Calvin Ayre — The Dealer

In the grey area of online gambling, a colourful Canadian entrepreneur is raking in millions

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Al Pacino, Matthew McConaughey and Rene Russo paraded up the red carpet for the recent première of the new Hollywood blockbuster Two for the Money. Later, television lights glared and paparazzi cameras flashed as the stars of the movie, set in the world of high-stakes sports betting, entered the exclusive after-party at the headquarters of the Academy of Motion Picture Arts and Sciences in Beverly Hills. Each was photographed in front of a sign bearing the logo “Bodog.com.” Inside, celebrities such as actor Harry Dean Stanton and tennis stars Venus and Serena Williams watched fellow partygoers play a few hands of Texas hold 'em poker at Bodog-branded tables. It was another coup for Calvin Ayre, the Lloydminster, Sask.-born founder and CEO of Bodog Entertainment Group–the Costa Rica-based online sports book and casino whose brash approach to branding is turning the online gambling industry on its head. “Celebrity is power,” says Ayre. “Attract the right celebrities to your brand and you raise the value of that brand.”

Bodog's branding connections with the film didn't end at the party. Scenes of the movie were shot at a Vancouver restaurant owned by Bodog. Ayre has just signed a marketing deal with Brandon Lang, the legendary sports handicapper on whose life the movie is loosely based. Now, in addition to touting his picks for NFL games, Lang also tells gamblers to log on to Bodog.com to place their bets. “This movie is going to make sports betting and Bodog much more popular,” says Ayre.

When it comes to getting attention for your brand, Ayre knows using celebrities is a sure bet. So far this year, Bodog has hosted a massive MTV party with Oscar-winner Jamie Foxx, a rock concert with rap superstar Snoop Dogg, poker tournaments with American Pie actress Shannon Elizabeth and a Las Vegas sports-betting and marketing conference featuring legends such as baseball Hall of Famer Reggie Jackson and Toronto-born poker master Daniel Negreanu. Those events–the firm will spend an additional US$50 million this year on other marketing and advertising efforts–put Bodog's name in front of millions of potential gamblers and helped position it as one of the world's hottest new brands.

While hitching your brand to a celebrity star may be old hat in most industries, in the online gaming world it is revolutionary. Just a few years ago, such a close association between Hollywood and offshore sports books and casinos would have been unthinkable. Traditionally, the sports-betting industry was more closely associated with the Mafia or shady back-alley bookies who employ thugs to collect bad debts. But online gambling is going legit and is more likely to employ MBAs than gangsters.

Ayre got into the online gambling business 10 years ago, founding the company that would eventually become Bodog with less than $10,000. Bodog now processes more than one million bets per day, up from 500,000 last year, and is expected to produce revenues of about US$200 million this year. By the end of 2005, those wagers–in virtual poker and blackjack rooms, on which team will win Monday Night Football, or even on who will be the last contestant standing on the television show Survivor–will be worth an estimated US$6 billion.

It all adds up to a billion-dollar company, at least according to the investment bankers who have tried to convince Ayre to take Bodog public. That sounds good to Ayre, who refers to himself as “a self-made billionaire” in his company bio and marketing materials. He may be right. In June, London-based PartyGaming–one of the largest online gambling firms in the world–was worth more than US$8.2 billion after its initial public offering.

Online gambling has never been so popular. Worldwide, online casino revenues have exploded to nearly US$12 billion this year from an estimated US$3 billion in 2001, according to a report by Christiansen Capital Advisors. The New Gloucester, Maine-based investment analysts expect those online revenues to double to more than US$24 billion by 2010. But with that growth has come increased competition; there are now more than 1,800 Internet casino sites operating around the world, according to the U.S. Government Accountability Office.

Running an online casino used to be a licence to print money–and you didn't even really need a licence. But now, it's no longer enough to simply put up a virtual casino and ensure that your gamblers can get their winnings quickly. In an increasingly commoditized industry, effective branding and marketing are what separate the winners from the losers. Using Virgin Group founder Richard Branson as a model, Ayre aims to build Bodog into not only one of the largest online gambling brands but also a mainstream 21st-century digital entertainment conglomerate.

