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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Social gaming revolutionizes the casino floor as revenue continues to grow

1 November 2015

A clearer picture of the convergence between social gaming and the casino floor was on full display inside the International Game Technology booth at last month's Global Gaming Expo.

IGT utilized the gaming industry's largest trade show to unveil its slot machine themed after the Netflix series "Orange Is the New Black," an acclaimed comedy-drama about life inside a woman's prison.

Simultaneously, the company launched "Orange Is the New Black" on its DoubleDown Casino social game platform.

IGT spokesman Phil O'Shaughnessy said the action marked the first time the manufacturer released a marquee licensed brand across both social and land-based operations. "Orange Is the New Black" won't be on casino floors until next year, but fans can still play the game on DoubleDown.

In the past, IGT would migrate its popular slot machine titles, such as "Wheel of Fortune," to the social casino site.

Gaming analyst Adam Krejcik said he expects the "Orange Is the New Black" model to become common.

Social gaming is far too profitable to ignore.

Krejcik said social casinos will reach $3.3 billion in revenue this year. By 2017, the figure could top $4 billion.

"This is one of the most lucrative and fastest growing subsectors of gaming," said, Krejcik who manages digital and interactive gaming analysis for Southern California-based Eilers Research.

Social gaming is typically viewed as free-to-play slots, table games and bingo played on a desktop computer or a mobile device. Players have the option to pay a nominal fee for virtual tokens — often less than a $1 for thousands of chips — in order to increase their bankroll. The fees are the primary revenue source.

Krejcik delivered a keynote talk on social gaming at the recent Casual Connect Conference in Tel Aviv, Israel. A copy of his presentation was sent to the investment community.

He said the social gaming marketplace has become crowded but dominated by "very large players." However, "room for growth" still exists.

Slot machine giants IGT and Scientific Games Corp. have their own social casino businesses. Casino operator Caesars Entertainment Corp. operates Playtika through its Montreal-based Caesars Interactive Entertainment. MGM Resorts International and Station Casinos entered social gaming through the myVegas application created by Burlingame, Calif.-based PlayStudios.

Casino operators said social gaming allows the companies to connect with customers even when they are not at their properties. MGM and Station Casinos customers can redeem myVegas points for nongaming rewards, such as restaurant offerings and room nights.

An increasing number of commercial and tribal casino operators are launching social gaming websites. Krejcik predicted the slot machine manufacturers will soon provide interactive versions of their games and titles to casino-owned social gaming sites, which will create a new revenue stream for the manufacturers.

"Bringing land-based content to social casino has been widely successful," Krejcik said. "There is no reason to think why a few established social brands couldn't also be successful on casino floor."

IGT was ridiculed when the company paid $500 million in 2012 for DoubleDown, which at the time was a stand-alone Seattle-based social gaming site that dominated Facebook. In the last quarter, before the company's merger with lottery provider GTECH, interactive gaming was the fastest-growing of the company's business segments with revenue increasing 23 percent.

Before Bally Technologies merged with Scientific Games, the slot maker spent $100 million to acquire Dragonplay, an Israel-based social gaming business. Krejcik said Scientific Games' new interactive division could prosper in the social table game market through ownership of SHFL entertainment, which controls a large library of table game content.

The future looks bright for the sector.

With skill-based slot machines the hot-button topic at G2E, Krejcik speculated the concepts presented at the show could find their way into social gaming experience.

Krejcik unveiled 13 different predictions for social gaming at the conference, including Caesars Interactive spinning-off "undervalued" Playtika into a separate publicly traded company.

In the first quarter, Caesars Interactive reported social gaming revenue of $167.6 million, more than double the revenue produced by one-time social gaming giant Zynga and three times the social gaming revenue produced by IGT. In addition to Playtika, Caesars Interactive owns Buffalo Studios, Pacific Interactive and a World Series of Poker free-play site.

Krejcik said Zynga — which began the process of earning a Nevada gaming license a few years ago before canceling the idea — could re-emerge. The company, which owns such games as "FarmVille" and "Words With Friends," has a social casino site that has been overshadowed by DoubleDown, with its IGT games, and Playtika.

"One of these days, you might see a Zynga casino in Las Vegas or something based on Playtika's 'Slotomania,' " Krejcik told Venturebeat.com.
Social gaming revolutionizes the casino floor as revenue continues to grow is republished from GamingMeets.com.