SS: We are speaking with Mitch Garber, a longtime veteran in the gaming industry and an attorney. Mitch, I think maybe the best place to start is for you to give just a brief recap of your background in the industry.
MG: Sure. I am a Montreal‐born, Canadian‐educated lawyer. I went to McGill University and got an undergraduate degree, and then did my law degree at the University of Ottawa, and I graduated in 1989. I sort of fell into representing casinos in Nevada and New Jersey as a gaming attorney around 1992, 1993.
I was representing a real estate transaction taking place in Austin, Texas, where the investor group was a group of Montrealers, and by chance, I met the Pratt Hotel Corporation, who at the time owned the Sands Hotel and Casino in Atlantic City and the one in Puerto Rico.
One thing led to another, and I joined IAGA [International Association of Gaming Attorneys] in around 1993, I believe, and started to become part of the gaming law community. I represented IGT (International Game Technology). I represented Anchor Gaming in negotiating contracts to bid and supply slot machines to casinos in Canada to start with. I represented the consortium that built the casino in Windsor, Ontario.
I started to get more deeply involved in gaming and, very early on, I got involved in online gaming. I was asked to help an Austrian‐licensed sportsbook operator get licensed in Antigua—something I knew very little about, but I tried to learn about quickly—and helped them do that.
In 1997, I introduced that same sportsbook operator to two friends of mine who were the founders of a large Internet service provider because I thought they might know how to process credit card transactions on the Internet. And I guess they did not know much about it, either, and they found their way and started a credit card processing business, which today, 18 years later, through many mergers and acquisitions and ups and downs—but mostly ups—is a $2.5 billion‐or‐so‐dollar company called Paysafe.
In 1999, I left my law practice to join them because the business had become part of and then spun out of Bell Canada, and it became Surefire Commerce. Over time, through some mergers and acquisitions, Surefire Commerce became Optimal Payments, and I became the CEO.
In 2006, I was recruited by a headhunting firm and an investment banking firm as a candidate to become the CEO of Party Gaming, which at the time was the largest online gaming company in the world, based in the UK and Gibraltar, and it was about a $10 billion public company. I was not there for the IPO [initial public offering].
I joined Party Gaming in April 2006. And then, as most people who read this will know, in September of 2006, UIGEA [Unlawful Internet Gambling Enforcement Act] got passed, and we were the first major company to make the public decision to turn off the U.S. portion of the business, which cost the company about 80% of its market cap at the time. We rebuilt the company from that point, also through mergers and acquisitions, which is a theme in my career.
I left Party Gaming towards the end of 2008, and I started Caesars Interactive Entertainment with the majority shareholders of Caesars, Apollo, and TPG. And I did that based out of Canada. We own the World Series of Poker, and we had high hopes for a legal poker bill in the United States, which did not materialize.
After a couple of years of realizing it was not materializing, we were very opportunistic in seeing that social games were starting on Facebook. I had a history of doing transactions in Israel and speaking Hebrew, found a company in Israel, and we got into social games by virtue of an acquisition of a company in Israel called Playtika, for about $100 million, and the rest is sort of history. As you may know, we just sold that company in 2016 for $4.4 billion to a Chinese consortium. And here I am.
SS: That was a pretty amazing sale. So, let me ask you this, because you basically have, what, 25 years in the industry? What do you think is the most critical change or changes that you have seen take place during that time?
MG: Two major changes come to mind. One is the economic crisis of 2008 and 2009. It is a financial or economic reality that remains very impactful in Las Vegas even now, eight or nine years later.
I think the second is related to how fast technology has grown to be part of the lives of almost everybody, not only in North America, but everywhere. When I joined Caesars in 2008, the revenue mix on the Las Vegas Strip was approximately 65% gaming and 35% non‐gaming. And now, nine years later, the mix is moving towards approximately 65% non‐gaming and 35% gaming. If you think about it, over a very short period of time, there has been a complete flip in the spend in Las Vegas from gaming to non‐gaming.
And then, of course, the non‐gaming revenue becoming dominated by nightclubs, day clubs, signature chef‐run restaurants, more retail, more live entertainment. Those are the two biggest changes that I have seen, the economic downturn and the complete flip in revenue mix in Las Vegas.
