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Casino Game Makers Target Zynga, Social Gaming
By Amir Efrati
Wall Street Journal
April 11, 2012, 11:59 AM
Web companies like Zynga ushered in a new era of “social” games on PCs and mobile devices that people can play online with their Facebook friends, forcing traditional console-game makers like Electronic Arts to join the fray to avoid being left behind.
Now, as Zynga ponders a way to enter the Internet gambling world, the makers of real-world casino games are entering Zynga’s turf, newly emboldened by a Justice Department opinion that indicated that many forms of online gambling could become legal.
Las Vegas-based International Game Technology, one of the top providers of casino games that generates $2 billion in annual revenue, began its push in January with the $500 million purchase of Double Down Interactive, which developed online casino-style games on Facebook that don’t involve any actual gambling. Rather, they involve the purchase of “virtual currency” that people can spend to play games for entertainment purposes.
But social games with real-money wagering is “going to come eventually,” said Patti Hart, CEO of IGT, in an interview.
“Think about how big Zynga Poker would be if it were about money, if you could win a jackpot and win a check,” she said.
If states began to allow social games and gambling to mix, social-game makers could tap into what will be a $30 billion global business next year, including $4.5 billion in the U.S., according to estimates from H2 Gambling Capital.
Hart gives credit to Zynga and Silicon Valley for developing virtual currency that doesn’t come with regulatory impediments, but she is skeptical that Zynga could translate its success in virtual-currency games to real-money games, where regulators have a lot of say.
“People assume you can take Zynga and slap real money on it,” but many of the casino-style games on Facebook, including Zynga’s, involve the use of mathematical formulas that wouldn’t sit well with regulators, she said. A Zynga spokeswoman had no immediate comment.
Besides Zynga, IGT’s many competitors in the social gambling space include a unit of casino operator Caesars Entertainment and a unit of Hollywood studio and casino operator MGM. EA’s PopCap unit has launched a slots game.
There’s also IncuBET, a Silicon Valley startup founded last year by former Wynn Las Vegas President Andrew Pascal and a former IGT executive Paul Matthews. It hasn’t yet released any games.
Even without real-money wagering, social gaming is becoming a big business. People will spend $2.9 billion on virtual goods in 2012, up from $2.2 in 2011, according to an Inside Virtual Goods report. That doesn’t include online advertising revenue, which Hart said IGT may eventually explore.
Double Down has more than five million monthly active users, according to appdata.com, and was the third-most-popular casino game maker on Facebook last year after Zynga and Playtika, according to Facebook.
IGT is bringing its library of hundreds of real-world casino games to the Double Down Casino, which people can use on the iPhone, iPad or through Facebook on PCs. It’s just launched games for Double Down based on the American Idol TV show and Brady Bunch movie.
“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.”