With acquisition costs rising, studios are being forced to invest more in marketing budgets to compete in a crowded sector. Will this slow down innovation, and how are operators and suppliers dealing with it?
With revenues for DoubleDown Casino soaring 151 per cent to $218.5m in IGT’s full-year results for 2013, helping to offset an 18 per cent drop in iGaming revenues, it is fair to say that those who doubted the wisdom of the $500m acquisition have been proved wrong. It is hard to tell, however, whether this dominance will last.
The studio started 2014 with a new chief, IGT CFO John Vandemore replacing Robert Melendres as vice president of emerging business. A number of staff also reached the end of the two-year deals that tied them to the company following the 2012 acquisition.
Also worrying is the fact that costs have steadily risen as customer acquisition becomes increasingly expensive. Operating expenses have grown to 33 per cent of revenues due to DoubleDown’s increased advertising outlay.
For a company with the financial firepower of IGT, and with an app as resilient as DoubleDown, this might not be a problem. However, for the wider industry it might have a more damaging effect. In a relatively new sector where start-ups are already struggling to maintain investor confidence, the huge outlay required to acquire a viable customer base will further erode faith in the industry.