GPWA Times - Issue 21 - May 2012

that this is a duty that we owe to the in- dustry to help sort it all out and help our operators be successful. VN: Now if Zynga wanted to do some- thing like this, work with a Caesars, are they prepared to go through the licensing and the vetting process that needs to hap- pen to work with a casino company? CASTLE: Well, you’d have to ask Zynga that. It would be unfair for me to weigh in on that. VN: I’m just speaking generically. Do companies outside the gaming space ap- preciate what it takes to operate inside the gaming space? CASTLE: With a company that has 297 gaming licenses around the world, I can tell you that even people in the gaming in- dustry who only have a few licenses have no concept of how challenging it is to deal with it. That’s not to disparage those com- panies, because they’re quite good at what they do. But frankly it would be a huge dis- traction for them to try to do that. I don’t suspect that’s what most will do. Most will find a way to partner with the industry, ei- ther by partnerships with manufacturing companies [or] acquisition by manufac- turing companies like Double Down and stuff like that, and then of course there’s always the other option, which is to just simply share technology, share know-how in a way that can be legal in certain ter- ritories. When you think of something like Zynga, Zynga is a worldwide operation for free-to-play gaming, and they have a database that is huge and enviable. That being said, to try to enable that would re- quire licensure in virtually every place in the world to do it the way you would like to see it happen, and we’ve seen time and time again that that can take decades to build. Zynga has – as one of their core val- ues – “Zynga speed,” and I guarantee that the gaming industry is not running at any- thing close to Zynga speed. VN: What are the five keys to developing a good social game? CASTLE: The most important thing about social entertainment experiences is in the first word – social. What I see happen so many times and the misgivings I have with so many people’s approaches, they look at one particular aspect of a social game, and they go, “Oh, it’s all about this.” But it’s not. There’s a cocktail, or a mix of features and benefits that have to be in a product right from the get-go to make them light up a social grid, to make you want to talk about it, to make me want to talk about it, to make maybe one out of 1,000 of our friends actually pay some money for some- thing. All those things have to be carefully balanced, and it’s the mix, that je ne sais quoi that becomes extremely difficult to get your head around. And it requires a real commitment to the scientific process and it requires operational excellence that is rare in the world. And I’m not in the business so it’s not really a competitor, but if I were to toot the horn of anybody, I would say the social media companies that have done re- ally well have been able to demonstrate op- erational excellence around the scientific process. And a live environment like that is completely foreign to gaming operators. It’s not even the same sport. VN: Circle back around and talk about the online gaming environment as it ex- ists in the United States today. Where are the key opportunities that you see, and how is Shuffle Master working to fulfill those key opportunities? CASTLE: Our opinion is that it’s going to be messy and sporadic in the beginning and eventually get better as time goes on. We’re optimists. Our strategy is to be very, very flexible in both our offerings and how we’ll work with customers and how we’ll work with other companies. We’re trying to be as neutral and agnostic about ev- erything as we can. We will happily inte- grate into other people’s platforms with our table games, because we have a lot of proprietary content that they can’t have in any other way. And we recognize for their offering it’s important and for our brand it’s important to be out there. On the flip side we’re very happy to work with them as well. We see ourselves as content pro- viders and platform providers. What we affirmatively are not is a B-to-C company. We simply will not go directly to custom- ers because it’s not our expertise. VN: So as you look forward two years from now, what is the state of the online gaming industry going to be? CASTLE: Two years is not very long. VN: So let’s do this, let’s do a two-year outlook, a five-year outlook, and a 10-year outlook. Where is real-money play going to be available? CASTLE: Within the next two years, I’d say there’s certain states that . . . expect to have real-money play happening. Nevada, New Jersey, California. There’s other states like Illinois and even Oregon, and then there are other states that are saying absolutely no way, like Utah. Hawaii, may- be, maybe not. Who knows? They tend to go back and forth. At the end of the day, I think two years from now you’re going to see the likely candidates, California, Ne- vada, New Jersey, moving . . . forward and being either legal or very close to it. Five years from now I think you’re going to see a whole lot more. I think you’re going to see a wide spattering of things opening up. I think the lotteries are a misunder- stood or a misappreciated group of people that will be able to bring gaming into a lot of places. So I think your five-year time frame has a lot of lotteries and activities online that we would today categorize as online gambling or online gaming, and there will be different regulations depend- ing on the individual lotteries. And then 10 years out I think it’s wide open and I think you’re going to see many more state compacts and maybe even some federal organization around all of it where you have much bigger pools of gaming that are operating. VN: You raise an interesting topic with lotteries. How does what the lotteries do and have the ability to do affect your over- all strategy in how you move forward? CASTLE: It affects our strategy because we need to be able to integrate into any- body’s offering – the products that we have work particularly well with some lotteries. We’re certainly in active discus- sions with people in Canada and in the United States as well. But the individu- al states govern the lottery rules. A few years back, it would have been unthink- able that you would have a 26-state lot- tery. But it happened eventually, because the market demanded it. So in the same way, I would say that it affects our strat- egy in the sense that, with a one-stop shop we are able to address a very large portion of the market, so of course it’s important to us and they’re potentially some of our biggest customers. Lou Castle is the chief strategy officer for Shuffle Master, one of the world’s biggest game providers for casinos. 33 Where to now in the U.S. – and who’s driving ?