The igaming industry has a rich history of innovation. Since starting in the industry in 1995, I was fortunate to have a front row seat to watch it blossom under amazing creativity and entrepreneurial spirit. The hubs at that point were Canada, the Caribbean, South Africa, Australia and a few other countries. The players’ market was clearly in the U.S. at first. There was little to no regulation for the first few years and the founders were constantly under pressure, especially in the U.S., of the federal prohibition efforts.
Some thirty years later, it’s a mature industry that has become more entrenched in Europe and is growing into new regions like Latam and Africa. But, what is the state of innovation in the industry today and what are the challenges? Having been involved with a startup launchpad (Defy the Odds) for the past six months has led me to offer some observations on our report card in this area. While the industry needs innovation and the players demand it, could we improve the infrastructure there to support such innovation?
The answer is yes.
One thing that has struck me is that it seems like innovation does not seem to be as much of a priority as one might expect from such a tech-focused business. While there are many business incubators/accelerators that target the video game industry and tech sectors in the sports world, for example, there seem to be few with an igaming focus. We partner with a leading incubator, Zero Odds, which is affiliated with the University of Nevada, Las Vegas (UNLV). They run two cohorts per year focusing on early stage gaming and hospitality startups. There are now starting to be some government support efforts in this regard that we’re seeing in the likes of New Jersey and Maryland. Seeking other igaming public or private incubators or accelerators that may be out there but are running quietly is a priority for Defy the Odds, so please reach out.
What about in-house research and development or innovation departments in some of the larger Tier 1 companies? Clearly, some of the companies, both operators and suppliers, do foster this in-house. But, is more focus on this needed? Probably. Some casino gaming platforms have sophisticated set-ups, including VC funds and internal incubators that seek out talented game developers to come in under their rubric. These are helpful to minimize the costs of game testing, licensing and other regulatory fees that stifle innovation, but more of these systems are needed. And a focus on entrepreneur programs in the larger companies could certainly help.
How about the investment side of the equation? The industry is blessed to have a number of VC firms and angel investors who put the bulk of their funds into startups. Many of these are folks who were pioneers and made their fortunes in the early years of the industry. We estimate that there are possibly 30-40 VC firms and angel investors that are the standard “go to” sources for startup investment. This group tends to be fairly tight, sharing information about the startups that they explore and those they like or don’t and why. It would be great to bring more firms from outside the industry into the fold. It will take a concentrated effort to educate some of these other investors about this highly regulated field and how it can yield good results for their funds.
The other piece of the puzzle is the policy-making and regulatory world. While legalization and regulatory processes are now the norm in many jurisdictions around the world, it’s become more and more costly. For example, startups which want to do business in states and provinces in North America need to apply for licenses in each jurisdiction. Those application fees add up and can be prohibitive. That’s one reason why some startups will attach themselves to one of those Tier 1 companies from the outset. If gaming regulators want to continue to see innovation, they might want to consider some innovative ways to foster that. Perhaps a tiered licensing fee for startups or other creative policies which will allow the little guys to step in and compete with what is an increasingly smaller set of operators and suppliers in light of ongoing consolidation.
What are the hot topics among startups? Many are what you would expect with startups focusing on AI, player engagement, new marketing approaches in the time of increasing ad restrictions, responsible gaming, regulatory technology, crypto, blockchain and cybersecurity. There’s also a subset of companies who are taking advantage of loopholes in the law and creating new products which are clearly appealing to players. That’s a time honored practice in this industry but that’s a topic for a different column.
So, whether it’s the governments, the leading companies, investors, incubators or the support organizations, determining how best to keep the industry fresh and of interest to the customer should be a responsibility of all of us.
