The player.

Near bankruptcy, gaming giant Bally Entertainment took a chance in 1990 and tapped as CEO Arthur Goldberg, a greenmail specialist with a history of making a quick buck and moving on. Goldberg's still there, strapped to a turnaround rocket and positioned in the middle of the surging entertainment economy.

When Arthur Goldberg took the reins at troubled Bally Manufacturing in 1990 with no prior gaming experience, that didn't mean he'd never rolled the dice. An accomplished greenmailer, Goldberg, 54, had made millions in the risky business of buying stakes in companies, then selling to raiders or management once the companies were in play. Since then, Goldberg has never quite been able to shake his hit-and-run reputation. "You're the guy running the store, and with the track record you've had, you tend not to stay around very long," then-Nevada Gaming Commissioner Bob Lewis once scolded Goldberg. And when Goldberg appeared recently on cable television's Consumer News and Business Channel to talk about the company's turnaround; the sticky question came up again: Would the former corporate raider again slip out the back door, this time with a small fortune in quarters stuffed in his pockets?

Then, as now, Goldberg declined to exclude the possibility of cashing out. "I'm going to continue to do it as long as we're having fun," he says, blowing smoke in the long-standing tradition of turnaround artists. As the air clears, however, at least one thing is certain: After a raucous 1995, in which Bally's share price surged 118.3 percent to $14 - the fourth best percentage gain nationwide - the company's shareholders are having as much fun as frat brothers trashing a hotel room on spring break. Revenues jumped 9 percent, to $1 billion, while income from continuing operations swung to $76.7 million from a loss of $1.9 million in the year-earlier period.

Analysts credit the tear to the completion of Goldberg's turnaround plan, under which he brought Bally back from the brink of bankruptcy, selling or spinning off businesses in health clubs, exercise equipment, and slot machines; leveling a balance sheet that had been anything but; and managing for cash instead of market share. Some also suggest that Goldberg's success marks both the ascendance of the bean counter in a business traditionally marked by flamboyant players such as Kirk Kerkorian, Steve Wynn, and Donald Trump, and the triumph of solid business principles over the underworld associations that cling to gambling like ketchup stains on a white tuxedo.

"New Age casino kings packing MBAs instead of heat," The New York Times Magazine recently intoned. Whatever the metaphor, Goldberg has Chicago-based Bally firmly positioned at the center of the so-called entertainment economy, among the fastest-growing sectors of U.S. business, which includes sports, casinos, amusement parks, movies, and video games. And perhaps most important, by shedding all noncasino operations, the company's chairman, president, and CEO has grabbed Wall Street's brass ring, making the company a much-valued pure play - in gaming, no less, entertainment's single hottest sector.

"Everyone wants to be entertained," says Goldberg, explaining the public's love affair with wagering. "The casino has taken the place of the racetrack in American society. We get all types in here: couples in their 70s who get a $10 sleeve of quarters and have a buffet meal for $4.95, and gamblers with credit lines of a half-million dollars.

"There's the pace and the excitement," continues the CEO, himself a racehorse owner who allows a lifelong passion for shooting craps - though not, of course, at Bally properties. "Have you seen the [New York State Lottery] TV commercial where Chuck the mail boy comes in, and now he owns the company?" he asks. "There's always that dream. We had a guy come in here recently and win an $8.5 million jackpot. You can't get that entertainment value anywhere else."

As a result, business is booming: Americans now spend more money on legalized gaming than all other forms of entertainment combined. On the casino side, Atlantic City, helped by gaming ally New jersey Gov. Christine Todd Whitman, is on a roll, finally reaping the benefits promised when gambling was legalized there nearly 20 years ago. Las Vegas, too, is abuzz with Bally, Mirage, and MGM Grand developing new projects, and deep-pocketed players such as Marvin Davis, Carl Icahn, Ron Perelman, and Sumner Redstone circling in the skies, looking for a stake. Riverboat gambling is hot in Louisiana and Mississippi; Connecticut has crashed the scene with the massive Foxwoods complex; and when the dust settles on the decade, U.S. casino revenues are expected to have tripled to around $24 billion.

Goldberg says the industry may experience a short-term correction as it absorbs new capacity over the next several years. There are also concerns about the economy (gambling is dependent on discretionary spending), and Goldberg acknowledges that states and municipalities - once trampling one another to compete for casino revenue and jobs - are looking harder at the deals they cut in terms of their income potential and social consequences.

