US live casino: early steps for key vertical
Live casino is a truly ‘new’ product on the New Jersey igaming landscape pioneered by the Golden Nugget Atlantic City group. Martyn Hannah talks to the operator to find out about the challenges it faced in bringing the product to the NJ market.
Walking along the corridor leading from the car park to the casino floor, patrons of the Golden Nugget in Atlantic City pass by a room that will strike some as odd.
Behind the floor-to-ceiling glass windows stand five casino tables, each equipped with cards and trained dealers.
But instead of players, the croupiers are looking out at a bank of lights and cameras as though on the film set of a Hollywood blockbuster. For those in the know, however, this room is the beating heart of Golden Nugget’s live dealer operation.
Live dealer casino has been on a major upward growth trajectory in Europe and is now seen as an integral, and in parts indispensable, component of online casino; but in the fledgling New Jersey market Golden Nugget is something of a pioneer.
The studio, developed in partnership with igaming platform supplier Ezugi, has been up and running since August 2016 and has provided a major boost to player acquisition and retention, according to Golden Nugget.
Despite this early optimism, other operators have yet to follow suit, with concerns over the cost of establishing a studio and the limited return on investment offered by the ring-fenced market preventing them from launching their own live product suites.
Over time that will change, argues Edward Ihre, chief executive of newly-launched live dealer operator Codeta: “Live dealer is only just starting to gain significant traction in European markets where online casino is far more established than in New Jersey.
“But as players become more familiar with online casino products, they will seek out games that offer them a more engaging and immersive experience. As the New Jersey market matures, live dealer will see an uptick in play and become huge,” he adds.
Trust building and scale issues
Thomas Winter, vice-president of online gaming at Golden Nugget, says its live dealer product has “exceeded expectations” and the company has already expanded opening times from eight to 10 hours per day, with plans to increase to 12 in the coming months.
Operators look to live dealer to build trust among players new to online gaming, which is certainly the case in the Garden State.
Retail players trying online for the first time often lack trust in the games, particularly when playing with brands they are unfamiliar with.
Resorts Casino is currently exploring ways of launching its own live casino, but Ed Andrewes, igaming consultant for the group, says they are still working on the finer details.
“The main challenge is creating an infrastructure that is cost effective for the size of the market. The current legislation dictates that the studio needs to be based on a licensed property and in most cases this means using prime and expensive floor space,” says Andrewes.
“In most other jurisdictions, studios can be based away from licensed premises within cheaper real estate locations designed specifically for broadcasting. These studios can be used by several operators, leading to significant economies of scale.”
Golden opportunity
Golden Nugget has opted to bite the bullet when it comes to costs, but it has a long-term strategy to allow other operators to use its studio for their own live dealer offerings, thus achieving the economies of scale Andrewes refers to.
In the meantime, the operator says its live dealer proposition is profitable, and is acting as an effective cross-sell tool for both retail and online play. It has also increased the number of tables from three to five, with construction already underway to build another 13.
Winter will not reveal the exact figures live casino currently generates, but says live games are not generating as much revenue as random number generated (RNG) table games at this stage, although he expects that to be the case by the end of the year.
Once the vertical is mature, Golden Nugget estimates live dealer will account for 10%-15% of total online revenues and be a major contributor to new sign-ups.
“Over the past two months our player acquisition rates have reached levels not seen since the first quarter of 2014. These new players are partly coming from the competition, but a number of them are new to igaming,” Winter says.
“We are also seeing that 50% of our new players place their first wagers on live tables then get to realise that we have the largest selection of slots games in the New Jersey market, and begin playing on those games. It is a very effective and cost-efficient cross-sell tool.”
The listed igaming operators also don’t publish exact breakdowns of their live casino activity but if one looks at the results of leading live gaming supplier Evolution Gaming for the third quarter of 2016, the group increased operating revenues by an impressive 47% to €29.2m while EBITDA rose 37% to €10.8m. Those figures represent margins of 37% during the period.
With such growth figures it is easy to see why New Jersey casinos would want to tap into such revenue streams.
Hurdles to clear
As ever though, Golden Nugget and Winter are optimistic about their live dealer product but bringing it to market wasn’t without its challenges. Building the studio was quite the journey, with the operator and tech partner Ezugi encountering a number of unexpected difficulties along the way.
Seeking County approval to take down a partition wall, working with architects to submit plans and adapting to specific constraints with lighting, cameras, and the space between tables saw the build time increase from 6-9 months, to nearer 15.
Winter says the New Jersey regulator bent over backwards to help keep things on track. “The Division of Gaming Enforcement was very supportive and helpful, as is always the case when operators and suppliers are trying to bring any new product to market.
“They worked hard with us on testing the product and adjusted half a dozen regulations to take into account liver dealer specifics. It took longer than we first anticipated, but it was totally worth the effort.”
Now live, the operator is not resting on its laurels. Its product is available on desktop and mobile, with Ezugi working on an iPad version due for release shortly. A smart TV version is a possibility, although a long-term one.
Product enhancements are also in the pipeline, including common draw options such as Blackjack Bet Behind and Hybrid Blackjack.
“This will enable us to offer Blackjack to an unlimited number of players,” says Winter. “Currently we are limited to seven – the physical number of positions on the table”.
Playing catch-up
Golden Nugget’s success will likely spur others into action, but Winter says it will be difficult for them to justify the cost of starting from scratch – especially if they are 18 months behind.
Rather he is encouraging them to partner with Golden Nugget to use its studio space to drive live dealer to the next level in the Garden State.
“Our view is that the benefits of sharing costs and building enough scale to expand operating hours in a profitable fashion more than offset the drawback of empowering competition,” he adds.
Regardless of how operators make it to market, the general consensus is that in the future live dealer will grow strongly in New Jersey and across the wider US market as more states legalise and regulate igaming.
For Codeta’s Edward Ihre meanwhile it is as much about being in the market early: “Those who get in there early and establish a smooth and solid live dealer product will be well placed to cash in as the market matures.”
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