The Golden Age of Gaming
The U.S. is losing billions of dollars in gaming revenue and taxes due to restrictions on unregulated online gambling hosted offshore. As the Great Depression lead the way for legal gambling in Nevada in 1930, the Great Recession has seen many financially challenged governments relax restrictions on land casinos, as well as online and mobile gambling.
In addition, according the Juniper Research, social gaming, driven by the popularity of smartphones and tablet devices is projected to generate $100 Billion in revenue by 2017. Following the clarification by the U.S. Justice Department that the UIEGA online gambling ban only applies to sports betting, a state-by-state race to regulate online gambling in the U.S. has begun.
Geo-fencing via smartphones is the key technology to ensure regulatory compliance. Land casinos, social gaming networks, racetracks, and gaming device suppliers are scrambling to gain market share in the emerging world of global gaming convergence.
Divide and Profit
Given the partisan gridlock in Washington, any federal regulation of online gambling is highly unlikely. Intrastate regulation of i-gaming appears to be the best near-term scenario for the nascent U.S. i-gaming industry. In addition, Mitt Romney and his supporters (including Sheldon Adelson) are opposed to online gambling.
Nevada Pioneers Intrastate Gaming
Nevada issued the first intrastate online gambling licenses to Bally Technologies (BYI), and International Game Technologies (IGT). Over 3 dozen gaming companies and equipment suppliers have pending license applications. New Jersey, Delaware, and several other states have similar bills at various states in the regulatory process.
American Wagering International
Nevada-based American Wagering International, a subsidiary of UK-based bookmaker William Hill currently offers mobile sportsbetting within the state of Nevada. Mobile betting at William Hill, the world's biggest bookmaker, continues to grow. The bookmaker reported that in 2011, mobile betting turnover reached 11 million pounds in a single week.
Bally Technologies, Inc.
Bally Technologies, Inc. , a leader in slots, video machines, casino-management, interactive applications, and networked and server-based systems for the global gaming industry, announced that its first iGaming platform is now live and powering a free-play poker website in partnership with Golden Nugget casinos in Las Vegas and Atlantic City, N.J.
The website, which can be accessed by visiting goldennuggetpoker.com, is one of the first free-play poker sites in the United States driven by a licensed gaming manufacturer. These sites can also accept to real-money play where legal. Bally Technologies' open architecture i-gaming platform is also designed for mobile integration and is ready to accommodate online wagering beyond poker, such as casino table games, video slots, and sports betting.
"The integration to Bally'sCMP™ player-tracking system andElite Bonusing Suite™ will enable casino operators to track and bonus players seamlessly through the traditional and virtual casino environments," said John Connelly, Vice President of Business Development at Bally Technologies. "We are licensed as a gaming manufacturer in hundreds of jurisdictions around the world and will work with casinos to provide one view of their patrons across online, mobile, and traditional platforms."
Churchill Downs Inc. (CHDN), which owns the famed Churchill Downs Racetrack in Louisville, Ky., filed an application with the Nevada Gaming Control Board, joining nearly three dozen casino operators and gaming equipment providers in seeking approval for interactive gaming within the state.
Churchill Downs operates twinspires.com, an online advance-deposit wagering service for the company's racetracks. Twinspires also accepts wagers on races from tracks around the country. Churchill Downs acquired Youbet.com in 2010, which was incorporated into TwinSpires.com.
In February 2012, Churchill Downs acquired Bluff Media, an Atlanta-based multimedia poker content, brand and publishing company. Bluff Media's assets include the poker publication Bluff Magazine and its online version, bluffmagazine.com; The PokerDB, an online database that tracks and ranks the performance of poker players and tournaments; several blogs, online poker forums, news and editorial content; and the websites bluff.com and bluffpoker.com.
While Bluff Media does not offer real-money gaming, Churchill Downs plans to integrate Bluff Media's content and revenue model.
IGT Acquires DoubleDown™ Casino
In January 2012, International Game Technology acquired DoubleDown Interactive. LLC for a total consideration that included $250 million in cash, $85 million in retention payments over the next two years, and up to $165 million in cash payable over the next three years subject to Double Down meeting certain financial performance targets.
The acquisition of the largest casino on Facebook provides IGT instant size and scale in the fast growing world of casino-style social gaming, and is expected to diversify IGT's popular gaming titles beyond the land casino and into Facebook, the world's largest social network with over 800 million global users. This powerful convergence model is anticipated to provide IGT an opportunity to entertain players with consistent, ubiquitous, thrilling gaming experiences across multiple platforms.
DoubleDown™ Casino is the world's largest virtual casino and one of the top 4 social media games in 2011 as rated by Facebook (FB). According to AppData.com, DoubleDown™ Casino currently has 4.7 million monthly active users, up from 3.3 million in October 2011. With a broad and expanding games portfolio, DoubleDown offers blackjack, slots, slot tournaments, video poker, and roulette to social gamers all around the world.
By April 2012, IGT reported that Double Down Casino increased its monthly users by 24% to 5.6 million as of 31 March 2012 when compared to 31 December 2011. Average Daily Users were reported at 1.4 million; and bookings per daily user at $0.24.
"As technological innovations increasingly influence consumer behavior, social dynamics are quickly transforming entertainment and gaming experiences everywhere," said Patti Hart, CEO of IGT. "The addition of Double Down launches IGT into a leadership position in social gaming, extends our global reach through new mediums, and leverages our unmatched expertise in game development. We intend to drive meaningful value from this rapidly growing distribution platform that reaches a new, but complementary, demographic of gamers."
"We need to be in every currency that people choose to use to make chance-based wagers," Hart said about IGT's purchase of Double Down.
"There will always be a place for the live experience, including casinos," she said, "but you can't restrict yourself; you need to distribute entertainment on all screens."
MGM Resorts International (MGM) announced a program that will allow its "M life" loyalty rewards members to access their social media and loyalty rewards accounts to earn free gifts from casinos in Las Vegas, Detroit and Mississippi.
Location-based updates to Twitter, Facebook Places, Foursquare or an Instagram photo earn 500 credits for each MGM resort visited in day. That's the equivalent of spending $20 on non-gaming activities, such as restaurants or nightclubs at these casinos.
When in Las Vegas, M life members can accumulate up 6,000 credits by visiting all 12 MGM resorts each day, or a possible 30,000 in a year, just through social media updates. Members advance one tier level after reaching 25,000 points.
WMS Industries Inc.
WMS Industries Inc. (WMS) announced the formation of Williams Interactive LLC, a wholly owned subsidiary that will focus on the growth, development and operational execution of the company's worldwide online wagering, social, casual and mobile gaming initiatives.
The creation of Williams Interactive LLC is intended to optimize the benefits of iGaming for WMS' casino operator customers and their players. Orrin J. Edidin, President of WMS Industries, has been promoted to the new position of President and Chief Executive Officer of Williams Interactive. WMS Interactive will also launch a free-play online casino game on Facebook.
Global Gaming Convergence
While social gaming IPOs struggle, the regulated U.S. gaming industry is well-positioned for a Golden Age of Gaming Convergence with global gaming conglomerates combining land based casinos, online casinos, smartphone gaming, and social gambling on sites such as goldennuggetpoker.com, Double Down Casino, or Zynga (ZNGA).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.