"We hold a selectively favorable short-term outlook and positive longer-term view of the gaming industry," says Daniel Zell, an analyst with New York-based Donaldson, Lufkin & Jenrette. "It is becoming increasingly difficult to identify undervalued opportunities in the sector." Zeff describes Bally as "an intriguing investment, if not a compelling trade," handing the company DLJ's "outperform" rating, second-highest on a five-point scale. Despite the fact that Bally's shares more than doubled in 1995, Zeff says the company "may still deserve a look."

It's a foggy afternoon in Atlantic City; the visibility from the executive offices of Bally's Grand Casino Resort stretches barely to the oceanfront boardwalk. Inside, Wally Bart, Arthur Goldberg's right-hand man here in Vegas East, a stocky, straight shooter who could double as casino bouncer - Joe Pesci in the movie, "Casino," the image clicks into place - is holding forth on the fine points of the business. But the real attraction is the corner office itself, once occupied by Steve Wynn, the gilded showman who promoted this palace, the former Golden Nugget, in television commercials with celebrity buddies such as Frank Sinatra. Wynn is now chairman and CEO of Mirage Resorts, but the ostentatious thumbprint remains: terra cotta and cream-colored marble tile in an entrance foyer, a drop-ceiling with brass fixtures and a stained-glass cloister of the boardwalk a century ago with men in handlebar mustaches courting damsels with parasols. The private bathroom alone, with a brass sink and fixtures, probably cost a croupier's annual salary. Noticing a visitor gawking at the display, the gravel-voiced Barr tersely declaims, "It's not our style."

Indeed, not: When Goldberg took over the company, he promptly eliminated the executive dining room, private jet, and corporate Rolls Royce - and enlisted Barr as Bally's president and COO in Atlantic City and the Mid-South region, because No. 2 shares with No. 1 a passion for jack-hammering costs and tracking cash flow, EBITDA, and other accounting arcana.

Goldberg, late for an interview, jaunts into the room with a plastic bag full of heavy, jingling objects, which he plunks down on a coffee table. "Bring your quarters?" Barr asks with a smirk. Not likely. Whatever Bally's commitment to austerity, the lord of the realm, tanned, square-jawed, and impeccably trim, decked out in a European-cut suit with a two-toned, spread-collar shirt, bold print tie, and brown, alligator loafers, looks like he belongs here.

Appearances, though, can be deceiving. Despite friendships with politicians such as New Jersey Sen. Bill Bradley and former Gov. Jim Florio, Goldberg, a Rutgers graduate who lifts weights in season with the school's football team, styles himself as a regular guy. He says his financial training gives him a different focus than other gaming impresarios: business before pleasure. Born and raised in New Jersey, Goldberg obtained a degree from the Villanova Law School. He took over his family's trucking business, Transco Group, and went on to run Triangle Industries, a wire and cable manufacturer, and defense contractor International Controls - after fugitive swindler Robert Vesco quit the company, and the country. (Goldberg trafficked in the stocks of Triangle and IC as a prelude to his management roles with the companies.) In 1989, Goldberg was serving as vice chairman of the New Jersey Sports Authority, a quasi-regulatory body, when his wife, Ronnie, urged him to take a chance on what was then Bally Manufacturing. As Goldberg watched the stock plunge from $12 to $2, he accumulated a 5 percent stake, sold the board on a turnaround plan, and was ushered in to succeed then-Chairman and CEO Robert Mullane. While the plan had a long fuse, the explosion blew the doors off in 1995: Bally's triple-digit stock-price gain is all the more significant given that an industry index of 15 leading companies declined by some 10 percent.

Whether Goldberg is as plebeian as he maintains, anyone who touches this business - or is touched by it - cannot help but be transformed. Caught up in a race to match the legions of white tigers, pirates, and princesses of Las Vegas' theme parks, Goldberg recently fielded his own entry: Paris Casino-Resort, located on 25 acres next to Bally's Las Vegas. The resort, expected to be completed in 1997, will be modeled after Paris and include as its central feature a 50-story replica of the Eiffel Tower, along with scale models of the Arc de Triomphe, Champs Elysees, the Paris Opera House, and the River Seine. Goldberg even plans to import French vines and to produce his own wine on site. "It'll be like a microbrewery," he says.

