Saturday interview: Bodog founder Calvin Ayre Financial Post
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Calvin Ayre is a successful - and controversial - entrepreneur. He grew up on a pig farm in Saskatchewan, attended the University of Waterloo on a full scholarship in physics and pioneered online gambling through his Bodog website family. He dabbled in real estate, then in the stock market in Vancouver, where he lost a skirmish with securities officials.
He built a huge gaming business and in 2006 made it to the cover of People magazine as one of the world's most eligible bachelors, and also to Forbes' 100 richest list. That same year, the United States cracked down on online gambling and he licensed his brand and technology to others.
Today, he is semi-retired, living mostly in Antigua and avoiding travel to the United States in case of repercussions. In a recent interview in Antigua by Diane Francis, FP editor-at-large, he talked about his life, his future, Bodog and the online gaming world.
Q Why did the Americans crack down on Internet gambling?
A They became concerned and passed the Unlawful Internet Gaming Enforcement Act, which restrains transfers of payments between banks in the United States and international gaming companies. It's not in effect until June 2010. It's not illegal for Americans to place bets, but it is illegal to solicit them. So, none of us located there. The first attacks began in 2006.
PartyGaming, a U.K. public company, raised US$10- billion in 2005 and that's when the U.S. government started changing [its focus]. [PartyGaming's] CEO was jailed and massive shareholder value was destroyed. Another, named BetonSports, was busted and all their customers lost all their money, too. The U.S. situation was partly due to the fact that some politicians didn't like it from a tax perspective [operators weren't incorporated or paying corporate tax in the United States].
Las Vegas is divided on online gambling - some are for it and some against. But you can't stuff the genie back into the bottle. The powers that be are trying to figure out how to tax online gambling. I predict it will be slowly legalized in a hodgepodge of states. Democratic Congressman Barney Frank is talking about bringing in a regime. The current U.S. stance is the same as Prohibition, which didn't work then and won't work now.
The U.S. will end up taxing online gaming in five or 10 years. The Canadian government is still sitting on the fence, but Quebec, British Columbia and a Maritime province are talking about intra-provincial online gaming.
Q Have they gone after you and is this why you live in Antigua?
A No, I haven't lived in Canada for 10 years or been in the Canadian tax system. The legal system did not allow me to do this in Canada legally. (He could not locate his head office and operations in Canada.) Now I like living in the tropics. I went home for a month this summer and love Canada.
As for Bodog, I've retired as a gaming operator. I own the brand names - Bodog.com - but have licensed them and the technology to others in various regions. Europe and Canada are served by Bodog Europe out of Antigua, where gaming is legal; Asia is served by Bodog88.com owned by a Canadian guy in the Philippines; and the United States is served out of the Mohawk reserve in Canada. My license model is like a franchise, but they have to operate their own entities. If they get into trouble or have a scandal the licence reverts back to me. But these are five-year deals.
Q How have you escaped the type of problems the British and others have had?
A [The Americans] have left me alone. I voluntarily exited that market in 2006. I don't think any of us are important in the big picture. The U.S. has a few other problems to think about these days. It's flattering but there are much bigger issues right now.
Q You don't go to the United States. Why?
A I wouldn't go because nobody in our space will go there. It's just standard procedure.
Q How much did Bodog make before the crackdown? Forbes said you were a billionaire?
A My current deals aren't revenue based and are all different structures, which I don't talk about. Forbes audited our books and based the number on the same multiple that the British public companies were trading at, or more than US$1.5-billion. In 2006, Bodog made US$320-million in revenues and 25% profit.
Q Does it upset you that the Americans did this?
A It's as if you owned an airplane and it crashed. You cannot cry about it. Things happen. You just have to deal with it. I have a nice life.
Q What about stories that the Americans seized US$24-million from a Bodog bank account?
A The operators of Bodog for the U.S. issued a press release and said that was not their's or Bodog's money.
Q What is the state of Internet gaming today after all this?
A It's bigger than ever.
Q Since it is not regulated everywhere, is there fraud?
A In the early days there were some issues, but the Internet has built-in transparency. Cheating sites are outed by players and the good sites get bigger. In 15 years, Bodog never missed a payout of a winning bet so we have a really strong brand. You grow your business by paying out all your winners. Also, the software in the jurisdictions where gambling is allowed is routinely audited. In sports betting, the scores are the scores so players monitor. It is self-regulated in that sense.
Q What's next?
A In September I will be launching a Bodog poker network. Poker is not illegal to bet online in the U.S. because it's considered a skilled game. It's a grey area, but there are lots of American companies with poker sites. I hired a guy who ran one and in 2010 we will have our site. Then we are planning a fifth Bodog business in Latin America in Spanish. I've also started Bodogbrand.com, which is an e-zine about the gaming industry with blogs and photos and party coverage. There's also Bodog-branded coffee and we are looking at coffee bars, starting in Latin America, possibly with gambling too.
Q You were in real estate and the stock market. How did you get into online gaming?
A It started in 1994, when I was in Saigon and could not get the Stanley Cup results for days. I was there to manage a real estate development and decided things were not working out well, so I walked away from my investment. I already had HQ Vancouver - a technology incubator company. I studied the Internet - knew it would revolutionize the world. I have a bachelor of science degree and taught myself networking. Then I read the newspaper one day about Ron "the Cigar" Sacco, who was taking bets in the Dominican Republic from over the phone. That was the lightbulb moment for me - sports betting over the Internet. Nobody else was doing this so I started building the software. With money raised in the market in 2000, I put up my website in three months and hired Carl Schmidt, a brilliant and hardworking software architect right out of university.
Q What's the future of gaming?
A In five years, Bodog will be a dominant player online again and governments will all be in this business.
