Forget eSports, social casinos or skill games. Virtual reality and augmented reality could be the future of the gaming industry.

With slot revenues declining by about 20 percent from the glory days, the industry’s reaction has been the addition of skill-based elements to their bonus rounds to attract the millennials. The problem with this approach is that the younger generations are used to highly interactive games, and will not get excited with a typical slot machine on today’s casino floor.

Furthermore, as millennials are becoming a larger percentage of the population, the current downtrend most likely will continue. To attract the new generation, the industry has to be more innovative and learn from its past successes.

When the computer industry invented EPROM about 40 years ago, gaming manufacturers were quick to take advantage of the new invention. The casino industry’s pursuit for the next stimulus should include virtual reality and augmented reality (VR/AR). Even though they seem futuristic, these technologies have already proved to be viable products, and are becoming mainstream a lot sooner than we think. The question now is when and how quickly they will explode into multibillion-dollar businesses.

Estimates are that by year 2020, VR/AR gaming will disrupt mobile gaming, and in the near future will be one of the most dominant forms of gaming.

As the hardware and software landscapes for VR/AR keep evolving, it is important to understand the VR/AR capabilities and to know which companies are behind them. Several major tech powerhouses such as Google, Facebook, Samsung, HTC, Sony and Microsoft have entered into VR/AR space, creating proprietary platforms and headsets. Today’s VR/AR headsets come in different prices, with some using iPhones and Galaxy phones as their core components.

Currently, there are distinct differences

between VR and AR, but indications are that in future they will blend together to be indistinguishable. As of now, the main difference between the two is that VR is an interactive digital re-creation of a real-life situation, and AR is an overlay of digital images and graphics to a real-world setting or event.

Another notable difference is that some AR applications may not need headsets, especially if they use mobile devices. As an example, Pokémon Go, which within the first three months of its launch generated 500 million downloads and $350 million in revenues, is defined as an AR game. However, the game runs on Apple and Google operating systems.

Overall, both VR and AR headsets provide 3D high-definition videos and audios with the main difference that VR provides a closed and fully immersive experience, versus AR, which delivers a partly immersive experience allowing a user to see through and around the headset.

As of now, VR and AR headsets are cumbersome devices, but in the future they will be less bulky and more stylish.

Regardless of the brand, VR headsets are designed to trick human brains into thinking they are teleported to an interactive virtual environment, a sensation that will be the foundation for new and innovative forms of gaming and entertainment. Similar to the EPROM that revolutionized gaming, VR/AR will be the next catalyst for gaming. The arcade and video game manufacturers have already started creating new VR/AR games of skill. Likewise, slot manufacturers will do the same.

Skill-based games that have no chance elements will not be viable replacements to slots. At best, they will occupy a small section of a casino’s floor, only attracting a small subset of the market. Moreover, since most millennials have low disposable income and have access to video games at home or in an arcade store, games of skill will not be a major component of a casino’s business.

Having said this, casinos have the opportunity to become venues for eSport tournaments, and if legally permissible, they could facilitate wagers on eSports by offering pre-match and in-game odds similar to those offered on sports such as football.

The next generation of casino games most probably will be a variation or a blend of:

1) popular social games, 2) slot games that require player decisions such as a video poker game, and,

3) eSports such as a first-person shooter game.

To avoid cannibalizing revenues from the current players and attract the millennials, the next generation of casino games must have a delicate balance between chance and skill. Also, similar to 3D movies that are available in both 3D and 2D versions, the next generation of games may be offered in both 3D and 2D formats.

All the major elements are currently in place for offering commercially viable VR and AR games. For example, operators may produce virtual casinos that closely resemble their properties and offer VR users to play the same electronic and table games offered in their land-based casinos. Alternatively, operators may offer an AR version of existing live-dealer online casinos and teleport players to their properties to remotely play at their baccarat and roulette tables along with those who are physically present at the property. These types of solutions will appeal to U.S. operators who have invested heavily in their properties and are looking to leverage their brands as virtual casinos, as well as those looking to generate additional revenues from remote players teleported to their tables within their properties.

Another potential AR application is sports wagering that has enhanced features, such as display of odds as digital layers on headsets that receive broadcast of a sporting event in 3D, or alternatively, a more immersive version, where headset users are teleported to a live match.

It is now time for casinos to recognize making minor enhancements to the current slot machines will no longer be effective, and their quest for generating new revenues and gaining the business of the millennials should include new types of content delivery technologies such as VR/AR.

Author: Bruce Merati

Bruce Merati is CEO of Uplay1 and Session Gaming. Uplay1 is an IP company and Session Gaming is a manufacturer and distributor.