A new breed of arcade: Putting devs' skill-based games on casino floors

Something interesting is happening in U.S. casinos: they're slowly becoming a bit more like arcades in order to get more young people gambling.

Gamblit Gaming is one of the companies nudging things along. The California-based company has been in the business of operating online and mobile games that players can wager real money on for some time, but mostly in the U.K.; it's only recently that U.S. casinos began to seriously consider putting skill-based games on their floors alongside slot machines.

And while Nevada passed a law last summer that allowed casinos in the state to incorporate slot machines with skill-based mechanics, Gamblit exec Darion Lowenstein says the company wants to go beyond game-like slots: it wants to put simple video games on casino floors. Think '90s arcade games, but with the option to wager real money. Gamblit has its own internal dev team, but it's also looking to partner with devs to port their games to casino floors, where Lowenstein claims an untapped audience of players is waiting to spend money on your game -- if it's approachable enough.

"The number one thing I tell devs when I meet with them is, think of a '90s arcade," Lowenstein told me at last week. "Because if your game requires too much in terms of tutorials, if there's any kind of buildup or long-term loop, it just doesn't work on a casino floor."

As an example he points to Wicked Witch's Catapult King, a mobile physics-based game that originally launched in 2012 and is now poised to hit U.S. casino floors via Gamblit's real-money game stations. 

"It's sort of like an SNK Neo Geo cabinet from 15 years ago; people can walk up and play anything they want," says Lowenstein. "So if they're a 55-year-old female who likes word games, we're launching with a word game. If they're a 21-year-old male who likes to knock down castles and destroy knights, they have Catapult King."

Lowenstein currently serves as marketing chief for Gamblit, so hyping the company is presumably part of his job. But he also oversees Gamblit's publishing, licensing and dev partnership work, and his career encompasses time spent as a producer at Rockstar and Activision, a development director at Electronic Arts, and (more recently) a Scopely VP overseeing mobile game development. Now, he claims skill-based casino games are poised for a mobile-esque boom.

The pitch to devs: mobile is overcrowded with games. Casino floors aren't (yet)

"I haven't seen an industry this ripe for success since I switched from making big-budget console games in 2010 to doing mobile," says Lowenstein. "Because when you look at the space, and you walk through any casino in Vegas, you just see tons of young people. And they're there for parties, and they're looking at slot machines like 'meh.'"

"They're even sitting at the slot machines and playing Clash Royale, or Candy Crush -- and not engaging with the games on the floor," he continues. "They have money. They have time. They're playing these games on their phone. But there's no outlet for that in casinos." 

This is the crux of what makes Gamblit interesting: the company is reaching out to game developers, many of whom struggle to get their game noticed in an overcrowded industry, and pitching them on casino floors as virgin territory.  

Of course, that territory is still mostly uncharted. Lowenstein acknowledges that the laws on what, exactly, is okay when it comes to skill-based gambling games are still being defined in different U.S. jurisdictions, noting that Gamblit has faced delays as it goes through the process of getting its games greenlit by legal authorities, gambling machine regulators and casino operators. 

He says its worth it to have the chance to get into a new market, one that doesn't face the user acquisition hurdles that he saw developers struggling with while working on free-to-play mobile games.

"I don't face the battle of user acquisition. That's been my biggest struggle with the last few mobile games I launched when I was still in freemium. The costs were doubling year over year for UA. The space was getting more and more crowded," says Lowenstein. "So for me it's very exciting to look at an industry that's very old, that's ripe for change, already has a customer base on the floor -- you just need to give them a product they actually want to play and engage in."

Casinos still get most of the money

So how does it work, exactly, from a developer's point of view? If you want to adapt your game for real-money wagers and release it onto U.S. casino floors via Gamblit's machines, Lowenstein claims the company doesn't currently offer a standard revenue share -- instead, it pays developers specific agreed-upon amounts based on revenue thresholds. Those revenue threshold are, in turn, tied to the revenue Gamblit sees from a given game -- not the game's gross revenue. 

