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www.HartfordBusiness.com • October 23, 2017 • Hartford Business Journal 7 By Norman Bell Special to the Hartford Business Journal T he casino industry's search for the answer to luring a new generation of players has turned to esports and the differing approaches being taken by Con- necticut and nearby casinos could define the competitive landscape for years to come. At the recent Global Gaming Expo in Las Vegas, es- ports was the focus of 20 different panel discussions across the four days. The impetus is clear — older Baby Boomers are aging out of the market and casinos have yet to find a way to crack Millennials, and to some extent Gen X — audiences. (Millennials are defined as those born 1984- 2004. Gen X includes those born 1965-1984.) Years of studies and reports suggest these younger generations are potential players — they are competitive, engage in gambling and are not afraid to spend money where they see value. But they view the slot machine as a dino- saur. They crave interactive games where skill, not chance, is the determining factor. The target audience grew up with gaming controllers in their hands. In Europe and Asia, billions of Euros are being wagered on competitive video gaming. One recent tournament in Cologne, Germa- ny, offered a prize purse of 35 million Euros. In the U.S., both the CBS and TBS television networks have begun airing the kind of pro- fessional esports tournaments that can draw thousands of spectators to arenas. So how do North American operators tap into this rich vein? MGM Resorts International, developer of the Springfield casino scheduled to open in 2018, has taken the lead. "They're the first to jump all in," said Will Green, senior direc- tor of research for the American Gaming Association. MGM's flagship esports project is a 30,000-square-foot space being built out on the casino floor at the Luxor in Las Vegas. When it opens early in 2018, it will be home to both small-scale, head-to-head events and globally tele- vised mega tourna- ments. In Springfield, Mass., Sid Green- feig, MGM's vice president of arena booking, confirmed MGM has had discussions with the MassMutual Center about its use as a venue for major esports events. Hosting esports events fits with MGM's stated goal of making Springfield "a vibrant destination city." Will that approach fundamentally change the competitive landscape? It's complicated, Connecticut casino operators say. Monetizing esports Mohegan Sun President and General Manager Ray Pineault says his team has explored hosting mega tournaments at the casino's busy arena and sponsoring a pro- fessional team of gamers. But so far, there is no plan to move ahead. It boils down to one question, Pineault says: "How do you monetize it?" Betting on esports has baffled casinos and regulators. Is it a spectator sport with house-set betting lines or a player-vs.- player betting system akin to poker with the house taking a cut for providing a fair venue? And how do regulators ensure the integrity of the game? Esports proponents say U.S. casinos can't wait for the betting answers or risk being left behind in the battle for player loyalty. They acknowledge that casinos should not expect to show a profit on the early stages of hosting events. The pay- back, they say, comes in increased food and beverage sales and in making a positive impression on potential customers. In this analysis, each new customer is valued at $35,000 to $40,000 across the lifetime of the relationship. And small losses on host- ing esports events should be considered a marketing/client- acquisition cost. Pineault seems unconvinced but did confirm plans are underway to create a Millennial-friendly gaming and lounge area to open in early 2018. He declined to reveal details of another project on the drawing board for late 2019. Still, it's all experiment in search of clues, Pineault said. "If you find an answer, give me a call." At Foxwoods, President and CEO Felix Rappaport said a similar analysis has taken place and the governing Mashantucket Pequot Tribal Nation is open to new ap- proaches. He points to the recent announcement of plans for a kart racing attraction and the zipline that will open next month. He also points to Foxwoods' mobile phone platform that provides a video gaming casino experi- ence, albeit without cash rewards. Rappaport had a front-row seat for Las Vegas' unsuccessful flirtation with becom- ing a family friendly resort and bristles at the comparison. "The zipline is not aimed at kids; it's for an older audience," he said, pointing out the kart track will have separate classes of vehicles for children and adults. One of Foxwoods' assets is space, Rap- paport said. "We can accommodate special areas and attractions for a wide variety of audiences." One idea that seems to be gaining trac- tion is a 5,000-square-foot esports gam- ing area. If that plan moves ahead, it could become home for arcade-style competition like video auto racing or head-to-head video gaming featuring popular commercial titles. In any case, the experiment would be accompanied by food and beverage service tailored to Millennial tastes. Skills-based gaming's slow start Esports isn't the only approach being tried by casinos. The concept of skill-based gaming had been center stage for recent iterations of the Global Gam- ing Expo, an an- nual gathering that draws more than 25,000 insiders to the Sands Conven- tion Center, less than five miles north of the mas- sacre site outside Mandalay Bay. However, initial returns on skilled- based games have been disappointing, both Pineault and Rap- paport said. Manufacturers, led by Game Co. and Gambit, are refocusing their skill-based gaming efforts on familiar brands with simple win propositions. One of those on display at the Global Gaming Expo was Pac-Man Battle Casino. It utilizes a wall- sized video display that allows two-to-four players to compete in the classic game. The display at Gamblit's booth showed the kind of communal interaction that would seem to appeal to Millennials. Finding an answer to the riddle of Mil- lennials seems certain to be a multi-year task. But 2018 may give a hint as to whether MGM can leverage esports into a first-mov- er advantage in winning the hearts — and wallets — of gamers. Esports: A definition Esports can include many things, from professional teams competing in Counter-Strike: Global Offensive for millions in prize money to casual users playing Candy Crush on their mobile phones to fantasy sports fans playing Draft Kings. The most common use of the term involves competi- tive video game play for some sort of prize. It can be head-to-head or a multi-player game, either on-site or via the internet. BY THE NUMBERS Esports Gaming 192 million Total number of gamers in the U.S. 41.7 million Total esports audience in the U.S. 23 million Active players of top competitive esports titles. $715 million Estimated amount bet on esports in the U.S. in 2016. The figure includes online poker and fantasy sports. $110 million Estimated prize money to be paid out in 6,739 esports events in 2017. Source: Nanus Advisors / Eilers & Krejcik Gaming Gaming's Future Foxwoods, Mohegan Sun weigh esports to lure Millennial gamblers Much like a pro football broadcast, analysts (foreground and on screen at top) describe and comment as players (shown in the background) compete at the recent Global Gaming Expo in Las Vegas. For the demonstration, 16 players competed in Street Fighter for a purse of $2,500. PHOTO | GLOBAL GAMING EXPO Felix Rappaport, President and CEO, Foxwoods Ray Pineault, President and General Manager, Mohegan Sun