Common to all the new venues is a seamless, nonstop environment - "continuous play," Goldberg calls it - where gamblers can wager on standard casino games and slide over to bet on horse races on television when they get tired. Though hardly representative of a casino's prime-time, nightlife glamour, a recent afternoon crowd at the Grand Casino comprises battalions of elderly bingo players disembarking from diesel buses and middle-aged housewives jerking slot machines in hypnotic repetition.

Though the underworld connections have faded into the background, the gaming industry fights a constant public relations battle against the seaminess that lingers in casinos. Consequently, it portrays gambling as a harmless diversion - an accurate depiction in most cases. Goldberg and other gaming CEOs adopt the approach of entertainment executives, who argue that music and movies don't cause violence but merely reflect popular culture and market demand. "People are going to gamble whether we're here or not," says Goldberg, who describes gaming as a "service industry."

Goldberg prefers to do most of his own gambling on the open market. Clearly, he hasn't yet kicked the takeover habit, and shareholders likely are hoping the CEO's side bets will provide enough amusement to keep him around for awhile. When Circus Circus was stumbling in 1994 under the leadership of CEO William Bennett, Bally Entertainment bought 680,000 shares of Circus stock before the besieged company adopted a poison pill, and Goldberg backed off. Goldberg played a similar game with Caesar's World before Rand Araskog's ITF - after taking a hard look at Bally itself - purchased the emperor's choice for $1.7 billion. Goldberg says Bally pocketed $12 million on the Caesar's sequence. More recently, Goldberg is said to have compiled a 10 percent stake in Telemundo, a Spanish-language TV network based in Miami, and a 4 percent share of Aztar, owner of the Tropicana in Las Vegas and TropWorld in Atlantic City.

The Player spoke recently with Chief Executive about Bally's plans and prospects.

- Joseph L. McCarthy

DOLLAR OPERATION

What was the basis of your turnaround strategy for Bally?

We decided to run the company for cash flow instead of earnings. If you run for earnings, you don't necessarily have cash. But if you run for cash, usually you'll develop earnings. It's important to have money to pay the bills.

Previous management paid interest with borrowings. On an interim basis, where you're planning a project, that's OK. But on a long-term basis, putting $300 million of debt on a key asset to fund interest payments is stupid.

One of my priorities on taking over here was to buy back our debt; the strongest part of our balance sheet was our liabilities. Marketing is great, but numbers are very important.

We also segregated out all of the non-gaming business lines, and that's when the earnings really exploded. This was the first time in 10 years that Bally was in the black for the fourth quarter.

Both of the businesses you've spun off - gaming equipment and health clubs - are doing reasonably well. So why were they not a good fit for Bally? And what is it about a pure play that Wall Street finds so appealing?

I think people understand a pure play: It's hard to have dissimilar businesses. Focus is important, and capital is limited. So if you're going in more than one direction, to whom do you give your capital?

In addition, about two years ago, we began to realize that our stock was languishing at $5 or $6. People said, "You're doing a great job on gaming, but we don't understand that health-club business." It's much different from casinos. You spend money upfront to build a club, but cash flow comes in over the life of a three-year membership contract. That causes fluctuation. Wall Street does not like anything uneven or unexpected.

Upon your arrival, you also encountered some problems as a vertically integrated business.

Yeah. We were making slot machines. Why would my competitors in the casino business want to make me wealthy by buying my machines? Another example: We were simultaneously in the health-club and exercise equipment businesses, making bikes, treadmills, and other aerobics machines. And we were selling this equipment to clubs that were our competitors. Why would they want to make us healthier by buying our equipment? So we can build more clubs to compete with them? It was a silly idea from the start.

ART OF THE DEAL

Gaming seems to be a lot like the hotel business. You build a property on the waterfront, then someone else puts down a landfill, builds on top of it, and takes away your water view. Isn't that what happened to Bally with a dock-side casino on the Mississippi?

Just about. We took over a project on the Mississippi River from a company named Lady Luck that didn't have the funds to finish. We were under the impression that no one would be closer to the big market in Memphis, TN. Lo and behold, regulations changed, and people were allowed to dig canals. We went from closest to farthest overnight. So we recently moved the barge from Tunica Township to Robinsonville, Tunica County. Once again, we're now closest to Memphis.

You've been predicting a short-term slowdown in gaming. Why?

