PERSPECTIVE BY JULIAN HARRIS

From the time that the process of the reform started with the appointment of the Budd Committee in 1999, and the publication of its report in 2001, up to the reporting of the Parliamentary Joint Scrutiny Committee – a knowledgeable and All-Party body – Government policy was consistent, and without major policy changes. But by 7th April 2005, when the Gambling Bill obtained Royal Assent, some five and a half years after the announcement of the gambling review, Government policy, at least in relation to casinos, lay in tatters, there was vociferous opposition to the idea of gambling reform, and in many significant respects the regulatory regime was to become more restrictive than ever.

vents, dear boy events”, was former Prime Minister Harold Macmillan’s response when asked what his biggest problem was. In CGI Issue 4, 2006 I looked at the history of gambling regulations in Great Britain running up to the Government’s proposals for reform which led to the publication of the draft Gambling Bill in November 2003. From the time that the process of the reform started with the appointment of the Budd Committee in 1999, and the publication of its report in 2001, up to the reporting of the Parliamentary Joint Scrutiny Committee – a knowledgeable and All-Party body – Government policy was consistent, and without major policy changes. But by 7th April 2005, when the Gambling Bill obtained Royal Assent, some five and a half years after the announcement of the gambling review, Government policy, at least in relation to casinos, lay in tatters, there was vociferous opposition to the idea of gambling reform, and in many significant respects the regulatory regime was to become more restrictive than ever. For five years Government, politicians of all parties and experts had carefully deliberated and refined the proposals through the gambling review report, the Government response, the publication of the draft Bill, two joint scrutiny committee reports and government responses to each. Through all of this, maintaining the policy of creating a market approach to gambling, but with strict social responsibility requirements, had been adhered to. Within a matter of a few months that policy was swept aside.

ONE STEP FORWARD, TWO STEPS BACK As originally drafted, the Gambling Bill reflected the free market approach, by placing no limitation on the number of casinos and by introducing for the first time machines for Casino & Gaming International ■ 29

UK: ORIGINS OF GAMBLING

>> The biggest change to the way in which the 2005 Act regards gambling lies in the policies to ensure social responsibility in its decision, summarised in the third of the three licensing objectives: the protection of children and the vulnerable. This has been a consistent theme throughout the reform process >>

casinos which would have unlimited stakes and prizes. In effect, however, the numbers would be limited by the space requirements; in other words, the size of gaming areas would be linked to the required provision of substantial non-gaming areas and other facilities. To maintain the balance of this additional freedom, the legislation was planned to contain three fundamental objectives which would guide all decisions taken under the Act, and all decisions of those regulating the industry. The objectives are:■ ■ ■

To keep crime out of gambling; To ensure that gambling is conducted fairly and openly; and To protect children and the vulnerable.

There were some discussions about the size of nongaming areas, and various recommendations made by the Joint Parliamentary Scrutiny Committee about size and location of casinos, but no substantial policy changes. Then on 14th June 2004, much to the consternation and anger of the existing British industry, Government announced that Category A gaming machines, with unlimited stakes and prizes, were to be limited to regional casinos only. Some prospective operators, mainly international operators from the US, South Africa and elsewhere, were disappointed by the introduction of a cap of 1,250 such machines per regional casino. Then on 30th November 2004 after an unprecedented two week adjournment of the Committee stage to rewrite the Bill, in a panic response to a tabloid media campaign, Richard Caborn, the Minister responsible for steering the Bill through the House of Commons, presented a revised Gambling Bill to the Committee in which the additional number of regional casinos would be restricted to eight. Not only were these important changes made very late in the day - in fact after the 30 ■ Casino & Gaming International

Bill had passed its most important Parliamentary stages - they were made without consultation. Moreover, as recently as June 2004, evidence had been given to the Joint Scrutiny Committee by the Government (Lord McIntosh of Haringey) that it did not have any optimum number of casinos in mind, and that this should be left to the market to determine. The Government’s approach had been entirely consistent with the recommendations of the Gambling Review Body, who concluded that their proposals made resort casinos – as they were then called - a legal possibility, and that the development of such casinos was a matter of commercial judgment. It was also consistent with the Government response, “a safe bet for success”, which stated:-

“The creation of resort casinos was not a specific policy objective of these changes. The extent to which schemes of this kind are promoted and taken forward will be primarily a matter for the private sector subject to local authority approval. The Government will naturally be watching any such developments with interest, and will wish to ensure that any wider public policy considerations, for example, in relation to tourists or regional economic development, are properly taken into account.” It was also consistent with the Joint Committee’s recommendations:-

“We believe that in creating the minimum total size for a [regional casino] will increase the size of the investment required to create such a facility, which in turn may limit the likely number of [regional casinos] to somewhere around 2025. We believe that it is appropriate to have fewer [regional casinos] than has been suggested by some of the evidence we have received”.

ONLINE GAMING At the time, Gala forecasted 30-50 regional casinos, and the BCA gave evidence that foreign operators were forecasting 20-40 regional casinos. Given the amount of investment required, leaving aside complex running restrictions, these numbers are almost certainly higher than would in practice finally have resulted, though it is fair to say that there had been something of a scrabble to secure the cooperation of interested local authorities. The imposition of a limited number was plainly a political decision, but the question is why such a dramatic u-turn was made at such a late stage, and without any prior consultation, bearing in mind that it related to key policy. The explanation given by Richard Caborn to the Gambling Bill’s Committee was that he had:-

“taken careful note of concerns raised during the Bill’s second reading debate about the casino proposals. Therefore, the large measure of support for the view that the licensing controls proposed for the Bill, working alongside the planning system, will not on their own be strong enough to guard against the proliferation of the kind of gambling facility hitherto untested in this country, or the location of regional casinos in unsuitable areas. The Government regards the regional casino framework, which was much strengthened by pre-legislative scrutiny as robust and comprehensive. However, we are happy to provide additional reassurance to those who would prefer a more cautious approach.”

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“The Government recognises, however, that the casino proposals in the Bill represent a significant change and we needed to take a cautious approach in order to assess whether their introduction leads to an increase in problem gambling. The Government has taken the view that this can increase problem gambling will be reduced if a limit is imposed on the number of casinos. We have therefore decided to settle an initial limit on the number of regional, large and small casinos of eight each.”

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The reality can be more simply stated: the Government was running scared. At a stroke it had thrown its entire policy out of the window in the face of uninformed opposition. When executing u-turns, Governments often claim that they are merely listening to the public, and therefore acting honourably. The reality, however, as they knew, was that such opposition as there was had very little basis in fact, but rather on deliberate misinterpretation and prejudice. The questions raised and the points made in Parliamentary debates at this time are difficult to read without losing faith in the British Parliamentary system. Had these concerns been justified, one can’t help wondering why the experts who sat on the Budd Committee, or the Parliamentarians who heard so much

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What the Minister was referring to was an hysterical and ill-informed press campaign, started by the Daily Mail who wanted to “kill the bill”.That campaign, relying as it did on well-rehearsed myths about casinos, and ignorance, outraged the sensitivities of “Middle England”, encouraged opposition by fringe religious groups, and frightened Labour MPs in the run up to a General Election. On 16th December 2004, the Government issued a statement of national policy relating to casinos, imposing a limit on the number of regional, large and small casinos of eight each. The rationale was stated to be as follows:-

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UK: ORIGINS OF GAMBLING

evidence on the Joint Parliamentary Scrutiny Committee had made the recommendations they did. Moreover, there was no logical explanation for the number eight. No explanation has ever been forthcoming, and given that there are nine regions in England, plus Scotland and Wales to consider, the number does not easily divide on that basis.

means probably the loss of £600 million of inward investment to some of those parts of the country where that inward investment is most needed, and the loss of probably in excess of 40,000 jobs. No Government can bind the next Parliament but it will be for the next Parliament to decide whether, in the light of demand and consistent with the precautionary principle, that number should be increased.”

RETREAT TO ROUT

This would have been a logical step; there had been no change in policy, Government had only agreed to the reduction as a result of political pressure immediately before a General Election, and it was open to the new Parliament to reconsider the matter. Moreover, after the Election, the Liberal Democrats said that they would not oppose a move to increase the number again, perhaps to four. By this time, however, the Government appeared entirely to have lost its nerve, and indicated that it would only raise the number with all-Party support, safe in the knowledge that this was never going to be forthcoming. As soon as a limit was placed on casino numbers, some way had to be found of selecting first of all the areas in which they would be located, and then to whom the licences would be granted. The Government appointed an advisory panel to advise on appropriate locations, originally expected to report in December, but now delayed until January. It should be noted that these are recommendations only, and it will be for the Secretary of State to make a final decision, before laying an order before Parliament. The selection is to be based on the following criteria:-

Sadly that was not to be the end of the story. In April 2005 the Government decided to call a General Election, with the Gambling Bill still in the Parliamentary process. In these circumstances the Government has a difficult choice: either the Bill is lost in its entirety and the Government, if it wants to proceed, has to start again in the new Parliament. Alternatively, it can negotiate a quick passage for a Bill with opposition parties. Not to their credit, the Conservative Party, who hitherto had been generally supportive of the Bill, and one of whose members had ably chaired the Parliamentary Scrutiny Committee, decided out of political motives to seek to win votes from Daily Mail readers by refusing to allow the Bill through, unless the number of regional casinos was reduced to a ludicrous one. Ludicrous because, on any view, one cannot properly have a pilot scheme adequately to test the effects of such a casino, if there is to be only one. There may not have been much logic in the Government’s reduction to eight, but at least it would have enabled the regional casinos to be tested in a variety of types of area and types of location. Following the Election, there was much discussion about the possibility that the Government would seek to increase the number of regional casino licences. As early as 7th April, before the Election, the Secretary of State (Tessa Jowell) had said:-

“The opposition had previously supported eight such casinos then reduced the number to four and now insist on one. On the basis of the Government’s original proposition agreed in Committee, some seven local authorities will miss out on the potential benefits of the regeneration in the first stage. We believe that regional casinos should be tested, primarily for any impact they might have because of the different nature of the regime, on problem gambling, and also for their power to regenerate run-down towns and cities. As the Honourable Member for Maldon and East Chelmsford is aware, we reserve the right to ask Parliament again what number of regional casinos is necessary to test their impact.” Don Foster for the Liberal Democrats expressed the hope:-

“That the Secretary of State will reassure us that it is not a hint that as soon as we return after the Election there will be any such moves.” The Secretary of State’s response to this short preElection debate on this matter suggested that this was precisely what she had in mind:-

“It is important that the industry remains supportive of this Bill and has confidence in it. The decision to reduce from eight to one the number of regional casinos in the first stage 32 ■ Casino & Gaming International

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A good range of types of areas; A good geographical spread of areas across Britain; Areas in need of economic development and regeneration and likely to benefit in regeneration terms from a casino.

So far as regional casinos are concerned, this is of course impossible, given that the number is one. But in the fact of selection, one can see that the original idea of opening up casino gaming to a free market had entirely been subverted. Far from a free market, we now have a competition process to look forward to, in line not with the free market approach, but with the selective approach adopted in many other jurisdictions, where a specific number of licences are to be allowed. Under the new regime, casino premises licences will be granted by the local licensing authority, as always intended, but local authorities will only be able to award casino premises licences if such a licence has been identified for its area. This is to be a two stage process. The first stage will be a regulatory test to ensure that all casino proposals satisfy the regulatory premises licensing requirements of the Act. The second will be triggered where there are more applications for casino premises licences with the local licensing authorities permitted to grant. This will be a competition held by the local authority, based on rules which have still not been finalised. It is envisaged that the local authority will set out its priorities and concerns in a set of objective key considerations, and will then invite operators to submit entries to the competition.

THE OTHER SIDE OF THE COIN We have seen that the original plan for reform was to comprise, on the one hand, a free market for all forms of

MOBILE GAMING gaming, including casino licences, combined with, on the other hand, if not as strict a regulatory system, then an increase in the powers of enforcement and much greater protection for children and other vulnerable persons. The Commission has said that it will adopt a risk based approach, and place much greater emphasis on ensuring that operators have their own internal systems designed to ensure compliance, rather than regulated by means of constant inspection and monitoring. A result is likely to be a more “front-loaded” regulatory system, with the Commission requiring much more detailed information and imposing more detailed conditions on operators and their compliance and regulatory systems in order to obtain licences. This policy is coupled with the much more draconian powers of enforcement available to the Commission, than ever were granted to the Gaming Board for Great Britain. For the first time, the Regulator will have power itself to impose penalties on operators without recourse to other authorities. It will also itself have the power to initiate prosecutions. This is a logical extension of the powers previously available to the Regulator, but operators have had to be vigilant during the consultation process to seek to curb an apparent wish on the part of the Commission to over-burden operators with strict liability requirements and attendant risks of penalty. To be fair, the Commission has argued that it will exercise its powers reasonably, but this is small comfort to operators faced with the possibility of losing their business without some element of fault on their part.

RESPONSIBLE GAMING Nevertheless, the biggest change to the way in which the 2005 Act regards gambling lies in the policies to ensure social responsibility in its decision, summarised in the third of the three licensing objectives: the protection of children and the vulnerable. This has been a consistent theme throughout the reform process. Upon the publication of the Budd Report in July 2001, Tessa Jowell said:-

“Our present gambling laws are badly in need of reform and updating. But reform must go hand in hand with tough practical measures to protect young and vulnerable people. There is no doubt that our current laws, as well as being too complex and out of date, failed to reflect the extent to which gambling has become an everyday part of the way in which millions of people choose to spend their leisure. But parents have a right to expect that their children will be protected by the law. So now I want to hear from the public: how do we get the balance right?” The language is noteworthy: tough practical measures to protect young and vulnerable people: parents have the right to expect that their children will be protected by the law. The licensing objectives pervade every aspect of the Act:■ Sections 45 to 64 set out the Offences in the Act which are designed to protect children and young persons. It is an offence to invite, cause or permit a child or young person to gamble. It is an offence to invite or permit a child or young person to enter casino premises, betting shops or adult gaming centres, although it is a defence to prove that the operator took all reasonable steps to determine the individual’s age and he reasonably believed that the individual was not a child.

London: +44 (0)20 7894 7000 Las Vegas: +1 (702) 677 3800

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Section 70 requires the Gambling Commission to have regard to the licensing objectives when considering applications for operating licences. Pursuant to section 153, a licensing authority shall aim to permit the use of premises for gambling insofar as the authority thinks it reasonably consistent with the licensing objectives. In preparing the regulations relating to the crucial area of the advertising of gambling, the Secretary of State is expressly required by section 328 to have regard to the need to protect children and vulnerable persons. Section 82 is a critical section. This stipulates that operating licences shall be subject to the condition that the licensee ensures compliance with any relevant social responsibility provision of a code of practice issued under section 24. Accordingly, if an operator fails to comply with a social responsibility provision of a code of practice, it will be committing a criminal offence and I will return to this issue again when I consider the code of practice which was issued by the Gambling Commission last week. Pursuant to section 83 an operating licence is subject to the condition that if the licensee becomes aware that a child or young person is using its gambling facilities, the licensee must return any stakes as soon as is reasonably practicable and may not give a prize to the child or young person. Be in no doubt that the first major operator to take bets from children under the new regime faces a huge amount of negative publicity.

Towards the end of 2006 the Gambling Commission issued its “licensing conditions and codes of practice”. I have set out the general conditions to be attached to operating licences and personal licences pursuant to section 75 and the principal code of practice pursuant to section 24. Under the general conditions imposed on personal licence holders, they must take all reasonable steps to ensure that the way in which they discharge their responsibilities in relation to licensed premises does not place the holder of the operating or any relevant premises licence in breach of their licence conditions. A personal licence holder should therefore be familiar with the operators’ social responsibility obligations, insofar as they 34 ■ Casino & Gaming International

are relevant to their office or operational function. Breach of the social responsibility provisions will be breach of the licence provision and may therefore involve criminal prosecution. Specifically, licensees must put into effect policies and procedures intended to promote socially responsible gambling, and in effect will be required to support financially the responsibility in gambling trust. They must also put into effect policies and procedures designed to prevent under-age gambling, and monitor their effectiveness. A number of measures are specifically designed for remote gambling licensees, such as:■ ■ ■ ■

Warning potential customers that under-age gambling is an offence; Requiring customers to affirm that they are of legal age. Using the best publicly available information for age verification purposes from country of residence. Additional age verification procedures where credit card not used.

Further measures include the requirement of the licensees to make information available to customers on how to gamble responsibly, and how to access information about obtaining help in respect of problem gambling. Licensees must also implement policies and procedures for customer interaction where they have concerns about a customer’s behaviour, and must introduce procedures for sole exclusion. Whilst it is true the 1968 Act contained a similar objective, to protect children and the vulnerable, there were no specific requirements as to how this would be done, such as those written into the 2005 Act, and into licence conditions and codes of practice. Nevertheless, this aspect of the legislation can be regarded as a natural progression, recognising that gambling is now very much more a part of every day leisure activity than it was in the 1960s.

DÉJÀ VU In the space of time available, I have been able only to look at casino gaming, but it is in that area that the development and subsequent rejection of policy is at its most stark. Whilst the 2005 Act does contain much which is admirably new, such as

TOTAL GAMING the welcome licensing of remote gaming, these areas do not effect the overall policy, or the approach taken in policy terms to the regulation of gambling. However, the approach to remote gambling has been consistent, largely because, oddly, it did not form part of the attack upon the Bill which focused primarily on casinos. In the approach taken to remote gambling, we see a recognition of new developments and of the change in social attitudes towards gambling. Placing the 2005 Act in its historical perspective, the recognition, initially by the Budd Committee, that social attitudes to gambling had changed since the 1960s from a vice to be tolerated to a perfectly proper adult leisure activity was to have been recognised in the policy of a free market approach, coupled with a requirement that gambling businesses operate legally, fairly and in a socially responsible manner. The combination of irresponsible opposition and Government weakness has detracted from what might have been regarded as a natural development, leaving us with the additional controls necessary to regulate a free market, but without the free market originally intended. Instead, we now have an even greater barrier to entry to the casino market than the old “demand” test imposed in the 1968 Act, at least for the first few years of the 2005 Act, when no one will be able to obtain a casino licence once the original 17 have been allocated. It is perhaps ironic that the result has been a flood of applications for new casino licences under the 1968 Act, which may result in a substantial increase in the number of casinos. CGI

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Recognised as a leading expert in national and international gambling and licensing law, Julian Harris is highly regarded by both operators and regulators throughout the world. He and John Hagan are the founder partners of Harris Hagan, the first UK law firm specialising in legal services to the gambling and leisure industries. He, John and other members of the firm have been at the forefront of those advising UK and international operators alike on the opportunities presented by the UK Government’s major reform of gambling law. With over 20 years experience of gambling law Julian has advised some of the world’s largest gaming and entertainment industry corporations. He and his team have also advised trade associations, including the British Casino Association and the Casino Operators’ Association of the UK. Julian came to specialise in this area representing the Gaming Board for Great Britain (the UK regulator) for five years early in his career. Julian is an experienced advocate, a respected and sought after conference speaker and the author of numerous articles and papers for gaming and legal publications and in the national press. He is recommended in all sides to the legal profession, and has been described by Chambers Guide as “astute” and “never misses a trick”. Julian is a Trustee of the International Association of Gaming Attorneys.

