Caesars Interactive levels up with Mitch Garber at the helm

It’s not all about traditional gambling anymore for Mitch Garber.

Five years ago, he set out to create Caesars Interactive Entertainment as an Internet wagering giant. The company controlled poker’s best brand — the World Series of Poker — and interest in legalizing online gaming was widespread.

Previously, Garber operated European online gaming leader PartyGaming and he planned to transfer that experience to the United States.

When state and federal legislation stalled, however, Garber turned Caesars Interactive into a social gaming giant. After having zero cash flow from social gaming in 2010, the balance sheet may show some $250 million in cash flow this year.

In the first quarter, Caesars Interactive reported social gaming revenue of $167.6 million, more than double the revenue produced by one-time social gaming giant Zynga and three times the social gaming revenue produced by slot machine manufacturer International Game Technology.

Garber, who engineered several acquisitions to create Caesars Interactive’s social gaming division, said he is amazed the company surpassed Zynga.

“I never thought that would happen,” he said.

Garber, 50, was in Las Vegas this week for the opening rounds of the World Series of Poker’s Main Event.

He holds two roles within the Caesars Entertainment Corp. empire — CEO of Montreal-based Caesars Interactive and CEO of Caesars Acquisition Corp., a Nasdaq-listed spin-off that controls Caesars Interactive and six casinos.

ACTIVE OUTSIDE OF CAESARS

Garber is also active outside of Caesars.

This week, he became chairman of Montreal-based Cirque du Soleil after TPG Capital — one of Caesars Entertainment’s private equity owners — acquired the majority ownership of the entertainment company with a Shanghai-based firm. Garber made an investment into Cirque, which has eight shows at Strip properties owned by MGM Resorts International.

Earlier this year, Garber became one of the “sharks” on “Dans L’oeil du Dragon,” the French-language Canadian version of the American reality television series, “Shark Tank,” where investors consider business offers from aspiring entrepreneurs.

He is also part of a Canadian investment group looking to return Major League Baseball to Montreal.

Caesars Entertainment owns 57 percent of Caesars Acquisition. Plans call for the business to be folded back into the parent company after the bankruptcy reorganization of the Caesars Entertainment Operating Co. division is completed.

“The bankruptcy is out there and it’s important, but we’re not part of the restructuring,” Garber said. “My goal is to create as much equity value as I can for the shareholders. We’re not paying attention to the bankruptcy, but we’re also not ignoring it.”

Caesars Interactive is one of the more profitable pieces of Caesars Acquisition, which also includes four Strip resorts — Planet Hollywood Resort and Casino, Bally’s - Las Vegas, The Cromwell, and the Linq Hotel & Casino — Harrah’s New Orleans Casino, and Horseshoe Casino Baltimore.

Social gaming — content played on a computer or mobile devices that is free to use but allows customers to buy virtual gaming tokens for a nominal fee — has made Caesars Interactive the No. 1 business in the space.

The company recorded more than 100 million game downloads last year, but just 3 percent of its customers purchased virtual tokens.

“When you have that many people, you only need a small number to buy coins,” Garber said.

Eilers Research gaming analyst Adam Krejcik, who follows online and social gaming companies, said Caesars Interactive has clearly solidified itself as the market leader in social casino gaming.

Garber said the World Series of Poker application, along with games from Playtika, Buffalo Studios and Pacific Interactive, have driven the business. Playtika, an Israeli company that was Caesars Interactive’s initial purchase, “is the heart of the operation.”

PROFIT FROM WSOP

The other profitable aspect of Caesars Interactive is the World Series of Poker.

This year’s tournament drew a record 103,512 entries to 68 bracelet events and awarded $210.3 million in winnings, the third highest all-time prize pool. The $565 buy-in “Colossus” drew 22,374 entries, the largest-ever live poker event.

The World Series of Poker also offered its first online bracelet event that had almost 1,000 entries paying a $1,000 buy-in to the Nevada-based WSOP.com website.

Garber said he’s disappointed real money online poker has yet to flourish in the U.S. However, he believes it’s “inevitable” the activity will find other locations outside Nevada, New Jersey and Delaware.

“Maybe in 10 years we’ll have 10,000 entries from 10 different states all connected,” Garber said.

He said the revenue from social gaming should be viewed as a nongaming activity.

“The next generation of any consumer product will have digital element,” Garber said.