He's off to a good start. This year, eGaming Review, a London-based magazine covering Internet gambling, named Bodog the seventh-most influential online gaming company (up from 16th last year). Bodog “has become the business model to follow in the U.S., with several sites aping its brash media-friendly strategy,” wrote the magazine. “It remains the most innovative site in the U.S. e-gaming space.”

And Bodog is growing. Nearly 150 people run the company's online gaming operations out of its head office in San José, Costa Rica. Another 200 people are employed by Vancouver-based Riptown Media, a wholly owned subsidiary of Bodog, that writes and develops new software, produces Bodog events and marketing and is even trying to develop its own reality show. Bodog also has a Swiss-based investment arm, a new venture capital division and a growing stable of real estate assets. In July, the company launched a music division, representing Canadian artists such as Bif Naked.

A winning streak, for sure. But will Bodog's luck hold out? After all, Internet gambling is still illegal in many parts of the world. And while Ayre has succeeded in attracting the attention of a growing number of online gamblers, he has also had run-ins with the British Columbia Securities Commission and, most recently, the U.S. Justice Department.

Calvin Ayre has a reputation as a man who likes to party. The Bodog website and press materials are littered with shots of the 44-year-old gambling tycoon drinking on yachts with scantily clad models, revelling until dawn with celebrities and living what Ayre calls “the Bodog lifestyle.” For Ayre, that lifestyle includes a 10,000-square-foot mansion near his Costa Rican headquarters, complete with pool and grotto. In person, Ayre looks every bit the party animal in fashionably distressed jeans and leather biker jacket. He's a little tired-looking this September day, having taken the red-eye flight to Vancouver from Los Angeles, where he attended the Silver Spoon Beauty Buffet, a trade show of sorts where high-end brands such as Audi and Yves Saint Laurent display their products and services to influential tastemakers and celebrities.

Don't let the playboy image fool you. When it comes to Bodog, Ayre (who has an MBA from City University in Seattle) is all business. Dig deeper into the company website and you'll find his detailed financial analysis of running a sports book alongside long articles chastising his competitors for not helping the industry develop better branding strategies. “People ask me if I am this crazy party guy or this management guy writing these quasi-academic articles,” he says over lunch at the Quay restaurant, a Bodog-owned lounge on the waterfront in Vancouver's fashionable Yaletown district. “I'm both. Bodog is both. We are a company that executes its transactions like a bank, but is also fun to be around.”

The Bodog name is part of an ambitious branding strategy Ayre envisioned from the start. Ayre came up with it while typing potential brand names into an Internet domain-registration search engine one night. He chose the appellation like a major corporation would pick the name of a new car or brand of soft drink: it had to have six letters or less, be easy to spell and remember, have some personality and be unlike any competitor's moniker. The last criterion was easy to fill since most of Bodog's rivals prefer straightforward brand names such as PartyPoker.com or Sportsbook.com. “Those names are great, but they aren't very portable if you want to expand into other entertainment industries,” says Ayre.

At the beginning, competitors ridiculed the name. Even Ayre's supporters doubted his vision of an online gambling business that could eventually morph into a mainstream digital entertainment business. Paul Lavers, president and CEO of SportsDirect, the Halifax-based online publisher of sports websites catering to online bettors, skeptically listened to Ayre lay out his vision for Bodog during a breakfast meeting at Toronto's Royal York hotel in 2001. “I remember looking at the diagram of where he said Bodog would go and thinking, yeah, right,” says Lavers. “But it has all come true.”

The launch of Bodog in 2000 was not Ayre's first foray into online gaming. After reading an article on the expanding world of sports betting back in 1992, he decided to convert his fledgling Vancouver-based Internet incubator company into a software support firm for online gambling. He was quickly able to license his software to several online casinos, but soon realized that the real money was in running your own gaming operation.

Unlike other online casino operators without the technical skills, Ayre owned the computer code that became the foundation of Bodog and could customize and improve it. Sure, it cost more to develop his own proprietary computer code than to merely license an off-the-shelf program. But as the business grew, he was able to keep all the profits instead of paying exorbitant licensing fees.

