Gaming America: Mar/Apr 2020

www.gamingamerica.com

Mar/Apr 2020

INSIDE: AMERICAN GAMING ASSOCIATION PRESIDENT & CEO BILL MILLER MARCH MADNESS INDIAN GAMING TRADESHOW AND CONVENTION PREVIEW THE FUTURE OF US ADVERTISING

A shift in strategy A detailed look at MGM's approach to real estate 1 GAMINGAMERICA

COO, EDITOR IN CHIEF Julian Perry EDITOR David Cook Editor@GamingAmerica.com

EDITOR’S LETTER

SENIOR STAFF WRITER Tim Poole STAFF WRITERS Owain Flanders Owain.Flanders@gamblinginsider.com Iqbal Johal Iqbal.Johal@gamblinginsider.com Aidan Williams Aidan.Williams@gamblinginsider.com Ezra Amacher Ezra.Amacher@playerspublishing.com LEAD DESIGNER Laura Fogar DESIGNERS Rebecca Lydamore, Olesya Adamska DESIGN ASSISTANTS Radostina Mihaylova, Louise Clark EVENTS MANAGER Mariya Savova PRODUCTION CONTROLLER Emily Jackson OPERATIONS ASSISTANT Shannon Moran WEBSITE MANAGER Tom Powling COMMERCIAL DIRECTOR Deepak Malkani Deepak.Malkani@gamblinginsider.com Tel: +44 (0)20 7729 6279 BUSINESS DEVELOPMENT DIRECTOR, MALTA Oz Mustafa Oz.Mustafa@gamblinginsider.com Tel: +356 3550 0485 EVENTS SALES MANAGER Ryan Horwood Ryan@globalgamingawards.com +44 (0) 208 638 7610 SENIOR ACCOUNT MANAGER William Aderele William.Aderele@gamblinginsider.com Tel: +44 (0)20 7739 2062 ACCOUNT MANAGERS Michael Juqula Michael.Juqula@gamblinginsider.com Tel: +44 (0)20 3487 0498 Clive Waite Clive.Waite@gamblinginsider.com Tel: +44 (0)20 7729 0643 Richard Carr Richard.Carr@gamblinginsider.com Tel: +44 (0) 203 435 5624 Nitesh Patel Nitesh.Patel@gamblinginsider.com Tel: +44 (0) 207 739 5768 US BUSINESS DEVELOPMENT MANAGER Aaron Harvey Aaron.Harvey@playerspublishing.com Tel: +1 702 425 7818 US ACCOUNT MANAGER Erica Clark Erica.Clark@playerspublishing.com Tel: +1 702 430 1912 CREDIT MANAGER Rachel Voit

JULIAN PERRY, COO, Editor in Chief

DAVID COOK, Editor

At the end of ICE London, it feels strange to say the busiest period of our gaming calendar is yet to come. But, in the US, that's very much the case, as we look forward to the National Indian Gaming Association trade show (24-27 March), with a view towards the Oklahoma Indian Gaming Association trade show (27-29 July) and, of course, G2E in October. As far away as that mammoth show is, preparations will have already begun in earnest, which is equally the case for the Global Gaming Awards Las Vegas (see our round-up on the latest state of play on p8).

There was, of course, a more European-centric focus at ICE. Many US companies still made the trip however, and we caught up with the likes of Gaming Arts (p50) and Lightning Box (p52) at the show. American Gaming Association CEO Bill Miller was also on hand to offer his expertise on all things gaming regulation and you can read his thoughts in our in-depth catch up with him in this magazine (p30).

Ahead of NIGA, there is naturally a heavy focus on tribal gaming and it's a theme that has come up in several of our interviews. More specifically, we have previewed the event itself (p40) and covered a tribal gaming conference from the ICE agenda (p28).

Inevitably, plenty has happened within US gaming since our last Gaming America publication and change has been rife within the industry. MGM Resorts International Chairman and CEO Jim Murren is stepping down after 12 years in his role and Tim Poole assesses his legacy in his From the top column (p6). We would also be remiss not to mention MGM's recent property sales, which are the subject of our cover feature from Sean Chaffin (p10), and is also touched on in an extremely informative feature from Oliver Lovat (p14).

Elsewhere, we consider some of US gaming's most pressing current issues: tax rates (p28), advertising (p34) and sports betting monopolization (p18). In a Gaming America first, we also address the issue of advertising in the form of a team debate, as Tim Poole, Owain Flanders and Iqbal Johal consider whether an over-use of sponsorship and advertising in sports betting could be something the US sector comes to regret.

As you can see, there has been an abundance of content for us to sink our teeth into while putting this publication together. Whether you're reading this at NIGA or in the comfort of your own home, we hope you'll enjoy getting your teeth into consuming the result.

CONTRIBUTING THIS ISSUE

WITH THANKS TO: Yaniv Sherman, Sean Chaffin, Oliver Lovat, Russell Witt, Michele Ciavarella, David Strow, David Forman, Bill Miller, Mike Lally, Michael Maokhamphiou, Mike Dreitzer, Valerie Spicer, Sheila Morago, Loretta Tuell, Jason Giles, Cathryn Lai, Andrew Burke, Sim Bielak, Mark DeDeaux, Eric Cunningham, David McKee, Mike Mixer Gaming America magazine ISSN 2632-766X Produced and published

by Players Publishing Ltd All material is strictly copyrighted and all rights reserved. Reproduction without permission is forbidden. Every care is taken in compiling the contents of Gambling Insider but we assume no responsibility for the effects arising therefrom.

The views expressed are not necessarily those of the publisher.

BILL MILLER

American Gaming Association

YANIV SHERMAN

888 Holdings

READ EVERY EDITION ONLINE FOR FREE AT GAMINGAMERICA.COM GAMINGAMERICA 3

CONTENTS 06

FROM THE TOP

08

GGA VEGAS

Tim Poole assesses Jim Murren's legacy at MGM Resorts International

An update on the nomination process for the Global Gaming Awards Las Vegas 2020

10

TENANT AND LANDLORD

14

TEAMSTERS TO TITANS

18

SPORTS BETTING MONOPOLIES

20

POLITICAL BETTING

24

MARCH MADNESS

28

TRIBAL ROUTES OF ENTRY

30

AN UNDERVALUED HAND

32

DEBATE: OVER-ADVERTISING?

34

TARGETING OFFSHORE

Sean Chaffin examines MGM Resorts International's sale and leaseback strategy

Oliver Lovat looks at how Las Vegas financing has evolved

Owain Flanders looks at state monopolization in the case of DC

Ezra Amacher speaks to Yaniv Sherman of 888 Holdings

Ezra Amacher speaks to industry experts about the sports betting phenomenon

Iqbal Johal reports on a tribal gaming conference from ICE London

Tim Poole speaks to American Gaming Association CEO Bill Miller

Tim Poole, Owain Flanders and Iqbal Johal debate the future of US advertising

Continuing our advertising focus, Tim Poole proposes an aggressive marketing strategy

38

COULD TAX RATES GET HIGHER?

40

INDIAN GAMING TRADESHOW AND CONVENTION PREVIEW (NIGA)

Tim Poole evaluates how politicians may perceive Pennsylvania's early success

We preview the biggest tribal gaming show

42

ICE NORTH AMERICA PREVIEW

44

INCREDIBLE TECHNOLOGIES

46

SCIENTIFIC GAMES

49

TABLETRAC

50

GAMING ARTS

52

LIGHTNING BOX

54

AGS

56

SUZOHAPP

58

BLUBERI

We preview ICE North America

Rusell Witt explains why class II gaming is more important than ever

We speak to Scientific Games' SVP Product Management and Product Marketing

Eric Cunningham explains how today's analytics can help the casino industry

Tim Poole sits down with Gaming Arts President Mike Dreitzer at ICE London

Lightning Box executives speak to Tim Poole about expanding to new territories

Owain Flanders speaks to Mark DeDeaux, AGS Senior Director of Slot Products

We speak to Sim Bielak, SuzoHapp's Global President of Gaming & Amusement

We speak to Bluberi CEO Andrew Burke

JIM MURREN

FROM THE TOP: JAPAN COULD BE JIM MURREN’S LASTING LEGACY Tim Poole evaluates what outgoing Chairman and CEO Jim Murren will leave behind at MGM Resorts International.

Jim Murren certainly made an impression during our hour-long interview for the US CEO Special of Gambling Insider magazine at the Bellagio last July. Here was a man who spoke passionately about not just gaming, but issues beyond it as well as showing humility as an executive and turning Las Vegas into a sporting capital.

This is why I was rather surprised by the immediate reaction to the Chairman and CEO's impending departure from MGM Resorts. Murren has been with the company since 1998 and has been Chairman and CEO since 2008. Not only did MGM's share price initially rise (it has since fallen) but there also appeared to be a lack of surprise given MGM’s recent performance and a lot of scorn for Murren on social media. Admittedly, the latter is easily explainable; seen as the man behind both parking fees and resort fees, it’s fair to say a fair few professional gamblers didn’t take too well to Murren.

Meanwhile, MGM’s Q4 results were "below expectations," with net revenue growing 4% year-on-year to $3.2bn and adjusted EBITDAR decreasing 3% to $682m. But without any sense of bias, he would always question the planning of a set of financial results that included a 10% full-year rise to $12.9bn.

My impression, and I’m sure all those reading from a neutral standpoint will agree, is these are the kind of numbers all gaming and entertainment firms would aspire to.

Those Q4 results have undoubtedly meant Murren’s departure comes in far different circumstances than a Chairman and CEO would desire; i.e. going out on top. But, as many analysts have 6 GAMINGAMERICA

JIM MURREN

written – with former American Gaming Association CEO Geoff Freeman going as far as penning an open-letter tribute – Murren’s legacy is an important one for Las Vegas. Carrying on Kirk Kerkorian’s visionary work with MGM, Murren has left a mark on the gaming sector that will be difficult to ignore.

Many of the benefits of Murren’s passions and achievements will be reaped further down the line. If Las Vegas ever hosts the Olympics, for example, Murren should be the first man to be thanked for his contribution to its sporting landscape.

Murren is also a firm advocate of equality in both sport and the workplace.

But, whatever your opinion on Murren’s performance as Chairman and CEO, his biggest legacy may well lie in Japan;

JIM MURREN

especially considering his comments on MGM’s Q4 and FY earnings call were interpreted as a hint he could take up a role within MGM’s Japanese business in the future. “I’m absolutely sure I’m going to be involved in the Japan project,” he said.

“In fact, I’ll probably be even more involved in the Japan project as time goes by.”

My goal – as it should be with any journalist – is to remain objective. On that basis, it’s difficult to paint Murren’s final years in the CEO role as an unwavering success, given respected industry analysts half-expected his departure following MGM’s

“MURREN HAS SPARED NO EXPENSE IN HIS PERSONAL BID TO SECURE A JAPANESE CASINO LICENSE FOR MGM, TELLING GAMBLING INSIDER BACK IN JULY HE HAS BEEN VISITING JAPAN FOR SOME 30 YEARS, FLYING OVER 30 TIMES WITHIN THE LAST THREE YEARS ALONE.” recent performance. It is equally difficult, however, for anyone to argue Murren has not left MGM in a strong long-term position internationally. He has put true emphasis on the “International” aspect of the brand name.

Having sold the real estate of the Bellagio for $4.25bn and agreed sales for the real estate of the MGM Grand and Mandalay Bay for a combined $4.6bn (as you can read about in this publication’s cover feature, beginning p10), Murren has left the casino operator in strong financial shape to enter the Japanese market. That financial backing does not look like it is going to waste either, with MGM’s chief competition for an integrated resort (IR) license in Osaka – as detailed in the November/December 2019 edition of From the top – now withdrawing from the race, leaving MGM in pole position.

Despite still pursuing a license elsewhere in Japan, Galaxy Entertainment has withdrawn from the Osaka IR race. With Genting doing the same, MGM and its partner Orix were the only survivors of Osaka’s Request for Proposal process.

Murren has spared no expense in his personal bid to secure a Japanese casino license for MGM, telling Gambling Insider back in July he has been visiting Japan for some 30 years, flying over 30 times within the last three years alone. It’s a market MGM clearly prioritizes, with President and COO Bill Hornbuckle describing it as the “largest untapped market in the world.”

He explained to Gambling Insider, also in July: “It represents the economics of something like Singapore. There will be three coveted licenses. Each one will have an audience of about 30 million if they are spread out correctly, so we’re all in. We’ve taken an Osaka-first position and we want to build something extremely special."

Now, should the Japanese market fulfil those expectations, MGM would be one of only three firms to benefit from a huge new source of revenue. It may even end up being the only US firm to land such a license and, in terms of legacies, that’s not one to be questioned. Of course, the potential issue exists of Japan perhaps not living up to its billing financially. But responsibility for that, realistically, would land firmly on those taking charge of the project from here on in.

Murren has done everything he can to put MGM on the Japanese map and will even stay on as a consultant in the short term, with his aforementioned hint of future Japan involvement to go with it. If projections are not matched, it is safe to say it will not be because of any shortcomings on Murren’s part. While analysts can speculate on Murren’s success in Las Vegas, the merits of prioritizing non-gaming revenue and Murren’s many other policies and business philosophies, his lasting legacy will be one of internationalization. You only need look at MGM’s expansion into Macau, which has been a resounding success and had Murren’s stamp all over it, to see proof of that.

An architect by nature, Murren is a man with long-term vision.

One day, that vision should become a reality as MGM opens its first Japanese casino, likely in Osaka, and more specifically, Yumeshima. Much like Murren’s tenure itself, some will lavish it with praise and others criticize it. But no one will be able to change the fact it is there – the physical representation of Murren’s grand design coming to life.

GAMINGAMERICA 7

GGA LAS VEGAS 2020

Lead Partner

SUBMIT YOUR SELF-NOMINATIONS FOR GGA LAS VEGAS 2020 The window for self-nominations to be submitted for the Global Gaming Awards Las Vegas 2020 is now officially open.

As the most respected and trusted Awards ceremony in the gaming industry, the Global Gaming Awards recognize and reward excellence displayed by industry companies across the previous 12 months.

The seventh edition of the luncheon ceremony will take place at the Sands Expo Convention Center on Monday 5 October, as part of the G2E show.

Any person can nominate any gaming industry company for an Award. Nominations can be submitted at GlobalGamingAwards.com/Vegas, along with a supporting statement, including reasons, products or achievements related to the last 12 months.

