The real power behind Casino On Net
14.03.2005The Israeli publication Haaretz this week carries a fascinating article on the Israelis wo own the parent company of online gambling giants like Casino On Net, Pacific Poker and Random Logic.
Written by Galit Yemini, the story remarks that Israelis who try to gamble at the popular global casino Web sites Casino-on-net.com or 888.com, which combines Casino-on-net and the Pacific Poker site, will find their entry barred. These two sites have made a strategic decision to block the entry of Israeli surfers, mainly due to the lack of clarity in Israeli law concerning Internet gambling.
Local gamblers have good reason to be insulted. While other international sites welcome Israelis and set up foreign-based sites in Hebrew, the biggest Internet casino site in the world, founded and controlled by Israelis, blocks their access!
Galit says that even without the Israeli visitors, however, the two pairs of brothers - Avi and Aharon Shaked and Shai and Ron Ben-Yitzhak - placed the right bet: The Internet gambling empire they established rakes in over US $1 billion a year, with estimated annual profits of $200-$300 million.
And he says that the mother company, VHL, which operates from Gibraltar and runs Casino-on-net and Pacific Poker, is now considering issuing stock on the London stock exchange, with a value around $2 billion, thanks to its high profitability. If the company does go public, it will have to disclose its financial reports, which could impact the whole gambling industry worldwide.
"Our policy is not to confirm or deny rumors on business discussions or contacts," responded a VHL source. "VHL will report or confirm only dealings that have matured to fruition."
The idea to set up Casino-on-net was apparently first raised in 1996 by Aharon Shaked, a dentist, while attending a dental convention held at a casino complex in Monte Carlo. He shared his idea with his brother Avi, who knew the Ben-Yitzhak brothers. The four founders set up the company, after purchasing a gambling license from the island of Antigua.
Shai Ben-Yitzhak is a software engineer who developed the technological platform for online casinos and founded Random Logic, a full-fledged Israeli company based in Tel Aviv. Random Logic provides the technology to all VHL's Internet casinos and is a separate entity from the other companies that operate the casinos and are registered in exotic tax shelters.
Haaretz reports that the Shakeds and Ben-Yitzhaks, like other top players in the Internet gambling industry, fiercely guard their privacy. Online gambling may be the most profitable Internet industry, but it is also the shadiest and most secretive, it says. Hundreds of Israelis work in it locally and abroad - as programmers, site designers, customer service representatives, etc. - and all have signed confidentiality agreements.
This industry has an astounding growth rate: In 1996 there were 30 Internet gambling sites with annual revenues of $30 million, according to data gathered by Christiansen Capital Advisers. In 2004 there were some 1,400 such sites with revenues of about $8 billion. This year these figures are expected to mount to 2,000 sites with revenues of $10 billion, about half of this from American gamblers. It is difficult to assess the size of this industry in Israel, but market sources estimate that there are tens of thousands of very active players, whose combined bets total tens of millions of dollars annually.
Experts attribute the massive expansion of this industry to the technological advances in broadband and cellular technology, which allow gamblers to bet on sports results via their cell phones or hand-held computers. The American obsession with poker, the most popular online game, is also credited with the surge in Internet gambling. PokerPlus.com estimates that revenues from approximately 200 online poker sites will reach $2 billion in 2005, representing 20 percent of all online gambling revenues.
Party Gaming, the company that operates partypoker.com, the largest online poker site in the world, attracts 55 percent of all only poker gambling, and is on its way to the stock market. The company has an abundance of cash and is planning to issue stock at a market value of $5 billion. Company owner Ruth Parasol, a California attorney with Jewish roots, is in no hurry to be interviewed, due to the problematic legal status of Internet gambling transactions. Industry sources say Parasol made a fortune from Internet pornography sites before switching to gambling.
Last week Poker Room.com - the fifth-largest poker site in the world, which will soon be launching a site in Hebrew - published its financial results. On Game, the Swedish company that operates Poker Room, had revenues of $60 million in 2004, with net profits of $20 million - a figure any Internet site can envy.
