On April 30, Ultimate Gaming made history with the launch of its Ultimate Poker online poker room in Nevada, becoming the first legal online gaming site in U.S. history. In
November, if all goes according to plan, Ultimate Gaming will launch Ultimate Casino in New Jersey as online gaming operator for Atlantic City’s Trump Taj Mahal, becoming one of the first online gaming sites to launch in that state.
For Tom Breitling, the chairman of Ultimate Gaming, the first-mover advantage in the first two U.S. online gaming states is just the start. He says his company plans to be involved globally in online gaming, and plans to become a leader in the field. Breitling refuses to get into the traditional squabbles about whether poker is a game of skill or a game of chance. He’d prefer to focus on the jobs, tax revenue and opportunities created, the same dynamic that spurred the growth of land-based gaming.
“Pioneers get all the unpaved roads and all the arrows,” Breitling says. “The question is, who’s going to settle in and become the leaders? I think we’ve put together an incredible team of people who are focused on creating a great customer experience. And if you do that, and you communicate with customers, and listen to them, it’s all about building long-lasting customer relationships. And that’s what will help us maintain our leadership position.”
Tobin Prior, the CEO of Ultimate Gaming, says, while his company is the first in the U.S. to operate, what his company is really pioneering is bringing together online gaming technology and the strictest of regulations.
“This industry has been up and running since the 1990s. We didn’t invent internet poker. What we did was embrace regulation, and build a platform that works to regulatory satisfaction and that also meets what the customers need. And so, we’re not naïve about any first-mover advantage. We know—from bitter experience, by the way—that it takes a lot to make the regulators happy; it takes a lot of money, a lot of time, a lot of engineering resources to make them happy. But I liken it to like a sort of crash test for automobiles. If you don’t pass that test, you can’t get your car on the road.”
Prior had been involved with Station Casinos founders Frank and Lorenzo Fertitta in the late 1990s when Station joined with Prior’s then-employer, Kerzner International. Prior built an online gaming site for the partnership that included state-of-the-art technology designed to pass regulatory scrutiny.
“We spent many months developing technology in terms of things that regulators are concerned about: age and location verification, and so on. I spent two years working on this stuff with the New Jersey regulators. And I actually have a letter on file from Mr. J.P. Suarez (former director of New Jersey’s Division of Gaming Enforcement), saying that our systems were compliant with New Jersey regulations, and we could go into the online space, provided that we applied those systems, and if we broke any of the rules, they’d slap us on the wrists. We were actually licensed in New Jersey at the time, and it was deemed to be a very rigorous licensing jurisdiction. We felt if we could comply with that, the rest of the U.S. regulators would be OK.”
But it wasn’t to be.
“In 2002, there was a very widely publicized letter from the Department of Justice saying that they believed that online gaming activity was illegal. It was illegal where the server existed and where the player existed, so any distinction about our server being in a legitimate jurisdiction and players being elsewhere was basically overruled. And we certainly couldn’t take play from our customers in America. So long story short, we got out of the business.
“In fact, all of us got out of the business—ourselves, Caesars, MGM, and everyone else at great expense. We sold our big server farms at cents on the dollar; all that pioneering work that we’d done was left for the industry to take up.
“So we sat and watched while those companies that didn’t close up shop took our customers from the sidelines. And we were a bit puzzled why there was no action for so long. And then Black Friday happened. That was kind of the turning point. That’s when the DOJ finally seemed to indicate they were going to do something about this. This was a very material business, and it really needed regulation.”
But by Black Friday, Breitling was already hard at work creating a company that would be in complete compliance with all regulatory oversight, as well as creating a proprietary platform that allowed Ultimate Gaming to move ahead without a technology partner for its system.
“We started to travel the world and look at platforms,” says Breitling. “But we could have saved ourselves millions of frequent flier miles, because right in our own backyard was Chris Derossi and the CyberArts team. And while CyberArts was based in California, Chris lived here in Las Vegas. When we started talking to Chris and his team, we realized first that it was a clean technology platform. Chris had only operated in legal jurisdictions. Secondly, we realized that he lives and breathes this; he understands the platform, he understands the scalability, understands what it is we wanted to do, and it turned out to be the perfect marriage. And so we’ve been building our team, here in Las Vegas as well as in California, for the last few years.”
Breitling says Ultimate’s goal was to become a business-to-consumer (B2C) company rather than a B2B (business-to-business) company.
“Interestingly enough, Chris had to change 10 years ago to become a B2B company,” says Breitling. “He wanted to be a B2C company. But he pivoted as a result of the legal rulings, and only operated in legal jurisdictions, which was important to us. That was an important part of it, because we would be able to convert to a B2C, and that’s what Chris really wanted to do in the first place. So we transitioned over the last few years, converting from a B2B, into a business-to-consumer business, and building up everything from the front end to the back end.”
