Global Gaming Business, October 2016 by Global Gaming Business

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GGB Global Gaming Business Magazine

BettiNG ON eSpOrtS State Of atlaNtic city atMs & caSH acceSS Ma’S StepHeN crOSBy

October 2016 • Vol. 15 • No. 10 • $10

Skillfully Done HOW VARIABLE PAYBACK SLOT GAMES WOULD WORK IN TODAY’S CASINOS

Mutual Respect How tribal gaming has boosted government-togovernment relations

Brand Rebounds How to build your iGaming site the second time around

Official Publication of the American Gaming Association

Association of Gaming Equipment Manufacturers

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CONTENTS

Vol. 15 • No. 10

october

Global Gaming Business Magazine

26 COVER STORY

COLUMNS

Skill Set The first slot machines to use skill as the primary play factor are reaching casinos after Nevada and New Jersey approved regulations for skill-based games using a variable-payback percentage. As the industry tests the waters on this new style of game, suppliers and regulators offer different ways to make skill work on the slot floor.

12 AGA Bigger Bang in Show Me State Geoff Freeman

14 Regulation Saving Face Richard Schuetz

18 Fantini’s Finance Dynamic Supply Side Frank Fantini

By Frank Legato

38 Table Games Great Gizmos

FEATURES

Roger Snow

20 Tribal Futures

Evolving ATMs

The nation’s gaming tribes reflect on the benefits casinos have brought to their members and view the possibilities and pitfalls of new tribal-state compacts.

Suppliers of ATMs and cash-access kiosks are incorporating strong anti-fraud measures.

By Dave Palermo

34 The eSports Advantage

DEPARTMENTS 6

The Agenda

By the Numbers

10 5 Questions

By Dave Bontempo

16 AGEM Page

The eSports phenomenon could be the next big moneymaker for casinos—if they’re paying attention.

49 Emerging Leaders With Elmcore Group’s Felix Danciu

By Chris Grove

62 Frankly Speaking Our monthly section highlighting and analyzing the emerging internet gaming markets.

50 Atlantic Attrition As the Taj Mahal becomes the fifth Atlantic City casino to close, remaining operators in the beleaguered gaming town look to the future. By Patrick Roberts

Global Gaming Business OCTOBER 2016

Feature 42 Branding iGaming The success of iGaming in New Jersey demonstrates how important a strong brand is to an internet casino. By Steve Ruddock

46 iGames News Roundup

64 New Game Review 68 Cutting Edge 70 Goods & Services 77 People 78 Casino Communications With Stephen Crosby, Chairman, Massachusetts Gaming Commission

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THE AGENDA

R-E-S-P-E-C-T

Vol. 15 • No. 10 • October 2016 Roger Gros, Publisher | rgros@ggbmagazine.com twitter: @GlobalGamingBiz Frank Legato, Editor | flegato@ggbmagazine.com twitter: @FranklySpeakn Monica Cooley, Art Director | cooley7@sunflower.com

Roger Gros, Publisher

ave you noticed the increased visibility the gaming industry has had in the United States lately? Let’s start right at the top and get the controversial issue out of the way. Donald Trump is running for president, and he very well might win. I’ve been doing an informal survey of his former executives since he announced his candidacy 18 months ago. At first, it was with incredulity that he began to win the early primaries. Those of us who knew him in the 1980s and ’90s in Atlantic City were shocked that so many Americans were responding to his brash and overblown personality, but he clearly hit a nerve, and people have been responding to it. Most (not all) of the former executives I talked to think he could do very well as president. Some think he’d be a disaster. Kind of mirrors the general electorate, actually. But let’s put aside politics for now and talk about what this means for the casino industry. Here’s a man who was a very powerful casino owner at one time. Again, you can debate how effective he was since he lost ownership of all his casinos, particularly those in Atlantic City, and how that occurred. Let’s not forget, however, that every casino that was open during Trump’s heyday in Atlantic City has also closed or gone bankrupt at some point. But the very fact that Americans are willing to consider voting for a former casino owner is a positive for our business. We already know the power Las Vegas Sands Chairman Sheldon Adelson yields in the Republican Party. Yes, it’s all connected to money he contributes to party candidates, but his views are well-known and respected. Then, MGM Chairman Jim Murren, a presumed Republican, says he’s going to support Hillary Clinton, and it’s frontpage news. And whatever Steve Wynn decides will generate lots of tweets. Clearly, this indicates a general acceptance that the casino industry is now mainstream. Let’s not ignore the role the American Gaming Association is playing with its “Gaming Votes” campaign, designed to show politicians in almost every state how important casino employees are when it comes to Election Day. To be truthful, this isn’t a new idea. Previous incarnations of the AGA have also pushed this agenda to varying degrees, but the

Global Gaming Business OCTOBER 2016

current campaign is tied to an issue: the legalization of sports betting. The campaign has been very effective by marking milestones in individual jurisdictions, bringing together casino executives, regulators, local politicians and other stakeholders to highlight the good casinos have done in those communities and why a legal sports betting industry would help even more. The AGA has worked with different law enforcement organizations to point out that legal sports betting would likely wipe out the illegal variety, which today dominates the activity. The campaign is getting traction and support from very high levels. Major media outlets are now recognizing that millions of people bet on games and are no longer shy about quoting spreads, line movements and late game moves that may impact gamblers. iGaming sites in New Jersey have already sponsored major-league sports teams. Can it be long before you begin to see advertisements from mobile sports books on uniforms of U.S. teams, the same way you do in Europe and around the world? At the state levels, casinos have a definite seat at the table. You’d expect that in states where gaming legalization is being considered. And there are two referendums this year: Arkansas and New Jersey (to expand casinos outside of Atlantic City). Other states have gaming issues that they are grappling with. Massachusetts is still wondering whether the Mashpee Wampanoag tribal casino will become a reality, while waiting on the first true integrated resort to open. Florida has compacting issues with the Seminoles, while racetracks and parimutuels outside of southern Florida want to get into the game. Alabama citizens almost got a say on a state lottery until no consensus could be reached. California once again teased us with online poker but in the end it failed. Pennsylvania actually built iGaming revenues into its budget, even though iGaming is not yet legal. So, the gaming industry has definitely gone from marginal to mainstream. It really matters what our industry does and how it reacts. Now maybe if we could be treated like every other business on regulatory and tax issues, we’ll really have made some progress.

John Buyachek, Director, Sales & Marketing jbchek@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com twitter: @LisaJohnsonPR Columnists Frank Fantini twitter: @FantiniResearch Geoff Freeman twitter: @GeoffFreemanAGA Richard Schuetz twitter: @Schuetzinc | Roger Snow Contributing Editors Dave Bontempo | Chris Grove twitter: @OPReport Dave Palermo twitter: @DavePalermo4 | Patrick Roberts Steve Ruddock twitter: @SteveRuddock| Michael Valanskie

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

• Mark A. Birtha, Senior Vice President & General Manager, Hard Rock International

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports twitter: @CDCNewswire

• Geoff Freeman, President & CEO, American Gaming Association twitter: @GeoffFreemanAGA

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Vice President & Chief Compliance Officer, MGM Resorts International, twitter: @stephenmartino

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, Vice President Systems Sales, Scientific Games

• Steven M. Rittvo, Chairman/CEO, The Innovation Group twitter: @InnovGrp

• Katherine Spilde, Executive Director, Sycuan Gaming Institute, San Diego State University

• Ernie Stevens, Jr., Chairman, National Indian Gaming Association twitter: @NIGA1985

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 901 American Pacific Drive, Suite 180 • Henderson, Nevada 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2016 Global Gaming Business LLC. Henderson, Nevada 89014 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 901 American Pacific Dr, Suite 180, Henderson, NV 89014 Official Publication

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© 2016 IGT. The trademarks used herein are owned by IGT or its affiliates, may not be used without permission, and where indicated with a ®, are registered in the U.S. IGT is committed to socially responsible gaming. The iPhone® is a trademark of Apple Inc., registered in the U.S. and other countries. Our business solutions empower customers to choose parameters and practices that become the foundation of their Responsible Gaming programs.

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BY THE

NUMBERS

BRITISh BETTINg PATTERNS I

n a quarterly report issued by the United Kingdom Gambling Commission in July, respondents were asked how they gambled and the games they play. The categories differ widely determined by whether the gambler participates in person or online. To view a full version of the study, visit gamblingcommission.gov.uk.

IN-PERSON PARTICIPATION

ONLINE PARTICIPATION

Tribal Payroll

veryone knows that wages are a big chunk of expenses in any casino, and that is also true in the tribal gaming world. In the 2015 version of the Indian Gaming Cost of Doing Business Report, issued annually by the Joseph Eve accounting firm, those costs are broken down by department and provide a fascinating snapshot of where workforce dollars are spent. To obtain a copy of the 2015 report, visit the Joseph Eve website at JosephEve.com.

Casino Wages by Department F&B 16.87% Housekeeping Security 11.13% Other Departments Slots 10.46% IS/IT 8.82% Bingo G&A Cage/Vault/Cashier/Count 8.81% Human Resources Maintenance/Landscaping 7.36% Executives/Managers Games 6.27% Transportation/Valet Table/Card 9 + ! % ) ( & + # %! * Club 6.02% Gift Shop 4.53% Keno Audit Finance/Revenue OTB Hotel 3.71% F 2.99% Total Wages Surveillance

Global Gaming Business OCTOBER 2016

2.54% 2.42% 2.26% 1.59% 1.55% 1.25% 0.68% 0.62% 0.10% 0.02% 100.00%

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NUTSHELL

“They

5Questions

Felix Rappaport

President & CEO, Foxwoods Resort Casino elix Rappaport, a former Wynn and MGM executive, was Fyearsappointed president and CEO of Foxwoods more than two ago. Since that time, Foxwoods has improved its financial performance and backed away from the fiscal cliff it was approaching. He spoke with GGB Publisher Roger Gros at his offices in Foxwoods in August. To hear the full podcast of the interview, visit GGBMagazine.com.

Said It”

“With the NFL, Major League Baseball, the NBA, the NHL, the NCAA, they’re all making money off fantasy sports. They’re investing in it. They go to court and they try to stop us in New Jersey from legalizing what is happening every Sunday—illegal bookmakers in the Mafia. They’d rather have them do it.” —Chris Christie, New Jersey governor, in a radio interview on New Jersey’s failed attempts to allow sports betting at casinos and racetracks

CALENDAR What did you do at Foxwoods to right the ship? First of all, I don’t want to take credit for “righting the ship.” It’s been a team effort. But I know that my predecessor, his team, the tribal council and tribal Chairman Rodney Butler spent thousands of hours working with our lenders to create a more stable financial environment. What I’ve focused on since I’ve been here is to rebuild the executive committee, bring in a creative marketing team and work with our lenders to have not only a good story to tell in terms of better operations and better financial results, but also to have a viable five-year strategic plan for the future.

1 2 3 4 5

What areas needed more attention than others? It’s kind of counterintuitive, but one of the reasons I was so optimistic was that there was room for improvement in virtually every area of our business. And I don’t say that to disparage anyone who came before me; it’s not my style. My style is to build on the foundation of what came before. And we’ve built a team that is one of the stronger if not the strongest of any that I’ve worked with in all my years in the business.

Tell us about the impact of the Tanger outlet mall that opened last year. It’s the only fully enclosed, fully climatized Tanger outlet mall in the world. This is the only one that is part of a casino, and for those who think an outlet mall has to be tacky, it’s the complete opposite. It’s a beautifully designed, 80-store facility, and continues to gain traction. The visitations continue to grow, and it really gives Foxwoods a tremendous competitive advantage over any other casino in the region.

The Plainridge Casino just opened in Massachusetts. What kind of impact has that had on your property? Penn National is a very good regional operator, and a large part of our market comes from Massachusetts, so you have to have a very compelling message to get your customers to travel further. If you just want to gamble and you have a place that’s five minutes away, that’s where you’ll go. But if you want the things we have to offer—38 restaurants, 300 shows a year, golf, spa, shopping and more— you’ll come to Foxwoods. So we haven’t felt that much of an impact.

With the upcoming integrated resorts in Massachusetts and New York, is gaming over-saturated in the region? That’s not a word I like to use. The world is competitive and organizations that evolve stay competitive, survive and thrive. And organizations that do not evolve don’t have much success. So it’s my job, my team’s job, the tribal council’s job, to figure out what we want to be when we grow up. We’re about to celebrate our 25th anniversary next year in February, so we have an abundance of resources and facilities—we’re the largest casino resort complex in North America. If we stay static, we’ll be less successful. If we build on our natural foundational elements and add to that, in my opinion, we’ll continue to thrive. It will be much more of a balance between gaming and non-gaming that we have traditionally enjoyed.

Global Gaming Business OCTOBER 2016

October 18-20: EiG - Excellence in iGaming 2016, Arena Berlin, Berlin, Germany. Produced by Clarion Events. For more information, visit eigexpo.com. October 23-24: IMGL Autumn Conference 2016, Dublin, Ireland. Produced by the International Masters of Gaming Law. For more information, visit GamingLawMasters.com. October 25-26: ESports & Casino Resorts, SLS Las Vegas. Produced by Naruscope and Global Gaming Business. For more information, visit Naruscope.com. October 31-November 3: IAGR 2016 Conference, Sydney, Australia. Produced by the International Association of Gaming Regulators. For more information, visit IAGR.com. November 7-9: Malta iGaming Seminar (MiGS) 2016, Hilton Malta. Produced by the Malta Gaming Authority. For more information, visit MaltaiGamingSeminar.com. November 9-11: SAGSE Buenos Aires, Costa Salguero, Buenos Aires. Produced by Mongraphie. For more information, visit Monographie.com. November 23-24: Balkan Entertainment & Gaming Exposition and the Eastern European Gaming Conference, Inter Expo Center, Sofia, Bulgaria. Produced by the Bulgarian Trade Association of Manufacturers and Operators in the Gaming Industry. For more information, visit BalkanGamingExpo.com.

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AMERICAN GAMING ASSOCIATION

Bigger Bang in Show Me State Missouri should enact progressive policies to generate more casino revenue for state

By Geoff Freeman, President & CEO, American Gaming Association

asinos in Missouri are driving big results—such as generating $8 billion in tax and admission revenue over more than two decades—while building strong ties with small businesses and community leaders. For these and many others reasons, the American Gaming Association visited St. Louis last month to shine a spotlight on the vital role the industry is playing in Missouri, a microcosm of our impact across 40 states. During the event at Pinnacle’s River City Casino & Hotel with Missouri gaming executives, St. Louis-area business and community leaders, state and local elected officials and gaming regulators, the conversation focused on the successes to date—but emphasized the need for policies and regulations that encourage innovation and reinvestment. For example, Missouri casinos routinely purchase from minority-owned, women-owned and small disadvantaged businesses—and they’re seen as a model for other businesses. “We have actually grown from working with one casino… to over 40, which is huge for our company,” said Andrea Scales Williams, president of Document Imaging Systems. “We’ve been able to hire three or four people, and because of the casino market, we now have four locations. We’re very proud to be working in the casino industry.” “The relationships our businesses form with gaming companies are unique,” said Ed Bryant, vice president, diverse business solutions, St. Louis Chamber of Commerce. “I’m seeing some best practices in the way that you source to and from minority-owned and diverse businesses. I’d like to see the gaming sector share your best practices. Share what you’re doing with the health care sector, with the advanced manufacturing sector, with other sectors.”

While casino gaming is a valued community partner in St. Louis and across Missouri, there’s room for growth. During the event, the panel focused on how legalized, regulated sports betting could generate additional tax revenue for the state of Missouri. As KMOV reported, “Missouri and other U.S. states are missing out on billions of dollars because of a federal law banning sports betting.” KSDK added, “Americans already bet $150 billion a year on sports illegally. So the push is to legalize it, and then also reap the benefits.”

betting) alone is “no(Sports silver bullet to gaming’s growth in Missouri.

Instead, a shift to progressive policies and regulations— not simply sticking with what worked yesterday— would go a long way.

Global Gaming Business OCTOBER 2016

”

The question about sports betting is a good one to ask. Of course, it alone is no silver bullet to gaming’s growth in Missouri. Instead, a shift to progressive policies and regulations—not simply sticking with what worked yesterday—would go a long way. As River City Casino’s Chris Plant said, “We are competing with other states and industries.” We encourage Missouri’s elected officials and gaming regulators to recognize intense competition from other states and to take a progressive view of gaming policy that supports greater reinvestment, flexibility to adapt to rapidly changing consumer demands and common-sense regulations that help the industry generate even greater tax revenue.

Follow Geoff Freeman on Twitter at @GeoffFreemanAGA.

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REGULATION

Saving Face Mr. Wynn, stupid regulations and why it is better to be happy than right

few years back, I had the opportunity to live in Macau while teaching a class on Casino Management & Regulation at both the University of Macau and Macau Polytechnic Institute, a class that had been organized by my friend Bill Eadington. For my first lecture, I opted to wear an old pair of cufflinks that my mother had collected during the Nixon era, for my mother had been this diehard Republican, and the design of these cufflinks was simply the late president’s last name. As I was introducing myself to the class during my very first lecture, I mentioned that I was wearing the cufflinks, and following the class several of the students (which included a number of professors from Macau) came up to take a look. I was fascinated by this response— these people really wanted to see the Nixon cufflinks and were actually somewhat reverent about them, and so I made one of my tasks during my tenure in Macau to understand why this was the case. The simple answer was, of course, that President Nixon officially recognized China as a country. I came to understand that the adoration for Nixon in Macau was about much more than just the act of his recognizing China, however, and the something else that I came to understand was the concept of face. I would never be so foolish as to suggest that I can speak to the cultural nuances of face in China; I cannot. I did come to understand the notion to the extent that to pubicly shame someone was to cause that person to lose face, and that causing someone to lose face carried with it the potential of further action, and that further action could be unpleasant. Anyway, I believe that I have learned enough on the topic to suggest that this whole thing of losing and saving face is critically important. Last October, Steve Wynn made a mistake. In the context of an earnings conference call, he suggested that a regulatory process that addressed how many tables could be offered in a casino in Macau was basically stupid.

By Richard Schuetz

Unfortunately, the target of his message lived by a code that such public shaming was a manifest and material loss of face and such an action could not take place without a cost. And as the gaming world has clearly seen, that cost is a very low allotment of gaming tables for Wynn’s new resort in Cotai. As I have gotten older, I seem to continually re-learn the lesson that it is often better to be happy than right, and when it comes to rants during earnings calls, my guess is that Mr. Wynn now

‘‘

to a number below that which would exist if determined by market forces, the results are somewhat predictable. The casino will not be able to meet demand, and will therefore offer overcrowding and poor service to its guests. With slots, even if they are server-based, there will be denominations that are not available, and people will not be able to get on machines. For table games, the casino reacts to the lack of supply by raising the table limits, which eliminates the revenues and repeat patronage of the lower-tier player. And the fact that this casino offers poor service because of this supply restriction is not good for anyone. A major issue with regulatory entities is that they are monopolies, led and staffed by people who often have a limited literacy and fluency in business, finance, economics and other skill sets that are materially important to understand in order to orchestrate an appropriate public policy and avoid the all-too-present law of unintended consequences. Furthermore, as a result of this limited literacy and fluency, they often make decisions based on fear and/or ignorance. The end of this daisy chain is that people who are trying to invest in communities, pay taxes, employ people and enhance the tourism appeal of a jurisdiction get subjected to a regulatory circus that, quite frankly, makes no sense. It is the damage that these regulators do to the public policy goals of their jurisdictions that should be the cause of the loss of face, and not someone speaking to the truth.

For a regulatory entity to make an effort to control the inputs into the production process is a huge market distortion—and market distortions, by definition, screw up markets, and this leads to a stream of unintended consequences that typically benefit no one.

Global Gaming Business OCTOBER 2016

really appreciates that concept. If there is a call that he and his many stakeholders could take back, I would guess it would be that call. But that is that, and unfortunately another interesting thing that I believe I have learned about the Chinese mindset is that it definitively has a long view—meaning, of course, that Wynn will probably be in the penalty box longer than he would like. Underneath this all, however, is the fact that Wynn was absolutely right. For a regulatory entity to make an effort to control the inputs into the production process is a huge market distortion— and market distortions, by definition, screw up markets, and this leads to a stream of unintended consequences that typically benefit no one. Furthermore, one does not have to fly to Asia to see this, for an integral aspect of the tribal compacting process in California is the placing of caps on the number of devices that the casino facility can offer. If a casino is to have its tables or slots limited

”

Richard Schuetz is the executive director of the Bermuda Casino Gaming Commission, and was formerly a commissioner for the California Gambling Control Commission. The opinions expressed in this article are his alone, and do not necessarily reflect the position of the government of Bermuda, the Bermuda Casino Gaming Commission, or any other entities or individuals within that country.