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JULIAN HARRIS

Stand 5510

London: +44 (0)20 7894 7000 Las Vegas: +1 (702) 677 3800

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UK: GAMBLING AND INSURANCE

A TALE OF TWO DEVELOPMENT PATHS BY GREGORY ANDERSON

The historical connection between gambling and insurance has for long been an awkward relationship that has not readily lent itself to comparative assessment. The perceived respectability and acceptance of commercial and financial activity, contrary to residual attitudes and prevalent views of gambling today, is nevertheless recognising a growing internationally sophisticated casino and gaming industry. The uphill struggle for acceptance and credibility depends in large measure on the wider economic impact the industry makes as it continues to expand. The context of the last two centuries in the UK reveals the essence of that path which continues to evolve.

espite the ubiquity which both gambling and insurance enjoy in so many parts of the world, today the differences in official and popular attitudes towards the two activities are very deeply ingrained. In contrast to the reassuring and ‘self-evident’ appeal of insurance whose prudential and socially responsible characteristics its supporters and providers are quick to emphasise, gambling seems to embody few positive social and moral qualities. Indeed, gambling is usually associated in the public mind with social problems and financial losses; an activity to be categorised and stigmatised with the other ageold vices of commercial sex, drug addiction and the ‘drinks trade’. Neither does gambling appear to offer anything like the economic benefits which insurers apparently generate by transferring risk from individual taxpayers and businesses to themselves. It must, of course, be acknowledged that gambling and insurance do differ considerably. One activity is risk-taking while the other is risk avoidance. More importantly, while insurance may be said to deal with pre-existing risks, gambling it has been said creates artificial ones. Historically, however, the distinction between the two activities was much less clear-cut. Indeed, in the past insurance and gambling were widely regarded as related activities and there is a good case for arguing that they still have more in common than the proponents of insurance in particular are prepared to admit. Using the English experience as a case study this article will seek to show that the socially and economically ‘respectable’ position which insurance now enjoys has been in large part historically determined by cultural and legislative processes which have increasingly sought to confer credibility upon insurance while at the same

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time separating it from gambling, a process which in turn has helped to transform the latter into an increasingly marginal and at times illicit activity. In England it was difficult to separate insurance from gambling since both activities occurred against a background of feverish speculation. The economic climate of 17th and 18th Century England, for example, was particularly conducive to a ‘buccaneering’ and speculative spirit fuelled by easy access to credit and stimulated by the borrowing requirements of the British State. The South Sea Bubble proved how dangerous such speculative ‘gambling ‘ could be for the investors concerned. However, in 1720, the same year as the South Sea Bubble Act was passed to control the worst speculative excesses of company promotion, Parliament permitted the incorporation by Royal Charter of two large insurance companies, The Royal Exchange and London Assurance, and thus confirmed the national importance of marine insurance and the need to bring it within the orbit of government

control. These companies, apart from providing loans for the Exchequer in return for their legal privileges, were seen as vital for Britain’s foreign trade. Nevertheless, since most marine insurance was underwritten at Lloyds rather than by the companies marine underwriting remained largely uncontrolled and inextricably tied up with speculative contingencies. In Lloyds coffee house genuine insurance was transacted alongside shipbroking, stockbroking and straightforward wagering. This gambling climate in the dealing room at Lloyds’ extended to its main business of marine insurance which were often based on ‘interest or no interest’ policies which were little more than wagers with individuals taking out insurance on the ships and cargoes of strangers and foreigners and often at imaginary values. ‘Interest or no interest’ policies “freed the policyholders from any requirement to document their ownership of freight or of a ship’s hull , and so opened the door to speculators betting on the success or failure of voyages by means of marine

>> A recent critique of insurance has suggested that it involves customers ‘taking a punt on an unlikely mishap’ with the ‘bookies’ (the insurance companies) ensuring that the odds are stacked against those same customers. This sceptical view further suggests that too many people take out insurance to cover minor losses which they could easily sustain from their own resources while at the same time some major losses for which they insure in order ‘to sleep more easily at night’ are as unlikely to occur as a big win on the national lottery >> 38 ■ Casino & Gaming International

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insurance.”1 There was widespread concern that such policies were, in effect, no more than an open invitation to insurance fraud. Of much greater concern was the speculation on other contingencies especially life insurance. The betting on the life spans of total strangers became increasingly popular during the 18th Century with little or no concern for the potential ‘moral hazard’ involved. Life policies were often sold through agents and the physical health – age as well as the identity of the insured – were all matters of conjecture. This betting on the lives of ‘at risk’ strangers, especially celebrities (the monarchy was a favourite subject), was also carried out on the floor of Lloyds as well as by insurance companies. So great an issue did this become that it led directly to the defection of some insurers at Lloyds who objected to gaming policies and to the setting up of a new and arguably more prudential Lloyds in 1769.2 The process by which the developmental paths of insurance and gambling began to diverge was a gradual one but during the course of the 18th Century there is clear evidence of official attitudes towards gambling beginning to harden while in contrast insurance was subject to more control and regulation in order to improve its credibility. In 1746 a landmark Act was passed which sought to prohibit marine insurance policies being sold to anyone unless they could demonstrate a financial interest in the ship to be insured. More importantly such was the public indignation that life insurance was being used as a vehicle for gambling, that shortly after the split at Lloyds over this issue and the setting up of the new Lloyds, Parliament passed the Gambling (life insurance) Act in 1774 which is rightly regarded as the great piece of landmark legislation in the history of British insurance. This Act “forbade insurance policies to be made on lives or on any other event in which the purchaser could not demonstrate an ‘insurable interest’, that is, a legitimate financial stake in the insured outcome which would distinguish the policy from a mere wager.”3 The introduction of the notion of ‘insurable interest’ established a dividing line between gambling and insurance which helped to legitimise the latter by making insurance contracts enforceable in law. The Act of 1774 applied only to insurance policies and gaming policies lay outside its scope but it had the effect of indicating official disapproval of gambling in a more subtle and effective way than previous specific anti-gambling legislation much of which had been either ignored or ineffective. The opposition to gambling gathered pace in the wake of the 1774 Act prompted by the increasing scale and scope of gambling which had expanded enormously during the 18th Century. Although much of the gambling in the 18th Century was a by-product of the speculative culture and many of the bets, such as eccentric wagers on the outcomes of uncertain events, were similar in spirit to the insurance policies taken out on the lives of ‘at risk’ strangers, gambling in general, especially in its popular form, began to be regarded in some quarters as unreasonable, socially disruptive and damaging to the economic order. The social dimension to gambling was the key to understanding its later prohibition. Such was the political and social power of the rich, and especially of the aristocracy, that their gambling was largely immune to the criticism of the moral reformers of the time. In fact, gambling was a favourite

pastime of the landed class in England and was a useful entry point into aristocratic court circles. However, aristocratic gambling was regarded as a private affair carried out either in the great houses or in the West End of London in gentlemen’s clubs like Whites and Crockfords. There was concern, however, when gambling crossed over the social boundaries as it did in some contexts, for example prize fighting (the Fancy) and the ‘raffish’ element among the rich socialised too closely with the lower orders. A totally different attitude prevailed towards popular gambling which became associated among the reformers with crime, destitution and moral degeneration. Even the annual draws of the State lottery became a matter of concern partly because of the disruption caused by the ensuing crowds and the threat of disorder (always a fear especially after the French Revolution) as well as the incidence of street crime. The reputation of popular gambling was not helped by the ‘Hells’, low-life taverns where gambling took place, and which were widely regarded as traps for the unwary run by crooked proprietors. In the 19th Century while insurance became embedded in the social system and particularly among the emergent urban middle class, working-class gambling was further marginalised. The 1774 Act was only the start of a legislative process which reached its logical conclusion in the Gaming Act of 1845 which made any contract by way of wagering or gaming, including those which purported to be insurance contracts, null and void. The non-enforceability of gambling contracts has, of course, continued to this day. In between these two Acts the State lottery was abolished in 1826, a symbolic anti-gambling gesture though one which occurred only after the Lottery’s value to the Exchequer had declined. The non-enforceability of gambling contracts in the courts probably had little impact on the gambling of the rich who had always shown a disdain for such legal devices preferring ‘gentlemen’s agreements’ as a way of settling one’s debts and interestingly such ‘honour contracts’ continued to be a feature of the City of London and particularly of Lloyds’ insurance arrangements. The 1845 Act was more important in cementing the split between insurance and gambling. A more direct attack on gambling per se occurred with the 1853 Lotteries and Betting Act which had the intention, at least, of outlawing cash betting except in specific locations, notably on-course enclosures. This Act was a direct assault on the proliferation of cash-betting offices which had been catering for the popular demand for gambling which began to emerge in this period. Under the 1853 Act credit betting was permitted so the wealthier classes were not disadvantaged. Predictably, this attempt at the suppression of popular gambling failed and simply helped to create new and more informal markets this time on the streets, in the factories and within the working-class communities of the Victorian cities. The moral reform attitudes which were at work in the 19th Century in respect of gambling appear to have had relatively little effect on popular gambling. Although the middle-class critics of gambling made the most extravagant claims equating gambling, in the same way as they did for the drink trade, with moral degeneration and slippage below the poverty line, for the most part working people were resistant to the paternalistic tirade which was directed against their culture and leisure time although a minority did join the Casino & Gaming International ■ 39

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temperance and anti-gambling lobbies. And in any case the available evidence suggests that while popular gambling was indeed very widespread and regular, for most working people it was largely under control. Inevitably, many critics pointed to insurance or saving as superior alternatives to gambling. By the mid-19th Century life insurance was becoming well-established among the urban middle-classes. However, until the emergence of largescale industrial assurance for working people in the late-19th Century, which provided cheap burial insurance policies, the premiums associated with life insurance were out of reach for most working people. For working people on limited or intermittent incomes, any type of saving other than for a respectable burial was difficult, but there was also an underlying social-psychological reason for many workers preferring to gamble rather than insure or save. Compared to the middle class that could take a longterm view of its economic interests, which included insuring its lives and property, the average member of the working class could not afford such a prudential approach and did not possess any property worth insuring. In any case gambling offered a chance of winning, however remote, allied to a degree of excitement. There is little evidence that there was a reckless abandon attached to most working-class gambling (in sharp contrast to the gambling of some members of the aristocracy) and there was a tradition of recycling winnings into family consumption.4 Although the insurance companies boasted about their creation of a new and more prudential class of middle-class clients they relied on the speculative element in life insurance to induce their customers to buy the policies. The demand for insurance in the 19th Century had to be created by the insurers and could never be taken for granted. The expansion of middle-class life insurance is inexplicable without the existence of speculative links with the stock market via endowments which came to replace whole-life policies. Although the 1774 Act had tried to drive gambling out of insurance it signally failed in the case of life insurance. Insurance did not suddenly and miraculously emerge into a new and altogether more prudential phase in the 19th Century and the life insurance companies invested much time and effort working out the annual bonuses which might be paid to policyholders. The bonus meetings were significant events for policyholders and the staff of the companies alike, generating a sense of excitement not dissimilar to that derived from gambling, and those companies which did not declare such a bonus risked losing their business to competitors. Moreover, the failure of some notable life companies shows that such a speculative ‘bonushunting’ strategy could be dangerous for the companies themselves.5 In Lloyds the speculative element was always present among its underwriters and although the Committee at Lloyds, fearful of any return to the type of wagering contracts which had damaged the institution’s reputation, tried to minimise these tendencies, the independent and speculative instincts of the underwriters often resurfaced and usually prevailed. In the 1880’s, for example, the famous underwriter, Cuthbert Heath, the man most credited with creating the modern Lloyds, emerged as an innovator who pushed insurance into the realm of gambling, certainly of speculation, with his ideas on, among other developments, the reinsurance of fire risks. It was said that in the Dealing 40 ■ Casino & Gaming International

William Crockford

room at Lloyds they were placing bets as to how long it would take for Heath to end up in Carey Street i.e. in bankruptcy. Heath survived and flourished as did Lloyds by searching out more speculative contingencies. In fact, historically, Lloyds has arguably always been closer to a betting than to an insurance market since it traditionally accepts risks at a fixed premium without full actuarial information and the availability of such actuarial information is generally regarded as the basic requirement which is necessary before insurance can truly exist.6 The legislative history of insurance and gambling in the second half of the 19th and into the 20th Centuries reveals most starkly the divergent paths along which they were developing in Britain. In 1870 the insurance sector was given a major boost to its credibility, which at that time was somewhat fragile, with the passage of the Life Insurance Companies Act in 1870 which sought for the first time to regulate the operation of insurance companies in order to protect both public and shareholders alike and although it took a long time this type of protection was extended to companies transacting other types of insurance business in 1909 and was later consolidated in the Assurance Companies Act of 1946. While legislation was passed to strengthen the insurance industry, the commercialisation of gambling by contrast was subject to increasing prohibition except for on-course betting. As the notion of what constituted an ‘insurable interest’ in an insurance contract was tested at regular intervals in the courts, so the courts also came down hard on anything which in their view could be interpreted as a gaming or wagering contract. As we have seen, these contracts have been unenforceable in law since 1845, but the Marine Insurance (Gambling Policies Act) of 1909 was passed in order to protect marine insurance and any wagering contracts in this area were deemed a criminal offence. Throughout the period under discussion commercial gambling operators were simply not allowed to function in what was otherwise a free market economy for other businesses. For example, the emergence and growth of professional sport from the 19th Century created

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opportunities for commercial betting which were fiercely resisted by the administrative bodies involved. When the Moores’ brothers sought to introduce a betting business in Liverpool based on professional football in the 1920’s they were forced to introduce their postal pools coupon business under the guise of credit betting in order to avoid the ban on cash betting. Only by such creative exploitation of legal loopholes were the football pools betting – the most important form of working-class betting in the 20th Century before the National Lottery – then able to expand. Apart from the legal restraints on gambling a much more formidable assault was the cultural and social one. Compared to the raffish and independent behaviour typified by the aristocracy which, of course, continued to gamble in the face of public and official disapproval, the model of gentlemanly conduct which was propagated so successfully from the 19th Century was a much more bourgeois one in which gambling among a number of other activities was strictly ‘off limits’. Because it was unacceptable for the middle and respectable working classes to gamble or be associated with gambling the legitimate market for gambling was necessarily restricted. More importantly gambling broke the social rules which were becoming dominant in this period. One of the great strengths of insurance was its success in creating a new type of prudential customer whose behaviour and attitudes mirrored the new social rules. These rules appealed particularly to those new groups, the middle and respectable working classes, whose lives and property were worth insuring and who had more of a stake in the community. Therefore, while every effort was being made to isolate insurance from gambling in a legal sense, the cultural gap between the two activities widened as well. Also the anti-gambling lobby was sufficiently wellorganised and determined to pressurise public opinion into an anti-gambling stance. The Anti-Gambling League was able to convince Parliament with a high proportion of sympathetic non-conformist Liberal and Labour MP’s to pass in 1906 what was perhaps the most obvious piece of class-based antigambling legislation of the period. The Street Betting Act of that year represented the culmination of over a century of prohibitionist pressure and succeeded in turning popular gambling into the criminal activity which its detractors had always believed it to be. The 1906 Act was to dominate attitudes towards gambling in Britain until the 1960’s and although the Act is now largely of historical interest its legacy of turning popular, commercial gambling into the kind of seedy, ‘backstreet’ and illegal activity which it was until the 1960’s is one which affects much of the public’s perception of the industry nearly 50 years after it was decriminalised. Despite the successful creation of ‘prudential man,’ and its increasing credibility, insurance has during its history often struggled to control its more speculative tendencies. The historical expansion of life insurance, which relied upon its speculative character to attract the so-called ‘prudential’ middle-class, shows that this control was only partially successful. Within both the City of London and Lloyds there has been little legislative interference over time and the kind of speculative activities traditionally cemented by gentlemen’s agreements have continued to operate. A recent critique of insurance has suggested that it involves customers ‘taking a punt on an unlikely mishap’ with the ‘bookies’ (the insurance companies) ensuring that the

odds are stacked against those same customers. This sceptical view further suggests that too many people take out insurance to cover minor losses which they could easily sustain from their own resources while at the same time some major losses for which they insure in order ‘to sleep more easily at night’ are as unlikely to occur as a big win on the national lottery. According to this critique “insurance is gambling for bores”.7 Neither can insurance be too easily or neatly linked into the creation of a ‘socially responsible’ society. While gambling has admittedly often suffered from too close an association with criminality (although this is at least in part because, historically, it has been turned into a criminal activity by the State) the question as to whether insurance lowers moral inhibitions or not is rarely confronted and the ‘costs’ associated with the huge amount of insurance fraud and even the occasional high profile ‘life insurance’ murders are, one presumes, more than outweighed by the benefits which insurance brings? Despite these problems and its continuing links with speculation and gambling, insurance remains both economically and culturally largely unassailable, while gambling still struggles to cast off its historical reputation as a vice best avoided by ‘respectable’ society. CGI

REFERENCES 1 2 3 4 5 6 7

See G. Anderson and G. Clark , The Appeal of insurance ,Proceedings of Instute fur Versicherungsbetriebslehre, Hannover, Spring, 2007. See H. Raynes, A history of British Insurance, London 1964. See Anderson and Clark, The Appeal of Insurance. See R. Mckibbin, Working-class Gambling in Britain 1880-1939, Past and Present, No. 82, 1979. See T. Alborn,The First Fund Managers: The Life Insurance Business in Victorian Britain, Victorian Studies, 2002, Vol. 45, No.1. On Lloyds see R.Flower and M.Jones, Lloyds of London, London 1974. See Matthew Parris’s Comment, a critique of insurance, in The Times, April 22,2006 and the reply by Stephen Haddrill for the defence, The Times, April 27, 2006

GREGORY ANDERSON Dr. Gregory Anderson is a senior lecturer and former head of the Department of Economics at the University of Salford. He was a visiting Professor at the State University of New York in 2005. His research interests include the economic history and economics of the service economy and occupations in the UK and the history of risk, insurance and gambling. He is co-organising an international conference at the University of Hanover in Germany in November 2006, the theme of which is the Historical Management of Risk and which will result in an edited collection of essays. An example of a recent article is G. Anderson, The Emergence and Development of Fidelity Insurance in Geneva Papers in Risk and Insurance, 2004. His current interest is the differential development of insurance and gambling as industries in the UK and elsewhere.

