Compliance and Technology

30 | iGamingBusiness North America | Issue 03 | October 2012

iGaming Business North America examines the social gaming space with Jez San OBE, President and Founder of PKR and Andrew Hughes, Co-Founder and CEO of AbZorba Games.

Do social games providers have a special obligation to public welfare if they provide casino-style games?Jez San (JS): Yes. When I was in the

computer games world, we spent all of our

time making our games as addictive as

possible because it meant they got played

for longer and provided more hours of

entertainment. The key is that these games

were sold once to the buyer (at retail) so the

more entertainment hours they provided,

the better value they were to the consumer

(all leisure activity can be valued that way).

Now, in the real money “gaming” world, we

go out of our way to avoid making our

games addictive – the word is “banned”

from our vocabulary. Gambling is already

inherently addictive to a select few people

without us tweaking the games to make

them even more so.

But, there’s this new game in town:

“freemium social games.” These games are,

yet again, designed to be as addictive as

possible, but the huge difference this time

is the very business model of the games’

creators is to increase the conversion rate

and make them immensely addictive –

and the “gotcha” is that these games are

designed to extract a continuing revenue

source from the players as they play.

Although it is possible to play them for

free, you are highly incentivized to pay

extra to or get a little further, or

progress a little faster.

THESOCIAL

GAMINGDEBATE

Compliance and Technology

iGamingBusiness North America | Issue 03 | October 2012 | 31

“It is imperative that we as an industry demonstrate a desire to self-regulate, have a coherent and cohesive voice saying ‘we will abide by good common goals for the protection of those who may be vulnerable, wherever they are needed’.”

And, they rely on a smaller proportion of

players paying a commensurately higher

percentage of revenue.

Andrew Hughes (AH): No. I cannot subscribe

to the notion that casino themed titles should

be viewed or treated any different from other

social games. The freemium model, the model

of choice for social games and gamers, does

seek to enhance game play through micro

sales, and why not? But the question, in effect,

proposes a two-tiered market regulation: self

or otherwise, which is indefensible.

Since a small percentage of social gamers provide a disproportionate amount of revenue for social games, does this indicate that this activity has the potential for abuse and that the games are “high-risk”? If so, then should other non-gambling games that display the same user behavior also be considered “high-risk” games?JS: Yes. There should be protections in place

to prevent people from overspending when

they are addicted and have lost control of their

cash. Players should be allowed to specify in

advance their maximum budget (per week or

per month) and the game should not allow

them to overspend. Ideally, it would be a

unifi ed spend limit for your entire collection of

social games. That way, people will get to enjoy

the games without the danger of getting into

debt or spending what they can’t afford. We

have rules and regulations in the “real money”

gaming world. We avoid problem gambling

and positively discriminate against it to curtail

the activities of those we have determined

to have a problem. We don’t want anyone

gambling with money they can’t afford.

Yet, in the “freemium social games” arena, it

seems the business model is to fi nd whales

and exploit them, but without fi rst checking if

they are rich whales or poor ones who haven’t

prioritized their cash adequately. I worry

about the single mother at home who just

wants a distraction and is playing a so-called

“free” game to while away the time… she is in

danger of an awful lot of trouble if she gets

addicted and fi nds she has overspent and

cant pay the rent or feed the kids. Why risk

this situation occurring? Why not just let all

users specify a spending limit so they don’t run

into fi nancial diffi culty? It wouldn’t be such a

problem if the games weren’t designed to be

addictive, but they are. The goal of all social

games creators is to make their games as

addictive as possible. And they can get away

with it because it doesn’t fall under existing

forms of gambling or consumer protection

rules. A little like “legal highs” that are one

step ahead of the law, or TV “quiz” phone-ins

that have impossible answers to questions to

extract maximum phone call revenue. These

guys all fall between the cracks in existing

consumer protection.

AH: Again no. I simply do not agree with the

assumptions that the freemium model has the

“potential for abuse” or poses a “high-risk” (I

assume of abuse here), at least no more than

many other industries, sectors, models, etc.

I would like to see empirical evidence that

widespread abuse is taking place. I do agree,

however, that we as an entertainment sector

can and should do more to set out codes of

practice that are just good business sense.

The more we are seen to adhere to a code the

less likely negative stories and sentiment can

fl ourish, true or false.

Should more stringent age limiting be imposed on social games that are high-revenue generative?JS: Yes. People are playing these games

thinking they’re benign and, in most cases,

initially thinking they’re free. Then, before they

know it, they get addicted and are making a

deposit they didn’t expect – with higher and

higher spend required to keep getting their

game “kicks.” There needs to be protection for

the vulnerable, just like in any other sector that

has a chance for people to lose a lot of money

without really planning to.

