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Playing the Silver Ball

Originally published in iGaming Business, issue #93.

“Ever since I was a young boy, I’ve played the silver ball.” The immortal words of Pete Townshend are a pretty good description of my childhood in Singapore and my fascination with pinball games in the arcades of old; then one day, they disappeared.

Word in the arcades was that they were banned by the government due to illegal gambling, and for a kid of eight, my first thought was, “why would anyone gamble on pinball?”

Jump ahead almost four decades — the games have changed, the names have changed — iGaming on eSports is now the new rage.

Ball One

Let’s hit play, launch the first ball from the slot and start this article out from the beginning.

Gambling on arcade games, as my opening alluded to, isn’t a new phenomenon. In fact, pinball owes its origins to random outcome games that resemble current day pachinko; balls dropping down through the machine, no flippers, no bumpers, just luck.

Is it any surprise that the manufacturers of these amusement games for arcades were the same ones that made slot machines? Amusement machines were a business strategy to expand their operations beyond the heavily regulated gaming industry, but gaming continued to surround these machines.

In1942, way before my childhood memories of losing pinball machines to legislation, New York City launched the first highly-publicised legal attack on pinball and

this led to the machines being banned until 1976.

Even after Gottlieb added flippers and evolved pinball from a game of chance to one of skill, the machines were still illegal in many parts of the world, and where they were legal, some required these to be labelled “For Amusement Only.” Others required establishments to obtain licenses to operate, and imposed a myriad of other hurdles.

Even when pinball started to reemerge, the stigma remained, with many parental organisations labeling the machines and the businesses that had them as being predatory to children and places where the “wrong type of people” would gather. That notion would continue into the age of video games and ultimately, served as one of the nails in the coffin that ended arcade establishments in the US and many parts of the world.

The combination of gambling and arcade games seemed to be natural, but public reaction to it quickly became toxic and there did not seem to be the appetite for regulated gaming to take it under its wings.

The games came, betting happened, then it went away — the ball fell between the flippers and that is it for ball one, round over.

Ball Two

Let’s jump ahead to a different era of games, an era where the games have left the confines of the arcade and invaded our homes.

Whether you’re on a computer or a console, computer games today run the gambit of genres, including pinball, and with the advent of the Internet, multiplayer games quickly became the trend.

From simple turn-based games to Massively Multiplayer Online (MMO) games, the latest in computing technology reshaped the way we play games. Whether it’s from the comfort of our homes here in the US or in the Internet and gaming cafes of Asia, computer gaming rapidly evolved from a solo affair to a social one.

Many of the most popular games are competitive; be it scores, levels or achievements, there’s something for every player archetype, every mood and every occasion, so it isn’t surprising that wagering on games popped up again.

At the turn of the millennium, a group of startups — GamerSaloon, BringIt and WorldGaming — came onto the market and offered the opportunity to wager on skill- based computer and console games.

Keeping things legal in a majority of states in the US, the companies offered only peer- to-peer or ladder “tournaments”, allowing players to wager on their own performance in a selected game. An entry fee charged by the operator provided the basis of revenue.

As a consultant to one of those three operators, I closely tracked the industry from the beginning of this trend.

The business model made sense. Gamers were a very competitive lot, leaderboards, trash-talking and the rising popularity of organised leagues like World Cyber Games in Asia, followed by Major League Gaming here in the US, turned up the heat for gamers.

“Put your money where your mouth is,” became the unofficial mantra of these sites and the point wasn’t lost to many of the game developers and publishers. Just like how wagering drives audience and profits for sporting leagues, it didn’t take a pinball wizard to realize that the same would probably apply to these games.

But there was a catch — just like in the early days of pinball, the stigma of gambling crossing paths with games, perceived as entertainment targeted at children, presented a hurdle.

Combined with the official anti-gambling position of all the US major league sports associations, game publishers were very cautious about officially supporting any form of gambling associated with the games they produced under license, and by association, any of the games they published, period.

As a result, operators didn’t have the luxury of any integrated mechanisms to determine winners and losers, tournament results were based on an honour-reporting system.

Without direct game integration, the operators were only able to retain hardcore players, which accelerated the “sharks vs. minnows” phenomenon and stunted growth. Since those early days, IGT acquired BringIt after it pivoted its model into being a platform for casual gaming tournaments and WorldGaming was acquired by Virgin Gaming. Only GamerSaloon exists today as they were, and they’ve now adopted the eSports moniker.

Ball two slips through the flippers with nothing much to cheer about, just another try at combining wagering with competitive computer games.

Final Ball

As we send our last ball into the field, we move to what is happening today in the world we now call eSports.

Short for Electronic Sports, Wikipedia defines eSports as “a term for organized multiplayer video game competitions.”

