A game of High scores and high stakes

How a small Toronto firm teamed up with Virgin to launch an online, video-game gambling industry

Photograph by Cole Garside

Virgin Gaming’s Toronto headquarters is filled with summer students, clad in shorts, T-shirts and flip-flops. They have been hired to test video games for the fledgling online service, which essentially allows gamers to bet money on the outcomes of popular console games like FIFA, Madden NFL and Halo, with Virgin Gaming taking a percentage of each jackpot. “Is this a dream job or what, guys?” bellows a beaming Zack Zeldin, 26, the company’s vice-president of gaming operations. He is met with a bunch of sheepish looks. “Look at those grins,” he says.

The truth is that the entire operation feels a bit like a dream come true for the people involved (although perhaps not for parents worried about the bank accounts of their college-aged sons and daughters). Virgin Gaming’s predecessor, Toronto-based World Gaming, had just 40,000 users and was still in a testing phase when a fortuitous personal connection—one of the company’s early investors, Rob Segal, now CEO, had previously helped launch the Virgin Mobile brand in Canada—placed it on the radar of Sir Richard Branson’s people.

Now, literally overnight, the operation has gone from a niche online site to a business operating under one of the world’s biggest and best-known brands. For Virgin, which purchased a minority stake in the company for an undisclosed sum, it’s an easy way to get in on the ground floor of what could one day become a big business. Segal says the site is now growing by 1,000 users a day and that a new industry is about to be born. Microsoft recently disclosed that there are nearly 40 million Xbox 360 owners, about half of whom play games online. “We’ve got to believe that at least one per cent want to make it more interesting,” adds Segal.

Zeldin says he and long-time friend Billy Levy got the idea for WorldGaming four years ago while attending school in Florida. They were nursing New Year’s Eve hangovers when Levy decided to put $100 on the outcome of a game of Madden NFL. Meanwhile, a few other friends were sitting nearby playing online poker. “It was kind of that light bulb moment,” Zeldin says. (Unlike online gambling, betting on video games is legal in Canada and most of the U.S. because they are considered games of skill, not chance.)

What the two lacked in programming prowess, they made up for with entrepreneurial drive (they previously launched a business importing chemical refrigerants for air conditioners). The key to WorldGaming’s approach was developing a way to verify users’ scores, a problem that plagued other betting sites. The solution was to cut deals with game-makers so scores achieved on online multi-player networks such as Xbox Live and PlayStation Network could be transmitted directly to WorldGaming’s servers. (Sony and Microsoft have not said if they plan to offer rival services.) Zeldin, Levy and fellow co-founder Ryan Tenbusch also set about creating ranking software that would let players challenge others of the same skill level.

While critics have voiced concerns that the site will lure young video-game players into a potentially destructive habit, Segal and Zeldin say they are promoting responsible behaviour by requiring participants to be 18, limiting bets to $1,000, and allowing account top-ups to a maximum of $500 a week. But for those who grew up playing video games in the arcade era, that still looks like an awful lot of quarters.

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