Troubles at GameCo portend concerns for the skill-based slot market – CDC Gaming Reports

Roughly 60 minutes into a Nevada Gaming Commission licensing hearing that quickly devolved into a four-hour interrogation, it was abundantly clear Blaine Graboyes’ future as CEO of skill-based slot machine developer GameCo was in peril.

Less than 24 hours after Graboyes was denied a gaming license on a 4-1 vote, the sharks were circling.

A handful of investment types were on the phone inquiring if the decision to kick the CEO to the curb was about questions surrounding his business dealings or the company. They wanted to know if there was value in the products, which combines slot machine wagering with arcade-style games.

Customers at the Ocean Resort in Atlantic City check out GameCo’s skill-based slot machines in 2018.

Clearly, gaming regulators had positive thoughts about GameCo.

“What (Mr. Graboyes) brings to the market is unique and exciting,” said Deborah Fuetsch, the only Gaming Commission member who supported the Gaming Control Board’s recommendation of a one-year limited license. “He deserves a year to respond and come back to us.”

Two weeks earlier, Gaming Control Board Chairman Brin Gibson said of GameCo, “I’m excited to see this concept of video game gambling on the casino floor.”

The trouble is that Graboyes was the visionary behind GameCo. The company’s management team can find a new CEO, but that person will not have Graboyes’ ideas, thoughts, and creative concepts for a company he has imagined for nearly a decade.

Graboyes launched GameCo in 2014 and by 2017, he had titles tied up for first-person action games based on Grammy Award-nominated DJ/Producer Steve Aoki and the movie Terminator 2: Judgment Day.

He raised $35 million through Fortress Investment Group, which brought respected global gaming and leisure investment advisor Adam Rosenberg onto GameCo’s board as a “board observer.” The board also includes Chairman Robert Montgomery, a longtime investor and adviser for media, communications, and technology companies, and Fifth Street Gaming CEO Seth Schorr, who is involved with Downtown Grand in Las Vegas.

GameCo currently offers casinos five slot machine games, such as “Call of Duty” and a basketball-themed title, which have a skill-based component in their jackpot rounds.

The company, however, had just 16 games in the field as of last week – four slot machines at Choctaw Durant Casino in Oklahoma and 12 in Nevada, divided among the Atlantis in Reno and Park MGM and MGM Grand in Las Vegas. GameCo employed 31 people, primarily at its Las Vegas headquarters.

Graboyes admitted to the Gaming Commission that the initial rollouts of the games in different markets were not as successful as he originally hoped, but he considered the exercise a learning experience.

Courtesy photo from GameCo of the installation of several games inside a casino.

The underlying question concerns the future of skill-based gaming, which became an industry buzzword in the latter part of the past decade. The topic brought about a fierce discussion in the gaming industry, but it was primarily hype and speculation.

Several of the major slot machine developers took their own stab at skill-based products, such as gambling games based on Asteroids and pinball.

In an industry built on innovation, a fiercely competitive, leading-edge company could be viewed as a pioneer that could ultimately fail, even if everything went as planned. One analyst said not every startup company, no matter how pioneering, can successfully transition into a gaming-industry leader.

“The trailblazers are here, and they are doing a good job,” AGS CEO David Lopez said in a 2019 interview. “The bad news is that the trailblazers don’t always make it.”

Add in COVID-19 and 2020 was recipe for disaster for skill-based slot machine developers.

Casinos throughout the U.S. closed in an effort to slow the spreading pandemic and some didn’t reopen until late summer or early fall. With operating restrictions and other capacity limitations, reopened casinos turned off their underperforming slot machines in favor of the more popular products.

Skilled-based slot machines may not have made the cut.

GameCo is not the only company where there has been upheaval.

In January, Synergy Blue founder and CEO Georg Washington said he was stepping aside but didn’t give a reason.

Gamblit Gaming “temporarily” closed its California headquarters and operations facility in Monrovia, California, due to COVID-19. That was March 20, 2020. There hasn’t been much activity since.

Sports betting long surpassed skill-based slot machines as a gaming-industry obsession. The activity, now legal in 20 states and Washington, D.C., is also viewed as a confluence between skill and wagering. It takes a certain knowledge to determine a wager on the potential outcome of a game.

It’s unclear if we will see the same growth between skill and slot machines.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at [email protected]. Follow @howardstutz on Twitter.

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