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IN-DEPTH 23 October 2015
Fighting to stay relevant
Confronted with a PlayStation generation who find luck-based games a complete turnoff, Julian Rogers asks how the industry can appeal to younger audiences
By Julian Rogers

Games like roulette and blackjack have been familiar fixtures on casino floors around the globe for decades. In fact, the origins of roulette, which means "little wheel" in French, can be traced back more than 200 years. These traditional casino games, along with other regulars like baccarat, craps and slots, possess an enduring quality that has drawn players back time and again in an often-futile bid to beat the house and walk away with a handsome profit. But while the traditional casino offering still largely appeals to inveterate gamblers and older players, there is increasing anxiety within the industry that luck-orientated games like slots just don’t resonate with mobile-gaming Millennials who were raised on a diet of mega-hit console franchises like Super Mario and Street Fighter.

When visiting places like Las Vegas this younger crowd tends to be more fixated on the pool parties, restaurants and nightclubs rather than chancing their arm in the casino pit. Indeed, Sin City has gained a reputation in recent years as a hedonistic playground for party-loving twentysomethings, somewhat supplanting its reputation as purely a gambling mecca. Coaxing these patrons away from the poolside entertainment and onto the casino floor is an ongoing challenge. Eric Meyerhofer, CEO of California-based gaming platform Gamblit Gaming, says most casino resorts and tribal casinos are fully cognisant of this growing problem. “Without exception, the operators recognise that they have a problem attracting younger people to the games. They see the average age of the money or the monetisation continue to rise and that doesn’t bode well.” He adds: “The floor is dominated by traditional casino games but these games aren’t penetrating the sub-40 group very well.”

Las Vegas welcomed over 41 million visitors in 2014, although just 12% came primarily to gamble, according to a survey by the Las Vegas Convention and Visitors Authority. Tellingly, only 4% of first-time visitors made the journey with their main intention being wagering. For some properties the once-critical focal point – the gaming floor – is no longer the main revenue generator. One way to redress this balance is by making gambling games that appeal to a younger generation who habitually play wildly popular casual mobile games like confectionary puzzler Candy Crush Saga or multiplayer battler Clash of Clans.

Meyerhofer’s Gamblit Gaming is trying to do just that by bringing real-money betting to mobile games with its proprietary wagering engine, while its touch-controlled surface tables offer social gambling games in bars and nightclubs. “People’s tastes are being reshaped as to what they think entertainment is,” he says. “Gambling should be about entertainment, so bring a product to that player class that they know and understand already as entertainment rather than expecting them to shift their tastes to something that is a more passive experience.”

That sounds all well and good, but bolting gambling elements to potentially addictive casual games raises the spectre of a spike in the number of people developing gambling problems. Meyerhofer, though, dismisses this idea by saying the issue will be covered by the casinos’ responsible gaming initiatives, while most players have the wherewithal to control their spending. “The vast majority of players have a budget, whether it’s how much you are going to spend in the casino’s club or on the gambling floor. And when you hit that point you are pretty much done.”

While it’s true to say table games have remained largely unchanged over the decades, slot machines have gradually transformed almost beyond recognition since the days of the rudimentary one-armed bandits. For instance, one of the latest all-singing, all-dancing slots by Aristocrat is themed around US hit comedy The Big Bang Theory and features a whopping 84-inch, ultra high-resolution 4K display. Seen in full flow with its flamboyant graphics and blaring sounds, the monstrous machine resembles a rocket launch. This licensed slot is clearly targeting a younger player (the vast majority of slots players are over 35), yet for many within this demographic these games remain an inherently luck-based playing experience with scant skill involved. For some, they are just outright boring.

Last year, however, New Jersey’s Division of Gaming Enforcement said it would welcome applications from developers of skill games, while, in May, Nevada Governor Brian Sandoval signed Senate Bill 9 that paves the way for slot machines in the Silver State to incorporate skill-based, arcade-style aspects into the games. American Gaming Association president Geoff Freeman said in a statement that the bill would allow for innovation and help gaming reach a “key customer demographic”. He also said he hoped other gaming states would follow Nevada’s lead.

The ability to offer variable-payback slots opens the door to a new level of creativity that will inject new life into the entire sectorMarcus Prater
The bill opens up new possibilities for slot manufacturers to radically transform game design and game mechanics to make them more like video games, which should attract a new breed of gambler who would otherwise shun slots. “The ability to offer variable-payback slots opens the door to a new level of creativity that will inject new life into the entire sector,” Marcus Prater, executive director of the Association of Gaming Equipment Manufacturers tells Gambling Insider. “Slot revenues have been flat, especially in North America, and operators have been asking for new levels of innovation for the slot floor. Without the ability to utilise variable-payback percentages, there’s not a way to include skill and arcade elements that are already so prevalent among our daily non-wagering gaming experiences.”

