Global Gaming Business, April 2013 by Global Gaming Business

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CANADA’S OLG CHANGES | ENTERTAINMENT OPTIONS | NJ OKs ONLINE GAMING | CASH ACCESS & ATMs

April 2013 • $10 • Vol. 12 • No. 4

Fixing Washington

Local Legends

Why Carcieri continues to plague Indian Country

Station Casinos

returns with new and improved operations and online technology

New Marketing Paradigm How to evaluate success of your campaigns Official Publication of the American Gaming Association

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Vol. 12 • No. 4

CONTENTS

ON THE COVER

april COLUMNS

Page 24

Return to Station

14 AGA Progress on Regulatory Reform

Las Vegas locals king Station Casinos has emerged from the global recession stronger than ever, thanks to gems like Green Valley Ranch and Red Rock, focus on entertainment, shrewd tribal casino management contracts and a general return of the locals market.

Frank J. Fahrenkopf, Jr.

16 Fantini’s Finance Internet Enthusiasm Frank Fantini

46 NIGA Indian Impact

By Roger Gros

Ernest Stevens, Jr.

Lorenzo and Frank Fertitta

50 Global Gaming Women Balancing Act

FEATURES 20 Coping with Carcieri As a core group of U.S. senators continues to resist legislation to “fix” the effects of the Supreme Court’s Carcieri v. Salazar decision, tribes struggle to deal with its fallout. By Dave Palermo

32 Cash Kings Suppliers of cashaccess technology hold the keys to the casino’s biggest commodity—its currency. By Dave Bontempo

36 Ontario Calling The Ontario Lottery and Gaming Corporation re-evaluates its future direction, including Canada’s biggest prize—a potential Toronto casino resort. By Michael Lipton, Kevin Weber and Jack Tadman

Monika Racek

DEPARTMENTS 4

The Agenda

Dateline 13 Nutshell

40 Beyond the Showroom Casino entertainment has changed since the days of Frank, Dean and Sammy. Casinos are taking a second look at how entertainment makes money for the operator.

52 New Game Review 56 Frankly Speaking

By Marjorie Preston

58 Cutting Edge

44 The Strength of Marketing In the first entry of a two-part report, the value of marketing is examined by a veteran operator and sought-after industry consultant.

60 iGames 62 Goods & Services

By Dean M. Macomber

65 People 48 The Science of Regulation A look at Gaming Laboratories International’s 12th annual GLI Roundtable regulator conference, plus a snapshot of this year’s iGaming North America conference.

66 Casino Communications With Ian Gosling, Chief Operating Officer, Regency Entertainment Group

By Patrick Roberts 3

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THE AGENDA

Ch-ChChanges Roger Gros, Publisher

Vol. 12 • No. 4 • April 2013 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com

e’ve been talking about online gaming now for years. Most of us expected that it would be a nice little addition to the business, but that we would continue to operate as always, just with a little more cash. Even today, there seems to be some question about what online gaming could be. Steve Wynn told me recently that he, like his pal Sheldon Adelson, remains skeptical about it. “I just don’t know if there’s a business there,” he said. Well, there is some kind of business there, and I’m not sure how it’s going to play out, but I believe it’s going to transform this industry within 10 years into something none of us will recognize. But let’s back up. The U.S. is late to the table when it comes to online gaming, and the way it is progressing is a bit confusing. Online gaming in Europe and other parts of the world is a big business. After the federal government has failed, during the last two sessions of Congress, to legalize online poker, three states have legalized their own versions of online gaming. And while I don’t wish to denigrate the efforts of Nevada or Delaware, it took a large state (population-wise, that is) like New Jersey to really create a game-changing moment. If you haven’t been paying attention, Governor Chris Christie signed a bill last month that legalized the full raft of online gaming—minus, of course, sports betting. He did so in his continuing quest to aid the recovery of Atlantic City, and required that online gaming operators in the state must own a casino in Atlantic City. The clause caused the online gaming giant PokerStars to agree to buy one of the struggling casinos on the Boardwalk, the Atlantic Club, formerly the Atlantic City Hilton, formerly Bally’s Grand and the Golden Nugget. And because New Jersey left out a “bad actor” clause in the legislation (one that banned the participation of any company that accepted illegal wagers in the U.S.), PokerStars is able to compete for a land-based gaming license in the state, which would of course turn into an online gaming license. Caesars Entertainment, which owns four casinos in Atlantic City, isn’t happy. After all, the com-

Global Gaming Business APRIL 2013

pany’s World Series of Poker brand stands to be the dominant player in the state, absent the presence of PokerStars. Caesars objects to allowing a company that blatantly broke U.S. laws to operate in New Jersey. And Caesars isn’t alone. Most of the other members of the American Gaming Association agree, and joined together in an unprecedented motion to intervene in the regulatory investigation of PokerStars. Now, whether this is appropriate or not isn’t the point. This is only the first salvo of online gaming companies coming ashore in the U.S. to participate in the market one way or another. How long will it be before one of the powerful online gaming companies buys one of the major land-based casino operators? MGM Resorts and Boyd Gaming already have a partnership with online gaming supplier bwin.party entertainment to run their online casinos (with the lion’s share of the revenue going to bwin.party, by the way). Look at the slot manufacturing business: There are now at least four companies that are a blend of lottery providers, online gaming suppliers and slotmakers. That’s a trend that is bound to continue. And what about tribal gaming? The big tribes are hard at work trying to determine how online gaming will impact them. The smaller tribes, with smaller resources, are wondering what it means for them. But make no mistake. Online gaming is going to affect land-based gaming at all levels, and those who are not prepared are going to have to pay the consequences. As more states begin to consider online gaming—and there are already more than half a dozen states where legislation has already been filed—the federal government will come under intense pressure to act. But how will that impact states that have already passed online gaming laws? Will they be grandfathered in, like the states that are permitted to offer sports betting after the federal ban? No one knows, but that is coming down the road as well. We are in the midst of a transformation of the gaming industry into something that few of us have considered. How will it look in 10 years? Is this good or bad? Who will be the winners and losers? I wish I could tell you, but all I know is that it’s going to be a bumpy ride.

EDITORIAL ADVISORY BOARD Mark A. Birtha, Vice President and General Manager, Fiesta Henderson Casino Hotel

• Julie Brinkerhoff-Jacobs, President Lifescapes International

• Nicholas Casiello Jr., Shareholder Fox Rothschild

• Jeffrey Compton, Publisher CDC E-Reports

• Dean Macomber, President, Macomber International, Inc.

• Courtney Muller, Group Vice President, Global Gaming Expo Reed Exhibition Companies •

Judy Patterson, Senior Vice President & Executive Director American Gaming Association

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, General Manager, ACSC Product Group Eastern Region Vice President, Bally Systems

• Steven M. Rittvo, President, The Innovation Group

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

• Ernie Stevens, Jr. Chairman, National Indian Gaming Association

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 6625 S. Valley View, Suite 422, Las Vegas, NV 89118 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2013 Global Gaming Business LLC. Las Vegas, Nev. 89118 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: Global Gaming Business, 6625 S. Valley View Blvd., Suite 422, Las Vegas, NV 89118 Official Publication

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DATELINE ASIA april2013

PACKER EYES SRI LANKA

Project would be closest casino to India

Solaire Dream

First of Entertainment City projects opens

t’s been more than 10 years since officials with the Philippine Amusement and Gaming Corporation (PAGCOR) announced plans for Entertainment City, a massive casino complex on reclaimed land by the shores of Manila Bay, and last month, that dream started to come alive. Solaire Manila, an integrated resort developed by Bloomberry Resorts, controlled by Philippine billionaire Enrique Razon, opened phase one last month, which includes 500 hotel rooms, 2,000 parking spaces, 300 table games, 1,200 slot machines and seven restaurants. The resort, which will eventually cost a total of $1.2 billion, is operated by Global Gaming Asset Mangement, a team of former Las Vegas Sands executives, including Bill Weidner, Brad Stone, Michael French and Dennis Andreaci. The casino will target the VIP market, and expects to garner at least 50 percent of its revenue from that segment, rising to 60 percent after it gets established, according to Andreaci. Manila has proven to be a lucrative locals market as well, so the property should receive substantial visitation from the city’s residents. Solaire is just the first of four Entertainment City IRs. Next to open in 2014 will be the Belle Grande, a joint venture between Macau operator Melco Crown and Philippine tycoon Henry Sy.

Doing the Numbers

Galaxy confident of government table quota ith the Macau government limiting table-game growth to 3 percent annually, some of the casino operators planning new properties in the Cotai region have been concerned that there won’t be enough tables to go around. But don’t count Galaxy Entertainment’s Francis Lui in that group. Galaxy, which is already building phase two of its Cotai property, is planning to add another 500 games to its existing 600. Another two phases are planned, which are projecting another 1,000 games. That

Francis Lui, deputy chairman of Galaxy Entertainment

seems to be much more than the 3 percent cap, which will only add another 2,000 games total for the SAR by 2023. But Galaxy’s deputy chairman isn’t concerned. “We said it is the capacity we are able to host,” Lui told Macau Business magazine. “We didn’t say we are going to have all those tables. It very much depends on the government.”

Global Gaming Business APRIL 2013

ontinuing his dive further into the casino industry, James Packer has visited Sri Lanka in an effort to determine what it would take for him to invest in an integrated resort in the capital city of Colombo. Packer, owner of Australia’s Crown Casinos and half owner of Australian Macau-based Melco Crown, met with Sri Lankan offigaming magnate cials last month. James Packer “They have not finalized the area and the amount they are going to invest,” Lakshman Yapa Abeywardene, Sri Lanka’s minister of investment promotion, told Reuters. “The government proposed for them to invest in a large city hotel in Colombo and go to (the eastern city of) Trincomalee to look into possible investment opportunities.” Sri Lanka is the focus of much international investment, largely from China, with an economy that is expected to grow by more than 7 percent in 2013. Located on an island adjacent to India, where gambling is largely prohibited, the nation was hit hard by the Christmas tsunami of 2004.

Bye-Bye Ho Tram MGM Resorts exits Vietnam project

GM Grand Ho Tram is no more. The property is still under construction, but MGM Resorts last month pulled out of a management agreement it had negotiated with Asian Coast Development, a Canadian company that owns 75 percent of the project, to manage the first phase of the project. The other 25 percent is owned by Pinnacle Entertainment, by virtue of a $108 million investment the U.S. regional casino operator made in Ho Tram last year. ACDL CEO Lloyd Nathan said phase one of the project is ready, and that it will open “in 2013.” Previous statements from the company said it would open in the first quarter of this year. “We thank MGM for its assistance in the hiring and training of our 2,000strong team of Vietnamese hospitality professionals,” said Nathan. “We are delighted that we have completed the construction of the first phase of our first resort. It includes 541 five-star rooms and suites, nine world-class restaurants, gaming facilities, convention and meeting space, luxury retail, bars, an ultralounge, a spa, three swimming pools, beach facilities, and other leisure amenities. ACDL is also currently constructing Tower 2 of the first resort, which will add an additional 559 five-star rooms and suites. In addition, it is constructing an 18-hole Greg Norman-designed championship golf course.” All is not well with the property, however. A problem was ACDL’s failure to obtain an investment certificate signed by the government. This was also cited by Pinnacle when it wrote off $25 million of its total investment in the fourth quarter of 2012, when banks suspended a $175 million credit facility. The MGM departure is a big blow to the Ho Tram project because MGM was planning to send some of its VIPs from Macau to the Vietnam integrated resort. Without MGM, ACDL will have to deal directly with the VIP operators, something they will do with much less leverage.

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DATELINE GLOBAL april2013

CloCk TiCking on FaTe oF ToronTo CaSino Mayor attempts to get better deal for city

MGM Grand Toronto, planned at the city’s Exhibition Place

oronto City Council will have to wait a little longer before exercising their final say on whether the city will host a casino or not. A highly anticipated report prepared for Mayor Rob Ford’s executive committee was not released as planned, a spokeswoman said, while the city continues in discussions with the Ontario Lottery and Gaming Corporation over their respective shares of the casino’s potential revenues. The staff report, requested by the committee in November, will consider the pros and cons of a casino in the city’s downtown and also the expansion of the existing gaming facilities at

History in the Making

Carrasco hotel reopens with casino in Uruguay he Sofitel Montevideo Casino Carrasco & Spa has reopened in the Uruguay capital after a US$75 million restoration and refurbishment. The 100-year-old hotel, which has been declared a national historical site, includes 116 rooms and a 3,000-square-meter casino with 400 machine games and 23 table games. It is operated by a consortium led by Codere Group of Spain, which oversaw the restoration.

National Director of Tourism of Uruguay Benjamin Liberoff said the investment will help promote tourism and investment in the company, and described the visitors to the hotel as “luxury tourism.” The opening coincided with a new air connection between Uruguay and Spain, a non-stop flight between Madrid and Montevideo on Air Europa, which will be launched in June. More than 1,500 guests attended the opening of the rejuve-

nated facility, which included many elements from the designer Philippe Stark. Montevideo Mayor Ricardo Erhlich said the hotel is part of the city’s heritage. “This is part of our identity,” he said, “a hotel with a great history, a building in a neighborhood that will transport us to the Montevideo of the 21st century.”

Halfway Home Baha Mar tops off in Bahamas

aha Mar, the $3.5 billion construction project designed to bring the Cable Beach area of Nassau, The Bahamas, back to prominence, celebrated the topping-off of its central casino-hotel structure last month with a “Roots and Wings” celebration at the construction site. The topping-off ceremony celebrates completion of the final level, the 25th floor, of the Baha Mar Casino & Hotel, the tallest of what will eventually be six branded hotels of varying price points at the massive resort complex, a destination resort sprawled across 1,000 beachfront acres slated to be complete in late 2014. In connection with the arts-inspired toppingoff event, Baha Mar officials announced the creation of Believe, the resort’s philanthropic

foundation, and a new design partnership with Bahamian multi-platinum Grammy award-winning performing artist, actor and designer Lenny Kravitz. Baha Mar also announced it will partner with luxury spa operator ESPA, and unveiled a formal cultural alliance with the National Art Gallery of The Bahamas. The Rt. Hon. Perry Christie, prime minister of The Bahamas, who delivered an address at the event, joined Baha Mar Chairman and CEO Sarkis Izmirlian in signing a commemorative tree painting, which was created by Bahamian artists during the early part of the celebration. The painting later was affixed to the top floor of the Baha Mar Casino & Hotel in an artistic twist on the conventional placing-of-a-tree topping-off tradition.

Woodbine racetrack. It also will include the results of public consultations held earlier this year on the casino question. A key issue will be how much the city will gain from hosting a casino. The OLG has estimated that amount at C$50 million-$100 million. A new casino in the Toronto metropolitan area is part of a plan by the OLG to expand tax revenues for the financially strapped province by scrapping slots at racetracks and opening the industry up to a casino-centric model run by private companies. Ford favors a casino for the money and jobs it would bring, but support from a majority of councillors is far from a sure thing. The casino’s opponents were quick to characterize the delay as a political tactic by the mayor’s office to try to negotiate a more favorable revenue split for the city.

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Gaming, Mon! Slot lounge opens in Jamaica

upreme Ventures Limited debuted its new Odyssey Gaming Lounge in Kingston, Jamaica, in February. The new gaming lounge was opened in partnership with the KLE Group, operators of nearby Usain Bolt’s Tracks & Records and Fiction Lounge. Odyssey is the first non-smoking gaming facility in Jamaica, as well as the first to introduce ticket-in/ticket-out technology (TITO) for the convenience of its customers. Brian George, SVL president and CEO, said, “We are proud of this partnership with the KLE Group, where the resources of both professional entities Supreme Ventures in gaming and KLE in hospitality services has resulted in our own hip strip right here in MarketPlace.” “Some of the gaming machines installed in Odyssey are the first of their kind in Jamaica and the Caribbean,” added George. “This has been a major investment for us and we are now poised to open our doors with the best customer service offering to our gamers.”

APRIL 2013 www.ggbmagazine.com

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DATELINE USA april2013

touchdowN for SportS LeagueS N

New Jersey loses round 1 of sports betting battle

ew Jersey had its day in court challenging the 1992 Professional and Amateur Sports Protection Act (PASPA) that banned sports betting in the states where it did not already exist. PASPA grandfathered in sports betting in four states—Nevada, Delaware, Montana and Oregon—but only Nevada is able to offer single-bet, single-event sports bets. The three other states had offered lottery-style parlay wagers, and are limited to those types of bets. U.S. District Court Judge Michael Shipp last month upheld PASPA, rejecting New Jersey’s claim that the law discriminated against the state, although it did offer a one-year window during which time

New Jersey had the opportunity to pass sports betting and failed to do so. New Jersey voters approved a sports betting referendum almost 20 years later in 2011, and when it tried to enact regulations and start wagering, the state was sued by the major sports leagues and the NCAA. Shipp had previously ruled that the leagues had standing and would have suffered damage had sports betting been implemented. New Jersey claimed the law violates state sovereignty and equal protection clauses. And just weeks before arguments were to begin, the Department of Justice joined the suit on the leagues’ side.

Over In Ohio

Ohio’s fourth and last casino resort, the Cincinnati Horseshoe Casino, opens he $400 million Cincinnati Horseshoe Casino opened in March to T fanfare and over 5,000 visitors in the first two hours of operation, with 10,000 showing up for the evening. “It was a magical night; we’re off to a great start,” enthused casino General Manager Kevin Kline. The opening was marked by a fireworks show and a speech by the city’s mayor, Mark Mallory. He called the joint operation by Rock Gaming and Caesars Entertainment “a great partnership for the city of Cincinnati.” He added, “This is part of the progress that we continue to see in our city, from the Banks to Fountain Square to Over-theRhine to here at the Horseshoe Casino, right out to our neighborhoods. We are seeing excitement in Cincinnati.” Dan Gilbert of Rock Gaming said the casino’s development was part of Cincinnati’s “urban renaissance.” Rock Gaming owns 80 percent of the casino, with Caesars owning the rest. The 400,000-square-foot facility is located on 23 acres. It operates 2,000 slot machines, 87 gaming tables, a World Series of Poker poker room, and three restaurants—Bobby Flay’s Burger Palace, Jack Binion’s Steak and Jimmy Buffet’s Margaritaville.

Global Gaming Business APRIL 2013

Genting Invades Vegas Resorts World to rise on former Stardust site

enting’s ambitions to become a major player in the U.S. gaming market took a giant leap forward last month when the company announced the purchase of Boyd Gaming’s suspended Echelon project on the Las Vegas Strip. Echelon had been shut down since 2007 and was becoming a rusting eyesore on the Strip with bare concrete and iron girders reaching to the sky. Genting will create an American flagship for its brand, Resorts World Las Vegas. Genting paid approximately $350 million for 87 acres on the north end of the Strip, across from the Riviera Hotel Casino. Combined with the 2014 opening of the SLS Las Vegas Casino Hotel (the former Sahara), the project will slide the balance of power on the Strip further north. The resort becomes the first major project to be announced in Las Vegas since the 2007 downturn, and marks a renewed faith in the growth of visitation to Las Vegas. While the number of people visiting Las Vegas has returned to 2007 levels, gaming revenues still lag behind. Resorts World Las Vegas will also become the first themed project on the Strip in 15 years, since the completion of Bellagio. The first phase of the project, which includes a 3,500-room resort with a 175,000-square-foot casino, a convention center and a 4,000-seat theater, is estimated to cost at least $2 billion, with some estimates as high as $7 billion for the completed project. In a highly orchestrated press conference at the Las Vegas offices of architect Paul Steelman, Brian Sandoval, the governor of Nevada, was joined by several county commissioners and, by phone, U.S. Senator Harry Reid, the Senate’s majority leader, in welcoming Genting Chairman and CEO Lim Kok Thay and other company officials to Nevada. Genting has yet to be licensed in Nevada, but operates the Resorts World New York City racino at Aqueduct Raceway.

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DATELINE TRIBAL april2013

All For One…

Off-Reservation casino in Wisconsin requires ‘consensus’

Fixing a Hole Carcieri ‘fix’ bill could help Massachusetts tribe

isconsin Governor Scott Walker recently said there must be “consensus” among all 11 of the state’s Native American tribes before he would approve any tribe’s proposal for an off-reservation casino. “Consensus doesn’t mean 10 yes and one no. Consensus means everybody says yes. Now, do they say that is a difficult wall to hurdle? Absolutely.” Walker said, “You Wisconsin Governor open the door without that sort of criteria,” meaning Scott Walker more tribes would want off-reservation casinos. The governor’s announcement is a particularly severe blow to the Menominee tribe, which has pursued an off-reservation casino at the former Dairyland Greyhound Park in Kenosha. Tribal leaders felt its application would be approved by the Bureau of Indian Affairs. Now they believe Walker is shielding the Forest County Potawatomi from losing an estimated $150 million in annual revenue at its Potawatomi Bingo Casino in Milwaukee if the Menominee casino would become a reality. The Potawatomi gambling hall, the nation’s first off-reservation casino, generated $368 million in the last fiscal year, and officials contend that would drop by up to $150 million if the Menominee’s Kenosha casino opened. Menominee Chairman Craig Corn said if Walker is “going to give veto power to the Forest County Potawatomi, then make sure he says that to all the Menominee people and the people in Kenosha, Racine and surrounding communities. The Menominee will have veto power on any other project, for that matter.” Menominee attorney Rory Dilweg noted Walker “would essentially be giving up his authority to a tribe or special interest. I’ve never heard of a governor voluntarily giving up authority.” If the Menominee’s federal application is approved and the tribe builds a Kenosha casino, the Potawatomi tribe has threatened to stop paying its annual casino fee of $30 million-$40 million, said Potawatomi Attorney General Jeffrey Crawford.

assachusetts Rep. Edward Markey has authored a bill that would provide a “fix” to the controversial 2009 U.S. Supreme Court’s Carcieri v. Salazar ruling, which prevents Indian tribes recognized after 1934 from putting land into trust. It derives that ruling from the language of the Indian Reorganization Act of 1934. Massachusetts Rep. Edward Markey The bill is similar to a bill that he sponsored several years ago. Markey is a ranking member of the House subcommittee that has responsibility for Native American matters. If Congress were to pass such a bill, the Mashpee Wampanoag tribe would be one of many tribes that could benefit. The Mashpees want to put land in Taunton into trust. The Carcieri ruling is a major stumbling block to that goal since the landless Mashpees were recognized in 2007, although they maintain that they have been under federal jurisdiction for centuries, and even cite an agreement between the tribe and King George III of Great Britain to argue that they were recognized before the United States was a nation. Such seeming trivia is actually of vital importance to the tribe, since the law the Massachusetts legislature passed last year that authorizes three casino resorts and a slots parlor set aside the license in Region C (the southeastern gaming zone) for an Indian tribe that could meet the requirements of the Indian Gaming Regulatory Act as well as successfully negotiate a gaming compact with the state. If the tribe cannot meet the requirements, the license could be made available to commercial bidders.