SS: Well, I think it illustrates that gaming really is an entertainment industry, as you talk about the other ancillary services that are now more dominant. So, it has been interesting to watch that.
The technology changes you talk about have been particularly important in terms of the I‐gaming side of the industry, and it has been probably one of the biggest challenges for regulators, because regulators have a hard time keeping up with innovations, products, processes, and things like that. The challenge has been for regulators to come up with a framework and still have enough flexibility to accommodate those changes. So, if you were talking with regulators or policymakers about how to craft laws that accommodate those changes, what advice would you have for them?
MG: I might answer the question a little differently than you anticipated but my experience with the regulators—and I am going to focus on Nevada and New Jersey—has been a great openness to all new ideas, including I‐gaming technology.
The way I would answer is that the land‐based gaming companies—and I would actually say, quite honestly, except for Caesars—and I think that the history and the facts will show that I am not saying that because I have been with Caesars—but except for Caesars, there has been no major movement by Wynn or by Sheldon Adelson. There has been some by MGM, and I would say MGM is the next mover after Caesars.
But the industry—meaning the land‐based licensed industry that is governed by these regulators you are talking about—they have not actually gone to the regulators in an aggressive, meaningful, and sophisticated way to move legislation for new I‐gaming products.
So, yes, we do have limited Internet gaming in Nevada and limited Internet gaming in New Jersey without a broader [regulatory] framework, I think, across the entire United States and without a significant lobby from the land‐based real revenue generators where those regulators are focused. I think if you went to the regulators and said, “Hey, guys, I think you need to be much more open to what is happening in the world today, where everybody has got a phone that has extremely fast WiFi, everyone is playing games or streaming content or watching movies in real time, or watching live events on their phone, and this is the new engagement,” I think the regulators would say, “We agree with you. So, where are all your proposals, and where is this large lobby?”
And that has been problematic. But that has kind of been my experience.
SS: I would agree with you 100%. That has been a problem all along. Is there a way to fix it?
MG: I think that the facts will show this, and I do not want it to come off as being opinionated. I think that there has been a lack of youthful senior leadership in the land‐based gaming industry on the interactive side. So, again, other than Caesars, has there been a major interactive division with a significant budget and significant support of the company to go and pursue opportunities in interactive games and interactive gaming?
Sitting around the boardroom tables of a lot of these companies, I think there is a distinct lack of interactive experts who have influence in the company. So, the first big change that I would think is needed is a larger, more qualified voice in this area of not only gaming, but all forms of revenue generation.
Are the land‐based casinos optimizing all forms of e‐commerce that they could be? Are they doing as many direct room bookings as they could? Are they selling as many tickets to shows online? Are they selling as many ancillary services with their reservations online? Are they engaging their customers online for the 360 days of the year that the customer is not in Las Vegas or New Jersey or wherever? I think the answer is no. I think there is a lot of room for growth there. So, leadership in the interactive side of the business, I think, would be for me the number one.
SS: I think one of the other issues that has created some blocks is that there are some very large and vocal operators with deep pockets out there who really are absolutely against it. You mentioned Adelson, and Wynn at times has been against it, sometimes he is for it. So how do you see getting past that block? Because when it comes to, for example, the trade associations that are out there, like American Gaming Association, they are kind of stuck in the middle. How do you get past that block, that split that is out there? Do we just wait it out?
MG: I think the lobby for online gaming has not been as strong or as influential as the lobby against it. A debate on Internet poker was organized between myself and Andy Abboud [representative from the Sands], and I think there is not a single person that watched that debate that would tell you that I did not win in every aspect in terms of disproving the allegations of the Sands group as to why they are against Internet poker.
They can be against Internet poker. I mean, that is fine. But to invoke terrorism and money laundering and all these things that are absolutely false, they have been able to, with their clout, on a state and even federal level, have more influence than those who have been lobbying in favor of a federal bill or more widespread legalization of Internet gaming.
SS: Well, again, that has been a longstanding problem, and I hope we can find a way to break that impasse. But I guess if some people have the resources—
MG: As an aside, simply as an individual—not speaking for Caesars or anybody else—as a Canadian who probably has no right to even have an opinion about this, I am very much against the whole idea of super‐PAC [political action committee] money in politics. I think it is absolutely terrible policy. You should not be able to buy influence in politics, especially in great democracies—and America is a great democracy. So, I think that is also part of the problem, in my personal and very humble Canadian view.
