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Tuesday, February 18, 2014

US Land Based Casino's Taking Very Different Views On Online Gambling And Social Casino Gaming

We have seen a flurry of announcements and proclamations recently related to the US online gaming and gambling positioning of the large Vegas based casinos.  The Sands, Wynn, Caesars and MGM have all publicly announced their views or interest in the online game space. The evidence unfolding is that there is very little online strategic gaming consensus amongst the top tier US land based operators.   What is this all all about, how does the discord impact US focused Internet gambling and is there any common ground amongst the US land based casino operators?

The Sands And Sheldon Adelson - There has been much press about Mr. Adelson's public proclamation that legalized online gambling in the US is "bad" for the land based casino business. He is opposing it and is going to lobby US states and  the federal government to stop the expansion of legalization. Why is Mr. Adelson so worried about online gaming in the US? 

Contrary to most other US land based operators the Sands has not taken the  online gaming space seriously or initiated any online initiatives. The assumption is that they have not because their primary focus has been in  land based casino development. Based on the public details of Mr Adleson's business he is indeed doing very well around the world with his land based operations. However, does he  believe that online gaming is now going to be a threat to his core business? If he does this a very controversial position because it is unclear that  online gambling  will take business away from  land based casino operations. In fact, some would argue that it drives traffic to the land based operation. Is the Sands just too late to the market and not prepared for online gaming? Conversely, is there something fundamentally anti competitive about US online gambling law or is the law too competitive not allowing US casino monopolies to own the space? Essentially, the reason or reasons  for Mr. Adelson's public opposition are difficult to quantify or qualify without knowing  the cause for his concerns.

Caesars and Gary Loveman - Caesars has taken a very proactive approach to online gaming in the US,  assuming  "real" money online gambling will be slow to roll out in the US the company has invested in social gaming/social casino properties. This preemptive, and perhaps an adjunct strategy to "real" money online gambling,  has resulted in the purchase of Playtika and Pacific Interactive. These  acquisitions are well documented. 

However, most people are unaware that Mr Loveman, as CEO of Harrahs,  launched a UK based casual/social gambling site called Luckyme about 10 years ago offering a number of casual games such as bingo, Yahtzee, etc. in a subscription service model similar to EA's Pogo property in the US.  Clearly, Mr. Loveman believes that social/freemium games have a place in the pantheon of gaming options offered by land based operators. The cost of acquiring gambling players in the UK made this model unworkable. However, lessons were learned about the popularity of this style of online gaming.  It also indicates that Caesars may be a believer in the convergence argument that espouses a close relationship between social/freemium games and "real" money gaming. However, their strategy could also indicate that  Caesars  is investing in social casino because it is unrestricted, legal, ubiquitous, has a lower operating cost relative to "real" money online gambling  and it  monetizes at an impressive rate.

Wynn And Steve Wynn - The Wynn's online gaming strategy has never been fully developed although Mr. Wynn has indicated that given the right "conditions" he would enter the space. He was rumored to want to buy  Zynga at one time. However, for some reason that deal was not consummated.  Perhaps this was a good thing given Zynga's fall from grace.  He has recently been quoted as being interested in operating an online casino in the US. However, he feels that at this time he does not believe that either the market and or the US regulatory online gambling regime will lead to a positive business "entrepreneurial" environment for online gambling in the US.   Much can be read into this assessment. However, it appears that the combination of the cost of licensing, restricted state populations and game content does not add up for Wynn. Unlike Caesars, Wynn has not commented on their current social casino strategy. This could mean that they may take another look at this sector given their earlier interest in Zynga. 

MGM and Jim Murren - MGM has been in and out of the online gambling space having launched an online gambling operation in the UK tens years ago. They closed the site due to the highly competitive UK market and the lack of brand awareness for MGM in the UK. They have also been in the social casino space with the funding of MyVegas and integration of the social game into their land based property. Essentially, they have the most well integrated online/offline game strategy  driving players to their land based operations. They are also busy exploring "real" money online gambling licenses in various states. We do not hear a lot about them in the press as it relates to online gambling, however, they may in fact be one of the biggest winners in the space if they have a combined offline, real money and social casino gaming implementation strategy.

Other Casinos - Stations Casino purchased the poker platform provider  Cyberarts  which runs the Nevada Ultimate Poker property. A number of other regional US casinos have been actively exploring the online gaming space and we will see what they implement in terms of social or  "real" money gaming. The smaller regional properties  will probably wait until online gambling legislation opens in the  states they are operating in  before they make a serious entry into the online gaming space.

It is clear that the some of the US Vegas land based casino's have been actively involved in the online gaming space for some time. The roll out of legal online gambling  in the US is now occurring and the early signs are indicating that the nature of the introduction  is causing some land based operators to think twice about entering the legal US online gambling market while others are steaming ahead.  

 Freemium/social casino continues to interest the land based casino operators as an alternative to or complement to their land based and perhaps real money online gambling  businesses. It is very interesting to see IGT become an "operator" of social casino as opposed to being exclusively focused on  a supplier of services to land based operators. Although their  earlier purchase of the Wagerworks online gambling platform and operation of that service in Europe did  indicate that they may have more  "operational" ambitions.  Will the other land based casino platform and game content suppliers follow the lead of IGT?

   The states may have to rethink their online gambling strategy and licensing structure having relied too heavily on the European online gambling model where large casinos are not present and social casino has not necessarily been exploited as a proxy for real money gambling. The US land based casinos need to have a stake in US online gambling for political and economic reasons. Without land based casino buy-in US online gambling could find itself facing some serious headwinds.  Freemium/Social gaming could be the big winner in all of this if legal US online gambling falters.

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.



         

3 comments:

Sean William said...

The most recent news about US online gambling that got the interest of many players is the integration of bitcoin of several online casinos. This paved the way for even more convenient gambling experience for US players than before. Bitcoin makes online transaction deposit and withdrawal faster, easier and safer than any other method of payment transaction.

Chino Moreno said...

Online Casinos should serve as a complementary for land based casinos instead of being a competition.
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Anonymous said...

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