Casino & Gaming International ■ 41

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US UIGEA REVIEW

SNEAKY ELECTION PLOY PUTS VULNERABLE AT RISK

BY RICK SMITH AND KEITH FURLONG

After a decade of false starts, antigambling forces in the U.S. Congress have finally succeeded in passing a specific ban on Internet gambling. Literally at the dead of night, without debate and far from public scrutiny, Republican leaders in Congress added an Internet gambling prohibition bill to completely unrelated, but important, legislation on port security. President George Bush made it official on 13th October 2006 when he signed the Port Security Bill.

he Senate majority leader at the time the bill was signed was Bill Frist (Republican-Tennessee). He had attached anti-Internet gambling language to the port security measure several hours before Congress adjourned on 30th September for its election recess. The language generally followed the language of the Unlawful Internet Gambling Enforcement Act (UIGEA) that had been passed by the House in July 2006. However, the Senate had not even held hearings on the measure. As it turned out, the opponents of Internet gambling would not have succeeded without sneaky political plays by Frist. In the 7th November mid-term election, Republicans lost control of not only the House, but the Senate as well. Although some Democrats are also opponents of this form of gambling, many feel that the UIGEA would not have come close to passing in this current session of Congress, which began on 4th January. The leading prohibitionists are opposed to all forms of gambling, a position rooted in their moral and religious beliefs. In specifically targeting Internet gambling, they contend that minors and compulsive gamblers become addicted, leading to a variety of social ills. What prohibitionists fail to note is that regulations supported by the online gaming industry would better address and in many cases alleviate these concerns. In fairness, it is important to realise that not all supporters of prohibition are religious-right zealots or fundamentalist Christian extremists. In the U.S. Senate, for example, Dianne Feinstein, a moderate California Democrat, and Mark Pryor, a moderate Arkansas Democrat, have been very supportive of attempts to ban Internet gambling. Online gambling opponents gained momentum by revelations that disgraced lobbyist Jack Abramoff had arranged payment to Rev. Louis Sheldon of the Traditional Values

Casino & Gaming International â&#x2013; 43

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Coalition to help defeat an anti-Internet gambling bill in 2000. Sheldon had urged Christian-right members of Congress to vote against the anti-Internet gambling bill because it had exemptions (known as carve-outs) for horseracing, lotteries and other activities, and therefore could be perceived as actually expanding legal online gambling. When informed later that he had received funding from Abramoff, Sheldon claimed that he was unaware and shocked. Abramoff, who is now in federal prison, had been lobbying on behalf of an online lottery company. Interestingly, leading up to the passage of UIGEA, public reaction to prohibition bills had not been particularly warm. Various polls found between 70 and 85 percent of respondents opposing prohibition efforts. On 9th June 2006, the Los Angeles Times took Congressional representatives to task in an editorial staunchly opposing an all-out prohibition of online gambling. The LATimes found prohibition legislation to be an unnecessary burden on financial firms, which would be banned from having their services used for electronic betting. The editorial also criticised Congress for an inherent hypocrisy, considering the continued exemption for online wagering on horseracing, which, thanks to a powerful lobby, has seen a half-decade of legal safeguard in the U.S. The West Coast’s largest newspaper further questioned the priorities of Congress in focusing on the banning of online gambling at a time when the nation faced so many political and social problems. The LATimes agreed with many leading gaming industry advocates that regulation instead of a ban on online gambling was a proper answer to the issue, citing Britain’s recent legalisation of Internet gambling as a role model for Americans. Neil Cavuto, lead business commentator for the rightwing Fox News, interviewed Rep. Robert Goodlatte (Republican-Virginia) about his legislation (Fox News, 12th June, 2006). Goodlatte had sponsored an anti-Internet gambling bill whose main points became part of UIGEA. Cavuto, generally considered an ally of the conservative cause, did not let Goodlatte off the hook for the flaws in his bill. Cavuto questioned the necessity of the legislation, as well as the severe penalties that could be incurred for not following the proposed new law. He even compared some of the proposed punishments for participating in Internet gambling to those given to people involved in child pornography sites. The leader of the anti-Internet gambling movement in the House of Representatives last year was Rep. Jim Leach (Republican-Iowa), often regarded as a moderate and someone who was disliked by religious conservatives within the Republican Party. Leach had enlisted the help of Frist to assist in the passage of his legislation in the Senate. Leach’s bill stood little chance of passage as a stand-alone bill in the Senate. But Frist, with the help of then-House Speaker Dennis Hastert (Republican-Illinois), pressured the conference committee chairman to insert it in the SAFE Ports Bill. Because of the importance of the SAFE Ports Bill, members of Congress would have been hard pressed to vote “no”. Although Leach was a 30-year veteran of Congress, he was defeated in his re-election bid in November (by 51 percent to 49 percent of votes cast). Leach publicly said he was defeated because his district was “the most Democratic district represented by a Republican, and I knew if there was a tidal wave, it was inescapable”. His defeat was “the most surprising defeat of the night” and the successful Democrat had not even prepared a victory speech. (American Banker, 44 ■ Casino & Gaming International

9th November 2006). Predictably, supporters of online gambling claimed that they played a major role in Leach’s defeat (“Online Gamblers Worked to Defeat Sponsor of AntiGambling Legislation,” COMWEB, 9th November 2006). Another prominent anti-Internet gambling representative who was defeated in the 2006 election was Rep. Sue Kelly (Republican-New York), who unlike Leach, was seen as a Bush loyalist. As chair of the House of Representatives Subcommittee on Oversight and Investigations, she expressed her opposition to Internet gambling in July 2001: “While Internet gambling represents a jackpot for such foreign jurisdictions, it is a wheel of misfortune for far too many Americans who struggle with gambling addictions and the loss of jobs, wrecked marriages and destroyed finances that often follow.” Goodlatte, a long-time crusader against Internet gambling, had no Democratic opponent and obtained 75 percent of the vote. Despite predictions of a close contest, Senator Jon Kyl (Republican-Arizona), the veteran Senate opponent of online gambling, won reelection easily.

NEW LEADERSHIP: A DEMOCRATICCONTROLLED CONGRESS In the session of Congress that just began, powerful House committees will be chaired by members who are more likely to support regulation of Internet gambling rather than prohibition, members such as Barney Frank (DemocratMassachusetts) and John Conyers (Democrat-Michigan). While Goodlatte has announced his intention to introduce a new bill to prohibit all Internet gambling by amending the 1961 Wire Act, his bill will probably never make it out of a Democratic-controlled committee in the House. The fact remains that most members of Congress do not count Internet gambling as a top priority. And some strongly anti-gambling Senators, such as Richard Lugar (RepublicanIndiana) may be wary of further complications with the World Trade Organisation over its conclusion that the U.S. was in violation of GATS (General Agreement on Trade in Services) because of the U.S. legalisation of interactive, interstate wagering on horseracing only for domestic organisations. Foreign betting services are excluded from this activity. Most members of Congress will want to see whether the proscribed 270-day period following the enactment of the UIGEA as part of the Port Security Bill will actually result in regulations to end financing of Internet gambling. There is consensus among many legal experts that the Act has not prohibited anything that was not already illegal. That could change, however. It is probable that a bill will be reintroduced to establish a commission to determine or recommend whether Internet gambling regulation is feasible. Rep. Jon Porter (Republican-Nevada) is likely to reintroduce his bill to create an Internet gambling study commission. Porter had originally introduced his legislation in the last session of Congress (“Commission to Study the Proper Response of the U.S. to the Growth of Internet Gambling” [HR 5474]). The bill had 50 co-sponsors, but was never considered by the Judiciary Committee. It was, however, supported by the American Gaming Association (AGA). The Porter study commission bill from the last congressional session would have created nine commissioners — two each would be appointed by the majority and minority leaders of the House and Senate and the eight appointees would then select the ninth member. Should such a bill be enacted into law, it would be helpful if the commissioners

US UIGEA REVIEW

were unbiased experts. The most recent federal gambling study commission, the National Gambling Impact Study Commission, established in the summer of 1996, had nine members, of which four were perceived to be pro–gaming, four were perceived to be anti-gambling and one was objective. Further, once Great Britain issues Internet gambling licenses in late 2007, it will be difficult to continue to assert that a regulatory body cannot ensure the suitability and solvency of licensees. Furthermore, powerful casino interests such as Harrah’s, MGM Mirage and Sun International will continue to push for U.S. licensing and regulation.

WHERE DO FINANCIAL INSTITUTIONS AND OTHER BUSINESSES STAND? Some representatives of the business community may step up efforts to minimize the impact of the regulations being drafted as a result of UIGEA. Bankers, especially at smaller community-based institutions, have previously expressed concerns about the regulatory burden that would be imposed on them. A group representing 5,000 small banks opposed the Leach legislation last summer for that reason. The use of U.S. credit cards for online gambling transactions had already been largely shut down during the last few years by major card-issuing banks, either on their own initiative or in reaction to pressure from state and federal officials. But UIGEA, in also outlawing cheques and electronic fund transfers, creates a burdensome technical problem for banks. Credit card transactions get codes that describe their general nature, and a bank can use software to block transactions with specific transaction codes. But the billions of cheques and electronic transfers that occur each year are not coded in the same manner. The system for clearing these transactions was not designed to identify the nature of the transaction. UIGEA gives federal officials 270 days, from13th October, to figure out how to implement the new prohibitions without adding undue burdens to the regulatory requirements of banks. It is not just the small-bank lobbying group that doubts whether this can be done. The AGA, while officially neutral on prohibition legislation, published a white paper on the issue in May 2006 that recommends a review committee. Further, two of the world’s largest casino companies — Harrah’s and MGM Mirage — have publicly stated support for licensing and regulating online gambling, believing that online gambling offers attractive synergies with their existing brick-and-mortar casino businesses. MGM Mirage even experimented with an online casino that was based in the Isle of Man, but closed the site in June 2003 because excluding American players, a measure required by American regulators, made the operation unprofitable. In December 2006 Las Vegas Sands Corp. announced that an agreement has been reached between one of its affiliates and Cantor Gaming, an affiliate of the global financial services company Cantor Fitzgerald, to launch an online casino and poker site initially aimed at serving the UK market, to be licensed in Alderney. Major American financial institutions, including Goldman Sachs, Morgan Stanley, Fidelity and Merrill Lynch, also have an interest having made significant investments in online gaming firms based outside the United States. Some of these companies also lost an opportunity for significant investment banking revenue when they couldn’t participate in initial public offerings of some of these firms.

Individual American players are still free to gamble online under the UIGEA; the prohibition bill does not make it a crime for the individual participant. The focus of the bill is on the “financial transaction provider” – which covers the companies involved in getting money from the player to the operator of the gambling site, and vice versa. American players, who are believed to account for half of all online gambling activity, can continue to play without fear of federal prosecution. Some of their favourite sites may no longer accept their wagers, however, as most of the publicly traded online gambling companies stopped taking American bets after passage of the UIGEA. The fact is that this new law doesn’t do anything to protect American consumers who choose to enjoy Internet poker and other games, and the immediate effect is to drive the industry further underground. Gambling sites will devise new methods for getting money from players, who have shown a resilient demand for this type of entertainment. The sad thing is that many of the largest and most responsible companies have already walked away from the U.S. market. The IGC contends that the U.S. action is a classic case of unintended consequences. In the guise of protecting vulnerable Americans – minors who want to gamble and adults who can’t control their gambling – Congress has actually heightened the risk to these groups. It has driven away the operators who followed the most socially responsible practices. It has also increased the possibility of online gambling being used for money laundering, because it has outlawed the most easily tracked methods of payment. While we recognise that the Internet provides unique challenges to the regulation of any activity, including simple retail transactions, Congress demonstrated no interest in even studying such issues. Political motives clearly drove its rush to pass a prohibition bill, as its members left Washington to hit the campaign trail. This was a sneaky election ploy, and it’s no coincidence that a ban on Internet gambling was part of the “family values” platform of the extreme right, which hoped to distract voters from real issues, such as the war in Iraq. If there was any good news, it was that the election year ploy did not play out in terms of election victories. CGI ■ Professor Joseph Kelly assisted with this article. RICK SMITH & KEITH FURLONG Rick Smith is the Executive Director of the Interactive Gaming Council (IGC). He is a former regulator with the Queensland Office of Gaming Regulation in Australia and a former New Zealand gaming regulator. Keith Furlong serves as the Deputy Director of the IGC, and is the Vice-President of the Catania Consulting Group, Inc., a New Jersey-based gaming consultancy and lobbying firm. He is a former Public Information Officer and Legislative Liaison with the New Jersey Division of Gaming Enforcement. IGC is the leading trade association – formed in 1996 — for the international interactive gaming industry, with its members operating, or supplying services to, most of the reputable gaming and wagering sites on the World Wide Web. Additional information about the IGC, including membership details, can be found at the association’s web site, www.igcouncil.org.

Casino & Gaming International ■ 45

EUROPEAN REGULATION: GERMANY

A FAR CRY FROM DICING WITH ROMAN SLAVERY BY MICHAEL HETTICH, HENDRIK SCHÖTTLE AND WULF HAMBACH

Games of dice have been recorded in Germany ever since Roman times and, since the 14th century when gambling houses were established, the population’s passion for gambling had boosted public finances. Centuries later, and following the 1949 Constitution, a multitude of legal codes evolved to regulate gambling. State financial interests, despite efforts to protect the vulnerable against the potential dangers of gambling, has remained a complex and legally ill-defined field. Today, it remains difficult to determine exactly how the market will develop although persistent inconsistencies do pose new possibilities.

he long tradition of gambling in Germany remained unregulated for many centuries and was characterised, initially, by great earnestness and sobriety. The first documented details of gaming activities were recorded in Tacitus’ Germania (98 AD). This depicted early games of dice for which the stakes included the risk of being enslaved and losing private land. Money stakes were not known at that time1. Until far into the Middle Ages the freedom to gamble was unlimited but as of 1276 AD it was regulated, firstly, by prohibition of cheating and later, from 1454 AD, by more general gambling prohibitions2. Through the creation of public gambling houses public finances have profited ever since the 14th Century. At an early point in time it was recognised that the state’s desire to achieve high revenues through gambling was actually difficult to reconcile with the aim of confining the demand for gambling under the existing law. As early as 1848 King Max II in Bavaria announced that he intended to abolish lottery games due to the popular rage for gambling. However, at the end of his speech he added that he would only be able to do so when state revenues were sufficient to allow for it3. This is an area of conflict in which the German gambling laws of today were born. While in the 17th Century the invention of roulette brought a considerable economic boom to spa resorts, many games of chance were entirely prohibited during the 19th Century and at the beginning of the 20th Century, and the organisation as well as those participating were liable to punishment4. The operation of gambling houses was only permitted again in 19335. Since today’s Constitution came into force in Germany in 1949, a multitude of codes regulating gambling law have come into existence. Due to the difficulty of reconciling the State’s

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financial interests to its aspiration to provide protection against the dangers of gambling, gaming law has remained a complex and unsystematic legal field. Starting from the criminal law prohibition in Art. 284 et seq. StGB (German Criminal Code) – which, among other things, makes the operation of gambling, advertising for gambling and participation in gambling in principle punishable – the provisions at the same time allow for an exception for gambling activities licensed by the authorities. Officially licensed gaming remains exempt from punishment. The question of who can obtain an official licence is, on the other hand, regulated by German administrative law. Part of this is commercial law and part of it is safety and police law but with no reasoning or material explanation given. The determining factors for this differentiation were historic, leading to a situation where betting on horses and gambling machines – games which are regulated by commercial law – being admitted for private providers to organise while casino games, lotteries and sports bets – games regulated by safety and police law – are almost exclusively in the State’s hands. According to the wording of the statute, casino-based games may only be operated by the state or by state-owned companies. The state monopoly was protected by the opinion, which was still unanimous only 20 years ago, that in this area any event organised by private providers resulted in criminal liability pursuant to Art. 284 et seq. StGB. Recently, there has been a fast and furious shift toward German gambling, triggered in particular by developments on the sports betting market. During the last few years, state providers have discovered sports bets as a lucrative source of revenue, which resulted in offers being promoted via the increasing intensity of advertising measures. This has happened even though it had been an open secret for a long time, and that the factor behind the sweeping marketing was not the protection of the players against gambling addiction, but rather financial interests.

48 ■ Casino & Gaming International

As a result, in March 2006 the Federal Constitutional Court (Bundesverfassungsgericht, BVerfG), after several postponements, reached its decision on the future of the German sports betting market. However, the clarification that had been expected by private providers of sports bets was not as explicit as some had hoped. The BVerfG did hold that the state monopoly for the area of sports betting in its present practice violates German constitutional law. However, the judges from Karlsruhe left the decision whether to liberalise the market or to maintain the monopoly subject to considerably tightened limitations on advertising and marketing for the state-run provider Oddset, to the legislator’s discretion. The court set a deadline, expiring 31st December 2007, to decide and to set up a new regulation that is compliant with the constitutional requirements. The court explicitly did not consider the question of a violation of European law. Against this background, the European Commission has, in the meantime, opened infringement proceedings against Germany.6 Legislation on lottery and sports betting law is reserved to the 16 German Federal States.7 The essential state gambling provisions are the State Lottery Treaty and the state casino laws. According to the lottery and sports betting laws of the 16 German Federal States, lotteries and sports betting in Germany are subject to a state monopoly. After the judgement by the BVerfG, 15 of the 16 Federal States decided to stick to the monopoly and drafted a new State Lottery Treaty which was to take into consideration the requirements set by the BVerfG, and was to continue to exclude private providers from the German market. In December 2006 it was planned to have the new draft State Treaty on gambling officially signed by the Prime Ministers of the Federal States. But this decision was postponed. Instead, according to press reports, 15 of the 16 Federal States agreed to sign the state treaty in a so-called “circulation procedure”, one by one. One of the Federal

EUROPEAN REGULATION: GERMANY

States, Schleswig-Holstein, refused to agree to the current draft. The governing parties in Schleswig-Holstein have substantial doubts regarding the monopoly per se and the compliance of the draft with constitutional and European law. The President of the European Commission, Mr. Barroso, and the EU-Commissioner for the Internal Market, Mr. McCreevy, severely criticised the current draft, too. If Schleswig-Holstein finally does not agree to the draft, the State Treaty cannot come into force in SchleswigHolstein. If the other states nevertheless approved the treaty, the result would be a rather chaotic legal situation, since private providers might then be permitted in SchleswigHolstein but not in the other Federal States. Such a course of action would be extraordinary in the German federal system, which usually only accepts unanimous decisions.

THE LEGAL BASIS FOR GAMBLING IN GERMANY The German Gambling Market (sporting bets, lotteries and casinos) is subject to federal and state jurisdiction. The essential federal provisions are: The German Criminal Code, the German Civil Code, the Law against Unfair Competition, the Trade Commerce and Industry Regulation Act (including the Gaming Regulation) and the Race Betting and Lottery Act:

GERMAN CRIMINAL CODE (ART. 284 STGB) Art. 284 of the German Criminal Code (StGB), which penalises the operation of illegitimate games of chance, is the main provision in German law pertaining to gambling. Section 1 of this article reads as follows:

Whoever publicly organises or runs a game of chance, or makes available the necessary equipment, without the permission of a public authority, shall be punished with up to two years imprisonment or a fine. Art. 287 StGB regulates illegitimate lotteries and payouts (lotteries with non-money prizes). It stipulates that the unlicensed organisation of lotteries is also subject to penal sanction – similarly to games of chance under Art. 284 of the StGB. These provisions are intended to secure public control of gambling8 and to channel the public’s natural passion for gambling.9 The most important (and also the most controversial) debate regarding Art. 284 StGB revolves around what is meant by an “administrative licence”. It is clear that a German license is included. The question whether foreign licenses are treated in the same way has not been clarified yet. The recent

decision from the Federal Constitutional Court did not resolve this issue, since it only had to deal with a Germanbased provider. One solution is to regard an EU-licence as valid if the controlling system is equivalent to German standards.10 So far, the Courts have not been able to agree on a uniform course. Several courts regard an EU-licence as sufficient, other courts do not.

LAW AGAINST UNFAIR COMPETITION (UWG) The Law against Unfair Competition (UWG) regulates the behaviour amongst competitors, mainly with regard to the marketing campaigns they may conduct, although it also puts further emphasis on consumer protection. Art. 4 No. 11 UWG in connection with Art. 284 Section 1 StGB enables state-run providers of gaming (such as Westlotto), to inundate foreign competitors with warning notices (a special instrument in German law of legal action against competitors which can be very costly for the addressee) and law suits – successfully to a large part. Westlotto, for instance, can achieve injunctive relief and elimination of the foreign offers through so-called “einstweilige Verfügungen” (interlocutory injunctions). Pursuant to Art. 9 and Art. 10 UWG, the competitor can also claim compensation for damages and request information on the sum of proceeds obtained. Under certain conditions, the state can then even “skim” the proceeds from the illegal action.

