Global Gaming Business, August 2016

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GGB Global Gaming Business Magazine

August 2016 • Vol. 15 • No. 8 • $10

THE PHILADELPHIA STORY MILLENNIALS AND THE VEGAS ENIGMA SEATING SOLUTIONS NJ DGE’S DAVID REBUCk

Tribal Testimony The state of Washington remains true to IGRA

Closing the Circle How GLI uses its unique corporate culture to serve the industry

U.S. Bonanza Why unregulated sports betting is sapping billions and threatening game integrity ®

Official Publication of the American Gaming Association

Payback Problem

Why slot hold and free play continue to challenge casinos and manufacturers Association of Gaming Equipment Manufacturers

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CONTENTS

Vol. 15 • No. 8

august

Global Gaming Business Magazine

24 COVER STORY Testing and More

COLUMNS 14 AGA Gathering Speed

Gaming Laboratories International was founded to offer vendors a private-lab option for testing to secure approval of slot machines, but GLI has evolved with the industry to become a vital source of education, information and yes, testing, for gaming regulators around the world.

Geoff Freeman

18 Fantini’s Finance Issue Oriented Frank Fantini

54 Table Games Theo Theories

By Frank Legato Cover photo ID on p. 24

Paul Magno, Sr. Vice President and James Maida, CEO and President, GLI

Roger Snow

DEPARTMENTS

FEATURES

14 Philly Freeze As Philadelphia’s mature gaming market continues to log revenue increases, potential market saturation from a new city casino looms.

By Marjorie Preston

48 Tribal Success Story The state of Washington provides a model for success in a Native American casino market, achieved in a manner like no other U.S. state.

6

The Agenda

8

By the Numbers

10 5 Questions 12 Gaming History

30 The Millennial Code

By Dave Palermo

16 AGEM Page

Operators and manufacturers are continuing their efforts to crack the code of how to generate loyalty in the millennial generation.

58 Comfort First

56 Frankly Speaking

By Oliver Lovat

34 Slot-Hold Conundrum

The design and manufacture of casino chairs is one of the most basic—and most important— supply tasks in the industry.

By Dave Bontempo

The industry continues to experience the negative effects on slot revenue of the high hold percentages inherent in multi-line penny games.

62 New Game Review 66 Cutting Edge 68 Goods & Services 73 People 74 Casino Communications With David Rebuck, Director, New Jersey Division of Gaming Enforcement

By Steve Gallaway

+plus Solving the Slot Riddle How are slot manufacturers and casino operators working to resolve the slot-hold issue?

By Mark Birtha

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

iGNA Outlook 40 The Rise of eSports Michael Vanaskie

4

Global Gaming Business AUGUST 2016

Feature 42 Betting on Sports Sports betting has huge potential, online and on land—but in the U.S., tapping that potential will need an act of Congress.

By Steve Ruddock

46 iGames News Roundup

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THE AGENDA

Are You Experienced?

Roger Gros, Publisher

e’ve been hearing a lot lately about the “experience” of gambling. Last month, we ran a cover feature about the visionary John Acres, and how he believes we’ve somehow lost our way in providing this experience to our players. He believes the technology which makes our jobs easier actually removes us from personal contact with the players, thereby decreasing their enjoyment of the experience. On the other hand, Acres says we fail to use the technology we have to enhance that experience because we’re focused on the technology and not the player.

I wrote a sidebar to the Acres piece about the Barona experience in California, where they use technology to get closer to their players. They don’t use those automated kiosks that spit out money when you insert your slot ticket, but instead hand you your winnings. Believe me, there is no image more powerful than seeing someone get a pile of Benjamins during a hand-paid jackpot.

In the Los Angeles Times last month, Stanford history professor Mark Braude wrote an op-ed called “We don’t go to casinos to win or lose, but to break even together.” Like most academics, he gets lost in the psychology of gambling, citing a couple of gambling historians (who, like Braude, I’ve never heard of) who contend “games of chance allow us to reflect on a fundamental paradox of living in a capitalist democracy: economically, we are pitted against one another in fierce competition, yet politically we must foster communal bonds with our fellow citizens. Casino gambling is one of the ways we symbolically try to untangle this Gordian knot.”

Heady stuff, that. Somehow, I must have missed those blue-haired seniors getting hyperaggressive at the Blazing 7s machine.

But after referring to Sigmund Freud, who claimed long ago that gambling is a way to annihilate yourself, Braude does come to a conclusion that made sense to me.

“Rather, the enduring popularity of casinos has nothing to do with the outcome of winning or losing—but how and where it’s done,” Braude writes.

Here, we can draw a direct line to the message Acres is spreading. John likes to tell a story about a woman he encountered playing a specific slot game that was invented by one of John’s friends. As he’s talking to this woman, Acres dials his friend and

W

6

Global Gaming Business AUGUST 2016

puts the slot player on the phone with him. She gushes about how much she has enjoyed his game over the years and how much it meant to her. Bear in mind here, she rarely won playing this game.

But the experience was so compelling that she gladly incurred those losses as the cost of entertainment.

How it’s done can also refer to the games you play. Like this woman’s experience, slot makers are endlessly searching for the Holy Grail of the perfect game that is at once compelling and interesting, but also profitable for casino operators. The recent table game revival also speaks to the “how” and the “communal bonds” that the two historian brainiacs were discussing.

Gambling is a also performance, insists Braude. Each hand of blackjack is like a one-act play where the players and the dealer have starring roles.

“I’ve witnessed no greater joy at a casino than when the blackjack dealer is the only one to bust and the whole table wins,” he explains. “Together, our little group beat the system. Money feels light as air and we are reminded that, despite guiding so much of our lives, it’s just an abstraction.”

Braude’s conclusion also bolsters the importance of the “place” you gamble. So it isn’t so bad to pour millions of dollars into a facility to attract gamblers and put them in the right frame of mind to play. Maybe there’s something to that feng shui moment that our Asian operators are always trying to achieve.

But the place you gamble is very subjective.

We’ve all heard and understand the “location, location, location” mantra that is true not only in real estate but also in gaming. Most casinos can draw a circle around their location—usually between 20 and 50 miles—that produces 90 percent of their business. Does it matter to those players what the casino looks like or what the experience is if it takes them half the time to reach than the next closest casino? I’m sure no one wants to take that chance, so much attention has to go to the place.

So let’s try to remember the experience as we develop new technology, better games and more fanciful casinos, because few players will keep coming back if the experience isn’t compelling—no matter what the joint looks like.

Vol. 15 • No. 8 • August 2016 Roger Gros, Publisher | rgros@ggbmagazine.com twitter: @GlobalGamingBiz Frank Legato, Editor | flegato@ggbmagazine.com twitter: @FranklySpeakn Monica Cooley, Art Director | cooley7@sunflower.com John Buyachek, Director, Sales & Marketing jbchek@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Frank Fantini twitter: @FantiniResearch Geoff Freeman twitter: @GeoffFreemanAGA Roger Snow | Michael Vanaskie Contributing Editors Mark Birtha | Dave Bontempo | Steve Gallaway Oliver Lovat | Dave Palermo twitter: @DavePalermo4 Marjorie Preston Steve Ruddock twitter: @SteveRuddock

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

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

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

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

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Partner, Duane Morris, Baltimore

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, Vice President Systems Sales, Scientific Games

• Steven M. Rittvo, Chairman/CEO, 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. 901 American Pacific Drive, Suite 180 • Henderson, Nevada 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor.

Copyright 2016 Global Gaming Business LLC. Henderson, Nevada 89014 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 901 American Pacific Dr, Suite 180, Henderson, NV 89014

Official Publication

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BY THE

NUMBERS eSports cash gambling market size

BIg NumBeRs W

hile the “skins” betting on eSports is many times greater than the cash betting, the gaming industry is undoubtedly most interested in the cash. “Skins” betting exchanges “virtual” items like game pieces, different cosmetic looks for game play—valued from a few pennies to thousands of dollars—acquired in different ways. But game developers do not permit the exchange of skins for cash. So the $7.4 billion market isn’t applicable at this point. The cash betting is very similar to traditional sports betting and will have a significant handle this year. This chart is from a report by Eilers & Krejcik Gaming and Narus Advisors.

Regional Review

I

n the June edition of Market Monitor by Manfredi Consulting, the regional results for commercial casinos were posted. The May 2016 calendar compared to May 2015 lost a Friday and Saturday while gaining a Monday and Tuesday. For most regional properties the net effect equates to a 3 percent to 5 percent decline before any other issues. Nationally, data shows a 1.5 percent decline. Casino gaming drivers: employment, income and gas prices are favorable. The 5 percent growth YTD through December for

U.S. Gaming Results May 2015 -YTD vs. May 2016 -YTD -3% or worse 0% to 3% 0% to +3% +3% or better Not in any range Data powered by JSA

8

Global Gaming Business AUGUST 2016

2015 may be unrealistic for 2016. Our 2016 forecast range is growth of 1 percent to 3 percent. So far, YTD comparison to last year is plus-2 percent. Manfredi principal Vince Manfredi is a marketing executive with more than 30 years experience providing profitable solutions for gaming and hospitality companies. Manfredi has served in senior marketing positions for major gaming corporations. Visit manfrediconsulting.com for more information.

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NUTSHELL

“They

5Questions

with Vic Salerno

President, US Fantasy Sports

A

lready famous for his groundbreaking approach to race and sports betting and mobile gaming in the United States, Vic Salerno is taking on the daily fantasy sports world and introducing a variant that is understandable to gaming regulators and popular with players. His US Fantasy Sports company was recently granted a license in Nevada to offer his unique style of DFS starting in the fall.

Salerno, a member of the Gaming Hall of Fame, spoke with GGB Publisher Roger Gros from his office in Las Vegas in July.

1 2 3 4 5

Tell us how your game works.

It will be a little different than the DFS you see now. We call the contests “events.” The first event would be picking the quarterback who would throw for the most yards. You can make parlay bets, too. All the wagers would go into one common pool, from all the different locations, whether it be the different sports and race books where it’s offered or on the mobile platform. So, instead of going into a race book and telling the ticket writer you want to bet the No. 2 horse in the fifth race at Santa Anita to win, you say you want the specific daily fantasy sports event and want to bet on No. 2 to win. No. 2 might be Tom Brady. So if on Sunday Brady throws for 330 yards, but someone else like Ben Roethlisberger throws for 350 yards, Brady would finish second.

No wonder regulators are comfortable with this. It’s exactly like betting a horse race.

Yes, and the biggest thing they like is the transparency. The more money bet on a player, the lower the odds are going to be. If someone bets $10,000 on Brady, his odds will go down and odds on other players will go up. You know where the money is going, unlike the fantasy games that are out there now.

This isn’t just for football, though?

No, we can use this system for baseball, basketball… any sport you can imagine.

And we can have the exotic bets, too. In horse racing, you have a “Pick 6.” We’re going to offer a Pick 7. You can bet $1 to win $1 million. You’d have to bet best quarterback, best running back, best defense, best kicker and others. We’ll start a million-dollar pool and it will be progressive.

The traditional sports bettor would be able to pick four quarterbacks and build parlay bets. We feel that’s going to be a real winner.

So, you’re not making the argument that this is a game of skill?

No, that’s just silly. If you risk money to win money, that’s the definition of gambling. We’re not denying that.

That’s not to say that skill isn’t involved. Weather, closed or open stadium, real grass or artificial turf, home or away, the players’ records against that specific team… Knowledge will always help when making your bets.

How applicable is this in other states, even where sports betting may not be permitted?

Our ultimate goal is to mirror what the racetracks do. I can now bet horse racing on my phone. The bet goes through a disseminator in Las Vegas and then goes to the specific track. We can do that all over the country, so that would be the perfect platform for our fantasy sports game. We’ve been talking to regulators, legislators and track operators all across the country about doing it in particular states. We believe we’re the best answer in how to do this in a transparent and open manner.

10

Global Gaming Business AUGUST 2016

Said It”

“We do not have a song for defeat, so we never learned how to give up.”

—Cowlitz Indian tribal spiritual leader Tanna Engdahl speaking at the official groundbreaking for the facility with development partners, the Mohegan Tribal Gaming Authority, about the casino that her tribe is building near La Center, Washington after many years of struggle

CALENDAR August 9-11: Australasian Gaming Expo (AGE) 2016, Sydney Exhibition Centre @ Glebe Island, Sydney, New South Wales, Australia. Produced by the Gaming Technologies Association. For more information, visit austgamingexpo.com.

September 26-29: Global Gaming Expo (G2E) 2016, Sands Expo Center, Las Vegas.

Produced by the American Gaming Association and Reed Exhibitions. For more information, visit GlobalGamingExpo.com.

October 18-20: EiG - Excellence in iGaming 2016, Arena Berlin, Berlin, Germany.

Produced by Clarion Events. For more information, visit eigexpo.com.

October 23-24: IMGL Autumn Conference 2016, Dublin, Ireland. Produced by the International Masters of Gaming Law. For more information, visit GamingLawMasters.com.

October 31-November 3: IAGR 2016 Conference, Sydney, Australia. Produced by the International Association of Gaming Regulators. For more information, visit IAGR.com.

November 7-9: Malta iGaming Seminar (MiGS) 2016, Hilton Malta. Produced by the Malta Gaming Authority. For more information, visit MaltaiGamingSeminar.com.

November 9-11: SAGSE Buenos Aires, Costa Salguero, Buenos Aires. Produced by Mongraphie. For more information, visit Monographie.com.

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GAMING HISTORY Binion’s Horseshoe was the original home of the World Series of Poker

The Big game The roots of the World Series of Poker go back to legendary gaming figures

By Patrick Roberts

W

hen the World Series of Poker got under way this year in Las Vegas, it marked the 47th edition of the famous tournament. Today, the WSOP is owned by the world’s largest casino company, Caesars Entertainment, and held at one of Caesars’ largest casinos, the Rio. It’s come a long way since Benny Binion launched the event at his Downtown casino, the HorseThe WSOP attracted attention from casino owners Benny Binion (r.) with the first two winners of the WSOP, shoe, in 1970. from around Las Vegas, including the Golden Nugget’s Amarillo Slim Preston (l.) and Johnny Moss Actually, the very first tournament that Steve Wynn, who watches Binion oversee a game (Photos courtesy of UNLV’s Center for Gaming Research) was to become the WSOP was held a year earlier in Reno and hosted by Texans Tom Moore, who owned the Holiday casino, and Vic Vickery, a gambler and to include four more games—Seven-Card Stud, Razz, Deuce-to-Seven Draw, and raconteur. Some of the gaming luminaries who attended that first event ina lower buy-in No Limit Hold ‘em event. cluded Jimmy “The Greek” Snyder, Rudy “Minnesota Fats” Wanderone, BinLater, Moss won his third championship and Brunson won back-to-back vicion, Doyle Brunson, “Amarillo Slim” Preston, Johnny Moss and Puggy tories to solidify his reputation as one of the game’s best players. Moss remained Pearson. the only three-time winner until Stu “The Kid” Unger won two titles in the The next year, Binion decided to hold a similar event at the Horseshoe.

1980s before tragically dying after winning his last WSOP in 1997.

The winner, Johnny Moss, didn’t even win one of the games—he was voted Throughout the ’70s and into the ’80s, Binion ruled the tournament, but as best player by the other contestants. Poker wasn’t an important game in or it grew, the Horseshoe, which didn’t even have a poker room when the WSOP out of the casino, so few paid attention. started, began to get tight. Benny’s son Jack took more and more responsibility as Binion knew he had a tiger by the tail, however. He instituted new rules, his father grew older. Benny Binion died on Christmas Day in 1989. Jack Binwith seven players putting up a $5,000 entry fee in a freeze-out format. Moss ion, along with his protégé tournament director Eric Drache, launched the first actually won to retain his title. satellite events, spreading the WSOP popularity far and wide.

In 1972, the legend began to grow as Amarillo Slim scored a come-fromThe 1990s saw the expansion of gaming nationwide, and Jack Binion’s behind victory and became the best ambassador poker ever had. A year later, Horseshoe Gaming was a major player, opening the most successful facilities in WSOP came to TV for the first time, televised by CBS Sports, and expanded several regional markets. That success caught the attention of Harrah’s Entertainment (now Caesars Entertainment), which bought Horseshoe Gaming (and the WSOP) in 2004.

Truth be told, Caesars has elevated WSOP into a major sporting event each year. With a new format, conducting the WSOP for a few months beginning in May each year and reserving the No-Limit Texas Hold ‘em finals for November has become a hit. ESPN provides wall-to-wall coverage and the “November Nine” is must-see TV for poker enthusiasts.

There have been no back-to-back winners of the WSOP since Johnny Chan accomplished the feat in 1987-88. There have been no repeat winners in the last 20 years. The WSOP bracelet has become the status symbol for any poker player, but the main event winner immediately is entered into the record books.

From seven players in 1970 to the almost 6,800 this year (the fifth-highest of all time); from the few thousand dollars for the winners in that first year to the $8 million at stake in 2016, the WSOP is clearly the crown jewel of poker championships.

But no matter how well-established or renowned the WSOP becomes, it will always be indebted to the passion and creativity of the Binion family that helped Philadelphia’s Joe McKeehen won almost $8 million in the 2015 create it.

WSOP held at the Rio in Las Vegas 12

Global Gaming Business AUGUST 2016

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AMERICAN GAMING ASSOCIATION

Gathering Speed AGA’s efforts continue momentum for legal sports betting

T

he thriving illegal sports betting market continues to reach new heights. After Americans made $139 billion in illegal wagers on U.S. sports in 2014, last year saw an uptick to nearly $150 billion in illegal bets. Super Bowl 50 and March Madness are two examples of prime targets for an illegal market that’s siphoning tax revenues and preying on consumers.

And because the federal ban has clearly failed, the American Gaming Association is promoting a new approach to sports betting that recognizes what millions of sports fans want: greater engagement with the sports they love.

Three developments in recent weeks are driving momentum for sports betting. First, AGA hosted its first-ever Law Enforcement Summit, where dozens of law enforcement leaders gathered. Second, the NHL became the first major sports league to locate a franchise in Las Vegas. Third, AGA convened a significantly expanded Gaming Experts Forum that helps to shape gaming policy and perception on sports betting and other critical gaming issues.

AGA took the unprecedented step in June of convening more than 30 law enforcement leaders in Washington, D.C. to educate this influential group on a new approach to sports betting. Members of AGA’s Illegal Gambling Advisory Board led a summit that convened local, state and federal law enforcement agencies.

Law enforcement on hand included the Federal Bureau of Investigation, the Federal Law Enforcement Officers Association, the National Sheriffs’ Association and the National District Attorneys Association.

The conversation focused on how law enforcement, which faces many competing priorities, can serve the public more effectively and share potential best practices for dealing with the illegal market, and whether a legal, regulated sports betting market would aid their efforts. The summit produced three key takeaways: Law enforcement’s engagement is critical to addressing outdated federal sports betting law; illegal sports betting is anything

14

Global Gaming Business AUGUST 2016

By Geoff Freeman President & CEO, American Gaming Association

but a victimless crime; and a regulated sports betting market could aid law enforcement efforts.

The Law Enforcement Summit came just days before the NHL announced that it will expand to Las Vegas, marking a significant win for Nevada, a win for casino gaming and a win for fans. It’s about time that Las Vegas joins the ranks of major league sports cities, and the ramifications of this move are many.

First, the placement of the first major profes-

ception among critical influencers from across the country. AGA convened congressional staff, media, academic experts and gaming executives at this increasingly popular event, which featured informed, in-depth conversations about the most critical issues we face—and an opportunity to inject gaming’s point of view into the dialogue.

The forum featured sports betting practitioners who demystified sports betting by detail-

The placement of the first major professional “sports franchise in Las Vegas reflects a rapidly evolving view of gaming as an important, mainstream segment of the broader economy that supports 1.7 million jobs and serves as a community partner in 40 states.

”

sional sports franchise in Las Vegas reflects a rapidly evolving view of gaming as an important, mainstream segment of the broader economy that supports 1.7 million jobs and serves as a community partner in 40 states.

Second, the NHL’s decision could open the door for other sports leagues to overcome the long-held concerns about casinos and gambling.

Following the NHL’s announcement, MLB Commissioner Rob Manfred said, “I think the whole ‘you can’t go to Vegas because there are casinos there,’ we passed that by a long time ago; there’s casinos all over the place… I see Las Vegas as a viable alternative. I would not disqualify it just because of the gambling issue.”

Finally, by breaking the Las Vegas dam, the NHL is pouring cold water on the argument that regulated sports betting harms the integrity of sports. ESPN Business Analyst and Sports Illustrated writer Andrew Brandt called the move to Las Vegas “a momentous inflection point in this discussion; it’s something that’s broken the ice.”

Brandt’s comments came during our second annual Gaming Experts Forum in Washington, D.C., an event that shapes gaming policy and per-

ing how the legal, regulated market actually works. Veteran South Point Sports Book Director Jimmy Vaccaro explained how they prevent illicit activity: “If someone comes to the window and he wants to bet $15,000 on a game, then we ask for some identification but he pulls his money back because he doesn’t want to show his ID, we call surveillance and take a picture of him—we have more photos than Kodak.” Others spoke of the technology available that can detect irregular betting patterns—a tool used successfully in Europe today.

