Betting on Digital Vegas: Introduction to iGaming ft. Todd Haushalter of Evolution

Announcer: Welcome to The Jump Off Point, an original podcast by Jump Capital. Today, our host Jason Felger facilitates an exciting chat on the wild world of iGaming with Jump Capital VP Tarun Gupta and our special guest Todd Haushalter. Todd is chief product officer of Evolution, the leader in B2B online casino services.

Jason Felger : Hey everyone. Today, I'm joined by Todd Haushalter who's the chief product officer for Evolution. If you don't know much about Evolution, that okay. They are a quiet giant to many outside the industry. We're going to talk with Todd about the business and their games, but to give you a little context before we get started, they have the largest market capitalization of any gaming company in the world. For context, Las Vegas stands as number two. They design, develop, and power many of the online casino games around the world. So, Todd, thank you so much. Welcome to the podcast.

Todd Haushalter: Thanks. It's my pleasure. This is fun.

Jason Felger : And I'm also joined by Tarun Gupta on the Jump team who spends much of his time at the intersection of gaming and gambling and of the future of how these massive industries are intertwining. Welcome, Tarun.

Tarun Gupta: Thanks, Jason. Excited to be here.

Jason Felger : And so, Todd, as I said, what we're going to talk about today is kind of where gaming is at, what is iGaming. Before we get into that, though, I do wanted to share with our listeners a quick review of your background. You spent your entire career in the casino gaming space, working in product at Shuffle, strategy for Bally, gaming ops for MGM, and the last six years leading product for Evolution Gaming. Obviously, you have incredible experience in the category and we want to get your perspective on iGaming, but also how that's been influencing the land- based casinos. IGaming is a huge market globally, but one that not many people in the US are fully aware of. So, to kick things off, it'd be great for you to give the listener some background on what is iGaming, maybe the parallels and differences to traditional land- based table games, just to set the table and give everyone a good starting line.

Todd Haushalter: Yeah. Thanks for the great introduction. Yeah. Casino just runs through my blood. So, it's only place I've ever worked. Yeah. IGaming is effectively just trying to take the experience that you would find on Las Vegas Boulevard and moving it to your phone or your desktop computer. And in its purest, simplest form, that's what it is. And you can find slots. You can find table games. You can find table games with live dealers, which is what Evolution kind of grew up doing. And you can find bingo. You can find sports betting. And just like the rest of your life, all right in your phone.

Tarun Gupta: Todd, it would be great if you could maybe contextualize a bit more for our audience the customer base for these types of games. Are they just traditional people who are playing in land- based that sort of poured over online? Or is it actually maybe a different set of people that take an interest in these types of games?

Todd Haushalter: A lot of times, you have people that are having their first ever casino experience online. The way gaming works is it's pretty geographically limited. So, if you've been to Las Vegas, you've been exposed to it, but maybe you don't care about gambling so much that you're going to drive 90 miles to the local casino. And maybe driving to that casino or that casino that is 90 miles from your house isn't even that compelling of an offering. So, you know about it, but you've never really been to a casino. Well, when you see on TV that there's sign- up bonuses or whatever else that you might find alluring or you want to make a bet on the Super Bowl and you can do it and sign up in a couple of minutes on your phone, well, this is just how you're getting exposed to it for the first time. The same way a lot of the first games people played maybe in my generation might have been a board game, a physical board game or a chess board or checkers, something like that, the first games kids are being exposed to today are in a digital embodiment. And so, as you move down in age, you undoubtedly have this generation of people that are playing online for the first time and that's really all they know. Unfortunately, for land- based, they're going to find land- based a bit boring, a bit slow. They're going to find a lot of challenges with land- based. They'll find some of the things better too, like you can have a waitress bring you a drink and you can hang with your friends more easily. But then you have a transition of people who understand land- based gaming, they play land- based gaming, but maybe they don't go to Las Vegas but two or three times a year or maybe the casino is far from their house and they don't want to get in their car and drive. And so, it's just entirely more convenient. The same way online food delivery might cause you to eat food from restaurants more often than it would if you actually had to get in your car and go to the restaurant and sit down. So, you got quite the gamut of people in online gaming. And it's very regionally distributed too because it's not widespread everywhere.

