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Competition or Convergence?

Is online gaming the way of the future, or self-defeating?

Competition or Convergence?

Online gaming. It seems like everyone is doing it. But exactly how we are all doing it is the crux of the issue.

Operators, of course, want to get into the game. They want to run their own online casinos, extend their brands, and gain new revenue and marketing streams. The problem is that most gaming companies—even the big boys like MGM Resorts or Caesars Entertainment—lack the in-house expertise to conduct online gaming effectively, so they have to go outside the company.

For MGM Resorts (and Boyd Gaming, as well), the answer has been to partner with bwin.party, one of the largest i-gaming companies in the world. Caesars has reached a deal with 888.com (and its Dragonfish subsidiary) to provide online gaming services to the company.

The slot manufacturers have also noted the growth of online gaming and gotten into the game. IGT has bought several online gaming providers, starting with pioneering online gaming systems company WagerWorks in 2005. Bally has developed an online gaming division, and has entered into joint ventures and partnerships with outside companies. WMS was one of the first into the business and recently announced the formation of Williams Interactive, which builds on its acquisition of the Jadestone Group and other partnerships, including one with Dragonfish. Other manufacturers have also developed strategies to enter the online gaming provider business. It’s becoming an online boomtown.

The market is going to undoubtedly be there. As I said right at the start, everyone is doing it. That means everyone from the little slot parlor in Louisiana to a mighty casino on the Strip in Las Vegas will have to have an online presence.

Of course, there’s a little matter of legalization to start with. But now that Nevada and Delaware—and soon New Jersey, California, Iowa and others—have legalized online gaming/poker, it’s just a matter of time before the issue gets the attention it deserves at the federal level. In fact, sources tell Global Gaming Business that Senators Harry Reid and Jon Kyl have already agreed on a basis for the legalization of online poker. Whether that can be accomplished or not in the “lame-duck session” following the November presidential election isn’t clear, but it’s not going to be long before there is some unanimity.

So while the path forward isn’t quite clear, the gaming operators are going to have to make choices when it comes to their online gaming providers.

When IGT bought Double Down Interactive earlier this year, there were some unattributed complaints from Las Vegas operators that IGT seemed to be setting up competition to their operations. Now that’s a stretch in any sense of the word. First of all, the Double Down casino is a play-for-free application on Facebook. A very popular one, granted, but it does not conduct real-money online gaming nor does it plan to. We interviewed several Double Down executives last October at G2E, and they were very clear that Double Down had neither the desire nor the capabilities to offer real for-money online gaming.

The social gaming field is quite different from real online gaming. Because no money is changing hands for betting, the systems have no need for sophisticated security features found in online gaming. The goal for players is essentially bragging rights, not the pot of gold at the end of the rainbow. For casinos, social games can be great marketing vehicles, capturing potential customers with compelling play-for-free games.

And think about it. Why would IGT or any other company (WMS was roundly criticized when it opened an online casino in Europe several years ago) want to compete with its main customers, the operators? Yes, online gaming will be lucrative, but if you lose your core business, it’s self-defeating.

And even though companies like bwin.party and 888.com themselves operate online casinos in legal online gaming jurisdictions, big American casino companies have decided to do business with them anyway.

So for gaming operators looking to decide what online gaming providers to use, consider the expertise that these companies can bring to the table. The idea that slot and table manufacturers will be competing against your online casinos isn’t rational. Pick your provider for the products and services offered and don’t worry about them competing against you. Won’t happen.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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