The Online Games Where the House Always Wins

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1:38Bloomberg Audio Studios. Podcasts. Radio. News. You definitely don't have to spend money to play the game. However, like, your experience is a lot better if you do. Brenna Ingram lives in Grand Rapids, Michigan. A few years ago, a couple of her friends told her about their new hobby. They were talking about this game, and I was like, what are you playing? And they're like, it's this game Monopoly Go, you should download it. And I was like, okay. Brenna got into it right away. Pretty soon, Monopoly Go became a central part of her social life. We started a group chat called the Monopoly Go Mommies.

2:19We talk about the game, we partner up with each other for different events, but then we also like talk about other things like life things and TV shows and just like it's become more of like a friend group. The rules of Monopoly Go are simple. You have dice that you are rolling around the Monopoly board. And as you go around the Monopoly board, you're either collecting tokens or collecting different things to then essentially get rewards. The game is free to play. But there are ways to get more dice, keep the game going longer, and advance through levels faster, if you're willing to pay. I feel like the first time I spent money in the game was probably like one of those like$4.99 deals or something to get more dice.

3:09Monopoly Go is part of a broad universe of online games where you can't actually make any money, but you can spend money. Some of them are known as social casinos. And Vernon Silver, a senior writer on Bloomberg's investigative team, has found that some people are spending a lot. A range of money is astounding. You have evidence in these cases of people spending over a million dollars on rolls or coins in these games where they don't have a chance ever of winning back a penny. Casino-style games have become a booming business for the companies that make them and for the platforms that carry them.

3:50The games brought in more than$11 billion last year, according to the market intelligence firm Sensor Tower Inc. But recently, the industry has been under growing scrutiny. These are lawsuits in the U.S. that involve using state gambling law to allege that these games were illegal gambling, and as a result, the players deserve to get their money back. Monopoly Go itself isn't the subject of any of these lawsuits, which target games that more overtly look like casinos, with graphics resembling slot machines. Still, Brenna's suggestion to somebody considering downloading Monopoly Go for the first time?

4:33Don't do it. I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, inside the world of social casinos, and how the world's biggest tech platforms have profited from their rise.

4:55Have you ever played Monopoly Go? Or Double Down Casino? Or Candy Crush? That's my game of choice. Well, these are all examples of app-based games that some in the industry categorize as social casinos or games with gambling-like elements. Bloomberg's Vernon Silver says the industry really got its start around 2010, when Apple's App Store was in its infancy, and everyone seemed to be playing Facebook games like Farmville. But the industry has only gained steam since the pandemic. During the lockdowns, you know, 2020 for COVID, there was a whole boom in people just being on their devices, people playing games, and that's when downloads and app spending took off.

5:42Vernon says these social casino games have shifted how some gaming companies make their money. The gaming economy used to be, you know, you spend 50 or 60 bucks to buy the game, you know, a cartridge or a login for a download. And it was yours and you played and you could play as much as you wanted. And it just became much more lucrative to have most people, and convenient for most people, for most people just playing for free. And then a small number of people day after day, week after week, pouring in thousands and in some cases, hundreds of thousands. into the gameplay. Today, the world of casino-style games is wide.

6:23It includes apps that look and operate very much like little mobile casinos, with virtual slot machines and roulette wheels. And it also includes games that look nothing like casinos, but still have some of those same gambling-style mechanics built in. Which scholars have defined as containing random rewards. So So a loot box, a chest where you open it up and you can either get one jewel or 10 jewels or a free sword or whatever it is. That when the internal game loop is embedded with a cycle of there's some resource you want and you go out and you try to get it. And at random, you can get more or less of it.

7:05And then eventually you can run out of it. And then here you are either waiting an hour or waiting a day or spending$1.99 to get more of that resource and you start the process all over again. So what might drive someone to spend not just a few dollars, but hundreds of dollars or more on virtual Monopoly Go dice or more jewels or more spins? One explanation lies in the game's design. Let's say you've been spending a buck or two for 20 minutes play every day for the last five days. And all of a sudden you realize, gosh, I've wasted all that money on those when I could have, you know, for 10 or 50 or 100 dollars gotten more than enough than I'd ever really need to spend for the rest of the month.

7:53And all of a sudden click, you've made your in-app purchase and you're spending it. Vernon says there are certain mechanics built into many of these games, like limited time offers and bundle deals, that tempt players to spend larger and larger amounts and keep playing longer. The players and the researchers say that there's really no difference between the flow state and the state of mind when you're on a casino floor or you're playing a game with random rewards. For some people, we found that's perfectly fine and it's under control. And for a small number of people who are the source of the vast majority of the income for online games of all types, it's a slightly different story.

