An official publication of Global Gaming Expo

SEPTEMBER 2002 

Virtual Realities

WagerWorks hopes to be leading online content provider

By Marian Green

WagerWorks chief executive officer Andrew Pascal envisions an online casino world filled with a variety of slot games similar to those found inside the walls of just about every bricks-and-mortar casino.

But he’s not merely envisioning it; he’s making it happen through WagerWorks Inc.

The San Francisco-based online technology and casino content provider has deals with MGM Mirage and Rank Plc. to supply online gaming content and hopes to become the supplier of choice, the IGT if you will, of the online gaming landscape.

The start-up company already has locked up online gaming rights from companies such as Sony Pictures and Freemantle Media to several licensed brand titles that have proven to be slam-dunks as slot games in the land-based casino world. Among them are gaming’s crown jewel of slot machines, Wheel of Fortune; The Price is Right; Jeopardy!; and Action Gaming’s line of video poker products, including the blockbuster, Triple Play Poker.

“Effectively what they’ve done is they’ve said, ‘Look, we’re licensing you those brands to create gambling games online, and what we want you to do is be respectful of the way those brands have been applied and executed in the land-based world so there’s synergy there, so that one is somewhat self-reinforcing to the other,’ ”he said.

Pascal knows the power of such  brands to attract and keep loyal players. After all, he is former chief executive officer of Silicon Gaming, the company that created the Odyssey gaming machine in the mid-’90s before the firm was sold about two years ago to International Game Technology.

Just months before its sale, Silicon had secured the rights to develop slot games based on the long-running game show The Price is Right, in a joint development agreement with Harrah’s Entertainment, and had also created a game based on its license with MGM Mirage for the slot version of Family Feud.

Walking before running

“I think we learned a lot of really important lessons at Silicon Gaming,” he said. Like WagerWorks, Silicon Gaming was “all about creating really compelling content.”

But one important lesson was “not to get overly enamored with what you create and make,” he said.

“The whole gaming experience allowed us to refine our sensibilities around what it meant to create a really great successful game,” Pascal said. “We’re going to leverage a lot of that experience now in refining the games that we created and have license to from Silicon Gaming, as well as creating new game experiences [with] the brands that we have control over.”

But before the company could demonstrate its game development prowess, it had to lay the foundations for successful operations. WagerWorks took that step when it reached a deal with MGM Mirage to create and operate a for-prize gaming site.

“Our whole approach with the play-for-prize community was to learn a lot,” Pascal said, while noting that MGM Mirage received some substantial commercial benefits by driving players to its Web site and engendering player loyalty.

The experience allowed WagerWorks to validate some of its key assumptions about online gaming players: “That people were interested in our content. That they responded to the fact that this was a trusted brand they were providing information to as opposed to some unknown casino operator, and that they would also respond to casino-proven content,” Pascal said.

It also enabled WagerWorks to develop a robust platform for what was a fairly complex enterprise, serving six MGM Mirage casinos tied to the play-for-prize site.

“Going through that whole cycle and understanding how to try to satisfy their needs and help them accomplish what they wanted to do with their business was a great experience for us,” he said.

The big leap

That foundation proved invaluable to WagerWorks, Pascal said, as it moved toward the pay-for-play arena.

WagerWorks has secured online gaming licenses in two of the three jurisdictions that Pascal believes effectively and efficiently regulate Internet gaming — Australia, Aldernay and Isle of Man, two semi-independent British islands.

WagerWorks holds licenses from one of the Australian territories as well as in Aldernay.

It also has online casino deals to develop technology and content for MGM Mirage, which holds a license from the Isle of Man, and for Rank Plc., which also holds a license from the Isle of Man.

Rank’s casino, www.HardRockCasino.com, began operation in July, using game content and infrastructure supplied by WagerWorks.

Deutsche Bank gaming analyst Marc Falcone has followed WagerWorks’ strides closely.

“WagerWorks is clearly one of the leaders in the online gaming market,” he said. “I give that company a lot of credit for doing as well as it has in what has proven to be a very difficult market and a competitive market.”

In addition to deals with MGM Mirage and Rank to create their online casinos, “The content they’ve acquired is great. The question is does that content translate effectively in the international marketplace, and I think it does,” Falcone said.

WagerWorks has made compliance a top priority, working hard to develop secure procedures to guard against underage bettors and bettors from jurisdictions where online gaming is illegal, such as the United States, Pascal said.

Pascal noted the company has devoted a lot of time and energy to creating solutions for those issues.

“We created a verification engine or module that addresses those issues,” he said. “We also recognize that the solution for those issues is going to evolve over time.

“There will be new technologies that we can take advantage of, there will be new data services that we can tap, and services we can engage that are going to allow us to further improve the accuracy of the information we get.”

Pascal noted that WagerWorks has shared this information with many regulators.

