Nevadans who want to play legal, regulated, online poker have just two options: Caesars Entertainment-backed WSOP.com or Real Gaming, supported by the South Point.
WSOP — which is affiliated with the World Series of Poker, also run by Caesars — is the big fish. But the South Point site is trying steadily to grow its position in the market.
The market hasn’t been explosive since regulated online poker began in Nevada a few years ago. Ultimate Poker, backed by Station Casinos, shut down in November, citing weak revenue and a limited pool of players. Those factors haven’t changed much for the remaining operators.
But Real Gaming co-founder Lawrence Vaughan sees online gaming becoming a much bigger deal in the future. In the meantime, his site is focused on doing the best it can in the limited market.
Vaughan recently sat down with VEGAS INC to discuss Real Gaming and the state of the online gambling industry.
What are some of the benefits and challenges that come with being tied to just one casino?
With the big companies, there’s the bureaucracy and the political nature of getting anything done. Imagine working in that environment and trying to accomplish something — think of the layers and the meetings you’d have to go through to get anything to market. It’s just insanity. I don’t think that would be very interesting to me, and I think it would be very frustrating.
What’s great about working with South Point owner Michael Gaughan is Michael’s organizations are very friendly and open in nature internally. There are not many levels of hierarchy, so there’s not a lot of midlevel management for no reason. So for us, when we want to get something done, Michael and I talk about it, the team talks about it, and then we just do it. We do not have to go through a lot of red tape to deliver products to the customer.
We have this new, we-want-to-turn-a-product-around-quickly, high-tech world with this sort of legacy, what-made-Vegas-Vegas culture. And that is good in terms of the customer service. We get how Vegas is supposed to work — Michael has impressed that into the company. I think that comes through to the customer.
Did Ultimate Poker’s shutdown affect you?
It affected us in a positive way. People were like, “Where do we go?” and there are two options.
The bad thing is, when it’s the beginning of an industry and a company drops out, it looks bad. So the first thing people always say is: “Hey, how’s that industry going?”
Well, not spectacular initially, but that’s sort of the getting started. Also, the player pool is really small in Nevada. It would be good for Nevada to open more games sooner. Or we need more state compacts, which also would solve that problem if we’re sticking with just poker.
Were you expecting the industry to perform better when it launched?
I was expecting it to move faster. I didn’t expect Nevada to do tremendously well; I don’t think anyone did. Everyone was putting money into it expecting things like state compacts or a federal law to come much sooner. These other states are opening up, it’s just — as bureaucracy tends to go — slower than expected.
What’s the outlook for your company and the industry?
For us, it’s OK because there are only two sites, and we’re still in this interesting phase where we can assess the market and define what it’s going to be. What we launched with and what will be on the market at the end of the year and what will be on the market a year from then are completely different products.
How do you get a local gamer to play online games?
That’s a conversion no one has done really well yet. But that’s changing.
The outlook is good, but I think people have to understand this isn’t the type of business you just turn on and it’s there. You’re building; you’re at the beginning of an industry. How long has any industry taken in the past century to become a stable industry, to become an understood one, especially a new one?
The definition of what online poker means in a regulated market is half-done. It’s not there. What poker is going develop into to be successful in this market is changing. Once they start opening up more games, once skill-based games transition to the Internet side, that’s going to be huge.
How big can Nevada’s market become in terms of operators? Is two really all the state can handle right now?
In this form, two or three is the most. Probably in five years from now, I would venture to say there will be more than $100 million a year in interactive gaming revenue in this state. So the market’s big. Most people would think that’s nuts, but it’s not. It’s true.
What do you have to do to get there?
Product. Product within the regulations, and product for new regulations that don’t exist yet but will.
Like more interstate sites and more games?
More games is critical. Poker is for one market. You need to make games for more markets.
The reason everyone started with poker is because it was not a threat; poker doesn’t hurt. Look at poker revenue in any casino: It’s nothing. So now that people see, “Oh my god, my poker rooms still work,” they might say, “You know what, maybe my slots will still work if we do slot machines online, too, and maybe I can make even more money for people that will play.”
Skill is really awesome when you look at interactive because the skill-based products are going to be the best of both worlds. You have interactive, which is for millennials. You have skill, which is for millennials. And now, you can give skills to millennials at home. People right now are looking at skill as a way to get millennials playing more out here on the floor. It will work that way, too, and I think that’s great. But if you bring it to interactive, the sky’s the limit in terms of Nevada. It could be a whole new revenue stream, and it won’t cannibalize anything.
Do you have strong feelings about the congressional effort to ban online gaming?
I think it’s counterproductive for the industry. There are a lot of people working really hard in this new space; there’s demand for it. It’s like music piracy in the late ’90s: It needed to be regulated, it needed to brought out of the dark, and it was solved. You saw that evolve.
The demand is there; no one with any amount of money can shut that up. They can hurt the industry, but they can’t stop what customers want.
How big do you want Real Gaming to become?
Our goal is just to make sure we deliver the best product to the customers — a better product than what you can get somewhere else. Inevitably, the rest will work itself out. The No. 1 thing for us right now is product and being on the cutting edge of product.
Is Gaughan’s main goal to make a lot of money?
Yeah. He’s a businessman, and he’s a damn good one. The goal of this is to make a lot of money. But also, he knows this is going to be where a lot of gaming revenue comes from in the future. Poker was the first domino to fall. We just expected — and I think everyone did — that more states would open up sooner. We all still know where this is going, which is that a lot of the games that are commonplace today outside of poker are going to be playable from other places at home or anywhere. And I think that’s where he sees it. He wants to be part of it.
What type of player do you think is attracted to your site?
They’ve done an excellent job with WSOP. That brand is saturated, and it puts itself out there as the place where you can win huge cash prizes. The brand affiliation with the actual WSOP, not the online one, is big.
I think most of our customers are overlap customers, though. They’re on both sites. So that being said, I think anyone who’s looking for a better promotion that week is going try us out.