Show Us the Money Florida lawmakers want to see the books of the Seminole tribe

lorida lawmakers want a full accounting of revenues from the seven Seminole casinos run in the southern part of the state. The move comes as legislators consider whether to renew or renegotiate the gaming compact that brings $233 million to state coffers each year. With non-tribal gaming interests lining up to invest in Florida, the state could conceivably also allow the compact to expire. Members of the House Select Committee on Gaming have asked the tribe’s attorney to make the casinos’ fiscal data available for review. “I’m not questioning the veracity of it; we know it’s somewhere around $2 billion, but once we know we can start planning,” said Rep. Jim Waldman. Barry Richard, an attorney for the tribe, said he

Global Gaming Business APRIL 2013

would make the request but couldn’t guarantee the numbers would be made available. “The confidential provision exists because of the fact that the tribe, as anybody in any business, has trade secrets,” Richard said. The compact, signed in 2010, continues through July 31, 2030. It includes a provision that The tribe’s most successful casino is Seminole Hard Rock Tampa. the Seminoles have exclusive rights on banked card games at five of the seven Genting or the Las Vegas Sands Corp. properties; that provision will expire July 31, 2015. “The tribe is one of the most successful casino Senator Garrett Richter of Naples, who chairs owners in the world. The tribe owns the Hard the Senate Gaming Committee, says that if the Rock franchise,” he said. “If the legislature wants to state really wants to expand gaming, it should conexpand, the tribe has things to offer that anyone sider the tribe before it invites new operators, like else can’t.”

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DATELINE EUROPE april2013

Web Weakness

Laying Down the Law

Ladbrokes betting shops successful, online shops not so much

Illegal casinos flourish In Russia

strong performance from its traditional betting shops helped U.K.-based Ladbrokes to an 8 percent jump in operating profit to £206 million in 2012. However, profit from its highly touted digital division fell 39 percent to £32 million, despite some £50 million spent on marketing and technology last year to upgrade infrastructure and make the offerings more technologically competitive. Britain’s second-largest bookmaker said it expects online revenues to pick up when new sports betting and mobile platforms are launched in the first half. “We are starting to see some moderately encouraging signs of payback,” Chief Executive Richard Glynn told Reuters. Ladbrokes operates more than 2,000 betting shops in Britain and plans to open another 100 this year, adopting a dual retail and online strategy that rival William Hill has also been pursuing. Ladbrokes announced conclusion of a deal last month to buy online betting exchange Betdaq for €30 million as part of the strategy.

espite a 2009 law banning gambling across D Russia, except for four remote areas, illegal casinos have thrived. In Moscow and the sur-

LIVING LARGE

Southampton open for casino bids

he English city of Southampton will begin accepting applications in April from companies interested in running a casino as part of a new waterfront development complex. The selection process is expected to take about 18 months. The casino will house up to 150 slot machines with prizes capped at £4,000, and up to 30 table games. Southampton is one of eight cities permitted casinos of this size, classified as “large” under U.K. regulations. More than a dozen companies have already contacted the council about running it. The preferred location for the project is Royal Pier, which officials consider a key to the success of a £450 million waterfront redevelopment plan. The city envisions at least two hotels at the site, together with restaurants, luxury residences and other leisure attractions.

Global Gaming Business APRIL 2013

A legal casino in Kalingrad

rounding area, police have recently “carried out a set of operations” shutting down 36 illegal casinos and seizing hundreds of gambling machines, according to the Interior Ministry’s press center. The report said gambling clubs operated as betting houses, restaurants and internet cafés, and illegal poker and other games were operating in several apartments. Police confiscated more than 440 gambling machines, seven poker tables, 26 gambling machines that accepted bills, and more than 1 million rubles in cash, or about $32,700. The operations generated revenues of more than 100 million rubles

or about $33 million, according to the report. Police also closed a casino operating in an old mansion in central Moscow. In the city of Kazan in the Volga region, Russian authorities are investigating an illegal casino that reportedly generated 32 million rubles, or $1.06 million. Officials said Emil Minigulov rented the premises, installed gambling equipment and hired a staff. He has been charged with organizing an illegal gambling business and earning large profits from illegal activities. If convicted, he could be sent to prison for up to six years.

All In France

Caesars to launch poker site

Dead at Leeds London Clubs closes British casino Clubs International has closed its Lbid ondon Alea casino in Leeds, and said it would not to run a new 150-slot casino planned for the city. Leeds is one of eight British cities chosen to host the “large” casino, as the category is known in U.K. regulations, which will also include up to 30 table games. The closure erased 99 jobs and resulted also in two celebrity-chef restaurants—James Martin’s Leeds Kitchen and Vineet Bhatia’s The Bird—shutting their doors, dealing a blow to municipal hopes for further redevelopment of the area known as Clarence Dock, where the casino was located. An LCI spokesman said the company had made “a significant investment into Alea when it opened in 2008, but current trading conditions in the Clarence Dock development have made this outcome inevitable.”

aesars Entertainment will soon use its Nevada online gaming license to launch a new real-money internet poker site in France using software from Gibraltar-based 888 Holdings plc., according to Gary Loveman, the operator’s CEO. Loveman told investors on a conference call that its new online poker site likely will be moved onto a platform developed by French firm Barrière des Jeux after launch. “We have the rights to use (888) software and introduce it—for example, in Nevada under what we consider to be quite reasonable terms,” Loveman said. “I would expect that when we go live in Nevada you will see us on the 888 platform. “We also, as you recall, acquired the right to use and to customize the software platform of Barrière Digital from France. We think that is a state-of-the-art platform, and we have developers working on its modifications to suit the World Series of Poker as we speak. So at some point, when the modification is complete, we’d anticipate that we might migrate off the 888 platform onto the Barrière platform in due time.”

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NUTSHELL

“They The CEO of MGM Resorts International has openly criticized the plan of New York Governor Andrew Cuomo to expand gaming in the state “by inches,” without considering the possible benefits of a casino in New York City. Jim Murren, whose company wants to build a $1.5 billion casino in the Big Apple, told the Albany Times-Union he doesn’t agree with New York’s approach, which would start the gaming expansion with three casinos upstate. Murren called the current model “tortured” and “flawed,” and disputed Cuomo’s claim that starting upstate would create an economic driver for the state’s neediest region, providing economic development and jobs. The Rank Group announced the opening of its newest Grosvenor G Casino in Reading, U.K. It is the group’s 21st G casino in Britain, and is located near the existing Grosvenor Casino Reading, which is itself undergoing refurbishment. “We’re confident that our further investment in Reading will be a valuable addition to an area already well known for its great leisure and entertainment offering,” said Chris Green, the new casino’s general manager. “Our G format casinos are a tried and tested concept which is designed to offer people not just a great casino experience but a whole entertainment repertoire.” The Navajo Nation expects to open the $130 million Twin Arrows Casino & Resort near Winslow, Arizona in May. The nation operates three casinos in New Mexico. However, the Navajo reservation also has its boundaries within Arizona. This will be the first Navajo casino in that state. Amenities will include more than 1,000 slot machines, 18 gaming tables and 12 poker tables. There will be several restaurants, a lounge, and a hotel with 89 rooms. The El Cortez Hotel & Casino in Downtown Las Vegas has been named to the National Register of Historic Places. The El Cortez first opened its doors in 1941 and installed the iconic “Welcome to Fabulous Las Vegas” sign in 1959. The sign was also named to the NRHP in 2009. Macau hosted fewer meetings, conferences and exhibitions last year compared with 2011. The total of 1,022 events represents a year-on-year drop of 2.2 percent, according to official data. However, the total number of participants and attendees increased 26.2 percent, to more than 1.6 million, mostly on the exhibitions side, which saw close to 1.5 million attendees, up 27.6 percent. Hollywood Casino Per-

ryville launched a new phase in Maryland gaming on March 7, when the casino opened the state’s first live table games. The casino, which was the first to open in Maryland in 2009, also initiated 24/7 gaming hours in connection with the new table offering. Maryland Live!, the state’s largest casino, will debut table games April 11. The Bellagio in Las Vegas has finished remodeling 928 rooms in its Spa Tower. The MGM Resorts International Design Group began the work last August as the last phase of a $70 million renovation that included the main tower and more than 3,300 rooms. California Governor Jerry Brown has signed a state tribal casino gaming compact with the Fort Independence Indian Reservation to operate a casino with up to 800 slot machines in Inyo County, near the Kings Canyon National Park. The compact does not allow roulette or any dice game. The tribe reportedly plans to build a Class III casino near Fort Independence’s Travel Plaza and Campground. Under the agreement, the tribe would share 10 percent of its revenue with non-gaming tribes. Chile has enacted a smoking ban that includes all enclosed spaces with public or commercial access, including casinos. Marketing Results, Inc. (MRI), the full-service casino marketing agency begun in 1988 by casino marketing veteran Gary Border, marked its 25th anniversary last month. The agency has more than 120 casino clients. MRI’s scorecard includes marketing management of 20 casino openings, six major casino resort expansions, 21 player loyalty programs designed and implemented, 10 gaming websites including mobile, trigger and proximity marketing features and tens of thousands of measured campaigns. Governor Deval Patrick of Massachusetts and the Mashpee Wampanoag tribe are close to reaching a deal on a second bite at the apple for the gaming compact that would allow the tribe to operate a casino in Taunton. During a press conference last month, Patrick said that a version of the compact is being reviewed by the Bureau of Indian Affairs before it is submitted to the agency so the tribe and state won’t have to deal with a second rejection by the BIA. The federal agency rejected the first compact in October of last year because it considered the 21.5 percent of gross revenues that the tribe agreed to pay the state to be too high.

CALENDAR April 23-25: Global iGaming Summit and Expo (GiGSE), San Francisco. Produced by Clarion Gaming. For more information, visit gigse.com. May 1 & 2: The RD&E Experience—Retail, Dining & Entertainment in the Gaming & Hospitality Industry, Planet Hollywood, Las Vegas. Produced by Global Gaming Business and the Innovation Group. For more information, visit RDEExperience.com. May 21-23: Global Gaming Expo (G2E) Asia, the Venetian Macao. Produced by Reed Exhibitions and the American Gaming Association. For more information, visit G2EAsia.com.

May 27-31: 15th International Conference on Gambling & Risk Taking, Caesars Palace, Las Vegas. Produced by the University of Nevada Las Vegas’ International Gaming Institute and the University of Nevada Reno’s Institute for the Study of Gambling and Commercial Gaming. For more information, visit www.igi.unlv.edu/conference. June 3-7: North American Gaming Regulators Association (NAGRA) Annual Training and Education Conference, Virginia Beach Hilton, Virginia Beach, Virginia. Produced by NAGRA. For more information, visit nagra.org.

Said It”

“The simple fact is we need to bring people back to your city. We need to bring pedestrians back into the streets, we need to bring cars back into the city.” —James J. Murren, chief executive officer of MGM Resorts International, speaking to residents of Springfield, Massachusetts, about the benefits of a casino that his company would bring to the city

“Simply put, we are the only company in the process who knows how to build a successful project in markets just like Springfield.” —Penn National Gaming Inc. CEO Peter M. Carlino, touting the benefits to Springfield, Massachusetts if his company builds a casino there

“At the rate states are moving now, this is not just about the federal bill anymore. It’s not happening in a solo universe.” —Jan Jones, lobbyist for Caesars Entertainment, on the U.S. government’s failed attempts to pass a federal online gaming bill

“We’re not surprised by the district court decision. We’re frustrated. We’re disappointed. We think it’s wrong.” —William J. Pascrell III, lead lobbyist for sports betting interests in New Jersey, on the court decision that upheld PASPA and turned down the state’s bid to launch sports betting

“This was a lot of work and it couldn’t have been done without the governor’s leadership and vision. As to our competitor, New Jersey, they should be accustomed to following Nevada.” —Nevada’s Assembly Majority Leader William Horne, who helped pass an expanded internet poker bill, beating similar legislation in New Jersey by about a week

“It went from a cold war to an all-out hot war overnight. You’re going to see Nevada and Delaware falling all over themselves to take a bet before New Jersey.” — Joe Brennan Jr., director of Interactive Media Entertainment & Gaming Association, on New Jersey’s approval of internet gaming

“We don’t build stand-alone boxes that have gaming in them. If you take a look at Casino Rama versus Bellagio, that’s a simple example. We build Bellagio.” —Alan Feldman, senior vice president of public affairs for MGM Resorts International, commenting on MGM’s proposal for a casino complex at the Ontario Place exhibition grounds in Toronto

APRIL 2013 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION by FRANK J. FAHRENKOPF, JR.

Progress on Regulatory Reform Vendors and operators are working with regulators to maintain integrity

f the many things in our business that make me proud, chief among them is that we have the finest regulatory system of any industry in the nation. This is due, in part, to the collaborative role our companies play in forming this framework, which benefits not just them, but also regulators, customers and the industry, from top to bottom. However, we will always need improvements. Changes in the way games are played, advancing technologies and new communications will continue to require new or updated regulations. New types of gaming-company ownerships and board structures, as well as federal oversight over many industry activities, present regulators with a new paradigm. This— combined with gaming’s rapid expansion throughout the country—makes it essential for both licensees and regulators to make the rapid adjustments necessary for our industry’s continued success. So, how are we doing? In 2011, the American Gaming Association launched an aggressive initiative to address regulatory reform. This involved forming a task force—made up of former regulators, compliance officers, lawyers and other industry professionals from the AGA membership—who collaborated to develop a list of 10 key reform recommendations. The list aimed to make an already-excellent system even better. The white paper resulting from this task force, titled “Improving Gaming Regulation: 10 Recommendations for Streamlining Processes While Maintaining Integrity,” was released in late 2011 and distributed to legislators and regulators across the country. In 2012, the AGA launched a section of its website dedicated to regulatory reform. This serves as a clearinghouse of information, displaying areas where reform is needed and charts for each state identifying regulatory priorities. Since this effort began—and thanks to diligent and ongoing efforts at the state level—I’m proud to say that significant inroads have been made. The state of Michigan is one example of a

Global Gaming Business APRIL 2013

Frank J. Fahrenkopf, Jr., President and CEO American Gaming Association

commercial gaming jurisdiction that has embraced the need for intelligent regulatory reform—reform that does not adversely impact casino operations, fairness of play or the overall integrity of the industry. Under the leadership of Executive Director Richard Kalm, the Michigan Gaming Control Board has made a number of reforms since the release of the AGA’s white paper. Rules that impact operators and suppliers (such as increasing the time between formal investigations from annually to every four years) have been modified. Additionally, the MGCB has made procedural changes that permit operators to process certain computer settings without an MGCB employee needing to be present for the administration of the process. Changes have also been made that positively impact casino suppliers, specifically including the removal of the five-day advanced shipping notification, as well as permitting limited personal disclosures by certain outside directors based upon their ultimate control over the supplier licensee. For non-gaming suppliers, the MGCB has increased the threshold for vendor registration from $5,000 in a 12-month period to $15,000, and also increased the threshold of business volume that non-gaming companies can conduct prior to being required to obtain a full license. The MGCB has also considered, and allowed, the use of “shelf” debt approvals, which permits greater flexibility when a casino operator and its financial service providers are able to enter the public market to refinance debt on the most favorable terms. Lastly, the MGCB licensing staff is currently in the process of finalizing procedures in which it will accept the universal Multi-Jurisdictional Disclosure Form and a Michigan Rider for key persons. Executive Director Kalm recently noted that “it is the responsibility of the MGCB to enforce the gaming laws adopted by the Michigan legislature, while at the same time balancing the regulations so as not to create unnecessary regulatory burdens.” We’ve seen progress in other states, too. In February, Rick Day cited the AGA’s white paper

during his interview for the role of executive director of the Massachusetts Gaming Commission. Day, who is the former director of the Washington Gaming Commission, said he took the white paper’s suggestions as evidence that gaming agencies need to “move forward” and adapt with the times to tackle new issues and technologies. Afterward, the commissioners voted to approve Day for his new role. Regulators from Michigan, Missouri and other states have cited the AGA’s white paper extensively in various conference sessions across the country. Based on these examples, it is clear that our efforts have created momentum. It is now important for the AGA, and our colleagues at the state level, to continue educating stakeholders about these suggested changes and how they are mutually beneficial for regulators and the industry. In 2013, the AGA will continue to push for regulatory reform in a number of ways. First, we plan to reconvene the task force that developed our white paper, with the goal of marking our progress and discussing the next steps. One of those next steps, we know already, is updating the AGA website to illustrate the headway that has been made and to continue to provide updated information on the topic. Other matters we want to address: How do we move forward and continue to facilitate change? And what else can we do? One topic we might address, for example, would be recommendations for standardizing shipping procedures—an area that could easily be streamlined, to all of our benefit. The commercial casino industry has a long history of working hand-in-hand with regulators, and that won’t change. We are happy with the dialogue that was sparked by the release of our white paper, and we look forward to it continuing. And, as always, we welcome comments and ideas from our member companies and other stakeholders for how best to serve both regulators and the industry at large when it comes to this important issue.

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FANTINI’S FINANCE by FRANK FANTINI

Internet Enthusiasm Is the launch of i-gaming in several U.S. states enough to generate excitement for the industry’s big guns?

nterest in internet gaming has caught investor imagination, leading to a big run-up in gaming stocks thought likely to benefit, with Caesars more than doubling and other companies jumping double digits. That response might be hasty. There are plenty of reasons to look for investment opportunities in online gaming, but few, or none, for jumping on trains that haven’t even been built yet, no less have left the station. The unknowns about internet gaming in the U.S. are greater than the knowns. For example: • Size of the market. Lots of guesses, but no one really knows. Thomas Allen of Morgan Stanley took a stab at estimating New Jersey. He figures i-gaming in the Garden State could produce $500 million to $1.1 billion in revenues, and add $1.10 to the stock price of Boyd and 30 cents to MGM Resorts. Based on other markets, Allen assumes i-gaming can be 13 percent of New Jersey’s current market and achieve 25 percent EBTIDA. That would be a base revenue of $640 million. He expects that Borgata could achieve 30 percent of i-gaming share, with a third of that revenue going to the Boyd-MGM joint venture and two thirds to i-gaming operator bwin.party. He then values it at 14 times EBITDA, which he says is on the high side for European operators. • Timing. An investor could wait a long time before meaningful internet revenues are generated in the U.S. Delaware hopes to be online by September 30, but officials there admit that is aggressive. Nevada is thought to be at least six months away, and that’s just internet poker. Estimates for New Jersey run from six months to a year and a half. And we don’t know if or when other states will jump in. • Beneficiaries. The names that first come to mind are Boyd, MGM Resorts and Caesars in the U.S., and London-listed 888 Holdings and bwin.party. BYD and MGM own the Borgata, which, it is assumed, will capture a big market share in New

‘‘

Jersey. Bwin.party has the contracts to serve BYD and MGM. Caesars owns the World Series of Poker, and 888 has the contract to serve Caesars (for a limited time). And, as nearly all profess, internet gaming, regardless of how it plays out, will be a multibilliondollar business. But automobiles were destined to be a multibillion-dollar business at the dawn of the 20th century when there were 300 carmakers. Who in 1910

ers and dynamics of internet gaming before jumping in.

BRICKS AND MORTAR IN AN I-GAMING WORLD One of the most frequently asked questions is how internet gaming will affect brick-and-mortar casinos. Many industries have been disrupted by online competitors. And the leaders of those industries, despite investing billions of dollars in the aggregate, are behind new giants like Amazon, eBay and Craigslist. So, the assumption is that will happen to casinos. It makes superficial sense that a dollar lost in a virtual slot machine is a dollar not available for a tangible slot machine, after all. We don’t think so. Casinos are an experience. And, unless human nature changes, people will continue to crave experience. Indeed, the more technology removes people from experience, the more they will crave it. One example of the powerful attraction of human interaction and experience is business travel. For decades, each new communications device has been heralded as a tool for long-distance meetings, making in-person meetings unnecessary. Yet business travel continues. Hotels proliferate. Convention business grows. Or consider entertainment. Movies didn’t kill live theater. TV didn’t kill movies. The internet hasn’t killed TV. But we don’t need analogies. We can look at Britain, where the number of casinos grows and companies like Paddy Power continue to add betting shops even as internet gaming has had years to develop. In brief, the arrival of internet gaming doesn’t mean the end of one world in order to welcome a new one. It means a world enriched with more choices.

Casinos are an experience. And, unless human nature changes, people will continue to crave experience.

Global Gaming Business APRIL 2013

’’

could have predicted which three would survive? • Off-shore operators. Nor should investors dismiss the potential for unlicensed off-shore gaming operators to continue to take big chunks of business. European countries such as the United Kingdom and France are finding out how difficult it is to profit from i-gaming in a global, and often illegal or non-legal, world. The U.K., for example, broadly legalized i-gaming some years ago assuming it would have a homegrown industry with the likes of 888 offering poker and sports betting shops like William Hill going online. And so they did. The problem, however, was that tiny markets with big internet ambitions such as Gibraltar, Malta and Alderney began luring British companies with low tax rates. Today, almost all the significant British-based gaming companies have headquartered their i-gaming operations elsewhere, leaving the government to threaten a tax at the point of consumption to capture some of the treasure they had planned on. In France, unlicensed off-shore i-gamers are beating the pants off the law-abiding, tax-paying competitors who must pay high French taxes. Our caution: take time to understand the play-

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

WWW.SPIELO.COM United States Casino Markets 1.800.864.7670 or 702.896.8500 Canada and International 1.800.561.GAME (4263) or 506.878.6000 CopyrightÂŠ 2013 Spielo International Canada ULC or its affiliates. All rights reserved. Photo of Howie Mandel courtesy of Alevy Productions, Inc. ÂŠ Endemol International B.V., Deal or No Deal is a registered trademark of Endemol International B.V. Used with permission. All rights reserved.