SS: That is a huge issue in the US. Let me ask you to move into a little bit different viewpoint on this. Many operators like Caesars go across multiple jurisdictions, and you have licensing and compliance requirements placed on you that take a lot of time and a lot of money.
Do you have any thoughts for the regulators on how to streamline that? Is there a way to do that so it is less burdensome, less costly, and less time‐consuming than what the current situation is?
MG: I think on the one hand, it is a very high barrier to entry into the gaming industry, which, from a selfish, for‐profit point of view, is a good thing when you are among the most licensed companies in the world. It is difficult to obtain and maintain a license that is a barrier to entry and competition in your business, which is not necessarily a terrible thing.
Now, having said that, I think that all casino executives, without exception, would agree that they cannot wrap their arms around how there is not a central fingerprint database, a central criminal history database, a central database for all of our bank records, the fact that we have to reproduce all of these things for each individual state, and sometimes more than once a year. We do not understand it, especially with today's technology. So, to have to get 14 sets of the same fingerprints and get your police records for 14 different jurisdictions, and your bank records—the same exact bank records 14 different times—of course, this is the number one way to streamline the regulatory process.
SS: That is a very concrete suggestion, so hopefully somebody will take that to heart. I know in talking with regulators that they come back to issues around security of the information, but I would hope we would be past that at this point. We will see what happens with that.
If you look back over the legal and regulatory issues, what do you think has created the most stumbling blocks to the growth of the [I‐gaming] industry?
MG: The lack of solidarity among the land‐based licensees. I cannot think of any other reasons. I mean, obviously, if Sheldon Adelson and Steve Wynn and Caesars and MGM were to have a common front about this issue, you would probably have a federal poker bill, and you would probably have a very well‐defined, secure set of rules for most of the states in the United States. I cannot imagine otherwise.
SS: You bring up the issue of state versus federal. The same thing goes in Europe, where it is country by country as opposed to EU. How do you see the most optimal set of circumstances? If you had your way, and you could actually effect what would be an ideal system, would it be state or federal?
MG: I think for the business of poker—and again, there have been court decisions that poker is a game of chance, which a large group of incredibly knowledgeable people do not agree with, myself among them—a federal poker bill makes the most sense for the industry, given the social nature of the game. The game is played by judges, politicians, regular citizens, CEOs, and teachers. In my view, it is a game of skill and it requires liquidity to be played at its most efficient. So, a federal poker bill would have been best.
On those games that do not require liquidity and which are games of chance, I guess I am indifferent. From an operating point of view, it is extremely expensive if you have to have a set of servers in 50 different states and a customer service center in each of the 50 states. So, if each state were to legalize online games and have its own set of regulations, which insisted upon having operations in the states, the business would not make economic sense, and could actually work against the proliferation of online gaming rather than work towards the expansion of online gaming.
SS: But yet, those are the selling points, I presume, to state legislators—jobs, things like that. So, that is where it gets to be a balancing act in that regard.
MG: You are right. Employment and taxes are the main selling points, no question. There has to be a middle ground somewhere, because there are not any businesses that have a full operation in every single state, starting from the beginning to the end—a set of servers, a team of customer service agents, a sales group, an executive group, compliance group, in each state. I do not think it exists, and so it would be hard for it to exist in this area, as well.
SS: So, your point on state versus federal is that it matters less on the regular casino games, but with poker, because of liquidity, that is more suited to federal?
MG: And the nature of the game.
SS: Let us talk a little bit about these new products that are coming out now, esports, daily fantasy sports, and then leading from that into sports betting in the U.S., could you just give us your thoughts on any of those more recent innovations and how they fit in?
MG: I think there is a big question mark around a lot of it. Certainly, fantasy sports are a huge activity, and, I believe, a big business. Daily fantasy, as it has been presented, versus season‐long fantasy, as it is played, I have to leave that to the regulators. There is no doubt that millions of Americans enjoy playing fantasy sports, and probably would like more fantasy opportunities than fewer fantasy opportunities.
