Gamblification June 2014 The intersection of social games and gambling

The biggest threat/opportunity in 40 years 2

Smartphones: #1 starting place for anything online Smartphone 65% 63% 65% 47% 59% 66% 56% SearchingBrowsingShoppingPlanningManagingSocialWatching an for infoThe internetOnlinea TripFinancesNetworkingOnline Video Started on a smartphone More media interactions occur on a smartphone than on any other device 38% of our daily media interactions Google – “The New Multi-screen World” 3

80% 80% 67% (40%) 64% 69%33% Mobile Time Spent onApps Used vs Downloads RevenueTablets (phones) Daily What do people do on mobile? Mostly, they play games. 50% 146 million 87% 80% Number with mobile device who play games Socialnomics – “Social Gaming Infographic: 81 Million Play Each Day + More Stats, Wired – “Mobile Kills the Console But Advances the Gaming Industry”, DigitalBuzz – ”infographic: Mobile Gaming Statistics 2011”, FactBrowser – “Mobile Game Fact Feed” 4

Mobile is crushing it. Annual growth rates = Mobile games % = 3.30% = 27.4% = All games Lotteries 2.05% = Operating Income Newzoo Data Explorer 2013, LaFleur’s 2014 World Lottery Almanac

Social Casino 6 Lottery [Candy Crush Saga = 62M Daily Active Users, 1B games played per day]

Who are mobile gamers? 30 66% Owners who play every day 53% Superdataresearch.com/blog/f2p-mobile-gamers-spend, iqu.com/blog/mobile-game-stats-you-need, Socialnomics – “Social Gaming Infographic: 81 Million Play Each Day + More Stats, Wired – “Mobile Kills the Console But Advances the Gaming Industry”, DigitalBuzz – “Infographic: Mobile Gaming Statistics 2011”, FactBrowser – “Mobile Game Fact Feed”, 2012 Newzoo Data Explorer 7 ( )

Who is your consumer? 8 Casino Lottery % 40 66% Social Casino Player Likelihood of Gen Y & Z to play slots vs. Boomers = 1/2 Fewer 18-34s since 1995 Casual Games Association “Social Casino Gaming 2012”, John Welte Gambling Participation in the US, 2002”, “Zmags: Meet the Connected Consumer, Harrah’s Survey “Profile of the American Casino Gambler, 2006”

Propensity to play mobile lottery in next 30 days LottoInteractive/Chatter Mobile Lottery Research – Q4-Q10, Camelot 9 UK Lottery Player Profile by Age

What about the Industry? Adapt or die. Tomorrow Utilize internet and mobile channels Provide games people want to play (and already are) Incorporate features that will drive engagement and retention Today Draw products = flat to declining sales All growth is in low margin Instants Jackpot fatigue = rising price points. Higher prices ≠ younger players 10

What are the risks? Current Retail Cash-based Anonymous Unenforceable procedures Unaudited performance Average convenience store clerk Tenure = 34 days 11 85% failure rate of age verification in Maryland 25% of under-age adolescents report buying a lottery ticket Problem Gambling Forensic Marketing LLC, Maryland State Lottery, National Council on Problem Gambling

What are the risks? Land-based Sales Impact Online lottery jurisdictions include Illinois (2012) Georgia (2013) Canada (2004) UK (2002) and many European countries In every jurisdiction with online lottery products, retail sales have continued to grow Problem Gambling Protections not available at retail 1.100% age verification 2.Monetary restrictions 3.Limit setting 4.Self-exclusions 5.Time outs 6.Enforcement 7.Reinstatement protocols 8.Personalized information 9.Clock visibility 10.Spend to date/cash balance 12

Don’t be these people 13