Global Gaming Business, July 2015

GGB Global Gaming Business Magazine

ARIZONA ARRANGEMENTS BINGO BONANZA AGA @ 20 SLS’s SCOTT KREEGER

July 2015 • Vol. 14 • no. 7 • $10

The

Millennial

Workers Republic?

Moment

How Macau is dealing with labor issues

Will they ever find the casino floor?

How casino entertainment has evolved to serve different demographics

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CONTENTS

Vol. 14 • No. 7

july

Global Gaming Business Magazine

COLUMNS

24 COVER STORY That’s Entertainment

14 AGA 20 Years Later

With all other things equal, entertainment is often the deciding factor in bringing customers to one property over another.

The types of acts have changed, but entertainment is still a prime factor in getting customers in the door and spending money.

Geoff Freeman

16 Fantini’s Finance Different Roads Frank Fantini

48 Marketing I Like Those Odds Rich Sullivan

By Marjorie Preston

52 Global Gaming Women Working Women

FEATURES

Jennifer Day

18 Millennial Challenge

57 Operations

One of the biggest challenges to the long-term health of the casino industry is how to serve younger players—and how the casino floor must change.

My Mistake Richard Schuetz

DEPARTMENTS

By John Lukasic

30 Battle of Glendale

44 Crisis in Macau

4 The Agenda

The Tohono O’odham Indian Nation’s West Valley Resort project in the Phoenix suburb of Glendale continues to inspire opposition from Congress and other tribes.

The problem of dismal results in Macau after the exodus of VIP play is compounded by an extremely tight labor market as new properties open.

6 Dateline

By Dave Palermo

40 That’s A Bingo!

Class II electronic bingo gets a lot of press, but technology has carried the classic paper version of bingo into the 21st century.

By James Rutherford

60 New Galaxy Galaxy Entertainment opens the first of the Cotai Strip’s new megaresorts amid Macau’s historic slump.

By Patrick Roberts

By Dave Bontempo

12 Nutshell 50 Emerging Leaders With Incredible Technologies’ Dan Schrementi and GameOn Affiliates’ Tom Galanis

54 New Game Review 58 Frankly Speaking 59 Cutting Edge

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

iGNA Outlook

62 Goods & Services 65 People 66 Casino Communications With Scott Kreeger, President & CEO, SLS Las Vegas

36 Betting on the Edge Tony Cabot

38 iGames News Roundup

Cover: The Arena at the Mohegan Sun in Connecticut www.ggbmagazine.com

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THE AGENDA

#

Hashtag Heaven

Vol. 14 • No. 7 • July 2015 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com

Roger Gros, Publisher

A

s an older person (#ancient), I’m pretty proud of keeping up with this social media stuff. We were the first gaming publication—online or off—to offer podcasts, and just marked 10 years of recordings (#listennow), all available on our GGB News website (#ggbnews.com).

But podcasts really aren’t “social media.” It is media, but not really social. For that, we have multiple Twitter feeds for all our important products (#globalgamingbiz), several Facebook pages for the same products (but I do not have a personal page— #leavemealone), and LinkedIn discussion groups that have over 5,000 members each (#casinoexecs).

But frankly, it took me a while to figure out how this “trending” thing works. You know, that list of subjects somewhere at the top of each page preceded by a #hashtag that people are talking (or tweeting or twerking, whatever) about. It probably took me longer to figure it out because my topics are never trending! Unless it’s a sports topic, which I comment upon once in a while. (#lebron, you know who you are!)

So to make up for that shortfall, here’s a list of topics that I do comment upon, freed up from the 140-character handcuffs that are Twitter. #socialgaming. Who would have ever thought that people would pay good money for worthless chips, just to see their names at the top of some stupid internet game leader board? Yeah, this started with those “Farmville”-style games and soon morphed into “real” casino games. But it’s not gambling, the operators tell us, because the players get nothing for their play. Except for maybe a free buffet, points credited to their player’s club accounts, and massive email marketing campaigns aimed at making them gamble real money. (#areyoukiddingme?) #iGaming. OK, if #socialgaming is trending up, #iGaming is trending down. People no longer are interested in online gaming because the numbers coming out of New Jersey, the largest of the three states to legalize iGaming, have been so anemic. But those numbers have only been anemic if compared to the sky-high predictions from operators, analysts and even Governor Chris Christie. (#bridgegate was just the start.) #regulatoryreform. Just got back from Vancouver and the conference for the International Association