With the maturing of the Internet and advancement in game technology, MMOs have evolved into something much more competitive and organised, allowing them to not just be a player’s activity but one for spectators too. The two groups I mentioned earlier, WCG and MLG, continue to be major players, but a multitude of more specific leagues and championship competitions have emerged.

We can generally classify eSports today into three main categories: real-time strategy (RTS) games like StarCraft, akin to a game like chess on steroids; first-person shooters, with games like Counter Strike and Call of Duty, akin to a game of paintball or laser- tag; and finally Multiplayer Online Battle Arenas (MOBA), with games like League of Legends and Defense of the Ancients or DotA, akin to, well, group brawls, on steroids, with magic.

Of course, it doesn’t end there, like in real sports, each league or championship may include different types and combination of games and categories, similar to how the Olympic Games may have a different slate of games as compared to the X-Games, and there are always the more specific championships like triathlons and tennis opens. Like real sports, eSports also come in individual and group genres.

While there can be a wide variety of games, we can broadly encompass the entire space into two general types, those that are purely skill-based, say soccer, and those that encompass an element of chance, say something like poker.

That said, unlike the real world where games that require physical skill may be affected by physical and environmental conditions like weather, there are games, like many MOBA and RTS games, that have fixed and clearly defined conditions that do not affect player performance. So arguably, a skill-based game online is almost totally based on the skill of the player, less their emotional and physical conditions.

Now comes the gambling twist, this time an iGaming one.

Today’s three major players are Vulcun, AlphaDraft and Unikrn. All three are backed by venture capital of some form, and all three are offering real-money games that range from fantasy sports-type competitions to direct wagering on the outcome of eSports games.

This time around, the playing field does look more favourable for success.

First, the primary business models of all three are targeted at the audience and not the players themselves, and since the current breed of games have built-in spectator features and viewers can tune in to coverage on TV or dedicated online digital streams like Twitch, the audience is out there.

Second, the experience is now seamless and integrated. Unikrn has integrated their system, where a customer can tune into a stream of a tournament and place a wager, the same way a handicapper can make an off-track bet on TVG. Since computer games are based on data, every action, every outcome is encapsulated in a data stream — it is an in-running operator’s fantasy come true!

Finally, at least for Vulcun and AlphaDraft, since their game offerings are in the fantasy sports structure, it is already legal and requires no regulatory oversight in the majority of states here in the US, with a specific carve-out in UIGEA, the Unlawful Internet Gambling Enforcement Act.

For Unikrn, while already legal and regulated in several jurisdictions, their model may present a harder path to take in the US, since it would be considered placing a wager on the outcome of a single event. There may also be further complications from the term “eSports.” If the events are analogous to sporting events, the players are then athletes which may now fall under PASPA, the Professional and Amateur Sports Protection Act, presenting yet another hurdle for operations outside of Nevada, Montana, Oregon and Delaware (for more on the legalities of wagering on eSports, see the piece by DLA Piper, and for more about Unikrn, the interview with Unikrn CEO, Rahul Sood, both in this issue).

Are the stars aligned this time around? Is the third time a charm and will ball three trigger “MULTIBALL!!” and send the segment into new heights?

If you’re a pinball player, you’ll realize that multiball can be both a blessing and a curse, and I see the potential for the current eSports iGaming arena to swing either way.

The amusement game stigma will continue to be an issue. While many competitive video games are actually played by adults, the perception, especially here in the US, is that kids play these games — people betting on a bunch of kids playing video games, especially if they are “deaf, dumb, and blind,” won’t play well as a message. Many parents here are still trying to wrap their heads around the fact that their kids can make money playing games!

But the larger issue I see is maintaining the spectator base.

As a video gamer, my dream is to be paid to play games, not have to put my own money on the line. Unlike poker, a bet isn’t integral to most video games, and as such, player-to-player bets will never be a big thing. Video game players, like athletes, play for the rush of competition. Even when some become jaded and play for salaries, they’re rarely gamblers that will bet on their own performance; and we all know what happens if they bet against themselves.

As in other forms of sports betting, spectator wagering, whether it be in the form of direct outcome or fantasy leagues, will be key. As such, growing and maintaining the spectator base will be crucial to the survival and growth of eSports iGaming.

And like all other broadcast sports, for it to be successful, the viewer base has to be diverse and needs to contain a significant amount of casual, non-players to prop the whole thing up, just like how economy seats keep an airline going while add-ons, business and first, pay and drive profits up.

Finally, the biggest attraction of eSports for iGaming could also be its biggest problem. Compared to sports, eSports events are shorter, faster and happen more often. Engagement and retention is great but the risk of burn-out also looms for all but the hardcore bettors.

Ball three is still bouncing up there. Will someone tilt the machine and kill the game prematurely? Will this be a high score or another dud? Time will tell but there are the makings of an exciting segment to track.

#eSports

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