Skill Games – What Will It Take for Success? By Andrew Tottenham, Managing Director, Tottenham & Co December 7, 2017 at 1:01 am The latest buzz to hit the slot floor is about games of skill, slot machine games that contain an element of skill – and the key word is “element”. The element of skill needs to allow the player to believe that they can affect the outcome, yet not enable the player to win consistently. That’s a bit like Blackjack – a better player faces a lower house percentage against them than does an average player. Let’s face it – there has been little innovation in slot games in the last two decades. Admittedly, slot machines are using better technology, multiple screens, and TITO (ticket in, ticket out), but from a player’s perspective what has been gained? Themed games add a bit of enjoyment, of course, and multi-lines make things more interesting, perhaps, but that’s about all. Skill games come in two flavours: multiplayer, where players play against each other for a pot that they have funded, less a small amount that goes to the house, and single player, with the player against the machine. The recent push for new product in this area has seen a plethora of entrants in the market, with some really innovative games: four player Pac-Man, a multi-player fish pond game, games built around Tetris, word games, and of course, racing and shoot ‘em up games. Why all the sudden interest? Casino operators have been dependent on an ageing population of slot players and, thus far, have not successfully attracted new, younger players. As most operators know, as time goes on the existing base get will get smaller and smaller if there are no replacements of new, younger players. The working hypothesis is that a new player base can be created from Millennials, but, we are told, Millennials do not like current slot games. This demographic group have grown up playing games online and research suggests they would prefer slot games with more interaction and skill than is currently available in most slot offerings. More on that later. It is important to get a handle on this demographic group. Millennials are Generation Y, those that came of age in the first decade of the new millennium. Millennials represent about 24% of the adult population of Europe, about 100 million people more or less. Unfortunately, they are the group that has suffered most from the world financial crisis; research suggests they are earning less than prior demographic cohorts (Generation X, Baby Boomers, etc.) at similar times in their careers. On top of that, many of them have student loans, and, due to housing costs rising to record levels, many are unable to buy a first home, so are dependent on the rental market, while in some countries rents are at an all-time high. Needless to say, their disposable income is suffering. That being said, these issues involve averages. There is the old joke about an economist whose head was in an oven and feet in a freezer; asked how he felt, he replied, “About average!” On the plus side, according to Nielsen, Millennials are the group that are most likely to eat out, and they value experiences over material things. Those two points bode well for casino operators. While, on average, Millennials do not have large disposable incomes, individually there should be enough to make a sizeable player base. It is true we are at the very early stages of developing skill games, and over time they will doubtless improve as they evolve, but the initial signals are that they have not been very successful; for example, Caesars removed them from their slot floors after a few months. There are several challenges that these games need to overcome to become a successful product, given that they are aimed at a group that largely does not play in casinos. Firstly, how does this new group hear about the games? Secondly, where can they find them? And finally, will they enjoy the games and want more occasions to play? Somehow casinos have to entice millennials on to the floor to try the new games, not an easy task when going to a casino does not have “share of mind” as a leisure activity. Once potential players are on the floor, they will need to know where to find these new games or recognise them amongst all the other slots. MGM Grand has gone some way to address this latter point with the creation of Level Up, an area that caters to the aspirations of this new market segment. It seems clear to me that without a coordinated marketing campaign that succeeds in attracting the Millennials to the casino, clear on-site signage denoting what is available, and an area specifically designed for the new market, skill games are doomed to fail. I overheard a conversation at the most recent G2E about whether people will enjoy playing a skill-based game where you ultimately lose, at least in financial terms. It is a good question; Millennials play online games to win, or at least to win most of the time. If the outcome of skill games is unpredictable but ultimately losing, do these games have a future? For me it is too early to tell. The final point is profitability. Can these games make money? The answer is yes, but not as much as regular slot machines. Skill games tend to have much longer play cycles; without a higher bet per game they will not reach the gross gaming revenue (GGR) per day that most slots achieve. If the casino must remove slots to include skill games, revenues are bound to suffer. Also, the same will happen if existing players start to migrate to these new games. As I said, we are at the very early stages of skill game development, so a ‘wait and see’ attitude is probably the most sensible approach. For now, you will need to be brave and have deep pockets if you want to use skill games to attract the Millennials.