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Companies find profit in no-cash gambling games

| Sunday, June 22, 2014, 9:00 p.m.

Major companies are enjoying big profits with gambling games that prohibit players from betting real money.

The idea of operators offering free-to-play slot machines, blackjack and poker might seem far-fetched. So might the prospect of people finding their gambling thrills with chips they can't ever cash out.

But both are happening worldwide, and experts predict the phenomenon will grow in the next few years.

The buzz is about social gaming — more specifically, social-casino gaming. Casino-style games played on smartphones, tablets and computers generated $200 million worldwide in 2009; four years later, the total was 10 times as much, or more than $2 billion, according to Eilers Research of Anaheim Hills, Calif., which specializes in casino industry analysis.

Social games such as Farmville and Candy Crush are free to download and play. The genre of social casino games includes many slot machine and table games that are practically the same as their counterparts in real casinos. People can play for free but have the option of buying chunks of game credits for small amounts. DoubleDown Casino offers 150,000 chips for $3; 1 million chips have a regular price of $8 but sometimes sell for $1.

Joost van Dreunen, CEO of SuperData Research, a New York company specializing in social gaming, says 4 percent to 6 percent of social-casino players buy credits, with an average purchase of $40 to $60 per month.

“It's more interesting (to play) if something's at stake,” van Dreunen says. “What's cool is wagering a few of your dollars, or maybe a little bit more, and that gives the game a much richer dimension.”

The credits are worthless outside the game. Players can never cash them in.

Several casino-related companies embrace social gaming. This month, slot manufacturer Bally Technologies agreed to pay as much as $100 million for Dragonplay, a social-gaming developer based in Israel. Slot maker International Game Technology owns DoubleDown, a top social-casino site on Facebook. In February, Caesar's Entertainment, which operates Harrah's, Caesar's and Horseshoe casinos, bought its fourth social-gaming company.

MX Digital, a smaller game developer, plans to launch its branded slot machines on Facebook in mid-August, says co-owner Eric Bischoff, who gained fame with professional wrestling. MX brands, now used in online casinos overseas, include David Hasselhoff, Blues Brothers, Hulk Hogan and James Dean.

“We're taking the same visual dynamics of the game, taking the codes, the math, all the things that make up our online slot machines, and we're converting them so people can play with tokens,” says Bischoff, who lived in Penn Hills as a child. “You can play with friends, can play against friends, we'll have a tournament platform, you can win tokens, you can give tokens. It's more of a social experience than a waged casino experience.”

Adam Krejcik, managing director of digital and interactive gaming for Eilers Research, says social-casino providers can choose one of two paths.

Those who want new revenue and a potentially lucrative profit center can follow the Caesar's Interactive example, offering the games as a separate business.

“They're trying to push traffic globally, not necessarily trying to pull (players) into the property,” he says. “They're trying to make money off you when you play these games.”

The other route, still in its early stages, is using social games to draw customers to a real casino, Krejcik says. Those operators focus less on making money from online games and more on enticing players to visit a real casino.

The key is that users prefer games with the same play and payout ratios as in traditional casinos.

“Not only are those games more popular,” Krejcik says, “but also they monetize at a better rate.”

Mark Gruetze is administrative editor for Trib Total Media. He can be reached at 412-320-7838 or players@tribweb.com.

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