Jason Felger : So, Todd, does that mean it... it doesn't mean, but is there a future state, where the current generations and future generations are just kind of native to iGaming? You see just a extreme, downward pressure on the market size for the land- based games?

Todd Haushalter: I think it gets hurt severely, probably. Let's think it through. If you look at the way land- based gaming has expanded across America, in the 90s, Native American casinos started popping up increasingly more. More states commercialized casinos. And largely, the trick was to build a casino closer to where the population is than the other people. And if you built something that was 20 minutes closer, you got to pick off the business or if you got one of a few privileged licenses in the state, then you got to share the business with a couple of others. But we don't have physical borders in America between states. If your state doesn't approve, a neighboring state does, people happily drive across the border to go play. And so, by building a casino closer, you got to get more business. Las Vegas is an exception. It's always been a destination resort. Atlantic City saw this. FoxWoods in Pennsylvania. Other places built closer. So, now, in your pocket, there's a casino. And that is going to be a severe threat. Not everybody likes going into casinos. Bellagio is amazing. Sure. But a lot of casinos, they're rather smokey and they might be some of the only places in the state where you can still smoke inside. They just don't have a destination. So, they've relied too heavily on their slots. So, I think it probably is a threat. And you'll start to see over the next decade, there will be pressure. And this one will close and then that one will those. And then as they close, that helps the survivors, right?

Jason Felger : Yeah.

Todd Haushalter: So, that will slow it down a little bit. But yeah. There's only so much gambling budget per individual to go around. And if they're giving some of it to online, it's going to be hard.

Jason Felger : It's a wonderful segue also to just start to get your perspective and story about Evolution. You've been there almost six years now or I think just over six years now. And in the context of iGaming, I'd love to hear the Evolution story. In particular, just leading the witness here a little bit, what did Evolution do to really disrupt and break away from the standpoint of bringing some of what you experience in land- based to the online, to the iGaming experience?

Todd Haushalter: So, Evolution's a great story. And you mentioned that we have the highest market cap of any gaming company. And that just happened recently. So, the first time ever, an online company has the biggest market cap in our industry. Evolution started with the vision that people would prefer live dealers and live video for a variety of reasons. One is a trust factor. When a gambler loses, there's this intense sense that they were cheated or that someone else at the table ruined it for them or something. And so, when you can actually see the cards be shuffled in front of you or see the roulette ball be spun in front of you, it brings a lot of trust. So, the company was founded with the idea, have a roulette dealer with a roulette wheel, spinning a ball in front of, like, a Logitech camera. And you stream a very poor video quality with a user interface. The dealer will manually enter the number into the keyboard. And the players can type in chat. And the dealers could talk back. Most people didn't have good enough video connection. And the original founders were going around to casinos saying," You should give us some real estate on your online casino. You've got slots. You've got sports. And you should have some real estate for us." And they're like," I don't know. The video's not even that great. It doesn't really hold up, but okay, sure. We'll give you a shot." So, they start to get some clients. And you pretty quickly bump into this issue of, well, are you going to run 24/7? So you might have five or six... they had, like, five or six tables... six tables in the original Evolution. And now, they're running 24/ 7 payroll. But you're running that at 4: 00 in the morning for the chance that a couple people might show up, but you want to run a full- service operation. So, money was tight. You spend a lot of money in the beginning. And until you kind of hit scale, it's hard. It's really hard. So, the company, to the extent that they made any money, they just plowed it right back in and right back in and right back in and increasingly got more real estate on the websites. So, now, we've got, like, 11,000, 12, 000 people in the company, mostly frontliners. So, think game hosts, game dealers, this kind of thing. And it's like walking through a Warner Brothers studio or something. You walk past it and there's just hundreds and hundreds of tables with dealers standing in front of cameras, reading the chat, being told when to spin, when to do what. And it's a really sort of immersive, social, trustworthy, fun experience. Now, of course, we have HD and 4K. We even have VR. So, we've come a long way.

Tarun Gupta: Todd, how much is just the internal culture of Evolution different from the other companies you've been at to really facilitate the innovation that has propelled you guys to where you're at in the industry?