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AGEMupdate SEPTEMBER 2016 KEY BOARD OF DIRECTORS ACTIONS

AGEM MEMBER PROFILE Ortiz Gaming is a leading multinational video bingo and machine developer in the gaming industry. Ortiz provides the finest gaming products on the market, and delivers multi-platform games through social and mobile platforms, always bringing innovation and new experiences. Ortiz gaming concepts are a proven model in North America, Europe, Latin America and Asia. A passion for innovation and technology has evolved Ortiz Gaming into a successful and lasting industry giant across the globe. Ortiz Gaming takes electronic bingo and machine gaming to the next level with an array of new games and systems aimed at growing its solid presence in land-based markets and extending it deep into the online and remote gaming space. Ortiz recently released new Class II and Class III slots, new keno and lottery games, new bonus concepts for bingo and newer and more interesting ways of reimagining gaming as a compelling entertainment proposition on whatever device the player chooses to engage with it. That will combine with new interactive and online offerings from the company. President and CEO Maurilio Silva sums it up with Ortiz’s theme for the recent G2E with three words: New, new, new. “G2E is a global event, and we have new products for every market. We have spent millions in research and development this year, and the show floor will reflect that. We will have products for land-based, interactive and even hybrids. With the release of so many new products, Ortiz Gaming highlights new product throughout all three days of the event.” Ortiz Gaming is based in Boca Raton, Florida. For more information on the company, visit ortizgaming.com.

• Nevada Gaming Control Board Chairman A.G. Burnett and his team met with AGEM representatives for a working session after the August meeting. A key issue discussed was the idea of introducing what the chairman has termed a New Innovation Beta program. This would be a major breakthrough for suppliers, as it allows them to place machines on the gaming floor in field trials prior to approval to evaluate player acceptance, test new features, and fix and update software. AGEM introduced a letter at a subsequent workshop supporting the chairman’s proposal. The language of this is now being finalized, and will be submitted to the Nevada Gaming Commission for a vote in October. • AGEM recently presented a document at a public meeting in Florida regarding regulatory changes and future product introductions. Following the meeting, revised draft rules are being prepared for AGEM members to comment on. The head of the regulatory agency in Florida will be visiting G2E to see the latest products and to gain further knowledge of the gaming industry. • Following recent activity in Brazil, James Kilsby of Gambling Compliance (the regulatory intelligence agency) presented an update at the September meeting. With a new government in place, two new bills have been proposed that are seen as the most significant step toward approving gambling in the last decade. Legislation to allow casinos, bingo halls and gaming machines in bars was passed by a special Chamber of Deputies committee on August 30. • AGEM welcomed two new members in September. Exacta Systems, a historical horse racing technology supplier based in Florida, was approved as a Bronze member and Gambling Compliance, a provider of independent business intelligence to the global gambling industry based in London and Washington, was approved as an Associate member.

UPCOMING EVENTS • The Executive Development Program (EDP) will be held November 10-19 in Lake Tahoe, Nevada. AGEM has been a supporter of this event since its inception, which is said to be gaming’s most prestigious leadership development academy.

AGEMindex The AGEM Index posted a slight decrease in August 2016 after gaining 34.67 points in July 2016. The composite index stood at 286.4 at the close of the month, which represents a decrease of 8.29 points, or 2.8 percent, when compared to July 2016. The AGEM Index reported a year-over-year increase for the 11th consecutive month, rising 95.95 points, or 50.4 percent, when compared to July 2015. During the latest period, half of the 14 global gaming equipment manufacturers reported month-to-month increases in stock price, with three up by more than 10 percent. The balance of manufacturers reported decreases in stock price during the month, with one declining by more than 10 percent.

AGEM

Stock Price At Month End Aug-16 Jul-16 Aug-15

Percent Change Prior Period Prior Year

Nasdaq: AGYS (US$) !

11.05 !

11.42 !

10.27 !

(3.24)

7.59

(0.10)

ASX: AGI (AU$) !

2.21 !

2.09 !

3.01 !

5.74

(26.58)

(0.01)

Aristocrat Technologies

ASX: ALL (AU$) !

15.10 !

15.94 !

8.44 !

(5.27)

78.91

(9.68)

Taiwan: 3064 (NT$) !

34.75 !

36.45 !

16.85 !

(4.66)

106.23

(0.05)

NYSE: CR (US$) !

64.32 !

62.30 !

52.54 !

3.24

22.42

1.55

Nasdaq: DAKT (US$) !

9.53 !

6.47 !

8.69 !

47.30

9.67

2.53

NYSE: EVRI (US$) !

2.11 !

1.90 !

5.17 !

11.05

(59.19)

0.20

OTCMKTS: GLXZ (US$) !

0.46 !

0.29 !

0.24 !

58.62

91.67

0.14

Nasdaq: GPIC (US$) !

9.95 !

9.28 !

9.51 !

7.22

4.63

0.07

NYSE: IGT (US$) !

22.83 !

20.90 !

16.98 !

9.23

34.45

5.41

ATHEX: INLOT (") !

0.88 !

0.90 !

1.52 !

(2.22)

(42.11)

(0.05)

Astro Corp. Crane Co. Daktronics, Inc. Everi Holdings Inc. Galaxy Gaming Inc. Gaming Partners International International Game Technology PLC INTRALOT S.A.

TYO: 9766 (¥) !

3,655 !

3,990 !

2,664 !

(8.40)

37.20

(6.21)

Scientific Games Corporation

Nasdaq: SGMS (US$) !

8.25 !

10.66 !

11.02 !

(22.61)

(25.14)

(2.08)

Nasdaq: TACT (US$) !

7.54 !

7.66 !

7.51 !

(1.57)

0.40

! "

Transact Technologies

! !

(0.01)

Konami Corp.

Change in Index ex Value !

(8.29)

AGEM In A ndex Value: Julyy 2016 !

294.68

AGEM Index Value: August 2016

Global Gaming Business OCTOBER 2016

Index Contribution

Ainsworth Game Technology

Agilysys

AGEM is an international trade association representing manufacturers of electronic gaming devices, systems, lotteries and components for the gaming industry. The association works to further the interests of gaming equipment manufacturers throughout the world. Through political action, trade show partnerships, information dissemination and good corporate citizenship, the members of AGEM work together to create benefits for every company within the organization. Together, AGEM and its member organizations have assisted regulatory commissions and participated in the legislative process to solve problems and create a positive business environment.

Exchange: Symbol (Currency)

286.40

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FANTINI’S FINANCE

Dynamic Supply Side A new CEO at Scientific Games is only one of the exciting developments with the slot-makers

or investors, the supplier side of the gaming industry has gotten smaller in recent years as IGT and Scientific Games (SGMS) led consolidations that saw the disappearance of such prominent public companies as Bally, WMS and GTECH. However, the space may become more interesting now that IGT and Sci Games have settled in to who they are, and as other companies emerge. The new IGT and Sci Games stories start with lotteries. Their historic investors knew them as slot companies, and they’ve had to learn the lottery component. Interestingly, lotteries give IGT and SGMS recurring revenue, just like the slot leasing business that for years attracted investors. The recurring revenues of lotteries are, in fact, more stable than slot leases. The business is locked in by multi-year contracts and is not subject to the constant shifts of an installed base of machines. And given that lotteries provide IGT with two-thirds of its revenue and SGMS with onethird of its revenue, that’s a lot of stability. Each company, of course, has its unique story. For IGT, it’s cash flow and the stability of leadership, as longtime CEO Marco Sala continues to lead the overall operation and American and Interactive CEO Renato Ascoli brings his experience and unified leadership to the Americas. For SGMS, the story is new leadership, as Kevin Sheehan takes over for much-admired Gavin Isaacs as CEO. Though we have a lot to learn about Sheehan, he does offer the experience of having turned around an even more indebted company, Norwegian Cruise Lines. But the story might get more interesting than just the Big Two. Here are some quick thoughts on several companies that might go public or become more liquid for U.S. investors: • Ainsworth, which trades on the Australia Stock Exchange, is about to undergo a transformation as founder Len Ainsworth’s 53 percent ownership is bought by Novomatic. • Novomatic is a giant, privately held Austrian-based company with big ambitions for North America. Ainsworth has those same ambitions. 18

Global Gaming Business OCTOBER 2016

By Frank Fantini

Now, Ainsworth provides Novomatic with the public vehicle by which to pursue those ambitions, and Novomatic provides Ainsworth with the resources to pursue its ambitions. • AGS. The former American Gaming Systems is another ambitious competitor starting to gain material market share as it enters Class III, expands into new markets and continues its push into the proprietary table game and shuffler businesses. Led by former Shuffle Master COO David Lopez, AGS has a young management team that learned its stuff in SHFL’s entrepreneurial environment. What’s important about AGS is its owner, Apollo Global Management. As a private equity firm, Apollo can be expected to someday monetize its investment in AGS. Apollo has been helping AGS grow so that monetization will be more lucrative when it happens. Apollo may choose to sell AGS on that day. Or it might decide to take AGS public, giving stock investors another company to play. • Aristocrat has been the hot supplier of the past couple of years, as CEO Jamie Odell’s strategy of focusing on the core business, emphasizing game content and pushing harder in North America is paying off handsomely. Aristocrat stock is fairly liquid on the Australia Stock Exchange. The company has long held to the idea that it lists only there. However, as North America becomes increasingly important, and more and more decision-makers are located in Las Vegas, it would not be overly surprising to see a dual listing in the U.S. someday. • Interblock. A few years ago, Interblock was just another of those little European electronic table game companies. No more. The sleek black-and-red Interblock machines are showing up increasingly in American casinos. Electronic table ganes—or ETGs as they are now commonly called—comprise a growing segment of gaming floors in the U.S. as they have been in Europe, and more recently in Asia. Under the leadership of CEO John Connelly, Interblock intends to raise its profile considerably.

LAS VEGAS GAMING GROWTH While so much attention has been given to gaming trends in Macau, it is worthwhile to note that there is a trend in the U.S., and it is up. That was evidenced in July when a favorable calendar and a resurgent Las Vegas drove gaming revenues to their best year-over-year comparison since February. July had one more Saturday and Sunday this year than last, but favorable calendar or not, the fact is U.S. casinos have grown revenues fairly steadily this year, up in every month but March and May. Here are some stats as recorded in Fantini’s National Revenue Report: Overall, gaming revenues jumped 4.09 percent to $3.64 billion in July, and a healthy 2.26 percent on a same-store basis. That beat year-to-date gains of 1.66 percent and 0.17 percent, showing an acceleration of growth. Indeed, same-store growth in July actually pushed that measure into positive territory for the year, as it had been down 0.28 percent through June. If someone wanted to look at the glass half-empty, it would be by factoring out the Las Vegas Strip. National gaming revenues sans Nevada actually declined in July, slipping 0.27 percent to $2.979 billion. And even the Strip was considerably less robust than its walloping 16.77 percent gain made it appear. Gamblers played lucky on the Strip, and highrolling Asians returned. Factor out lucky-for-the-casinos blackjack and baccarat, and the Strip actually grew revenues a more pedestrian 4.75 percent. That is much closer to the 4.4 percent win of slot machines, a more reliable measure of domestic play. Further, the Las Vegas locals market declined 4.67 percent. In other words, regional and locals play in U.S. casinos could be interpreted to actually have been weaker in July normalizing for the calendar and subtracting the Las Vegas Strip. Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.fantiniresearch.com.

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Tribes are using casinos to strengthen governments, relations BY DAVE PALERMO

he August 9 meeting of the California Senate Government Organization Committee was, by any objective analysis, a love fest of committee members, American Indian leaders and city and county officials gathered to discuss new and amended tribal-state casino compacts. Legislators, mayors, labor leaders and others praised six tribes represented at the meeting for using casino resources to strengthen their governments, build diversified economies and create jobs and prosperity for surrounding non-Indian communities. Committee members commended tribal leaders for working with counties and municipalities on zoning and development, traffic, and fire and police protection. And labor leaders acknowledged tribes for creating quality jobs, providing generous wages and benefits and, most importantly, making it easier for workers to unionize. Meanwhile, those who paused to reflect on the birth and evolution of Indian gaming in the Golden State breathed a sigh of relief. Proposition 1A—the 2000 ballot initiative which planted the seeds of what is today a $7.9 billion gambling industry with 60 state-licensed casinos

employing 56,000 mostly non-Indian workers—prompted fears tribal casinos would negatively impact local communities. “There was a lot of apprehension,” recalled Republican Senator Patricia Bates. “There was a lot of worry as to whether there would be the kind of mitigation” necessary to address traffic, environmental and other impacts of Indian casinos development. “There was such suspicion,” agreed Democratic Senator Steve Glazer. “Critics didn’t realize it was always in the tribes’ interests to do things right— to treat their employees well, to work with the communities. Tribal concerns about public safety equaled or exceeded everyone else.”

Local Reactions Mixed

Traffic and infrastructure problems did, indeed, ignite local opposition as new Indian casinos sprung up in largely rural communities while existing tent and prefabricated gambling halls quickly evolved into upscale casino resorts. Yolo County farmers complained of heavily trafficked roads leading to Cache Creek Casino, owned by the Yocha Dehe Wintun Nation. Similar complaints were voiced by neighbors of River Rock Casino, operated by the Pomo Indians of Dry Creek Rancheria in Sonoma County. Water wells dried up near a casino resort golf course owned —Mark Macarro, Chairman, by the Barona Band of Mission Pechanga Band of Luiseño Indians Indians in remote San Diego

“This new agreement reflects the mature and respectful governmentto-government relationship that we’ve cultivated between the state of California and local governments.”

Global Gaming Business OCTOBER 2016

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Vincent Armenta, former chairman of the Santa Ynez Band of Chumash Indians, negotiated a compact with the state that gave workers a “fair opportunity” to organize

County. And San Bernardino County neighborhoods complained of congestion created by a popular casino operated by the San Manuel Band of Mission Indians. “I don’t believe people thought tribes were going to develop the luxury hotels, the spas, the fitness centers, the golf courses. All that came as a surprise,” says Cheryl Schmit of Stand Up California, a gambling watchdog group. “We held press events and rallies. We had a meeting with 22 community groups in the governor’s office.” But the large-scale traffic, crime and other casino-related problems predicted by many elected officials, anti-gambling zealots and major newspapers did not materialize; quite the contrary. Working with local officials, the mostly small indigenous communities (there are fewer than 40,000 members of the state’s 110 federally recognized tribes) managed to smooth out much of the traffic, public safety and other casino impacts. In the process, tribes strengthened or built governments from the ground up, many establishing for the first time municipal service agreements (MSAs) and memorandums of understanding (MOUs) with nearby counties, towns and villages. “Tribes have become very competent, well-resourced governments that are, usually, very good partners to local communities,” says Kevin Washburn, who stepped down late last year as the Department of the Interior’s assistant secretary for Indian affairs. “They share the same goals.” “I do believe we have maturing governments,” says Robert Scheid, who until recently directed community relations for the Viejas Band of Kumeyaay Indians in San Diego County. “It’s a new era of tribal gaming and sophisticated tribal governments.” “The tribes that have their casinos up and running—and have been running for a while—I think they’re doing a better job,” Schmit says. Tribes today provide nearby communities with enhanced fire and police protection, emergency medical services, elder care facilities and hospital and school programs.

“You have gone way beyond expectations. You have been a role model,” Bates told Barona Chairman Clifford LaChappa, one of 17 tribes signing new and amended tribal-state regulatory compacts since Governor Jerry Brown took office in 2011. “I say that for all the tribes,” Bates said. “Congratulations and thank you so much for your partnership.” Legislators at the meeting also heralded the tens of millions of dollars in annual tribal charitable contributions to schools, hospitals and civic and community organizations. “It’s fantastic to have a tribal casino in any one of the districts for what tribes do for the schools, the roads, the hospitals,” Senator Tom Berryhill said.

Compacts in Evolution Many tribal leaders in California and elsewhere credit the evolution of tribalstate gambling compacts required in the Indian Gaming Regulatory Act (IGRA) of 1988 for creating constructive government relations between tribes and surrounding communities. But others worry that the compacts, particularly in California but also in several of the other 28 states with Indian casinos, are encroaching on tribal sovereignty, subjecting indigenous communities to the governmental jurisdiction of nearby counties and municipalities. IGRA requires tribes seeking to operate casino-style gambling on Indian lands to enter into tribal-state agreements, or compacts, that mandate tribes reimburse states for regulatory oversight costs. But while it was the intent of IGRA to limit compact negotiations to the scope and regulation of gambling, agreements in California and other states have extended beyond gambling to include revenue sharing, labor relations, non-casino development and tobacco and sales taxes.

Popular Barona Casino is located just 30 minutes from downtown San Diego, California

“As to mitigation, I would say they are legitimate issues, but they may not need to be in compacts.” —Kevin Washburn, Former Assistant Secretary for Indian Affairs, Department of the Interior OCTOBER 2016 www.ggbmagazine.com

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“The tribe is our friend, our neighbor and our partner in the continued growth of the city of Palm Springs.” —Palm Springs Mayor Robert Moon, on the Agua Caliente Band of Cahuilla Indians

IGRA and the 9th Circuit U.S. Court of Appeals in Rincon Band of Luiseño Indians v. Schwarzenegger in 2010 discouraged states from taxing tribal casino revenues. But IGRA allows payments to mitigate local impacts from casino development, a process Indian law experts say has been abused in California and elsewhere. Landmark 1999 compacts agreed to by more than 60 California tribes, scheduled to expire in 2020, call for tribes and local governments to voluntarily enter into “good faith” negotiations on casino mitigation issues. But 38 new and amended ’99 agreements negotiated by Brown and former Governor Arnold Schwarzenegger mandate that tribes enter into judicially enforceable local government mitigation agreements, earmarking up to 15 percent of tribal casino revenues. Brown agreements—which are tailored to address individual tribal and community development and planning issues—also require payments to an Indian college fund and a Revenue Sharing Trust Fund for non-gaming tribes and those with fewer than 350 slot machines. In addition, tribes under the Brown compacts receive tax credits for renewable energy, recycling and water conservation projects and investments in nongaming economic development and health care facilities. Most lucrative casino tribes have embraced the Brown compacts and amended tribal labor relations ordinances (TLROs) requiring tribes to remain neutral in union elections, making it easier for the politically powerful hotel workers union to organize workers. “This new agreement reflects the mature and respectful government-to-government relationship that we’ve cultivated between the state of California and local governments,” Mark Macarro, chairman of the Pechanga Band of Luiseño Indians, says of his tribe’s amended compact. “The compact reflects many of the progressive values the state and Pechanga share.” “Our strategy was to make sure there was a fair opportunity” for workers seeking to organize, says Vincent Armenta, who negotiated a Brown compact for the Santa Ynez Band of Chumash Indians before stepping down as chairman earlier this year. “I think the amended TLRO reflected that, very clearly.”

Brown Compacts Generating Criticism Not all tribes are pleased with the direction Brown is taking with the compacts. Twenty-five tribes still operating under the ’99 compacts—and negotiating jointly as the Compact Tribes Steering Committee (CTSC)—oppose mandatory local mitigation, labor provisions and other components of the Brown agreements. CTSC Chairman Dale Miller, chairman of the Elk Valley Rancheria, says the group is seeking a compact that closely adheres to the ’99 agreement, which calls for voluntary mitigation and TLROs with union organizing provisions resembling federal labor law. “That’s certainly correct,” Miller says. “That’s certainly true.” CTSC members contend the successful tribal/local government cooperation over the past 16 years has been achieved under the voluntary mitigation provisions in the ’99 compact, not the agreements negotiated by Brown and Schwarzenegger. “The tribes are saying, ‘Let’s just stay with the ’99 compact,’” says Lee 22

Global Gaming Business OCTOBER 2016

Acebedo, executive director of the California Nations Indian Gaming Association. “It’s good. It works.” Attorney Scott Crowell, who litigated the Rincon federal case, says the state is circumventing IGRA prohibitions against taxing tribal casino revenues by mandating tribes pay into a local government mitigation fund rather than the state general fund. “I applaud the Brown administration for getting off the Schwarzenegger platform,” Crowell says, which demanded that 20 percent or more of a tribe’s gaming revenue be paid into the state General Fund in exchange for additional slot machines. “Rincon was a major step in the right direction,” Crowell says. “But a compact that includes a smaller illegal gaming tax is still an illegal gaming tax. “Tribes can provide for that local casino mitigation without involvement by the state, thank you very much.” Tribal-state compacts are subject to review by the U.S. Department of the Interior, which acts as legal trustee for the tribes. All 38 new and amended compacts under the Brown and Schwarzenegger administrations were “deemed” approved by Interior, meaning the agency had reservations about the agreements that didn’t rise to the level of rejection. Two other compacts were rejected. “As to mitigation, I would say they are legitimate issues, but they may not need to be in compacts,” says Washburn, who reviewed many of the Brown agreements. “And indeed, gaming compacts may be inappropriate places to address those issues. “Some of these issues may well exceed the scope of what Congress intended compacts to address under IGRA.” CTSC tribes are bound by a signed protocol not to publicly discuss details of negotiations with Brown aide Joginder Dhillon. But sources close to negotiations who requested anonymity say CTSC tribes are pushing back against mandatory mitigation provisions. “The idea that the state should require the tribes and local governments to enter into binding agreements—which obviously gives local governments a tremendous amount of negotiating leverage—is a non-starter with the CTSC tribes,” one source says. “They don’t agree with that.” “The state has wanted a binding, enforceable agreement with the county as a precondition for new construction, expansion or renovation,” another CTSC source says. “This group has been very, very opposed to that concept. I would say it’s close to a non-starter for most of these tribes.” Sources said CTSC tribes are also discouraged by compact provisions calling for an increase in state regulatory authority, including audits. “The newer compacts involve the state in regulatory roles far beyond what’s in the ’99 compacts,” says a tribal source who requested anonymity. “The tribes don’t think that’s necessary or appropriate.” Tribes commend Dhillon for being receptive to allowing tribal courts to handle tort matters and player disputes. Dhillon through a spokesperson declined comment. Dhillon previously said the UNITE HERE hotel workers union is invited

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“We are growing the governmental experience and expertise necessary to partner with state, county, regional and municipal agencies in confronting issues of growth and preservation of our precious resources.” —Former Viejas Chairman Anthony Pico

into compact negotiations only when permitted by the tribes. But tribes contend it would be difficult to get compacts approved by the state legislature without union involvement in the talks. “That’s disingenuous on Joe’s part,” says a tribal official who requested anonymity. “The union embarked on a strategy of telling tribes, ‘You can reach whatever compact you want with the governor. But if you don’t reach agreement with us, we’ll kill it in the legislature.’” The CTSC talks have yet to take up the TLROs. CTSC Chairman Miller declined to discuss specifics of negotiations, but expresses optimism the tribes will be able to work out a deal with Dhillon. “I personally have a good relationship with the man,” Miller says. A Special Distribution Fund established under the ’99 compacts to deal with local mitigation was depleted in the Schwarzenegger administration, prompting the California State Association of Counties (CSAC) to lobby for the mandatory mitigation agreements. “Our main concern is that the Brown compacts address local impacts… and allow counties to maintain input over how those impacts are addressed,” CSAC legislative representative Kiana Valentine says. “It appears from a first glance that they do so. But each compact is different and the devil is in the details.” Crowell is concerned not just with the compact mitigation, but provisions requiring tribes to submit development plans for review by county and municipal building inspectors. “Of course the cities and counties are going to attest that these compacts are wonderful for them,” he says. “It is a sledgehammer for cities and counties to extort tribes for fees not directly related to the costs of mitigating the impacts of gaming. “I understand at the end of the day, tribes feel the agreement is better than fighting the state of California for what’s right. But that doesn’t make it right.” Yocha Dehe pays some $6 million a year to largely agricultural Yolo County, far beyond the $1.3 million in economic impact created by the casino, tribal Chairman Leland Kinter says. But the tribe values its local relationships, he says, and is pleased to contribute its highly regarded fire department, a child care center and, to date, $28 million in charitable contributions. “Even while the cost the county incurs because of our casino is much lower than the amount of money the tribe pays… we continue to contribute funds and build our relationships,” Kinter says. “In the beginning, we faced a great amount of uncertainty,” Kinter says of the birth of reservation gambling. “Our leaders worked hard to build trust among our neighbors and local governments.” Agua Caliente Band of Cahuilla Indians has a checkerboard, 32,000-acre reservation in the arid Coachella Valley. Its compact allows the tribe to augment its two casino resorts with four 500-machine casinos on newly acquired trust lands. The band shares borders and municipal agreements with Palm Springs, Rancho Mirage and Cathedral City. 24

Global Gaming Business OCTOBER 2016

“The tribe is our friend, our neighbor and our partner in the continued growth of the city of Palm Springs,” Mayor Robert Moon says.

