The amount of talk surrounding online gambling has increased dramatically since the Department of Justice clarified the Wire Act just over one year ago. Most of the attention, however, has been focused on legislation to allow players to access gaming services from their homes over the Internet. While this—with the exception of lotteries in Georgia and Illinois—has resulted in much noise but little action, interactive gambling on licensed premises via mobile devices is now legal across some of the U.S.’ biggest gaming markets.
It was the Silver State that first passed legislation allowing indoor mobile gaming in 2006, and in the summer of 2012 both New Jersey and Minnesota followed its lead. Yet so far, despite enabling legislation being available in these three states and the clear demographic shift toward mass usage of mobile devices for transactional activity, few major gaming operators or manufacturers seem to have embraced this opportunity.
Why is that? And will that change in 2013? To answer these questions, let’s break the issues down to some of their core elements.
Can operators and vendors make money from mobile gaming on property?
The legislation allowing mobile gambling passed by Nevada does have a few caveats. First, it requires that operators hold a non-restricted gaming license and operate 100 or more slots machines, as well as one other game. The legislation also limits indoor mobile gaming to the “public areas” of hotels, meaning that gaming is not permitted in hotel rooms that are meant for sleeping or living accommodation.
In 2009, the Palazzo and the Venetian became the first casinos in Nevada to take advantage of this legislation when they began offering patrons the ability to place in-running sports wagers through a device they called PocketCasino. The following year they also made casino-style games available. The PocketCasino system they use is developed by Cantor, which markets the device as the eDeck and has been a pioneer in the indoor mobile sector.
However, anecdotal evidence indicates that the take-up of the eDeck for gaming, via the Samsung Android Tablets that have been customized for this purpose, has been minimal. As the pioneer in the space, Cantor has had to take point in seeking solutions to the significant triple challenges of technology, regulations and customer experience.
The story looks very similar in Minnesota, where the legislature in August 2012 enabled the play of pull tabs via mobile devices in approved locations throughout the state. By December, however, the initial enthusiasm seemed to have ebbed away somewhat, with local media reporting that revenue projections have already been cut by half due to disappointing early performance.
What needs to change for operators to actually make money from mobile i-gaming on property?
The obvious answer is that the games have to be made easier for players to access. Playing on devices owned by the premises is clearly a major restriction to adoption. Why would a player, surrounded by slot machines and table games, go through the time-consuming process of checking out an unknown device from a staff member when they are used to playing, spending and interacting via their own smartphone and/or tablet?
Yet to the established gaming industry, it still seems a significant leap of faith to move away from the advantages of proprietary systems, like Cantor’s eDeck, which allows operators to control every aspect of the indoor gaming system, from the devices themselves to the servers and network infrastructure used for geolocation. For this reason, many operators and regulators see proprietary systems as beneficial and comfortably close to the networked slot machines they are used to.
Unfortunately, these advantages seem to not count in the eyes of the players who appear uninterested in a “rental” tablet/device that is nothing more than a “slot machine by prescription” kept behind the counter and out of reach for an impulse spin.
Shackling the innovation of the gaming industry to dated proprietary systems will hardly help it keep pace with the lightning-quick development going on in other sectors—not least social gaming! Even if operators choose to invest in keeping a proprietary system up to date with the latest hardware and software, they may soon find it prohibitively expensive, as it will make them dependent on their bespoke systems supplier for all upgrades.
If operators really hope to make money from mobile i-gaming, then they will need to evolve out of this proprietary cul-de-sac, get in step with the mobile commerce revolution that has swept the U.S. over the last few years and simply allow players to interact with their mobile gaming services in a manner in which the players are already comfortable with … i.e., on their own devices.
What about the technological challenges?
In order to work within the laws and regulations that permit indoor mobile gambling at land-based establishments, it is first necessary to have systems in place that can geolocate any device within that licensable area. Without such systems, it is impossible to block access to individuals attempting to play these games from prohibited locations … which is particularly important when failure to do so can be met with a federal criminal penalty of up to five years jail time.
