The President's Corner
GSA's President, Peter DeRaedt, addresses some of the most current
and pressing issues in the gaming industry.
ONLINE GAMING - THE IMPACT OF TECHNOLOGY FOR REGULATORS
For 15 years the Gaming Standards Association (GSA- a not for profit organization), has been successfully creating platforms for industry collaboration. Prompted by the proliferation of online gaming in the US, GSA is considering the creation of a trusted regulatory environment to encourage closer collaboration between all stakeholders.GSA likes to call for a dialogue on the harmonization of datasets and assess the benefit for the industry. The dialogue might or might not result into an agreement for the creation of an online regulatory monitoring messaging standard to further assist the regulators and augment the level of transparency and integrity.
Today GSA's messaging standards are deployed by the gaming industry throughout the world to centrally monitor gaming devices. As the regulated land based industry starts to move online, GSA is working with its members to establish clarity on the key regulatory and standard issues that we are now facing.
THE WORLD IS CHANGING AROUND US
The Internet is doubling in size every 5.32 years. In October 2012 there were 620,480,777 domains registered and the total number of users was estimated at 2,405,000,000 with a global penetration of 34%. The US Internet growth alone was 153% between 2000-2012 and 79% population have access to Internet.
The fact is that the Internet has revolutionized our lives andhas changed customer behavior. Today eBay is the world's largest garage sale online, Expedia the world's largest travel agency online, Amazon the world's largest department store online and Pokerstars the world's largest poker room online.
We have entered the exponential revolution age and we need to adjust to start thinking exponentially. Our linear thinking will no longer support the way we are living today and the environment that is being created around us. When we say that a computer will be 10 times faster in 10 years, we can easily understand it and tend to be impressed. But when we say that in actual fact a computer will be 1024 times faster in 10 years we tend to struggle with this notion. Some years ago we thought the Internet belonged to the Personal Computer. Today we have an 'explosive' growth of the Internet on smartphones, tablets, cameras, radios, TVs…. Information used to be stored on portable medium in limited capacities. Today information is accessedfrom the Cloud and it's anybody's guess where and how big it is.
New technologies are impacting the way consumers gamble too. Consumer demand is changing the perception of gambling itself. We used to believe that people gamble to win money and to have aa good time, but social gambling where players pay to play with no chance of winning is showing us that there is a far greater leisure component to the game play than the industry imagined.
ONLINE GAMING - SOME MARKET SEGMENTS
Take a look at the data from some new market segments such as mobile gaming and live dealer games.
The massive growth of smart phones and tablets is one of the most important technology innovations in the online gaming industry in the last 5 years. In 2012 there are more than 1 billion smartphones in use and there are more than 6B mobile subscribers globally. Analysts predict an annual growth as high as 39%. Note that 49% of time spend on a mobile devices is spend on gaming applications and30% on social networking applications. On December 2012 a 28-year old Londoner won $530,584 at William Hill property playing a game on his phone!
The live dealer market has grown by 18% in just 4 years from $18B in 2008 to an estimated $41B in 2012. Its growth is driven by technology as more people have broadband connections permitting high quality real time feed. The trust factor of a live dealer has the same effect as in a real casino, but adds a personal touch to the game as the player now has the game set in his own environment.
THE IMPACT ON THE GAMING INDUSTRY
This exponential transformation impacts regulators and the industry.Over the years regulators developed resources to control gambling. Today technology is outpacing them far quicker than they can manage to acquire the necessary competencies. In 2012, The Nevada Gaming Control Board decided to start relying on Independent Testing Labs (ITL's) for product compliance and certification. The regulator has started to collaborate with the industry to allow forinnovation to move into the market quicker.
ITL's have been able to make significant investments attractingmore technology savvy people. Additionally they have gained a global experience by testing gaming equipment in many states and even countries and reducing the cost of testing. They created the required tools to support their business to become more profitable. The result of this partnership is decreased time to market of new products, reduced costs for operators and brought broader control to the regulator. This is the new way forward for policy makers who need to invest more in developing collaborative platforms than trying to build monoliths that will never be able to expand at the exponential growth of the market they control.