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Carcieri continues to play havoc with Indian Country By Dave Palermo

he Chickahominy Indians were among several Virginia tribes signing the Treaty of Middle Plantation with King Charles II of England in 1677, ending war with the colonies. Chickahominy descendants still live on their ancestral lands. But primarily because the treaty establishing “a good and just peace” predated formation of the United States, the Chickahominy today are not recognized as Indians by the federal government. Narragansett Indians indigenous to what is now Rhode Island ceded most of their land to colonists in 1709. But when the modern tribe in 1991 acquired 31 acres of land for a housing development, efforts to place the property in trust were opposed by Governor Donald Carcieri, who feared the tribe would build a casino. Unfortunately for Narragansett, the tribe wasn’t granted federal recognition until 1983. The U.S. Supreme Court, claiming Narragansett was not “under federal jurisdiction” in 1934 when Congress passed the Indian Reorganization Act, ruled in 2009 that the Department of Interior had no authority to place land in trust for the tribe. News coverage surrounding the Supreme Court’s controversial decision in Carcieri v. Salazar (the reference is to former Interior Secretary Ken Salazar) targets its impact on the ability of tribes to acquire and place land in trust for casinos.

MORE TIME, MORE MONEY Indeed, Carcieri and the court’s subsequent ruling in Salazar v. Patchak—which gives individuals six years to sue the government over fee-to-trust decisions—have created legal hurdles and dramatically increased the time and expense for tribes seeking to get land/trust applications for casinos through Interior and its Bureau of Indian Affairs. Then there are the Carcieri-based lawsuits from anti-gambling groups. “You’re looking at seven, eight years if there’s litigation,” says tribal attorney Michael Anderson of Anderson Indian Law. “If there’s no litigation, tribes are looking at an additional three or four years” tacked onto a bureaucratic process that even for non-gambling applications is both long and arduous. And the costs? “Oh, it’s awful,” says tribal attorney Heather Sibbison with SNR Denton. Tribes confronting the Carcieri challenge that they were “under federal jurisdiction” in 1934 are often forced to spend millions of dollars in attorney fees and research by teams of ethnologists, anthropologists and genealogists. But while Carcieri is making life difficult for some 20 tribes currently seeking land for casinos, the greater concern is the impact the ruling has had on hundreds of Indian governments trying to acquire land for housing, schools, health facilities and other community needs. Carcieri has greatly complicated the ability of tribes to re-acquire ancestral lands essential to their role as governments responsible for the welfare of their citizens. 20

Global Gaming Business APRIL 2013

In addition, the court ruling—and the perception of tribes as purveyors of gambling—is further hindering the ability of indigenous groups such as the Chickahominy from achieving federal recognition as tribes, regardless of culturally rich histories dating back hundreds of years. Efforts to remedy the fix with congressional legislation to amend IRA and give all 565 tribes and Alaska Native villages equal legal status with Interior’s land/trust process is meeting opposition from groups opposed to Indian casinos on newly acquired lands, erroneously branded by the press as “reservation shopping.” Opponents to a “Carcieri fix” include many tribes already operating 460 casinos in 28 states. Some are concerned new casinos will encroach on ancestral lands. Others say expanded Indian gambling breaks promises made to states supporting tribal ballot initiatives. Many simply don’t want the competition. “To some degree gaming has hijacked all Indian policy,” says Kevin Washburn, assistant secretary for Indian affairs and master of the understatement.

GAMBLING LOGJAM Getting a positive Carcieri determination from Interior’s Office of the Solicitor is less time-consuming and costly for more than 100 treaty tribes and those on IRA rolls when the act was passed in 1934. But the process is a nightmare for historic tribes on the Eastern seaboard and newly recognized and restored tribes hoping to get into the gambling business. The Mashpee Wampanoag Indians of Massachusetts, who greeted the Pilgrims in the early 1600s but were not federally recognized until 2007, have been told a Carcieri determination from Interior will come this spring. The tribe then faces years of litigation over efforts to build a $500 million casino in Taunton. If a recently recognized tribe is diligent in building its case on the “under federal jurisdiction” issue and does not face challenges from local governments and other tribes, it may get land in trust for a casino as quickly as two years. But the litigation? “It can take as long as 10 years,” says Clyde Barrow, director of the Center for Public Policy Analysis at the University of Massachusetts. It has been two years since Interior placed 152 acres of land in trust for the previously landless Cowlitz Tribe of Indians in Washington state, which was officially recognized by the federal government in 2000. Cowlitz, which filed its land/trust application in 2002, hopes to build a government center and $510 million hotel-casino. Cowlitz is a legal test case by Interior officials hoping to move forward on gambling land/trust applications in the wake of Carcieri. There are numerous references to tribes in the U.S. Constitution. But justices do not regard that as being “under federal jurisdiction,” requiring instead some nexus with federal agencies. Justices in Carcieri didn’t even define what

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MURDERER’S ROW These senators are blocking any “fix” for the Carcieri Supreme Court decision: (Clockwise) John McCain, Arizona; Jack Reed, Rhode Island; Dianne Feinstein, California; Chuck Schumer, New York

the phrase means, further complicating the issue. A treaty is preferable as evidence of being “under federal jurisdiction.” Documentation of federal involvement in providing health care and social services, handling probates and land allotments or educating indigenous children at Indian boarding schools also works. “Cowlitz happens to have a particularly rich, documented history with the federal government,” Sibbison says. But the Cowlitz casino remains bogged down by lawsuits from local governments and the nearby Confederated Tribes of Grand Ronde. Similar lawsuits have been filed against North Fork and Enterprise rancherias in California, which in 2011 got Interior approval to have land placed in trust for casinos. Tribes are also plaintiffs in those court actions, pressing Carcieri claims and accusations Cowlitz is encroaching on ancestral lands. North Fork’s federal recognition was restored in 1983 and the land/trust process began in 2004. Enterprise was federally recognized in 1915 and began the land/trust process in 2002. Anderson believes at least half the 20 land/trust applications for casinos pending with Interior will be delayed by Carcieri reviews by the Office of the Solicitor and subsequent lawsuits. “While small in numbers, you’re looking at projects that combined are expected to generate at least $500 million a year in government revenue,” Anderson says.

BREAKING THE LOGJAM Since Carcieri, Interior has been routing applications to place fee lands in trust to the Office of the Solicitor, either at the regional or D.C. level. Nongaming fee-to-trust applications are remanded to BIA regional offices for final determinations. Gaming applications end up in D.C. “We have been careful to consider that issue under federal jurisdiction with virtually every land-into-trust decision,” BIA Director Kevin Washburn says. “At a minimum it means we’ve had analysis from the solicitor’s office, sometimes a full-blown opinion.” While Carcieri reviews have slowed the process, in the last three years Interior has unclogged a logjam of land/trust cases left over from the Bush administration, processing 1,041 applications for nearly 200,000 acres of land. Only 11 cases involved casinos. Research necessary to prove a case for federal recognition is monumental. But with the Carcieri ruling, tribes scaling the legal cliffs for recognition must duplicate the effort to meet the court’s “under federal jurisdiction” mandate in placing land into trust. “It’s an enormous amount of work,” Sibbison says. “It requires a lot of digging around in archives. For Cowlitz it was very time-consuming, very expensive. We were lucky because it turned out the tribe, in fact, had a lot of inAPRIL 2013 www.ggbmagazine.com

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‘People get bent out of shape, thinking developers are sort of buying tribes. The reality is you can’t get through the process without money.’

teraction with its local (Indian) allowing them to operate as governments agency. receiving trust services from Interior and “For us it was painful and expenthe BIA. sive,” says Sibbison. “For others it is Eighty-seven groups have submitted going to be even worse.” completed petitions, according to the Of—Tribal Attorney Heather Sibbison For some tribes seeking to place fice of Federal Acknowledgement. Sevenland into trust, whether it be for teen were granted recognition by OFA, gaming or non-gambling developnine were recognized by Congress and 10 ment, the legal mountain erected by received recognition “by other means.” Carcieri is simply too high. There are 14 petitions in the pipeline. “We’re processing land into trust for some tribes and not at all for othThe recognition process can take as long as 30 years. Many tribes, lacking ers,” Washburn says. “Just as gaming to some degree creates haves and havemoney and resources, have solicited casino developers to help navigate the bunots in Indian Country, Carcieri creates even more fundamental haves and reaucracy and finance the litigation. That has created problems. have-nots. “The reality in modern times is most tribes don’t make it through the “We don’t tend to disapprove many of these land-into-trust applications. process unless they find developers willing to lend them a bunch of money in You won’t find a whole lot of decisions from us saying, ‘No, this is rejected exchange for a promise the tribe will let them run a new gaming facility,” Sibbecause of the Carcieri analysis.’ bison says. “They either just languish or they are withdrawn. We tell the tribe it “That exacerbates the problem because people get bent out of shape, doesn’t look good, and they just kind of go away.” thinking developers are sort of buying tribes. The reality is you can’t get through the process without money.” NO FIX IN SIGHT “Some people think (federal recognition) is simply not a just policy,” says Washburn believes there’s unity in Indian Country for a congressional fix to Washburn, who hopes to reform the process, aware similar efforts by previous the Carcieri decision. BIA directors have failed. “Some tribes don’t need a Carcieri fix,” Washburn says. “But despite that “People will tell you there are groups that should be recognized as tribes tribes have been standing shoulder-to-shoulder, unified, in saying there needs but couldn’t make it through the process,” he says. “That’s concerning. to be a Carcieri fix. “If it’s a lengthy and expensive process, people should have confidence in “We are all equal and we all should have the right to restore our homethe outcome. At a minimum we need to have a process that people believe is lands.” just.” Indian Country unity is not showing up in D.C., however, as lobbyists Along with a flawed federal recognition policy, there apparently is a need are split on how to approach those in Congress—notably Senators Dianne to reform Interior’s land/trust procedures. Feinstein (D-California), John McCain (R-Arizona), Jack Reed (D-Rhode Island) and Chuck Schumer (D-New York)—opposed to any fix that does not BACK AND FORTH include amending federal law to limit tribal casinos on newly acquired lands. Many believe land/trust decisions should be viewed from an economic perspecAnderson supports a “clean” fix with no amendments to the Indian tive. But there is little empirical data to show what most believe is a wealth of Gaming Regulatory Act of 1988. jobs and economic growth tied to development on Indian lands, both on and “I have explicit marching orders for a clean fix,” says Brian Patterson, off the reservation. president of the United South and Eastern Tribes. “That’s the short and long At the least, Congress may need to become engaged in creating Indian polof it. All I can say is there cannot be two classes of citizenry in Indian Counicy rather than leaving decisions to a Supreme Court not accountable to the try.” voters, or tribes. Other lobbyists representing tribes opposed to the spread of Indian casi“This is a direct challenge to Congress from the Supreme Court,” Matthew nos, particularly those that encroach on the ancestral lands of other tribal naFletcher, director of the Indigenous Law & Policy Center at Michigan State tions, believe a compromise is necessary. University, says of Carcieri and Patchak. “There is a real power struggle going “The real question facing Indian Country is whether a clean Carcieri fix is on, and Congress is losing because it can’t make decisions. The Supreme Court realistic and viable in today’s environment,” says Larry Rosenthal, partner in runs things right now. IETAN, a government relations firm. “If Congress wants control of Indian affairs, and I’m sure they do, they should do something about the situation. A GREATER INJUSTICE “The court has been saying for many years, ‘Hey, if you don’t like our deThere are 366 federally recognized tribes in the lower 48 states. Since 1978, cision, reverse it.’ Congress never reverses anything. 352 indigenous groups have expressed the desire to be federally recognized, “It’s time they did.”

Global Gaming Business APRIL 2013

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Classic Comeback Station Casinos is back and stronger than ever By RogeR gRos

Fighting Championship, the largest he economic downturn in 2007 MMA organization, which is presumhit the gaming industry hard, ably now valued at more than Station and didn’t spare companies Casinos. based in Las Vegas. Whether the casinos were based on the Strip or were considered locals casinos based in the Humble Beginnings community, the financial turmoil didn’t Station Casinos’ locals roots began when discriminate. Frank Fertitta Jr., the brothers’ father, Station Casinos, strictly a locals operopened Bingo Palace on Sahara just west ator, was hit even harder than most comof the Strip in 1976. Now Palace StaLorenzo and Frank Fertitta panies because all of its properties and tion, the casino began the empire that is cash flow are located in the Las Vegas today Station Casinos. market, which was among the hardest hit areas in the country during the ecoThe company made its reputation on being “the place where everyone nomic collapse. To make matters worse, the collapse occurred just after Station knows your name.” The casinos quickly achieved a reputation for valuing Casinos was bought by an investment group led by Colony Capital. So, when the their local customers, and were so familiar with them that it bragged a playfalling revenues hit quickly, Station declared bankruptcy in 2009 in order to reers club wasn’t necessary. But when the company grew so large that a players structure its debts. club was required, Station developed the Boarding Pass, which quickly beTwo years later, Station emerged from bankruptcy with the company primarily came the state-of-the-art loyalty card program for Las Vegas locals casinos. intact with its original owners—Frank and Lorenzo Fertitta—as the largest shareKevin Kelley, chief operating officer of Station Casinos, explains that holders, with an ownership stake of 45 percent. Today, the brothers own the mathis attention to the customers remains today, and was a chief reason that jority of the company with 58 percent of the equity. Deutsche Bank owns 25 the company survived through the recession. percent and former Station bondholders own 15 percent. The company owns nine “It was a very challenging time,” he says. “We did the best we could in large casino hotels and seven other smaller casino-only facilities with bars and terms of informing our team members and guests about the process, as a rerestaurants. structuring is complex and oftentimes confusing, especially since our operaThe company also has three management contracts with tribes in California tions ran no differently than they always had during this challenging time and Michigan, as well as a burgeoning interest in online gaming with majority period. Once our new structure was negotiated and approved by the court, ownership in Ultimate Gaming, a B2C company that has been licensed to operate and it became clear Station Casinos would remain mainly intact, we recogin Nevada (see sidebar on page 30). nized the importance of needing to do a lot in order to erase the tarnish of Oh, and by the way, the Fertittas are also the majority owners of the Ultimate bankruptcy from the company.”

Global Gaming Business APRIL 2013

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In September 2011, we launched our new rewards program, where $1 of coin-in gets you three points and cash back. That made a significant impact as we’ve gone forward.

“

—Kevin Kelley

”

COO, Station Casinos

Kelley says the company went back to basics. “We launched the ‘We Love Locals’ campaign early in 2011,” he explains. “That was our commitment to the community. We were going back to the core values of Station Casinos, and promising that the guest experience for our local Las Vegas customers was going to be excellent, then going out and delivering it every single day. It was very well received. It got our team members re-energized, it got our guests refocused, and business started coming back through the door.” But that wasn’t enough, says Kelley. It took one more step. “We knew that over the course of the restructuring period we had to make some significant modifications to our rewards program,” he says. “The environment had become very, very competitive. All of our competitors were trying to buy visits, and we recognized that there were some issues inside our rewards program that needed to be modified in order to make us competitive. And so in September 2011, we launched our new rewards program, where $1 of coin-in gets you three points and cash back. That made a significant impact as well as we’ve gone forward. And so, those two key elements really helped us get from where we were in the dark days, back to the traction and momentum that we expect on a year-overyear basis going forward.”

Market Conditions Marc Falcone, a former Wall Street gaming analyst, joined Station during the dark days of restructuring. He says the locals market has been slowly crawling back, and there have been some significant recent developments that give the company confidence that pace will quicken. “We’re seeing a lot of very positive directional trends in the business,” he says. “And I think if you take a three- to five-year outlook, we see very positive inflection points for a more robust locals economy here in Las Vegas, clearly one of the hardest-hit economies in the United States. But it’s setting up very well now for a sustainable recovery. “First, you’ve got ongoing and sustained improvements on the Las Vegas Strip, whether it’s peak visitation or peak in the level of occupied rooms; you see continued improvements in group bookings, non-gaming trends and gaming revenues. So the Strip metrics are a good foundation for what we expect will be recovery in our revenue environment here in the Las Vegas locals market. “The No. 2 driving factor for us is we continue to see a more favorable jobs environment. We saw about 15,700 jobs added in 2012. We are encouraged right now by the fact that we could have $10 billion to $12 billion of capital being invested in the market in the next several years. Notably, we’re extremely excited about Genting’s purchase of the Echelon site and their commitment to building a multibillion-dollar project, as well as the announcement about AEG and MGM building a new arena. “So when you take the collective capital dollars, where there is both new added construction jobs, and also permanent jobs, then we should benefit along with everyone here in this economy. We haven’t seen this amount of dollars committed to the Las Vegas community since prior to 2008, which we think is an encouraging factor.”

APRIL 2013 www.ggbmagazine.com

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Red Rock Casino

Lucky Bar at Red Rock Casino

If you take a three- to fiveyear outlook, we see very positive inflection points for a more robust locals economy here in Las Vegas, clearly one of the hardest-hit economies in the United States. But it’s setting up very well now for a sustainable recovery.

“

—Marc Falcone CFO, Station Casinos

”

Flagship Focus While Station Casinos has a collection of hotel casinos across the Las Vegas Valley, two stand out as true “resort” destinations that draw from the same customer pool as the Las Vegas Strip. Green Valley Ranch, located to the east of the Strip not far from the airport, was Station’s first foray into the resort-style property. With an attached shopping and dining area, the District (not owned by the company), and an overthe-top pool and spa area with magnificent views of the Strip, Green Valley Ranch was opened in 2001 and led to the planning of a second resort-style casino in the city’s Summerlin area, Red Rock Casino Resort and Spa. These two flagship properties are important to Station. Kelley uses a UFC metaphor to describe them. “When you look at the luxury portfolio, as we call it, they punch above their weight, for sure,” he says. “They’re blessed with great locations in two of the most robust communities in the valley, and then when you look at the assets themselves and all the different components that they make up, we have a good competitive advantage, especially when compared to the competition in both of those regions. “So, when you look across our whole portfolio, clearly Red Rock and Green Valley Ranch are what we would say ‘performing above index,’ which is very good. We see a recovery in these areas, and then as the rest of the valley recovers, we expect to see the same kind of indexing going forward.” Falcone agrees. “Clearly those two properties will be the real significant engines of growth for our company within the broader portfolio we have,” he says. 26

Global Gaming Business APRIL 2013

It’s not only the flagship properties that appeal to gamblers and non-gamblers alike; Station properties have built a reputation on amenities such as bowling, cinemas and reasonably priced food. Kelley says that’s part of the strategy to offer something for everyone. “Because we have such a diverse portfolio, we have multiple different entertainment opportunities for people, ranging from simple cafés all the way up to very sophisticated fine dining; bowling centers to luxury spas. There’s a consistent standard that runs through everything we do. We want to be the best in class in everything that we do, so we spend a lot of time thinking about and executing towards making sure that we have the best food quality, the best service, and most important in this environment today, across every single aspect of our portfolio, great value. “Consumers are still really value-conscious. So if you’re a wealthy, affluent person who lives in Summerlin and you want to come to a spa, we know you’re looking for a deal. If you’re somebody who is a casual gamer and you want a quick burger in one of our Wild Burger cafés, you’re looking for a deal. So it’s very competitive out there, and making sure that we execute at the highest levels and have that price value that really differentiates us from the competition is what we focus on every single day.”

show of shows Entertainment has always been a centerpiece of the Station experience as well. Some of the venues at various Station properties around town—Railhead at

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Slots and tables at Gun Lake Casino

Station’s signature Feast Buffet

Boulder Station, Revolver at Santa Fe, Rocks Lounge at Red Rock, just to name a few—are legendary when it comes to local and national acts. So it was surprising to see the company shut down Ovation at Green Valley Ranch and the amphitheater at Red Rock, which has hosted such stars as Toby Keith, the Beach Boys and Mötley Crüe. Kelley says the company is evaluating its entertainment policy. Kelley says the company plans to focus on smaller shows at the Red Rock pool area, and utilization of the arena-sized amphitheater will be re-evaluated later this year. “These things are cyclical,” he says, “and I think we’re looking at the general entertainment landscape and how we can be effective in that. At Ovation, we felt like there was a better opportunity for that space. We’re going to be launching bingo at Green Valley Ranch, which is something that we never have had there, and that Ovation space made a very attractive location for a bingo hall, because we have two other live entertainment venues. “As it relates to the amphitheater at Red Rock, the entertainment environment is very competitive when you think about competing against the Mandalay Bays and the MGMs of the world, at MGM Grand Garden. And while we had a very successful run, we felt that as you looked at the ongoing competitive nature of the business, it really isn’t core to our business. So, will it come back? Can it come back? We’re still going do some shows out there at the Red Rock pool this year. It won’t be the multiple thousand-seat arena that we had built in the back, but at the end of the day we think we can come up with some great shows that are going to entice and more than satisfy the consumer.” Kelley explains that the entertainment is traditionally used by Station to introduce new people to the properties, but there’s more to it than that. “Candidly, we’re a bit disappointed with the gaming associated with an event at the amphitheater, on the night of the event. And that gave us pause in terms of how we looked at entertainment on a go-forward basis. On the other hand, when you looked at how the amphitheater performed out there, it was very well received from the local population. They loved it. But in the end, it’s not key to the long-term strategies of what we wanted our company to do, and so as time goes by, as things continue to grow and improve, we may wind up reintegrating it back into our entertainment lineup.”

Tribal Talent Station Casinos has been very deliberate when entering the tribal gaming management market. The company’s first venture into the field was a home run when it developed the Thunder Valley Casino for the United Auburn tribe near Sacramento, California. Now that its seven-year contract has expired and man28

Global Gaming Business APRIL 2013

agement turned over to the tribe, Kelley says it was a very rewarding experience. “Would we have loved to have had an extension?” he asks. “Of course. But at the end of the day, it’s something that we’re very proud of. It validated us as a first-class developer in the tribal gaming space. It gave us a great calling card when we go out to other tribes throughout the country, and they can see the realities of what we helped that tribe create, so it’s been very beneficial for us.” Falcone says the company has learned much during the development of Thunder Valley and now Gun Lake, giving them a unique perspective in the industry. “We’ve come with a level of patience to successfully work with these tribes and develop these successful facilities and operate them, I think, better than any other gaming company in the industry,” he says. Following the success at Thunder Valley, the Gun Lake Tribe of Michigan and the Federated Indians of Graton Rancheria in California reached agreements with Station. Gun Lake opened last year to great success, with a total investment of $165 million. “The tribe has already been able to go back and refinance their financial structure at a very, very low cost to capital, creating more incremental revenue to them, and to us,” says Falcone. Kelley is particularly excited about the Graton Resort & Casino, which will be the closest casino to San Francisco when it opens late this year. The facility will include 3,000 slot machines, 144 table games, four restaurants, a food court and plenty of spaces to park some of the 150,000 vehicles that pass by each day on the 101. That’s just the beginning, says Kelley. “The tribe is very excited about ultimately fulfilling their overall master plan, and that includes hotel rooms, spa, meeting space. But they’ve taken a very responsible and conservative approach to this. They realize that this is a big, expensive project, and their No. 1 focus is paying down debt, and then once they get to a comfortable place they can use their free cash flow and the power of their balance sheet to continue to expand.” The Graton Rancheria has limited competition in this market. “But when you look at the scale and quality and the offerings that we have there, we believe that we’re going to have more than our fair share of the market with this opportunity,” says Kelley. Falcone says the demographics work well for the company too. “We get to benefit from a deep Asian population, and approximately 33 percent of the San Francisco population is of Asian decent,” he says. “We have targeted plans to capture a significant amount of that population into our specialty Asian areas in the casino that we’re developing.”

