Social casino could become $7bn industry by 2015, report claims
Continued lack of regulation would see value of sector soar, but Morgan Stanley blue paper predicts the introduction of regulation within the next three years.
The social casino sector could be worth up to US$7bn by 2015 with around 173m people playing online, a report by Morgan Stanley claims.
The paper suggests that in a “best case scenario” in which the market, which is currently valued at $1.7bn, remains unregulated and the customer base stays loyal to the current market leaders, the industry could reach the $7bn figure.
However, the report also says that the most likely scenario will see it valued at around $2.5bn by 2015, and predicts that some form of regulation could be introduced. This corresponds with industry research firm SuperData Research’s prediction of $2.4bn made in September.
Under this scenario, should customers remain loyal to the current market leaders, each 10% market share would be worth up to $600m, the report predicts.
While the majority of social casino operators dispute the need for industry regulation, with Plumbee chief executive Raf Keustermans saying it would make it “impossible” to operate a business in the sector, Morgan Stanley predicts that legislation is all but inevitable.
The report states: “In its current unregulated form, growth is only constrained by the imagination of the developers, and the speed with which they can develop and market high-quality products. In future, we expect regulation to act as more of a constraint, restricting the type and location of customers that can play, which should constrain the player base, and probably introducing some duties, which would constrain margins and leave less funds available for product development and marketing.”
The report goes on to compare player revenues, contrasting Zynga and its JV partner bwin.party’s average revenue per user (ARPU) to show the gulf in player spend. While Zynga makes $0.05 per player, bwin.party’s ARPU stands at $13.31 “ 285x higher than its partner.
On the subject of convergence between the online gambling and social casino sectors, Morgan Stanley admits that there is “little evidence of significant convergence between the player bases of social and real money gambling”, citing 888’s inability to effectively convert players from its social division Mytopia into gamblers.
However, it admits that there is “significant potential” for greater crossover in the long-term, through the gamification of non-gambling games; features from social casino apps being baked into real money gambling offerings, and consolidation in the industry resulting in further acquisitions similar to IGT’s acquisition of DoubleDown Interactive.