“ … skill or amusement games are not considered to be gambling in most U.S. jurisdictions… since they are ‘clean,’ the lure of gaming competition and prizes represents a powerful marketing tool with very substantial profit potential.”
– From “Gaming Law In a Nutshell”, a summary of U.S. and international gambling laws written in 2012.
For-profit game competitions with real-world prizes are legal.
Prizes are everywhere. Simply take a look at your TV: Sports and motorsports, dancing and singing contests, game shows and reality shows. Beyond the TV there are more, poker, bridge and chess tournaments, even eating competitions. Prizes capture our interest, for killing terrorists ($25 million for Osama Bin Laden) and capturing common criminals.
People love prizes. They give us competition and drama. So why do the people who make video games ignore the dramatic centerpiece of our best-known games: The Prize?
What is stopping game developers?
It appears that lack of real prizes in computer games is based on a simple misunderstanding: if a game pays money to winners it must be a gambling game.
If I offered a $20 PlayStation Network Card to the winner of a game contest I’d be operating a slot machine, right?
The phobia towards giving real prizes has come down to us from the early days of pinball (games with both luck and skill) . It is time to fix this error, offer game players the joy of competing for dollars, and allow game companies the joy of collecting dollars.
How would game contests work?
Call of Duty (CoD), a game by Activision, is great first person shooter. Let’s take a look at raising the stakes with real rewards.
To enter a CoD contest players would buy a bandoleer of Special Contest Ammunition for one dollar. That single dollar purchase then becomes the contest entry fee. The players’ money would enter into a pool with 100 other competitors, where they would compete against one another to win the challenge. The winning individual or team would split the prize money from the pool. For example, if 100 people bought the Special Contest Ammunition to enter the contest and a team of 10 won, the winning team would split the $50 prize, and earn a free ticket to the next, more difficult (and higher stakes) challenge. Activision would pocket the other $50.
Of course, the full price game would come with a few free tickets, to whet new players’ appetite for real competition. For the uninitiated in game design, loss aversion is a more powerful incentive than curiosity. To trigger this sense of loss, after players consume their free tickets, they either must buy more tickets or lose their ability to join real competitions — just at the point when they are starting to have a chance to win.
To make contests viral, winners would also be rewarded with free contest tickets to give to their friends. If game companies want to
abuse social marketing, they could require winners to post their victories to Facebook to collect their prizes.
Isn’t this what Major League Gaming is already doing?
Yes and no.
Yes – they are offering prizes, made possible by a good-sized and quickly growing fan base.
No – they do not enhance game playing, except for a few hundred very serious gamers.
eSportsEarnings.com is trying to track the growing eSports market. According to them eSports has grown from $27k in prizes in 1999, to $14M (estimated) this year.
They also report that while Major League Gaming is the largest eSports league, its competitors are close behind.
And that professional gaming is driven by the big, competitive games.
Where Major League Gaming and the other e-Sport leagues uses world-class players to attract a large viewing audience, other companies hope to attract many levels of peer-to-peer competition, and monetize that broad base of players directly. There are many “bet against your friends” services in the USA. The oldest (still operating) is GSN, a joint venture between Sony Pictures Television (58% owners) and DirecTV (42%).
GSN has been in the cash-prize business since it bought Toronto-based FUN Technologies in 2007 and renamed it GSN Cash Games. Unfortunately it seemed to have missed the social networking revolution.
In the more gambling friendly UK, King has been profitably operating games of skill since 2005.
King’s history shows that real world prizes alone aren’t enough. You need something people want to play, say Candy Crush Saga, to build an audience. King tried hundreds of games before finding the pot o’ gold. Perhaps if Facebook hadn’t barred P2P waging, King would have been content with simple P2P betting.
The second in the USA is Virgin Gaming, renamed from World Gaming after a 2010 investment from the Virgin Group. They take roughly a 10% house cut or ‘rake’.
One pithy quote on Virgin Gaming is from the prominent game analyst Michael Pachter, who in 2010 said, “It’s one thing to lose time playing video games, it’s another to lose your house. I am incredibly skeptical that this will work.” But by by 2013 Dean Takahashi could write: “Virgin Gaming now has 2.5 million players on the web. Gamers have won over $32 million in cash in 20 million tournaments. Cash games are up 280 percent from a year ago. Deposits are up 250 percent. Sponsorships are up over 900 percent. A recent Halo tournament, the Halo Infinity Challenge, drew 292,000 participants. They played 9 million games over three weeks.”
As more numbers come in, head-to-head betting is heating up.
Skillz received $5.5M in Series A funding on June 18, 2013. Skillz is “the US’s first platform for real-money gambling on mobile games“. “Skillz improves gameplay by tapping into gamers’ fundamental desire for meaningful competition.” And “Face-off against friends and rivals to earn bragging rights, cash and other prizes.” Sounds right to me.
