Game over for the iGaming sector?

The Video gaming sector is on the verge of majorly unsettling the iGaming sector and very few operators seem to be willing to pay attention to this disturbing reality. A late diagnostic is always painful, however our sector needs to react accordingly to the gravity of this huge threat.

1) How the video gaming sector is locking the current 18 – 35 age range market.

For the last couple of years the iGaming sector has been struggling to attract new young customers. With these young generations rapidly representing half of our market, the struggle is becoming a critical issue.

Most experts claim that it has always been the case throughout history and that younger generations will come to iGaming the way that people come to the opera: as they age. They may be partially correct, however they are clearly missing the new elephant in the room.

For years, the video gaming industry was unable to ''chase on our land'' because they had initially targeted the child and teenage market. However, because the video gaming industry did such an excellent job, customers never actually stopped playing their games and the average age of gamers is now 35 years in 2017 (30 in 2013). It may come as a surprise, however our young and reluctant prospective clients are already their customers.

The video gaming industry perfectly understands the expectations of the 18-35 age range market and the end of 2017 had already seen the decisive first step of the video gaming sector in our direction with the launch of a loot box system. Similar to a number of other games, Star Wars Battlefront II invites players to pay real money in order to unlock a virtual "loot box" with no knowledge of the kind of reward there is inside.

The publisher, Electronic Arts (EA), indicated that the "mechanics of Star Wars Battlefront II are not gambling," however the Belgian Gaming Commission is conducting investigations into how exactly players are rewarded through access to these "loot boxes."

There has almost never been a time where the gaming industry has been so discordant and in such an uproar over an issue as the debate over loot boxes, making for one of the most significant stories for the industry in 2017. With billions of dollars at stake, the issue is sensitive and precarious particularly since legislators and regulators across the globe have begun to speak up.

Chris Lee, the Hawaiian state representative, recently held a press conference where he branded loot boxes as ''predatory gaming,'' and is currently working towards a legislation that bans minors from purchasing them. He later added in a Reddit post that ''such loot boxes and micro transactions are explicitly designed to prey upon and exploit human psychology in the same way that casino games are designed.'' A regulator in the Australian state of Victoria also agrees that ''what occurs with 'loot boxes' does constitute gambling'' and that the gaming regulatory body was "engaging with interstate and international counterparts" on policy changes.

For those who are still missing the big picture, the introduction of loot boxes is the first clear attempt by the video gaming industry to directly compete with the iGaming sector.

By introducing elements of luck in their skill games, they begin to offer the best of both worlds. By doing so, they are erasing any competitive advantage that our sector could possibly offer. They are making sure that, even as they age, the customers will stick with them because they are catering to all their present and likely their future expectations.

2) How the video gaming sector will take over of the + 35 market

If most iGaming companies appear to somewhat accept the fact that the 18-35 age range market is an unreachable target, it is mostly because they are confident that they will continue to milk the +35 market cow for more years to come.

Yet, once again, the near future will prove them wrong and that this sense of security is a dangerous illusion.

Recently, Rockstar announced that GTA VI will offer an online real money poker and casino game. With GTA V being the fastest selling entertainment product in human history, this should be seen as a critical warning for the future of our industry.

If GTA VI were to disrupt the casino and the poker industry, there is no doubt that it would not be only their current 85 million customers that would start playing poker and casino in their game, but also the countless customers of ours that they would begin to attract.

If any doubt still remains, we may compare a simple number for reference: GTA V cost $280M while an average casino platform likely cost around $5M to create.

It would be absolutely unrealistic to believe that we stand a chance with our current offer. We are at least 20 years late and until we start investing a substantial amount of money towards developing our game, we will be stuck at a point that is miles away from what our customers expect from us.

Knowing that Rockstar, one of the market leaders in the video gaming industry, is looking in our direction, there is no doubt that the sector's next step will be to offer the only thing that they are currently not providing: a real money based kind of experience. The quality of these games will be of such a high level compared to ours that we will immediately be looked at as a has-been industry.

 3) The American mirage

This year, the American delegation, alongside the Maltese and the Italian ones, will be the biggest delegation at ICE. Many within our sector see the evolution of the legislation in the States as another gold rush. However, the reality may prove to be very different. If the US market opens, the video gaming industry is in the perfect position to be the only winner.