Esports, again, there seems to be a business in esports. I am not sure yet about where the economics in esports lie outside of the owners of the IP [intellectual property] of the games but again, another growth business. Both are tied to a digital interactive platform that did not exist 20 years ago. So, there is clearly growth in both areas.
SS: I think we are now seeing another opportunity for the land‐based operators in the facilities that they are beginning to build for esports. Some of them are going to be very big to draw in that particular demographic to watch tournaments.
MG: I agree with you and that makes a lot of sense. Caesars built a Wheel, MGM built the T‐Mobile Center, and the Raiders are coming to town. There are a lot of non‐gambling facilities being built to drive traffic to the Las Vegas Strip. And traffic numbers are at an all‐time high, basically. So, clearly, it is working.
And esports is another traffic driver. The profile of the traffic that will be driven into Las Vegas through esports remains to be seen. Where will they spend their money? How much will they spend? How many of them will there be? But yes, absolutely, it falls into my first answer, which is this new flip‐side, 65/35 non‐gaming/gaming.
SS: So what about sports betting? Do you have thoughts on that?
MG: I cannot speak to sports betting outside of Nevada and where movement in legislation stands there. What I can speak to is the next generation of person—never mind of the gambler—who wants to be able to do almost every transaction on their phone and wants to be able to do real‐time, in‐game live wagering.
The current format, where some of the Las Vegas sportsbooks still work with a gentleman or a woman wearing a visor and using a pencil and a piece of paper, is not going to make it through the next decade.
So, I am a big proponent of more secure technology with lots of options, and again, the more Nevada is able to enable that outcome, and the more securely and regulated it is, then the more influence that experience could have on future states.
SS: I've heard proposals that would make Nevada the regulatory hub for sports betting and allow other states to compact with them for that regulation. Would something like that make sense from an operator's viewpoint?
MG: I have not given it enough thought. Nevada is, by far, the expert on sports betting in the country. No other state has legalized sports betting to the extent that Nevada has, so it almost makes sense that Nevada has to be the leader in everything to do with sports betting. If other states would look to Nevada to collaborate with them, learn from them, work with them, it makes the most sense.
SS: And the sports betting issue, at least in the US, is one that is clearly getting some lobbying efforts and resources put behind it through the American Gaming Association. Do you see that moving forward? It appears to me, from the standpoint of them beginning to work with any group from law enforcement to the leagues, there is some progress being chipped away here. Do you have any thoughts on that?
MG: My thoughts are along the lines that land‐based gaming companies are more aggressively in need of alternative sources of revenue and more aggressively in need of meeting the technology demands of consumers. And again, that requires unity among the land‐based operators who want to move something in the same direction.
We've been used to a 60‐year‐old woman sitting in front of slot machines for four hours and pulling the one‐armed bandit. In 10–15 years from now, what are the numbers for that activity going to look like? I think they are going to look dismal. This is not what the future generation of men or women wants to be doing.
And so, unless we, as a group, can cater to what the next generation of men and women want to be doing, it is going to be very, very difficult to grow revenue and profit in these businesses.
SS: Let me ask you a couple of unrelated questions. You mentioned earlier about mergers and acquisitions, and consolidation continues to be a big story in the industry overall. So, I am curious to get your perspective, because obviously you have been involved in a lot activity in that regard, and you are an operator. There is a lot of consolidation that has occurred on the supplier side, too. How do you see things sorting out over the next few years? Will there be continued consolidation?
MG: On the land‐based side, it is very hard to tell, because you have only a handful of very strong companies. You know, you have Caesars, MGM, Wynn, Las Vegas Sands, and I might have missed one, but really, that is only a handful of really strong global gaming companies. Aside from Sands, almost all of them have gotten to where they are today through mergers and acquisitions. So, I do not know how much more room there is in that regard.
On the online side, there has not been as much consolidation as there probably could be, because not as many land‐based companies have bought online gaming companies. If you will recall, at one point there was a rumor that Wynn was buying Gamesys, or at another point someone was buying PokerStars. And those consolidation efforts never materialized.
I would see I‐gaming growth through acquisition if the land‐based casino operators find their way from a regulatory point of view and from a business plan point of view to want to buy some of the existing experienced businesses.
SS: That is a good point. I had not really thought about the fact that there has not been that much crossover in that regard. For a while, people were hypothesizing that online companies would go buy a land‐based company. That has not really happened, either.