"The biggest split that goes out goes to the casino operator," says Lowenstein. "So they're going to take between 70 and 80 percent of everything, just off the top, as well as taxes. Taxes cut off the top as well. Now, after that, everything that's left over is the publisher's share. That'd be Gamblit. And then basically from that point on is where the split goes into the developer and Gamblit."

A Gamblit game machine, photographed by Peter Bohler for The New York Times

But again, that split is tied to monthly thresholds -- if a game generates 1 million in a month (after taxes and the casino's take), the developers gets X amount. If it makes 2 million that month, the developer gets Y amount. "The developer gets a monthly fee based on the performance of their game on the casino floor across all regions that we have hardware. It's just not a direct rev-share split," explains Lowenstein. "It keeps them from having to go through the licensing process."

The licensing process there is what Lowenstein describes as a 6-month to year-long vetting process by gambling authorities that can cost "anywhere from several hundred thousand dollars to over a million." The Gamblit exec says Gamblit has worked with said authorities to have its personnel and platform vetted, and reached an agreement whereby it only needs to do a "simple background check" on any developers it partners with in order to launch their games into U.S. casinos as skill-based gambling games on its platform.

"So for example when I joined Gamblit, which is fully licensed in Nevada, the U.K. and different territories, I had to go through about 9 months of investigations for each jurisdiction," says Lowenstein. "Where they went through like, who I've lived with! Where my money's at! All this crazy stuff. So what we do as a real-money publisher is, we shield the developer from having to go through all that."

The fact that a developers' earnings on a given game are directly tied to how much money players spend on the game raises some ethical design questions that get especially thorny when you start to consider putting that game on casino floors, where people are often encouraged to drink and gamble.

Lowenstein says Gamblit does not encourage developers it partners with to "tune" their games to entice people to wager more money on them, and though it can't be sure that people with gambling problems won't walk up to a Gamblit game on a casino floor and blow their life's savings, there's no more risk of that with a skill-based game than there is with a slot machine -- there may even be less.

"We've done studies, we've done focus groups, we've done a lot of different testing, and we've found that people who are true gamblers are more into that instant feedback of slot machines. Where you're gambling every six seconds. You're hitting that button, you're getting that thrill, that excitement of throwing down money," says Lowenstein. "We're more of a social, interactive experience where the player, when they play our games, they're inherently more focused on 'Did I beat the boss? Did I get to the next level?' And the wagering proposition almost becomes kind of secondary to that experience."

Really, says Lowenstein, the idea is to add spice to a game by letting players wager real money on their performance. It's an argument very similar to the one former Battle.net chief Greg Canessa made to Gamasutra last month for Sparcade, a mobile app from GSN Games that affords players the opportunity to wager real money on mobile game matches they play against other players.

"The money motivation is not the main reason people are interested in playing competitively for money,” said Canessa. “It’s really about the fact about having a buck down makes the game more interesting to people."

Gamblit operates a very similar mobile game gambling platform in the U.K., but in U.S. casinos Lowenstein says Gamblit's machines are legally required to return a certain baseline percentage of all money that comes in back to players. That percentage, referred to as RTP (Return To Player), varies by jurisdiction but typically hovers around 75 to 80 percent.

Moreover, he claims that the "addictive core loops" that drive some players to invest thousands of dollars into mobile F2P cash cows like Clash of Clans are effectively impossible to implement right now on Gamblit machines, because they don't (yet) allow for progress to be saved and tracked over time.

"The reality is, for the games we're making, freemium game design doesn't work. Anything that's a persistent universe that you have to invest money in, doesn't work. Because there's no saving on the machines," says Lowenstein. "We'll have that later on. But for now, it's very much a '90s arcade experience. It's walk up to the machine: what can you learn in 60 seconds? And then feel comfortable enough, three drinks in, to put 20 bucks in and try a game on the machine."

Gamblit's machines, replete with a handful of games (developed both by external devs and Gamblit's own 14-person internal dev team) that let players wager real money on their in-game performance, are expected to begin popping up in U.S. casinos later this year. Whether they'll be able to draw casino attendees' attention away from the games they're already playing on their phones remains to be seen.