We’re a better player (Full Transcript)
CEO Mitchell Etess says Mohegan Sun is better than the Las Vegas legend
What follows is the complete transcript of a discussion with Mitchell Etess, the chief executive officer of Mohegan Sun, on March 11, 2014.
CommonWealth: Steve Wynn says you have a conflict of interest owning a casino in Massachusetts that would be 111 miles away from your casino in Connecticut? You will pay a 25 percent tax on table games in Massachusetts and nothing in Connecticut. He says you have an incentive to keep business sin Connecticut.
MITCHELL ETESS: He thinks if he keeps saying things they become the reality. He is also excited about bringing up our partner, Brigade Asset Management. What he doesn’t bring up when he talks about them in a negative way is that we have a contract with Brigade that forbids us to operate the casino in Massachusetts in any way other than to benefit the casino in Massachusetts. There is specific language in our agreement that discusses how we can market to people from Connecticut, how we can market to people in the database, how we can market to people around the area. And we are mandated by our agreement to market to people around our casino and not to overmarket to bring them to Connecticut. Despite the tax rate difference, we are legally obliged to only operate Mohegan Sun Massachusetts as its own entity. Look, Brigade does not own a part of Mohegan Sun Connecticut. They’re investing a tremendous amount of money in this project because of the way we operate and because we have those customers in our database already, because we’re a known entity, and we are mandated by our agreement with them to market to them. So the reality is that the Commonwealth can’t be more protected than they are against that issue. Conversely, Mr. Wynn seems to talk a lot about his ability to bring in high-end international play, even though if you look at the numbers there really isn’t all that much difference. The reality is there is an 8 or 9 percent tax rate in Las Vegas and a 25 percent tax rate in Massachusetts, and he has absolutely no protection for the Commonwealth in that regard. We feel our whole program with Brigade is a real strength of our platform because we have the customers in our database and we have the ability and the necessity to market to them.
CW: Are you saying Massachusetts is off limits to the Connecticut casino?
CW: But Connecticut has the database, right?
ETESS: We will be marketing to those customers in the Mohegan Sun Connecticut database. They have to sign up in Massachusetts and there in that database, so we’re seeding the database. Once they’re in both databases, we cannot, based on their geography, market to them in Connecticut.
CW: You’ve said Mohegan Sun Connecticut brought in $911 million in gaming revenues last year, more than any other casino in the western hemisphere. Then Wynn says his noncasino revenue in Las Vegas was about $1 billion.
ETESS: That’s very exciting except this isn’t the Massachusetts nongaming bill. This is the Massachusetts gaming bill. It’s another example of the vast differences between a Las Vegas casino and a northeastern casino. He’s not really focusing on what this is all about, which is driving gaming revenue. In Las Vegas, what does he have, 5,000 hotel rooms there? That drives a lot of nongaming revenue. They drive a lot of revenue from their show room there. There’s nightclubs in Vegas that make $50 million in profit. This is not Las Vegas. This is about gaming revenue and giving 25 percent of gaming revenue to the state. Regardless of what that may or may not be in Las Vegas, where they’ve got 5,000 hotel rooms or whatever it is, he’s got a 600-room hotel here. It doesn’t really matter. We’re kind of focusing not so much on keeping all the revenue trapped at Mohegan Sun Massachusetts. We’re an outwardly facing group. We’ve taken our points program, which would be revenue driven to the property, frankly, and extending our comp powers out into the community. We’re a different model. This is about gaming revenue and let’s not forget that.
CW: It’s a gaming law, but is it all about getting the most people to gamble? Isn’t the goal jobs, economic development, taxes. There’s a lot of goals, aren’t there?
ETESS: What does nongaming revenue have to do with any of those things, when we’re creating nongaming revenue as well. I don’t think he’s suggesting he’s going to have $1.3 billion of nongaming revenue in Massachusetts. We’re about creating jobs and we’re about sending revenue out to the community. Our property in Connecticut is spectacular. What we’re designing and going to construct in Massachusetts will also be spectacular. That’s about increasing tourism to the region, creating another tourist destination in Massachusetts. It’s about all those different things.
