Q & A: Darold Parken

As competition heats up in the online gambling industry, the trend for gaming software technology providers has been to increase flexibility and capture new markets through diversification. Chartwell Technology of Calgary, however, is taking a different approach: They're sticking with what they know.

What they know is Java casino games, and by concentrating on software development, and only software development, President and CEO Darold Parken, believes the company is able to deliver the best product in the business. The company leaves payment processing, marketing and license acquisition in the able hands of the operator.

Through a recent agreement with Harrah's Entertainment in which Chartwell has developed an online play-for-free casino for Harrah's, Chartwell is attempting to take the approach to the next level. And according to Parken, similar agreements will be announced in the near future.

Following is an interview with Parken conducted Jan. 10, 2000.

IGN: Can you briefly supply some background on the formation of Chartwell Technology?

DP: We're late entrants to the Internet gaming software business in the sense that we've only been around for two years. We started in the business in December of '98. We spent the first year building our base--Java software. The industry was already well in gear when we got into it, so we were able to look at what was out there and what wasn't out there. Effectively, that's how we decided on our particular strategy, which was to provide the Java-based, or the in-browser, solution and to provide that solution on a non-participatory basis where we would provide all of the tools to an operator who had particular expertise in operating a gaming site. . . as opposed to providing a turnkey solution--hosting, licensing, marketing, processing funds--which a lot of our competitors do. That's how we're distinctive. It's really a function of coming into the scene a little late and seeing what was there and what we didn't see and thought there was a market for. We've spent the two years that we've been in the business developing our own team, which now includes about 40 people, and building our product from the ground up.

IGN: Have you done any upgrades recently? Is this something you do on an ongoing basis?

DP: We've got a development cycle which is ongoing. It's really focused more on our CyberBoss, which is our backend utility. That's the most significant change that we're implementing right now--the extent of reporting and the type of management features that it will permit. . . things like managing bonus programs; our loyalty program; the ability to replay game at any time in the event of a dispute; credit scoring, where you attach points to a specific player's actions in order to target him for incentives or prevent play if there's some sort of fraud going on. We're taking the administrative tool (CyberBoss) and making it a more effective business management and promotional tool.

CyberBoss is a Web-based, in-browser management tool. We've got a release targeted for Jan. 31, which provides a lot of marketing and business development features. Then the next release is March 15.

IGN: So you don't do the marketing for your licensees, but you certainly give them the tools for doing it themselves. . .

DP: That's the whole objective--to provide the tools for flexibility and let the operator do the management. We've talked to a lot of existing clients of competitors and they're saying they want more control, and that fits with our model.

IGN: Can you talk about the development of software for the Harrah's play-for-fun casino? Is it integrated with their Total Rewards (player loyalty) system?

DP: Yes, we've done a considerable amount of integration with their system. Part of the deal was that we would provide this. That's a concern for a lot of the land-based casinos--a concern that the virtual casino that we build for them is able to communicate with the variety of different systems they've already got in place.

IGN: Has U.S. policy affected your business plan?

DP: It hasn't. U.S. policy is still up in the air. We've always had our play-for-fun application. That's what we've been deploying with the Las Vegas-based casinos and the U.S.-based portal sites. The parent company in Canada deals with those installations. The play-for-real application is handled by our subsidiary company in Belize, where it's legal to operate an online casino.

IGN: Through your agreement with Harrah's, you're certainly in a position to become a major player in the American interactive gaming industry, depending, of course, on whether Internet casinos are legalized. Have you approached the American Gaming Association about possibly becoming a member?

DP: We haven't yet taken that step, but we'll approach the gaming associations in the next few months--there's a couple of them that are important--and also the regulatory bodies. We'd like to open up a dialogue. It was a bit premature a year ago because no one in Las Vegas was running any gaming software, even in a play-for-fun environment. It's no longer premature because you've got Harrah's and MGM. (MGM is planning to launch a play-for-fun site too.) There's talk of others, and we're certainly talking to a number of others about providing a similar service to them. Because that's a reality, I think that the Nevada Gaming Commission would probably be amenable to opening up discussions about rules, ability to audit and things like that. I'm not really talking about regulation for online gaming for real in Nevada. But, we'd be happy to engage in discussions with them about the type of software requirements that would be introduced by them in that scenario. It's obviously something they must be looking at, and I expect they'd probably take their cue from places like Queensland.

IGN: If Nevada gets around to examining a regulatory approach toward Internet gambling, one of the key issues will most certainly be the ability to block bets placed by players located in certain jurisdictions. How would you approach the development of border control technology? Is that something you'd outsource?

