Lou Castle, Shufflemaster
The full interview with Lou Castle, chief strategy officer at Shufflemaster, which originally ran in issue 19 of InsidePoker Business
In March, Las Vegas firm Shuffle Master agreed to buy the Ongame Network from bwin.party for €19.5 million. The purchase was intriguing with Shuffle Master joining the growing ranks of US companies gearing up for regulation with a further €10m payment due to bwin.party if and when the US doors open to regulation. One of the key men overseeing the deal is Shuffle Master’s chief strategy officer Lou Castle.
If Castle’s name seems familiar, it could be because he co-founded video game developer Westwood Studios, which created the legendary Command and Conquer series and sold over 10 million copies worldwide. When the studio was bought by gaming mega corp Electronic Arts (EA), Castle became the vice president of creative development at the Los Angeles studio of EA. After working on a game called Boom Blox with a certain Steven Spielberg, Castle was convinced the video game industry needed to provide a more immediate form of entertainment and so became CEO of browser-based gaming company Instant Action. ‘[Entertainment] has to be immediately accessible,’ he says.
‘I have to be able to share the experience with people, it has to be free to sample and the monetisation has to be incremental and based on consumption not up front.’ Though funding dried up at Instant Action, Castle continued to believe in these principles and took up the post of VP of Studios at social gaming giant Zynga on the basis that it shared the same vision. A short tenure of seven months at the LA-based firm might suggest crossed purposes, but Castle speaks of Zynga in glowing terms and cites ‘family’ as his main motivation for moving on.
‘It became clear to me that the only way to be successful would be to be there 24/7. That just wasn’t what I’d expected and that coupled with the fact that I’d been on the board at Shuffle Master for seven years, it seemed like the right time to make a big change and move into the gambling business.’ InsidePoker Business asked the industry veteran about how he plans to bring his vast video game experience and his short but inspirational time at Zynga to Shuffle Master’s poker ambitions.
InsidePoker Business: Why did Shuffle Master choose to buy Ongame?
Lou Castle: Officially we have entered into a definitive agreement to purchase Ongame and are waiting on regulatory approval which we expect to have very soon. First and foremost, they are a strict B2B operator and that is exactly in line with our strategy. The second biggest reason was the success of the platform in Europe. Ongame are experts in rapidly addressing regulated markets and doing so in a way that allows for database storage across many different environments. It’s extremely important if you’re going to live in a highly fragmented, highly regulated environment that you have the ability to combine as many of your liquidity pools as possible. The system was designed in the last few years when there were multiple regulatory environments to address. The third is that Ongame has the healthiest poker network, in our estimation, currently in the market. It has the highest return of revenue for operators and it’s focused on high quality play where players are very loyal and engaged.
IPB: Some analysts have tried to draw a correlation between bwin.party’s absence from the network and the relatively low purchase price of Ongame. What do you say to that?
LC: I’d say firstly that there is no correlation. In the case of the pending acquisition of Ongame, this was really our company of choice to acquire and we had certain financial constraints that we really couldn’t go beyond in good conscience. We’re a very profitable company and one of the weird quirks of markets is that the more profitable you are the more difficult it is to buy companies that don’t meet that same standard. That being said, I think we were also the perfect partner for Ongame when it comes to the business strategy and the way our companies fit together like puzzle pieces. Jim Ryan genuinely wanted to make sure that the best partnership was put together. I have no way of verifying this, but I was told that they had more attractive offers on paper but felt we were the best partners not just for the price but because we would give Ongame a very good home.
IPB: What can you tell us about the additional €10 million that is payable in the event that online poker becomes regulated in the US within five years?
LC: It has to do as much with commitment and accounting than anything else. We seriously wanted to buy a viable European business that we could invest in and grow. Our suspicion is that things don’t always happen as you want in gaming and we didn’t want to purchase a technology base [hoping] that something was going to happen in the US. We were trying to assess what the current value of the European business would be considering how much additional money we expect to invest in the business to grow it.
IPB: What leads you to believe that regulation is going to take place soon?
LC: Nevada has already put in place all of its statutory requirements and set up its regulatory board for online poker. We’ve been through the licensing process as an operator almost 300 times (we currently hold nearly 300 licences around the world). Not just Nevada, but California, New Jersey, Iowa, each one of the states is looking at the opportunity. So it’s feeling like this time around, there’s a significant amount of will to put in the regulatory framework that we feel would have always been required for a healthy US market.
IPB: How healthy a state do you think the industry is in considering everything that’s happened?
LC: I feel very badly for the customers that were caught in the federal enforcement of the law, that’s always regrettable. On the other side of the equation, while Black Friday was black for the customers of sites operating illegally in the United States, it was actually kind of a ‘white Friday’ for regulated companies everywhere because it meant the government was willing to enforce its laws. On top of that the Department of Justice letter in December, where they affirmatively stated that states that legalised gambling would not have to fight the government over the Wire Act, gave companies like Shuffle Master confidence that we can invest in the market and we know we have the power of the law on our side. So Black Friday gave the opposite effect of what you might expect, and ultimately it was very healthy for the industry.
IPB: Most online poker operators now have the stated aim to cater for recreational players. Is that Shuffle Master’s strategy as well?
LC: My personal belief is that it’s not about fish and sharks, it’s about really simple, really easy, really obvious entry into the game and playing against people who are a similar skill-set to your own. It’s about feeling like you got a good entertainment experience regardless of whether you win or lose. I truly believe accessibility to a large variety of customers is the most important thing to address as an industry. As proof I look to Zynga Poker and I say there are millions of people who want to play poker. There are lots of people that would love to play the game and wouldn’t mind losing a little bit of money for the chance to win – as long as they weren’t playing against people who were literally taking their money.