8:40Brenna Ingram says the Monopoly Go Mommies consider themselves casual, social gamers. But at a certain point, they wanted to figure out how much they'd been spending on the app. So everyone went to customer service, asked. I think mine was like 80 bucks in the past three years. But there were people in the group that had spent like$1 ,500,$2 ,000,$3 ,000. That's like a vacation or, you know, like rent payment and that kind of thing. So the amount is kind of insane. Hasbro, which makes the Monopoly board game, said it works with Scopely, the game maker behind Monopoly Go, to deliver a fun, engaging and responsible player experience.

9:25Scopely said that Monopoly Go players, on average, have spent less than a dollar per month, with most making zero purchases. But some of the biggest players of these kinds of games can spend much more. Within the industry, employees at social casino app companies have borrowed the language of traditional gambling businesses to categorize their customers, according to internal emails. Spending a few thousand dollars might make you a minnow. Tens of thousands? That makes you a dolphin. And the people who spend hundreds of thousands to millions? They're known as whales. We're talking about an economy where something in the range of 6 % of the players generate almost all the income.

10:11This lucrative social casino business model has started to be tested in court. Lawyers have started bringing a series of class action lawsuits against the makers of some of these games. The plaintiff's core argument is that these companies are essentially running gambling operations without a license. What these lawsuits are trying to do is to get some of that money back. Game makers have argued in court filings that their games weren't illegal gambling because players don't need to pay to play and are never winners or losers of something of value. They also highlight the positive feedback they've gotten from players.

10:49One of the cases Vernon examined was brought in Washington state against the maker of a game called High Five Casino. High Five Casino is what we would call a traditional OG social casino. This is like you go in, there are lots of different versions of casino games. It is, you know, it's one app and within that app, there are dozens and dozens of versions of kind of the same thing. You know, slot machines, what have you, set up with different branding and graphics. Vernon says one of the striking pieces of evidence in the lawsuit emerged from a transcript between a customer and a customer service rep.

11:28This particular customer said that they had lost their own ability to control their playing and in a real self-deprecating way said, look, I'm addicted. You got to take it off. I can't help myself. And this player was expressing fairly clearly what they wanted the company to do, which was to get the thing off their computer, whatever that might mean to this person's knowledge of how these things worked. The player didn't want it accessible anymore. And how did the company respond? They shut off her ability to buy new coins. And then they thanked her and gave her a billion free coins to continue playing with.

12:14This was significant because had this been a regulated casino, Las Vegas or online, there in almost every jurisdiction in the U.S. would have been a procedure, a mandated procedure for helping that person self-exclude from playing that game. And, you know, what the gambling addiction advocates have pointed out, as well as the lawyers for the plaintiffs in this case, is that when you aren't a real money casino and you're not regulated and you're marketing yourself as a game, you don't have the same regulations, which means you don't have the same guardrails. And when people do get in over their heads, there aren't as many protections for them.

12:58In 2024, a judge in the High Five Casino case ultimately ruled the company had violated gambling laws. And last year, a jury ordered the company to pay almost$25 million in damages to players. High Five declined to comment for the story. In April, it agreed with the plaintiffs on a settlement, the terms of which haven't been disclosed. Many similar class action suits against other game developers have also ended in settlements. In Washington state alone, social casinos companies have paid over half a billion dollars in settlements. The company behind High Five Casino no longer offers the game in Washington state.

13:41But in most others, it's still free to play via Apple, Facebook and Google. After the break, how the biggest tech platforms in the world are also taking a cut of social casinos. and why lawsuits are now coming for them, too.

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15:38Over the past two decades, so-called social casino games have become a massive business. The industry's revenue has more than doubled in the past six years. These games have attracted millions and millions of players, and the companies behind them have been hit with lawsuits that allege some social casinos are more like gambling casinos, where, as the saying goes, the house always wins. But there are some other figures that have been essential to the success of this growing industry. The tech platforms that host the games. To get one of these games, you generally have to download it from someplace.

16:21And for the most part, as we went from the desktop and Facebook era into the mobile era, Google's Play Store and Apple's App Store became the main place to get these games. Bloomberg's Vernon Silver says those tech companies decide which social casino apps make it onto their platforms. And when those apps make money from users, the platforms profit too. You have to, you know, apps have to apply to be on the app store. And they also process the payments that are made through the apps. And for all but the smallest earning apps, Google and Apple collect a commission, which is 30 % of the in-app spending.

17:07with some exceptions for certain programs for small businesses. But when it comes to the absolute biggest earners, the vast majority of the dollars that flow through the in-app purchases are generating a 30 % commission for Apple and Google. What do we know about how profitable these social casino games have been for these platforms? The question of how much the platforms are making off of this is sort of a key one to understand who's really benefiting financially the most from this boom in mobile gaming and all the in-app purchases that go through it. Apple, we know, is the biggest player because they're the one with the biggest total in-app purchases eclipsing Google, which is which is second.

