Industry Insider: Melissa Blau, Founder and Director, iGaming Capital

In this month’s Industry Insider, we spoke with Melissa Blau, founder and director, of iGaming Capital about how she’s seen the gaming industry change during her tenure, what we can learn from our international colleagues in rolling out iGaming, the buzzword on everyone’s mind, and more.

You’ve specialized in iGaming throughout your extensive career in the gaming industry spanning nearly two decades. What initially drew you to this industry, and what notable transformations have you observed?

I was initially drawn into iGaming from a class I took at Harvard Business School. It was called the “Coming of Managerial Capitalism” and much of it was inspired by the book “The Visible Hand” by Alfred Chandler. While quite a dense read, the course and book discussed the respective roles of business and government and specifically how when a business or industry are creatively able to jump ahead or around the rules of law and government, great wealth is created, legally. Government inevitably and eventually catches up and places proper governance and taxes in place which curtail or restrict potential profit. It was this class that inspired me the following semester to write a business plan of putting a casino on the internet. While I didn’t go into the industry for another eight years, it was definitely what drew me to this industry.

When I first began working in this industry in 2004, I started as the CFO of Gibraltar licensed operator, St. Minver. We specialized in iGaming as the online operator representing the largest gaming brand in the United Kingdom, Gala, and possibly the largest bingo brand in the world, Gala Bingo. At the time gaming operators were tied to a single platform and game library. The industry was dominated by two platforms/games suppliers who were very siloed; operators on the Playtech platform featured Playtech games, Microgaming operators featured Microgaming games. There were some independent game studios, but their presence was limited.

Throughout my 20 years in the industry, I would have to say that the growth of the strength and dominance of third-party game providers has been the biggest transformation as well as the growth and prominence of live dealer studios.

iGaming has had an established presence across various global jurisdictions for a considerable amount of time. As it assumes a prominent position in the United States, what are some recommended strategies and industry standards that states, and operators, can adopt to attain success? Additionally, are there areas in which the U.S. iGaming industry can draw insights from international counterparts?

While iGaming has not benefited from the same mass distribution as online sports betting in the U.S., no one should underestimate its prominent role in its profitability and long-term viability of this industry. iGaming legalized in the United States in 2013 with the introduction of Delaware, quickly followed by launch in New Jersey. Unfortunately, little happened for the next five years. It wasn’t until the overturning of PASPA in 2018 and the subsequent rapid expansion of mobile sports wagering that really furthered the expansion of iGaming. Mobile sports betting was a catalyst for the expansion of iGaming on two fronts. As new states legalized mobile sports betting, several states included iGaming as part of the expansion including Pennsylvania (2019), West Virginia (2020), Michigan (2021), and Connecticut (2021). Furthermore, the addition of mobile sports betting in New Jersey demonstrated what we already knew in Europe, that the presence of both iGaming and sports betting in a single app or account increases the size of the market by an order of magnitude. In the case of New Jersey, we saw iGaming in the state jump from $277 million in 2018 to $461 million in 2019 with the introduction of mobile sports betting, and, further fueled by COVID and increased player investment, jump to $1.64 billion in 2020.

Michigan was another amazing example of the power of iGaming. In the inaugural year of a joint launch of both iGaming and mobile sports wagering, iGaming generated $1.11 billion in Gross Gaming Revenue, almost 4 times the $292 million generated from mobile sports betting. In addition, with their respective tax rates of iGaming between 20-25 percent and mobile sports betting of 10 percent, iGaming contributed $201.7 million to the state of Michigan as opposed to mobile sports wagering contributing $7.2 million.

Knowing all of this, I have a hard time understanding why so many other states have failed at getting iGaming legalized. To date, online sports wagering is live in 24 states (plus Washington D.C. and Puerto Rico) and pending live in another few states. Despite iGaming legalization in only five states, the tax contribution from iGaming since inception has been approximately $3.1 billion, compared to the $2.4 billion contributed by mobile sports wagering in 24 states.

If the U.S. can draw any insights from international counterparts, it’s that iGaming plays a critical role in the viability of online wagering. International counterparts, as well as the five U.S. states, that have offered iGaming for many years have demonstrated that with the proper controls, iGaming can be administered in a responsible and profitable way. Before more operators further downsize or pull out of markets altogether in an effort to conserve cash, we as an industry need to better coordinate our lobbying efforts and educate legislators that iGaming is safe and a requirement for the long-term viability of this industry.

At any industry conference, the buzzword “omnichannel” often takes center stage, always sparking extensive discussions. Why is this the time for operators to adapt their business models and explore avenues beyond the traditional brick-and-mortar casino approach?

“Omnichannel” is a great buzzword, though I often find myself using it too often. I recently started working with one of my clients on exploring how to deliver an omnichannel solution using Class II wagering on tribal land utilizing a seamless digital wallet. I was pleasantly surprised to see leaders in the market such as Everi and Aristocrat make such great strides. Despite my working in the industry for 20 years, 10 of which catered to land-based casinos, I had not appreciated how complicated it was to bridge the land-based and online environments. Creating a truly seamless experience goes beyond merely implementing an online solution with geolocation and beacon technology. Conflicting regulations for player identification, moving the money seamlessly from the floor to the mobile device and back again, and implementation of the player loyalty for new and existing players is more complicated than first meets the eye. I am excited to see over the next few months how we tackle these issues, and I am very hopeful it will be solved and executed is a flawless manner.

If land-based casinos want to compete statewide on the mobile device against powerhouses such as FanDuel, DraftKings, BetMGM, and Caesars, they must figure out how to implement an omnichannel solution. Brick-and-mortar casinos’ biggest asset is their existing players database, plus the ability to onboard players while at the casino is critical to their success. The majority of brick-and-mortar casinos will be licensing technology from third-party providers in order to offer iGaming or online sports betting. Hence, not owning their own tech stack will put them at a competitive disadvantage. It is critical that they fire flawlessly on all other cylinders and onboarding at the property will be one of them.

G2E is the catalyst for gaming - fostering innovation and driving growth by convening the global industry to define tomorrow. What are you most looking forward to seeing at Global Gaming Expo 2023?

I have attended G2E every year since 2010, and with each year the online component has grown increasingly a core part of the event, both as it pertains to the educational sessions as well as the exhibition. While my days are typically packed with back-to-back meetings, my favorite day is Thursday when the show quiets down and I carve out the morning to walk the exhibition floor, browsing from booth to booth to learn what’s new, and what’s next. There has never been a G2E that I didn’t learn something new or see something unexpected. This year, I am keen to focus on more on iGaming Class II, digital payments, and the innovations that surround the two. I am looking forward to seeing what new innovations the slot and table manufacturers dream up next. A few years ago, IGT debuted some really cutting-edge virtual reality games as part of their Virtual Zone division, partnering with third-party experts such as Sixsense and HTC Vive. From what I have seen, operators such as Caesars, MGM, Boyd, and others have been eager to embrace innovation, adding new products that resonate with a new audience or provide new entertainment for existing patrons.

While it’s a shame that a fair amount of the innovation does not make it into full production, it is important that we continue to invest the resources in trying new and innovative products. With the rapid increase in iGaming revenue over the past couple of years, coupled with the increasing reality of Class II mobile on premise for tribal casinos, I am hopeful this year’s G2E will see a resurgence of product innovation.