The major challenge in being a casino industry observer is making sense of the news.  It is part of the job, as it were, to take the  information available daily, sort out the significant from the routine news and to discover the trends.  It is tricky to pick out the significant events and to find the trends that will impact the industry’s future.  The process is basically the same whether one is trying to understand the trends of the entire industry or of a specific segment.  A modern casino is much more than a simple building filled with gamblers playing slot machines and table games, it is a resort.  In a resort, accounting, management, technology, entertainment, food and beverage, hotel operations and retail are not only part of the casino industry, but of the larger universe of those industries.  Each is subject to the trends of its broader industry.  In turn the trends in those industries become the catalysts for important change in the casino resort world.

Over the course of my career, the one segment of the casino industry that seeming had no connection with an external industry was slot machines. Slot machines may have been part of the game industry, but because they paid out coins as well as took them, slot machines have always been a separate industry, influenced only in minor ways by external factors.  Traditionally, slot machines have been designed, built and distributed by slot machine companies and slot machine people.  Today, that is changing and game designers at the major slot manufacturers may have come from other segments of the game industry and software development.

Regardless of the career path of the game designers, slot machines are still just slot machines, regardless of the theme employed.  An Elvis Presley slot machine, or any other themed game, is still a slot machine and has no connection with Elvis, except the licensing of the “franchise name.”  Most of those themed games are identical to other themed games in the underlying mathematics and the mathematics are what make the game. Even video poker is designed mathematically to give the house an advantage and offset the skill of a player.  Still, whatever the current state of game design in the slot universe it will change and it change dramatically. And the change has just started, not in Las Vegas, but in San Francisco.

The change is coming from outside the casino industry; Forbes reported on May 7^th that a company called Skilz is going to launch a real money platform for games of skill.  First, that will mean that without or without anyone booking the bet, i.e. no house necessary, people will be able to bet against each other when playing a game of skill. It is already possible in some countries for players to bet against each other in traditional sports on a betting exchange – an entity rather like a stock market for sports bettors.

What Skilz is proposing is one step beyond that; Skilz is going to offer wagering opportunities on games of skill.  Just what is a game of skill you might ask?  One of the most obvious answers is poker, but that answer is not obvious to all courts; poker is still considered a game of risk and not a game of skill in many jurisdictions; and the casino version of video poker confirms that.  However, there are lots of other possibilities, chess and checkers for example – ho-hum, how boring.  And you are right, those games would never be the vanguard of a major paradigm shift.

But there are other games of skill that are much more exciting, at least to their loyal players.  Think about Halo, Halo: Combat Evolved, Project Gotham Racing, Grand Theft Auto, Star Wars: Knights of the Old Republic, Madden NFL and Call of Duty.  If you haven’t heard of those games you have passed your 60^th birthday and have no children or grandchildren that range in age from 14 to 40; because men and boys (and some girls) in those age ranges know and play the popular video games.  Betting on the outcome of those games has promised a huge potential for the gaming industry since the early 1980s when Pac-Man was introduced.  The gaming industry and regulators have been hesitant to embrace the trend, but they may no longer have a choice.  Skilz says it is legal to bet on games of skill in 36 states; that is more than enough of player base to make the concept financially viable.

It is also a large enough base to drive change in the casino industry.  It may not be easy for slot companies to switch gears quickly. IGT, Bally and, Aristocrat could have trouble competing against the manufacturers of the leading video games for designers; and buying the game titles would be very pricey. They are extremely profitable and the game developers of the best games get premium compensation.  But as the casino industry struggles to re-engineer itself for a newer generation of casino customers –whether that be online or in bricks and mortar casinos – it will have to tap into the activities the newer generation finds interesting.  The games and themes that dominate the casino floor today reflect the gaming culture of the 20^th century.  Games like Call of Duty and Grand Theft Auto represent the gaming culture of the 21^st century.  Casinos have moved into the 21^st century with most aspects of their operations, now slot machines will have to follow or they will be left very behind.

Real Money Gambling On Mobile Games Is Here; For anyone who’s been waiting years to make a dollar from the hundreds of hours spent honing their skills on phone games, the moment has arrived. A new San Francisco startup called Skillz just launched the US’s first platform for real-money gambling on mobile games, and it could be the start of an industry worth tens of billions, if not more.  The key to Skillz is that while casino style-games have been waiting for legislation that legalizes online betting for games of chance, gambling on games of skill is already legal in 36 states. Dave Thier, Forbes, 5-7-13

There are some nice statistics from the company’s first week of operation. One game tripled daily revenue, another found their players playing for three times longer. Questing after points and virtual coins has already proven its ability to get us hopelessly sucked into virtual worlds, so it stands to reason that US dollars are even more effective. Skillz operates a lot of small scale tournaments between friends — four people kick in a dollar, the winner takes home the pot. Dave Thier, Forbes, 5-7-13

In my opinion, gambling on skill-based video games could become much larger than any casino-style mobile game. It’s the iPhone-obsessive’s chance to show the world just how good they’ve become at tiny Wings. And it goes beyond mobile as well — there’s big money if professional video game tournaments, but there could be even bigger money in amateur competition. What if every single Call of Duty match had a little button at the bottom: “make it interesting?” A one dollar bet would suffice. People play FPS’s on the level of billions of matches a year. Those dollars could add up quickly. Dave Thier, Forbes, 5-7-13