Q & A: Scott Smith, Next Generation Gaming

One of the gaming industry’s leading game designers, Next Generation Gaming, has been able to carve a niche for itself with both land-based gaming machine suppliers and Internet gaming operators. The company’s strong position in both sectors comes after it was forced to re-evaluate its business plan when the Australian government enacted a permanent ban on Internet gaming for companies within its borders.

IGN spoke with Next Generation’s general manager, Scott Smith, and discussed the company’s future as it heads into 2002. Smith said the company is working on software that will help implement the new version of its games for end-users, both in the land-based and online word.

IGN: Next Generation found itself in an interesting place after the Australian government permanently extended its moratorium on interactive gaming. Many online operators headed offshore or closed their operations, but you guys have been able to spread your operations on a global scale. How did all that come about?

Scott Smith: We originally started focusing on Australia because of its location, and we had done a few deals with some of the bigger players in Australia. Obviously when the moratorium did kick in it caused a big hiccup along the way, but we were able to survive. It caused us to focus more globally, and in particular on Europe at that point in time.

In hindsight, even though at the time it wasn’t good news, the moratorium was the spark that we needed to start focusing on a more global business plan. As a result of that, we now have an office in London and we are planning to open one up in Las Vegas by next month. At this stage, probably 80 to 90 percent of our business is offshore business, which is outside of Australia.

IGN: In the long term then, it sounds like the moratorium and the subsequent ban on Internet gaming for Australian operators was a good thing for your business.

SS: It certainly did impact our sales at that point in time, but in the long term is has been a very positive thing for us. We have been able to focus on a much bigger pie. There were sales that were canceled as a result of it, but that only forced us to look elsewhere to fill that void. It took us some time to find those other outlets, but now that we have established those connections in other parts of the world, we are in a great position to grow the business more than we ever anticipated this quickly.

In the last 12 months we have been dealing with the majority of the betting suppliers and we are at different stages with most of them. We are developing games branded with our stuff, and some of the deals we are developing them for other brands. We have also spent some time focusing on the machine manufacturers in Las Vegas and we are currently working with two of the largest manufacturers out of the U.S. in building games for their slots.

IGN: Those partnerships you reference in America are with Bally’s and Williams. Both have a strong presence in the land-based arena. Do you see them merging that presence with the Internet?

SS: That is really what we can offer these companies. We have extensive experience in working with the machine manufactures in Australia and helping them convert their games to the Internet, and we are going to be able to do that with those companies you mentioned. We bring that knowledge of how the land-based world works and what has failed and how to integrate that with the Internet.

IGN: Having said that, then you must be from the school of thought that says the land-based players who have a strong brand will be able to dominate the Internet arena once they get up and running.

SS: Absolutely. I think there is no question that these guys will get the lion’s share of the marketplace when they become established players. I mean, www.ceaserspalace.com is a very hard URL to beat. It is certainly recognizable around the world, so that brand recognition will be key in their success. It certainly will persuade a lot of the players, I believe, just in that they know they can trust that brand and there will be no issues in not being paid or being cheated. I do still believe that is a concern for players. I am not saying that it actually happens, although there is a lot of historical evidence to suggest it does.

IGN: Next Generation is one of the leaders from a gaming developer standpoint. What do you see as the key elements that will be added to games in 2002?

SS: We are well advanced in the game design, but one thing that we have found difficult to implement is the functionality or the capability of the systems they run on. It is more of an issue on the Internet than it is with our land-based operations, but it still is an issue at both levels.

We can do some pretty fancy things with the games, but at the end of the day the system of the machine has got to be able to handle not only [the graphics of] the game, but also [the functions of] the game. That has been something that has led us to some work on producing some middleware technology aimed at not only the online world but potentially machines. With that we can actually create a buffer between the back end and the end user.

The back-end guys have so many things that they have to be concerned with--building functionality into the system to be able to handle a special slot game is probably fairly low on the priority list. They are dealing with all these important issues like security and management issues with all the players' accounts and everything else.

So that piece of technology that we have been working on is in beta form, and we are starting to produce a little bit more function in that. The idea is that we will take not only the function outside the system, but we will also control the display. We will take control of the game function, including the mathematics of the game. That will put us in a position where we will be able to start looking at true real-time 3D graphics.

That is one of our biggest focuses for 2002. We want to get that commercially available and something that a back-end supplier can come in and buy right off the shelf and say, "I want one of those and I want those games with it." Then with a small amount of integration, off we go and it works.

IGN: You mentioned you are beta testing that now. Do you have a timetable of when you would like to see it come to market in 2002?

SS: We are probably looking at second quarter 2002. Before a commercial product can be available, we will do an early release, and that is kind of our target for getting the early release out. That will be reasonably light on function, then we will advance it from there. It will really depend on market demand from there on how quickly we update and advance the product.

IGN: Speaking of market demand, we have heard a lot about how the global economy is slowing. What kind of trickle-down effects, if any, have you seen in the gaming industry? Do you see operators wanting to update their game offerings more frequently or less frequently than they did in the past?

SS: We aren’t at the operator level to see the figures, but it certainly has been a general topic of conversation that there has been a slowdown of business. It is becoming tougher, and the business has become more competitive than in the past. We are finding that operators are having to spend more money on marketing--some of them are spending ridiculous amounts of money on marketing--but at the end of the day that has actually been a good thing for us.

That has led operators to have a good look at the operations and what they are offering, and they realize they have to try to differentiate themselves in some way. Obviously one of the best ways to do that is through your games. So in actual fact that has worked in our favor because we have had some operators whom we were dealing with for a long time all of the sudden realize they had to differentiate themselves through their games. They have had to offer different sorts of games and use different methods of thinking in the creation of them to gain that competitive edge.