4

Global Gaming Business JULY 2015

of Gaming Advisors (#IAGA), where I rubbed elbows with some of the most progressive regulators and ex-regulators in the business. These are people who understand that regulation does not have to be draconian, and that regulators and operators can actually work together for the betterment of the industry. Sometimes, however, those relationships can be too close (#californiacrapshoot). #macaudisaster. In May, I visited Macau for the first time since revenues started to fall, and I was shocked at the lack of business. On a Saturday night, where a year ago there were five deep around almost every table, there were dead games and very little excitement. The crackdown of the Chinese government on corruption has so scared every player that they’re not likely to return until the government sends a clear signal that the crackdown is over, or at least winding down (#violatorsexecuted). #ACupturn. I’m headed back to Atlantic City for the summer, where last year it seemed I was called to the Boardwalk by some broadcast media team every day to comment on the latest casino closure. It made for a depressing summer for me, but a disastrous summer for those who lost their jobs. Has that trend reversed itself? Probably not until a decision is made on adding North Jersey casinos to the already-saturated market (#stupidpoliticians). #Americangaming. It’s been 20 years since the American Gaming Association was formed. I’ve worked very closely with this group right from the start (#officialmagazine) and thought that the departure of original president Frank Fahrenkopf couldn’t be good. But after a rough start, the new guy Geoff Freeman has come out fighting for the industry, and has been very effective in almost every situation (#aggressive). #sportsbetting. So the NFL uses its influence to cancel a fantasy sports convention because it is being held in a casino (since when is the Sands Expo Center a casino?) but not because fantasy sports is really gambling? Adam Silver, please call Roger Goodell to explain how ridiculous this looks. (#areyoukiddingme2?)

OK, now what can you tell me about Instagram, Pinterest, Snapchat, Vine…. (#confused).

David Coheen, North American Sales & Marketing Director dcoheen@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 Tony Cabot | Jennifer Day | Frank Fantini Geoff Freeman | Richard Schuetz | Rich Sullivan Contributing Editors Dave Bontempo | John Lukasic | Erica Meeske Dave Palermo | Marjorie Preston | Patrick Roberts Robert Rossiello | James Rutherford Angela Slovachek

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

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Partner, Duane Morris, Baltimore

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 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 2015 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

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DATELINE USA july2015

northern exposure Hard Rock, Meadowlands unveil NJ casino plan K

ey local lawmakers and construction union leaders gathered last month at the Meadowlands Racetrack in East Rutherford to announce details of a grand plan for North Jersey’s first casino in partnership with Hard Rock International.

The Hard Rock Casino at Meadowlands Racetrack would be a $1 billion casino and entertainment complex adjacent to the North Jersey track’s new grandstand, and would offer 500 slot machines, 200 table games, 10 restaurants, four bars, a multi-purpose Hard Rock Live showroom, and a lineup of music memorabilia from the world’s largest collection of iconic rock artifacts.

The grand vision was laid out by Hard Rock International Chairman Jim Allen and Meadowlands Racing & Entertainment Chairman Jeff Gural, who has already invested more than $100 million into improvements at the track,

Florida Fantasy?

Court Ruling Could Open Up Slot Market

W

ith politicians continuing to debate the future of gambling in Florida, a state appeals court has thrown a monkey wrench into the works. Last month, Creek Entertainment Gretna is a north Florida racetrack the 1st District Court of Appeals ruled 2-1 that the a state regulator must issue that features rodeo-style barrel racing a license for slot machines to Creek Entertainment Gretna, which opened a barrel-racing course in 2011.

The facility offers flat-track horse racing, simulcast betting and poker, as permitted by state law. But when voters in Gadsden County authorized slots, the Department of Business and Professional Regulation refused to issue a license, and Creek sued.

The refusal was based on a legal opinion by Attorney General Pam Bondi that state legislators did not mean to expand slot machine gaming beyond Broward and Miami-Dade counties, which were authorized to offer racetrack slots in a 2004 constitutional amendment approved by the voters.

Judge Robert Benton ruled that regulators did not base their denial on any errors or omission in the application and instead relied on Bondi’s interpretation. Gadsden County, he said, was allowed to hold the referendum under a wide-ranging law passed by legislators that authorized the current agreement with the Creek tribe.

Judge Scott Makar, who worked for Bondi at the time of the ruling, disagreed.