The self-nomination window will close on Sunday 24 May. All self-nominations will then be considered by the Gaming America editorial team. The Nomination Panel will put forward their own recommendations before the final Shortlist is decided.

8 GAMINGAMERICA

Nominated companies will then be able to provide a supporting statement to the Judging Panel, who will cast their first- and second-choice votes in all 12 categories, before the winners are revealed at the ceremony in October.

The 12 Awards up for grabs are: Land-Based Operator of the Year; Digital Operator of the Year; Land-Based Product of the Year; Digital Product of the Year; Land-Based Industry Supplier of the Year; Digital Industry Supplier of the Year; Customer Loyalty Program of the Year; Property of the Year; Product Innovation of the Year; Slot of the Year; Responsible Business of the Year; and American Executive of the Year.

Aristocrat was the standout winner at last year's ceremony, as it was the only company to take home more than one Award, winning Land-Based Industry Supplier of the Year and Slot of the Year with its Buffalo Diamond game.

The Global Gaming Awards Las Vegas are powered by Gambling Insider in association with G2E and are independently adjudicated by KPMG Isle of Man. BetConstruct is the Lead Partner of the Global Gaming Awards Las Vegas.

MGM RESORTS

MGM RESORTS: TENANT AND LANDLORD Sean Chaffin examines MGM Resorts International's sale and leaseback strategy with some of its biggest properties.

A major casino corporation without casinos or hotels? That may sound a bit oxymoronic, but in recent months, that has been the trend for one of the largest gaming companies in the world.

In January, MGM Resorts announced the sale of the Mandalay Bay and MGM Grand to the Blackstone Group in a $2.5bn deal.

Two months earlier, MGM Resorts and Blackstone reached a similar deal for the Bellagio in Las Vegas as part of a $4.25bn sale-leaseback transaction.

This isn’t exactly a complete casino purchase in the traditional sense and the details of the deal clarify the shift in strategy MGM Resorts has undergone in recent years. As part of the deal, the company’s real estate investment trust (REIT), MGM Growth Properties, enters into a joint venture with the Blackstone Group. MGM Growth will own 50.1% of the joint venture and Blackstone 49.9%.

As part of the deal, Blackstone also adds the real-estate assets of Mandalay Bay from MGM Growth Properties, and will lease both properties back to MGM Resorts at an initial annual rent of $292m. The moves are part of a shift in strategy to what’s called a “asset-light” MGM, where it moves toward simply functioning as a 10 GAMINGAMERICA

gaming and hotel operator. The company no longer owns the building where eager gamblers book a suite and hit the slot machines and craps tables.

Outgoing Chairman and CEO Jim Murren said when the deal was announced: “These announcements represent a key milestone in executing the company's previously communicated asset-light strategy; one that enables a best-in-class balance sheet and strong free cash flow generation to provide MGM Resorts with meaningful strategic flexibility to create continued value for our shareholders.”

SHIFT IN STRATEGY What is the point of this shift in business strategy? We are discussing this at a particularly interesting time, as it was announced in February Murren would be stepping down. He joined the company in 1998 and had been CEO since 2008. MGM's net revenue for Q4 2019 was $3.2bn, up 4% year-on-year, while adjusted EBITDAR descended 3% to $682m. Whatever the exact reasons behind Murren's departure, it will certainly lead to an adjustment period and change is clearly on the horizon for the operator as a whole.

MGM RESORTS

Long-time Las Vegas business journalist David McKee says the new approach to property management allows MGM to reduce its top-heavy leverage and enables the company to harvest revenue streams from properties like Bellagio and MGM Grand while paying relatively modest rent.

“Maintenance becomes the responsibility of the new owner,” McKee says. “The company is additionally incentivized to drive performance at the now-rented resorts.”

MGM becomes merely a tenant, operating its casino and hotel management business in a facility that it leases. For Blackstone, the deal offers a safer, more steady return than a traditional gaming investment.

“Gaming REITs are a safer play than the gaming group itself, which doesn't move predictably in the market,” McKee says. “Right now, gaming operator stocks are doing surprisingly well during the coronavirus outbreak, but the shutdown of the Macau casinos shows how vulnerable those stocks could be to volatile shifts in the economy. Already, stock analysts are writing off the first two, maybe three quarters of the year and putting their hopes on a fourth quarter 2020 recovery.”

A CASH WAR CHEST In general, Wall Street has been pleased with the new focus.

As part of the announcement of the recent agreement, MGM made clear this won’t be the last sale and leaseback deal.

The company listed possible deals down the line for its MGM Springfield property in Massachusetts and its 50% stake in CityCenter Las Vegas.

“Our corporate objective remains crystal clear," Murren said.

"We will continue to monetize our owned real estate assets, which facilitates our strong focus on returning capital to our shareholders, while also retaining significant flexibility to pursue our visible growth initiatives, including Japan and sports betting.”

That “monetized” note is critical. MGM basically remains a casino company without losing control of its assets – not even the buildings it operates in. An agreement in rent has been reached, and the company continues to function basically as it had before, but now with a cash infusion.

Mike Mixer is a Las Vegas-based Executive Managing Director of Colliers International, a global real estate service and investment management company. He’s an expert in the resort and gaming market, and says that cash infusion allows a company to move beyond owning real estate.

“The primary advantage of this asset-light approach is to raise cheap capital without giving up operational control,” Mixer says.

“This capital can be used for new growth initiatives or to pay down existing debt.”

While it is not part of the leaseback plan, MGM let go of Las Vegas’s Circus Circus to Treasure Island owner Phil Ruffin. The $825m deal also included the Slots-A-Fun Casino located next door and an adjacent 37 acres. Ruffin believed the properties would be part of a revival of the north end of the Strip.

12 GAMINGAMERICA

“I’m very happy about it,” Ruffin told Vegas Inc. “This is going to make a lot of money. Where can you find 102 acres on the Strip?

This has been a cash cow for a long time and it’s just going to become more and more valuable.”

However, MGM always viewed Circus Circus as a “non-core” asset and the sale added more cash to its warchest. A key part of these recent moves may be an overarching goal of winning a license to own a casino in Japan. Mixer believes that while the leaseback approach may be good for the business and stock, Japan is the ultimate goal.

The country recently legalized casinos to be operated as integrated resorts with hotels and conference facilities, with the goal of attracting more foreign tourists. MGM has plenty of experience in that arena, as anyone who’s visited Aria or Bellagio can attest. Mixer believes pursuing a casino license in Japan is the right move for MGM at this time and shows shrewdness among gaming company management.

“In particular to MGM’s strategy, it probably makes sense as they pursue a very costly, but likely lucrative, quest for a Japanese gaming license,” Mixer says. “The minimum cost to develop a project in Japan will be very high. [Leaseback agreements are] a relatively new strategy for the gaming industry, but not such a new strategy for the real estate industry. I think it shows Las Vegas gaming companies have achieved a new level of sophisticated thinking.”

MGM even hinted at this approach as part of the announcement to sell MGM Grand and Mandalay Bay, with Murren noting the moves allow for it to return capital to shareholders but also retain “significant flexibility to pursue our visible growth initiatives, including Japan and sports betting.”

But are there any negatives to the company’s new leaseback and cash infusion approach? Are the actual casino facilities themselves a key part of a gaming company’s value? Could a disagreement among Blackstone and MGM derail the agreements at some point down the line?

“One challenge may be to devalue the overall company value as it removes hard assets from the balance sheet,” Mixer notes.

“Another may be a longer-term challenge to renew the leases with the new landlords. It is hard to predict what the market will be in 30 to 50 years.”

For the time being, sale and leaseback seem to be a trend in the industry, with Penn National Gaming and Caesars Entertainment making use of this approach to some degree as well. Many will be following the results of MGM’s more expansive approach.

Mixer adds: “I think other gaming companies are watching and exploring the strategy for their own companies.”

Sean Chaffin is a freelance writer in Crandall, Texas, and senior writer for Casino Player and Strictly Slots magazines. His work appears in numerous websites and publications. Follow him on Twitter @PokerTraditions or email him at seanchaffin@sbcglobal.net for story assignments.

TEAMSTERS TO TITANS

FROM TEAMSTERS TO TITANS Oliver Lovat reports on how Las Vegas casino financing has evolved from the backroom to the boardroom, and how REITs have changed operator strategy.

In Downtown Las Vegas, on the site of the old Federal Court House and Post Office, sits the National Museum of Organized Crime and Law Enforcement; better known as The Mob Museum.

The museum highlights the influence of organized crime in the early days of Las Vegas and explores its legacy. Most interesting for today is the development and ownership of Las Vegas’ iconic casinos.

14 GAMINGAMERICA

A FAMILY AFFAIR From the opening of The Strip’s Flamingo in 1946 until Boyd Gaming’s enforced operational control of The Stardust in 1984, various 'families' held both declared and undeclared interests in Las Vegas Strip casinos. Much of this was enabled thanks to the loans provided by Teamsters Central States Pension Fund for casino construction, at a time when there was little commercial lending for casino development.

TEAMSTERS TO TITANS

Nate and Jerome Mack and E. Parry Thomas facilitated much of the financing through The Bank of Las Vegas and latterly, The Valley Bank of Nevada, which was a pivotal catalyst for Las Vegas’ development. Over time, many of the loans sanctioned by Jimmy Hoffa were repaid with millions of dollars of accrued interest, proving excellent investments for the Union Pension Fund. This allowed many Teamsters members a comfortable retirement, which was ironically a benefit not afforded to some of those that sanctioned them.

Legitimate finance came to town with the Corporate Gaming Acts of 1967 and 1969, led by Howard Hughes and Kirk Kerkorian, providing lawful exits to investments made by Moe Dalitz, Meyer Lansky and their colleagues that took the early risk in building casino resorts. This change allowed Las Vegas to shake off its shady image and proved convenient and fruitful investment for both sellers and buyers.

RAISING THE STAKES: CAPITAL MARKETS DISCOVER CASINOS As 1,000-room casino resorts became the norm, the costs to build these palaces exceeded the capabilities of local finance.

Kerkorian, the owner of Western Airlines and MGM Studios, financed his International Leisure Corp. via a variety of international funding tools, which were exposed to the volatility of the currency and financial markets of the time.

The properties were performing, but the currency swings induced the sale of his Las Vegas hotel assets to Hilton in 1970, less than two years after opening. Undeterred, he returned to Las Vegas, opening The MGM Grand (now Bally’s) in 1973, again using commercial finance to fund the $106m resort. The Perlmans had leveraged Lum’s to acquire Caesars Palace, which they operated very profitably, but attempts to raise commercial finance for other ventures proved mixed.

In 1973, Meshulam Riklis acquired the Riviera Casino using his favorite financing tool – the high-interest bearing bond. He expanded the Riviera before it was forced into bankruptcy a decade later, arguably as a consequence of developments on the other side of the country.

Atlantic City became the second US jurisdiction to permit legal gambling, with the aim of rejuvenating the flagging Boardwalk. The first bets were placed at Resorts Casino in 1978 and within a short period, Atlantic City surpassed Las Vegas as the US gaming capital, in terms of revenue (which was to be the case until 1999).

Atlantic City saw the majority of casino development in the 1980s. The best-known operators were Donald Trump (then just a New York developer with an appetite for financial leverage), the Las Vegas giants Caesars World

and a virtually unknown Downtown Las Vegas operator, who gained exposure with his light-hearted celebrity advertisements, named Steve Wynn.

Later, in the 1990s, business builder Arthur Goldberg led Bally’s manufacturing to become a diverse organization, which included theme parks, gyms and casinos, via continual acquisitions and disposals. Hilton acquired Goldberg’s Bally's, before shortly separating the casino business to form Park Place Entertainment – a move led by Goldberg. Park Place became the originator for corporate gaming acquisitions; at the time of Goldberg’s passing in 2000 at the age of 58, it was the largest casino company in the US. Park Place was eventually acquired

by Harrah’s, but by 2015 it gave up the fight and finally filed for bankruptcy with $24bn of debt. Trump’s leveraged model had already filed for bankruptcy four times; in 1991, 2004, 2009 and 2014.

Revisiting the merits of the capital structure developed by Riklis, Michael Milken and Wynn financed the construction of the Golden Nugget towers in Las Vegas and Atlantic City and, ultimately,The Mirage with bonds to investor acclaim and financial success. Circus Circus Enterprises, the Las Vegas-based operator, built Excalibur with cash on the balance sheet.

The successes of Mirage Resorts and Circus Circus − both publicly traded entities − alerted broader capital markets to the financial appeal of casinos. With leadership less backroom and more boardroom, the institutional financial taps loosened, leading to rapid growth throughout the 1990s.

Outside Atlantic City and Las Vegas, tribal gaming also proliferated in the '90s. However, commercial lending to Native Americans was not as forthcoming. When the Mashantucket Pequot Tribal Nation built Foxwoods in Connecticut, opening in 1992, the resort was financed by Malaysia’s Lim Family, owners of Genting Highlands. It was joined in 1996 by Mohegan Sun, financed in part by Sol Kerzner, the South African developer. After many years of success and expansion, by the time of the 2008 financial crisis, both ventures had accrued significant commercial debt. Meeting their obligations became challenging. Unlike commercial businesses, the US recognizes Native American tribes as sovereign, thus outside federal jurisdiction.

Therefore, tribal ventures cannot issue public equity, sell tribal assets to commercial businesses, get sued or even file for bankruptcy, even in the case of default.

Restructuring the non-performing tribal debt post-crisis was therefore challenging for Native American casinos and an anathema to many lenders.

With high barriers to entry and irregular, unproven and volatile cash flows, financing casinos was not always a safe bet.

GAMINGAMERICA 15

TEAMSTERS TO TITANS

REAL-ESTATE INVESTMENT TRUSTS With the exception of liberating Europe and ending tyranny for millions, real-estate investment trusts (REITs) are perhaps Dwight D. Eisenhower’s most enduring legacy.

The REIT Act (which was an amendment to the Cigar Excise Tax Extension of 1960) has been the bedrock of the US real-estate industry for decades.

The characteristics of REITs make them a highly advantageous investment for those wishing to invest in the asset class, without physically investing in bricks and mortar.

The REIT Act exempts companies whose sole act is holding real estate from paying corporate income tax if income is distributed as dividends to shareholders.

As income must be distributed pre-tax, this has historically led to above-average dividend distributions rather than conventional stocks, and has therefore been more desirable to investors seeking predictable cash returns.