CW: Your site is ready to build, so would it take just six months to start construction?
CW: But on some of the changes he’s asked for, including the tax withholding provision, he’s received support from the Gaming Commission and legislators on Beacon Hill. When you say you aren’t asking for changes, does that mean you want the law to stay the way it is now?
ETESS: We knew what the regulations were when we got involved in this process. We are aware of that particular aspect of it and we will work with the regulators in whatever shape or form they want. If they want to increase it, we’re certainly not going to stand in their way. But we’re not standing here saying that has to change or we’re not going to operate. We knew that.
CW: If there’s a referendum question that makes it to the ballot to overturn the gaming law, would your company be involved in trying to defeat it.
ETESS: We’re already part of the group that’s going to oppose it. Nothing would be more painful for me than to go through everything we’ve been through in this whole process, win the license, and then have it go on the ballot. I’d kill myself.
CW: What group is it that’s opposed to the ballot question?
ETESS: There’s some group that has gotten together to oppose the ballot question. I don’t think Mr. Wynn is part of that group. I think MGM is and a few people are involved with that.
CW: If Mohegan Sun isn’t selected, would Wynn be at a disadvantage in this market?
ETESS: Clearly the Commonwealth would be way better off if we’re the applicant. We’d be a very, very fierce competitor for all the business up here, as we do know the market, as we do know the area, as we do have a very solid name here. We’re used to dealing in competitive markets. All the markets we’re in are competitive. It’s not just about high-end business. We do a very nice high-end business at our property in Connecticut and even, based on the market, in Pennsylvania. Obviously, the definition of high is much lower in a place like Wilkes-Barre. Day to day on the front lines, fighting for market share, is what we’re good at. Clearly, we’d be a very fierce competitor.
CW: The commission voted 3-2 in favor of Plainville with the three in the majority saying the continued operation of harness racing was a key fact in their decision. How does that bode for your proposal since you’re going to be propping up Suffolk Downs?
ETESS: I’ve made it a practice not to say anything about how anybody might react as far as the Gaming Commission goes, but the reality of our proposal is that if we get the license the owners of Suffolk Downs have written in writing to the commission that they will keep Suffolk Downs open for 15 years from the time we get the license and they will keep operating between now and the time we open. So, basically, without Mohegan Sun Massachusetts there will be no more Suffolk Downs. I guess that certainly seemed to be a factor in the awarding of the slots license. I would certainly hope we’ll be the beneficiary of the same thing, but I don’t really know how they’ll view this versus that. But certainly it’s a true fact we will be keeping Suffolk Downs in operation.
CW: Wynn keeps bad-mouthing Mohegan Sun.
ETESS: It’s frustrating to see that Steve Wynn continuously seems to paint us as this rinky-dink operation. Anybody who’s seen Mohegan Sun Connecticut knows that it’s a high quality operation, that it is unparalleled, really. If you put it on The Strip in Las Vegas and give it 2,000 or 3,000 more rooms, as everyone in Vegas has, it would be very, very competitive. We’re being constantly cast as a regional operator blah blah blah, but we operate a world-renowned facility that’s won national accolades. We’re respected in the industry.CW: Why do you think Wynn does that?
ETESS: He’s mostly selling Steve Wynn. I’m Steve Wynn and they’re not. I was thinking about this. Steve Wynn is Steve Wynn, OK? He revolutionized the gaming industry in Las Vegas, right? Boston is a sports town so I was thinking about it in terms of a sports analogy. Tiger Woods obviously revolutionized golf when he entered the scene. People started working out. He changed the entire way professional golf was played and he was dominant. He was, therefore, a legend in the business. Well, right now, he hasn’t won a major tournament in like five years, or whatever it is. And there’s other people out there who are now better players. That doesn’t make him any less of a legend, nor does it make Steve Wynn any less of a legend. All the things he’s meant to this industry, which is earth shattering and incredible, but that doesn’t mean that we’re not a better player right now, and we really are. That’s kind of the way I feel, at least for this project. If we were bidding for a license in Macau, I’d say forget it.