From CEO of Skillz, Andrew Paradise: “We have a survey that shows 41 percent of consumers want to play in real-money competitions in their favorite iPhone or Android games.
Another platform newcomer is Cashplay.co, which went live June 27, 2013.
Even newer is cashbet.com, recently angel-funded by Fred Hsu and others.
Here’s Fred’s take on it. “The only real-money platform that I have vetted from all aspects – team, technical, compliance (HUGE), marketing and distribution strategy – and have given a vehement thumbs up. A true platform not run by 25 year old kids. We are still very early on with real money platforms, this one is worth taking a look at.”
There’s Skillville from the fertile YetiZen incubator. “Since the official launch in April 2010, over 1 million tournaments have been played and over $500,000 in prizes have been won by players in the community. ” And there’s GamerSaloon.
All the P2P betting companies pay lip service to fair play, including magic ranking algorithms and randomized matching. Since no one is offering handicapping yet, most gamers don’t want to wager against stronger opponents, so it makes sense for these companies to talk about a level playing field. However this is difficult. On a true level playing field, you’d always contend against a perfectly matched opponent in a perfectly matched game. In this case you’d win 50% of the time, lose 50% of the time, and thus end up always losing money, the amount equal to the house cut (~10%).
Of course, we’re not going to get perfectly homogenized opponents; we’re going to get, at each tier of skill, strong players preying on weak players, and sharks diligently figuring out how to masquerade as minnows.
As poker players know, collusion, not leveling, is the real problem of skill-based games. The only way to prevent colluding is to prevent playing with your friends or acquaintances. 🙁
Here’s Ned’s take:
What’s being overlooked is that we don’t have to focus on me-versus-you games: Gambling on skill is a zero-sum (at best) game. Games should be non-zero-sum, like life. To make a better game, we must invent contests that increase the average enjoyment of the average player.
“That action is best which procures the greatest happiness for the greatest numbers.”
– Francis Hutcheson, 1725
Game designers should create contest rules that make people happy; aiding the weak, creating the most helpful (and viewed) videos, amazing speed runs, dying in the way that evokes the most schadenfreude (taking pleasure in other people’s pain, including virtual pain), and above all for creation of new, popular game scenarios or objects.
Another interesting approach is what World or Warcraft does: http://us.battle.net/wow/en/community/arena/
WOW encourages players to spend $20 to rent a “new level-90 character with full sets of epic gear” for 9 weeks. In addition, after playing 50 games, you receive a lovely “Armored Murloc” pet.
At their least inspired, game contests are a form of game rentals that increase game revenues, unlike Blockbuster or Game Fly game rentals, which cannibalize game sales.
What do I win?
In-game rewards, second chances, cash or $20 PlayStation Network Cards are easy to offer. Sponsors can provide additional rewards – the sky’s the limit. A good game designer (or neuroscientist) will tell you that unexpected rewards are best. On the other hand, cash rewards are ideal in return for hard work. If Joe Jones spends 400 hours making a Little Big Planet level, and the level is played one million times generating $100,000 in additional revenue, Media Molecule should be happy to pay Joe $10,000. Then Joe can quit his day job and go into business making Little Big Planet even more awesome.
Today, a runner can plop down $255 to enter the NYC Marathon for a chance to win some of the $700k purse. A student can spend $14 to take the PSATs to win a $10,000 National Merit Scholarship. Or, a gamer could take a quick walk over to the local comic book shop and spend six dollars to enter the local Magic: The Gathering tournament. A player with some extra coffee money should be able to have the same chance with Sony’s MLB: The Show.
Unlike old-fashioned contests, games with cash stakes should be designed so that average players have a real or perceived chance to win each time they play. It could be about half the time or once in every dozen tries. One in five hundred tries might even work if the perception is that anyone can win, and I should keep trying (“Next time it’s going to be me!”). The gamer, like the gambler, should feel that he’s only a shot away from something to brag about.
For-profit skill games with real-world prizes are legal.
I foresee a day, not too distant, when most games generate a nice chunk of their revenue from contests, tournaments and competition. On that day, some games are purposely built for tournament play and the prize experience. What I don’t understand is why contests and prizes aren’t already standard fare? Are we game makers afraid to grow up and make games a true adult pastime?
Even as a teen, I remember with great fondness playing in a two-dollar Diplomacy tournament, winner takes all. The inevitable loss of two dollars was insignificant to how much fun I had turning a mere game into something real. The thought of a real reward made the whole experience much more compelling. It engaged an entirely new part of my brain- the non-game part. How much sweeter would our games be if we could spend a single dollar to make the game real? As for the game maker, well, selling a $1 stake is much sweeter than selling the game for $.99.
Games are all about fun. I want more fun. I want a chance to win.
Give me a stake in the game.