It is the most tax-efficient method to invest in property, and unlike holding direct real estate, offers liquidity and flexible exposure for both small and large investors.

Outside telecommunications and data-storage-focused companies, the two largest US REITS are Prologis – the logistics and warehousing giant – and Simon Property Group. The latter has relevancy in Las Vegas as the owner of both North and South Outlets, the upscale Crystals SCENARIO 1: SINGLE COMPANY at CityCenter and the lucrative Forum shops, which redefined Las Vegas as a shopping destination. Shopping, Enterprise Value activity $3bn not gaming, is the number-one undertaken by Las Vegas visitors; Simon has been the enabler and $2bn Debt main beneficiary of this trend.

A REITING OF EBITDA MINDS? $500m It seems so obvious now. With a background in commercial real-estateDebt finance, I was visiting a faculty at The University $150m Service College of Estate Management in 2011, when I began researching Las Vegas casinos. At this time, I advocated for Tax $100m casino resorts to investigate separating into opco propco (operating company/property company) structures; the propco element being a REIT. My argument was based on the cost of money to the (then indebted) operators and the inefficiencies of gaming companies’ capital structures. Take a look at long-term notes; the gaming companies were issuing these at above 6% (some significantly more so), thus further burdening their debt/equity ratios and restricting free cash flow.

Caesars was underwater due to their debt pile. MGM Resorts also had repayment struggles. REIT structures were not suitable to Las Vegas Sands and Wynn Resorts, who operated out of single assets in Las Vegas and internationally. But the aforementioned giants, plus Penn 16 GAMINGAMERICA

National, Pinnacle Entertainment and Ameristar, had large, geographically diverse, national property footprints, holding the value of their real estate on their balance sheets. This was the ideal foundation for a sale and leaseback or even setting up a casino REIT should the companies wish to retain some aspect of ownership.

The sample illustration below highlights the bottom-line difference in capital structures:

SCENARIO 1: SINGLE COMPANY

SCENARIO 2

Enterprise Value

$3bn

Market V

Debt

$2bn

Debt

EBITDA

$500m

EBITD

Debt Service

$150m

Rent

Tax

$100m

Tax Net

SCENARIO 2: GAMING CO + REIT Market Value

$1bn

Debt

0

EBITDA

$500m

Rent

$120m

Tax

$120m

Net

$260m

As we see in the scenarios above, by setting up an associated REIT alongside a casino operations company, there are obvious benefits to the bottom line. In the illustration, the REIT would acquire the real estate from the gaming companies, which is then used to reduce debt, distribute cash to shareholders or just boost the balance sheet. The gaming operator pays annual rent to the REIT, which holds the assets on better commercial financing terms and without tax liability on the distribution faced by traditional gaming companies.

TEAMSTERS TO TITANS

GAMING REITS IN ACTION The first commercial casino company to act was Penn National, novating its assets into the Gaming and Leisure Properties Inc. (GLPI) REIT in 2013. With the added firepower and support of GLPI, by 2018 Penn National was able to launch a $2.8bn bid for its main rival, Pinnacle, which had previously embarked on its own growth strategy by acquiring Ameristar in 2013. From the seed of 21 Penn National properties, GLPI now owns more than 45 properties with a market capitalization of more than $10bn; 2.5 times that of Penn National, which itself traded at 3 times that at the time of selling its real assets.

Despite initial skepticism of this structure, MGM Resorts co-founded MGM Growth Properties (MGMGP) in 2015 and shortly after, MGMGP acquired a portfolio from MGM on a sale and leaseback basis.

More recently, MGMGP and Blackstone’s REIT have partnered to acquire other MGM Resorts properties that had yet to be sold, namely The MGM Grand and The Bellagio, for a total of nearly $7bn. This denotes two of the largest, single-asset transactions in the history of global real estate.

From nothing, MGMGP now has a market capitalization of more than $10bn. In the same period, MGM’s ordinary stock has risen by more than 50%.

With a slightly different pretext, Caesars emerged from bankruptcy in 2017 with Caesars Entertainment Corporation as an operating company and VICI as a REIT, owning properties leased to Caesars to manage.

VICI has been more ambitious, further investing in casinos outside the Caesars portfolio, acquiring Margaritaville and Greektown, both leased to Penn, and owns casinos operated

by Jack Entertainment and Hard Rock International; all competitors to Caesars Entertainment. This new structure is perhaps the enabler for the most ambitious casino deal in history; Eldorado Resorts’ planned acquisition of Caesars Entertainment for $17.3bn. The role of VICI is crucial in this move, acquiring properties from Eldorado to fund the transaction.

Arthur Goldberg would certainly have enjoyed working in this environment.

TOMORROW’S TITANS Each year, MBA students from Cass Business School come to Las Vegas; I have been running the trip since 2011. The Business School is focused on finance and strategy, and the students come here to study the evolution of the city as a case study, meeting representatives of the main resorts and other key figures.

In 2019, the first stop was The Mob Museum. It was noted the early mobsters were predominantly Jewish immigrants and Italians, and were sophisticated in terms of finance and customer psychology. Their career choice was a reflection

”IT IS UNDOUBTED THAT IF THEY WERE AROUND TODAY, LANSKY, DALITZ AND HOFFA WOULD NOT BE ASSOCIATED WITH ORGANIZED CRIME, AND INSTEAD WOULD BE GIANTS OF WALL STREET OR TITANS OF BUSINESS, SUCH WAS THEIR AMBITION.” of that time. They were denied openings because of their ethnic backgrounds and lacked the opportunities to acquire the requisite education and qualifications to be able to join established industries, such as law and banking.

It is undoubted that if they were around today, Lansky, Dalitz and Hoffa would not be associated with organized crime, and instead would be giants of Wall Street or titans of business, such was their ambition, leadership and understanding of business. Estes Kefauver, who was the running mate to Adlai Stevenson when he lost to Dwight D. Eisenhower in the 1952 Presidential Election and led the charge against organized crime, would be speechless after seeing how the industry has evolved.

Today, casino management and leadership has professionalized to the degree that the only industry association with unlawful activity is a part of the nation’s history, fit only as an attraction for tourists. Casinos and gaming properties are recognized as a proven and desirable asset class and a good bet for institutional investors to meet the needs of the entire nation’s pensions; not just those of the teamsters.

Oliver Lovat leads the Denstone Group, which offers strategic advice and consultancy on customer-facing, asset-backed investment and development, with a focus on casino resorts.

He is a Fellow of the Royal Institution of Chartered Surveyors and visiting faculty at Cass Business School in London. .

GAMINGAMERICA 17

MONOPOLIZATION

SPORTS BETTING MONOPOLIZATION AND THE CASE OF DC Owain Flanders speaks with Newgioco CEO Michele Ciavarella about whether it's the right approach for state legislators

MICHELE CIAVARELLA

In 1903, American anti-monopolist Elizabeth Magie created a board game she hoped would reflect the economic inequality of the society in which she lived. The aim of the game was simple: to buy as much property and land as possible, subsequently stripping opponents of their finances through taxation and rent.

That game, Monopoly, has now sold hundreds of millions of copies worldwide, and its name is more synonymous with family arguments than political leftism, but it mirrors an important issue facing sports betting regulators in the US. At the time of writing, 13 states have legalized sports betting.

With more expected to follow this trend throughout the year, state regulators have many decisions to make in assessing what kind 18 GAMINGAMERICA

of market they want to create in their jurisdictions. One of these decisions, and potentially the most vital, is whether to create an open market or to allow for monopolization.

Although creating a state-run sports betting market with one licensed operator is the most direct form of monopolization, it is not the only way in which a market can be closed off to competition. Setting highly expensive entrance fees such as licensing and gaming taxes can create a situation in which only the most profitable operators can survive, while tethering licenses to physical casinos can also restrict the number of operators that can enter a market.

Speaking with Gaming America, Michele Ciavarella, CEO of operator Newgioco, says these monopolization methods range from “high levels of poor policy down to blatantly shameful behaviour that contradicts the nature of regulating the market.”

These might seem like strong words, but Ciavarella knows more than most how monopolization can exclude some operators from getting a share in a market with high potential.

The District of Columbia passed a bill in Dec 2018 to legalize and regulate sports betting, and since then, the state has been on a long journey centered on a controversial deal for betting rights.

In February last year, the DC Council awarded operator Intralot exclusive rights for mobile sports betting in Washington DC with a majority vote, despite three Council members expressing concern over the deal.

Intralot already operated its lottery within the state, and lottery officials were eager to skip a bidding process and work directly with the firm, arguing the supplier provided the “most expedient solution with the greatest return on investment.” It is a move that provoked not only negative reactions from a number of operators – DraftKings and FanDuel both condemned the deal in Washington Post columns – but also a lengthy court trial.

The deal was investigated by a Superior Court judge on allegations that the DC Lottery had unfairly favoured Intralot in

MONOPOLIZATION

the bidding process. These claims did nothing to prevent the deal however, and in July the Council voted to award lottery and sports betting operations to Intralot for the next five years in a deal reportedly worth $215m.

Undoubtedly, this was a disappointing result for other operators eyeing up the high potential of the market. One such operator was Newgioco. Although it has since made a deal with Grand Central and Handle 19, two Washington sports bars aiming to offer sports betting in the state, Newgioco boss Ciavarella remains vocal about his opposition to the deal. He says he condemns the state lottery partnership, not for its suggested unlawfulness, but for a lack of education in its proponents.

“It is like saying that everyone ‘can drive’ a car in the state, but only one person is ‘allowed to drive,’” Ciavarella tells Gaming America. “It is not that the pathway of handing the oversight to the state lottery is incorrect, that’s fine in itself, but it is simply shameful to claim that a fair request for proposal has been conducted when the selection committee has no clue what they are selecting, have no experience of the dangers of the product, and have no understanding that permitting one operator to provide product, such as selecting one lottery platform for the state lottery, is not the proper process in the case of a sports bet.”

Ciavarella believes the DC Lottery committee responsible for proposing the extension to Intralot’s partnership incorrectly dealt with sports betting in the same way they would a lottery or casino product. He argues sports betting requires a higher level of skill from the operator, to manage risks while offering competitive odds. “Without competition,” Ciavarella explains, “the playing field and fairness to the consumer is vacated, and thus the sports bet is no longer a sports bet but rather a casino product where the possibilities are tilted in the favor of the monopoly operators.”

With that in mind, what could be the dangers inherent in allowing one operator complete and exclusive autonomy over a jurisdiction’s sports betting market?

If there is no competition to force an operator to create attractive prices for a customer, then this could lead a bookmaker to provide unfair prices – a situation with two potential results. Firstly, the operator could fail to attract potential sports bettors into the market, with revenue failing to reach its potential as a result.

Secondly, sports bettors may prefer to bet with underground

bookmakers who provide better pricing, putting the player at risk with an unregulated operator.

On the other side of the fence is Chris Sfatos, Group Deputy CEO of Intralot. Speaking with Gaming America late last year, Sfatos described the reasons for the deal as “quite simple,” explaining that it was more about the lottery not wanting to take the risk of migration to new technologies when it could just continue with its existing supplier. He believes the attention generated by the deal was more a matter of politics than anything else, and proposed the $500m in state revenue driven

by Intralot over the past decade as the logical reason for the DC Lottery’s choice.

Regardless of the reason for enacting such a deal, its effect on the state’s gaming revenue will only show in time. However, European markets can provide an effective comparison.

On 1 January 2019, Sweden re-regulated its gambling market, ending the monopoly of Svenska Spel as its sole gaming operator.

Since then, levels of gambling participation have actually fallen.

In a Swedish Gambling Authority (SGA) study, 60% of Swedes reported they had gambled for money in 2019, in comparison with 66% in 2018 when the monopoly was in place. It has also been a difficult period of transition for licensed operators, with many blaming poor full year results on a turbulent Swedish market and the failure of channelization. All of this suggests that without effective legislation, an open market might not perform as well as expected.

On the other hand, the UK is an example of an open market in which legislation has historically worked correctly and efficiently, allowing a market to reach its potential for growth. Despite a 0.3% decrease year-on-year, Britain’s Gross Gambling Yield (GGY) was £14.4bn ($18.6bn) from Apr 2018 to Mar 2019. The market’s European dominance is unquestionable, and in 2018, the UK market accounted for the largest portion of the total European online gambling market, according to figures released by the European Gaming and Betting Association.

Ultimately, a state must make an informed decision as to whether it is going to open its market up to all. As Ciavarella says, while sports betting is from the same family as lottery and casino gambling, it is an entirely different beast. This can’t be ignored when assessing what is best for a state’s sports betting future.

However, it is also important to note that whatever shape a market takes, effective and clear legislation can be the most vital driver towards success.

“WITHOUT COMPETITION, THE PLAYING FIELD AND FAIRNESS TO THE CONSUMER IS VACATED, AND THUS THE SPORTS BET IS NO LONGER A SPORTS BET BUT RATHER A CASINO PRODUCT WHERE THE POSSIBILITIES ARE TILTED IN THE FAVOR OF THE MONOPOLY OPERATORS.”

GAMINGAMERICA 19

POLITICAL BETTING

IS POLITICAL BETTING GOOD FOR BUSINESS? 888 Holdings SVP, Head of Commercial Development Yaniv Sherman speaks to Ezra Amacher about political betting within the US. What is 888 Holdings’ approach to US political betting markets?

Traditionally, you need to bear a few things in mind.

Back in Europe, which has a longer history of sports betting, political wagering is a prop bet or a novelty bet. In the UK, we’ve been giving Royal Family and Parliamentary betting, but they’re fringe. In the US, it is different because the Presidential Election is much bigger than any parliamentary event in Europe, so it garners a lot of interest. But there are also the regulatory implications.

By construction, any event offered must be approved in advance by the Department of Gaming Enforcement and they’re very selective. For what they allow betting on, I would guess they won’t be allowing much betting on political events due to the areas of consideration.

Also, betting is moved a lot by live events and dynamic content. At the end of the day, the Democratic Convention and the Presidential Election don’t generate a lot of events or contests.

If anything, it’s more of a novelty or a PR-related bet. I don’t see this becoming a material revenue 20 GAMINGAMERICA

generator, especially given the regulatory implications here. I also don’t think it’s right to drive bettors to bet on political events.

What, if any, precedent exists for US political betting?

