A fiery debate on the regulation of social casino games

Real-money online-gambling companies have to abide by strict regulations that stop them from milking every last penny from gambling addicts who can’t afford to pay. But makers of social casino games (such as Zynga Poker on Facebook) are under no such restrictions. Should they be?

That was one of the topics debated at the Social Gambling Conference in London on Friday. The discussion put the real-money online-gambling companies at odds with the makers of non-gambling social casino titles, where users pay for virtual goods (such as poker chips) but are not allowed to cash out their winnings.

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The panel, moderated by Stuart Tilly, director of a new group dubbed the Social Gaming Association, produced some fireworks at the first-time summit in London on Friday. Tilly’s group is a new association representing the non-gambling social-casino-game companies.

Jez San, president and founder of real-money gambling firm PKR, said he does not believe that gambling regulators should force social-casino-game enterprises to comply with responsible-gaming regulations.

But San (pictured above in blue on the far left), who spent two decades in the non-gambling video-game business and participated in the real-money gambling industry for the last six years, said that the social-casino-game industry should voluntarily submit itself to its own self-regulation.

“I don’t believe social games should be regulated. But I do believe the providers of the social games should take a more responsible attitude than they are currently taking,” San said.

He said the most important thing is that the social-gaming outfits should allow individuals to impose their own limitations on how much money they can spend in a month. The people behind real-money online gambling experiences must currently do so in order to show they are taking responsibility for the possibility that addicted players might overspend.

San said that he doesn’t want to see a newspaper like the (tabloid) Daily Mail write a profile of a single mother who lost all of her money playing casino-like social pastimes on Facebook. If the industry doesn’t impose its own regulations, it will inevitably face more strict government regulation in the future. If social-game companies (such as Zynga) do not self-regulate, they could make the whole industry look bad when the inevitable addiction problems surface.

“We don’t want to be profiled as having ruined someone’s life or bankrupted a single mother who can’t pay the bills,” San said. “We act in a very responsible manner. We don’t allow minors to play, and we don’t allow the vulnerable to play. The social gaming world doesn’t acknowledge such problems and would like to put its head in the sand and pretend that it’s a free world and people can spend whatever they want.”

Andrew Hughes (pictured left), chief executive of social-casino-title firm AbZorba Games, was on the other side of the discourse.

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“There is a lot of debate still to be had,” he said. “I don’t think regulation should happen now. It’s too confusing … First, it is entertainment. You do not have to play. About 98 percent of my gamers never pay a single cent. They can earn chips looking at advertisements. Nobody can take the monetary value out of our game.”

Consumers can self-regulate now, and Hughes said voluntary self-regulation is fine. So in that sense, he agreed with San. But he would not grant that the social-game companies try to get people addicted. He noted that, among paying players of social casino titles, only 7 percent of them ever buy anything.

San said that average revenue per paying person is misleading, given that a small amount of gamers account for a large amount of sales. Hughes returned to the fact that it is clear in his releases that the play is just for fun.

San added, many of the social-game firms will not impose limits because “their job is to find whales” (people who spend a lot of money on social casino efforts, sort of like high rollers in Las Vegas) and then get them addicted.

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“Can we keep it to social gaming,” Hughes asked. “We are not talking about social gambling. Social gaming is about a free experience.”

San said that the definitions of social gaming and social gambling are becoming blurry. He noted, for instance, that you can put a value on poker chips if an (unofficial) secondary market appears where individuals sell off their extra poker chips in a social casino title. But Hughes noted the games are closed loops, where you can buy virtual poker chips but cannot officially cash them out. San argued back that no game company has ever done much to shut down unofficial secondary markets.

Gambling consultant Steve Donoughue (pictured at top of first page, middle) said that it is not correct that developers want to get everyone addicted. San countered that would be easy to conclude if you go to a social-gaming developer conference. Hughes also wouldn’t concede that point on addiction.

Referring to his past releases, San said that the goal in video games was to get players addicted. But that was different because it was a one-time purchase, not an ongoing virtual goods purchase that could be repeated over and over.

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The panel did not address the fact that the real-money online gambling organizations compete head on with the social-casino-game makers. The real-money gambling outfits would naturally rather slow down the social-casino-title enterprises.

Donoughue said that if social efforts are just for fun, then social-casino-game operators should not have to suffer the cost or incompetence of regulatory review. San said that the cost of protecting consumers is actually pretty low. But Donoughue also said that addiction applies to everything, but you don’t have to offer protection to everybody because certain individuals lack self-control.

“These are games, and we do not want to regulate them in the same way we do not regulate the sales of playing cards and plastic poker chips,” Donoughue said. “We need to live in a world where there is an element of self-responsibility. If you play a game that might look like Blackjack, but there is no money coming out, this is a game. This is not gambling.”

San advocated “voluntary consumer protection,” even for non-gambling, non-casino experiences, especially if they have vulnerable players who are prone to addiction.

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From the way the panel went, you would have thought that the big bottles of water on the table were more like bottles of vodka. Donoughue told San to “shut up” and stop interrupting. San shot back, “That’s a very good argument.”

Donoughue said that San was “accusing an industry, the social-games industry,” of being malicious about hooking gamers. San said, “I’m not accusing. I’m guaranteeing that is what they do.”

In the gambling world, companies have to allow people to set their own limits. If they don’t want to lose more than 50 pounds (or dollars a month), they should be allowed to set a monthly limit that shuts down their accounts once they exceed the 50 pounds. San said social-gaming companies don’t want to put those limits on people because it might affect profits. One attorney in the audience sided with San, saying that social titles have a huge reach, but no one has bothered to study the issue of addiction using real consumer data.

Tilly said at the close of the discussion that the debate was a draw. Here’s a video of some of the issues discussed at the event, where I was one of the speakers.

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The conference organizers paid my way to London, where I gave a speech. Our coverage of the conference remains objective.