Tag Archives: gaming software

How To Start Your Own Online Casino & Poker Room Gaming Business (Page 1 of 2)

Date: June 7, 2007

Dear Entrepreneur,

Did you know that online gambling business is currently one of the fastest growing business categories in the world? In fact, the gambling industry in the United States alone generates more annual revenues, than the Hollywood movie industry, music industry and video game industry sales combined! Americans spend over $54 billion on gambling annually. The popularity of online gaming is increasing rapidly and this year has seen significant growth in Europe and Asia. In China and Malaysia, there are twice as many online gamers as there are Internet shoppers. Around 43% of Chinese Internet users play games online, while just 16% report that they shop online.

Revenues in online gaming business rose from only $800 million to over $2 billion in 1999! By year 2006, it is estimated that online gambling industry will top over $14 billion in revenues! London-based Merrill Lynch analyst Andrew Burnett says online gambling could generate more than $150 billion in revenues by 2015. The potential of online gaming business is too big to ignore. Now is the perfect time to get onboard.

Until recently small entrepreneurs had no chance of getting into the gambling industry, because of huge capital investments, gaming license acquisitions and legal red tape. The internet eliminated all the obstacles. You can now own and promote your own online casino, sportsbook and multiplayer poker room gaming business and generate revenues you’ve only dreamt about.

There are 3 ways to start an online gaming business:

1) Most Expensive – Design and implement all gaming software for an online casino, sportsbook and multiplayer poker room which could cost you millions of US Dollars. You will also need to obtain a gaming license to run your online gaming business, which requires approval from most governments. However, you will have full control of your gaming site, and full knowledge of the source code of your gaming software. In addition, no royalties are paid out to a gaming software development company.

2) Average – Become a Licensee of an Online Gambling Software Provider. This is a far less expensive option and the client receives all the gambling software and sometimes even the equipment necessary. It is also the most popular option for both licensed land-based establishments as well as entrepreneurs. Costs range from $30,000 to $350,000. The average licensing fees are around $150,000 (this usually includes marketing costs). In most cases a royalty is paid to the gaming software provider as a percentage of the monthly “take” or “drop” (gross profit). Usually the gaming software provider has payment processing (merchant account providers) already set up for a fully turnkey operation.

3) Most Affordable – Become a Sublicensee of an existing Licensee. This is the least expensive option to start an online gaming business. Costs range from $5,000 to $60,000. The sublicensee is responsible for all the marketing and receives a smaller percentage than a full licensee (2), because royalties paid to the licensee are much higher.

Online Poker, The Leading Edge

As a gaming software developer, CyberArts is often asked about the future direction of online poker. Here are some of the more interesting developments we see on the horizon.

Online Gaming Software Grows Up The next generation of gaming software must be reliable and stable. The market and the high cost of player acquisition demand no less. Technology exists that provides the same kind of robustness and scalability found in numerous fail-safe platforms like mission-critical financial systems and air traffic control systems. Developing such platforms requires careful, rigorous design, implementation and testing, and takes years to complete, but what gaming company can settle for less?

Early online gaming software was PC-based, single-user games downloaded or on CD. Developers extended these games to support multiple players online. The popularity of online poker caught those developers by surprise. The underlying architecture was not designed to support thousands of simultaneous users, playing frequent large tournaments. Compounding these challenges were poor internet connections including modems.

As online poker took off, leading sites attracted more players than the designers had anticipated. The early systems failed and crashed spectacularly – sometimes taking down gaming sites for hours every day, interrupting tournaments and alienating players. Gaming software developers reacted by re-architecting with countless patches and fixes, forcing time-consuming client downloads.

Many do not realize that poker software is still not as stable as the industry requires and nowhere close to the stability of online stock trading applications. As recently as last year, two of the top five sites suffered damaging multi-day outages. Most networks crash or experience unacceptable lag every few days. MTBF (Mean Time Between Failures) is a measure of how often you can expect your online poker room to crash. Ask vendors to document in writing their historical MTBF.

Poker and Social Networking Gaming has always been about entertainment. Social networks like MySpace and Facebook have attracted tens of millions of users, and their growth continues. The popularity is based on the simple fact that people like to congregate, share interests and “play together.”

Poker software developers have started to build social networking concepts into their platforms – allowing players, for example, to congregate in private rooms. This functionality may be superseded, though, by a parallel trend. Spurred by Facebook “opening up” their platform to allow embedded applications, poker operators have created versions of their games that can be played right “inside” Facebook pages. CyberArts recently created such an application for its licensee PurePlay, which operates highly successful online poker tournaments in a U.S-legal subscription model.

The PurePlay Facebook client is downloadable from within any user’s Facebook page, and users can invite friends and acquaintances to play. A Flash-based version of the client will allow game play within a Facebook page.

A page can be an individual Facebook profile, or can be a special page created for a group or organization. This capability will give rise to informal groups and teams. Players can organize tournaments around schools, football clubs, brands, hobbies – the possibilities are limitless, and such groups can come together quickly and with little or no investment in software development.

Big Media and Advergaming Gaming is increasingly about branding and transmitting a marketing message to mass audiences of players. We’ve recently seen a growing interest in online poker from “Big Media,” i.e., television, news and other print companies. They reason that free online poker is a good way to attract players to their sites, cementing brand loyalty and providing “eyeballs” for advertising. These companies require flexible interfaces where the cards, chips and especially the table felt may be branded to reflect an advertisers’ look and messages. CyberArts’ flexible interface allows ads to be embedded into the game – on the game table, chips and cards. High definition interfaces are possible, freeing marketers from a me-too look and feel.

An example is shown above – a free online poker game offered by CyberArts licensee The Score, which is Canada’s leading sports television and radio network. Built into ScorePoker is sophisticated “advergaming server” software built by Toronto based Advertising Gaming Network. AGN’s software displays ads intelligently. It draws data about players from The Score’s member database – say, the player’s geographic location, and sports interests – and combines it with player history data. It then displays ads tailored to each player. A Vancouver player might see local ads, while a football fan who’s won a big tournament might see a congratulatory banner from his favorite team and Molson Ale. Players see ads at the appropriate time during a game, for instance after a hand is folded or during a break. No player is going to click on an ad when they are thinking about whether to call a big raise. Why bother to show ads at times like that?

Games Beyond Poker Finally, the future of online poker will surely include other games that can be cross-sold to the same audience. Having built a profitable base of players that enjoy gaming, it makes sense to offer them allied products such as other games. Of course, a consistent look and feel, with single sign-on and shared wallet, is the only way to go. A universal gaming platform built to enterprise class standards of reliability should be part of the strategic plan for every successful operator.