“The alternative view, which would restructure the statute and change its meaning to allow slot machines to be deployed on a statewide basis without any clear authority to do so, is inconsistent with principles of statutory and constitutional construction, legislative intent, and the history of laws prohibiting slot machines in the state,” Makar wrote.

The court has asked the Florida Supreme Court to make a final decision.

6

Global Gaming Business JULY 2015

including the recently completed $85 million grandstand which features sports bars overlooking the racetrack and a rooftop lounge with killer views of Manhattan. Hard Rock contributed a 16 percent equity stake to that project.

“This is not just a legendary day for our brand, but a tremendous opportunity for the state of New Jersey,” said Allen, a South Jersey native and still a resident of the state (as well as Florida, where Hard Rock is headquartered). He said the Hard Rock Meadowlands plan “is about maximizing the potential for the state of New Jersey… It’s about how we can grow the tax base, create more jobs and create more opportunities here in the state of New Jersey.”

If approved, Allen said, the first phase of the new casino could be open by summer or fall of 2016.

To become reality, of course, the casino would require an amendment to the New Jersey state constitution, which restricts casinos to Atlantic City. Allen, Gural and the assembled North Jersey lawmakers all stressed that 2015 is the year to get it done. To get the issue on this November’s election ballot, both chambers would have to pass a constitutional amendment referendum bill by two-thirds margins

by August 1.

The lawmakers and Gural stressed that a statewide vote this year is essential, because the issue would be lost amid the din of campaigning in next year’s presidential contest. Gural went as far as to say if the issue fails this year, lawmakers should wait until 2017 to focus the full attention of the voters on the potential benefits of a North Jersey casino.

Two weeks earlier, New Jersey Governor Chris Christie said on a radio talk show that he is now in favor of a northern casino.

Another ClAssiC Paragon gets final approval to operate Westgate

P

aragon Gaming, which ran the Riviera until its May 4 closing, has received final approval from the Nevada Gaming Commission to run the Westgate Las Vegas, formerly the Las Vegas Hilton, LVH and the International.

Scott Menke, Paragon CEO, said the main focus will be to improve hotel occupancy, which is currently about 60 percent. Menke is confident Paragon can improve that number to over 80 percent. He said Paragon improved Riviera occupancy from around 50 percent to nearly 80 percent in its short time there.

The Westgate has a few things going for it, too, in addition to new management. With the closing of the nearby Riviera, the property is a perfect fit to appeal to the Riviera patrons of the past. Renovations abound for the property as well, as they continue to improve the outdoor pool area, build new restaurants, add shows, and add the new home of Elvis Presley’s Graceland memorabilia.

The International Hotel was Presley’s home when he performed in Las Vegas. The total cost will exceed $100 million.

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DATELINE TRIBAL july2015

More is Better?

Governor to sign Connecticut casino bill

Government oversiGht GAO report criticizes NIGC A

n extensive report on the tribal government gaming industry was released last month by the federal General Accounting Office (GAO). While some details had been leaked previously, the report generally supports the regulatory regime in the industry at the tribal level, finding a variety of issues that need to be addressed.

The federal-level regulatory agency, the National Indian Gaming Commission, has recently relied on voluntary compliance with its regulation, something that has irked some members of Congress.

The report also evaluated state-level oversight of tribal gaming and found that seven states have an active regulatory role, 11 states have a moderate role and six states are categorized as having a limited role.

The GAO recommended that the commission (1) obtain input from states on its plans to issue

guidance on Class II minimum internal control standards; (2) review and revise, as needed, its performance measures to better assess its training and technical assistance efforts; and (3) develop documented procedures and guidance to improve the use of letters of concern. The commission said it generally agreed with GAO’s recommendations.

U.S. Senator John McCain, one of the authors of the Indian Gaming Regulatory Act of 1988, was more critical.

“The primary role of NIGC is to maintain the health and integrity of Indian gaming for the benefit of Indian tribes,” said McCain. “If NIGC continues to rely on Indian casinos to voluntarily comply with federal guidelines, then the commission must at least improve its state and tribal training and consultation initiatives and develop metrics that assess their effectiveness.”

