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Issue Date: Vol. 49, No.6, June 2009, Posted On: 6/16/2009


SKILL4CASH: Is SWP Coin-Op's Next Big Thing?


Nick Montano
Nick@vendingtimes.net
Skill4Cash, Yohan Perez, skill with prize, SWP terminals, touchscreen amusement devices, coin-op amusements, entertainment kiosks, vending, out-of-home entertainment devices

Yohan Perez wants to offer the coin-op industry a best in class entertainment product that is technically and legally sound, and practical and fun for consumers. The chief executive of Skill4Cash, which has begun deploying novel amusement devices of the same name, also wants players to win and operators to earn.

Skill4Cash is the first of its kind skill with prize machine, or SWP in coin-op industry parlance, for the U.S. market.

The SWP terminals are running in California and are about to roll out in New York and Texas. In California, they are generating averages up to $160 a week per unit without the benefit of promotions or tournaments at this time. The manufacturer, based in Hallandale, FL, is working toward a nationwide expansion, and plans to partner with operators on a revenue-sharing basis.

WHAT'S NEXT: Yohan Perez shows off Skill4Cash SWP terminals, which can dispense golden dollar cash prizes, at the company's Hallandale, FL, headquarters. Shown here are the 2008 (r.) and 2009 models. Constructed of 4mm. gauge steel, the outer shell is built to last and prevent break-ins.



Skill4Cash is an upright touchscreen amusement device that dispenses $1 dollar coins as cash prizes. Content consists of skill-based games that award winnings based on players' scores or achievement levels. Unique to the game is its "level challenge system," which allows players to practice and perfect their skills over time, thus encouraging them to seek deeper challenges.

The machines run on a proprietary network, which is supported by intelligent backend systems and regular content updates. The dedicated network infrastructure can also serve as a marketing vehicle during and after gameplay, turning the machines' screens into digital billboards. They are engineered to comply with the laws governing cash payouts. While a growing number of Americans continues to play skill-based games for prizes online, Skill4Cash says it's the only company offering them the same experience in a physical format from a self-service terminal.

Deal or No Deal, 1 VS. 100, Monkey Business and Nuts!, along with Prize Pyramids, Solitaire and Wordcube are some of the games running on the system. Skill4Cash offers three game modes in which to play.

Play4Cash pits players against a list of predetermined goals, or points, associated with cash prizes. Payouts increase alongside the score up to a maximum prize of $100 a game. The cost to play one game is $1 and prizes are paid out directly from the kiosk.

Play4Tournament offers monthly and instant tournament modes. Players enter a monthly tournament by registering their scores on leaderboards. Normally, the top 20 places earn cash, prizes, or both. There is no limit to the number of attempts a player can make and each time a previous score is surpassed the leaderboard is updated. The play price is $2 and prizes are distributed to winners after a simple claim form is received.

Players enter instant tournaments similarly, but entries are limited. Once all entries are reached, winners are determined instantly; text messages notify participants of their ranking and provide them with a winner claim code, if applicable. The code can be entered into any terminal, which pays out the prize on the spot. Cost to play is usually $2. Higher vend prices, up to $10, and equally larger prize pools will be introduced shortly, which are expected to increase cashbox averages and player winnings.

Patrons can use the third mode, Play4Fun, to play entirely for fun without prizes to develop their skills. The cost is 50¢ for a game.

Skill with prize games are operated widely in the United Kingdom, where they are unregulated. According to Perez, the SWP differs greatly from its "amusement with prize" relative, which is strictly a gambling machine similar to slots. The main difference is that the outcome of SWP is fully controllable by a player's ability. As a result, there are no chance elements that control a game's outcome. The second dissimilarity is that all SWP challenges, regardless of the level of difficulty, are achievable. "With AWP, no matter how proficient a player may be, the outcome of the game will be based entirely on chance," Perez said. He noted that gamblers have very little interest in playing SWPs.

SKILL WITH PRIZE AND U.S. LAW

Are SWPs legal in the U.S.? Perez says Skill4Cash has left no stone unturned in working with law enforcement and regulatory agencies. "The legal concern is typically whether or not a machine can pay cash as an award," he explained. "Is entering in a pool tournament with the opportunity to win cash a skill game? What about a dart tournament, Scrabble or Golden Tee? Yes, it's legal. In the current, and future, states in which our machines operate, cash awards are clearly okay when the game is based on skill and not chance, except in a few places where local ordinances says it's not. Our products are games of skill, which is a fact and no longer a legal question."

