Packer closes CrownGames
(source: AFR May 7, 2003)

Packer closes CrownGames
May 7
Ben Power and Katrina Nicholas

Kerry Packer has dumped his internet casino ambitions, shutting down the loss-making CrownGames site due to a global regulatory crackdown on online gambling.

Mr Packer's Publishing & Broadcasting Ltd yesterday said the closure of CrownGames followed major regulatory changes in the internet gaming environment, including the increasing difficulties gamblers faced using credit cards to pay for games.

The decision to shut CrownGames came as federal Communications Minister Richard Alston delivered a surprise backflip on the government's policy towards online gaming, saying it was legitimate and a relatively harmless exercise.

Analysts said the closure of CrownGames could hurt Jupiters' sale of its sportsbetting operation, Centrebet, which has been clouded by regulatory issues.

"If Kerry Packer couldn't make it work online it raises the question [of] whether others can," one analyst said.

PBL said the prospects of making a success of CrownGames - which has cost the company more than $25million - was harmed by governments around the world cracking down on offshore casinos in a bid to protect tax revenue.

However, PBL has not given up its aspirations to offer multimedia gaming services to punters, shifting its lobbying effort to interactive gambling on television sets.

PBL recently lodged a submission to the federal government's review of the interactive gambling regulations. It was seeking a change to the laws to allow gambling during sporting events. Under current laws, it's allowed only at the start of events.

A change would make it more attractive for PBL's Nine Network and its part-owned pay-TV service Foxtel to offer interactive gambling.

CrownGames was launched in January 2002 as a Vanuatu-based joint venture between PBL and ecorp after Mr Packer failed to stop the federal government banning online casinos being offered to Australian punters.

At the time, online gambling was viewed as the next big thing with potential revenues in the billions of dollars.

It had no regulatory links with Melbourne's Crown Casino and did not offer online gaming services to Australia and New Zealand and the massive United States market.

In May 2002, it rolled out a Chinese version in Asia. The site conserved its marketing budget by targeting Asian high-roller gamblers, which meant it competed with Melbourne's Crown.

It was run by the chief executive of PBL Gaming, Andrew MacDonald, an internationally respected gaming executive, who is said to have Mr Packer's ear on gambling issues. Mr MacDonald has been in Vanuatu in past weeks winding the operation down.

The site posted an EBITDA loss of $9.8 million in 2002 and $5.6million in the first half of this year.

Mr MacDonald will return from Vanuatu to Australia permanently and may work on possible gaming acquisitions for PBL.

Insiders said the company had decided that CrownGames would not turn into a major business down the track and more losses couldn't be justified. The closure will result in a one-off $1 million cost for PBL in 2003 and 12 staff will be made redundant.

The closure comes just months after Mr Packer privatised ecorp.

Analysts said they had expected CrownGames to be closed after the ecorp shareholder buyout and after PBL wrote off the value of its online gaming software to the tune of $12million in the first half.

PBL chief executive Peter Yates said: "We have flagged at our past two results presentations that a review of our online gaming operations would be conducted prior to the end of this financial year.

"We have formed the view that the business will not break even this financial year and is now unlikely to achieve the scale necessary for this business to contribute meaningfully to the group's profitability."

Date Posted: 06-May-2003

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