GPWA Times - Issue 21 - May 2012

Does social gaming have a role to play in the real-money online gaming world? Shuffle Master’s CSO Lou Castle certainly thinks so. And he should know. He’s worked at Zynga. VN: Let’s start off with Black Friday. Where were you when you heard the news that the DOJ had indicted PokerStars and Full Tilt? CASTLE: So prior to my job as CSO of Shuffle Master, I was on the Board of Di- rectors, so I actually happened to be in a board meeting where we were having a discussion of an unrelated topic when that all broke. And I have to say that as much as I am pained for the people who were negatively affected by Black Friday, what I was very happy to see was that the DOJ was finally going to do something about enforcing the regulation that they put in place, because for a company like Shuffle Master with 297 gaming licenses and all the money and time that are as- sociated with being a legal player, the hardest thing in the world is dealing with people that are skirting the system or cir- cumventing the regulations. VN: Did that have a direct impact on your strategy to acquire Ongame? CASTLE: At that time we hadn’t talked to Ongame yet. It did not necessarily have an impact on our strategy. We had started eight or nine months earlier on building an interactive platform to deliver our pro- prietary content, so it didn’t affect it in the sense that it changed what we were doing, but it validated our belief that the open dot-com kind of no-rules world was go- ing to be changed into something that was much more regulated and controlled. So I think it validated our strategy more than changed it. VN: Game development in the online gam- ing world has sort of been a wild-wild west. Come up with concepts, push them out the door, and you come up with more concepts and push them out the door, and you don’t really worry about who has come up with the last concept or whether they’re sort of similar concepts, you just keep it moving out the door. As you enter this sort of mar- ket, obviously, you’re going into a regulat- ed environment, but how do you go about thinking about content development in a sort of wild-wild-west environment? How do you approach it from a business stand- point and a legal standpoint? CASTLE: Well, first we operate in affir- matively legal environments. So we have the rule of law behind us. Shuffle Master is a content creation company, very much like other slot and table game manufac- turers. So our approach is to actually take the time to develop products completely and fully and test them thoroughly before putting them into the market. That being said, coming from eight months of being the vice president of studios at Zynga, I can tell you the value of being able to quickly iterate on software is very impor- tant. You have to understand, though, in a regulated environment, you have to sub- mit portions of your software, if not the entire stack of software, for regulatory ap- proval, which takes a long time. So to en- ter into this space, I think what we bring is both the understanding of regulatory environments and the development of regulated software and the necessity to be able to market rapidly and change some components to be able to address market changes. So I think we’re well positioned to be very competitive. VN: Talk about your IP library and the ability to bring that IP library on- line in a way that customers will be able to recognize. CASTLE: Shuffle Master has 30 games in the market right now, proprietary table games. Those are the games that you think of when you walk into a casino, like 3-Card Poker, Casino War, Let It Ride, and of the 30 or so that are in the market right now and the 20 that are under development, that constitutes about 86 percent of the world market for proprietary games. We also have a wide variety of side games that help to make non-proprietary games like blackjack work much better for the casino, and for the players – players have a lot more fun. So we’re already in the space where we develop properties and we’ve got a huge library. So we’ve designed our system to be able to quickly adapt our table games onto it, and also to facilitate player vs. player games and slot machine products. We were set up to go build all this stuff ourself, basically. VN: Take something like 3-Card Poker. I’ve seen that on every online casino site. CASTLE: Hopefully not for very long. Understand, too, that when the world was wild and wide open, Shuffle Master, being a licensed provider, really wasn’t on an even playing field, because we would have to live by all our regulatory rules while our competitors didn’t. So it was very difficult to enforce our rights, our patents and our trademarks. They’re still very much en- forceable, but if you have somebody that’s not operating in a legal jurisdiction, how do you even sue them or how do you even approach them? They basically just tell you, “Aw, forget it, I’m not even going to listen to you.” That’s why it was really im- portant to us to see Italy and France and Be neutral, be agnostic and be ready to act quickly “ For a company like Shuffle Master with 297 gaming licenses and all the money and time that are associated with being a legal player, the hardest thing in the world is dealing with people that are skirting the system or circumventing the regulations.” 31 Where to now in the U.S. – and who’s driving ?