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The Lottery Developer Network is a development and testing environment that connects approved game developers with the resources to design, code and construct interactive lottery games. Traditionally, casual and social game developers – such as those who create popular Facebook games such as “Farmville” or “Words With Friends” – were unable to easily transfer their work to the lottery industry due to regulatory issues on the state level.
“Getting vetted to do lottery or casino games is a big deal,” said Rick Perrone, president of Stamford, Conn.-based Tournament One Corp., one of the members of the network. “[GTECH] is offering a huge amount of standardization and organization and continuity.” Tournament One has about 40 employees split between its Stamford and Las Vegas offices.
The company, which has a seven-year history with GTECH, is one of the two current members of the network, the other being the Canadian firm Telos Entertainment Inc.
Jon Leach, vice president of business development for Telos Entertainment, said the developer network represents a growth opportunity for all technology companies, game developers and players. “We see nothing but growth from the younger audience – 18- to 25-year-old players – who normally wouldn’t purchase scratch tickets but would play games digitally,” Leach said.
GTECH has received more than 35 total applications to join the network. Approval is pending for 13 of the applicants.
“Casual game developers are looking for this today because they’re looking for ways to monetize their assets,” said Tom Napolitano, GTECH’s senior manager of innovation and one of the heads of the lottery-developer network program. The network functions under a full revenue-share model in which developers get a percentage of whatever sales their game generates. “If their game does well, they do well,” said Napolitano.
Perrone said his company joined the network not only due to its long relationship with GTECH but because it thinks the move from printed instant games to digital games is going to drive the industry for the next five years. “The 18- to 35-year-olders that don’t go to lottery stores and don’t buy lottery tickets are glued to their smartphones and tablets, and we think that’s a way to [get that market],” he said.
Besides opening up the talent pool and tapping into a rapidly growing market, the big thing the developers network does is cut down on the time it takes for a lottery to put out a digital game. According to Napolitano, the lotteries that were running these types of games before would basically write a document describing what kind of game they wanted, how it would work and what prizes they wanted. They would hand it to a developer and in nine to 12 months would get their game back. “That game might not even be relevant anymore. Nine months in as eternity on the Internet,” said Napolitano. “We knew we wanted to move much faster than that.
“We tried to take that potential one-year window down to a week,” he said.
Napolitano used the example of a popular zombie movie. Lotteries can look in the library, find a game and try to piggyback on the excitement from the movie. “They can take advantage of the hype. That’s the kind of flexibility we want to give them, to be more reactive to their current markets no matter how small they are,” he said.
According to J.P. Mark, president of Farmhouse Equity Research LLC, in Fair Oaks, Calif., GTECH’s new network is important for two main reasons: the open-development platform that attracts new-game designers and the fact that it establishes a new long-term opportunity for growth.
“Because of the highly regulated nature of the industry, lottery-game development has always been restricted, but with the Lottery Development Network, GTECH has found a way to lock down certain key operating-system elements, but at the same time giving game developers new freedom to innovate,” Mark said.
Mark was skeptical, however, of the system’s ability to make an immediate splash in the lottery world.
“I would not expect GTECH’s LDN to immediately change the industry landscape, but over time, if a few of their new games become increasingly popular, this effort has great upside potential,” he said.
Once a new game is approved, it will be added to the GTECH Game Market, the company’s version of Apple’s App Store or Android’s Google Play market that is expected to launch in January. “We used to go state to state and promote our games or go to conferences and annual shows and that’s how you present your wares. Now everything goes up on the lottery-developer network as a catalog,” said Perrone. “For us, it’s a huge plus.”
On the Game Market, lotteries will be able to peruse hundreds of different games, analyzing the odds, price structure and prize payouts and quickly get that game to market for real-money gaming.
Much like the standard scratch-ticket market, a player must be within state borders in order to play a lottery’s online game. GTECH analyzes either the gamer’s IP address on their computer or the cell tower being used for a smartphone to ensure they are actually within the state.
The Game Market will launch with approximately 30 games but will eventually contain thousands of options. Right now, gamers will play on the Internet on a lottery’s website, but GTECH is already starting to recruit developers to support games on mobile environments for Android and Apple phones and tablets.
“We need to go where the players are,” said Napolitano. “We can no longer assume they’re going to walk into a 7-11 and find our instant ticket on the wall.”
Lottery gaming currently represents a $40 billion business. Digital gaming makes up about 60 percent of the lottery revenue, according to Perrone, who said he believed it will continue to drive the business for at least the next three to five years.
Napolitano said GTECH is also investigating a university-program aspect of the network. “The university can develop a game as a class project or as an individual project to make some money,” he said.
Before, there were only a handful of key vendors that most lotteries would look to for digital-gaming technology. “Now content is going to come from anyplace you want,” said Napolitano.