Dorothy’s Dilemma Yellow Brick Road’s curtain opens

A

fter several months filled with anticipation, excitement and controversy, the Oneida Nation’s Yellow Brick Road Casino has opened in Chittenango, New York. The inspiration for the casino came from Chittenango being the birthplace of The Wonderful Wizard of Oz author L. Frank Baum. Oneida Nation CEO Ray Halbritter told those on hand for the ceremony, “We sought to revitalize the community.”

“Visit our community,” said Chittenango Mayor Ron Goeler. “It’s worth visiting.” The casino has created over 250 jobs, according to Goeler. Just minutes after doors opened to the public, one guest won a $3,000 jackpot at one of the 430 slot machines inside. The 67,000square-foot venue also has a 500-seat bingo hall, in addition to a saloon, bar and restaurants.

Part of the deal stuck by the Oneidas in-

cludes them sharing 25 percent of slot revenue for a 10-county exclusivity zone. Since last spring, the Oneidas have paid out around $65 million to the state. However, a license was granted last December, which will see the building of Lago, a $425 million casino 55 miles from Oneida territory.

Halbritter is obviously very upset at the choice to grant a casino in the area, and said, “They share the revenue that we’re making, so their revenue is imperiled, too, which in essence impacts the overall intentions of the agreement we made—the very carefully negotiated agreement, very painstakingly negotiated.”

The Lago is projected to siphon away $54.2 million from local racinos, and $78.5 million from tribal casinos annually, which comes to 51 percent of Lago’s projected earnings.

T

he Connecticut House joined the Senate in approving a process that could lead to a new casino jointly operated by the state’s two gaming tribes.

Now, the focus shifts to Connecticut Governor Governor Dannel P. Dannel P. Malloy Malloy. Spokesman Mark Bergman told the Associated Press the “governor fully intends to sign it into law.”

The bill that passed both chambers creates a several-step process that could lead to building a casino that would help the Mohegan and Mashantucket Pequot tribes fend off competition from casinos due to come online in neighboring Massachusetts, but also in other nearby states.

The tribes operate Foxwoods Resort Casino and the Mohegan Sun, which are about 70 miles from Springfield, Massachusetts, where MGM is building a new casino resort due to open in the fall of 2017.

The final bill had been considerably revised from a bill that would have authorized three more satellite casinos. State Attorney General George Jepsen warned that the bill might violate the U.S. Constitution by allowing just those tribes to build casinos when other tribes are waiting in the wings to get federal recognition—and could also breach the existing statetribal gaming compacts.

The bill as approved instead passes the ball to the tribes to work with a host community and come back to the legislature with an agreement that the lawmakers can approve or not.

This would require amending state law to allow casino, i.e. non-reservation gambling. The existing casinos are on sovereign Indian land. Any agreement would also need the blessing of the Bureau of Indian Affairs.

The tribes would first issue a request for proposals for a single satellite casino. The location that has been talked about most often is along Interstate 91, strategically placed to intercept as much traffic heading south to Springfield as possible.

Three communities that have already expressed interest in hosting a satellite casino are East Windsor, Windsor Locks and East Hartford. All three are closer to Springfield than the existing tribal casinos.

JULY 2015 www.ggbmagazine.com

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DATELINE ASIA july2015

Banyan Tree Plans Vietnam Casino Will nation allow locals to gamble?

DanCe with Me

Okada gets new Manila partner

P

hilippine real estate development firm Century Properties has reached a settlement with Universal Entertainment Corp., which was briefly its partner in a plan to develop a Manila casino resort.

Century has withdrawn its court case against Universal, which is owned by Japanese slot mogul Kazuo Okada, in an “amicable” resolution, reported Reuters.

In 2014, Universal Entertainment terminated its deal with Century to build upscale residential and commercial facilities in the $2 billion Manila Bay resort. The original deal would have given Century Properties a 36 percent ownership of Eagle I Landholdings Inc., the owner of the lot where the casino is being built, according to World Casino News.

Star of the Show

In related news, according to a filing with the Japanese Stock Exchange, Universal has sold its 40 percent stake in Eagle Antonio Cojuangco II Holdco Inc., which owns 60 percent of Eagle I. Any foreign operator must have a local partner to develop and operate a Philippine casino; All Seasons Hotels & Resorts Corp., a Philippine company owned by Antonio Cojuangco, bought the Eagle II stake in January for $2.9 million. Cojuangco, who is related to the country’s president, will be Okada’s new partner.

A Century spokesman said the company received no financial settlement in the case, and the company “wishes the Okada group well in the continuation of the Manila Bay Resorts project.”