From law enforcement and sports leagues to media and academics, it’s become clear among many that the status-quo sports betting policy in the United States isn’t working. Events organized by AGA, such as the Law Enforcement Summit and Gaming Experts Forum, will help to progress this issue in a way that reflects the unsustainability of a massive, thriving illegal sports betting market that is primed to top $150 billion by next year.

Follow Geoff Freeman on Twitter, @GeoffFreemanAGA.

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AGEMupdate AGEM KEY BOARD OF DIRECTORS ACTIONS

AGEM MEMBER PROFILE Based in Alpharetta, Georgia, Agilysys is a leading technology company that provides innovative point-of-sale, property management, inventory and procurement, workforce management, analytics, document management, mobile and wireless solutions and services to the hospitality industry. Agilysys’ next-generation solutions and services allow properties to better connect, interact and transact with their customers by streamlining operations, improving efficiency, increasing guest recruitment and wallet share, and enhancing the guest experience. Agilysys serves four major market sectors: Gaming: Hotels, Resorts and Cruise; Foodservice Management and Restaurants; Universities and Stadiums; and Healthcare.

Agilysys operates throughout North America, Europe and Asia.

Agilysys is reimagining hospitality with the industry’s only commercial-grade mobile POS tablet that is temperature, drop and shock resistant. The Agilysys InfoGeneis Flex tablets include an ultralong battery life to keep transactions flowing throughout an entire shift, and feature broad temperature tolerances allowing tremendous flexibility to use in a wide range of outdoor venues. Certified for use in demanding hospitality environments, businesses are now able to capture even more guest wallet share and improve the guest experience where consumer-grade tablets fail.

Agilysys executives and hospitality experts are regular industry speakers, participating on panels at ICE 2016, G2E Asia 2016, HITEC 2016 and G2E 2016. The company’s “Navigating the Payments Security Challenge� panel session at HITEC 2016 had the highest attendance for a panel breakout at the event, and included renowned experts in the industry, from such companies as VISA, ingenico and Discover. With data breaches and payment card fraud on the rise, U.S. businesses are grappling with the need to secure their payment systems and protect their reputations. Other recent Agilysys speaking topics have included Beyond Gaming: Tracking the Value of the Non-Gaming Customer, and Growth & Stability: How to Maximize Current Customers and Optimize Total Revenue, and the company will be participating on the How to Optimize Total Casino Profitability within the Non-Gaming Environment panel at G2E 2016.

For more information about Agilysys, contact Robert Shecterle at 770-810- 6046 or robert.shecterle@agilysys.com.

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Global Gaming Business AUGUST 2016

• Geoff Freeman, President and CEO of the American Gaming Association (AGA), attended the July monthly board meeting to address members regarding the positive changes the AGA has been working on over the last three years. He also emphasized the desire for the AGA to work closer with AGEM to improve the flow of communication and to collaborate on common issues to achieve benefits for all. A list of key objectives will be drawn up in the coming months to start the process. • Prompted in part by recent Nevada Gaming Policy Committee meetings, AGEM and the Nevada Gaming Control Board (GCB) are working together to review existing regulatory language and identify specific changes and updates. AGEM submitted comments to the GCB in late June, and GCB Chairman A.G. Burnett and his staff will attend the August AGEM meeting and a subsequent working session. • AGEM Director of Responsible Gaming Connie Jones recently attended Global Gaming Women – The Power of Technology luncheon held in Las Vegas on June 16. The event was very well-attended and featured an impressive line up of speakers and sponsors. • The AGEM membership reached an all-time high of 154 when Automated Cashless Systems based in Reno was voted in as an associate member at the July meeting.

UPCOMING EVENTS • July 15 saw the deadline for the inaugural Memorial Award nominations to be submitted, honoring June 2016 Jens Halle and Peter Mead. The selection process is now under way, and the winners will be announced at G2E. • A full-day public meeting is being held in Florida on July 26 regarding regulatory changes and future product introductions. AGEM will be represented there, in part to answer questions and make suggestions regarding the possibility of skill-based gaming in Florida.

AGEMindex The AGEM Index posted a modest increase in June after gaining 28.83 points in May. The composite index stood at 260.01 at the close of the month, which represents an increase of 4.67 points, or 1.83 percent, when compared to May. The AGEM Index reported a year-over- year increase for the eighth consecutive month, rising 67.7 points, or 35.2 percent, when compared to June 2015. During the latest period, 11 of the 14 global gaming equipment manufacturers reported month-to-month drops in stock price, with five down by more than 10 percent. Of the three manufacturers reporting increases in stock price during the month, one was up by more than 10 percent.

The broader stock markets reported mixed results in June largely due the recent British exit from the European Union, which has rattled international and domestic markets. The S&P 500 reported a month-to-month increase of 0.1 percent, rising to 2,098.96. Additionally, the Dow Jones Industrial Average increased 0.8 percent to g the period, falling to 17,929.99. NASDAQ decreased 2.24,827.67. percent during the period, falling to 4,827.67.

AGEM

Exchange: Symbol (Currency)

Stock Price At Month End Percent Change Jun-16 May-16 Jun-15 Prior Period Prior Year

Index Contribution

Nasdaq: AGYS (US$)

10.47

11.73

9.18

(10.74)

14.05

(0.31)

Ainsworth Game Technology

ASX: AGI (AU$)

2.16

2.40

2.57

(10.00)

(15.95)

(0.46)

Aristocrat Technologies

ASX: ALL (AU$)

13.80

12.86

7.65

7.31

80.39

8.25

Taiwan: 3064 (NT$)

37.30

39.30

30.20

(5.09)

23.51

(0.04)

Agilysys

Astro Corp.

Crane Co. Daktronics, Inc. Everi Holdings Inc. Galaxy Gaming Inc. Gaming Partners International International Game Technology PLC

NYSE: CR (US$)

56.72

57.40

58.73

(1.18)

(3.42)

(0.47)

Nasdaq: DAKT (US$)

6.25

7.97

11.86

(21.58)

(47.30)

(0.71)

NYSE: EVRI (US$)

1.15

1.43

7.74

(19.58)

(85.14)

(0.18)

OTCMKTS: GLXZ (US$)

0.31

0.26

0.16

19.23

93.75

0.03

Nasdaq: GPIC (US$)

9.30

9.01

10.11

3.22

(8.01)

0.03

NYSE: IGT (US$)

18.74

18.96

17.76

(1.16)

5.52

(0.52)

INTRALOT S.A.

0.90

1.07

1.70

(15.89)

(47.06)

(0.31)

Konami Corp.

TYO: 9766 (ÂĽ)

3,895

4,200

2,276

(7.26)

71.13

(0.11)

Nasdaq: SGMS (US$)

9.19

9.79

15.54

(6.13)

(40.86)

(0.59)

Nasdaq: TACT (US$)

8.02

7.44

6.68

7.80

20.06

0.06

Scientific Games Corporation Transact Technologies

Change in Index Value

4.67

AGEM Index Value: May 2016

255.34

AGEM Index Value: June 2016

260.01

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

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p. 18 fanitini:Layout 1 7/14/16 11:45 AM Page 18

FANTINI’S FINANCE

Issue Oriented Crunch time in Macau; Brexit bombshell; Isle rebound

W

e are about to learn the nearterm future of Macau gaming, and with it, the near-term fate of the casino operators whose stocks have crashed in recent years.

The story will be told by the success, or otherwise, of Wynn Resorts’ Wynn Palace opening in August, Las Vegas Sands’ Parisian the following month, and MGM Cotai early in the new year.

Last year’s ballyhooed resort openings did not live up to hopes that they would stem the decline in gambling revenue and ignite the mass-market business, drawing tourists in the Las Vegas manner.

Wynn Palace opens in August

Indeed, Melco Crown’s Studio City, seen as the poster child for the new approach, has so disappointed that the company which boasted that the new property had no VIP tables is now adding them.

LVS and WYNN believe they will be different.

LVS says the Parisian, with its half-size Eiffel Tower, will be immediately iconic and will draw tourists just like Venetian attracts them to its canals.

WYNN expects Wynn Palace to be a true palace that will be the first choice of the affluent and of high rollers.

The hope for MGM Macau is based in large part on scale—the property will more than triple MGM’s capacity in the market, meaning big upside potential.

If the three companies are right, expect to see their stocks benefit significantly.

Early indicators are mixed. Praveen Choudhary of Morgan Stanley reported that his survey of room rates show Wynn Palace is commanding high prices. The property leads the pack, only except for Ritz Carlton and Banyan Tree, he said.

Those high rates benefit both Wynn and competitors who can maintain rates through the open18

Global Gaming Business AUGUST 2016

By Frank Fantini

ing, Choudhary said.

Indeed, Choudhary raised his rating on Hong Kong-listed Wynn Macau to equal rate in part based on early strong demand and rate, but he also cautioned that the property might not achieve EBITDA projections of $450 million to $600 million next year because of soft gambling demand.

Morgan Stanley also sees some weakness in Macau’s most important market, China, citing a firm-commissioned survey showing average stays by mainlanders down to 3.3 days from 4.4 last year. That could be worrisome, because the Las Vegas-like model relies on multi-night stays and spending outside of casinos.

The survey also finds competition coming from what at first blush seems a strange place— Disneyland.

Thirty percent of survey respondents said they might visit Macau less often as the new Shanghai Disneyland wins some of their business.

Finally, there is the increasing competition from the likes of South Korea, the Philippines and Australia for VIP players.

Not all news out of the Morgan Stanley survey was negative. Twenty-six percent of respondents said they intend to gamble more this year, and 70 percent say they will still visit Macau.

We’ll know soon enough whether Wynn Palace and Parisian are sufficiently compelling to do for Macau—or at least for their companies—what Galaxy II and Studio City so far have failed to do, or whether Macau becomes a long slog for all the operators despite investing billions of dollars.

SHOULD YOU EXIT WITH BREXIT? Britain’s decision to leave the European Union is one of those events that captures the public imagination.

For many investors, it became a reason to sell out of British gaming stocks.

But that reaction might have been premature.

Consider: The companies with a big online presence aren’t headquartered in Britain, anyway.

They chose to domicile in tax havens such as Gibraltar. As such, they might continue their EU membership, thus access to European markets.

One concern is that Gibraltar could lose its EU

access as a British protectorate, but nothing would then prevent U.K. operators from relocating to an EU member country.

The greater issue might be long-term effect on the British economy and currency, but for now that’s speculative.

In the meantime, Britain’s Brexit negotiations with the EU will bear watching.

ISLE OF CAPRI, WELCOME BACK New Isle of Capri CEO Eric Hausler said in his company’s quarterly investor conference call that he’s excited about fiscal year 2017, which started May 1.

And well he should be.

For the first time in a very long time ISLE is no longer a regional casino operator so burdened by debt that its price-to-sales ratio was depressed well below 1-to-1.

Indeed, ISLE’s ratio of debt-to-EBITDA of 4.4 times is now below that of most casino operators, and it’s headed down towards the upper 3s to low 4s, Hausler said.

That means investors can begin to value ISLE on its ability to generate earnings, and with adjusted earnings per share up to $1.26 last year and 62 cents in the fourth quarter, there appears to be plenty of room to get the stock price up to where that price-to-sales ratio is far beyond its current 0.6-to-1.

It also means that ISLE can look to grow like a conventional company, a fact Hausler addressed in the conference call when he talked about parameters for buying casinos, expanding into new jurisdictions, upgrading properties and upgrading casino floors.

In turn, that brought some cautionary advice from analysts. In other words, after so long in the wilderness, ISLE remains something of a show-me stock even after growing EBITDA and EBITDA margins in eight of the past nine quarters.

However, investors waiting too long to be shown could risk missing the best part of the ride.

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

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The Philadelphia Story: Schuylkill Competition

Pennsylvania gaming revenues hit an all-time high last year, propelled by a surge at the tables. Philadelphia’s going strong, but can its casino industry stand more competition?

By Marjorie Preston

T

he battle of the Philadelphia casinos is like a rematch between Rocky Balboa and Apollo Creed.

In this corner: SugarHouse, the city’s sole existing casino, in the Fishtown neighborhood. Built on the Delaware River at the site of a former Domino Sugar factory, SugarHouse opened in 2010 with 1,600 slots and 40 table games. A recent $164 million upgrade added 44 more tables, 289 slot machines and a 28-table poker room, as well as new dining options, a concert venue and a new parking garage.

In the other corner: Stadium Casino LLC. Stadium is a partnership of Baltimore-based hospitality giant the Cordish Companies and Greenwood Gaming, owner of Parx, the highest-grossing casino in southeastern Pennsylvania. In 2014, the all-star Stadium team won Philly’s second (and last) gaming license.

Its winning pitch included a casino with Cordish’s famous Live! brand in a sprawling $450 million entertainment complex to be developed near the city’s sports arenas. Under the proposal, it will have 2,000 slots, 150 table games and a boutique hotel.

Tough Enough In 2012, Pennsylvania became the second-largest gaming jurisdiction in the U.S. after Las Vegas, edging out former champ Atlantic City. Pound for pound, the market is still going strong; last year, the Keystone State’s 12 casinos raked in more than $3.1 billion in revenues, the highest-ever annual take.

Despite the apparent health of the industry, SugarHouse has mounted a legal challenge to keep the Live! project from moving forward, and in March, the State Supreme Court pulled the plug on the project, at least temporarily.

Ostensibly, this round is about the suitability of Greenwood’s primary investor, Watche “Bob” Manoukian; under the current arrangement, he would have an ownership stake exceeding the 33.3 percent state limit. But for SugarHouse, there’s a second, deeper concern: another contender in an already crowded ring, the southeastern Pennsylvania casino market.

“We’ve been very vocal about it—we don’t see a need in this market for another provider,” says SugarHouse General Manager Wendy Hamilton. “Nothing about the numbers says if you add another casino, you’re going to get another casino’s worth of revenue.

“Competition is good—it’s good for customers, and keeps operators on

The Live! casino in Philadelphia is a joint venture between the Cordish Companies, which owns Maryland Live! outside of Baltimore, and Greenwood Gaming, the owner of the Parx casino in suburban Philadelphia

their toes. But we have plenty of it. There is a point of diminishing returns.”

If the Live! project goes forward, she foresees “significant cannibalization of the existing operators.”

Hamilton points to her property’s expansion, which debuted in May, as evidence of “modest gaming growth in this market,” and a need for prudence.

“We more than doubled the size of the property in square footage, but we only increased gaming positions by about 20 percent,” she says. “That tells you we were focused on non-gaming amenities to help us grow gaming revenues. This is the most competitive gaming region in the country. Though we’re seeing some reasonable growth in table games, it’s like pulling teeth trying to make growth happen in slots.

“Nothing says we need another 2,000 slots and another 150 table games in this immediate region.”

Due to the pending legal challenge, the Cordish Companies declined to comment for this article; Greenwood Gaming did not respond to a request for comment.

The remaining competitors in Southeastern Pennsylvania are: • Parx, a casino and thoroughbred racetrack in Bensalem, Bucks County, about 30 minutes from Philadelphia; • Harrah’s Philadelphia, which includes a harness track, and is located on the Chester city waterfront, about 20 minutes from Philadelphia; and, • Valley Forge Casino & Resort, a Category 3 license-holder (the smaller resort class), about 40 minutes from Philadelphia.

The legal challenge mounted by SugarHouse (and Market East Associates, which also bid for the city’s second gaming license) has stalled, but ultimately

Pound for pound, the market is still going strong; last year, the Keystone State’s 12 casinos raked in more than $3.1 billion in revenues, the highest-ever annual take.

20

Global Gaming Business AUGUST 2016

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Greenwood Gaming’s Parx Casino in Bensalem is the region’s highestgrossing gaming facility

Harrah’s Philadelphia is a racino located with a harness track in Chester, just south of Philadelphia

Built on the Delaware River at the site of a former Domino Sugar factory, SugarHouse opened in 2010

“Competition is good—it’s good for customers, and keeps operators on their toes. But we have plenty of it. There is a point of diminishing returns.”

—SugarHouse GM Wendy Hamilton on why she opposes the Live! casino addition to the market

may not prevent the Live! development, which state lawmakers are counting on to help balance a strained budget. What then?

“The Philly market has been pretty strong,” says Cory Morowitz, chairman of New Jersey-based Morowitz Gaming Advisors. “But if you look at gaming throughout the Northeast, yes, it’s pretty saturated. There aren’t a lot of opportunities to grow on the land-based side unless it’s in a new jurisdiction or virgin territory.”

He believes the Live! project “won’t grow the market significantly, and will certainly take some share from the other operators in the market.” Even so, he adds, “The new investment kind of plugs a hole in the market near the ballparks, and the market can absorb it, but it will take market share from the other guys, in Chester and at SugarHouse.”

Investment Matters Live! could be more of a regional draw than SugarHouse due to its location, just off Interstate 95 near Philadelphia International Airport, says Morowitz.

“Over the years, it’s been shown that casinos in inner-city locations generally don’t generate the revenue that the population says they should—although they do well, they’re harder to get to and not as convenient. Based on its location and depending on the investment, (Live!) may draw from a wider

catchment area than SugarHouse.”

The level of investment is key, he says, as well as creating one destination with multiple attractions.

“In a very competitive market, that clustering of assets will be helpful for them.” SugarHouse, on the other hand, can depend on the loyalty it’s built up over years of operation, as well as what Hamilton calls “a nice little renaissance in our micro-neighborhood in Fishtown and Northern Liberties. We have trendy restaurants and bars, a new Live Nation theater, a comedy club—it all kind of works together to make this ZIP code the place to be.”

Its local patrons, who according to Hamilton typically hail from within a 40-mile radius, are unlikely to defect en masse to another property, Morowitz suggests.

“Gaming revenues are driven by database players, who come often and play a lot over the course of a year,” he says. “They’re more dependent on proximity and the types of things these players like, which are free play and a good buffet. Investment matters more in a regional market, where people travel longer and spend more time on property. It won’t hurt (Live!) to have all that investment, which will allow them to cross-market with people who are there for other reasons.”

Harrah’s, for its part, may experience some impact from new competition, “but they’re part of a bigger entity, the biggest gaming company in the world,” observes Jeffrey Lolli, associate professor of the Center for Hospitality Management at Widener University, and a former director of hotel operations at Harrah’s.

“Caesars’ Total Rewards customers will go to Harrah’s whether they’re in New Orleans, Las Vegas, New Jersey or Pennsylvania,” Lolli says. “SugarHouse and Chester have their own dedicated market” to susAUGUST 2016 www.ggbmagazine.com

21

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“The (Philadelphia) market’s been growing over the last couple years, it’s grown this year, and I think it will continue to grow.”

—Cory Morowitz, Morowitz Gaming Advisors

tain them if and when the South Philly project goes forth. But over time, with exposure to other options, those loyalties could shift.

Another advantage for Live! is that its plan includes a hotel. “Sands Bethlehem always gets a larger set of gamers and keeps people there longer because it’s a whole entertainment complex,” says Lolli. “People who go to sporting events (in South Philadelphia) are already there, and can migrate to the casino after a football or baseball game.” They also have the option of staying a night or two.

One big drawback for the property could be traffic on I-95, which tends to snarl in rush hours, on game days, and during big concert events (South Philly is home to Citizens Bank Park, home of the Phillies, plus the Wells Fargo Center and Lincoln Financial Field, which collectively host not only professional league football and soccer and college sports but superstar entertainers like Taylor Swift, Beyonce, Adele and Coldplay).

The Million-Dollar Question The growth in table games—up 7.8 percent from 2014 to 2015 across the state—“bodes well for the future,” says Morowitz.

“When you look across the entire United States, the slot market has been in the doldrums, and table games have been one of the few bright spots. It says something about the changing customer that’s out there in the gaming environment. It’s very different from 30 years ago, when table games were the bastard stepchild” of the gaming environment. For 2015, slots in Pennsylvania were up less than 2 percent year-over-year, according to figures released in January from the state Gaming Control Board.

The 14 percent tax rate on tables is also favorable for Pennsylvania operators, he adds. “It’s much lower than on slots (at 55 percent), unlike jurisdictions like Atlantic City, where the rate on slots and table games is the same. In those cases, the labor costs of table games kind of force operators to feature their slot product over tables.”

Back in 2007, two casinos licensed for Philadelphia were still on the drawing board (a license awarded to Foxwoods was ultimately rescinded). SugarHouse was in the pipeline, and the Philadelphia Convention and Visitors Bureau was test-marketing the slogan “Where High Stakes Meet Cheesesteaks.”

At the time, Meryl Levitz, president and CEO of the Greater Philadelphia Tourism Marketing Corp., wondered if casinos would “pull money from retail and pull diners from restaurants. The question was, ‘Are they going to add to the pie, or just cut off a slice of it?’

“Today,” she says, “I would say they’ve added to what makes Philadelphia and the countryside a well-rounded destination for all kinds of travelers—leisure, overnight, conventions. According to the research, casinos are among the top 10 visitors’ activities in day leisure, on par with the proportion of visitors who attend pro-am sporting events and go to zoos.

