Q&A: Paul Mathews, WagerWorks

Within the last year WagerWorks has gone from a relatively unknown software supplier to the interactive gaming industry to one of the sector's major players.

The California-based company was founded in April of 2000 by Silicon Gaming and was spun off as its own company after Silicon Gaming was bought out by IGT. The supplier landed a big fish last year when it was tabbed to supply MGM Mirage with an interactive gaming system for its yet-to-launch Isle of Man online casino.

"[WagerWorks] was really founded and based on the idea of being the most credible content supplier. We knew that when the big brands, which are highly regulated in their land-based business, looked for a supplier, they couldn't partner with suppliers who have chosen to operate or license their systems and take wagers from places they shouldn't."

-Paul Mathews

Since then the company has continued to make progress. Yesterday it was announced that WagerWorks was one of three original licensees to be granted permission to conduct interactive gaming operations from Alderney, part of the Channel Islands.

Paul Mathews, the company's vice president of government affairs, talked to IGN about recent developments, how the company hopes to leverage its various licenses and what changes he sees happening in the industry.

IGN: What do you hope to do with the license you now have in Alderney?

Paul Mathews: A couple of things are important to note with us getting the license. The first is that we believe we are the only software supplier that has ever been through a formal regulatory process like this and been found to be suitable. We are talking about a First-World market with the Isle of Man, Australia and Alderney.

We now hold two licenses, actually: one in Norfolk Island, which we got several years ago, and now Alderney. We think that is a big deal for us because our customers can rest assured that we are a high quality, competent and a compliant company.

Secondly, we believe that there are licensees out there that have brands they want to leverage online but they don't want to be operators. The need for a license to operate will be important in moving forward. We don't have any licensees today who have asked us to do that, they have all opted to operate their own sites.

Eventually someone is going to say to us, "We want your software and we want to leverage our brand online but we don't necessarily want to do it ourselves, so will you do it for us?" We need a license to do that.

IGN: Is there any intention of launching a WagerWorks Casino now that you have the ability with the license?

PM: None. We don't think there is any brand value in WagerWorks and we don't want to spend millions and millions of dollars trying to get one. And we feel that is competing against our customers, and we don't feel that is a very good idea.

IGN: Is there a timetable for when we can expect to see something operational out of Alderney?

PM: There is no timetable yet. We are working aggressively on attracting the right kind of licensees for that situation.

IGN: WagerWorks was spun off from Silicon Gaming. Whatever happened to that company?

PM: I was actually the COO of Silicon Gaming. In March of 2001 it was sold to IGT. All of the technology, a lot of the people and the slot machine company was bought by IGT. At the same time of the acquisition of Silicon Gaming by IGT we spun out WagerWorks formally and completely from Silicon Gaming. Now they are two separate companies and Silicon Gaming is part of IGT and we couldn't be a more separate company from them.

IGN: WagerWorks has a great deal of experience with the land-based gaming sector, how has that translated over to your business plan with the interactive marketplace?

PM: Our strategy is to take proven content in the casino industry and leverage it online. That doesn't necessarily mean proven technology; it is a totally different platform base for the technology. But we believe the games that are successful in the casino will be successful online.

IGN: A lot of gaming software suppliers are struggling right now. What is WagerWorks doing differently to avoid these struggles?

PM: Our company was really founded and based on the idea of being the most credible content supplier. We knew that when the big brands, which are highly regulated in their land-based business, looked for a supplier, they couldn't partner with suppliers who have chosen to operate or license their systems and take wagers from places they shouldn't.

So when someone like MGM Mirage looks at a systems supplier, there are a certain number of companies that they can't even consider. You won't see U.S. companies or Nevada licensees doing business with those guys. Because we choose a different path that limits our competition a little bit. And out of those companies that haven't chased the short-term dollar for the long-term we feel we are the best.

We are in this for the long-term benefit and are building a really cool system with great content. Every time we show it to a prospective licensee they are kind of wowed by it.

There is no magic potion but we think that we are doing the right things so far.

IGN: And it seems to be that a lot of those companies you're targeting are entering the online arena, or at least position themselves to make that move.

PM: Everybody is moving forward and everybody has a plan that they are starting to put into place. We seem to be in the right place at the right time currently and that should have good implications for us in the long term.

"We don't really want to have 100 licensees that won't be important to us. What will be important is that we have the 10 to 15 best, and those will be the biggest and most highly regulated companies."

-Paul Mathews

IGN:WagerWorks and Orbis (a sports betting technology company) recently entered into a partnership. How has that been going and what do you see in the future?

PM: The relationship is excellent. We are building a fully integrated solution. They are the best in the world with sports and we think that we are very, very good at casino games, so it is a perfect fit for the two companies. We complement each other perfectly. We are building a fully integrated system that we can take to prospective licensees and show them that it is all right here. They won’t have to go find a casino from one guy, slot games from another, tournament software from some one else and then their sports book from another supplier and then try to plug it all together. We are offering the total solution and it is great. It is a joint marketing and distribution and development agreement.

IGN: Does WagerWorks have a target number of licensees you'd like to have within a year?

PM: We really don't. We don't have our minds on being the biggest in terms of licensees. What we want are the best. Our plan is to go after 20 percent of the market, but the 20 percent that generates 80 percent of the revenue.

We don't really want to have 100 licensees that won't be important to us. What will be important is that we have the 10 to 15 best, and those will be the biggest and most highly regulated companies. Or big companies outside of the gaming industry.

IGN: WagerWorks doesn't have any live online casinos yet. Are you generating any revenue at this point?

PM: We operate the play-for-fun site for MGM, and they are starting to phase out their points program as they move towards their cash site. They want to dedicate their resources to that. There is some revenue with that and there is revenue coming in already on the deal with MGM as we develop the system for them. Hopefully we will have some new licensees to talk about pretty soon.

IGN: So what do you think WagerWorks can offer a licensee that is different from everything else that is out there?

PM: The commitment to compliance is probably our biggest differentiation from other suppliers. Our quality content is probably the best anyone has seen when we put it online. We understand the gambling industry because we are from the traditional gambling industry. This is a very, very, very cool product. The fully integrated product that we are working on is really neat. We feel we have the best product, the best company and the best content.