Star Vegas in Poipet, Cambodia

Donaco pays $360 million for Cambodian casino ustralia-listed gaming company Donaco International will pay $360 million to buy Star Vegas, described by Forbes as “the best casino” in Poipet, Cambodia. The casino has 109 gaming tables in a gaming area that could accommodate more than twice that number, along with more than 1,260 gaming machines.

Forbes reports that the Cambodian gaming market is especially healthy due to its proximity to Thailand, where casinos are still illegal, improved transportation to and from Macau including better highways, longer open hours along the border, and, “perhaps most important,” according to the publica-

A

tion, “Thailand’s military rulers cracking down on Bangkok’s vast illegal casino trade.”

The country’s Excise Department has retained Sungsidh Piriyaranhsa of Rangsit University to consider the regulatory and tax structures. Piriyaranhsa, dean of the university’s College of Social Innovation, is believed to advocate a tax on profits rather than revenues.

Donaco was established in 2002 by Joey Lim and his grandfather Tan Sri Lim Goh Tong, who also founded the Genting conglomerate of Malaysia.

China to taiwan: ‘no Casinos’ Will Beijing pull the plug on trade?

T

aiwan has been warned by the Beijing government that it will face reprisals if it opens a casino in the Kinmen Islands.

Gambling is not permitted in mainland China. Though Taiwan considers itself a sovereign entity, the Chinese government still considers it a province under Beijing control, according to Macau 8

Business. In 2009, the Taiwanese government approved legislation that gave its islands the right to decide via referendum whether they want to develop casinos.

Beijing has reportedly told officials in Taiwan that if a casino opens on any of the Kinmen Islands, it could put an end to postal and transportation services

Global Gaming Business JULY 2015

and block direct trade channels between the Fujian ports of Xiamen and Fuzhou and the Taiwan islands.

GGRAsia reported that the president of Taiwan’s legislature, Wang Jin-pyng, is “unfazed” by the threat and will move forward with a casino plan for the islands.

The resort would be based at Laguna Lang Cô in Thua Thien-Hue province

Vietnamese waterfront resort is looking to ALaguna develop an integrated resort with gaming.

Lang Cô in Vietnam’s Thua Thien-Hue province has issued a request for concept to develop the project. The beachfront resort, which first opened in March 2013, includes a Banyan Tree hotel, an Angsana spa, a championship 18-hole golf course, meeting and convention facilities, and a number of private villas and residences. It is bordered by a tropical forest and mountain range and is located 49.5 kilometers (about 31 miles) from the city of Da Nang.

Banyan Tree Capital will oversee the RFC process, and has designated Global Market Advisors LLC as its strategic procurement adviser.

In a statement, the company said it will not operate the casino.

“This RFC process is to identify quality companies who can and will” run the gaming aspect, said Banyan Tree Capital Managing Director Steve Small. “The master plan is currently under consideration to be awarded a gaming license, and we believe that experienced operators will be interested in the potential of integrated entertainment facilities and support the government’s aim to boost Vietnam’s tourism competitiveness.

“We are seeking facilities and strategies that are focused on attracting foreign tourists from greater Asia, with a particular focus on inbound tourists from China and greater Asia,” he said.

“Our team looks forward to interacting with senior executives in the global gaming industry on this very unique opportunity,” added Jonathan Galaviz of Global Market Advisors. “Vietnam’s tourism and gaming sector is growing, and this project aligns with a story of economic growth.”

Permitting locals to gamble is likely to attract more investors, according to the report; presently, Vietnamese citizens may work in casinos, but not play in them.

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DATELINE GLOBAL july2015

Will BAhA MAr EvEr OpEn? May 1 debut pushed back four months

T

he 1,000-room Baha Mar Casino & Hotel in the Bahamas, which was to have celebrated its grand opening May 1, will now not open until September at the earliest.

The $3.5 billion complex, reportedly the most lavish and costly development in the islands’ history, also includes a 300-room SLS hotel and a 200-room Rosewood hotel. Both have pushed back accepting room reservations until at least September 8, reports Travel Weekly.

The 707-room Grand Hyatt at Baha Mar is accepting reservations from June 16, according to its website, but guests cannot check in until October 1.