“They’re repeat visitors, and frequently a person won’t go to just one casino but will try their luck at several different opportunities, so each one has to be its own destination, create this nice zone where you get music, food, dancing, comedy clubs, gaming, free parking. It’s like connecting the dots, or the beads on a necklace.”

There must also be something for the person she calls “the reluctant visitor:” the spouse, sweetheart or friend who tags along with the gambler, but would rather shop or go sightseeing than be glued to a slot terminal. “You always have an influencer,” says Levitz, “but there has to be something for the people with the influencer.”

The Live! project certainly would have all that, if it ever comes to fruition. In the past, the Stadium partners have estimated it could take about 15 months, from groundbreaking to grand opening, for the complex to become operational. But for now, the project remains in limbo, and the competitors remain in their corners. For now, Morowitz sums up the current Philly gaming market with one word: “resilient.”

“The market’s been growing over the last couple of years, it’s grown this year, and I think it will continue to grow,” he says.

A deciding factor for any new property could be the state of the economy when it opens.

“Gaming is so economic-dependent,” says Lolli. “People will always travel, no matter what the economy is like, but no one really has to go to a casino. That’s disposable income. When people have to cut back, it’ll be, ‘I’m not going to gamble, I’m not going to see a show.’ If the economy holds up, I think (Live!) can do well, depending on the million-dollar question: “Do we need another casino in Philadelphia?”

In the past, the Stadium partners have estimated it could take about 15 months, from groundbreaking to grand opening, for the complex to become operational. But for now, the project remains in limbo, and the competitors remain in their corners.

22

Global Gaming Business AUGUST 2016

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p. 24 GLI:Layout 1 7/14/16 11:46 AM Page 24

Certified Evolution The evolution of Gaming Laboratories International has mirrored the evolution of the gaming industry.

By Frank Legato hen James Maida and Paul Magno founded Gaming Laboratories International in 1989, the idea was to provide suppliers to the gaming industry with an alternative to what was then a time-consuming process in getting new slot machines approved by the overworked state-run labs in the only two legal casino jurisdictions at the time, Nevada and New Jersey.

Maida, who had worked at one of those overworked agencies, had the solution—create a private testing process focused on the highest quality while providing greater efficiency and cost saving than can be provided by a single state bureaucracy.

“Private testing produced economic efficiencies that cannot be replicated in single-jurisdiction government labs,” Maida says. “By using test results and applying different standings from multiple jurisdictions, GLI has been able to save the industry untold millions by leveraging the outcome of testing results and applying those scientific outcomes against the various standards jurisdictions adopt for slot machines and other gaming devices.”

With longtime friend and New Jersey Division of Gaming Enforcement colleague Magno, Maida launched GLI as the first private testing option for industry suppliers.

Of course, the forming of GLI was perfect in its timing, Center front, counterclockwise: Paul Magno, Sr. Vice President; James Maida, CEO and President; Ian Hughes, VP of Global Services; Martin Britton, GLI Europe and Africa Managing coming as it did only a year after passage of the Indian Director; Bruce Hecht, CFO; Dave Daniels, General Manager Colorado and Nevada; John Gaming Regulatory Act. GLI instantly became the go-to lab Grau, VP of Engineering; Christie Eickelman, VP of Worldwide Marketing; Tim Reigel, Chief for the new Native American gaming industry, with nearly Technology Officer; Salim Adatia, VP of iGaming and Canadian Services; Kevin Mullally, VP all of the eventual 28 U.S. Indian gaming jurisdictions acof Government Affairs and General Counsel; Richard LaBrocca, Sr. Director of Engineering; cepting GLI certification for approval of both Class II and Christine Gallo, VP of Compliance and Quality Assurance Class III gaming devices.

But the advent of Indian gaming was only one of the monumental changes that would meet the young GLI— technology was changing in ways that would continue to redefine the slot maing,” Maida says. “We keep our quality extremely high. We also want to be chine, and the systems that control them. experts in every jurisdiction that we are in around the world.”

The company has dominated the worldwide testing market by making sure The quality of the testing itself, he adds, is matched by quality service. its own staff maintains the highly specialized expertise needed to evaluate new “Those core values require us to go out and have face-to-face meetings, and technology, creating the fastest path to market for suppliers without diminishing provide over-the-top daily customer service,” he says. “There’s no excuse here regulatory control. at GLI if a customer calls and does not receive a call back. We are almost neuMaida says GLI has remained the leader in testing by closely watching the rotic as to getting back to clients, to getting them what they need, because we market, hiring top engineering talent as needed to handle all the new technoloknow that in the gaming industry, time marches on.” gies, and most of all, by listening to its customers and fulfilling their needs.

The service culture does not end when GLI certifies a game for a supplier.

“Here at GLI, our first core value is really to provide the best quality in testAccording to Maida, the company routinely is called upon to ensure games on

W

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Global Gaming Business AUGUST 2016

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The testing organization Maida started with two employees some 27 years ago is now a global network of 20 offices on six continents, with 900 employees, speaking more than 50 languages. casino floors are in compliance with the applicable regulations. “In the mid 1990s, we started our services practice involving on-site inspections—inspecting all the games that were on the floor,” he explains. “Many casinos have us in each year to inspect the machines on the floor, to make sure that they are in compliance with what we’ve certified.”

It’s one of the ways GLI has both defined and expanded the nature of testing gaming devices and systems. Gaming testing is still the core business of GLI, and Maida maintains that testing to ensure integrity of gaming devices and systems is the common pathway to everything else GLI does.

And GLI does a lot.

The testing organization Maida started with two employees some 27 years ago is now a global network of 20 offices on six continents, with 900 employees, speaking more than 50 languages. In Canada, where the company has been active for 20 years, GLI recently opened an expanded instant scratch-ticket testing lab, and in June announced the acquisition of Bulletproof Solutions, a trusted Atlantic Canada IT solutions provider.

Bulletproof will allow GLI to expand the professional services it has offered in addition to the basic testing services—from consulting with government officials setting up new regulatory regimes to bringing professional regulators in various world gaming regions together for its GLI University series of roundtable seminars.

North American operations are joined by GLI offices in Latin America, Europe, Asia/Pacific and South Africa.

As for the core testing services, the areas of GLI’s testing expertise have swelled with requests for additional services from its worldwide clients. “We found out that regulators and operators alike were looking for much more robust services from us,” Maida says, “like, for instance, network risk assessment. How secure is the casino?”

GLI has added cybersecurity and network security to its testing services.

Compliance audits in connection with anti-money laundering requirements, responsible gaming programs and other services have been added as well.

“Around five years ago, we started to add much more to the basic testing,” says Maida. “Testing is still our core business, but we’re bolting a lot more services on top of that—pre-compliance services, on-site professional services.

“Many casinos are now upgrading their online systems. It’s been years that they’ve been running with the same online system, so we provide consulting work in terms of, from a regulatory point of view, how do you upgrade from a previous version of your slot system, to the most recent version? Or, do you switch slot systems all together? It’s really a natural expansion. We do these professional services not only for the regulators, but also for the operators.”

It’s all about protecting the client’s profitability, he says—from preventing loss from security breaches to ensuring games perform in the field like they are supposed to perform. “For many suppliers, we provide them feedback with everything that was submitted and every failure that they had in those submissions,” says Maida, “and then we quantify them in terms of what they need to work on going forward.

“We feed back to them all the errors we’re seeing coming out of their development process, so they can focus on correcting them to allow for more first-pass yield (quick regulatory approval). Since we implemented that process two years ago, we’ve seen most major suppliers actually increase their first-pass yield.”

Tools of the Trade Through the years, GLI has not only constantly maintained its expertise in testing as technology has advanced, but along the way, has invented or acquired unique tools to accomplish every extra service its customers have sought.

One of the biggest successes has been the company’s patented GLI Link technology, which essentially eliminated the requirement that a gaming device be physically in the company’s main Las Vegas lab to be tested and certified.

“GLI Link allows us to remotely test machines,” Maida explains. “If we have a machine in Australia today, and we have to test it on an online system that’s sitting in our Las Vegas office, we can hook that up and remotely do it. We AUGUST 2016 www.ggbmagazine.com

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don’t have to pick the machine up and move it. That saves suppliers a lot of time and money.”

(He adds that all testing of online gaming systems can be done remotely.)

“GLI is efficient in moving work around the world, to our offices where they’re licensed to do the testing. We can quickly jump on it at 3 in the morning in Asia, or whatever the local time is in New York, and be able to test things 24 hours a day and get it done.”

He estimates that remote testing has turned GLI’s average turnaround time from 33 days to 15-19 days. “The one thing we do pride ourselves on is that nearly 100 percent of the time, we make the customer’s request dates,” Maida says. “If something comes in today and has to be out in seven days, we’ll have our team work through the weekend, work overtime. At the same time, we consistently ask whether we are meeting or exceeding what the customer needs and wants.”

Other new tools have been developed through a partnership with Kobetron, a third-party testing company in which Maida and Magno invested last year. The first success of the partnership was Verify+ by Kobetron, a plug-and-play verification tool that uses a computer’s USB port to verify virtually every signature method to maximize compliance efficiency.

In June, Kobetron acquired Gaming Informatics, which produces a software suite that tracks inventory of electronic gaming equipment.

Kobetron “houses all of our tools,” says Maida. “GLI is out of that business, and Kobetron will be picking it up. It avoids conflicts, and allows us to have a dedicated team of professionals thinking about the tools the customers need.”

“Here at GLI, our core value is really to provide the best quality in testing. We keep our quality extremely high. We also want to be experts in every jurisdiction that we are in around the world.”

—James Maida, founder, Gaming Laboratories International

Working Together Maida says GLI has expanded its services directly in response to those customer needs, and to changes in the nature of the business confronting its customers.

As for customer feedback, GLI’s methodology is simple: Ask them, face to face, what they need. “We are the only lab in the world that actually has a fulltime global development team,” Maida says. “We have approximately 40 people globally, who are traveling each week to go see clients. We see virtually every tribal casino in the United States, up to three times a year.

“We also communicate with gaming regulators constantly, and not only here in North America. We have a team dedicated to Latin America and the Caribbean, traveling to every country and meeting with operators and suppliers and testifying where laws are changing. We also have a team that travels throughout Asia-Pacific.”

GLI has done pre-regulatory work—consulting with new jurisdictions— from Saipan to Japan. In the U.S., the company recently consulted in the startups of gaming jurisdictions in Maryland and Massachusetts. “I would say we do 99.9 percent of all the consulting for new jurisdictions, on a technical basis,” Maida says. “We also have an anti-money laundering unit, and we bring in FinCEN and the Treasury Department (to help in consulting), especially in South America.

“We’ve been consulting the Mexican government for years. (Government Relations VP) Kevin Mullally and (Director of Latin America Government Relations and Business Development) Karen Sierra-Hughes have a special working relationship with governments in the Caribbean. Regulation isn’t just born in one big step; it’s a continual process. Look at Jamaica—a client of ours for more than 10 years, and now they have implemented a great deal of good, innovative regulation over the last year.”

Maida says each new jurisdiction has to be approached from a unique perspective.

“We realize each jurisdiction is unique and has its own culture, politics, policy goals, strengths and weaknesses,” he says. “Our job is to tailor a solution that 26

Global Gaming Business AUGUST 2016

specifically meets the needs of the jurisdiction rather than cutting and pasting policies from established jurisdictions that may not fit the situation.

“At the same time, we want to create global efficiencies that make it easier for suppliers and operators to conduct business on a global basis. It is hard work, but we have people that are uniquely qualified to do it, and our clients recognize that.”

Meanwhile, the company takes its customer road show everywhere to make sure GLI is providing customers what they need. “We’re in Macau, we’re in Singapore, we’re all throughout Australia and New Zealand,” Maida says. “In Europe, we have a dedicated team that travels from Ireland all the way through to Eastern Europe, meeting with suppliers and regulators.”

Educate and Inform One of the most productive ways GLI keeps its finger on the pulse of all the various world jurisdictions it serves is by bringing all the regulators together for Regulators Roundtables, the popular educational events created under the banner of GLI University.

The main Regulators Roundtable event, which has been staged annually for more than 12 years, “started out as 35 people in a conference room in Colorado,” Maida says. “Last year, it was well in excess of 200 people in Las Vegas.”

It wasn’t long before GLI addressed the fact that regulators in many regions are under government travel restrictions or tight budgets. GLI University expanded to hold regional roundtables and seminars around the world.

“Not only did we host our Regulators Roundtable in March of this year in Las Vegas, but we will be holding a Latin American and Caribbean roundtable in Curaçao, the third week of August,” says Maida. “We’re presenting a Midwest Regional Gaming Regulators Seminar for state regulators this month. That event currently has regulators registered from 12 states and many different tribal jurisdictions.

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One of the most productive ways GLI keeps its finger on the pulse of all the various world jurisdictions it serves is by bringing all the regulators together for Regulators Roundtables, the popular educational events created under the banner of GLI University

“For Australia, we’ll be working with the International Association of Gaming Regulators in Sydney in October. We partnered with the International Association of Gaming Advisors in Malta, in conjunction with the Gaming Regulators European Forum. Our goal is to host between four and seven of these events around the world every year.”

GLI University draws speakers from all over the world to conduct seminars for regulators on responsible gaming programs, new technology, network risk assessments, cybersecurity, mobile gaming, even eSports and daily fantasy sports.

The agendas change with the issues. “We work hard to provide content that is current,” Maida says. “There are some core things that we do, like a new technology update, but the agenda changes depending on what’s happening in the industry.”

For instance, last year, GLI brought in people from the U.S. Treasury Department and the American Gaming Association to advise attendees on antimoney laundering issues that were the hot-button topic at the time. “We bring in the people who are experts, whether we’re talking about Brazil, Peru or the U.S.,” says Maida.

Future-Proof GLI’s testing and assessment services have adapted to the changing industry perhaps more effectively than any other sector of the industry, and as a result, the company has been a major player in just about every big technological and regulatory change the casino business has seen since 1989.

The next few years promise to provide the company many more opportunities to be at the forefront of a new era in gaming.

The company already is in the thick of the worldwide online gaming industry, providing testing and consultation services in mature iGaming jurisdictions in Europe, Asia and elsewhere. It has used this expertise to guide new iGaming jurisdictions in the U.S., from its New Jersey home base to Nevada, Delaware and, most recently, Pennsylvania.

GLI not only does all the game testing globally for iGaming jurisdictions, but in mature European online gaming markets, regularly checks the system security. “We do most of the security audits in Italy for all of the online sites,” Maida says, adding that GLI performs annual security audits for iGaming jurisdictions around the world.

“We are licensed to do that in Atlantic City, so we’re hoping we’ll be able to do security audits with the casinos there,” he says. “We not only do the annual assessments, but we also can perform network risk and cybersecurity audits. All those professional services that we can offer to land-based casinos, we actually offer to the online casinos as well.”

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Global Gaming Business AUGUST 2016

Online testing applies not only to the casino business, but to the worldwide lottery industry as well. As the casino and lottery worlds continue to converge, GLI is ready.

“For lotteries, we conduct a great deal of World Lottery Association audits,” Maida notes. “We’re the only lab in North America that can do a WLA audit for lotteries—not only for security controls assessment, but for responsible gaming controls. We run that as a completely separate division from our certification and testing.”

It’s one of the services provided by GLI’s Professional Services group, which was established in 2011 and has been expanding ever since. Its recently acquired Bulletproof group provides management oversight, software testing, quality assurance testing and other services. Maida says with the acquisition, GLI will further enhance its existing professional services capabilities to lotteries, regulators and operators.

Moving forward, GLI is ready to address the new casino world, from cybersecurity to skill games to eSports, daily fantasy sports and new payment technology for the casinos.

The latter is a natural progression for GLI, which was at the forefront of certification of payment technology from bill validators to ticket-in/ticket-out.

“Now, we’re going to get to electronic cards or swipe technology as a way to transfer credits,” Maida says. “There are a lot of ways to make this industry more cashless. In our own lives, we have things like Apple Pay, Samsung Pay and other mobile solutions. You don’t even have to have a wallet with you; you just carry around your phone, watch or other device.

“There are policy issues with all that, and I think regulators are looking at it.

Because they see it in their daily lives, they’re all saying, ‘How might this apply to the casinos?’”

Asked to pick out the most significant new development facing the industry, Maida says he can’t even select one. “I pick out four or five things and watch them all at the same time,” he says, although the current legislative climate would suggest that internet gaming, daily fantasy sports and eSports will provide some of the near-term regulatory challenges to the industry.

Whatever the systems and devices that will be involved in the next era of gaming, GLI will be testing it. (“GLI is capable of testing everything we throw at them,” said one of the company’s long-term clients.) The company maintains its mastery of new gaming technologies by constantly adapting its own workforce to handle new developments.

“The really great thing about being a private company, and not having rules that government often has, is that we can hire people, and we are constantly in a state of hire,” Maida says. “And, as new technologies come on board, we adapt by hiring smart computer engineers, electrical engineers—we’re able to adjust our workforce by adding more and more skills.”

Maida adds that suppliers are “very open” with GLI with respect to new technologies. “They meet with us regularly ahead of anything that they’re going to do that’s a major technological shift, so we actually can see it, touch it, understand it, and then make sure we have the appropriate people to be ready when it comes in,” he says.

“At this moment we are working on new technology ideas that probably won’t be out for the next 18 months to two years, but we already know what we’ll need in terms of testing. And, we’ve been doing the same thing now for more than 27 years—talking to clients, knowing what their needs are going to be before they actually need it, and then making sure that we have the right team here to perform it.

“We work every day to make testing faster, more efficient and less expensive while never sacrificing quality. Our focus is on great customer service, integrity and delivering the best possible value.”

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How to capture the loyalty of millennials

VEGAS ENIGMA

S

DecoDeD

uccessful casino operators know there are only two drivers of sustainable competitive advantage—location and loyalty. Assuming that once built, moving a casino to another location is not a feasible strategy, hundreds of millions of dollars have been invested by the gaming industry in developing methods to capture customer loyalty.

Of course, there are many types of customer and many types of loyalty.

The 2007-08 financial crisis and the resulting consequences for Las Vegas meant that on one hand, new investments were delayed or mothballed entirely and costs were cut across all businesses. On the other, operators had to think more smartly about their customers and seek additional revenue generators throughout their portfolio, and indeed, find new nontraditional customers.

Over the past decade, the question of whether the next generation will continue to visit Las Vegas has been answered. In 2007, 29 percent of Las Vegas visitors were under 40 with the average age being 50 years old. By year-end 2014, 44 percent were under 40 with the average age of 45.2. Although this rose slightly in 2015, many analysts believe that the trend of younger visitors coming to Las Vegas will continue.

Millennials make up roughly 25 percent of the U.S. population and have an annual direct spending power estimated at $200 billion. Their indirect spending power each year is approximately $500 billion; this is a significant market and one that traditional Las Vegas had not catered to.

Today, Las Vegas is the playground for millennials, as it was for boomers and Gens X and Y before them. Targeting younger customers is difficult, as in some ways this group displays different behaviors than their parents and older segments, and all research points to a highly disloyal group of customers that do not respond to established triggers of incremental transactional loyalty, or even in the functional elements that have been the alternative marketing platform.

The question that has thus vexed strategists is how operators can effectively capture loyalty in this increasingly valuable group of visitors, which is one I sought to answer in my recent research.

30

BY OLIVER LOVAT

Global Gaming Business AUGUST 2016

The Customer

In order to capture loyalty, we must first understand the customer and why they come to Las Vegas.

Q. How many times have you been to Las Vegas in total?

TOP 10 MARKETS

OF MILLENNIALS (BY %/INDEX OF CONCENTRATION/FLIGHT TIME TO LV) 1. Austin, TX

(16%, 120, 180mins)

2. Salt Lake City, UT

(15%, 117, 90mins)

3. San Diego, CA

(15%, 117, 70mins)

4. Los Angeles, CA

(14%, 109, 70mins)

5. Denver, CO

(14%, 109, 110mins)

6. Washington, DC

(14%, 109, 5 hours)

7. Houston, TX

(14%, 108, 190mins)

8. Las Vegas, NV

(14%, 108, N/A)

9. San Francisco, CA

(14%, 107, 90mins)

10. Dallas-Ft. Worth, TX

(14%, 106,160mins)

Millennials who visit Las Vegas do so many times, with 49 percent of respondents visiting Las Vegas more than eight times. Fifty-five percent of millennial visitors come to Las Vegas to “escape,” and although 49 percent are married, 64 percent come with friends.

Members of this group are significantly less likely to travel for family reunions, relaxation or to gamble than non-millennials, but are significantly more likely to come for a special occasion or shared experience, such as a notable birthday or bachelor(ette) party.

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Of the top 10 U.S. cities of millennials ranked by concentration of residency, eight can reach Las Vegas in less than three hours by flight. Five can reach Las Vegas in under two hours.

Within this generation, there have been significant societal shifts. The traditional nuclear family of grandparents, parents and children living in close proximity is highly rare, as people relocate, whether for economic or educational reasons. This demographic migration from smaller to larger cities where there are higher concentrations of young people is pronounced, but it also means that families and friends live in separate cities.