Todd Haushalter: Yeah. Great question. So, I came out of land- based. And everything at Evolution, like, I thought we had very sophisticated game protection at say MGM or Wynn. At Shuffle Master, we specialized in making game protection devices like automated shufflers. So, I was pretty up on that subject. And you come to Evolution and they basically took a ground- up... it was almost good that they didn't have hardcore casino people around when they were starting the company because they track everything: every card that's dealt, they track the speed of the dealing. They assess the dealers. They have a bonus scheme to ensure that the game dealers are providing the best possible experience. They're tracked for how fast are they? Are they mistake- free? And are they friendly? And the dealers can make up to double their pay. And so, just completely novel. Whereas in Las Vegas, the model is to pay minimum wage and then tips take care of the rest. So, the dealers work for the players. And it's very tech- driven, very data- driven, and in a way that I had never seen before. The effort to track seconds is so incredibly scientific. I had been in the casino business my entire life and it never really occurred to me... we always talked about faster games and things like that, but at Evolution, there's a specific number of seconds during betting time every single round, and then a very specific amount of time that they're targeted to spin the ball in the wheel so that you don't have these really long game rounds because players don't like that. It gets boring for them. And so, everything is optimized to make the playing experience as fun as possible. And it's all tracked. And then it's built into bonuses. So, it's this flywheel that's just incredible. Mistake resolution, nothing is left up to a supervisor's personal opinion. Everything is scientific. And so, it's really like a tech company.

Jason Felger : Why aren't there more people coming after Evolution's model and Evolution's business? And there are some for sure, but there's hundreds of slot providers, online slot providers, but-

Todd Haushalter: Yeah. Hundreds.

Jason Felger : ...not nearly as many live gaming. And so, part of this is just your kind of view of the market, but also maybe a little bit about why is this so difficult? I have to assume, to a certain extent, just the difficulty of it is something that maybe you don't appreciate on face value, whether it's the experience or the product or the regulatory aspects of it.

Todd Haushalter: It's yes to all. It's a good question. Of course, people can see our market cap and it's not like they don't sit around in their boardroom meetings and say," Maybe we should go take a piece of that pie." And that's fine. And that might grow the live casino business in wonderful ways. I don't think there's any evidence to suggest that the water's not warm and that we would do better if we had more competition. If you build McDonald's next to Burger King and then Subway comes in, the whole street just does better. So, I'm not necessarily in love with the fact that's there's not anybody else doing it in a big, grand way, but let's just with who is the kind of group of people that should start or could start their own live casino. Are they working right now in a casino, hiring dealers, teaching them procedures, understanding game protection and game security, managing and securing cards and dice and things like that, managing mistakes, retraining, handling the discipline, the HR machinery? Okay. Are they those kinds of people? So, we'll call them casino operations people. Or are they technology people who are able to optimize the video when the new version of Chrome is released and optimize that video for the iPhone 6, 7, 8, 9, 10, 11, and 12, and then for the new Huawei P20, and then for every obscure phone you can possibly imagine? So, of course you need both. Okay. So, you have a good tech team. And then you have good ops people. And you need a big pile of cash because you got to build all this. And that's fine. There's a lot of money around in the world. And then you need good games. So, okay, great. So, you take a good stab. And you can just start with roulette and blackjack. Those are great games. Baccarat's a great game. So, you start with those. And so, you get it up and it's pretty sufficient. You might bump into some proprietary stuff, but then... We can start our own ketchup company and take on Heinz. And maybe we could pick off some business. And if we could make it taste every bit as good as Heinz, meh, why do I need to switch? I'm comfortable with Evolution. So, that's if you get it all right. And remember, we talked about gambling being very intimate and you have to build trust. And so, presumably everybody that's going to play with us today, most of them have already won some nice hands and they've built some trust. And there's no reason for them to go and switch to a different blackjack table. But then you have, on top of that, each person plays one or two other game types. So, they might like to play Monopoly Live or Crazy Time or Deal or No Deal or the new one we released today, Cash or Crash, or they might like to play a variant of baccarat like Lightning Baccarat or soon we'll release Lightning Blackjack or Lightning Roulette. All proprietary. Now, you can do your own versions of these and you can copy- cat, but you can copy Coca- Cola and Heinz. And with, what, however old Evolution is now 15, 17 years, whatever, you got to get the players to come with you. So, we bought a company. We bought this company NetEnt. They had five or 600 people in their live division. And they had been at it for many years. Highly capable company. We bought them for over a billion dollars, like, I think about$ 2 billion. Highly capable company. Second- biggest market cap company inaudible online. They had been bleeding money. 50, 70 million, they probably spent on their live division. They just never really had the revenue coming through. They had the expenses. And it's just a dog fight. So, that's kind of a fairly complete answer as to why it's hard. And a lot of people have started and thrown in the towel. We've had a number of our partners that said," Oh, we're going to do our own live casino," and universally, they've shut them down.