Sports betting has only been legal in Las Vegas the past couple of decades and it’s only been legal elsewhere since the overturning of PASPA in May 2018, so there hasn’t been a major election campaign since sports betting was legalized. This will be the first. From what I see so far, I don’t see much action on it. I think as we draw near to November, I have seen some requests come in to allow for betting on these types of events. When you offer these bets, you’re essentially taking a political stand or you may find yourself taking a political stand.

So I’m not sure if it’s good for business.

How do operators generate odds for this type of market?

To the best of my knowledge, most sportsbook operators including ours don’t hold the proficiency numbers. We have very qualified traders that know how to locate a

19 GAMINGAMERICA

POLITICAL BETTING

sporting bet and derive a price appropriately. Looking at other events, it’s like trying to offer bets on the weather. Because these are novelty bets, if you are going to offer them, you should probably reduce the risk by limiting the amount of bets or the size of bets allowed; or offering up what is equivalent to a promotional activity and cap it as such.

I don’t know of any sportsbook operator that has a specific proficiency in their pricing in political campaigns.

I think it’s a whole other section. Trying to price the Iowa caucus outcome correctly – it’s not our core business. If anything, it should be priced on commercial consideration rather than actual content. You can also attract the wrong type of attention if you’re trying to do that.

What type of events or markets does political betting best compare to?

These bets naturally create attention, that’s the reason why operators do it. It’s a singular event like the Super Bowl. At the end of the day, the Super Bowl itself is an event that attracts a lot of attention, and for a lot of new players that will be their first bet. As an event itself, it’s just one game that’s three hours long. We always prefer a bigger selection of events on top of just one game, no matter how popular it may be.

Its outcome can also drive you to the red significantly.

It’s just one event, so the Election mainly will create a lot of attraction from the marketing perspective, and then you think about how you can cross-sell the people making a bet on the Presidential campaign into actual sports betting. The closest example I have is horseracing in the UK, where the Grand National traditionally attracts a type of recreational bettor.

YANIV SHERMAN

22 GAMINGAMERICA

“IT’S LIKE TRYING TO OFFER BETS ON THE WEATHER. BECAUSE THESE ARE NOVELTY BETS, IF YOU ARE GOING TO OFFER THEM, YOU SHOULD PROBABLY REDUCE THE RISK BY LIMITING THE AMOUNT OF BETS OR THE SIZE OF BETS ALLOWED.” - YANIV SHERMAN Crossing over into classical sports betting is harder.

Here, it also carries the possibility of all sorts of political backlash. From 888’s perspective, I would view this very carefully if I’d like to offer these types of markets, because the direct commercial benefit they bring might be quite limited as opposed to the risk you’ll be bearing from a financial and a PR perspective.

Based on what you are saying, is it fair to conclude there’s an inherent risk in offering political betting?

Yes, and I’m saying yes from a dual perspective. Predicting a sports betting event or any event outcome has been predicated on a very binary result. Either it happened or not. Your team lost or not. You were over or under. Here it can become a lot more complicated. It’s sort of a dynamic parlay bet and, at the end of an outcome, look at the latest Democratic Party Iowa Caucus results. We weren’t sure who won right after.

These events are quite tricky to quantify and also to put into terms that will be acceptable for both regulators and players. It's a novelty. You need to take into consideration that it’s much less predictable; and if you can’t translate that into sports betting and gaming success, you’re running the risk of being considered an outlier.

I see this as more in the field of the challenger brand with small events in the marketplace, where people try to create some traction and attention around them. Are they willing to live with the risk? 888 is a global brand operating in 13 jurisdictions and holds a reputation as a gaming operator, so I wouldn’t want to associate myself with any political fallout that may be the result of something like this.

MARCH MADNESS

MAKING THE MOST OF MARCH MADNESS Ezra Amacher looks into the betting intricacies of March Madness, one of the busiest weeks on the US sports betting calendar.

In many states, for the first time in the NCAA Tournament’s seven-decade history, tens of millions of Americans will have the opportunity to bet on games from their home state. From Montana to Michigan to New Hampshire, bettors will wager on college basketball from nearby casinos or on their own mobile devices. Last year, New Jersey in particular saw a March Madness betting rush, but that opportunity has now spread to many more states.

Like the games themselves however, the tournament is expected to deliver uncertainty to sportsbook operators across the country. David Strow, VP of Corporate Communications for Boyd Gaming, tells Gaming America: “To be honest, we don’t 24 GAMINGAMERICA

know what quite to expect. This is the first time we’ve had sports betting in some of our states for March Madness, but certainly we’re very excited for the opportunity based on what’s happened in Nevada over the years.”

March Madness is a nationwide event but the delirium may be best-felt in Las Vegas. Millions of people flock to Sin City for the first round of the NCAA Tournament, when 48 games take place over 80 hours. The results on the court are only overshadowed by those at the ticket window. In March 2019, Nevada sportsbooks took in a total basketball handle of $495m.

In the first full year of a post-PASPA environment, that meant Nevada had steered clear of its rivals. New Jersey saw $100m

19 GAMINGAMERICA

MARCH MADNESS

placed on the NCAA Tournament last year, an impressive figure but not one to worry Las Vegas casinos. Strow explains: “You have a lot of customers who have been coming to Las Vegas for years. It’s been a tradition for them. They have a hotel they like to go to. They have a sportsbook they like to go to with their friends to watch March Madness. So you’re going to see those customers wanting to return to Las Vegas to have that long weekend.”

When PASPA was overturned, some in the sports betting industry expressed concern Las Vegas would take a hit for events like the Super Bowl and the NCAA Tournament. Those anxieties have been put to rest. David Forman, Senior Director of Research for the American Gaming Association, tells Gaming America: “It’s definitely a case of growing the pie rather than dividing it up, so I think everybody has been able to do well without cannibalizing too much state-to-state.”

Sportsbooks across the country should be in line for a strong March Madness showing. The AGA reported a 25% jump for Super Bowl wagering this year, which bodes well for March Madness. Forman says: “I would hope we’ll see something similar with March Madness, given the proliferation of legal brick-and-mortar sportsbooks since last year.”

The way the NCAA Tournament handle and revenue break down within states with legalized sports betting is a different matter.

In states with nascent sports betting markets like Pennsylvania, sportsbooks who’ve partnered with recognizable brands have performed strongest. Boyd Gaming-owned Valley Forge Casino’s FanDuel sportsbook took in $156m of January 2020 handle, accounting for 45% of Pennsylvania’s monthly haul.

Strow explains: “We are especially confident because of who our partner is. FanDuel is a very powerful brand. They currently hold very close to 50% of the Pennsylvania market. It’s kind of become the go-to sports betting brand in Pennsylvania.” Boyd Gaming and FanDuel’s partnership spans sportsbooks in Iowa, Indiana and Mississippi as well. Sportsbooks in states where college basketball is popular, or who have schools likely to compete for a national title, stand to capitalize the most.

“What makes March Madness so appealing is you have so many teams participating from all over the country,” Strow continues. “So for each of those properties it’s likely they’re going to have some local teams they can follow and root for. Indiana is like ground zero for college basketball, so obviously that will probably be pretty popular there.”

While states like Indiana and Pennsylvania already have well-established sports betting markets, others will be joining the mix just in time for the tournament. The Montana Lottery’s sports betting product was scheduled to launch for March 9, while Illinois Governor J.B. Pritzker promised legislators sports wagering would go live in time for the tournament.

Michigan was also in a race against the clock to launch sports betting in time for the Big Dance. Whether these states can successfully launch sports betting in time for March 26 GAMINGAMERICA

Madness carries implications for their own jurisdiction, as well as neighboring states competing for regional customers.

Sportsbooks in Indiana, for example, would stand to benefit from delayed launches in neighboring Illinois or Michigan, in which case residents of those states might drive across the border to bet in Hoosier territory.

The first four days of the NCAA Tournament brings in the highest tally of wagers, which raises the stakes for sportsbooks hoping to cash in. Strow tells Gaming America: “In those four days, you will literally start at nine o’clock in the morning and they will be playing games until nine o’clock at night non-stop.

That is such a unique experience, being able to watch and wager on so many games simultaneously, that’s really when you see the heaviest betting interest.”

Betting on college basketball is what brings people to casinos, but the continuous action is what keeps them there. For casinos in states with new sports betting markets, March Madness presents an opportunity to gain clientele and lure them to attractions outside the sportsbook. Strow explains: “From Boyd Gaming’s perspective, that’s what has made sports betting such a success for us. It’s about a lot more than simply getting a new customer in the building and placing a bet on the game. They can spend money in the casino or a table game, they may go into a restaurant, they may get some drinks at the bar; but it’s an opportunity to get new customers into the building to introduce them to what we have to offer and to grow our customer base.

March Madness fits perfectly into that category.”

But there remains a shady element to betting on popular events like March Madness. Though legalized sports betting is more accessible than ever for many Americans, bettors continue to wager illegally, cutting down on casino and operator profits.

In 2018, the AGA reported that 97% of the $10bn placed on March Madness wagers that year would take place illegally.

“We did some consumer research on sports betting we released last spring, just trying to get at consumers’ knowledge of the market,” Forman says. “I was pretty surprised at the level of confusion out there on whether betting online is legal or even whether a bookie is legal or not. A surprising number of people just don’t know and I think there’s a lot of work for the industry to do to drive home who is and is not a legal operator.”

As more states legalize sports betting though, a greater number of Americans appear to be turning to legal methods. The AGA found that of the 26 million Americans expected to wager on this year’s Super Bowl, close to four million planned to head to a brick-and-mortar sportsbook, and another five million were to wager on a mobile or online platform, whether legal or illegal.

Strow concludes: “Historically your two biggest events on the sports calendar are the Super Bowl and March Madness.

The Super Bowl was fantastically successful across the country; and I think we’re optimistic we’re going to have a very successful March Madness Tournament.”

TRIBAL GAMING

STATES VERSUS TRIBES? Across the US, tribal gaming is a $33.7bn industry with 460 gaming establishments, operated by 240 federally recognized tribes in 29 states. A panel at this year’s ICE London discusses tribal gaming’s route into sports betting and the hurdles it faces.

MODERATOR VALERIE SPICER, Founding Partner, Trilogy Group

SPEAKERS SHEILA MORAGO, Executive Director, Oklahoma Indian Gaming Association LORETTA TUELL, Attorney, Tuell Law JASON GILES, Executive Director of the National Indian Gaming Association

VS: You see a lot of coverage about tribal gaming and sports betting and you see comments such as tribes are slow to get going, they haven’t made decisions yet but I think that’s really a myth, and I want to clarify that it’s a methodical process. There is a lot going on when you are a tribal government involved in gaming and you have to take plenty into consideration, not only what is in your compact and the relationship with the state – all of those factors and what does it mean to you, so it’s a bigger decision.

California has just launched an initiative regarding sports betting. The ballot initiative has been put forward by the state’s 18 tribes, with one million signatures needed for a referendum. It is the number one market for tribal gaming in the US and a lot of people are waiting to see what is going to happen in the state and what that would mean for everyone else.

LT: California is unique; we have 110 tribes and there’s a lot of money there, a lot of economic development and it’s the fifth-biggest economy in the world. When you look at the top 10 sectors of influence in that, tribes are number 10 in the sector and leading that with jobs, so from my perspective, tribes have a voice in this debate and where they want to go and how they want to move forward is critical.

28 GAMINGAMERICA

A few years ago, one of the main topics here was online. It’s playing out a little differently with the expansion into sports betting. The initiative is tribally driven, tribally written and tribally sanctioned. In the US, you need authorization for the type of gaming you are going to do. With this initiative, the first thing to know is it is anticipated that even if it passes, it won’t start until at least 2022. It’s a nuance of California law but there's a tribal-driven initiative out there, and if it passes, it creates a market.

VS: Oklahoma is the number-two gaming market segment for tribal gaming in the US. It has a lot going on there, a number of tribes, with more than 130 gaming facilities, so Sheila, let’s deep dive about what’s going on right now.

SM: To say we’re going through some issues in Oklahoma is mild. Currently right now we have a Governor who is being sued by five tribes, after telling us in July that our compacts expire at the end of the year. However, we argued that the contract has a comma and goes on to read if the state does certain things then the compact should automatically renew for another 15 years. It’s safe to say we’re on different sides of that glass, and each time he keeps digging himself a deeper hole. But five tribes have sued him to say look, let the judge decide if the compact automatically renews, and when you lose then we can sit down and talk about rates and exclusivity.

VS: When you look from a national perspective and all the different states that are potentially looking to come online, what are some of the concerns that come to the National Indian Gaming Association (NIGA) from tribes of those states and what do you foresee happening with them?

JG: The tribes in each of the states have got to exercise their political muscle, as we know in Oklahoma. This is crazy but if the state of California – the fifth-largest

TRIBAL GAMING

economy in the world – went to all their tech companies and said ‘give us more money or you’re out of here’ those companies would refuse and go up to Seattle, Portland maybe Nevada. Tribes can’t leave, that’s our homeland. Hello states, tribes cannot just get up and leave. We’re going to be here and you’re going to have to deal with it.

SM: Indian gaming is the only thing in the US where a state governor can convene and say ‘I want more money from you although I didn’t put in a dime and risk one cent on your operations’. Although they allowed us to open class III gaming, which is great and we did, we put all the money at risk, we took out all the loans, we did all the infrastructure, which was in rural areas and more than 90% of tribal gaming is in rural areas in the US. When we do infrastructure builds for our facilities, we tend to actually upgrade or put in new infrastructure for the surrounding community. So they are the largest employers in these communities, they are the largest infrastructure building roads, improving healthcare, the money they make that revitalizes their communities. Everything we do is for the betterment of, yes, us, but our neighbors as well, which is the biggest thing about it. When you have a state which comes in and says ‘we want more money because you should not be making that much money, and we’ve had zero input,' it's insulting at best.

It is down in the south in particular where you have the population, you have the market ability for tribes to compete and be supplying for the state and nearby populations; even if they are land-based sports betting.

In that regard, one tribe sitting next to the other does not want to see the operator. You now have the ability as operators and suppliers to come in depending on your relationship with the tribes, to have that competition within the state.

It is those who decide they can see what is coming and want to get in which I think is the most important thing for me, versus the intricacies of the strategy to create that playing field. California wants to get into this, the tribes in California want to get in on it and they are creating a pathway to what is their best advantage.

JG: The tribes that are up and running are in unique circumstances. The number one thing you have to realize if you're doing business with Indian country is that every tribe is unique, every tribe in different states has its very own set of circumstances. Examples are out there, with the likes of New Mexico where the Governor trusted the tribes to run sports betting and are doing a fantastic job running it mainly by themselves, on how tribes can do sports betting. Just exercise your sovereignty and self-determination and go get it done, which is what our message has always been.