17:59These companies don't report in their financials how much they're making on games, let alone even on the App Store. Apple does not break out their App Store revenue as a specific line item. But Wall Street analysts have their estimates of how much the App Store brings in. And some of the market intelligence agencies that track app spending have their estimates. And what we found out at Bloomberg is it all kind of lines up. According to a Bloomberg analysis of Apple's financial filings, analyst estimates, and data from Sensor Tower, last year, Apple ended up generating a higher gross profit from game spending across all games on the App Store, including social casinos, than it did from selling Macs.

18:49Apple is adamant that you can't calculate these numbers because they don't calculate this sort of profitability themselves inside the company. And any attempt to estimate this based on analyst estimates is an approximation that can't possibly be accurate. And when it comes to the more general question to them of what do they make of social casinos, They point out that social casinos as a category is a very small slice of the overall gaming business that's run on the App Store, let alone apps of all kinds. And they also are very clear to say that they don't have any role in designing the direct mechanics inside the games that are on their platform.

19:41What about Meta and Google? How do they think about social casinos, again, both in terms of their business and in terms of the impact that these games can have? So Meta and Google, just like Apple, for social casinos in particular, are super clear about the fact that these are not real money casinos that are being run on their platforms, that this is entertainment and that should only be seen as such. and that when it comes to actual real money casinos, there is a route, for example, with the App Store and also through the Play Store with Google where real money gambling companies can register their apps but they also have to submit their gaming commission state by state.

20:24They have to comply with all the rules like your DraftKings. One thing that's clear among all the platforms is they want people to understand that when it comes to the real money gambling that you've been hearing more and more about, they're not taking a cut from that. And that when it comes to simulated gambling with the social casinos, that it's their position that they have to put age ratings on them that are for adults only and that these should not be construed in any way as anything other than entertainment. But Apple, Google, and Meta are the target of a new series of class action lawsuits brought by the same law firm that sued the maker of High Five Casino.

21:06The cases against the platforms were kind of the second step. So when they sued the platforms, they made a very similar argument that, you know, this is illegal gambling and that the platforms that are hosting, approving, processing the payments for these games should be held responsible in the same way that the games themselves are starting to be held responsible. Those cases are winding their way through the courts right now. A judge in California rejected one of the central claims of these suits, that Apple, Google, and Meta were co-conspirators in an illegal gambling enterprise. But the judge ruled the case could proceed on another one of its key points, that when it comes to social casino games, the platforms acted as payment processors, not merely publishers.

21:57A trial is yet to be scheduled. That is, for the lawyers who brought the cases, the ultimate possibility in getting accountability for the entities that are hosting and processing all the payments for these games. Meta and Google said social casinos must comply with those platforms' standards and applicable laws, including measures protecting minors, and cannot offer anything of monetary value. In a statement, a Google spokesman said, quote, we maintain clear distinctions between licensed real money gambling and social casino games. Apple said in a statement that social casino games are a small fraction of the overall game market and that Bloomberg's reporting conflates the two.

22:42The company also highlighted that it includes user protections on apps that feature simulated gambling, like enforcing age limits and, quote, requiring developers to transparently disclose the odds for randomized virtual items before purchase. It's so interesting, Vernon, this increased scrutiny on social casino games and the companies and platforms that make and carry them is coming at a time when it seems like there are so many elements of our society that are essentially gambling. There's the rise of DraftKings, there's Polymarket, there's CalShay. You can really bet on anything right now. And I'm wondering where you see social casino games fitting into that picture, what it says about our society right now and where you see this industry going from here?

23:31The idea that within the context of all the real gambling that you're hearing about, that there's a corner of that universe where people are not even able to get their money back, there's zero way of winning, probably tells you something about what's driving all the other, the DraftKings and the Polymarkets. It's that maybe the money doesn't even matter. That maybe this is just about the designers and developers of these games understanding more about what keeps people glued to their screens.

24:15This is The Big Take from Bloomberg News. I'm Sarah Holder. The show is hosted by me, David Gurra, and Juan Ha. The show is made by Aaron Edwards, David Fox, Jeff Grocott, Eleanor Harrison Dengate, Patty Hirsch, Rachel Lewis-Kriskie, Katie McMurrin, Naomi Ng, Julia Press, Tracy Samuelson, Naomi Shaven, Alex Sugiura, Julia Weaver, Yang Yang, and Taka Yasuzawa. There's much more on Bloomberg.com. Get unlimited access to all of our coverage at a special rate for listeners at Bloomberg.com slash podcast offer. Thanks for listening. We'll be back on Monday.

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