Social gaming expands for slot machine maker IGT

6 August 2012

The casino industry is trying to get a grasp on the growing social gaming phenomena.

Slot machine giant International Game Technology (IGT) is offering its DoubleDown social gaming website to casino operators interested in exploring the process.

IGT, which acquired DoubleDown in January for $500 million, recently placed the ability to enter the free play casino through the websites of several small casino companies. There is no charge to the casino operator.

The company has announced agreements with Casino Del Sol Resort in Tucson, Ariz., and with the Golden Acorn Casino & Travel Center in Campo, Calif., 50 miles east of San Diego. IGT is expected to announce a similar deal with Jacobs Entertainment of Colorado, which operates the three Gold Dust West casinos in Reno, Carson City and Elko.

"It's one of those 'What do we have to lose?' propositions," Jacobs Entertainment President Steve Roark said. The company operates roughly 1,000 slot machines in Nevada. "We're always looking for ways to continue to interact and reach out to our customers, and this seems an opportunity.'

Eric Tom, IGT executive vice president of global sales, said discussions are ongoing with some 20 other companies.

"There are a number in the funnel, and these recent announcements have generated some interest," Tom said.

Tom said the idea is two-fold. First, it allows casinos to have contact with players away from the traditional "brick and mortar" gaming facilities. Meanwhile, customers have a chance to play IGT's slot machine titles for free.

In free-to-play social gaming, players bet virtual chips and can use real money to buy more than the house provides. In the third quarter, IGT said customers who spent real dollars on DoubleDown helped fuel the company's 9 percent revenue increase. IGT did not break out a figure for the DoubleDown contribution, but its interactive gaming business was part of an overall 13 percent revenue increase in its gaming operations division.

IGT said the company's DoubleDown users spent on average 25 cents per day on the website, up from 24 cents per day in the second quarter.

Analysts have been trying to understand the DoubleDown acquisition and how it will fit into the company's overall strategy for online gaming expansion.

"We have tried to be constructive on IGT's growth initiatives within online and social gaming, as it is important to be forward looking," Credit Suisse gaming analyst Joel Simkins said. "The cost of this expansion and lack of financial benefit near term are concerns.

DoubleDown is closely associated with Facebook and is the largest free play casino on the social networking site. IGT told investors DoubleDown had 5.2 million monthly users at the end of June, a decrease of 7 percent compared with the end of March.

Simkins said the decline in users was "troubling for a controversial acquisition completed near the recent peak for social gaming valuations."

It's notable that IGT was awarded an interactive gaming license by Nevada regulators in July to supply online gaming systems to casino operators.

Tom said the deals with casino operators to give their customers access to DoubleDown through various means would increase the number of users of social gaming sites.

The other key is the continuing addition of IGT's popular slot machine titles to the DoubleDown Casino. Many of those titles involve slot machines leased by casinos from IGT in which the operator and manufacturer share in the gaming revenues.

"A relationship can exist between the player and the game," Tom said. "We want to give the player reasons to play the game in an actual casino setting."

Roark sees another advantage to allowing Gold Dust West customers to play for free on DoubleDown; it helps prepare them for the possibility of legal online gaming coming to the United States.

"There are just a lot pluses to this," Roark said. "It helps our customers feel comfortable in an online setting."

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