HORSERACE BETTING: THE RACE BETTING AND LOTTERY ACT (RWG) OF 192211 The RWG came into force as a reaction to the increase in betting activities at horse races at the turn of the 20th Century (at that time there were no betting activities on soccer yet). The Act is amended by the regulatory statutes (AB RWG) of 22nd June 1922. Under this Act, horse racing and horse breeding clubs may be authorised to accept bets and to distribute the stakes among the winners, and professional bookmakers may be approved as wager acceptance offices.12 To be granted such authorisation, the bookmaker must prove his personal reliability (Art. 3 AB RWG).

TRADE COMMERCE AND INDUSTRY REGULATION ACT The operation of games such as amusement arcades and fruit machines (only offline games) is not subject to state jurisdiction (nor to the state monopoly) but is instead – in accordance with Art. 74 I of the German Constitution (Grundgesetz, GG) – covered by basic commercial law (and

>> Recently, there has been a fast and furious shift toward German gambling, triggered in particular by developments on the sports betting market. During the last few years, state providers have discovered sports bets as a lucrative source of revenue, which resulted in offers being promoted via the increasing intensity of advertising measures. This has happened even though it had been an open secret for a long time, and that the factor behind the sweeping marketing was not the protection of the players against gambling addiction, but rather financial interests >> Casino & Gaming International ■ 49

EUROPEAN REGULATION: GERMANY

therefore subject to federal jurisdiction). The Trade Commerce and Industry Regulation Act (Gewerbeordnung, GewO) is federal law and deals with such offline games in para. 33 c – f. These regulations are not applicable to online games. In Germany, there is a legal loop-hole with regard to the provision of online “games of skill” (and many casino games) where money is invested. Many games are not prohibited and are therefore allowed. The distinction between “games of skill” and “games of chance” usually is complicated indeed– especially with regard to online games.

FURTHER REGULATIONS Although International Private Law allows for both the choice of the applicable foreign (case) law in regard to the contracts concluded and a choice of the court of jurisdiction, German law stipulates that German consumer protection provisions must be adhered to if the contractual relationship was created via commerce on the Internet and the customer replied to it from his (German-based) computer. Therefore, German consumer protection rules for distance selling contracts require extensive warnings and instructions about, for instance, special rights of withdrawal for consumers, etc. Further on, Art. 305c and Art. 307 BGB (German Civil Code) stipulate that questionable and surprising clauses in the STCs are to be construed according to the interpretation which is most favourable to the customer. Given that the STCs are the basis of every single contract, it is crucial that they satisfy the domestic consumer protection requirements.

CONCLUSION At present, it is hard to forecast how the market will develop in the near future. There is evidence to suggest that the market will be opened for private providers in the medium to long term. On the one hand, the State offers will probably not be able to survive economically under the restrictions set by the Federal Constitutional Court. On the other hand, the Commission and the European Court of Justice have shown, in the cases of Germany and Italy, that they consider national gambling monopolies to be inconsistent with the fundamental regulations of the EC Treaty. CGI

REFERENCES 1 2

3 4 5

6 7 8 9 10 11 12

Tacitus, Germania, Cap. XXIV. Compare for instance: His, Das Strafrecht des deutschen Mittelalters, Zweiter Teil (Criminal law in the German Middle Ages, Part two), page 324; for further verification see: Volk, Glücksspiel im Internet (Gambling on the Internet), page 4 et seq. Compare further verification in Roth, Das große Los (The Jackpot), pages 54 et seq., 64 et seq. Belz, Das Glücksspiel im Strafrecht (Gambling in Criminal Law), page 18; Volk, Glücksspiel im Internet (Gambling on the Internet), page 5 et seq. Gesetz über die Zulassung öffentlicher Spielbanken (Statute on the admission of public gaming houses) dated 14.7.1933, RGBl. I 1933, page 480. http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP /06/436&format=HTML&aged=0&language=EN&guiLanguage=en see Art. 30 and 70 I of the German Constitution Eser/Heine in Schönke/Schröder, StGB, Art. 284 StGB Section 1 Tröndle/Fischer, StGB, Art. 284 StGB, Section 1. Schönke/Schröder, StGB, 27th edition 2006, Art. 284 StGB, par. 22d. RGBl. I, p. 393, latest amendment by Act of August 24, 2002, BGBl. I, p. 3412. The RWG was enacted on 16th June 1922. Habersack, Münchner Kommentar, 2004, Art. 763 BGB par. 11.

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M. HETTICH, H. SCHÖTTLE & W. HAMBACH Dr. Michael Hettich is specialised on German Gambling Law. His doctorate’s degree on “New Issues of the Public Gaming Law” (“Neue Fragen des öffentlichen Glücksspielrechts”) was published in Germany in 2006. His work deals with constitutional aspects of the state monopoly and with European and international legal issues of national and international services for gambling. He already focussed on administrative aspects of internet law, when working as scientific assistant at the chair of Prof. Dr. Heckmann at Passau University and during his apprenticeship to the Bar with the international aw firm Clifford Chance in Frankfurt. Thereby he created the basis for consulting in the field of online gaming services. Until 2005, Dr. Hettich was working for the international law firm Nörr Stiefenhofer Lutz. Hendrik studied law in Saarbrücken, completed the 2nd State exam in the year 2002. Following the apprenticeship to the Bar (legal clerkship), he completed his doctorate on “Legal Advice via the Internet“, thus specialising in the legal domain of Data Protection and IT-law. Until 2005, Dr. Hendrik Schöttle was a visiting lecturer and scientific assistant at the Institute for Legal Informatics in Saarbrücken. As a qualified lawyer, Dr. Schöttle remains involved in the technical side of IT-law. Dr. Schöttle has published numerous articles in several national and international journals. He is co-author of the book “Elektronischer Rechtsverkehr”, published in the fall of 2005, as well as of the “Juris Praxiskommentar”, a legal, practice related commentary on the German Civil code. Dr. Schöttle is teacher at the German institute “Anwaltakademie” for ITlaw. Wulf studied law in Regensburg and Hamburg. During his apprenticeship to the Bar and in his doctorate which he completed while at the Max-PlanckInstitute for foreign and international private law, he had already begun to specialise on Media Law and Gaming Law. He gathered experience abroad in various places, including at the German American Chamber of Commerce in Houston (USA). From 2000 until 2001, he worked for the renowned Business Law Firm, Westphal Voges und Krohn, as well as for the media company, Verlagsgruppe Milchstrasse in Hamburg. Up until 2005, he practised in the area of gambling and betting law at a law firm in Munich. Dr. Hambach regularly writes for national and international legal publications. He is co-author of the Internet Gambling Report and his work has appeared in a variety of publications, including the WorldOnline GamblingLawReport, Gambling Exclusive, Betting Business, Casino Lawyer, Coin Slots, Interactive Gaming News the legal paper, Sport & Recht, (Sport and Law) as well as the Frankfurter Allgemeine Zeitung. He also writes for the ISA-CASINOS press agency.

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75 YEARS OF NEVADA GAMING

CENTRE OF THE CASINO UNIVERSE FROM BOOTLEGGING TO WALL STREET BY MICHAEL GREEN

For Nevada, making gambling legal in 1931 had little to do with the Great Depression then afflicting the world. Contrary to expectations at the time, legal gambling was—and remains— something to be excited about. Once it was thoroughly disreputable and today, gambling is legal in one form or another in 48 of the 50 states and its publicly traded corporations are among Wall Street’s most respected firms.

eople should not get overly excited about the effects of the new gambling bill—conditions will be little different than they are at the present time …,” the Las Vegas Evening Review-Journal declared on 19th March, 1931. The writer was referring to a new Nevada law allowing wideopen gambling. Seventy-five years later, conditions are indeed a lot different. From a few small clubs along Virginia Street in Reno and Fremont Street in Las Vegas, and in towns around Nevada, the gaming industry is now a respectable, multibillion-dollar business, legal now in 48 of the 50 United States and gaining popularity around the world. Yet Nevada remains the heart of the gaming universe— much in the same way that the heart pumps blood out and blood flows into it. How and why has gambling in Nevada been so successful? The answers lie in a series of themes, people and events, all combining to shape the industry.

IMAGE AND MYTH For Nevada, making gambling legal in 1931 had little to do with the Great Depression then afflicting the world. Businessmen and real estate developers pushed the idea of legal gambling during the Winter 1930 elections. The state’s political boss, George Wingfield, who owned most of Nevada’s major mines and banks, always favoured as little government regulation as possible—and allowing casinos to operate legally certainly fit in with Wingfield’s views. But the myth grew that Nevada simply decided to make legal what had long gone on illegally, all for the purposes of taxing and regulating a vice. Granted, this belief was due partly to a lack of historical knowledge, due partly to a rural Nevada rancher, Phil Tobin, introducing the legislation and claiming that the idea was his alone, saying, “The damn state Casino & Gaming International ■ 53

75 YEARS OF NEVADA GAMING

was broke and we needed the money,” although the state was better off financially than many in that era. Yet Nevadans—defenders of gaming—took a stand at variance with historical reality, creating a myth. In fact, the state of Nevada derived little revenue from gaming during its first decade-and-a-half as a legal enterprise. Most of the money went into county and city coffers because local agencies were responsible for regulating gaming. Not until 1945 did Nevada legislators take steps to bring the burgeoning industry under state control by approving the first tax on gaming revenue—0.25 percent—and giving the Nevada Tax Commission authority over licensing and regulation. By then it was too little, too late—and helped produce another part of Nevada gaming mythology. Informed that legalisation might attract a noted Chicago entrepreneur, the Washoe County sheriff replied, “Al Capone is welcome in Reno as long as he behaves himself.” In fact, an old Capone ally, Jimmy McKay, already ran Reno’s illegal casinos and another friend, Frank Detra, recently had moved to Las Vegas. Local police lacked the ability to conduct the kinds of investigations and enforcement needed to keep organised crime out of Nevada casinos. By the time the state was ready to step in, organised crime interests had wrapped their tentacles around Las Vegas. Representing East Coast interests, Bugsy Siegel had taken control of the wire disseminating racing results to betting parlours, then taken over the downtown Las Vegas El Cortez and invested mob money in Hollywood businessman Billy Wilkerson’s planned luxury resort, the Flamingo. Davie Berman had migrated from Minneapolis and Gus Greenbaum from Phoenix to run casinos. Some of them were violent—Siegel earned the nickname Bugsy, “Icepick Willie” Alderman had nothing to do

56 ■ Casino & Gaming International

with ice sculpture and Berman reputedly could strangle a man with one hand. Some of them had graduated from the enforcement end of the mob when they proved their business acumen. Siegel never did: the Flamingo really became profitable only after he died. Not until the 1970s would the violent, or non-gaming side, of organised crime become obvious in Las Vegas. With the Teamsters pension fund providing investment money and Atlantic City giving eastern families a closer cash cow to control, midwestern organised crime interests gained primacy in Las Vegas. The Kansas City mob ran the Tropicana through front woman Mitzi Stauffer Briggs, a chemical heiress, and the Chicago mob ran the Stardust and Hacienda on the Strip and the Fremont downtown. Chicago’s local executive was Frank “Lefty” Rosenthal, who went so far as to host his own local television talk show. Its enforcer was Anthony Spilotro, who became involved in street rackets, even setting up what became known as the “Hole in the Wall Gang”—burglars who earned their nickname when they blew a hole in the wall of a local jewelry store during a robbery. This kind of open hubris, previously unseen in Las Vegas casino executives, made it easier for federal prosecutors and state regulators to force them out of gaming in favour of corporate entities. Yet in the public consciousness, “the mob” remained central to Las Vegas. Movies helped: “The Godfather” films gave organised crime a human face, and films like “Bugsy” and “Casino” suggested that face could be glamorous— never mind that any resemblance between the latter two films and history was strictly coincidental. So did the rise of corporate gaming. As each department of a hotel became a profit centre, hotel-casinos gave way to megaresorts and machines increasingly supplanted table games, the older, mob-run Las Vegas suddenly seemed more appealing and personal—and certainly cheaper, despite inflation. The myth grew that “gangsters” built Las Vegas. Clearly,

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75 YEARS OF NEVADA GAMING

their money helped. But J. Kell Houssels, Jr., the longtime Tropicana and Showboat operator whose father knew gangsters and cleaned them out of his operations, put it simply: “Thugs don’t know how to run casinos.” Successful operators came from bookmaking (Greenbaum at the Flamingo and Riviera) or nightclubs (Jack Entratter at the Sands), or from illegal casinos in other states where they knew how to run their business under the radar and control the politicians who might seek to control them. While Benny Binion, who ran the downtown Horseshoe, had a long rap sheet, he had at least as long a history of knowing how to run casinos profitably. Today’s Nevada casinos are bigger, more attractive and more mechanised than their predecessors, but as a longtime casino executive once wisely said, “A joint’s a joint.”

MORE THAN THE STRIP For many, gambling in Nevada, and especially Las Vegas, is the Strip. This is wrong for a few reasons involving the history of Nevada gaming. First, except for a few small nightclubs, the Strip was virtually nonexistent as a gaming entity until 1941 and surged ahead of downtown in the 1950s. Before that, gambling in Las Vegas centered on downtown, where clubs were within walking distance of one another. Only with the building of larger resorts and infusions of money connected with organised crime did the Strip surpass downtown as the place to be in Las Vegas. And with the airport closer to the Strip, which also was the first stop on the highway from southern California, once the Strip passed downtown, it never looked back. Also, downtown influenced the Strip in ways that go beyond chronology. Several leading hotel-casino operators started out on Fremont Street in Las Vegas in smaller clubs where they were able to try out ideas on a smaller scale. Bugsy Siegel and Gus Greenbaum were downtown before moving to the Flamingo. Wilbur Clark owned a downtown club before he built the Desert Inn. J. Kell Houssels, Sr., ran the Las Vegas Club, El Cortez and Showboat before

operating the Tropicana. More recently—and famously—the Boyds ran downtown and locals casinos before taking over the Stardust, which Bill Boyd will implode to make room for the $5.3 billion Echelon Place. Steve Wynn’s first casino was the Golden Nugget, which he expanded before entering the Atlantic City market and triggering the recent megaresort boom by opening The Mirage in 1989. Downtown Las Vegas also predated a Strip trend: themed casinos. Wynn receives much of the credit for this trend for building The Mirage, Treasure Island and Bellagio, while what was originally Circus Circus Enterprises built the Excalibur and Luxor, and Sheldon Adelson replaced the Sands with The Venetian. But Wynn gives credit to Jay Sarno, who built Caesars Palace and Circus Circus. While Sarno hatched his plans without necessarily knowing it, Las Vegas had a theme from the moment of legalisation: it was part of the old west. The downtown clubs bore names like the Boulder Club, the Frontier Club, the Pioneer Club, the Apache, the El Cortez and the Golden Nugget. The first two Strip hotel-casinos were the El Rancho Vegas and Hotel Last Frontier. Their operators came from a variety of regions, but in Las Vegas they often dressed in western garb and encouraged the idea that patrons were on the frontier. Nor has entertainment been the Strip’s exclusive province. They were a far cry from the stars associated with the old Strip of the 1950s and 1960s or the major concerts held in arenas today, but early Las Vegas clubs often had small lounge shows—including a mid-1930s appearance by the Gumm Sisters, one of whom changed her name to Judy Garland. The first headliners to appear in Nevada casinos were at Elko’s—yes, the small northeastern Nevada town better known for cattle ranching—Commercial Hotel. While the Rat Pack became synonymous with the Sands and today the names of celebrities adorn numerous Las Vegas Strip showrooms, Bill Harrah was well known for giving celebrities special treatment at his Reno and Lake Tahoe resorts. Few also have grasped the importance of gambling in Las Vegas beyond the Strip and even downtown. Shortly Casino & Gaming International ■ 59

75 YEARS OF NEVADA GAMING

>> Harrah became the first Nevada casino owner to convert his company into a publicly traded corporation after the Corporate Gaming Act of 1969 encouraged Wall Street investment in Nevada casinos. He was one of the few casino operators to back that measure, but he was consistent: he also was among the few who strongly supported increased state regulation of gaming >>

after the 1931 legislation passed, bootlegger Tony Cornero and his brothers opened The Meadows east of downtown on the road to Hoover Dam. It was the first local “carpet joint,” meaning it lacked the sawdust floors traditionally associated with a casino. But it also may be seen as the first neighbourhood casino, notwithstanding that residences didn’t surround it, because it was off the usual path. Historically, the first real neighborhood casino in southern Nevada was the Showboat, opened in 1954 across from where the Meadows had stood. The Boyds built Sam’s Town down Boulder Highway from the Showboat in 1979. Coast Casinos merged with Boyd after its founder, Michael Gaughan, built several locals-oriented hotelcasinos. From its beginnings with the Bingo Palace, now Palace Station, opening just west of the Strip in 1976, Station Casinos has mushroomed into a locals giant with Boulder Station, Sunset Station, Green Valley Ranch, Texas Station, the Fiesta and Fiesta Henderson (bought from the Maloof family), Red Rock Station and others on the drawing board for Las Vegas and Reno. Smaller casinos have met local needs and often served

60 ■ Casino & Gaming International

as a training ground for employees at larger operations. In North Las Vegas, Major Riddle, who also had owned the Dunes, built the Silver Nugget on Las Vegas Boulevard. About a mile closer to downtown Las Vegas, Jerry’s Nugget has been a local success story for more than 40 years. The Boyds first entered casino ownership with Henderson’s Eldorado Casino. Drivers on Interstate 15 to Las Vegas often stop at Primm or in Jean and find hotel-casinos that would dwarf many earlier Strip properties and the ones they left behind in southern California.

REMEMBERING RENO Today, studies and statistics show that gambling and tourism are far less critical to Reno’s economy than they are in Las Vegas. But the history of Nevada gaming really originates in Reno. It was the first area to dominate the industry, and those who dominated it later in Las Vegas probably never realised how much they learned and benefited from their counterparts along the Truckee River, four in particular: Raymond “Pappy” Smith, Charles Mapes, Ernest Primm and Bill Harrah.

75 YEARS OF NEVADA GAMING

Smith opened Harold’s Club in 1935. Long before what happened in Las Vegas stayed in Las Vegas, he was advertising his casino when gambling was a less respectable business and thus less likely to be advertised. Thomas Wilson’s advertising agency designed a campaign, complete with a covered wagon and 2,300 signs eventually posted saying “Harold’s Club or Bust.” They sent the signs to Nevadans fighting overseas in the Second World War and applied to NASA for permission to send one to the moon— unsuccessfully, sad to say. But the campaign made Harold’s Club known around the world and showed that casinos could advertise and be advertised in creative yet standard ways. And Smith’s family sold the club to Howard Hughes, whose influence in Nevada extended well beyond the southern part of the state, where his activities received far more attention. Smith also was an innovator in games. When Harold’s Club opened, the tables were the centre piece of any casino and slot machines almost an afterthought. Smith tried a new game: mouse roulette. While the image might be of mice dizzily trying to choose between red and black numbers, it actually consisted of betting on which hole the mouse would run into—until gamblers found they could attract or distract the mice with noise and the Smiths found the game wildly unprofitable. But it reflected an experimentation that would reappear later as casinos tried such games as pai-gow poker and Caribbean stud, and the invention of the computer chip and the loosening of slots would lead to video poker and more elaborate machines dominating the casino floor. Reno-born and bred, Mapes returned from service in the Second World War to build his own hotel-casino. In 1947, he opened the Mapes Hotel. It was the nation’s first postwar high-rise hotel and Nevada’s tallest building—a far cry from Bob Stupak’s Stratosphere Tower or the 40-story Mandalay Bay. He did it at the same time that the Flamingo, built and owned by more colourful characters, was opening on the Strip—and one of his executives, Bill Pechart, had a questionable past that prompted state officials to ban him from the casino grounds. Primm tried to open the Primadonna in Reno in 1951. It took four years before his casino operated because his building was on the west side of Virginia Street and Reno officials wanted to limit gambling to the east side. He eventually won their approval for that project and an expansion onto nearby Sierra Street—contributing to the spread of gambling throughout Reno. He later sold his properties to Del Webb—another figure more closely associated with southern Nevada, yet prominent in Reno gambling circles. And Primm’s family started the casinos that make up the I-15 California-Nevada border town of Primm. Harrah was one of many California gambling operators who migrated to Nevada, but one of the few southern Californians who chose Reno over Las Vegas. He tried numerous clubs before finally opening Harrah’s Club in 1946. He added a Lake Tahoe property and constantly expanded his Reno place, eventually adding a 24-story hotel. An avid car collector, he added an automobile museum that became a tourist attraction in its own right—a forerunner of many of the attractions available at Nevada resorts today. Harrah was a forerunner in a lot of other ways. He became the first Nevada casino owner to convert his company into a publicly traded corporation after the Corporate Gaming Act of 1969 encouraged Wall Street

investment in Nevada casinos. He was one of the few casino operators to back that measure, but he was consistent: he also was among the few who strongly supported increased state regulation of gaming.