‘Give Us Time … We’ll Catch Up’ Because of their small enrollments, tribal governments in California are normally staffed by non-Indian professionals, many with limited experience working with indigenous Americans. This is particularly true with tribes that began building their governments and economies with the birth of compacted casino gambling 16 years ago. “Tribes didn’t know how to run businesses or a government, so they hired people to do the job,” says Nikki Symington, a longtime Indian advocate who now works in political and public affairs for the Rincon. “I think gaming is assimilating tribes more than anything ever has. They are copying, merging into and being co-opted by the dominant culture in both business and government. “Soon, the tribe becomes a typical local government,” Symington says, rather than a culturally rich, indigenous community. Scheid, however, commends tribes for using casino resources to preserve culture, traditions and language. One veteran tribal attorney who requested anonymity says tribal leaders often must balance issues of sovereignty and self-governance with the need to work with state and local governments for the benefit of their citizens. “I’ve seen tribes—because of gaming and tribal-state compacts—go from horrific rates of unemployment and high school dropouts to full employment and near 100 percent graduate rates,” the attorney says. “I could sit out on my tribal lands and say, ‘I am sovereign,’ yet have nothing. I could have no housing, no health care, no education, no cultural programs, but damn it, I’m sovereign. The state doesn’t have the right to tell me what to do with the dirt that is my reservation.” Anthony Pico, former chairman of the Viejas Band of Kumeyaay Indians, in a 2007 speech before the San Diego Association of Governments spoke of the challenges facing tribal communities. “We are growing the governmental experience and expertise necessary to partner with state, county, regional and municipal agencies in confronting issues of growth and preservation of our precious resources,” Pico said. “It’s not easy, strengthening a government, building a diversified economy and rebuilding a tribal community decimated by generations of poverty and neglect. Some tribes are vastly more sophisticated in their governmental operations than other tribes. “Our political and approval processes are very democratic, but different from those of a state or local government,” Pico said. “We are new to working with other governments. We are still learning your rules as we develop many of our own. “Tribes have only had the resources to begin the process of nation rebuilding for, what, six, seven years? We are trying to do what it has taken our neighboring counties and municipalities several generations to accomplish. “Give us some time. I assure you, we’ll catch up.”

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Skill Plays Slot-makers, regulators solve the puzzle of skill-based slot games By Frank Legato

n the coming weeks, an Atlantic City casino is likely to be the first in the nation to host a new kind of slot machine—an arcade-style, first-person shooter game called Danger Arena. Produced by startup slot-maker GameCo, Danger Arena doesn’t look like your typical slot machine. It is housed in what looks more like an arcade console than a slot cabinet. It has an Xbox-style controller. But most groundbreaking of all is the game play. Each play typically lasts less than a minute, and players win by using the controller to shoot robots on the screen. The more robots, the more winnings. No spinning reels, no waiting for lucky bonus rounds. Winning depends on the skill of the player. Danger Arena, at press time very close to final approval by the New Jersey Division of Gaming Enforcement, is the first game in the New Jersey slot approval lab that was submitted in response to a call two years ago by state regulators for different kinds of slot games, including games employing skill as a primary path to the highest winnings. Danger Arena is by no means alone among new games this year that will employ skill, and New Jersey is by no means the only jurisdiction welcoming skillbased slot games. Over the coming year, the industry can expect to see an entirely new category of slot machines introduced to casinos in Nevada and New Jersey, and perhaps eventually across the country. There is palpable momentum in the movement to bring skill to the slot floor, but make no mistake: The game style is in its embryonic stages, as manufacturers are still trying to get on top of what has been a monumental mathematical challenge—how to offer profitable skill games within the parameters of slot regulations designed to return a minimum portion of wagers to players. It’s a tall order, but after two years of effort, several manufacturers appear close to filling it.

Genesis of Skill Slots No entity has worked harder to make skill-based slots a reality than the Association of Gaming Equipment Manufacturers (AGEM), which issued a challenge to 26

Global Gaming Business OCTOBER 2016

its members around two years ago to broaden the slot audience in the face of declining revenues. Many of the major slot manufacturers had dabbled in skill for years. Bally introduced Pong to the slot floor as early as 2007, and had produced other games such as All That Jazz that employ skill in bonus rounds. IGT has its “Video Reel Edge” series, in which the bonus sequences are much like arcadestyle video games, and other manufacturers have produced what have become known as “hybrid” games—traditional slots with an element of skill in the bonus. However, in 2014, the New Jersey Division of Gaming Enforcement called on slot manufacturers for something more—new styles of games that would include skill as a major factor in winning or losing. The reasons were many: The younger generation of casino-goers were openly disdainful of traditional slots, preferring mobile-game entertainment. Some current players were abandoning the dominant form of slot machine, the multi-line penny game, because of the high hold percentages typical to the genre. For the slot market to be sustainable into the future, New Jersey regulators said, something new was in order. New Jersey was not alone. By 2014, AGEM was already working with regulators and lawmakers in Nevada to draft what would become Senate Bill 9, a statute specifically allowing for variable-payback slot machines—in other words, games that would allow a return-to-player (RTP) that would increase with higher levels of skill. The passage of SB 9 in Nevada came at the end of a year of workshops involving AGEM, the Nevada Gaming Control Board and representatives of major slot manufacturers. AGEM then worked with the gaming board to craft what would become Regulation 14, Scientific Games takes it up a level with Space Invaders, the famous arcade shooting game, which the slot-maker has modified to fit the variable-payback regulations

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along with the technical standards that would govern the new skill-based games. “When we created the skill/hybrid games category in SB 9, it was a collective effort between the industry and the regulators to try to add another type of game to casino floors in Nevada,” recalls A.G. Burnett, chairman of the Nevada Gaming Control Board. Burnett says the idea was to blend chance with skill to create games that would attract new players while adhering to the statutes which require slot machines to be fair to all. SB 9, the enabling legislation for the new category of game, was passed in spring of 2015. AGEM then worked with the gaming board to craft what would become Regulation 14, the technical standards that would govern the new skill-based games. It was not an easy task. How do you place a cap on skill so casinos aren’t slammed by advantage players who happen to be very skilled at video games? On the other end, how do you assure that less-skilled players achieve at least the state-required minimum RTP? According to Burnett, topics like these were discussed during a series of three workshops with manufacturers and AGEM representatives as the regulations were being crafted. He says ultimately, the manufacturers will determine the best way to achieve both goals. Burnett says in the end, the gaming board is concerned with two basics: that games are fair to patrons, and that they can be properly audited for revenue and taxes. “Aside from that, everything’s on the table,” he says. At the same time the Nevada process was ramping up, New Jersey was working on its own regulations to govern skill-based gaming. Unlike Nevada, the state’s gaming authorities saw no need for a totally new statute governing variable-payback slots. “We have statutory authority to authorize casino games,” says Eric Weiss, deputy executive director of the New Jersey Division

of Gaming Enforcement. “This is just another casino game.” Gaming Laboratories International, which certifies slot machines for jurisdictions in a large swath of the U.S., took the same approach, placing skill games under the GLI 11 standard used for all slot approvals. Statute or not, New Jersey and GLI were dealing with the same issues as Nevada and AGEM in making skill games a reality. Weiss says the skill games are approved using the exact same parameters on which pure-luck slot machines are evaluated. “The skill-based games are not that much different,” Weiss says. “You’re coming up with a theoretical hold percentage. When you understand how the game operates compared to a paytable, you have to make some mathematical assumptions on this, but we have very talented and experienced mathematicians who worked with the vendor to determine what the theoretical would be on those games.” The final skill-based regulations in New Jersey are similar to those adopted in Nevada—approval of a skill game in Nevada virtually assures approval in New Jersey. One significant difference in the New Jersey regulations from the Nevada rules is something called “adaptive play.” Essentially, the regulation allows manufacturers to incorporate automatic adjustments to an RTP that is below the state minimum—a nod to fairness for players without the skill to excel at the new games. “We have the 83 percent hold requirement for any game that is a slot machine,” Weiss says, “and at the end of the day, these manufacturers are selling these products and claiming there’s going to be a theoretical hold. But what happens if everyone who comes in is just very poorly skilled?” The New Jersey regulations allow automatic adjustments to be incorporated to meet the state RTP minimum. The DGE is not setting any

There is palpable momentum in the movement to bring skill to the slot floor, but make no mistake: The game style is in its embryonic stages, as manufacturers are still trying to get on top of what has been a monumental mathematical challenge—how to offer profitable skill games within the parameters of slot regulations designed to return a minimum portion of wagers to players. OCTOBER 2016 www.ggbmagazine.com

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rules on how that can be achieved, although Weiss offers a few suggestions: “Can we have a mystery bonus award that brings the payback percentage back up? Or could they have a hidden Easter egg in a first-person shooter-type game where you hit a can that has the value behind it to bring the payback percentage back up? “We’re not prescribing how to use that feature; we just make it available to the vendor.” Weiss adds that the regulation is targeted only for poorly skilled people who cannot achieve the state minimum RTP on skill games. “If well-skilled people are beating the game, it cannot adapt by lowering the payback percentage,” he says. “You can only correct for poor play.” Nevada authorities opted not to codify any adaptive regulation, Burnett says, so as not to upend the basic premise that each game on a slot machine is an independent event, with each person having the same chance as the next to win, whether by chance or by skill. “A lot of that dialogue has to occur between the casino operator and the manufacturer, and we did not want to necessarily put restrictions into our tech standards that would stop that dialogue,” Burnett says. “We recognize that you’re going to have players who are naturally just better than others, and as long as the patron goes into the game with full knowledge that a lot of it depends on his or her skill, and notices are given—and we did require that in our

“We believe the TournEvent execution will attract not only the current customer base, but the millennial base and the Gen X base.” —David Lucchese, Executive Vice President of Games, Everi

Global Gaming Business OCTOBER 2016

regulations—then it’s going to be something that’s between the player and the operator.”

Nuts and Bolts Details such as these are what the industry’s suppliers and regulators have been working on to make skill-based slots a reality. And according to Marcus Prater, executive director of AGEM, we’re still at the beginning of the process. “Despite AGEM leading this effort, I’ve maintained that this is going to be a slow process, and we won’t see the end effect for roughly five years,” Prater says. “I’m trying to promote some patience on the hype.” Prater says companies are still trying to solve the substantial mathematical challenges proposed by skill games. “Those are questions that need to be addressed, and we don’t have the answers yet,” he says. “I do believe these companies will solve the riddle, but it’s a slow process. For this to become commercially successful, it needs to grow. For it to grow, we as suppliers need to get product on the floor to see how players react.” For the suppliers who participated in the regulatory workshops in Nevada, that means all players—not just young players seeking slot experiences different from the norm. “We really are looking at skill-based games not exclusively as a way to bring in that mystical millennial crowd,” says Matt Reback, vice president of marketing for Konami Gaming. “We think skill-based games need to appeal to the core player. And frankly, we believe they will and can appeal to the core player, but also at the same time, potentially new slot players.” Konami was deeply involved in the Nevada regulatory workshops on skill games. “We were part of a working group within the industry to review and in-

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The better players are at getting that frog across the street, the more they will win. To a point, of course. fluence the development of regs and standards,” Reback says. “Our thought was, in combination with the other suppliers, let’s take all that experience and wisdom we have and try and help, so that we move the industry forward in a good way.” As far as solving the mathematical riddle of skill games, Reback draws parallels to video poker, which he calls the “best and most solid analogy” to skillbased slots in terms of balancing chance and skill. “We’ve got years and years of knowledge looking at a game like that, where you have to have an RTP range,” Reback says. “On the top end and bottom end, you have to satisfy those requirements. If you’re going to cap it at 95 percent or 98 percent, skill can only get you up to 95 or 98, the same way video poker will get you up to the top end of your pay table with perfect strategy. “The same thing on the bottom end. If you sit there and don’t push a button for your entire experience, we need to make sure we can guarantee a minimum RTP, because that’s what the regs and standards require.”

advantage players.” Other slot manufacturers are joining the skill-based effort this year. Everi, for instance, is using a newly acquired license to bring the hit mobile video game “Fruit Ninja” to the slot floor. One format will be a traditional video slot on the company’s High Rise cabinet, with a pure-skill bonus game based on the popular fruit-slicing game, which is the second-most downloaded paid mobile app in the world. The other form, though, is pure skill—an out-of-revenue game for the TournEvent instant-tournament system. “When a player goes into the TournEvent contest, instead of popping balloons and spinning reels, they’re going to be slicing up all kinds of fruit, dodging a bomb, and those kinds of events, in a pure skill game,” says David Lucchese, executive vice president of games for Everi. “We believe the TournEvent execution will attract not only the current customer base, but the millennial base and the Gen X base.” Everi solved the variable-payback puzzle by letting the operator select the level of skill. “Since all jurisdictions are not created equal, we built levels into the software from full skill to faux skill,” he explains. “The operator can run it at full skill, but we’re going to give them the ability to dial it back—it’s less about automated adjustment, if you will, and more about operator-selectable.” Also involved in working toward skill-based gaming is leading slotmaker International Game Technology, which was the first to apply skill in

‘Gamblified’ and Ready Reback calls it “gamblifying” the skill game. If zero skill is employed, he says, the element of chance needs to be employed to ensure that the bottom return is at least within state requirements—and the more skill employed, the higher the return, up to a maximum level. Konami is applying these principles to its first two games designed under the variable-payback guidelines. Beat Square is based on the Japanese game concept Jubeat—owned by sister company Konami Digital Entertainment. Reback likens it to a hand-based version of the digital dancing game “Dance Dance Revolution”—also, as it happens, owned by Konami. When musical notes appear, instead of dancing with your feet as in Dance Dance Revolution, you use your hands. This is accompanied by Frogger: Get Hoppin’, a casino version of Konami’s popular arcade hit in which players manipulate a digital frog across lanes of traffic and obstacles. Konami Gaming released a standard slot with a bonus event replicating the arcade game last year. This time, the better players are at getting that frog across the street, the more they will win. To a point, of course. “I think video poker is the right analogy,” Reback says, “because in our games, you can play Beat Square and have really good strategy or play Frogger and get really good at it, but at some point, no matter how good you get, over time the game is never going to put the operator in a position to get beat by 30

Global Gaming Business OCTOBER 2016

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“It’s the kind of thing you’d see on an Xbox or PC in terms of game play. Typically, the game experiences are about 45-90 seconds in length. On our first game, I’m fighting robots. If I take out six or more robots, I’m in the money. If I take out 10 robots, I get the highest payout.” —Blaine Graboyes, CEO, GameCo

a big way with its Video Reel Edge slot series. Games like Tulley’s Treasure Hunt and Blood Life were traditional slots in the base games, but gave the player the option to play a skill-based bonus that placed the player inside a Nintendo-like 3D video game. “Those were largely due to working with the industry to change the rules to allow those styles of games,” says Jacob Lanning, vice president of international market strategy for IGT. “It’s definitely a category and rule set we’ve been pushing.” IGT continues to release products in the Video Reel Edge series. This year, the company launches Texas Tea Pinball and Cleopatra Pinball, which both feature a true skill-based pinball bonus using virtual flippers. IGT is launching a game called Lucky’s Quest that falls more closely under the new variable-payback guidelines than the Video Reel Edge games, which employ much more chance. Lucky’s Quest is a mobile-style matching game that will be available for play on the CrystalCore cabinet, as well as on a mobile device using IGT’s On Premise mobile on-property network. It’s based on a narrative starring a dragon named Lucky. In Lucky’s Quest, players can unlock characters, win credits and advance to new levels based on performance in the title’s symbolmatching game. Players with more skill achieve more opportunities to win the prizes. As far as how IGT solves the balancing act between skill and chance, Lanning says it depends on the game. “There are a few different ways we’ve done it,” he says. “It really depends on the game type, and the decisions that we make are really driven by the experience we’re trying to create for those players.” On the Video Reel Edge series, skill is balanced by doing “asynchronist progressives,” Lanning says. If you trigger the skill bonus and play poorly, the difference between the actual outcome and the theoretical expected outcome is put into a progressive pot, which is awarded as a mystery progressive to future players. The values of the progressive prizes are adjusted according to the skill levels of previous players. Scientific Games also is no stranger to skill-based traditional slots. This year, the company takes it up a level with Space Invaders, the famous arcade shooting game, which the slot-maker has modified to fit the variable-payback regulations. “It’s a hybrid game,” explains Jamie Vann, senior principal game designer for Scientific Games. “You do play a slot game, so a big portion of your return is based on random outcomes. However, your skill can affect a large portion of your return.” 32

Global Gaming Business OCTOBER 2016

The game offers the option of a free-spin bonus for those less-skilled. “If you play with above-average skill, you will return more in the skill bonus than you would in the free-spin game,” Vann says. Beyond that, the levels of what can be achieved with skill, and what must be achieved for a minimum RTP, are achieved much as they are with arcade games. “Optimal play” is relative. On Space Invaders, says Vann, optimal play means every shot you took hit the target you were aiming at, and it was always the most valuable target on the screen. “We know there aren’t going to be any players who can actually do that,” he says. “The art of this is going to be how to figure out how good players are going to be in the field when you put your game out.” Finally, at GLI and before regulators in Nevada are games from the young company that has made bringing computer games to casinos its main business. Gamblit Gaming is ready to begin Nevada field trials next year, says founder and CEO Eric Meyerhofer. Meyerhofer says Gamblit’s games, which feature rewards for reaching higher levels as in a mobile-style game, use a system of “skill points” earned through skilled play that can be used in jurisdictions where skill games are not yet approved. “This is a different kind of product,” he says. “We think the slot market is incredibly well-served, but we’re looking to reach that untapped market in casinos—in our opinion, those under 45.”

First to Market While manufacturers across the industry test the waters with skill-based products that solve the skill/chance equation in various ways, one young company appears on the brink of being the first to launch a live variable-payback game on a real slot floor. New York-based GameCo Inc. was founded in 2015 with the sole purpose of “bringing video games to casinos,” says Blaine Graboyes, the company’s CEO. The company’s core product is the Video Game Gambling Machine, or VGM. It uses an arcade-style cabinet, and features a custom controller designed in partnership with Suzo-Happ. It is a pure video-game platform. “This isn’t an enhanced slot machine or a bonus round,” says Graboyes. “The actual game experience is, I play a video game and my skill in the game determines my payout.” Graboyes says the first GameCo skill offering, Danger Arena, will be launched in an Atlantic City casino just after the Global Gaming Expo trade show. He did not want to reveal the casino pending final approval of the game. Danger Arena is a simple first-person shooter game. “It’s the

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1 9 0 0 AT T O R N E Y S | 3 8 L O C AT I O N S W O R L D W I D E˚

kind of thing you’d see on an Xbox or PC in terms of game play,” says Graboyes. “Typically, the game experiences are about 45-90 seconds in length. On our first game, I’m fighting robots. If I take out six or more robots, I’m in the money. If I take out 10 robots, I get the highest payout.” GameCo builds its games under the GLI 11 standard, which is the current standard for slot machines, electronic poker and blackjack. Graboyes says the first games will target a 90 percent return-to-player. “And I’m pretty confident we’re going to hit that number.”

