No slots, no problem: Social gaming steps in to fill the empty space

No slots, no problem: Social gaming steps in to fill the empty space

  • Howard Stutz
April 28, 2020 11:30 PM

Slot machines around the country are silenced. But slot players are still in the game – albeit trying now to win non-cash awards, rather than life-changing jackpots.

With nearly 1,000 casinos closed throughout the U.S., social gaming has filled the void.

Research firm Eilers & Krejcik Gaming noted this month that social gaming revenues were roughly $5.7 billion in the last 12 months. In the first three months of 2020, social gaming revenue grew 6.8% to more than $1.5 billion.

Playtika, which owns Slotomania and Caesars Entertainment social games, including WSOP, was at the top of the chart in the first quarter with $425 million in revenue, up almost 10% from a year ago.

That’s a lot of virtual tokens.

The bulk of the first quarter results came before the COVID-19 coronavirus pandemic closed commercial and tribal casinos in 43 states. Eilers & Krejcik now expect social gaming revenue to increase by 7% through 2021.

“If current run-rates persist, the second quarter could see the industry post double-digit sequential growth, with many companies reporting record revenues,” said Eilers & Krejcik partner Adam Krejcik.

But will the growth last?

“Even when land-based casinos reopen, many patrons (especially the elderly) may choose to avoid them for health concerns and see greater entertainment value per dollar in social casino,” Krejcik said.

Screengrab courtesy PlayStudios

Macquarie Securities gaming analyst Chad Beynon told investors that trends for social gaming started to surge in the back half of March, when the U.S. casino market went into lockdown.

Social gaming involves online versions of the industry’s most popular slot content – or original games, in some cases – played for free on a mobile device or desktop computer. Players use virtual tokens to play the games. For nominal fees, however, players can increase their bankroll by purchasing additional tokens.

Social gaming tied to casino websites allows players to win restaurant vouchers, show tickets, hotel room discounts, and other non-gaming awards that can be redeemed when visiting the property.

Privately held PlayStudios has rewards tied to more than 70 hospitality, entertainment, and leisure brands. PlayStudios operates the myVegas line of social gaming platforms in partnership with MGM Resorts International casinos in five states, including eight properties on the Strip.

Slot manufacturers offer free play versions of their popular game titles through their own applications as a way of keeping players engaged when they are away from the casino.

Scientific Games took the concept one step further last year, when the Las Vegas-based slot machine provider spun off its social game division into SciPlay, a separate public company. Scientific Games maintained a 17% ownership stake in the new company.

Beynon expects SciPlay’s cash flow to increase by 19% this year.

“The stay at home order from the states leading to higher mobile use will flow through in the second-quarter results, so we have increased our (cash flow) estimate by $1 million for the quarter,” Beynon said.

On Tuesday, shares of SciPlay closed at $10.63 on the Nasdaq. Scientific Games, whose portfolio includes casino, lottery, and sports betting products, closed at $11.55, also on the Nasdaq. At their high points over the last 52 weeks, Scientific Games’ stock was nearly double the price of SciPlay.

PlayStudios has upped its presence and messaging since the pandemic and stay at home orders were issued. The company, which was founded in 2011 by gaming executive Andrew Pascal, launched an advertising campaign in Las Vegas and Denver dubbed In Is The New Out, which follows a young couple practicing social distancing at home and includes them playing the myVegas slot games for entertainment.

Screengrab courtesy of PlayStudios

Pascal said the partnership with MGM allows customers to play slot and table games in a virtual Las Vegas setting. With casinos closed, the games on myVegas, including myVegas Blackjack, offer MGM a way to maintain its presence with customers.

“From the beginning, we envisioned myVegas as an entertainment product that also served to drive tourism to Las Vegas,” Pascal said. “It’s a very unique approach to promoting the city, and with the awards offered by our partners, we’re able to take players who may have never planned to visit Las Vegas and turn them into repeat visitors.”

PlayStudios struck a partnership with Konami Gaming for KonamiSlots. In 2016, PlayStudios acquired Tel Aviv-based game studio Scene53 and launched its Pop! Slots mobile app.

Krejcik said the social gaming industry’s second quarter could result in double-digit year-over-year growth, with many companies potentially reporting record revenues. It’s clear social gaming is benefiting from the casino industry shutdown. Last year, the North American slot market produced roughly $75.7 billion in revenues, Eilers and Krejcik said.

Krejcik said the growth’s sustainability, once casinos reopen, is still to be determined.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.