“Our whole emphasis is on compliance and really wanting to make sure that our customers and prospective customers know that we satisfy and meet the same standards that they’re going to be held to by any jurisdiction that they choose to operate from,” he said.

WagerWorks’ content underwent “months and months of very rigorous testing” to be certified for Rank’s HardRockCasino.com venture.

“As extensive an evaluation as you would find here in a more traditional land environment, we had to undergo in the U.K.,” he said.

“We think we’ve done everything we can to really substantiate our credibility.”

The combination of strong game content and focused efforts on compliance should serve WagerWorks well, Falcone said.

“It’s a successful recipe,” he said. “And they’re playing by the rules, which should position them very solidly over the long term.”

Content is king

It’s all about the content, and creating memorable game experiences for the player, Pascal said.

“It’s about what it means to go to the Hard Rock online casino or the MGM Mirage online casino, and have a great experience.”

In addition to its slot games, WagerWorks offers a complete suite of table games that he said delivers a rich play experience not found elsewhere online. “We’ve been very

 focused on what is the essence of the game, and we’ve just really tried to play that up.”

The company also is partnering on projects with Orbis, a U.K.-based firm focused on online race and sports wagering in legal jurisdictions.

“We clearly understand casino gaming;  what we didn’t have an expertise in at the timewas race and sports book operation,” he said. “Orbis is a very credible, experienced company with a number of customers, all of which are well-established credible companies.”

Perhaps the most distinguishing aspect of WagerWorks falls in the area of online slots.

“One of the things that we learned [at Silicon Gaming] is creating successful gambling games is very difficult,” Pascal said. “IGT has done an outstanding job, and one of the core elements of its strategy has been to go out and license established games.”

WagerWorks effectively has done the same thing, Pascal said.

“We think there are a number of brands that not only have great international appeal because of the success of those game shows, but have been established as the primary game franchises within the gambling industry. So we’re very excited to be the exclusive licensee of those brands,” he said of the branded games expected to launch next year.

Paul Miltenberger, WagerWorks chief financial officer, said the Wheel of Fortune license alone is very promising. “It’s carried significant economic value and strategic value to IGT,”  Miltenberger said. “We’d like to prove out that these games will attract players and also demonstrate the kind of performance they’ve exhibited in the domestic, land-based casino market.”

New slot twists

While the branded titles will feature the same look and feel of the land-based games, Pascal predicted the online versions may pique gamblers’ interest even more.

“What we want to do is make sure we satisfy people’s initial expectations when they come and they play Wheel of Fortune online, but at the same time we think there is a lot we can do to extend it and enhance game play,” he said.

“A player of Wheel of Fortune online is certainly going to recognize the similarities, but as they spend more time, they’ll start to discover new and different features than they’ll find offline.”

After all, it’s a different medium, Pascal said. “Over time that’ll become more obvious. Instead of going into a casino environment and sitting down at a singular position and having what is for the most part an isolated experience, online you have the ability to tap into a community of people who are playing a game or games with similar characteristics, so there are really interesting opportunities to kind of take advantage of that sense of community and create competitions and events that really heighten the overall gambling experience.”

So although it’s about the games, he said, it’s also about connecting people.

Looking forward

Securing major clients — MGM Mirage and Rank — as its first customers is an important step for establishing the young company, Pascal noted.

“Getting your first customer is obviously a very significant milestone. We have a great relationship with MGM Mirage,” he said.

“And the fact that Rank did a very thorough evaluation of all the different suppliers that are out there ... and felt that we were the best because of how unique our content is ... means a lot.”

In addition to the online HardRockCasino.com, Rank owns and operates the Grosvenor Casinos, bingo parlors, Hard Rock Cafes, and one Hard Rock hotel-casino in Manchester, England, with another in the works.

“It’s always been our intention to satisfy and work with a number of different partners,” Pascal said.

More land-based casino companies are looking at the online market, Falcone said.

“They’re trying to find new customers, expand their customer base. It’s definitely an opportunity.”

And brand will carry substantial weight, in terms of winning a customer’s business, he said.

“When you know who those operators are, that they have integrity, and they’re licensed, you’re more likely to play there. If you’re playing on Joe’s Casino, you really don’t know who that is,” Falcone said.

“A combination of a strong brand name and the content should lead to a pretty successful formula,” Falcone said. “Those who offer the higher entertainment value and the better mix of game product and amenities on their sites are going to be the winners in the end.”

Traditional game manufacturers also are looking closely at the online market to determine how they can penetrate it, he noted.

Pascal said WagerWorks is open to partnerships with traditional game manufacturers.

“This is an interesting market and a very dynamic market, he said. “We feel we can partner with other suppliers that have games.”

The U.S. market

Many experts predict that online gaming eventually will be legalized in the United States, but probably not anytime soon.

WagerWorks has taken that into account, Pascal said.

“All of our business modeling, all of our strategies are purely internationally focused,” he said.“We basically made the assumption today that it’s not going to happen here in the United States for a very long time.”

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