Answering the Questions Much of the industry will be watching the first skill-based slot games very closely. As that happens, Prater says AGEM is dedicated to helping new jurisdictions craft skill-based/variable-payback statutes and regulations, including a bestpractices document the organization offers new jurisdictions that incorporates “what we feel are the best of Nevada, New Jersey and the GLI 11 standard,” Prater says. (For more information, visit AGEM.org.) Meanwhile, as Prater and regulatory officials stress, the remaining questions, puzzles and solutions that will form the art of skill-based gaming will ultimately be answered by the operators, through live casino action. What will skill ultimately do to slot return? Will the games work well on the main floor? Placed next to the ultra-lounge? In special millennial-friendly rooms or slot areas? Graboyes at GameCo says his potential customers are divided on these questions. “Some casinos have definitive plans for dedicated areas,” he says. “Other casinos are just giving them top placement on the floor. I’m not really sure which will perform better. The way I view it, this is a great opportunity for beta-testing in the field, and getting actual data, and then adapting it.” “All of us are wading into this brave new world of skill-based with a couple of jurisdictions,” adds Everi’s Lucchese. “We view skillbased games as evolution, not a revolution. Let’s wade into it; let’s learn together and see where we go.”

Experience The Global Gaming Practice at Greenberg Traurig is knowledgeable on virtually all matters concerning the casino industry The gaming universe is changing. New casino markets continue to open. Revised gaming regulations are adopted. Various forms of legal gaming, such as skill based slot machines, are being unveiled. New types of potential gaming related activities, including daily fantasy sports and eSports, are being created and debated on a daily basis. The Greenberg Traurig Global Gaming Practice stays abreast of this changing casino world. We rely on the experience of 40 attorneys with diverse backgrounds on virtually all aspects of gaming operations. We possess a unique understanding of gaming law that comes from hands on involvement in working with gaming regulators and government officials worldwide.

Global Gaming Practice Acquisitions | Financing | IP | Labor | Litigation | Operations | Real Estate | Regulatory Learn more at gtlaw.com/gaming GREENBERG TR AURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2016 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Martha A. Sabol in Chicago at 312.456.8400. °These numbers are subject to fluctuation. 27802

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Fad or Phenomenon?

In the rise of eSports, clear lessons for way. The first: How does eSports gambling take place? There are two basic classes of eSports gambling the commercial casino industry products: cash betting (where people wager cash on various BY CHRIS GROVE

he rise of professional competitive video gaming—generally referred to as eSports—has caught many by surprise. Perhaps such a phenomenon was inevitable; video games are both entertaining and generally invite competition by nature, so it naturally follows that many who enjoy playing video games also enjoy watching video games contested by players possessing elite levels of skill. What should come as even less of a surprise, even to those caught off guard by the recent cultural ascension of eSports, is that eSports gambling is drafting on the growth of eSports. While still in a nascent stage, eSports gambling already boasts an aggregate handle that outstrips both daily fantasy sports and regulated sports betting in Nevada. ESports gambling spans a wide array of products, enjoys some clear parallels with—but also some equally clear points of departure from—traditional gambling, and contains critical lessons for a commercial casino industry searching for ways to connect with the next generations of customers.

How do people engage in eSports gambling? Before we get to those lessons, there are a few foundational pieces to get out of the 34

Global Gaming Business OCTOBER 2016

products) and virtual-item betting (where people wager virtual game items instead of cash). Cash betting is the simplest of the two, and functions more or less analogously to traditional sports betting. ESports fans wager cash at sports books with a dedicated eSports focus, like Unikrn, or at mainstream sports books offering eSports markets, like bet365 and Pinnacle. Other popular cash-based eSports gambling products include fantasy eSports sites (offered by both DraftKings and FanDuel) and sites where players pay an entry fee and compete head-to-head in various video game titles for a prize (GamerSaloon). Virtual-item betting is a bit trickier to digest. Various video games offer virtual items (often referred to as “skins” because they alter the cosmetic appearance of a player’s character in the game) that players can earn, purchase and trade among each other. That combination of value and transferability created the conditions for these virtual items or skins to be employed as an ad hoc currency. Gambling sites where virtual items could be deposited and gambled, with additional virtual items serving as the potential prize, were quick to follow the introduction of transferrable virtual items in major video games like Counter-Strike: Global Offensive. Sites offering virtual-item gambling provide a full spectrum of products to players; sports betting, roulette, dice games, lotteries and coin flips are among the most popular formats.

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How big is the market? Cash betting and virtual-item betting have two very different foundations and trajectories. Cash betting on eSports currently generates a relatively modest handle. Estimates from Narus Advisors and Eilers & Krejcik Gaming call for a total amount wagered across all eSports cash gambling products of $649 million in 2016. The vast majority of that will be sports book-style betting on eSports matches. For the sports books leading the vertical, eSports handle sits in a second tier of sports in terms of volume (think greater than rugby but less than ice hockey). Virtual-item betting is a different, and more complex, story. When we published projections for virtual-item handle back in May, we saw a market that would top over $6 billion in total wagers before the year ended. Then, in July, game publisher Valve, which controls the games with the majority of virtual items used for betting (CS:GO and Dota 2), launched a crackdown on virtualitem betting sites. The immediate impact of that crackdown was a violent reshaping of the market for virtual-item betting. Many high-profile sites shuttered in the wake of Valve’s actions. But no small amount of sites blatantly defied Valve’s ban and continue to offer virtual-item betting to customers.

• ESports betting handle will benefit significantly from the development of more sophisticated betting products and markets (right now, simple match outcome betting accounts for the majority of action) along with broader event coverage and higher limits. Tellingly, growth in eSports betting volume at vertical leader Pinnacle has doubled every year since inception, and is set to grow over 300 percent yearover-year in 2016. Virtual-item betting is far trickier to handicap. The controlling question is simple: How successful will Valve be in its crackdown on betting sites? We do not believe Valve can completely eradicate virtual-item betting (the only way to do so would be to eliminate the ability for players to transfer items, a change we imagine the company would make only if legally compelled to), so success becomes a question of degree: • If Valve enjoys a high degree of success, the virtual-item gambling market could shrink to a shadow of its former self (our bear case for 2020 is total wagered of $166 million). • If enforcement lags a step behind motivated gambling site operators, activity could rebound and climb back toward $1 billion. • But in nearly all plausible worlds, virtual-item wagering handle never returns anywhere near the dizzying heights of 2015-16.

Where is the market heading? We expect cash betting on eSports to enjoy largely uninterrupted growth on the way to reaching roughly $11.5 billion in handle by 2020. A prediction of some 20X growth over just four years certainly raises some eyebrows, but we believe the growth story is relatively clear and non-controversial: • ESports betting will continue to draft off of the broader global growth of eSports and the video gaming industry. • The growth of eSports betting will soon pass a tipping point of demand after which mainstream bookmakers will materially increase marketing budgets, product investment, and the development of trading expertise related to eSports betting.

What are the threats to growth? While the upside for eSports gambling is significant, there are two potential choke points for growth. The first is game integrity, an issue that manifests in both familiar and unfamiliar ways in competitive eSports. Match-fixing—including scandals at the highest levels—is a documented part of the eSports landscape. Relatively low compensation for players, deep industry fragmentation and the lack of a universal governing body are just a few of the factors that all but ensure match-fixing will remain a material issue in the near term. OCTOBER 2016 www.ggbmagazine.com

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While frills are few and far between, social elements abound. The majority of popular virtual-item gambling products involve players pitted against one another in a pool. But eSports must also guard against unique threats to the game environment itself. On the most malignant end of the spectrum: Players already have developed “hacks” that confer game-deciding advantages over competitors (such as the ability to automatically aim precisely in a combat game). Preventing such hacks in competitive play requires a significant investment in vigilant oversight, an investment that some event organizers may not be able or willing to commit. In grayer territory, we find a more subtle sort of game exploitation that stems from the reality that digital environments are unpredictable and exploitable in a way that physical environments are not. LeBron James cannot suddenly jump three times higher one night than the night before. But resourceful eSports players can uncover developer oversights that, when exploited, immediately and violently upset the balance of the game. One recent example makes the point. In July 2015, eSports powerhouse Blizzard was forced to ban a Heroes of the Storm game character from use in competitive play after an eSports pro leveraged a bug in the game—during a competitive match—to endow that character with game-dominating abilities. Athletes probing the edges of a game for an advantage are endemic to all sports. But the inherent presence of such a significant blind spot (game developers lack a perfect understanding of what is possible in their worlds) injects a unique uncertainty into eSports betting. A second threat to growth can be found in the cultural linkage of video games and minors. The persistent preconception that video games are largely for kids doesn’t stand up to scrutiny (the average age of an active eSports player hovers around 25, and the average age of a fan drifts closer to 30; both numbers are likely to head upward in the decade ahead). But the fact remains that millions of eSports players and fans are below the legal age to gamble (although the same could readily be said for traditional sports). That reality, paired with the stereotype of video gaming as an activity dominated by adolescents, will likely create cultural, legal and regulatory stumbling blocks for eSports gambling products that did not exist for traditional gambling products. The threat of pushback alone may deter game publishers from even allowing arm’s-length associations with gambling, let alone embracing and integrating the activity.

The takeaways for the commercial casino industry After several months spent investigating the market for eSports gambling, three clear lessons for the commercial casino industry emerged. First: A strong demand for gambling exists among eSports fans. A persistent trope in the commercial gambling industry is that millennials don’t have the budget for or interest in gambling. Cash betting on eSports tests the validity of that assumption, and virtual-item gambling absolutely explodes it, at least in regards to the sub-section of the millennial generation that is engaged with eSports. The development of skin betting into a multibillion-dollar industry by turnover took a little over a year, and happened in an almost completely organic fashion. There is simply no world in which such a rapid development occurs in such a fashion absent an intense level of inherent demand for gambling among 36

Global Gaming Business OCTOBER 2016

eSports fans. Second: That demand may not be obvious through the prism of traditional gambling. Every generation prefers to gamble in a slightly different way. The same is broadly true for every culture. The emergence of virtual-item gambling among eSports fans underlines this point. Much of the misunderstanding regarding the appetite for gambling among millennials may be a function of the commercial gambling industry failing to appreciate that they may be asking the wrong question—“Do millennials want to gamble via the products I currently offer?”—instead of, “Do millennials want to gamble?”—without realizing it. The apparent absence of successful skin betting sites built around slot machine-style games furthers the point. The modern casino is dominated by the slot machine, so much so that a cohort not engaging with slot machines can quickly become a shorthand for that cohort being generally disinterested in gambling. For whatever reason, the slot machine format does not appear to resonate with eSports fans (even when presented in the most favorable context possible), a predisposition that seems to broadly echo throughout the millennial generation. Third: Focus on speed, simplicity and social elements when designing gambling games for the eSports audience. The majority of popular virtual-item gambling games (outside of sports betting) are rapid-fire games that resolve in a matter of seconds, with new rounds starting right as the last round concludes (or occurring in parallel). The fundamental game mechanic in popular virtual-item gambling products tends to be hyper-simple (a coin flip, a lottery draw, a game of roulette reduced to black/red/green). This simplicity extends to the user interface. Options are minimal. Bells and whistles are all but absent. While frills are few and far between, social elements abound. The majority of popular virtual-item gambling products involve players pitted against one another in a pool. The most popular skin sports betting site is a tote system. Even in games where players compete against the house, there tends to be some social element involved. ESports still seems more fad than phenomenon to many. That attitude is understandable, but is becoming increasingly less defensible, especially in the context of the modern casino industry. Leaders in heavyweight mainstream categories such as broadcasting (ESPN, Turner), new media (Amazon, Facebook), beverage (Coca-Cola, Budweiser) and insurance (GEICO) have recognized eSports as a viable bridge to a new generation of customers. Armed with the roadmap provided by the current market for eSports wagering, there’s little reason for the commercial gambling industry not to follow suit. Chris Grove is a partner with Narus Advisors and a longtime analyst of online gaming and sports betting. The intersection of eSports and the gambling industry will be the exclusive focus of ESports & Casino Resorts, a two-day conference hosted at the SLS in Las Vegas on October 25 and 26. The conference will feature gambling industry experts like Grove alongside eSports voices from Twitch, Turner Broadcasting, Unikrn and dozens more.

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TABLE GAMES

Great Gizmos Why there is nothing like G2E on the face of the earth

ore than 20,000 men and women—casino executives, product suppliers, investment bankers, folks who take a wrong turn leaving Delmonico Steakhouse—are expected to attend this year’s Global Gaming Expo in Las Vegas. And this means one thing and one thing only. That in a world of 7.5 billion people, 7,499,980,000 aren’t coming at all. Here’s what they are going to miss, besides the amazing games, cool gizmos, awesome ideas, and wiz-bang technological advancements: 9 p.m. Saturday: Wheels down at McCarran International, one of the last remaining airports that’s not located a Tour De France stage away from the part of the city that, you know, people actually want to visit. Which is nice. 12:01 a.m. to 11:59 p.m. Sunday: Plenty of REM sleep, a healthy brunch, morning mass, afternoon constitutional, evening rubdown, topped with a marathon flash-card study session to memorize the exhibition booth numbers. And that’s exactly what you tell my wife if she asks, capiche? 10 a.m. Monday: It’s T-minus 24 hours until show time, and as is the case at this point every year, the main hall looks like Godzilla just crushed, crumbled and chomped his way through it. You’re talking a real disaster area. It’s like the fall of Saigon, minus the humidity and the helicopters. 9:30 p.m. Monday: This is when all the rah-rah, team-building, team-bonding and trash-talking from suppliers reaches its crescendo. Between the rhetoric and the alcohol—did we mention the alcohol?—companies big and small whip themselves into a frenzy about all the dominating and overpowering and punishing they’re going to do this week. It’s all very Fifty Shades of Grey. 9:59:59 a.m. Tuesday: The last screw of the last slot machine in the last booth gets its last quarter-turn.

Global Gaming Business OCTOBER 2016

By Roger Snow

One second later: The doors swing wide, the crowd pours in. Oh, the humanity! Like literally. Look at all those people. There hasn’t been a mob this big since July 14, 1789, when the Bastille was overrun by half of Paris. 12:55 p.m. Tuesday: Damn, this place is huge. Been here nearly three hours and haven’t left the first booth yet. And no, it’s not because the salespeople are so aggressive they won’t let you out. That’s just a coincidence. You could argue that G2E, like the Hermitage in Russia, Disneyland in California, or—uh, quick, pick a place—the Waitomo glowworm caves in New Zealand, is too big to experience in a single day. Or even two. The key is to plan. When you get the expo directory, the first thing you need to do is colorcode the suppliers as follows: “red” for the ones you must see; “green” for the ones you should see; “yellow” for the ones you promised you’d see, but really don’t want to see; “Orange” for the ones you will see on your way out the door; and “Fuchsia” for the ones you will only see if they see you first. Then, 15 minutes later, after you’ve accidentally left this Crayola concoction behind at the bottom of some toilet stall, go out there and do what everyone else does: Wander aimlessly and follow the smell of kettle corn. 5:05 p.m. Tuesday: In case you’re curious, that giant “ahhhhhh” sound is from all the suppliers sitting down for the first time in seven hours. And in case you’re curious again, that giant “ewwwwww” sound is from all the suppliers taking off their shoes for the first time in seven hours. 12:45 a.m. Wednesday: Party time! Buoyed by adrenaline and alcohol—did we mention the alcohol?—suppliers always loosen their ties and let down their hair the first night after the first day. Outdoors at Hard Rock. Indoors at Hakkasan. A little of both at Ghost Bar. Vegas, baby! Woo-hoo! What happens here, stays here, and all that sort of rot. No curfew, no last call, no problem.

7:15 a.m. Wednesday: Somebody shut off that f****** alarm clock before it gets f******drop-kicked down the f****** elevator shaft! 12:30 p.m. Wednesday: The official midway point of the conference. Nine-and-a-half hours down, nine-and-a-half hours to go. And to get though G2E Hump Day, it’s also nine-and-ahalf cups of coffee down, nine-and-a-half to go. Somewhere in Seattle, Howard Shultz is smiling. 10 p.m. Wednesday: Last night’s lesson is well-learned and well-remembered. Lights out. 11 a.m. Thursday: Check-out time. Yes, the evacuation starts while the show’s still going on—and going strong—because companies that send people to Las Vegas typically don’t want to face another night’s food, lodging, alcohol—did we mention the alcohol?—and mini-bar ransacking. 1:30 p.m. Thursday: And down the stretch we come. After three frenzied and frenetic days, the expo has finally started to slow. To. A. Crawl. Not much business takes place in these, the waning moments of G2E, except for that of the funny or monkey variety. Off in the periphery, the tear-down crews are watching and waiting, like a murder of crows, ready to descend and do their business once the clock strikes 3. 11:45 p.m. Thursday: If you didn’t know the world’s biggest gaming expo was here, you wouldn’t know it was here. The roadies are so good, so efficient, that by the time the clock strikes midnight, all that’s left is a pile of used lanyards and the smell of kettle corn. Oh, and a color-coded directory that was found at the bottom of a toilet stall. Yours? 10 a.m. Friday: Hey, it’s only 362 days until G2E 2017 begins. And you know what? We can’t wait. See you then! Roger Snow is a senior vice president with Scientific Games. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Scientific Games Corporation or its affiliates.

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s y o B e h Tare Back n w o T in

Re-establishing an online gaming brand By Steve Ruddock

egardless of the industry, a strong brand is an invaluable asset. The problem is, strong brands are difficult to build, and maintaining a strong brand requires diligence to stave off competitors. And no matter how strong, no brand is unassailable, something one American beer company discovered during the 1970s. In 1976, Schlitz was the second most popular beer in the United States, and the chief rival of Anheuser-Busch. Schlitz held this place of prominence despite several missteps by its cost-cutting owner Robert Uihlein, Jr., the great-greatnephew of company founder August Krug. In a run of incompetence that reads more like a Max Bialystock and Leo Bloom-hatched scheme to self-destruct the company than a legitimate business plan, Uihlein decided to change both the brewing process and the recipe for the No. 2-selling beer in the United States. To add insult to injury, the original recipe was also lost forever when the recipe was changed. And that was just the warm-up act. In 1976, Schlitz had to recall 10 million bottles when a new additive reacted with the beer’s foam stabilizer, a product of yet another one of Uihlein’s costcutting tactics. With the company losing ground to competitors, it was dealt yet another blow when Uihlein was diagnosed with leukemia and died shortly thereafter. With the loss of Uihlein, an accountant and a geologist took over control of the company. Their control of the company didn’t last very long, and had even worse results than Uihlein, as they decided to run one of the worst ad campaigns in television history in 1977. To give you an idea how bad it was, it’s known as the “Drink Schlitz or I’ll kill you” ad campaign. A 1981 strike at its Milwaukee plant was the proverbial coup de grace for Schlitz. Despite being gifted a 100-year-old established brand, Schlitz fell into irrelevancy under the stewardship of Uihlein and his immediate successors. To be fair, not all of Uihlein’s policies were seen as mistakes at the time, as the company felt it needed to increase production to keep up with demand. 42

Global Gaming Business OCTOBER 2016

On its surface, the story of Schlitz is the quintessential cautionary tale of a company cutting corners and trying to rely on its brand instead of strengthening it, but it also provides us with other valuable lessons, such as the difficulty in rebooting a forgotten brand. Since its collapse, Schlitz has been bought and sold several times over, and is still being produced and sold to this day, but attempts to resurrect the once-mighty brand have produced trivial results. Online poker companies trying to break into the still-nascent legal U.S. markets could learn a lot from Schlitz Beer, as they were once powerhouses in the U.S. market and now face a somewhat similar uphill battle, albeit for different reasons.

re-establishing a Brand When New Jersey legalized online poker in early 2013, online poker companies were lining up to partner with New Jersey casinos. Nevada and Delaware had beaten New Jersey to the punch, but it was the Garden State’s near 9 million residents (nearly triple the population of Delaware and Nevada combined) that appealed to online poker operators, particularly the operators that were around during the glory days of online poker, when the U.S. market was a cash cow. Companies like 888 and PartyPoker had been out of the U.S. market for some seven years when they relaunched in New Jersey in November 2013. And while seven years may not seem like much, the brands were about as well-known as Schlitz Beer is in 2016. Instead of a license to print money, a New Jersey online poker license became an exercise in establishing and re-establishing your brand, when all of your competitors (the land-based casinos that online poker companies rushed to partner with) possessed powerhouse brands. Not even PartyPoker, the former No. 1 online poker site in the world as late as 2006, stood a chance, and it was its partner, Borgata, which accounted for three-quarters of the network’s traffic. After its prolonged absence, the PartyPoker brand no longer resonated.

