Wednesday, November 12, 2014

Nothing Stays the Same – Everything Changes: Skill Based Gambling

I have always tried to strip my language, both written and verbal, of absolutes but the title of this blog post alone has two – nothing and everything. When you are talking about technology, absolutes seem to fit.

Technology, computers and digital devices especially, have drastically changed the way we live and many of the institutions that were once commonplace.

The home computer has decimated the travel agent business. Nearly everyone needing a plane ticket and/or a resort reservation these days merely logs on and makes the arrangements.

When was the last time you saw anyone loading a camera with celluloid film? Not any time in the last decade or so. Computer technology has made film obsolete to the point that most movie theaters in the USA no longer rely on "movies" that are on film but digital ones shown on digital projectors instead.

Land telephone lines are dinosaurs and print newspapers are fast following on their path to extinction. Pay phone kiosks and phone books are relics of times past. CDs, once heralded as the most modern of technologies, are merely shiny remnants of an outdated music playing format following in the footprints of cassette tapes, eight track tapes, vinyl long playing records, and 45 rpms with big holes in the centers.  

And although many of us wait anxiously for our daily delivery of snail mail, that too has a limited shelf life, I am sure.

Why should the gambling industry go unscathed? It will not and it has already started to feel the encroachment of new technology.

Online gambling is not a newcomer to any of us. According to Wikipedia (which, by the way, made the Encyclopedia Britannica obsolete!), Planet Poker opened its digital doors for real money gambling in early 1998, years  before no-limit hold ‘em poker was all the rage. In the last 15 years we have seen legal online gambling come and go and come back again and I can assure you that it will never go away for good. With improvements in network access and better software, online gambling, poker in particular, will come close to overshadowing and possibly even eclipsing the card games played in brick and mortar gambling halls.

The entire gambling industry is up for grabs and despite the grumblings of casino moguls like Sheldon Adelson and Steve Wynn, digital “gaming,” as we now know it, is where the future lies.

Gambling is fun, it’s entertaining, and it’s often exhilarating but the bottom line is that gambling is a business and the industry exists to make money for corporations and stockholders, not to keep a smile or a frown on anyone’s faces. Good corporate process demands that the product meet the needs/desires/whims, etc. of the consumer. Baby boomers have sustained many industries and they continue to support the gambling industry but, sad as it seems, baby boomers are growing older and soon will be no more. Losing a consumer base is unacceptable for a business,  so smart companies look ahead and this is what they see – a younger generation, raised on computer games, familiar with technology, comfortable with cell phones, with money to burn now and in the future, who do not like the idea of losing money by chance. Instead, young people prefer games of skill and therefore they have universally ignored the lure of slot machines that so mesmerized their parents and grandparents.

For business that’s not a good thing, since most casinos generate the lion’s share of their profits from slots.

Enter “skill-based gaming.”

Although we are not talking chess, bridge or backgammon here, those games do qualify as skill-based games. Millenials play these games but they are not tailored to the characteristics that most young people embody – short attention spans, a need for quick availability, and a love of things naturally attractive and glitzy. 

 The games young people adore are the ones that are readily accessible from their smartphones – games like Candy Crush, Farmville and Minecraft.

Young people play all of these games and the manufacturers, King, Zynga, and Mojang respectively, do very well financially just as things are today. Most of these games and many others like them make money using what they call in the industry a “freemium” model –you download and play the game for free but if you get stuck you can buy more time, more lives, or more game tokens for real money, sometimes for less than a dollar at a time. That seems like a small expenditure to enable someone to make those last few connections and move to the next level. And, it is. And the companies bank on lots of young people feeling the same way, so it turns out that this gaming industry is really a numbers game. One dollar – not such a big deal; a million players spending one dollar each – a very big deal!

It is estimated that 100 million users log on to Candy Crush each day generating income in the $1 - $3 million range daily. That’s a lot of dough, a lot of dough that has not gone unnoticed by the gambling industry that is cunningly putting 2 and 2 together in the hopes of coming out with much more than 4.

$1 X 1,000,000 = $1,000,000

·         Premise – they (the younger generation) hate slot machines and the element (the only element actually) of chance.
·         Fact – they love hand-held computer skill games with a minimum of chance built in with lots of skill required.
·         Fact – they are willing to spend money – a little at a time – to succeed.
·         Conclusion – let’s build skill-based games that involve putting money at risk much in the same way as today’s slot machines and make a fortune in the bargain.

The only two things that have stopped casinos from putting some form of skill-based gaming into their venues up to this point are legal issues and development issues. Companies like European based Gambit Gaming have vowed to take up the challenge of “gamblifying” (a new industry needs new words!) existing skill-based games or some very much like them and presenting them to regulators in places where the laws already allow for this kind of wagering, New Jersey in particular. 

Nevada, unfortunately, is a step behind here since their laws do not permit skill-based gambling as written. All indications are that they are working on it and hope to have something in place sooner rather than later.

In the USA, New Jersey, in an attempt to revive a floundering Atlantic City gambling operation, has vigorously sought proposals for skill-based games and the Division of Gaming Enforcement has been quoted as saying they are “eager to receive skill-based games for consideration.”

Soon we may find that dexterity and knowledge far outweigh bankroll and wit on the gambling floors of this nation and other nations.  Soon our gambling museums may be stuffed with the electronic one-armed bandits that are so popular today. The next time you visit your local casino, instead of just spinning the “Wheel of Fortune” after you are lucky enough to get a “spin” logo to come up, you may have to answer a few questions or spell a few words. Or even better, you may not have to be inside a casino at all. The future of gaming, just like the future of nearly everything else in this universe, may soon be no farther away than your smartphone. 


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