Jackpot: Big Fish Games Dives into Real-Money Online Gambling

8/16/12Follow @curtwoodward

Casual game companies are already big money-makers on smartphones and social networks, often by selling power-ups and extra digital goodies that gamers can use to supercharge their play.

But the industry’s next frontier is something edgier and potentially more lucrative: Real-money gambling.

As of today, Seattle’s Big Fish Games is going all in. Big Fish says it will offer players in the U.K. the ability to make real bets through the upcoming version of its Big Fish Casino iPhone app.

Players in the U.S. won’t be able to take advantage—online gambling is still illegal in this country. But American regulators are moving toward a legal and regulated online gambling system, and setting up a virtual casino now gives Big Fish a new stream of cash while it waits for the U.S. landscape to sort itself out.

Big Fish’s casino app is the result of a purchase the 10-year-old company made last year, buying Oakland, CA’s Self Aware Games. That small company made a virtual gambling game called Card Ace: Casino, which was a Top 10 iPhone app.

Earlier this year, Big Fish founder and CEO Paul Thelen told me that the Self Aware acquisition made sense even without legal online gambling in the U.S. “What we bought was a stock,” he said. “The call option on that stock is if gambling is legalized in more areas of the country.”

Paul Thelen

But there’s been some changes to the landscape—specifically, the emergence of Betable, a London-based company that is licensed to provide online gambling in the U.K. Betable, which also has an office in San Francisco, is offering casual game developers the ability to rake in money from legal online gambling across the pond by plugging their game into its system.

I was there last month when Betable CEO Christopher Griffin told a crowd at the Casual Connect conference in Seattle how it all works. Betable handles all of the security, transactions, identity verification, and legal liability—for an undisclosed share of the revenue. Game publishers simply plug their creation into the Betable system and draw the users.

That separation allows U.S. game developers to legally collect money from online gamblers in the U.K., because Betable is the actual entity doing all of the nitty-gritty work of processing the gambling transactions.

In his pitch to game developers, Griffin cited in-house research that showed average monthly revenue per user for a typical casual game was $1. Adding gambling to the picture puts that figure at $100 or more a month, he says.

Big Fish’s entry into the world of online gambling is a huge signal about where the industry is going. Pretty soon, it might not be unusual for your average casual or mobile game developer to have a casino-type product that makes a bunch of money, underwriting any other games they want to produce. Or, as Griffin said, versions of existing games that incorporate gambling into the regular gameplay, rather than just pumping out digital slot machines and blackjack tables.

By jumping into the fray now, Big Fish is also getting ahead of other big names in the casual games business. High on that list is San Francisco-based Zynga (NASDAQ: ZNGA), the maker of Facebook-based games that announced last month (after a disappointing quarterly earnings report) that it was getting into online gambling in the first half of 2013.

Bloomberg News, which got a preview of the Big Fish and Betable news, cites an analyst report that mobile device gambling could bring $100 billion in bets by 2017. And those bets could be more lucrative than other kinds of mobile transactions: Bloomberg points out that, while Apple allows online gambling apps that comply with local laws, it doesn’t take a cut of the action.

“Apple wants to keep arms’ length from this,” Thelen tells Bloomberg. “They don’t want to be the middleman in a gambling operation.” Betable sure does. And landing an established name like Big Fish makes it likely that more developers will follow.

Big Fish is still privately held and has long reported that it is profitable. Thelen says the company, which grew out of his personal game-coding hobby, collected more than $180 million in revenue last year.

Big Fish has bet on other bold expansions recently, including a Netflix-like subscription streaming service that would give players the ability to seamlessly play casual games when they switch from laptops to mobile devices, and connected TVs. That service opens up a new way of making money from its catalog of games, but also gives Big Fish a way to enter the Asian markets without losing money to pirates.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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