Perhaps in the past, people in different cities lost touch, but with modern communication, geography is a lesser barrier to relationships. The research undertaken suggests that although people live in different and disparate cities, when they meet, they do so in Las Vegas.

Customer Behaviors Forty-nine percent of millennials gamble mostly in the hotel they are staying, but only 30 percent spend most of their F&B budget in their host property.

As profit centers, food, beverage and nightlife also remain key components in the Vegas experience, and in the branding and identity of a resort.

However, they alone are not a driver of loyalty, but rather remain an effective marketing tool, as visitors are likely to spend most of their budget outside the property they are staying in. Indeed, this also implies a failure of the operators to capture their customers’ share of F&B wallet, and key questions need to be addresses in this area.

Why this is important is that average F&B spend has increased from $254.49 to $292.00 since 2007, some 15 percent, whereas other spending areas have either declined or are near par. Overall non-gaming spending has increased by $45 per person from 2007 to 2015.

Unlike past generations, 40 percent of millennials decide their Las Vegas schedule more than a month before they arrive. Sixty-six percent of respondents follow Las Vegas news when they are at home. This gives operators a unique opportunity to engage with their customers before, during and after their Las Vegas visit.

The segment is open to engagement to consume information to prepare for future visits. However, much of this communication is not directly with the operators (26 percent), but with peer-driven sources, such as Facebook (44 percent), Vegas Tripping (35 percent) and TripAdvisor (34 percent).

(Some respondents cited multiple sources.) Nearly 75 percent of respondents stated they had all the information they need in order to plan their trips in advance of setting foot in Nevada.

What Happens in vegas‌ The popular consensus is that millennials do not gamble. To an extent, this is correct, but a more accurate statement would be millennials do not gamble yet, or even in the same way as their parents and grandparents. This poses a second question for operators, and an ongoing debate is under way among operators, manufacturers and architects, with many theories and strategies being proposed.

Q. How Much Do You Spend In Las Vegas?

Currently, millennials actually spend more on food and beverage than on gaming. However, the percentage who would rather spend a sum on food and gaming combined is about even, implying that if the customer had a larger budget, they would spend a greater amount on gaming.

We also note that the players who spend the most on gaming (over $1,000) are those who typically have been to Las Vegas the most often. This is important, as if captured as a loyal customer, over time there are significant customer lifetime value opportunities in both gaming and non-gaming spend, and there is evidence of an accelerator effect rather than a linear response to visitation and spend.

Fifty-one percent of millennials are more likely to visit a nightclub in Las Vegas than their hometown, and 60 percent actually visit nightclubs in Las Vegas. Twenty-nine percent make their choice of hotel based on their nightlife plans. Therefore, the nightlife component is significantly more relevant than simple F&B provision.

AverAge revenues per person 2007-2015 2007

2008

2009

2010

2011

2012

2013

2014

2015

Lodging

$381.05

$355.88

$272.81

$286.70

$310.95

$307.33

$275.95

$276.96

$348.98

F&B

$254.49

$273.39

$250.32

$256.82

$274.69

$265.11

$278.95

$281.88

$292.00

Transportation $62.66

$59.26

$53.31

$62.87

$64.25

$57.77

$59.68

$68.83

$73.45

Shopping

$114.50

$121.90

$101.97

$122.80

$129.34

$149.29

$140.90

$149.77

$122.66

Shows

$47.87

$51.64

$39.87

$49.28

$47.52

$42.89

$38.45

$47.56

$61.95

Sightseeing

$8.31

$7.12

$5.77

$7.21

$10.24

$9.63

$9.29

$14.49

$14.86

Gambling*

$555.64

$531.98

$481.57

$466.20

$447.63

$484.70

$529.57

$530.11

$578.34

Total excl.

Gambling

$868.88

$869.19

$724.05

$785.68

$836.99

$832.02

$803.22

$839.49

$913.90

Total inc.

Gambling

$1,424.52 $1,401.17 $1,205.62 $1,251.88 $1,284.62 $1,316.72 $1,332.79 $1,369.60

$1,492.24

Source: UNLV/LVCVA

AUGUST 2016 www.ggbmagazine.com

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80% under 40 are

prepared to spend more on F&B than in their hometown. Those who can afford it, gamble (mostly where they are staying).

Those who cannot, spend it on food and beverage, but would gamble if they could.

Eighty percent under 40 are prepared to spend more on F&B than in their hometown. We also note that as visitors come more often, they gamble more, and that the customers with the larger gaming budgets are more likely to be loyal to particular properties. This is, in effect, a “double whammy”— we find that loyal customers are the most profitable, and there is a great value to achieving retention.

Fifty-seven percent of respondents believe that seeing a performer play live is more special in Las Vegas than in their hometown, and 92 percent believe they can get a range of experiences in Las Vegas that they cannot get anywhere else.

So in summarizing what the next generation of customer feels, they typically come with friends, and come often. They know what they are going to do before they come—having asked their friends or peer group online—but don’t necessarily book it before they arrive.

Those who can afford it, gamble (mostly where they are staying).

Those who cannot, spend it on food and beverage, but would gamble if they could. They go to bars, restaurants and nightclubs mainly in other properties than where they are staying, and spend more than they would in their normal environment. They welcome the opportunity to go to a concert and seek out new experiences that they can’t do in their home locations.

The Customer-Operator Engagement Model The communication strategy has three stages—initially to inform the customer, followed by nurturing relationship and finally reinforcing the message. There are multiple methods in implementing this strategy, which a trained strategist can identify, but practical steps are unique for individual properties and operators.

The Riddle Solved: Capturing Loyalty of Millennials This research was designed to understand the drivers of loyalty within this segment of customers. To this end, we note that the main strategies for millennials are customer attraction, with little in the way of retention, other than the traditional methods.

Player’s clubs and targeted marketing techniques which proved so effective in the 2000s are increasingly ineffective; this customer eschews the incremental loyalty that was the hallmark of prior visitors.

Rather, the drivers of loyalty are both functional and emotional. In a functional sense, in attracting this segment of visitor, we note that there are three primary drivers in the decision-making process in choosing which property to stay in: room pricing, reputation and range of amenities. In an emotional sense, we note that the drivers of loyalty are based around concepts of community and shared experiences, rather than aspiration and service drivers.

The challenge for operators is how to tailor both the marketing and the experience for this customer and seek to capture their loyalty. Based on the research, see the graphic at right.

32

Global Gaming Business AUGUST 2016

The Las Vegas experience is not just about what happens in Vegas.

The operator that invests in developing the relationship between the customer and community, physical in terms of amenity but also in environment, culture and communication, will achieve a sustainable competitive advantage. And that is the secret of capturing loyalty for the next generation of visitors.

Oliver Lovat FRICS is visiting faculty at Cass Business School in London. As CEO of Denstone, he advises customer-facing, asset-backed businesses on strategic competitive advantage and maximizing value. For a full version of this research, contact him at oliver@denstone-re.com.

BGT_advert-2016_212,73x276,23mm_GGB_RZ.indd 1

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The Beat Goes On Why slot hold and free play threaten the players’ enjoyment of the games and the revenue of the casinos

By Steve Gallaway

I

n 2014, GGB published an article by this author titled “Killing the Gaming Experience,” igniting a debate that rages today. The basis of that article was that the gaming industry has seen a substantial increase in slot hold percentage over the past decade due primarily to the growth of less volatile, multi-line video reel penny slot machines and the growth of free play as a marketing tool.

The net results were diminished gaming experiences for customers. The article spurred a significant amount of interest from within the industry, both from operators and manufacturers. Some industry veterans pointed out that it was not fair to just blame video reel games and free play; equally at fault is what has happened to the average bet on these games and the increased “cost to cover.”

Cost to cover is the minimum amount that must be wagered to ensure that all possible lines have at least one coin bet on them. This would mean that on a traditional, three-line quarter stepper slot machine, the cost to cover would be 75 cents. If one only bet two coins per pull, he would not be betting on all three lines and would be, in effect, playing a higher-hold slot machine.

In addition, on that game, a player must bet the maximum on all three lines in order to have a chance to hit the top line jackpot. Since hitting the top line jackpot is factored into the hold percentage of a machine, not playing the max bet per line would increase the theoretical hold percentage even more.

These two factors have greater significance today. For example, say a player sits down at a 2-cent multi-line video reel slot machine, with 40 lines and a max bet of 10 credits per line. The cost to cover is 80 cents (2 cents times 40). The max bet, the one needed to have a chance at the top line jackpot, is $8 (2 cents times 40 times 10).

Traditionally in casinos, lower-denomination machines carried the higher hold percentages. Nickel games had a higher hold than quarters, which had a

34

Global Gaming Business AUGUST 2016

higher hold than dollars. As such, when penny games where first introduced, they were equipped with the highest hold on the floor. However, a penny game today is far from a penny game of past generations. When one looks at the average bet (closer to $1.75 per spin), one could argue that it would make more sense to price them closer to traditional $1 steppers.

How This Combination Has Impacted the Gaming Experience Over the past two years, industry professionals have tried to better explain the lackluster performance of electronic gaming devices in established domestic gaming markets. The U.S. economy has fully recovered from the recession of 2009 and consumer spending is now returning to pre-recession levels. Nevertheless, most domestic gaming markets have yet to enjoy the fruits of an im-

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Come Together

Slot makers and casino operators need to work together to resolve the slot hold issue By Mark Birtha

proved economy to the same levels that they achieved pre-recession. There is now widespread belief that an overall increase in slot hold percentages by casino operators could be having a deleterious effect on customers’ gaming experiences.

In 2015, AGEM issued a comprehensive study that evaluated the relationship of slot hold percentages to gaming revenue. Unfortunately, the study was limited to just those factors and did not compare apples to apples, since in some jurisdictions hold percentages were based on gross slot revenues and in others they were based on net slot revenue (gross slot revenue minus free play).

In evaluating the lack of growth in slot revenue since the onset of the recession, one must include the hold percent of a machine (based on gross), the cost to cover (therefore affecting average bet), max bet, and the amount of free play issued. The following example illustrates trends that we are seeing.

Let’s assume that Betty, a 55-year-old player, used to be a quarter player who wagered on a traditional, three-reel slot machine. She used to have an average bet of 75 cents on a 7 percent-hold machine, and her budget would last 3.5 hours, the sweet spot in time that gamers seem to enjoy for their overall gambling experience.

As the number of penny games on the floor began to increase, Betty was allured by the graphics and quality of the games, and started migrating to that more entertaining experience.

As she played, she found that the higher her average bet, the more often she was able to get into the bonus rounds, and the games became even more fun.

Over time, her average bet increased to $1.75 per spin, and she was now playing a 12 percent-hold machine. If her budget remained the same as when she was a quarter player, it would theoretically be gone in less than an

s with all things rooted in technology, A change is constant, and this evolution has been clearly evident in the casino space as the games people play continue to evolve along with the look and feel of the gaming floor. There have been a number of influences that have resulted in the programmatic changes in the way we operate our marketplaces.

The “rise of the machines” has resulted in a shift in which guests spend their money (particularly domestically) as more revenue is yielded through slot machines and video lottery terminals versus traditional table game products. And to that point, we have seen a migration from more strategy-based games like video poker, where outcomes could be marginally influenced, to a higher preponderance of play on reel games, and specifically video reel.

At the same time, both gaming operators and slot manufacturers have looked to keep the experience fresh and the floors optimized, and this has resulted in content that is more engaging and appealing to patrons.

But two of the biggest changes over the last 20 years have been the guests’ appetite for penny

games and the increased use of participation games that have altered the way we look at hold percentages and the results we have seen with payouts. Penny games were a tidal wave of product that took the industry by storm. Australian math-based games and the multi-line slot product were enchanting to players and profitable for both operators and manufacturers.

Although pennies were the primary denomination, the games’ multi-line aspect generated far larger average bets that rivaled higher-denom games and yet allowed those volumes to be predicated on par settings that were typically higher in nature.

At the same time, game manufacturers were continuing to push the limits and invest in R&D, as well as bringing entertainment flavor to the modern floor via theme-based participation games. Every movie or musician, celebrity or reality TV fad has had its day in the sun and pull of the handle.

These games have a high floor turnover rate and even higher license fee structure, so it is critical that the vendors keep the product fresh and yet pay the bills. The lease scenario allows operators to do the same. The result is a larger quantity of this style of game on casino floors around the world, coupled with an increased appetite by gaming patrons—and the high hold strategy in place to pay for this product. Thus, this shift in product and customer appeal has resulted in an escalating par setting strategy that has changed the way we operate the entire business model.

Operators and manufacturers need to sit down together (as this too has changed) and collectively look at the product and experience we deliver, in order to both understand this change and its genesis—but more importantly, to keep the customer in mind as we design and deliver new gaming experiences to our patrons.

This must be the next evolution in the gaming industry.

—Mark Birtha is president and general manager of Hard Rock Rocksino in Northfield, Ohio. He was formerly general manager at Fiesta Henderson in Nevada and Casino del Sol in Tucson.

AUGUST 2016 www.ggbmagazine.com

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hour. In real life, part of the reason that Betty’s handle would have increased on the new penny games is that she would be receiving free play offers, which gives her more time on device. However, even if her gross loss per trip doubled (half from free play and half from her pocket), her money is still lasting half the amount of time it was before.

Not only is Betty losing her money more quickly, but she is also finding that when tax season comes around, she has won fewer jackpots than when she was a 25-cent player. It seemed like she was winning all the time on the penny slots (lights, whistles, bonus rounds), but the lessvolatile penny machines did not hit the $1,200 jackpots as much as the games she played in the past.

Because of all of these factors, Betty’s gaming experience has been clearly diminished. So where does she go? What does she do? Perhaps one day the casino will lose her to online casinos where she can get the same games with a much lower hold percentage.

How Free Play Feeds Into the Equation Any examination of slot hold trends must also include a discussion of the effects of free play. The two are intertwined. Free play has largely replaced the issuance of cash for promotions, rebates and mail offers in casinos throughout North America.

With the ever-increasing number of high tax jurisdictions, free play is often the only marketing tool that casinos can utilize without costing them hard, taxable dollars.

Free play began to emerge as a marketing tool in the early 2000s. Prior to that time, casinos used 36

Global Gaming Business AUGUST 2016

The problem is that free play is not free. Since free play increases slot machine handle without increasing revenue, it theoretically decreases hold percent. In other words, as handle increases due to free play, slot floor hold decreases.

To counteract this effect, the hold on slot machines must be increased in order to maintain slot hold par. cash as a primary means to reward customers for their loyalty or to stimulate a trip to the casino.

From coupons for a roll of nickels to direct mail offers that rebated a portion of a customer’s prior loss, casinos dispensed cash to get customers to sit down in front of slot machines. The problem was that casino operators always felt that not all customers took the cash they so generously gave them and wagered the money in a slot machine. It was widely believed (and quite rightfully so) that some customers took their cash and walked out of the casino without ever having wagered a nickel.

By the late 1990s, casino operators had begun to ask slot system manufacturers for the ability to issue non-negotiable slot credits to replace cash premiums. Over the next decade, various technological and regulatory changes took place, and

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1 9 0 0 AT T O R N E Y S | 3 8 L O C AT I O N S W O R L D W I D E˚ generally by 2012, virtually every casino had systems and slot machines that could issue free play.

For a variety of reasons, free play became the primary marketing tool to foster loyalty and encourage repeat visitation. In many jurisdictions where free play is not taxed, this large marketing expense actually disappeared from the income statement.

In other jurisdictions, where it showed up in a contra revenue account, many operators argued that free play was free, so why not give more?

The problem is that free play is not free. Since free play increases slot machine handle without increasing revenue, it theoretically decreases hold percent. In other words, as handle increases due to free play, slot floor hold decreases. To counteract this effect, the hold on slot machines must be increased in order to maintain slot hold par.

Slot revenue trends in Pennsylvania illustrate this point. Statewide, the machines held 9.7 percent; however, the casinos’ net hold (based on taxable revenue only, or gross slot revenue less free play) was actually only 7.9 percent.

While free play is a good benefit to the minority of players who receive all of that free play, it is bad for new customers who come to the casino without any free play offers, or existing customers who don’t generate enough theo to qualify for offers. At the end of the day, the majority of players who wager at slot machines at a casino do not receive free play. Only the minority who are avid, loyal players and use their slot club cards diligently get those offers.

In nearly any healthy industry, 80 percent of revenue comes from 20 percent of customers.

However, many casinos are finding this ratio closer to 90/10. This is dangerous, as a casino needs that other 80 percent of customers to one day develop into loyal players, and their 20 percent of revenue generated today is very valuable.

Without the proper exposure to new customers, future growth is near impossible.

The industry must find a way to keep all players engaged, provide value for their gaming dollars, and not rely on continuing to increase price (higher slot hold, higher costs to cover) to grow slot revenue. That is the true challenge for the industry.

Steve Gallaway is the managing partner of Global Market Advisors, a gaming and tourism consulting firm. He can be reached at sgallaway@globalmarketadvisors.com.

Global Reach The Global Gaming Practice at Greenberg Traurig is not limited to North America With hands on experience in Asia, Latin America and Europe, our 40 attorneys know there is more to understanding gaming law than just operating a casino. Our attorneys have diverse backgrounds in all aspects of gaming company operations. We have experience in working with foreign governments and with regulators worldwide.

The Greenberg Traurig Global Gaming Practice can address casino operations, lotteries, pari-mutuel wagering, charitable gaming, tribal gaming, and Internet gaming. Our backgrounds include representing casino owners, operators and executives, gaming manufacturers and suppliers, private equity firms and investment banks on gaming related matters.

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

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iGAMING NORTH AMERICA

The Rise of eSports Does this emerging sport offer an opportunity for gaming-related companies?

By Michael Vanaskie

L

eague of Legends, Defense of the Ancients, Halo, Call of Duty, and Hearthstone.

Whether these titles are familiar to you or not, they represent some of the most popular competitive games in the burgeoning industry that is eSports.

While eSports may still be an ignorable industry to outsiders, in reality it represents a highgrowth industry that is still in its relatively early stages of expansion. To have a clear understanding of the potential of the industry, it is important to have a cursory familiarity of the history of eSports.

The eSports industry of today lends its roots to the Nintendo World Championships, which were first held in 1990. The industry did not start gaining momentum, however, until the early 2000s as online multi-player games emerged.

Today, eSports fans travel to sold-out arenas to watch the world championships of their favorite games. If they can’t make the event in person, they are happy to stream the competition online.

Statistics highlight that the industry is far from ignorable. Newzoo, an eSports market intelligence firm, estimates that the eSports industry generated total revenue of $325 million in 2015. This represents year-over-year growth of over 67 percent from 2014 revenue, which was $194 million.

Furthermore, Newzoo estimates that this figure will increase to over $1 billion in 2019.

Not only has the industry experienced strong revenue growth, the number of eSports viewers and enthusiasts continues to grow steadily.

With the strong growth eSports has (and is expected to) achieved, there have been numerous ancillary products and services launched over the years. From eSports arenas to streaming services dedicated to eSports and even fantasy sports leagues, the industry has been a popular outlet for 40

Global Gaming Business AUGUST 2016

innovation and expansion. The growth in the industry has also piqued the interest of a number of globally recognized brands.

Amazon placed a big bet on eSports when it acquired Twitch, a website allowing video gamers to broadcast their play online, for nearly $1 billion.

ESPN’s website now has a section dedicated to eSports.

Colleges are also beginning to recognize eSports tournaments as legitimate intercollegiate competitions. This past March, college basketball’s March Madness was not the only college tournament occurring. This year marked the second annual “Heroes of the Dorm” eSports tournament hosted by Blizzard Entertainment.

There is no denying that the eSports industry is here to stay. However, the question remains on whether or not eSports represents an attractive opportunity for the gaming industry. Currently, there appear to be two primary channels for gaming entities to capitalize on the eSports market.

First, there is the opportunity for gaming properties and resorts to add eSports arena facilities or host eSports tournaments. As discussed previously, eSports fans travel to large arenas (such as the Staples Center in Los Angeles) to watch the top eSports events in person. For the top events, attendees are willing to pay over $70 to get the in-person experience.

Operators may see this as a proactive strategy to attract millennials to their resorts. From a direct revenue perspective, however, it is unlikely that eSports arenas will move the needle for most properties.

The second, and perhaps more interesting channel, for the gaming industry is eSports betting, where legal gaming operators can add eSportsbook or daily fantasy eSports products. Eilers Research estimates that the eSports betting market was approximately $2 billion in 2015.

The research firm projects that this figure will exceed $23 billion by 2020, which would generate approximately $1.8 billion in revenue for the betting operators. If gaming operators take too long to move, the potential revenue segment may pass them by. Traditional sports betting operators and new eSports-focused betting operators alike are already capitalizing on the market.

The Downtown Grand in Las Vegas has been one of the earliest adopters of an eSports facility. While it does not offer admission for spectators at this time, the property launched an eSports lounge earlier this year and has expansion plans.

Currently, the facility runs fixed-entry and fixed-prize tournaments where it returns 100 percent of the entry pool to contestants.

