December 23, 2019 Casino, eSports

The future is already on the casino floor

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Oliver Lovat discusses innovation within land-based casinos, emphasizing the progress already made in the space.

Having written a UNLV paper researching the next generation of visitors to Las Vegas, I hear the statement we are wasting our time with “millennials” and young people because they just don’t gamble in casinos. This is true; however, having invested heavily in amenities for that segment in the areas of non-gaming, the industry has been successful; the number of under-40s coming to Las Vegas has grown almost continually across the past 15 years to over 19 million people. 

I am also witness to much discussion of forming a “millennials strategy,” incorporating “skill-based” games, which include esports, arcade-style games, branded slots, PSX and Xbox consoles – basically anything outside the traditional casino floor. In the past five years, many hours have been spent by executives, both correctly and spuriously, debating what the future holds for casinos, while true innovators have taken non-traditional gaming from ideas to regulated products found on the casino floor.

We are now at a stage where this sector can be critically evaluated – and what we are finding is our answers are already on the casino floor.

What are we talking about?

For the uninitiated, especially the older members of the industry, esports is the most bewildering. The best way to explain professional esports is competitive gaming in a digital format. There may be cash prizes, such as with Epic Games’ Fortnite (which has multi-million-dollar pools), or just on a local level, where kudos and smaller awards can be gained. There are more than 250 million registered Fortnite players, making it the largest game in the world.

Anyone with an internet connection and hardware participates; but what has evolved is an established viewing audience on platforms such as Twitch.tv. Twitch is owned by Amazon and the numbers are staggering: an average of 1.3 million viewers at any given time, three million unique content creators every month, 15 million average daily visitors and more than 500 billion minutes watched in 2018.

A frequent expression heard in the discussions surrounding esports is the incomprehension of the third-party viewing element, which is significantly different from video game behavior. However, viewing of television sport has high figures and more people play esports than football, baseball, hockey or golf; so why wouldn’t esports feature the same high viewing figures? 

The principle innovators in the video game casino product area are Synergy Blue, Next Gaming, Gamblit Gaming and GameCo.  Most conform to the design of traditional slots, although these games involve the player playing a game where skill can influence the outcome, with cash rewards rewarded via a random number generator determining the size of the prize – or likelihood of award. 

Not dissimilar from the quiz games that appeared in pubs across the UK from the 1990s, these games are targeted at the younger customer and are either proprietary design, or co-opt known titles, such as Gamblit’s Pac-Man or Next’s Arkanoid and other early arcade titles. Like arcade games, there is a pay-to-play component, yet the nature of the games is very different.

Skill-based games are not new. Blackjack is a skill-based casino game, as is poker, which grew in popularity during WWII through GIs serving the US. This was played in the post-war period as a social tool played by the ex-servicemen around the kitchen or living room table. Of course, high stakes and tournament poker always attracted a dedicated crowd and legendary characters, including Nick “The Greek” and Doyle Brunson (the first person to be made a millionaire from tournament winnings). Professional poker really came alive in 1970 when Binion’s hosted the World Series of Poker (WSOP), attracting even more characters and awarding bracelets for winners. 

California allowed poker rooms in the late 1980s and, with more people playing, the market grew. Poker became a televised phenomenon; before federal restrictions, online poker was one of the earliest commercial successes of the nascent internet. Today, the Caesars-owned WSOP is a global event. In 2019, the Main Event featured over 6,000 entrants paying $10,000 to enter, with Hossein Ensan winning the $10m first prize. Poker is not just a casino tournament product, with video poker a key component in many casinos. In some, it is the best-performing aspect, in terms of coin-in. 

William “Si” Redd, the entrepreneur, casino owner and a 1991 inductee to the Gaming Hall of Fame, understood the attraction of screen-based poker to the gaming customer. Originally working as a distributor for Bally (in the days when the company was focused on jukeboxes), he set up Sircoma to distribute his video poker games, based on five-card draw. His first patent was in 1979. While others, notably Bally, had doubts about his product, the once niche product grew.