No reasons have been given for the delay, the fourth setback for a project that broke ground in early 2011. The latest announcement has raised the ire of prospective travelers and travel agencies that planned to visit the new resort, which is

backed by the Chinese Export-Import Bank and is president of government affairs, subsequently being built by China State Construction Engineersaid there is “absolutely no truth to the story, ing Corp. and I categorically deny it.”

Media reports say Malaysian casino giant Last year, Baha Mar pushed back a planned Genting Group is considering acquiring the project late 2014 opening to this spring, saying, “The from its original developer, Sarkis Izmirlian’s Baha contractor has not completed the work with an Mar Resorts Ltd. Earlier this year, Izmirlian blasted attention to detail consistent with Baha Mar both its Chinese state-owned construction firm standards of excellence.” and the Bahamian government for the delays in the Sources tell GGB that China State is refusresort’s opening. ing to complete the work until Baha Mar pays it Last month, a government source told local for work already completed. And, according to media outlet The Tribune that Baha Mar “does not the sources, Baha Mar disputes the cost and have the cash to finish the project or pay the conquality of the work completed, leading to the tractor.” A tabloid report said Bahamian Prime current impasse.

Minister Perry Christie had struck a deal that would see Genting acquire a 51 percent stake in the project. Robert No public hearings on Sands, Baha Mar’s senior vice Sydney project

FINE FROM FinCEN

U.S. Treasury given CNMI casino jurisdiction

A

ruling in the Commonwealth of the Northern Mariana Islands has granted the U.S. Department of the Treasury authority to regulate casinos in the territory. A statute has been authorized by Congress allowing Treasury to expand the definition of the United States to include the CNMI. The case of CNMI Chief Judge Ramona v. Manglona was quoted in the ruling, which hopes to address money laundering. Last November, the U.S. government filed 158 criminal charges against Hong Kong Entertainment Investments Ltd. in regards to local gaming property Tinian Dynasty Hotel and Casino. More than 150 of those counts regarded failures to file currency transaction reports. FinCEN fined the property $75 million last month.

“Tinian Dynasty’s actions presented a real threat to the financial integrity of the region and the U.S. financial system,” said FinCEN Director Jennifer 10

Tinian Dynasty Hotel and Casino

Shasky Calvery in a statement.

Hong Kong Entertainment moved to dismiss the case, due to the belief the U.S. Congress never gave the U.S. Treasury authority to regulate the CNMI casinos. Manglona ruled that from its inception in 1970, the U.S. Bank Secrecy Act granted the Treasury secretary authority to include “the possessions of the United States” as part of the “United States.”

George Que, a VIP services manager from Tinian, was charged in 2014 with conspiracy to allow gamblers to conduct transactions over $10,000 without filling necessary paperwork with the U.S. government.

Global Gaming Business JULY 2015

Packer’s ‘Secret’ Plan?

hree years after the project was announced, James Packer’s proposed $1.5 billion hotel and casino complex at Barangaroo in Sydney Harbor remains shrouded in secrecy, according to a report in the Sydney Morning Herald.

The development originated as “a billionaire’s thought bubble,” the publication reported, and since then has not been subject to public debate. Questions on the VIPs-only project will be limited to written submissions “to bureaucrats who will decide what’s best behind closed doors,” the Herald charged.

In 2013, the government reached an agreement with Packer’s Crown Resorts to develop a high-roller casino with a hotel and luxury apartments. Since then, the Independent Liquor and Gaming Authority has chosen not to open the project to public hearings, which might call into question Crown’s bid for Sydney’s second casino license.

Planning Minister Rob Stokes has ruled against public hearings on a modified plan for the development. Instead, he said, an independent advisory panel will assess the reworked proposal along with other government bodies. The Herald cited documents obtained under freedomof-information laws that show the government’s first choice to head the panel was former Prime Minister Paul Keating, a known supporter of the Packer plan. When Keating declined, the role was filled by New South Wales government architect Peter Poulet.

The panel’s recommendations will not be binding, and Stokes will not consider the modification to Barangaroo South as a new application—even though Packer’s revised proposal calls for a building 275 meters (902 feet) tall, more than 100 meters higher than the previous plan.

T

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DATELINE EUROPE july2015

Time for London ‘Super-Casinos?’

Cyprus Casino attraCts Major FirMs Gaming’s big players eye a

2005 Gambling Act “a complete failure”

Mediterranean casino

a

number of global gaming companies are said to be interested in bidding for a casino license in Cyprus. The suitors include MGM Resorts International, Caesars Entertainment, Genting Malaysia and Kerzner International.