Jason Felger : One of the things you touched on, which I know you're passionate about, is the games themselves. And where the market is taking you, taking Evolution, kind of the where's the consumer taking Evolution as far as the actual games they're desiring? Tarun also mentioned just maybe the influences that are coming from other industries, live streaming being one that you see in retail and e- commerce extensively. How do you kind of distill all of that? As you think about where is the player going? What is the consumer looking for? And how does that drive your own roadmap and your own thinking of new games or the evolution of certain games? Would love just to kind of hear your product perspective on games and the customer desires and wants that they have.

Todd Haushalter: So, we touched on a little bit ago when we were talking about shorter attention spans. So, we try to pay attention to everything that's hot. Hot and/ or trend. So, not just flash in the pan, but also hot and maybe trending. And so, we are still riding a wonderful wave of video. Facebook effectively turned into a video platform. TikTok, look at that. I mean, I think when a 14- year- old does a search today, I'm not even sure they use Google. I think they just goes straight to YouTube a lot of times, particularly if it's something explanatory or if you want to figure out if your iPhone isn't behaving well, you go to YouTube to search it. And so, when Apple releases a new phone, that helps us because that means that the video will be a little crisper, it'll hold the signal a little bit further away from the cell phone tower. 5G helps us. It doesn't help online slot providers because video is hard and challenging in a lot of different ways. And we're doing extremely low- latency video. The second a player says," Hit," in blackjack, we need to get that signal to the dealer on a module. They need to see that, deal the card. And it needs to all feel quite real time to you. And if you can't see the cards because it's too fuzzy, we got a big problem. So, anyway. So, we're looking for big trends. So, video, we're clearly riding that wave. So, as a result of that, while we're living in it, we're pulling more things into video. So, I think the conversions of slots in video is a good opportunity. Now, that we've got a slots company, it's very natural to sort of marry some of those concepts and push them together into one. Also, the way people navigate is something we pay a lot of attention to. So, the way they navigate particularly video sites like Netflix or YouTube, people increasingly expect what they see on YouTube out of other video sites. So, they want to be able to minimize their video window or be able to sort of multitask. And they're expecting that of us. Now, some players expect to multitask more than others. When you're playing a hand of blackjack, you're pretty focused, but baccarat players, they want to be able to play on multiple baccarat tables at the same time. And so, we've given them the ability to do that. And so, that's something. Then we're looking a lot at apps, like, game apps. What are people out there doing? But it's very easy to get tricked, I think. You can look at Red Dead Redemption 2 or Halo or something like this, Fortnite and say," Oh, how do we turn it into a gambling game?" It's a fool's errand, at least today it is. And so, you might as well be asking," How do we turn the great game of chess into a gambling game?" or," How do we turn Mahjong into a gambling game?" Well, some things are just not meant to be, but people are trying to do these things. It's natural. It's very natural. I always like to use the example, people will try to do combination things: let's fuse together the best of video games and the best of gambling into one world. Okay, great. And it's fine. There's probably a way to do it. And I've spent a lot of time thinking about that, but I'm not quite positive on it. But people like video games and people like gambling. And there's even people that like both. And so, you draw that venn diagram and you highlight that sweet spot in the middle, but people like ice cream and people like pizza, but they don't want their ice cream on top of their pizza; they want them separately. And I think that's a big mistake that a lot of... it's easy to make. It's a very obvious, easy mistake to make when you look broadly into society and say," How can we bring that into gambling?" There's a subtlety to it that's quite fine. Gambling games are hard. They're very hard. It's a little bit like writing music songs. There's a lot of them out there, except when you listen to a song you don't like, you don't lose money. Even if you like a game, you probably are going to lose money on it. So, it's almost amazing that any games work. And how many games have really withstood the test of time? 10? Blackjack, craps, roulette, baccarat. We could kind of rattle off a list. There's a few slots, Wheel of Fortune. There's some out there. It's very, very tough to create something where you bet a dollar and you get back 95 cents and people find that amusing over and over and over. So, it's a tricky task. It's a fine art.

