Charlotte Observer: N.C. Sweepstakes Parlors Gear
Tue April 17, 2012
Charlotte Observer: N.C. Sweepstakes Parlors Gear Up For Expansion
Rodney Robinson, 48, of Concord plays a nickel at a time with a limit of $5 whenever he goes to The Internet Pit Stop near Concord Mills. Above, Robinson talks with Deana Petty, co-owner of the Internet sweepstakes business. John D. Simmons - email@example.com
Sweepstakes parlors in North Carolina are poised for another rapid expansion, a month after the N.C. Court of Appeals made them legal.
In Charlotte, contractors spent Monday putting finishing touches on Laid Back Jack's on Tyvola Road, a black-lit establishment that looks like a mini casino.
City of Concord officials have already noted more people coming in and asking how to set them up. And in Raleigh, five new parlors have already received permits since the court ruling.
Between 700 and 800 sweepstakes establishments operate in North Carolina, with annual revenue reaching as much as $500 million to $1 billion, according to the Internet Based Sweepstakes Organization, which represents a number of sweepstakes establishments in the state.
Their terminals can be found at mom-and-pop convenience stores, in strip malls and in standalone buildings across the state. In many cases, companies that sell the technology will take ownership stakes in the establishments to bring down the start-up costs.
"I enjoy the expeditious nature of this. It's immediate gratification," said Rodney Robinson, 48, while rhythmically clicking last week at the Internet Pit Stop in Concord. "To me, it's like going to an arcade and playing a video game."
Many of the games resemble slot machines, minus the lever. Others are card games, like Deuces Wild. A jackpot posted on the wall steadily builds and can pay out at any time.
In Charlotte, clusters of sweepstakes parlors operate along Old Pineville Road, parts of Independence Boulevard and other locations. With last month's ruling that the state legislature can't categorically ban the games, the industry is preparing for new entrants.
"They're really coming out of the woodwork," said Bruce Hales, N.C. regional sales manager for Georgia-based Lucky Sweeps, which sells terminals and games.
Most sweepstakes operators openly acknowledge that yes, it is gambling - or, as one operator put it, "gambling lite."
At the same time, they defend themselves as job creators and a source of alcohol-free fun, not the havens of "vice and dissipation" described in the statute the court struck down.
So-called "sweepstakes" games came into fashion after the General Assembly banned video poker in 2007. The new games were structured differently to separate them from gambling under the letter of the law.
Instead of putting money into a machine, customers purchase computer time. They can also check Facebook, update their resume, print, fax or copy - though the industry acknowledges people seldom use the machines for that.
Supporters liken them to the famous "Monopoly" promotion at McDonald's. In the fast-food version, customers purchase a drink or a large fry, not the game pieces.
Mecklenburg County had a spike in new sweepstakes parlors in early 2010, Julie Berger of the county tax collector's office said. Sixty opened up in the first three months of the year.
That summer, the state legislature passed the law intended to close the loophole, crafting a ban on sweepstakes that use an "entertaining display" to reveal the results.
Two makers of sweepstakes game software, from Texas and Oklahoma, challenged the ban as unconstitutional. The state allowed companies to open and operate while the case was pending.
Early last month, the N.C. Court of Appeals ruled 2-1 that the law was indeed too broad and violated the First Amendment. Judge Ann Marie Calabria wrote that the law could be construed to ban all video games.
The attorney general's office has already appealed the ruling to the state Supreme Court, spokeswoman Noelle Talley said.
As the legal battle continues to play out, cities and towns around the state have put together ordinances laying out where they can locate and imposing privilege license fees.
Raleigh charges $3,500 for the first machine, plus $1,000 for each additional terminal, up to $20,000, said revenue manager Kimsu Harrington. Wilmington sweepstakes owners pay up to $3,000 per machine each year.
The city of Charlotte convened a citizen's advisory group to put together some rules governing where they can locate as they became "enormously popular" in the city, according to a presentation given by the city zoning department in December.
One proposal is to prevent sweepstakes parlors from opening within 400 feet of each other. Last May, the city identified 69 sweepstakes parlors in operation. Of those, 13 were within the 400-foot zone.
The city council could take up rules this summer.
New type of business
As more open up, some proprietors say they want to carve out a niche by creating clean, modern establishments that cater to an older clientele. They're targeting middle-aged customers by moving away from the image of a smoke-filled gambling den.
With slick flat-screened monitors arranged in pods, the Internet Pit Stop in Concord could pass for a library's computer room at the start of business.
"My mom lives by the Bible. She said 'I do not think so. You are not opening a gambling joint'," said co-owner Deana Petty, who opened the business in January. "But once you understand more about it, it doesn't have to be what everybody thinks it is."
The Internet Based Sweepstakes Organization says 80 percent of the state's customers are women. Of those, 80 percent are older than 40.
"It provides something that the community just never realized there was a great need for," president Chase Brooks said. "That is a social environment for folks in the middle age of their lives that want to go somewhere and they want to socialize and relax."
Linda Dooley, co-owner of Cash Point Internet Cafe off Old Pineville Road, said she is talking with assisted living centers about setting up day-trips for their residents. Her parlor opened in November, and prides itself on its cleanliness and comfort.
Her cafe also employs three people, creating jobs that sweepstakes parlor owners say are sorely needed in a county with more than 10 percent unemployment. Dooley herself was laid off in 2009.
"It's still a business. It's feeding people's kids and making mortgage payments," Dooley said. "You close those places down, you take away those jobs."