Old methodologies and technologies will crush the ability to drive business forward. As the markets mature, operators that do not innovate will simply die. Gaming is moving to a personal device anywhere anytime. The market is shifting from location centric to player centric and regulation is shifting from game centric to system centric. The new generation of players see valuein playing to improve their social status rather than simply winning hard cash.Today social gamesarestarting todrive revenue for land-based casinos (the US Social Gaming market for casino style games has been estimated at $680m per annum), but land-based casinos cannot staywith only social gaming in the future.
Regulated, real money online wagering will soon be available from some of the most highly respected regulatory regimes in the world in Nevada and New Jersey.
Yet there are significant differences between regulating land-based gaming versus online gaming. In land-based gaming the gaming device is essentiallyowned by the manufacturer and the operator. The process of design, manufacture and placement of a gaming device is strictly controlled and its function is dedicated to gaming. It is maintained by the operator and supported by the manufacturer. The device is certified and located in a controlled environment. The experience happens on site within a limited space.
In contrast, in online gaming the gaming device is owned by the player. The device can be a smartphone, tablet, PC or public terminal. It is not dedicated for gaming only. The operator has to guess the type of the gaming device. It is not certified and unlikely to haveadequate security. The device is used in an uncontrolled environment. Game content is delivered by the manufacturer to an unlimited amount of devices.
All this brings change to the way we regulate gaming today. We need to have technical standards for interoperability outside the gaming floor. Those same standards must address the needs of the industry as well as the needs of the regulators.
Regulators in Europe are discussing better ways of sharing information. Not only could this result into the pooling of player liquidity it will also significantly support the principles of gaming policy.
Any time we are dealing with solutions to protect consumers and their money online, we are faced with a daunting task. The banking industry continues to deal with this on a daily basis.
Regulators and the industry must not chase the Internet. Collaboration is critical to support this exponential change we are all faced with.
Referring to one of my favorite books by Tapscott, Don and Williams, Anthony. Macrowikinomics, Penguin, 2010, it describes new solutions for an interconnected planet. It discusses the power of collaborate innovation allowing transformations of industries including openness and interdependencies.
One cannot simply bury ones head in the sand. Governments and regulators need to face the new challenges and become more open to new technologies. The industry needs to understand the new consumer of gaming. These new players play online for pleasure, win and social status.
To have effective regulationswe need a new generation of thinking thatare able to perceive the exponential expansion and create an environment in which it can thrive in a safe and responsible manner.
With its vast experience in technical standards GSA is committed to continuing to play a key role both in Europe and North America by facilitating a dialogue that can result into the much-needed online gaming regulatory messaging standard thus supporting the principles of the gaming policy makers.
A new connected world of gaming
As the world becomes more interconnected the boundaries between physical and virtual space will fade. The Internet is how we interact socially, communicate, entertain, keep informed, meet, innovate, collaborate etc. It is the virtual air we breathe that allows us to manage our daily lives. We will all be connected and for the next generations it will be hard to imagine NOT being connected. Social behaviors will continue to shift and so will the gaming industry as a whole.
As the demand and access to the Internet continues to grow, so will the real and significant technological challenges of ensuring data protection, security and integrity. The financial industry is all too familiar with these challenges. Whilst the challenges are highly complex it is essential to keep the world turning and people socially interconnected. Global collaboration between governments will be vital to provide a socially responsible and safe online access. The world is getting smaller and we need to recognize the technology threats, identify solutions to ensure protection of consumers.
The world of gaming will become flat and this globalization will make gaming available anywhere, anytime. Gaming will become ubiquitous and part of the social fabric. The industry will find new ways to globally collaborate to achieve a level of social responsibility through shared regulations offering protection through responsibly managed and monitored online gaming experiences. Centralized systems will provide a much-needed oversight to ensure the level of protection consumers are seeking. At the same time these interconnected systems will automatically determine revenue for the governments involved at the respective geographical locations. It is this global collaboration between the policy domain and vendor domain that remains most critical to ensure a sustainable and continued growth for the gaming industry.
