The mobile F2P social casino market explained in 15 minutes

yeah sorry people I have a very bad cold so I'll do my best to uh not start coughing too often I basically going to give you guys an update um on the Social Casino space free toplay casino games um it's uh it's one of the sub sectors of uh of the gaming industry or the games industry um a lot of Articles have been published about it we're not always the most popular boys in in the industry but uh in the next 15 minutes I'll basically give you guys an update on what's happening right now and um any other Trends a little bit about us um Plumb company I'm a CEO and co-founder of we were created uh three and a half years ago uh 3x EA playfish people we're 65 people today all based in London I would say we are in the top 10 um both in revenue and in in audience we raised in total close to 177 Million last round was led by TV production

company endal and we have two games live um a slot game which is still our Flagship game and uh a bingo game which we launched uh end of uh last year so Social Casino um and when I say Social Casino I'm talking about free toplay games I'm not talking about real money regulated gambling I'm talking about the the freet to-play games it's um it's a fast growing industry uh and is becoming mature quite fast in 2014 the estimate which I think is believe aable was that Social Casino games uh had a revenue of around $2.7 billion and the expectation for 2015 is that it's going to be between three and three and a half billion dollar so it is quite a it is a meaningful chunk of the games industry it is not it's not trivial um when I say mature I think it's um the next point is actually an example of that right now about 50% of the revenues are owned by the top five players um the top five players will come to that later are um are actually

companies that traditionally have never been into video games they're more traditional gambling or or Casino companies Caesars IGT Aristocrat Zinga is also still in there and big fish as well um we still see ongoing consolidation more and more m&a I'll talk about that uh a little bit later but we also see and this is not unique to social casin obviously is that Facebook canvas as a platform for games has definitely hit a plateau it's definitely over its peak um and there's huge growth in Mobile and tablets instead interesting point is that because of the the audience that plays Soha casino games tend to skew older um for plumby our average player is 52 years old and we're not really an exception in the industry um that there was probably a bit more inertia compared to other Industries targeting a younger audience of moving away from Facebook I know for example for strategy games and games targeting a younger audience or younger Dem graphic Facebook canas has

been over so to speak for for quite a few years so Casino kind of held um uh the casino audience stayed longer on Facebook canvas and actually bit of a as a result of that what we hear right now is that um more than 50% of all the games revenue on Facebook canvas comes from casino games um what we also see and again this is not just unique to the casino uh category is that production and marketing budgets are going up uh today I would probably say the absolute minimum production budget for an ambitious casino game where you actually want to that become wants to um generate meaningful revenues has to be at least $2 million and we see marketing budgets of $10 million uh and more so it's definitely no longer in the territory it's quite hostile I think for newcomers unless you're very well funded um or you are a company already in this space there's basically three main categories in uh in Social Casino um slots Bingo

and poker there is a category called Casino which is basically also all the traditional table games your Blackjack your roulette and so on but when we see companies that basically um have other casino games for example Double Down Casino which is the number two in the industry would be a good example we still see that the majority of the revenue comes from slots actually um in the case of double down it's rumored that more than 70% of their revenue actually comes from slots so I think it's almost fair to say that you can actually club together casino and Slots that would basically mean that um if you basically look at them as one category that they would represent um almost three qus of the total revenue of the industry and 55% of the audience Bingo would be around yeah around 15% of the market and poker would be uh the remaining part obviously demographics are a little bit different as you can imagine between the different ones um

Bingo and Slots tend to skew more female a bit older while poker tend to skew a little bit more male and uh and younger mentioned this earlier the top five in the market currently has 53% market share and growing um yeah it basically means that um yeah it's becoming harder I think as a smaller player to get a meaningful chunk of the pie uh this is I think this was the top 10 in um in May 2014 also if you look at at the names the the companies that actually are dominating the space the biggest player right now is Caesars um Caesars did a bunch of Acquisitions that they bought four or five Social Casino studios in the last couple of years most famous one being pla from stania also bought House of fund they also bought an EA studio in Montreal that was making the WSOP poker game number two is IGT IGT has been in the slots manufacturing business the traditional

landbased slots uh machines for decades um bought double down in a very spectacular um deal a couple of years ago for for half a billion dollar at the time everybody thought that igt's board was was going crazy but I think if you look at the current um revenue and and and profit Trends I think it was a very very sensible deal Zinga is still around with their poker those had a couple of slots games that are doing quite well if anything I would say the only thing at Zinga that is sort of like kind of working right now would probably be their Casino industry I think everything else is probably a little bit more challenging um GSN another big player has been around in casual games for a while did a big acquisition but bash gaming from Bingo Bash uh and big fish obviously got acquired for uh close to $900 million in uh uh later end of last year is also a very big player with our Big Fish Casino

again this is not um new for most of you here um it's all about mobile uh mobile took over web in the mid 13 as I mentioned earlier probably Casino it was a little bit slower than in other categories but it's definitely happening um desktop is still 50% Facebook canvas is still 50% of current revenues but it's it's going down quite quite quickly m&a so there's been a lot of um there's been a lot of deals in this space over $2 billion dollar worth in the last four years including some really big ones mentioned Double Down half a billion uh big fish close to 900 um million and one interesting thing here is actually that a lot of the m&a actually happened from very old-fashioned companies uh actually landbased traditional companies have been around for 20 30 50 60 100 years um well we don't see a lot of deals coming from sort of like the newcomers the

