The Real Power Behind Casino On Net
Published: Friday, March 18, 2005 Online-Casinos.com
THE REAL POWER BEHIND CASINO ON NET
Israelis rake in over a billion a
year, and it all started at the dentist says author
The 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.
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