Bringing esports to a Las Vegas casino

The two men sit on the edge of their chairs, custom fight sticks in hand, eyes fixed on the screen. Behind them, at least 20 people watch, drink and chat about video games. Just feet away, a pair of slightly inebriated women loudly cheers and claps at the roulette table, but the atmosphere inside the lounge is laid back, a refuge from the noise and neon lights of the casino. It's a typical Friday night for the Downtown Grand, a hotel that recently went all in on esports by hosting weekly contests, watch parties and competitive events.

Seth Schorr

The global esports market is rapidly expanding; market researcher Newzoo (via VentureBeat) expects it to grow by 43 percent in 2016 from $325 million to $463 million. By 2019, Newzoo predicts esports will be a billion dollar industry, and as it continues to grow in popularity and viewership, this so-called "esports tourism" may be a prime market for a city like Las Vegas. Sin City has the infrastructure in place to support large-scale gaming events like Evo and The International. There's even talk that Beijing-based company Ourgame International Holdings Ltd. wants to build a dedicated esports arena on the Las Vegas Strip, according to Vegas Inc.

If the city does become a future esports hotspot, the Downtown Grand wants to play a big part in that success. While massive professional gaming events happen every year, there isn't a full-time, 365 days a year esports destination. Seth Schorr, chairman of the Downtown Grand and CEO of its gaming license holder and casino operator, Fifth Street Gaming, tells Polygon he hopes his hotel, and the rest of the Las Vegas metropolitan area, will be that destination.

"We wanted to create an environment that caters to the esports audience 24/7," he says, "not just the weekend of an event, and then come Monday it's no longer an esports hotel. We wanted to activate our property so that the esports enthusiasts always want to come visit the property and there's always something going on."

Learning to become an 'esports hotel'

Schorr believes esports is a way for casinos to cater to people in their mid to late 20s, offering them an activity that's relevant to them. Early last year, he began looking into how he could bring esports to the Downtown Grand, meeting with various tournament operators, team owners, players and game publishers. It took most of the year to really learn about the industry, he says.

The hotel took its first step into the world of professional gaming in November 2015. It invited the LA Renegades, a newly-formed team of Australian Counter Strike: Global Offensive players, to stay and train on the property in a private practice room built specifically for it. During a two-month residency, the Renegades trained for league competitions like the RGN Pro Series Championship, where the team placed second. The team also hosted meet-and-greets and held exhibition tournaments. "[The residency] was a great learning opportunity for us, understanding what equipment they needed, what type of training facilities," says Schorr. "They play eight hours, practice eight hours a day."

The Downtown Grand went on to quickly establish itself as an "esports hotel," according to Schorr. That November, it held a watch party for the Intel Extreme Masters 2015 championship in San Jose, Calif. converting its café into a viewing room. It hosted the Wargaming.net League North America Season 2 Regional Finals for World of Tanks in February, and it also hosted the opening event for the 2016 Madden Community Championship in March. It removed the blackjack tables and slot machines from its high limit room and replaced them with comfy chairs, big screens, Xbox Ones, PlayStation 4s and high-end Republic of Gamers PCs. Now dubbed the Downtown Underground, the newly dedicated esports lounge started holding weekly gaming contests. "This isn't in a corner somewhere," Schorr says. "This isn't in a bar or lounge hidden in the corner. This is right on the casino floor. We have contests where people come, they pay an entry fee, they win a cash prize and it's very exciting. It brings a lot of energy."

Right now, the Downtown Grand's weekly competitions are small in scale. On a night where a game like NBA 2K16 is featured, Schorr estimates 15-20 people enter the contest, each paying a $15 entry fee. A game like Counter-Strike: Global Offensive might bring in about 50 players. Those are modest numbers to some, but Schorr says he is happy with them. He's not looking for anything more than that, he says, because the contests are supposed to be intimate affairs.

"I gauge our success on how well it's been received by the community," he says. Schorr claims he's gotten largely positive feedback from the community, which is something he says he didn't expect.

"It's a very vocal community, right? I mean, if you do something that's disingenuous or not authentic, they're going to talk about it on social media and be very vocal about it," he says. "We almost expected some criticism, because any time you do something new, you have critics, and that's fine. We always welcome that type of feedback. [But] because we took our time and partnered with the right people, it's been well received."

The gambling industry's growing millennial problem

Hotels like the Downtown Grand are suffering from a growing problem: Younger people don't want to play slot machines.

Nearly 3.5 million people visited Sin City in January, according to the Las Vegas Convention and Visitors Authority. Citywide hotel and motel occupancy was up three percent compared to January 2015. Yet, overall gaming revenue was down on the Las Vegas Strip by more than seven percent. More people, especially millennials, are visiting Las Vegas, but they're spending their money on restaurants, on nightclubs or on table games like blackjack, which generate far less revenue for casinos than slots.