CHANGES AT A DIAMOND JUBILEE Harrah also provides a way to tie together these themes of Nevada’s 75 years of legal gambling. As 2006 came to an end, the publicly traded corporation he set up accepted a buyout offer from private equity groups Apollo Management and Texas Pacific Group. Just as the arrivals of Howard Hughes and corporate gaming changed the face of Nevada gaming, so might the entry of private equity groups into the market—and Harrah was crucial to corporate gaming and as much an individual power in his own right as Hughes. Harrah’s now is based in Las Vegas, where it owns most of the properties at the corner of Flamingo and the Strip— Harrah’s, the Flamingo, the Imperial Palace, the Barbary Coast, Bally’s and Paris on one side, Caesars on the other. Yet its roots are in Reno, just as much of the power and profits were in Nevada when the legislature restored legal gambling in 1931. And the buyout reflects the evolution of gaming. Once it was thoroughly disreputable, a business for bootleggers and the underworld, or at least for those who liked to dwell on the other side of the law. Today, gambling is legal in one form or another in 48 of the 50 states. Its publicly traded corporations are among Wall Street’s most respected firms. Where Senator Pat McCarran once said that no Nevadan could hope for higher office with the stigma of gaming associated with him, a Nevadan, Harry Reid, is now the U.S. Senate majority leader and casino executives like Steve Wynn have been major presidential donors. Seventy-five years later, contrary to expectations at the time, legal gambling was— and remains—something to be excited about. CGI

MICHAEL GREEN Dr. Michael Green earned his Ph. D. from Columbia University and is currently professor of history at the Community College of Southern Nevada, editor-in-chief at the Nevada Historical Society Quarterly, and a member of the editorial advisory board of the University of Nevada Press. He writes for a variety of publications and is a regular speaker on the history of Las Vegas and Nevada before civic groups and the Las Vegas Chamber of Commerce, and has been a guest on radio and television shows, including an appearance on A&E. He is the author of many articles on the Civil War, including the forthcoming publication The North’s Civil War: The Home Front, which is a summary of his PH.D. dissertation Freedom, Union, and Power: Lincoln and His Party in the Civil War (Fordham University Press). Dr. Green was also the interviewer and editor for the oral history A Liberal Conscience: Ralph Denton, Nevandan (2001) and co-editor of Nevada: Readings and Perspectives (1997). He coauthored A Centennial History of Las Vegas and the History of Lionel Sawyer & Collins.

Casino & Gaming International ■ 61

SUZO-HAPP: STRATEGIC CUSTOMER-ORIENTED GROWTH 2007 is a year in which we see the continued growth of the ICE within the strong foundation of the ATEI in London. Similarly, the Suzo Happ Group has enjoyed continued growth within the foundation of Suzo in Europe / South America and Happ in the United States of America. The group is growing into the strategic set that the owners have focused on. All top management is aware of the blue sky notion…how and where a company should grow in the future…both internally and externally. Well, the sun has certainly shone on the Suzo Happ Group. Management set on both internal and external growth. Like putting pieces of a jigsaw together…the right companies that fit into the strategy have been brought into the Group. This began with AESI in Las Vegas with its very strong links in the USA and excellent pull-through results in the American casinos, specifically for MEI banknote readers and FutureLogic printers. Mazzco followed in the United States, with its strong amusement and vending ties, further aiding the Group, especially Happ, to cement this side of the business. In Europe Suzo expanded into the Iberian peninsula and its well-respected distributor in Spain and Sadectronic – under the leadership of Pedro Garcia – was amalgamated into Suzo Spain. Starpoint – one of the best-known companies in the industry – became the latest member of the Group the end of 2006. This established manufacturer of push buttons fits very well in this spare part Group of companies. Suzo’s presence in Latin America continues to grow, with Jens Peiler and his team setting up a Freeport centre in Montevideo, Uruguay. The process of Suzo’s Latin America customers in import and export have been simplified thanks to this Freeport. Only a strong strategy can support such extensive growth. The focus has been and will continue with best-in-class products, be them home-grown (e.g. Suzo hoppers and toppers) or distribution products (e.g. MEI, FutureLogic). Indeed, the SuzoHapp Group can boost almost complete distribution rights for MEI and FutureLogic around the globe. “It is this kind of presence and service that attracts the best suppliers to us and gives our customers the confidence and trust that we can support our extensive product range around the globe. We are very busy continuing to implement this strategy”, commented Marcel Oelen, Managing Director of Suzo. The effects of the quality of the FutureLogic GEN2 printer and the MEI SC note reader, together with the sales and service of Suzo, can be seen more and more evidently. These products that are often requested as standard by American casinos are being appreciated more and more by European casinos. On the amusement side, Suzo now offer a low-cost, best-inclass banknote reader from Pyramid Technologies. This is called Trilogy and is made in the USA. The stackerless version can accept notes up to 85 mm in width (and so also the English GBP 50 note) and will be joined by the stacker version very soon. Suzo UK has been very busy building on their extensive product range and were proud to announce a major distribution contract with Leisure Link for the supply of billiard cloth and accessories. Charlies Sines, General Manager of Suzo UK, stated, “this contract underlines the unique combination of professionalism, industry knowledge and contacts and the way we do business at Suzo UK”. This year the Suzo Happ Group can be found as ever with a stand on the ATEI (number 2110) and ICE (number 3910). The ICE stand has a strategic link with MEI and FutureLogic. “Our global link with these two suppliers in underlined by our joint stand positioning”, stated Marcel Oelen. German guests are invited to visit the Suzo stand at the IMA (Hall 8a, stand C09) between 16th and 18th January in Düsseldorf.

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CASINO DESIGN & RESORT RESTORATION

CLASSIC, GRAND AND REBORN: RECREATING A SUMPTUOUS HISTORIC LANDMARK INTERVIEW WITH GEORGE S. RIDGWAY

The following three interviews present an insight into one of the grandest resort casino restorations ever to be undertaken in the United States. As the French Lick Springs development unfolds in Indiana, the Midwest may soon experience a major destination impact. Major architectural, engineering, restoration and preservation expertise has gone into a project where no expense has been spared at $382 million. With rare attention to detail and fidelity to historic origins, the resort elements combine to create a unique leisure ambiance that breathes past, present and future.

GI: What influenced you to take the restoration path initially and is it likely, given the challenges the casino industry offers today, that you may stray from your chosen direction?

GR: My involvement in restoration came about through the historical societies and the work of Bill and Gayle Cook and their son Carl. In my private practise we have done quite a number of historic restorations prior to the French Lick Resort Casino and I doubt that I will ever stray from that. CGI: So you would say the newly opened French Lick Hotel has helped to confirm your position? GR: In many ways that is so and we are still being confirmed as work progresses at the older West Baden Springs Hotel. CGI: What is it about the resort that attracts you professionally and aesthetically? GR: The French Lick is a great classic hotel built at the turn of the 20th Century. Among other things, the structure has a great amount of plaster ornamentation that is historically unique. It has a lot of gold leaf and very, very detailed plaster work that is extremely difficult to reproduce. You just canâ&#x20AC;&#x2122;t afford to build them like that today. As we started out it may have been rated as a three or three-and-a-half diamond resort, but the lobby of the French Lick has got to be a seven or an eight now - it is just a wonderful human space people can enjoy! Casino & Gaming International â&#x2013; 65

CASINO DESIGN & RESORT RESTORATION

CGI: Is this one of the rarest examples of a major restoration to include a casino in the United States today? GR: I don’t think putting a major hotel and a casino together is all that unique in itself of course, but when you couple that with the historic restoration of not one but two grand hotels – one a national historic landmark – then it is certainly unique. CGI: What are practical characteristics of restoration work that make this so compelling and different from a modern design challenge? 66 ■ Casino & Gaming International

GR: The largest challenge was the investigative work and the documentation that had to be found in the course of research. Then, together with all of that, modern building codes have to be applied. As I say, the French Lick Hotel, having been built at the turn of the 20th Century, had a lot of structural problems. But far beyond that was the challenge of replacing all the wiring, plumbing, heating and air conditioning, to bring it up to modern efficient standards. Those mechanical, electrical and plumbing phases or MEPs were totally abandoned, ripped out of the building and reinstalled brand new. Now, just try finding places in old plaster walls where it is

CASINO DESIGN & RESORT RESTORATION

possible to run the conduit, ducting and pipe chases! We had to create a tunnel underneath the building running 400 feet from one end to the other to accommodate all of this. As luck would have it, the building was founded on solid rock. If we had used miniature hoe rams to create the seven foot high by five foot wide tunnel it would have taken weeks to remove the rock. Inside the building, using controlled mine-type blasting, we blew out the rock from under it. The blasting was expedited around three weeks ahead of where we would have been had we had to hoe ram the rock. We hired an old mine blasting engineer who came with oodles and gobs of insurance! And he did an excellent job. He was blasting out about five or six feet of tunnel about every four hours. CGI: What hidden gems from the past did you uncover in the course of this work? GR: Don Quackenbush the hotel maintenance engineer has been working at this hotel for 38 years. There is a mezzanine area in the hotel lobby that had 161 little 15-Watt light bulbs. They were all set inside a plaster rosette and everything was painted the same ugly grey colour. I said: ‘Don, they look like lights?’ ‘Yes, they are’. So I said ‘Why don’t you turn them on?’ ‘I’ve been here 38 years and I have never seen them on’. Well, we found the circuitry and actually got the lights working again. Then we went to the first level of the lobby and in between the wall brackets we found painted over duck tape and behind that was another rosette. Another 891 lights were discovered and now they are all working again. There was a major surprise on the third floor of this six-floor hotel. The third floor spans a rather large lobby, about 45 feet across. The floor of the corridor deflected down seven inches. There were guestrooms along the corridor where you would step up seven inches to get into the lounge. We found that in around 1910 the lobby had four of its major supporting columns taken out. In its place were 12x12 timbers that had been turned into bridge dresses in a truss configuration that not only spanned the third floor, but that actually carried floors four, five and six including the lifts. When the columns were taken out and the trusses put in we found the timbers were structurally sound but all of the joints had opened up three, four, five and seven inches in one place – the source of our floor deflection. So we had our structural engineer do quite a bit of research on historic timber bridges to find the solution that would enable us to correct these deformities in the joints. He came up with a system of plates, anchors and bolt-through connections which held the building just where it was, and then on floors three, four and five levelled-up the floor from on top. Anyone walking through there now would not notice it, but the interesting thing is you would have to pass through one of these trusses on each side of the corridor to get to the guest room bathroom. As you open the door you would have seen a significant section of 12x12 timber so we had to deal with that. Well, it was a bit like a treasure hunt and we hoped the building wouldn’t fall down on us before we found all the treasure! CGI: Did the things you discovered provide a template for what was missing?

At one point we had to open up a corridor wall and we discovered a bottle of Gin plastered into it. The empty vessel we pulled out contained a note written in 1917: ‘Bob and Charles drank this Gin, got plastered and plastered this wall’! That bottle is now in the hotel museum together with the note.

GR: This building had been photographed quite a bit so there were a lot of historic images and it had also been written about in a few books. Some of the owners, the Taggart family1 in particular, had quite a bit written about them and we were fortunate here where we were not so fortunate at West Baden. Although we did not find anything for the 1901 construction we did find plans for 1905, 1910, 1915 and 1925. We therefore did have some original drawings although they were not quite correct, but still it was a good platform to start from. At one point we had to open up a corridor wall and we discovered a bottle of Gin plastered into it. The empty vessel we pulled out contained a note written in 1917: ‘Bob and Charles drank this Gin, got plastered and plastered this wall’! That bottle is now in the hotel museum together with the note. CGI: Creating a living history for today’s clientele at the French Lick must be quite a challenge? GR: It was a challenge in that modern amenities had to be brought into a historic building. A lot of that is down to what you never see – the wiring, plumbing, heating – while at the same time you have to be careful not to destroy what gives the building its historic character. Today, if you walk through those rooms, you will see new carpeting, wallpaper, heating system, air ventilation and plumbing; all designed to look as if it has been there for a hundred years, right down to the ceramic tiles in the bathrooms. People who have not been to the hotel before would not necessarily notice a significant change and may well think this a grand hotel that’s simply been cleaned up and given a coat of paint. However, at $66 million for that part of the restoration it is rather more than a cosmetic ‘face-lift’! Casino & Gaming International ■ 67

CASINO DESIGN & RESORT RESTORATION

CGI: Has the original architecture been compromised in any way by the installation of modern facilities?

CGI: Do you think that the restoration approach in the leisure, gaming and casino industry is something that warrants more attention and recognition?

GR: No not at all. I would say the two are in sympathy. CGI: Is there a distinction being drawn between restoration and preservation or are they closely linked? GR: The two approaches are hand in glove. This project is a historic restoration and preservation. There is $20 million in tax credits at stake for the restoration approved through the National Park Service. We met with the State Department’s Advisory Council on Historic Preservation many times; we, for instance, flew to Washington DC, met with National Park Service people, and were in constant communication with them whenever there were ‘surprises’. So when we found historic documentation showing the detail of what the doors looked like we would send that information off and get their permission to duplicate those doors accordingly. It is therefore clearly both a restoration and preservation project. CGI: Often there is a compromise dictated by commercial requirements. Is this the case here or have you been able to resist cutting corners? GR: I would say the opposite is true. The National Park Service went so far as to say that we must preserve the giant Maple and Oak trees and that the Japanese Garden should be restored in every respect. That was one of their major points: we had to restore the garden to its former glory right down to the Coi fish although I’m still not so sure that it ever had any! In Indiana the attitude to preservation is very strict. Again, we replaced 1,808 windows but these had to match the original profile and be duplicated exactly, which still meant putting 40 windows in every day, seven days a week, to meet the deadline. CGI: In terms of the complete complex, what makes you think that full restoration is the key to making it a top-drawer attraction? GR: Time will tell whether we are right about our assumptions. The valley has a strong reputation for gambling even though it was illegal from the time the two hotels were put together. A lot of our advertising campaigns played off the history: the rebirth of a resort, the rebirth of a dream, the rebirth of history. And then there are the amenities like the World class Pete Dye Golf Course and Donald Ross Golf Course, the casino – it all amounts to a vision of a Midwest premier destination resort. CGI: What has been the general professional and community reaction to the whole plan and its progress up to the finishing line? GR: The referendum to approve gambling in Orange County was overwhelmingly in favour at 82 per cent. The press from as far away as New York City, Phoenix, The Los Angeles Times and the press throughout this immediate area have been very upbeat and favourable; hardly any downside at all. 68 ■ Casino & Gaming International

GR: Well, it takes a dedicated and different type of owner to bring gaming and leisure activities together and, on top of that, to throw in the mix of restoration. It would be a lot like taking the Greenbrier Hotel and a Homestead Hotel out east, gently slide them together to within a mile of each other and put a casino in the middle. I think that is a winning combination. Now here, I am standing on ground today where, one mile north of me, there is the West Baden ‘eighth wonder of the world’, especially the dome, a casino and golf courses all around me, and roads coming to this site that rival both the Homestead and Greenbrier… CGI: Is this something that could be repeated elsewhere in the United States? GR: I do hope so. There are so many great hotels – but many that could use a real shot in the arm. We believe that at the French Lick Resort there is a 50-50 split between gaming and leisure interest at the moment. That may change but at this time I think there are a lot of people coming here to enjoy the resort and all the things that it has to offer, with gambling as the icing on the cake. CGI

NOTE: 1

Thomas Taggart headed a syndicate that bought French Lick Springs in 1901, his vision launched the resort. He was Mayor of Indianapolis at the time and became a Senator briefly.

GEORGE S. RIDGWAY George S. Ridgway, AIA, NCARB, ISPLS gained his Batchelor of Science from Indiana State University in 1968 and Master of Science in 1975. George has over 30 years experience in architecture and historic restoration, ranging from health care facilities, retirement centres, commercial & industrial buildings to religious and family facilities and historic renovation projects. He is President of G S Ridgway & Assocs, founded in 1979 as a company devoted to providing quality architectural design. George attaches particular importance to complete management from conception of the project through to final completion. However complex, special and unique creative design solutions with attention to enduring aesthetics and structural longevity are the Ridgway hallmark. He is a member of the National Historic Trust of Indiana and on the Advisory Council of the Historic Landmarks Foundation of Indiana.

CASINO DESIGN & RESORT RESTORATION

FRENCH LICK RIVERBOAT CASINO CELEBRATES TRADITION AND MODERN GAMING INTERVIEW WITH CHRIS LEININGER

Indiana’s French Lick Resort Casino is a singular configuration of the historic and the modern. Its centrepiece of two historic hotels includes one (West Baden) originating in the mid-18th Century and is recognised as one of America’s top ten national historical landmarks today. Within this setting the new Las Vegas style Riverboat Casino was opened in October 2006, creating a unique association that celebrates tradition while connecting with modern gaming interests and providing a much needed source of employment in the area.

GI: You became General Manager of the French Lick Resort Casino just over two years ago, at a point when restoration was well underway. What was it that encouraged you to take this on?