Over the next 25 years we will witness exciting new gaming experiences spanning across geographical boundaries with potentially global jackpots. A whole new world of gaming will emerge anytime, anywhere and the rewards will be substantial. Lottery operators are well positioned to take full advantage of these new paradigm shifts and land-based operators will expand their product offerings through further global collaboration. Future generations will want instant gratification and expect a level of gaming sophistication and experience not yet offered anywhere. It will be harder to retain player loyalty due to the short attention span and as the gaming world will become flatter every day, so will the new opportunities grow.
The gaming industry will need to adapt and offer solutions for the ever growing connected planet. But this can only be done hand in hand with policy domain stakeholders.
How will the look/design of land-based casinos change? What will stay the same?
Land based casinos will morph into themed resorts or themed "experience bubbles" that promote social interaction. They will bring people back together from the physical separation instigated by the technology revolution. These entertainment bubbles will stimulate the senses in various ways. They will offer variety of pleasures and enhanced services such as food, music, movies, gaming, shopping, etc. The focus will be to bring people back together. Visitors will be able to interact with anyone anywhere and share their experiences.
Whenever you enter these experience bubbles, the environment knows everything about you and your preferences. You will receive tailored experiences. Whatever your desires or dreams are, you will be pampered and able to interact with like-minded people in a safe environment. Interactive surfaces will allow you to continue your social dialogues, invite people to share or play games with you, order anything you like, from goods to adventure trips, travel promotions. Your winnings will not necessarily be cash, it can be any goods and services you prefer or accept.
The traditional tables/slots as we know them today will fade away and be replaced by remote thin client devices allowing you to play anything, anywhere, anytime. They will become multi dimension gaming experiences spanning across multiple properties real or virtual. Gaming will be cloud based and central regulatory servers will monitor access to games based on biometric characteristics of the user. Data will be shared across states, provinces, and countries.
How will land based and online gaming coexist?
They will be so intertwined that there will no longer be delineation between them. Some of the older generations still think about connecting to the Internet to read their email or access information on websites.
What will casino marketing look like in the future?
You will be known and they will find you. They will pamper you with offers wherever you are. As they know your preferences, whenever you are close to a wine store, you might receive a special offer for a wine you like and by the way, you will earn loyalty points or a free "experience" when you purchase that special bottle. Whether it's a wine store or you enter your favorite experience bubble at which you have a membership, they will know you and find you. Interactive surfaces will not only bring a new experience they will drive targeted marketing to you on yet another "device." If you leave you will carry that message with you and you will never be out of touch or out of reach for marketing, gaming or anything else that the bubble has to offer unless, of course, you opt out. Don't forget you are truly connected.
What about expansion? Where do you see casino growth occurring?
Casino growth in the format we know it today, will definitely accelerate in Asia and India. However this will be quickly followed by and expanded by portable virtual experiences and become truly global and interconnects through social media channels.
What will be the role of cash going forward, if any?
Today cash is king; tomorrow we are dealing in virtual currencies. Cash will be phased out and virtual currencies will dominate all transactions. NFC technology will eventually replace cash and debit cards. Status, goods and services will become more important than cash as it is the way to differentiate yourself in the virtual world. When you win, you might cash out by requesting a service you like.
Which casino operators will be the most forward thinking and ready to embrace such change?
Only those operators that are forward thinking, have the vision, embrace the change, and are willing to commit the resources needed will drive the gaming experiences of the future. They might not necessarily be casino operators, as we know them today.
Will regulators be ready for these changes or will they hold us back?
The rapidly evolving technology landscape creates significant issues that are unique to our industry. For regulators it is becoming increasingly more challenging to stay up to speed with the fast changing world of technology allowing them to craft regulations to protect consumers. Gaming is an intricate part of the fabric of people's life and the technology revolution we are all experiencing will only accelerate. This reality will force the industry to create a far more collaborative environment between stakeholders of the policy domain and industry domain. As an industry we need to create common regulatory and technical standards across multiple jurisdictions on a global scale.