The payout on a slot machine is currently around the 88% mark, but this could rise to 98% for a skill-based slot if a player is especially proficient at a game, ensuring the house still turns a profit. What precisely these skill games will look like and how they will work in practice isn’t clear at this stage, but the industry will be aiming for engrossing hybrid games that blend just the right level of skill with luck to keep players of varying abilities interested. “If it’s a pure skill game then only the most skillful will win and that’s not a mass-market product,” says Meyerhofer. “Hybrid games have a blend of skill and chance in a way that poker does. So not everyone is going to win on any given night but you are willing to take the shot.”

So with land-based operators examining a more diversified casino offering, it raises the question as to whether casinos in the online sphere need to explore offering more casual P2P gaming. Playing console games against online opponents for money is nothing new, of course, but operators could look to cash in on the phenomenal growth in e-sports, for example.

Andy Harris, commercial director of Realistic Games, has been entrenched in the online and land-based gambling industry since the nineties and has worked for companies that have served up everything from backgammon to quizzes with cash prizes. However, that recurring issue with P2P gaming kept rearing its ugly head: the skills gap. “You are always going to get a small minority who are significantly more skillful than the rest,” he says, “so you end up with a situation where the rest are the people who are feeding that ecosystem. As a player, you end up getting annoyed at losing all the time. We looked at ways of levelling the playing field but it is impossible.”

Without exception, the operators recognise that they have a problem attracting younger people to the games. They see the average age of the money or the monetisation continue to rise and that doesn’t bode well
Eric Meyerhofer
Instead, there have been tweaks made to stalwarts of the casino vertical over the years to freshen up the games and create more interest and betting action. For instance, many sites offer side bets on blackjack like 21+3 (combine your two cards with the dealer’s first card to form a three-card poker hand) and Perfect Pairs (a bet on whether your cards be a mixed pair, a pair of the same colour or an exact match of colour and suit).

Similarly, including more engaging and interactive bonus rounds in slots gives players a greater feeling that they are influencing the outcome of the game. “Roulette, slots and blackjack have been around since the dawn of time and still rule the day, but they appear in a subtly different guise to how they did 20 years ago,” says Harris. “This dominance will continue but I think they will change in more subtle ways to meet consumer requirements.” For Harris, who has “absolutely no doubt” that traditional casino games will still be around in 20 years from now, it’s simple: “We have to keep evolving to keep people engaged.”

Evolving is one thing, of course, but your dyed-in-the-wool casino player probably won’t be enamoured at the prospect of casinos eventually resembling an amusement arcade. To placate these fears, it’s about striking the right balance between traditional and new. In fact, Meyerhofer foresees a “cornucopia” of chance- and skill-based games spread across the casino floor and into the bars and other areas of the property for “lounge-style gaming”. And perhaps even dedicated e-sports areas, he suggests. “Some casinos are considering putting in e-sports zones where you can spectate and wager on players. It’s being looked at very seriously.”

From the gaming machine manufacturers’ perspective, Prater says there will always be space for established games. “I think there will always be room for traditional casinos games, but we need to do something to attract a younger demographic that is setting trends and driving business in a wide variety of industries around the world. Las Vegas visitors keep getting younger, but those younger players would rather play games on their phones and visit nightclubs than play in the casino. It won’t happen overnight, but I’m confident the gaming suppliers will change that with a new level of creativity for the slot floor.” The skill-based slots are expected to start appearing in Nevada casinos in 2016. Only then will we get to see whether these machines really do captivate the PlayStation and mobile gaming generation.
DISCUSS THIS ARTICLE
IN-DEPTH 16 August 2019
Roundtable: David vs Goliath – Can startups really disrupt the industry?

(AL) Alexander Levchenko – CEO, Evoplay Entertainment

Alexander Levchenko is CEO of innovative game development studio Evoplay Entertainment. He has overseen the rapid expansion of the company since it was founded in early 2017 with the vision of revolutionising the player experience.

(RL) Ruben Loeches – CMO, R Franco

Rubén Loeches is CMO at R. Franco Group, Spain’s most established multinational gaming supplier and solutions provider. With over 10 years working in the gambling, betting and online gaming industries, he is skilled in operations management and marketing strategy.

(JB) Julian Buhagiar – Co-Founder, RB Capital:

Julian Buhagiar is an investor, CEO & board director to multiple ventures in gaming, fintech & media markets. He has lead investments, M & As and exits to date in excess of $370m.

(DM) Dominic Mansour – CEO, Bragg Gaming Group:

Dominic Mansour has an extensive background of nearly 20 years in the gaming and lottery industry. He has a deep understanding of the lottery secto,r having been CEO at the UK-based Health Lottery, as well as building bingos.com from scratch, which he sold to NetPlay TV plc.

What does it take for a startup to make waves in gaming?