Given that more than half of the U.S. population owns a smartphone and almost a quarter owns a tablet, and both markets are growing, it makes sense for land-based operators to look to indoor mobile gaming systems that take advantage of these devices. There are certainly some good reasons for doing so. Proprietary hardware is generally more expensive (even more so for the comparative few units required for this kind of initiative), meaning there are significant cost benefits to utilizing hardware that is already paid for by the consumer. In addition, the users are likely to have a better experience when they are using a device they are intimately familiar with.
The technical challenges, particularly with regard to devices that patrons bring with them to gaming establishments, are not insignificant. In the case of Nevada, non-gaming areas have to be excluded, and in New Jersey, while patrons are permitted to gamble from their hotel rooms, the device must be inoperable within the property’s car parks. Realizing that not all land-based operators have the same needs or face the same requirements, companies servicing the indoor mobile gaming sector (such as GeoComply) generally work off two different types of indoor geolocation systems: device-centric or network-centric.
Under this approach all the geolocation data from Wi-Fi and/or Bluetooth signals is gathered by the device itself. This data is then sent to a server for analysis before a response is sent back to the device stating whether or not the user is within an area sanctioned for mobile gaming (see Figure 1). The advantages of the device-centric approach is that it can make use of any existing wireless network to geolocate devices accessing the gaming service, which should help to keep implementation and maintenance costs down.
The second system is a network-centric approach where the network is responsible for gathering all Wi-Fi and/or Bluetooth signal data. Once this data is gathered, it is then sent to a server that performs triangulation calculations to determine the position of devices accessing the gaming service (see Figure 2). The advantage of this system is that the device accessing the gaming service is effectively dumb, as it is not required to process any information other than the pass or fail geolocation response it receives from the server. The primary downside to this system is that it requires specialized network hardware that will drive implementation and upgrade costs up to a certain degree.
For either of these solutions to work, it is necessary that a patron’s device is able to interface with software that allows for geolocation. For this, GeoComply offers two different solutions. The first allows operators to embed a short code in their HTML5-enabled gaming website that allows the facility to geolocate users who are accessing the website. The second solution is a downloadable app that is installed on the user’s mobile device. When the app is launched, it opens a modified version of a gaming website within a wrapper. The primary difference between the two options is that the downloaded solution provides more security features, such as the ability to detect Wi-Fi spoofing. Yet, for some operators, asking a patron to download an app might not sit well, given problems with getting gambling apps into the official app stores.
What are the risks to the core business through cannibalization? Is mobile i-gaming genuinely complementary? Will it bring in players and revenues from new demographics that would not normally play a slot or a table game?
The issue of “cannibalizing” versus “complementing” often lies at the heart of the land-based gaming industry’s approach to online gaming. As the former managing director of the online division of Ladbrokes, the U.K.’s market-leading gaming operator, I came across this question early on in my career. However, 18 months after our start-up, we were delivering eight-figure EBITDA profitability from new markets into the core business based on very low capital investment—and these questions wore off like a sea mist.
Fourteen years later, Ladbrokes’ land-based business is not only fit and healthy, but it is actually outperforming the online division, in terms of growth.
The reality (it seems to me) is that land-based gaming will be here for many decades to come. Online gaming will not have the same effect on Las Vegas as Amazon and iTunes had on Tower Records and Blockbuster.
It is likely that a significant (and growing) demographic of players will never be attracted to gambling on slot machines and tables. To not develop games and channels to service them is to ignore a significant business opportunity that the land-based sector is very well-positioned for.
As a strategic “halfway house,” mobile gaming at land-based operations offers an intriguing, low-risk market entry option, as the above fears are considerably lessened when online gambling occurs on the premises only.
When the solution is deployed effectively, it should be a winning proposition not only for the operator, but also the player.