We all desire a social environment; we like to be with and around other people. Technology advancement has created a level of social connectivity like never witnessed before. However at the same time it created a level of social physical isolation like never seen before. I believe that the bubbles have the opportunity to bring create and foster social environments and themed eco systems that will create a very unique global gaming environment.
Will the brick and mortar casino business be another Blockbuster or Barnes and Nobles story? In 25 years I predict it will and 'casino's' will no longer exist the way we know them today, but virtually they will thrive.
October 16, 2012 ...
Welcome to my first column in The President's Corner. I'll be using this space to bring to your attention some of the current trends in gaming and how GSA fits into the puzzle.
The gaming industry is going through a metamorphosis and the Internet is at the core of it all. Current brick and mortar gaming operators are getting nervous, as they are concerned about their gaming revenue and how to co-exist within the digital domain. We have all witnessed the closures of Barnes and Nobles, Borders, Blockbusters and many other seemingly strong companies. Technology has simply changed the way we consume goods and services and gaming will not be spared.
Gaming is a highly regulated industry and it needs to be to ensure the level of consumer protection required. However, moving outside the boundaries of the well-defined, well-regulated and controlled environments (brick and mortar casinos) is a daunting task especially for those from the policy domain. The online gaming market, as it currently exists, is made up of fragmented pockets of legal and illegal spending, whose size it is often impossible to track or measure accurately. The best long-term solution to support growth in revenues and tax receipts is to allow cross-border gaming and liquidity flows between different territories. The key issue for providers remains the critical mass of number of available players.
In the US, regulators are focusing on regulating within their boundaries. This will lead to a fragmented regulatory framework that will stifle online gaming. Without cross-border regulation our industry will be unable to move forward as it will get stuck in small pockets across the country all with their own regulatory flavors. In this ever more connected world, the gaming industry will be faced with the tough competition of consumer discretionary spending.
Although online gaming has been around for many years outside the US, the announcement by the DOJ in Dec 2012, "that the federal Wire Act is no longer regarded as an enforceable law for indicting online poker," has created a frenzy of activities by operators, vendors and regulators. There is a new level of excitement in the air; are gaming operators able to grow and re-invent the gaming business by expanding product and services through these new channels? Maybe, however, we lack the detailed knowledge and expertise to fully understand the scope and significant challenges that lie ahead of us.
Financial institutions and retailers are all too familiar with the challenges in maintaining a highly secure environment. Cybercrime and security threats will not go away, they will intensify and only through global collaboration will we be able to stay one step ahead. We need to explore the creation of an environment where stakeholders of the various domains (policy, vendors, consumers) can collaborate and thereby create a regulatory framework supported by the necessary standards that address the industry needs.
In the book MacroWikinomics, Anthony Williams states: "The monolithic self-contained, inward focused enterprise is dead or dying! Internal capabilities and a handful of partnership are not sufficient to meet the markets expectations for growth and innovation."
In comparison with other industries, our industry has always been lagging behind the technology curve. Today, however, we no longer have that luxury. With the advent of Internet and mobile gaming, the complexities of crafting solid regulations is becoming even more challenging due to the exponentially multifaceted environment.
Global industry wide collaboration can lead to a set of harmonized regulations in record time. We have to at all cost avoid the creation of fragmented regulations and proprietary or de-facto standards in our industry. We need to continue to forge stronger relationships between the vendor domain and the policy domain.
Over many years now GSA has brought together vendors and operators creating a level of collaboration that enabled us to successfully develop standards that fulfill real business needs. Our member's participants have poured their hearts into the creation of these standards that are finally being embraced around the world. However, our life has only just begun, together with other industry associations, GSA is well positioned to forge wider industry partnerships and to create solutions addressing the technology convergence that is taking place.