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Another voice has entered the debate over “skins” in the prospective Pennsylvania online gambling market.
Itai Freiberger, the CEO of 888 Holdings Ltd, wrote to the Pennsylvania Gaming Control Board (PGCB) to appeal for the gaming regulations to allow casino licensees to offer multiple online brands. His company operates 888 Poker and 888 Casino in New Jersey.
Full text of the letter can be found here.
The “skins” issue has become important partly because of the opposition of Penn National and the Parx Casino. Both casinos argue that:
888 insists that allowing multiple skins brings benefits to the casinos and their customers.
Freiberger’s letter takes some of the contrary arguments head-on and makes a credible case based on its actual experience rather than the vague fears expressed by Parx and Penn National.
Here’s the summary of the case that Freiberger makes:
Freiberger begins his case by setting out 888’s credentials as a trustworthy advisor on the skins issue:
“888 is presently the only operator licensed to provide its services in all three regulated US jurisdictions (Nevada, New Jersey and Delaware), and operates the only US inter-state poker network.”
Freiberger informs the PGCB that 888 is a committed supporter of regulated online gaming and that it believes regulation is essential to create “legal certainty.”
Moreover, 888 expects to have a direct interest as an Internet Gaming Operator partnered with one of the Pennsylvania casino licensees.
Freiberger points out that online gambling is a complex undertaking:
“To provide players with an exceptional online gaming offering, licensees will need significant technological and human infrastructure – a stable, successful and well tested gaming platform; qualified and experienced support staff; qualified and experienced responsible gambling, fraud prevention and compliance staff; online marketing know-how, etc.”
Freiberger explains that permitting multiple skins will allow the casinos to “create a multi-tiered offering,” with different sites appealing to different demographic groups.
888 compares this market concept to the existing practice of having different rooms with a land-based casino offering different game types for different customers.
Big international brands bring with them their reputation and “proven track record in the online industry.”
Taken together, these factors help maximize the market size and concomitant revenues to the treasury.
Freiberger argues that the extremely high license costs in Pennsylvania – a minimum of $10 million for the casino to get a license with an extra $1 million to offer online games – will act as a significant bar to some brands that will decide not to enter the market.
“This, we believe, will have an overall adverse effect on the rapid development of a Pennsylvania online market.”
Finally, Freiberger addresses the issue of cannibalization.
“Evidence from other regulated jurisdictions like New Jersey shows these concerns to be unwarranted and, in fact, that online offerings of both local and non-local brands have an overall positive impact on the total reported revenue of the land-based licensees.”
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The arguments Freiberger pitched line up against those offered by the Parx Casino, and they don’t completely debunk Parx’s position.
888 isn’t the first to write to the PGCB about the issue. iDEA Growth, a lobbying group in favor of online gambling also made the case for multiple skins.
In their letter to the PGCB, they made the telling point that:
“Lawmakers were aware of the issue of skins and, if they had intended to limit their use, the legislature could have done so easily. In fact, earlier drafts of the legislation did include specific limits on skins. The issue of skins also was addressed at hearings and in discussions with industry participants, including iDEA.
Therefore, the absence of a limit suggests lawmakers concluded that allowing multiple skins would be beneficial to Pennsylvania’s market. The legislature was aware of skins, considered a limit, and then consciously chose not to insert one. Regulations should follow that cue.”
So even though Freiberger’s letter may not have been a comprehensive rebuttal of Penn National and Parx, other interested parties support 888’s arguments.
The PGCB will now need to weigh carefully the opposing arguments and settle the issue once and for all. It could go either way.