Q & A: Ron Luniewski, Youbet.com

After nearly getting de-listed from the Nasdaq, things are starting to look up for Internet betting service provider Youbet.com.

The company has entered a strategic relationship with TVG, a wholly owned subsidiary of Gemstar-TV Guide International Inc. TVG is the 24-hour interactive horse racing network available nationwide on cable and satellite systems with exclusive simulcast and interactive wagering rights to live racing from leading racetracks in the United States.

The horseracing industry in California will be introducing account wagering sometime this year. The state has passed legislation, and the process now is in the regulatory phase. The system could be in front of state bettors within the next month but more likely won't be an option until late spring.

The number of active registered users with Youbet.com continues to rise, and with the help of new Co-CEO Ron Luniewski, the company hopes to reach profitability in the short term. IGN spoke with the new executive at Youbet.com to discuss the company's direction under his tenure and where it is headed in 2002. The company hopes to cash in on California's new account wager systems, but is also looking at other jurisdictions to take its business to.

IGN: Youbet.com has been undergoing a restructuring of sorts over the last six months, which has included you being named as co-CEO. Do you feel the company is headed in the right direction now?

Ron Luniewski: Absolutely. I can't comment on the fourth quarter yet but we are going to come out strong.

I think what we did was, we went back to the basics and focused on horseracing and made sure we had a good business going there. Now we can go and pursue the best international deals by playing to our strength, which is our technology.

IGN: During the second quarter, there was a real push to get the number of Youbet.com registered users up to the 30,000 mark by the end of 2001. Can you comment on where that figure stands now?

RL: I can only give you numbers as of third quarter and we were at about 17,000 then.

IGN: So there has been some growth, because during the second quarter it was kind of stagnant at that 12,000-13,000 mark.

RL: Yes, that is correct. We have the users going in the right direction.

We did the TVG deal roughly in the April time frame. We then went through the licensing process in Oregon, where we are now licensed to operate our own hub. We got that licensee in May and frankly in record time we had the hub up and running by Sept. 1. We were really excited.

IGN: Did you see any effects from the events of Sept. 11 on your business?

RL: Like everybody, we got hit by it. The Breeders' Cup ran in Belmont Park in New York and we didn't see the growth on that event as we hoped, but it was understandable, so we were affected by Sept. 11. But we now have come back from that and our numbers are ahead of last year.

IGN: So implementing the Oregon hub has moved operations forward?

RL: We turned on all the content in September, but we weren't really ever able to maximize the TVG content because of the timing, but now the content has shifted to the winter, which is where Magna dominates.

They have Gulfstream and Santa Anita and we have that content available. Now, for the most part, it is transparent to our users. Then you have California opening up, so we are very optimistic about next year.

IGN: You mentioned earlier that you will start pursuing international initiatives. Are you able to comment on any of those?

RL: I wouldn't even call them initiatives; I would call them strategies. We are working on a lot of things and may even have an announcement about our international plan soon.

What our strategy there is is to leverage our product, which is by far the best product in the horseracing business. … If you look, we are the fifth-largest streamer of live audio and video on the Internet today, and we do it in a very cost-effective way. There are guys that have their audio and video out there and it scales to 1,000 concurrent users and then it gets cost prohibitive. We are way beyond that.

All the account management and funding mechanisms that we are doing are at the head of the class. What we want to do is take the horseracing model and go into other key horseracing markets and apply that technology with the correct local partners.

We also believe that there is tremendous opportunity to take our technology, the non-horseracing specific modules, such as all of our live event management software and processes that we have, and do live sports betting with the correct partners. We will pursue those initiatives.

IGN: As you look to those content partners, how important is it for you to align yourself with the right land-based brand for your international strategy?

RL: That is probably the most important thing. This is a watershed year, I think, for the industry. If you look at who is getting into the interactive wagering area over the last year and now into this one, they all have strong land-based brands.

What we are very good at is a combination of applying technology with the best business and system processes to make a fun and compelling service.

If everyone has the same slot machines that you pull a lever on, what is your differentiator other than your brand name? If you can do something that is as compelling as we did in horseracing for other live sports and casinos, then that is the differentiator. You combine that with a known brand, and you will be tough to beat and very powerful.