US Casino Industry Trying To Evolve, But Conservatism Holds It Back

Steve Ruddock May 3, 2017 2697 Reads
US casino evolution

The casino industry is constantly on the lookout for the next transformative product.

But as much as casinos want to innovate and evolve, they also know where their bread is buttered. The result is a struggle to balance the desire to look toward the future with the need to reinforce existing revenue streams.

These two competing ideals were on full display at the GiGse 2017 conference.

GiGse is considered one of the most forward-looking conferences in gaming. But even amid discussions ranging from esports to virtual reality, the underlying conservatism of the American land-based casino industry often reared its head.

Hurry up and wait for casinos

On the one hand, there was former New Jersey Division of Gaming Enforcement officer George Rover. He emphatically stated, “the slot machine is dead,” declaring new products need to take its place. On the other hand, Rover, who now runs a consulting company, noted there has always been a lack of urgency among casinos to bring new products to the floor.

Drawing from his own experiences in New Jersey, Rover explained that when the DGE approved skill-based gaming in Atlantic City, the only result was a free-throw shooting contest at Borgata.

Rover and the DGE expected innovative games to make their way to the casino floor. What they got was something else altogether, even if the free throw contest was a success. It would be several years before the first skill-based casino games made an appearance in Atlantic City.

John Kenefick, the CIO of Pechanga Casino explained how the “hurry up and wait” approach is frequently adopted by tribes. During a panel titled Tribal Innovation, Kenefick noted how tribes tend to lose sight of the big picture. Citing an example of his own, Kenefick said Pechanga isn’t currently involved in on-premise mobile gaming, “but we’re ready to do it.”

And while it’s waiting, Kenefick said the casino is already looking at what is on the horizon.

On the same panel, Seth Young, the director of online gaming at Foxwoods, offered yet another reason why implementation tends to be a laborious process. Young noted how difficult it is to get new technology through a large corporation. Leadership may not be fully up to speed on new products.

Not only is it not always up to speed, but the industry is having a hard time simply classifying many of the new products coming online.

Is it gaming or gambling? Both? Or something else entirely?

Social gaming, esports, virtual reality and skill-based gaming don’t fit neatly into the traditional boxes that have long existed to separate gaming and non-gaming revenue.

Not surprisingly, speakers at GiGse 2017 were adding a bit of nuance in an attempt to separate gambling revenue from gaming revenue, trying to simultaneously distinguish between games that have a wagering component and games that don’t.

Of course, this can get a bit tricky. Certain products can fall under both designations.

For example, virtual reality arenas in a casino might be gaming because there is an entry fee for the player to embark on what amounts to a ride. At the same time it could be gambling if it allows others to place bets on games.

The same dynamic can occur with esports. Casinos can monetize esports in a variety of ways, ranging from hosting a tournament, to providing an individual experience, to offering sports betting on esports matches.

It’s therefore difficult to sell these products to executives and tribal leaders. They may not want to push the envelope and put their existing business at risk in any way.

The increased role of the gaming regulator

For legal reasons, these designations are growing in importance. In the end it often falls on the shoulders of regulators to sort things out.

At GiGse, Rover noted regulators now wear many hats. In addition to being prosecutors and investigators, they need to assist the casinos by providing legal clarity. They must also create an atmosphere that fosters innovation.

Rover noted even though social casinos don’t fall into the gambling category, the DGE decided to place boundaries on what they can and can’t do. In New Jersey, players have to log out to move from social games to real-money online casino games. The payout schedules have to mirror one another.

Regulators in an ever-evolving gaming world

As much as companies aren’t fond of regulations, creating these boundaries helps eliminate uncertainty. Those boundaries should assuage any concerns operators might have about different products.

As Kenneth George Jr., the chairman of the Forest County Potawatomi Gaming Commission stated, “[Tribes] could be doing some of these things right now. Internet gaming is legal [DFS, social casinos] because it’s not considered gambling.”

But George also noted, tribal leadership has other things on its plate and doesn’t fully understand how to manage internet gaming opportunities, or even the need to get in the game.

George is of the mindset that regulators are best equipped to make these calls, but need the OK from up the chain to act in such a manner.

This is a point of view Massachusetts Gaming Commission Chairman Stephen Crosby has also been espousing: legalize it and call it all gambling; then let the regulators do their jobs.

As Crosby explained it in a 2016 interview:

 “There have been millions of dollars spent litigating whether DFS is a game of skill or a game of chance, and if it’s some skill is it enough skill to make it avoid the regulations of games of chance.

“That just makes no sense to me.

“What difference does it make as a matter of public policy whether you gamble on the throw of dice or the throw of a dart? Does it make any difference that one is skillful and one is pure chance? Should they be regulated any different? I just don’t get that.”

Still, until more latitude is given to regulators, the US casino industry will continue to lag behind in rolling out new, innovative products.

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