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WE’RE AL ALWAYS WAYS Y

People feel like they are a part of something bigger here than just a regular job. When your opinion matters and you’re asked for it, and you’re encouraged to contribute, I think that creates a buy-in and a connectivity and a differentiation from many other companies in the industry.

“

—Kevin Kelley

RAISING R AISING T THE

”

COO, Station Casinos

One final tribal casino will be built for the North Fork Mono Rancheria, in North Fork, California, near Fresno, where the company hopes to break ground in 2014.

Culture Club Despite the recent financial turmoil, Station Casinos is still a family-owned enterprise, and as such, values a special relationship with its employees. Kelley says it all comes from the top. “It comes back to valuing people,” he says. “It started a long time ago with Frank’s dad, who developed a philosophy that you treat everybody with dignity and respect. And that has been handed down to Frank and Lorenzo, and those guys live it every single day. We’re a very competitive company, we’re a very driven company, we’re a very focused company. But at the end of the day, there’s an underlying respect where we value people’s contributions, we recognize them for what they do, we appreciate them, which is different from many other companies in this industry.” Falcone agrees. “We are a family-owned and operated business, that stemmed that culture from its founding in 1976, from day one, and that continues today,” he says. “Frank and Lorenzo bring that commitment from the top all the way down, and create the precedent of the culture that the employees and the executives embrace here.” Kelly says there is a certain mission that the company tries to communicate to its employees. “People feel like they are a part of something bigger here than just a regular job,” he says. “When your opinion matters and you’re asked for it, and you’re encouraged to contribute, I think that creates a buy-in and a connectivity and a differentiation from many other companies in the industry.” More proof of the value of employees is the return of executives who leave for other opportuni-

ties. Kelley himself left to become CEO of Hard Rock Hotel in Las Vegas, and later joined Las Vegas Sands, with responsibilities for its Macau project. President Steve Cavallaro returned recently after an absence of several years. Add that talent to an innovative core of general managers at the various properties and Station has a very deep bench. “One of the things that we try to do and work hard at is alignment and clarity, and making sure people understand what our mission is and how they fit into that overall mission,” says Kelley. “That’s one of our strongest features, I think, alignment. But it takes guys like our general managers who have the leadership skills and the business savvy, to be able to clearly direct a large team of people to reach the objectives that we need.” Unlike most other casino companies in Las Vegas, Station runs a non-union shop, a fact that has been harshly criticized by the Culinary Union. But Kelley says Station is not preventing employees from unionizing, if that is their desire. “We’ve given the union every opportunity to have a secret ballot election to protect the rights of our team members,” he says, “and they’ve always run from that opportunity. So our employees will tell us when they want to have a union. And if and when they do, it’s something that we respect, it’s their right, it’s their legal right, and we’re not going stand in the way. But we’re not going be bullied by the heavy-handed tactics of the culinary union trying to twist the arms of our team members in some sort of way that is not within the boundaries of good legal structure.” Kelley says employees are happy at Station. “More than half our employees have been with us more than five years,” he says. “That tells us that they like working for us. We work very hard to try and provide the best benefits and the best pay for our competitive set.”

We’re W e’re N Never ever Satisfied. Satissfied. We bbelieve We elieve in in cconstantly onstantly iimproving. mproving. FFrom rom generating gener ating ffresh resh sstrategic tr ategic ttactics actics to to m maximizing aximizing tthe he ROI ROI ooff the the ttried ried aand nd ttrue, rue, we we are are always always finding finding nnew ew w ways ays ttoo reach reach more more pplayers. layers. ItIt iiss tthis his w way ay ooff thinking thinking tthat hat hhelps elps us us ccreate reate aand nd grow grow ssome ome ooff tthe he m most os t successful suc cessful casino casino bbrands rands in in the t he iindustry ndustry – bbar ar nnone. one. W Wee are are ready ready to to hhelp elp yyou ou eelevate levate yyour our game. game. Callll today C Cal today for for a free ffrree ppr presentation resentation 800.475.2000. 80 0.475.20 0 0.

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Ultimate Experience Station Casinos now owns the majority of shares in an online gaming company, Ultimate Gaming By RogeR gRos or a company that depends upon frequent visitation, online gaming would seem an anathema to that strategy. To be sure, online gaming actively encourages players to stay home rather than get dressed and drive to a casino. It’s the ultimate in convenience gambling. Yet, Station Casinos recently acquired the majority stake in Fertitta Interactive, the online gaming arm of Fertitta Entertainment, which is branded as Ultimate Gaming. But there’s a method to the madness, says Station Casinos CFO Marc Falcone. “Our view all along with online gaming has been that federal regulation, poker only, should be the primary stepping stone to evaluate the success of the online poker to begin with, number one, and then take next steps into other areas of gaming,” he says. “One of the things that give us a competitive advantage in Nevada, frankly, is that we have the largest database of locals customers and repeat visitation. We feel that will position us to not only communicate with our customers on the regular frequent visits, but also through the online channels. So we are in a better position to provide the offerings and the points to our customers, whereas if they’re playing at home they can redeem for the same type of offers, and will still create that frequency of visitation.” Tobin Prior, a former development senior executive for Sun and Kerzner International, is the president of Ultimate Gaming. He believes that the poker-only designation is important for the gaming industry to test the impact of online betting on their land-based products. “We are in favor of a federal bill that would legalize online poker,” he says. “In Nevada, we’re ready to implement our system once the Gaming Control Board authorizes us to do so. That will mean only online poker, so we’re comfortable that game will not disrupt the frequent visitation you see today at Station Casinos or impact on current jobs and investment. Full online gaming could be another matter.”

Forward Thinking Station Casinos has been investigating online gaming for several years now. In fact, the company agreed to a partnership with Full Tilt Poker just weeks before the infamous “Black Friday” indictments ended that relationship in 2011. The company decided to focus on developing a system and content that the company would own and control. In October 2011, Fertitta Interactive agreed to buy CyberArts, a California-based technology company that had provided games and technical solutions to several lottery, bingo and poker online gaming companies in Europe. The company realized that it would have more control over its online gaming offering and presence if it took this route. Prior says Ultimate Gaming grew out of the CyberArts purchase, but the model has been changed substantially. “We took the B2B model used by CyberArts and turned it into a B2C model,” he says. “We had all the technology experts and the engineers, but we didn’t have the marketing and customer service component. Now we do.” Prior says Ultimate Gaming has several advantages that no other online gaming provider has. Rather than contract with a systems provider, by operating its own system, the company will have more control over its own destiny, says Prior. 30

Global Gaming Business APRIL 2013

Tobin Prior President, Ultimate Gaming

“We’ve got an entrepreneurial leadership team, a land-based gaming operation with lots of experience in a strict regulatory environment, proprietary technology with experienced development experience, and a brand that will span the next generation,” he says. In addition to Station Casinos, Ultimate Gaming has an exclusive marketing partnership with Ultimate Fighting Championship (UFC). Prior says that relationship will pay big dividends in the future. “UFC is a trusted name,” Prior says, “and research shows that people will seek out a trusted name when gambling online.” The brand is already being promoted at UFC events, with its logo on the octagons where the fighting takes place. Best of all, the demographics of UFC fans are exactly the same demographics of online gamblers. In the social media area, UFC has more than 10 million followers on Twitter versus only 2.4 million for MGM Resorts, the top Las Vegas Twitter casino. Online poker demographics are almost identical to UFC when it comes to gender: 74/25 for online poker and 63/37 for UFC. Best of all, a recent survey showed UFC fans are almost twice as likely to have gambled online within the last 30 days than the average adult.

The states equation Ultimate Gaming is ultimately prepared for the online gaming world by offering a large platform of online games. The site offers 20 variations of poker and another 14 varieties of casino games, some aimed at the Asian gamblers. This allows Ultimate Gaming to participate in any of the approved online gaming jurisdictions, pending licensure. But herein lies the rub. While Prior and Station executives clearly prefer the federal path to online poker, that route is very questionable at this time, and the state-by-state legalization currently under way makes the path to success more complicated. Falcone says Ultimate Gaming is going to be flexible, but it plans to be a player not only in Nevada, where it is currently licensed, but in other states that have entered the arena. “Until we have a better clarity around where Nevada is positioning itself with poker, versus a broader online offering, it will be difficult for us to say how we’re going to approach it,” he says. “But I think we’re adequately positioned from a technology and an offering standpoint online. With so many variations of poker, and the additional table games, we also have several areas of slot development, licensing and content already agreed upon. So from providing the offerings, we’re positioned well. We’ll just have to see which direction the regulators take.” Prior, who was involved with an online gaming effort via Kerzner International early in the 2000s, says the company can’t sit back and wait for things to happen, which is what occurred in those days. “We need to be proactive when it comes to the legalization of online gaming,” he says. “We need to be aggressive in public relations and get into the market. It’s not a given you’re going to make money, but you’ll never know until you get up and running.”

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is Providing the money for betting can be a complicated process BY DAVE BONTEMPO

n the gaming world, cash delivery is king. Perhaps also the queen, emperor and ruler. Winners in this multibillion-dollar, breathtakingly fast business are those who can produce funding mechanisms faster than players can snap their fingers for money. Suppliers provide upgraded kiosks, ATMs and mobile apps, which in turn enable credit cards, checks and bank cards to spill money or vouchers into the player’s hand. Or onto a game. Table devices have even emerged to let players change games, cashless, without missing a beat. Any supplier able to reduce player down time and spike casino revenue earns a seat at the table of riches. Companies angling for this market must think outside the box. Sightline, built by former Global Cash Access executives, unveiled a card backed by a bank, a creditcard company, a gaming giant and a processing kingpin. It is used in conjunction with casino loyalty cards. Global Cash Access, the industry leader, partnered with a social-media stalwart to position itself for online gaming, and will utilize software. This creates a new area for GCA, which already specializes in land-based properties. While the Las Vegas companies enhance their niche, Toronto-based NRT champions kiosks. Its cashless theme spans several areas: the machines it uses with Sightline, the imminent off-site breakthrough in Las Vegas sports betting and a new currency-conversion mechanism which debuted in Connecticut in March. All of the companies played to their strengths. Sightline and NRT found a link in the gaming chain and attached their innovation to it. Global Cash Access, more financially armed, hooked up with a finished product to become an immediate online major player. All three companies invested millions, on spec, and hoped they were right. For them, so far so good. 32

Global Gaming Business APRIL 2013

CLEAR INSIGHT Las Vegas-based Sightline provides turn-key and licensed payment solutions to various players in the gaming world. The company is aptly named, for it was a vision that drove five entrepreneurs to launch a bold gamble in 2010. Former GCA executives Kirk Sanford, Tom Sears, Harry Hagerty, Diran Kludjian and Omer Sattar teamed up at Sightline and found a new idea. For the last two and a half years, they have invested millions to bring a product into gambling’s extended sphere. Success looks to be in the cards. Or, make that, the card. Online gaming’s new floodgates create a colossal opportunity for their Loyalty Card Plus Discover Prepaid Card. The product is the same as a casino’s loyalty card, and gives players the chance to access their prepaid account through the closed-loop proprietary Sightline network, SPAN. That network allows them to transfer funds in real time to and from a slot system, table games, race and sports book or online casino. Sattar estimates there are 37 million casino reward cards available for conversion into a prepaid card. In the past year, his company assembled several essential teammates to go after them. Sightline obtained the backing of Sutton Bank, which issues the cards; Discover, the card network; Vantiv, which processes billions of transactions; and slot manufacturer Bally Technologies, for the brick-and-mortar and online gaming platform. For good measure, Sightline added NRT’s worldwide kiosk clout. “We put our own butts on the line, so it is very exciting to see this happening now,” says Sattar, one of leaders behind the company’s card effort. “When you consider that New Jersey, Delaware and Nevada allow online gaming, what about the next step? We are watching California closely. That’s 40 million50 million people. We are moving the gaming industry forward, and much of the success has finally happened in the past few months.

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“

We have the largest kiosk footprint out there. They came to us to do their integration, and it makes perfect sense. We have 100 percent market share in Macau, 100 percent share in Singapore, 95 percent in Canada.

”

—Michael Dominelli, VP of Marketing and Product Development, NRT

“We’re in a small business here, and your reputation is your gold. We didn’t want to be known as someone who sells vapor-ware (a product that exists more in concept than reality). We were able to gain some major companies willing to make a big bet on us, and we consider that thrilling.” How does it work? Customers can pre-fund the accounts online, through their mobile phone or load funds at the casino with cash, jackpot payouts and other ways, including TITO tickets. The funds act as a bank account, with FDIC protection. Players are, in effect, drawing from their own loyalty card when they tap funds either to play or spend money elsewhere. Because of the card’s link to Discover, they can also increase their spending flexibility. “You can be sitting at home, using a mobile app now legal in Nevada,” Sattar says. “You have the money on deposit with a casino, and let’s say you placed a bet for $100 and you have won $500. Using the mobile app, you can cash out in real time, or deposit the money into the online gaming account. “Now, you want to take your wife out to dinner. You can do it with the funds on your pre-paid card. Or you can buy something on Amazon.com or go to Home Depot. The most important thing is that you have access to your money at all times. You also can go to any ATM in the country to cash out. “The advantage for the customer is that the casino is not holding their money all the time.” That’s an edge for the casino, too. Sattar says a casino that needs to have $300 million-$500 million available in its machines now has the advantage of putting that money directly to work. If fewer funds are needed to be part of the games, the property can take a percentage of it to pay down debt. That would in turn increase a company’s earnings per share by 1015 percent, he estimates. “Everybody wins,” he says. “If you don’t do something that’s good for the customer, the customer won’t be part of it. If you can’t do something the casino can profit by, they won’t sell it for you.” Casinos profit beyond the art of “untrapping” millions of dollars. Unlike many technological advancements, this one costs nothing. “All you have to do is say yes,” Sattar asserts.

“There is no hardware, absolutely nothing for you to buy.” Sightline’s partnerships are prominent. Vantiv is a leading integrated payment processor differentiated by a single, proprietary technology platform. It offers a suite of traditional and innovative payment processing and technology solutions to merchants and financial institutions in the U.S., enabling them to address their payment processing needs through a single provider.

NRT ROLLING The correlation between Sightline and kiosk kingpin NRT was logical, according to Michael Dominelli, the vice president of marketing and product development specialist for the Torontobased company. “We have the largest kiosk footprint out there,” he says. “They came to us to do their integration, and it makes perfect sense. We have 100 percent market share in Macau, 100 percent share in Singapore, 95 percent in Canada, etc. “If you have a slot voucher, you can either take the cash or load the card.” Dominelli says the partnership addresses both client maintenance and a look to the future. “We always like to keep options open,” he says. “If a customer likes this card, we don’t want to be the guy that says you can’t integrate. We don’t wish to restrict them. Going forward, this all goes toward cashless gaming. People ask when cash is going away in the casinos, and I think it’s going to be in about 10 years. It’s a generation thing, nothing to do with technology. “You have guys who have grown up with cash, and they will always want cash. That person still likes to put $500 down on the table to get started. Young guys like me, who grew up more in a digital age, are comfortable with having our money on a phone, a mobile app or a card. “We need to prepare for the day when cash does go away. We have to be ahead of the curve. When the customers are ready, you need to have already been ready.” NRT, founded by Dominelli’s father John 20 APRIL 2013 www.ggbmagazine.com

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“

We bring all their different systems together, helping them control their payments, branding and currency. Rather than having a particular pay system for poker, or sports betting, etc., casinos can have something that is as seamless as possible over different systems, whatever they choose.

”

—Tim Richards, GM and Senior VP of Interactive Solutions, GCA

years ago, has assertively expanded its tentacles. Infiltrating the colossal Macau market with its kiosk solutions in 2012 was a huge forward step. It followed by launching a revolutionary operation in Nevada, by which customers can remotely call in to apply for an account through a dealer, and then use funds to bet sporting events off site. That process is moving toward the experiment stage, but has the blessing of Nevada officials, Dominelli says. NRT is allowed to install up to 35 kiosks at malls, gas stations and just about any place in which customers live or shop, he says. The combination of a live video feed and a kiosk enables a customer to speak with a live attendant to establish an account. NRT, which invested about $1 million in this technology on spec—hoping for state approval—may have up to 300 of these by the end of the year. A customer can purchase gas and a sports wager at the same time, without driving to the casino. For locals and anyone who wishes to avoid traffic on the Strip, this is a convenience breakthrough. The addition of online gaming may bring the kiosk element into play in many other states. NRT’s next big gambit is currency conversion. Or, more formally, Dynamic Currency Conversion. Unveiled at Connecticut’s Mohegan Sun in March, it allows international players to determine whether kiosk transaction fees occur realtime, at a predetermined rate, or several days later, at an undetermined, but usually higher rate. Customers win, Dominelli says, because NRT deals directly with a Canadian bank to establish a pre-set conversion cost, which is lower than one normally pays. There is no fluctuation based on market conditions between the world currencies on a given day. “You know exactly what you are paying for up front,” Dominelli says. “It’s not like you make the transaction in the United States, go back to your home country and find out you paid maybe 10 percent of your money to do that.” NRT wins, he indicates, because it shares in the revenue generated by the transaction. So, presumably, would the casino operator. “One executive called it money coming down from the sky,” Dominelli laughs. This process gives NRT five payment systems: ATM, cash advance, point-ofsale debit, check cashing and currency conversion.

GCA: WHAT’S IN YOUR WALLET? Industry giant Global Cash Access Holdings moved into the social media and online gaming realm by announcing a partnership with Live Gamer late in 2012. The move is designed to give operators of legalized online wager-based casino games a licensed end-to-end payment, patron e-wallet and management solution. The deal combines GCA’s casino cash management products with Live Gamer’s impact in the social industry. Live Gamer has deals with Facebook, Electronic Arts and Sony Online Entertainment, and enables customers to spend money on social and entertainment websites. The setup, expected to roll out this year, enables GCA clients to easily transi34

Global Gaming Business APRIL 2013

tion gaming activities from off-line to online and back, creating a seamless experience. This integrated solution will allow operators to both service and expand their player base. GCA made a follow-up move by introducing the Digital Wallet among its new products at ICE in February. The Digital Wallet solution will manage multiple currencies. While many analysts view online gaming as its own realm, GCA can either treat it as such or leverage its land-based prominence to help operators cater to customers. GCA already has a rich land-based network to pitch its products to. It dispensed over $19 billion in 2011, stemming from over $35,000 in transactions every minute and $52 million per day. It is licensed in over 350 jurisdictions, serves 1,100 casinos globally in more than 35 countries and has over 8,000 patron touch points around the world. GCA services exist in more than 700 casinos in the United States alone. The company is a global provider of cash access and data intelligence services and solutions to the gaming industry. “Half the cash on the casino floor in the U.S. comes out of our devices,” says Tim Richards, the general manager and senior vice president of interactive solutions for the Las Vegas-based industry giant. “Our biggest sell is to the casino property, enabling them to own, control and brand the experience for their players, especially as it ties in to their marketing and club efforts. We bring all their different systems together, helping them control their payments, branding and currency. Rather than having a particular pay system for poker, or sports betting, etc., casinos can have something that is as seamless as possible over different systems, whatever they choose.” Online players, or shoppers, can become quickly comfortable with the Digital Wallet. Two major screens help players keep track of their bankroll. “One is what we call the portfolio view,” Richards says. “The patron would use this screen to view and access the wallets from different operators. They can easily see their balances for the wallet and the individual currencies and loyalty points available. Customers would use this as a tool to add to or remove funds from the wallet, and also transfer the funds to the associated site’s wagering account or game they would like to play. “The second is the payment wall. The screen would prompt when a customer wants to make a payment while visiting or playing on a site. The unique piece is that GCA can offer multiple forms of payment, which includes local and alternative methods that are outside the normal credit card networks. This is demonstrated by tabs across the top of the screen. This is important due to the constraints the banks have put on processing i-gaming transactions. By offering these various methods, it will ultimately make the user experience much greater and drive more funds to the sites.”

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Go North, Young Man OLG’s modern monopoly and opportunities for growth By Michael Lipton, Kevin Weber and Jack Tadman Caesars Entertainment wants to utilize the Toronto Convention Center for a billion-dollar casino project. MGM Resorts, Las Vegas Sands and Wynn Resorts are among the other companies expected to bid if Toronto officials give the go ahead.

n Canada, each province has a monopoly over gaming which takes place within provincial boundaries. The Ontario Lottery and Gaming Corporation (OLG), Ontario’s provincial gaming monopoly, reported over $2 billion in profits last year. Despite its large profits, certain aspects of OLG’s operations, such as its revenue from casinos located on the Canada-United States border, have been in decline. As a result, in 2010, the government of Ontario asked OLG to review its operation to ensure future success. On March 12, 2012, OLG presented the results of that review, delivered in the form of a Strategic Business Review to the Ontario Ministry of Finance setting out OLG’s plans to modernize lottery and gaming in Ontario. The review notes that the “lottery and casino games available in Ontario were designed in the 1970s and 1990s for the core gaming demographic of the time.” The review cites advances in technology, changes to customer shopping patterns, demographic shifts, and a decrease in visits from American customers as reasons for declining revenues, and notes a lack of participation by adults under the age of 45 in Ontario government-run gaming. The review made three broad recommendations with respect to the policy and practices of the OLG: • become more customer focused; • expand regulated private-sector delivery of lottery and gaming; and • renew OLG’s role in the oversight of lottery and gaming.

BECOME MORE CUSTOMER-FOCUSED The review recommends making gaming opportunities more accessible to customers. Specific recommendations include expanding the location of slot facilities beyond casinos and racetracks and adding additional gaming facilities in the province. As well, the review recommends expanding the location of lottery terminals beyond convenience stores and into supermarkets and large retailers.