Bodog continued that strategy last year when it launched its own virtual poker room to cash in on the booming popularity of the game. The company could have simply licensed existing poker software and had its own poker room up and running in a matter of days. But to ensure he maintained control of the business, Ayre paid Vancouver-based Micropower US$1.5 million for not only an existing poker program but the entire team that developed it. The group spent the next six months upgrading and customizing the poker software that now provides Bodog with revenues of about US$200,000 per day, says Ayre.

Poker currently generates about 20% of Bodog's revenue, with the sports-betting operation and other casino games each contributing about 40% of the company's US$200 million in total annual revenue. It is the popularity of poker, however, that has brought many players online and introduced them to other forms of gambling available there.

Before the profits could roll in, Ayre had to get Bodog noticed. There wasn't enough money or respectability in the online gambling industry at the time to employ his current celebrity tactics, so instead, Ayre used himself–or rather, alter ego Cole Turner.

Ayre developed the character of Cole Turner as an Indiana Jones-style executive who jet-setted around the globe and engaged in wild exploits. Industry tabloids ran photos of Turner partying with models, online gambling forums debated everything from his flamboyant behaviour to his taste in beer, and Bodog faithfully fed the flames by publicizing his appearance at industry events and various adventures, such as a trip to Cambodia where he partied with massage-parlor girls. Ayre even created a rival spoof sports book, Hail Mary Sports, whose fictional CEO taunted Turner and challenged him to public fist fights.

As Bodog grew, however, Turner eventually became a liability: the company was getting noticed and covered by more mainstream media that didn't understand Cole Turner wasn't real. Finally, last December, Ayre killed off the character and revealed his true identity. “Cole Turner became a victim of his own success,” says Ayre. “We needed a real CEO, not some character, and we have a traditional branding strategy now.”

Ayre still retains some of Cole Turner's danger, though. He takes weekly weapons training from three Canadian former soldiers in charge of Bodog's Costa Rican security. Just about wherever he goes in the country, he carries a 9 mm Heckler & Koch semi-automatic German pistol. The gun is for protection after a violent armed robbery he lived through two years ago. The pistol “is sitting loaded on the desk beside me now in the special fast-opening gun bag I carry it in,” Ayre says in an e-mail from his Costa Rican headquarters. “Kidnappings of high-profile individuals are becoming a major problem down here…and I am super high-profile.”

Bodog may now employ traditional marketing, but it's certainly not boring. Last year, the company handed out free thong underwear adorned with the Bodog logo to college students at football tailgate parties to celebrate the Bodog “wedgie tour.” Ayre used to hand out the underwear as business cards. And last January, the company took out a full-page ad in the Los Angeles Times, offering US$50 million for rights to host a football game between Orange Bowl-winning University of Southern California and Auburn University, winner of the Sugar Bowl. The teams declined, but the match would have been banned anyway as a violation of the National Collegiate Athletic Association's anti-gambling policy.

Ayre wasn't the only off-shore gambling executive to have an alias, but he was the only one to use it as a branding tool. Others merely used a fictional name to skirt the attention of U.S. regulators and law enforcement, says Chris Costigan, an online columnist who covers the Internet gambling industry. “It was a good way to avoid getting hassled at the border or maybe even arrested while doing business in the U.S.,” he says. It was not an irrational fear. Back in 1998, U.S. authorities arrested San Franciscan Jay Cohen after they determined that his Antigua-based World Sports Exchange had targeted and accepted bets from U.S. citizens. Cohen was sentenced to 21 months in prison in 2000.

Today, just about every reputable online casino operator can cross the U.S. border without fear of arrest. That's not because the industry is legal, however–at least not in the United States. The laws concerning online gambling in Canada and the United States are similar: no bets can be accepted and no bets can be processed without a government licence. To date, neither Ottawa nor Washington has issued such a licence. Instead, online gaming operates legally offshore in places such as the Caribbean, Gibraltar or Malta. The U.K. is now licensing online sports books, and there is even a booming online casino-licensing business on the Quebec native reserve of Kahnawake.

That hasn't stopped U.S. authorities from continuing to crack down on the industry. Not only is it illegal to operate an online gambling website in the United States, it's illegal to advertise one, as well. Bodog found that out in March when the U.S. Justice Department raided the offices of Esquire magazine after the New York-based publication ran an eight-page Bodog advertising supplement, titled “The Gentlemen's Guide to Poker,” to promote its recently launched online poker room. No charges have been filed yet, and Ayre claims the raid was aimed at intimidating mainstream media operators. “It's just a lot of sabre-rattling,” he says. “The justice department has been doing this for years, but we are still advertising in lots of other publications.”