Sircoma was renamed International Game Technology and today IGT is one of the largest gaming technology suppliers in the world. Lenny Frome published many mathematical strategies for video poker, simply explaining the skill component to the format. This allowed, in some games, for the house edge to be reduced to a minimal amount. With the active distribution of the games, and widely published insights in how to play near-profitably, the game grew exponentially and is still highly popular to this day.

Firstly, and crucially, we need to separate esports and video game gambling. Esports is a thing. It is real. It is established. Undeniably, the man that has led the drive to converge esports and casinos is Seth Schorr. We consider many gaming visionaries to be near the end of their careers, yet Schorr is in his prime, on an ongoing mission to bring together old and new gaming experiences. 

At the Downtown Grand Casino in Las Vegas, Schorr implemented the first esports program, with in-house teams, contests and events. The journey has been complex and fraught in places, but other casinos have sought to adapt accordingly. As interesting is the launch of Schorr’s KonekTV, a commercial product that can stream esports (and other relevant information, such as sporting odds and vendor promotions) to existing TV infrastructure. Whereas traditional sporting events are ubiquitous in every bar and pub, his platform allows for the next generation that prefers to watch esports, bringing a new demographic into a social environment.

The problem, as far as casino operators see it, is how do you monetize esports? The answer lies on the casino floor; esports is today’s poker. The UNLV says, across Nevada, the average monthly revenue obtained from poker in casinos is c.$10m. This is not a significant amount when the costs of operating tables across the state are considered. But what poker does is bring in revenue in food and beverage, potentially hotel rooms and additional gaming spend; perhaps poker players play table games or slots when they are in the building. Poker is an amenity for the casino.

Esports should be considered the same. Games can also be televised, tournaments held, rakes charged and ticket revenue obtained. Granted, many of the core demographic of esports players may be below legal gambling age. That though, will obviously change; until it does, all customers will still need to eat and drink – as do their families and friends.

Gambling video games are indeed something new and revolutionary, as video poker once was, and could be as lucrative. But, learning from video poker, it isn’t just about the product, it is how it evolves and how it is consumed. The secret sauce of video poker wasn’t just the game in itself. Having consulted for casinos, a look at some of the highest-performing devices shows video poker is among the most played games on the casino floor – in particular, video poker at bars. Customers sit, drink, watch sports and play video poker. 

This is very different from traditional slots which, as studies show, have a semi-hypnotic element and are played by those seeking a form of active escapism and low-level risk. Also, the most popular versions are not just the original variant, but evolutions, such as Ernie Moody’s Triple Play video poker, where the simple game was adapted for higher excitement and risk. Video Poker as a distinct measure is not recorded in Nevada, although multi-denomination slot win (of which a large amount is video poker) generates north of $200m monthly. 

The target customer of video gaming for money is not the current slot customer. Inside Caesars’ Linq resort, there are TV screens adjacent to game console screens, so sports can be viewed and esports can be played in the same line of vision; this generation is used to multi-screen simultaneous engagement.  The industry needs to find the correct place and environment  for these games to be played. 

It may be in the same format as video poker, at a bar and in front of a TV, showing esports on KonekTV. GameCo launched a bar-top games device at G2E and mini-multiplayer arena; could this be the tipping point? Otherwise, it may be that one of the games launched at this 

year’s conference could be the break-out as Triple Play Poker was. As the case study indicates, social participation was at the root of poker’s original success in the US gaming experience. Whether an amateur or professional, every poker guide will tell you there is one secret to a successful poker strategy: all you need is patience. 

Oliver Lovat leads the Denstone Group, which offers strategic advice and consultancy on customer-facing, asset-backed investment and development, with a focus on casino resorts. He is a Fellow of the Royal Institution of Chartered Surveyors and visiting faculty at Cass Business School in London. He lives in Las Vegas.

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