EXPAND PRIVATE-SECTOR DELIVERY The review’s recommendation that OLG operations expand regulated private-sector delivery of lottery and gaming is a major change in philosophy for OLG and state-conducted gaming in Ontario. Presently, casinos and racetrack slots facilities in Ontario are operated by a mix of OLG and private-sector entities. At the time of the release of the review, the OLG directly employed approximately 7,700 people, and indirectly used the services of approximately 10,000 private-sector employees. The review expresses the benefit of modifying this system, whereby regulated private operators are engaged by the OLG to run the day-to-day operations of all existing OLG-operated gaming facilities and all new gaming facilities, gradually reducing the number of people directly employed by OLG. OLG would cease to be involved in the day-to-day operational aspects of the 36

Global Gaming Business APRIL 2013

gaming facilities and lotteries. Under this model, casinos and other gaming facilities would be conducted and managed by the OLG in a manner that maximizes private-sector investment. Ticket lotteries would be entirely operated by the private sector.

RENEW OLG’S OVERSIGHT ROLE The review’s recommendation that OLG renew its role in the oversight of lottery and gaming envisions the OLG improving its conduct and management of gaming by improving its business and infrastructure to manage all aspects of customer interaction. This will include customer and game management (databases, approval or marketing programs) and market management (high-level planning for new gaming sites, product strategy). Since the review was released in March 2012, OLG has made progress with respect to its modernization plan in three areas of gaming modernization: gaming, lotteries, and i-gaming. OLG’s procurement process consists of a request for information (RFI), request for pre-qualification (RFPQ) and a request for proposals (RFP).

GAMING Ontarians made approximately 2.7 million visits to gaming facilities in 2011. However, OLG notes that revenue from certain gaming facilities, such as gaming facilities located on the Canada-U.S. border, are declining, and certain areas, such as the greater Toronto area, are underserviced by gaming facilities. OLG released its RFI for gaming on May 17, 2012 and closed it on July 4, 2012. In the RFI, OLG divided the gaming market in Ontario into 29 “gaming zones,” geographic areas where regulated private-sector providers will be allowed to operate a gaming facility. For each gaming zone, OLG has defined the geographic boundaries, the number of gaming positions, payouts and betting limits, the types of games offered and the responsible gambling policies that will apply to all zones across Ontario. These gaming zones were further grouped into gaming bundles. Gaming bundles are groups of gaming zones—each gaming bundle represents a separate bidding opportunity. OLG released its RFPQs for three gaming bundles (the Ottawa area, East, and North) on November 30, 2012, closed its RFPQs for Ottawa area and

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Ontario East on March 7, 2013, and closed its RFPQ for Ontario North on March 14, 2013. Interested service providers are required to submit proposals for the entire gaming bundle, not for individual gaming zones or gaming sites contained within a gaming bundle. According to OLG CEO Rod Phillips, OLG will not have more than one gaming site in each gaming zone.

LOTTERY Approximately 8 million Ontarians played the lottery in 2011. The review notes that OLG’s current technology and sales model with respect to lottery could be improved to better serve an evolving customer base. There are approximately 10,000 lottery terminals across Ontario, but as OLG notes, those terminals do not reflect the shopping patterns of adults in Ontario. Lottery terminals will be expanded to include “multi-lane” solutions for supermarkets, drug stores and big-box retailers. OLG is currently exploring opportunities to move the day-to-day operation of its lottery network to a private-sector operator, and to deliver its product through new channels such as the internet and through mobile devices. OLG released its RFI for lottery on June 7, 2012 and closed it RFI on August 2, 2012. The RFPQ for lottery was released on December 14, 2012 and closes on April 4, 2013. OLG described three goals with respect modernizing its lottery program. The

first goal is to introduce a new sales channel for lottery products. OLG intends to accomplish this goal by expanding options for sales to include multi-lane checkouts at major retail outlets such as grocery, drug and big-box stores. The second goal is to provide a platform for further innovation of OLG’s lottery business. OLG intends to accomplish this goal by allowing more rapid development and deployment of new lottery games, as well as increasing the capacity of OLG’s lottery network for non-lottery purposes. The third goal is to increase operational efficiencies. OLG intends to accomplish this goal by engaging a service provider to assume the responsibility for the day-to-day operation and upgrade of its network of existing lottery terminals. Potential service providers are being asked to demonstrate their experience as it relates to the lottery business, including: • success in developing customer-driven growth strategies; • ability to operate complex and dynamic businesses; • access to the resources, tools and technology needed to operate a sustainable lottery business; and • capacity to lead the transition of customers, retailers, employees and technology to a new operating model. The service provider selected by OLG will be responsible for recommend-

APRIL 2013 www.ggbmagazine.com

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Caesars Windsor is the kind of casino resort OLG wants to encourage in other parts of the province, while it discourages slot parlors like the Fort Erie racetrack, where OLG slots have been removed.

The potential of building a gaming site in Toronto has drawn interest from elite gaming and development companies pledging to invest billions of dollars in gaming and non-gaming facilities.

ing strategies to maximize the growth and success of OLG’s lottery business, developing products and market plans, operations, and process and cost optimization. The service provider will also be a single point of contact for OLG by being responsible for subcontractors and ensuring that OLG’s modernization requirements are met. As noted earlier, OLG’s new role will be to step back from the operation of lottery, and focus on the conduct, management and oversight of lottery. Included in OLG’s new role is setting the overall strategy for lottery, managing the market by approving channel strategies and products and preventing and mitigating the effects of problem gambling through OLG’s responsible gambling program.

iGAMING According to OLG, $1 billion is wagered annually by Canadians on i-gaming sites that are not authorized in Ontario, $400 million of which is wagered by Ontarians. In August 2010, OLG announced its intentions to offer i-gaming to Ontario residents. In providing its i-gaming product, OLG is focusing on analyzing and enhancing best practices and security procedures adopted in other jurisdictions across Canada and Europe, and has committed to implementing a strong responsible gambling program and offering increased player protections, secure transactions and data privacy. OLG has set up a website at www.playolg.ca with introductory information about OLG’s i-gaming product. According to the FAQ section of the website, “PlayOLG will launch its full gaming and service solution to the public in the second half of 2013.” Ontario will become the eighth province in Canada to offer i-gaming, following the leads of British Columbia, Quebec, Nova Scotia, New Brunswick, Newfoundland, Prince Edward Island and Manitoba. OLG released its RFI for providers of internet gaming services on November 15, 2010 and released its RFP on December 9, 2011. The RFP closed on February 17, 2012. OLG has not yet announced its game providers for launch. 38

Global Gaming Business APRIL 2013

Will a Gaming Site be Built in Toronto? Any proposed new gaming site, or movement of an existing gaming site, requires municipal approval, as well as approval from OLG and the Ontario government. Toronto, Canada’s biggest city and North America’s fourth largest city, does not currently have a gaming site, and residents of the city and Toronto City Council appear to be divided as to whether a gaming site should be located in the city and, if a gaming site is approved by the municipality, what a suitable location would be for the gaming site. A report was supposed to be delivered to the Toronto City Council’s executive committee in mid-March, with the executive committee debating the issue on March 20. The report is to consider the pros and cons of a gaming site in downtown Toronto or at an existing racetrack and slots facility in Mississauga, a suburb of Toronto, and the results of public consultations. However, due to delays in receiving the report, the city council debate and vote will be delayed until April at the earliest, and possibly May or later. Officially, the report was delayed because city staff are awaiting receipt of certain information from OLG. Critics of a Toronto gaming site have stated that the delay is a stall tactic being used by Toronto Mayor Rob Ford (who has publicly voiced his support for the casino development) due to a lack of votes in favor of a downtown Toronto gaming site. The potential of building a gaming site in Toronto has drawn interest from elite gaming and development companies pledging to invest billions of dollars in gaming and non-gaming facilities. In addition to the billions of dollars in investments into the development of gaming and non-gaming facilities, benefits of a Toronto casino include the creation of nearly 10,000 permanent jobs, the attraction of over a million new visitors to Toronto who would spend approximately $1 billion on nongaming activities, and $50 million-$100 million in annual hosting fees to the city of Toronto. While critics may point out that discussing “modernization” in the same vein as “monopoly” seems counter-intuitive, OLG must operate within the

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framework of the Canadian Criminal Code, which requires OLG to “conduct and manage” all gaming in Ontario. By involving the private sector in the operation of gaming, lottery, and i-gaming to the maximum extent possible while still “conducting and managing” gaming in Ontario, OLG appears to have taken a step forward toward ensuring its future success. Plans to offer i-gaming were made public prior to the release of the review. OLG announced its plans to offer i-gaming in August 2010. Michael Lipton has served as senior counsel on gaming law matters for over 20 years, regularly representing governments, lottery corporations, and gaming equipment suppliers/manufacturers and counseling licensees throughout North America on gaming compliance issues. Lipton is a founding member of the International Masters of Gaming Law and a past president. He is a senior partner at Dickinson Wright LLP and head of the Canadian Gaming Law Group, and can be reached at 416-866-2929 or mdliptonqc@dickinsonwright.com.

Kevin Weber has practiced gaming law for his entire 15-year career. He is a prolific author and speaker on gaming issues. A member of the International Masters of Gaming Law, he guides clients through compliance issues with gaming regulators, and provides opinions on all matters relating to the lawful operation of gaming, both land-based and online. He advises clients on business immigration matters, facilitating cross-border transfers of personnel for companies in multi-jurisdictional industries such as gaming, and can be reached at 416-367-0899 or kweber@dickinsonwright.com . Jack Tadman is an associate at Dickinson Wright LLP and a member of the Gaming Law Group, and can be reached at 416-777-4018 or JTadman@dickinsonwright.com.

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APRIL 2013 www.ggbmagazine.com

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Entertainment Options: From the Showroom to the Meeting Room and Beyond The days are long gone when casino entertainment was limited to headliners and lounge acts. The definition of entertainment today is more elastic and designed to appeal to almost everyone.

From Carrie Underwood at Mandalay Bay to boy band One Direction at Mohegan Sun, the scope of casino entertainment is wide and inclusive.

By MaRjoRie PReSton

uring the 1950s and 1960s, the marquees that lined the Las Vegas Strip were dominated by superstar crooners and comics (Sinatra, Martin and Lewis, Judy Garland) and lounge acts (Don Rickles, Shecky Greene, Louis Prima). For a few bucks and the cost of a highball, players could hit the showroom for headliners, and later on, after losing their nut at the craps table, recover in the casino lounge. In those days, entertainment was not a moneymaker, but almost an afterthought, designed to keep players in the house, on the gaming floor, and in a gambling mood. Fast forward to November 31-December 1, 2012, when a boy band still in the acne-and-adenoids stage made Mohegan Sun the hottest place on the planet, and arguably stirred the kind of mania once created by the Rat Pack. Tickets for One Direction (virtually unknown before the group appeared on Britain’s X Factor in 2010) sold out two shows in 20 minutes before crashing Ticketmaster. Then the real frenzy began. Desperate fans willingly paid double and triple the face value of tickets in the “secondary market” (online resellers like BigStub.com and Ticket Liquidator), and scalpers undoubtedly got much more. In one zany promotion, fathers in feather boas and heels participated in a “Daddy Drag Race” to get their little darlings into the show. And for two nights, 10,000 high-decibel teens and tweens crowded the resort arena to see (and maybe even hear) the young heartthrobs. How times have changed. “Twenty years ago you wouldn’t think One Direction would ever have had a

place in the casino industry—now it’s the complete opposite,” says Tom Cantone, vice president of sports and entertainment at the Uncasville, Connecticut resort. “The weekend they were here, we were the No. 1 tweeted brand in the world, the most talked-about brand on social media—Mohegan Sun was everywhere, from Southeast Asia to Europe to South America.” The bonanza wasn’t limited to ticket sales and brand buzz. Because most ticket-holders were adolescent girls (some from as far away as California), they were accompanied by dutiful parents. During the concert, the “drop-off crowd” had nothing to do for two or three hours but eat, drink, shop and play. “Most hotels and restaurants were jammed,” says Cantone with satisfaction. “And we had the biggest merchandising night ever.” That phenomenal two-night stand validated Cantone’s entertainment strategy, which can be summed up in three little words: Follow pop culture. “That’s your roadmap—follow it and you’re going to have a success rate in the casino that’s better than your competition,” says the industry veteran, who’s been credited with revolutionizing the role of entertainment as a revenue generator. “In my opinion, any property of any size can upstage anybody at any time. All they need is the right artist and the right booking at the right time— because it’s all about the timing.”

Some are recording artists, some are TV stars, some are movie stars, but they all have one thing in common: they’re in demand right now. When you corral that energy zone into your facility, you’ve got yourself a party.” —Tom Cantone, VP of Sports and Entertainment, Mohegan Sun

Global Gaming Business APRIL 2013

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Formulas for Success the casino industry entertainment formula is often copycat

You Can’t Please Everybody… Or Can You? Even Cantone may be surprised by the breadth of today’s casino entertainment, which includes not just headliners and lounge acts but celebrity chefs, Broadway hits, sporting events, ethnic acts, tribute bands, “diva” extravaganzas, and 1,001 variations on Cirque du Soleil. Then there’s the seemingly inexhaustible roster of reality TV stars, from the casts of Jersey Shore, Dancing with the Stars and the Real Housewives to Pawn Stars and the fishermen of The Deadliest Catch. Think of these celebrities du jour as “the class of the year—the class of 2012, the class of 2013, the most popular kids in your class,” Cantone says. “Some are recording artists, some are TV stars, some are movie stars, but they all have one thing in common: they’re in demand right now. When you corral that energy zone into your facility, you’ve got yourself a party.” In an increasingly competitive industry and still-challenging economy, every casino amenity and every customer has become exponentially more valuable. For that reason, Mohegan Sun continues to host its “Winning Authors” series, and though the literary meet-and-greets are free and attendance may be moderate, they bring in people who otherwise might have no reason to patronize a casino resort. (Last year’s authors included former O.J. Simpson prosecutor-turned-novelist Marcia Clark and mom-and-daughter mystery writers Mary Higgins Clark and Carol Higgins Clark.) Casting a wide net through entertainment not only normalizes the casino experience for a broader group of patrons, but in the case of One Direction and other kiddie acts, it also sets the stage for the future. “The next generation is in already in the house,” says Cantone. “Those young people who came to Mohegan Sun are going to know and have a comfort level with the brand.” Another advantage is the power these customers wield via their Facebook pages, Twitter accounts, smart phones and other social media outlets. “We have tens of thousands of people selling our shows,” says Cantone. “These events are now bookings on steroids, Super Bowl kinds of events that people want to be around. And when you tie into that kind of firepower, you really win the day.” The talent also can set the Twitterverse abuzz. When comedian Conan O’Brien was forced out of the Tonight Show in January 2010, he booked one night of his concert tour at Mohegan Sun. As Cantone recalls, “We went on sale, he did one tweet, and we sold out in a minute. We never spent a nickel.”

Courting ‘Barbara’ While it may be tempting to try and skew young and hip—after all, mainstream media including TV, radio and motion pictures seem to believe the only consumer worth wooing is between ages 18 and 35—the typical casino patron in many cases may still be a “53-year-old woman who plays slots,” says Clint Billups of CFB Productions, a Las Vegas-based entertainment agency. Presumably, says Billups, that middle-aged, middle-class woman—known in some advertising circles as “Barbara”—has a husband who plays table games, and married kids who sometimes come with them to the casino. And casino properties will disregard Barbara at their peril. “Here in Las Vegas, three casinos in the last decade really tried to focus on the 20- to 30-year-old market,” says Billups. “Of course, when the recession hit and suddenly the 20- and 30-somethings didn’t have the disposable income they were accustomed to, all three properties—the Palms, the Cosmopolitan and the Hard Rock—ran into financial difficulties.” The Palms has recently pulled a turnabout, Billups notes. Though the resort still courts the young adult market—through a recent spring break promotion, for example—it is not narrowcasting to younger patrons. Under President Joe Magliarditi, who took the helm during an ownership change in mid-2011, the Palms is courting locals, a demographic it overlooked before, as well as women. In

Peter Wagg

here’s more than one way to derive revenue from casino entertainment—as long as it’s the right entertainment. So says Peter Wagg, the award-winning writer-producer who helped create several Cirque du Soleil shows and launched the record-shattering Celine Dion residency at Caesars Palace. “Back in the Rat Pack days,” says Wagg, “the property didn’t get any revenue from the show— the revenue went to the performer and what the casino gained was foot traffic, people that came into the property and spent the money once they got there.” Steve Wynn created a new paradigm in 1990, when he installed Siegfried & Roy in their own theater at the Mirage, and then split the profit with the lion-taming illusionists. It was a good investment; the show—which only ended in 2003 when Roy Horn was mauled by a performing tiger—was one of the most popular in Vegas history. The Celine Dion show marked a pendulum shift back to the original formula, says Wagg. Caesars built the $100 million Colosseum just for the French-Canadian songbird—which he calls “a massive gamble.” “It changed everything back again. With Celine, Caesars didn’t get any revenue from ticket sales, which were split between the producers, Celine and the promoters, AEG. But what Caesars gathered was tremendous increase in both room occupancy and gaming revenue. Thirdly and almost more importantly, it put Caesars back on the map. At the time (2003), they were probably the most well-known brand on the Strip, but so behind the times, they were just dying.” The success of Dion’s A New Day kicked off a whole new trend: the superstar residency. Elton John, Shania Twain, Cher and Bette Midler have since followed in Dion’s footprints. “No one thought it would work,” says Wagg. “Now everybody is doing the same thing.” Cirque also has its copycats, who blend airborne acrobatics, soaring music and colorful costumes in an attempt to mimic the worldwide entertainment juggernaut. Since it was founded by French-Canadian street performers in 1984, the Cirque brand has spawned more than two dozen productions, from Viva Elvis to The Beatles: Love to the latest extravaganza, Michael Jackson: One, opening this spring at Mandalay Bay in Las Vegas. More than 100 million people in 40 countries have seen a Cirque show, and other shows have incorporated Cirque elements, with varying degrees of success. But the first is usually the best, says Wagg: “It’s the person who’s basically got the balls to go and roll the dice and take a chance on something that starts the new wave,” he says. “Because the minute you have a success, everybody goes, ‘Me too.’” Wagg is quick to add that he doesn’t believe anything is truly original. “Originality comes in taking something that exists and fusing together into something that’s completely new. I based that on the fact that only seven stories have ever been written, and all of them were written by Shakespeare.”

APRIL 2013 www.ggbmagazine.com

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2012, the change in direction prompted the Las Vegas Sun to dub Magliarditi a “quick-change artist.” “I get a kick out of it when I walk through the Palms now,” says Billups with a laugh. “On Thursdays, it’s Seniors Day. I never thought I’d see that.” “It’s a mistake to think you’re gonna be young and hip 24/7,” agrees Cantone. “You’ve got to mix the recipe so the perception is you’re young and hip, but you still have enough there for the demographic that’s paying the bills.”

Loss Leader or Profit Center? In the 1930s and 1940s, when the gaming halls of Nevada were nothing more than bars with slot machines, entertainment—if it was provided at all—usually was a piano player with a tip jar. “The introduction of headliner entertainment came when Bugsy Siegel opened the Flamingo and wanted to get people to drive in and fly in to his casino in the desert,” says Billups. “Today it’s come down to two philosophies: The traditional approach is that entertainment drives traffic; this was Bugsy Seigel’s original idea. The other approach sees entertainment as a profit center; it should generate a profit like slots or anything else.” But selling out the showroom isn’t good enough, he adds. “What impact does it have on hotel rooms, food and beverage, non-gaming amenities like the spa and even right down to retail? It’s one thing to sell out every seat, but if hotel occupancy isn’t up because of it, and people are eating at the food court

Headbangers Ball What seemed like an entertainment mismatch worked out just fine for the Luxor in Las Vegas. he heavy-metal band Godsmack is known for tuneful ditties like “Sick of Life,” “Crying like a Bitch,” and “I F***ing Hate You.” So in late 2011, when the band joined other nihilistic rockers— Seether, Korn, Hate Breed—for a two-day outdoor festival at the Luxor, it raised a few eyebrows. After all, Luxor is known for traditional Vegas entertainment: Criss Angel, Carrot Top, and the long-stemmed showgirls of the Fantasy revue. But the 48 Hours festival worked so well, MGM Resorts International is turning the concert venue—a former overflow parking lot—into a dedicated event space. The first concert on the Luxor lot was Soundclash during spring break 2011, sponsored by Red Bull and starring Cee Lo Green. “Something like this had never been done—an outdoor festival on Las Vegas Boulevard,” says Chris Baldizan, MGM senior vice president of entertainment. “It allowed us to see that maybe this was a viable option for the future; festivals have never been more popular in this country.” Rockstar Energy Drink, sponsor of 48 Hours, also saw potential in the alliance. “They said, ‘Let’s try it. It’s an older demographic that spends money on rooms, spends money in the casino, and spends money at the bar, which is a big deal,’” Baldizan says. “It led us to further develop the space so we can market to our partners or create festivals of our own.” The completed space—as yet unnamed—could accommodate up to 40,000 guests for a variety of entertainment. “We’re not gearing toward electronic dance music or rock, but Latin, country—we can do food shows there, sporting events, a variety of things,” says Baldizan.

Global Gaming Business APRIL 2013

instead of the steak house, perhaps it’s not the best choice of entertainment. It has to round the bases and serve every venue and offering in the resort.” At MGM Resorts International, with 10 resorts on the Vegas Strip alone, the operative word is “options,” says Chris Baldizan, senior vice president of entertainment for the global company. In the 1970s, when the U.S. casino industry was limited to Nevada, entertainment was little more than an amenity— with the only game in town, it didn’t have to contribute appreciably to the bottom line. “It was, ‘Come stay at our place and gamble, and by the way, see a great show or have a nice dinner,’” says Baldizan. “Those amenities were either complimentary, or the price points were such that they were not revenue drivers.” Today, with gaming revenue not always the biggest slice of the pie, entertainment has to pull its own weight. “Not only is it the traditional lounges and theaters, it’s arena acts and headliners, it’s dining, it’s shopping, it’s going to nightclubs, it’s going to day pools and day clubs,” says Baldizan. “That same dollar has been split so many different ways—and oh, by the way, we’re still trying to find some people who are gaming.”

