The purchase of social gaming company Double Down Interactive by leading slot manufacturer International Game Technology—announced two weeks ago at a price of $500 million to be paid over three years—is raising major concerns among some analysts. 

Union Gaming Group principal Bill Lerner warned last week that the purchase of Double Down—which developed and feeds content to the DoubleDown Casino on Facebook, the world’s largest social network—is alienating the operators who buy their games for brick-and-mortar casinos.

Lerner wrote in a research note that at least three major casino operators are “irritated” that IGT will be competing with the content they buy from the manufacturer, and that they will enter the internet gaming market themselves to compete with IGT should online gaming become legal.

“We believe that three major casino operators have taken exception to IGT's acquisition of Double Down,” Lerner wrote in the note to investors. “They suggest that they will react negatively especially if IGT pushes around content that they cannot have access to. They also are concerned about how IGT will treat poker once they launch it and when it is legalized. They highlight that IGT is going directly to the end user, which contrasts with IGT’s view that they are B2B and not B2C. We believe this could manifest in retaliatory purchasing behavior.”

One of those potentially retaliating could be MGM Resorts International, which recently bought Playtika, the developer of Facebook’s Slotomania game, the second-largest social-gaming application on the giant network.

Lerner advised investors to sell IGT shares and to replace them with shares of Bally Technologies, Shuffle Master and other supplier stocks.

IGT officials insisted the Double Down acquisition is meant to put the manufacturer’s products in front of social media users so they play them in brick-and-mortar casinos and future i-gaming sites—not to compete with operators. “IGT has no plans to operate an online casino in Nevada and compete with our customers,” said Staci Alonso, IGT’s vice president of marketing, in an interview with the Las Vegas Review-Journal.

Janney Montgomery Scott gaming analyst Brian McGill took this same view of the purchase, telling the newspaper, “The one major positive would be if online poker is legalized, it now has a partner in Facebook and it could benefit from this relationship. In the meantime, it is expected that virtual gambling will continue to grow and IGT will benefit from now putting its titles on the site that can be available for virtual gaming.”

By Staff