“The goal is to ultimately have a room that is similar to a poker room,” says Seth Schorr, Downtown Grand’s chairman. “We’re currently helping the (Nevada) Gaming Control Board in drafting legislation to allow eSports tournaments to operate similar to poker tournaments from an operator’s perspective.”

This would allow the property to take a percentage of the entry fees and generate direct revenue from the tournaments.

While it is still relatively early for the eSports industry, the industry and its growth prospects are too big to ignore.

It remains to be seen what the ultimate size of the eSports market will be; however, it is clear that there are opportunities for innovative companies (including gaming-related companies) to capitalize on the industry as it continues on its attractive growth trajectory. As for Downtown Grand’s positioning, Schorr is excited to be a driving force in bringing eSports to the gaming industry. “We are taking a holistic approach to the (eSports) community and are working towards positioning our facility around eSports,” Schorr says.

As the eSports industry continues to gain momentum within gaming and betting, the Innovation Group is committed to having our finger on the pulse of the developments. To that end, be on the lookout for our next Emerging Leaders of Gaming video webinar, which will focus on the eSports industry and feature a panel of industry experts.

Michael Vanaskie is a senior analyst with the Innovation Group. He has in-depth experience conducting strategic and financial analysis for the gaming industry.

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The big

business of

regulated and unregulated sports betting

By Steve Ruddock

Wanna Bet? S

ports betting is big business around the globe.

Regulated sports betting is one of the key verticals of the multinational gaming companies doing business in Europe, Asia and beyond, where it’s responsible for a plurality of their business. It’s even bigger business in unregulated markets, where illegal offshore sites and underground bookies deal in billions of dollars of business every year.

One of those unregulated markets is the United States, where an antiquated law, the Professional and Amateur Sports Protection Act of 1992 (PASPA) has limited legal sports betting to Nevada, with several other states—Oregon, Montana and Delaware—allowed to offer what amount to little more than parlay bets due to PASPA exemptions.

That could all be changing.

Based on sports betting’s popularity, its ability to generate revenue around the globe, and the need to keep the gaming industry, one of the biggest employers in the United States (gaming employs 1.7 million people in 40 states), strong and prosperous, states such as New Jersey are challenging PASPA in court, and the federal government is coming under increasing pressure from the gaming industry to revisit PASPA. “Next year will be the 25th anniversary of PASPA,” says American Gaming Association President and CEO Geoffrey Freeman. “The only thing it’s accomplished is driving trillions of dollars into the black market.”

Few policy changes would have a larger or more immediate impact on the gaming industry than the legalization of sports betting. There’s little downside or social impact should sports betting gain legal status. It’s an activity that is already happening on a massive scale in the United States, with most of the money going offshore and into the black market, instead of bolstering U.S. businesses and state coffers, and at the same time leaving customers vulnerable and raising questions about game integrity.

Taking all of this into account, Freeman says, “There are few policies that create winners across the board.” Sports betting would seem to be one of those policies.

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Long Overdue

After years of internal debate and a lack of consensus, U.S. casino corporations are now fully on board with legalized sports betting. “Based on a year of data, the industry really came around to embracing expansion,” Freeman says of his AGA membership’s newfound stance on sports betting following a lengthy review.

“What they really understand is there isn’t a monopoly in Nevada,” Freeman says when asked about the oft-cited belief that some gaming corporations would like to keep a monopoly on sports betting in Nevada.

“We had $15 billion bet on the Super Bowl and March Madness this year, and only a little over $100 million of that was in Nevada. Clearly, there is no monopoly.”

Gaming in the United States is a $240 billion-a-year industry, and Freeman and the casinos the AGA represents now see sports betting as an avenue for future growth. “When we look at the potential growth of the industry, the question people are asking is, how do we make this $240 billion industry a $300 billion industry?” Freeman explains. “Sports betting is part of the growth opportunity here in the United States.”

A 2015 Gambling Compliance report on sports betting estimated the U.S. sports betting market at $12 billion—a substantial amount but well below the AGA’s own estimates. By comparison, in 2015, Nevada’s legal sports books took in $231 million, less than 2 percent of Gambling Compliance’s estimates. As Freeman notes, limiting sports betting to Nevada is not giving local operators a monopoly on money wagered on sports in the United States.

An even scarier side-by-side comparison is the amount wagered legally and illegally in the United States. Estimates for the amount wagered illegally in the U.S. range from $80 billion to $380 billion, while Nevada’s legal sports wagers tallied $4.2 billion in 2015.

Sports betting may not add $60 billion to the gaming industry’s yearly revenues, but it can close that gap. With over 98 percent of sports betting taking place in black markets, sports betting is a nearly untapped sector in

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the United States due to the current federal prohibition imposed by PASPA, and would provide the gaming industry with an immediate revenue boost.

We’re talking billions of dollars.

To get a handle on the amount of money that could be wagered on sports in the United States, we can look across the Atlantic, to Europe, where sports betting is not only legal (in most countries) but a part of European sports culture.

man says. “When that money starts in the black market, it doesn’t make its way to the white market.

“It stays in the black market and is used to fund other illegal activities, human or drug trafficking, money laundering. When the money starts in a bad market, it stays in a bad market.”

If sports betting were regulated, casinos would generate more revenue, state governments would collect more taxes, and consumer protections and game integrity issues could be tackled.

Big Picture

Integrity Suffers

The entire sports betting market (bricks and mortar and online, regulated and unregulated) is estimated to be in the $125 billion to $150 billion range globally, with about $70 billion of that coming from regulated markets, according to forecasts made in a 2012 report by the European Gaming and Betting Association (EGBA).

Regulated sports betting accounts for about 14 percent of total gambling yield worldwide. However, the numbers for regulated sports betting are much higher in Europe, as the Asian market is, like the United States, largely unregulated, with most of the betting taking place underground.

In 2012, the European sports betting market was around €10 billion according to EGBA, and likely in the €12 billion-€15 billion range in 2016. According to Gambling Compliance’s estimates, the U.S. would see similar revenues—revenues that are currently being funneled offshore or into black markets.

In the U.S., that means about $12 billion of revenue is lost every year.

“Most of the illegal gambling in this country is sports betting,” Free-

Like many activities currently prohibited by the U.S. government, sports betting’s legal status does little to dissuade people from betting on sports.

Rather, it sends them to offshore sites and illegal bookmakers.

Legal Sports Reports listed nearly a dozen illegal gambling busts over the course of the first six months of 2016. The most recent ring processed $927 million in bets, according to the Brooklyn district attorney that oversaw the investigation.

“We turn a blind eye to illegal markets here in the United States,” Freeman says, “which affects the integrity of the games. I think it’s ironic that some of the leagues say, ‘We don’t have sports betting so therefore we have integrity,’ when it’s the opposite—we don’t have legal sports betting, so we don’t really know what’s going on.”

These same issues are raising their heads in eSports competitions and skin betting markets, where a lack of regulation has led to rumors of match-fixing scandals at eSports competitions, and allegations of a multiple skin-betting site rigging its games.

If sports betting were regulated, casinos would generate more revenue, state governments would collect more taxes, and consumer protections and game integrity issues could be tackled.

AUGUST 2016 www.ggbmagazine.com

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Solving the Millennial Problem On a more positive note, more and more sports betting is taking place online, which is the domain of the coveted millennial gambler, a demographic U.S. casinos have had a difficult time penetrating. Regulated sports betting could be the bridge to these customers.

In its European online gaming tracker, Eilers & Krejcik Gaming estimates the European online gaming market (Eilers includes Turkey and Russia in Europe) to be worth €14.3 billion annually, with the European online sports betting market estimated to make up slightly less than €6 billion of those revenue dollars, or about 42 percent of all online gaming revenue.

Most of that revenue is generated in fewer than 10 countries, as nearly 80 percent of Europe’s online gaming revenue funnels through the U.K., Germany, Italy, France, Spain and the Nordic countries. The U.K. accounts for a full 38 percent of the continent’s regulated iGaming revenue, and is a market largely driven by sports betting, as well as online casinos.

It should be noted that while analysts agree on the total amount wagered and the amount of sports wagering taking place online, there are some major discrepancies between analysts when it comes to the size of the online casino, online poker and online bingo markets in Europe, and what percentage of total revenue they account for. Because of this, it’s hard to tell if sports betting or online casino games rule the roost in Europe. But suffice it to say, both are key verticals for online gaming companies.

Big Money, Big Action There is one other interesting addendum to this data. Based on Eilers & Krejcik’s data, if we eliminate the smaller companies from the market, leaving only the largest 10 or so gaming companies, sports betting is clearly the biggest revenue generator. This is an indication that the sports betting market is top-heavy and difficult for a startup company to break into, while there is a place in the market for smaller online casino operators. If the same holds true in the U.S., major casino corporations should have little to fear from startup companies.

Sports Bettors are the Low-Hanging Fruit Online casino may be on relatively equal footing with sports betting in terms of total revenue, but sports betting has two distinct advantages over other forms of internet gambling: 1. The average player lifespan is longer.

2. Player acquisition costs are lower.

With player acquisition costs less than half of online casino and poker, and player life expectancies routinely eclipsing 12 months, sports betting customers are the proverbial low-hanging fruit for online operators.

Casinos could use the inroads they make in sports betting to later target

“Most of the illegal gambling in this country is sports betting. When that money starts in the black market, it doesn’t make its way to the white market.”

—Geoff Freeman, American Gaming Association President and CEO

their sports-book customers with exclusive offers that could lead to brick-andmortar stays as well as spending on other verticals, gaming and beyond.

Essentially, sports betting, particularly online, gives casinos a direct path to the coveted millennial.

Where Change Will Take Place For all of this to go from theory to reality, laws will need to be changed in the United States. Fortunately, this process has already begun. PASPA is currently being attacked on two separate fronts—on the state and federal level.

The legal challenges to PASPA are taking place at the state level, most notably in New Jersey, which is awaiting a ruling from the Third Circuit Court of Appeals in their case against the NCAA and professional sports leagues. At the same time, there is a concerted lobbying push for a repeal or overhaul of PASPA on the federal level. This push is being led by the AGA. When asked if legal sports betting would come about because of action at the state or federal level, Freeman says he believes it will be federal action that will remove the PASPA barrier and open the floodgates for legal sports betting in the United States. “We have the opportunity to take a look at a failed law and find an alternative way of doing this,” Freeman says.

“While courts might opine, at the end of the day, I think it’s going to take place in the halls of Congress. Congress is going to need to revisit PASPA.” His hope is that by looking at the successes of Europe, and the need to bring sports betting out of the shadows and give it a good cleanse, sports betting will eventually be handled in an effective regulated way.

If Congress does look at what he firmly believes is a failed law, he sees two possible outcomes: 1. Congress could repeal PASPA and empower the states to pass legislation.

2. Congress could repeal PASPA and put a different structure in place at the federal level—a structure Freeman could see as light (a basic set of regulations all states must adhere to) or heavy (a PASPA-esque law that would take most of the framework away from individual states).

For all of this to go from theory to reality, laws will need to be changed in the United States. Fortunately, this process has already begun. PASPA is currently being attacked on two separate fronts—on the state and federal level.

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Online Gaming On Horizon in Pennsylvania

A

Pechanga Proposes iPoker Bill Amendment

T

he Pechanga Band of Luiseño Mission Indiansled coalition of seven gaming tribes has offered a solution that it hopes will end the deadlock over a “bad actor” clause in the iPoker bill by suggesting to California Rep. Adam Gray that he include language into his bill, AB 2863, that would prevent PokerStars from participating as a provider until 2026. It would also pay $60 million once PokerStars enters the market.

Gray’s original version of his bill included no “bad actor” language. However, under pressure from the Pechanga group, which includes the Lytton Band of Pomo Indians, the Capitan Grande Band of Diegueño Mission Indians/Viejas and the Capitan Grande Band of Mission Indians of the Viejas Reservation, Gray added a provision that defined bad actors as those who offered illegal online gaming to Californians after 2011. By “bad actor” Pechanga means anyone who operated sites after the passage of the Unlawful Internet Gambling Enforcement Act of 2006, which includes PokerStars.

In 2011, the Department of Justice concluded that the Federal Wire Act was meant to prohibit online sports betting, but not online poker. That was also the year that PokerStars left the U.S. market.

That wording included a provision where bad actors could not participate until 2021 unless they paid $20 million to the state. Even then they would not be allowed to use customer lists compiled before they obtained a California license.

Gray is very anxious to try to win over the Pechanga coalition since his bill, being a financial bill, would require a two-thirds majority of both houses of the legislature.

Pechanga’s position is at odds with a majority of card clubs, racetrack interests and gaming tribes, including the Barona Band of Mission Indians, the Yocha Dehe Wintun Nation and the Table Mountain Rancheria, who are pushing for legalization of online poker, including a coalition that has partnered with PokerStars.

Pechanga sent a letter to Gray outlining its position and saying that it would drop its opposition to the bill if it gets its way.

“We note that this represents a significant concession from our long-standing position of permanent disqualification of assets used in illegal activities, and provides a pathway for offshore service providers to access the California market,” says the letter.

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California U.S. Senator Dianne Feinstein opposes any online poker bill in her state

It implies that the only reason anyone would oppose its amendments are to allow those who have broken the law to operate in California.

A spokesman for Amaya, which owns PokerStars, answered Pechanga’s letter: “It is a shame that obstructionist forces continue to block the passage of a pro-consumer online poker bill in California. We finally have real progress this year, with the majority of gaming tribes supporting the legislation, along with the AFL-CIO, SEIU, Teamsters, horse-racing tracks, card rooms and gaming operators. Unfortunately, a recent amendment to AB 2863 is unconstitutional, and our opponents seem intent to expand upon that flawed and unconstitutional language.”

Some of the largest card clubs in the Golden State, including the Bicycle Casino in Bell Gardens, Commerce Casino and the Gardens Casino in Hawaiian Gardens, and some of the largest gaming tribes, back the bill. A provision that could pay the horse-racing industry as much as $60 million annually caused the industry to withdraw its demand for a place at the table.

U.S. Senator Dianne Feinstein opposes the bill, and has asked the legislature to reject it because, she says, poker sites “provide ready avenues for money laundering and other possible offenses… and, they are harmful to children. For those reasons, I am firmly against internet gambling.”

Gray has left the door open to further revisions of the bill. His chief of staff, Trent Hager, told the Daily Breeze, “This has been a complicated negotiation given the large number of various interests involved. The good news is all sides agree that the current lack of consumer protection is unacceptable. Real progress is finally being made, and we are optimistic an agreement can be reached.”

s usual, Pennsylvania entered the new fiscal year without a state budget and nothing certain on whether a major expansion of gaming will be approved as part of it.

The possibility of Pennsylvania legalizing online gaming to help plug a $1 billion shortfall in the proposed $31.5 billion spending package seemed very real as June drew to a close with passage in the House of Representatives of a bill that would also regulate daily fantasy sports and allow the state’s casinos to open satellite machine gaming facilities statewide.

In the end, the legislature passed a bill that had some pluses and minuses for gaming. It Pennsylvania Governor included $100 milTom Wolf lion in revenue from iGaming (mostly from licensing fees in the first year), but didn’t pass a bill that would actually legalize the activity. That important decision will be put off until the fall.

The legislature also tacked on a 2 percent increase to the tax on table game revenues, raising it to 16 percent. But it is supposedly only a temporary increase, scheduled to be rolled back in three years. But the 14 percent was already scheduled to be rolled back to 12 percent, so it’s unlikely that the rate will be reduced anytime soon.

Governor Tom Wolf is expected to sign the bill, which will set up a showdown in the next session of the legislature.

There is also opposition to online gambling, mainly from Sands Bethlehem, one of the state’s largest and most successful casinos whose ownership, Las Vegas Sands, is the sector’s most vocal enemy from within the industry.

Sands Bethlehem President and CEO Mark Juliano told GGB that his company will continue to oppose the introduction of online gaming in Pennsylvania during the fall session of the legislature.

DraftKings and Canadian Football League Form Partnership

W

ith most of its battles in state legislatures on hold for the summer, DraftKings announced a new partnership agreement with the Canadian Football League.

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The deal represents a first for DraftKings with a Canadian league, though the site does have an existing relationship with Maple Leaf Sports and Entertainment Ltd., which owns the NHL’s Toronto Maple Leafs, the NBA’s Toronto Raptors and MLS’ Toronto FC. The alliance means the CFL will be featured on a major DFS site for the first time.

DraftKings currently has several free-to-play contests that offer tickets to CFL games as prizes.

The company said in a press release that “the CFL will be fully integrated across DraftKings digital properties, including online and mobile,” and that the contests will be a visible presence “across the league’s media and promotional platforms.”

DraftKings also began offering paid contests for the league’s opening week, which started June 23.

The partnership is initially for just the 2016 season, but could evolve into a long-term deal, the release said.

The move comes after reports surfaced that DraftKings’ launch in the U.K. has not been gaining traction in the competitive gambling market there. The Associated Press quoted several U.K. analysts that DraftKings has gotten off to a slow start since launching in Britain in February.

However, a report in OnlinePokerReport.com outlines how in all three markets, a lengthy process to draft new online licensing and regulations has forced legitimate operators out of those markets, creating a climate for illicit online gambling sites to thrive.

The loss of the Portuguese market was noted by Amaya, Inc.—owner of PokerStars—as a negative factor in Amaya’s third-quarter report, which lowered revenue projections for the year.

Meanwhile, Dutch regulators have been trying to finalize regulations since 2014, and have barred unlicensed operators from advertising there. New Dutch

gambling legislation has hit many delays, but the final bill has been presented in the lower house of the Netherlands parliament, where it is expected to pass. It will then go to the country’s Senate.

However, it sets the tax rate for internet and land-based gambling at a common 29 percent of gross gaming revenue, which many online companies have balked at.

Finally, Slovenia began the process of introducing its own online gambling regulation in 2013, and in March 2016 notified its new laws to the EU Commission for approval.

PokerStars Pulls Out of Slovenia

P

okerStars has pulled out of Slovenia’s online gambling market, marking the third year in a row it has pulled out of a European gaming market that was debating new online gambling regulations.

PokerStars left Portugal last year and the Dutch market in 2014.

PokerStars released a message to players in Slovenia: “We hope that we will be able to return to the market in due course, and will continue to support the implementation of fair and consistent regulation that serves the needs of all stakeholders and includes a strong commitment to consumer protection, particularly of vulnerable people, in Slovenia. There is already a successful framework for such regulation in Europe, and PokerStars is currently licensed in 12 EU countries. We hope to apply for a license in Slovenia when it is possible.”

AUGUST 2016 www.ggbmagazine.com

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As IGRA Intended The Washington state tribal gaming industry is a model of how sovereign nations deal with state governments on gaming

BY DAVE PALERMO

I

f there were a hall of fame for contemporary American Indian leaders who championed native sovereignty and self-determination, Washington state would be well-represented.

From Chairman Ron Allen of the Jamestown S’Klallam to the late Joe DeLaCruz of the Quinault Nation, Lummi Sam Cagey and Nisqually Billy Frank—from Mel Tonasket of the Colville Reservation to Yakama Mel Sampson and Tulalip Stan Jones—Washington’s list of pioneers in self-determination is long and distinguished.

Much of their efforts in building strong tribal governance grew out of the fishing wars and the landmark Boldt federal court decision of 1974, which gave Washington’s indigenous communities the right to comanage salmon and other fisheries with the state.

Indian self-governance in the state of Alki (indigenous Australian for “bye and bye”) was further solidified with the Centennial Accord of 1989, which established a framework for government relations between the state and its 29 federally recognized tribes.

“We have had strong leadership dealing with a whole lot of concerns, beyond fisheries,” says Allen, who for decades has served in high-level positions with the National Congress of American Indians. “We have a long history of political activism.”

Strong and mutually respectful tribal-state relations greatly facilitated the emergence in the early 1990s of what is today a $2.3 billion tribal gambling industry that has closely adhered to the congressional intent of the Indian Gaming Regulatory Act (IGRA) of 1988.

IGRA ignited legal and political confrontations in several states opposed to Indian casinos. Tribes and states warred over regulations, market exclusivity, revenue sharing, machine limits and casinos on newly acquired trust lands, often referred to as “off-reservation gambling.”

But those controversies failed to materialize in Washington. And when gambling disputes did arise, they were diplomatically resolved by tribal and state officials.

As a result, indigenous governments in Washington are not required by regulatory agreements, or compacts, to share casino revenue, a common practice in several states although prohibited in IRGA and discouraged by the U.S. Department of the Interior, which reviews compacts.

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A spokesman for Governor Jay Inslee says “the governor supports the idea that gaming is a very important aspect of economic development for the tribes.”

Continued Cooperation Initial confusion over the types of slot machines allowable under state prohibitions was settled in a “friendly” lawsuit that in 1998 defined the nearly 30,000 tribal lottery devices found in 27 of 28 Washington casinos, one of which operates only Class II, bingo-style gambling.

A landmark 2015 compact amendment eliminated an artificial cap on machines, allowing tribes to increase their inventory based on market demands.

And state regulators are working with tribes to expedite the approval process for new devices and eliminate duplication of compliance audits.