According to the Entertainment Software association (ESA) 155 million Americans regularly play video games and 42% of Americans play for at least three hours per week. This is what we can easily call a captive audience! "Video games are ingrained in our culture," said ESA president and CEO Michael Gallagher.

Against a competitor that holds a massive amount of customers, power, budget, and talent, how exactly are we planning to win this war?

4) Is it too late?

It is becoming critical but our sector can still overcome this colossal challenge. If we do not want to end up like Kodak (the worldwide camera leader that died in 10 years because they refused to face the consequences of the digital revolution), our reactions needs to equal the danger:

1) Massive reinvestment in our current offer to lock our existing customers

Fighting with a plastic fork when facing a fiercely armed army is not the best idea. We need to invest the same amount (50 to 300$M) in each game if we want to have a chance to win the battle.

Of course, only the industry’s big name groups will be able to react accordingly to the challenge. Their responsibility is therefore huge, particularly the networks since they are the ones structuring the offer. They need to pave the way of the sector. Knowing that it takes around three to five years to launch a top game, one could say that they urgently need to make a move.

2) Understand the needs of the younger customers and adapt our offer… to attract them

Over the last four years, Oulala has trained its focus entirely on understanding the exact needs of the newer generations. In order to truly gauge their expectations, we launched our game as a free version for two years to gather data. Our portals of communication included email, forum, live chat, polls and studies. It stands to reason that if a start up such as ourselves can afford to tightly budget our way through two years with the goal of understanding customers, then bigger companies could certainly also afford to allocate a reasonable budget for the same motive.

This is what we have learned from our customers:

A) They are looking for skill games.

After a childhood and teen years well spent playing fantastic skill games on their consoles, chances are one would be completely hooked on skill games. Logically, upon adulthood, one begins to cultivate the longing to play for real money. With an ever growing stake making the game increasingly exciting, one may be hard pressed to find a reason anyone would suddenly retreat to luck games instead.

The latter is an issue that sector strategists often tend to ignore. Instead, they seem to leap to the assumption that what worked for the older generations will also work for the newer ones, thus overlooking the fact that the former were raised before the 1982 launch of the first Atari console. This would go down as a fatal error in any CTO's book.

B) They are looking for social games.

Everyone appears to be on the same page regarding this observation. Nonetheless, it is crucial that one understand that what we may want to give them is actually nothing close to what they are hoping for. We may be willing to offer social luck games because building them is easier, however they are looking for real social games, that is, a game that offers bragging rights following a victory. This is the kind of satisfaction that a game of luck cannot offer. It is for this reason that social games started out on skill games and should continue to do as such.

C) They seek optimal graphic design and gameplay.

Following 15 years of having played games costing between $50 million and $300 million to build, the level of expectation reaches a new threshold with regards to graphic design and gameplay.

5) Action plan

The sector needs to accept the market reality and start offering products that fit its needs. Luckily for our industry, many young B2B companies have already begun to offer social, skill-based products that are customized for them. Daily Fantasy Sport is, of course, one of these new games, and this is why Oulala.com was launched four years ago as a fully customizable solution with API, Iframe and Turnkey to offer the most innovative DFS game in the market to iGaming operators.

Moreover, I still maintain that a number of major iGaming groups as well as a few big land based casino groups have the financial resources to fight this war and obtain the dominant position in this upcoming market. However, to win a war, you must first realize that there is one at all!

* Originally published in Casino & Gaming International (Issue 32 – 2018 Q1 Edition) - www.cgimagazine.com

About the author:

Valéry Bollier has 9 years of experience in the media and online marketing as well as 13 years of experience within the iGaming industry. He is the shareholder and former CMO of ZEturf (20% of the French online horse racing market) and Co-founder/CEO of Oulala, the first B2B Fantasy football game based on European football. In 2016, Oulala was presented with the best Daily Fantasy Football Game award. Bollier is also a private investor and a regular speaker at industry conferences and seminars, as well as a contributor to various B2B publications. He was awarded in 2016 as ''Tech ambassador of Malta'' as well as the ''iGaming Idol'' (in the category ''Data & Business Intelligence''). In 2017 he was elected the ''ICE prophet''.

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