CL: I viewed it as a unique opportunity to get involved in a facility that had so many more dimensions to it than the traditional riverboats here in the Midwest. In large part this is on its way to becoming a destination resort. CGI: How have you found your experience and knowledge with Trump and Harrah’s to be an advantage in this environment? CL: I started out in the industry with Harrah’s in Lake Tahoe, a premier destination area in the country. About 10 years ago I came back to Indiana to work with the facilities: I opened the Blue Chip casino in Michigan City and then spent some time with Harrah’s again before going on to run the Trump. It’s a hybrid of that background that enabled me to develop both an appreciation of what destination resorts are all about and a very good market knowledge and regulatory reputation here in Indiana. CGI: Once you had decided to take this particular path what were the challenges facing you? CL: Primarily, it was the emphasis on ensuring that all of our efforts were going towards building ourselves a premier destination in the Midwest. I’m sure you can appreciate those are lofty enough objectives and that does not happen overnight. Casino & Gaming International ■ 71

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CGI: We are just into December but do you feel this is beginning to emerge? CL: Well, we are about 40 days into the operation so I wouldn’t say we have got full validation of it just yet! But we’re very optimistic that, come peak tourism season in the summer, the facilities will be very well received. CGI: What is the background to the decision to incorporate the Casino as an integral part of the resort complex? CL: It began with the initial legislation in Indiana some 11 years ago. There was provision for 11 licences and one of them was to be located on Patoka Lake in this region. At the time the legislators didn’t know that the Army Corps controlled access to it and would not permit riverboat gaming. As the industry emerged, and all of the riverboats along the Ohio River and Lake Michigan were able to open up, there remained one licence that had not been put into play. Rather uniquely, that was to the benefit of the two historic French Lick Hotel structures. The re-location and approval of legislation to allow for the riverboat brought about the fundamental business model that makes sense for the level of investment that would be necessary to bring them back to their former grandeur. CGI: You recently had your official opening of the restoration complex. Did it live up to expectations? CL: We had our inauguration on 31st October last year and 72 ■ Casino & Gaming International

yes I think the opening exceeded our expectations reflecting a great deal of interest that people in the region have in seeing what we have accomplished. It is quite unlike anything else: a combination of assets and historic richness that cannot easily be explained in presentations. You just cannot convey the spirit of how remarkable these facilities are; you actually have to see them in person. CGI: This raises a point about how well the Casino fits in with the grand nature of this resort. Do you think it successfully makes the transition from the historic to the modern with the inclusion of the casino? CL: Architecturally, we have made accommodation as best as the legislative intent will allow. The test of time will tell when we find out what’s been received amongst our visitor base. CGI: As the operational chief of the Casino your role seems both daunting and fascinating. Do you have a sense of mission to help reinvent past glories but in a modern setting, or is this just another casino placed in an unusual environment? CL: We came to appreciate when we started work on our marketing plan, that we are significantly different to other facilities which, in so many cases, are thematically defined Caesar’s being the obvious one. There, you enter the world of the Roman Empire, while we have 100 years of tangible history and a great deal of richness in just telling our story for what it actually is. So there isn’t a need to create a fantasy around it because it is all quite naturally a part of what we

CASINO DESIGN & RESORT RESTORATION

have been in the past. We bring that out in our marketing by recalling some of the more substantial individuals and things that have happened at these facilities. CGI: But how do you convey that sense in the Casino, is there to some degree a portrayal of the past? CL: I would say it has been a linkage created through a more modern medium. We have a very robust video display system installed that enables us to create our own internal marketing message. That will be rich in the history and of the facilities as a whole creating cross-sell opportunities, right down to the machine level of our slot games. We have the little eye view screens that Bally makes. While people wait for jackpot pay outs they are traditionally entertained with a cartoon-like feature. Well, among other things we are currently talking about showing old-time movies as a means to bring about the historical linkage with all of the facilities. CGI: So rather than the history getting in the way of the core financial nature of the Casino operation; that it actually adds to its attraction for gambling? CL: Very much so. I think right now in our country people are drawn to re-living parts of their past, perhaps for more enjoyable memories of bygone times. CGI: What went into designing and installing the technology? Were there special issues here due to the restoration aspect? CL: Not really. We set out to create a state-of-the-art gaming facility, bringing in the features of a single-level spacious floor with high ceilings, well circulated and with the most modern of slot equipment. We were the first to launch an entirely coin-less format, and one that also has the latest in player tracking systems. The intended goal here is that our slot player cards would afford people the ability to go to any of the outlets across the entire campus and seamlessly interact and redeem their player rewards at the point of sale.

CL: The most satisfying reaction has been from people who consider us a Las Vegas style casino. It has been the greatest confirming response we have had, especially as we initially set out to accomplish just that. Peoples impressions are revealing: some feel the Casino is remarkably different from a space standpoint and that goes all the way down to how we have laid out the slot machines, creating primary isle ways, and so much else that is possible when you build something from the ground up on this scale. CGI: To what extent is the state of Indiana benefiting from the Casino operation? CL: By taking on this project we have created an economic stimulus in an area that has the highest unemployment rate and the lowest per capita income in the State. We view our project as a cornerstone of what will be the economic revitalisation of the entire area. CGI: This is a long-term scenario… CL: Absolutely, and again delivering on the ambitious goal of becoming the premier destination resort in the Midwest. CGI: Do you see yourself as something of a model development perhaps, looking at regionalisation elsewhere in the United States? CL: There is no other circumstance where there are two historic hotels within a mile of each other and the manner in which they exist here so we view ourselves as one of a kind. Certainly, in comparison to the other renowned historic hotels of the Greenbrier1 calibre none offer casino entertainment as a form of recreation.

CGI: Has that enabled you to create just the right atmosphere at the Casino? CL: We are continuing to learn as we go with that but our goal is to create a Midwestern alternative to what many people have sought to go to Las Vegas to experience. The Riverboats that have traditionally operated here just haven’t had the ability to do that until now. CGI: You think that the combination of restoration and Casino on this complex will maximise the viability of the entire project? CL: To the extent that we have more to do here, we also have golf amenities and horseback riding, which means this is more on the lines of people coming to stay longer periods to enjoy all the recreating than simply a trip of convenience. That is what competing facilities with metropolitan areas do very well here. CGI: What has been the general reaction to the Casino’s inclusion in the restoration? Casino & Gaming International ■ 73

CASINO DESIGN & RESORT RESTORATION

CGI: A multi-experience approach is the trend, as we are seeing in Las Vegas and the ‘city within a city’ approach. Is that the pattern of behaviour expected to occur with the French Lick?

know some very good profile gaming customers who enjoy the uniqueness of the resort attributes that, again, they don’t get at thematically based casinos that play on the fantasy aspects.

CL: We believe that will be the type of behaviour that occurs over time. It is only at a foundation point at this juncture, but that is our intention – working with the community, bringing on additional and varied activities and shopping options. It really means playing out to what much of the Vegas model has done, all self-contained within those mega-facilities. Certainly, with the small town nature of this community we have a great deal of opportunity to make some pretty meaningful change occur fairly quickly.

CGI: There must be some interesting tales from the past associated with the resort. What springs to mind?

CGI: What impact have you had on the community? CL: During our hiring of staff Orange County saw the greatest reduction in unemployment of any county in the State. So we are actively putting people who have not had opportunities into very well paid positions with benefits. I am now able to be active in my community using discretionary money that I have available to spend in businesses that act as an incubator of economic development, putting people to work. CGI: Are you trying to re-create the celebrity status associated with the past? CL: We believe there is a broad enough offering in the resort’s qualities to do that eventually. Certainly, once the West Baden is operational the French Lick Resort will present a dramatic uniqueness, thereby enabling us to be adaptive. So we can serve a very discerning customer – and, as you suggest, the higher end of exclusive celebrity - along with people who are intrigued by the resort’s significance and what it means to them and their past. CGI: As with the Las Vegas casinos you will be looking internationally… CL: Yes, and we have been anticipating that. Recently, we began working with Pete Dye,2 in my view one of the greatest golf course designers of the modern era, to take a piece of property we were able to acquire above the resort and set about creating a world class golf course. To give context to that location: it is the second highest point in Indiana and on a clear day has vistas up to 50 miles around. Pete is developing a championship course that he suggests could be one of the finest in the world. For someone who has designed some 300 courses to be that excited about what he is able to work towards here, we really feel it is going to bring about that must-see attribute in a segment that has some very attractive gaming characteristics. CGI: The Casino could be designed as the primary focus or, in a sense, as an option where the entertainment may prove to be the main attraction? CL: I think it is reasonable that people may come in and enjoy the resorts amenities, without feeling the Casino is the primary draw to that. Certainly, we are going to be active marketeers to have the reverse of that as well by getting to 74 ■ Casino & Gaming International

CL: When we began building work at the Donald Ross golf course, the club house was installed with a bar we bought from the Chicago stockyards which at one time was frequented by Al Capone. On the surface of the bar there is an arrow carved into it that is thought to denote that the last three seats of the bar were reserved for Mr Capone and his people. Everybody else was expected to stay to the left of that. So we’ve put a little plaque together as a memorial, explaining how we came to acquire the bar. CGI: So what have been the significant moments for you over the last two years working with French Lick? CL: Being on the Casino floor on a Saturday night when it has been full and realising the decade-long legislative effort that went in to accomplishing this; and seeing the validation of all of this as it all came together. In some degree the personal reward of being part of the project is that you feel it has the right influences on economic development for an impoverished area. There is the implication that, in a time frame of perhaps 15 or 20 years, people will establish that I was part of that foundation. CGI

NOTE: 1 2

The Greenbrier 5-Star luxury hotel - resort, founded in 1778, is also a national historic landmark in West Virginia. Pete Dye is renowned as the most prolific golf landscape architect in American history and a key influential figure over the last quarter century. He was considered to have designed 30 per cent of the first 18 courses of the ‘Top 100 Courses You Can Play’ and designed four of ‘The Greatest 100 Courses in the United States’. His 1971 La Romana, Casa de Campo, Dominican Republic layout many believe is the best seaside golf course in the history of golf course design.

CHRIS LEININGER Chris Leininger is Chief Operating Officer of the French Lick Springs Resort Casino restoration and development project. Prior to joining the executive team at French Lick Resort Casino, he served as general manager for Trump Casino and Hotel in Gary, Ind. Previously, he was vice president of finance for Harrah’s Casino and Hotel in East Chicago, Ind., and vice president of operations at Emerald Casino in Rosemont, Illinois. Leininger has also served as director of finance for Blue Chip Casino in Michigan City, Indiana, and controller for Harrah’s Lake Tahoe in Stateline, Nevada.

For more information please contact, Ray Sharman Tel: Fax: Email:

+44 (0) 1494 878960 +44 (0) 1494 878963 ray.sharman@globaltote.tv

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CASINO DESIGN & RESORT RESTORATION

CUTTING NO CORNERS: INVESTING IN THE PAST FOR THE FUTURE INTERVIEW WITH STEPHEN L. FERGUSON

The Cook Group is renowned as the leader in the global medical devices market with an unusual track record, among other interests, for the preservation of over 50 historic properties. The French Lick and West Baden Hotels comprise the company's most ambitious resort casino restoration to date and that has been led with a passion for recreating what were very nearly lost gems of elegance in the leisure industry.

GI: What is it that compels a distinguished international medical corporation like the Cook Group to want to lead the restoration of an historic resort?

SF: Well, we’ve had extensive experience in restoration over the last 30 years and we have completed over 50 historic properties. The West Baden Springs Hotel we began restoring in 1996. It was one of the most endangered historic properties in the United States. It is a very significant historic property because of the role it played in the Midwest in the early 1900s; but it was also a significant architectural structure since it had the world’s largest free standing dome until the Houston Astrodome was built in the 1960s. So for over 60 years it was the largest free standing dome and that makes it architecturally significant. When you are in its presence it is much more like something you would experience in Europe, rather like the cathedral structures you encounter on the Continent and in England or Italy. We started work on that property when it was very near collapse and aimed to bring it back to life, not as a monument or a museum but to bring real life back to it. That led us to gaming and then we had the opportunity to acquire the French Lick Springs Hotel which is the other historic property that is part of the resort. The announcement of Franklin Roosevelt’s nomination for President of the United States back in 1931 was made at the French Lick Hotel. So the properties not only have architectural but considerable historic significance. Casino & Gaming International ■ 77

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On the gaming side there were 11 licences authorised within the Indiana General Assembly in the early 1990s and 10 of those had been approved and were operating. The 11th licence was for a riverboat on the Patoka Lake, but for legal reasons was never granted. We then set about as a local community to transfer that licence from a nearby reservoir to a site between the historic properties. That gave us the basis for the restoration for what I believe is going to be one of the worlds leading resorts. CGI: Did Bill and Gayle Cook have a major role in looking particularly at the French Lick restoration or is this something that is a natural occurrence as part of the Cook Group? SF: Well, the Cook Group is who the Cook’s are. Bill and Gayle Cook have had a long personal interest in restoration – as I say over 50 properties – and they get involved directly in the detailed nature of the restoration and the history associated with it. So it is both a personal and a corporate involvement. CGI: Do you consider this particular development to be the ultimate in your restoration experience so far? SF: Yes, I would say it is one of the largest historic restorations that has ever been undertaken in the United States nationally, and it is certainly the most significant as far as the company and the Cook’s are concerned. The National Trust for Historic Preservation maintains a list of the endangered properties in the country and this was in the top 10 for the entire nation. 78 ■ Casino & Gaming International

CGI: Do you think that the medical basis of your company tends to make you receptive to the idea of creating economic stability in the locality? SF: We have a commitment outside the medical business to the State of Indiana in a number of different ways. This is literally an impact project for Orange County, which has the highest unemployment in Indiana. Originally, employment was based on timber, furniture, coal and agriculture, which are all natural resource driven. Today, this area is on track to become a tourist destination with its beautiful rolling hills, a very scenic part of the Midwest. In effect, it is returning to its natural heritage as a destination resort. In its heyday eight train loads of passengers came in and out of the French Lick daily and, consequently, became well recognised as a tourist destination. Returning it to that is natural in this day and age and gaming was an important part of that at the time. Up until the mid-1940s gaming existed at the French Lick even though it was illegal. Governor Schricker shut down illegal gaming in 1949. So returning it to legalised gaming today is a natural part of the history of the valley. CGI: Given that you are including the Casino as an integral part of the French Lick restoration, does this suggest that the Cook Group may form a gaming division? SF: Well, I wouldn’t want to say no! As you probably have learned, we had a successful Indiana-based Broadway show called Blast! that played in London, UK, for a period as part of

CASINO DESIGN & RESORT RESTORATION

its international tour before returning to Indiana. That is an example of the different forms of entertainment we are involved in. Our vision for the area is that we expand on the resorts, world class golf, all the things that you can do in a rural outdoors setting, with gaming, and then we see the possibility of continuing to build on that with music, theatres and many other entertainment features. CGI: There appears to have been a big capital outlay on this project without any real return for sometime to come. Is this a well-founded risk or are you more concerned to see that this restoration is done in detail in the right way, perhaps a combination of those factors? SF: A combination of factors. When you are in the medical device business you cut no corners. In our restoration work we have the same approach. We are long term investors and believe that you do it right to begin with and grow it slowly, and in that way you accomplish your aims. We look ahead five or ten years in everything we do, so we view the restoration as a similar project in that it needs to be done in a quality manner to be successful and that also makes it a long term investment. CGI: Is it also part of the company’s mission to consider the community benefit through the French Lick? SF: That is our culture. We have an obligation to give back to the community. When we entered into the West Baden restoration and Historic Landmarks approached us, Bill and Gayle Cook began discussing it. I said to them that this is both a responsibility and a matter of the heart because we have to go into this on a very long-term basis. After all, we thought, is there anybody else? This building is about to collapse and Historic Landmarks viewed us as a last chance to save this structure. This is something which we felt we had both the ability and capability of doing: the ability financially and the capability given our previous experience. We just had to step up to this. That culture permeates the Cook Group; it’s part of our mission to give back. CGI: Can you envisage a situation where the Cook Group becomes involved in community health situations stemming from problem gambling? SF: We’ve entered into this with a slightly different view. We see this as a resort gaming destination and we are looking for people who have disposable entertainment dollars. If you go out to dinner and watch a movie it’s easy to spend a hundred dollars. We view this as another form of entertainment, so we are looking at who we are trying to attract to the resort in a different fashion to other gaming operations located in a major metropolitan area. Our engagement in entertainment – I mentioned Blast! earlier – is about looking for that entertainment dollar. We are looking to establish a clinic and, in fact, to provide people with jobs, education and health care in the area. CGI: When do you envisage the entire resort being completed?

SF: The West Baden hotel will be open in May this year and the second Pete Dye golf course in ’08. Then there are other developments that we will probably stage in ’07, ’08 and ’09 – that is the timeframe as we build up the project. CGI: Perhaps your global commercial range could mean you might consider similar resort projects elsewhere, or is this a unique event for you? SF: Well, it is unique but, yes, with the entertainment business we would certainly consider other opportunities. CGI: Over the past years of association with the French Lick what would you say have been the defining moments for you? SF: When we sent all the boys from French Lick to the local Ivy Tech Community College for training, and then to see the pride in their faces at their graduation, that for me was one defining moment. And then, whenever I walk into the West Baden Dome I still get goose bumps, almost like an artist feeling the satisfaction of observing his finished work. CGI STEPHEN L. FERGUSON Stephen L. Ferguson is Chairman of the Board of Cook Group, the world’s largest privately held medical device manufacturer with international headquarters in Bloomington, Indiana. COOK® (www.cookgroup.com) is a leading designer, manufacturer and global distributor of minimally invasive medical device technology for diagnostic and therapeutic procedures. Cook Group also owns and operates real estate, retail management and travel services businesses. Through its real estate development and management company CFC, Inc., the Cook Group family of companies has placed a special emphasis on preserving architecturally significant buildings in Bloomington and south central Indiana.

Casino & Gaming International ■ 79

THE TIP OF THE ICEBERG Matti Zinder, CEO, Spin3

As mobile phone penetration levels continued to snowball in 2006, various business and consumer applications saw the light of day and some gained favourable acceptance as well as a cult-type following: from Blackberries for business communication to music, instant messaging (IM) and mobile gaming for mass consumers. Nevertheless, the year 2006 only saw the tip of the iceberg called mobile gambling. With industry analysts revising mobile gambling forecasts month on month, the figure is now pegged at USD 23 billion by 2011. And, while the US saw landmark legislation on online gambling come into effect late last year, various countries including Macau, Singapore, Sweden, the UK, Italy, Spain and some in South America saw uptake of gambling in some form or another: Mobile, online, brick & mortar for both real money and play for fun casino games. There were various reasons that drove this growth in mobile gambling in 2006. Riding on the back of increasing mobile penetration numbers, wireless casino system providers, like Spin3, were quick to move ahead of the technology curve not only to accommodate unique, high-quality casino games on hundreds of the leading handsets but also provide a seamless backend management system for mobile casino operators with stringent checks for age verification and fraud. Clearly, the market is ripe for more growth in 2007. With immense progress achieved on the technical, back-end side of mobile gambling service provision, casino operators have shown rapid acceptance for the mobile medium to expand their business. This year we’ll see a different kind of growth experienced by the industry, as we seek to build greater confidence by offering service level benchmarks and unique marketing and distribution tools to casino operators. This growth will be driven by the availability of rich content, with varied uses from marketing to consumer retention, and the ability of wireless casino system providers to leverage competitive differentiators. To enable casino operators to ride the wave of mobility, Spin3 will unveil its latest three innovations at ICEi 2007: the GameWire MultiLink™ open system solution, the Ki-Bi® gambling card, and SpinSupport™. In support of open standards for all, Spin3’s GameWire MultiLink is a new integration platform allowing any interactive casino operator to launch a mobile casino. This development assumes significance in that the renowned GameWire V2.1 wireless casino system can now be seamlessly integrated with an operator’s system allowing any interactive casino operator to enter the mobile space and take advantage of Spin3’s award winning solutions. Spin3 will also unveil the Ki-Bi card – a unique electronic, credit-card sized device that delivers mobile gambling content directly into the hands of players. Ki-Bi cards eliminate many of the difficulties associated with extending a gambling business to mobile. In addition to easy distribution of content, Ki-Bi cards can also deliver GPRS settings direct to the phone. Both the convenience and attractiveness of the Ki-Bi card gives operators a competitive edge towards maximizing new revenue-generating opportunities in the growing mobile environment. At ICEi, Spin3 will reiterate its commitment to casino operators wanting to add a mobile casino offering by establishing yet another benchmark in service levels: SpinSupport. This optional service is provided uniquely to Spin3 clients, through the strategic relationship with BrightMark, the leading call center provider for interactive casinos. Spin3 clients will be able to take advantage of a 24/7 multi-lingual service center, dedicated chat, email, phone and SMS support. SpinSupport will utilize a unique GameWire feature – the “Call Me” button which allows players to receive an immediate call back from a service representative. Spin3 clients have the opportunity to receive industry-leading customer support services, which have been proven to provide enhanced customer satisfaction and improved business performance. Innovations and commitment such as these will drive operator and consumer confidence in wireless systems in 2007 and the industry can only experience one-way growth: upward. Casino operators keen to experience the mobile gambling revolution can visit the Spin3 booth at ICEi and play ten high-quality Java-based mobile casino games such as BlackJack, Poker and Major Millions, on pre-loaded handsets.

