US tribes’ reluctance to embrace igaming has widely been put down to a reluctance to reopen hard-won compacts as well as fears over land-based cannibalization and that betting regulation will inevitably lead to online casino. But as several pioneers are proving, ultimately it seems to come down to executives’ experience and commercial imperatives
In the midst of all the industry activity in the US it can be easy to overlook the tribal gaming sector. There are a number of reasons for this. Some tribes have made plain their opposition to regulating online casino and sports betting (online or land-based for the latter). Some have shown little interest in the issue, while others, such as Mohegan Sun and Pala Band of Mission Indians, pioneered igaming sites in 2013-14 and have since built up their online businesses outside their home states. However, the picture is far from clear and a number of questions crop up. What were the strategic reasons behind an igaming launch? And how was the decision reached within tribal councils (especially when one considers that igaming was viewed negatively or with indifference by many tribes)? What were the expectations and were they reached? What more can we expect from the tribes? How likely are we to see a resolution of the regulatory deadlock in the biggest state of all, California? That last question is purely rhetorical, as 60-odd tribes and numerous industry stakeholders stand their ground on the issue.
The obstacles to tribes launching igaming offerings or being reticent about supporting the online vertical are well known. Many of them believe remote gambling products would jeopardize the economic wellbeing of their casino properties, that online would divert footfall from their land-based premises and have a detrimental impact on what is, in effect, the economic engine of many of their communities. From a product perspective it is also important to note that while sports betting is an obvious acquisition tool, it is largely viewed as a gateway to casino and regulated online casino would result in less footfall to the games tables and lead to less handle from their key revenue source. Politically they are also reticent to re-open gambling compacts they have spent years negotiating with their state governments.
Tribes also like to control as much as of their environment as possible, so signing deals with numerous thirdparty providers that offer products and technology platforms they don’t have a firm grasp of is not something they are much enthused about. All this is understandable and accurate, to some extent. As is often the case, the situation on the ground is more fluid. The tribes that have made headway in the US igaming space are those, such as Pala Interactive, that took an early gamble on the sector or, like Connecticut’s Mohegan Sun and Foxwoods, benefit from strong financial standing in their home states. For the latter two, the knowledge that Wynn was building a major resort due to open in June in neighbouring Boston, Massachusetts, also played a key part. Avi Alroy, VP of Interactive Gaming for Mohegan Gaming & Entertainment, says: “Our strategy for online betting products is that it’s an additional way for Mohegan Sun to introduce new players to our brand and ultimately to our brick-and-mortar facility. Also, we know gaming very well, and this is another channel for us to service new and existing players.”
Mohegan Sun owns the Resorts Casino in Atlantic City but did not have much brand recognition when it launched an online casino in New Jersey in 2013. It now has a 3% share of the igaming market in the Garden State. Is the group surprised at how well it has performed there? Alroy says simply that it is very happy with its “New Jersey online product and it goes to show that our brand reach is strong, beyond Connecticut and Pennsylvania.” However, it has learned from the experience and will apply that to the online launch of Mohegan Sun Pocono in Pennsylvania.
Sports betting is due to go live in July in partnership with Kindred (Unibet) and casino is slated for September with Pala Interactive. “The challenges are going to be very different than those in the New Jersey market, but the process has been smooth and we are coming to Pennsylvania with a better understanding of what players want. This will allow us to do better in the acquisition and retention of players,” says Alroy. Pala Interactive launched its igaming offering Pala Casino in New Jersey in 2013-14 and has grown as both a consumer and business-tobusiness brand, although the latter is where the focus is. The fact it is headed by former Bwin.party CEO Jim Ryan explains in part why the tribe launched so early, while Ryan’s experience at the company meant the knowledge and skills were there to steer the project.
“We entered a year after the market opened and Pala had no brand recognition in New Jersey,” says Ryan. “The key thing to remember is that it all takes time: the licensing, getting the player account management system right, KYC and geolocation providers, content and payments. Anyone doing it now will speak again in two years’ time. “We are now in a great position to expand on the B2B front and grow with our clients. The fact that Pala Interactive effectively is a small start up means the state [-by-state regulatory] system is ideal for us. We are nimble and adaptable and the decision to go into New Jersey is serving us really well when it comes to servicing clients in newly regulated states. The experience and business we have built is extremely valuable— and we’re profitable.”
Clearly the hard work of those early days is paying off, but it wasn’t easy. “With CPAs at US$700- 1,000, in those early days we really had to work hard. We’ve now got five years’ experience, CPAs have halved and lifetime values are very good in NJ. But the key really was providing players with maximum payment options and great customer service.” Ryan adds that the group will push on in the B2B space. It has already announced a partnership with the Abénakis de Wolinak First Nation tribe in Canada, has launched in Mexico and is looking to do the same in Buenos Aires province in Argentina. Meanwhile, more US deals will be announced shortly. It also signed a deal with SBTech in January and the latter will be hoping to make inroads into the tribal sector through the partnership, as Pala Interactive’s business development teams look to sell its igaming solution to more tribes. So while many have bemoaned the reticence and allegedly closed mindset of some tribes when it comes to pushing for further igaming regulation, in reality it seems to be as much about individual companies, their executives and how they approach the channel.
ONLINE HERITAGE AND COMMERCIAL IMPERATIVES
Avi Alroy spent three years at Playtech, like Ryan is completely familiar with the sector and as his comments imply, tribes moving into igaming is also very much to do As for the regulated online gambling wave continuing to spread across the US, Alroy admits: “It’s been a somewhat slow process. On the other hand, igaming paved the way for a quick adaptation of online sports betting in multiple states, which so far is exceeding expectations.”
And as one industry contact speaking off the record says: “Reopening compacts and the fear that betting regulation will lead to online casino is one aspect. There are also the existing agreements some have with their states: Mohegan Sun and Foxwoods funnel 25% of their slots revenues to the state, but they have exclusivity in Connecticut. “This means their revenue streams are secure and there is no competition from other tribes to bite into them. But in the end, it’s also about executives who have the vision and skill to carry out the strategy.”
There is also the issue of commercial imperative and having to diversify: if a major state like Texas shows no sign of regulating, there is no imperative for local tribal casinos, or those in neighboring states, to press for regulatory change. As mentioned earlier, Mohegan Sun and Foxwoods addressed the imminent opening of a Wynn resort in Boston early and have broadened their income streams and geographical reach.
For all that, it does seem like the igaming regulatory wave continues spreading across US tribes, as the recent Oneida Nation-Scientific Games partnership in New York shows. However erratically, we should expect more tribes to get online in the near future. with individual company executives. “Perhaps I’m biased as I’m coming from the online interactive side, but we also see changes in many other industries moving towards a multichannel or omnichannel business (online and land-based), and we would like to be at the forefront of it.
“We’re also one of the few US tribes to have commercial casinos in Canada and South Korea [due to launch in 2021]. Igaming will be another way for us to service our loyal players but also introduce our various products and resorts to a new and possibly younger generation.”
JAKE POLLARD is a leading journalist and content producer in the igaming sector. He has covered the industry for many years and has worked on all the major businessto- business publications.