In my professional practice, I have had the chance to advise many online and land-based casino operators, and I must confess that I love the Information and Communications Technology (ICT) and its social effects. Mexico is right now involved in an ICT revolution, and President Enrique Peña Nieto has been convinced to reduce the digital divide under his current administration (2012-2018); this is extremely significant under the social media scope.
In my Gaming Industry Forecast article in the January 2013 issue of CEM, I mentioned that “Current President Enrique Peña Nieto and his federal administration believe changes [to gaming regulations] are needed. And the Mexican gaming business is wide open to his support, as well as the changes required to bring the industry into the world spotlight as a first-class regulated gaming jurisdiction and destination.” For this issue, I interviewed Jake Kalpakian, CEO of Las Vegas From Home.com Entertainment Inc., (LVFH) www.lvfh.com, who is expanding the company’s business influence to Mexico and Latin America, to take a look at what his company does and its plans in Mexico. Our interview reflects the many opportunities being created under this new administration.
José Luis Benavides: Can you talk about your background?
Jake Kalpakian: I have been the president and a director of LVFH since 1999. It is an online gaming-software development company listed on the TSX Venture Exchange here in Canada. I’ve managed small-cap publicly listed companies for more than 23 years and have raised tens of millions of dollars for junior resource and technological companies during this time. I currently sit on the board of several Canadian publicly listed companies; however, I have always had a passion for gambling and the gambling industry in general, which is why I have made LVFH my main focus.
JLB: Please talk about LVFH’s early years.
JK: LVFH started business in late 1999 with a focus on online poker. Under the Action Poker and Tiger Gaming brands, LVFH did very well until 2006, when the Unlawful Internet Gambling Enforcement Act was introduced in the U.S. LVFH then sold this business and related brands and focused on Asia. During this time, LVFH worked with one of the largest sportsbooks in Asia, among many other companies. Our current focus is now on Latin America and mobile gaming and, to a lesser extent, social gaming on Facebook.
JLB: Why did you decide to expand your business to Mexico?
JK: Unlike Europe, where the gaming industry is dominated by a handful of large companies, Latin America is still wide open and full of opportunity. Mexico is one of the strongest economies in Latin America, complemented by a population of more than 100 million people, so it made a lot of sense to start there. The legal framework and our existing contacts also made it easier to start in Mexico.
JLB: Do you see Mexico as a country to invest in?
JK: Yes. The current administration, headed by Nieto, is showing interest in supporting foreign investors, offering legal security and making many important regulatory changes.
JLB: Taking into consideration your international experience, how would you explain the benefits Mexico offers as compared to some other Latin countries?
JK: Mexico has a modern communications infrastructure that accommodates high speed Internet through land-based and wireless cell phone networks. Approximately 120 million people live in Mexico and many own a PC, tablet device and/or smartphone. Mexico has the infrastructure and tech-savvy culture to support online gaming, especially on mobile devices.
JLB: Can you mention your target age and the games that you offer in Mexico?
JK: In Mexico, the minimum age to play (online and land-based) is 18, and we do not take bets from players under this age. Our current focus is bingo and slot games, but we are ready to branch out to all verticals, such as poker, sportsbook, etc.
JLB: Can you talk about your Real Vegas Casino app on Facebook?
JK: Our Real Vegas Casino app was launched on Facebook in March 2012, offering Texas Hold ‘em, multiplayer blackjack, multiplayer roulette and several slot games. This app is considered a “social casino” that does not allow real gambling. Instead, players are awarded free chips on a daily basis to play the games, and if they run out, they can choose to buy more chips. A small portion of the players buys chips, which makes the business model sustainable. The more lucrative aspect of this business is to convert a portion of these players to our gaming site in Mexico in the future.
JLB: Is the Real Vegas Casino app your first step to conquering the smartphone and tablet market in México?
JK: We launched Real Vegas Casino on the Google Play store for Android-based smartphones and tablets in October 2012. An iPhone and iPad version is coming soon. Having a solid mobile product is important for the future of our business, with so many people now purchasing tablet devices and smartphones instead of PCs.
JLB: Is LVFH planning to execute some business with the biggest mobile carriers in Mexico?
JK: Yes, indeed. Consider the fact that the Mexican market operates 100 million mobile devices between four different carriers and currently only a handful of Mexican permit holders are taking advantage of this.
JLB: Do you have the project gross numbers and revenues that LVFH is anticipating for the Mexican market?
JK: We are working on these numbers now, with our product development and operational planning being done in parallel. The planning process involves many topics including forecasting, marketing, taxes, operational expenses, legal and regulatory matters.
JLB: Talking about branding and marketing, what kind of campaigns are you working on?
JK: Mexico has some regulatory boundaries about gaming advertising, and we will respect them. We are interested in an aggressive mainstream campaign with some “below the line” (BTL) strategies, including traditional SEO and Internet advertising.
JLB: What do you think about the Mexican gaming environment?
JK: The Mexican gaming environment is still fairly young compared with online gaming jurisdictions in other parts of the world. It is crucial that the Mexican government continues to develop and enforce its gaming policies. I believe that the current government is pursuing this goal much more so than the previous government.
JLB: How do you feel about the fact that a company such as LVFH must be tied with a land-based Mexican permit holder?
JK: The main purpose of regulated markets is for governments to be able to tax and control online gaming activities in their respective states. Additionally, these states can prosper from new local jobs, new business and foreign investment.
Tying the online gaming business to land-based Mexican permit holders is a natural step and has some similarities to how regulations are being applied in New Jersey and Nevada. The process limits the number of Mexican online gaming operators, which results in a handful of large operators. A small number of large operators can expand locally and to other Latin American countries much faster than a large number of small operators.
As the Mexican online gaming industry grows, it will create more local jobs, more spin-off businesses and increased gaming tax revenue. Mexico is poised to be the online gaming leader of Latin America.
In the end it’s a win for the operators, the Mexican government and the people of Mexico.
JLB: Do you think the current administration is planning to take a page from the U.S. and their big time poker blackout and start blocking IP addresses of many unlicensed gaming websites?
JK: We are very delighted and encouraged that the current administration is making this a priority. This is a very positive development for any company that is serious about building a 100 percent legal, successful and sustainable online gaming business in Mexico.