The man behind XBLA places bet on skill-based, real-money gaming on mobile

Greg Canessa, the brains behind Xbox Live Arcade and former head of Blizzard’s widely-used online service Battle.net, is venturing into a business with even greater mass market potential.

Dubbed “Sparcade,” a new mobile app currently in closed beta from Sony-owned GSN Games, brings licensed properties like Tetris and Pac-Man into the arena of skill-based games, in which players can wager real cash on their skills against real-life opponents.

It’s a unique model for mobile games, and could open new opportunities for developers to get their games to the top of app charts that are currently barricaded by well-established companies and brands, Canessa, general manager of GSN Games said in a phone interview.

“If we play our cards right, which we plan to, we’ll create a completely new industry category on mobile and an alternative monetization model,” he said. “We’re launching this idea of casual-competitive gaming to today’s generation of mobile gamers,” an idea derived from the established web-based skill gaming business that GSN Games has been involved with for years.

In a 2014 presentation, GSN Games said that its web-based business hosted 2 million tournaments per day, 75 million skill-gaming players, and $175 million prized out, annually. The same presentation said GSN’s business model is “whale-driven” (meaning a tiny amount of players drive the large majority of sales).

GSN currently has Sparcade partnerships with Electronic Arts (Tetris Burst), Bandai Namco (Pac-Man), and Hasbro (Scrabble). The company is still on the lookout for more licensing partnerships with developers both large and small, and fleshing out other to-be-announced partnerships. The app is slated to arrive on iOS first, with Android to follow.

Canessa said the popularity of casual games, popularity and accessibility of mobile, the rise of eSports and competitive video games, and the static top-grossing charts are what inspired the idea for Sparcade. He said the platform aims to give developers whose games aren’t necessarily a great fit for the free-to-play model to monetize in a new way.

Here’s how Sparcade works: Players download the free-to-play Sparcade app, which is basically a platform for a variety of skill-based games, with social features built around them. Players are given a daily amount of free currency, which they can spend to practice on games within the app. Players also have the option to transfer into the app real money that they can wager when challenging other players.

Sparcade hosts a number of different tournament types, rulesets, difficulty levels and so on. Players pay an entry fee, compete against one another for the prize pool, and GSN and its licensing partners take a cut. “The more tournaments we build, and the faster we build them, the more money we make,” Canessa said.

Skill games are games in which the outcome comes from physical or mental skill, as opposed to pure chance, like a slot machine. Game developers on Sparcade must build a special skill-gaming version of their games to make sure that everyone is competing on equal terms, as eliminating chance is crucial to stay out of the highly-regulated realm of gambling.

For example, in the version of Tetris Burst on Sparcade, all players in the same tournament receive the same tetriminos in the same order, giving all players the same opportunity for success or failure.

Canessa said GSN Games’ years of experience in web-based, real cash skill gaming means the company understands the state-by-state, country-by-country regulations their business needs to adhere to. Skill-based gaming is largely unregulated, he said, and falls under the same legal restrictions “as golf tournaments and bowling tournaments.” The app also knows when a player is in a state that does or does not allow skill-based gaming, restricting their play as necessary.

Canessa said that GSN Games’ consumer and market research showed that casual players are willing to pit their skills against others’ for money. “We have found a very large audience for this—over 50 percent of the addressable market in North America alone in terms of mobile game players are interested in this type of concept,” said Canessa. The interest, he said, runs across all demographics, with all kinds of people split between either being very ‘into’ the idea and people who have no interest whatsoever.

Canessa said Sparcade is designed to host low-stakes wagers that are meant for entertainment purposes only. Entry fees start at $1 in tournaments with 2-5 people. “The money motivation is not the main reason people are interested in playing competitively for money,” said Canessa. “It’s not about going out and winning enough money to win a jet ski or buy a Rolex…It’s really about the fact about having a buck down makes the game more interesting to people.”

While Canessa believes there is opportunity in this new space, he admits that what Sparcade is trying to do is uncharted waters on mobile. “This thing could go six ways to Sunday,” Canessa said. As a first-mover with this model, he knows that the first challenge for Sparcade will be getting it in front of people, and getting them to try it. But he hopes recognizable casual games and strong social features will not only get traction for Sparcade, but also launch a new way for developers to monetize their games.

“I would like nothing better than to wake up in three years, and have Sparcade be one of many games in the app store that does this,” he said.