AH: I can see this working in most cases,

managed through the gateways such as

iTunes and Google Play. But, where should

that line be drawn? Age and revenue

potential? I don’t , however, consider age

itself to be a barrier to foolish spending; take

drinking as a good example. The vulnerable

are not necessarily protected at all by

prohibitions. Again, I point to responsible

codes and self regulation.

Is there a need for an external regulator for social casino-style games providers? If so, should the government or platform providers issue the guidelines for the regulation of social games?JS: It doesn’t hurt for there to be guidelines or

safety requirements to protect the vulnerable,

just like in other industries (not least consumer

credit and gambling). But I’m not advocating

regulation; I’m just advocating a responsible

attitude and awareness on the part of the social

games industry. I would like to see them take a

similarly responsible attitude that their licensed

real-money gaming cousins do. The world

doesn’t need more industries being regulated.

Compliance and Technology

32 | iGamingBusiness North America | Issue 03 | October 2012

AH: No. Casino games are no different

from a racing game; indeed, I fi nd some

pay-to-win models in racing, fl ying and

farm games, for example, far “pushier” than

any casino format. Moreover, this would

stifl e or decline a valued and valuable

entertainment sector, entrepreneurs and

investors would hesitate to launch and

back businesses due to prohibitive costs

and red tape. An industry adopted code of

practice would work.

When do social games become a matter of public health and is there a difference between social casino games and other social games?JS: Any game that is addictive and can

extract large amounts of money out of

random people – who may not be able to

afford it – has to have some safeguards

and protections for the vulnerable. If you

showed your bank balance on the way in

and you were rich, then go to town and

spend thousands on your farm. But, if

you’re not rich, and you’re spending beyond

your means, then the games companies

have a duty of care not to let that go

unnoticed. They say that “the lottery is a tax

on the stupid,” because people pay to play

and have less chance of winning than being

struck by lightning… twice. But will social

games become the new “tax?” These people

pay more than those in the gambling

world, and yet they have almost no chance

of winning. What’s going on there? This

makes a casino game much better value to

the player. What’s the world going to come

to when playing a “free game” can lose

you more money and be more addictive

than a casino game?

AH: I’m not certain they ever will become a

public health issue. Given that Angry Birds

broke all known records for installs and

revenues, can we say that was addictive

and therefore a public health risk? I don’t

believe so. And would I like a fraction

of that success in my mobile fun casino

games? Of course. Indeed, we are fast

approaching a million installs and within

those, we have never witnessed mass

excessive payments in one go or in the

lifetime of any gamer. So, no, let’s not have

a two-tier system.

What would be the consequences to the providers of social games and to social gaming platforms like Facebook if government regulators were to regulate social gaming?JS: The social and freemium games

industry needs to do be seen to care about

its players. It needs to be proactive. Hiding

behind excuses like “you don’t need to

pay, you can always play for free” (while

making it as addictive as possible and

encouraging uncontrolled spending for a

few vulnerable players) just seems fraught

with risk and is asking to be regulated.

Social games industry: please empower

your users to set their own spending

limits. You can avoid being over-regulated

by governments if you are seen to be

responsible. Right now, you are in denial

that there’s a problem.

AH: Regulation could introduce costs and

red-tape that might take months to form

and instigate. The whole debate could itself

cause hesitation to newcomers entering

the space and innovation will suffer. We

would have to see how far reaching any

such regulation would be; it could stagnate

an entire industry sector in its current form

and that is a risk to employers, start-ups

and the young pool of developers out there.

Therefore, it is imperative that we

as an industry demonstrate a desire

to self-regulate, have a coherent and

cohesive voice saying “we will abide by

good common goals for the protection of

those who may be vulnerable, wherever

they are needed.” Importantly, we should

all be sticking up for the vast majority of

responsible gaming companies who strive

to build, create and employ and already

abide by such codes.

Jez San, OBE, is President and Founder of PKR. Jez is the fi rst person to ever be awarded an OBE for services to the computer games industry and is one of the UK’s best known technology entrepreneurs. Having founded his fi rst company Argonaut at age 16, Jez was responsible for hit release StarGlider, one of the fi rst 3D games to hit the nascent video games market. As President, Jez’s day-to-day role involves negotiating strategic partnerships, working with investors and building and refi ning company strategy.

Andrew Hughes has been at the heart of mobile service creation from its inception in the mid 90s and believes AbZorba Games and the mobile social gaming phenomena is where all his entrepreneurial experience and mobile action fi t together. He is excited and focused to lead AbZorba as this amazing market develops. Previously, Andrew has co-founded several mobile marketing companies in Europe including Saverfone, Brainstorm Marketing, Airtime Angels and the global Mobile Marketing Association in UK and Italy. He is also Principle Consultant at Mobile EMEA Consulting and currently resides in Madrid, Spain

“I’m not advocating regulation; I’m just advocating a responsible attitude and awareness on the part of the social games industry. I would like to see them take a similarly responsible attitude that their licensed real-money gaming cousins do.”