To get around the ban on advertising, Bodog and other online gambling operations have launched new “dot-net” sites where no real gambling takes place. For example, players can log on to Bodog.net and play poker for free using play money. Critics argue that it's merely a ruse, that many players just ignore the “dot-net” and go straight to Bodog.com to gamble for real. “At a logical level, it's ridiculous,” says Ayre. “But if there is no gambling at Bodog.net, then there is no gambling, and we should be able to advertise it.”

While Bodog may have incurred the ire of one branch of the U.S. government, it's doing business with another. Just two months after the Esquire raid, Bodog hosted a two-day “Bodog Salutes our Troops” charity event and rock concert featuring Snoop Dogg in Hawaii, in partnership with the U.S. Department of Defense. “Don't tell me the U.S. military didn't know who we were,” says Ayre. “They may not have known whether Saddam had weapons of mass destruction, but I can guarantee you they knew what Bodog does. That's no secret.”

A violation of arcane advertising codes is not the only time Ayre has run afoul of regulators. In 1996, he was fined $10,000 and banned from acting as an officer or director of any public company in British Columbia for 20 years after settling charges of insider trading in connection with his short tenure as president of Vancouver-based Bicer Medical Systems. Ayre settled the case without a hearing. As a result of the ban, he would not be able to take Bodog public–at least in Canada. But that's all right with him. Launching a Bodog IPO holds no interest for Ayre. “I'm still having fun,” he says. “Public markets aren't any fun.”

Despite Bodog's brash marketing, Ayre's brush with securities regulators has made him very conservative in his business dealings. For instance, unlike in the United States, Bodog does no marketing in Canada and doesn't even accept bets from Canadian gamblers. That's done to safeguard Bodog's Canadian assets from the type of problems that have ensnared other online casinos, such as Starnet Communications. Back in 1999, Vancouver police raided the offices of Starnet, alleging the company took bets from Canadians and processed those wagers on Canadian soil. Starnet, which has since changed its name to World Gaming, was eventually fined more than $100,000 and was forced to fork over nearly $4 million in seized assets as proceeds of crime.

With a growing portfolio of assets in Canada, Bodog has a lot to protect. Besides owning the entire building housing the Quay restaurant (which will soon be renovated and renamed Bodog), it also owns three penthouse apartments in Vancouver that are rented out as income properties, plus an 11-acre farm and a 140-acre cattle ranch near the Vancouver suburb of Langley. “Canada is a great place to invest,” says Ayre. “Lately, we have made more on our Canadian real estate assets than on our blue-chip stocks.”

Ayre is also conservative in how he runs his gambling operation. Bodog caps the amount players can bet at US$5,000. Rather than marketing itself to professional gamblers, Bodog caters to recreational bettors–those who want to wager a few bucks on their favourite team to make the Monday Night Football game a little more interesting. These are players who don't necessarily care that Bodog doesn't always offer the best odds or that it frequently publishes its odds later than many other books. “We are not gamblers, we are businessmen in the gambling business,” says Ayre. “You have to be conservative; running a sports book is like running a small commodities exchange.”

Regulatory crackdowns, either by Canadian authorities or the U.S. Justice Department, don't scare Ayre. Ironically, the only thing that could really hurt Bodog would be if the U.S. government legalized online gambling. That would open the door for mainstream U.S. casinos to unleash their already well-known brands onto the online market. “That is without a doubt the only real serious danger lurking out there for a brand like Bodog that is big in our industry but not very big among the public at large,” says Ayre. “Even people who don't gamble can all name casinos like Caesars Palace or Mandalay Bay.”

Luckily for Ayre, legalized Internet gambling in North America doesn't seem to be in the cards. Meanwhile, as his online industry continues to grow in size and popularity, Ayre predicts he will be able to go toe-to-toe with the best-known mainstream casinos. Supporters like Paul Lavers agree. “If I had to bet between Caesars and Bodog,” he says, “I'd put my money on Bodog.”

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