IGT in Legalized US Online Gambling Market

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Even though there is no certainty about how and when online gambling will become legal in the United States, analysts and investors associated with the gambling industry have begun to theorize what would be the strategies employed by the current stake holders. The question that has come up in several forums is will those currently engaged in supplying slot machines to land casinos be content with providing online casino games to the Internet divisions of their present customers. Or will these businesses want a larger share of the pie by operating online gambling portals themselves, thus competing with their present clients.

International Game Technology (IGT) is a leading supplier of slot machines to land casinos. Through its online casino software division WagerWorks it provides content to online casino operators. IGT made some moves for the future when earlier this year it announced intent to acquire social gaming provider Double Down Interactive, which operates the Double Down Casino on Facebook. Then IGT had gone on record stating that it was not interested in operating an online casino, but would use Double Down to showcase its content to the potential buyers of its software. Now IGT is launching a free-play version of its slot machine based on the popular reality television series American Idol for a social gaming audience on Facebook. The objective is to induce Facebook users to wager with real money on this slot game when it goes live at online casinos.

Janney Montgomery Scott gaming analyst Brian McGill commented that such steps taken by IGT could affect its relationship with its brick-and-mortar customers. Credit Suisse gaming analyst Joel Simkins actually told the IGT management last month that some of the company's major casino customers had complained about IGT becoming a potential competitor. IGT Chief Executive Officer Patti Hart responded to this allegation by affirming that it had strong ties with most of its casino operator customers. Hart added that even if a few unhappy customers stop purchasing its games it will not "break the balance sheet" of IGT.

Simkins, who has studied IGT closely, endorses this view. He says that IGT has a diversified customer base, which is particularly strong in the regional markets and in Native American gaming markets. The noises being made by some customers are more for affect than any real intent. Using Double Down as a display platform for its large suite of games provides IGT with a massive competitive advantage. Simkins further believes that in the long-term IGT will be able to deliver content for new online slot machines at 25% of the cost of its competitors. Therefore it seems that IGT has prepared itself well for the future after legalization of the US online gambling market.

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