Gambit on Future of Gaming

GAMBIT MEETING January FORUM RECAP
VENUE: CASS BUSINESS SCHOOL, LONDON - 13 January 2010

Speakers on the night: (right to left), Dermot Smurfit (COO, GameAccount, evening drinks sponsor), Jim McNiven (Founder Kerb), Gareth Wong (Gambit & GamBond® Founder), and Barak Rabinowitz (Founder CEO of Amuso.com).

- Report prepared by Ian Wallis, at the time, Editor to be of eGaming review.

The Future of eGaming

Such is the fast-changing nature of online gambling, committing to a cast-iron vision of its future is a brief few will accept. The most recent Gambit event did, however, provide some illumination.

For GameAccount’s COO Dermot Smurfit the future can be glimpsed if we identify the key emerging themes. And his firm’s well-placed. Known for its skill-based games, GameAccount has 12 sports betting operators under contract, provides software for lottery operators, and is targeting the North American market for the legal provision of state lotteries and skill-based games. The games of skill and chance it has developed since 2007 have been supplemented by ‘side games’.

While software robots are the bane of his organisation’s existence as far as nailing really significant revenue from skill-based games goes, there are numerous reasons for optimism. The Italian market represents the first of those.
Breaking Italy.

GameAccount started its Italian Job in 2007, launching towards the end of 2008 after a “tortured technical process to allow gamers to play”. Since creating the first real-money tournament there the signs for growth in the territory are stronger than anywhere else. “We are supplying software as a service and there’s pent-up demand for regulated products like ours.” It’s a reward, he says, for “massive up-front investment”.

But it’s not about merely replicating GameAccount’s portfolio territory by territory. Instead, Smurfit believes companies need to think local. It recently went live with an online version of an Italian game called Briscola, a game blending skill and chance. It’s a policy the company’s repeating elsewhere – and the savvy will adopt the same approach.

Diversification, regulation and innovation

Away from GameAccount’s forays overseas, there are signs of business model envy, with increasing numbers in B2C building a B2B offering and vice versa, with the likes of PartyGaming moving to become operators.

Smurfit also points to what he calls the ‘Balkanisation of Europe’, following recent regulation and taxation announcements from the Sports Minister and the likelihood of further activity. “There are nine individual major western jurisdictions going through this process,” he says.

“Steps have been taken to require offshore operators to acquire UK licenses to attract UK gamers. It will happen. The UK Gambling Commission meets with other regulators to copy the best and worst parts of French, Italian and Danish regulations. It’s a huge opportunity and threat for companies. It could be a problem for large publicly listed companies that dominate the market.”
GameAccount is well-placed as one of relatively few with a licence, categorising everything it does as gambling, ensuring a day in the sun for its skill-based games by redistributing activity and revenue in favour of taxation authorities, says Smurfit.

Smurfit adds that operators are becoming increasingly reluctant to take innovation risk as “major brands have drawn in their horns on suppliers they work with”. It’s something he refers to as the end of the Cambrian-era for product creation. And we’re seeing an increase in small scale and mid-market mergers and acquisitions, such as the Î10m GTS, £11m WinkBingo, and £72m CashCade deals.

Convergence is King

For Barak Rabinowitz, CEO of online trivia platform Amuso.com, the trend for media, social media and entertainment organisations looking for online revenues from gaming is a welcome one. “A lot of media sites show ad-funded models tank and there are a lot of commercial managers depending on finding new revenue streams,” he says.

The ability to monetise and distribute skill-based games was something he identified while still at Yahoo! and led to him starting Amuso. To support the point he notes that casual and skill-based gaming is now estimated to be worth $3bn, with the likes of Miniclip and King.com leading the way.

A further $5m is said to be generated by online versions of TV quiz shows such as Who Wants to be a Millionaire and The Weakest Link. And online gambling generates $21bn. “Trivia is a way to bring casual gaming, online gambling and TV quiz shows together,” says Rabinowitz. As part of this convergence, he believes the future will see TV formats applied to Amuso’s technology and distributed across the web as customised products.

And while the likes of Bebo, MySpace and MTV would never consider a gambling proposition for their youthful audiences, they have proved open to skill-based games via Amuso.

Egaming’s acceptable face

The other positive in terms of acceptability is that even with fairly strict regulations, such as those experienced in Australia, the distribution of skill-based games is permitted. Rabinowitz sees the social power of such games becoming more of a force, with contacts selecting and challenging friends to play, irrespective of the social network they are playing from.

For Jim McNiven, CEO of viral games company Kerb, the huge growth of games website Zynga, which was estimated to have generated $200m in revenues last year, is evidence of the power of virals. “When you look closer, Zynga is not a games company, but a viral company,” he says.

The $1.5m generated for the Haiti earthquake appeal in just five days through selling limited edition virtual goods days after the Gambit event has only reinforced the view. The challenge that remains for egaming companies viral plays is how to truly monetise their biggest campaign successes beyond the eyeballs.
And with comments about the two-dimensional experience of online casinos and the importance of mobile coming from the floor, what the Gambit’s Future of Gaming showed – and it won’t come as news – is the in industry is a hotbed of threats and opportunities as diverse as they are potent. There’ll be two types of company that characterise the future of online gambling: the quick and the dead.

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