Inside Asian Gaming

International Briefs Kerkorian Drops MGM Bid Billionaire investor Kirk Kerkorian abandoned efforts to buy two of MGM Mirage’s Las Vegas casino complexes after the company dis- closed plans to build another resort in the city.MGM shares fell steep- ly on June 20, following the news. The moves damped speculation that MGM, the world’s second- largest casino company, may be for sale. The possibility of a buyout had driven the stock price up steeply since May 21, when Kerkorian, 90, said he may try to buy the Bellagio Hotel & Casino and CityCenter, a hotel, condo and casino project. Kerkorian’s Tracinda Corp., the owner of a 56% stake in MGM Mi- rage, said it will “continue to monitor” its investment, which dates back to 1986 when he founded MGM Grand. The statement came af- ter MGM said it would join with Kerzner International Holdings Ltd. to build the new casino. MGM and closely held Kerzner said they will build the new casino on 40 acres of a 78-acre plot owned by MGM. Kerzner will lead the planning and provide cash for the project. Each company will have an equal stake in the casino, they said. The companies plan to reach a final agreement in the third quarter. They said planning and design will take 1 year, and construction will last about 3 years. The new resort may cost US$4 billion, based on de- velopment costs and land values of other recent projects on the Strip. Kerkorian, the son of an Armenian immigrant rancher in Califor- nia’s San JoaquinValley,was an investor in the Metro- Goldwyn-Mayer Inc. movie studio in the 1970s. He used the MGM Grand name for a group of hotels he sold to Bally Entertainment Corp. in 1986. The same year, he founded MGM Grand Inc., taking it public in 1987, and opened the MGM Grand, Las Vegas’s largest casino in 1993. The company later acquired Steve Wynn’s Mirage Resorts Inc. in 2000 for US$6.4 billion and Mandalay Resort Group in 2005. MGM owns Mandalay Bay, Treasure Island and other casinos in- cluding Circus Circus on the north end of the Las Vegas Strip near the site of the new resort. Kerzner International owns the Atlantis resort in its hometown of Paradise Island, Bahamas, and it is building an- other Atlantis in Dubai. PBL Buys Onto Vegas Strip James Packer, the son of the late Australian media and casino mag- nate Kerry Packer, has reportedly reached a partnership agreement that could result in the building of a Crown branded casino on the Las Vegas Strip. Publishing and Broadcasting Ltd.(PBL), the company Kerry Packer created and which the younger Packer now controls, announced an agreement with Austin, Texas-based developer Christopher Milam. Milam holds purchase options for the site of the former Wet n’ Wild water theme park adjacent to the Sahara Hotel & Casino on the Strip’s north end. Milam, who confirmed the partnership to the Las Vegas Review-Journal,has shown interest in building his own 1,888-foot-tall tower on the site. PBL paid US$22.5 million for a 37.5 percent stake in LVTI—the holding company Milam created for the Strip development proj- ect. The Crown Las Vegas project would include a 5,000-room hotel, 250,000 square feet of casino space and 625,000 square feet of retail, dining, entertainment and convention space. The property is expect- ed to take four years to build and would be operated by Crown Ltd., a new subsidiary of PBL. It’s the second deal Packer has made on the Las Vegas Strip. In April, PBL spent $250 million to acquire a 19.6 percent stake in Fon- tainebleau Resorts, a Las Vegas-based company that is currently building its $2.8 billion resort-casino project on the north end of the Strip as well.That project is slated for a 2009-opening. But Packer and PBL have yet to be licensed for gaming in Nevada, and the Packer family’s past dealings—including with Lawrence Ho, the son of Chinese businessman Stanley Ho and the head of Melco, the company PBL has partnered with to build casinos in Macau—are likely to be closely scrutinized. Stanly Ho has battled allegations that his casino operations have ties with organized crime,money launder- ing, drug trafficking and prostitution. MGM Mirage, which partnered with daughter Pansy Ho for its MGM Grand Macau project, recently had to explain its agreements in detail to gaming regulators throughout the United States before receiving approval. As for Packer’s PBL, “We will take a look at all his partners,” said Nevada Gaming Control Board Chairman Dennis Neilander.“It would still be something that we would have to look at.” Google’s Extends Ban on Gambling Ads Google has expanded its ban on gambling advertising to include play-for-free Web sites. Google and Yahoo both recently banned ad- vertisements on real-money sites, but Google now is the first major search engine to ban all forms of online gambling advertising. “Google has always prohibited the advertising of things like bingo, poker and online casinos. However, having looked at this issue very carefully and considered the views of our users,we have decided to extend our policy,”a spokesperson for the search engine giant said. “While we respect people’s differing views on gambling and support freedom of expression, we believe that this new policy is simpler for everyone to understand and more in tune with users’ wishes.” For operators the decision eliminates a significant component of their marketing strategies. They had been able in the past to work around anti-Web gambling legislation and policy by advertising free sections of their sites or by separating domains devoted to free gam- bling on search terms like“online gambling”in order to generate traf- fic. Operators also used free-play sites to obtain personal details from users and use this information to launch targeted direct-to-consumer e-mail marketing campaigns to encourage visitors to sign up