You can safely assume that any company even remotely involved in a federal investigation is probably a bad investment. Or can you? I'm not so sure anymore. Yesterday, The New York Times Co. (NYSE:NYT) reported that U.S. marshals seized $3.2 million from Discovery Communications, broadcaster of the World Poker Tour, which is 80% owned by Lakes Entertainment (NASDAQ:LACO).
The cash was part of a payment made to Discovery by Tropical Paradise, a Costa Rican casino operator that runs a very popular online poker room. In exchange, Discovery was to run a series of ads during WPT broadcasts. Some of the ads ran late last year but were quickly pulled, contractually entitling Tropical Paradise to a refund. The U.S., however, contends that airing such ads is illegal, giving it grounds to seize the money.
To be sure, this is quite a mess, but there may be good news. Certainly not for Tropical Paradise or Discovery. But the publicity may help Lakes continue to build its WPT brand, which may lead to more licensing deals and related products.
Indeed, this is an area where Lakes has excelled lately. Anheuser-Busch (NYSE:BUD), for example, has claimed the official beer of the World Poker Tour. And two weeks ago, Lakes inked deals to put the WPT logo on playing cards and chips, in a video game, on T-shirts, and to adorn an entire casual sportswear line. There's even a WPT scratch-off lottery game planned, which could fit nicely with Lakes' "World Poker Tour All-In" casino table game, which has already been adopted by one California casino.
But surely there must be some damage from this imbroglio, right? Yeah, it's not good to lose ad money from the online gaming sites, where probably more than a few viewers spend their time and money, but it's not like the spots haven't been filled. Ads hawking poker self-improvement wares now fill dead air during WPT broadcasts. And the WPT still maintains relationships with many gaming sites. For example, this season there are three WPT tourneys sponsored by online poker rooms. There's no reason Tropical Paradise couldn't sponsor a fourth.
Licensing can indeed be a great business -- just ask shareholders of Marvel Enterprises (NYSE:MVL). But before you go "all in" on Lakes, I suggest you read fellow Fool Jeff Hwang's articles on the company. His research and analysis is excellent and worth your time. Here are a couple to get you started:
Fool contributor Tim Beyers is a confessed poker wannabe. He plans to play in a local poker tournament this summer, but dreams of a seat at a WPT final table. Tim owns no interest in any of the companies mentioned, and you can view his Fool profile here.
