GAN sits down to talk with its partners, reflect on 2015 and look to the future
In the middle of 2013 no one in the U.S. market had heard of Simulated Gaming™. A new creation of GAN, Simulated Gaming™ was designed to combine the best of online real money gaming technologies with the best of social - providing world-leading casino operations with a secure, data-centric, and engaging vehicle for engaging online. Today, many of GANs’ partners generate over a billion dollars in revenues per year. How did GAN take a product that didn’t exist three years ago and become one of the most prominent players in the social gaming space? We spoke with a few of our partners about their own journeys from 2013 to today in moving online.
Prior to the second half of 2015, there was reluctance on the part of larger casinos to get involved in social gaming, often citing reasons like waiting for real money gaming legislation and the unknown value that social could bring to their operation. Pennsylvania’s online gaming draft legislation was seen as a potential catalyst to galvanising many other states to take steps to also legalise. Throughout the course of 2015, regulatory stagnation set in while another product line continued to skyrocket in value: social gaming. Operators finally looked up and saw that in the absence of real money gambling, billions were being made online- and being captured primarily by slot machine suppliers who’d moved their products online. Simulated Gaming™ provided operators with a chance to finally enter the all-important online space, increase revenue and casino traffic and put in place the necessary infrastructure to one day be able to seamlessly switch to a real money gaming system.
GAN ushered in 2016 on a high note with the announcements of several high-profile clients for the 4th quarter of 2015. Along with San Manuel and Maryland Live!, GAN broke into the Las Vegas market with the signing of AcePlay Poker, an important step and validation of the executive decision to move our CEO and base to Las Vegas. In addition, we announced a deal with multi-property Isle of Capri, multi-property Rock Gaming and Atlantic City’s Borgata Hotel Casino & Spa, the latter giving us a commanding share of New Jersey’s online real-money market.
GAN's very own James Smurfit interviewed several members of the GAN Simulated Gaming™ family of partners to get their thoughts on the space and their experience partnering with GAN.
James’s first interviewee was Julius Patta, the lead consultant to Maryland Live! Casino, Maryland’s leading property which operates approximately 4,000 slots and over 200 table games. GAN’s Simulated Gaming™ product replaced the free-to-play website previously operated by Maryland Live!
James: Social casinos face stiff competition from freemium games from big companies such as Facebook. How do you think the industry should react to this challenge going forward?
Julius Patta: Facebook is only a platform; they do not produce content. They have given rise to companies like Zynga, who primarily exist because Facebook does. Zynga have been trying to leave, to save 30% from Gross Revs in Facebook fees, with little success. With the exception of iOS and Android, there is no other global platform that reaches the population. Zynga, like anyone else can only survive through innovation. Companies who purchase traffic to gain visibility for their games are doomed to perish: the math of the business is unsustainable. It is all about the games. And while some of the big boys, Zynga included, may have more resources, there are no guarantees for producing winning content. Innovation and creativity can come from anywhere…
James: We are currently seeing a big debate around the legality of daily fantasy sports around the country. Do you think this conversation will help push the debate around the potential legalization of online real money gambling across the United States?
Julius Patta: No. It will not. Major operators and their elected representatives, state by state are interested in the ultimate prize: legalization of sports betting. All else will be sacrificed as a bargaining chip. Again, the money math is indisputable. In the short term, DFS will be recognized as a derivative sports-betting activity and either prohibited or strictly regulated — and it will not be able to cross state lines, in order to comply with the federal Wire act.
James: In a similar vein do you think that DFS conversation could lead to any potential legal conversations or ramifications surrounding Simulated Gaming™?
Julius Patta: As long as Simulated Gaming™, or any other form of Freemium gaming does not introduce a process or a game-mechanic where players can win cash, real goods, services or anything of negotiable value, paying for entertainment will not attract gaming regulations. However, everyone (mostly state treasurers) is eying a different prize: tax revenue. I could see changes in retail taxation. At present, virtual goods are exempt from state sales tax (Feds do not impose sales taxes). In my mind, I can’t justify imposing sales tax on sales transactions, say, for concert tickets purchased online, and not imposing sales tax for purchasing virtual credit packs… sooner or later regulations will emerge introducing a tax burden on the consumer, making operators obligated to collect and remit this tax to their state treasury.
