G2E: Racing Card Derby

"The game appeals to players of all ages and offers bets paying from 1-1 through to 10-1."
-- From the website for Racing Card Derby.

On Wednesday, we talked a bit about the lack of innovation in table games creation by companies such as Shuffle Master (NAS: SHFL) , how the gaming industry has not seen a blockbuster table game since blackjack, and how the industry may not see one until somebody steps up and creates a game that is theoretically beatable. That said, while it's a very difficult business to play in, there is room for new players to step in to the table games space and take market share.

We won't be focusing on specific stock ideas in this column, but instead will be diving into the product side of the gaming industry to kick the tires on a relatively innovative new game from another group. We'll talk about the features that work about this game, as well as the factors that limit its potential.

Racing Card Derby
Over in the DigiDeal booth at the G2E gaming conference, was a game called Racing Card Derby, created by a group out of Australia. DigiDeal -- a Washington-based maker of electronic table games that was divested by International Game Technology (NYS: IGT) in 2010 -- does not own the rights to the game, but rather acts as the U.S. agent for Racing Card Derby. In addition, there is an agreement to put a version of the Racing Card Derby game on DigiDeal's electronic table game platform.

In Racing Card Derby, the dealer draws cards from a standard 52-card deck and uses the drawn cards to simulate a horse race on an LCD monitor. In this case, the horse race is a race of suits -- spades, diamonds, hearts, and clubs -- and for each deal there is a winning suit, a second-place suit, and a third-place suit.

To determine the winning suit, the dealer keeps dealing cards until four cards of one suit appear. The dealer can deal three diamonds off the top of the deck, but if four spades appear before a fourth diamond hits, then spades are the winning suit.

The second-place suit is determined by the next card that is dealt that is not the winning suit. So if the winning suit is spades and the next card is a diamond, then diamonds are the second-place suit; but if the winning suit is spades and the next card is a spade, then the dealer will keep dealing until a non-spade hits.

And then the third-place suit is simply the next card off that is a different suit from both the winning suit and the second-place suit.

The table is a layout like the layout on a roulette table, where a player can make various bets. The player can bet on the winning suit (which pays 3-1) or the winning color (red/black as in roulette, paying 1-1). The player can also bet a trifecta on the order of the first-, second-, and third-place finishers; this pays 10-1 if you get the finish order exactly, 1-1 if you get the winner, and 2-1 if you get the first- and second-place finishers right. You can also bet an exact quinella on the order of the first- and second-place finishers, which pays 10-1.

Now if it seems odd to you that you get paid 1-1 for betting red-black or get paid 3-1 for betting a suit to win straight up, you're right because there is a catch: Whenever the 2 of spades appears during the deal, you only get paid 2-1 on a winning suit rather than 3-1, and reduces the payout on the red-black bets from 1-1 to 1-2. This is the source of the house advantage, much like the 0 and 00 in roulette.

The 2 of spades is known in the game as the protest card, which I was told appears one in six deals (I'll trust the company math). The result is a house edge which the company says is 5.8%.

Why the game works
The main thing going for Racing Card Derby is that the game is relatively simple as far as betting goes. And like roulette, you have a variety of bet options which range from 50-50 type bets (red-black) to higher-variance plays with 10-1 payouts. All you have to do is pick a color, a suit, or a group of suits.

Forces against it
There are multiple forces against Racing Card Derby, where:

  1. The game is arcane.

  2. You don't need to draw cards to simulate a horse race when you can just simulate a horse race.

  3. The house edge is too high.

According to the game's website, the average deal takes 11 cards to complete. However, it doesn't take a genius to realize that from a pure game standpoint, you should only really need about four cards to determine the three winning suits -- because from a pure game standpoint, the first card off the top of the deck should be enough to determine the first winner.

The only reason it takes 11 cards to complete an average deal is because the game calls for the dealer to draw until four of a suit appear in order to determine the winner. And the only reason the game calls for the dealer to draw until four of a suit appear is so that the 2 of spades -- the "protest card," aka the house advantage -- can appear one in six times.

I know, you might be (but probably aren't) saying that dealing until four of a suit appear to determine the winner is what makes the game a "race," but this is faulty reasoning.

Because in addition to dealing extra cards for no real purpose other than to raise the house advantage, there is another real force against this game, and it is that you don't need to draw cards to simulate a horse race when you can just simulate a horse race. IGT -- among several other companies -- has an electronic table game that does just that in its Triple Towers Virtual Horse Racing game.

Lastly, the 5.8% house advantage will ultimately be too tough a pill to swallow for the game to have mass appeal.

A creative but ultimately niche game
I am all for creative new games, and I think Racing Card Derby fits the bill as something innovative and easy enough to pick up. The game has had field trials at the Las Vegas Sands (NYS: LVS) Venetian Macau, in Australia, and in Europe, and has gained placements at MGM Mirage's (NYS: MGM) Circus Circus in Reno, Nev., as well as one of Ameristar Casinos' (NAS: ASCA) properties in Jackpot, Nev.

That said, while I suspect the game will pick up a few placements here and there, I don't see it as being more than a niche game at best.

At the time thisarticle was published Fool contributorJeff Hwangis a gaming industry consultant with HVS. Jeff is an expert blackjack player, and the best-selling author of four books on pot-limit Omaha poker. Jeff owns shares of International Game Technology and Ameristar Casinos. The Motley Fool owns shares of International Game Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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