for real- money pay-to play games. Google’s exit leaves MSN as the last of the Big Three search en- gines still allowing advertising for online gambling. China Fears Prompt Betex CEO Exit Betex’s CEO and finance chief have resigned in the wake of the arrests earlier this year of three of the online lottery operator’s employees in China in connection with an investigation into illegal gambling. Peter Greenhill and Stuart Barker quit after failing to receive as- surances from Chinese authorities that they would not be arrested if they entered the country, according to a report in eGaming Review. Non-executive director Philip Goodmaker has also resigned, the magazine said. No charges against the employees had been brought by Chinese authorities, as of this writing, and they were still being held in China. Greenhill told eGaming Review that his name and Barker’s had surfaced in the investigation. “It was too much to ask, perhaps, for proper assurances,” he said.“It is better for the company if someone else takes over.” Chief Operating Officer Jeremy Longley has been named CEO. Al- exander von Franckenstein was appointed a non-executive director to replace Goodmaker. More on US Web Gambling Ban The US Congress was awash in Internet gambling discussion last month with the introduction of two new bills in the House of Repre- sentatives complementing Massachusetts Democrat Barney Frank’s Internet Gambling Regulation and Enforcement Act. The first of these companion bills, the Internet Gambling Regu- lation and Tax Enforcement Act, introduced by Rep. Jim McDermott (D-Wash.), would create a structure to tax licensed online gambling in the United States.The legislation calls for operators licensed by the Financial Crimes Enforcement Network to pay a fee of 2 percent of all funds deposited by any person placing a bet. It is estimated the tax could generate up to US$25 billion. Frank’s bill would undo theWeb gambling ban passed into law last year by providing a framework for a licensed, regulated industry in the States. His bill designates FinCEN as the agency to oversee the industry. The Unlawful Internet Gambling Enforcement Act,passed by Con- gress last September when the Republican Party was in the majority, makes it a crime in the United States for banks and financial service providers to process Web gambling money transactions. A second companion bill, introduced by Rep. Robert Wexler and titled the Skill Game Protection Act, would exempt poker, mahjong, bridge, chess and like contests from last year’s ban. “Poker is a game, it is not a crime,”said the Florida Democrat.“Mil- lions of Americans enjoy competing with each other in games of skill on the Internet.We should protect the freedom of law-abiding adults to participate in these great American pastimes.” Wexler is a senior member of the House Committee on Foreign Affairs and the House Judiciary Committee. He also sits on the Finan- cial Services Committee, which is chaired by Frank. Financial Services held its first hearings on Frank’s bill last month. A fourth bill,introduced in May on the heels of Frank’s bill,propos- es a study of Internet gambling by the National Academy of Sciences. The bill was introduced by Nevada Democrat Shelley Berkeley and is supported by the American Gaming Association,the federal lobbying arm of the U.S. land-based casino industry. In one of the more interesting developments in recent weeks, a newly formed group of Internet freedomadvocates has added its voice to the debate, filing a lawsuit in federal court challenging UIGEA. The Internet Media Entertainment & Gaming Association, lobby- ists based in Washington, D.C., are asking a US District Court in New Jersey to issue an injunction restraining U.S.Attorney General Alberto Gonzales, the Federal Trade Commission and the Federal Reserve from enforcing UIGEA. “The purpose of the Unlawful Internet Gambling Enforcement Act is to prevent Americans from engaging in their fundamental rights to conduct their lives in the manner they wish to live it — to be free from the government imposing public morality in the privacy of one’s home,” said attorney Eric M. Bernstein in filing the challenge. iMEGA also has established a legal fund to carry on its fight. Attorney Edward Leyden, president of the group, said, “As with the U.S. financial markets, transparency assures that broad access to relevant data and the balancing forces of a free market all operate to maintain fairness and prevent corruption. Similarly, in this age of a yawning federal ‘tax gap,’ U.S. taxation of Internet gaming transac- tions and companies could generate more than $20 billion during the next several years — all while saving federal law enforcement dollars for the fight against terrorism and other dire issues.” Leyden is vice chairman of the Tax Section of the American Bar As- sociation and has worked as a contract advisor to the National Foot- ball League Players Association. Virgin and Betfair Join Forces Virgin Games has teamed with Betfair on the launch of a betting ser- vice called Virgin Bets. The new venture will take bets on sports and entertainment events. On the sports side it will initially cover world football, cricket, golf, greyhound racing, motor sports, rugby and tennis. (Horseracing will be added later this year.) Virgin Games Chief Executive Simon Burridge said the partnership with the world’s largest online betting exchange means the site’s odds “will be better value than traditional bookies, meaning punters can place their bets with confidence that they are getting the best deal.” Entertainment and so-called novelty bets will be equally impor- tant to the mix, he said. “Virgin Games is all about fun and entertainment, so novelty bet- ting is a good fit for the brand.” 45 44

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