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UK CASINO SCENE

CAN THERE BE CLARITY & CONSENSUS ON COMPLEX ISSUES? BY PAUL BUCHANAN

Over the past couple of years Hall Aitken, an independent consultancy working in the field of regeneration, has undertaken several commissions on the impacts of casinos in the UK for public and private sector organisations. This research has shown that there is a broad spectrum of opinion on the effects of casinos in the UK and that opinions tend to be highly polarised between the pro and anti camps. Any review of existing research will show that the issues are highly complex and that, if anything, the grey areas or the areas that need clarification outweigh the areas of agreement.

he fundamental issue about whether casinos can have a positive impact in regenerating neighbourhoods comes down to what people expect from the development. The UK government set out to achieve some highly specific outcomes from introducing the new casino licenses. These include rationalising gambling legislation to make it clearer and easier to enforce, to bring it up to date and include newer forms of gambling such as Internet gambling. It aims to take account of changes in casino gambling and to cater for demand to establish new casinos in the UK. Some of our research examined whether the government’s aims for the new Gambling Act can be achieved through building casinos. The Secretary of State asked the Casino Advisory Panel (CAP) “to ensure that locations satisfy the need for the best possible test of social impact (which may require a range of locations of different kinds such as seaside resorts, edge of town developments or inner city centres)”. The panel has also been asked to include areas in need of regeneration (as measured by unemployment and other social deprivation data) and are likely to benefit in these terms from a new casino to ensure those areas selected are willing to licence a new casino and to provide its recommendations to the Secretary of State by the end of 2006. The CAP is expected to announce the results of its deliberations very soon. Our findings were that: (i) the estimates of economic benefit from a regional development casino are both optimistic and potentially misleading; (ii) the social costs of regional casino development are potentially high and for most locations would outweigh any economic benefit; and (iii) the proposed regional casino will, on balance, undermine government targets on neighbourhood regeneration. These findings caused a stir in the casino industry and

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UK CASINO SCENE

also among local authorities considering bidding for a casino license. But we set out to test whether the regional casinos could actually deliver the objectives laid down by the government. These objectives include: new job creation, better jobs, increased wage levels, crime reduction, better housing, safer neighbourhoods, improved health, promoting enterprise and small businesses, reducing unemployment and promoting equality. We looked at these issues because they are the basis of the Government’s own regeneration targets and are therefore the areas where impact is expected to be found. A regional casino will employ a large number of people, potentially hundreds or even thousands depending on the scale of the development and associated facilities. We tried to look at whether the jobs that were created could be filled by people within the local area (that needed to be regenerated), whether there was a match between the skills required and the local labour market and if not, then where would these jobs come from? We explored whether the jobs that were created were additional jobs or whether they were simply being displaced from other businesses locally. For most locations the jobs would largely be displaced and were therefore not wholly new to the economy. This is because there is little if any new spend associated with the casino, so it is simply moved from one place to another. In most locations it would be difficult to recruit the staff needed by a casino from local unemployed. There are benefits: It means that local authorities and their development partners will have to work very hard to focus on extracting maximum benefit. This may mean introducing training programmes, Section 106 agreements with casino operators, HR practices that enable local people to be recruited and retained within the new development. We assessed the balancing arguments for economic gain and that is the social cost attached to a very large-scale casino as envisaged by the award of a regional casino licence. This is an area where there has been a great deal of work carried out all over the world and some authoritative studies undertaken principally in the USA and Australia. A great deal of evidence was heard by the Budd Commission in advance of the Gambling Bill being published. Whatever the scale and cost of social impacts, they do occur at local level and within the area expected to be regenerated by the casino. The responsibility for managing these localised effects will fall to the local authority and services within that area. But perhaps more significantly the landscape is changing in ways that cannot easily be anticipated due to the influence of Internet gambling and the more widespread access to gambling in general. One of the more interesting issues is the ability of a casino to generate economic benefit into an area under the current government model. The Gambling Act and its free market model uses a regulatory regime to set an even playing field for competition to develop casinos in particular locations. This should produce a high quality of development providing the highest levels of regeneration benefit to the areas most in need. But because there is only one pilot regional casino licence available most of these aspirations are unlikely to be met. It is very difficult to identify a location for a pilot casino which is going to provide illustrative lessons for potential locations elsewhere. Most of the bidding locations are significantly different from each other and from other locations in the UK. The benefits of casinos are highly location specific and 84 ■ Casino & Gaming International

even examining different locations within a single city can yield quite different levels of likely benefit in different places. The UK model also means that the tax gain will go direct to the Treasury and only indirectly back into the local community. So there is no direct benefit to local community coffers from the presence of a casino. Some bidders have tried to get round this problem by offering to set up local community funds which the casino would contribute to voluntarily. And the owners of the casino who would presumably be largely overseas based would reasonably expect to repatriate some or all of the profits from the casino. But there are casino models in Europe and in North America where the casino is in public ownership and the taxation accrues to the local community. There is a direct link in the minds of the public between the money spent in the casino and the common good. In fact in some legislatures, for example in Alberta, Canada, the proceeds from casino gambling are distributed through the Lottery fund. But if the government’s agenda appears to be neighbourhood regeneration measured in terms of unemployment and deprivation, the main bidders for the licences have concentrated on the physical regeneration characteristics of casinos. This is perhaps where the benefits of casino building can be quantified more clearly. There will be short-term gains through construction jobs potentially running into hundreds or thousands on some of the very large-scale schemes being put forward. But these are only temporary. In the longer term the benefits of very large-scale building works, particularly if they have a catalytic effect in attracting other forms of development, can be very valuable to a local economy. Many of the current bids use the casino in this way: arenas, conference halls, hotels and other leisure and commercial developments. If casinos can act in this manner in bringing in associated developments then the benefits might be clearer. So we are faced with a position in 2007 where there are a significant number of additional casinos potentially being opened within the next one or two years. Exactly how many will materialise is an interesting question, because many of the license applications are likely to have been speculative. There is a feeling that at this point that market forces may actually play a part. In a highly regulated casino environment in the UK over the last 40 years demand for casino gambling has been artificially restricted by controlling supply. So the true demand has never been tested. But some studies have suggested that there is a saturation point for casino gambling and that this is likely to be encountered at the smaller end of the casino spectrum. It will be interesting to see how many of the existing licenses are developed as well as the 16 new large and small casinos. CGI PAUL BUCHANAN Paul Buchanan heads Hall Aitken’s strategy and tourism practice. Over the past 20 years he has worked at senior level in local authorities and a statutory tourist board before developing a successful consultancy practice. In recent years he has completed projects as far afield as Eastern Europe and the Falkland Islands although most clients are UK-based. He is chair of one of Scotland’s largest FE colleges.

THE NEXT GENERATION OF MULTIPLATFORM GAMING As the online gaming industry matures, the technology platform running things behind the scenes has become a key factor towards success. Whether your operation includes an online casino, poker room, bingo room or integrated sportsbook environment – the software platform is the backbone of your entire business. The selection of a software provider should be treated as any strategic business decision. In fact, the right software goes beyond web-based applications or database management. Today’s online gaming software provider has evolved into a business partner. Playtech, the world’s largest publicly traded online gaming software provider, has since its inception dedicated itself to providing state-of–the-art technology and constant innovation, quickly earning a place as a leading gaming software provider. Playtech has adopted a business model and philosophy that places a high priority on fostering a true partnership with its licensees. Driven first and foremost by clients’ needs, Playtech’s product development has over the years been shaped to provide licensees with the added value and optimized business performance needed to capitalize on the growing world market for multi-activity gaming operations. In fact, some of the company’s most successful and popular innovations came about as a direct result of the ongoing dialogue between Playtech and its licensees. In order to provide its licensees with the latest gaming innovations needed to maintain an edge in the industry, Playtech has increased its games release frequency, bringing the number of games in Playtech’s portfolio to more than 90. Lately, Playtech has focused on introducing innovative brand-new concepts in online gaming such as the Dollar Ball progressive side bet as well as the exclusive to Playtech licensees Tequila Poker, while also developing an additional new variety of games including video slots, multi line video pokers and attractive progressive slots. All of Playtech’s products have been designed and developed to attract an international audience by boasting multicurrency support and a wide variety of European, Asian and other languages. Each of the products have been expertly developed and translated by native gaming enthusiasts using the precise local gambling parlance needed to provide that extra bit of comfort players seek when gambling online. Further new products include a new, improved version of Playtech’s Live Games Network. Live Games have proven to be extremely popular among high rollers and the Asian market in particular. Playtech looks to further strengthen its market leading position in Asia by offering a full range of Asian games including mahjong and pachinko, which offers country specific variations and a number of exclusive and patented features. Additional efforts include the recent acquisition of the Tribeca poker network. This acquisition promises to hold huge potential to Playtech licensees as it is believed that the completion of the migration to Playtech’s poker network - iPoker, will transform it into one of the biggest and most attractive poker networks on the net. Playtech has also lately concentrated on providing its licensees with an answer to the growing market interest in mobile gaming. Featuring full integration with the Playtech platform, the mobile client delivers multiple handset support and the latest in advanced graphics and audio technology to provide for a high game integration rate and casino branding within the mobile casino. Playtech has prepared itself for future expansion into new markets and for the developmental capabilities that such ambitions demand by inaugurating a brand-new European development center and the Playtech Academy. While the purpose of the development center is to diversify products and focus on client support, the Academy has been created to optimize recruitment efforts by finding, educating and then recruiting IT talent. As the online market matures and becomes more competitive, Playtech finds itself fully prepared to meet the current and future challenges facing software providers. The company’s client-led developmental process and licensee partnership policy take the technology to a new level, attracting even more operators and allowing for the creation of the future innovations that will keep Playtech on the cutting edge of the online gaming industry.

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TIME TO CHANGE THE GAME PLAN

BY JOHAN BERG

he interactive gaming market is continually changing, so it is always a good time for operators to consider ways of revising their game plans. The international online gaming sector is prone to radical shifts in technology as well as changes in local regulations, economies and consumer trends. The gaming operator who wants to remain successful and rise above the competition must be quick to anticipate these changes and strategically adapt to them. Savvy operators stay ahead in the game by foreseeing trends and investing in a flexible solution that can easily be adjusted to meet new demands. Consumer demand will continue to light the way in the online gaming industry even though prospects may appear somewhat dim at present. The international gaming market is currently in a slump. Industry-wide

profits are down due to sluggish capital markets activity and new legal restrictions. The good news is: People have an undying passion for online gaming entertainment, and in the end, consumer demand always wins. In October, the U.S. government prohibited its residents from gambling online with the passage of the Unlawful Internet Gambling Enforcement Act. The law disables payments made by cheque, credit card and other electronic payment systems to cover and settle bets with online gaming sites. A major consumer segment in the international market was cut off overnight. Hardest hit were online gambling firms that relied on a majority of American customers. The challenge facing established operators now is to maintain market share in the competitive European market and to find ways to reach new customers with novel products that provide entertainment.

GLOCALISATION The Internet may now be accessible in all corners of the world, but to globalise and achieve international success, an online gaming firm must now glocalise by taking into account the different languages, cultural tastes and legal restrictions that characterise local populations. In online gaming, glocalisation is about making each player feel at home with familiar games he can enjoy in his native language and national currency. It is also about enlisting the help of local affiliates to promote the gaming site and influence potential customers to give the games a whirl. Given its cultural diversity, the European online gaming market can be a challenging one for operators.

A HISTORY LESSON Traditionally, online gaming firms set their sights on attracting and keeping devoted punters and high rollers.

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Their business models centred on catering primarily to the male, middle-aged offline gambler. The online casino games and online sports book betting opportunities that were offered generated revenue for the operator through advantageous house odds. Those who gambled on the Internet were assumed to be motivated primarily by the thrill of winning itself. However, the subsequent popularity of online bingo, online poker and other multiplayer games taught the interactive gaming industry several important lessons. One is that online players are certainly not all male, middle-aged gamblers. Young and old, men and women, seasoned gamblers as well as those who have never before placed an offline bet are drawn to online multiplayer games. Approximately 85 percent of online bingo players are women, and Gala Group reports that bingo is now the most popular leisure activity in the UK for young women between 20 and 25 years old. Studies have also shown that women more frequently play online poker than participate in offline poker games. Online gaming firms are being compelled to revise their profiles of target customers. They are gradually coming to recognise that the right game with the right stuff can eventually bring the mass market to online gaming.

MORE BANG FOR THE BUCK A successful online game for the mass market is one players simply cannot resist due to its sheer entertainment value. Smart operators aim to give the player more bang for each buck they bet. In a game players perceive as having a desirable blend of luck, skill and social interaction – poker, for example – they may not even realise they are actually gambling, but rather paying for an exciting entertainment experience as they do when, for example, they purchase a movie or concert ticket. Entertaining games are often based on attractive themes. Ladbrokesgames.com’s “Deal or No Deal”, modelled after the blockbuster television game show, was unsurprisingly the most popular online game offered on the Ladbrokes site this past fall. Games created with entertainment in mind tend to attract a wide audience of lower-stakes players rather than an elite group of high-stakes gamblers. However, targeting a mass audience motivated by a desire to be entertained and interact with each other rather than a handful of make-or-break high rollers motivated primarily by the thrill of placing large wagers makes for a more stable online gaming business over time.

A COMPETITIVE EDGE THROUGH COOPERATION In online bingo, as well as in online poker and other multiplayer games, it takes a certain critical number of players to keep the balls rolling. In essence, it takes players to make players. To attract ample player liquidity, operators are now banding together to create large gaming networks. In a network, individual operators cooperate as partners by directing their respective players to a single gaming site. This leads to a greater mass of interacting players and the opportunity for the gaming site to offer larger common jackpots, better

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promotions, tournaments and other attractive prizes to keep the network alive and thriving. Like the rest of the universe, the online gaming industry is governed by the law of nature that states that smaller bodies tend to gravitate toward larger ones.

GAMING IS SOCIAL Man cannot live by payouts alone. In the offline world, gaming is a social activity for all but the most compulsive of gamblers (the very individuals responsible gaming operations wish to circumvent). Online gaming operators are realising that community is key – in other words, the social aspects of gaming are just as important to consider when vying for customers as the games and odds. The first online gambling operators must have known this, but chose to ignore the social aspects of gaming to focus almost exclusively on enhancing their games with flashier animations and better functionality for the single player. Their goal was to improve the online gambling experience for each individual sitting alone at his PC. When multi-player games became popular the Internet, operators began to realise most customers enjoy the gaming experience – be it win or lose – far more and develop a desire to repeat it when there are other people with which to share it. To develop a sense of community, operators must foster player interaction by giving customers the ability to chat with each other, bet against each other, share personal photos and unique information about themselves in their profiles and keep tabs on their own performance and friends’ through high-score lists. By sharing game recommendations and favourite strategy tips, players become a resource in effectively promoting the gaming site amongst themselves. Without a critical number of players and a sense of community in the current market, a gaming site will simply not be sticky enough to stick around.

EASY, PLEASY! Ease is a simple word, but a complicated concern for any successful gaming operation. Operators must make things as straightforward as possible for today’s customers. The man on the street will tell you he barely has any spare time to devote to personal entertainment, let alone time and attention to devote to any hassle and difficulty in accessing that entertainment. An online player is out for instant gratification, but a cluttered site or games menu, a time-consuming software download and a complicated account registration process are far from enjoyable and may remind potential players they have offline dishes to wash, some sleep to catch up on or a more welcoming, efficient gaming site to visit. Selective modular downloads, instead of a single large, time-consuming download, provided one alternative, but now operators can now offer potential customers online games developed in Flash. Flash-based games, which open directly in the player’s web browser, can be played in an instant. The games can become successful in themselves, but can also spark a player’s interest in subsequently downloading an operator’s entire suite of games.

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Navigation within the gaming site and between games must also be made easy for the player through smart features. Directly from the games menu, the player should be able to see where to find online friends as well as the entire selection of games he is being offered, with screenshots and animations to give the player some idea as to what the games are about. The player should not be required to enter each game to get a feeling for it. Helpful information on each game should always be conveniently accessible. From a game, the player should be able to click on “Help” to refresh his understanding of the rules. The player should also be able to click from one game directly into a new game and be given the option of enjoying multiple games simultaneously. It is also important the player be given easy access to his personal customer history and playing statistics. Detailed information on each game that has been played strengthens customers’ overall trust in the honesty of the gaming operation and may serve as a needed “wake-up call” to a customer who wishes to avoid overspending and problem gambling. Simplicity and ease are also important when it comes to the style of the games themselves. General interest in traditional casino table games like craps is on the decline. Although there are still craps aficionados around, they are becoming a rarity. The numerous betting options in craps are far too complicated for most new players to take time to master. For better or worse, an increasing number of players are passing on games with more complicated rules in search of nobrainers. Slots machines and soft games are currently all the rage since game play is fast and intuitive.

ONE SOLUTION DOES NOT FIT ALL To hold players’ interest, operators must provide a wide selection of games and be able to launch new games and other applications quickly and effortlessly. In the olden days, the operator would purchase an online casino solution from a supplier and then be bound to rely on that supplier for all new game applications subsequently added to the casino. Suppliers forced operators to conform to a one-solution-fits-all operation. In shackles, the operator would demand additional game applications and other modifications, but had little to say about the games the supplier actually brought to market and the speed at which that happened. The result was that operators were often slow to react to changing trends in online gaming. If the operator added an online casino to an online sports book operation, the data gathered from each operation were processed separately, making it difficult for the operator to oversee and manage the entire operation and cross-promote games and betting opportunities. Players would even suffer the inconvenience of having to register to use multiple accounts – one for the sports book, one for the casino, etc. Fortunately, that is now considered an inefficient, old-fashioned way to develop an online gaming operation.

THE SMART WAY Now operators can exercise more buying power and have the freedom to expand and alter their operations at will to meet consumer demand. The operator is no longer compelled to rely on a single supplier, but has the independence to purchase new solutions and applications from several different developers and integrate them all into the same operation using a proficient Gaming Management System. Thanks to smart integration, a single account now accompanies the player – like a wallet in his pocket – from game to game. Funds are always conveniently available to the player, whether he chooses to place a bet in roulette, play a hand of Texas Hold’em or wager on a favourite football team. From anywhere in the online gaming operation, the player can deposit new funds into his account without having to leave the gaming action. The operator also benefits by being able to track a customer’s behaviour in its entirety through a single account. The information concluded about customer behaviour through data mining becomes more accurate when each customer can be observed from a 360degree perspective. This valuable information can be used to better conduct more accurate business profitability analyses and to craft more effective ad campaigns and cross-product promotions to increase long-term sales and player satisfaction. To survive in the changing market, operators must anticipate and quickly adapt to changes. The operator can have it all today: an online poker room that offers multiple games, languages and currencies from one supplier, an online casino from another, an online bingo hall from a third, plus a selection of Flash-based skill games from additional developers. The goal of an online gaming operation is to provide easily-accessible, innovative entertainment to a wide audience over time by heeding local tastes and trends. Operators thus require the ability to access information from all areas of their diverse operations to better evaluate their businesses and plan strategies to react quickly to the changing marketplace and expand into new markets. A flexible Gaming Management System – based on standard technology and an open, scalable architecture – that can easily integrate new games and applications becomes an indispensable tool. CGI

JOHAN BERG Johan Berg is president and CEO of Boss Media, a leading supplier of online gaming software and solutions, to companies such as William Hill and Sportingbet. Before assuming command of Boss Media in 2005 at the age of 46, Berg served in various executive positions at Intentia, acquiring vast knowledge of the international software industry.

