I started covering this industry in the mid-1990s when the gaming label really took hold under the leadership of the American Gaming Association and Frank Fahrenkopf. I always thought it was smart politics, a way to give elected officials language that they and their voters could be comfortable with as casinos spread like wildfire across the country. Two decades later, it’s the “gaming industry,” no doubt about it.
What that means to actual customers was always problematic. After all, there was another gaming industry, video gaming, that arguably had a more legitimate claim on the term, as outcomes were tied to actual player performance. As things evolved, social games fell into the gaming category as well. And the casino gaming industry started to get antsy about the future. Non-gambling games are eating up mindshare. Not only that, people are finding ways to monetize the results of the games without applying gambling-style math. Can skill-based gaming games become successful gambling games in a brick-and-mortar casino setting?
This was a major focus of G2E 2016, where every session with an eSports or skill-based angle was packed with attendees. I went to my share of them and I will say one thing up front: I have a sense of where things are going, but I don’t have the slightest clue where it’s going to end up. I also had a server-based gaming flashback. This was the post-TITO mousetrap that was going to drive the replacement cycle with new terminals tied to a central server (or servers) that would give casinos the power to change games and game math on the fly. The benefits to the operator were apparent, but no one was ever able to satisfactorily explain the value to the player. So it went nowhere. We have talked about things that never really panned out with enthusiasm and a high degree of certainty for the better part of a decade in this industry, so wait-and-see is probably a reliable way to go when it comes to would-be paradigm shifts.
That’s a long-winded way of saying what marketing research guru Mike Meczka said in four words when he was presented with the Casino Marketing & Technology Lifetime Achievement Award a few years back: “It’s the gambling, stupid.” (I’m looking at my blue button with the yellow text right now, Mike.) There’s a strong argument that skill-based games will only become noteworthy in casinos if the gambling component, also known as randomness, can be successfully incorporated.
But there’s also an argument that things change in technology-driven environments and industries need to either evolve or risk decline. With eSports, the gambling component could be limited to betting on players in the context of a well-regulated competitive video gaming regime, and why not make Las Vegas into the live eSports capital of the world while we’re at it, with eventual migration to regional markets? However, gamers peak in their late teens and tend to bail in their early 20s, so how does that work in venues where the minimum age is 21? At the show it was clear that suppliers are on the case, with some novel approaches, i.e. arcade-style games that are purely skill-based with sleek, lounge-friendly designs. Casinos are paying attention, but, as noted, they have been told their world will change before.
And, let’s face it, highly-regulated industries have their quirks. One is an aversion to volatility, particularly when the business model has been tied to slot math and 10 to 12 percent hold percentages that have reliably thrown off streams of cash to state and tribal governments for decades now. Casino owners can be forgiven for making that piece of the business top priority. But you can see the need to change, even if skill games are absent from the equation. Electronic table games, for instance, continue to grow in popularity for many of the same reasons that pure gaming is popular; there is a skill component and the technology is cool. But even though they play as regular table games with 2 to 5 percent holds, they typically fall under the slot department. This can lead to arcane discussions about why slot hold is falling even though the culprit is a popular new game. Some suppliers will tell you that the typical slots/tables operational dichotomy isn’t a fit with coming opportunities in ETGs, skill-based and arcade-style games. If there’s a sure thing here, I’d say it’s complexity.