Partners, Not Licences, Key To Game Developers Success In RMG

This post orignially appeared on blog.betable.com. 

There was interesting news yesterday from social gaming giant Zynga. In second quarter results the company said it was abandoning plans to work towards getting a U.S. real-money gaming licence.

Zynga had applied for a finding of suitability in Nevada, the first step to acquiring an online gambling licence in that state.

In response to questioning from analysts during an earnings call yesterday, Chief Operating Officer, David Ko said, “We must stay focused on our priorities. … The decision we made around real-money gambling was around focus.”

However, Zynga’s partnership with online gambling operator Bwin.Party in the U.K. remains intact. Earlier this month, the pair announced they would launch their two real-money titles on Facebook. The U.K. venture relies on Bwin.Party’s existing gambling licences and its real-money expertise. Yesterday Zynga said it will “continue to evaluate” this opportunity.

This leads to two interesting conclusions:

A) Zynga is still interested in making real-money gaming work.

B) Applying directly for a gambling licence is too much work and too distracting for even the biggest social game developer in existence.

Zynga has laid off a large number of staff but even so, its 2400 employees represent a bigger workforce than most of the other leading social game developers combined. Despite these assets, Zynga has found the task of pivoting to run a gambling operation itself too distracting to pursue at this critical time for the business.

The problem is that offering gambling is not as simple as getting a licence – and that process alone is lengthy, burdensome and expensive. Once a licence is acquired, compliance is a constant strain on resources. Every game must be tested, regular reports must be sent to regulators, taxes must be paid, transactions must be monitored, every customer must be vetted… in short it would represent a complete change in cultural for Zynga to become a gambling operator. Clearly this is a price they are not currently willing to pay.

Partnerships are a better bet for even the largest game developers. By relying on an operator that knows the regulated  gambling space, a developer can retain a good portion of the freedom they enjoy in the world of free-to-play. But how much “business-as-usual” they will enjoy depends to a large degree on how a deal is structured. In some existing real-money/gaming deals, the developer ends up being little more than an IP licensor. That is fine if you are not interested in the end product, but not so great if you are in the business of making games.

At Betable, we pride ourselves on being able to offer game developers more freedom to continue working how they want, than any other potential partner in the real-money gaming space. That is not just freedom from handling regulation and licensing, but also freedom to design games without being limited to restrictive tools or a clumsy platform.

From our perspective, these are not just a nice-to-have cultural elements for developers, they are the essential core of what makes game companies so great. Allowing developers to concentrate on game design not only results in the best products for consumers, it will ultimately create the best businesses in the market.

For the increasing number of game companies that want to explore the opportunity of real-money, choosing the right partner is probably the biggest decision they will have to make.