With Delaware only days away from launching the first legal real-money online casino games in the United States, Ed Sutor – CEO of Dover Downs – is undeniably part of the vanguard for regulated American iGaming.
Marco Valerio recently interviewed Sutor, a conversation that spanned how Delaware will approach compacts, the unique structure of regulated gambling in Delaware and how online gambling will impact land-based revenues.
Marco Valerio: I wanted to begin with just your own personal entry, and professional as well, into the iGaming space: you and your companies. When did it begin?
Ed Sutor: It all started with the Department of Justice letter interpreting the Wire Act that it only pertained to sports betting. That set the whole industry going.
Our state is so small and nimble, and our governor has shown a propensity to allow for additional forms of gaming under the direction of the lottery. He’s the one that brought in sports betting. He’s the one that brought in table games. He brought in keno. These were games that, at one time before our governor came on board, it was only slots, but he’s allowed all these other forms of gaming to be run by the lottery.
We’re an agent of the lottery. Technically they’re the regulator and the operator, but they push the operational decisions and the responsibility for building and staffing these places back to their agents. There are three agents and three tracks in the state of Delaware.
Valerio: Could you tell me a bit about Dover Downs’ role in all of this? Delaware does seem to have a unique gaming identity. How does it work?
Sutor: As soon as that Department of Justice decree came out, there were a bunch of iGaming conferences, especially in the state of Nevada. We attended those conferences along with our lottery officials because it was brand new to both of us. We’re so used to working with our lottery officials that we did it hand in hand. We went down this road and educated each other.
In June 2012 our state passed a law authorizing Internet gaming. By that time up until this week, it was pretty fast for our regulators to get the ball rolling. Well, we would be the first one to have full-blown casino gaming on the Internet.
As you know, Nevada only has poker. Atlantic City has everything, but they’re a month or so behind us. So it was important for our state to be the first.
You know what that led to? We got more response from around the world than we otherwise would have. Because we’re such a small state, we didn’t get a lot of attention, not like New Jersey. So the way we did get attention is anybody who wants to be the first to operate in the United States full gaming respond to our RFP. We’re very satisfied with the number of responses. After a long evaluation process they selected 888/Sci Games as the platform.
Valerio: Were you involved in that selection?
Sutor: Yeah. We weren’t a voting member, but we attended every single one of the presentations. That went on for weeks and weeks. Then we had an opportunity to present our thoughts to a five member voting panel made up primarily of regulators and representatives of the IT department of the state, the attorney general’s office, things like that, and the lottery officials, of course.
They had the final say, but we were with them every step of the way, and they listened to what our concerns were and what our suggestions were. All things considered, it went pretty well.
Valerio: Great. So tell us – I think you said Thursday is when this is going live?
Sutor: Yes. We’re still in testing right now. A lot of things going on this week. Still, I have not heard any deviation – it’s not our call, it’ll be the state’s call, but again, they’re listening to us. The state has not retracted from the date of October 31st, but if there are any things that pop up, it’s totally the decision of the secretary of finance.
Valerio: So the 888 platform and the Scientific Inc. platforms go live in a few days, supposedly. Where is Dover Downs in all of this? Where is the branding? Where is the benefit to Dover Downs? Could you tell me a bit about that?
Sutor: What we hope to do, as I mentioned during the conference, is to not neglect our big investment we currently have in the bricks and mortar here. We spent over $300 million on this facility. I’m not going to drive all my customers to the Internet so that they don’t visit our place. That’s not – but I don’t think that will happen anyway.
What we’re going to do is use it a a player acquisition tool because most of the people who are going to be playing on the Internet tend to be younger, from 28 to 35. Hopefully, there we can reach new people who have never been here before. Then, as I mentioned in the conference again, when they play, just like they play here and they put their card in the machine they get points. They can redeem points for food, for beverage, for concerts, for hotel.
We aim to treat those people the same way on the Internet. If somebody was playing on the Internet and gains points, at certain levels they’re going to get a voucher or an offer to bring that voucher back to the bricks and mortar to redeem it, once again, for food, for fine dining, for concerts, for hotel rooms.
So we think we are in the best position of the three casinos because we have more invested in our property and we have more amenities to offer our customers. We look at it as a player acquisition tool. Hopefully, there’s more people coming from the Internet to the bricks and mortar, rather than the other way around. Most consultants have told us that’s the truth. That’s the way we should expect, that these people who are playing will be moved to the gaming area and not likely to be customers of us.
Valerio: It’s interesting because you said that during the conference, and I pointed out how much it impressed me that that online gaming was going to be for you guys a way to bring new people to the brick and mortar. You must be aware that that attitude has been usually uncommon amongst casino operators. What do you make of that? Do you think – what kind of precedent – do you think it’s going to set a precedent or set some examples?
Sutor: To tell you the truth, I think that any casino, if you ask them point-blank about the Internet, they’re afraid. Their first thing is they’re afraid that it will cannibalize their existing business. We were afraid of that, too. To join this to your year-long process, over and over again we asked the people from Europe and people from Canada, “How much did this impact your existing casino?” And they said, “Very, very little. Most of it is new customers.”
Believe it or not, we actually had a free-to-play site ten years ago where you could come on to doverdowns.com and you could get in and start playing games. We could offer you incentives to visit the casino. That was a wonderful player acquisition, so this wasn’t anything new to us.
We did it before and now we’re going to do it again because, as I said, we have too much invested here. I’ve got 1500 employees, I’ve got a $300 million investment. It doesn’t do me any good to drive all that business to the Internet and have those people not visit us. That would not be good.
Based upon what we’ve been told by experts in the industry, we should look for a whole new market, a younger demo that hasn’t been coming to the casinos who you’ll be able to make offers to. We’re such a small state, anybody can get here from anywhere in our state in about an hour. It’s that small from either south, north, or west. Can’t go east because that’s the ocean. [Laughter]
Valerio: Speaking of participation from people in other states – I mean, we did talk about compacts and liquidity agreements during the conference. What’s your opinion on that?
Sutor: We don’t need compacts for table games and slots. Slots – it’s a one-on-one thing. You don’t need ten people. Even if it’s one person, they can play.
When you get to the game of poker, there you have tables and you need people at tables and to be able to offer all the types of games there are: Omaha, Texas Hold’em, Seven Stud, all those things — in denominations of penny games and five-cent games and $1 and $10 and $100 – there’s so many – and 24/7, you need a lot of people.
Delaware doesn’t have that. We think we’re going to start out real slow with poker. We’re not looking at that to drive a lot of revenues until we can hook up with another state.
Nevada is having that difficulty right now. They don’t even have 2.7 million people. They only have two poker products that are out there right now. I would say that their activity is rather modest. They need additional people as well. If they can do a compact with New Jersey, that will be great for Nevada and it will be great for us; and it would be very helpful for New Jersey. The one that everyone wants to hook up with is California.
Sutor: They have 37 million people. They don’t even have to hook up with anybody else, but I’ve heard two different stories. One Indian tribe out there wanted to prohibit anybody from compacting with another state, but some of the more reasonable tribes said, “No, that doesn’t make sense.
We would encourage the state of California to do a compact.” But they don’t even have a law yet, so it’s premature to be talking whether they will or they won’t do a compact. I know that Nevada and Delaware state officials have talked already about doing a compact.
Hopefully New Jersey will be willing to do a compact because in the end, it’s going to help them as well. The more people you can get onto the games, the better.