Another unrelated question, but one of the things that has been interesting to watch over the course of the I‐gaming evolution is looking at regulated markets versus unregulated markets. And that has always changed from day to day in some cases.
So, I think companies—you mentioned Party Poker, when the UIGEA was passed—made a decision to cut off U.S. play. How do companies go about making those sorts of decisions, and what are the implications for their decisions down the road? You are uniquely positioned to answer questions like that.
MG: I think it goes back to one of your initial questions about the regulatory environment in the United States. Given that land‐based gaming is among the most regulated industries in America—and rightfully so, and I am happy that it is—the operators have been especially prudent about erring on the side of caution. And it seems that the land‐based operators, by and large, have not gotten sufficient comfort about the clarity of the legal position of some of the online gaming companies, which they apply to the EU. In the case of taking bets from Canada, they applied their interpretation of Canadian law, or the lack of Canadian law.
It appears to me there has not been enough absolute clarity in the minds of the legal and regulatory departments of the land‐based gaming companies to pursue these acquisitions and then maintain the business in all of the countries with full confidence that they have the legal rights in each of the countries to be doing exactly the activity that the company is doing.
SS: And that is often a moving target, is it not? If you have another jurisdiction that opens up and does legalize, it is an opportunity. But sometimes they can have—I think with PokerStars coming in in New Jersey, for example, there were legacy issues that they had to resolve. So, it gets complicated pretty quickly.
MG: But I also think that the land‐based gaming companies are so big that, absent a federal poker bill, the appetite to go out and do these deals is understandably low. And if there would have been a federal poker bill, or even a California poker bill, I think you would have seen, or will see, tremendous activity.
SS: Any predictions on whether California will ever get a poker bill?
MG: Ever?
SS: Well, they seem to be in a perpetual impasse after 10 years or more.
MG: Let's put it this way. I spoke at IAGA, I think, in ’99 or 2000, I do not remember exactly, and it is 17 years later, so I have been absolutely wrong. I have spoken many times since then, and many times I remember—I do not remember the dates, but I remember saying five years from now, ten years from now. You know, I have clearly been wrong.
And so am I going to find myself 10 years from now and say, “Okay, well, it is like 27 years since 2000, and I am still talking to Sue Schneider about the same thing?” I do not know.
SS: Do you have any thoughts on the impasse and how to characterize it? What is the hang‐up there?
MG: A common front, a common goal, and a common group. That is the impasse. It is not a regulatory impasse. I mean, certainly, [with the] federal poker bill, that is a regulatory impasse. But could we have had [a] federal poker [bill] if all of the land‐based operators were in unison that it was a good thing, that it was the future, that it could be regulated, and it was not a danger? If Sheldon Adelson was onside, and Steve Wynn was onside, and all the CEOs were able to make their representations together as one group, would we have a federal poker bill today? Yes. We would have had it through the Obama administration. I have no doubt.
SS: Okay, I have one last question for you, and this is looking basically five to ten years down the road, as you just said. What do you see happening with the industry? How do you think it will be changed in that period of time? Or not?
MG: Well, let us look at the last eight to nine years. We see the revenue mix—I have mentioned it three times during the interview. So, in 10 years from now, I have to imagine that a significant part of the revenue mix has to be digital. I just do not see that there is not online sports betting, at least in Nevada, that takes place, for the most part, the way it is done today.
I find it hard to see a situation where there are not more large states that legalize poker. I do not know what Donald Trump's position on online gaming is at all, but I do know the Republican Party's position [on online gaming], so I do not see the federal poker bill being raised again during Trump's administration. But I do see in 10 years from now much more revenue from Internet gaming, with many more states offering many more options. I do see that.
SS: And do you see a role with state lotteries with this sort of thing? Some of that is beginning now, but do you see that growing on the state lottery side of things, too?
MG: I think there is no doubt that state lotteries play a really important role in this. They have a revenue stream to protect. They are very advanced in their ability to offer games, and even offer games with some digital components to their constituents. So, I do think that there could be a role there.
SS: And they certainly have an audience, so they have got all the components there. Is there anything that we have not discussed that you would like to bring up or add?
MG: I cannot think of much more to add.
SS: Okay, great. I really appreciate your time and your thoughts.
