Denver entrepreneurs bring whole new bet game to Vegas

James Paton, Rocky Mountain News

Published May 4, 2006 at midnight

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Nick Koustas fondly recalls his first trip to Las Vegas when he was 7 years old, his dad slipping out of a Caesar's Palace hotel room in a suit for all-night craps sessions.

"I got the bug," he says.

Now, nearly three decades later, the Denver entrepreneur has taken gambling to a new level.

Koustas, with partners John Mix and Xander Oxman, developed technology dubbed Rapid Bet Live that allows gamblers to place an array of bets throughout a sporting event on everything from who will sink the next three-point shot in a basketball game to who will commit the next penalty in hockey.

Odds can be put on whether the upcoming pitch will be a strike, or whether Broncos quarterback Jake Plummer will toss a touchdown or an interception on the next drive.

Las Vegas customers can set up accounts and punch bets into touch screens that sit beside 30-inch plasma TVs, and do it while a game is in progress, rather than simply wagering on the score or the outcome before the action begins.

"This is the future of sports betting," says the 35-year-old Koustas, who admits his bookie inspired the idea, which he then brought to Mix's Denver company, Ironspark.

Their joint venture, STB Holdings, struck a three-year deal in 2004 to license the system to VirtGame Corp., which agreed to give the Denver businessmen stock valued at $500,000 and half of the revenue generated by the product.

When Progressive Gaming International, the publicly traded Vegas company, acquired VirtGame last year, it bought the sports-betting technology outright. STB received an upfront cash sum and will get a percentage of the revenue over the next 20 years. Neither side would divulge the terms of the transaction.

The technology has appeared on a trial basis at the Palms Hotel and Casino, and Progressive Gaming expects to gain approval from gaming regulators any day now to roll it out in other Las Vegas casinos, says Michael Sicuro, the company's chief financial officer.

"We have been talking to a number of casino operators, and we think there should be good things to come," he says.

The STB guys think real-time betting could extend beyond sports to reality-TV shows such as Survivor or American Idol, putting odds on who will get voted off the island or whether "Simon will call this guy an idiot," Mix said.

They are not the only ones who see promise in this kind of gambling.

Interactive Systems Worldwide, based in West Paterson, N.J., calls itself the "originator" of the concept and sued STB and Progressive Gaming in December, accusing them of infringing on its patents.

Interactive had a similar product that was used in the late 1990s in several Vegas casinos, including Excalibur and Bally's, but was pulled in 2000 as the company focused on overseas markets, says Bernard Albanese, its top executive.

"We were a little ahead of our time," he says.

Users of Interactive's SportXction betting system probably were not technologically savvy enough to buy into it, he acknowledges, and the product was too complicated.

Interactive has sought to try again and return to Vegas with a bigger partner. Progressive seemed a natural fit but ultimately rejected an affiliation, Albanese says.

The New Jersey company said in a statement at the time of the lawsuit that "while it is unfortunate that we have had to resort to legal action to protect our technology, we intend to re-enter the Nevada market and must take all appropriate steps to defend our intellectual property."

Progressive CFO Sicuro calls the allegations "baseless" and is moving ahead. The case is pending.

Koustas believes others are trying to jump into the real-time sports betting game, too, potentially adding competition.

That appears to be the case. MGM Mirage over the past five years has been "inundated with proposals from companies with similar technology," according to Robert Walker, race and sports book director for the company's casinos.

"And it comes down to the same issue every time," he says. "We don't want to be a test site."

Walker says MGM Mirage is taking a "wait-and-see approach," making sure the system works well before signing up, but "it's definitely something we'd love to get in on."

Progressive Gaming's stock has risen 8 percent in 2006 on the Nasdaq, closing Wednesday at $10.54, though it is down about 25 percent from early May 2005.

For Koustas, a University of Colorado graduate, a gambling venture is no surprise. His company, which mainly holds Web domain names and leases them to companies that covet them, is called Rolling Dice Productions. And Koustas says he has been betting on sports for 20 years, though he adds he never makes big wagers.

"I don't push it," he says.

For Mix, 33, and Oxman, 26, gambling was never an interest. In fact, they say they do not do it at all.

Ironspark, whose revenue ranges from $2 million to $3 million a year according to Mix, is a technology consulting company that also develops software such as Rapid Bet Live that it seeks to commercialize.

"We'd say, 'I bet this team gets five runs off the Rockies this inning," says Mix, who went to the Colorado School of Mines. "But we wouldn't actually bet money."

However, they were intrigued by the concept.

"We couldn't believe Vegas wasn't taking bets like this," Mix says.

Koustas and Ironspark already are turning to other ideas. They are developing an online program that would allow people to participate in "split-the-pot" contests linked to sporting events in which they can pay $5, for instance, for a shot to win the pool of money raised.

Roughly a third of the cash would go to charities, and a portion would become fees for the operators. They hope to sell the system to sports teams and alumni associations.

In the meantime, they are watching Vegas closely.

If Rapid Bet Live is a success, it will take the young businessmen on a lucrative 20-year revenue ride, Mix says. Then again, like any business deal, it could fizzle.

"The biggest concern is that it doesn't get traction or that people don't want to play it," Mix says. "But people seem to be playing it."

Variety of wagers

Some of the possible bets while a game is in progress:

• Whether the next pitch will be a ball or a strike

• Which team will score the first touchdown

• Who will hit the next three-point shot

• Which player will score the next goal

• Which basketball team will be the first to score 17 in the first 10 minutes

POSSIBLE FUTURE USES:

• Which Survivor contestant will be voted off next

• Which American Idol contestant will be called an idiot by Simon

• Who will get lost on The Amazing Race