Identity Crisis - Skill Games Industry Searches for Itself

17 November 2006

It's prosperous, it's exciting, it's innovative, it's growing . . . but what the heck is it?

It has been lumped with the console gaming craze (at the behest of console gaming biz). It has been nudged in the direction of soft gaming (gambling's version of "soft porn" . . . or the "soft drink," I guess). Some might suggest that it is gambling wrapped in a friendly, de-stigmatized package, sort of "I-gaming lite."

So, when I came to Vancouver last week for River City Group's "InDepth" conference on skill games, I was hoping to get a better handle on the sector from those who are entrenched in the business. Just where is its place among gambling, gaming and other forms of interactive entertainment?

But I came out of it with the realization that the leaders of skill games companies are trying to nail it down themselves.

Drill down a bit and there's even more confusion. On one side of the skill games spectrum you'll find video games not unlike those played via consoles (sports, roll playing, etc.). From there you move on to puzzle games and word games and then to strategic board games like chess and backgammon.

The common thread is that the user pays to play the games, and if he is good, he wins a prize, but where do you draw the line between skill and chance?

And that brings us to the legal discussion.

The U.S. Unlawful Internet Gambling Enforcement Act (UIGEA) sort of kind of doesn't refer to games of skill . . . whatever they are. Attorney Martin Owens, who chaired the InDepth conference, says they're not on the government's radar, and industry leaders generally agree, so the million-dollar question, then, is: Will U.S. law enforcement consider some or all forms of skill games illegal once the government "discovers" the industry?

For the moment, it is suspended in murk (the government likes this, by the way), and absolute clarity is ultimately reached by taking it to the courts. Any volunteers?

Albeit a crackdown on games of skill seems like a long shot. Wide-scale raids on a notorious "Bejeweled" ring doesn't sound like a good PR move for the DOJ, and newspaper headlines like "Backgammon Crime Lord Seized at LaGuardia" seem a bit far fetched.

Nevertheless, considering the U.S. government's propensity to prosecute over the last year, can you blame investors for staying away? Already, three of the industry's most prominent companies--Fun Technologies, GameAccount and chosen the better-safe-than-sorry route and are no longer taking U.S. play.

I suggested during the closing roundtable in Vancouver that these conditions make a very good case for either forming an industry association or pushing for membership in an established association. The skill games providers recognize this need, but don't have a lot of options. The games associations aren't putting out the welcome mat, and starting and maintaining a new association, as panelist Duncan Cheadle of JPM Securities pointed out, requires money that just isn't there. The aforementioned U.S. departure of Fun Technologies, GameAccount and certainly doesn't help matters.

That leaves the option of aligning themselves with Internet gambling, which means they'd be jumping to the gambling side of the fence. Coming out of last year's skill games conference in Las Vegas, there was clearly an effort on the part of many skill games providers to distance themselves from gambling.

Helping this decision was the gambling sector's halfhearted efforts to conquer the skill games space. Most operators threw games of skill up on their sites as another product in their one-stop shops with little effort toward marketing them or building a player base.

But the UIGEA changes everything. Suddenly, gambling operators are looking at games of skill as profit centers rather than just an afterthought, and the skill games providers are trying to figure out which direction go.

That there's not clear definition of skill games makes it all the more interesting. Amid the confusion, many are bailing out of the U.S.-facing skill games business on the basis that it's illegal, while gambling operators are opting into the business on the basis that it's legal. Perhaps this sets the stage for gambling operators to start buying up skill games providers.

The Way Forward

I left the Vegas skill games conference in '05 feeling that the industry was just starting to come together and on the verge of breaking through. But due to unfortunate circumstances, it has instead taken a step back.

As things stand now, not only is the industry without direction, it is without a driver and without a vehicle. Yet, most people would agree that somehow the potential for great things is still there.

Despite this grim picture, consider this: People like to play games. They like to compete, they're willing to pay for entertainment and they like to win money.

If someone--anyone--can get a handle on this, we might have something big. Until then, chaos reigns.

Related Links
I-Gaming InDepth - Skill Games & Bingo 2006