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MGM Resorts takes cautious approach to actual real money Internet gaming

28 May 2014

By Howard Stutz
MGM Resorts International supports the legalization of online wagering in the U.S.

The casino giant holds an interactive gaming license in Nevada.

But the company’s Internet presence is devoted to a free-to-play casino site that allows customers of its M Life loyalty program to earn rewards, which can be redeemed at MGM properties in Las Vegas and Mississippi.

MGM Resorts is taking a wait-and-see approach in regard to real money Internet gaming.

The business model just isn’t there yet.

Macquarie Securities gaming analyst Chad Beynon doesn’t blame MGM Resorts or any other casino company from sitting out the current Internet gambling effort in the U.S. Just three states have legalized forms of online gambling, and federal legislation — both for and against — is bottled up in Congress.

California seems to be the only state moving forward with some type of Internet poker legislation.

Nevada, which has three poker-only websites, reported less than $1 million in monthly online gaming revenue in both February and March.

New Jersey, which offers full-scale online gaming through sites operated by six Atlantic City casinos, experienced its first monthly decline in April. For the first four months of the year, online gaming has produced $43 million in New Jersey, far below most projections.

Delaware’s revenue has been inconsequential.

“Overall, recent data and news headlines have been almost uniformly negative for iGaming companies and near-term jurisdictional expansions,” Beynon said. “Most states remain in the ‘wait and see mode.’ Despite this, companies remained optimistic around the business. However, a lack of progress keeps us concerned.”

Meanwhile, social gaming is flourishing.

The free-to-play websites — either stand-alone or offered through social platforms such as Facebook — earn revenue through nominal fees customers pay to purchase virtual gaming tokens, often less than $1 for thousands of chips.

Caesars Interactive Entertainment is the leading social gaming provider, according to two analysts. The company, a subsidiary of Caesars Entertainment Corp., has several social gaming sites, including Playtika, Slotomania and Bingo Blitz. The division operates real-money Internet gaming in Nevada and New Jersey.

Eilers Research gaming analyst Adam Krejcik told investors Caesars Interactive has distanced itself from the competition with an estimated 19 percent share of the total market. Earlier this year, the company purchased another smaller social gaming business to grow its market.

In the quarter that ended March 31, Caesars’ social gaming revenue was $115.7 million. Overall, the total social gaming market produced $202.5 million in revenue in the three-month period.

“Social gaming in the U.S. continues to grow while iGaming remains lackluster,” Beynon said.

Krejcik predicted Caesars would generate more than $500 million in social gaming revenue this year and the industry as a whole will reach $2.6 billion. Social gaming takes place on multiple platforms, especially mobile devices.

“Overall, we underestimated mobile game revenues this quarter,” Krejcik said. “It was another record quarter for the social casino game industry, as mobile continues to perform better than expected.”

Krejcik said slot machine giant International Game Technology, which owns the the social gaming product DoubleDown Casino, benefited from the increased use in mobile products, such as iPads. IGT has increased its content offerings on DoubleDown.

Krejcik estimated mobile accounted for 39 percent of IGT’s DoubleDown revenue of $68.8 million in the quarter.

The social gaming figures have obviously piqued MGM Resorts’ interest. The company’s myVegas platform is operated by PlayStudios of Burlingame, Calif., a company founded by former Wynn Las Vegas President Andrew Pascal. Krejcik said PlayStudios has revenue of $11.6 million in the first quarter, eighth out of the top 10 social gaming companies.

Last week, MGM Resorts and PlayStudios announced an expansion of the myVegas platform to move beyond the company’s Strip hotel-casinos and include MGM’s Mississippi resorts, Beau Rivage in Biloxi, Miss., and the Gold Strike Tunica. Under the program, players can redeem points earned through social gaming for show tickets, restaurant meals, hotel room and suites upgrades and golf outings.

Pascal said in a statement myVegas was the only social gaming application that allows players to use their earned virtual rewards inside a traditional resort property.

Krejcik said PlayStudios was one of the faster-growing social gaming companies in the last quarter. The partnership with MGM Resorts “underlines the importance of have a successful mobile strategy/solution.”

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