While one Native American tribe is exiting the igaming space, another is entering, focusing on helping tribes navigate online gaming and sports betting as the verticals expand across the US.
In March, Boyd Gaming announced it will acquire Pala Interactive, the igaming software and services supplier majority-owned by the Pala Band of Mission Indians of California. The $170m deal is expected to close in the first quarter of 2023.
In April, at the Indian Gaming Tradeshow & Conference and at a formal launch last week, the Mashantucket Pequot Tribal Nation of Connecticut announced a startup venture, Wondr Nation. The new business is an online gaming entertainment company focused on using emerging technologies and trends to create new experiences for players.
Wondr Nation, which manages the Foxwoods Resort Casino’s social casino named Foxwoods Online, will do strategic management of real-money online casinos and sports-betting platforms to maximise engagement and sales.
Pala Interactive, meanwhile, was founded by the Pala Band of Mission Indians in 2013. It has built an online gaming technology company that provides real-money and social gaming solutions on both a business-to-business and business-to-consumer basis in regulated markets across the US and Canada.
Its technology includes a player management system, casino, poker, integrated sports, social casino and poker platforms, as well as managed services. It provides B2B services in eight US states plus Canada and operates B2C offerings in New Jersey and Canada. Among the customers licensing Pala technology is European online gaming operator Kindred, with its Unibet brand.
With the sale, Pala will leave North American tribes without a fellow member they can partner with as an online technology provider.
Jim Ryan, CEO of Pala Interactive, argues the sale shouldn’t be viewed as a negative for the tribal community but as a success story as one of the first online gaming technology developers in the US that patiently waited for the marketplace to regulate and launch. There are many tribes that have now entered into the online gaming marketplace, but as operators instead.
The tribe made a bet on the online gaming marketplace, starting by developing its own products ahead of a California online poker initiative that never came to fruition when legislation failed to pass.
In July 2013, Pala decided to acquire the Toronto-based RealTime Edge Software from Ryan and his partner, Uri Kozai, the chief technology officer.
From Tribal Initiative to Industry Success
When New Jersey enabled online gaming, Pala launched a player account management system and casino products in November 2014, and “the rest was history,” Ryan says.
“There weren’t many tribal enterprises who were making that type of bet at that point in time,” he explains. “There were many years until late in 2018 on the back of the Supreme Court repeal of PASPA where there wasn’t a lot going on in the US regulated online gaming marketplace. All the while we were building our technology and PASPA got repealed and states started to regulate, and then we built a successful business.”
Boyd Gaming’s Acquisition of Pala Interactive
A decade ago, Pala had started to build out its own platform when they reached out to Ryan to join the tribal online initiative as CEO. Ryan said no, but the tribe liked what his company was doing and decided to buy it and abandon the tribe’s development effort.
Ryan and the current management team will stay on when Pala is acquired by Boyd Gaming.
“The tribe is now in the process of exiting at an attractive and fair price for all parties,” Ryan adds. “From that perspective, the Pala Band of Mission Indians and their membership get to celebrate the success of that.”
Pala has 11 customers, four of which are tribal, and the sale won’t affect them, Ryan notes. Instead, the acquisition will allow the company under Boyd to expand more aggressively with more capital and have the ability to hire people faster and grow the business quicker.
“I don’t see any losers,” he says.
As for losing a tribe in the gaming technology space, Ryan says it would have been difficult for Pala over the years to license its content to tribal competitors in California and their land-based properties if the opportunity existed.
“But it’s been a benefit for us in other jurisdictions in the US and Canada,” he continues. “We understand how tribes work, and that translates into how we do business with our current and future customers.
The Unique Approach of Tribal Operators
“We look forward to doing more tribal business and hope our heritage will help in that regard. We’ve lived in the tribal world and understand it,” he explains. “It’s a different mindset. Tribal operators don’t enter a marketplace with the viewpoint of securing 7% market share. They enter a marketplace with the viewpoint of generating positive cash flow that benefits their membership, leveraging off their land-based database, having their brand extend beyond the brick-and-mortar property and drawing the consumer back to the brick-and-mortar property.
“There’s a different psychology. That’s why you don’t see any of the tribes competing with the MGMs of the world and DraftKings.”
Tribal operators have land-based management teams but online gaming is new to them, Ryan points out. Pala licenses them the technology – the player account management system, the casino product, poker product and integrated sports product and provides management services, which range from customer support to fraud and compliance management, to acquisition and retention marketing.
“That’s one of the things that makes us unique to the tribal operators and frankly non-tribal land-based operators who want to get into this,” he says. “We can provide the operational services as well as the technical.”
Pala Interactive will continue to compete for tribal business and hopes to win it, with several competitors in the space. Online gaming is live in New Jersey, Pennsylvania, Delaware, Michigan, West Virginia and since last fall in Connecticut.
Wondr Nation enters the fray
Rodney Butler, chairman of the Mashantucket Pequot Tribal Nation in Connecticut, says the Pala sale to Boyd is a testament to what the tribe was able to create. They were able to build a product that commercial operators thought was so good that it could be rolled out at their properties.
“Not that we want to build a product and sell it,” Butler says. “Our ultimate goal is what we’re working on with igaming and social gaming and everything else is to put that into a product that we can scale and roll out nationally.”
Wondr Nation is leveraging what the tribe has learned in Connecticut and will work with tribes and other commercial jurisdictions to roll out social gaming, online gaming and sports betting and provide management services.
“What Pala has done is a model that a lot of tribes would like to follow,” Anika Howard, president and CEO of Wondr Nation says. “What we’re doing is different. There are a number of ways to approach being a part of the igaming content.
“There are platforms and management services and part of it is looking at where the opportunities are going forward.