Jason Felger : It honestly sounds almost impossible when you phrase it that way, but I think that makes the rise of Evolution that much more impressive. In terms of the games, starting to bring on the traditional land- based games like the typical plain vanilla blackjack, baccarat is one starting point, but you've evolved into creating your own content, merging some of it with game show elements. Maybe just talk about how you think about the creation of your own proprietary content.

Todd Haushalter: I love gaming. And I also know that roulette isn't going to be enough to entertain people tomorrow and beyond. So, I asked the question of the classic games. Let's say we're evolving a classic game. What do the players of tomorrow want out of their blackjack experience? And what do they want out of their roulette experience? And so, with roulette, a journey that we went on, I said," Okay, well, for sure they want bigger pays." And so, there's only 37 events that can happen on the wheel. So, it's very hard to pay 50: 1 on an event when the most rare event is 1 in 37. So, then you say," Okay, well, what if we put two balls in the wheel?" Well, you can do it. We even have a game called Double Ball Roulette. But it's a little bit goofy for most of the population. They just don't want two balls in the wheel. They like it with one ball. And then if they both land in the same pocket, the odds of that happening are 37 times 37. So, okay, that's not good enough. And you say," Well, what if we strung together multiple spins or multiple wheels?" Okay. All quite goofy. People don't want that. What do they want? They want to play roulette normally and have a chance to win 100, 200, 500 times their bet. So, I concocted this method where... what we did was we said," We'll reduce the pays from 35: 1 down to 29: 1. And then in exchange for that, on occasion or every round, some numbers, one to five numbers will pay big, fat payouts somewhere between 50 and 500 times your bet." And we called it Lightning Roulette. And the game has smashed. It's the number- one game in the world right now. I always say if Lightning Roulette were its own publicly- traded company, it would be one of the five- biggest companies out there. It's insanely big. That's sort of the best example of a prize. Meaning if you can catch lightning in a bottle if you can write a good script or a good song or a good game, you can have quite a big prize. So, in that case, we just started with, how do you preserve roulette as much as you possibly can, introduce one new thing that players will love, that they're sure to love, like bigger pays? Is that trade off acceptable. Okay. Well, how often do I even feel that trade- off? Well, by taking the pays from 35 to 29, not that often. You only feel it when you win. So, you feel it. It's like," Okay, I still won 29 units in exchange for this big opportunity every time." So, that's sort of just kind of walking you through the process in one game. Other times, I'll work backwards from how do we make the most entertaining possible game we can make that's so entertaining that you don't even have to gamble. You can just watch it. Other times I say," How do we get people screaming at their computers and make something super emotional where you're super charged up and energized?"

Jason Felger : The social aspect is super interesting when you think about online gaming, whether it is that kind of emotional response that you're talking about. But when I think about, what do I enjoy the most about going into a casino in playing blackjack or particularly something like craps, it's the social aspect of it. And so, how does that come into your thinking? And how could that also start to come into games more so?

