UWin! is Cliff Dutton’s domain at GTECH
GTECH, the West Greenwich-based lottery giant is betting big on the Internet. So far, the company has created a wholly owned subsidiary called UWin! and signed deals with Denmark and Ireland to provide Internet lotteries. UWin! expects to announce four more Internet lottery deals in the coming months.
All of this as the company anticipates what would prove to be another big score – the legalization of Internet gambling in the United States.
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While gaming in the Internet is illegal in the United States, experts estimate that some 750 illegal Internet gaming sites now exist – generating as much as $1 billion in annual revenues.
GTECH officials are confident that the legalization of Internet gaming here is not so much a question of if, but when.
GTECH and UWin! clearly see the Internet as a limitless frontier, the perfect elixir for what has become an increasingly stagnant lottery industry in the United States. While scratch tickets and traditional lotteries remain popular, they are not the interactive approach demanded by the new generation of game players.
Cliff Dutton, is president of UWin! and a vice president at GTECH. Dutton is busy these days preparing for a busy summer, when both the Denmark and Ireland Internet gaming will begin. Dutton uses three words to describe UWin! and the Internet games it will feature.
”It’s secure, authorized and fun,” he said.
Dutton is proud to point out that UWin!’s major selling point is that it is regulated, and therefore, very reliable.
”Most Internet gaming now is operating outside of the context of government authorization,” said Dutton. “Once the player realizes this is an alternative to that unauthorized – and therefore, untrustworthy – gaming on the Internet, and that this is indeed sponsored by a government entity, then the player has more faith that they are going to be treated more fairly. That there will be appropriate control, payment – the things you care about.”
Dutton sees security and a feeling of trust as critical to any gaming player. He also points to the success of the traditional lotteries and the fact they provide a revenue source for such things as public education. That, he said, fosters a sense of community.
”Security also matters because a player needs to know that the game is fair – that they are connecting to whom they think they are connecting to,” he said.
UWin!, explained Dutton, is looking to tap into an existing and rapidly growing market – Internet users. Not only do Internet users earn an average of $50,000 per year, according to the Internet Industry Almanac, the number of them will grow to 327 million, with 101 million users in Europe, by the end of this year.
Dutton looks to Europe and sees much to do for Uwin! In fact, said Dutton, while the legalization of Internet gaming in the U.S. is important to the company, “we’re not dependent upon it.”
That doesn’t mean he thinks U.S. officials should delay in addressing the issue. It is simply not going away, he said.
”It’s a policy decision that the federal government needs to undertake to decide if they want to continue to protect contributions to good causes that have already been enabled by lotteriesbecause the threat of competition from unregulated wagering on the Internet is great and not-stoppable,” said Dutton.
GTECH a major player
GTECH is the world’s largest supplier and operator of lottery systems. The company has contracts with 36 countries and 28 U.S. states. Its 2000 fiscal revenue exceeded $1 billion. The company employs 4,800 worldwide and has regional offices in Australia, Belgium, Brazil, Canada, Florida, Poland, South Africa and the United Kingdom.
Its stock is traded on the New York Stock Exchange, under the symbol GTK.
As chairman and chief executive officer of GTECH, William Y. O’Connor is responsible for establishing broad policy and overseeing the strategic direction of the company. He joined GTECH as president and chief operating officer in December 1994 and played a key role in expanding the company’s core competencies into the gaming and entertainment, network management, and government services markets.
In 1997, O’Connor was elected chief executive officer and handed the challenge of diversifying and growing GTECH.
O’Connor and his wife, Denise, have a ten-month-old son. He also has a grown son and daughter from a previous marriage. He holds a degree in electrical engineering from Renssalaer Polytechnic Institute in Troy, New York.
O’Connor believes that the federal government needs to acknowledge that the Internet gaming business is going on and that “we need to offer a government-sanctioned alternative.”
Putting the issue off, he said, is putting off the inevitable. He sees it – and much more – as part of a new, entertainment medium.
”Two years down the road we are going to have interactive TV – a new way of looking at and playing games on television,” he said.
Last week, the Providence Business News discussed Internet gaming – and GTECH’s approach to it – with O’Connor.
PBN: What do you figure the odds are that Internet gambling will be legalized in the United States?
O’CONNOR: It’s a matter of time. It’s not a matter of whether it will or it won’t.
Why are you so confident of that?
Because these sites are growing every day. You can’t take an arcane law and have it be meaningful on the Internet. The Internet is a ubiquitous, wide-open structure. It is basically an uncontrolled situation. Unless you really focus hard on the infrastructure and focus hard on how people can play on it and so forthyou have to want to invoke these controls of discipline. If you don’t want to, you can always provide a service that anyone can enter no matter what law tries to prevent him or her from doing so. The Internet is so open, that you have to focus on it to make it do what law would like it to do or regulatory agencies would like it to do. The best you can hope for in my estimation, is that if you are a jurisdiction, you can offer a service that is very law abiding – and I think people, given the alternative, will do it – but if you don’t offer a law abiding service, they will always have the alternative that you can’t stop, to go with a renegade service. It is very similar to the bootleggers. As soon as we lifted prohibition, guess what? There was no reason for them anymore.
And clearly, that renegade activity is going on now?
