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Friday, January 31, 2014

Understanding The Relation Between Land Based Casinos And Online Gaming

The upcoming online gambling debate between Caesars and the Sands CEO's is a bell weather for the historical, cultural and operational divide that has existed between operators of online casino game content such as social casino and online gambling operators and the operators of land based casinos. The upcoming debate addressing the legalization of online gambling in the US and its impact on land based casinos has been going on for years with casinos changing their minds on supporting online gaming or ignoring it maintaining a singular focus on land based operations.

Many people are unaware of how long land based casinos have actually been confronted with this questions and how they have vacillated between supporting, not supporting and supporting again, etc. operating, running or engaging in joint ventures related to online game content.

Between 2001 and 2004 many of the UK casinos and land based brands such as Hard Rock successfully launched online gambling operations and still do today. US casinos also entered the UK online gambling and pseudo social/gambling market around the same time and eventually closed their operations for a number of reasons.
Of particular interest was the social casino  site launched by MGM for the America audience in 2001. The service was a resounding and surprising success but was closed because the service was not tied into the MGM loyalty  systems and MGM was more interested in "real" online gambling in the UK.

The emergence of Zynga poker between 2007 and 2009 attracted the interest of land based operators again and they turned their attention to "social/freemium" gaming.  Fast forward to 2013/14 with MGM/MyVegas  jumping back into the social/freemium arena  with the added benefit of integrating the property into their loyalty systems. IGT buys DoubleDown and the other Slot providers such as Bally's and Williams all start to convert their traditional offline slot content to online versions. Caesar's buys Playtika, etc.

Despite all of this activity there still remains a divide and a degree of skepticism on the part of traditional casino operators, small regional casinos and even operations managers within the larger land based casinos that have launched online businesses. If online is real and if they should get involved?  The Sands is upfront about this, however, others have the same feeling. Social and real money online gaming operators still sense an aloof  and sometimes disconnected relationship with land based casino staff.

So what is at the basis of this confused and for many, a rather frustrating state of affairs between offline and online gaming operations?

The fact of the matter is that both of these businesses models could not be more different. There are more reasons for  each group not to engage then their are to engage. Everything from day to day operations, marketing, staffing, content selections, priorities, regulations, history, skill sets, etc.  are different.

The one binding factor between the two business sectors is that in the US and Canada the gambling regulation and license are being  controlled by land based operators. This does force the two sectors to collaborate in some way and ironically forces land based operators to become online gambling experts.

The Sheldon Adelson Gary Loveman debate is going to  engage the question "will online gaming positively or negatively impact land based operations" and does online gambling make any sense from a purely financial sense based on a land based casino's operating model, cash flow and profitability. we will see how the debate goes.

Social and freemium gaming is a wild card in the overall debate because it is not subject to the same regulatory rigor and has a very different operating model for "real" money online gambling. Pace of Innovation,  extreme competition, size of the market, etc . are examples of why this sector has a different spin to it.

In the end, despite the outcome of the debate social and online gambling are here to stay. Even if legislation to legalize online gambling roles out at a glacial pace in the US there are plenty of "illegal" sites that are and will fill the demand for this content.

There is certainly a place in the business world for land based casinos that take no interest in online social/freemium or real gaming and a place for pure online models. Offline and online are fundamentally different experiences and people will have their preferences. The questions is where will the growth in total players and revenue per player  come from?Currently, Vegas is beginning to generate more revenue from non-gaming activities. The regionals still are predominately gaming revenue. However that is because they have less non-gaming revenue opportunities. Competition is fierce in the online space, especially, in the balkenized world of European online gambling. This may force both online and offline gaming content providers to form joint venture  across borders and within different gaming models to stay competitive. Essentially, the two operating groups may have to collaborate to remain competitive.

  Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes  about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications.


Chino Moreno said...

I don't think land based casinos should be threaten with online casino sites. They should treat it as complement.
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Chino Moreno said...

Thanks for the awareness. I hope you don't mind me sharing the awareness to my fellow gamblers.

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Chino Moreno said...

Thanks for clarifying things. I definitely learn more about online casino and land based casino now.

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