VS: You talk about competition and you look at what is happening in California; certainly there are issues in there with the tribes all at sea with the cardrooms and how they go about play; yet when the initiative filed for sports betting in the city of California, the tribes included some of the racetracks in their initiative. How will that all play out?

LT: California has lottery, it has racetracks, it has cardrooms, it has the casinos run by tribes and that is it. If there is going to be an expansion, tribes want to make sure they are driving the bus. In that regard, they also know to maybe create the opportunities to bring your enemies closer. What I’m looking at is it was very strategic about how the initiative will play out because in Indian country – if you’ve learned anything from these two – nothing happens over night. We have the federal regime that oversees us; we have the Indian gaming regulatory act that requires these tribal-state compacts.

So the only way for us to ensure we're ready when they pull the switch is for them to give that lee-time of 2022.

But it's in that time you have the ability to create this competition among tribes.

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BILL MILLER

AN UNDERVALUED HAND Tim Poole catches up with American Gaming Association (AGA) President and CEO Bill Miller at ICE London, for a broad discussion on state-by-state regulation, mobile wagering and public sentiment. the total amount wagered. Among that piece, you can either win money or lose money.

Here in the UK, we were able to go to a Tottenham Hotspur game the other day and the conversations were around every time Manchester City loses, the books actually do better.

The public has basically been betting on Man City every match, so the books are getting crushed. When the books get crushed, they don’t pay taxes on the money they lose; only the money they win. My view is that Americans have always loved to bet on sports. Unfortunately, up until recently, most have only had the opportunity to bet on sports illegally and that’s why there is momentum for the prospect of a safely regulated market.

That, combined with tax revenues, is making it a warm and welcome environment for politicians. But I do think there is an education element to understanding what this really means if you’re trying to fund all of government. There’s sometimes a reality check around that.

BILL MILLER

To start with, I wanted to get your view on the sports betting situation in Maine, where the Governor recently rejected a sports betting bill, mentioning missed tax revenue targets in other states. Has there been a wider focus on a lack of tax revenue at state level and could this hold US sports betting back?

I think, as it relates to sports betting, there is a massive education process taking place. That education process involves, in many cases, politicians who see gross numbers being bet and think that is what they are able to tax on – and that’s just not the case. To a degree, the politicians have been acquainted with casino gaming or lotteries, where it’s much easier for them to determine what the tax rate is based on that product. With sports betting, you only get a piece of 30 GAMINGAMERICA

In a more positive case study, how do you reflect on the first full-year sports betting figures coming out of New Jersey? Has the Garden State surpassed expectations and is it a strong enough advertisement for other states?

From the AGA’s perspective, we haven’t been prescriptive in terms of what legislation should look like. We’re recognizing every state has different stakeholders they have to work through. But one thing we have said is, if we are going to compete in the elite as a legal, regulated marketplace, we have to recognize Americans have bet on sports for a long time – and they’ve bet on sports illegally for a long time.

So, for us to get that customer to migrate from the illegal marketplace to the legal marketplace, it has to have many of the conveniences illegal operators offer.

That means you have to have an app, figure out a tax rate that’s low enough and offer odds that are competitive with the illegal marketplace. Mobility is an important part of the success in New Jersey, not only for overall revenue, but it’s also helped because it’s been tied to brick-and-mortar.

I think New Jersey is a good model and many of the states still working through legislation would look at New Jersey

BILL MILLER

and say, if we already have brick-and-mortar, this is a good way for us to think about it.

But then you’ve got a state like Tennessee that doesn’t have any casinos at all but offers sports betting, so it’s 100% mobile.

Every state’s handling this a little bit differently. Our job and our goal is to, first and foremost, promote the benefits of a safe legal market, juxtaposed against the illegal market people have been utilizing for decades. Starting off with that fundamental, you have to recognize every state has its own unique circumstances to work through as they’re pushing legislation.

In Pennsylvania, is it encouraging that a healthy amount of operators and suppliers have not been put off by its sports betting tax rate of 36%?

Absolutely. Ultimately, it goes back to the point I try and make at every turn. In Pennsylvania, there’s a lot of professional and college sports teams. You’ve got a very passionate fan base and those fans who used to bet illegally are moving to the regulated marketplace. Tax rates aside, fans are recognizing now there is a legal option they didn’t have before and they’re taking advantage of it; that’s exciting.

Do you see a healthy future for online casino within the US, given the current uncertainty over the Wire Act, or is it perhaps a little early to judge?

The public perception of the industry’s never been better. My strong view is that because the general public has evolved in their view of the industry. While it may have been colored in the past by the Casino or Godfather movies, as the expansion of gaming moved from two states – New Jersey and Nevada – to 43, the public started to see casinos open in their community, and all their stereotypes got replaced. Areas have been revamped and the fire chief can talk about the two new fire engines he’s just bought, while people go to church and meet people who work at the casino. Many of these stereotypes have been broken down by the reality of these communities.

So I think we start off with a pretty good hand: an undervalued hand. Our job as the AGA is to bring life to those stories and make sure politicians, particularly in Washington, understand them. The regulators in states where there is already gaming get it. We’re an industry that pays the highest tax rates in each of the states in which we operate. They understand that – but for us – they’ve got to make harder choices around raising taxes or cutting programs and – because of us – more people are being employed, there are better opportunities created for smaller businesses, while we are also supporting social programs.

People may have been told there would be negative consequences of casinos being built in certain states, but people have seen that’s not the reality.

Where our challenge is, in part because at the federal level politicians don’t enjoy the tax benefits, politicians can be somewhat disinterested parties. Our job – and it’s an exciting job – is to try and connect the real stories in the community with those federal politicians who may at some point decide it’s in their interest to create an additional level of oversight and tax, for an industry that’s already well-regulated and well-taxed. In the UK and other places where the industry has not been forward-leaning with regards to the benefits created to communities and our commitment to responsible gambling, the pendulum does swing in a very negative and very harsh dynamic to the industry. You always want to learn from other examples and case studies. What we’re trying to do is put ourselves in the best possible position to not see government come down harder on the industry.

“THE PUBLIC PERCEPTION OF THE INDUSTRY HAS NEVER BEEN HIGHER. WHILE IT MAY HAVE BEEN COLORED IN THE PAST

BY THE CASINO OR GODFATHER MOVIES, ALL THE PUBLIC’S STEREOTYPES ARE BEING REPLACED.”

It’s certainly very early. I always think it’s important to make the distinction between national online gambling, which is still illegal in the US, and mobility, which is happening on a state-by-state, case-by-case basis.

I think it’s still quite early in the cycle to look at what the impact of online is in states. But I think it’s something every one of our operators is looking at and, certainly from an investment perspective, thinking about. They’re assessing whether it has positive or negative implications to brick-and-mortar and they’re asking whether they can make it beneficial.

I think those are the questions operators are working their way through in different states.

When you spoke to us a few months ago, you discussed transforming public sentiment into political muscle. How has that journey been progressing for the AGA?

GAMINGAMERICA 31

SPORTS BETTING ADS

DEBATE: WILL US SPORTS BETTING ADS NEGATIVELY IMPACT PUBLIC OPINION? Owain Flanders, Iqbal Johal and Tim Poole put forward their arguments as to whether increased gambling sponsorship in US sports might bruise the industry.

YES - OWAIN FLANDERS The US only has to take a look across the Atlantic for a perfect example of how increased gambling advertising can negatively impact public opinion against the industry.

Much like the US, the UK is a nation of sports fans - sport which is now intrinsically linked with the gambling industry through sponsorship deals. In the English Premier League this season, 10 out of 20 teams bear the branding of a gambling company, the joint highest number ever. In the Championship league below, this number rises to 17 out of 24 teams, meaning nearly 60% of clubs in England’s top two divisions have betting partnerships this season. Stadiums are also adorned with gambling branding, while those watching on television will be inundated with gambling advertisements before and after kick-off.

It is no coincidence that at the same time gambling advertisement is at an all time high in the UK, public perception of the industry seems to be at an all time low. Anti-gambling sentiment is persistent in mainstream media, with industry criticism coming from all areas. With this comes increased pressure on the Gambling Commission and government to introduce tighter regulation, which has ultimately resulted in a ‘whistle-to-whistle’ ban on half-time gambling advertisements, and could well lead to more dramatic restrictions moving forward.

Last year saw a flurry of gambling sponsorships in US sports as operators sealed partnerships with leagues, teams and sporting arenas. There is an understandable buzz in the US sports betting market right now, but if caution is not taken then a very familiar future could be in store for the US gambling industry.

Speaking at a sports betting conference last year, Keith O’Loughlin, SVP Sportsbook and Platforms at Scientific Games Digital, insisted that “gambling is culturally a lot more accepted 32 GAMINGAMERICA

in the US.” But while this might hold true at the moment, how long will it be until US sports fans begin to notice the encroaching influence of gambling sponsorship on their favorite sports? When New York Knicks fans turn up to watch their team at a DraftKing’s-sponsored Madison Square Garden next season; will resentment begin to form in their minds?

If the US industry wants to prevent itself from falling into the same trap as its more mature, but far from perfect, cousin across the pond; operators should take a step back and consider a different approach. When public opinion can be so easily and lastingly swayed, a little more caution is needed.

YES – IQBAL JOHAL Sports betting in the UK and the US are in very different stages. In fact, you could compare them to an old married couple and two newlyweds who are blinded by love.

After many glorious years of legal betting in the UK, it now seems to be at a crossroads, with the wider public virtually sick of the sight of it.

At the other end of the spectrum is US sports betting, which became legalized in May 2018. After years of trying to get approval for its go-ahead, sports betting in the US is very much in the honeymoon stage - an exciting period, with betting widely accepted in the states it’s legalized in.

That means we’re someway removed from the apathy, the over-exposure and frankly ill feeling toward sports betting found in the UK. As Owain mentioned, with such a high percentage of clubs in the top two divisions having betting companies as their main sponsor and the countless number of adverts promoting betting in stadiums and on television, it’s unsurprising there’s going to be negative public sentiment toward gambling. This is only worsened by the fact that, according to figures from the Gambling Commission’s 2018/19 annual report, 24 million

SPORTS BETTING ADS

adults gamble in the UK, with more than two million of those at either high or low risk of problem gambling. With this in mind, it is evident why public perception of sports betting and gambling in general is at its lowest point in the UK. This anti-gambling sentiment is why countless new regulatory changes have been pushed through by the Gambling Commission in recent times, with added concern and debate as to whether the amount of sponsorship from betting companies in sport should be limited, or even banned.

Currently, the US public are generally ignorant to issues that could arise in the future – much like a newly married couple. Over time, as the public and sports betting grow more tiresome of each other, and sports betting sponsorships inevitably flood into all the North American major leagues, then we might be having the same debates in the US as we are now having in the UK. But as for now, let the innocence of this newfound relationship blossom.

NO - TIM POOLE We have all seen the pitfalls of an abundance of advertising and sponsorship in the UK market. Even if regulators don’t act – we are realistically expecting them to in due course – all members of the public seem to do when it comes to sports betting adverts is complain about how many they see. But, while my colleagues have raised reasonable and valid concerns about the potential dangers of over-sponsorship and advertising regulation, I can envisage the situation panning out rather differently in the US. Firstly, the public sentiment is far more pro-gambling in the US than it is in the UK, and the excitement and momentum of the fledgling sports betting markets

opening up state-by-state are creating a completely different atmosphere across the Atlantic Ocean.

Admittedly, this atmosphere can change with time. The UK market is mature and saturated; a few more years of similar advertising volumes in the US may well end up creating the same problems. But, should US gambling companies approach with both caution and care, they can avoid these kinds of issues in future.

Sure, there is a rush now to partner with every team, stadium and league possible. Once that initial onslaught is over though, operators can learn from the lessons of the UK and tread with caution. Responsible gambling is already promoted far more in the US, compared to the reactionary stance many UK operators take. Meanwhile, the American Gaming Association is far better at vocalizing the industry’s point of view than anything to date in the UK (the Betting and Gaming Council is trying to change this).

Naturally, we can’t have DraftKings, FanDuel, BetMGM or William Hill dominating every bit of televised, online or social media space in the US. But I am confident the US market will learn from the gaming industry’s past mistakes on other continents. After all, some of the biggest players in the market have partnerships and joint ventures with UK-facing companies (or indeed operate in both countries themselves).

Sure, over-advertising and sponsorship could become an issue in the US some day. The two factors working in the sector’s favor, however, are the positive public sentiment pervading the US – simply non-existent in the UK at present – and the fact firms can learn exactly what not to do based on the actions of their European predecessors.

GAMINGAMERICA 33

ADVERTISING

SHOULD ADS CALL OUT OFFSHORE OPERATORS?

It is almost needless to remind you all of the precarious time facing operators in the European gambling industry right now. The situation is such that one of our recent GI Friday Guest Columns – which is well worth a read – zones in on the regulatory and margin-related pressures 2019 brought UK operators alone.

In the US however, public sentiment is rather the reverse.

Yet similar challenges remain when it comes to educating both politicians and the public. Some of my own conversations with those from the industry, both during and since ICE London, have also reflected on these challenges. But they have also focused on how little those outside the sector actually understand about these challenges. That is, in most cases, not the fault of others – it’s the fault of the gaming industry itself.

AN INTERNAL/EXTERNAL DIVIDE

Tim Poole proposes an aggressive advertising strategy to highlight the threats posed to players by illegal gaming operators.

34 GAMINGAMERICA

In a B2B sense, especially at Gaming America, where our job is to provide analysis and information to the industry, we as a sector are well-versed in discussing the pressures which face us. That’s particularly true when it comes to problem gambling and channelization, topics frequently addressed at trade shows and on conference agendas.

But ask anyone about channelization and will they even know what it means? Speak to someone working for a regulator, meanwhile, and see if they'll be able to list all the current

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ADVERTISING

responsible gambling policies and software operators currently use or have in place. Again, this situation is in a better current state in the US than in Europe – but the issue still remains.

The likelihood of knowledge in both scenarios is very low, because the industry hasn’t quite figured out a way of highlighting what are actually two of its biggest strengths: • While problem gambling is an undeniable challenge for operators, the amount of R & D already conducted within the field has led to great strides towards helping players.