online gambling companies which at first glance looks a bit strange because you would think that there's more of a of a a cultural fit or technology fit between an online gambling company and a Social Casino Studio but when we think about how online gambling actually operates in the large majority of online gambling companies products are outsourced they actually use third party products not a lot of online gambling companies own their own technology or products they basically use uh the same slots as their competitors or blackjack or roulette or poker software um while the landbased casinos have been much more focused on thinking from I would almost say a product point of view how can we create a unique experience in the belagio or in the wind um in our Resort that is not exactly the same as something else how do we actually think about creating an experience for players which I think from a mindset point of view is much more closer to what you will find in the Social Casino company than the idea of

like let's Outsource technology and products uh and so on so that's just my personal Theory um I think it does play a role and obviously also what doesn't help um it helps from an m&a point of view is that this the landbased casino industry has been largely flat there's not been a huge amount of growth obviously these companies need to find new areas uh of growth so this quite spectacular 2 billion in the last couple of years there's basically two main corporate strategies that have been driving that um first one would is almost a bit redundant now I would say that was definitely maybe the first wave where gambling companies look at soci casino almost as a marketing tool as a way to build a brand as a way to build an audience um there a couple of examples Poker Stars launching a free-to-play game uh cheeky Bingo also has a free-to-play game so the idea is much more to extend the brand maybe build an audience or enter in markets where real money gambling is not allowed or not yet allowed um another deal would be to link your casino game with your uh with your

CRM systems your loyalty system MGM is doing that really clever with guys from play Studios with their my Vegas game where you can actually play a free game and by playing you actually collect points in your MGM credit card uh MGM loyalty card that you then can go and if you are in the bellaj you can get a free bottle of wine with your dinner and so on so there's a clever uh link between the two but probably the the most important driver is soia Casino as a grow driver a growth engine a revenue driver um we've seen that a lot of the social ex companies have been growing fast in Topline but also have been very profitable which again is not a given in the mobile game Space um so they're not really part of the gambling world at all they basically are run as separate entities within these organizations and are yeah basically the grow drivers we see that right now at IGT which again is a company that is it's a huge company thousands and thousands of Staff with see that the social Casino arm is basically what is

driving sorry what has been driving the growth for the last couple of years I think I there one um yeah couple of one other slide um like it is quite different comparing social with real money Casino the products are quite different even though they look very similar sometimes but also the expectation and the audience is quite different what people want to get out of a social freet to-play casino game versus out of a real money um if you if you are a gambler you might be familiar with this gambling Trill the idea that you are so close to winning or that um you don't really get that in a in a social Pro because there is no cash out you cannot win anything you cannot win a prize even um it's really more about me time a bit of entertainment a bit of guilty pleasure maybe um social players optimize their time their game play for time they want to play longer rather than that they want to win something out of it so is quite a different way of playing slots or Bingo

or poker compared to real money um also the key driver for spending in those kind of games is again I want to buy more time rather than I want to win more coins that's not really the the main driver um so people have also said that once uh real money gambling is allowed in the US which God knows might happen in the next 5 years maybe we'll see um then maybe the Social Casino will Social Casino games will die because then all the players there almost a substitute St because people don't have access to real money on online casino um but there's a lot of evidence there um a lot of players in in the UK Italy Sweden where online gambling is is totally uh available for everyone there's a huge number of online gambling websites also mobile real money gambling websites and we don't really see a drop of players there the same actually in the two states in the US where online gambling is allowed New Jersey and no one has seen any significant drop in

Social um Casino players so I personally don't think that there is any cannibalization effect and if there will be anything it will be very low single digit uh percentages and this is an interesting one obviously it's a little bit apples to pairs um but it is interesting that in the US uh currently in terms of Revenue um we see that Social Casino is a much much larger part than online gambling obviously it's also because there's only a hand handful of states that have legalized it so I appreciate it's not not 100% Fair um but still I think it is it is telling that Social Casino is really um a meaningful driver of growth and revenue in its own right and doesn't need real money gambling to uh to to to have um any relevance as a business so that's it I think I stayed nicely within my time um happy to answer any questions that's my Twitter and that's our website thank you very much thank you very much um you know person it's fascinating that you

know when we started out the Social Casino thing there was this kind of expectation that it was all going to be about particularly the US legalizing gambling and I think you I think you've said this for a long time and I think you know I I've always agree with you is that this idea that it's actually a different enjoyment and I think a really fascinating thing for me is it seems to me and tell me if you think I'm right it seems that the casinos are actually lending their brand authenticity to the social games rather than the other way around is that is that fair their brand but also I think about how players like to play because I think that the way how players play Social Casino is quite similar to how you play in Vegas you wonderand around a bit you have a drink you're going to try to find a nice show to watch you gamble a bit like it's much more casual it's all about the experience rather than the machine a social kind of um ease a safety if you like of playing a game that doesn't have a payout cuz I can pay and I don't have the anxiety over whether I'm going to get my money back or not and there's a certain safety in that kind of model I would argue I think that's true as well

yeah absolutely so one last one opportunity for a question if anyone's got one before we have a coffee break anyone got a quick question on that note I think I'll take it as a a thank you SRA thank you very much