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Threat or Opportunity?

Gaming in the metaverse will look different than today’s gaming, but will it add value to the existing gaming companies, attract more players and pass regulatory scrutiny?

Threat or Opportunity?

Metaverse gaming often is discussed within the industry as a novelty unlikely to be adopted by the existing gaming audience. Moreover, it’s often muddled by the inclusion of (or conflation with) hot topics like crypto, blockchain, and virtual reality. In this article, I aim to paint a better picture of why metaverse casinos are inevitable, what a metaverse casino could look like, and why metaverse casinos might even be the ultimate marketing tool for our existing slot players—not just the slot players of the future.

Modern casino resorts provide incredible entertainment experiences, with world-class hotels and amenities and unrivaled guest service. But while slot machines have incorporated bigger and better screens and faster processors, the games themselves aren’t that different today than they were 10 years ago.

And the higher hold of games—a contentious topic that we won’t explore here—combined with faster processors, and therefore higher throughput, isn’t helping the perception of games by players. Industry revenue growth notwithstanding, there is limited slot product innovation today.

The two most significant advancements on casino floors over the last 10 years arguably have been (1) the advent of sports wagering, and (2) the creation of Lightning Link. The repeal of the Professional and Amateur Sports Protection Act ignited a firestorm, for sure. Valuations for teams skyrocketed. Media entered the fray. States scrambled to pass legislation. For casinos, though, sportsbooks are largely an underperforming amenity, particularly as jurisdictions move to allowing mobile and online sports betting.

Meanwhile, Lightning Link has overperformed since day one, spawning countless spinoffs at most of the major manufacturers. Indeed, the last five G2Es basically blend together from a product standpoint because new slot product has been stagnant. Couple the product on slot floors with the aging demographic of players and it becomes clear that online gaming will play an enormous role in the future of the gaming industry.

Today, online gaming is truly nascent, and online product today is basically only as innovative as land-based product. It represents at best a “version 1.0” and serves only as an effective solution to “How can we get our land-based offerings on a mobile phone or tablet immediately?”

With all deference to the product teams, user interface and user experience seemingly focus primarily on player preferences and serving them the right games. It is not a huge leap to assume that the next generation of online gaming will provide a significantly more immersive user experience. Further, the shorter and cheaper online product cycles should help to democratize game development and provide fertile ground for innovation.

What will that new, more immersive experience look like?

A metaverse—even though we often say “the metaverse,” it’s worth noting that there are and will be many distinct metaverses—is a virtual world that allows users to interact with other users and with a computer-generated environment. Notably, this definition does not include the words “crypto,” “bitcoin,” “blockchain,” “AR/VR,” or other concepts that often are conflated with metaverse.

That’s not to say that these are totally unrelated. Some metaverses use crypto to power their underlying economies, and sometimes metaverses enhance their experiences through the use of augmented or virtual reality, but you can think of these as tools that metaverse creators leverage, rather than requisites.

Indeed, Minecraft and Roblox are exceptionally popular metaverse examples that do not rely on these technologies. Minecraft lets users explore a 3D world, mine resources, craft useful items from these resources, fight for survival against zombies, and optionally enter worlds to interact with other live online players.

Roblox is an online gaming community that facilitates the creation and publishing of games, and which allows players to play this user-generated content. Nintendo even jumped into the blockchain-less metaverse fray with Animal Crossing: New Horizons, an incredibly popular game that places users on an island and allows them to begin resource mining, house building, and interacting with both computer-generated island inhabitants and other live online players. All to say, many metaverses are allowing users to create and define rich, immersive experiences already today.

For many, (many, many) years, a conversation about how to attract the next generation of gamblers has persisted across the industry. Well, my 7-year-old plays Minecraft with his friends and watches Minecraft videos on YouTube before school.

Both my 7- and 4-year-olds play Animal Crossing on the Nintendo Switch, checking in to get their daily rewards or just to wander around the island and catch bugs or fish. I can say unequivocally that the next generation is growing up “in the metaverse” already, and the numbers from these games tell the real story: Roblox has 65 million daily active users and well over 200 million monthly active users, while Minecraft has more than 160 million monthly active users.

But metaverses are not only for the young. In fact, they may be the perfect way to engage with our existing, aging databases. Mobility issues, health issues, strong smoking or non-smoking preferences, the inability to drive or get a ride—all of these will reduce casino visitation as guests age.

Metaverse casinos will emulate the experiences and service levels of a physical casino, but allow guests to comfortably enjoy the casino from their own home. Imagine customers flipping from the virtual world to the physical world to access their own kitchens and bathrooms, or to accommodate their own day-to-day schedules without regard for transit time. They can still speak with hosts and spend time engaging in actual conversations with their “casino friends,” with whom they meet and interact with regularly at physical casinos today.

So, what does a casino in the metaverse really look like? Notwithstanding the fact that a few first-generation metaverse casinos already exist, primarily in under-regulated markets and leveraging cryptocurrencies, it is a fool’s errand to be overly prescriptive about what metaverse casinos will look like. The success almost certainly will be generated by creators more clever than I, ones who figure out how to captivate users and provide them a value proposition that I can’t imagine. That said, I am happy make a few predictions.

Successful metaverse casinos will not be stand-alone entities.

Just as physical casinos reap the benefit of being part of integrated resort developments, leveraging a diverse set of non-gaming offerings to increase their attractiveness to potential guests, so too will metaverse casinos find success as part of broader virtual communities.

