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Casino Chiefs Differ on Internet Gambling

LAS VEGAS, Nevada – Oct. 3, 2001 – With the gaming industry on a rocky road to recovery after the East Coast terrorist attacks, some industry observers began wondering whether the industry would expand into the controversial sector of Internet gambling to jump-start business.

``Panelists in a "state of the industry" session at Global Gaming Expo 2001 at the Las Vegas Convention Center on Tuesday made it clear that the events of Sept. 11 haven't unified key players in the Internet debate: They still differ on whether the public is ready for casino gambling from a home computer.

Tom Gallagher, president and chief executive officer of Park Place Entertainment Corp., and Terry Lanni, chairman and chief executive officer of MGM MIRAGE, concurred that the legalization of Internet gambling is in the industry's future, but they're at odds on how and when that should occur.

Frank Fahrenkopf, chief executive officer of the American Gaming Association, moderated the Tuesday session and affirmed his organization's stance on Internet gaming -- that it opposes it on the grounds that the technology is not available to properly police who plays on line.

Gallagher leans toward the AGA position, arguing that the industry must be wary of damaging some of the respectability it has gained from the public in recent years.

"We've got to be careful about giving the impression that we're trying to put a vacuum cleaner in their pockets," Gallagher said.

Lanni agrees that Internet gambling should only go forward if regulators can keep track of who plays. Critics have said playing from a home computer invites all kinds of abuse, from underage players to players with a history of compulsive gambling problems.

Internet gambling isn't even legal in the United States, yet industry leaders know many U.S. players wager at offshore Internet casinos.

"When all these issues are satisfied, we feel (Internet gambling) should be controlled by regulated, publicly traded companies," Lanni said.

He also said gambling from a home computer isn't as pervasive as some critics claim -- players still have to turn their computers on and find an Internet site to play.

Panelist Des Randall, chief executive officer and managing director of Aristocrat Technologies, an Australian slot machine maker, said the Australian government may have muddied the waters in the United States when it "did a back flip" on its Internet gaming policy.

Some Australian states began licensing Internet gaming companies last year, but the Australian parliament moved in and banned Internet gambling earlier this year. Caught in the middle the policy change was a Las Vegas company, American Wagering Inc., which was forced by the Nevada Gaming Control Board to sell its MegaSports subsidiary in Australia. After Internet gambling was banned, the sale was stalled, contributing to a $127,572 loss for American Wagering last quarter.

Randall said he felt the move by the parliament was an effort to thwart gambling, not the use of Internet technology.

The online casino debate was spurred again earlier this year when the Nevada Legislature authorized Internet gambling as long as regulators can assure that it is secure and legal by federal standards.

The Internet gambling issue probably would have been one of the leading topics for the state of the industry panel Tuesday had it not been upstaged by the events of the last three weeks.

Fahrenkopf, who offered a moment of silence to honor victims of the attack before beginning the panel, started the presentation with an analysis of how the industry would rebound from the economic downturn resulting from the attacks.

Most of the comments were similar to those that came from experts on the first day of the Gaming Expo -- that the industry would be resilient, but the recovery would be slow.

"The recovery will be gradual, but there will be a recovery," Gallagher said. "We must continue to move forward by doing what we do best."

He added that Las Vegas has bounced back from economic disruptions before and it would do it again. He also said terrorists would win "if we start altering our ways" now.

Ernest Stevens, chairman of the National Indian Gaming Association, was applauded when he said his draft-age sons are willing "to follow in the footsteps of their warrior ancestors" to defend the nation in a conflict with terrorists.

Other industry updates offered by panelists:

* Stevens said his association is determined to pursue compacts between Indian tribes and state governments in Texas, Florida, Alabama and Arkansas for Las Vegas-style casinos.

* Paul Herzfeld, chief executive of Casinos Austria International, said the outlook for expansion in Europe may have brightened this year with the release of a gambling review report to the British parliament by Sir Alan Budd. The Budd report puts the industry in a favorable light, Herzfeld said.

* Asked if the casino industry should participate in debates over airport security, since the aviation industry is so closely tied to the success of casinos in some markets, Lanni said he would rather leave those issues to experts in that field. Lanni and Gallagher said Americans would need to grow accustomed to the increased level of security checks, just as they occur overseas.

* Fahrenkopf said the AGA is working with Washington lawmakers for an economic stimulus package that would help promote air travel and tourism.

* Lanni and Gallagher predicted that the gaming industry could face more consolidation in the years ahead, only in the next round of mergers, the casino companies may be the subject of the takeover by larger companies that own other entertainment venues.

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