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“A brand is part of the narrative that helps tell the story of your product.” —Media RX CEO Alex Dreyfus

PokerStars, which relaunched in March 2016, was a different story. The PokerStars brand quickly ascended to the top of the New Jersey market, and was so strong that its land-based partner, Resorts Casino, doesn’t offer a selfbranded online poker site in New Jersey. Unlike 888 and PartyPoker, which left the U.S. market in late 2006, PokerStars operated in the United States until April 15, 2011, known as Black Friday in the online poker world. Because of this, and because of its position of prominence around the globe, the company’s brand was much fresher in people’s minds. PokerStars had also remained in the news quite a bit during its U.S. absence. There was the 10-figure settlement with the Department of Justice that included the purchase of Full Tilt Poker in 2012 stemming from the Black Friday indictments. There was the company’s attempt to buy the Atlantic Club Casino in 2013. There was the blockbuster takeover by Amaya in 2014 and the subsequent insider trading charges filed against former Amaya CEO David Baazov that came to light. And there was PokerStars’ protracted licensing process that began in 2013 but wasn’t consummated until 2015. And for those who follow poker outside of New Jersey, there are the numerous PokerStars-branded tournaments around the globe, the company’s high-profile poker and sports ambassadors, and PokerStars’ heavy involvement in California’s efforts to legalize online poker. Even in absentia, the company was hard to ignore. “PokerStars is global, and is arguably the most talked-about brand in poker,” Amaya Vice President of Corporate Communications Eric Hollreiser says. “So, for most American poker fans—who are following their favorite players and the big online and live tournaments—we are still the most relevant company to them, because we’re driving the game forward whether or not they can play on our real-money online offering.” As Hollreiser notes, PokerStars’ problem wasn’t a lack of brand awareness, but a lack of poker awareness. “Our absence left a marketing vacuum for the promotion of poker generally,” Hollreiser says. “So, the next generation of players were not exposed to online poker marketing, which in 2010 was nearly ubiquitous. “The lack of marketing also led to the decrease in original poker content on TV and online, further reducing the promotion of the game. “We need to re-engage these consumers with poker in general, not just our brand. And we need to do it in the context of today’s world, not the world of 2010.” Hollreiser goes on to detail the company’s numerous marketing strategies designed to re-engage with lapsed players.

“We’re promoting our mobile apps and innovative new formats like Spin & Gos, which are more relevant to many people’s lifestyles in 2016. Our PokerStars Festival and PokerStars Championship events have entertainment and experiences beyond poker. “We have Jason Somerville attracting huge audiences watching, chatting and playing with him on Twitch and at Run It Up live events. That’s why we support more charitable events than any poker company in the world. These things are not just relevant but important to people’s lives.” And at the center of all of this is the PokerStars brand, which the company was able to quickly re-establish in the U.S. market.

When Is It Right To Retire a Brand? PokerStars also faced another interesting branding dilemma recently, when the company decided to retire the 13-year-old European Poker Tour brand. A decision that was unlikely an easy one, it is a decision MediaRX CEO Alex Dreyfus has had to make twice in recent years. In 2012, the short-lived Epic Poker League and its parent company, Federated Sports + Gaming, abruptly folded, leaving behind a pile of debts and plenty of aggrieved players. The EPL also had several salvageable assets. One of those assets, the Global Poker Index, was scooped up by Pinnacle Entertainment during the EPL bankruptcy auction in June 2012. Shortly thereafter, the GPI came under the sway of former Winamax and ChiliPoker founder Dreyfus. The Global Poker Index was developed to be a ranking system to help the Epic Poker League determine the top 300 poker players eligible to play in EPL events. Dreyfus saw far more potential in the product. Dreyfus kept the brand, and in fact used it as the base to build subsequent brands, despite the slight taint it acquired from its time with the much-maligned EPL. But Dreyfus did make some other big changes. “Our first move was to build on the GPI’s existing international rankings by adding localized rankings to help reinforce the vision,” Dreyfus says. The GPI also got a new logo and a new website, to further fit into Dreyfus’ “vision”—a vision that would be imagined several years down the road with the launch of the Global Poker League, a poker-sports hybrid league propped up by the GPI, and several other poker products Dreyfus had stockpiled over the years. As Dreyfus explains, he prefers each vertical to have its own identity, but for the brands to be interconnected, in this case using the root words Global and Poker—in 2015 Dreyfus hosted the Global Poker Masters, a Ryder Cup-inspired poker tournament series. “A brand is part of the narrative that helps tell the story of your prodOCTOBER 2016 www.ggbmagazine.com

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uct,” Dreyfus explains. And, as Dreyfus intimates, when the products are connected, it often helps if the brands are too. But this isn’t always an option, or an easy decision, as Dreyfus discovered when he purchased the popular website TheHendonMob.com in 2013. The Hendon Mob is ubiquitous with live tournament results, and rebranding the site to add Global Poker would have likely done unimaginable harm to its traffic. So, despite Dreyfus’ fondness for interconnected brands, the Hendon Mob was left alone, as was the European Poker Awards, an awards banquet that dates back to 2001. In part because of its history, Dreyfus decided against rebranding it as the Global Poker Awards Europe, or some similar mashup of words.

Amaya Brand Awareness PokerStars wrestled with this very same juxtaposition. Unlike Dreyfus, PokerStars decided to 86 an established brand in favor of brand continuity. In addition to being an online poker juggernaut, PokerStars also hosts more than a dozen live poker tours and tournament series around the globe. These disparate tours boast names like the PokerStars Latin America Poker Tour, and the PokerStars U.K. and Ireland Poker Tour, and were typically referred to by their acronyms, the LAPT and the UKIPT. Then there is the PokerStars Estrellas Tour (an Iberian-based tour), which players and media often shortened to Estrellas. Even the company’s flagship tour, the PokerStars European Poker Tour, was by and large known simply as

the EPT. The problem should already be clear. In each case it’s the word PokerStars that is dropped. In the end, they decided to consolidate, and bring all tours and tournaments squarely under the PokerStars banner, made up of just two categories, each promoting the PokerStars brand front and center: PokerStars Festival events and PokerStars Championship events. For Dreyfus, the right move was to stick with the Hendon Mob, since his other associated brands weren’t as well known, nor did they have the history and goodwill to overcome such a dramatic change. This isn’t the case for PokerStars. As Hollreiser notes, the EPT was geographically limited, evidenced by the cadre of other tours the company had launched around the globe. “The creation of PokerStars Championship and PokerStars Festival events builds upon the success of EPT and leverages the global power of the PokerStars brand,” Hollreiser says. “PokerStars Championship and PokerStars Festival events will elevate the expertise and the high-quality standard of EPT events to a global audience, while extending the PokerStars brand. Importantly, these events further strengthen the connection between online and live poker events, which will be good for both platforms and create more winning opportunities and fun experiences for more players.” It would be easy for PokerStars to pull a Schlitz, and simply rely on their brand, but looking at their recent moves, it seems the company has learned the lessons of Schlitz, and instead of falling back on its PokerStars brand, the company continues to try to grow and strengthen it in existing and new markets.

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Legislative Year Ends: No iPoker Bill in California

or the ninth year in a row, the California legislature failed to pass an iPoker bill. In this year as in past years, competing interests among gaming tribes contributed to the gridlock, or more accurately, defined the gridlock. The most recent bill to be fought over was AB 2863, which, as the legislative year ended on August 30, was lying inert on the Assembly floor. States that have legalized online poker and/or iGaming and are collecting taxes from it are still limited to Delaware, Nevada and New Jersey, although Pennsylvania recently included iGaming revenue in its next budget, signaling a possible legalization in 2017. In California this year, a key agreement was forged with the racetrack industry that persuaded them to sit on the sidelines and not try to participate in online poker in return for being paid up to $60 million each year from poker taxes. However, the main sticking point continued to be the participation or non-participation of PokerStars, which, in the swirling maelstrom of shifting alliances, found itself on the losing end as the session came to an end. It was not for lack of trying by Assemblyman Adam Gray, who, although not the only author of an iPoker bill, ended up dominating the discussion with AB 2863. This bill was passed by the Governmental Organization Committee, which he chaired, in April by unanimous consent. That bill reflected the deal that had been cut that gave the racing industry a place at the table, but without being able to operate a casino site. The amendment process continued, and the “bad actor clause” which addressed the special circumstance of PokerStars, supposedly addressed. It created a situation where companies that did business with U.S. online poker players after December 2011 (which did not include PokerStars) would not be able to participate. Then in June, Gray amended the bill to change the date from December 2011 to 2006, which did catch PokerStars in its net, but which let it get out of the net by paying $20 million—or waiting five years. This version passed the Appropriations Com46

Global Gaming Business OCTOBER 2016

An odd twist in the California iPoker debate came when Pechanga, which leads the anti-PokerStars coalition, hired the lobbying firm of former Congressman Gary Condit (l.), the father-in-law of the bill sponsor, Assemblyman Adam Gray

mittee and was sent to the Assembly floor. That’s when the coalition led by Pechanga announced its opposition, and made clear that it would oppose any bill that didn’t exclude PokerStars altogether. It didn’t say that exactly, but proposed an amendment that would exclude the company for a decade plus require them to pay $60 million for the privilege of operating at the end of that time. The coalition wrote Gray: “We deeply appreciate your leadership in bringing stakeholders together to try and resolve the outstanding differences regarding internet poker legislation. At a time when California was making painful budget cuts to education, public safety and social services, these and other offshore poker sites evaded paying tens of millions of dollars in California taxes.” Gray tweaked his bill again, this time to keep PokerStars out of the market for five years, with no chance to pay a fine and shorten that period. Supporters of PokerStars, led by the Morongo tribe, and their opponents took turns calling each other obstructionists while groups representing actual poker players began to make sure that everyone felt their pain. Gray’s final amendment, which was perceived as an about-face, occurred at just about the same time that Pechanga hired BBC Public Affairs, a lobbying group founded by former U.S. Rep. Gary Condit, who is Gray’s father-in-law. When PokerStars and its supporters saw the final version, they threatened a lawsuit to challenge the constitutionality of a law intended to punish one party—an action compared to a Bill of Attainder, something specifically banned by the U.S. Constitution. The Golden State’s online poker market is estimated to be about $400 million, and about 1 million California players who play without the benefit of consumer protections. To tap some of that money for the state government, Gray’s bill had anticipated a 10 percent tax, which is higher than in neighboring Nevada.

Paysafe Acquires Income Access

ontreal-based Paysafe, a leading global provider of payment solutions, announced that it is expanding its product capabilities by acquiring Income Access Group, a pioneering affiliate technology business, for a cash consideration of C$40 million (approximately US$30 million). Income Access is a market-leading brand providing affiliate technology for businesses to manage their performance marketing programs. In addition, more than 25,000 affiliates use the company’s multi-channel software for their marketing campaigns. Income Access was founded in 2002 by Nicky Senyard. It is based in Montreal with employees in Paysafe CEO Vancouver, London Joel Leonoff and Brisbane. Paysafe President and Chief Executive Officer Joel Leonoff said, “By adding Income Access’ affiliate technology to our product suite alongside our Skrill and Neteller brands and deepening our merchant relationships, this transaction delivers on Paysafe’s strategic objectives to provide relevant payment solutions that serve the evolving needs of our merchants. “Income Access is an excellent fit for our business. This acquisition will help to extend our leadership position in niche-orientated payment solutions as we add value for our merchants and redefine the role of a payments provider,” Leonoff said. Lorenzo Pellegrino, divisional CEO at Paysafe responsible for the group’s flagship Skrill and Neteller brands, added, “We are always looking to enhance the breadth of our product offering. By integrating Income Access’ industryleading expertise within our business, we both expand our global affiliate network and embed our payment capabilities more deeply into the merchants we work with.” Income Access CEO Senyard said, “Our technology and global affiliate network, combined with Paysafe’s comprehensive payments offering, creates a winning combination for the benefit of our existing and new partners.” Senyard will remain with the business as managing director.

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Frieberger: Press Leak Hurt 888 Bid for William Hill

hen Britain’s Sunday Times disclosed early in the summer that that 888 Holdings Plc. and Rank Group Plc. were preparing a merger bid for U.K. bookmaker William Hill, it held the companies to a 888 Chief Executive timetable that ultimately Officer Itai Frieberger hurt the failed acquisition offer, 888 Chief Executive Officer Itai Frieberger says. 888 and Rank announced their interest in acquiring William Hill on July 24 after the potential bid was reported by the Times. That announcement set off a time limit of about a month for making a formal bid under U.K. regulations. William Hill’s board eventually rejected two offers for the company. “The leak didn’t allow us to have a conversation behind closed doors,” Frieberger told Bloomberg News. “That’s one of the root causes of why we couldn’t progress it. Before we could make a call to William Hill, it was all over the press. That is very unfortunate.” Despite the failed merger attempt, Frieberger said 888 still has room to grow. “We don’t see M&A as a critical path in the way 888 moves forward,” he said. “The only reason we will do a deal is to create additional shareholder value.” According to Bloomberg, 888 shares rose as much as 6.9 percent in London after the company said a strong first-half performance continued into the third quarter. Average daily revenue per customer rose 22 percent on a like-for-like basis from the start of the third quarter to August 27.

Malta Readying DFS Licensing

he Malta Gaming Authority announced that daily fantasy sports is a skill-based offering, and thus exempt from the requirement of a gambling license in the island nation. The authority said in a press release that fantasy sports should be regulated and licensed differently than online gambling sites. The authority said fantasy sports is a contest “whereby the winning outcome is determined predominantly through the skill or knowledge of the player, and where the results are determined by the accumulation of statistical results of the perform-

Global Gaming Business OCTOBER 2016

ance of a number of individuals in sporting events, but shall not include the forecast of the score, point spread or any other future occurrence of one or multiple events, and for the avoidance of doubt, the definition of a ‘bet’ as defined in the Act shall not be applicable.” The gaming regulator has been developing a licensing framework to regulate skill-based games, including fantasy sports, which will also set the rules for determining whether a game is a “skill game” or a “controlled skill game.” The framework is expected to be passed by the end of the year.

Study: NJ Online Players Using Responsible Gaming Tools

ptions designed to head off gambling problems in New Jersey’s online gambling industry are being taken advantage of by players, according to a Rutgers University study. Titled “Internet Gaming in New Jersey” from the university’s Center for Gambling Studies, the study found that 94,255 people gambled online at some point in 2014, with men (72,366) making up the majority. Of the total number of gamblers, 14.23 percent took advantage of responsible gaming measures mandated by the state Division of Gaming Enforcement. Options include cool-off intervals, time limits and self-exclusion periods. The study found that players 25-34 years old used RG tools most frequently. The study found that 31.15 percent of all 25-to-34-year-olds incorporated RG features. “The most encouraging finding from this analysis is the apparent efficacy of the limit-setting tools,” the Center for Gambling Studies stated. But the report also said more safeguards are needed. “RG lacks uniform branding, outreach and marketing to ensure all players are aware of the array of features available,” the paper concludes. “We would recommend that RG be included as part of registration for a player account and for continued usage for existing players.”

Antigua & Barbuda to Make Final Attempt to Solve U.S. Gambling Dispute

ntigua & Barbuda have rejected a “paltry” offer from the United States to settle a longstanding dispute over the larger country restricting U.S. players from accessing online gambling sites based in the island nation. Prime Minister Gaston Browne told Observer

Media that the nation’s U.S. ambassador will make the counter offer soon. “We will never accept any one-sided agreement in which they treat us with contempt, and in which they fail to settle the issue in a meaningful manner,” Browne said. “We’re hoping that as a result of that proposal we’ll be able to come to a mutually satisfactory agreement.” Browne had previously announced that the U.S. offer had been rejected, saying that the U.S. wasn’t taking the nation seriously. The online gaming dispute began in 2003 when the U.S. began restricting U.S. players from accessing overseas gambling sites, including sites based in Antigua & Barbuda. The country took the matter to the World Trade Organization, which ruled in 2007 that Antigua & Barbuda could violate U.S. copyrights to recover what was estimated to be losses of $21 million annually. It’s estimated that country has lost over $200 million in revenue since the U.S. began blocking players. Browne has said the country is determined to recover most of that amount. Browne is scheduled to visit the United Nations next month, and has said he may use the opportunity to criticize the U.S. for attempting to “utilize their might to trample on a small state.”

GVC, IGT Licensed in Romania

icensing decisions continue to be made in Romania to clear the country of unregulated online gaming operators. Last month, two large companies were approved by the Romanian National Gaming Office (ONJN). Romania passed new gaming regulation last year, opening up the market to regulation-compliant operators and providers. GVC announced that ONJN has granted the group a full and permanent 10-year license to operate sports betting and casino games in the country, via its fully owned subsidiary, Headlong Limited. In addition, the group has also been awarded a Class II license to supply software, affiliate marketing and hosting services to Headlong. The group has previously been operating its Sportingbet brand in Romania under the terms of an interim license, which was granted on September 1, 2015. The new licenses come into effect from September 1, 2016. And International Game Technology also announced that IGT (Gibraltar) Limited has obtained two Romanian Class II licenses, for platform management and software provision, by the ONJN, and it will now utilize the power of its remote game server to serve customers in Romania.

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EMERGING LEADERS Money Man Felix Danciu Chief Executive Officer, Elmcore Group ften in business, a well-rounded background and diverse experience provide a solid foundation for achievement. Felix Danciu is a prime example of someone able to leverage his competency in diverse industries to help realize additional success in the gaming sector. Danciu, who currently serves as the chief executive officer of Elmcore Group—a private investment firm headquartered in Las Vegas—did not have a direct path into gaming. Upon graduating from Cornell, Danciu began his professional career in investment banking. Since then, his career has remained primarily focused within finance. Danciu has nearly two decades in M&A and private equity—specializing in leveraged buyouts and corporate finance with extensive experience in international transactions. On top of this, Danciu has been a corporate executive in a multitude of industries including technology, manufacturing and consumer products. With such a diverse and distinguished background, it is clear that Danciu had a solid foundation for success within the gaming industry. While Danciu’s transition to the gaming industry may appear to have happened by chance, it was more probable than one might think. “I grew up in Las Vegas, and was surrounded by the gaming industry,” says Danciu. “It was inevitable that I would get into gaming one day.” Working in the gaming industry was, as Danciu puts it, “part of a natural evolution of my career.” Danciu’s breakthrough in the gaming industry came from his work with NYX Gaming Group. As part of his work with the company, Danciu consulted on their operations, served as interim chief financial officer, and acted as a strategic adviser for the company’s initial public offering on the TSX Venture Exchange. Danciu credits NYX Gaming Group’s chief executive officer, Matt Davey, for giving him the opportunity to work with the company as well as providing unique insights on the industry. “Matt Davey taught me the nuances of the industry,” says Danciu. “I was really an outsider, and feel like I still may be.” Being an outsider, however, is not a hurdle in all instances. “With my experience outside of gaming, I was able to bring fresh ideas to tackle gaming-related problems,” explains Danciu. In a sense, Danciu had to reconsider his usual approach, while pulling from past experiences to match his potential to the many opportunities within the gaming industry. His advice for young leaders draws from his own experience. “Don’t be afraid to reinvent yourself,” says Danciu. “Take initiative through self-study and calculated risks, and broaden your knowledge base to stay ahead of the competitive environment.” Danciu also stresses the benefits of having a strong professional network. “Surround yourself with good people. Any success in this industry will be through a team effort.” —Michael Vanaskie, The Innovation Group

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Another One

Bites the Dust Trump Taj Mahal becomes the fifth Atlantic City casino to close since 2014 By Patrick Roberts

Trump Taj Mahal will close October 10 after a crippling strike by the local culinary union

tlantic City has endured tough times since the economy turned south in 2007 and regional casino competition exploded. But nothing has hit the city as hard as the closing of four casinos in 2014. Until this month, when Trump Taj Mahal will close its doors. And the Taj may not be the last to close if a looming referendum that would approve two casinos in North Jersey is successful.

Taj Turndown The Taj almost closed in 2014 as well. It was only via the intercession of Carl Icahn, then the casino’s largest debtor, that it survived. But even then, the Taj barely survived. To do so, Taj managers cut overhead. One of the biggest items was eliminating the health insurance for its workers. In 2014, a bankruptcy court judge allowed Taj Mahal owner Trump Entertainment to terminate its health and pension benefits with Local 54 of the 50

Global Gaming Business OCTOBER 2016

UNITE HERE union. The union and Icahn—who was clearly going to take control of the property after it emerged from bankruptcy—have been waging a battle ever since. Taj Mahal management reportedly had offered a lesser restoration of benefits, but the union rejected the offer and went out on strike. The Taj held off a challenge to that decision in federal court. The union, which represents about 1,000 workers at the casino, went on strike on July 1 in an attempt to regain those benefits. The effort was immediately rejected by Icahn. Two weeks into the strike, Icahn announced that the property would close on October 10, resulting in a loss of more than 3,000 jobs for the resort. Tony Rodio, the president of Icahn’s Tropicana Entertainment, which also owns the Tropicana in Atlantic City, said there was no path to profitability and blamed the union for the closure. The union disagreed.

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The casinos have agreed not to sue the city for back taxes in exchange for a PILOT program (Payment in Lieu of Taxes). At one time, casinos paid about 80 percent of Atlantic City property taxes. With the PILOT program, that percentage is down to 40, causing massive tax increases on the city’s residents and small businesses, which increased by 40 percent in 2015.

