“The casinos are much more interested in establishing an online gaming presence.”

It seems that a growing number of land-based Vegas casinos are going online – in spite of the fact that Internet gambling is largely illegal in the U.S. So how are they getting around the issue?

By launching play-for-fun sites.

The sites look a lot like real-money sites, but don’t accept wagers. That’s not a problem for these casinos, however; the goal of these sites isn’t to make money. The casinos are much more interested in establishing an online gaming presence and loyal customer base, with the hope that Nevada will eventually legalize online wagering.

MGM Mirage and Harrah’s are already running free sites, and other casino giants are joining that exclusive club. This week, the Hard Rock Hotel and Casino of Las Vegas launched its own play-for-fun casino site.

The site, which was developed by dot com Entertainment Group, gives players a choice of play-for-fun Slots, Roulette, Video Poker, Craps, Blackjack, Caribbean Poker and Table Poker.

Players can enjoy better-than-average Java (no-download) games that are branded with the Hard Rock name. The games have a ‘Vegas’ look and feel to them, which means players will find a lot of pinks, turquoise blues, and purples on the tables.

The new partnership should be a boon for both Online Casino Singapore companies, if growth projections for the online gaming industry are accurate.

This is dot com’s first deal with a land-based Vegas casino, and that could possibly pave the way for future partnerships – especially if online gambling gets the green light in the Silver State. Other gaming software companies are likely to be working on their own Vegas deals at this time.

More importantly, however, the Hard Rock got its foot in the Internet casino door before most of the other big Vegas casinos. The brand recognition of the Hard Rock name will undoubtedly attract customers and that strong market share, along with the casino’s position as one of the first Vegas casinos to go online, could translate into big money – provided real-money wagering gets approval.

Look for more Las Vegas land-based casinos to launch play-for-fun sites in the near future as the battle for online casino supremacy heats up.






  1. Thomas Baker knows a good bet when he sees one. When his company’s stockplunged like almost every other after the September 11 terrorist attacks, the chief executive of International Game Technology (NYSE:IGT-news) cracked open his corporate piggy bank and repurchased $100 million of the Reno [Nev.] company’s shares. The stock has since climbed by 60%. “We had the cash,” Baker says with characteristic understatement. “It looked like a very good deal.”


Baker is bullish on IGT, No. 46 on this year’s BusinessWeek 50 list of top-performing companies, but should you be? In an industry known more for all-you-can-eat buffets than consistent earnings growth, IGT has been among the best performing gambling stocks. The company is the world’s leading maker of slot machines, with a 60% market share. Sales and earnings have more than doubled over the past six years, and its stock has climbed nearly five-fold during that period. The good news is that analysts are expecting more of the same.


Wall Street forecasts that IGT’s earnings per share will climb about 14% this year, to $3.30, according to a survey of 15 brokerage firms by earnings estimate compiler Multex.com. For the fiscal year that ended last September, IGT earned $213 million, on sales of $1.3 billion. “Better to put your money in IGT stock than in one of their slot machines,” jokes Bruce S. Sherman, chairman of Private Capital Management, a money-management firm in Naples, Fla., that’s IGT’s largest shareholder. Sherman says his company recently has been adding to its 6.5 million-share IGT position.


CASHING IN. Still, the events of September 11 and the natural cycle of the business may make this a transitional year for IGT. In the wake of the terrorist attacks, gamblers are driving to local casinos more often than hopping on planes. That trend has hurt casinos in Las Vegas, which as a result have cut back on capital spending.


And last year, IGT got a big boost from the legalization of slot machines on Indian reservations in California. But in its most recent quarter, the company sold only 250 new machines to that market, down from 3,500 in the same period last year. That decline put IGT’s domestic shipments at 12,600 machines, from 15,000 in the first quarter of last year.


Some investors are taking their chips off the table. Like IGT itself, Ariel Capital Management, the well-known Chicago-based money-management outfit, was a big buyer of IGT shares after September 11. Lately, the firm has been a seller. Ariel now has 970,000 shares, down from 3 million in October.


INNOVATIONS. “We love the stock, but it’s not one of those hidden gems anymore,” says John Miller, an analyst at Online Casino Singapore. “On a valuation basis, it’s a little rich.” At a recent price of $60 per share, IGT sells for about 18 times this year’s estimated earnings.


Still, IGT has a lot going for it. No. 1 is technology. IGT has always been a leader in product development. In the 1980s, the company was among the first to put microprocessors in slot machines in place of the mechanical wheels. In 1986, it connected a number of machines in “Megabuck” networks that promised higher payouts to gamblers. IGT typically leases these machines to casinos and takes a cut of gambling revenues in return. Revenues from such arrangements now make up nearly two-thirds of IGT’s cash flow.


More recently, it launched coinless machines that use paper tickets to tally winnings. That saves the casino time and money. “A large jackpot can take 30 minutes to verify,” notes IGT’s Baker. “It’s a hassle winning $200 worth of nickels.” Overall, Baker figures that his company spends more on researching and developing new slot machines — some $60 million last year — than the rest of the industry combined.


QUICKER TURNAROUND. The new technologies and new game ideas — a game featuring TV personality Regis Philbin is a popular one lately — helps drive the market for replacement machines. IGT has dropped the average amount of time a casino keeps a slot machine from seven years to just over four, notes Todd Greisbach, an analyst at Liberty Wanger Asset, a longtime IGT investor. That means more sales of new machines, at roughly $11,000 each.


Then there are the new jurisdictions, a big source of IGT’s sales over the last two decades. Even though the U.S. macroeconomic outlook is improving, state budgets will likely keep being squeezed because of a variety of factors. Tough economic times often prompt states to seek new sources of revenue, such as casinos. The 1970s brought Atlantic City, and the early 1990s saw riverboat gambling spread in the Midwest. Casino gambling is now being considered in eight states, most notably New York, Pennsylvania, and Kentucky.


Lastly, IGT should benefit from its recent merger with Anchor Gaming, which in addition to cost savings should contribute significantly to earnings per share because Anchor was acquired with IGT stock trading at a higher multiple of earnings. Liberty Wanger’s Greisbach figures the acquisition could add as much as 30 cents to IGT earnings this year.


IGT may see slower sales growth in 2002 compared with last year, but longer term, the odds are still in its favor.