Todd Haushalter: Something cool is happening. You see it in Europe. And probably you'll start to see it or hear about it in America. And that is some friends will get together. So, I'll invite you guys over and like I would invite you over for anything, right? Come over for a barbecue and some drinks, whatever. And I'll say," You guys want to rumble on the tables?" And," What are you talking about?" I'll log in. I'm going to pull out my phone. I'm going to AirPlay from my phone to my TV. And we'll all put in$ 50. So, you got four of us, so$ 200 in the pot. I'll pick a game and I'll spin until I'm either down$ 20 or I'm up whatever. And then I'll hand the phone to you and you'll spin. And we're sitting there in the comfort of our own home and you're playing. And so, you can have a very social experience. Incredibly social. And that's sort of a way that it's sort of being manufactured. And it's a completely new phenomenon. And it was happening before COVID for sure, but post- COVID or in COVID it sort of accelerated it, like COVID accelerated all things digital. But then I think this is another wonderful benefit about live. And I want to make it even more social. It's hard, though, because you're sitting there and you're betting$ 50 on a hand and you're really focused. This is an important 45 seconds for you. And if I'm like," Hey, buddy. What's going on?" You're like," Hold on a second. Wait until the ball lands. I'll talk to you in a second." It's kind of a big deal. Or if it's a decision- based game like blackjack, you're really focused. And so, you walk through a casino and it feels incredibly social because it's the most alive place that you might go, but on a very individualistic level, the slot players are focused on their slots. We design a slot floor quite specifically so that people can hide from each other. So, you position your slots in rows of five and seven, not four and six, because everybody wants to have a seat open next to them. So, if I have four in a bank, I can only fit two people there with seats open next to them. But if I have five, I can fit three. And if I have six seats, I can still only fit three. So, it's wasteful to put them in rows of six. And the end caps of the games on the end always outperform the games in the middle. And so, these days in the casinos, they've taken out a lot of slots and they position these round banks. And so, there's never anybody next to you if it's round. So, there's a lot of individualism happening in the gambling experience, even if it feels very social. But we're looking for ways to push people into communities. We have some fun things that we do, like during bonus rounds we'll make everybody pick, do you want to be on the left or the right side? And so, then they kind of break into teams and they start typing in the chat, you know," Let's go blue side." That's kind of fun. And so, we try to do that kind of stuff to sort of bind players together and pit them against the casino. And that creates a bit of a communal experience, which I really think benefits.

Tarun Gupta: Hey, Todd, to just transition to a different area, there's been a lot of consolidation in this market, right? I mean, you mentioned Evolution's acquisition of NetEnd. There's also the recent DraftKings's announcement of acquiring Gold Nugget's online casino business. How do you think about that consolidation?

Todd Haushalter: A lot of it's American- led. A lot of the American companies have the market caps. And so, they can use that market cap to, like you said, either shore up their tech stack or widen their reach to players. And it's definitely early days. It's definitely early days. We will absolutely look back on 2021 and view this as the... I mean, almost all of the gambling in the world is happening in land- based, which is largely driven by regulation. If it was just a pure, open, free market, we'd probably be at 25% online right now. And maybe 25%, 30% by now. Instead, I think it's probably closer to like five or three. It's not very high. So, when I see operators buying operators, that makes sense to me. I get that. There's some wonderful brands out there. The different brands stand for different things. There's economies of scale there. They get access to new player bases, possibly new markets, et cetera. When I see them buying the tech stack, call it, so it could be platforms or it could be buying their own sports book or whatever, I don't understand it. Now, that doesn't mean it's bad. I just mean literally just me. Just I don't understand it. The biggest online casinos in the world are in Europe and they don't do it. They kind of went through that a long time ago. And they realized it's just cheaper. You need 100 people maybe to support a platform. Maybe you're paying some percentage points on it, whatever it is, 5% or 10% of your GGR to a platform or a sports book or whatever. And that is in place of the fixed costs of having a massive team, a massive team to support the tech. And that's a fixed cost. So, I guess if your revenues are massive, then you can get it down below what your revenue share on it would be. There's something very powerful about... well, let's switch over to slot making because that's where I live. So, when we make a slot or a game, I'm very relaxed about spending a million dollars to make a game that's... in live, that's small ball these days. I'm very relaxed about calling up and doing a deal with a Hollywood movie studio to get the rights with millions of dollars and minimum guarantees because we get to share that cost across hundreds and hundreds and hundreds of partners. And so, they get a game that if they ever tried to just build it on their own, the minimum guarantees and the development costs and then the risk if the game doesn't work is so severe that it would have to be one of the greatest games of all time for them to justify that kind of a build. And they can get access to these games for just a few percentage points. Then if it doesn't work, they just quickly remove it. So, just the approach to development is very different if you're making your own games. They have to be cheap. They have to be small budget. What does that mean? That means they can be beautiful, but they just can't be rich. They can't be layered. They can't have progression. They can't have a lot of the modern features. You're probably not going to hire the absolute, stone- cold, best people in the industry. They're expensive too. And it's challenging. So, there might be a really great strategy there, particularly if you're big. The biggest casinos in Europe aren't really doing that, for the most part, by and large. You can find examples, but you'll probably see more consolidation. You probably will. And the land- based guys, they have to get into the game. Most of them are in some fashion or another. I don't think Sands will stay on the sidelines forever. They've got a huge market cap. And they can use some of that. And they've got a lot of cash. They just sold Palazzo and Venetian. And so, they can do a lot with that money. So, I think you'll continue to see more.

