Eldorado deal to push growth of 3G Studios

3G Studio's partnership with Eldorado Resorts to produce online gaming, a deal announced last week, means the Reno-based video game developer is headed for a large-scale expansion, President James Kosta says.

Eldorado Interactive, a subsidiary of Eldorado Resorts, plans to launch its free-to-play slot machines later this month, and it also has a similar poker product in beta testing that should go live in November. A version of the poker game played for real currency is expected to be released by the first quarter of 2013 as Eldorado Interactive earns certification and licensing from the state Gaming Control Board.

To handle the transition from creating video games to online gambling, 3G is expanding its footprint at 300 E. Second Street, and it's added offices in Shanghai and Delhi to help write code.

3G currently employs about 80 people and expects to employ between 120 and 150 by year-end, Kosta says. Its Reno office is adding another 13,000 square feet formerly occupied by the law firm Fennemore Craig Jones Vargas.

3G also is in the midst of securing $20 million in venture funding from investment banks in San Francisco and Seattle to help finance its growth. It's the first time the company has sought investment capital.

"We have had some friend and family money come in, but this is the first time we have actually gone out and seeking venture and bank funding," Kosta says.

3G in September filed for approval from the Gaming Control Board for three separate licenses to build, host and market the technology that will run an online gaming site. Currently, only online poker is legal, but 3G expects to launch games in other areas as they also become legal. Kosta says online sports betting could be next, followed by games such as bingo or keno, and lastly, games of chance such as slot machines.

Video game giants such as Zynga and Electronic Arts also seek to enter the online gaming arena, he notes but 3G was first.

"We are out there ahead of everyone else," Kosta says. "We are the very first video game company to file to become a licensed technology service provider in the United States."

Due to financial reporting requirements and Gaming Control Board oversight, game developers must partner with a brick-and-mortar institution, which led to the joint venture, Kosta says. The Eldorado Interactive venture is likely the first in a wave of such partnerships as U.S. technology providers pair their services with Nevada-based casino operators.

"Those brick and mortar operators already understand the banking and reporting requirements, and they are best equipped to be able to deal with having a successful online operation out of the gate," Kosta says. "Companies like ours can focus on creating new content and servicing the customers and looking for ways to drive revenue from the player base, while operators like Eldorado Interactive will be focused on the banking and reporting requirements and expanding the venture into other jurisdictions as they become legal."

3G Studios has been preparing for entry into online gaming over the past few years as it sought ways to offset the time, costs and risk of developing video games. It entered ancillary industries such as streaming video and eventually licensed technology with Netflix and Hulu. Company executives also spent time working with teams at IGT and Bally to educate themselves on market expectations for online gaming.

3G plans on bringing more arcade-style gameplay to gamblers and more importantly, drawing casual video gamers to the gaming market. For instance, 3G's Outlaw Poker combines a quick-draw tournament with the poker hands players' poker cards determine the outcome of a shoot-out and whether their character lives or is peppered with bullets.

It's also revamping the look of games of pure chance, such as slot machines. As an example, 3G's Fish Fortune fishing game charges users for every cast and rewards them with cash for fish reeled in. Another example is a horse racing game that's been recast as a monster truck racing game to target the 25- to 45-year-old male audience.

"These are just some of the ways we are going to be revolutionizing that industry," Kosta says.

3G Studios already has about 20 games in hand that span several different segments of gaming.

"There are some very significant games and some very significant offerings, but we will start with poker we have to play by the rules," Kosta says.