Schorr believes this shift is happening, in part, because slots are too one-dimensional for people who've grown up surrounded by advanced technology. "They're working on three or four different devices at once. They're very dynamic, and a slot machine, a current slot machine where you sit at a machine and hit one button is too slow and boring, and the technology, quite frankly, seems very dated. So slot manufacturers will be evolving their products and will integrate more skill-based gaming within the product," he says.

Blaine Graboyes

Blaine Graboyes is the co-founder and CEO of GameCo, Inc., a company that wants to bring esports and skill-based video game gambling machines to casinos. He agrees with Schorr (who sits on GameCo's board) that slots are unattractive to many people.

"[Slots] are random; there's no skill," he says. "You pull a lever and just wait for an animation for a result that was already determined in the millisecond that you bet. If you grew up playing Nintendo and PlayStation, it just is not engaging at all to play slot machines. And young people have better entertainment options."

Graboyes, an executive producer and game designer with nearly 20 years of experience in digital media, pitched the idea of bringing esports to casinos about two years ago as a way to attract a new generation of gamers. "And very quickly, the casinos that I was talking to said that they didn't think it would be a good fit because they'd had similar events, and while they might attract a few thousand people for the weekend, none of those people gambled at the casino," he says.

"[Esports events] will only happen when there are games on the casino floor that are attractive to this audience," he adds. "The casinos [don't] benefit from attracting more millennial and Gen X gamers unless they're getting them onto the floor."

Graboyes believes his video game gambling machines are the solution. The VGMs look like arcade cabinets but function similarly to slots and electronic gaming machines. All of them have what's called "Return to Player" or "Hold," which is a term used by casinos to describe the percentage of money wagered that's given back to players over time. This ensures that the best gamers aren't taking all the money, Graboyes says. Everyone has a fair experience.

Bets will likely range between $1 to $7 per session, according to Graboyes, and those sessions will last around 30 to 90 seconds. The better you do at your chosen game, the bigger your payout. The VGMs will involve a combination of both chance and skill. In electronic poker or blackjack, the chance element is the deal of the cards; the skill is in how you play them. But in a VGM, the chance will be in the game design. A first-person shooter might have randomized levels, for example, or a racing game could have random tracks. GameCo has already licensed a racing title called rFactor for its machines, along with the art and environments of 505 Games' first-person shooter Rekoil. Eventually, the company hopes to adapt games from a variety of genres, including sports, fighting, puzzle, hidden object and match 3.

"Occupancy is a key issue for casinos," he adds, "meaning how long a player stays with a game, and so we think that we have a real solution for that, because our games are very, very engaging and fun for all gamers — male, female, younger, older."

GameCo recently submitted an application to the Division of Gaming Enforcement in New Jersey, and it plans to debut its video game gambling machines sometime this year, once they've gone through the Garden State's regulatory approval process. Although Graboyes expects the machines will reach Las Vegas in 2017, he says he doesn't envision putting them in the standard casinos of today. "Almost every major casino has some program looking at the future of gaming," he says. "And so we're working with these innovators to help them build areas that are dedicated to gamers … and so that might take the form of esports events, VR demonstrations, meet-and-greets, cosplay contests, conferences and lectures. Anything that is really engaging to a gamer is something that we want to bring to the casino and really make casinos a destination for these younger gamers."

The future of esports in Las Vegas

Ultimately, Graboyes sees the future of esports in Las Vegas as being not so different from traditional sports tourism. "People travel all over to go to their favorite games and follow their team, and go to the Superbowl, and visit all kinds of destinations," he says. "I don't see why it would be very much different from that."

"I'd say the big opportunity for casinos is that gamers don't have a home," he adds. "There is no destination currently for gamers. And so casinos have a real opportunity to reposition themselves as that home or destination for gamers, and they have a lot to leverage."

But before Las Vegas can turn into a gamer's paradise, it faces a few challenges.

Graboyes believes that esports needs to be more formalized before regulators will allow people to bet on it. Unlike professional sports leagues like the NFL and NHL, there is no governing body in competitive gaming, no overarching set of rules. While the ESL and the Pro Gaming League have begun drug testing players, there are other leagues that still don't. "It'll be a few years now, I think, until the leagues and the teams and the players become as formalized as traditional sports, and I think you'll need to see that happen before you see widespread esports book betting," Graboyes says.

Tournament schedules are another issue, according to Schorr. A large-scale event like The International lasts several days and might not start on time. "It's hard to activate a space and to create a party that lasts two days," he says. "It's hard to keep the energy consistent."

Despite these difficulties, both Schorr and Graboyes believe that esports will continue to shape the future of Las Vegas, a city that's constantly evolving as younger generations seek new forms of entertainment.

"It's going to keep Las Vegas relevant," Schorr says. He plans to work with the Nevada Gaming Control Board in the future to make the Downtown Grand's video game contests more like poker, where people can sit, put money in a pot, and compete against each other — with the house taking a cut, of course.

"They're not quite there yet," he says, "and there's a lot of regulatory process to get that regulated and legalized, but we think that's the direction, at least partially, that gambling will be going."

"There will absolutely be video game casinos before the end of the decade," says Graboyes, "and we certainly will be a part of it."