I see a slowdown in some jurisdictions and in the number of new jurisdictions that are legalizing gaming. Many referendums have been defeated lately, like in Florida, where they wanted to install gaming at 57 racetracks. States are saying, "Not now, maybe later."

What's the rationale?

I think they want to sort out some of the elements of what gaming really produces in a new jurisdiction. In New Jersey and Nevada, where gaming has existed for years, it's a known quantity in tourism, revenues, and, on the down side, in social problems. But in new areas, regulators and legislators perceive a risk of crime - which has proven to be false - additional welfare, and people gambling too much. Some of these objections come on moral grounds.

There's also the regressive tax issue. Gambling taxes poor people more than rich people. If the state takes 8 cents on the dollar, and I make twice what you make, you're really paying twice the taxes.

Some states also seem to be looking for a greater cut of the business in terms of taxes.

Mississippi, Nevada, and New Jersey all have single-digit tax rates. Louisiana is the only one in double digits, and it's already had three bankruptcies there. The tax rates, of course, were not the entire reason for that. Some people just put too much money into their projects and couldn't generate a sufficient return.

But I worry that too many facilities in too many jurisdictions will cut margins to the point where we can't provide the services.

NET PLAYERS

With the Internet booming, people are talking about interactive gaming as the next big frontier. What's your take?

We're going to be looking at it, although there are some major legal and regulatory issues involved, particularly in terms of underage gaming. They can't control pornography on the Internet, how will they control video poker? Moreover, there are financial implications. Computer hackers seem to be able to get into anything.

From a business standpoint, what is gaming's appeal?

Here, we have the ability to increase demand through smart marketing and the development of new products. When I ran a defense contractor, International Controls, the biggest product we had was bombs for the military. There was no way to increase demand short of starting a World War. [Laughs.]

Do you gamble yourself?

I really don't play the horses although I own a couple. But over the years, I've loved to play dice. A game of craps is mentally and mathematically challenging, and it transcends almost everything.

You think that's the quintessential form of gambling, an All-American game?

It came out in World War II, with sailors playing on battleships. The jackpot's still the American dream. When we don't have dreams, we're not going to have a country.

In another form of gambling, you still have the stock bug. You've been acquiring shares of Telemundo and Aztar.

We're not in the gambling business, and we're not going to gamble with our shareholders' money. However, from time to time, when stocks dip under their intrinsic value, we buy them. We're sitting right now with almost a quarter of a billion dollars in cash.

We became the largest shareholder in Caesar's. We announced an intention to buy 25 percent of the company. By law, after you buy $15 million worth of stock in a company, you need government approval under the Hart-Scott-Rodino Antitrust Act. We applied for that. Then Caesar's took $67 1/2 a share to merge with ITT. We made $12 million to $13 million.

Given that most of your deals are in your own industry, I assume this means that over the long term, you're bullish on gaming and acquisitions.

Yeah, I'm bullish. If we can do an acquisition, we save overhead on the new project. We don't need new lawyers, we don't need new purchasing people; we can immediately take out 10 percent to 12 percent in expenses. That's very effective for us.

Would you rule out categorically selling the company if you got the right offer?

I'd have to look at it if someone made an offer that would accelerate shareholder value in the long term, not just in the first hour. I've said publicly that there will be consolidation in this industry.

But?

But there are just a couple more things I want to do to build the company.

RELATED ARTICLE: If You Build It...

Construction-wise, the gaming industry is on a roll, spending lots of dollars, often cooperatively, to bring much of the world - buildings, monuments, lakes, and people - to Las Vegas. Not only is Bally recreating much of Paris on The Strip, but: Mirage has broken ground for Bellagio (above) a $1.25 billion Vegas version of the Lake Como resort of the same name, featuring a 100,000-square-foot casino and a 12-acre, man-made lake; Mirage has teamed up with Circus Circus to develop a $344 million desert-side Monte Carlo (bottom); and MGM Grand and Primadonna Resorts are taking New York, New York far, far west of the Hudson - to the tune of $425 million (below).

But not all teamwork in the gaming industry is quite so collegial - or civic-minded. As he prepares a triumphant return to Atlantic City, in the form of a $500 million hotel reminiscent of the glitzy volcanic creations he's become known for in Vegas, Mirage's Steve Wynn is facing stiff and vocal opposition from two of that seaside city's kingpins: Bally's Arthur Goldberg and the Trump Organization's Donald Trump.