“This labor dispute has been going on for almost two years,” said union President Bob McDevitt in a press statement. “The company has saved about $25 million in labor expenses, but lost between $150 million and $200 million in revenues. The proposal we put forward today allows all of us to move forward. Now it’s time to see if this company is interested in moving forward or just wants to punish workers and Atlantic City.” A last-ditch attempt to keep the casino from closing was anything but that. Rodio said the meeting between the union and Taj Mahal management had been scheduled to discuss details of the closing. He also issued a lengthy and blistering statement blaming McDevitt personally for sabotaging negotiations leading to the Taj’s eventual closure. “This was not a negotiating session,” Rodio said. “As previously announced, the Taj Mahal will close its doors on October 10, 2016. Bob McDevitt and the Taj bargaining committee have no one to blame but themselves for this sad outcome. If McDevitt cared even one iota about the future of the employees, he would have allowed them to vote on the proposal we offered five weeks ago based on his recommendations, which we believe could have saved the Taj. But in the end, he blindsided us and the employees because closing the Taj served his personal purposes.” All is not lost for Taj workers, however. Since the announcement of the closing, competing city casinos have conducted job fairs that have drawn many Taj Mahal workers. MGM Resorts, the owner of the Borgata Hotel Casino & Spa, was first, holding a job fair for its new MGM National Harbor Casino in Maryland, which drew more than 500 applicants. Later, Caesars Entertainment held a job fair to fill about 200 positions at its three Atlantic City properties as well as about 300 more between Harrah’s Philadelphia and Horseshoe Casino Baltimore. Caesars officials said the job fair was designed to attract Taj Mahal employees, as well as other trained and experienced personnel that have lost jobs in Atlantic City. Tioga Downs Casino in Nichols, New York also held a job fair in Atlantic City in late August.

Revel-ation One of the casinos that did close in 2014, Revel—which had opened only two years earlier—may never reopen, at least under the ownership of Florida

developer Glenn Straub, who said he is tired of negotiating regulatory hurdles in New Jersey and may abandon plans to reopen the property. Straub said he has been frustrated by the slow progress he has had getting regulatory approvals from the state. “This state stinks,” he said. “It just stinks… I worked in five states. This is 10 times worse than what it would be anyplace else.” Straub’s comments came at a meeting of the state Casino Reinvestment Development Authority, which must approve plans for the site. The authority had just delayed voting Straub’s redevelopment plans for the site until September. Straub bought the closed Revel out of bankruptcy for $82 million, though the property cost $2.4 billion to build. He then launched a lengthy battle with the site’s former power plant operators over electricity at the site, but those issues were settled earlier this year. He then said he hoped to reopen at least part of the property earlier this summer. Straub also planned to lease out part of the site to a casino operator, but balked when state regulators ruled Straub’s company Polo North Country Club Inc. would still need to gain some form of casino licensing. Straub had not expected to need licensing to lease out casino space. But since his plan also envisioned some profit sharing, the Division of Gaming Enforcement required a level of licensing. Straub told the Newark Star Ledger that he is tired of fighting to reopen. “To hell with that,” he said. “I’ve got other things to do. I don’t have time to be screwing around with this stuff.” There were also reports by the Philadelphia Inquirer that Fantasea Resorts, an Atlantic City time-share company, is negotiating with Straub to take over space in the property. “We’re in negotiations about Revel with the owner about a variety of scenarios,” Herbert Ushewokunze, spokesman for Fantasea, told the paper. “We’re considering what we can do that would best serve our interests.” Straub told the Inquirer in a telephone call, “We’ve been talking about the 12 floors that are unfinished out of 54.”

In-State Competition The damage to Atlantic City from competition began when Delaware legalized casinos in the early 2000s, but didn’t intensify until Pennsylvania and New York got into gaming a few years later. But the biggest damage could OCTOBER 2016 www.ggbmagazine.com

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Despite the bad press surrounding Atlantic City and the announced closing of the Trump Taj Mahal, Atlantic City’s casino industry brought in $259 million in profits for the first six months of 2016—a 21 percent bump over last year.

come from inside, now that a referendum will be on the ballot in November that could bring two massive casinos to North Jersey. Both sides in the debate over whether to expand casino gambling in New Jersey outside of Atlantic City have started taking their case to voters through extensive advertising campaigns. Some observers expect more than $20 million to be spent on the campaign, the most expensive ever. Those in favor of expanding casinos to northern New Jersey gained some support for state Assemblyman Ralph Caputo, the chairman of the Assembly’s Tourism, Gaming and the Arts Committee. Caputo is a former casino executive in Atlantic City who is leading the charge. “Powerful and well-heeled political, corporate and labor interests outside New Jersey will spend whatever it takes to defeat the referendum for North Jersey casinos in order to keep billions of dollars of our gaming revenue flowing out of New Jersey and into their pockets,” Caputo said in a press release. “They like things exactly the way they are, and will use innuendo and outlandish accusations to convince New Jersey taxpayers to vote against our own best interests because it benefits them, and that offends me.” Voters will be asked to decide whether two new casinos can be built in northern New Jersey. Though the referendum doesn’t say where the casinos will be built, proposals for casinos at the Meadowlands Racetrack and in Jersey City are considered the leading contenders. Supporters say the state needs to build the casinos to win back casino tax revenue lost to new casinos in neighboring states. Opponents say the new casinos will just further cannibalize the Atlantic City market and would lead to more casino closings there. They also point out that there is no stated tax rate in the wording of the referendum, nor any discussion about how the money will be divided (Atlantic City was hoping for at least $50 million a year). And since New York has already voted to consider casinos in the New York City area, any advantage a North Jersey casino had would be quickly erased. Voters in the northern part of the state are already seeing an advertising push from both sides. Two organizations, No North Jersey Casino Coalition and Trenton’s Bad Bet, are also fighting against expansion. The groups are not required to disclose all of their backers, but previous reports have said that groups representing casino interests in both Pennsylvania and New York are supporting the effort to defeat the referendum. Polls suggest that the referendum will likely fail with voters. A Fairleigh Dickinson University study published this summer found that only 35 percent of New Jerseyans support the referendum.

Government Headache A state takeover of the activities of the Atlantic City government is also likely to occur in November. Governor Chris Christie and the legislature have given Atlantic City until that time to come up with a plan that would stabilize the city’s budget, which has been $100 million overdrawn annually since 2010, when the state began to oversee the city’s finances. In exchange for bailing out the city, the state wants to liquidate the city’s 52

Global Gaming Business OCTOBER 2016

Ralph Caputo, a disgruntled former casino worker turned state assemblyman, is leading the fight to legalize two new casinos in North Jersey

Municipal Utilities Authority, one of the few valuable assets that remain. The state also wants the city to turn over the site of the city’s former airport, Bader Field, for sale. The casinos have agreed not to sue the city for back taxes in exchange for a PILOT program (Payment in Lieu of Taxes). At one time, casinos paid about 80 percent of Atlantic City property taxes. With the PILOT program, that percentage is down to 40, causing massive tax increases on the city’s residents and small businesses, which increased by 40 percent in 2015.

Silver Lining Despite the bad press surrounding Atlantic City and the announced closing of the Trump Taj Mahal, Atlantic City’s casino industry brought in $259 million in profits for the first six months of 2016—a 21 percent bump over last year. Six of the city’s eight casinos saw profit increases, including the Taj Mahal, which turned a $2 million profit for the six months after losing nearly $10 million for the first six months of 2015. According to the New Jersey Division of Gaming Enforcement, the city’s casinos reported a collective second-quarter profit of about $259 million, compared with $213 million in 2015. Operating profits were up 15 percent in the second quarter of the year at $152 million, a 15 percent increase compared with $132 million in the second quarter of 2015. New Jersey Casino Control Commission Chairman Matt Levinson released a statement saying that the results show that “slowly but surely,” profits are increasing for the resort’s casinos, and noting that profits are the highest for the first six-month period since 2010. “For the first time in eight years, every single bricks-and-mortar casino reported positive operating income,” Levinson said. According to the DGE, the Borgata reported the biggest increase, up 27 percent in the second quarter to $106 million, compared with the same period last year. Resorts reported profits of $5.7 million, up 26 percent compared with last year; Tropicana posted a profit of $17 million, an increase of 25 percent over 2015; Golden Nugget saw a profit of $13.3 million, up 12 percent compared with last year; and Bally’s was up to $17 million, or about 8 percent over 2015. Even Trump Taj Mahal reported profits of $2 million, compared with operating losses of $9.6 million in the second quarter of 2015. Caesars saw a decline in profits of 0.2 percent compared with 2015 to $36.5 million in the second quarter of 2016. Harrah’s profits were down 3 percent to $57 million. Gross operating profit reflects earnings before interest, taxes, depreciation and other charges, and is a widely accepted measure of profitability in the Atlantic City casino industry.

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Cash Games The evolution of delivering money to casino players | By Dave Bontempo Vantiv and Las Vegas-based Sightline Payments recently introduced a loyalty card at Mohegan Sun

t began as a major detour, dwindled to a speed bump and now gravitates toward the rear-view mirror of gaming’s financial journey. The Europe, Master Pay and Visa (EMV) fraud liability shift, making ATM owners rather than card issuers absorb the cost of theft, dawns more subtly than once expected next month. The deadline initially brought panic in some casino quarters. They mirror changes unfolding last fall in convenience stores, requiring owners to adopt chip technology over the magnetic card in order to maintain theft protection. If customers don’t invest in new technology—designed to make POS theft nearly obsolete—they assume fraud risk. Small operators weigh the odds. Big operations, like casinos, upgrade. Bad enough, they reason, that override codes have occasionally made ATMs think they contained $5 bills rather than 20s and thus dispensed $1,000 on $250 transactions. At least those episodes were isolated, finite, and could be addressed with a financial institution. Yet what if operators lack recourse for bad checks, insufficient funds or

Global Gaming Business OCTOBER 2016

hacking in a business containing billions in seed money planted in ATMs and related disbursal vehicles? That would handcuff the lucrative funds transaction process. Companies that supply casinos come to the forefront. They moved well ahead of the deadline to ease operator concerns and protect their own lucrative accounts. Their products mix the secure realm of chip cards with the aggressive functionality of bill-breaking, TITO, check-cashing and, even, player identification. ATM fees are steep enough for tiered players to value a property waiving them. New technology rapidly brings operators toward the age when they can provide the reward, easily, right at the ATM. Score one for the vendors. They saw the financial roadblocks in new regulations, adjusted their product-line GPS and now steer customers around the problem. For many operators, the adjustment may be no worse than a NASCAR pit stop.

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Everi Angle Covered Everi has already begun recouping a major security investment. In March, the Las Vegas company said it was the first in the casino industry to offer an EMV-chip signature option for an ATM device. It is fully end-to-end EMV-compliant with all its financial transaction devices, platforms, and systems used at hundreds of casino properties across the U.S. Startup costs impacted the first-quarter bottom line, but rewards will soon materialize, according to Michael Rumbolz, its president and CEO. “We continue to see increases in total cash to the floor, and we benefited from higher kiosk sales relative to Q1,” Rumbolz recently said in a conference call regarding second-quarter company earnings. “As anticipated, the first quarter charges and fraud losses that were associated with the implementation of our full endto-end EMV solution within our payments business were significantly lower in the second quarter. Overall, we were pleased with our performance in Q2 and we are looking forward to the second half of the year with a particular focus on maintaining the pace of our execution on our key initiatives.” Everi continues to showcase its sleek and modern CXC 4.0 L multi-function kiosk, designed to offer casinos integrated cash handling solutions and critical cash access services. The CXC 4.0 L kiosk is Everi’s smaller-footprint solution, and includes beneficial features such as multiple ticket redemption and easy bill breaking. With all the company’s payment solutions, the CXC 4.0 L is EMV-compliant and equipped to handle EMV-chip technology, which can significantly reduce fraud when combined with other forms of payment security, company officials say. Everi also provides video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software. Its service range includes ATMs, fully integrated kiosks, products that improve credit decision-making, compliance and data solutions, along with online payment processing for operators who offer intrastate, internet-based gaming and lottery activities. While Everi has an array of products, it paid particular attention to compliance, according to Tim Richards, senior vice president of payment innovations for Everi Payments. “Transaction security is the responsibility of the payment provider, and lack of security

“Everi is the first end-to-end provider of EMV to gaming.” —Tim Richards, Senior Vice President of Payment Innovations, Everi Payments

OCTOBER 2016 www.ggbmagazine.com

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Everi’s CXC 4.0 L multifunction kiosk, designed to offer casinos integrated cash handling solutions and critical cash access services

by a casino’s chosen gaming payments provider can have a detrimental impact,” Richards says. “Everi is the first end-to-end provider of EMV to gaming. Our rollout of EMV-compliant devices included the required compliance with POS cash advances, and it was supplemented by a full compliance for all of our ATMs, well ahead of 2016 and 2017 deadlines imposed by Visa and MasterCard. “We also worked with the EMV oversight group, EMV-CO, to specify a new transaction type allowing for the initiation of a signature-based transaction at an unattended device to meet card network rules for cash advances. All of our EMV-compliant transactions are completed securely on our PCI DSS 3.2-compliant, active/active payments network.” An operator can never be too prepared, he asserts. “From loss of funds to the gaming floor to higher decline rates and other imposed transaction limits, cash access transactions conducted with limited, or out-of-regulation, security is not an option for gaming operators.”

Rolling Along Cincinnati-based Vantiv brought gleaming credentials into the gaming world. It handles more than 23 billion transactions worth more than $842 billion annually. Its retailers include non-gaming industry giants like WalMart, CVS, Kroger, Macy’s, Wendy’s, Nordstrom and Walgreens. Gaming offered an ideal expansion area. Three years ago, the company launched Vantiv Gaming Solutions, which became Vantiv Entertainment Solutions, reflecting its intent to help casinos, iGaming, lottery and social gaming operators build strategic pay programs. Vantiv provides the connectivity for anyone using a card to fund gaming purchases. Amid this explosive growth, operators seek shelter from costly hacking. They tap into a logical extension from the convenience-store realm, according to Joe Pappano, senior vice president and managing director of Vantiv Entertainment Solutions. “This is the evolution of how payments are going to occur domestically,” Pappano indicates. “It’s an experience that’s been used successfully in other countries for quite some time. There may be a belief that it’s going to impact the customer experience because the transaction is going to be delayed. There is a slight trade-off between the speed of the transaction and the security of the data, but it is ultimately more important to enhance security and reduce fraud. What matters is the safety and soundness of the financial ecosystem.” As one door closes, another opens in the battle between hackers and op56

Global Gaming Business OCTOBER 2016

erational security. Pappano told GGB last year the effectiveness of the chip card will dramatically reduce fraud and push con artists into the online realm. Measures have begun to address that, too. “Biometrics are an increasingly utilized means of identifying someone at the point of purchase regardless of online, mobile or card-present,” Pappano indicates. “Thumbprint and retinal scans ensure an even higher level of authentication prior to authorizing a transaction, and the networks continue on the adoption of these technologies. And biometrics enhance the customer experience as well, since it is far simpler for a customer to scan their thumbprint than to remember their user ID and password. “We see the industry continuing to adopt these and other new innovations to make customer transactions more seamless at the point of interaction, whether it’s on a mobile device, at the point of sale or on a PC-based system.” Vantiv and Las Vegas-based Sightline Payments recently introduced a loyalty card at Mohegan Sun, a major casino power. Pappano says the willingness of Mohegan Sun to implement this innovation pulls the entire industry forward. “The adoption of cashless solutions is not an easy step for an industry which still relies very heavily on cash for 95 percent of its gaming transactions,” he says. “Mohegan Sun is at the forefront of an entire industry evolution toward safe, secure, technology-driven gaming transactions. “Vantiv’s passion and drive is to simplify payment innovation. Our relationship with Mohegan Sun and Sightline Payments exemplifies just that.”

Success is in the Cards Omer Sattar, co-founder and executive vice president of strategic initiatives for Sightline Payments, has long been ahead of the gaming-financial institutions curve. He is, in some respects, a card shark. A couple years back, Sattar introduced Sightline’s Loyalty Plus Card, enabling casinos to reward patrons both in their property and at nearby stores. He recently unfurled the use of a card, backed by a bank, as a major breakthrough in Nevada sports books. For Sattar, the casino-property floor is only one source of funds, despite being the original player in this lineup. “The term ‘cash access’ is interesting in that it doesn’t apply anywhere outside the casino industry, really,” he says. “When you tell people in the casino industry that you do cash access services, they know exactly what that means. If one goes to a payments show and uses the term ‘cash access services,’ they would say, ‘Wait, what are you talking about? What does that mean?’” “The world is changing, so we think that the term ‘cash access’ itself is something that, over time, will fade out of existence. And it all becomes about the user experience—how does the user interact with the game in the most frictionless way possible? How does the user experience the casino re-

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sort, even outside of gaming, in the most frictionless way possible?” Sattar adds that cash will still be involved in casinos for some time, but change is imminent. The methods by which one obtains funds, however, may appear limitless. “It will include more mobile, it will include more innovative ways of Sightline’s Play+ system has getting your money into a table game been installed at the Mohegan Sun with acceptance by much of or into a slot device or, quite frankly, the player base using a mobile device for all activity,” Sattar indicates. “Even the term ‘cashless,’ in and of itself, is not the best term. It’s about creating the best consumer experience across gaming and non-gaming for patrons of gaming entertainment facilities, and it just so happens that cash is not the best consumer experience. So over time, there will be less cash used at casinos, just as cash usage has decreased in the broader economy.” Like Pappano, Sattar hails security advancements. They are the backbone of his innovations. And while fraud may be headed online, gaming does not have to be victimized, he asserts.

“Generally speaking, the fraud will gravitate to the path of least resistance,” he says. “It’s water flowing downhill. Internet gaming is definitely not like water flowing down a hill. It’s easier for me to buy a stolen credit card off of some hacker website and try to shop online for regular merchandise where I don’t have to give detailed information to engage, such as my Social Security number. It’s a good question to ask: If brick-and-mortar fraud becomes more difficult to commit because of EMV, will it automatically move to iGaming? I don’t think that’s what we’ve seen and I don’t think that’s what we will see. Fraud may move online, but iGaming is not the path of least resistance. That being said, there is no room for complacency, ever, when it comes to fraud, and one always needs to be vigilant.”

On the Money Las Vegas-based DiTronics, which annually processes nearly $3 billion through its cash access systems, has nearly tripled its revenues since August 2013, according to Jim Kirner, its senior vice president of sales and marketing. DiTronics’ latest product, the DFS 500, increases the speed, durability and functionality of casino kiosks and continues to gain new installs. Amid the industry’s rush for “new and improved,” DiTronics installed a security measure this year. It had written the codes and field-tested software to make kiosks EMV-compliant well before the deadline, Kirner says. A casino

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“We give the operators a chance to know what their customers’ wallet looks like based around actual financial transactions.” —Jim Kirner, Senior Vice President of Sales and Marketing, DiTronics

buying a new kiosk will have the security measures already implemented. Customers who purchased the DFS 500 within the last year most likely have EMV compatibility installed and have obtained software through DiTronics, he adds. A small number of properties will opt out of ATM functionality because they would be upgrading older equipment and don’t want to buy new products. Kirner says concern expressed by operators over EMV fraud liability has receded over time. Vendors in general have removed the fears by advancing their software. ` With one concern tackled, DiTronics poises for an imminent rollout, ATM Express. It is the first phase of customer identification for targeting offers. If a casino customer has given operators permission to link a bank or credit card to a player-identification profile, that patron can obtain a benefit at the ATM. The gambler can receive discounts based on tier loyalty. Phase 2, enabling that operator to craft marketing offers to the player, will likely be deployed in the next several months. “The biggest trend we’re seeing from operators is the question of how 60

Global Gaming Business OCTOBER 2016

much promotion is too much promotion,” Kirner says. “Casinos are trying to guard against over-marketing. It’s not that aggressive marketing is a bad thing, but things have gotten so competitive out there that at some point they are wondering if they are overspending, whether they are reinvesting too much and where that fine line is. “Think about what the casino general manager is concerned about,” Kirner adds. “That person wonders, ‘Am I doing everything I can to attract customers?’ There are numerous offers out there. Is that person’s property over-incentivizing people? While the operator wants to provide great customer service, at what point with the free play is the property not getting what they intended out of an offer? “We give the operators a chance to know what their customers’ wallet looks like based around actual financial transactions. They are going to know what that player is spending. If the customer took $200 out and put $100 into play, how do they capture the remaining $100? You can market to that player more effectively with this type of information.” The innovation enhances the impact offered by DFS 500, which offers versatility. Transaction Rewards integrates funds access with a casino’s player database to provide customized fee structures by player ranking as well as the ability to award players points for completing their transactions at your casino. Smart Dispense reduces wear-and-tear on the kiosk and improves the player experience, all while reducing the cash in all kiosks across the casino. Jackpot Pay eliminates the need for jackpot dispense units and making some or all of your kiosks able to dispense jackpots. DFS-500 features also include a dual bill validator, with multiple ticket pay-off capability of up to 10 tickets at the same time. It’s bill-holding capacity of five cassettes/3,000 notes each reduces the need to refill cassettes during busy times, and features a 17-inch touch-screen and multi-color LED illumination, Kirner says. As cash-access technology in the casino industry continues to advance, operators become more secure—and patrons easily obtain the funds needed to drive the business.