According to Perez, the design of Skill4Cash games were aided by compliance experts, who include former law officials assigned to gaming sectors and others who worked in gaming control. Written opinions by legal experts and software tests by independent laboratories are part of the company's system of checks.

"An attorney general won't give you an opinion about facts," Perez noted, "but our legal opinions are irrefutable. Since April 2006, we have poured immense resources into our dialogue with law enforcement and government agencies – and in some cases we had to educate them about the law."

In California, just about every law enforcement agency is aware of Skill4Cash, Perez reported. Long Beach contested the games, but failed to prove they were not skill-based. "We've put as much into meeting with top officials in Sacramento and various counties as some companies do to get a law passed," he said. "We have received favorable private written responses from the state's liquor authority and a few top county officials. One county has even invited us to make a presentation to vice-enforcement officers. Cutting corners on legal studies and R&D would have resulted in failure."

The firm's licensed operators are expected by fall to have more than 300 games online in California, where a beta test began in May 2007. Games officially rolled out last October.

Since Skill4Cash owns the equipment, the chief executive explained, it is responsible for making sure the product conforms to state and local regulations and therefore protects licensed operators against legal issues, should they happen to crop up.

FORENSIC INVESTMENT

To prove that properly engineered cash-for-skill is legal in the U.S., Perez's company has invested several hundred thousand dollars over the past three years. A substantial financial investment is required to build compliant SWP devices, and to develop legal and political knowledge to support them, he observed, adding: "This will make it difficult for competing products to enter the market."

Since every Skill4Cash challenge is solvable, the payout percentage on the system cannot be controlled, preventing "guarantees" to operators. Other than the player, no one can determine whether or not a goal is met. Payouts might be averaged over time, but they fluctuate regularly and cannot be controlled as a whole. However, the difficulty level of challenges increases as a player's skill advances.

And it is unlikely that the games can be manipulated by crude methods, such as positioning the cabinet in ways to make it difficult to reach the controls. "There are only two elements that control a player's ability to effectively play at their skill level," Perez explained. "These are being able to see and touch the kiosk's display. We don't expect anyone to play if either of these two elements is missing. And because we own the equipment, there are standards of operation that need to be maintained that cover this sort of thing."

Because Skill4Cash machines are not for sale, operators are offered the opportunity to partner with the company under a revenue-sharing agreement that allows them take possession of the equipment with no investment. This operating model, Perez believes, will enable small vendors to participate in what could become the dominant amusement category.

"The no-investment strategy is a key factor for operators right now and offers greater ROI," he said. The revenue program, which uses a 50-50 split structure between operator and manufacturer, imposes no minimums. Skill4Cash's earnings estimates, based on two years of testing, project $6,468.75 in net profit for a machine generating $431.25 a month over five years. There is no expense for maintenance, upgrades or financing.

REINVENTING THE OPERATOR

"We offer a different revenue model than most operators are accustomed to," he said, "but it provides them with more money and removes liabilities. We don't have a choice but to innovate. This creative business model is, to some extent, new to an industry that has traditionally operated under specific policies and practices for decades. In order to survive in hard economic times, manufacturers, operators and even location owners need to realize that working capital is tight, and operators cannot stay current with new equipment at the rate of distribution that they require."

Perez also argues that the rapidly growing technology invested in building game platforms has made the traditional 50-50 revenue split impractical. "Operators need to be strong and educate location owners that they need to spend thousands of dollars just to keep up with the latest greatest game platforms, and 60-40 cashbox splits should be more of the norm rather than the standard," he underscored.

Skill4Cash products will be on display at the upcoming AMOA International Expo, which takes place in September in Las Vegas. "One thing is certain; AMOA's show theme is exactly what Skill4Cash has believed in since we started in 2006 – we fully support Re-Think, Re-Tool, Re-Focus," Perez summed up. "It's our objective moving forward as we bring on new operators to our program."


Topic: Music and Games Features

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