The Cost of Doing Business A key demographic in Las Vegas is the business customer, who doesn’t travel to Sin City solely to sell widgets. More than 19,000 conventions and trade shows brought approximately 5 million people to the city last year, and when day is done, those conventioneers and meeting attendees are ready to cut loose. Bundling entertainment with the convention or meeting crowd is a natural, says Baldizan. “A property like Mandalay Bay is geared more toward convention clients, especially during the mid-week, but we’re also adding a new nightclub there and a new Cirque show (Michael Jackson: One). We try to strategically place entertainment options at each of our properties that make the most sense to the demographic going there, or those we’re trying to get there. We have an army, literally, of sales associates and sales managers who keep entertainment as a tool in their bucket—the ability to offer group discounts or buyouts for specific shows,” he says. Last month, for example, country singer Carrie Underwood performed a public show at the Mandalay Bay Event Center on a Saturday night. The following Monday—usually a “dark” night for headliners—a convention group staying at the MGM Grand “piggybacked on that (to get) a private show,” says Baldizan. “Another example is Santana, which has a residency at the House of Blues. Many conventions will do a buyout of a show or buy a block of 200 tickets for a show.” Billups recalls an instance in which two dozen high rollers wanted to meet legendary singer Tony Bennett, who was in concert. The casino arranged a meet-and-greet, and the gaming activity that night “covered the cost of Bennett,” Billups says. “The 10,000 people in the arena became profit. So is the value in the ticket sales or the casino, or is it in the meet-and-greet afterward?”

New Direction How much have times changed? Cantone of Mohegan Sun notes that today, many casinos do not even include the word “casino” in their brand name. “People say, ‘What business are you in?’ Well, we’re not in the gaming business. We are in the entertainment business, all of us. Whether it’s a restaurant or a club or an event or a show, we are in the entertainment industry. Gaming happens to be part of it, and it’s a very important part, but it’s not the only part. “All we do,” he says, “is create memories.” Billups agrees. “We see this all the time in Vegas. I ask, ‘How did you enjoy your trip? Did you win or lose?’ and they say, ‘Oh, it was great, but we were so busy we hardly had time to hit the slots or the tables.’”

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Making a Mark A “one-stop shopping center” for evaluating the efficacy of marketing programs By Dean M. Macomber hile it would be overly simplistic and wrong to use only one metric to monitor and measure marketing performance, marginal return—the performance of the last unit of marketing effort—is one of the best. Marginal return may be used to measure the performance of a given marketing program/initiative, target market segment, and competitive dynamics and impact. Marginal return is also a valid tool to rank-order the allocation of finite marketing resources among various marketing programs and target market segments. Applying marginal return analyses to marketing, however, requires certain infrastructure and mindset. This article will review the theory and the support environment needed to employ the theory as well as provide examples along the way to illustrate how marginal return works in practice.

An Introduction This is the first part of a two-part article that sequentially takes the act of marketing from a focus on theory in Part 1, morphing in Part 2 into a description of practical market tools and approaches that culminates in the rather sophisticated use of marginal return as perhaps one of the best tools to measure and manage marketing performance. To get there and understand what is taking place when we do, however, we must begin with marketing theory.

Key Marketing Principles And Approach At its best, marketing is a process. Lest this statement scare off marketers who fear encumbrance of an effort that at its heart they believe needs to be loose, unconstrained, managed more by trial-and-error than rules, these two approaches need not be mutually exclusive. In fact, provisions must be made for both, but I would just as strongly advocate that the soft side of marketing as we might call it should take place upon a foundation of a proactive, systematized marketing process in order to harness the benefits of both approaches. Both approaches begin with the first and core driving principle of marketing: Develop goods and services (collectively “products”) that meet or exceed the needs, wants and expectations of the consumer at a price that creates a real or perceived value. From this departure point is where the systemization aspect takes off, the second principle of marketing: Market to market segments. Intentionally or unintentionally, all businesses market (sell) their products to market segments. Market segments may be loosely defined as groups of consumers with similarities. The needs, wants and expectations of potential market segments (target market segments or “TMSs”) are then synthesized into goods and services that respond to those needs, wants and expectations. Some companies build products around TMSs while others find TMSs for the products they build. Either approach works, as long as the two are ultimately connected and perfectly aligned. 44

Global Gaming Business APRIL 2013

There are many ways to identify and define a TMS, but that is the subject of another article. Suffice to say at this point that any TMS is a good one wherein the consumers in that TMS have similar actionable attributes. Thus, a TMS formulated on where the consumer lives is actionable because it tells us where to contact them, and research tells us that those living close to a casino have different needs, wants and expectations (e.g., day-trip visitors) than those living farther away (e.g., overnight visitors). The use of the TMS provides a basis around which to build, monitor and measure marketing initiatives, and to measure performance. With these two principles in mind, the first step in the development of a systematized process is to identify all available TMSs in the marketplace. From this exhaustive list, the second step is to identify and develop the optimal TMS mix for your property that collectively best aligns with the positioning, attributes and mindset of a given property to the collective needs, wants and expectations of the optimal TMS mix. Note that the optimal TMS mix is assembled not just by figuratively stacking each TMS independently on top of one another and marketing to each separately, but also by grouping multiple TMSs and evaluating them in aggregate until the synergistic potential is optimized. Upon first hearing, this and many other aspects of a systematized process sound very precise and detailed. In reality, the process generally starts out very general and ambiguous, and then, as information and results are gathered and the marketing team becomes more experienced, the TMSs and the data contained within become more detailed and precise, thus diminishing the ambiguity over time. Once the optimal TMS mix is identified, the next step is to continuously, relentlessly and zealously pursue each TMS individually, in groups, and in aggregate through a steady stream of motivators, i.e., actions that motivate patronage. These motivators may be disaggregated into two main types of marketing effort: Product Marketing: Product marketing refers to the development of the concept, production, delivery and receiving of the goods and services offered by the business that meet or exceed the needs, wants and expectations of TMSs (target guest experiences or “TGEs”). The motivator is the raw attractiveness of the product. Overly simplistically, in gaming the product may be thought of as a leisure, entertainment-related experience. In execution, gaming properties offer a number of carefully constructed and produced gaming and non-gaming leisure, entertainment-related experiences. It is the array of these products or TGEs that casinos sell and consumers come to buy. Properly aligned, product marketing extracts the greatest natural demand from the marketplace.

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Demand Stimulation Marketing: Demand stimulation marketing extracts the remaining, latent demand in the marketplace that product marketing cannot do alone. Demand stimulation marketing relies upon dozens of marketing tools to extract this demand, including but not limited to such things as public relations, press relations, signage (external and internal), sales teams, perquisites, hosts and hosting, promotions, discounts (e.g., price discounts, complimentaries, credit), special events, satellite offices, and third-party marketing representatives. Demand stimulation marketing in practice ideally should sequentially follow the demand cycle: create awareness, motivate trial, spur repeat visitation, and engender loyalty. Demand stimulation marketing programs are designed to extract the remaining potential demand in the marketplace. Where the product(s) is/are exactly aligned with the optimal TMS mix or if there is little to no capital available to align the product(s) to the optimal TMS mix, then the marketing effort shifts to demand stimulation marketing. This works, too. In fact, demand stimulation marketing tools can extract demand that would otherwise not manifest by product marketing alone and/or make up for product marketing deficiencies or disadvantages vis a vis your competition. For example, demand stimulation marketing can catalyze a visit from a potential fence-sitting ambivalent but curious gamer. It can also provide an aspirational-based loyalty club that engenders loyalty and allows a given property to capture a greater share of wallet. To maximize the potential of the marketing effort, a holistic, sum-of-the-parts approach must be built around the concepts of product and demand stimulation marketing.

Business Growth Phases Returning to the step where TMSs are being identified and the optimal TMS mix is developed, marketers must identify all potential TMSs, ascribe some potential maximum potential to each TMS, guess-estimate their ability to capture a share of this maximum potential, and guess-estimate the cost (capital and operating) of effectively serving that TMS to yield a guess-estimated maximum potential profit and return. The drivers behind achieving the maximum potential must be thoroughly identified and understood by the marketing team. Additionally, the marketing team needs to identify, comprehend and quantify the risks associated with catering to each TMS—thus in a sense adding a third dimension to the evaluation. Ideally, the end result of this initial exercise is an exhaustive list of potential TMSs with the maximum potential and risks associated with each quantified. The bulk of the time is spent getting to this point. Once this work has been completed, it is a relatively easy task of selecting the optimal TMS mix, i.e., picking those TMSs with the highest maximum potential and least risk as adjusted for any non-quantitative considerations. Once the optimal TMS mix is first established, the formation of marketing initiatives and programs can begin. In practice, the marketing effort should follow the classical business growth phases: launch phase (or opening for a casino), growth phase, maturity/harvest phase, and for some, a wind-down/termination phase. For properties opening, these phases all begin at the same time. However, for properties already open, individual activities at a casino may be at different stages of their own business cycle: e.g., the opening of a new restaurant, bar, club, entertainment venue, MICE center, retail mall, or any number of other activities, even though the property may have been open for some years. There are many performance metrics to use when monitoring, measuring and reacting to actual performance, but the introduction of the business cycle is where the mathematical tool of tracking trends comes in very handy. This means not just tracking where we are but where we have been and where we are going. Performancewise, this means tracking rate of growth: i.e., is our business volume growing, steady or decreasing? Is our profitability growing, steady or decreasing? The answers to these

questions are hugely telling. At launch, growth should be steep and look like a power curve, i.e., growth is increasing at an increasing rate. Growth rates are typically at their highest at this point in the business cycle, at times showing early period-overperiod growth rates of 100 percent or multiples thereof. But, this period is typically also the shortest. Once past launch or the introduction phase, the business typically enters a longer growth phase. In the growth phase, growth is still positive and high, but below the rocket-like growth associated with launch, say more in the 20 percent to 99 percent range. Then, as the marketplace has seen every motivator at least once and/or competitors fight back and/or new casinos open relegating the subject property to “not new” status, and as those with a proclivity to gamble and gamble at the subject casino have been offered motivators at expense levels that begin to reach tolerable maximum limits (i.e., minimum profit margins), the property enters the mature phase. At this point, marketers are trying to squeeze out the remaining untapped demand and seeking new TMSs to add to an optimal TMS mix that is getting stale. In mature markets with no new entrants/competitors, competitors tend to morph into the harvest side of the mature phase. Competitors stop trying to “buy the business” from each other, put “fences” around their marketing niches, cut other costs, and milk the marketplace. This can still be a financially fruitful time because of a depreciated balance sheet and acquired efficiency, but is not going to lead to any “buy” recommendations from stock analysts—but possible good, stable free cash flow for public or private owners. A wind-down or termination phase may end the ownership period wherein the owner feels it is time to end ownership.

Source: sampruett.wordpress.com (Google Search: “Business Growth Phases”)

The growth curve of a new casino may not exactly follow the exact form of slanted S-curve typically associated with the business growth curve, but if smoothed out using various tracking techniques (e.g., moving average), the performance of most properties will follow this template. A growth curve graph and the data contained within is a tool to cross-determine and/or crossvalidate conditions sensed, touched and experienced in day-to-day activities. Marketing theory, business growth phases and the business growth curve can help advise companies to better conceptualize, develop and market their properties. In next month’s issue, Part 2 will build upon marketing theory to discuss practical tools to measure and manage marketing performance. Dean Macomber is president of Macomber International, Inc. With 35 years of diversified experience in the gaming industry ranging from dealer to president, development to operations involving mega-destination resorts to locals-oriented casinos in numerous domestic and international venues, Macomber provides executive-level consulting in the areas of strategic and business planning, feasibility and all other project development phases, and pre- and post-opening management and profit improvement engagements. He can be reached at macomberinc@gmail.com. APRIL 2013 www.ggbmagazine.com

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NATIONAL INDIAN GAMING ASSOCIATION by ERNEST STEVENS, JR.

Indian Impact Tribal government gaming supports hundreds of tribes, allowing them to provide for their people.

mong Indian tribes, our origins, history and heritage are always important. Our Native nations are the original American democracies, with our own unique life ways and cultures. As we strive to provide a more educated, healthier, prosperous community life, we always focus on our culture. We look toward the 7th generation of our people, so we can provide a future for our children, their children and the coming generations. Through Indian gaming, many of our Indian tribes have achieved cultural revitalization, provided new educational opportunities, embarked on restorative health initiatives and worked to create new jobs and opportunities for our people. This year is the 25th anniversary of the enactment of the Indian Gaming Regulatory Act, and it is evident that Indian gaming has achieved great success. The goal of the act is to “promote tribal economic development, tribal self-sufficiency, and strong tribal government.” Through Indian gaming, significant tribal economic, cultural, community and governmental progress has been made by many, many Indian tribes. Approximately 240 Indian tribes use gaming to generate essential governmental revenues for education, health care, child and elder care, police and fire protection, community development and cultural revitalization. Indian gaming now generates 600,000 jobs annually and approximately $27 billion in gross revenues. That equals all the small business activity in Indian Country, and Indian gaming generates much of that small business activity. Today, we must safeguard our industry as we see the development of internet gaming. We need fair access to legal markets, and a fair regulatory structure that recognizes Indian sovereignty, respects our tribal tax base, and acknowledges Native nations as equal partners with the federal government. The origin of the federal-tribal relationship is what the Constitution requires—bilateral nationto-nation relations based upon mutual consent. That’s reflected in the Commerce Clause, where the Indian Commerce Clause parallels the language of the Foreign Commerce Clause. Congress has the power to regulate commerce with the Indian 46

Global Gaming Business APRIL 2013

tribes, not for the Indian tribes. Treaty-making is the embodiment of mutual consent, and the Supremacy Clause classes our treaties among the Supreme Law of the Land. We will call upon the United States Congress to honor the original intent of the Constitution. Naturally, we are watching the developments in Nevada and New Jersey concerning internet gaming with interest. Gaming is crucial to the economies of these states, and they are working to enter the arena of internet gaming. Other states will follow. Indian tribes are looking to enter internet gaming through inter-tribal consortia, as recognized in the Indian Gaming Regulatory Act and safeguarded through the Unlawful Internet Gambling Enforcement Act. At the same time, tribes are closely monitoring federal legislative developments

of revision, once again. During that process, it is imperative that Indian tribes be respected as enduring nations. Our Native people are dual citizens— citizens of the United States and citizens of our Native nations. The United States must continue to respect our tribal governments and not interfere with tribal self-government by taxing tribal citizens for partaking in tribal self-government. On the regulatory front, the National Indian Gaming Commission has been active. In terms of regulations, NIGC has been working on background check and licensing standards for management and key employees, minimum internal control and technical standards for Class II gaming with a new emphasis on gaming kiosks, enforcement procedures and appeal processes. Recently, the NIGC has undertaken to revise and streamline

‘‘

We must safeguard our industry as we see the development of internet gaming. We need fair access to legal markets, and a fair regulatory structure that recognizes Indian sovereignty, respects our tribal tax base, and acknowledges Native nations as equal partners with the federal government. on internet gaming. The nation is transfixed by the sequestration debate. We all need a sound federal budget that leaves room for the growth and development of the great engine of democracy—the economy. Yet, at the same time, America cannot abandon Americans, who need support through unemployment insurance, WIC, assistance to families in need, commodities, heating and housing assistance, disability insurance, etc. We cannot abandon our elders, who have worked a lifetime to secure a stable retirement. Native Americans and all Americans are counting on the president to provide leadership and the Congress to act as effective partners in the effort to safeguard the nation, now and for the future, through sound, thoughtful budgetary action. Soon the focus will turn to tax reform. The modern federal income tax code was developed in the 1950s and revised in 1986. Now, over a period of decades, the federal income tax code has picked up provisions that are not effective and it is in need

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its consultation policy, yet we are always cautious about “streamlining” consultation because Indian tribes always must ensure that vigorous consultation occurs before any change that impacts tribal self-government or Indian gaming operations. As we move forward in the second term of President Barack Obama, it is a time of opportunity, expectancy, and potential progress. We want to join in turning the wheel of progress forward to provide a better life for all Americans. We must renew our communities and revitalize our Indian traditions as we take those steps forward. It is a challenging time and an exciting time. We look forward to joining hands across Indian Country and across America in this 25th anniversary year of the Indian Gaming Regulatory Act. Ernie Stevens, Jr. is the chairman and national spokesman for the National Indian Gaming Association in Washington, D.C. Stevens is currently serving his sixth two-year term as the organization’s leader.

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Unrestricted U nrestricted support suppor t ffor or UNLV UNLV provides provides educational unique educatio nal oopportunities ppor tunities students.. for our students

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Knights of the Roundtable {

GLI event draws 400 regulators by Patrick Roberts

}

or many regulators, the GLI Roundtable is the highlight of the year. Toiling away in government offices doesn’t provide much feedback for the difficult evaluations and decisions made by those dedicated public servants, so a trip to Las Vegas to hear about the latest technology and network with similar public officials from other jurisdictions is just what the doctor ordered. The GLI Roundtable held its 12th edition last month at the Flamingo Hotel and Casino, and recorded a record number of attendees, with more than 400 regulators and public officials accepting the invitation. GLI, one of the leading testing labs in the gaming business, has expanded dramatically over the past several years. President James Maida explained to the audience that the company has added over 200 employees in the last two years to accommodate the massive increase in business, as well as prospective testing challenges that will come with the onset of online gaming in major markets like the United States. In addition to general sessions that addressed topics of interest to all attendees, the GLI Roundtable also featured “Learning Modules” that broke down the overall topics into smaller, more focused sessions. Online gaming was a key component of the discussions this year, considering the legalization of the electronic wagering systems in three states and more likely to join in. And attendees and invited guests of GLI gathered for a fun event at the end of the first day. GLI took over the Margaritaville Restaurant in the Flamingo, featuring food, drinks and networking. At the opening keynote address, Bally Technologies President and CEO Ramesh Srinivasan addressed the audience and stressed how quickly the gaming industry is changing, and why regulators need to stay ahead of the curve. “It’s a fast-paced world,” said Srinivasan, “and the gaming industry must get better and learn how to change.” He also explained that even though there is a perception that gaming technology companies are on the cutting edge, there are many hurdles that hold back those types of companies, including flat revenue for slot manufacturers over the past five years, capital constraints, the relatively slow speed of the B2B business model versus the B2C model, and disputes over intellectual property. A social gaming panel was also assembled to discuss how regulators should respond to the phenomenon of social gambling. With GLI Vice President Kevin 48

Global Gaming Business APRIL 2013

Left: Bally CEO Ramesh Srinivasan (r.) is welcomed by GLI President James Maida. An opening night reception at Jimmy Buffett’s Margaritaville brought together regulators and gaming executives.

Mullally moderating, the panel featured John Cramp, CEO of Gaming Network Solutions; Ian Grieve, VP of distribution for 3G Studios; Jamie Hummingbird, director of the Cherokee Nation Gaming Commission; Mitch Kamin, principal with Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg P.C.; and Mark Ostrowski, executive director of the Illinois Gaming Board. The panelists began by noting that “virtual goods” are the underpinning of all social gaming, and by their very nature, they have no value. But Cramp noted that there are some exchanges where these “goods” can be exchange for things of value. Nonetheless, there is little monetization of social gaming, so regulations are not necessary at this time, they all agreed. And because there are no laws governing it or court cases defining it, establishing regulations would be difficult. But the future is a different story. Mullally pointed out that virtually all companies involved in social gaming have plans to monetize social gaming and move players from their “premium games” to money games. That’s when regulations will become necessary, said Hummingbird. But perhaps the lynchpin for the GLI Roundtable each year is the interaction between Maida and Patrick Moore, GLI’s director of technical compliance. The two identify issues that regulators must consider each year; things that will change the way they do things. This year, the list included many technology advances: 1) New Technology vs. Legacy Regulations: With technology advancing so quickly, Maida emphasized regulators must also move quickly. If the regulatory structure requires long consideration of new rules, Maida says agencies should find a fast-track method to change rules, or the regulations themselves will start to regress. 2) Skill-Based Gaming: While most regulations about skill-based games centered around poker and blackjack, Moore explained that many slot machines now have skill-based applications, mostly in the bonus rounds, which requires physical dexterity to get the biggest advantage. He said these games have begun to attract Gen X and Gen Y players because of the similarity to video games.

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{

And in addition to joystick-like devices, the technology is advancing quickly to include biometric moves, like gazes, gestures and voice. Although those advancements are not yet fieldready, it won’t be long. 3) Promotional Games: Like community games, these games have communal features that include several machines, banks of machines or all the machines in a casino. Triggered by “picture-in-picture” technology, these games have a player interface technology that is groundbreaking. 4) Cloud Computing: Hardly a new technology, cloud technology is new to gaming, and regulations will require quick updates to stay current. The challenges for regulators are the off-site locations and the security of the cloud itself. And audits of cloud operators may become necessary in the future. 5) Social Gaming: This is the wild card. Today, the focus is on the premium model (players pay to buy points) versus free play. The games have strong demographics: women 25-38. And there’s a big lottery component to social games that will continue to expand. 6) Game Authentication Terminal: GATs are a connection with a laptop computer that allows machines to spill out all their data to the computer using a protocol adopted by the Gaming Standards Association. The computer basically interrogates the game. By satisfying GAT requirements, the protocol revolutionizes how the floor is managed from a regulatory standpoint. 7) Network Security: With hacking seemingly a daily occurrence, it’s only a question of time before an online casino is hit. So more robust network security is necessary, including higher encryption speed, complicated algorithm changes, stepped-up cyber security and the expansion of two-factor authentication for players. 8) Convergence: The i-gaming and lottery markets have already converged, with most companies having dual divisions. But the gaming market is also being addressed, with companies like Lottomatica (soon to be GTECH), Scientific Games (the recent purchase of WMS Gaming) and Intralot all having slot manufacturing businesses, as well as lottery and online gaming divisions.

iGaming Gathering

he latest edition of iGaming North America drew more than 500 attendees in February at Planet Hollywood in Las Vegas to hear the latest information about online gaming and its applications to the North American market. From a keynote conversation between iGNA organizer Sue Schneider and outgoing American Gaming Association Preisdent and CEO Frank J. Fahrenkopf, Jr., to a session that featured poker superstar Daniel Negreanu, attendees at the conference were wowed by the information and the technology used to spread it.

Sue Schneider and Frank J. Fahrenkopf discussed the land-based gaming industry’s historical views about online gaming.

Left: Acres 4.0 founder John Acres offers his vision of how online gaming and land-based gaming will forge a new experience for players. Right: Poker pro Daniel Negreanu

World Poker Tour founder Steve Lipscomb and Maryland Lottery & Gaming Commission Executive Director Stephen Martino listen to Aristocrat Americas COO Atul Bali make a point about the future of online gaming.

APRIL 2013 www.ggbmagazine.com

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GLOBAL GAMING WOMEN by MONIKA RACEK, Novomatic Group of Companies

Balancing Act Is the concept of a work-family balance myth or reality?