Tribes and the state are partners in economic progress ignited by tribal government gambling, on and off tribal lands.

“We have a pretty good relationship with our 29 tribal governments,” says Nicholas Brown, general counsel to Washington Governor Jay Inslee.

“Tribes are a big part of the landscape on a lot of different fronts, gaming being one of them.

“The governor really supports the idea that gaming is a very important aspect of economic development for the tribes. And that’s worked pretty well for both the state and the tribes,” he says, creating non-Indian jobs in largely rural parts of the state.

“Tribes have been allowed to prosper… without a massive expansion of gaming.”

“One of the big things that separates Washington from most of the other states is we don’t have revenue sharing,” says Chris Stearns, chairman of the Washington Gambling Control Commission (WGCC). “The tribes are able to keep much more of what they bring in. That really is the intent of IGRA, to help tribes develop not only their economies but also their governmental infrastructure—health care, fire, police, you name it.

“When you look at IGRA and its intent to help tribes strengthen their governments, that’s exactly what’s happening in Washington.”

Washington tribes employ some 30,000 mostly non-Indians in casino and government jobs, dispersing more than $1.4 billion in annual wages and benefits, according to a 2012 economic impact study by the Taylor Policy Group.

The industry generates roughly $2.4 billion in goods and services and has a $3.5 billion value to the state economy, according to the study.

Tribal governments strengthened by gambling work closely with the state, counties and municipalities on environmental and conservation projects. Two percent of tribal casino revenues go to local governments with additional money going to charities. Tribal health clinics often serve citizens from reser-

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“The commission is proud to have worked on a government-to-government basis with the tribes as well as with the governor’s office.”

—Chris Stearns, a Native American and chairman of the Washington State Gaming Commission, which oversees both commercial and tribal gaming in the state

vations and the surrounding communities.

“We are realizing the maximum benefit of Indian gaming, for both the tribes and the state,” says Bill Iyall, chairman of the Cowlitz Indian Tribe of southwest Washington, which received federal recognition in 2002 and is currently building its ilani resort casino in La Center.

“It’s been a collaborative relationship, proactive rather than reactive.”

Doing It Right IGRA was enacted in response to a 1987 U.S. Supreme Court ruling upholding the right of tribes to operate gambling on Indian lands. Gambling was intended to primarily benefit tribes seeking to strengthen governments and build diversified economies, generating revenue to subsidize poorly funded federal health, education, law enforcement and other programs for tribal citizens.

Non-Indian communities near largely rural and often impoverished reservations were expected to benefit from jobs and economic growth generated by casinos and related development.

But the emergence of tribal government gambling as intended under IGRA was far from smooth.

Indian casinos in many states sparked legal and political disputes over market exclusivity, revenue sharing, tribal-state regulatory compacts, mitigation with local communities and land/trust issues.

Governors in Alabama, Florida, California and elsewhere initially refused to negotiate compacts required to operate Class III, casino-style gambling.

Others insisted tribes sign onerous revenue-sharing agreements. Tribes in 10 of 28 states with casinos share their profits.

There were exceptions to the pushback against Indian gambling, notably Minnesota, Wisconsin and Mississippi, where the late Choctaw Chief Phillip Martin hammered out a generous compact with then-Governor Kirk Fordice, who Martin regarded as a friend as well as a political ally.

Allen met with a similar experience when he sat down to talk compact amendments with former Governor Gary Locke (1997-2005).

“He never liked gambling, for personal reasons,” recalls Allen, chairman of the Washington Indian Gaming Association (WIGA), a lobby and trade group. “But he recognized the right of tribes, as governments, to engage in the industry. He was respectful of tribal governments.”

An agreement was reached between the tribes, Locke and then-Attorney General Christine Gregoire to enter into a consensual or “friendly” lawsuit to

define gambling devices that would fit the state’s prohibition against slot machines.

An agreement in principle was reached in 1998 on a gaming device modeled after the state lottery.

“The type of gaming they have is somewhat unique,” says economist Allen Meister of Nathan Associates, author of the annual Indian Gaming Industry Report. “They have tribal lottery systems that are not exactly slot machines, but they’re not Class II bingo, either. They’re something different. It’s sort of unique in terms of what’s offered in other states.”

Locke bought into Allen’s suggestion that tribes in remote areas of the state lacking the market to open casinos be allowed to lease machine allocations to tribes in urban areas. All 29 tribes have compacts, but only 21 operate casinos, according to regulators.

Locke and his successors embraced the concept of IGRA that tribes should be the primary beneficiary of gambling.

Tribal Power Revenue sharing was broached when Gregoire in 2005 tentatively agreed to a compact with the Spokane Tribe, but she backed away from the agreement when pressured by tribes and opponents to gambling expansion.

“It wasn’t well-received by the legislature and the public,” Brown says.

“Since that time, the idea of revenue sharing hasn’t arisen with any great support.”

“We’re not like other states such as New Mexico, where tribes were fighting with the governor over machines and revenue to the state,” Stearns says.

“We don’t have that kind of atmosphere here. It’s pretty amazing.”

The amicable relationship between tribes and the state has continued under Inslee, who last year amended tribal-state compacts to raise a cap on video lottery machines and allow future increases based largely on market demands rather than artificial limitations.

The amendments are expected to help casino tribes expand hotel and non-gambling amenities needed to cope with a leveling-off of machine and table game revenue.

State tribal gambling revenues have largely plateaued at about $2.3 billion a year, according to several sources. Tribal governments don’t disclose revenue figures.

“These amendments are an important milestone for the people of Washington state and the Indian tribes,” Stearns says. “The commission is proud to

Washington tribes employ some 30,000 mostly non-Indians in casino and government jobs, dispersing more than $1.4 billion in annual wages and benefits, according to a 2012 economic impact study by the Taylor Policy Group.

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“We have a long history of political activism.”

—W. ‘Ron’ Allen, Chairman, Washington Indian Gaming Association and the Jamestown S’ Klallam Tribe

have worked on a government-to-government basis with the tribes as well as with the governor’s office.”

“It’s another progressive step by Washington state, being respectful of the tribes and the needs of their communities,” Allen says. “These compact adjustments allow the tribes to continue with the moderate growth we’ve experienced over the last five years.

“This agreement ensures that if we need more machines in the future, they will be available. It took 20 years for us to achieve that relationship and the level of confidence between the tribes and the state that the growth in gaming will be moderate from this day forward.”

Regulatory Compliance and Cooperation The WGCC was established in 1973 to regulate the card room industry, which once comprised about 100 “mini casinos” but has since fallen to some 50 facilities.

“We as a state agency have had a lot of experience licensing and regulating gambling prior to the Indian Gaming Regulatory Act,” WGCC Executive Director Dave Trujillo says. “Many of those on our staff have grown up with tribal leaders and tribal gaming commissioners.”

Tribal-agency relations mirror those of other state agencies.

“The constructive relationship can be proven by the lack of litigation as compared to other states,” Trujillo says. “The instances of litigation have been few and far between.”

With the emergence of tribal gambling, card rooms were allowed to extend their operations to include house-bank blackjack. The industry “continues to trend downward, though it may have stabilized just a little bit,” Trujillo says.

State and tribal regulators are currently working on methods of smoothing and accelerating the approval process for new devices. They also are attempting to do away with duplicative and expensive compliance audits.

“We’re taking an active lead in redefining the regulatory relationship between the state and the tribes,” Allen says. “We’re going to change the way we do business.”

IGRA gives the tribes primacy in regulating gambling. Brown says the state is aware many tribes have experienced regulatory agencies, eliminating the need for overlapping audits.

“A number of tribes have been in gaming for many years and have strong track records for successful management and regulations,” Brown says. “They perhaps might need less (state oversight) than other tribes that

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are new to the business and don’t have that record of success.

“Our compacts generally provide the same level of oversight for all our tribes. The challenge for the state will be how we transition to greater self-regulation and pull back from duplication of some services.

“There are a couple of tribes who have pushed for more independence. We’re exploring some options.”

The Cowlitz tribe recently broke ground on its ilani casino in La Center, which will be managed by the Mohegan Tribe of Connecticut

Machine Issues Remain State law restricts tribes to tribal lottery system (TLS) devices and prohibits traditional slot machines, a frustration to casino operators exposed to the latest video technology at gambling industry trade shows, most of which are not permitted in their jurisdiction.

“They look nice, they sound nice and they’re marketed nice,” Trujillo says, but not to Washington.

“Slot machines are prohibited by statute,” Trujillo says. “Most of the country has slot machines. Vendors and manufacturers build to the greatest market. And the greatest market is not Washington.”

“How do you work with a manufacturer to devise a game that fits within our legal definition of an allowable game? That is a challenge,” Stearns says.

As partial compensation, the WGCC is working with tribes to speed up the testing and approval process for new devices.

“There is a need to streamline the review process with regard to vendors who want to bring their products into Washington state,” Allen says. “We need quicker access to the new devices.”

Trujillo says most applications are processed within time guidelines set down in the compacts.

“Generally, we’re better than the compact demands in turnaround time,” Trujillo says. “We think we have found the magical number for staffing.”

Allen believes Trujillo is sensitive to tribal concerns.

“He doesn’t want the commission to be an unnecessary burden to the ability of the tribes to obtain new products,” Allen says.

Spokane Controversy Inslee’s decision earlier this year to approve the Spokane tribe’s petition to open a casino and commercial development on newly acquired trust land in Spokane County generated controversy.

It was the second “off-reservation” casino approved in Washington, the first being the Kalispel Tribe in 1998, which also operates a casino resort in the county.

The Spokane project—which underwent an exhaustive, expensive and lengthy federal review process—was opposed by several local agencies and a nearby Air Force base, despite the fact it is expected to generate 5,000 jobs and $400 million in revenue to the region.

Inslee contends the proposal is unique and not likely to establish a statewide trend of additional casinos on newly acquired lands.

“It doesn’t have any actual precedent. It’s not legally binding in any way on any future governor,” Brown says. “The governor felt it wasn’t likely to lead to any substantial proliferation.”

Allen remains concerned, however, that other tribes will follow Spokane’s lead.

“Every proposal has to be reviewed on its own merits. That’s true,” Allen 52

Global Gaming Business AUGUST 2016

says of attempts to launch casino projects off existing reservations.

But he notes the Skokomish Indian Tribe in Shelton has long contemplated opening a NASCAR racetrack and casino in Kittitas County, a project it said it would pursue if the Spokane casino was approved.

Stearns and Trujillo are skeptical the project will prompt other off-reservation projects.

“It’s hard to say this will be a trend now, based on that particular action,” Trujillo says.

“Everything is unique.”

A Vibrant Gambling Market Washington Indian gaming revenue jumped nearly 3 percent in 2014, Meister says, making it the third-largest tribal gambling market in the country, behind California and Oklahoma. The growth has been steady.

“The state of Washington has growth that is outperforming Indian gaming nationwide, if you look at overall figures,” Meister says, with the rate of increase slowing since before the recession of 2008.

“During the recession, things slowed down. They continue to be slower than they had been historically. That’s similar to a lot of states,” Meister says.

“But in most years, Washington has outperformed tribes nationally. Since 2000, in every year except one, Washington outperformed other states. There has not been a year of decline.”

The leveling-off of double-digit growth that highlighted enactment of IGRA taught tribal casino operators some valuable lessons.

“It forced the tribes to step back and become more surgical in the way they operated their businesses,” Allen says. “They became more efficient.

They started running tighter ships. They grew prepared for when the market improved, which it did. That’s what you see now.”

Future industry growth will likely to be tied to increased casino floor space and non-gambling amenities at existing properties, although Cowlitz and the off-reservation Spokane casino will likely increase statewide gambling revenues.

“A lot of the growth has been existing properties,” Meister says. “That’s similar to what we’re seeing in other states. We’re seeing the development of more non-gaming amenities, things like hotels, which not only expand the reach of casinos, but provide another revenue source.”

No Threat From Commercial Gambling Meanwhile, tribal governments, through WIGA, have strengthened ties with state House and Senate leaders.

“We’ve done a very good job of developing a relationship with the leadership of both parties,” Allen says.

The political activism has managed to stymie legislative efforts to look to commercial gambling as a means of enhancing the state budget. Several states have turned to commercial gambling, creating competition for tribal casinos.

“That’s always possible, of course. But it’s much more likely to be the reverse situation, where the tribes would expand the offerings they have,” Stearns says. “They would be the ones driving change at the state level.”

“I haven’t seen any significant initiative by the legislature to explore that,” Brown says of the likelihood of commercial gambling in the state. “Frankly, I don’t necessarily think the market is there for a substantial expansion.

“We don’t want to see a rapid expansion of gaming. As a matter of policy, it should be slow and consistent.”

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TABLE GAMES

Theo Theories Comping is a complicated formula, but let’s see if we can make it much simpler.

H

ow do I comp thee? Let me count the ways.

Because there are many—so many,

too many.

But maybe there’s room for one more.

Casinos routinely rebate a percentage of your losses—your theo (theoretical) losses, anyway— through the ancient art and science known as comping. This, of course, leads to three questions: How does the casino know who I am? How does the casino know how much I bet? And who the #$@% is Theo?

Turns out these answers are entangled and intertwined, like the spirals of a cobweb or the story lines of a Twilight Zone episode. Imagine, if you will, a slot player, and every time she sits down at 88 Fortunes or Buffalo Thunder, she inserts her casino card into the machine, thus answering Question One. Then, with said card in said slot slot, she makes $1,000 in bets, thus answering Question Two. To answer me this Question Three—the Theo question—doesn’t take a lot of brain power, unless simple multiplication is a lot of brain power. Slot machines have mathematical advantages, the percentage of handle you should lose over time. Your theoretical loss is the amount you bet (aka, handle) by that advantage. For example, generating $1,000 in handle into a 10 percent advantage yields a theoretical loss of $100.

You then get a bit of that back via free food, free booze, free rooms, or free all of the above.

Easy, peasy, George and Weezy.

And it’s exactly the same with table games.

Well, except for the part where it’s completely different. Slot machines are digital; they are built to collect and process data. Table games are analog; the data are there, but they’re harder to herd than a horde of Hodors.

Enter Floor Man. It is the job of the floor supervisor, the immediate boss of the dealer and immediate subordinate of the pit manager, to replicate those computerized calculations via good, old fashioned guesses and estimates. How does the floorman know who you are? He asks. How does he know how much you bet? He watches you play a few hands. How does he know how long you

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By Roger Snow

played? He looks at his watch.

When it comes to calculating comps, slots vs. tables, it’s Moneyball vs. Wiffleball, smart bombs vs. boomerangs, RAM and ROM vs. WAG. Making an impossible job, uh—impossibler?—is the complexity of these newfangled table games. High Card Flush, Fortune Asia Poker, Ultimate Texas Hold ‘em, etc. may look simple, but mathematically, they are nothing short of diabolical.

Take Three Card Poker. Please. Take lots and lots of them. You’ve got the Ante bet. You’ve got the Pair Plus. You’ve got the 6 Card Bonus. You’ve got the Two Way Bad Beat. You’ve got the progressive. And coming soon, you’ve got the Coverall bet that enables players to have action on every hand at the table.

And, if you’re the one trying to attain perfect ratings accuracy, you’ve got a headache big enough to take down a dinosaur.

Fortunately, there’s something in business known as the Half Ass Axiom—or will be, if this column goes viral—which goes something like this: 50 percent effort yields 90 percent results.

Traditional tables, barring an RFID or optical revolution, are never going to do what slots do when it comes to comping. Buy hey, you don’t need to pursue perfection when OK is OK. So, how can casinos can fine-tune their comping methodology without driving themselves batty in the process? Simple. Have the floor supervisor consider each bet that’s made before the cards come out. That section of the ratings slip, when completed, would contain the following information:

To compute the player’s theoretical loss, the casino system would need to know the corresponding house advantages for each bet (table, below), as well as the overall hands per hour (assume 40):

In one hour of gambling, this player— imaginary though he may be—generated a theoretical loss of $108. Had the casino used the current practice of aggregating all bets and applying a blended house edge of, say, 5 percent, the system would have estimated his theo loss at $62.

Sixty-two instead of 108. In other words, or in this case other numbers, that’s an error rate of 43 percent. And if casinos are off by that much, they might as well kick Theo to the curb and issue comps based on actual losses.

The point is this: If accuracy matters when it comes to rating and rewarding specialty game players—and who knows, maybe to some it doesn’t—this methodology is infinitely better than what’s currently used. Now admittedly, breaking down the rating by bet type is more cumbersome and burdensome for front-line staff, but it will yield a result that better reflects a player’s theoretical loss, as well as his past and future value to the casino.

And if that’s not worthy of a half-ass effort, then what is?

Roger Snow is a senior vice president with Scientific Games. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Scientific Games Corporation or its affiliates.

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FRANKLY SPEAKING

by Frank Legato

Counter-Strikes and Taylor Swift

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RINALDO

Their names are Trevor “TmarTn” Martin, Thomas “ProSyndicate” Cassell and Josh “JoshOG” Beaver. Of course, if you scroll down to their pictures, they don’t look anything like their gangsta names. They look more like they were just heading down to the science lab after study hall.

By the way, YouTube and Twitch was one of my favorite cop shows of the ’70s.

Before we move on, let me say I’m excited to see how the casinos approach eSports, and whether it will continue to involve showroom or arena events like at the Downtown Grand in Las Vegas, events on big screens in special lounges, as machines on the slot floor, or all of the above.

Whatever it is, they’d better move quickly. In another dozen years, these millennials are going to have some serious money to spend.

Speaking of millennials, U.S. pop singer and noted millennial Taylor Swift popped up on the gambling screen last month, as the subject of wagers in China’s quasi-legal online betting market. Bettors on the Chinese online marketplace Taobao, which offers wagers cloaked as “insurance plans,” were betting on when Swift would break up with her boyfriend, the British actor Tom Hiddleston.

The last line was 2-to-1 on a breakup within periods ranging from six months to a year. The “Hiddleswift Insurance Plans” were going for one yan a piece, or 15 cents in the U.S. OK, Taylor Swift’s love life is not exactly the kind of thing that would attract wagers from my own boomer generation, but hey, it might be another good way for casinos to attract the millennials. Maybe they can add a bonus wager on whether or not Swift and Katy Perry will actually get into a fistfight.

Hey, my wife leaves the People laying around.

How about a new eSports event that will attract millennials and boomers alike? That’s right. Taylor Swift vs. Katy Perry in an eSports match. Their avatars can be dressed up like superheroes.

Betting opens with Perry a 2-to-1 favorite. Place your bets, kids!

VICT OR

I

’m told that one of the hottest topics at next month’s Global Gaming Expo is going to be eSports, the latest wacky idea designed to draw a new generation of players who won’t have disposable income for another 10 years.

Seriously, how many millennials do you know with thousands of dollars to throw around gambling in a casino? I know I didn’t when I was 25. It took a couple of decades for paying-off-the-student-loan money to become gambling money, and I’m sure it’s worse these days.

But that’s OK—we’re going to spend millions now marketing to them, because hey, before you know it, it’s 2030, and we’ve missed our shot. It’s like marketing a car to 6-year-olds so they’ll want to drive it when they’re old enough.

Nevertheless, the industry continues to march to the millennial beat, the latest example being eSports, a truly mystifying attraction that asks me to fork over cash so I can sit and watch two kids with controllers assume the identities of characters in a huge video game and battle to the digital death.

You know, like I used to watch my kids do in the basement. For free.

I know, eSports are different, with professional leagues and video-game battles with grisly high-definition animation on big screens, and world-famous star players with pearl-handled controllers holstered for the next match, filling up stadiums with adoring, pimply-faced fans.

Hey, if I was a star video gamer, I’d sure have a holstered, pearlhandled controller. Unless they just play on their phones now. Do they? God, I’m old.

Anyway, for the casino industry, the potential benefits are obvious, which is to say there are a lot of things on which to place bets within the eSports universe, from the next character to lose a limb to which direction the brim on the oversized, sideways baseball cap on your favorite player’s head is pointed.

Wait, don’t they dress all hip-hop, with baggy clothes and bling and sideways hats? That’s how I’d dress if I was a star video gamer.

And you can’t blame me, if you look only at the names of some of the biggest star video gamers. There was a story on ESPN.com last month about a gambling scandal in which a group of star gamers allegedly hid their ownership in a betting site taking wagers on competitions involving the game “Counter-Strike: Global Offensive.”

Wow, is that out already? I’m still mastering “Counter-Strike: Municipal Offensive.” I’d better start practicing.

In any event, according to ESPN.com, the players involved in the betting scandal are “three of YouTube and Twitch’s most popular gaming personalities.”

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Have a Seat Comfort and ergonomics come together in casino chairs

BY DAVE BONTEMPO

P

their market. Painstaking hours of research and development, followed by ull up a chair, witness a new gaming star. focus groups and experimentation, are not required. Companies already are Seating gains increased respect in the comfort-driven in the chair business. Quick negotiations can yield a lucrative custom gamcasino world. Luxury is a necessity for an industry that ing order. crunches numbers to predict patron value, but can’t measure One recent trend involves casinos endorsing the high-limit sector for revenue lost from someone’s aching back. seating choice. As that sector grows, the chair becomes more than an accent Chairs, once ancillary units, now affect time on device more than most piece.