Customer service, cooling-off periods and responsible gambling technology are at the forefront of the online industry – but you wouldn’t think it listening to the unfounded claims of anti-gambling critics. Land-based casinos have also come on leaps and bounds when it comes to responsible gambling and anti-money laundering measures.

• Gambling will always be in high demand and regulated operators are a market’s only chance of protecting a customer who wants to gamble. Politicians and members of the public aren’t aware of the damage offshore operators cause and don’t realize excess regulation will push gamblers in the direction of these operators, creating an even bigger problem but hiding it from official figures.

Point one is well worth emphasizing amid growing speculation about online stake limits within the UK market, as well as an inevitable reticence from certain US states which have yet to legalize gambling. Restricting limits on fixed-odds betting terminals in the UK market was a completely different ball game for this precise reason.

In the online sphere, a range of safeguards exist, which politicians calling for limitations are conveniently ignoring.

Emphasizing these safeguards in the right way at the right time – avoiding appearing defensive and argumentative as the industry has in the past – can help reduce the occurrence of the second point. Should online stake limits be introduced in the UK, the majority of online players will be welcomed with open arms by offshore operators who don’t have to enforce the same policies or standards; they, unopposed, can squeeze as much revenue out of customers as unfairly as they want, with none of this revenue being taxable, of course.

MAKE THE MESSAGE CLEAR While this is not currently a reality in the US, the UK market is far more mature and could potentially set a precedent for the future on the other side of the Atlantic Ocean. So why not get the message out accordingly?

The American Gaming Association is leading the way here but why don’t regulated operators do the same, taking the fight to black-market firms and educate the public at the same time?

In other words, why don’t licensed operators call out offshore operators with their ads?

36 GAMINGAMERICA

“IF CHANNELIZATION AND PROBLEM GAMBLING CREATE SUCH PRESSURE FOR OPERATORS, WHY NOT ARM THE PUBLIC WITH THE KNOWLEDGE THEY NEED TO HELP THEMSELVES?” Picture it: a TV ad is split into two frames. The left screen shows a delighted player joining a regulated bookmaker, where the phrase ‘Gamble Responsibly’ features prominently.

We can call this operator ‘SafeBet’ for hypothetical purposes but DraftKings, FanDuel, BetMGM, William Hill et al can all adopt this tactic, too.

At the same time on the right frame, an equally excited player joins ‘OffshoreBet,’ where there is no mention of gambling responsibly and phrases like ‘Win Big’ and ‘No Limits’ are plastered across the screen. Flash to the next scene and the frame on the left shows all the available responsible gambling options – much like TV ads in the UK already do – such as cooling-off periods and deposit limits. It can even show a deposit being turned down and a company representative talking the player through why on the phone.

Simultaneously, the right frame shows a multi-figure deposit being accepted and encouragement to bet even more, along with a clear disregard for player wellbeing. Subtle elements could be enforced, such as hypothetical advertisements from illegal or unlicensed companies.

EDUCATE AND INFORM In the final scene, the player on the left is delighted after winning big, completing their withdrawal and being congratulated by the operator. OffshoreBet’s unfortunate victim, however, has the smile wiped from their face when reading the following error message: "We’re sorry, there was an unexpected error and we cannot pay out your winnings."

At the end, the ad could contain an operator logo alongside the message: 'Only gamble with those you can trust. Bet responsibly with licensed operators.' It's a format that could easily be replicated online, on social media and even in print.

These scenarios would naturally be tailored for the purposes of advertising, as regulated operators naturally still need to attract new business – as any company would. But the message would be an honest and crucial one. If channelization and problem gambling create such pressure for operators, and are of such importance to players, why not arm members of the public with the knowledge they need to help themselves?

PA TAXES

HAS PENNSYLVANIA’S HIGH TAX RATE BEEN JUSTIFIED?

Tim Poole looks into the relative success of the Keystone State's first full year of sports betting and examines whether it justifies Pennsylvania's 36% sports betting tax rate.

There are two routes I can take into work every morning. One route is more comfortable, guarantees me a seat and gives me more time above ground for YouTubing. But the other gets me into the office just as conveniently and is perhaps only a couple of minutes longer. So, while I have a firm favorite out of the two, the outcome is ultimately the same, with the main difference being the enjoyment of the journey itself.

Following the release of Pennsylvania’s gaming results for 2019, one could argue it’s exactly the same situation for those setting the state's sports betting policy – particularly when compared to neighboring New Jersey. For the full year, the state of Pennsylvania boasted $1.49bn in sports wagering handle and $84.1m in sports wagering revenue.

New Jersey, by comparison, generated $3.47bn in handle and $299.4m in revenue, despite holding approximately 2/3 of the Keystone State’s overall population.

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The key point for policymakers however, is their respective sports betting tax revenue tallies, which were not too dissimilar, despite these disparities. In Pennsylvania, taxes derived from sports wagering for 2019 totalled $30.3m from a sports betting tax rate of 36%. In New Jersey, tax revenue totalled $36.5m, from an online sports betting tax rate of 13% and a retail rate of 8.5%.

So, despite handle being more than double that of Pennsylvania in the Garden State, and revenue being more than triple, tax revenue in New Jersey was only 20% higher.

Considering the strong warnings against Pennslyvania’s high sports betting tax rate when it was initially imposed, this early evidence is not going to deter policymakers.

The strongest argument against a tax rate which eats into more than a quarter of total revenue is that, with a more moderate rate, Pennsylvania could potentially double or triple

PA TAXES

its business by attracting a greater number of suppliers and operators. But, off the back of these results, policymakers may be just as inclined to argue New Jersey is actually missing out on valuable tax revenue; whereas Pennsylvania is maximizing it without turning away the market’s biggest players (both FanDuel and DraftKings are live in the state).

Any politician could also argue Pennsylvania is behind the Garden State in its life cycle as a sports betting jurisdiction, having launched later. New Jersey’s market is booming having just completed its second year and first full year ofsports wagering. By that point in its journey, who’s to say Pennsylvania’s tax revenue total won’t be higher than $36.5m?

More worrying in this respect is the fact analysts have said over 70% of 2019 handle was generated online in the Keystone State, despite mobile sports betting only launching in May. This is a crucial statistic, as the Pennsylvania Gaming Control Board’s official figures, too, show $43m worth of annual revenue from mobile; that's compared to $41m from retail, despite retail sports wagering launching in November 2018 and lasting the full year for 2019. One can only assume a full year’s worth of mobile sports betting in the Keystone State would therefore equate to a greater tax revenue total than New Jersey’s.

This, of course, is not to argue higher tax rates are actually better – in terms of encouraging business, for those from a monetarism school of thought, or those who simply prefer a free market, they certainly aren’t. But, at a time when certain states are lagging behind projected tax revenue totals and others are rejecting sports betting legislation in fear of exactly that, Pennsylvania’s tax figures open the door for more convincing arguments against lower tax rates.

In Maine, Governor Janet Mills recently vetoed a sports betting bill – becoming just the second state Governor to date to do so. Problem gambling concerns were at the heart of her message but, crucially, she also alluded to other states falling short of their revenue projections. She said: "We are told the state can access new revenues by legalizing sports betting. But for the more than a dozen states that have enacted legislation regarding this form of gambling, revenues have fallen far short of projections for a variety of reasons. The economic impact of mobile sports gambling on pre-existing facilities, given the potential saturation in the market, is uncertain.”

Here’s where Pennsylvania’s full-year results may be a double-edged sword for gaming firms. Politicians, at the end of the day, need to concern themselves with tax revenue as the bottom line, rather than business revenue.

On the plus side, Pennsylvania’s tax revenue shows there is genuine potential for other states considering legalizing sports wagering. But it equally shows there is scope for higher tax rates, especially in a state with a high enough population and enough interest from gaming companies.

“DESPITE HANDLE BEING MORE THAN DOUBLE THAT OF PENNSYLVANIA IN THE GARDEN STATE, AND REVENUE BEING MORE THAN TRIPLE, TAX REVENUE IN NEW JERSEY WAS ONLY 20% HIGHER.” Returning to Pennsylvania itself, anyone hoping for lower sports betting taxes in the Keystone State would realistically have needed results to dwindle early on. By contrast, the early figures suggest operators make enough to maintain an interest in the state. Meanwhile, policymakers can proudly say they have generated almost as much tax in Pennsylvania in just half a year of mobile wagering as New Jersey has with a full year of mobile. While that may encourage more states to legalize sports betting in the long run, it may also encourage them a higher tax rate is the way to go.

For the sake of balance however, it is important to stress these are only early indications. This is certainly something American Gaming Association CEO Bill Miller emphasizes when we put the question to him at ICE London. He tells Gaming America: “I think it’s early to make the determination.

Pennsylvania, from a population perspective, is a bigger state.

You’ve got more sports teams in Pennsylvania than you do in New Jersey. It’s premature to evaluate those as apples-toapples comparisons. I think it will be for some time, in part because of the number of people that are betting.”

While Miller “appreciates the comment” and acknowledges people might infer the tax rate isn’t hurting Pennsylvania, he believes supply and demand will ultimately justify New Jersey’s approach in the long run. He explains: “I do believe in the law of supply and demand and economics, and if people are able to migrate to one or the other, they’re going to go to a place where there’s less tax. So I think it’s early to make too many important conclusions on the divergence of tax rates in New Jersey and Pennsylvania. If you tax something at a higher rate, your tax revenue is going to be higher, depending upon the number of bets made. Again, I think it’s premature to make too many judgements around that.”

GAMINGAMERICA 39

EVENT PREVIEW

NIGA 2020 Tuesday 24 March to Friday 27 March, San Diego Convention Center

NIGA 2020: What to expect from this year’s show San Diego, with all of its parks, beaches and the annual superhero sighting at Comic-Con International, is never a bad place to visit, and with the 2020 edition of the Indian Gaming Tradeshow & Convention now on our doorstep, you should set your sights on a trip to America's finest city.

The show, hosted by the National Indian Gaming Association, gets underway on Tuesday, 24 March for four days at the San Diego Convention Center and is one of the biggest Indian and tribal gaming shows.

It celebrates its 36th year, rounding off the complete roulette wheel of years (minus the zero), and as ever, this show will be well worth a spin.

As for whether the house will always win, that question is reserved for the San Diego Convention Center which plays host, and will do so again next year as well.

It lies on the bay waterfront and is just a 10-minute drive away from San Diego International Airport, as well as being within walking distance of more than 13,000 first-class hotel rooms.

The show provides an ideal time for businesses to network and there are few better opportunities to develop your knowledge and reach within the industry, but what can you expect to actually see?

The one-mile walk for wellness returns at 7am to get it off to a brisk start, before a golf tournament for associate members at 8am on the first day of the show.

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The conference sessions begin on the same day from 11am until 4pm, before a welcome event in the evening.

All conferences are exactly 50 minutes long, barring one two-part conference, and starting on the hour.

The bulk of the shows are set for Wednesday, with a total of 89 conferences on that day alone. The day is set to cover a wide range of topics, with everything from enterprise development to security and surveillance to be discussed.

Given the controversy still raging in Oklahoma regarding the new tribal gaming compact in the state, which is yet to be agreed at the time of writing, it should be no surprise there is a conference on the matter. This will feature three attorneys, as well as Tuari Bigknife, Attorney General, Viejas Band of Kumeyaay Indians, Lael Echo-Hawk, Principal for MThirtySix and Aurene Martin, Managing Partner, Spirit Rock Consulting.

During the 50-minute session on Wednesday, they will be debating recent developments in the sports betting landscape within Indian Country, compact amendments and tribal-state compact issues.

The four-day show will be chaired by Victor Rocha, the President of Victor-Strategies and the owner/publisher of Pechanga.net.

NIGA Chairman Ernie Stevens will lead several events, including a golf tournament on Tuesday, as well as an awards ceremony and education sessions throughout the conference.

It is not all business, however, with a Native Strong Comedy Slam event late on Thursday evening at the Hard Rock Hotel, as well as an awards ceremony recognizing leadership and a cocktail reception providing ample time for more light-hearted moments.

The latter two days will see the trade show floor open.

At the time of writing, there are set to be 309 exhibitors, but there may be more added as the show draws closer.

With a huge range of conferences, companies and events all gathered in scenic San Diego, the show is a brilliant opportunity for people to learn more as well as develop contacts and businesses.

Regardless of what you see and do, the show is set to give another fascinating insight into the Indian gaming industry.

EVENT PREVIEW

ICE north america 13 and 14 May 2020, New Orleans, Ernest N. Morial Convention Center

ICE North America: Back for round two After the roaring success of the inaugural ICE North America last year, the show is back and even bigger this May. ICE North America 2020 will take place in New Orleans on 13 and 14 May, with the pre-event on Tuesday 12 May, from the New Orleans Ernest N. Morial Convention Center, along the Mississippi River.

As with 2019 and its counterparts such as ICE London, the Clarion Gaming run event features the biggest names in gaming, from operators, regulators, government representatives and suppliers.

Last year’s event in Boston saw 42 exhibitors, with more than 1,700 delegates attending, but that doesn’t come close to the expected attendance this time around. More than 80 exhibitors and 2,500 attendees from the gaming world will grace ICE North America with their presence, as at least 47 states and 40 countries are set to be represented.

Apart from it being the one-stop event for the next generation of technology and market trends in gaming, as well as learning from industry leaders through talks and discussions, it is free to attend for decision-makers within gaming.

Some of the themes on display at ICE North America will unsurprisingly focus on sports betting, with 13 US states having legalized the vertical at the time of writing.

With sports betting in its infancy in the US and destined to look a world apart in five years' time, ICE North America will be crucial in providing industry intelligence as the market heats up.

Among the other key themes to feature at this year’s event will be changing player and customer habits, and responsible marketing and gaming.

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As sports betting increases, so does advertising, with lessons to be learned particularly from the UK and mainland Europe, to address concerns surrounding excessive advertising.

Responsible gaming will be brought to the forefront at ICE North America, with plenty dedicated to it in the conference agenda. Case studies and current models will be explored, as well as how companies can best present themselves, the importance of diversity and inclusion and how it should be seen as the first pillar of sustainability in the industry.

Aside from conferences and discussion on the gaming industry, ICE North America will be a great chance for exhibitors to showcase their latest products and trends, while there will also be networking opportunities.

This includes dedicated areas, such as the Responsible Gambling Zone (RGZ). This will be a focal point for discussions, demonstrations and conversations on how the industry can offer a safe product and grow over the long-term. Similar to the Consumer Protection Show at ICE London, the RGZ will also raise funds for a charity that will be chosen nearer the time.