Alec Driscoll is the Director of Gaming Development at American Casino & Entertainment Properties LLC (ACEP), which operates four properties in Nevada, including the landmark Stratosphere Casino, Hotel & Tower on the Las Vegas Strip. The Stratosphere is GAN’s first Las Vegas Strip client and was a milestone moment in the company's expansion into the North American gaming market.
James: We're starting to see an operational trend of onboarding a staff member dedicated to the online space, be it social, real money, and overlapping with the casino's .com presence. How important to your casino's executive team was the decision of creating an online lead to help navigate the waters in what is still a relatively young industry?
Alec Driscoll: When we began this in 2011 we made a strategic decision that someone within the organization had to be the owner of this new business. The idea of an internal champion who can drive the initiative, nurture the initiative and, in some cases, protect the initiative as our industry evolves to be more inclusive of digital and Internet-based technologies was a necessity in our plan. We also see great value in partnering with a group like GAN to help provide guidance and a sounding board as many companies that originated outside the U.S. have a much more diverse and experienced history in this space. Naturally, we believe that the onboarding starts with the internal champion, utilizes GAN for a period of time, but eventually builds out internal expertise in the long run.
James: GAN operates a Customer Advisory Board to bring together GAN customers to collaborate on innovative projects in the sector. How important do you think this kind of collaboration is in the B2B business? Will coming together for a common cause drive the industry forward?
Alec Driscoll: We believe this is vital. The idea that a group of operators can work with a vendor like GAN in true partnership is something needed in this industry right now. There are two major fronts operators are dealing with when it comes to online gaming, social or otherwise: the first is that of awareness/adoption. This is both internal organizational education like showing the ability to create a new channel, a new database of players, that can add value to the organization and the second front is educating the player base that this extension of their relationship with a casino brand exists. Both of these are major obstacles that I believe a CAB helps with. The ability to share experiences and strategies to best communicate effectively. Consider it efficiencies to monetization.
Conor Mara is marketing supervisor at Empire City Casino, one of our oldest clients in America. Empire City Casino is a major New York Casino with over 5000 slots and a plethora of table games combined with a selection of award-winning restaurants. GAN and Empire City signed a partnership in 2014.When asked about the importance of our CAB he agreed with Mr Driscoll, stating:
Conor Mara: Periodic Advisory Board meetings or user conferences are great to discuss future direction and current best demonstrated practices. While the users are in different primary markets, they are competitors vying for the same online gaming dollars.
When talking about the original decision to partner with GAN, he said:
Conor Mara: We chose GAN as our platform because of the shared revenue model and game mix.
As mentioned earlier, in addition to the partners listed above, in 2015 GAN also entered into business with major companies Borgata and Isle of Capri. Borgata Hotel Casino & Spa, opened in 2003 as a joint venture between Boyd Gaming Corporation and MGM Resorts International, is the leading destination casino resort in New Jersey earning almost $700m for the year 2015. It has also been the New Jersey online market leader since online gaming was introduced in the state two years ago. GAN’s Simulated Gaming™ product will allow Borgata’s customers- the majority of whom live outside the state- to experience playing online with Borgata for free.
GAN and Lady Luck Interactive LLC, a wholly-owned subsidiary of NASDAQ- listed Isle of Capri Casinos Inc. (“ISLE”), signed an agreement to launch a Simulated Gaming™ product at the end of 2015. The product is projected to launch on web and mobile during the first half of 2016. Headquartered out of St. Louis, Missouri, ISLE is one of the largest regional casino operating groups in the United States with fourteen properties.
Looking to the Future
Although GAN is pleased with its achievements during the course of 2015, the company has no intention of resting on its laurels. As such, the beginning of 2016 saw the company close a deal with multi-property Rock Gaming. GAN will be providing Simulated Gaming™ to their Ohio properties by mid-summer. Rock Gaming and its affiliates’ portfolio of properties include over 13,000 gaming positions, more than 400,000 square feet of gaming space, over 600 hotel rooms and 35 bars and restaurants. Rock Gaming is comprised of approximately 7,000 team members across four Midwestern US states and generates more than $1 billion in revenues annually.
GAN also has several other deals in motion with potential clients that the company is very interested in adding to “The GAN Family.” This will continue to grow GAN’s existing international portfolio with clients in the United States, across Europe and even as far afield as Australia with our partner Club8 Casino. 2016 promises to be an exciting year for a dynamic and ever-growing industry, and as an industry leader GAN plans on continuing to be at the forefront of its innovation and growth.