Jason Felger : Todd, you have a global perspective, but would love to hear your US perspective. US is going through kind of a little bit of an early adoption, although, as you said, accelerated with COVID, around online sports betting, online, mobile, the last couple of years, but iGaming, online gaming, is still fairly small. I think three states of any consequence are allowing it. So, how do you think about just where the US is headed in the sense of IGaming?

Todd Haushalter: I don't know if my crystal ball is better than anybody else's on this one, but I'll give you a different way to look at it maybe. If you walk into a casino that has a complete gaming offering, everything from Bingo to racing sports, to slots, tables, poker, and you'd say," How much real estate does the sports book take up in the casino at the Bellagio or Wynn or MGM Grand?" Not much. Not much. It's a nice room, but it's tucked off to the side. And at nighttime after maybe 9: 00 PM, not much happens. And so, most of the casino's filled with slot machines and table games. Bingo is quite small. The poker room is an amenity. And online is about the same. So, now you've got some... some are just shy of 20 states, 16, whatever is, that have approved sports betting. So, they've approved a tiny, little corner in the casino. And you've got a lot of highly motivated companies to add a bunch of slots to their" casino floors". The casino floor's on the phone, but they're highly motivated. And with that, comes tax revenues and everything else. And so, I would expect that the hardest step is getting gaming into the state digitally in the first place. Then once you have sports in, I don't think it's a very big step to transition from there to casino. When you look at the tax situation, and a lot of states have spent a money during COVID and they've maybe not made a lot of money during COVID, it's a pretty palatable way to raise revenues for the state. You've got a lot of motivated partners of ours that are going to try to push it, push casino. So, you'll see it come to the other states largely. Then there's this thing that happens in America where the more something happens, the more something happens, like the legalization of marijuana. Maybe in Colorado or somewhere, they approved it for medical use however long ago. And then another state does medical use. And then inaudible say like," Well, what do you think is going to happen in the future?" I think they're going to make it for recreational use. Then I think more states are going to adopt it and more states are going to adopt it. And then the big boys are going to come in and it's going to be publicly- traded companies and all that sort of stuff. And so, I think it'll take a similar trajectory. If California or New York or Florida or one of these major population centers green lights online gaming, then obviously that'll be a big shot in the arm. Then they got to do it with a reasonable tax scheme. So, it seems almost inevitable. You don't see the digital world being contained much anywhere else. I don't know why it would be here. And if you fast forward seven years, it's in 42 states.

Tarun Gupta: And, Todd, I know we went into a lot of the product development that you could guys are doing and why your games are succeeding in the market. From an operator standpoint, how do they succeed? Is it purely having access to the games that someone like you is creating? Or is it something beyond that that enables them to actually win in sort of the online casino market?