Early this March, the U.S. Chamber of Commerce’s Center for Women in Business released new research analyzing the best practices of 12 companies that are leaders in promoting and developing women at the board, C-suite and management levels. The results, developed in conjunction with McKinsey and Company, reveal that companies that excel in this area share several common threads. Among the leading companies, commitment to gender equality starts at the top. Senior management—from the CEO on down—is committed to gender equality. The top companies all have leaders who are personally invested in diversity, and a top team or specialized group responsible for acknowledging and discussing diversity issues. Top performers also invest in internal women’s development programs, creating opportunities for talented employees to grow and excel. Finally, successful programs are backed up by accountability. Recruitment and talent management programs are designed to promote women’s advancement. And progress—or the lack thereof— in hiring and promoting women is measured, reported and discussed at all levels of the organization. In short, gender equality among these top companies is not just a buzzword or aspiration— it is an expectation built into the cultural and operational structure of their businesses. Many gaming companies make gender equality a priority, and Global Gaming Women will be working with industry leadership in the months and years ahead to determine how gaming companies can ensure these values can best be translated into measureable business practice. In the meantime, here’s one Global Gaming Woman’s experience of how working in the gaming industry has allowed her to have a successful career while balancing a successful home life as well. There are countless stories like hers, and we look forward to sharing them in this forum and others.

Global Gaming Business APRIL 2013

he ability to reconcile children with a career is discussed frequently these days. Before I get started, let me make a confession: until 28 weeks ago, this issue was completely off my radar. Since graduating from law school, I had been committed 100 percent to my new, exciting working environment. My main aspiration had been to gather professional experience in all kinds of areas, industries and positions, because I had only one goal: to learn, to prove myself and to gather the utmost amount of experience in as little time as possible. But already during my yearlong court internship and after entering my professional career (as a research associate at the higher administrative court), several female colleagues of my generation were quick to impress upon me the obvious advantages of having a career as a judge, thus implying an employment by the state. What surprised me and was beyond my comprehension at the time was that these advantages related exclusively to the supposed option of having both children and a career. When discussing the advantages of such a career, the only arguments these women, who at the time were 23-24 years old, brought forward related to the presumed compatibility of the desire to have children (which, I am certain, in some cases cannot have been fully formed yet) and the flexibility in terms of time, which the profession of a judge would entail. According to them, such a balance would be hard to find in the private sector. When after two years I finally decided to take the leap into the private sector, some of these female colleagues simply could not understand what had gotten into me. Switching to the “insecure” private sector in times such as these? With all its uncomfortable implications, such as 60-70-hour weeks, all-in contracts, zero private life and thus no opportunity of “getting” both children and a career? In their eyes it was obvious: I had clearly lost my mind.

Six years ago, after having worked as a legal consultant for a consulting firm, I decided to switch to the unfamiliar, but all the more fascinating gaming industry. At the time, I was 30 years old, unmarried and without children. As the gaming industry is traditionally male-dominated, I must admit I was quite surprised once I got to know and experience firsthand the family spirit of this company. The company offered me, right from the beginning, permanent opportunities for further development. In 2011, I was appointed to the board of directors of Admiral Casinos & Entertainment AG, a wholly-owned subsidiary of Novomatic. In light of recent events, however, I will soon be able to report from my own experience that the value of family—and thus a balance between family and work—is not subordinated, but rather seen as equivalent and equally important. My current situation shows that there is no contradiction in wanting to manage not only professional but also private agendas. Let me also mention that there were the CEO and the owner of the company who spoke of the compatibility of work and family not as something special, but rather as something selfevident. For me, personally, this attitude demonstrated by our leaders is both an incentive and a responsibility to overcome the challenges of both my company and my family. I will be glad to share with you how this “plays” out. Dr. Monika Racek has been on the board of directors of Admiral Casinos & Entertainment AG, based in Gumpoldskirchen, Austria, since June 2011. She is responsible for the protection of players, as well as human resources and legal affairs. Besides her work for Admiral, she is head of responsible gaming and corporate social responsibility (CSR) for Novomatic Group of Companies. To read the U.S. Chamber’s Center for Women in Business report, “Advancing Women to the Top,” visit cwb.uschamber.com.

RDEad2013

10/10/12

2:34 PM

Page 1

EXPERIENCE

“

The RD&E Experience was a cutting edge look at the future of the gaming industry and how to synergize your non-gaming amenities to ensure the profitability and long term competitiveness of your casino enterprise.

”

—Mark Birtha, Station Casinos

RETAIL, DINING & ENTERTAINMENT IN THE GAMING AND HOSPITALITY INDUSTRY

SAVE the DATE Global Gaming Business Magazine and The Innovation Group of Companies will once again present the groundbreaking conference RD&E Experience. RD&E is the only conference dedicated to non-gaming amenities and the revenue they produce. Come claim your share.

Don’t miss it!

MAY 1-2, 2013 Planet Hollywood, Las Vegas For Information contact Bonnie Rattner at 702-596-9182 or brattner@ggbmagazine.com

www.RDEexperience.com

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NEW GAME REVIEW by Frank Legato

Catch The Money Aruze Gaming

his is the latest game in Aruze’s “Innovator With Radiant Reels” series. The name refers to the reels themselves, which are bright and pulsate with various colors (there’s even a brightness control to adjust the visuals). Also, the reels are oversized—at 18.1 inches across, with each reel strip measuring 3.54 inches, they are the largest strips for a five-reel format in the business. Along with the lighting effects, the reels spin at variable speeds according to what’s happening in the game. Catch the Money is a five-reel, five-line stepper game with scatter-pays and a bonus feature called “Money Bag Chance.” There is a wild symbol that applies to all symbols in the base game except for bonus triggers. The player is awarded the scatter pay when any of the “Coins” or “Money Bag Chance” symbols appear on the reels. The Money Bag Chance symbol appears only on the middle reel. The Money Bag Chance feature is triggered when the bonus symbol appears on the third reel. A new set of bonus reels appears, and the player spins a wheel in the top box to determine a number of free spins.

The wheel—it can be spun by physically touching the wheel on the top screen, or by pressing a spin button—awards six, eight, 12 or 15 free games on the bonus reels. The feature ends when any “7” win appears, or the displayed number of free games has been played. Five 7s on the bonus reels return the game’s progressive jackpot, which resets at $200. (The feature cannot be triggered again during the feature.) Credits bet and lines played during the feature are the same as the game that triggered the feature. Manufacturer: Aruze Gaming Platform: Innovator With Radiant Reels Format: Five-reel, five-line stepper slot Denomination: .01 Max Bet: 150, 300, 450, 600 Top Award: Progressive; $200 reset Hit Frequency: Approximately 50% Theoretical Hold: 2.1%—13%

Superman, The Comic Series Aristocrat Technologies

he first “Superman” slot released by Aristocrat was based on the 1978 film starring Christopher Reeve. This second slot carrying the Man of Steel theme is based on the classic comic-book version of Superman, according to the latest updates to the super-hero in DC Comics. Superman, The Comic Series features all the familiar images of the comic-book Man of Steel and his enemies (mainly the famously diabolical Lex Luthor), and a stable of bonus events evoking the legendary comic series. One special feature relates to the design of the cabinet containing the slot. Called the “Vervehd” cabinet, it features an extra wide, extra-long video display in a vertical top-box monitor. This results in bonus events like a “Random Reel Increase,” in which Superman flies onto the screen and expands the reels from four symbols to as many as eight symbols, and pays for any additional winning combinations. Other features can occur in the base game, even with the extra-long reels in play. In “Clark Kent Symbol Change,” all Clark Kent symbols will randomly change into Superman symbols. With “Wild Drill Down,” wild symbols will randomly change symbols directly below them into wild symbols. 52

Global Gaming Business APRIL 2013

There also is a free games feature, in which eight, 10 or 15 free games are awarded. During the free games, any reels that randomly stretch to eight symbols high lock in at that height for the remainder of the free spins. A winning combination of “kryptonite” symbols awards two extra free games. Finally, the larger bets on this game transform it into a higher-level game with a different theme and different reel configuration. When the player bets 50-250 credits per spin, the game is themed around Superman, in the “Reel Power 4x5” format—no paylines, but wins on adjacent reels, with four symbols on each of the five reels. The Superman theme carries a progressive jackpot resetting at $250,000. Betting more than $5 a spin—from 500 credits to 2,500 credits—changes the theme to Lex Luthor, and changes the top jackpot to $2.5 million. The top jackpot is won when five gold shield symbols land in a row. The player touches the shields to reveal credit prizes or “$” symbols. Five $ symbols return the grand jackpot. Manufacturer: Aristocrat Technologies Platform: Gen7 Format: Five-reel, “Reel Power 4X5” video slot Denomination: .01 Max Bet: 2,500 Top Award: Progressive; resets of $250,000 and $2.5 million Hit Frequency: Approximately 50% Theoretical Hold: 9.49%—12.37%

Tee Up

for

Responsible Show your support for responsible gaming research and education at the 15th Annual AGEM-AGA Golf Classic, presented by JCM Global. This charity event will take place on Tuesday, April 30 at gorgeous Cascata in Boulder City, Nev. Proceeds from the event will benefit the National Center for Responsible Gaming (NCRG), the only national organization exclusively devoted to the funding of peer-reviewed research on gambling disorders and to educating the public about gambling disorders and responsible gaming. More than $1 million has been raised for the NCRG since the event’s inception. Don’t miss your chance to enjoy one of America’s most breathtaking golf courses while helping to fund the important work of the NCRG. If you are interested in sponsoring the event or teeing off yourself, visit the Golf Classic website, Golf.JCMGlobal.com.

Photo @ iStockphoto.com/mrPliskin

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Deal Or No Deal Join ’N Play 2 Spielo International

his is a new version of the game that has been one of Spielo’s franchise players since its original introduction under the Atronic brand in Europe—it was introduced in the U.S. after the American version of the popular game show, based on a basic gambling feature, debuted on NBC in 2005 starring host Howie Mandell. The central feature of the game show has remained relatively unchanged in the slot machine through all its incarnations. Called the “Briefcase Bonus,” the feature allows the player to pick one of a group of briefcases. The values of all the briefcases are revealed, but not which amount is in which case. The player then selects a briefcase or briefcases to open, permitting a rough estimate of the values in the remaining hidden cases, including the player’s. The “Banker” then makes the player an offer for his briefcase, and the player can accept the guaranteed bonus—making it a “Deal”—or reject it with “No Deal.” The process is then repeated, with subsequent offers adjusted according to the likely value of the remaining hidden cases, until either the player accepts a deal or is left holding the only briefcase. This newest version of the game is the second entry of the communitystyle Briefcase Bonus, in which all players in the bank who have earned 18 “Qualifier Cases” participate in the common bonus event. The Community Bonus, which occurs randomly during base-game play, is guaranteed to hit at least every eight minutes.

Other bonus features in the new version include the “Banker’s Offer,” a miniature version of the Briefcase Bonus with only one round of offers; and the “Take Or Risk” bonus, in which the player is presented a briefcase and an offer, and can take the offer or risk opening a mystery briefcase for more or less money. The “Build Your Win” bonus presents the player with three briefcases, each hiding a single digit. The player strategically places each digit on a five-digit field to create the biggest win possible. These events involving the briefcases and offers are accompanied by a free-spin bonus in which eight free games are awarded at a 2X multiplier, and the “Best Deal Bonus,” in which the player chooses from five different amounts offered by the Banker for what they feel is the “Best Deal.” Both of these events award credits and “Qualifier Cases” toward qualifying for the Community Bonus. Manufacturer: Spielo International Platform: Sensys Ep Format: Five-reel, 50-line video slot Denomination: .01 Max Bet: 250 Top Award: 10,000 credits times line bet Hit Frequency: 30.4%, 30.7% Theoretical Hold: 5.97%—14.05%

Desert Sky

Multimedia Games

his Southwest-themed video slot from Multimedia Games features a base-game bonus multiplier in a five-reel, 50-line setup with a four-by-five configuration (four rows of symbols instead of the standard three). The multiplier feature, called “Straight Shot Multipliers,” increases line wins for the four “straight,” or horizontal paylines. Wins on payline No. 1 are multiplied by three. Wins on payline No. 2 pay 5 times the normal payout; wins on payline No. 3, 7X; and payline No. 4, 10X. The multipliers apply to both base-game spins and the Free Spin bonus. Three, four or five scattered Free Spin symbols award 10, 20 or 40 free spins, respectively. The free-game round can be re-triggered at any time during the free spins, for a total of up to 120 free spins. The game program features medium volatility in seven different payout configurations from 85 percent to 98 percent. Desert Sky carries Multimedia Games’ 180-day house average guarantee. If, during the first 180 days the game is placed, it does not perform above 90 percent of the house average for the same denomination for a 30-day period, Multimedia Games will convert the game to a different, similar-type game at no additional cost. 54

Global Gaming Business APRIL 2013

Additionally, Multimedia advertises the game as “TournEvent Ready,” meaning it can be placed in existing setups of TournEvent, the instant tournament system that is one of the manufacturer’s most popular products. Manufacturer: Multimedia Games Platform: MGAM Video Reel Format: Five-reel, 50-line video slot Denomination: .01, .02, .03 Max Bet: 500 Top Award: 524,000 Hit Frequency: Approximately 50% Theoretical Hold: 2%—15%

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FRANKLY SPEAKING by Frank Legato

News We Can Use

Global Gaming Business APRIL 2013

VIC TOR RINAL DO

K, did Miley Cirus and Liam Hemsworth really split? Are Jennifer Aniston and Justin Theroux really already married? Are Sean Lowe and Catherine Giudici from The Bachelor really “saving it” until after the wedding? Boy, I’m glad I don’t have to deal with the “regular news” in this column. I can’t imagine having to offer analysis of complicated news events such as the above. Luckily, there is plenty of casino news that is ripe for the kind of thorough, insightful analysis you’ve come to expect in this space. (Ha ha.) For instance: A man in Oklahoma was arrested and charged with “maiming” in connection with a casino incident. When I saw the headline, I thought someone went at another casino player with a chain saw or something. As it turns out, a player was hauled to jail for biting a casino security guard. “It was a very substantial bite,” Catoosa Police Chief Kevin McKim told reporters. Boy, if I had to go to jail every time I bit a security guard, they’d have to send me up for life. (OK, I’m kidding. I only bite video poker machines.) Evidently, the guard is going to be fine, although he will need rabies shots, and the player is going to be put down. In other gaming news, bookmakers across Europe and in Las Vegas have proven once again that they will take bets on anything. Last month, they were taking bets on who the new pope was going to be. As cardinals of the Catholic Church began their conclave to elect a new pope last month, bookmakers were giving 100,000-to-1 odds on U2 singer Bono and roughly the same odds on disgraced cyclist Lance Armstrong becoming pope. The conclave took two days and three votes (I think the first two votes were just the cardinals doing the old “pope-adope” routine on us) before they picked a cardinal from Argentina who took the name Pope Francis I. Pope Frank. Imagine that. I had planned to put my money on Sheldon Adelson—Pope Sands I—until I realized that it almost certainly would be a cardinal who became pope. So I went with Carlos Beltran. In still other gaming news, I came across a press release on a new

casino product that no player will want to be without. It’s called the “Gamble Box,” touted by its manufacturer as a “revolutionary pocket-sized device to help gamblers quit while they’re ahead.” It is a wallet-sized steel box with a lock on it. The idea is to slide folded cash winnings into a slot in the top of the box. You’re supposed to leave the key at home, so you won’t be able to get at your winnings until you’re away from the casino. Is it me, or are there more effective money-management techniques out there? Like, say, printing your cash-out ticket and sticking it in your wallet? Also, the manufacturer of this product must realize there are these amazing machines at casinos that let you stick a card in and get cash out. I suppose the instructions tell you to keep your ATM card and credit cards in the locked box too, right? Personally, I have a fail-safe money management technique. If I lose, I just bite a security guard. Then, I go to jail, where I can’t gamble. Finally, it appears the old Stardust site on the Las Vegas Strip is actually going to have a real casino on it. Malaysian casino giant Genting announced it is buying the site of what was once going to be Boyd’s Echelon project to create a China-themed resort, complete with a faux Great Wall. They even plan a panda exhibit. Do you suppose they’ll have dealers and cocktail servers dress up like Mao? Will there be pandas dressed up like Elvis? Will there be little red books in the rooms instead of the Gideon Bible? Will they have American take-out? Seriously, though, the casino will carry Genting’s Resorts World brand, and whatever they do, it is sure to be an improvement over the current resort that graces the site, the Rusty Bare Structural Steel Casino Resort and Spa. By the way, one more bit of monumental “regular” news that actually was posted on an internet news site: Kim Kardashian almost got a speeding ticket. According to a source close to the investigation, the cop let her off with a warning. Whew, thank goodness for Kim. A speeding ticket surely would have ruined her chances to become pope.

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CUTTING EDGE by Frank Legato

Custom Surveillance Product: Video System Integration Manufacturer: North American Video

ideo surveillance installations designed and deployed by North American Video deliver the benefit of NAV’s specific gaming market expertise and product knowledge. With the key objectives of risk mitigation, loss prevention and compliance, NAV customizes each system with the technologies and products that meet the needs of customers while improving efficiency. For gaming installations, performance specifications must be designed to ensure compliance with strict jurisdictional regulations, defining required parameters including frame rates, retention time and surveillance coverage. Further, integration with other casino applications including access control, perimeter security, license plate recognition, car counting, people counting and retail point-of sale (POS) systems delivers enhanced operational benefits for casino operators, improving ROI. Expert planning and deployment of a video surveillance system greatly improves the user experience with multiple ease-of-use benefits. For example, a graphical or logical layout interface is more intuitive than having to memorize monitor and camera numbers. Simplified user interfaces also enable more effective use of monitors and monitor walls, and can prevent operators from missing events. Multi-view displays, in conjunction with high-definition monitors, provide the capability for enhanced surveillance of gaming tables, cash cages and other highly sensitive

areas within the casino. IP systems also have the ability to present live video and play back archived video on the same monitor, enabling more timely investigation of suspicious gaming table activity. Beyond design and implementation, NAV provides expert guidance regarding repair or replacement, assists security and IT staff with budgeting and provides predictable costs for support and maintenance through a single contract. As new products and technologies come to market, the experienced system integrator can help assess the benefits for the casino. This helps users stay ahead of changing business conditions or compliance/regulatory issues. For more information on North American Video, e-mail info@navcctv.com, call toll-free 1-800-714-0717, or visit www.navcctv.com.

Real-Time Service Product: Kai Manufacturer: Acres 4.0

cres 4.0 is launching a computer software product that assures service, personnel management and other slot floor management, all in real time using mobile devices. “Kai” is the world’s first virtual slot floor manager, with the sole goal to make players happier and lower costs. It operates by listening into the back-of-house slot system and sending messages over secured Wi-Fi to the appropriate staff members to handle each service event via mobile hand-held devices—no live human dispatcher required. Kai keeps an updated database that holds all employees, their skills, assigned work areas and current tasks. It instantly detects problems—hand-paid jackpots, ticket paper empty, bill jams, etc.—and dispatches the most qualified, available employee from the database to respond via an app running on inexpensive iPods and iPads. If there is a carded player on the machine with the event, Kai knows that too, and will tell the employee the player’s name and tier level for greater personalized service.

Global Gaming Business APRIL 2013

When the floor is busy, Kai prioritizes player needs according to worth: Valuable players receive immediate attention, while no one waits too long for help. Kai automatically performs MEAL entries, providing easily accessible records and full compliance with regulations. This means gone are the days of paper books inside machines with illegible entries. Now, records are kept digitally and easily accessed from a desktop computer. Kai measures each employee’s performance via an iPad app and keeps managers informed of what’s happening on the floor at every moment of the day, so operators can better plan staffing levels, improve training and conduct more objective employee reviews. In-application text and radio communications allow employees to communicate across the floor seamlessly, making standard expensive radios obsolete. For more information, visit www.acres4.com.

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Jersey Joins Online gaming legalization sparks battle between U.S. landbased casinos and PokerStars By Patrick Roberts

New Jersey Governor Chris Christie

ew Jersey has entered the burgeoning U.S. online gaming market. Governor Chris Christie signed internet gambling bill AB 2578 in late February, making his state the third to approve online casino wagering, behind Nevada and Delaware. The legislation represents the largest expansion of legalized gambling in New Jersey since the first casino began operating in Atlantic City in 1978. Online gambling is expected to have longterm effects on Atlantic City, which has suffered six straight years of declining revenue. Gaming experts have predicted internet gambling could generate as much as $1.2 billion in its first year, but others say that estimate is too high. Christie had conditionally vetoed the bill on February 7, and New Jersey lawmakers worked quickly to re-craft the measure to meet the governor’s approval. Players will now be able to place bets within state borders from their personal computers or mobile devices through servers based at Atlantic City casinos. Games include all types currently being played on casino floors. Internet gambling revenue will be taxed at 15 percent, up from the 10 percent originally proposed. In comparison, gambling revenue won on the casino floors of Atlantic City is taxed at 8 percent. The legislation will have a life span of only 10 years, a trial period the governor insisted upon to assess the effects of online wagering. After that, lawmakers must reauthorize the legislation for it to continue. An increase in funds for gambling addiction was also part of the governor’s recommendations. Ethical provisions have been worked into the bill, extending prohibitions on casino-related employment to internet gambling licensees and affiliates and requiring elected officials to disclose their representation of or participation in entities seeking or holding internet gambling licenses. 60

Global Gaming Business APRIL 2013

Interstate Compacts Perhaps most importantly, the bill allows reciprocal agreements with other states that would allow residents of those states to place a wager through Atlantic City’s internet gambling system. Nevada beat the Garden State by a week when it rushed to pass expanded legislation allowing bets on internet poker from players outside the state in legal online gaming jurisdictions. Interstate compacts will be essential in the growth of online gaming—especially shared poker pools—and could help Atlantic City become a leader in the field. Most experts agree the potential player pools in Delaware and Nevada are too small to create profitable online gaming ventures by themselves, but with New Jersey’s large population, it could stand alone and still be successful. “Finally, some good news for Atlantic City’s future,” said state Senator Raymond Lesniak, one of the strongest proponents of online gambling. “Internet gaming will give an immediate boost to the outlook for Atlantic City’s future, preventing the closing of at least one casino, and saving thousands of jobs,” referring to the almost 3,000 employees at the Atlantic Club and Trump Plaza, the city’s weakest-performing properties. The Atlantic Club is being bought by the Rational Group, owners of the leading online poker sites PokerStars and FullTilt Poker, while the California-based Meruelo Group recently purchased Trump Plaza. Both deals were contingent on the passage of the internet gaming bill. Christie, who had vetoed an internet gambling bill last year over constitutional concerns, weighed the implications of AB 2578 carefully. “This was a critical decision, and one that I

did not make lightly,” Christie said. “But with the proper regulatory framework and safeguards that I insisted on including in the bill, I am confident that we are offering a responsible yet exciting option that will make Atlantic City more competitive while also bringing financial benefits to New Jersey as a whole.” Some of those financial gains have already been factored into Christie’s 2014 budget. Shortly after signing the bill, the governor presented his $33 billion budget proposal, which included a $200 million increase in projected casino revenue taxes in 2014 from internet gambling. Some analysts believe that the estimates for online gaming revenue stated by proponents and the Christie administration are too high. Union Gaming Group of Las Vegas believes that Christie’s estimates are double what can actually be expected. “The governor’s budget summary estimate that proceeds from total casino revenue will be $435.8 million in FY2014, which is up nearly $200 million from $235.4 million in FY2013,” Union Gaming wrote in a note to investors. “The state treasurer’s office estimates that $180 million (90 percent) of the $200 million increase will be related to online gaming. The state is assuming some organic growth in casinos driven by economic recovery and citywide marketing initiatives. Backing into the market revenue size by using the 15 percent tax rate suggests the state believes it will be $1.2 billion. For comparison, Atlantic City casinos collectively generated $3.05 billion in gaming win in 2012. The state is also not likely considering any potential impacts of cannibalization that online gaming could seemingly create.” Comparing the New Jersey online market to already legal European models, Union Gaming says the take from online gaming will be less. “The two main drivers of online gaming revenues are penetration rate and yield per account,” the report continues. “Yield per account is the theoretical annual value of each online player… Combining the two products in New Jersey, we expect the market from a revenue standpoint to generate $530 million in the first full year of operations (versus the likely $1.2 billion the state is forecasting) growing to $840 million after a fiveyear ramp.”