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FRANKLY SPEAKING by Frank Legato

Blowin’ in the Harbor

Global Gaming Business OCTOBER 2016

RINALDO

sure-fire fun and mayhem soon to arrive. The owner of Machine Guns Vegas, Genghis Cohen, is planning to build a 16.2-acre theme park just west of Interstate 15 south of the M Resort. First, is that his real name? Would a couple named Cohen really look at each other and say, “Dear, let’s name him Genghis?” I’m guessing not. Unless they were naming him after the Genghis Cohen restaurant in Los Angeles. (Chinese American cuisine, four and a half stars. Try the Szechuan egg rolls.) Anyhow, Genghis Cohen wants to open this theme park in Sloan that offers bungee-jumping, an ATV obstacle course, and speed boats zipping through man-made channels. He’s proposing to call it XPark Vegas, and I must admit, it sounds really cool. I originally thought it was even more interesting when the news feed l was looking at left a comma out of the headline: “Plan Proposes Bungee Jumping Speedboats, Other Attractions for Sloan.” Oh boy, bungee-jumping speedboats. Sign me up! Incidentally, the Las Vegas Review Journal ran a picture of Cohen at his Machine Guns Vegas location, hoisting an M1919 Browning mounted, belt-fed machine gun. Now that should be at the theme park. Moving on, the Review Journal reports that a casino restaurant in North Las Vegas has reopened after an inspection by health officials in response to a bedbug scare. A woman posted Facebook pictures of welts on her legs from bedbug bites and a photo purporting to show a nest of the micro-bloodsuckers under a table. The photos went viral, and reportedly, other patrons chimed in with bedbug stories, bedbug pictures and alarming bedbug warnings. Gadzooks. Bedbugs in a restaurant! They normally show up in the middle of the night in, um, beds. I researched this extensively at one point several years ago. (Don’t ask.) Bedbugs generally don’t form columns with little bedbug generals and attack people while they’re sitting at a table. These must have been some kind of mutant bedbugs, maybe left over from the Nevada atomic tests in the 1950s. The casino had only recently been inspected, and received an “A” grade from the health district. How could they anticipate… The Attack of the Atomic Bedbugs? (Columbia Pictures, 1954.) Evidently, nuclear fallout was just… blowin’ in the wind. Oh, come on, you knew I was circling back to Dylan at some point. VICT OR

t says here that Bob Dylan’s coming to MGM National Harbor. No, not as a performer, or for that matter as a 1960s folk icon, who became electric, with a cool organ sound, and people were upset, and whose band became The Band. No, Mr. Zimmerman arrives at MGM National Harbor as an iron sculptor. That’s a sculptor who works with iron. Not, you know, a sculptor made out of iron. Although that would be really cool. Dylan will be at the new Maryland MGM property to officially unveil a giant iron archway he designed for the casino. Titled Portal, the sculpture will be permanently displayed at the MGM National Harbor Casino after its Grand Opening, the date for which MGM has pinpointed as “later this year.” According to an article in Rolling Stone—yes, I still subscribe, wise guy—Dylan’s sculptures incorporate “found objects including farm equipment, children’s toys, wheels, axes, cogs and even antique firearms.” I wonder if tin fire trucks and Colt Peacemakers are woven into the sculpture. With an ax. I guess I’ll have to wait until the Grand Opening. Hey, maybe I’ll get to interview Bob. Maybe I’ll even get into Rolling Stone. GGB: “Mr. Dylan, what did you incorporate into your archway sculpture for MGM National Harbor?” Dylan: “Stuff that Mack the Finger got from Louie the King. Like 40 red, white and blue shoestrings. And a thousand telephones that don’t ring. Do you know where I can get rid of these things?” “Well, Mr. Dylan,” I’ll say to him, “I think it can be easily done. Just take everything down to Highway 61.” Yes, I did an entire bit so I could get a verse of Dylan’s “Highway 61 Revisited” into a column. Hey, you can turn the page, you know? By the way, what Dylan actually did say in a statement was nearly as bizarre: “Gates appeal to me because of the negative space they allow. They can be closed, but at the same time they allow the seasons and breezes to enter and flow. They can shut you out or shut you in. And in some ways, there is no difference.” Wow. Shut you out, or shut you in. Hey, like a rolling stone, right? Moving down to Sloan, Nevada (pop. 105), we find the site of some

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NEW GAME REVIEW by Frank Legato

Cabinet of Curiosities Everi Holdings

he title of this game is Cabinet of Curiosities, and the slot cabinet itself reflects this. The theme is of a nefarious 19th century mad scientist, doctor or plain old madman who collects weird “specimens” as curiosities and puts them on shelves in a cabinet. To reflect this, Everi’s Core HDX cabinet is given an eerie black cover, and five progressive jackpot meters surround a large, creepy-looking eyeball in the center of the top box. The base game is a five-reel, 40-line video slot. During random base-game spins, butterflies flutter out of the cabinet and onto the reels, turning four to six reel positions wild. Another mystery bonus occurs when spiders crawl onto the screen and spin a web to reveal either a credit award or a multiplier. Players spin a web that reveals either a credit award of up to 400 times the line bet or a multiplier of up to 10X, which is applied to the total bet. A third mystery feature occurs when a creepy baby doll pops up to reveal a credit award. When bonus symbols land on the first, third and fifth reels, the player is

invited to choose cabinet doors, revealing objects that can be added to one of the progressive tier “specimen shelves.” Once a shelf is filled, the progressive prize is awarded and the bonus ends. Free Spin symbols on the three middle rows trigger a bonus of double the total bet plus five free spins. During free spins, if Free Spin symbols land on reels 3, 4, and 5, the player earns double the total bet plus five free spins. Each free spin alternates the mystery features, and the freegame feature can retrigger up to 25 spins. Manufacturer: Everi Holdings Platform: Core HDX Format: Five-reel, 40-line video slot Denomination: .01 Max Bet: 160 Top Award: 1,280,400 credits Hit Frequency: Approximately 50% Theoretical Hold: 2%-15%

Huckleberry Finn Ainsworth Game Technology

his is the first of three games to be released on Ainsworth’s new “Cash Odyssey” series of games on the new A600 cabinet. All three games are based on literary classics—the other two are Gulliver’s Travels and Robinson Crusoe. The manufacturer is making Cash Odyssey games available in a variety of configurations, with packages including high-definition overhead LCD screens, a media controller and a progressive controller. Four-game, six-game and eight-game banks are available in seven different configurations. Huckleberry Finn is a five-reel, 30-line video slot featuring a four-level progressive jackpot. Progressives are won through various combinations of “Cash Odyssey Jackpot” symbols in the red-bordered center position on reels 2 and 4. The top progressive, resetting at $10,000 in the penny version, is awarded when those two red-bordered symbols flank a “Gold Globe” symbol on the third reel. The Mini jackpot is awarded when Cash Odyssey Jackpot appears in either of the blue-bordered top or bottom reel positions on reel 2 and either of the blue-bordered top or bottom reel positions on reel 4. The Minor jackpot is awarded when Cash Odyssey Jackpot appears in either of the blue-bordered top or bottom reel positions on reel 2 and in the red-bordered center position on reel 4. The Major jackpot is awarded when Cash Odyssey Jackpot appears in either of the blue-bordered top or bottom reel positions on reel 4 and in the red-bordered center position on reel 2. A free-spin feature is triggered by three or more scattered logos. Eight 64

Global Gaming Business OCTOBER 2016

free games are awarded, with five more tacked on for two or more scattered logos on a free spin. Also during the free-spin feature, if Cash Odyssey or Cash Odyssey Jackpot appears on only one of reel 2 or 4, a Respin Feature is triggered. The jackpot symbol stays in place while all other reels are re-spun once. Manufacturer: Ainsworth Game Technology Platform: A600; Cash Odyssey Format: Five-reel, 30-line video slot Denomination: .01, .02, .05 Max Bet: 150, 300, 450, 600 Top Award: Progressive; $10,000, $20,000 or $50,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 8%-11%

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Money Roll

Incredible Technologies

his latest slot in IT’s “Money Family” of games uses both monitors of the Infinity cabinet to create a continuous display illustrating a printing press. As with other games in the Money Family, the setup is simple and easy to understand—reel symbols include cash in various denominations (the animated dead president front-and-center), wild symbols and bonus trigger symbols. Wins are paid any time five or more like symbols appear on the screen, as long as they are connected starting from the left reel. Incorporating a five-reel “Scatter Ways” format, Money Roll features “Mystery Stacks,” which are clusters of hidden symbols that can switch to any symbol, including the wild symbol and the free spin scatter, at random. Additionally, a mystery “Fast Line Multiplier” feature can trigger on any spin with a scatter in the middle reel. In that case, all symbols in that row are added together, and the player must choose from three money bags to reveal a multiplier that can award up to four times the win.

Five or more scattered “Free Spins” symbols trigger a free-spin round that can retrigger up to 100 spins. The free-spin event plays out on an expanded reel set called “Mega Cash Reels.” The reels expand to the entire cabinet in a continuous display of eight rows of symbols, greatly increasing the number of scatter-pay wins. Money Roll features fixed bet options of 35, 70, 105, 140 and 280, and is available exclusively on the company’s Infinity platform of casino games. Manufacturer: Incredible Technologies Platform: Infinity Format: Five-reel, scatter-pay video slot Denomination: Multi-denomination; high denominations included Max Bet: 35, 70, 105, 140, 280 Top Award: 10,500 credits times line bet Hit Frequency: Approximately 70% Theoretical Hold: 6%-14.85%

Sharknado

Aristocrat Technologies

his new premium game on Aristocrat’s Arc Single cabinet features multiple bonus events themed around the TV disaster series about sharks set loose across flooded streets in Los Angeles. The base game is a highly volatile 40-line video slot with a four-level progressive jackpot. Base game features include Random Reel Expansion, in which reels randomly expand from four rows to six, seven or eight rows on a given spin, transforming the game to 100 pay lines for that spin. In another mystery feature, on any given spin, the Wild Shower Feature may randomly add Wild, 2X Wild and 3X Wild symbols to any position on the screen to enhance line wins. Also in the base game, the random Symbol Storm Feature can expand the reels to 100 lines while an arbitrary chosen symbol is stacked on each reel strip to increase the chances for big wins. Another mystery primary-game feature is Max Stacks. At the start of each spin, a stack consisting of one randomly chosen

Global Gaming Business OCTOBER 2016

symbol is added to each reel, increasing the chance for five-ofa-kind wins. To these base-game features are added several symbol-driven and mystery bonus events, all themed around the tsunami that brought sharks to the L.A. streets in the TV show. Three or more scattered Shark Wheel symbols trigger one spin on a wheel that awards credits, free games or one of the four progressive jackpots. In the interactive “Chainsaw the Sharks,” a mystery event, players “slice” floating sharks to reveal credits or a “Bomb” symbol. Players continue to swipe for wins until three Bomb symbols are revealed. Finally, slices in the Shark Wheel can award from eight to 40 free games, with any of the random reel-expansion, stacking and wild-symbol events available. Manufacturer: Aristocrat Technologies Platform: Arc Single Format: Five-reel 40-line video slot Denomination: .01-20.00 Max Bet: 400 Top Award: Progressive; $5,000 or $10,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 9.99%-12.18%

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CUTTING EDGE by Frank Legato

Dynamic Display Product: Flexible LED Displays Manufacturer: Gaming Support

aming Support has launched an innovative new promotion tool in its Flexible LED Displays. With an impressive 2.5 pixel pitch, it is one of the highest-resolution displays on the market, perfectly suited for promoting messages across a venue. Powered by Gaming Support’s Media Player, uploading vivid content is easy with just a touch of the fingertips using the product’s iPad app. Gaming Support’s media player enables direct communication with the audience. The operator can schedule content, and emphasize jackpot values collected by the Jackpot Controller. Promotional messages, gaming-related content, odometering progressive jackpot values and jackpot hit celebrations are all supported on this display. The brightness and clarity of the flexible LED displays will catch the eyes of customers while the content will keep them at their seats. Additional benefits are provided for back-end operations. The displays can be used for stand-alone signage, or to create custom dis-

plays that follow a property’s interior curvature (convex as well as concave). The flexible LED panels are easily installed in any matrix desired, and don’t require the bulky, heavy enclosures of many LED products. Gaming Support’s Flexible LED Displays are highly energy-efficient—lightweight yet robust. Servicing is remarkably easy with access from the front. Unlike the LED displays of the past, it uses no fans or other cooling equipment, so there no longer is constant noise. For more information, visit Gaming Support’s booth at G2E or gamingsupport.com.

Real-Time Data Product: GlobalSuite Embedded Power BI Manufacturer: Casino Data Imaging

DI has leveraged the power and focus of Microsoft’s embedded Power BI within the GlobalSuite data visualization application. This important update brings user-friendly, compelling and interactive performance analysis, including trending and indexing, allowing end users to make pre-emptive actionable decisions. The update includes “state-of-the industry” analysis libraries that address requests and feedback from end users. As customers see the ease and power of GlobalSuite Power BI, the library continues to expand. Also, users will notice certain standard performance reports as more actionable in Power BI’s visual environment. Examples include, but are not limited to, Daily Trend Analysis Leased Games, Slot Detail Owned and Leased, Title Treemap Owned and Leased, Trend Analysis, Slot, Table and Player Summaries, and Title Trend Slope Analysis. GlobalSuite Embedded Power BI is easy to edit or to use to create your own program. Between CDI training, tutorials and help desk, end users have tremendous flexibility in edits and creation. The data conditioning, provided by CDI engineering, layers end users away from the complexities of analysis without sacrificing power and flexibility. This provides GlobalSuite components, including Embedded Power BI, the ability to conduct more thorough analyses that optimize performance in-

Global Gaming Business OCTOBER 2016

dexing and address ongoing requirements such as couponing and leased games. Power BI launches an update on a weekly basis. On top of that, Power BI selects new features to include in its updates based on requests made by end users through the Power BI Community portal. The graphic shows the ease of leased games analysis by combining the power of indexing with trend charts. Just select one or more existing performance indices, set the desired constant value, activate the trend feature and choose one or more of your lease title(s). By using a simple slope/intercept formula, the user can easily forecast when titles may potentially fall below expectations. For more information, visit casinodataimaging.com.

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GOODS&SERVICES

Scientific Games will own EZ Baccarat now that it has agreed to purchase DEQ

SCIGAMES BUYS DEQ, SPINS OFF INTERACTIVE

lots, systems and lottery giant Scientific Games made two moves in September that demonstrate the new direction it will take under recently appointed President and CEO Kevin Sheehan. The company announced that it has designated its wholly owned interactive social gaming subsidiaries, including Dragonplay Ltd. and Phantom EFX, as unrestricted subsidiaries under its debt agreements, with the goal of maximizing growth for the company. The company indicated it will consider a range of options to solidify its leadership in this fast-growing segment, including potential new joint ventures, acquisitions, IPO and other growth options. “Our industry-leading investment in innovation is paying off,” said Sheehan. “Following our company’s third consecutive quarter of revenue growth, we see this as a perfect time to accelerate momentum and explore additional opportunities to deliver greater value from this strong and rapidly growing segment of our business.” The company’s social gaming business has generated sequential double-digit growth in each of the most recent three quarters and a 68 percent increase in revenue year-over-year for the most recent quarter (second quarter ended June 30). Following the unrestricted designation, the social gaming entities will remain wholly owned by Scientific Games and continue under the leadership of Barry Cottle, chief executive, interactive and Jordan Levin, president, interactive. Meanwhile, Scientific Games is expanding its reach into table game technologies with a deal to buy DEQ Systems. The all-cash transaction totals C$21 million, or C$0.38 per share of Quebec-based DEQ. DEQ generated C$9.5 million in the financial year ended May 31, principally on an innovative progressive game platform called EZ Baccarat. The 70

Global Gaming Business OCTOBER 2016

company has around 800 of the games placed in 150 casinos worldwide. Scientific Games sees the acquisition as enhancing its positioning as a one-stop shop for casino operators, adding more proprietary table games and table progressive systems to the Shuffle Master brand along with a high-margin base of recurring revenue via the licensing of DEQ’s intellectual property. “The DEQ team has grown a fantastic business focused on providing revenue-generating and entertaining solutions for casino operators around the world,” said Roger Snow, Sci Games’ senior vice president, table and utility products. DEQ Systems President and CEO Joseph Bertolone said, “We look forward to working closely with the Scientific Games team to ensure a smooth transition and continued innovation for gaming operators and their players around the world.” The deal is expected to close in the fourth quarter, pending the assent of DEQ’s shareholders and regulatory approvals, and be accretive to earnings and operating cash flow for Scientific Games in 2017.

INTERBLOCK BUYS TECH PARTNER

nterblock has announced a purchase agreement with Elektrina, a high-technology company based in Slovenia. The deal includes complete share acquisition by Interblock’s parent company, Slovenia’s Interblock d.d.

Elektrina develops electronic boards and access control and specializes in developing innovative, smart solutions for its customers. Elektrina’s products are used across the entire Interblock product portfolio and for third-party B2B solution providers, specializing in fields of energy consumption, automation, gaming technology and more. “We are proud to announce this momentous acquisition as Interblock continues to grow,” said Tomaz Zvipelj, Interblock executive director and board member. “Due to the industry’s increasing demand of our electronic table games (ETGs), Interblock has recognized substantial synergies between both companies, which led us to the business decision to acquire 100 percent owner-

ship of Elektrina, which will support current and future expansion globally. Interblock will maintain current Elektrina employees and is excited to welcome these highly skilled employees to the team.” Elektrina Director Urban Bergant added, “We have worked closely with the Interblock team for many years, and it gives us great pleasure to become a part of one of the fastest-growing gaming companies in the world.”

Lawrence Shepherd (Independent Gaming) and David Orrick (Merkur Gaming) at the Sydney launch of Independent Gaming’s Bluestar

MERKUR EXPANDS DOWN UNDER

erkur Gaming and Independent Gaming have joined forces to develop a new machine gaming platform for the Australian locals market. The new Bluestar—the name is derived from Australia-based Independent’s corporate logo—is a variation on the Merkurstar cabinet that Germany’s Merkur has deployed with great success in Europe. The upright features 25-inch crystal screens and Merkur’s proprietary Wow sound system. Independent Gaming founder and Managing Director Lawrence Shepherd described the Bluestar as the culmination of “a long and intensive process.” “By working together so closely with the excellent team at Merkur Gaming, we have created something that is truly special.” “We have already been able to initiate discussions with Lawrence Shepherd and his team on several other fronts,” said Athanasios Isaakidis, Merkur’s international sales director and head of international product management. “I see the strong relationship with Independent Gaming as a win-win as we continue down the path of technology innovation, literally, around the world.”

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INNOVATION GROUP EXPANDS IN BRAZIL

ooking ahead to a vote in Brazil’s Congress later this year on a major expansion of the country’s gaming industry, U.S.-based Innovation Group is partnering with Brazil’s BetConsult and Federico Lannes IGC to offer a range of services to operators and investors looking to set up shop in South America’s largest country. The group announced it is working with government officials on key issues such as regulation, and also is preparing analytical tools to estimate revenue potential and profitability under a wide range of bingo, casino and potentially online opportunities. A lot of this will be laid out in an industry conference in the country in November, Innovation said. Legislation has been proposed to allow both resort casinos and smaller machine gaming venues, and possibly internet gaming. A Special Commission on National Development approved the measure by a wide margin last December, and is currently negotiating revisions with lawmakers. Innovation forecasts that an expanded market featuring 244,000 gaming positions could gener-

ate 140 million visits annually by its third year, and potentially more than $7 billion in gaming revenue.

sort Experience at G2E. Professional eSports athletes and GameCo executives demoed the game for booth visitors.

GAMECO DEBUTS WORLD’S FIRST SKILL-BASED VGM

AGA PARTNERS WITH DISTRICT ATTORNEYS; VISITS ST. LOUIS

t last month’s Global Gaming Expo, GameCo released the world’s first skill-based video game gambling machine. The VGM will be offered in Atlantic City later this year.

GameCo Chief Executive Officer Blaine Graboyes said, “Fall is gearing up to be a pivotal time for GameCo, first with the impending launch of our VGM in Atlantic City, as well as our participation at G2E. The debut of our VGM on casino floors will be a historic first step in the evolution of slot gaming, an industry that is adapting for a new generation of players. We are excited to discuss and share our product with the international gaming and casino industry at G2E.” GameCo’s premier VGM, the Tri-Pod VGM Carousel, was also displayed at the Integrated Re-

he American Gaming Association last month built on two important initiatives designed to reduce illegal gambling and encourage the legalization of sports wagering. The AGA and National District Attorneys Association (NDAA) announced a partnership to expose illegal gambling that included training for law enforcement officials at last month’s Global Gaming Expo. The joint presentation and training featured prosecutors and representatives from the Federal Bureau of Investigation, the Texas Lottery Commission and the Nevada Gaming Control Board, as well as experts on tribal sovereignty and other casino industry representatives. Nevada Attorney General Adam Laxalt and representatives from the Arizona and Mississippi attorney general offices were also expected to participate.