There will be great opportunities for betting start-ups to pitch in front of the high-profile ICE North America audience and secure potential investors or strategic partners through Pitch ICE. Networking will continue to be a major theme at ICE, which will be encouraged to help companies to build on existing relations while creating new foundations for future business and importantly, learn from the best the gaming world has to offer.

Dedicated networking events will be available for participants to get involved with for free, with plenty of opportunity for a party or two.

ICE will see the launch of its brand new Match Buyer Programme. This interactive, unique meeting format will bring together decision-makers and suppliers to create a collaborative network during the event. This will help each buyer generate their own personalized agenda and meeting reminders to create the most relevant and efficient meetings for contributing businesses.

With still plenty of time for more exclusive events and marquee appearances to be confirmed, this is just a snippet of what you can expect at ICE North America 2020, making it one of the must-see industry events of the year.

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CLASS ACTION

THE IMPORTANCE OF CLASS II GAMING Russell Witt, Director of Central Determinate Gaming at Incredible Technologies, explains why he believes class II gaming is more important than ever.

RUSSELL WITT

Tribes across the country have been successfully operating traditional forms of bingo (i.e. live call or session bingo, tip jars, or punch boards) for more than 50 years. In the late 1970’s, the Seminole Tribe of Florida opened the first ‘high stakes’ bingo hall offering larger prizes and bigger game sessions. The success of the Seminole’s high stakes bingo games led to the famous Cabazon decision in 1987 which set the stage for the Federal Government to pass the Indian Gaming Regulatory Act (IGRA) of 1988. This became the regulatory framework for tribal gaming as we know it today. IGRA defined the three classes of gaming that tribes could operate; most notable being that the tribes were the primary regulators of all class II gaming activity.

The Cabazon decision showed that tribes have the sovereign right to operate class II gaming without interference from state government. Class II gaming is only subordinate to the federal government, yet most tribes fail to see the benefits in the operation of class II gaming systems. Many perceive the addition of class II gaming to a class III gaming floor too difficult or too steep of a learning curve. Most of these observations or declarations are made based on preconceived notions of what 44 GAMINGAMERICA

class II games looked and played like in the past, or a lack of understanding of class II gaming systems.

With many traditional class II manufacturers having merged with or been acquired by major traditional class III manufacturers, tribes will continue to see an explosion of product and hardware innovations on an unprecedented scale. Incredible Technologies has observed the changes and maturity of the class II market and made the strategic decision to enter the class II space. After years of success in class III jurisdictions and forming partnerships with valued tribal customers, entering class II marks a commitment to tribal sovereignty and success. The products and technologies being dedicated to class II development, spanning many gaming manufacturers, are unprecedented.

What does this mean for the tribes? Access to each manufacturer’s latest and greatest titles and hardware platforms available in class II. Many of the titles that tribal casino customers know and have grown to love in class III are being made available in class II. Not only do tribes now have unprecedented access to hardware and software options, but the gap that existed between class II and class III game performance in the past has narrowed. In some cases we’re seeing class II product actually outperform class III in mixed use markets. The shift is monumental and tribes should be positioned to take full advantage of these new opportunities.

Today more than ever we are witnessing states and tribes locked in battles over gaming revenue. The most notable example is the current battle in Oklahoma between Governor Stitt and the gaming tribes. Many tribal casinos in Oklahoma are operating up to 50% class II games on their casino floors.

Oklahoma represents the largest percentage and number of class II games in the country. The tribes’ commitment to class II is one of the main reasons they can stand united against the state and serve as a shining example of the true power of class II. Class II is entering a true renaissance period where tribes will reap the benefits of technologic advancements, feature designs and revenue performance the likes of which have never been seen before.

SCIENTIFIC GAMES

AHEAD OF THE GAME Cathryn Lai, SVP Product Management and Product Marketing at Scientific Games, speaks to Gaming America about gaming innovation and the supplier’s plans for 2020. had to ensure all the different product lines and the commercial side are all talking to each other and offering a full Scientific Games offering.

What were Scientific Games’ proudest achievements of 2019?

We were proud of a lot of things. We launched our Wave XL cabinet and that has been a very successful cabinet for us. It has this new age curve 49” display and has been getting a lot of strong performance in North America. We put it in both gaming ops and for sale. We launched Table Master Quartz at the end of Dec 2019 which is our next generation table electronic game quartz product. That’s been growing very quickly.

CATHRYN LAI

You’ve been at Scientific Games for close to six years now.

What are some of the most important developments you’ve seen in the business during that time?

If we’re talking about the past five to six years, we have gone through a lot of mergers. That is one of the strengths of Scientific Games, that we’ve been able to bring together some of the biggest brands through the Bally brand, the WMS brand and the Shuffle Master brand. Through that, we have been able to bring all the great content and unique games that come from these studios and put it into one package in the form of a Scientific Games product offering. That has been the strongest attribute on our roadmap that has propelled us forwards.

You took up your current role over a year ago now. What have been some of the main challenges you faced as Senior Vice President of Products and Marketing during that time?

I think we have a lot of great technology that we have been trying to push out in the past year, so trying to get that aligned across the business and their product lines has been, not so much a challenge, but more of an opportunity. We have great content on the propriety table games side, so we have been trying to leverage all of the great findings and great ideas to make strong this proposition that comes from Scientific Games. Also, we have 46 GAMINGAMERICA

A major part of your role is product innovation. How does Scientific Games stay ahead of the game in terms of product development?

There’s two parts. There’s the technology piece and the game design piece. I truly believe we have some of the best game designers in the industry. They’re from all over the world because we have global studios. We have a really good understanding of each unique market.

We also leverage a lot of our insights and analytics. We have a strong insights and analytics team so we can really focus on the player, making products for the players and segmenting it correctly. We do a lot of focus group testing so I think that really helps us make stronger and better games.

From a technology perspective, we also think beyond gaming. We are one of the leaders at looking at technology.

You’ve probably heard a lot about the vision technology we’ve been working on, such as chip recognition, and thinking about how advanced learning and object recognition can be leveraged into our game play and services. A lot of people are moving to mobile commerce with non-cash handling, so we have had a lot of innovations in that area too. It’s really about being able to bridge across, not just gaming, but sports betting, our digital offering and our lottery offering with these new technologies.

This is the Scientific Games ecosystem.

Is there something a younger consumer requires from a casino gaming product that is different to an older demographic?

We have been trying to target younger demographics, and we know that card games and more social elements are important to the

SCIENTIFIC GAMES

younger generation. We will create games where you can earn an award that offers prizes for everybody in a joint bank to create more of a community style to gaming. That is an important thing we have been driving. Also, our whole electronic table games segment is popular with the younger demographic. Younger players like to play poker and blackjack so we look to bring them from the table onto our electronic table games. That’s been a big opportunity for us.

What are the most exciting markets for you right now?

There’s a lot of exciting markets for us right now. First and foremost our core is North America, which is our biggest revenue generator, but we are everywhere. Australia is a big exciting market for us.

We’re number one in the Asian market in Macau. Even in North America we have gotten into historical horse racing, and class II is a very big market for us. We look at all of the opportunities globally and make sure we are investing our R&D resources where we can get the most profit.

What is the focus for 2020?

At NIGA, we’re going to be launching two new platforms. We have this cabinet called the Twin Star Matrix, which is a new dual screen. We are going to be launching it as a for-sale product and a gaming operations product. We’ve also got some new strong

48 GAMINGAMERICA

hits that we’re very excited about including a new game called 88 Fortunes Gong which we will be showing in gaming operations with a game called Penny Pier, which is from our Australian studios. It has been doing very well over there so we’re bringing it over.

”WE HAVE A STRONG INSIGHTS AND ANALYTICS TEAM SO WE CAN REALLY FOCUS ON THE PLAYER, MAKING PRODUCTS FOR THE PLAYER AND SEGMENTING IT PROPERLY. WE DO A LOT OF FOCUS GROUP TESTING SO I THINK THAT REALLY HELPS US MAKE STRONGER AND BETTER GAMES.”

TABLE TRAC, INC.

IDENTIFYING GUEST TRENDS Eric Cunningham, Training and Marketing Manager of casino management system supplier Table Trac, Inc., explains how today's analytics can answer questions casino operators will be asking.

Today’s casinos are full of an overwhelming amount of information that can be used to keep a property relevant, productive and ahead of the competition. Whether it is historical, predictive or exploratory data, we need someone or something to tell us which direction to turn when planning for the future and how to react to changing trends. Having valuable in-depth insight into the performance of our casino can create added efficiencies and give us the confidence to make proactive business decisions.

For years, spreadsheets have been the go-to workhorse for gathering information, but they are not user or viewer friendly. When it comes to understanding what is happening and, most importantly, answering why it is happening, interactive dashboards and visualizations are the future.

Casino operations are now able to use intuitive analytical software to eliminate the arduous task of pulling reports, compiling information, and building visual representations to empower their teams to get the most out of their data with straightforward, easy to understand visualizations. These products offer the ability for visualizations to be generated each day automatically by linking relevant databases and extracting only the necessary data to assess and address performance.

Using standardized reporting structures that produce intuitive data regularly, these visualizations are also now interactive and can answer the most critical question posed by any operator: Why? Why are the guests coming to our property?

Why are there not more guests?

Why are they not staying longer?

Why are we making this much revenue?

Why are we not making more revenue?

Today’s analytical software tools can drill down years’ worth of data with a few mouse clicks to quickly view any segment of your gaming or player performance data. By quickly choosing a couple of parameters, all levels within organizations can see the impact (both positive and negative) their department is having on the overall success of the casino through interactive and exportable dashboards. Top-level management can now quickly recognize the coin-in, net

win, and freeplay impact for all of their properties, to identify areas that need immediate attention and take action through automatically generated dashboards and reports delivered to their email before they even get to the office.

Guest participation is the very building block of operational success. With thousands of guest preferences possible, operators are tasked with finding as many diverse promotions, game variations, floor layouts, and other non-gaming amenities as we can to maintain and increase guest participation. Using easily configurable flash reports and dashboards to follow where the data leads, we can identify promotions that have the highest guest participation, deliver a strong ROI and identify which games continuously have the lowest win per unit to replace them with games that are top performers, maintaining a fresh game selection.

Through proper data management, performance monitoring and influence factoring, we can create and maintain a productive business model while growing a solid guest base.

With guests driving productivity, how we react to that level of participation is the responsibility of operators.

By adequately measuring how guests enjoy their experience, we can focus our efforts and actions toward maximizing their time with us. Identifying guest trends real-time through thoughtfully designed analytic tools allows us to know why we are performing at our current level and what we can do to keep relevant, productive and ultimately ahead of our competition.

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GAMING ARTS

TRIBAL INNOVATION AND SUSTAINABILITY Gaming Arts President Mike Dreitzer speaks to Tim Poole at ICE London about the supplier’s support of tribal gaming and the economic health of tribal gaming as a whole.

For a company like Gaming Arts, how do your preparations for ICE and G2E compare to your preparations for NIGA and the Oklahoma Indian Gaming Association show?

We are a small company and we’re just starting in many ways.

We’ve certainly only just started being in the slot business within the last year. We’re showing our products and trying to find customers who find value in our products. A lot of what we show is the same across these events because we’re showing our games, capabilities and technology to customers; assessing whether they can find interest in a co-hold in the US, UK or other parts of the world. I will say this: our product was designed for the North American market and the tribal market but that’s not to say it can’t be used in Europe. That’s why we’re here at ICE London.

Do you work with a lot of tribes and is tribal gaming a big interest for Gaming Arts?

MIKE DREITZER

How much of a presence do tribal gaming firms have at a show like ICE London?

There are some people from tribal gaming in the US that do come to ICE. Of course, it’s not a lot of representation but there is some. From what I can tell, the folks that come from tribal gaming look at some of the online gaming and social gaming-type solutions. This year, with the growing presence of sports betting in the US, I believe they’re coming to look for solutions for their particular tribe. In March, we convene at the National Indian Gaming Association (NIGA) show in San Diego, where there is a greater tribal focus. That’s an association show we always support every year and feel honored to be part of for our tribal customers.

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Enormous, yes. At this stage, the tribal gaming opportunity, working with our tribal partners as a supplier, represents the lion’s share of our business. Most of the business we do is in tribal casinos. Tribal gaming has proliferated in the last two decades within the US and has grown, as a matter of revenue, larger than what we call commercial gaming (non-tribal in the US).

So the short answer is, yes, tribal gaming is a very, very big part of what we do. It’s a very important constituency and a very important group of partners and customers. Whether it’s here, at NIGA or G2E, we do our best to put our best foot forward to all our customers – but tribal gaming is an enormous part of our strategy.

What is your take on the current regulatory situations within tribal gaming, particularly in Oklahoma and California?

I’m certainly aware of the situation in Oklahoma, where they’re negotiating a renewal of the compact. We’re very keenly aware of what’s going on in California, too. It’s important as participants in this market to understand what the regulatory and legal landscape is, so we keep an eye on it. I don’t think it’s for us to say or opine on how the tribes do their business.

GAMING ARTS

But we keep an eye on it and our goal is to be at all times the best partner possible to our tribal customers, offering them cutting-edge technology and gaming experiences that will give their players interest and desire to keep coming back and playing. That’s where our focus is, on the entertainment side rather than the political side. We deal with the landscape but, at the end of the day, it’s about providing a great product and service to our customers in the tribal community.

Do these kinds of issues have an impact on you as a supplier, though, in terms of your planning and what markets you’re targeting?

Some of these things can present opportunities. I’ll give you a perfect example: this is an industry statement rather than a Gaming Arts statement, per sé. At present, each tribe has a compact with the state, which is essentially a contract and terms upon which they can provide class III gaming devices, for a certain amount of tax the tribe then agrees with the state. Class II gaming, which is based upon a bingo RNG, a bingo game with an entertaining display, those are outside the context of the compact. Therefore, there is no tax to be paid as a result of the tribe’s usage of the games.

So sometimes when things like this happen, we see some of our tribal customers have a renewed commitment to request for R & D in the class II area. Again, we don’t have a class II product – we are focusing on class II for 2021 and we’re looking currently at RNG class III opportunities. But when these things happen, the landscape shifts and, as a result, there is greater interest in class II. So the tribe has more sovereignty as they work with suppliers not within the context of the compact. From our perspective, the rest of it is understanding what the landscape is and providing the very best product we can in tribal or commercial casinos anywhere.

have made a multi, multi-million-dollar commitment to provide the very best product. That’s definitely a trend we see and they really are sparing no expense in that area.