Todd Haushalter: So, you can think of it a lot like Amazon, how Amazon wins. So, a big part of their business is getting players signed up and depositing at a fair cost, but then once you've got them, having a casino offering that's curated for them. So, once you start to get a bit of data on what the player likes, putting games in front of them that they're likely to enjoy. Then a lot of our partners, what they'll do is they say," We love all the stuff that you guys are doing at Evolution, but we want our own casino. We want our own live. So, we want them wearing our uniforms. We want our colors on the screen. We want our studio design. We want it to look and feel like us. And then we can talk about our promotion this Saturday. We can do our own giveaways. We can have a wheel in the studio that we spin and give free money back to players. We have total control. We can say our company name over and over on the stream because it's only our players." And so, those are dedicated tables. And it's a wonderful way to reinforce brand because if you take a game, some slot game like Starburst for example, well Starbust is the same on every single partner we have. It's importantly the same. We want that consistency. But live, having your own casino with your own style, your own flavor, your own everything, you might have dealers that are part of your advertising campaign and so they're own billboards. And it's kind of a novelty to come in and see them when you play. It's sort of like playing with a little celebrity and that's kind of neat. So, that's a huge opportunity. And then running the casino smart. So, what are your minimum bets? What are your maximum bets? We see a lot of casinos that are too timid. And as they grow, they should become increasingly comfortable taking bigger bets. But players are pinned up against their maximum bet. Just for simplicity, say you have a 50 Euro max bet in roulette and 8% of your playing population is betting 50 euros. Well, some percentage of them we can reasonably conclude would be happy to go higher. And rich people like to play online casino too. And they just want to be more. So, optimizing for that sort of stuff is really important. And then promotional activity, using tools. So, we have tools like giving players free games, either as a reward for their loyalty or maybe as a way to get them back if they haven't played in a while. And these sorts of things. You have all sorts of promotional tools. You have probably 100 different promotional tools that you can utilize. And so, some casinos are really good at taking advantage of them; some of them aren't. But there's a lot of points of differentiation.

Jason Felger : Todd, we, we always like to try to start to close things up with a little context for the startup founder, the entrepreneurs out there. And I'm just reflecting on some of what you've said. It's not clear to me if there's space for early- stage companies, startups to kind of attack the iGaming industry because of the infrastructure, just the amount of capital, the complexities. It, in some respects, almost sounds like an industry for the larger incumbents and some of just the larger out there. But would love your perspective. Do you see innovation, do you see opportunity for early- stage companies to come into gaming? And, if so, where? Or do you think it really is one that's going to be dominated by the larger providers for the near term?

Todd Haushalter: I think there's opportunity. The live casino space is a little tricky for the reasons that I said, but for sure there is. It's a bit high- risk. Like I said, if we wanted to start our own music studio, if you can catch a hit, it really can do a lot for you. But let's say we invent our own game. We can whip it together. There are companies out there that are already integrated into lots and lots of online sites. And so, we can build a game that we believe is solid and good and has a unique angle. And we can distribute it through them. They're going to take a percentage of our revenue, but we can stay small. We can just stay a few people: a couple of designers, couple programmers. And then we let them do our sales. If you can make a good game, then it will get out there. It will get an honest look. Another thing you can do is you can start in land- based. So, if you have a cool land- based idea, you can get it there, have it establish its roots, then call me and say," Hey, Todd. I got something that's lighting the world on fire on land- based. You want to license the concept from me?" And if we take it, we'll happily do it. And we might write you checks for$ 50,000 a month for the rest of your life. It's a nice business. And you can do that as a lone wolf, as a single individual. You just go to some state, get the approval to distribute a game, or to Native American casinos, get the approval. And then if the game has some stickiness to it, you off and running. If you have a bit deeper pockets, you can jump into being a operator. You take the games to the players. Now, you need to have some unique way to acquire players. You're not going to do it by just being better at Google. You're not. The other players are too sophisticated. But if you have some niche angle, maybe there's a very particular subset of players that you have access to through some other element in your company or something like that or some country where you're particularly strong or something, you can play that angle. So, there's still stuff out there. The last, best game hasn't been made, I assure you. I wish I knew what we were going to do in 2023, so I'd just do it now.

Jason Felger : Well, Todd, thank you again for the time today. Just sharing with us the experience at Evolution, your perspective on the iGaming space. It's just been excellent to talk to you. So, thank you again. And Tarun, thanks for joining as well.

Announcer: Thank you so much for listening to this month's episode of the Jump Off Point, an original podcast by Jump Capital. If you have an idea for the show or know of someone who would make a great guest, please contact podcast @ jumpcap. com.