While traditional slot machines remain a lucrative moneymaker for licensors, the gaming industry continues to turn to cellphone- and tablet-based casino gaming, skill-based machines in which players compete against each other (rather than against the machine), new technologies and a host of other measures to try to attract a younger crowd.

As it gathers next week in Las Vegas for the annual Global Gaming Expo, the industry is working its way through a changing licensing environment in which social casino games are being deployed to help attract Millennials and Gen X,Y and Zers who are used to playing games on the move.  

To be sure, physical slot machines featuring licensed properties as varied as The Walking Dead, Wheel of Fortune, Monopoly, Madonna, Space Invaders, Harley Davidson and Wizard of Oz still generate a lot of play in casinos. But those properties and others are also popping up more and more in mobile formats, mostly in free-to-play versions designed to generate revenue via players purchasing tokens beyond their initial opening stake.

In some cases, companies such as Aristocrat and Scientific Games, whose roots are in physical machines, have established online development and publishing operations, and seek licenses for both digital and physical formats. 

For example, Scientific Games has had the slot machine license for Hasbro’s Monopoly for 20 years, while its SG Social Division launched a Monopoly mobile app in July; that game also includes links to other Hasbro-licensed slot titles such as Battleship, Clue, Ouija and Yahtzee. Similarly, Aristocrat fields physical and digital casino games based on The Walking Dead.

 “Typically when the suppliers are interested in a new license, they now want all of the platforms whereas in the past it was pretty focused on the physical machine,” says Sony’s Stacy Kerr, whose company helped introduce licensing to slot machines with Wheel of Fortune in 1996. “They want to capture as many consumers as possible; part of it is that the demographic of those playing the machines is changing, and they definitely want to get a younger consumer.”

Deal structures differ

Typically, casinos pay manufacturers a daily rental fee to put the machines on their gaming floors. In the vast majority of licensing deals, property owners are paid a flat percentage of that rental fee. Licensors don’t, however, participate in the machine revenue stream, since that would require them to undergo a thorough financial examination and background checks by local gaming commissions — a lengthy and invasive process that most don’t want to put themselves through.

The contracts typically run 3-5 years, given that it can take 18-24 months from initial design to finished product. That development timeline also affects the kinds of titles – properties that have shown some staying power — that end up on the machines. “It is hard to capitalize on a [today’s]hot videogame when two years from now you don’t know if it is still going to be that way,” says Russell Binder of agency Striker Entertainment. “That is why the decisions (for casino-based machines) are rooted in proven success over a length of time with a demographic rooted in those that play slots.”

On the other hand, says Binder, “Companies are very aggressive in seeking licenses for social casino games because the barriers to entry are a lot lower cost-wise, and that makes companies more willing to take a risk.” 

In agreements for online casino games, licensors may get a share of receipts in the case of real-money games that are legal in four states (New Jersey, Delaware, Nevada and Pennsylvania) and in some international markets. 

With social casino games that are commonly available as free downloads, in which players are playing for credits rather than money, licensors receive a share of revenue from in-app purchases of such elements as extra turns or upgrades. 

For both kinds of online casino games, where the development cycle can be a matter of a few months, contracts run 2-3 years and sometimes require frequent refreshes of the software, to make sure a title remains current with any changes in gaming trends.​

A broader audience

Social games can be more flexible and marketed to a broader audience, some of whom may have never been to casino before, says Endemol Shine’s Kelly Hill. 

“There is a correlation between a social game that allows people to play on their own time and if they like the game, when they go to a casino they will seek it out,” says GameCo’s Richard Maryyanek, whose company develops skill-based slot machines.

Gaming companies have both embraced and backed away from the online business. International Game Technology (IGT) acquired social casino developer Double Down Interactive in 2012 and signed a series of licensing deals, including one with Sony in 2014 for mobile and online Jeopardy! and Wheel of Fortune slots that carried a $185 million prepayment. But last year it sold Double Down to South Korean casino operator DoubleU in a deal that gives DoubleU access to IGT titles in exchange for royalty payments that are shared with the games’ trademark licensors.  

The sale represented a return for IGT to its core casino-based business. “We found we were not a social casino operator,” IGT’s Walter Bugno told a gaming publication earlier this year. “That is not where our focus is.” IGT also believed the online games put it in a position of competing with its casino operator customers, some of whom operate their own online casinos. 

Earlier this year, IGT released a Ghostbusters 4D video slot machine featuring an ultra-high definition screen and gesture recognition technology that allows players to “touch” on-screen images.

As IGT moved away from the social casino business, Aristocrat extended its reach in the mobile space, purchasing social game developer Big Fish. Big Fish already had developed a non-licensed social casino prior to the sale and Aristocrat is considering using that platform for licensed versions, says Aristocrat’s Jon Hanlin.

But Aristocrat isn’t lessening its focus on traditional slot machines. Variety reported Aristocrat paid upwards of $10 million in guarantees last year to license the singer Madonna for a slot machine that is expected to ship in spring 2019. That will be in addition to the Brittany Spears and Mariah Carey slots Aristocrat has already deployed in Las Vegas at Planet Hollywood (Spears) and Caesars Palace (Carey) where the singers have residencies. Aristocrat also will introduce a Motown-licensed slot machine at Global Gaming Expo.

 “We are trying to have a mix of properties, with Brittany Spears attracting a younger audience and Motown playing to a slightly older customer,” says  Hanlin. “Casinos want as a diverse a crowd as they can get.”

As part of the effort to attract a younger customer, casinos also have been testing skill-based slot machines developed by companies such as GameCo and Gamblit Gaming. The latter signed a licensing deal for Endemol’s “Deal or No Deal;” The machine is slated to debut later this year.  New York-based GameCo, meanwhile, will introduce “Soul Caliber 2”-licensed machine at Global Gaming Expo under an agreement with Bandai Namco Entertainment. It also signed a pact with Paramount for Mission Impossible. 

Gamblit’s polling has shown its consumers average 36 years old, slightly younger than the 40-year-old and up customer for standard slot machines.

Contacts:

Aristocraft, Jon Hanlin, VP Commercial Strategy-Gaming Operations, jon.hanlin@aristocrat.com

Endemol Shine Group North America, Kelly Hill, VP Licensing Partnerships, 747-529-8000, Kelly.hill@endemolshine.us

GameCo, Richard Maryyanek, Head of Business Development, 917- 653-7557

IGT, Walter Bugno, CEO International, +44 20 7494 8750

Scientific Games, Derik Mooberry, EVP Strategic Products, 702- 897-7150, derik.mooberry@scientificgames.com

Striker Entertainment, Russell Binder, Partner, 818-225-9355, russell@strikerent.com

Sony, Stacy Kerr, SVP Licensing, 310-244-6256, stacy.kerr@spe.sony.com