Related to that, even though our industry is very highly regulated, the tribes pursue the cutting edge in a lot of cases.

This means you’ll have greater technology, more functionality, more sizzle, more games with greater bells and whistles, and gameplay mechanics. You’ll see a lot of that in tribal country.

One of the tribes’ hallmarks is innovation.

So would you say it’s a sense of forward thinking and ambition with regards to innovation, rather than capitalizing on what the tribes already have?

”THE TRIBES PURSUE THE CUTTING EDGE IN A LOT OF CASES. THIS MEANS YOU’LL HAVE GREATER TECHNOLOGY, MORE FUNCTIONALITY, MORE SIZZLE, MORE GAMES WITH GREATER BELLS AND WHISTLES, AND GAMEPLAY MECHANICS. ONE OF THE TRIBES’ HALLMARKS IS INNOVATION.”

Regulation aside, what are the biggest trends you envisage for tribal gaming in 2020?

First of all, I would say the economic health of the tribes and tribal gaming seems to be quite strong. They are interested in providing to their player the very best product and very best player experience – and that costs money. So the capital budgets that seem to exist for tribes are significant and they

Yes, as with any floor, tribal gaming floors have to have an eye on the present and have certain staples necessary within their casino floors. But, yes, there’s a forward-looking approach and tribes are always looking to improve what’s gone before.

Another trend I think is interesting is a continued reliance on analytics. The tribes themselves are focusing more and more on data-driven solutions.

You see that in gaming generally but in tribal gaming especially. You have a lot of tools and software to always try and gain the best yield and analytics. The tribal gaming space is very sophisticated.

Our mission as a small company is to provide these spaces and our customers with compelling products for their players.

Every day we wake up with that philosophy and we want to be different. We have recently been identified as different. We will continue to strive to be great partners for tribal gaming. Our industry is very small and we believe we are a tool that can help supply economic benefit and reward to tribes. That, in turn, will be good for the health and sustainability of the tribe.

We believe in that sort of involvement and we will hopefully be there to provide a little diversity, perhaps in places where casinos see weaknesses on their floors. It all ties together; we’re very fortunate and grateful to have been accepted as a supplier in tribal gaming – it’s not an easy thing to do.

Tribes see how responsive we are to their wants and needs and we’re very grateful; we will always be a strong supporter of tribal gaming.

GAMINGAMERICA 51

LIGHTNING BOX

NEW GAMES, NEW TERRITORIES Tim Poole speaks to Lightning Box Account Manager Mike Lally and Operations Manager Michael Maokhamphiou at ICE London.

Can you give us an intro into the latest developments at Lightning Box in North America?

MM: We’re definitely interested in getting more content flowing out to new markets. So Pennsylvania, they launched online gaming last year and we are looking to launch in their online casinos this year, via our platform partner Scientific Games. Toward the end of last year, we had our first release into the Canadian market via Loto-Québec (LQ). This year, we’re targeting Atlantic Lottery Corporation (ALC) and British Columbia Lottery Corporation (BCLC).

How big is the Canadian market? We don’t hear as much about it compared to the US. MM: Well, there are advantages to that. You don’t have the abundance of suppliers you currently have in the European market. With Canada, they are a state(province)-run affair and quite selective with their licensing partner.

ML: With the likes of BCLC, LQ and ALC, you’ve almost got that ring-fenced market and a captive audience. If you can get into working with those companies, there are some big numbers there – BCLC are competing with the likes of Sky Vegas. There are the likes of Ontario Lottery and Gaming Corporation (OLG) as well.

MM: Yes, there are mini markets in Canada. For us, it’s important we get our foot in the door at the right time and make our mark with our style of game. For us, it’s a big deal to get our licensee and move into the markets that are opening.

ML: This year, we’re showing games to operators and getting positive feedback on different themes, different new game mechanics. Some of our Lightning and Jackpot games have done really well. Sometimes games can have a very samey feel but we want to get new ideas out there. If your game is a success, you can do a second integration. But then if you do a third one and so forth, by the sixth integration operators will feel it’s more of the same. You don’t want to innovate too much as you could go too far away from your core values. We say keep it 60% core and try and innovate 20/30%, 10% keeping the UI the same.

How much momentum is there in US online gaming, taking into account any Wire Act-related uncertainty?

MM: Once New Jersey started, we knew there was going to be that domino effect. You’re going to see other markets open up: Pennsylvania online casino next, you’ll probably look at Michigan later. Eventually, with the combination of sportsbook being legislated for in the US, we’re going to see more states open up that online gaming market. We aim to establish ourselves early in the Nth American online casino market.

The European market is still significant to us at the moment but we have to make sure we are aware of the other online gaming markets and opportunities available to us. We want to cover all areas and all markets we are permitted to go into. We already have a presence in the US market through land-based and social casinos, so that makes the transition a lot easier. A lot of the players based in the US still relate to the land-based look and feel of a game.

ML: LQ is great; we’ve got games live with them. BCLC we’re just emerging with a license soon and hopefully we’ll have 10 games live there in the next 12 months. There’s a lot of opportunity in Canada, for sure.

What would you say is Lightning Box’s key focus this year?

What are your general goals, including Canada, for 2020?

MM: We want to diversify our game mechanics and bring in a bit

MM: We still want to be a reputable supplier out there, producing good games, having operators still recognize us as a key supplier they want to work with. So it’s important for us to maintain relationships and build a rapport with new operators; that’s why we’re here at ICE London.

more innovation. We want to look at new, refreshed concepts that are unique in the market, that can really take off and put a footprint in the market. It’s always good to diversify and look at ways of improving yourself. We’re primarily a game design studio, so that’s our bread and butter and that’s what we focus on. This is what we need to do to be in line with the market.

ML: We’re a games studio so our main thing this year is the new games, new themes and new mechanisms we are getting out to operators as far and wide as we can. We are targeting new territories and this year trying a few new things, while trying to expand into Canada. So new games, new territories.

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AGS

FINDING THE BALANCE Mark DeDeaux, Senior Director of Slot Products at AGS, speaks with Gaming America about commitments to multiple markets.

We are very much a growing company. In the past 10 months, the most significant factor has been our investment in R & D. Typically, with those investments you start to see the results 12 to 18 months later. We’ve made a number of these investments into R & D, including opening new game-development studios both in the US and Australia. In many ways, we’re a completely different company today than we were a year ago.

What are some of the benefits of AGS’ commitments to the class II tribal market and class III commercial market?

MARK DEDEAUX

How did you first get involved with AGS? I have roughly 28 years of experience in the gaming industry.

I started on the casino operations side with what was Harrah’s and is now Caesars Entertainment. I spent 10 years on that side of the business and then transitioned onto the gaming supplier side after that. About 10 months ago, I joined AGS as Senior Director of Slot Products.

In your experience, what have been some of the most important developments in slot gaming in recent years?

It’s been exciting to see how slot machines have become such an important part of the gaming operation. Then when you look at the trends in technology and consumer electronics, you see how gaming technology follows that evolution. For example, you can look at how TV screens and computer screens have gotten bigger and how slot machine monitors have followed that trend.

Similarly, slot machines follow trends in technology. Video games are now more immersive and more interactive, so we are starting to see that evolution in slots becoming more entertaining and more immersive. At AGS, we have incorporated technology into our new premium slot games so the merchandising displays will actually interact with the games. That’s an example of how we are looking at technology and implementing it within our games to make the experience more entertaining for players.

What are some of the main changes you have seen at AGS since joining the company?

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The tribal class II market is large in the US and continues to grow.

We have a commitment to both class II and class III, so our product development strategy contemplates how we develop games that support both markets. We have a very focused effort on that and it gives a balance to our business. Our roots are in the class II tribal markets; we have excelled in class II and we are getting into the class III commercial space on a much larger scale.

In a 90-day window this spring, we are launching three unique products that are brand new to the company and they are going to be launched as both class II and class III products, so we have a very strong commitment to finding a balance between both markets.

What will be different about AGS’ offering at NIGA in comparison to previous years?

NIGA is going to be a big show for us this year. At G2E last year we displayed our Starwall video canvas merchandising display and two new slot cabinets – the Orion Rise and Orion Curve.

These three new hardware innovations are all targeted for both the class II and class III markets. NIGA will be the first event where all three of those products are launched and available for sale and/or lease. The Starwall is our most recently launched product.

We call it Starwall because it is designed with hundreds of LED tiles, which seamlessly form a large display that goes from the floor all the way up and expands across a bank of our Orion Portrait games; so it gives the experience that these games are all immersed in this LED video wall. It’s all really exciting.

How important are events like NIGA for AGS? NIGA has grown to become tribal gaming’s flagship event. We love working with tribal customers and helping contribute to their success because the tribes have a big impact on their communities and the markets they operate in. For us, just being a part of that support and the commitment the tribes make to communities is meaningful, above and beyond anything else.

SUZOHAPP

EXCEEDING CUSTOMER EXPECTATIONS Sim Bielak, President of Global Gaming and Amusement at Suzohapp, speaks with Gaming America about the company’s customer focus and the evolution of payment technology.

What are the most exciting markets for you right now?

The North American and European casino gaming markets remain steady but strong. Obviously, we are looking for larger emerging markets such as the sports betting market in the US, which has evolved in some areas faster than expected. In addition, we are always keeping an eye on international markets to see regulation take hold, such as in markets like Brazil, which can have significant potential. We are always looking for new opportunities for growth.

SIM BIELAK

When I first came on board with the company they were looking to diversify the revenues out of our core business, with some acquisitions outside the gaming and amusements space. This was nothing more than just diversifying the business overall. I took up the role of President of the Gaming and Amusement business mid-last year. The aim of that was to refocus our efforts on the global gaming and amusement business, because it is a core segment to our company. Over the last several months we have refocused our efforts in this space by introducing a number of investments in people and products, really driving the business forward.

Our whole strategy is to simplify the sourcing many times, so whether you’re an OEM looking for innovative, highly engineered solutions for your gaming machines, or you’re an operator of casinos, we really are the best provider in terms of fares, availability and support. Similarly, we have the engineers, the resources and the manufacturing capabilities to meet any of our customers' needs.

We’re now working in a much leaner working environment. For us, it’s been more about the last six months than the last six years.

Which of your brands are most popular with the gaming sector?

Before joining Suzohapp in 2013, you worked in the payments industry for a number of years. What are some of the biggest developments you’ve seen in this space?

We have seen a transformation in fast payments in the gaming space as it is gets more efficient. Now we are seeing continued demand for that to be increasingly more efficient. Then there are the efforts to deal with coin starvation in the form of coin recycling and different versions of ticket methods. Through a need to minimize cash collection, we are moving more toward a card-based and cashless system. It has been good to move away from coins but we still have the issue of ticket collection. The next natural step will be to move away from tickets altogether and towards a card. Obviously this will happen over time given the necessary regulatory approvals.

The reality is cash is not going to go away completely, but the question is – how can you handle it more efficiently?

You’ve been at Suzohapp over six years now. Within that time, how have you seen the company develop?

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We have a number of well-known brands in the gaming sector. Our ELO products are very popular, which are our premium products for electronic table games. Then we have our own Suzohapp-branded products such as our dynamic button panel and our range of mechanical wheels. Suzohapp has been known for many years to have all the components for the gaming sector, so I wouldn’t say there is one specific brand.

What have been your proudest achievements since being appointed President of Global Gaming and Amusement in June last year?

It has been great to come back and refocus on an industry I love and am passionate about, with great customers, friends and colleagues.

I’m working with a great team of people to make the business even more successful. Having very loyal customers has been a key driver for our continued growth and success.

What is the absolute focus for 2020?

Exceeding our customers’ expectations.

NURTURING TALENT

"WATERING THE FLOWERS" Andrew Burke, recently appointed CEO of Bluberi, speaks with Gaming America about his plans to nurture the company's talent.

Tell us a bit about your background. Have you always been involved in the gaming world?

I started out at a private equity firm called Alpine Investors based in San Francisco. When I joined them in 2006 they owned a company called AGS. I started working on gaming-related stuff at the private equity firm, including work with AGS but also looking at the acquisition of other companies.

Eventually, I ended up joining AGS full-time. I was doing sales, marketing, business development and a little bit of everything.

I took a full time role with them in 2010 and moved to Las Vegas to join that executive team. Then I stayed on after we sold the company to Apollo in 2014.

When David Lopez came on as CEO he fully solidified my role as being in charge of the slot division. I ran that slot division at AGS all the way up to my departure in December last year. It’s been a lot of fun!

What are some of the most important lessons you learned during that time at AGS that you are looking to bring to Bluberi?

First, I learned that culture matters. Having a great culture and having a place where people are excited to come to work is really important. It’s a top priority for me. I want the environment to be fun and rewarding but also challenging and it is really hard to balance all of those things. If you end up too far on the end of the fun spectrum then nobody takes you seriously but if you’re too far on the serious spectrum nobody has any fun. It’s critical for the success of any small company within this space to balance those.

Second, I learned that it is important to move quickly and be decisive. When you are a small company it is about how fast you respond to your customer’s needs and how fast you react to changes and challenges in the market.

Finally, it is about being easy to do business with. That is one of my main goals. I would love Bluberi to be the easiest company to do business within the industry. That can be the way we work with internal customers, external customer, vendors and everyone. If we can use that as our mantra it will guide the way we think about everything.

What was it about Bluberi that made you make the leap from AGS? The company has a very rich history. They’ve been in business for over 20 years. The first time I visited the company in Quebec 58 GAMINGAMERICA

ANDREW BURKE

was in 2006. I went there on behalf of AGS because they had a partnership with Bluberi. I realized that the team here is a very talented pool of gaming development and gaming professionals. They have a very solid class II system and product. The idea of taking this great fundamental business and growing it was really attractive.

I also love small businesses. My passion and heart is in small companies. When I was at Alpine we invested in small companies, so I love the entrepreneurial spirit that you really feel at a small company where everything everybody does matters. You make a direct impact on the business every day.

Now you’ve adopted the role of CEO, what is the game plan moving forward from a development perspective?

It’s about watering the flowers. I think there is a really great base of folks here and they’ve been chomping at the bit for a really great opportunity, so for me it’s about supporting them and giving them everything they need to execute on their vision. My goal is to get all the roadblocks out of their way.

The core vision they have is a really good one, but it just needs a bit of love to blossom.