It becomes a signature. hospitality functions. An operator may survive with a standard hotel room or restaurant menu for gamblers who simply want action, but a substandard High-Limit Heaven seat may be costly. An uncomfortable patron often stops gambling, and Youngstown, Ohio-based Gasser Chair Company has manufactured mademay leave the property. Players want bells, whistles and foam. to-order commercial seating for the hospitality and gaming markets Gasser Chairman Series Seating is an intangible domain. It can’t be linked for more than 70 years. The company wants its chairs to elevate a to specified levels of play, yet it holds a unique role in space rather than simply fill one. the action. Gaming establishments have become more Gasser sports gaming seat types in several areas: slots, table attuned to their chairmen, and chairwomen of the games, poker, high limit, bingo and sports book. The high-limit board. segment generating gaming excitement also caught this company’s Companies respond with newer, specialized chairs. attention.

Gasser took out a second display booth at G2E in 2015 Their initial efforts concerned durability, with gaming’s to focus on high-limit gaming. It has also rolled out the 24-hour demands tripling those of its office-world Chairman and Paragon Series to address the incounterparts. Later enhancements include lumbar supdustry trend. port, foam injection, curved edges, friction-reducing “The high-limit area is its own animal,” coating and flexible wood framing. More width for bigsays Christine Dravis, account manager for ger players and proper height to match a machine also Gasser Chair.

“Players want to be treated a little became prominent. special, and we’ve seen an increase in those So did the fancy “ergonomics” tag. Themed hightypes of requests. limit areas, the aura of exclusivity on some games and “With the high-limit area, you may be the interactive components some chairs have with slot dealing with something that fits the specific demachines raise the value of prime seating. sign of a casino room,” she adds. “The casinos will Chair companies face both a major obstacle and often make their own decisions regarding color coordination benefit. Unlike suppliers who produce printers, trackwith the carpets, the walls and everything else, and then ing systems or cash access, they can’t link a chair to revthey will make a request to us for a chair that is not only enue gained. Customer play is considered a reflection of comfortable and durable, but is unique for their envithe loyalty program, or the games, but not the seat. By ronment.” the time someone realizes a chair is ineffective, it has alMany properties have themes they wish to incorpoready caused lost revenue. rate. Dravis says Gasser deals with the “must-haves” On the flip side, companies can easily ascertain 58

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Gasser Paragon Series

an operator wants, whether that’s a specific chair width, color, wood frame or ergonomic feature. Then, it produces the order.

The Chairman Series is ideal for sitdown slot players. Its noted features include a plush three-pillow backrest, targeted primarily for high-limit rooms. The chair is “richlooking,” Dravis notes, citing an important aesthetic linked with high-end seats. It also has a patented “halo” disc base, enabling easy movement for maintenance personnel so the unit won’t dig into the carpet.

The Chairman Series has a molded ergonomic seat with Pommel, an eco-friendly powder-coated base, and a round foot rest with arched supports. A full rotation swivel and optional wood-arm caps are included in this model, which is on the floor at Wynn Palace in Macau.

The Paragon series is created for a sitdown table game. Paragon 5-V contains a fully upholstered seat and back, box-sewn seat with arm wrap, five-vane polished aluminum base, twin wheel casters and five locking positions.

The Paragon 158 has many of the same characteristics. It also sports a halo base with arched support and circular foot rest. The Paragon Series is showcased at the Graton Resort and Casino in Rohnert Park, California.

Just as G2E highlighted Gasser’s acknowledgment of the high-limit market growth last year, ICE in 2016 planted some seeds for this year and beyond.

“Everybody knows the big trend now is toward millennials,” Dravis indicates. “Virtual reality games are starting to come to the forefront. While addressing that is more on the people that manufacture the slot games, once we see those games and what kinds of bells and whistles they have, then we can adjust our seating. The newer millennials are geared toward sports, like wrestling, soccer and horse racing. The market will have to react.”

Dravis envisions the millennial trend resulting in separate areas of the casinos for them, and perhaps requiring theater-type chairs.

Anticipating the future has been a company trademark. Several decades back, George Gasser, one of its founders, convinced gaming magnate Bill Harrah that stools in front of slot machines would let customers play longer. Gasser had noticed gamblers taking stools from the bar over to the slot machines to extend their time on device.

Fortunately for the company, Gasser did not “sit” on this information. He returned to Youngstown, built a simple round seat and basic four-leg frame with a footrest and secured the company’s entry into the lucrative gaming world.

Innovations followed. Gasser Chair Company introduced a 10year warranty, the longest warranty of its kind for commercial seating. It promoted casters and swivels to provide greater ease for restaurant and lounge seating. In the hospitality and gaming industries, excess wear and tear, especially along

the perimeter of the backrests of chairs, had been a long-standing problem.

Gasser designed and patented a specially extruded vinyl edging to guard against such damage, and the company subsequently introduced the “Protective Edge” on its entire seating line.

In recent years, the company delivered player-adjusted seat height and the halo-base to make chairs easier to move and reduce abrasive carpet wear.

Sitting in Style StylGame Group specializes in the design and production of ergonomic products for the gaming world. The products are made in Italy, where the company was founded in 2001. A Las Vegas office opened in 2010.

The company offers an array of products for traditional gaming devices, including the ergonomic-driven Play in Comfort Series and an interchangeable option via the Royal Stool, in which customers can select different seat models and frames.

“It’s been proven that if the player is able to enjoy his moment at the fullest, he extends his playing time, therefore increasing the proceeds and the value of the slot machine,” says Roberto Ronchi, the export sales manager of StylGame.

“Besides that, this company was born inside a territory historically characterized by the production of chairs, where the ‘Made in Italy Quality’ is enhanced by an ancient artisan experience, careful to the choice of raw materials and to details,” he adds.

Ronchi says in-depth research several years ago—which entailed ergonomics, slot bases and optimal dimensions for the cabinet—brought StylGame into an era it still enjoys. The study led to the Play in Comfort line, which keeps building. The program began in 2009 with a product defining the correct combination of player, chair and machine. In 2012 came the Top Line, which outlines correct dimensions of the slot bases, further improving the gaming station StylGame Group and player comPlay in Comfort Series

AUGUST 2016 www.ggbmagazine.com

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fort. Last year saw the innovation of Play in Comfort, Global Experience, which fully involves the player in the game dynamics.

The element that distinguishes Global Experience is the Service Call, an integrated system able to optimize the service offered to the player and consequently the comfort, Ronchi explains. Service Call allows the player to get the hall services (cash, bar-restaurant and technical assistance) without stopping play. It also extends time on device, a critical component of bottom-line effectiveness, he asserts.

Ronchi believes an important industry shift has begun.

“Until recently, the producers of the slot machines did not give much importance to the seat,” he indicates.

“Now, aware of the ergonomic studies done and of the positive results achieved, some of them have started to design and sell the slots combined to the correct seat, specially designed for the type of machine produced.”

Ronchi says youth will be served going forward.

An industry shift toward millennials exceeds mobile apps and age-appropriate game themes. It’s visual.

In Ronchi’s assessment, bright makes right.

“We believe that the more popular amusement and aggregation sites will be those more highly specialized and complete,” he contends. “The tendency of the new casinos is to have light furniture and brighter environments to attract a younger target.

Consequently, we are conceiving a new line of more modern chairs, technological and innovative from the point of view of the design.”

Fred Brendel, the U.S. sales manager for StylGame, says customer reactions in the chairs speak volumes to him.

The comfort zone might be on “medium.”

“Being in the business, when I go into any casino, I’m watching how people are reacting to their experience with the chairs,” he says. “If the foam is too soft, they will often be shifting positions. If it is too hard, the initial impression is that this is not a comfortable chair. I think medium density is the ideal foam.”

Ideal is an appropriate term. That’s what the unit must feel like for a player.

“A 1 percent or 2 percent change in time on device can mean millions of dollars over the course of time,” he says. “We don’t want players to be focused on the chair. We want them focused on the game.”

Unless, of course, the chair and game are one, a trend accomplished by placing speakers next to one’s head, for example, and combining the use of the chair and the machine. The trend continues to rise for theme-based games utilizing the chair and machine, he indicates.

Noblesse Gesture Patir, established in 1991 by Seref Patir as a family-run business, has developed into one of the world’s leading designers and manufacturers of premium casino and hospitality seating.

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tional casino to live and card-game chairs and roulette units. Office poker and bingo chairs are included in the product line.

The designs and technical features are produced by the company and protected by international patents, according to Dennys Patir, the company’s business development director and Seref’s son.

Its recently released Noblesse Collection features exceptional finishings and new models of seats that offer players increased comfort, Dennys Patir contends.

Its first installation was at Elexus Resort & Casino in Cyprus, one of the most prestigious casino projects in Europe in 2015. Yet, the company retains a keen eye for the American market.

“Our biggest market is Europe, where we are the leading manufacturer of high-quality casino seating, but we are recording strong sales growth in the Americas,” says Patir.

“This is why we decided to establish our branch in Las Vegas.”

The new accessory range for the Noblesse Collection includes a stylish metal hand-pull that allows a high maneuverability of seats. An extended gas-lift cover and the quilted stitched pattern applied on the backrest cover provide a touch of elegance, Patir notes.

PVC elements are available in shades of complementary color (seat holder and protective edge parts) and are designed to increase the robustness of seats. The collection includes the new material DEPAR, which comes with upgraded features like flexing endurance and tear strength.

Operators can choose the ideal base and combine it with the desired upper seating. All Patir models are interchangeable.

The company can either customize chairs from the existing product range or create something new for customers.

And so, the race continues. Gaming gradually relies more heavily on its chairs, and the companies hustle to gain market position.

Patir’s recently released Noblesse Collection installed at Elexus Resort & Casino

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NEW GAME REVIEW

by Frank Legato

Kooza

Scientific Games

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his new Bally title is the first slot machine ever to carry the theme of a famous Cirque du Soleil production, in this case the touring show Kooza, which premiered in 2007.

Kooza, the slot machine, recreates all the characters from the circus-themed road show, including “The Trickster,” who reprises the role of central character in the slot theme.

Other characters including “The Innocent,” “The King,” the two court clowns and others are recreated as reel symbols in the base fivereel, 40-line video slot.

There are several bonus events built around the theme, including mystery events in the primary game and a wheel bonus on a unique spinning display built into top of the circular Bally Alpha 2 Pro Wave 360.

This configuration uses a spinning circular display above four games in Bally Pro Wave cabinets, each featuring a concave 42-inch curved vertical monitor.

The wheel bonus can award credit prizes or one of four progressive jackpot levels, ranging from a “Mini” resetting at $25 to the wide-area “Magnifique” jackpot, resetting at $400,000.

The primary game features random events including Mystery Stacks, which bunches like symbols together for large wins; and Instant Win, which gives the player a pick from three icons to reveal an instant credit award. There are two different free-game events, called Trickster Free Games and Wheel of Fire Free Games. Both are triggered as outcomes of the Bonus Wheel, which is triggered through bonus symbols on the reels.

The “Kooza Jackpot” result on the Bonus Wheel triggers a separate wheel, viewed from the side, game-show style, which can land on one of the four progressive jackpots. The maximum bet of 300 credits is required to qualify for the progressives.

Manufacturer: Scientific Games Platform: Alpha 2 Format: Five-reel, 40-line video slot Denomination: .01 Max Bet: 300 Top Award: Progressive; $400,000 reset Hit Frequency: 31.23% Theoretical Hold: 14.35%

Lamp of Destiny Konami Gaming

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his is the latest game on Konami’s Concerto format, the cabinet launched at last year’s G2E that features twin 27-inch HD game screens set against a smooth black surface to create a cinematic feel. Concerto also features a 19.5-inch video topper and signature holographic side lighting.

Lamp of Destiny is a five-reel video slot available in 20-line, 30-line or 40-line configuration. The game theme is centered around a flying genie character, who appears on the screen to trigger full-reel wild symbols on all but the first reel, or uncovers hidden mystery bonus events. The game features Konami’s Action Stacked Symbols, which are like symbols stacked in random events to increase four- and five-symbol wins.

Three or more magic lamp symbols trigger a free-game bonus event.

The genie swoops down in a cloud of smoke to reveal three identical lamps, each holding a hidden multiplier prize. Two lamps contain normal free games with up to 20X random multipliers, while one lamp contains the same volume of “super free games” with up to 100X random multipliers.

The feature can be retriggered during the free spins, and any additional

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free games acquired during the free game feature will accumulate and transport the player back to the lamp selection feature at the cessation of the initial free game award to select another prize.

Lamp of Destiny is a KP3+ platform game available exclusively on the new Concerto cabinet.

Manufacturer: Konami Gaming Platform: KP3+ Format: Five-reel, 20-, 30- or 40-line video slot Denomination: .01-5.00 Max Bet: 200 Top Award: 10,000 times line bet Hit Frequency: 36% Theoretical Hold: 4%-18%

“G2E G2E is truly a global trade show.”

Tom Nieman VP of Marketing, JCM Global

Discover new technologies. Source new vendors. Stay current with industry trends.

Energize your career with world-class education and professional development.

And make valuable new connections. It all happens at the gaming industry’s premier event: Global Gaming Expo.

Join Tom and thousands of other gaming professionals at G2E. Register today at globalgamingexpo.com

GLOBAL GAMING EXPO SEPTEMBER 27 – 29, 2016 SANDS EXPO CENTER LAS VEGAS

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Super Vault

Aruze Gaming America

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his is the third game in Aruze’s 999.9 Gold Wheel Series of traditional three-reel mechanical reel-spinning slot machines that duplicate the look, style and spinning bonus wheel made popular by IGT’s Wheel of Fortune, but in a for-sale machine offering an on-site progressive, making it less expensive to offer than the famous game and resulting in a much more frequent progressive.

Super Vault is a classic three-reel, single-line slot game on the new Cube-X Ultimate cabinet, centered around the spinning bonus wheel. Every 64 spins, three wheel symbols land to initiate a spin on the physical wheel atop the machine. The top jackpot changes with the amount wagered, resetting to between $999 and $9,999.

Max bet is not required to qualify for a progressive, but each progressive gets larger with higher wagers. The minimum bet is 50 credits (50 cents). The player selects a “bet multiplier” from 1 to 10. On the lowest wager, the jackpots reset at $999 (Grand), $100 (Major), $30 (Minor) and $10 (Mini).

As a button is pressed to increase the bet multiplier, the progressive meters change accordingly—two credits change the Grand

progressive to a $1,999 start. At max bet (250, 500, 750 or 1,000 credits, depending on the version of the game), the top Grand jackpot starts at $9,999.

The jackpots can be linked with two other Cube-X Ultimate progressive slots that are out in the field, Bags of Cash and Diamond Desire.

There also are two different wheel-spinning bonus events. The standard bonus, triggered by three SPIN symbols, triggers a spin of the Gold Wheel for either one of 13 credit awards—ranging from 100 credits to 3,000 credits—or one of the four jackpots.

If the three SPIN symbols on the payline include one on the third reel marked “SUPER SPIN,” it triggers what’s called “Gold Wheel Super.” In this case, after the Gold Wheel is spun, the player is awarded a multiplier of 5X, 8X or 10X applied to the credit prize (except the progressive).

Manufacturer: Aruze Gaming America Platform: Cube-X Ultimate Format: Three-reel, single-line stepper slot Denomination: .01 Max Bet: 250, 500, 750, 1,000 Top Award: Progressive; $9,999 reset Hit Frequency: Approximately 50% Theoretical Hold: 2.03%-12.66%

Winner’s Choice 2

International Game Technology

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his is the second version of IGT’s popular Winner’s Choice multi-game video slot. The game offers an initial menu of six classic IGT video slot games, in both payline versions and the slotmaker’s MultiWay Xtra setup, in which there are no paylines and wins come from adjacent symbols. The latter setup offers a total of 720 ways to win on each spin.

The new game is on IGT’s CrystalDual cabinet.

Winner’s Choice 2 offers the player the option to play any one or up to four of the games on the menu simultaneously. A set perline wager applies to each of the four games for primary-game spins. Triggered bonus events

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cause isolation of the game on which the event occurs.

The inaugural themes on the Winner’s Choice 2 menu are timetested IGT games: Stinkin’ Rich, Kitty Glitter, Coyote Moon, Mystical Mermaid, Fire Opals and Fire Horse. Each game theme has unique reel and payline setups.

In addition to the individual bonus events, there is a mystery wheel-spin bonus. On any random spin, a wheel appears on which the player selects one of the game themes. Another wheel spin determines how many free games will be awarded on that game—up to 96 initial free games, with possible triggers of standard free-spin bonuses adding to the event.

Manufacturer: International Game Technology Platform: CrystalDual Format: Multi-game video slot Denomination: Multi-denomination Max Bet: Various Top Award: Various Hit Frequency: Various Theoretical Hold: Various

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DON’T MISS AN ISSUE OF GAMING’S MOST IMPORTANT TRADE PUBLICATIONS!

Subscribe to Global Gaming Business, the official magazine of G2E and the American Gaming Association.

Visit www.ggbmagazine.com

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CUTTING EDGE

by Frank Legato

Data, Simplified Product: QuickFind Manufacturer: DataSpade

ataSpade has introduced QuickFind, a new CRM dashboard software solution that enables player’s clubs, hosts and marketing departments to access on-demand player data under one simplified software solution.

Ready for use on PC or mobile devices, casino employees can access player information on the fly and update important account details. QuickFind is simple to install and use, and is easily accessible via a web browser.

Users can assign hosts, identify highend patrons, view player points earned and check player statistics for comping decisions— all on demand.

QuickFind creates a simple, unifed and intuitive interface that can be used in sync with all gaming departments to retrieve player data as needed in real time. Hosts can research and identify quality players, past due and new players, quick-loss players and decliners.

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Hosts’ notes and actions can also be accessed by the player’s club and marketing department.

Marketing can check player information for direct mail conflict resolutions and identify highend patrons to assign hosts. Players club officials can check notes on players, tier statuses and points earned.

QuickFind also allows gaming departments to create and run top-level gaming summaries, and has many different reporting options to choose from for all gaming activity. These reports can be automatically generated once the criteria are selected, and easily exported when compiled.

QuickFind is a base software solution that can be customizable on a per-client need for additional plug-ins and/or functions for reports.

For more information, visit dataspade.com or email info@dataspade.com.

Printing Plus Product: Paycheck NextGen Manufacturer: Nanoptix, Inc.

he new Paycheck NextGen from Nanoptix, Inc. revolutionizes how the industry sees TITO printers and their capabilities.

Compared to competing printers, Paycheck NextGen offers superior speed, longevity and reliability and pushes past these features by offering future-proof connectivity and capabilities, according to the company.

More than just a printer, the Paycheck NextGen has a PC-based infrastructure powered by a dual core processor. It not only prints TITO tickets but can run additional components, secondary software and/or media content. In addition to being promotional coupon-ready, it is fully integrated with the following connectivity: Ethernet port, HDMI, 5 USB ports (hosts and slaves), serial, micro SD reader and Bluetooth capability.

With game management systems looking to offer new features and technologies, Paycheck NextGen is the ideal choice for operators, as it can be fully networked and can provide promotional coupons through several of its connections. As a Paycheck Series printer, it features easy-serviceability-by-design and new troubleshooting menus via its web-based reporting.

Whether they are troubleshooting through USB, HDMI and/or Blue-

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tooth, technicians agree it is an exceptionally designed, performance-driven, completely future-proof TITO printer which is answering their floor’s biggest issues.

Operators today identify printer issues as ticket jams, misprints called “half tickets” and wasted paper, which in turn creates loss of revenue, increased operational costs and player dissatisfaction. The Paycheck NextGen answers these needs by eliminating the use of unreliable presenters and providing the first completely straight and fully integrated antijamming paper path, guaranteeing a jam-free, fully printed ticket.

As the only printer offering a standard 400-ticket tray, double its competition, its available protective cover will protect paper from UV discoloration, debris and dust. To maximize each stack, its integrated “Last Ticket” feature allows the printer to trigger its paper-low sensor on the last one or two tickets, beating competitors’ 10-20 ticket detection, and eliminating wasted paper in return.

Rounding off its innovative features, its anti-spillage conduits offer additional protection for specific environments like bar-top games, as these channels will deviate any liquids away from critical electronic components.

For more information, visit nanoptix.ca.

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40

Young & Restless?

Nominate your best and most accomplished employees or co-workers for GGB’s

Under

Forty

For the last four years, Global Gaming Business magazine has published its 40 Under 40 Awards. e nominees have come from all parts of the gaming industry—operators, casino suppliers, regulators, attorneys, researchers and more. is year, GGB’s 40 Under 40 promises to uncover the most talented and dedicated people currently involved in the industry. It’s simple to nominate your most impressive candidate: Submit your entry to G2E’s Emerging Leaders program. Emerging Leaders candidates immediately are entered into GGB’s 40 Under 40 nominees.

To nominate yourself, your employee, or your most impressive colleague under the age of 40, simply visit G2E’s Emerging Leaders site under the “Show Info” section at globalgamingexpo.com. And good luck!