Additionally, metaverse casinos will find success in communities with groups of other casinos. Perhaps we will see a Caesars metaverse casino next to an MGM metaverse casino next to a virtual reality racetrack that allows users to experience driving a Formula One car on the course being developed in Las Vegas. Or walk next door to see Springsteen at the metaverse Sphere. Metastrip, here we come.

Metaverse casinos will be more social than physical casinos.

There is no barrier in the metaverse to having spectators at the high-limit dice game. Further, because the metaverse doesn’t have the same physical constraints as a brick-and-mortar casino, creating virtual player lounges where people can discuss anything from slots and tables to food and TV shows is relatively cost-free.

As a parent, I can’t always make it to our friends’ football watch parties, but I could put the kids to bed, throw on a headset, walk into the FanDuel sportsbook at the metaverse Mohegan Sun, and watch the game sitting “next to” and chatting (live, not in text) with my friends doing the same thing from their homes.

Will casino operators want people to be playing and not just being social? Sure, but they’ll also be generating brand loyalty to the casino because of the value proposition, and they’ll use that loyalty and the opportunity to serve those users ads, profile users to understand their preferences, and generally monetize the user’s impressions and activity.

Entertainment will be abundant.

Entertainment and special events are labor-intensive in the real world. But as we all saw during the height of the pandemic, artists can make great music from home studios. This presents a whole world of opportunities in which the artist can stay home, the guest can stay home, and the casino doesn’t need to bolster security, valet, arena, F&B, hotel, etc., with costly temporary staff. They didn’t even need to build a physical arena in the first place! Flowthrough on revenues will be huge, allowing casinos to market themselves effectively and bring lower-cost entertainment direct to the consumer.

One-to-one marketing will finally be achieved.

We all know the industry adage: deliver the right offer to the right guest at the right time. Well, in an entirely digital world, leveraging data about every interaction the guest has with the virtual world or its inhabitants—not to mention the ubiquitous browsing, shopping, voting, and other data attached to web denizens—a casino will be able to pinpoint the right basket of offers better than it ever has, providing the marketer’s dream of an incredibly personalized and customized experience.

Exclusivity will create value and loyalty.

The best guests at the casino will gain access to exclusive virtual events (think: private concerts, cooking classes, celebrity Q&A), to exclusive areas of the casino, and perhaps most importantly to other VIP guests. Of course, there will be exclusive gaming parlors, but there also will be exclusive social lounges with networking events and giveaways.

Luxury brands like Porsche and Rolex and global sports powerhouses like Manchester United already have launched virtual initiatives (primarily through NFTs) to create exclusive communities, and those communities can only thrive by creating value for the members. At their core, casinos already succeed on the premise of making everyone feel like a VIP, while going over the top to cater to true VIPs, so this should be a natural extension for them.

Regulators will fall in love with virtual gaming.

Certainly, everything digital is a hot topic from a regulatory perspective. KYC, AML, age verification, and cross-jurisdictional concerns abound. But the good thing about the digital world is that you can’t just walk into it with glasses and a fake mustache. Digital banking, including crypto exchanges, have largely resolved identity checking and geolocation issues. And in a digital world—I hesitate to say the “blockchain” word—we have a host of added benefits, including provable game integrity and real-time monitoring for responsible gaming concerns. Players can set bet limits, loss limits, time limits, visitation limits, and transaction limits easily; and even if they don’t, the casino could arguably monitor for at-risk behavior.

I also believe that virtual and augmented reality will also be a huge part of the success of these casinos over time. I’ve used the word “immersive,” and I think escaping the physical world, and being able to do so as if you’re standing with a friend who lives across the globe, will be a game-changer for casino development.

Big picture: Are metaverse casinos a threat or an opportunity?

When I started to write this article, I was asked this question. As I thought about it, I considered the margin expansion we saw during the 2021 reopenings when most amenities remained shuttered and the cost savings and margin expansion that metaverse casinos would represent. I thought about how we could provide value to our global guests of all demographics and deliver custom experiences that capture everything guests already love about our physical resorts quickly, conveniently, and on-demand.

I considered the value of the data we would collect on consumers in our metaverse resorts and how we’d be able to not only optimize gambling-oriented enticements and serve them additional ads, but also monetize the profile and behavioral data we collect with external advertisers. I thought about the ability we would have to tap into other online communities, without regard for physical location, to co-brand, cross-market, and bring swaths of players into our integrated metaverse resorts. And I was excited about the opportunity that this could present to gaming companies.

I also reflected on the aforementioned casino games that look exactly the same as they did a decade ago and about an industry that has been incredibly slow to embrace technological change. And then it occurred to me: the real threat that metaverse casinos pose is that others will develop them before the existing gaming industry does.

The industry’s approach for its entire history has been guest-service and  value-based. The winners in this space will be the ones who can create and deliver on the best value proposition for customers of all ages—who better to do that than us? Metaverse casinos are coming. It’s time for the industry to put on its VR headset and plant its virtual stake in the ground.

Brian Wyman, data scientist and senior vice president of operations and data analytics at The Innovation Group, holds a doctorate in mathematics from the University of Michigan. Wyman works with clients to transform their data into actionable insights and bottom-line financial results. Along with The Innovation Group’s analytics efforts, Wyman oversees the group’s sports betting advisory services and its Las Vegas office.

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