Waterhouse VC: Nothing Beats Interaction

Every month, industry investors Waterhouse VC publish an article that spotlights different aspects of the ecosystem. This month, Tom Waterhouse delves into why nothing beats interaction.

Barry Diller made his money betting on the future of media and technology. He greenlit blockbusters at Paramount, launched a TV network at Fox, and turned IAC into an internet giant.

Now, at 84, he is betting big on casinos.

People Inc., formerly IAC, has proposed buying the majority of MGM Resorts it does not already own, valuing the group at more than $18 billion. Days earlier, hospitality tycoon Tilman Fertitta agreed to buy Caesars Entertainment in a deal valuing the company at $17.6 billion.

Neither deal is final, but the timing is interesting. Capital is pouring into artificial intelligence, making gambling products quicker to build, easier to personalise and faster to scale. Land-based casinos are often treated as legacy assets.

Diller sees something different. MGM fits his definition of a real-world asset that AI “cannot easily replicate or disintermediate.”

Gambling is not governed by consumer preference alone. Regulation decides where activity can happen, which products exist and how much friction sits between the customer and the bet.

Land-based casinos still own something valuable: permission, place and people.

MGM’s Osaka integrated resort, due around 2030, and the emergence of licensed integrated resorts in the UAE show the same pattern. Governments are using scarce physical gaming licences to anchor tourism, hospitality and entertainment.

Online was meant to kill the betting shop. Exchanges were meant to kill the bookmaker. Crypto casinos, sweepstakes operators and prediction markets have all shown that when regulated markets leave gaps, demand finds another route.

Channels rarely disappear. When one is constrained, demand moves to whoever offers the best mix of access, experience and permission.

Land-based casinos still hold that mix. Permission, place and people are hard to replicate online. What they lack is the speed and interactivity of online. Closing that gap is the opportunity, and for Waterhouse VC the question is who captures it.

Speed and Access

For most of casino history, the venue was the distribution layer. The licence, the building and the geography controlled access.

An online operator can reach anyone with a smartphone, see how they play, personalise offers, cross-sell products and re-engage them in real time. Content moves at the same speed. An online studio can build a game in weeks and distribute it to hundreds of operators overnight. For example, SPRIBE's Aviator game reportedly processes hundreds of thousands of bets per minute.

European online gambling revenue reached €47.9 billion in 2024, and, on EGBA estimates, accounted for 39% of total gambling revenue. Casino is the largest online vertical at €21.5 billion, two and a half times its land-based equivalent. US iGaming grew 27.6% in 2025 to $10.74 billion, against 2.3% for traditional casino gaming.

An online sportsbook shows form, prices, live pictures, props and markets that never stop moving. An online casino shows jackpots, game history, recommendations, tournaments, streams and social proof. The operator can change the experience while the customer is still playing.

That is the standard land-based casinos now compete against.

Permission, Place and People

The case for land-based starts with permission. Online casino exists only where governments allow it. New Jersey launched in November 2013. More than a decade later, only eight US states have legalised it and seven are live. The rest stay closed, held back by tax, tribal interests and incumbent lobbying.

The seven live states generated more than $10 billion in 2025. In Pennsylvania and New Jersey online overtook commercial land-based revenue for the first time.

Scarcity creates value for those with permission, and it explains why leakage persists. The AGA estimates illegal and unregulated US gambling generates $53.9 billion a year and costs states $15.3 billion in taxes. Once a channel grows large and politically uncomfortable enough, pressure builds to bring it inside the regulated perimeter.

The second asset is place. A licence does not just grant permission. It fixes the business to a location: physical, visible, taxable, inspected and locally embedded. A casino employs local people and draws tourists. In Japan and the UAE, new licences are tied to building resorts that bring in visitors, not just approving a room full of machines.

The third asset is people, and place is what gathers them. A busy floor has hosts, regulars, groups, tourists, noise and the buzz of winning in front of others. That is part of what the customer pays for. It is the one thing a screen at home cannot reproduce.

Inside the Machine

Across much of the market, innovation still starts and ends with the machine. The great destination resorts are the exception, where the whole property is the product. That reliance on the machine matters, because a handful of manufacturers control it.

North American core game market share, Eilers & Krejcik Gaming and Fantini Research, November 2023. IGT’s gaming division and Everi have since combined under Apollo.

That concentration has produced innovation in cabinet design, game maths, graphics, content and performance. But the wider floor experience has not moved with it.

The reason is structural. Manufacturers profit by making their own machines more valuable. They are hardware-led businesses. DoubleDown is a useful example. It launched the largest casino on Facebook in 2010, and IGT, then the biggest name in slots, bought it two years later for roughly $500 million rather than build its own.

A casino floor is different. It is not one manufacturer's showroom but a mixed environment, with cabinets, systems and data spread across several vendors. That makes floor-wide innovation difficult.

The manufacturers' incentives are machine-level. The operators' capabilities are venue-level.

Operators own the customer relationship and would benefit from a more dynamic floor, but their strengths are property, compliance, hospitality, loyalty and operations. They are not usually software companies.

As a result, the floor still relies on familiar tools: VIP hosts, loyalty cards, free play, mailers, drawings and slot tournaments on isolated banks of machines.

Operators know the online threat. MGM, Caesars, Penn and Boyd all run online casinos, and in Pennsylvania alone 24 licensed online platforms operate through land-based licence holders. In states where iGaming remains illegal, some operators have pushed into white-label social casinos instead.

But both of these follow the customer out of the building, into online channels where the venue has less control and keeps less of each dollar. They chase the customer onto the screen instead of making the floor itself better.

The bigger opportunity is the other way round: technology that brings players through the door and makes the floor feel alive once they are there.

The Opportunity

The machines themselves do not need to change. A slot machine is still a slot machine, and a table game is still a table game. The opportunity is everything around them: information, competition, rewards, social play and live events.

Every sportsbook lets a punter check form, prices and markets before committing. A customer on a casino floor walks past hundreds of machines with little sense of which to play or what is happening around them.

It could look like a Monday night video poker challenge. A floor-wide competition during March Madness. A live leaderboard among friends. A host pulling players into a timed tournament without shutting down a bank of machines. Rewards that respond to what is happening on the floor, not last month’s CRM cycle.

The machine stays physical. The layer around it becomes digital.

The scarce assets are already in place: the licence, the property, the machines and the customer standing on the floor. What is missing is the digital layer around it.

Waterhouse VC has taken an option in Slot Check, a business building into this layer. Slot Check surfaces machine-level performance information to players in near real time and supports challenges, tournaments and social play without altering licensed game hardware. The attraction is simple: it gives the physical floor some of the information, competition and engagement mechanics that online products already use.

Online casinos won on access and engagement, and the ease with which they can innovate. The floor owns what online cannot replicate: permission, place and people. The opportunity is not to make land-based casinos look like online casinos. It is to add a digital layer around the physical experience. That is where the supplier value sits, and where Waterhouse VC is focused: backing infrastructure that helps regulated operators compete.