IPB: Do you feel like the industry hasn’t made enough of the power of poker as a game in the purest sense?
LC: There’s certainly a lot more fun to be had in the game, it generally takes itself quite seriously, and that’s okay. The best games I’ve made are those that superficially are entertaining and don’t need much commitment to understand but have an extremely deep element to them, where you continue to dig and it becomes more complex. From my experience as a video game maker and having been involved with many sequels, when you have a product that is constantly being pushed to a market, if you continue to cater to the most hardcore of your audience you tend to shrink the audience and create a feedback loop. To make that smaller audience more happy you have to do more things that make only the smaller audience happier. My observation of poker as an industry is that it’s suffered from this. The move to downloadable clients instead of web-based, open architecture creates a lot of friction to actually get into the game. It makes playing a friendly game of poker look like flying a 747.
IPB: Does it amaze you that poker lobbies still look the way they do?
LC: Most poker clients, even good ones, do seem quite dated from an interface-design and a visual-presentation point of view. But I temper that with the idea that making too radical a change too quickly might lose the core of the audience. I’ve been guilty in my career of making too many changes to a product sequel. Bing Gordon, chief creative officer at EA, used to say you want one third predictable, one third evolutionary and one third novel where you have new features that seem exciting. In the past, I’ve gone two thirds novel and that has not worked out so well.
IPB: You were only at Zynga for a short time but can you tell me a little about the culture there and a few reasons why it’s been so successful?
LC: I think Zynga is wildly misunderstood by a lot of people and you don’t get it until you’ve worked there and had a chance to live the Zynga values. I have the utmost respect for how the company works. It’s not about a lightning strike of creativity, it’s more about stability. Their model is a scientific method. They have very creative people that make assumptions, very talented people who execute those assumptions and extremely good metrics that measure the results. And they do all this at a speed that is easily many times faster than I’ve seen any other company do it.
IPB: What metrics do you mean exactly?
LC: I’m always asked what the most important statistic to watch is and I’m a little cheeky with the answer: it’s the one thing you forgot to measure. The other part that no one seems to ask is how often should you measure? And the answer is ‘instantly’ and ‘always’. That’s why two of the things that surprise me most about the poker industry is that there are still downloadable clients. That to me is shockingly archaic. The second thing is that there is any downtime for maintenance. The thing that people often miss about Zynga is that every game is always available 24/7. The products don’t get taken down to get maintained, they get rebuilt two to three times a week. And they don’t take the game down to do it. It’s a disaster if you don’t get the game up for seconds or minutes. It’s a revenue loss. Those are the elements I think can be brought into this industry, but they have more to do with dedication and discipline than any stroke of genius. I’m hoping I can impart that kind of religion. If we can aspire to be as good as Zynga and what they do I think we can couple that with things we are the best in the world at and make for a really great run at the market.
IPB: If Zynga were to offer real-money gaming, would the poker industry be in big trouble?
LC: Should Zynga point all of its guns in that direction, then everyone would be in trouble! But that being said, Zynga does very well and doesn’t have to live within a lot of constraints by doing what they’re doing. My expectation, and I have no inside knowledge, is that they would find a way to partner with a company so they would not have to live within those constraints and could continue to do all the things they do well and still leverage their incredible position with their player database. If they decided to create a separate team which was just for real-money gaming, I have no doubt they’d be highly successful.
IPB: You were previously CEO of Instant Action, a browser-based gaming site. Do you really think that if all poker clients were browser-based, that would have a dramatic effect?
LC: I would make the assertion that downloading clients is empirically removing customers from the mix. There’s no doubt in my mind, it’s not a maybe, it’s absolutely, positively true. There are many people who will not play poker online as long as they have to download a client. It simply comes down to metrics, if you watch your funnel of acquisition that’s always the problem. Can you get over the trust issues, the performance issues? Those are separate, technical issues, they’re not marketing or sales problems.
IPB: So people feel like they just don’t have time to download a client?
LC: I don’t think it’s a conscious decision, I think it’s fundamentally human nature to be easily distracted, easily bored. When we created Command and Conquer we put a lot of effort into making the installation process an entertaining experience. I was asked why we’d put so much effort into that when it wasn’t part of the game and I said: ‘The minute I bought the game, I’ve made the decision to play so why should I have to wait 20 minutes to have any fun?’ Frankly, if it wasn’t for the way the market evolved, I think we would have set a trend that would have stuck. I’ve seen the statistics where you shorten the load time and get more engagement. One more click means 15% loss. One-click Amazon purchasing is pretty damned powerful. Our internet strategy for all of our table games is zero clicks, zero friction. The first click you’re making is to say, ‘deal’.
IPB: Do you think the poker industry understands the one-click mentality?
LC: There are some people who have argued that I don’t understand the poker market, that they are more sophisticated and to that I would say, yes they are. But if I had a restaurant at the top of a hill that required you to climb 150 steps, I’m not going to have anybody who can’t climb 150 steps so there’s a selection bias!
IPB: Is instant action something you’re going to try to bring to Ongame?
LC: Right now I’m deeply respectful of the market that we have, we are a B2B business and we have B2C customers of ours who directly address the market so all the stuff I’m talking about is not something that we’re going to necessarily initiate, it’s going to be things we recommend to our customers. In the free-to-play space where we are more in control of the actual experience, for our table games we are absolutely going to be introducing these concepts. Experience tells me people want fun and if you can give it to them fast and for free, that’s a pretty big combination.