Innovation: Casinos need to put some skin in the game, too By Nick Sortal, CDC Gaming Reports October 25, 2017 at 9:36 pm Yes, it’s in the best interest of GameCo for a culture to develop that favors innovation among alternative game developers and operators, company president Blaine Graboyes admits. But it also behooves the casinos, who are seeking solutions to a flat slot market. So executives from Interblock and Konami Gaming joined Graboyes this year in forming the Innovation Adoption Advisory Panel, which has now published a white paper to spell out solutions and best practices. (I’ve added the recommendations of that white paper to the bottom of this piece.) “As an operator I want as many manufacturers developing as many unique games as possible, and I want as many options as possible for our guests,” said panel member David Farahi, COO of Monarch Gaming & Resort in Reno. “I’m just trying to give them ideas and hopefully they’ll listen, and they’ll develop along that path and we’ll get better products.” Graboyes’ GameCo has been the first to market with skill-based games, or what the company calls “video game gambling machines.” The games are legal in New Jersey, and likely will be approved elsewhere soon. But Graboyes and others in the skill-based space are having difficulty because the games don’t yield revenues anywhere close to the house average of a regular slot machine. They can argue that their games can bring in new customers, but proving that is difficult. Those supporting eSports and iGaming face similar challenges. The white paper offers suggestions on pricing and marketing, and was written to encourage dialogue, the summary notes. “The bottom line is the challenge they’re going to have is that it’s hard to measure if the play on the machine is incremental or not,” Farahi said. “If not, they just compare it to a regular slot machine performance and at this point it’s not going to match up.” Farahi, who has sat on the customer advisory boards of all the major slot manufacturers, recommends developing products that can be placed in non-traditional areas, such as a sports book. That way if the machine-generated revenue there, it would clearly be an addition to the casino’s existing haul. He also suggests that game manufacturers change their tack of trying to persuade slot directors to buy their machines. “I think that’s not a great use of their marketing dollars,” he said. “In this case they should spend their dollars marketing to the end consumer. Blaine [Graboyes] knows who his players are better than I do.” Graboyes, who became involved in the casino business after attending art school – not the typical path – says he looks at the innovation panel as a process. “In art school it’s all about creative criticism and being able to internalize and benefit. I looked at the innovation panel as an art school project in many ways,” he says. “I’m new to this industry, I wasn’t here for TITO or server-based gaming.” That said, Graboyes’ opinion is that observers are often “binary” when predicting whether younger players will eventually turn to slots. “I hear that either all young people will grow up to play slots because previous generation didn’t when they were younger and they all grew up to play slots,” he said. “Or, young people grew up with Xbox, Facebook, and smartphones and they’ll never play slots.” “Whenever I hear all or never, it raises my red flag meter,” Graboyes said. “A certain number of people will grow up to play slots; I very much am a believer that slots are never going away. They are amazing products.” He said skill-based games likely will become just a piece of the total casino revenue. “We’re looking for only a couple of percentage points on the overall floor,” he said. And he says that he’s not ashamed to be innovating in public. “I think that’s something the slot and casino industry has been very wary about and that has slowed the pace of innovation, that’s one thing that slowed it was fear of failure,” he said. “In the technology world the saying is ‘Move fast, break things.’” He also encourages the industry to adapt what he calls “the Mobile app mentality.“ “We find that iteration cycles are 90 to 120 days, where in apps and social it might be 90 to 120 minutes,” he said. “I’ve certainly launched and operated games where we make hour-by-hour changes.” ********** Here is the summary of key findings, insights, and recommendations from the recent white paper of the Innovation Adoption Advisory Panel: New and innovative solutions have the best chance to succeed if they can drive both incremental revenue and cost savings. The key is finding the solution to a problem even if it is not readily apparent (E.g. TITO). At a minimum, a new product needs to be additive to the player’s overall entertainment experience. When introduced to the casino and to players, the performance of an innovative solution should not be evaluated by comparing it to the performance of a legacy gaming offering. Casino operators and suppliers should work together to define new evaluation metrics that can help provide more understanding on the benefit a new innovation brings to the total future value of a customer. New pricing models and placement models for innovative solutions should be considered for their initial rollout period compared to traditional gaming equipment pricing models. Casino operators and gaming equipment suppliers need to work collaboratively in regard to pricing, marketing, placement, and needed updates to give a new product a chance to catch the attention of players. Millennials and other younger generations are already enjoying non-gaming amenities at casinos and incremental revenue can be generated if these audiences can be engaged with gaming offerings. Suppliers and casino operators should be considering non-traditional areas of the casino property for the placement of an innovative new gaming product in order to best gauge its ability to generate incremental revenue. When deployed correctly, iGaming offers benefits to casino operators in terms of incremental revenue and marketing channel. It also can benefit suppliers as a cost-effective R&D function. Development of products for the casino of the future need to consider not only the increasing comfort all consumers have with technology-aided entertainment, but also younger generations’ demand and expectation for new forms of technology-enabled entertainment.