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Pigs, ducks, devils and Mitch Garber

07

Feb

13

On day two of ICE, social and mobile grabbed the limelight at the first fully converged ICE. Caesars Interactive CEO Mitch Garber rounded off day two of ICE with an interview, which he agreed to do so that he could spread the word that social gaming should not be regulated.

I’m not sure Garber’s belligerent style makes him the best ambassador or would-be lobbyist. I guess that’s why Caesars employs the diplomatic skills of government and communications VP Jan Jones.

“We don’t accept the argument that they [social casino games] are like gambling games. We don’t accept the argument that they are training people for gambling games,” thundered Garber.

So social casino games are nothing like real casino games? Apparently not.

According to Garber: “There is absolutely no difference between social casino games and games where birds are killing pigs.”

Er.....ok.

The should we/shouldn’t we regulate social casino games debate was more eloquently argued earlier in the day.

Paul Morris of the UK Gambling Commission was on hand to give the official view. The Commission is investigating the potential risks of social games. Morris appealed to the industry to share figures to help the Commission understand players, their motivations and their risks.

Morris spoke about the “duck test” - if it looks like a duck, sounds like a duck and moves like a duck then it probably is a duck. In the case of social gambling, many games might look like gambling games but do not meet the legal definition of gambling in the UK.

PKR founder Jez San, taking the devil’s advocate role for the debate, asked where virtual chips stood in the definition. A social slot game might look like a gambling game but unless there is a prize of money or money’s worth then it is not gambling at present.

“We have taken a straight and narrow view on money’s worth,” said Morris. Fundamentally if something has no sell-on value it does not constitute money’s worth.

It was pointed out that there is a black market in virtual chips and that you buy them. “We can change our view,” warned Morris before admitting they did not plan to at present.

The traditional argument against regulation was put forward by Slingo CEO Rich Roberts and Playstudios co-founder Paul Matthews. Social games are just another form of entertainment. If you start regulating social games then what about other video games, cinema or television?

The difference here, pointed out San, is that you pay as you play with social games rather than paying a set fee up front.

“They have a business model that makes you spend more than you intend. If you set some rules, give people the tools to limit their spending, then you might avoid regulation,” argued San.

Even that, for Matthews, is a “slippery slope”.

Morris admitted that there is concern about the word “grooming” and if politicians and the media make this a hot topic then regulation might become inevitable.

With that warning ringing in our ears, the panel left the stage for some of the finance community’s leading lights to discuss the opportunities for investments, M&A and partnerships. All were fairly confident that the M&A landscape in this space is likely to be fairly healthy although Investec analyst James Hollins warned that valuations are impossible.

Hollins admitted that he is approaching this from a UK listed company perspective but said there are only three criteria for an acquisition: “1. Do we desperately need these customers? 2. Do we desperately need this technology? or 3. Do we desperately need to be in this space?”

Burleywood Capital partner Andrew Burnett compared the social games space to the craziness of the dot.com boom with huge amounts being demanded for loss-making companies although he did admit that the figures coming out of IGT suggest the $500m paid for DoubleDown Interactive look less crazy with hindsight.

Playsino CEO Brock Pierce believes there are more potential buyers than quality companies, a point which Akur director David Shapton agreed with. While Global Leisure Partners director David Bains suggested consolidation was inevitable Shapton pointed out that consolidation between social companies was unlikely given the multitude of potential buyers.

Convergence should drive some consolidation but throughout the day many, including Garber, claimed that social is a completely separate revenue stream.

“We have not marketed real money gambling to a single one of our social players,” stated Garber before admitting there may be synergies one day. But for now he would prefer to keep his nose clean in that regard.

Convergence between land and online was the theme next door with the likes of Genting Alderney chief Peter Nolan and Emmanuel Mewissen of Belgium’s Circus Groupe explaining how they have approached this important trend. While social is grabbing the headlines this is the here and now of gambling. Foxwoods’ Frank Pracukowski had an interesting take on the situation stateside. He has found that most European B2B providers have absolutely no idea what US land-based casinos want. Take some time to get to know your customer before ramming your product down their throat, was his message.

While there have been attempts to ghettoise the sports betting community and most interactive suppliers are situated at one end of the ExCel hall, it immediately struck us that this is the first fully converged ICE with land and online suppliers intermingled around the hall and huge amounts of stands claiming to do everything: land, social and online.

However, if you’re not there yet and most aren’t then you should bare in mind a few warnings. Any casino, bookmaker or media company eyeing a social acquisition should note the cautionary words of the CEOs and founders of Dragonplay, Big Fish, Product Madness etc. All agreed the Facebook social casino space is saturated. As Akur’s Shapton had pointed out earlier, new entrants are bypassing PCs for mobile and even there, some leaders are emerging.

Which, again, would suggest the need for a bit of innovation. Burnett believes gamification is the next big trend. He provided the example of Sweden’s speed camera lottery, which Volkswagen invested in a year ago. If you are speeding then you get fined. If you don’t then you get entered into a lottery and the prizes come from the fines. Speeding dropped by 24 per cent. Ingenious!

Burnett and Pierce also suggested looking to Latin America with the World Cup and Olympics both being played in Brazil. Burnett said to watch Betmotion. Pierce tipped companies such as Virgin Gaming (Canada’s not Gamesys’) and Xfire, which are bringing skill-based wagering to the US while Shapton believes the market for social betting is still wide open.

And if you’re not too hungover after last night’s parties, then you still have the chance to find your own innovators among the stands today. A final word of warning from us: it’s going to be even bigger next year with ICE organisers suggesting they will open up both sides of the food and drink alleyway. Perhaps we should all swap our suits and shoes for tracksuits and trainers?