After spending three days at ICE, the largest B2B iGaming show in the world, I wanted to share some of the highlights. While there was nothing dramatically different this year, it reinforced several trends:
There are many red oceans
I have written many times about blue oceans and red oceans, the former being spaces in the market where your competitors are irrelevant, the latter where you are competing directly with others. In the iGaming space, there is very little creativity and almost all the companies are just trying to be a little better than their competitors. There are a few silos in the industry, and within each silo the companies are largely interchangeable. Virtually all the companies, large and small, are imitating each other and adding minor twists around the fringes. The concern with this situation is that in a red ocean it is very challenging to maintain your margins and generate long-term growth.
Content as a commodity
The iGaming industry is evolving to a position where content is becoming a commodity, in part driven by the red ocean mentality. Technology and globalization is also contributing to this situation, as the barriers to entry are exceedingly low for content development. A good artist and designer anywhere — Chicago, Bangalore, Vilnius or Jakarta — can create a beautiful slot. While math is critical, there are many great mathematicians who can make the beautiful slot into a decent game. Not only does good content flood the market, it allows operators to create their own content cost effectively and skim a large part of their revenue into machines that do not generate third party royalties.
While this problem runs counter to the concept that content is king, content is not king if it is virtually the same. Content that stands out still enjoys premium pricing and attracts more players and operators. Great content cannot be replaced with quickly made internal product. Very little content, though, falls into this bucket and most is competing for an increasingly small revenue pool.
While this situation is bad news for content creators, it is great for operators. The plethora of slot providers puts the basic supply and demand formula in favor of operators. They can negotiate more favorable royalty deals or build their own competitive machines with minimal cost.
Platforms offering zero value
Consistent with the glut of content is a glut of platforms and aggregators. In the video game space, there are many “publishers” who will license a game, take a share (sometimes very significant) and just submit the game to the AppStores, adding virtually zero value.
In the iGaming space, many people have created platforms where they aggregate slots content and distribute it to operators. The problem is that many of these platforms or aggregators have few relationships with operators, and even the operators who have integrated them put the content in the back of the virtual store. There were many stories at ICE of slots developers who have generated dollars or only cents from an integration with a platform. Just as in the video gaming space, content providers need to do their due diligence before selecting a platform.
Lots of people speaking American
For many years, G2E has been the gambling show that Americans went to while ICE was largely for Europeans, but I heard many American accents this year. Additionally, some traditionally US focused companies — Everi, AGS, Scientific Games, etc. — had large presences at ICE. It shows the US companies, particularly content providers, understand that the online real money market (which is dominated by Europeans) dwarfs the US land based market. Europe provides a great opportunity for many of these companies, though it also means more content on the market.
Not everyone got the memo about crypto
While the bloom is off the crypto rose almost everywhere, particularly tech, many iGaming companies are still operating on the momentum it had twelve months ago. Throw the word crypto on a mediocre offering and expect it to be worth an order of magnitude more. This approach is consistent with how the industry reacts and copies rather than seeks blue oceans, so I am confident that next year there will be very little crypto left and they will be chasing the next one year old trend.
The promise of virtual sports
Not all the news is bad. The quality and breadth of the virtual sports offerings is very impressive. Walking through the virtuals area was like being at a sports bar with multiple TVs showing live events. The rendered virtual sports are often better than games available for console, like Madden or FIFA. There are also some great offerings that put together video clips of live events and create a virtual event. I expect virtual sports to be a big growth area online (both real money and social) in the next few years.
- At ICE this year, there was little new and many companies copying each other, competing in a red ocean.
- There is a glut of slots content, driving down revenue for slots providers but potentially providing a cost savings for operators.
- Virtual sports represents the best opportunity for growth, as the quality of the content is improving exponentially.