Media reports indicate that representatives of those companies have met with landowners and officials in hopes of expanding into Cyprus,

Malta Mission

which is expected to be ready to issue a license by the end of 2015.

Some 15 companies are said to be looking at the potential jurisdiction. Limassol and Larnaca have been suggested as potential destinations if the project gets the go-ahead.

Crystal Serenity

MGA OKs first cruise liner casino

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he Malta Gaming Authority has approved a casino cruise application from Crystal Cruises, represented in Malta by the Gollcher Group. The ship Crystal Serenity, which arrived in Malta last week, offers blackjack, craps, roulette, Three Card Poker, Ultimate Texas Hold ‘em and mini-baccarat, as well as slot and video poker machines, according to a statement from the MGA. “Valletta Cruise Port welcomes this first application, following our instigation to introduce this legislation,” said Stephen Xuereb, Valletta Cruise Port’s chief executive officer.

“This legislation makes Malta a more attractive proposition to cruise liners, particularly those cruise liners that opt to call at Malta or Gozo for

assive gaming halls once planned for London should be reconsidered as the U.K. gaming industry promotes more responsible gambling, says a former Scotland Yard special ops officer who now Caesars executive works for Caesars EnterRoy Ramm tainment.

Roy Ramm is now the governance and public affairs director at the U.S.-based gaming giant. He slammed the current 2005 Gambling Act as a “complete failure” that has not created a robust industry to aid communities that bid for casinos. Sixteen licenses were granted, according to the London Evening Standard, but only two have opened.

Ramm, a former commander of specialist operations at Scotland Yard, says a new responsible gaming initiative called Playing Safe will bolster responsible gaming practices within the industry; Caesars, which operates three casinos in London, is the first company to win a certificate of good practice.

“This is about making sure gambling is a pastime, not a problem for people. For a tiny percentage, less than 3 percent, it becomes a problem,” Ramm told the Standard.

Plans for the giant gaming centers were shelved by former Prime Minister Gordon Brown.

The U.K. Gambling Commission’s new social responsibility code includes self-exclusion policies that would be underwritten by operators. It was drafted by the commission and the Remote Gambling Association in consultation with representatives from Bet 365, Betfair, Paddy Power, SkyBet, Coral Racing and William Hill.

M

an overnight stay.” Casino cruise ships will operate their casinos “with the stipulated conditions while berthed within Maltese territorial waters,” said MGA Executive Chairman Joseph Cuschieri.

Parliamentary Secretary José Herrera said the debut of the new ships “is indeed very good and exciting news, which augurs well for the future.”

Herrera said the MGA and Valletta Cruise Port are committed to increasing the island’s gaming and cruise industries.

Vladivostok Debut Lawrence Ho’s Tigre de Cristal casino resort in Russia will be ready to open by August 28

L

Lawrence Ho awrence Ho’s Tigre de Cristal resort in the Primorye region of Russia is on track to finish construction by the end of June and open by the end of August.

The casino will likely include 15 baccarat tables, 800 slot machines, 25 additional table games, 25 VIP tables and a 119-room hotel. It will target the “underserved North Asia gaming market,” according to a February report in GGRAsia, including 300 million Chinese, Koreans and Japanese. According to a recent note rom Daiwa Securities, there is a US$100 million domestic gaming market in the Primorye economic zone area near Vladivostok.

Ho is the majority owner of the casino through the firm Summit Ascent Holdings. He is also chairman of Melco International Development Ltd. and a partner in Macau casino operator Melco Crown Entertainment Ltd.

BRITISH RESPONSIBILITY Operators serious about problem gaming

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he Senet Group, a self-regulatory group founded by Britain’s top gaming operators, has announced a second series of TV and online ads warning gamblers not to spend more than they can afford. According to the company, the campaign called “#badbetty” is aimed to increase awareness of problem gambling.

JULY 2015 www.ggbmagazine.com

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NUTSHELL Las Vegas-based Nevada Gold, which operates 10 casinos throughout Washington, announced it will acquire its first casino in Nevada, the Club Fortune Casino. The casino, in Henderson, generated $16 million in revenue, in addition to $2.4 million cash flow for 2014. The deal will cost Nevada Gold $14.2 million in cash and 1.2 million shares of the company’s common stock. It is anticipated the sale will be financed with an expansion of Nevada Gold’s current credit facility.