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GOODS&SERVICES NOVOMATIC MOVES CLOSER TO CONTROL OF AINSWORTH

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he purchase of a majority stake in Ainsworth Game Technology by Austria’s Novomatic Group moved closer to completion after Ainsworth’s shareholders approved the deal at the Australian slot giant’s annual meeting.

The tie-up with Novomatic—a global leader in machine gaming and operations—totaling a 53 percent stake Len Ainsworth sold his is expected to significantly remaining stake in his enhance AGT’s product company to Novomatic depth and strengthen it as a competitor in international markets.

Once regulatory and licensing approvals are achieved and the sale consummated, “AGT will benefit from collaboration across a range of markets that will be substantially positive for longterm shareholder wealth creation,” said Novomatic Group CEO Harald Neumann.

Ainsworth Chief Executive Danny Gladstone praised Novomatic as “a highly respected and impressive industry leader.”

“We look forward to progressing this relationship and to execute on our international growth strategy,” he said.

Novomatic’s shopping spree continued in June with the purchase of U.K. machine gaming operator Talarius from Australia’s Tatts Group.

The A$210 million buy gives Novomatic Talarius’ nationwide portfolio of Quicksilver AWP venues, which contributed around 2 percent to Tatts’ overall earnings last year, the Australian gaming and betting operator said. Tatts said it will record a loss of A$50 million on the sale, whose proceeds will be used to pay down debt.

IGT ORGANIZES FOR GLOBAL GROWTH

I

nternational Game Technology is developing a new centralized Administrative Services structure to maximize the efficiency of its massive global operIGT veteran Robert ations through enhanced K. Vincent is leading consolidation, coordina- the company’s tion and management.

Administrative The centralization Services division 68

Global Gaming Business AUGUST 2016

will ensure the proper delivery of the more than $1 billion in goods and services the company procures annually and to support the operation of business units spanning more than 100 countries by capturing improved synergies.

A major focus will be coordination and oversight of corporate security and cybersecurity functions. These will be centralized under a new Global Information Security Office within Administration Services, which also will oversee global procurement, real estate and facilities, food services, environmental health and safety and facility security and monitoring.

The new group will be led by 20-year IGT veteran Robert K. Vincent as executive vice president for administrative services and external relations. He will continue to lead the external affairs functions that include global corporate communications, media relations, branding and social responsibility programs, as well as provide Investor Relations support. He will report directly to CEO Marco Sala.

“As I have previously done, I am turning to a senior executive in whom I have great confidence to lead these functions,” Sala said. “Bob Vincent has the right balance of experience and good judgment to successfully meet the challenges associated with managing, supplying and protecting our growing global enterprise.”

The company also announced the appointment of Mario Di Loreto as executive vice president of human resources, organization and transformation, responsible for providing overall HR leadership and strategy.

Prior to joining IGT, Di Loreto was executive vice president for human resources and organization at Telecom Italia, a 50,000-employee group, and served at one time as human resources group director for Barilla, where he was responsible for 15,000 employees in 17 countries. He has held HR positions with Starwood Hotels, Air One and Alitalia.

WILLIAM HILL GOES VIRTUAL IN LAS VEGAS

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.K.-based William Hill is offering virtual horse racing at the Silver Sevens and Plaza Hotel & Casino in Las Vegas.

William Hill is the largest race and sports book operator in Nevada, and the state’s Gaming Commission last year approved the company’s license for virtual horse racing.

William Hill is using virtual horse racing to

The Plaza Hotel & Casino in Downtown Las Vegas will offer virtual racing in its William Hill sports book

liven things up and provide more betting opportunities, primarily during weekdays, when fewer live races are run.

Virtual races are run every five minutes, with legendary race announcer Tom Durkin calling the action. Each race contains eight to 12 virtual horses, and bettors can lay wagers to win, place or show, as well as exactas and trifectas.

William Hill conducted test runs of the virtual racing product prior to obtaining its regulatory approval last year, and says about 18 percent of its revenues from horse racing now come from virtual racing at its U.K. operations.

The company has no predictions for its Nevada operations, where interest in horse racing has declined in recent years, as well as nationally.

William Hill did not speculate on the potential popularity of virtual horse racing with millennialgeneration visitors, who greatly favor immersive, interactive and technologically advanced gaming options over traditional slots-based gaming. Millennials grew up with online gaming and advanced gaming systems, and virtual horse racing might prove more popular with them than live racing or slots.

AINSWORTH LAUNCHES NEW CABINET IN NORTH AMERICA

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insworth Game Technology introduced its new A600 cabinet in the North American gaming market, incorporating the company’s deep knowledge into a new product for its casino partners.

The A600 takes existing Ainsworth technology to the next level with larger game screens, dynamic lighting effects and a state-of-the-art LCD touch-screen button deck.

“The A600 launch continues the tremendous growth and progress we have seen in North America

over the past year,” said Ainsworth PresidentNorth America Mike Dreitzer. “It has been an exciting year for Ainsworth. We opened our brand-new 291,000-square-foot North American headquarters in Las Vegas and began offering our Class II gaming products after the successful acquisition of Nova Technologies. Now, we continue our momentum with the release of the A600, which is built to perform with the highest engineering standards and an extensive game library.”

While being focused on supreme engineering and best-in-class reliability, the A600 includes the high-end graphics, high-resolution screen and interactive button decks that are expected by today’s casino operators and slot players.

Two 24-inch screens and game-driven lighting effects enable players to experience Ainsworth’s games in an entirely new way on the A600. An LCD touch-screen button deck gives an innovative look and feel, while also allowing less down time during software changes. A casino operator will never have to change a button deck on this new cabinet.

The A600 will come with a full library of game titles—including the proven games developed for the A560 Dual Screen, alongside a variety of games designed exclusively for this new cabinet.

ARISTOCRAT LOOKING FOR A BIGGER BANG

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ristocrat has launched a new slot, The Big Bang Theory Jackpot Multiverse, on the company’s Arc Double cabinet.

Key features of the new three-game set of 25 lines each include large, multi-level MSP/SSP jackpots available at less than max bet and guaranteed progressive wins for max-bet players, plus additional credits when the jackpot feature is triggered.

The package is set up for medium volatility with stacking wild symbols and a spinning-wheel “Bazinga! Bonus” feature for added volatility.

Draws include “Cosmic Multi-Wilds” and “Teleportation Accumulation” free spins where players collect atoms to unlock additional reel sets.

In the “Supermassive Phenomenon,” symbols rapidly expand from one to 19 wilds during free spins.

In “Cookie Recombination,” players get six picks from 18 symbols for rewards.

The Big Bang Theory Jackpot Multiverse

AUGUST 2016 www.ggbmagazine.com

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NEW AGS CABINET A GO IN MISSISSIPPI

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GS has won approval from the Mississippi Gaming Control Board to market its Icon slot cabinet to the state’s casinos.

The approval comes after a successful field trial at Beau Rivage Resort & Casino in Biloxi.

Building on the commercial success of AGS’ Colossal Diamonds on Big Red, the visually striking Icon features two flush-mounted 23-inch high-definition LCDs, an integrated digital sound system, appealing play mechanics and a suite of AGS’ new Icon customized game content, slot cabinet including Gold Dragon Red Dragon and Fire Wolf.

“Giving players throughout Mississippi a chance to experience our increasingly popular coregambler style games is a win for operators and a win for us,” said Robert Perry, senior vice president of sales for AGS.

NORWEGIAN PICKS KONAMI SYNKROS

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onami Gaming, Inc. announced that its awardwinning Synkros casino management system has been selected by Norwegian Cruise Line Holdings (NCLH) to help power casino operations across its world-class fleet, including a total of 3,666 slots and 289 table games. Through the upcoming year, Konami will launch its latest Synkros systems technology on a total of 18 ships operated by NCLH under its three brands: Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.

“Throughout its history, Norwegian has been recognized for bringing innovation to the cruising experience, and this undoubtedly extends to the gaming and technology conveniences found on board our ships,” said Jim Abbas, senior vice president of casino operations at NCLH. “Now, across the company’s three brands, we are continually embracing new technologies, and Synkros has demonstrated core alignment in bringing these features to market.”

The global cruise company first selected Synkros in 2012 for two of its newest cruise ships, primarily due to the platform’s reliability, marketing and multi-site capabilities. Three years later, NCLH is further expanding Konami’s system to its fleet with tools such as Money Klip cashless wagering, 70

Global Gaming Business AUGUST 2016

cage management and Advanced Incentives Bonusing.

“Konami is very pleased to continue supporting the diverse business needs of Norwegian Cruise Line Holdings,” said Scott Richards, director, systems sales for Konami. “Our team has dedicated itself to preparation and efficiency as multi-site conversions and new installations progress. We’ve seen strong momentum to date and look ahead to additional successes.”

JCM ANNOUNCES COLLABORATIVE EFFORT

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ash-handling and ticket supplier JCM Global announced that it is collaborating with other manufacturers of casino technology on a new generation of products.

“JCM’s plans involve continuing a journey that takes casino patrons using our technology beyond merely the completion of a transaction,” Tom Nieman, JCM Global’s vice president of sales and marketing, told GGRAsia.

“We believe that the core gaming product—the slot machine—can be utilized in new ways to unlock greater value for the operator. Just as the content in gaming machines is evolving via such things as skill-based games, the need to generate additional revenue from the current devices is evolving.

“This will take a spirit of cooperation between slot manufacturer, casino management system provider, the operator and jurisdictional regulators.”

Nieman said the evolution of intelligent cash boxes, promotional couponing and 100 percent scanning of banknotes is part of the collaboration.

“That has been the result of listening to the needs of casino operators,” he said. “We pride ourselves in leading such innovation. With costs declining for processing power, and data transfer speeds being enhanced, innovative applications become more and more practical. It’s possible we might have more to say on this topic at G2E Las Vegas in September.”

Jack offers the action of a live blackjack game with actual cards and a live dealer, streamed to individual gaming terminals. Each game is a live, real-time game of 21, with each player going up against the dealer only.

Players see the hand being dealt on their screens, and all the standard blackjack betting options, like splitting, doubling down and insurance, are available. Players use a touch-screen monitor for buy-ins, payouts and tips.

“Shaq Jack makes it possible for new or casual players to play blackjack without the intimidation of sitting at a communal table with a dealer and experienced players,” Callender said. “On the other hand, serious players will enjoy Shaq Jack because they don’t have to worry about newbies ruining their game by playing a bad hand. It’s just you against the dealer.”

DUETTO BRINGS REVENUE STRATEGY TO RIVER SPIRIT

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uetto, the market leader in hotel and casino profit optimization technology, announced that it will provide revenue strategy solutions for the gaming property and the new 27-story hotel under construction at River Spirit Casino Resort in Tulsa, Oklahoma.

TROPICANA AC LAUNCHES ‘SHAQ JACK’

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n July 1, Tropicana Atlantic City launched a hybrid blackjack system called “Shaq Jack,” combining a live dealer with private gaming stations in a game named after four-time NBA champion Shaquille O’Neal.

“Here at Tropicana, we embrace innovative games like this that enhance the guest experience and give players more power and more control,” said Tropicana General Manager Steve Callender.

“Shaq Jack is an engaging game designed to appeal to novice and expert blackjack players alike.”

Created by Dynamic Gaming Systems, Shaq

Duetto’s GameChanger application will enable River Spirit to manage pricing and demand for the 483 rooms and suites being added to the property, making it the largest casino resort in Tulsa.

Tom Allen, general manager of resort operations at River Spirit Casino Resort, said an innovative revenue management system like Duetto’s cloud-based application was essential for the hotel, which is scheduled to be complete in December 2016 as part of a $365 million expansion.

Project1

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Esports & Casino Resorts WHEN

VENUE

INFO

October 25-26, 2016

SLS Las Vegas

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Esports & Casino Resorts is a two-day conference bringing together stakeholders from the commercial gambling and esports industries.

THE FOCUS: A pragmatic, in-depth discussion of the mutually beneficial opportunities that exist today.

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PEOPLE DALL NAMED MOTORCITY CASINO PRESIDENT

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otorCity Casino Hotel in Detroit announced Bruce Dall, who has served as interim president since February, recently was named president. A 28-year casino industry veteran, Dall also served as MotorCity’s chief Bruce Dall financial officer and senior vice president of finance and administration.

MotorCity did not renew former President Gregg Solomon’s contract for undisclosed reasons, and also withdrew former Senior Vice President of Operations Jenny Holady’s application for president from Michigan Gaming Control Board consideration.

Prior to joining MotorCity, Dall worked at Greektown Casino-Hotel for seven years, as assistant general manager and chief financial officer. He also served as chief financial officer and treasurer at Hard Rock Hotel & Casino, as controller at the former Desert Inn casino hotel in Las Vegas, and as director of internal audit at the former casino operator Caesars World.

MGM NATIONAL HARBOR ANNOUNCES STAFF APPOINTMENTS

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GM National Harbor, the casino resort set to open later this year in Prince George’s County, Maryland, announced that it has appointed teams to lead its hotel operations, brand and retail marketing, and communications efforts.

MGM National Harbor welcomes Patrick Fisher as executive director of hotel operations, Sarah Moore as executive director of brand marketing and retail and Dasha Ross Smith as direcPatrick Fisher tor of communications.

Fisher is executive director of hotel operations for MGM National Harbor. In this role, he is responsible for overseeing all aspects of hotel operations including guest services, call center, housekeeping, spa and salon, fitness center, pool, reservations Dasha Ross Smith

and more. Prior to joining MGM National Harbor, Fisher served as director of rooms at the AAA Five Diamond Ritz-Carlton, Washington, D.C. Sarah Moore Moore is executive director of brand marketing and retail. In this role, she is responsible for the development and execution of strategic marketing plans and overall brand management, as well as oversight of the resort’s retail program. Prior to joining MGM National Harbor, Moore served as director of brand management for MGM Resorts International, providing strategic direction and support to Aria, Vdara, Luxor, Excalibur, MGM National Harbor and MGM Springfield.

Smith is director of communications. She is responsible for leading the resort’s communications and social media efforts. She joins MGM National Harbor from Wells Fargo, where she served as communications lead for the corporate responsibility group.

EADINGTON PROTÉGÉ BECOMES HIS SUCCESSOR

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evada’s renowned university gaming studies programs will be working more closely together following the appointment of Bo Bernhard to the Philip G. Satre Chair in Gaming Studies at the University of Nevada, Reno.

Bernhard, executive director of the International Gaming Institute at the University of Nevada, Las Vegas, succeeds the late Bill Eadington in the UNR post.

Eadington, an economist and pioneer in the study of commercial gaming as an academic discipline, founded the Institute for the Study of Gambling and Commercial Gaming at UNR. He held the Satre Chair until his death in 2013.

“Bill was one of the kindest, most generous people,” Bernhard said. “He took the time to speak with everyone, share his knowledge and teach what he knew regardless of who it was or where they were from. As a naïve undergraduate interested in learn-

Bo Bernhard (r.) and gaming studies pioneer, the late Bill Eadington

ing more about gambling, all the way through my doctoral program and beyond, Bill was an incredible mentor to me.”

Bernhard will maintain his position at UNLV and will continue to work with UNR’s Executive Development Program, held in Lake Tahoe each fall, as a joint project of the two schools. He also will continue to develop the gaming minor at the UNR and assist with course development.

STUTZ JOINS GOLDEN ENTERTAINMENT

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oward Stutz recently joined Las Vegas-based Golden Entertainment, Inc. as director of corporate communications, where he will lead the company’s internal and external communications functions Howard Stutz through all of its divisions nationwide.

Previously, Stutz was strategic development manager for the Las Vegas office of the Greenberg Traurig law firm and its Global Gaming Practice.

Prior to that, for more than three decades, Stutz was an award-winning journalist and communications professional, covering the casino gaming industry for the Las Vegas Review-Journal from 1987 to 1991 and 2004 to 2016.

GGB

August 2016 Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Acres . . . . . . . . . . . . . . . . . . . . . . . . . . .38,39,45,75 AGEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Agilysys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Best Games Technology . . . . . . . . . . . . . . . . . . . .33 Data Spade . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Everi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Fabicash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . . . .69 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53,63 Gasser Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 GGB News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 GGB Subscription . . . . . . . . . . . . . . . . . . . . . . . .65 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Greenberg Traurig . . . . . . . . . . . . . . . . . . . . . . . .37 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Incredible Technologies . . . . . . . . . . . . . . . . . . . .49 Interblock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 JCM Global . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Konami . . . . . . . . . . . . . . . . . . . . . . . . .Back Cover Micro Game Technology . . . . . . . . . . . . . . . . . . .41 Narus Advisors eSports Conference . . . . . . . . . .72 NetEnt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . . . .36 Scientific Games . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Sightline Payments . . . . . . . . . . . . . . . . . . . . . . .27 UNLV Foundation . . . . . . . . . . . . . . . . . . . . . . . . .57

AUGUST 2016 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Q

&A

David Rebuck Director, New Jersey Division of Gaming Enforcement

D

avid Rebuck has been the director of New Jersey’s Division of Gaming Enforcement for the past seven volatile years. He came into office with a charge to fundamentally change the regulatory structure in New Jersey, creating an investigative/licensing arrangement between the DGE and the Casino Control Commission. Then he had to deal with the economic crater that hit Atlantic City following the 2007 recession that culminated with the closing of four casinos in 2014. In the meantime, he oversaw the introduction of legal iGaming into New Jersey. To read the extended interview with Rebuck, visit GGBMagazine.com.

GGB: Let’s start with the last year, in which Atlantic City has absorbed the loss of four casinos. Revenues have stabilized and most experts believe the market has “right-sized.”

How is the DGE responding to this new reality?

Rebuck: We spent the past year responding to

the closing of four casinos in 2014. It was something we saw coming, but it was worse than I had anticipated. So we reduced the number of staff that was necessary to oversee 12 casinos to one that was effective for eight.

And stabilization is the word I would use.

We’re no longer seeing the revenue decline month after month; I think we’re at the point now where we see the casinos actually having a chance to compete against the surrounding states, so we have stabilization with the opportunity for growth.

Since Atlantic City is a free market in gaming, there is no limit on licenses. Do you believe that adding more licenses makes sense for businesses?

We’ve had several groups come to us over the past year to look at operating in Atlantic City.

We’ve met with all of them, and up until now, none have decided to move forward. I think 74

Global Gaming Business AUGUST 2016

this demonstrates the reality of the market, and unless someone is reading it a different way, these groups have declined to become involved.

Let’s move to the North Jersey casino referendum. While we all agree that this would be a disaster for Atlantic City, the DGE has a statewide responsibility to ensure gaming is operated with integrity. Where does the DGE stand on this referendum?

We serve the governor’s office, and his view is that the people of New Jersey should be able to have a voice on whether there is gaming expansion outside of Atlantic City. So we’re pleased to be able to support that bill, and we’re ready, willing and able to do what is necessary under the law to implement the expansion of gaming if that is the choice of the people.

Does it bother you that there are few specifics contained in the bill?

Those who oppose the expansion of gaming, particularly here in the Atlantic City area, point to the lack of specifics in the bill. Their complaint is that people don’t know what they are voting for. They say, “How can you make that decision unless you know the details like the location, the tax rate and other things?” From the legislature’s point of view, they want to keep their options open. All these details would be filled in after the referendum is passed. So we’ll be ready to provide input and options if it ever comes to that point.

Let’s turn to the good news over the past year, the growth of iGaming in New Jersey. Why do you think it has finally taken off and found a foothold with the public?

I think a lot of it was growing pains. The assumption that U.S. online players would be the same as European players didn’t really hold up. So, it took a while for the online casinos to get to know their customers. Their marketing strategies have become more sophisticated.

I also think that the introduction of new games and products has made a big difference.

And the improvement in technology has helped too. No longer is geolocation an issue. Payment processing has improved, although it’s still not perfect. And players now understand how to play, how the procedures work, and how they can have fun. It’s a combination of all these things.

Tell us about the liquidity agreement that you’ve reached with the UK Gambling Commission.

We sent letters to our licensees that also operate in the United Kingdom and asked them to suggest ways we could include players from both jurisdictions in the same pool. We first talked to the UK Gambling Commission about how this would work and we both agreed it could be done with cooperation from the licensees.

With 9 million people in New Jersey, and more than 63 million in the United Kingdom, this would mean a massive increase in liquidity for New Jersey operators. Even when you discount children and non-gamblers, it gives us access to a market that is very familiar with online gaming.

That number is one-fifth of the total U.S. population.

Will this include all casino gaming?

Not initially. Our intent is to increase the liquidity of online poker, by exposing the games to many more players. Later, it could be expanded to include all casino games. We’ve given our licensees until August 1 to respond, and we’ll figure out where we go from there.

We’d still have to figure out lots of issues: specific regulations, how the tax rate from each jurisdiction would be applied, player ID and geolocation issues, and other things we probably haven’t even considered yet. But you have to start somewhere.

But we’re very serious about this, and we want to move it along as quickly as possible, so iGaming in New Jersey will continue the impressive growth we’ve shown over the last 15 months.

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