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“This partnership offers the latest evidence that illegal gambling, including the massive illegal sports betting market, is a priority for law enforcement at every level across the country,” said Geoff Freeman, president and CEO of the American Gaming Association. “Global Gaming Expo offers the perfect opportunity to convene district attorneys and others in law enforcement with gaming industry professionals to learn best practices for exposing shady operators that are tied to organized crime and who siphon revenues from governments and the legal, regulated gaming industry.” More information can be found at StopIllegalGambling.org. And in Missouri in August, the AGA met in St. Louis to discuss the upcoming election. With the state playing an important role in the 2016 presidential election, the state’s casinos delivered a clear message to Republicans and Democrats alike: look no further than the gaming industry for examples of consistent job creation and robust economic development. The AGA

“We encourage elected officials to take a progressive view of gaming policy that encourages greater reinvestment, flexibility to adapt to rapidly changing consumer demands and common-sense regulations that help the industry generate even greater tax revenue.” —Geoff Freeman, president and CEO of the American Gaming Association, at the roundtable forum at Pinnacle’s River City Casino in Missouri

convened a roundtable forum at Pinnacle’s River City Casino with Missouri gaming executives, St. Louis-area business and community leaders, and state and local elected officials to note the $8 billion in tax and admission revenue generated by the industry since the first casino’s doors opened in the state in 1994. “Thanks to unmatched career opportunities, tax revenues and charitable contributions, casino gaming is a valued community partner in St. 72

Global Gaming Business OCTOBER 2016

Virginia McDowell, former president and CEO of Isle of Capri and current president and chairwoman of Global Gaming Women, says the industry provides unparalleled opportunities for women in Missouri

Louis and across Missouri,” said Freeman. “However, the policies that worked yesterday will not work tomorrow. We encourage elected officials to take a progressive view of gaming policy that encourages greater reinvestment, flexibility to adapt to rapidly changing consumer demands and common-sense regulations that help the industry generate even greater tax revenue.” “Missouri’s casinos are proud to be good neighbors and good corporate citizens,” said Mike Winter, executive director of the Missouri Gaming Association. “Today’s panel provided a portrait of the many ways in which we boost St. Louis and communities throughout our state.” Participants also focused on the industry’s impact on the state and local communities, workforce development and diversity. Women make up nearly half of the Missouri gaming workforce, while more than 40 percent of employees are people of color. Further, Missouri casinos routinely purchase from minority-owned, women-owned and small disadvantaged businesses. “The gaming industry consistently provides unmatched career opportunities for employees from diverse backgrounds and a range of experiences,” said Virginia McDowell, president and chairwoman of Global Gaming Women, a 501(c) 3 with a mission to support women in the gaming industry. Freeman also spoke of the enormous opportunity legalized sports betting presents for Missouri if the 24-year federal government ban is lifted. Americans bet at least $150 billion on sports illegally last year alone, and AGA is aggressively building a broad coalition that will urge Congress to adopt a new approach. Legal, regulated sports betting could generate significant tax revenue for state and local governments in Missouri. St. Louis is the latest stop on AGA’s “Gaming Votes” tour, which aims to highlight the industry’s role as a strong community partner for candidates. Polls show Missouri poised to be a battleground state this fall, and presidential candidates will debate in St. Louis just weeks before Election Day. AGA has hosted similar events in in Ohio, Iowa, Colorado, Nevada, Pennsylvania, Michigan and Mississippi. Casino gaming supports more than 1.7 million jobs in 40 states.

UNLV INSTITUTE STUDYING ESPORTS

lthough it isn’t legal in Nevada yet, the University of Nevada, Las Vegas announced it is studying eSports and its potential regulation in the state.

The International Gaming Institute at UNLV works closely with state gaming regulators to study current trends and create new knowledge that helps to shape gaming regulations. With many casino operators looking to include eSports among gaming offerings to lure UNLV eSports Lab more millennial-age visiDirector Robert tors to Las Vegas, the Rippee gaming institute has created an eSports lab to generate new knowledge about the growing phenomenon. UNLV Hospitality Lab and eSports Lab Director Robert Rippee says eSports is a hot topic among casino executives, and generally is viewed as one of the greatest tools for luring millennials to Las Vegas. At the university’s eSports Lab, Rippee says students will learn about eSports games, player and fan behavior, and help to determine how best to effectively reach millennials via marketing. Ultimately, the university is looking to help shape future regulation of eSports, which many casino operators view as a strong lure for millennials. Millennials already are the single most populous age group in the United States, expected to reach a total population of 81 million by 2036, according to the Pew Center.

GILBERT MOVING JACK ENTERTAINMENT HQ

an Gilbert’s Jack Entertainment will spend $7 million to renovate the long-vacant St. Mary’s schoolhouse in Greektown, downtown Detroit, to serve as the casino company’s headquarters. Jack Entertainment will vacate space in One Woodward Avenue in December. “Our move will bring us closer to our 2,000 team members at our Greektown Casino-Hotel, and affirms our longstanding commitment to the Greektown district,” said Jack Entertainment Chief Executive Officer Matt Cullen. Gilbert spent more than $70 million renovating Greektown Casino-Hotel, which he took

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Dan Gilbert’s Jack Entertainment will spend $7 million to renovate the long-vacant St. Mary’s schoolhouse in Greektown, downtown Detroit, to serve as the casino company’s headquarters

over in 2013. The casino will be rebranded Jack Detroit Casino Hotel Greektown in early 2017. Built in 1868 and designed by Puis Daubner, the 29,000-square-foot former school, vacant for a decade, connects to Greektown Casino-Hotel through a pedestrian skywalk. Jack Entertainment will use four of the building’s five floors, with a retail tenant on the ground floor. Through Gilbert’s real estate arm, Bedrock, he has purchased more than 95 properties in Detroit and Cleveland. He has spent more than $2.2 billion on more than 14 million square feet of real estate in downtown Detroit. Jack Entertainment employs 7,000 people in four states, and its casino properties generate more than $1.4 billion in annual revenue.

HIGH MARKS FOR CASINO CASH TRAC

and food and beverage operations together with recyclers, kiosks, ATMs and cash dispensers. The company started business four years ago in Oklahoma’s tribal markets, and now works with 100 properties in 10 states and the U.S. Virgin Islands.

NEW VIP SUITES AT THE COSMOPOLITAN

igh rollers looking for exclusive gaming and swanky digs will have another option when the Cosmopolitan of Las Vegas completes upgrades to its penthouse suites. The Cosmopolitan has hired three interior designers to help create 21 VIP penthouse suites and a private gambling parlor at the top of the resort’s 51story Boulevard Tower. The new suites collectively will be called the Boulevard Penthouses, and are to be designed by Tihany Design in New York, Daun Curry, and Richmond International in London. The project is part of a $300 million upgrade to the Cosmopolitan, as it undergoes a massive rebranding effort.

asino Cash Trac has been recognized by Inc. magazine as one of the outstanding companies in the United States. The developer of gaming operations management and accounting software has been ranked near the top of the “Inc. 5000” in three categories: rated the No. 1 company in Oklahoma, the 19th best software company in America and the nation’s 251st fastest-growing company. “You associate yourself with the right people,” said Kurt Williams, co-founder and chief executive of Tulsa-based CCT. “The success of this company is because we have the people in the room that we do.” The Inc. 5000 ranks U.S.-based, privately held, independent companies according to percentage revenue growth over a three-year period. Revenue in the initial year must be at least $100,000 and at least $2 million in year three. CCT has grown revenues 1,575 percent since 2012, largely on the strength of its Casino Audit System for cage operations and revenue audit automation. The system offers full integration with casino management systems and hotel 74

An element of the new suites at the Cosmopolitan by Tihany Design

“These one-of-a-kind designer Boulevard Penthouses and private gaming salon are the final project to solidify the Cosmopolitan’s position atop the list of full-service luxury properties in Las Vegas,” said Cosmopolitan President and CEO Bill McBeath. Each penthouse is to range in size from 2,000 square feet to 5,000 square feet, and all will occupy 63,000 square feet of hotel space. Some will feature a teal and “jewel” tones, while others will be more cobalt blue in nature. “Our idea in partnering with these three outstanding designers was not to have 21 penthouses painted with the same brush, but to find creative

Global Gaming Business OCTOBER 2016

partners who would bring the touches of residential high design to the hospitality space—the results will be unparalleled,” McBeath said. Work already has gotten under way, and is to be completed by early 2017.

TCSJOHNHUXLEY TO SUPPLY CASINO ADMIRAL SAN ROQUE

asino Admiral San Roque is the first casino opened by the Novomatic Group in Spain, and is located in Andalucía, in the south of the Iberian peninsula. The casino opened its doors at the end of July after extensive refurbishments that lasted 12 months. The state-of-the-art gaming venue sets the bar high with no expense spared, to ensure visitors have a gaming experience that compares to that of a Las Vegas casino. The gaming area consists of 125 gaming positions including electronic roulette, and in addition has eight gaming tables. TCSJohnHuxley was chosen to supply the live gaming equipment, which includes four roulette tables and four blackjack and poker tables. Chipper Champ 2 chipping machines, A-Plus shufflers, Saturn roulette wheels and e-FXTM 29inch displays complete the order. The custom-designed tables provide the perfect complement to the new casino interior, and in addition, the casino decided to install Blaze LED surface technology on the roulette tables to bring added excitement to the gaming floor. Using an under-layout illuminated gaming surface, players and gaming staff are able to instantly benefit from seeing winning numbers clearly highlighted. In addition, with the improved visibility of winning sections, pit bosses and security staff can also easily monitor game procedures from a distance. Players also have the benefit of game prompts that light up on the layout, such as place your bets, no more bets and finish betting.

AGS POSTS IMPRESSIVE CLASS III GROWTH

GS, a gaming supplier with one of the industry’s most diversified product portfolios, announced that recent regulatory approvals of its new, high-performing Icon cabinet have resulted in an increase of installs and orders for its Class III slot games available on the cabinet, as well as triggering a field trial partnership with one of the world’s top cruise lines based in Florida. These key business benchmarks highlight the company’s remarkable growth in the Class III casino marketplace and now bring AGS’ core slot machine content to operators and players throughout a growing list of jurisdictions.

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“In the past few months, we’ve secured a number of new, strategic regulatory approvals for our Icon cabinet, including Nevada, Florida, New Jersey, and Mississippi,” said David Lopez, AGS’ president and CEO. “Between current installs and new orders, we’ve partnered with nearly 150 casinos across the U.S. to bring Icon and its games to new players. This growth shows how we’re continuing to deliver on our integration goals, one of which is focusing on expanding our Class III footprint in major markets throughout the U.S.” Featuring two flush-mounted 23-inch HD LCDs and an integrated digital sound system, the Icon cabinet delivers a truly compelling player experience. Its striking visual effects enhance AGS’ suite of customized, premium game content and play mechanics, including the player-favorites Gold Dragon Red Dragon, FireWolf, Golden Wins and Jade Wins.

VIZEXPLORER ANNOUNCES STRATEGIC INVESTMENT AND TECHNOLOGY DEVELOPMENT AGREEMENT

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izExplorer, a provider of operational intelligence solutions, announced that it has closed a strategic investment and technology development agreement with Stanley Black & Decker, a worldleading provider of tools and storage, commercial electronic security and engineered fastening systems. “We are pleased to partner with VizExplorer to accelerate development of new products for our customers,” said Larry Harper, vice president, Stanley Ventures, the newly formed corporate venture arm of Stanley Black & Decker. “The partnership has great potential to address common operational challenges our customers face on a daily basis.” The investment and collaboration enhances the joint strategies articulated by VizExplorer and Stanley Black & Decker. Together, the companies will collaborate to develop products that move the industry forward and help businesses gain insight into their day-to-day operations. “We are excited that Stanley has selected VizExplorer to power the next generation of solutions for its customers,” said VizExplorer CTO and founder Andrew Cardno. “This agreement marks our entry into the manufacturing world, where we are eager to leverage our expertise gleaned from the gaming industry.” OCTOBER 2016 www.ggbmagazine.com

Esports & Casino Resorts WHEN

VENUE

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October 25-26, 2016

SLS Las Vegas

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Esports & Casino Resorts is a two-day conference bringing together stakeholders from the commercial gambling and esports industries. THE FOCUS: A pragmatic, in-depth discussion of the mutually beneficial opportunities that exist today.

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PEOPLE FORMER CAESARS HEAD PERLMAN DEAD AT 90

lifford Perlman, former president of Caesars World, died last month at the age of 90. Perlman and his brother Stuart bought the three-year-old Caesars Palace in 1969 from founder Jay Sarno for $60 Clifford Perlman million and immediately transformed the troubled property, growing the hotel from 550 rooms to 1,750. Under his leadership, Caesars Palace signed international stars to appear in the showroom, was the location of several blockbuster movies, and launched a sports legacy with title fights and championship events. “Clifford Perlman was a visionary who took Caesars Palace to a new level,” said Gary Selesner, current president of Caesars Palace. “He recognized the potential of Las Vegas with that expansion. During his 13 years running the property, he pushed it forward in so many ways, and many of those strategies with the movies and expanding all started with him. He did do much for the Caesars Palace brand, but a lot of these things were key for Las Vegas becoming the international destination and place where you went for luxury and to have fun.” Perlman’s great contribution, however, might be the attention of Wall Street for Las Vegas. Caesars Palace became so profitable under his leadership that lenders began to sit up and take notice. In fact, Aetna became the first public company to invest in a casino under Perlman’s watch. Perlman was inducted into the AGA’s Gaming Hall of Fame in 2007.

JOHNSON NAMED TO WYNN RESORTS BOARD

ynn Resorts, Limited recently named Admiral Jay L. Johnson as a Class II member of its board of directors, bringing the board from nine to 10 members. Johnson will serve on the board’s CompensaJay L. Johnson tion Committee. His term will end at the 2019 annual meeting. Following a distinguished 32-year career in the U.S. Navy, serving as chief of Naval Operations and a member of the Joint Chiefs of Staff, Johnson re-

tired in July 2000. He then served in various senior executive roles at Dominion Resources Inc., including serving as chief executive officer of Dominion Virginia Power.

AGA HIRES PUBLIC AFFAIRS EXECUTIVE

he American Gaming Association last month hired Erik Balsbaugh as vice president of public affairs. In this role, Balsbaugh will advance AGA’s day-to-day public affairs efforts, which include aggressive campaigns to change federal sports betting law and to shape the industry’s image as a strong community partner. “Erik brings sharp campaigns skills and unmatched experience, including working on gaming issues in MasErik Balsbaugh sachusetts, that will help AGA and the industry achieve its most important goals over the coming months and years,” said Sara Rayme, senior vice president of public affairs. “Many in the industry already know what Erik is capable of, and we’re excited to welcome him to the AGA team.” Balsbaugh spent the last five years at the Dewey Square Group in Boston, where he managed public relations, electoral and issue campaigns for corporate, nonprofit and gaming clients.

INTERBLOCK NAMES DIRECTOR OF CUSTOMER AND PLAYER SERVICE

uxury gaming manufacJennifer Saragnese turer Interblock has named sales and marketing expert Jennifer Saragnese as director of customer and player service. Saragnese will oversee Interblock’s global marketing strategy team from the company’s corporate office in Las Vegas, focusing on customer service and account management for all of Interblock’s existing customers. This team is a new addition to the Interblock organization. Saragnese and her team will work with all of Interblock’s customers to strengthen successful partnerships and create new ones, and will collaborate with customers to implement best practices around service and product performance.

TEDESCO JOINS MARYLAND LIVE! CASINO

obert Tedesco recently was named senior vice Robert Tedesco president and assistant general manager at the Cordish Companies’ Maryland Live! Casino. With nearly 30 years of direct management experience in the hospitality industry, Tedesco will oversee day-to-day management and operations of the mid-Atlantic region’s most successful gaming facility. In addition, Tedesco will serve on the corporate design and development team of Maryland Live!’s multimillion-dollar flagship Live! Hotel, Event Center and Spa. Tedesco has held senior executive and management positions in gaming, hotel, food and beverage, facilities, spa and golf operations. Most recently, he served as vice president and assistant general manager at Red Rock Casino Resort and Spa in Las Vegas. Prior to that, he was affiliated with Station Casinos, Pinnacle Entertainment and Hyatt Gaming properties.

GGB

October 2016 Index of Advertisers

Acres . . . . . . . . . . . . . . . . . . . . . . . .40,41,59,79 Adlink Technology . . . . . . . . . . . . . . . . . . . . .47 AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 AGEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 Agilysys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Cintas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Crane Payment Innovations . . . . . . . . . . . . . .58 DataSpade . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Ditronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 Everi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Fabicash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . .75 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 Gaming Partners International . . . . . . . . . . . .53 Gasser Chair . . . . . . . . . . . . . . . . . . . . . . . . . .55 GGB News . . . . . . . . . . . . . . . . . . . . . . . . . . .71 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Greenberg Traurig . . . . . . . . . . . . . . . . . . . . .33 Hnedak Bobo Group . . . . . . . . . . . . . . . . . . . .39 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,31 Incredible Technologies . . . . . . . . . . . . . . . . .44 Innovation Group . . . . . . . . . . . . . . . . . . . . . .57 Interblock . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 JCM Global . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Konami . . . . . . . . . . . . . . . . . . . . . . . Back Cover Malta iGaming . . . . . . . . . . . . . . . . . . . . . . . .69 Nauro eSports . . . . . . . . . . . . . . . . . . . . . . . .76 NetEnt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . .12 SG Interactive . . . . . . . . . . . . . . . . . . . . . . . . .63 Scientific Games . . . . . . . . . . . . . . . . . . . . . . .15 Sightline Payments . . . . . . . . . . . . . . . . . . . . .25 Top Golf USA . . . . . . . . . . . . . . . . . . . . . . . . .37 VizExplorer . . . . . . . . . . . . . . . . . . . . . . . . . . .45

OCTOBER 2016 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Stephen Crosby

Chairman, Massachusetts Gaming Commission

overnor Deval Patrick appointed Stephen Crosby chairman of the Massachusetts Gaming Commission in 2012. Four years later, there is only one casino—a racino in Plainville—open, with two others at least two years away. Crosby previously was the founding dean of the John W. McCormack Graduate School of Policy and Global Studies at University of Massachusetts Boston. He has more than 45 years of public policy experience. At the commission, Crosby has created one of the most respected regulatory bodies in the United States. He spoke with GGB Publisher Roger Gros at his offices in Boston in August. To hear a full podcast of the interview, visit GGBMagazine.com. GGB: There’s been a lot of criticism that there is only one casino up and running after four years. How much control did you really have over that?

Stephen Crosby: Well, a lot of it was in the act—principally the issues having to do with local control and litigation. And then there were also a lot of lawsuits, and a lot of politics. So, I would say, maybe a third of it was sort of within our control. We chose to be very methodical, and we were very new to the game. We didn’t know much of anything. And we did feel very strongly that we wanted to make sure we created a competitive environment. So we spent a fair amount of time making sure that the industry knew that we were really open for business. There were no inside deals; this was going to be an open, competitive, transparent process. So, we could have sped it up, but I think we always felt strongly that getting it right was better than getting it fast. What were some of the hurdles you met early on?

One of them was the whole background check process. We got these documents, this multi-ju78

Global Gaming Business OCTOBER 2016

risdictional individual background checks, and a lot of us thought this is unbelievably invasive. I’ve been a businessman more than I’ve been in the public sector, and I thought as a businessman that this was crazy. But our consultants thought that this is the way it’s done, and that it was better to start out as a heavy regulator and retreat, rather than start light and go heavy. The issue of competition was a major issue. There was kind of a subterranean belief here that Suffolk Downs and Caesars, who were partnered, had the inside track on the Eastern Massachusetts casino. And we didn’t want that to be the perception, because that was keeping other bidders from coming in. So we took our time and we created that perception that it was an open bidding process. One of the things that you oversee that very few states with commercial casinos also oversee is the tribal gaming element. How do you handle that?

We don’t directly regulate the tribe, but we do have a compact, which has an agreement that says that we will give them certain kinds of financial benefits, and potentially exclusivity in exchange for which we get some money, but also we get this oversight role. But it’s a partnership; I want to be clear about that. We’re not regulating the tribe. The commission decided that there would be only one tribal casino in the southeastern region, but a lawsuit is challenging the BIA’s decision to put land into trust. How are you handling that?

Massachusetts is broken up into three regions, and we have the authority to license one commercial casino in each of those three regions. We’ve done it in Western Mass, we’ve done it in Eastern Mass. Southeastern Mass is where the tribal casino is purported to be. We don’t really want two casinos down there, we thought, but we never have known for sure whether there ever

would be a tribal casino. After three years, they got their land in trust, and for a variety of reasons, some of which have to do with the tribe, some of which have to do with the proposal itself, we decided not to award that commercial license. Then, the Federal District Court reversed the BIA’s decision, as you said, to award land in trust. So we are right back now to where we were four and a half years ago, which is wondering whether or not the tribe will ever get land in trust. So, at this point, we’re just sitting tight. Tell us about your responsible gaming program, GameSense.

There was a lot of focus in our statute about promoting responsible gaming and trying to control problem gambling. We’ve taken that very seriously. We’ve put together a whole program that we call GameSense, which is a program that has its roots in Canada, although we’ve developed it quite a bit. And it has really three basic elements. First, we have a GameSense agent, a responsible gaming agent, on the casino floor, 16 hours a day. That person’s job is to inform people about how the games work. Secondly, the GameSense agents are largely responsible for our voluntary self-exclusion program. Most voluntary self-exclusions are sort of a law-enforcement function, and you’re kind of treated like you’re a bad guy. We would like to make it sort of an entry point to treatment, and encourage people. The third element is the PlayMyWay, which is a play management system, what the industry sometimes refers to as “pre-commitment.” And, it is a system in Massachusetts, where when you put your player card in, up comes a screen that says, “Would you like to set budget?” How much are you willing to lose? Today, this week, this month? You can say no and move on. If you say yes, the system will warn you when you’re getting close to your budget. But it will never shut you down. It’s just a tool to help you manage your budget.

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