Bridging the Gap in Social Gaming
“We see social gaming as a big piece of that,” Howard adds. “There’s a big gap between suppliers and platform providers and the operators in terms of understanding strategically what is the right mix and how do you think of those things. We feel like we fill the gap there and can be of assistance in that area.”
The Mashantucket Pequot Tribe partners with DraftKings for both its online igaming and sports betting platform at Foxwoods Resort Casino in Connecticut. With Wondr Nation, according to Howard, the Tribe wants to seek out strategic alliances and find those opportunities that make sense.
“I like the Rush Street Interactive (RSI) model,” she says. “It’s similar in that RSI started with creating all of these services to supply companies within their ecosystem. That’s where we are starting.
“Foxwoods is our partner and our client. We’re looking at what types of services we can provide for the other entities of the Mashantucket Pequot Tribal Nation and build that ability up so we expand it.”
What Pala did was serve as an example of what’s possible, she adds. Tribes want to be able to build some of those platforms and capabilities and take advantage of their Native American ties, but there will be suitors at some point.
Inspiration from the Pala Interactive Model
“Pala is no different from what’s happening in the market,” Howard explains. “We have seen a lot of these smaller companies be part of this consolidation. It’s going to be harder and harder as a smaller platform provider to be able to compete against some of those consolidated businesses.”
Howard is she’s not aware of any other tribes trying to replicate what Mashantucket Pequot is trying to do.
“For us, we have this market, but it’s also about what’s next. It’s not online gaming, sports betting, social gaming or bust.”
“There’s a lot of opportunities with esports that haven’t been explored. There’s opportunities of how gaming companies embrace the metaverse and NFTs. Part of what we want to do is invest in some of the initial research and opportunities to see where the next trends are coming from and what are the things we can do to be part of that.
“A lot of times gaming companies are laser focused in one particular area and what we want to be is a little more disruptive in the market by figuring out the other opportunities beyond what we’re seeing today.”
Setting Sights on iGaming Market Leadership
Howard says Wondr Nation’s goal is to be solidified into the igaming space in the next two to three years. The world and technology are changing and with the proliferation of online gaming and sports betting, that opportunity is going to become more of a commodity, she said.
“Most of the states are going to be approved (for sports betting) and after that it’s what’s next,” she continues. “For me, it’s looking at the consumer and having that customer-first approach and where there’s an opportunity to do things differently. For now, everyone is rushing to market, but it’s becoming a sea of sameness. What can you do to differentiate yourself and what are the things that you can do?”
In Connecticut, Foxwoods’ online gaming includes table games and slots. Since October, there’s been about $4bn in online handle and $1bn in sports betting handle in the state by all operators combined over the first six months, which Howard says was much greater than Foxwoods expected. Connecticut’s other tribal casino operation is run by the Mohegan Sun, which partners with FanDuel. The Connecticut Lottery does sports only and partners with RSI.
“Everyone is scared about igaming because they think it’s going to cannibalise their traditional bricks-and-mortar offering and we haven’t seen that to be true at all,” she adds. “There are so many studies looking at other markets that that’s not the case.”
Cannibalisation is not a concern
The tribe has looked at the makeup of players and found that there are online gaming players, social gaming players and brick-and-mortar players. The player motivations and what they like are different, but Howard points out they rarely see someone who’s a hardcore land-based casino player suddenly move to online. Players might split their wallet, but it’s unlikely someone will shift from their core area.
“It’s additive to the market,” Howard says of online gaming. “But it’s scary because people normally think igaming is going to cannibalise. That’s why you saw operators lobbying against it before, but now we have case studies that show it’s not the case.”
Howard believes it’s going to take time for igaming to expand in other states and among tribes. Connecticut has only two tribes and that made it easier and aided by the Covid-19 pandemic that spurred state lawmakers to seek out the online option when casinos were shuttered.
In states with dozens of tribes, it will be more complicated to get that online option approved, Howard predicts. It’s already difficult to do so in states with commercial gaming operations.
Pala’s Ryan thinks it’s great for tribes because there’s merit in tribe-to-tribe business because there’s a common understanding of the ultimate objective, which is to generate cash flows and return that to their membership.
Howard and Wondr Nation are counting on that.
“I feel like in many cases because of the things we are experiencing, we are in a position to uniquely understand some of the challenges that tribes have and be able to assist and figure out those opportunities to work together,” Howard says. “That’s our hypothesis.”
Butler adds they’ve already worked with some tribes in implementing social gaming platforms. The Mashantucket Pequot learned “through the fire” and now what the tribe knows about igaming and sports betting is a great opportunity to work with tribes who are trying to figure that out.
“We’ve been through that process with the request for proposals and looking at potential partners and how to structure a deal, and we can pass that knowledge on to other tribes,” Butler explains.
As for one bit of advice, Butler says if they had to do it over again, they would have launched igaming on their Connecticut reservation a decade ago. That would have allowed them to develop a technical knowledge when igaming was launched statewide in 2021 after state legislation passed. Their experience and contacts, however, should yield results.
“I’ve been chairman for 13 years and have built relationships with other tribes and relationships still matter,” says Butler. “We can definitely highlight pitfalls and opportunities.”
Victor Rocha, chairman of the annual conference hosted by the rebranded Indian Gaming Association, argues there’s no lamenting the pending sale of the Pala igaming initiative, calling it a success story.
Tribes are now excited to see the new venture by the Mashantucket Pequot.
“Foxwoods has been the first in many things in this industry,” Rocha says. “Before Foxwoods built their casino, we didn’t know we could build our casinos that high or that big.
“They are a great addition to the industry. They have experience, are respectable and have a brand. I hope they do well. I’m excited.”