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ON WITH THE GAME

BY ROGER RAATGEVER

n industry that has had a mixed year is already, I believe, set for renewal over the next year. We have turned a corner and a new revitalised landscape is emerging. I want to explore some of the opportunities presented to our industry and suggest some possible ways forward in 2007 and beyond. As was discussed in here by Joe Kelly and Alex Igelman in their scintillating analysis, the skies have not fallen in for online gambling. In addition to the valid legal points they raised, I think the events in the US culminating in the Senate passage of the Unlawful Internet Gambling Enforcement Act (UIGE) can act as a catalyst for a re-analysis by many companies of the global market. We are, after all, a global industry: arguably one of the fastest growing on the internet in revenue terms, with global hubs and in a position to attract revenues from many territories. Operators who were seriously exposed to the US market have taken the hit and recent fourth quarter figures reflect that fact, however the same figures have also started showing strong revenue growth from other regions and signs of new players who are beginning to counter the revenue loss from the US. More mixed news can be expected as Q4 is fully reported in the first three months of 2007. After that, in some ways the signing of the UIGE into law will have a galvanising effect. For a year or two

we had all been predicting that Asia was set to bring in revenues that might double the size of the global market by 2010, or 2012, or 2015 or whenever. Whilst there is considerable untapped potential in Asia the market spans across a number of culturally diverse territories. The key will be localisation as software providers adapt games to local cultures and tastes. Microgaming’s Live Dealer product is a perfect example of this. One should not underestimate the potential in Europe. Operators are continually exploring new regions with multi-language options. Combine this with innovative new game strategies that provide local market appeal and 2007 may spring a few surprises.

POWER OF THE BRAND All this localised knowledge must be backed by the trust engendered by a big-hitting brand, which was the rationale behind our consolidation into a superbrand in the spring. Here at Microgaming we certainly believe we start from a very strong position because of that decision. We now live in a branded world and our belief is that a big brand, particularly on the internet, is needed to enhance recognition for a platinum standard of software so that the words ‘Powered by Microgaming’ on sites will continue to grow in stature. The aspiration was that everyone in the industry, in addition to the players, will associate the marque even more closely with

>> As an industry, we’ve taken bigger hits before, like the early coding issues that bedeviled progress for years and if there is something that is core to this industry’s success it is resilience, practicality and innovation. What we will witness are new ways of gaming to fit new territories and to fit different sensibilities, together with solutions we haven’t looked at before >> Casino & Gaming International ■ 91

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a more sophisticated, intuitive and involving gaming experience, thus enabling operators with Microgaming software to retain players longer and leading to loyalty. This in turn will allow the company to gain greater recognition from players as well as the industry. We at Microgaming believe this has already added weight to individual operator marketing budgets. The forthcoming consolidation of operator ‘superbrands’ powered by equally trusted and reliable software brands is going to be good for both casino and poker sides of the industry. It is also important for the future of the industry that there is no conflict between the two sides. It is our commitment to games development - the cornerstone of our offer - which is key to growth. Alongside this, new platforms are going to be key to the industry’s development in 2007 and beyond.

MOVING FORWARD Operators will demand new game development as they seek to attract new customers and increase market share in existing territories. This industry is far from mature so the key will be to have an aggressive new game rollout strategy that gives operators the platform to take new casino games to market. Multiplayer will gain momentum in 2007 and will start to provide novel ways to exploit all markets. Operators will require software that enables them to provide an improved platform of tournament play across a multitude of games. Microgaming is well positioned to take advantage of this and have some interesting announcements coming up. Mobile will again be a focus in 2007 as devices start to come to market that finally fulfill the 3G promise that

>> Operators will demand new game development as they seek to attract new customers and increase market share in existing territories. This industry is far from mature so the key will be to have an aggressive new game rollout strategy that gives operators the platform to take new casino games to market >> 92 ■ Casino & Gaming International

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has not quite been delivered since 2000. The Mobile gaming market, currently estimated at $2 billion per annum, is predicted to grow exponentially and has the potential to reach $16 billion in revenues from 450 million mobile users by 2008 (Juniper Research). Trouble is, no one is currently making any predictions about where mobile phones in general are going to be in more than a couple of years time, bar the fact that we will be watching TV on them. The industry will start to get to grips with mobile wallets that are going to be seamlessly transferring money to games providers able to provide quick on the move ‘short game’ experiences. Microgaming has successfully adapted casino games to mobile concepts, covering both casino table games and slots. We will see the industry up its game here during the next year or eighteen months as we approach the real promise of mobile. Mobile is a means of attracting new types of player, but issues such as how operators are going to handle the possibility of targeting e-vouchers to players and ensuring age restrictions are enforced will need to be addressed. The way mobile will develop will be much clearer in 12 months and I think there is much cause for optimism. Key to driving this forward will be player protection with eCOGRA and the IGC continuing their excellent work into the mobile gambling arena. It is going to take a consumer leap and much education to start the ball rolling on some of the predicted developments in the general market such as pre-paid money on phones and, eventually, access to bank accounts. Developments such as these may well happen in years to come and the right level of player confidence will ensure that it transfers into the gambling arena. In addition to these exciting prospects on the mobile front, I believe that in mature markets, table games will fuel further growth. Existing games like blackjack, backgammon and roulette will become more dynamic, providing potential to bring in new players as well as gaining a larger slice of players’ existing gaming wallets.

RESPONSIBILITY AND RESPECTABILITY As we all know, The Gambling Commission finally takes over responsibilities for the UK in September. This new regime has involved a very comprehensive process of consultation that has led to a unique code that covers the whole industry on and offline. If this can be seen to work, then it will greatly help our cause worldwide. The IGC and eCOGRA have done a great job in representing us as an industry and again we all have to work together to raise the bar on responsible gambling, because a new level of decisiveness in this area can lead to new perceptions. Importantly it requires a change of tone. The UK is regulating the industry because it has reached the conclusion that online gaming is best placed in a safe secure and regulated environment, as opposed to prohibition that could drive the industry underground. It also wants a share of the revenue. Whilst it may not entice many operators to relocate it may well prove a

catalyst for further regulation throughout Europe. I and Microgaming have always been involved at the forefront of moving this industry to the next level of responsible gambling. For example we were one of the founding members of both the IGC and eCOGRA. But when the industry is genuinely involving new players in new ways of playing, new challenges in this area present themselves and I think this is the year that we start meeting these and offer new solutions. As a start we at Microgaming are convening a round table early in the New Year to address precisely this area and we hope to shape the agenda for the new chapter I have outlined.

BACK TO THE FUTURE As an industry, we’ve taken bigger hits before, like the early coding issues that bedeviled progress for years and if there is something that is core to this industry’s success it is resilience, practicality and innovation. What we will witness are new ways of gaming to fit new territories and to fit different sensibilities, together with solutions we haven’t looked at before. E-wallets came out of the last crisis and we led the world in offering this security to every player, thereby attracting new players. Once again we will re-write precedents: out of adversity and challenge comes opportunity. As described, our rebrand in the spring turned out to be fortuitously timed since a ‘superband’ approach is much better suited to the emerging world I’ve described. Boutique brand names were absolutely essential to build player loyalty, but they are not the best way forward now. The expected M&A activity in the wake of UIGE is now becoming a reality. Larger groups are channeling effort into nurturing new markets and new technologies, and are viewing the larger picture on self-regulation. They are adding perceived overall global value and will put the industry into a different growth league. Microgaming is about developing software that powers games. That will be the focus for the entire industry too as it grasps the opportunity to develop new concepts and ideas. In the seven years I have been in the industry, I have witnessed ‘turn on a penny’ strategic changes when required and I think there will continue to be a fair bit of that. But bigger players require bigger visions and that will be the main change this coming year. It will be one of the most interesting we have yet seen, even by the standards of this extraordinary industry. CGI

ROGER RAATGEVER Roger, a trained accountant is one of the online gambling industry’s longest serving CEOs. Having joined Isle of Man based Microgaming over a decade ago; Roger has been instrumental in steering the company’s growth from just three employees to over 60, cementing its position as the world’s largest software provider.

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A UNIQUE MULTICHANNEL SOLUTION BY FRANK DEECKE

e started to operate our online casino (xxlclubacasino.com) in May 2006. This set the basis for our business model and enabled us to operate interactive video terminals (iVTs) today within any type of gambling operation or venues (casinos, playrooms, night clubs, bars, hotel rooms and cruise boats). In other words, wherever we find an Internet connection or GSM mobile phone reception. This business model is a logical development of pure online home gambling and has a tremendous worldwide open market. We do not depend on country specific legal restrictions and due to our offshore gambling status we have been a truly global business from day one. For strategic reasons and best market opportunities XXL Interactive’s main operational office is based in Switzerland with other representative offices in Moscow, Russia and Latvia. The technical hearts, the RNG servers and Internet broadband backbone connection are in Curacao (Netherlands Antilles), the design centre is in

London, and our group holding is implemented in the British Virgin Islands. Language-specific customer support centres were opened in Antigua and Russia and a European language centre will soon follow. Having spent two years in R&D, finding the right partners, investors, and educating our support and management staff, we started the online casino which will be followed by the online poker platform. For us, choosing the right partners that are the undisputed leaders in their respected business field is the only way to make sure we will surpass any competitor today and in the future. This is the reason we teamed up with Playtech and Videobet as our software partners. Playtech was the only company that could meet our extensive requirements to create what we see as a new level of online gambling experience for our customers. Playtech acted like a partner during the build-up and realisation phase. Their technical experts and management team gave us critical professional advice on how best to meet the XXL Club ambitious project goals. We have also chosen in our opinion the best partners to produce our various gambling devices (XXL iVT, XXL iTV, the XXL Video Table or our Wireless TabletSolution) – Futurelogic, MEI, SUZO, Dell to name only a few, which is directly reflected in our top quality highestfeatured gambling devices.

UNLIMITED POSSIBILITIES OF NEW GAMBLING DEVICES The main idea behind each device is to provide operators with unlimited possibilities of where to operate the device, giving customers the opportunity to play wherever and whenever they feel like it. Each device is therefore specific to a particular operator need. We have built a gambling platform that suits the needs of the newest casinos as well as operators, coming from a

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totally different background, who want to capitalise on new revenue models. Our gaming platform makes it possible for players to play using their mobile phones, Slot machine-type iVTs from hotel rooms using TV sets, or in restaurants, in night clubs or at the pool using wireless tablet gaming devices. This platform gives us fresh paths to new nonexploited customers, not only online but also in land based venues. You really can play the same games whenever and wherever you want. All games (over 85) are available on every platform. We try to reach the widest possible audience across all imaginable demographic classifications. There is absolutely no limit to where we can operate. New games are released on a monthly basis to meet new player demands and are automatically available on all the different gaming channels.

THE COMPETITION AND THEIR MARKET PRODUCTS There is no other company or product that gives this kind of new business opportunity to their customers. Some of our direct competitors have similar iVT solutions but are not able to offer players to play with one single account in casinos, on their mobile, and from their home while still enabling the operator to participate in revenue from all those channels. This is a truly unique solution. Some concentrate only on operating an online casino while others operate some sort of iVts, but none of them do both of this mainly due to there proprietary gaming platform and to the extremely complex processes that need to be mastered in order to be able to operate a multi-channel environment. We spent more than two years defining, engineering and programming those processes. It sounds easy to say that we want players to be able to open their online account in the casino venue and play there or on any other channel, but I can assure everyone that making it happen was not trivial at all! When engineering this process it is necessary to keep in mind legislation, fraud, money laundering, age restrictions, currency requirements, and to come up with a generic working solution through all of the channels. This is quite a challenge. At the moment we are the only company that has mastered this process enabling our players and operators to play anywhere at anytime. It will

take others quite some time and substantial investment to replicate the required business processes. Just a few major players in the gambling industry are able to create a comparative product.

CUSTOMISING OUR GAMBLING SOLUTION FOR BOTH OPERATOR AND PLAYER NEEDS Our business model is extremely flexible, enabling us to customise part of it to suit each individual operatorâ&#x20AC;&#x2122;s needs. We can, for example, develop new games tailored to any specific market and operator. We are currently developing a Bingo hall for the Brazilian market. Brazilians love to play Bingo and we want to respond to their need. The same is possible for our iVT solution. Each terminal can be fully customised by changing panels, top signs, cabinet colours as well as adding cup holders or language localisation. The operators have multiple setting possibilities to adapt the gaming devices to best fit player needs. Games can be defined per iVT making it possible to have just slot games grouped together in a separate game floor area or for sending incentives and short commercials to the players. We support multiple payment solutions like Ticket IN/Ticket OUT, bill acceptors, pre-paid cards and member cards.

EXTRA SERVICES TO CLIENTS We have a state-of-the-art back end management system and a 24-hour support service. Success in this business is about more than just games. The XXL Interactive platform includes the Monitoring and Control System (MCS), which provides every staff member with the exact functionality they need to do their jobs easily and successfully, making sure that the revenue stream continues uninterrupted and operators have real time information on what is happening on the different gaming platforms. We also provide additional services to our operators, like training, marketing support, management, education, financing, accounting, franchising and leasing.

SUPPORTING A REVENUE SHARING AFFILIATE PROGRAMME We support and encourage such a programme. The revenue sharing model gives the operator additional

>> Having spent two years in R&D, finding the right partners, investors, and educating our support and management staff, we started the online casino which will be followed by the online poker platform. For us, choosing the right partners that are the undisputed leaders in their respected business field is the only way to make sure we will surpass any competitor today and in the future. This is the reason we teamed up with Playtech and Videobet as our software partners. Playtech was the only company that could meet our extensive requirements to create what we see as a new level of online gambling experience for our customers >>

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revenue possibilities throughout every gaming channel. An operator can encourage players gambling in his venue to play online also and still be a beneficiary of revenue from this activity. A player gets assigned to an operator forever. It does not matter anymore where gambling actually takes place, whether it’s on his mobile phone, on his PC at home or in the operator’s venue. The operator that “signs” the player will benefit from any future earnings generated by this player. This gives each operator the possibility of participating in the growing online gambling business without having to invest millions of dollars in operating, marketing and supporting a costly online gambling platform.

FOCUS ON THE RUSSIAN MARKET Our initial customers are in Moscow: three of the top casinos will be implementing our solution shortly and a pilot was successfully started at the Ambassador Casino in Moscow, since then both player and operator feedback has been overwhelming! We also have major requests from hotel chains wanting to make it possible for guests to play in the casino without leaving their room and going to the casino floor. We are in talks with big players in Cyprus, Brazil, Germany, Mexico, Italy and Switzerland. All are more than ready to jump on our platform and are in the process of clarifying the legal matters. By analysing the European market we found that Russia was the perfect location for our product due to the fact that the current legal climate is unknown for the most part, and our products do not get taxed the way conventional slot machines get taxed. This gives us, of course, another major killing criterion for operators to switch to our product palette. We are looking forward to gaining up to 20 percent of the actual Russian gaming market within the next three years. We have produced two exclusive 20-line slot games customised for Russian players. The very popular Russian-Poker should soon follow.

XXL’S ULTIMATE GOAL We aim to become the number one provider and operator of Interactive gambling solutions in the world with the most secure global multi-channel platform and the most attractive and fairest games in the industry. We want every operator and every client to be 100 percent satisfied with the product and the services we offer them. We have a long term vision and are not after quick and dirty winnings for the prize. We want to be recognised by both operators and players as the fairest partner. We are here for the long run and are looking for a one-to-one relationship with all our partners. With this in mind, we started our online casino. Already we can see from many online forum entries and player feedback that we provide a five star gambling experience combined with a five star customer service. This level of expertise is achieved through a lean organisation with highly qualified co-workers and top-of-the-class business partners to provide the highest possible product quality and service.

THE GLOBAL PROGRESSIVE JACKPOT Our system architecture enables us to link real-time multiple venues in various locations as well as the online gaming platform and mobile casino together. This way we can offer worldwide progressive jackpots to our operators and players. Every player can win one of the 16 running progressive jackpots no matter where they are playing! The chance to win jackpots is exactly the same, while no operator risks having to pay the million jackpot alone. This makes it very interesting for small operators as they can offer players the chance to win big without having to cash-out the sum if a player wins it in their venue. The Global Jackpots are growing extremely fast and are often hit and payouts made almost on a monthly basis to players. This is a major difference compared to the most common progressive jackpots in smaller casinos. We also have the possibility to group an operator chain together and offer them their own progressive jackpot, or even define local jackpots per venue.

SUCCESS AND WHAT CONTRIBUTES TO IT The feedback we receive from operators, affiliates and players to date has been very positive. They identify themselves with the product and understand the underlying business model and its superiority. We consider this to be our first success! First of all, we have a unique product. To be successful you always need to be a step ahead of the others. Second, we have a very good working team built out from professionals with multiple cultural backgrounds and expertise. We are all working in the same direction, generating fresh ideas and solutions on a daily basis. Consequently, it is very rewarding to be part of this new company, where each of us can make things happen and where team work is really everything. Our partners also strongly contributed to this ‘success’. The meaning of XXL says it all: eXtra, eXtra Large! To think big is wonderful as long as you keep your feet on the ground. ‘Interactive’ stands, of course, for game interactivity that qualifies all of our products. Putting both together gives an insight into who we want to be in the future. Simply put: a globally active player in the new gambling industry. CGI

FRANK DEECKE Frank Deecke is Vice President and Senior Partner of XXL Interactive International. He has been involved in the Internet industry since 1997 after mastering in finance and marketing at the HEC business school in Lausanne and Paris. He is also cofounder of the eBusiness solution provider company Silversite SA that gave consultancy to the XXL group of companies.

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Asian Gaming Expo Becomes

An Event That Towers Above The Rest. G2E Asia | 13-14 June 2007 Macau Tower Convention & Entertainment Centre Macau, People’s Republic of China Introducing G2E Asia (Global Gaming Expo Asia), formerly The Asian Gaming Expo and Conference. This premier gaming event returns 13-14 of June 2007 to the Macau Tower Convention & Entertainment Centre in Macau, People’s Republic of China. Save the date and plan to join us for the biggest and most important gaming event in Asia, at one of the world’s most exciting gaming venues, Macau. Brought to you by the organizers of Global Gaming Expo (G2E), the world’s premier gaming event, G2E Asia offers a rare opportunity to see the latest gaming products from the largest selection of manufacturers and suppliers. You’ll also learn about the latest trends in Asian and global gaming and how to compete on a global scale in educational sessions led by industry leaders. And you’ll have plenty of opportunities to expand your networking circle, exchanging ideas with colleagues on critical global issues. For more information about attending and exhibiting, call Raymond Tam in Hong Kong at (852) 2824 0330 or email raymond.tam@reedexpo.com.cn or call Brett DeWeese in the U.S. at (203) 840 5341 or email bdeweese@globalgamingexpo.com.

www.G2EAsia.com