Oh yes. There are some 750 sites or more that are available to anybody in the United States. Most people can click on and do it anyway. And if they won’t let you on immediately, there are ways you can get on, if you are so inclined.
How far are these people providing these illegal services from your standard bookies?
I look at them as pirates. They go to an unregulated, uncontrolled environment. They set up their servers and provide a gaming site. Here’s the real problem – the dilemma. GTECH is supporting every law, every way we know. We are putting more money into infrastructure than anybody else is in the world that I know of. We are trying to be on the side of the angels of the government everywhere. It’s very restrictive for us. Deals go by that we can’t participate in. However, these guys today that are illegitimate – they are attracting traffic. They’re setting up a server. Now, prohibition gets lifted. They suddenly become legitimate. Now all of these lotteries or government jump on legitimate services and here we are, we’re out in the cold.
Why such a push for Internet lotteries – is the market here in the U.S. stagnant, as some reports have it?
This is a world of change. It’s not only a change to dot.com, our whole world and how it interfaces with retail is changing. There are new venues in retail. Some traditional venues are either not being visited as often, or are in some cases, going away. Let’s look at the U.S. We our seeing more superstores that are multi-lane, large stores and then you get to the boutique. Or you see convenience stores, where more and more offer gas. More of the service is trying to be done at the pump so that you don’t have to come inside. These are major changes that impact us. At the same time, the economy is moving at a faster pace. Young people are used to dot.com and clicking and a lot of interactive work. What we’re seeing is that our population is graying a little bit – in terms of the standard lottery.
That’s an interesting example. These people who are paying at the pump. They are not going into a store, not seeing your products. That’s not good for you.
You have a choice. You can either go to the pump, somehow. Or you can attract them back into the store.
And going to the pump is the future?
I think so. We have to decide how we are going to do that. Most of that going to the pump right now is on a credit card basis.
What do you say to those opponents who point to the problems of compulsive gamblers and say that we simply have to stop this expansion of gambling?
First, you have to decide if gaming fits your whole approach – your culture. It turns out that almost every human on the earth enjoys some form of gaming. So let’s assume that we decide gaming is not the evil, if balanced. Then there are different kinds of gaming. You have the casino, which most people recognize as hard-core gaming. And you have the lottery, which is about as soft a form of gaming as you can have. Then you have this Internet approach to gaming. My feeling is that you have to decide first if you are in a culture that says gaming is okay. There is also another distinguishing factor. On the lottery side, why are they in place? To create money for good causes, generally.
And that remains true?
Absolutely. That’s all of our lotteries. So we look at it and we say, people have fun. It’s good for government and people really don’t get hurt in that arena. When you look at the Internet, the fear is that people become closet players, in a sense. They get on the Internet and really smoke up the terminal and lose all their money. The actuality of it is that you can put controls on that just like you can at the convenience store – better even. If an individual wants to run around to enough convenience stores, there is no way for us to control them. But if they are playing on their PC, we can say; ‘You have played enough today.’ We also offer third-party databases, so that you can do the best approach possible for registration so that you can make sure your age control is as strong as it can be.
It would seem that a company like GTECH would have to put forth a massive lobbying effort to help the cause in terms of getting online gambling legalized in the United States. But GTECH has in the past been criticized for strong lobbying approaches. How do find a middle ground?
What we were criticized for in the past was the way we lobbied. We had contracts in which, if you were a lobbyist for us and we were in that jurisdiction, we would pay you. We would also have some lobbyists who were on percent of percents. In other words, we get a percent of what is done in that lottery and we paid the lobbyist a percent of what we got. We’ve stopped all that, and have for a number of years now. Our lobbyists now are paid precisely for what we ask them to do. There are no longer anything more than a one-year contract, and quite often it’s a six-month-contract, fixed fee. We pay for service, basically. Have we cut back on lobbying. We have as many lobbyists now as the day I walked in here. We think in the U.S. it is a very legitimate way to do your business. We use it as an educational source. There is a lot happening in government and these are people who are responsible for a wide array of subject matters. The person who gets the best shake on this is the person who educates the staff and the Congressperson. We spend our time doing that. At the same time, these are not full-time employees because we could not afford to have them hanging around all the time. To answer your question about whether we will have a massive effortour approach is to educate the government and not just the Congress people, but the regulators as to what the Internet is about and how you secure the Internet. It’s an important question the U.S. has to wrestle with. Security is a multi-layered thing. You build your security by making it harder for people with bad intents – you make it harder for them to get what they want. It’s a complex game. Now, the regulator operates under arcane laws. He or she thinks; I walk into a store and I’m under 16. I can’t do that.’ Then they apply that to the Internet. I will try to get on that site or I will hire somebody to crack that site. If they get on, you’ve broken the law – without regard to figuring this out, in a security sense. There is no sense of protecting it, of making it better.
There are estimates that the online gambling market in the U.S. could grow to $5.5 billion by 2004. How are these estimates arrived at if the subject is illegal, and do you consider that reasonable?
Normally, what happens is that you have 750 sites. Someone has taken a look at the number of hits and the time on site. There’s probably more than $1 billion out there today being played. Someone has done an extrapolation of that.
So it’s probably not far fetched?
I don’t think it is too far fetched, but it’s all best estimate built on best estimate.
