It has been 25 years since American businessman William Scott launched the world’s very first real money online casino. In the early years of online gambling, classic table games like poker, baccarat and roulette were the most popular with players.
However, as technology improved the online sector began to follow the same pattern as its land-based predecessors, with slot machines accounting for the largest chunk of revenues and profits. Nowadays online slot machine games are one of the most popular online casino games available.
With the gambling landscape changing year on year, or even month by month, will the reign of the slot machine continue on, or will it fall by the wayside? Arguably the biggest issue providers have is the competition they face from one another, meaning they gave to try elaborate offer to attract players, so how do companies convert players looking for free spins into paying customers?
The current environment
On the surface there has been no better time to run an online casino than now with remote gambling revenues around the globe steadily increasing.
As you would expect, the majority of that growth is being driven by the popularity of online slots. In the UK for example, online gambling accounted for around £5 billion in revenues last year – £3.2 billion of that came directly from slot games.
Farther afield in the US where online gambling is slowly moving toward widespread legalisation after the initial buzz of sports betting subsides, slots are the staple that are keeping the industry ticking over.
Despite that success though, there are several threats on the horizon that will have to be navigated to guarantee the long-term future of slots. Here are just a few that are causing online providers to scratch their heads.
This is an issue that is two-fold for online slots. Firstly there is the competition that relatively new but increasingly popular additions to the online gambling pose.
Online bingo is one such game that is growing in popularity with every passing month and is seemingly just as profitable as slots. This has led many of online gambling’s biggest names to branch out and begin offering bingo facilities to their customers.
The second issue of competition that poses a threat to slots is the increasingly competitive market in which they operate. The potential profits of remote gambling have led to record numbers of gambling licence applications in recent years.
As a result the market is becoming more and more saturated, with companies no longer able to rely on offering customers free spins as an incentive to join their sites. Instead, many providers are taking the potentially foolish decision to increase their payouts and increase their RTP percentages.
At the extreme end, this could lead to a lot of smaller companies falling into financial difficulties when large jackpots are won. At the other end of the scale, larger companies who base their business models on slot machine profits could see those margins dramatically slashed.
If you speak to anyone in the gambling industry now about the ‘next big thing’, they will point you in the direction of augmented reality and virtual reality integration.
Online casinos are intent on narrowing the gap between themselves and land-based casinos to the point that players have no clear reason to visit their local casino instead of playing online.
Live casinos have already launched successfully, seeing a revival in the popularity of classic table games. AR and VR look to be the next technological advancements set to revolutionise the online gambling industry.
When these services launch, there will be a massive rise in the appeal of casino games that allow players to interact with one another and socialise. Slot machines, which don’t really stand to benefit from AR or VR could be an unintended casualty of this integration.
In 2014 David Cameron commissioned a government led report into the social impacts of gambling in the UK. One of the key findings was the highly-addictive nature of fixed-odds betting terminals that ministers described as a “social blight”.
Four years later the government brought into law a requirement on gambling companies to reduce the maximum stake on these terminals from £100 to £2. This was a worrying move for online gambling companies as ‘fixed-odds betting terminals’ is in effect, a fancy way of saying ‘slot machines’.
In fact, this is a point that many objectors to the law change made to the government when the decision was passed. At the time of writing, another government led report into the social impacts of gambling in the UK has been commissioned.
There is a fear in the industry that the findings will be as equally harsh as they were in 2014, which could lead to a series of damaging reforms for online slots. The only sliver of hope for the online gambling industry is that the current government review is being led by John Whittingdale, a politician who has previously been supportive of the industry.
There are a number of threats that are facing the long-term viability of online slots. Competition from within increases the chances of the industry cannibalising itself and effectively being the architect of its own downfall.
Whilst this is of course possible, it would still be out of character for an industry that has proven itself capable of adapting to great effect in the past two decades.
Technology however, could quite easily see slot machines fall in popularity. Gambling in general has long prided itself on being a the forefront of innovation, so if a more profitable alternative is created, slots will fall to the wayside.
With all that said, the current government led review into the industry is the biggest risk to the long-term future of slots. If the review comes to a similar conclusion as the report of 2014, then it is more than likely that we will see maximum bets for online slots substantially cut.
This would have devastating impacts on the profits of slot machines. Online gambling providers in the UK will therefore be hoping that the symbols fall into place for them…