The Relationship Between Software Game Providers And Casinos

Posted: April 11, 2024

Updated: April 11, 2024

Many players have no idea of the behind-the-scenes of the online casino industry. They are surprised to learn that many casino don't make or own their games. Third party game developers like Evolution, Microgaming, and NetEnt are responsible for not only providing casinos with games, but in many cases the prizes as well.

It's no real surprise that the online gambling industry is fascinating to many people, especially when you consider its business side. With so many online gambling companies and a vast array of land-based casinos, it almost feels like a monopoly. This can lead to confusion, especially when you realize that many well-known brands are owned by the same conglomerate, which is not widely known by their customers, the players. Additionally, there's a misconception about how the top online casino sites in the US like King Billy Casino operate. Many people assume they develop all their games in-house. However, there's actually a close relationship between software game providers/developers and online casinos. Let's explore how these two quite separate industries benefit each other and the overall iGaming sector.

What Are Software Game Providers?

After playing some online casino games, you might have noticed that many live online casinos offer the exact same online slot games, sometimes hundreds of them. This might make you wonder how it's possible. Well, it's because there's a whole industry within the online gambling world. A niche within a niche if you like. This micro-niche is worth billions within the multi-hundred billion dollar gambling niche. In fact, there are companies whose sole dedication is to providing the technology and content for these games. They are known as software game providers. Over two decades ago, as the industry shifted online, some individuals, or pioneers, recognized that any online casino, whether new or established, couldn't operate without game content. Thus, the online slot game was born, along with digital versions of table games.

An Example With Playtech

One of the industry leaders who founded one of the earliest software game providers was Israeli entrepreneur Teddy Sagi. He had a strong vision for a groundbreaking company. This led to the creation of Playtech. After securing funding, he assembled a team of top mathematicians from across Europe. https://www.youtube.com/watch?v=dSIBIikZU8E&pp=ygUTVGVkZHkgU2FnaSBQbGF5dGVjaA%3D%3D The rest, as they say, is history. Playtech, along with other major players of the time like Microgaming, Pragmatic Play, and NetEnt, swiftly rose to prominence and earned great respect. Many casino deals soon followed.

Evolution Of Partnerships In The Digital Age

In the early days of iGaming, it was a bit of a risk for software game providers like Playtech, and at the same time, for online casinos. Many were hesitant to dive into the online casino scene. After all, it was easier and safer to stick with sports betting instead. While it's easy to assume that striking deals would've been a breeze, given the immense popularity of online casino products today, back then it was all very new and untried. However, by the late nineties, software providers began to see a surge in demand for their products. This meant that when it came to negotiating with online casinos, they had a lot more bargaining power.

Providers Have Become Industry Leaders

Over the past 20 years or so, the dynamics of deals between software game providers and online casinos have evolved, with many new arrangements coming into play. It's worth noting that there are now significantly more online casinos and software providers in the market. However, competition has turned out to be a positive force.

The way both sides of the industry operate has also changed, especially in their approach to business. There used to be a misconception that tech entrepreneurs or employees lacked skills in sales or negotiation. However, this notion has been completely debunked. Software providers understand that online casinos rely on them and that they can't survive without their products. As a result, they hold a strong position in negotiations.

Financial Arrangements Between Online Casinos And Software Game Providers

According to online casino news in the US, while it might seem straightforward, hammering out a deal between a software provider and an online casino can actually be quite complex and time-consuming, especially if it's their first collaboration. Each company has its own preferred deal structure. Those with long-standing relationships might have additional economic advantages built into their agreements that kick in over time. As such, there are numerous factors to take into account. Firstly, the geographical location of both the online casino and the software game provider is crucial. This is especially true with regard to gambling regulations and licenses. A deal can hit a snag right at the beginning if these factors aren't aligned. Additionally, the size of the software provider's workforce is important. Can they adequately meet the demands of the online casino, particularly in the long term if there's a need for a continuous supply of games and updates? Logistics also play a significant role. Will there be any issues with delivering the required services or products? Once these logistical matters are sorted, then the financial and numerical aspects of the deal can be discussed. But even then, there's still a lot of ground to cover.

How The Money Flows

Experienced software providers, especially those known for developing award-winning products, like Evolution Gaming and their live dealer games, understand they have several advantages when negotiating deals. Their reputation for innovation and quality can influence the pricing and structure of their agreements. Typically, these companies prefer to charge an upfront fee for their services. This fee can range from hundreds of thousands to millions of dollars, with much depending on factors like brand recognition. The most common transaction type nowadays involves an upfront fee along with a monthly retainer. This could either be a revenue-sharing agreement or a flat monthly fee. Keep in mind that this is regardless of the games' actual performance.

Ongoing Gaming Maintenance

Additionally, software game providers often offer upkeep and maintenance services for their products. All games, being digital, need continuous monitoring. They may pass on part of this cost to the casino brand. The duration of the deal is also a key negotiation point. In new relationships, a casino might prefer a short-term arrangement before committing further, although this can complicate matters for both parties.

The Art Of Negotiation

Detailed information about these deals is unlikely to become public knowledge unless there's a threat of legal action. However, it's safe to assume that each software provider has unique agreements with the online casinos they collaborate with. There are several reasons for this. Firstly, the online gambling industry, while it appears vast, is actually quite interconnected, forming a tight-knit community at higher levels. It's common for employees to move between online casinos and software providers, which can influence deal details due to existing relationships or insider knowledge.

Additionally, various other factors may affect these agreements. For instance, if a software provider sees potential in a new online casino, they might offer reduced fees initially in exchange for prioritized placement of their games on the casino's page. This ensures visibility and helps foster a long-term business relationship with that specific brand.

How Deals Are Made

Moreover, if a software game provider is partnering with an established online casino like King Billy Casino but in a new market where it aims to grow its presence, it might find itself at a disadvantage initially. In such cases, they might consider offering a fee reduction to the casino. However, this also grants them valuable insight into how the new market will respond to their products. Especially if they have the goal of becoming the top non-native provider for casinos in that region. Thus, the initial reduction in fees could prove to be a valuable long-term investment.

Will More Software Game Providers Affect Future Business?

With the emergence of new iGaming markets in recent years, particularly in the US, Canada, and Latin America, the online gambling industry is expected to continue its rapid expansion. This growth trend is likely to prompt the launch of yet more software game providers, with them all aiming to meet the demands of these new markets and trends. Despite the increasing number of players entering the industry, healthy competition has been a big trend over the years. The iGaming sector generates hundreds of billions of dollars annually, with software providers enjoying a significant share of this revenue. The entrance of more software providers into the market is expected to reinforce current financial forecasts. With this, it's safe to say that the iGaming industry is poised for unprecedented global growth in the near future.