Derossi says he understood that sticking to legal jurisdictions might cost him some money early on but would pay off in the long run.
“In 2003, when we had started with ambitions to bring our poker product as an operator—B2C—to the U.S., there was a turning point. I had a meeting in Las Vegas with some of the casino operators, who made it clear to me that if we were to ever do anything that was in the gray zone, we could forever be tainted and unable to ever do business with a brick-and-mortar licensee in Nevada, because they would not put their very valuable gaming license at risk doing business with a tainted company.
“And we knew someday we wanted to participate in this market; we knew it was coming. We just didn’t know how long. And so we decided that we were going to stay on the white side of the line and treat all the gray area as forbidden territory. And so that’s what we did. We spent 10 years longer than we expected, providing our technology to legal jurisdictions. And then, when the opportunity came along with this merger to go back to a B2C, in a legal way, in the United States, it felt like we were finally getting the chance to do what we were born to do.”
Four months into the legalization of online gaming in Nevada, Ultimate Poker remains the only site up and running in the state, as of mid-September. (Caesars Entertainment’s WSOP.com went live in Nevada on September 19.) Breitling says the company has learned a lot during those months, but it all came down to one thing.
“The bottom line is that the technology is working,” he says. “And that there was lots of pent-up demand. We’ve dealt nearly 14 million hands of poker. We’ve delivered 700,000 pages of reports to the Nevada regulators. We are defining this area where innovation meets regulation, and it really is about working hand-in-hand with regulators to prove that the technology works.
“It’s a process and it’s a journey. We just released our second version that had over 60 new features and enhancements to it, including our loyalty program. So this is a process where you are listening to customers, constantly working to enhance and enrich the customer experience, and that’s the culture we have. We’re entrepreneurs, and we love building businesses, but this is a new environment.”
Breitling says he’s not surprised that Ultimate Poker has no competition thus far.
“I would say that there is reason why there’s only one,” he explains. “And that’s because it’s hard. And it’s a testament to Tobin, and Chris, and the entire team that’s now over 100 people, by the way. So when we talk about employing people, and bringing taxes back to America, and protecting players, everything’s happening the way we outlined it in the beginning. But it’s hard. And there’s some challenges that these guys and that our team encountered, from day one. But we met every challenge and addressed them and worked with regulators, and the customers are enjoying the games.
“We’re now giving out around three-quarters of a million dollars every week in tournament prize money. So Nevada is just the tip of the iceberg, but it has been a learning experience, and I think you have to embark on that journey with that mindset. That this is a journey that you are going on, where you have to look out for the consumers. You have to put in place a new set of standards. We’ve done all that, and it’s just the beginning.”
Prior says the compliance issues make it difficult.
“It’s not just a matter of taking a legacy product and putting it into a regulated environment,” he says. “You’re dependent on second and third parties and other parties down the line, to make everything come together. Regulators want to make sure that they protect the customers in many, many regards, whether it’s their data, their money, or whether it’s proving that they are within the four walls of any state.
“They want that to be really, really robust technology. So we took the best-of-breed third-party technology, integrated that with our platform, and proved it out. And proving these things out is always going to come with some glitches. It’s going to be slightly less convenient for a lot of players than systems that they have been used to, or systems that still don’t have any regulatory controls built in, because that’s the nature of what we’re dealing with. And that’s where this whole concept of regulation meeting innovation, or meeting the practical world, happens.”
Nevada and Delaware (the second state to legalize online gaming) have small populations that many doubt can support online gaming. Breitling wouldn’t dispute that, but says Nevada is a launching pad for his company.
“Let’s take a step back,” he explains. “When we decided to get into this business, it was with the intent of creating a global business. And in true entrepreneurial fashion, the decisions we made indicate that. And so when you look at the series of Ultimate brands—Ultimate Poker, Ultimate Casino, Ultimate Gaming, the technology platform—it’s not our position to determine what games a jurisdiction decides to offer and regulate, but whatever they want, we’re going to provide those games at the highest level of integrity that satisfies customers.
“So when we say that Nevada is the tip of the iceberg, it truly is. We’ve proved a lot here. It’s a state that only has 2.7 million people, and we think it’s in the range of just north of 100,000 online poker players that are potential customers. And when you talk about 50 million poker players that are living in this country, you’re talking about a small fraction of that number.
“But it’s very important, and it’s important for a number of reasons. One, everyday revenue is going into these state coffers that has not been going into these coffers. Two, players are actually logging on and being protected and enjoying these games, and we’re proving we have the technology. And then three, our platform is satisfying the Nevada regulators.
“But this business will only succeed if there is a multiple-market strategy, which is why we hope to be among the first in New Jersey. We’ve made a lot of customers happy in Nevada, but the competition is coming. And I think the competition is actually good. It forces you to innovate your product, and it will grow the market. You’re going to have players coming and going. But we know that it’s just the beginning.”