DP: I guess we'd outsource a part of it, but it would be incumbent upon us to come up with a number of different solutions ourselves to identify and restrict who's accessing the casino and from where. There's a number of things we're working on right now to provide jurisdiction screening. We haven't come up with anything fool proof, however, we do have some ideas on some things that we can introduce which will identify exactly where, geographically, the player's computer is located.

The next question is determining who it is sitting at the machine, and we're certainly aware of all the biometric solutions that are out there right now. But, these things are still in early stages and I don't think they'll provide the solutions just yet. It's probably more of a pin number/password thing.

To answer your question, we'd certainly be looking to outsource player-specific identification. If it were mandated that some sort of biometric screen be utilized, we'd be outsourcing that for sure. But, there's a number of things that we could do ourselves from a software side regarding the locating of the computer accessing the casino.

IGN: A lot of technology companies will fall by the wayside in coming months as investors bail out on dot-coms, but the companies with good products and solid business plans will survive. From an investment standpoint, how does Chartwell distinguish itself amid the huge pool of dot-coms that are taking a hit right now?

DP: There's been a total one-eighty on that whole technology, hype-driven market where a good story was what people were looking for. If you complicated that story with income or earnings, it was a bad thing. People didn't want things complicated with income and earnings numbers. It's the story they were looking for--the potential. Now it's totally changed.

Our strategy to address that is to increase the level of our revenues, to achieve profitability and to ultimately produce earnings. That's really the only thing the investment community is going to pay attention to in this next year. We're rapping up our revenues significantly, and our objective is to achieve profitability this year and to obviously expand that profitability in the following years. We intend to do that through the increased pace of our licensing and the nature of the licensees. We're seeing a much different licensee group now. The group that we're dealing with now is more sophisticated. And there are more brand names. Those are going to be dominant in Internet gaming just as they are in every other segment of the Internet. That's an objective--to get more of the brand names utilizing our product.

Internet gambling is still a relatively new market and it's certainly a growing market, and the advent of legislation in the United States to regulate online gaming would be huge for the market. But, even without that, the development of markets in Europe throughout this year and Asia this year and perhaps the next year, it's still a huge market. I think the actual business case is developing nicely for us and the story is a compelling one from a technology point of view. Our model is not the ad revenue business model which looks like it's kind of a bust so far. I don't know that advertising revenue on the Internet is dead, but businesses based solely on advertising revenues are crashing and burning right now. They're spending huge amounts of money to generate traffic, and that traffic doesn't translate to revenue.

We've got a very different business model. We don't spend any money to generate traffic. It's our customers who generate traffic, and they generate traffic for a very specific purpose: betting for real dollars or entertainment.

IGN: We talked briefly about the Harrah's agreement, and I'd like to go back to that for a moment. Is the Harrah's partnership indicative of the direction Chartwell is going?

DP: It's a major focus of ours now--to expand sales to the land-based casino markets. We're dealing with a lot of the players in the market right now and getting some pretty good responses. We expect over the next quarter that that segment of our business will certainly be much expanded. It's important from a brand-name perspective. We want to associate our name with brand names. We want to establish our own name as a brand, obviously, and you do that by associating with strong brands.

The eventuality of legalized online gaming in the United States is another important reason why we'd like to establish relationships with the land-based gaming companies today because we expect they will probably be the online gaming companies of tomorrow.

IGN: Should we expect news in the near future regarding similar agreements?

DP: Yes, we'll have news this month.

IGN: Have you perceived that there are other Internet gaming software companies vying to capture the land-based market too?

DP: Yes, most certainly there are.

IGN: Was Chartwell the first I-gaming company to enter this market?

DP: I think we were the first. We started targeting this market and proposing the introduction of online games to the existing casino's websites about a year ago. That was certainly before anyone else had been talking about it. We talked to MGM before they did their deal with Silicon Gaming.

I know that, in talking with some other of the large operators in the United States, that they're certainly talking to others. It makes sense to go out and find out what's out there. I think our strength there is, again, we're focused on the product; we're focused on development. We want to provide you with the best Java product you can get today and we want ensure that in six months you're still running the best, and in a year you're still running the best. That's really the key. We're not involved in any other side of that business, and I think that's extremely important to them. They certainly don't want their player lists and stuff like that being exposed in any kind of an environment where there's a potential for conflict.

I also believe that as time goes on people will migrate to the Java, or the in-browser, solution as opposed to the download. I think the download is expecting too much from a visitor to your site to commit himself to downloading the software and then to maintaining that software.