As the recession deepens, online slot machine revenue growth is outpacing other casino gaming types. This could be the start of an exciting new trend in the industry, but for now, the future looks less certain than ever.
Online slot machines are expanding rapidly. From 2006 to 2008, revenue generated by online slot machines grew at a 12% CAGR (compound annual growth rate). During the same period, pgslot revenues from table games, poker, and video poker grew at 3%, 7%, and 9% respectively.
Despite the fact that online slots generated nearly a quarter of all online casino revenue growth from 2005 to 2008, the U.S. gaming industry has not been quick to embrace the growth potential of online slots. Since 2005, most operators have responded by decreasing the number of online slot machines on their sites, or by transitioning their slots away from the web.
Concerns about the high turnover rate of online slots, as well as a questionable online safety record, have kept some operators from embracing this growth opportunity. Yet, other operators are more excited about the potential of online slots, and some are investing heavily in online slots in order to cash in on the expected growth.
Based on our research, we believe that online slot machines are poised to replace table games and poker as the online casino gaming growth engine.
The Evolution of Online Slots
Online slots grew out of the emergence of electronic games, with the first to be introduced being “Pari-gol” and “Bally’s Bonus Poker” in the early 1980s. At the time, these games were stand-alone products, while today they are a component of multi-game titles.
As the technology improved, it was no longer necessary to play these games in the same physical location. A second wave of games was introduced in the mid-1990s with the advent of multi-game titles, most notably “Winning Poker”, “Games by Mail”, “Parlay Poker”, and “Pai Gow Poker”.
To date, however, online slots have been held back by a number of limitations. The most obvious of these limitations is the relatively low number of online slot machines. Although the number of slots at land-based casinos has increased to over 18,000, online slots still number only a few thousand.
Even when a slot is online, it is often a limited-run product. After its launch, many slots are removed from online sites, pgslot and the site may not put slots back on line unless they experience significant revenue growth.
Why have online slots generated such little interest?
During the early days of online gaming, people were much more concerned about the integrity of online gaming. Some had concerns about online safety, and others worried about the high turnover rate of online slots.
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