Igaming Focus: U.S. online casino — early days and scarcity value By Jake Pollard, CDC Gaming Reports May 11, 2022 at 10:00 am The online casino vertical is less visible than its sports betting counterpart but is more profitable and at a much earlier stage of development in the U.S. than in Europe. In this column we will look into the vertical and will also continue updating readers on the issues impacting the segment in coming weeks and months. The need for new gaming content is of great importance in online casino, but the dynamics of the industry are not simple, especially for games studios. Around 40 new games are launched every month, and in some ways games producers have to decide on a business model that can come down to finding a balance between quality and quantity. Quality vs. quantity With both options there are pitfalls, risks and rewards. Go for quality, in design, storyline and content, and run the risk that a game in which you’ve invested considerable time and effort flops on operators’ websites – or at least doesn’t match the returns you had forecast. Going for quantity is an obvious way for studios to address some of these issues. They can ‘play the numbers game’ by launching numerous titles in the hope that a sufficient number of them will work well enough for them to hit their ROI targets. But that option also runs the risk of overkill and of coming out with games that are neither good nor financially beneficial, while both operators and suppliers go through the content with little discernment or attention to detail as to why a certain product works (or doesn’t). And by going down this route, games studios are also putting themselves under pressure to produce, or churn out (to use a more apposite description), new games at a high frequency and for a very short lifespan. Having said all that, the reasons for games not being profitable for studios can be as numerous as the number of games players see on online casino websites. They can range from lack of marketing from the operator, their short shelf-lives, apart from the most well-known titles or new ones that have turned into sudden hits with the players; or players just not connecting with a new offering. Different life cycles Kevin Dale, CEO and founder of the icasino monitoring provider eGaming Monitor, reveals that in the U.S. a total of 108 studios are active in online casino. This compares with a total of 566 studios worldwide. As the table below shows, the number of studios that have their games on U.S. sites runs at 22 in the U.S. vs. 46 in the rest of the world, and U.S. operators have on average 281 games on their sites vs. 590 in the rest of the world. The data shows that the U.S. is far less mature than European markets, “as you would expect, because far fewer games studios are active there, as a result there are far fewer games per site,” says Dale. But of course the U.S. is also a major opportunity for studios, first and foremost because “it’s a large and new market that is hungry for new content”. Dale says gaming content developers are “hoping that their games will gain traction amongst a relatively new audience (at least for online gaming). In this sense, some newcomers can carve out a larger share in the U.S. than they would normally have elsewhere if one of the first few suppliers.” More shelf space Another important factor that is linked to the novelty of the U.S. market is that there is less content to compete against and the shelf space for their products is bigger. “The competition for shelf space is far lower for studios over there, as the table above shows, so their games will actually perform better, all things being equal. In this sense there’s been a bit of a goldrush not just for operators but for studios too, racing to get themselves on the approved supplier lists of the various regulators in the U.S. and Canada,” says Dale. “To some extent you could argue that innovation is less important,” he adds, “since many games and mechanics that are popular outside of the U.S. that we (Europeans) have enjoyed for years are actually innovative locally. Megaways for example is relatively new, while ‘crash games’, where players can choose when to cash out as their stake multiplies from one card to the next, would be something truly novel.” Scarcity value The (regulated) online casino vertical in the U.S. has the specificity of only being regulated in just five states and that scarcity is also what makes it so valuable. It’s also why the biggest brands that have sports betting ambitions and strong casino backgrounds, such as MGM or Caesars, are banking so much on it; and why DraftKings has acquired Golden Nugget Online Gaming. For the time being, the major U.S. offline players such as IGT or Scientific Games (now Light & Wonder) are enjoying similar levels of success online. But that dominance in the U.S., but not in Europe, is also why IGT recently acquired iSoftbet for $170m. And as CEO Kevin Sadusky commented during the group‘s first quarter results on May 10: “The acquisition of iSoftbet was part of a desire to accelerate the product suite and capabilities in the digital space. We’re excited about prospects and our early icasino leadership in the U.S., but in Europe IGT is less established. iSoftbet has been very competitive there for many years, it gives us the competency and helps us fill a niche and become an online leader as we are in land-based.” As the market matures, we should see more studios operating in the U.S., but as it is unlikely that icasino regulation will spread to many more states in the near term we should also look out to see how competition intensifies as more online-first studios enter the U.S.