DM: On the one hand, it’s a bit like brand marketing; you build an identity, a reputation and a strategy. When you know what you stand for, you then do your best to get heard. That doesn’t necessarily require a TV commercial but ensuring whatever you do stands out from the crowd. Then you have to get out there and talk to people about it. 

AL: Being better than the competition is no longer enough; if you’re small, new and want to make a difference – you have to turn the industry on its head. Those looking to make waves need to come up with a new concept or a ground-breaking solution. Take Elon Musk, he didn’t found Tesla to improve the existing electric cars on the market, he founded it to create the industry’s first mass-market electric sports car. It’s the same for online gaming; if you want to make waves as a startup, you have to bring something revolutionary to the table.

JB: Unique IP is key, particularly in emerging (non-EU) markets. As does the ability to release products on time, with minimal downtime and/or turnaround time when issues inevitably occur. A good salesforce capable of rapidly striking partnerships with the right players is vital, as is not getting bogged down too early on in legal, operational and admin red tape.

How easy it for startups to bring their ideas to life? How do they attract capital?

AL: It depends on the people and ideas behind the startup. Of course – the wave of ‘unicorns’ is not what it used to be. Some time ago the hype was a lot greater in terms of investing in startups, but that’s changed now. Investors now want more detail – and even more importantly, to evaluate whether the startup has the capacity (as well as the vision) to solve the problem it set out to address. That’s not to say investors are no longer interested in startups – they certainly are – but now more than ever, it’s important for startups to understand their audience as well as dreaming big.

JB: To get to market quickly, you need a great but small, team. If slots or sportsbook, the mathematical engine and UX/UI are crucial. Having a lean, agile dev team that can rapidly turn wire framing and mathematical logic into product is essential. Paying more for the right team is sometimes necessary, especially when good resources are scarce (here’s looking at you, Malta and Gibraltar).

Building capital is a different beast altogether. You won’t be able to secure any funding until you have a working proof of concept and, even then, capital is likely to be drip fed. Be prepared to get a family and friends round early on to deliver a ‘kick-ass’ demo, then start looking at early-stage VCs that specialise in growth-stage assets.

How do you react when you see startups coming in with their plan for disruption?

RL: We welcome the innovation and fresh thinking startups bring. This is particularly the case in Latin America, with a market still in its infancy. One area we’d especially like to see startups making waves is in the slot development sector. Latin America is a young market that needs local innovation suited to its unique conditions – especially in regard to mobile gaming.

Operators eyeing the market have Europe‐focused core products, which creates a struggle to work to the requirements of players and regulators. To succeed there, it has become more important than ever to work with those with a knowhow of the local area to adapt products and games to besuitable from the off; we welcome the chance for local talent to develop and grow.

Do you think it’s easier for established companies to innovate and establish new ideas? 

AL: From a financial perspective, yes. It is without a doubt easier for incumbent companies to establish a pipeline of innovation via their R & D departments, as well as having the tools to hand for data gathering and analysis.

But it stops there. Startups hold court in every other way. Not only are they flexible, they can easily switch from one idea to another, change strategy instantly as the market demands and easily move team members around. Established companies know this – and this is why we’re seeing an emerging trend for established companies to acquire small, innovative online gaming start-ups. They have the right resources and unique ideas, as well as the ability to bring a fresh approach to businesses’ thinking.

RL: For me, it’s always going to be established companies. Only with the resources, industry experience and know‐how can a company apply technology and services that truly make a difference. Of course there are exceptions. But when it comes to providing a platform that can be approved by regulators across multiple markets – as well as suiting an operators’ multiple jurisdictions – it is simply impossible for a couple of young bright minds with a few million behind them to get this done.

DM: I actually think it’s harder for established companies. It’s key to differentiate between having a good idea and executing one. That’s where the big corporates struggle most. They’re full of amazing people with all sorts of great ideas but getting them through systems and processes is nearly impossible.

Is it essential to patent-protect innovative products?

AL: It’s a very interesting subject. If we take IT for example – patents can actually become a block to the evolutionary process within the industry. Of course, getting a patent future proofs yourself from the competition copying your concept but, having said that, if you’re looking to protect yourself from someone more creative, smarter and agile, you’ve probably lost the battle already!

In our industry everything is moving faster and research takes less time than the development itself. No matter how good you are at copy pasting, you can’t copy Google or Netflix. The most important thing is not the tech itself but rather its ‘use-case’ – or in other words, does it solve what it’s meant to solve? Competition is healthy and the key to innovation. If you spend your whole time looking behind you, you’ll never be able move forwards.

JB: Tricky question, and one that depends on what and where you launch this IP. It can be difficult to patent mathematical engines and logic, mostly because they’re re-treading prior art. Branding, artwork and UX is more important and can easily be copied, but the territories you launch will determine how protectable your IP will be once patented. US/EU/Japan is easy but expensive to protect in. But China/South East Asia is a nightmare to cover adequately. Specialised patent lawyers with experience in software, and ideally gaming, can help you better.

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