GPWA Times - Issue 21 - May 2012

COVER STORY The Innovation Group COO Kimberly Arnold looks at the threat lotteries pro- vide to traditional casino companies and says gaming companies better take it seriously. VN: Where were you when you found out about the DOJ indictments on Black Friday? ARNOLD: I was sitting at my desk, and I found out about it through a flurry of postings on LinkedIn and some other gaming sites, through tweets and differ- ent people posting. VN: How surprised were you when it happened? ARNOLD: I was very surprised, I think probably along with the rest of the indus- try. The tone that was set, I think caught a lot of people off guard as well. VN: As the process went forward, the first step was PokerStars paying everybody’s money back. Were you surprised Poker- Stars was able to pay people right away? ARNOLD: I do think that was the best move. We were aware of others that were looking to do the same thing, even if they couldn’t. VN: So that’s the PokerStars side. Full Tilt gets their license suspended and then folds a little later. How surprised were you that Full Tilt ended up collapsing as a re- sult of all of this? ARNOLD: I’m not going to comment on that one. I guess I can say that it shows the significance of how complex those op- erations were, and that they were not in a position [to pay people back]. VN: If you take a look at the complexities of the business and where the industry was at that time, when you were talking to people within the gaming industry, did this signal to them a new opportunity? Or was it more “We still need to study this”? ARNOLD: Actually it’s funny, because we have the iGaming North America confer- ence. We found that was actually an im- portant discussion at our event last year, and depending on whom you asked, it was White Friday, Black Friday or Gray Fri- day, and they referred to them differently. It was an opportunity for some. I think it opened up a lot of people’s eyes and made them realize that they needed to be com- pliant and setting the tone for the industry because the government was coming down the line. It definitely set a tone, but it de- pends on whom you asked. I remember being at the conference and a lot of people having very different opinions on whether it was good for the industry. VN: Fast forward to December. We get the weird letter written by the DOJ, which was written in September, released in De- cember, saying, “As long as it’s not sports betting, it’s OK.” How surprised were you by that admission by the DOJ? ARNOLD: Very surprised. We saw, again, a flurry of activity from our clients. I think it opened up a lot of eyes and made people realize that they needed to start looking more closely at the issue. From those clients who had been kind of on the fence waiting to see, we saw a very signifi- cant interest. And that’s carried through ever since. VN: So that feels like it was more of a game-changer than Black Friday, a signif- icant mental obstacle was removed from people pursuing it. ARNOLD: I think it was, from inspiring the client base to really look closely at the issue. That was more of a game-changer in my opinion. VN: Continue on that theme of the DOJ’s decision. Lotteries get a lot of leeway with this DOJ decision. And in a certain stand- point, become a natural competitor to gaming interests in the online space. How serious is the threat of lotteries competing with gaming companies? How seriously should brick-and-mortar casinos be tak- ing that? ARNOLD: I think they should take it se- riously. Obviously the DOJ opinion was the result of two lotteries that asked for the ruling, and several entities have lever- aged beyond or are looking beyond hav- ing their existing products online, and if they can make that leap into offering ca- sino-style games or the competitive-style games that blur more into the entertain- ment functions that casino providers see . . . one of our consultants made a com- ment to me yesterday that in some cases, the laws for lotteries might be easier to change than gaming. It’s something that could realistically happen. We have also been in association with a couple of lotter- ies that we know have put out very broad RFPs, so they’re looking at all of their op- tions. I think they’re considering it, and I think the land-based casino operators have to pay attention. VN: Everyone has talked about the Europeans coming over and offering their services and really being the ex- perts at providing it, but it could turn out that the lotteries end up being the real competition. What happens next? Keep your eye on the lotteries! “ People were sitting back kind of waiting to see what happened with the fed, and now I think they’ve been saying because of the fed we need to race and try to get something done and that’s why you see these initiatives and legislative efforts.” Where to now in the U.S. – and who’s driving ?

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