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“

This was a critical decision, and one that I did not make lightly. But with the proper regulatory framework and safeguards that I insisted on including in the bill, I am confident that we are offering a responsible yet exciting option that will make Atlantic City more competitive while also bringing financial benefits to New Jersey as a whole. —Chris Christie,

Rigid Regulations The bill will not take effect until the state Division of Gaming Enforcement announces a start date. The DGE is under a tight, three- to ninemonth deadline to establish a regulatory framework. That framework will have to include player identification and geo-location technology to prevent underage and problem gambling. Gamblers would have to set up online accounts with a particular Atlantic City casino—most likely in person. Regulations are expected to allow players to set daily limits on play and per-hand limits similar to those established on casino floors. There could also be some legal challenges to the system, particularly if interstate compacts are enacted. It’s unclear if the Justice Department would seek to stop any cross-border online gambling, even though it issued a memo in late 2011 saying that only online sports betting is considered illegal under the 1963 Wire Act. But the Unlawful Internet Gambling Enforcement Act of 2006 may be a factor. In addition, the New Jersey racetracks were written out of the bill after being included in a 2010 version that Christie vetoed, so a legal challenge from that group is not out of the question. Casino executives have estimated it could take six months to a year to get the system up and running. Gary Loveman, chairman and chief executive officer of Caesars Entertainment—which runs four properties in Atlantic City—predicted it would be closer to 18 months to two years. Commenting on the potential gains of internet gaming, Loveman told casino analysts, “In New Jersey, you can see it’s quite a meaningful market for us, and we think it will be quite profitable.”

Since the New Jersey legislation includes no “penalty box”—a five-year period imposed on companies that continued to accept U.S. bets after the 2006 passage of the Unlawful Internet Gaming Enforcement Act, which is included in the Nevada law—Rational is able to pursue a New Jersey license. In March, the American Gaming Association objected, citing previous law-breaking by PokerStars, and asked to intervene in the New Jersey regulatory investigation, urging the regulators to block a license for Rational. In response, Rational asked the state to reject the bid because the “AGA lacks a significant interest in the outcome,” and calling it a “thinly veiled anti-competitive campaign against the entry of a competitor into the market.” Many observers see the hand of Caesars En-

Governor of New Jersey

”

tertainment behind the AGA move. Caesars is poised to dominate a New Jersey market with its powerful World Series of Poker brand, but the entry of the possibly more powerful PokerStars brand could derail the online plans of the gaming giant. In a related development, Forbes reported that Caesars tried to sell its Rio Casino Hotel in Las Vegas, along with the World Series of Poker, to Rational in early February. In the letter to the New Jersey regulators seeking to keep the AGA out of the PokerStars investigation, Rational said, “At that time, Caesars suggested that this acquisition would give Pokerstars a better relationship with Caesars and would help PokerStars gain a license in Nevada.” Rational rejected the approach because “it had no plans to acquire another casino in the near term.”

War of the Worlds With the passage of the bill, the Rational Group’s purchase of the Atlantic Club moved forward and ignited a firestorm of criticism from the American casino industry. The company’s PokerStars website was shut down on “Black Friday,” April 15, 2011, when the Justice Department handed down indictments against PokerStars, Full Tilt and Absolute Poker, charging racketeering, money laundering and more. Rational paid a $731 million fine to the DOJ to have the charges dropped with no finding of guilt. APRIL 2013 www.ggbmagazine.com

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GOODS&SERVICES IGT: Split Decision fter months of A back-and-forth in a bitter proxy fight initiated by former Chairman and CEO Charles Mathewson, shareholdIGT CEO Patti Hart ers of slot manufacturer International Game Technology re-elected seven of the company’s eight current directors, while electing one of the three nominees to the board proposed by a dissident shareholder group. At the company’s annual meeting last month, shareholders elected Daniel Silvers, president of New York’s Ader Investment Management, to the IGT board. Silvers was one of a slate of three nominees proposed by Silver’s boss, veteran gaming stock analyst Jason Ader. The other two of the dissident group’s nominees, rejected by shareholders, were former insurance industry executive Raymond J. Brooks and Mathewson, who has been critical of current IGT management, and particularly current CEO Patti Hart, for what the Ader group has called negligence of core IGT products in favor of online and social gaming acquisitions. Ader and Mathewson control 3 percent of IGT’s outstanding shares. Hart was re-elected to the board along with current Chairman Phil Satre and former Nevada Governor Bob Miller, who, the Ader group had pointed out during the proxy battle, are the only two current board members with gaming industry experience. The split decision allows both sides to claim a partial victory in the bitter proxy fight, which saw Hart and the Ader Group exchange broadsides over the direction of the slot-making giant. The Ader Group claimed IGT’s market share had eroded because of costly non-core investments in social media and online gaming platforms, while Hart criticized Mathewson for an “outmoded” vision, and for maintaining a “lavish lifestyle” on the company dime after his 2003 retirement and installation as chairman emeritus.

BMM Debuts New Vegas Headquarters MM Testlabs, a gaming product testing laboraBopened tory and technical consultancy, last month the doors to its new headquarters in southern Nevada. The newly expanded space, located at 815 Pilot Road, Suite G, in Las Vegas, comprises 22,000 62

Global Gaming Business APRIL 2013

square feet with plans of further expansion into an adjacent building. The entire expansion highlights an economic development success story that showcases an innovative business with North American and global impacts. BMM employs more than 200 people in 12 countries and operates 11 gaming labs. It also serves more than 400 gaming jurisdictions. “As our business continues its year-on-year growth, and as we continue to provide gaming product compliance and testing services across North America and international markets, we are proud to make Las Vegas our global business home and celebrate the opening of our wonderful new offices and laboratory space,” said BMM Global President and Chief Executive Officer Martin Storm. “After hiring many staff in Las Vegas over the years, we are looking forward to adding 100 people or so in Las Vegas over the next two years.”

SHFL devices covered on the first day of last year’s G2E Asia

the matter, it appears the dispute will continue. The court ruled that the Asian subsidiary of SHFL entertainment was registered in Macau as a retailer and distributor but not as a manufacturer, and therefore the company’s claim that it was “directly and effectively harmed” by the government’s recognition of Chun’s patents was dismissed. LT Games’ patent for the device was filed before SHFL’s, but SHFL was clearly selling and manufacturing the device prior to LT Games’ patent application. The conflict will continue.

TournEvent Goes National lot manufacturer Multimedia Games anSTournEvent nounced the official launch of its first national of Champions. The event, first de-

BMM executives welcome Nevada regulatory officials to the new facility

As part of the grand opening celebration on March 7, BMM held a VIP event that included tours of the office space and lab, a meet-and-greet with BMM executives and a ribbon-cutting. The event’s theme, “Celebrate Opportunities,” speaks to the opportunities that have evolved from BMM. Among them are: job opportunities with new hires; educational opportunities with BMM’s new scholarship program being developed with UNLV; and Opportunity Village, a charitable organization that BMM supports.

SHFL Loses Macau Appeal he ongoing dispute between SHFL entertainTintellectual ment and LT Games owner Jay Chun over the property rights to electronic table games in Macau got even more heated last month. A SHFL appeal was denied by a Macau court, and the company’s future course in Macau is uncertain. At last year’s G2E Asia, LT Games complained to Macau customs officers, who forced SHFL to cover the games with sheets while the conflict was being resolved. With the decision of the Court of Second Instance, striking down SHFL’s appeal on

signed as a statewide event for casinos using the manufacturer’s TournEvent instant tournament system, is the industry’s first nationwide slot tournament. TournEvent was developed as an instant tournament for dedicated banks, in a system with cameras in each machine that provides an overhead video display of the tournaments in progress. Leaders are displayed on video as a master of ceremonies calls the slot tournament like a sporting event. Special features include a “pop-up” side game that allows players to boost their scores while the tournament is ongoing, and a feature that boosts players into first place automatically. This year, casinos across the country that have

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installed the TournEvent system are eligible to participate with satellite events for the 2013 National TournEvent of Champions. Winners of each casino’s qualifying event receive a five-night trip to Las Vegas (including airfare and accommodations for the participant and a guest) to play in the national championship on September 25, which will be held in conjunction with the Global Gaming Expo. The national finals will be held in the Lagasse’s Stadium, with approximately 75 participants competing for a $100,000 grand prize, bragging rights for their home casino, and the title of Nation’s Best Slot Tournament Player.

G2E Launches iGaming Webinars

G2E Online webinars, the iGaming Virtual ticket and a five-day G2E 2013 conference pass, is available for $2,500.

Bally Installs EBS at Apache

different manufacturers instantly into tournament mode, and back to revenue mode when a tournament is finished. Apache is the first casino in Oklahoma to feature the EBS applications.

system manufacturer Bally TechnoloSninggieslotEliteandannounced it has installed its award-winBonusing Suite of networked bonus

Sci Games/WMS Merger Cleared

game applications at Oklahoma’s Apache Casino Hotel. The networked EBS applications Apache will be able to offer Virtual Racing, the popular floorwide video horse race, the NASCAR version of Virtual Racing, and DM Tournaments, an instant tournament function that can transform slots of

lobal Gaming Expo, the premier trade show G and conference event for the international gaming entertainment industry and the leading resource on i-gaming, will expand its programming to offer year-round online sessions focused on all things i-gaming. G2E Online will now include a series of 10 webinars throughout the year on topics such as internet gambling legalization and regulatory updates, operating models and technology options, player protection and payment processing, and more. As an introduction to the online program, the first two G2E Online sessions were streamed live from iGaming North America in February at no cost. In addition to the 10 G2E Online sessions, igaming will be a primary focus at this year’s G2E and G2E Asia events. The iGaming Congress and the two-day iGaming conference track at G2E 2013 will provide an overview of internet gambling operations and regulations around the world, as well as in-depth sessions intended to prepare the U.S. market for business in advance of potential legalization. For those who cannot attend the conference in person, G2E also offers online access to the iGaming Congress and iGaming conference track through iGaming Virtual at G2E. G2E 2013 will be held September 24-26 at the Sands Expo and Convention Center in Las Vegas. G2E Asia 2013 will also feature i-gamingspecific sessions that will take a close look at Asian online and social gaming models. G2E Asia 2013 will be held May 21-23 at The Venetian Macao. The remaining eight webinars of G2E Online are available for $499 as part of the G2E Online Fast Pass. This pass also provides access to iGaming Virtual at G2E. Additionally, the G2E Online Super Pass, which includes the remaining eight

Elite Bonusing Suite U-Spin Bonusing Spin-to-Win

he Federal Trade Commission has waived the TAntitrust waiting period under the Hart-Scott-Rodino Improvements Act (HSR) to clear the way for the acquisition of slot manufacturer WMS Industries by lottery industry giant Scientific Games. The clearance allows the $1.5 billion transaction to move to the next phase, which is approval by the shareholders of both companies. The HSR requires merging companies to file detailed reports with the FTC and the Justice Department to see whether the combination violates antitrust laws. There is a 30-day waiting period (15 days for all-cash transactions) before the merger can be completed. The companies can request the waiting period be terminated early, which will be granted if both antitrust agencies complete their reviews and determine no enforcement action is necessary.

APRIL 2013 www.ggbmagazine.com

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PEOPLE SENIOR MANAGEMENT SHAKEUP AT REVEL

evin DeSanctis, the chief executive officer of Atlantic City’s Revel casino resort, has announced he will step down from his post. DeSanctis, who was instrumental in guiding the resort through its difficult financing Kevin DeSanctis and construction phase, will hand over his operations duties to new CEO Jeffrey Hartmann. DeSanctis and chief investment officer Michael Garrity will resign from their current positions but will retain responsibilities with Revel Group, the holding company that developed the casino and holds its license. Both men will now develop amenity projects for the $2.4 billion resort. A 20-year veteran of the casino, hospitality and leisure industry, Hartmann has worked as a consultant for Revel since the early part of this year through his firm, the Hartmann Group LLP. Before developing his own company, Hartmann was president and CEO of Mohegan Sun in Connecticut from January 2011 to October 2012. He had been with the Mohegan Tribal Gaming Authority since 1996, serving as chief operating officer and chief financial officer before taking over the casino. The news comes shortly before Revel is scheduled to file for Chapter 11 bankruptcy. The prepackaged restructuring will see Revel erase about two-thirds of its debt and give lenders a greater equity stake in the resort. Since opening in April 2012, Revel has consistently underperformed, and has twice gone back to lenders for additional capital.

SPIEGEL, POSTER STEP DOWN AT WYNN

arilyn Winn Spiegel resigned last month as president of Wynn Las Vegas and Encore to work on design and development of company projects, including proposed resorts in Philadelphia and Boston, Wynn Resorts has announced. “In Marilyn’s two-year tenure with us, our Las Vegas resorts have achieved their highest combined revenues,” Steve Wynn, chairman and CEO of Wynn Resorts, said in a statement. “This realignment of our most valuable resource, Marilyn Spiegel our people, will help put our company on the path for financial growth in Las Vegas, as well as outside of Las Vegas, for years to come.”

Before joining Wynn, Spiegel was a senior vice president and general manager of Bally’s Las Vegas, Planet Hollywood and the Rio for Caesars Entertainment. Previously, she served as corporate vice president of human resources for the gaming giant. Wynn named Maurice Wooden, former chief operating officer of Wynn Las Vegas and Encore, as Speigel’s successor. Timothy Poster, who served as executive vice president of strategy and development for Wynn Resorts, was named chief operating officer, but resigned shortly afterwards. No reason was given by Wynn Resorts, and a spokesman wouldn’t confirm reports that licensing problems were Poster’s undoing.

KAMINKOW JOINS ARISTOCRAT

lot manufacturer Aristocrat Leisure Limited announced that Joe Kaminkow, who headed game development at International Game Technology Joe Kaminkow during that manufacturer’s total dominance of the slot market, has joined Aristocrat’s U.S. subsidiary, Aristocrat Technologies, as senior vice president of game development. During two separate stints in charge of game design at IGT, Kaminkow was responsible for producing a slew of slot games that have become legendary in the industry, from the most popular TV and movie-themed games of the early 2000s like The Price Is Right, The Beverly Hillbillies, Creature from the Black Lagoon and the Star Wars series to games during his more recent stint including the Center Stage movie-style setup for Batman and American Idol, to Sex and the City, Ghostbusters and The Twilight Zone. Aristocrat is bringing in Kaminkow to further an effort to boost its stable of recurring-revenue games. The company recently enhanced its creative talent pool with exclusive third-party appointments of Daniel Marks and former Aristocrat game designer Scott Olive.

GAMING LEGEND WICHINSKY DIES

he industry lost one of its modern-day pioneers last month when Mickey Wichinsky, former Sands partner, Bally salesman and inventor, died at 90. Wichinsky first entered gaming as a partner in the Sands Casino in Las Vegas during the mid-1950s. He was credited with installing the first Bally slot machines there in the 1960s. He subsequently established the first Nevada distributorship for Bally, selling the first Bally slots with dollar-sized hoppers in

the 1970s. In 1975, Wichinsky left Bally to found Son Glenn, also a gaming exec, and father Mickey Wichinsky supplier Games of Nevada, which scored success with Wichinsky’s “Flip It,” the machine with mechanical pushers forcing mountains of quarters into a tray that was ubiquitous in Nevada casinos in the ’70s and ’80s. Wichinsky remained a major designer of gaming machines throughout his career. He sold Games of Nevada to Cantor Gaming in 2010, and was awarded the Nevada Gaming Commission’s Lifetime Achievement Award for 50 years of service to the Nevada industry.

WALTHER JOINS KONAMI

lot manufacturer Konami Gaming has named Steve Walther as director of games product management. He will be responsible for product life cycle management for the company’s worldwide game product portfolio. Steve Walther Walther formerly was a longtime marketing executive with rival slot-maker Aruze Gaming America, where most recently he was senior vice president of marketing and chief marketing officer.

April 2013 Index of Advertisers Acres 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Bally Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Cantor Gaming . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Casino City Press . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43, 55 G2E Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 Gambling & Risk Conference . . . . . . . . . . . . . . . . . . .57 Global Cash Access GCA . . . . . . . . . . . . . . . . . . . . . .31 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Innovation Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 JBA Consulting Engineers . . . . . . . . . . . . . . . . . . . . .15 Konami Gaming . . . . . . . . . . . . . . . .18, 19, Back Cover LT Gaming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 MEI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Multimedia Games . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 NAGRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 NEWave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 RD&E Experience Conference . . . . . . . . . . . . . . . . . .51 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Spielo International . . . . . . . . . . . . . . . . . . . . . . . . . .17 US Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 UNLV Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

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CASINO COMMUNICATIONS

Ian Gosling Chief Operating Officer, Regency Entertainment Group

an Gosling is chief operating officer of Regency Entertainment Group, operator of two major casinos in Greece—in Thessaloniki in Northern Greece and Mont Parnes in Athens— which are among Europe’s largest and most profitable casinos. In nearly two years with Regency, Gosling has led an effort to re-define casino operations in Greece, as the land-based casino industry is emerging from the recession by adapting to changes in the marketplace. The Greek casino industry is still batting competition, however, from illegal casinos that could threaten to derail plans for a new VLT market in the country. Gosling spoke with Global Gaming Business Editor Frank Legato at February’s ICE Totally Gaming trade show in London about the challenges that lay ahead in Greece. To hear a full podcast of this interview, including Gosling’s views on legal VLTs and online gaming in Greece, visit ggbnews.com/podcasts. GGB: Regency’s two casinos control 56 perent of the market in Greece today, but take us back to the privatization of 1995. The casinos were designed for a quite different market, weren’t they? Ian Gosling: When the casinos came about, the whole emphasis was placed on tourism. The casino business was coming to Greece to help the tourism industry. Well, it wasn’t too long after opening that we saw that, in actual fact, what we had generated was a very heavy locals market casino. In Thessaloniki, we have over a million visitors every year through the casino, and in Athens, it’s over that. The vast majority of those are Greeks. So there is the odd tourist and a foreign visitor that turns up, but really we’re running two locals casinos. And how did things change in 2007-2008, with the global recession? The casino business in Greece was phenomenal before that. The propensity to gamble among the

Global Gaming Business APRIL 2013

Greeks is second to none. But once the recession began affecting Europe—and of course it affected Greece far worse than anywhere else—we saw sort of a downturn starting in 2008, and that’s continued until today. There was a smoking ban during that time as well, right? Yes. Under pressure from the European Union, Greece did introduce a smoking ban into the casinos, but this wasn’t a total ban. What we were allowed to do was pay to the state a certain taxation, and segment areas of our casinos—smoking areas and areas as non-smoking. That was a positive. The Greeks are prolific smokers, and as the smoking ban was introduced into the casino, the complimentary tobacco that the casino was offering to its customers was something that we did stop. The savings between the two casinos ran into the millions. How have you adjusted to what you might call the new normal in the market? We recognize that our players didn’t lose their passion to play. But what they had now was a smaller bankroll. So, what we decided to do was to utilize the size of our casinos. By European standards, our casinos are large; three of Europe’s four largest casinos are in Greece. So, what we did is drive the volume. We looked to bring in as many people as we possibly can, and then we just priced accordingly. We were looking to give them value for money and to sell them more time. We did that through our pricing structure, with our machines and our table games, and also with the food and beverage and entertainment offerings that we have. How have illegal or gray-market casinos affected business? Historically, Greece has always had gray machines. I remember opening up the casino in 1996 in Thessaloniki, and the gray market was pretty

prevalent then. Later, it was reduced and the police departments and gaming authorities tackled the issue and brought it under control. But during this recessionary period—over the last five years— we’ve seen the whole gray market grow again, not only in machine play, but also with table games. We see a lot of private, illegal poker clubs. We see illegal tables, and we see illegal slot machines, and illegal internet sites as well. So, the gray market is as big as it ever was, and right now there doesn’t seem to be the appetite for anybody to really tackle the problem. These places have no regulations or taxation on them? Greece runs a tight regulatory shop. They have rigid controls, and the casinos observe those and operate to those standards. But the gray market doesn’t have these. They can solicit customers a lot easier; they’re in prime locations, downtown locations. They’re not paying their staff in the correct way; they’re making black money payments to their staff, so no social security is being paid. There is no tax going to the state, and at the same time, as we in the casinos are watching the gray market grow, the government decides to put an extra 2 percent on our tax, but ignore this gray market. And if that gray market wasn’t there, then of course the casino revenues would increase, and the taxation would roll back to the government. What can and should be done about this? There’s an organization in Greece called OPAP which runs a lot of the sports betting and lottery games. Thirty-four percent of that company is owned by the state. If there was an organization in the country that really should lobby the government and get the government to do something (about illegal casinos), it is OPAP. In the casino industry, we’ve tried, but we’ve had limited success. We really need a major emphasis to encourage the government to come down on it.

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