The online gaming suppliers in the European market in the early part of the 2000s were tempted by big money coming from grey- and black-listed online casinos and poker rooms. Some succumbed to that temptation, but Game Account Network insisted on only dealing with white-listed operations in preparation for the launch of the U.S. market. It turned out to be a great strategy, according to CEO Dermot Smurfit. The company has a partnership in New Jersey with Betfair, and has blazed the social gaming trail in the U.S. by opening a social casino for Foxwoods that has been an amazing success in producing revenue and bringing new and existing players to the property. Smurfit spoke with GGB Publisher Roger Gros at the Indian Gaming trade show in San Diego in May. To hear a full podcast of this interview, visit ggbmagazine.com.
GGB: Tell us how your company came about.
Smurfit: We’re in year 12 of running the Game Account business. It really started when my family’s paper and packaging business was taken private around 2000—we got some cash, and we wanted to look at other high-growth industries to build a business. I raised my hand and said, what about online gaming?
Back in those days, it wasn’t a very clean business.
No, but we took another direction. We wouldn’t do business with bad people or bad companies, and we waited for the market to regulate. Ten years ago there was no meaningful regulation of internet gaming. That led to the “Wild West” days where you just needed a license on some sunny tropical island and you were off and running to crazy profits.
Our mission is to provide the tools and technology to land-based casinos in regulated jurisdictions, because the regulators always favor the land-based incumbents. They are the natural equitable inheritors of the market opportunity. As regulation shines a torchlight on these legal jurisdictions, you begin to see the likely probable value over time.
You’ve been making tremendous progress, not only in the legal online gaming market, but also in the social gaming market, or as you like to call it, simulated gaming. Explain how that came about.
The Game Account mission over the last two years has been to build a product capability on top of our real-money system that would enable a land-based casino to reuse what we’ve already built in New Jersey to build a social gaming business, on their own website, accessed by their own existing players. It allows the companies and their customers the ability to explore simulated gaming.
Foxwoods has been first to market—we launched in January—and the results are rather astonishing. We’re delighted with the progress Foxwoods has made so far, and we’re confident that business will grow quickly.
How does this differ from Facebook applications?
Facebook social casinos are effectively games and game applications built on top of the platform that Facebook already offers. They keep 30 percent of the revenues in return for having built this extraordinarily powerful global platform. These are very sophisticated games, but all the financial services aspects are managed by Facebook.
This is one end of the internet gaming spectrum. At the other end is real-money online gaming that is going to be very heavily regulated, with ID verification, geolocation, payment processing and more. There’s a lot of complexity. We’re at the midpoint, what we call simulated gaming. And we call it simulated because we’re using our existing, real-money technical capabilities. That means a casino can do with simulated gaming all the stuff they should be doing with real-money gaming—age and ID verification—just as you would in a land-based casino.
It’s taken us a long time—more than two years—to get this right, but as Winston Churchill once said, we’ve come to the end of the beginning.
So players actually buy virtual money for real money?
Yes, we’ve actually sold billions of virtual dollars for real dollars. It’s quite a fascinating development intellectually that players who find playing games online interesting are willing to pay for extended playing time.
Just like at a slot machine, they’re able to spend lots of time on device. And if you, as a land-based casino, don’t serve them, somebody else will.
So, how do casinos use simulated gaming to drive customers to the land-based casino?
If the player lives within driving distance of the casino, you can message them and offer them some kind of promotion. The land-based casino is the primary mode for the casinos to monetize the customer. Get them to the casino property and they’re going to spend $100 or $200 every time they visit, whatever the number is. In the online casino, you’ll get the purchasing customer for $40. And you’ll get 15 percent to 20 percent of these customers to visit the casino. That’s a very meaningful number, with very high margins.
Does the simulated casino go away when real-money iGaming is approved?
We don’t believe it does. Of the thousands of people who have registered at Foxwoods.com, a large number are from New Jersey. They have the opportunity to play real-money games online, yet they decide to play this simulated gaming. And they have exactly the same propensity to purchase virtual currency. So as a consequence, we’ve reached a tentative conclusion that simulated gaming is an overlay on top of real-money gaming, both in the casino and online. We believe there’s a little bit of fantasy involved—they can bet thousands of “virtual” dollars—as well as a desire not to overspend on playing the games.