Ultimate Gaming has reached an agreement with Trump Taj Mahal in Atlantic City to be the online gaming operator for its casino license. The casino will not be branded as Trump or Taj Mahal, but as Ultimate Casino. Breitling is happy with the partnership.
“The Taj Mahal has been a hub for poker on the East Coast over the last 15 or 20 years. It’s got a great history. And then you look at our other sister company, the Ultimate Fighting Championship, the first fight that the UFC had after Frank and Lorenzo (Fertitta) bought the company, was UFC 30, Battle on the Boardwalk, at the Taj Mahal.”
Prior says the Ultimate Gaming brands will be used, along with some third-party content that will include popular slot games and proprietary table games.
“We will be offering the Ultimate brands, so we’ll be having Ultimate Casino and Ultimate Poker,” he explains. “We are at an advanced stage of getting ready for the November date that the regulators have set for gaming to commence in New Jersey. We’re working hard on a daily basis with the Division of Gaming Enforcement and with our partners, to make sure that we’re in as good a state of readiness as possible. Regulations are still unfolding, so some of what we will have to comply with is not yet clarified, although the bulk of it is, and we are already compliant with another pretty comparable regulatory environment.”
Payment processing has been an issue in Nevada, but one that has been alleviated by having more than a dozen Station Casinos in the Las Vegas area where the majority of Ultimate Poker’s customers are located. Players can also do wire transfers from their bank accounts. But credit-card companies are reluctant to approve transfers to and from customers’ accounts because of the uncertainty surrounding the 2006 Unlawful Internet Gaming Enforcement Act, which prohibits financial transactions for gambling purposes. At this time, one major credit card company is working with Ultimate Gaming and is considering any outgoing transaction a cash advance with a very high interest rate.
Prior says he isn’t concerned about New Jersey because there are still seven or eight ways to transfer funds in and out of the Ultimate Gaming site.
“We have cooperation from our payments processing partners and the companies that they work with,” he explains. “There are still credit card companies that we need to convince on an individual basis to participate in the regulated gaming industry, as well as the issuing banks. That’s not completed yet.”
Breitling believes the company’s experience in Nevada and New Jersey will be a gateway to other states. And that will be accomplished by establishing the Ultimate brands.
“It comes down to choice,” he says, “and so we’re fortunate that we’ve built this dynamic environment with the technology that Chris has developed, which is very flexible. We’ll approach it jurisdiction-by-jurisdiction and game-by-game. And that will build the brand. But we understand defining a brand is a huge task.”
Constantly referring to the “experience,” Breitling says the company is laser-focused on today’s customers and how they perceive that experience.
“We want to over-deliver on that experience,” he says. “And what you’re talking about is a change in the way people think. This is truly about an integrated online gaming experience. People want this. Remember, we weren’t carrying iPads or smart phones around as little as 15 years ago. And now people want to do everything on these devices. They want to shop on Amazon at 2 or 3 in the morning, and buy a shirt or a book. And they want to play games online. So we want the Ultimate series of brands to stand for great entertainment. We want it to appeal to a broad audience, whether it’s in Nevada with only poker or New Jersey, where it will be a full suite of casino games. We want our brand to be fresh and exciting. Customers want to be able to go on their devices and get bursts of entertainment, play games that they know and like. And for us, a big part of that foundation is about trust. So at the core of it, the Ultimate Gaming and the Ultimate series of brands will be about real-money online gaming, and a brand that you can trust.”
But again, says Prior, it all comes back to the experience.
“We focus not only on the brand itself and on the product, but on the experience,” he says. “So a lot of what we focus on is the user experience, and the customer service aspect of that user experience. We’ve gone to great lengths to get the best people into this business, who really understand the consumer, who really understand what they need. We’ve been through that learning curve, and we really do place a lot of emphasis on the customer experience and our customer service side of the business.”
Interstate agreements are an important measure of the success of state-by-state legal online gaming. Breitling says there is certainly a synergy between Nevada and New Jersey that he hopes will come to an agreement on interstate play for poker, but that other states are watching.
“We’ve been surprised with the amount of attention we received from states across this entire country,” he says, “because many of them need revenue, and want to protect their players. We’ve talked to more than 10 states that are very interested in this activity. Let’s look at the UFC example. The UFC started in one state, New Jersey, when the Fertitta brothers bought the company. They’re now approved in 49 states in this country, and over 100 countries in the world. If we follow that same roadmap—and that’s been a little over a decade—if we’re sitting here in a decade, and we’re sitting in 49 states, and over 100 countries in the world, offering our online gaming products with the Ultimate series of brands that resonate with customers, I think we’ll have a pretty dynamic and lively business, and this will be a pretty dynamic and lively industry.”