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Skill games become on-line winners

Adeo Ressi, chief of Game Trust, a company that conducts tournaments for Web clients, is pictured in his New York office last Friday. The screen shows ``Chain Reactor Duel,'' a popular game. PHOTO: NYT

For US companies locked out of the lucrative global industry in Internet gambling, there is still money to be made -- as long as they don't call it gambling.

So-called games of skill like Spades, 8-ball, and Solitaire are attracting more players online than ever, thanks partly to the growing pool of prize money available to winners and the tightening noose of US federal regulation around online games of chance. Although revenues are small compared to those reaped by pure gambling sites, some in the industry believe that could change.

"This will continue to be a larger part of the online gambling market, although since there's skill involved you can't really call it gambling," said Sebastian Sinclair, president of Christiansen Capital Advisors, a gambling industry consultancy.

"These games are better suited to the medium than casino games, because they're more entertaining, and money is secondary," he said.

Secondary to some, perhaps, but for others, the money is everything.

"We refer to this as competitive entertainment," said Stephen Killeen, chief executive of World-Winner, which runs a game site that charges tournament players and head-to-head challengers about US$1.50 for every game they play, while awarding winners roughly US$3.20.

"The idea behind this is `loser buys drinks,"' he said.

"And because these are games of skill, as opposed to games of chance, there's an added dimension of, `OK, I have to concentrate on this,"' Killeen added. "It's not, `What's this random roll going to show me?"'

The generally accepted standard for legal gaming is that it must involve a contest where skill is the predominant factor in winning or losing; if a game is too easy or too hard for the participants, skill is less a factor in the outcome than luck.

Killeen's site offers about 30 games, and provides game services to Yahoo, Lycos and Entertainments Arts' Pogo.com. He compares his company's role to that of the US Tennis Association, which organizes the US Open tournament.

"We provide the setting, award the prizes and create the draws," he said. "We take a management fee and award the prize to the winners. The difference is, we do it for millions of people."

WorldWinner has more than 10 million registered users, which places the site near the top of its category. Sixty-five percent of World-Winner's registrants are women over age 40.

"It turns out they really like to play games online," Killeen said.

"Mostly, they like the traditional games they're used to playing offline," he said.

The company, which is privately held, does not disclose revenues, but Killeen says it is "at break-even level" after nearly four years in operation. It raised US$23 million from investors during that time.

No one in the industry is making a lot of money from this yet: Sinclair, the industry consultant, estimates that these kind of skill-based games account for less than 5 percent of the US$7.5 billion online gambling industry.

But the crackdown on illegal gambling, Killeen said, has turned the market in a more favorable direction. Under pressure from the US Justice Department, Yahoo, Google and MSN last month stop-ped accepting advertisements from online casino operators, because such advertisements could be deemed by courts as aiding and abetting illegal gambling.

As a result, WorldWinner and its competitors no longer must bid against some of the Web's more aggressive marketers to get top placement for advertisements. Nor are their sites lumped in with casino gambling.

"There's a greater understanding of what we do now," Killeen said.

Still, purveyors of skill-based Internet games have not emerged unscathed from online gambling's legal hassles. Companies such as WorldWinner and others continue to lobby Congress, lest they be included in legislation barring all types of games with cash or prize awards. A bill that would forbid the use of credit cards and fund transfers to pay for unlawful gambling passed in the House last year and is now in the Senate.

Indeed, some states have laws that bar such contests or discourage them because their statutes blur the distinction between games of skill and games of chance. As a result, WorldWinner, for instance, turns away prospective customers in Arizona, Arkansas, Delaware, Florida, Iowa, Louisiana and Maryland.

If games of skill finally win market share in the states where they are deemed legal, it will be a vindication of sorts for a business that is intrinsically more difficult to run than casino games, analysts said. To evenly match players, companies must establish rankings based on past contests.

And they must maintain elaborate security systems to prevent hackers from manipulating the games.

The difficulty of running cash-based games of skill is one reason companies like Electronic Arts simply buy the service from businesses like WorldWinner.
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