Australian slot manufacturer Aristocrat Leisure Ltd. has sold its Japanese units to Fields Corp., a company focused on the pachinko and pachislot industry in Japan. The sale covers Aristocrat’s entire Japan operations, including KK Aristocrat Technologies and KK Spiky, the company said in a statement. Aristocrat Leisure had stated in April that it planned to retain its KK Spiky business. “The transaction completed concurrently with the signing of the sale and purchase agreement,” Aristocrat Leisure said.

The decision follows what it described as a “strategic review” of its Japanese business. The company had announced on April 21 that it would wind down its main Japanese unit.

Z Capital Partners, the largest shareholder of Affinity Gaming at 39.5 percent, had their offer to buy out the company rejected formally.

Matt Doheny, a member of the Affinity board, said the $9.75-per-share offer “significantly undervalues” the company. Affinity filed the letter with the Securities and Exchange Commission. Doheny wrote, “Z Capital would need to materially increase the per-share price in the proposal to make it attractive based on the special committee’s evaluation.” James Zenni, CEO of Z Capital, said Affinity’s value has declined more than 30 percent in recent years. Payment solutions provider Global Payments has completed the acquisition of the gaming assets from Certegy Check Services, a subsidiary of Fidelity National Information Services (FIS). In a statement confirming the deal, Global Payments said the deal relates to its business for licensed gaming operators. The FIS operation includes 260 marquee gaming client locations, and provides a wideranging suite of services designed specifically for the

gaming industry. The acquisition of Certegy Check Services comes after Global Payments in March finalized a deal to purchase payment gateway Realex Payments. E-table supplier Interblock has installed its first Mini Star Roulette product in Serbia, and now the Playoff Casino in Kragujevac is home to the country’s first Mini Star 5 electronic roulette product. Interblock’s Mini Star 5 electronic roulette game features the field-proven Golden Chip Progressive Jackpot. “I am very proud and happy that we have purchased Interblock’s beautiful Mini Star Roulette,” said Playoff Casino spokesman Zoran Živojinovi . “I appreciate Interblock’s game quality and the overall luxury brand of Interblock. Based on that and on our great business relationship, we decided to move forward with this installation, and we are excited to bring this game to our players.” London-based Genesis Gaming announced the industry premiere of the “Rotating Reels” feature in its latest video slot game, Gods Of Giza, available on the Quickfire Network.

The new feature helps deliver bigger and more frequent wins by rotating a full 360 degrees following each free spin, stopping every 90 degrees to re-evaluate new winning combinations from the shifting symbols. As Japan continues to debate legal casinos, Clarion Events Ltd. has announced that its second Japan Gaming Congress will take place October 7-9 in Tokyo. The event will focus on “identifying and implementing an integrated resort model that will maximize benefits for all parties, including operators and the Japanese economy,” the organizers said. The Coeur d’Alene Tribe of Idaho has asked the state Supreme Court to rule that a law passed by the legislature banning instant horse racing terminals at the state’s three racetracks was not legally vetoed by Governor C.L. “Butch” Otter. The tribe claims that the veto was not transmitted to lawmakers in a timely manner. Instant racing terminals allow bettors to wager on past races where the names are removed. The tribe does not like the machines because it says they too closely resemble slot machines.

CALENDAR

“They

Said It”

“We would rather not see Kinmen tourism, which has tremendous potential, impacted by the gambling industry.”

—Fan Liqing, Taiwan Affairs Office, on mainland China’s warning against bringing casinos to Taiwan

“Our strategy has not changed. Supply will create the demand.”

—Sheldon Adelson, LV Sands Corp., in a variation of “build it and they will come,” referring to Macau, which is in a yearlong slump

“There’s so many other rules. There’s laws, there’s ethics commission rules, there’s local rules, so if we’re going to do anything we want to be sure we fit in with everything else that’s already going on, with the topic.”

—Stephen Crosby, Massachusetts Gaming Commission chairman, commenting about a proposed rule that would have forbidden elected officials in communities that host casinos from playing in them— a rule that was disapproved

“We can’t draft a budget with magic money that doesn’t exist. This is insanity. You’re insane.

And history will look upon you unkindly.”

—Illinois House Republican leader Jim Durkin on plans the Democrats propose to use money from new casinos to balance the state budget

“There is not a lot left of the hotel from when it first opened because of expansions, but it’s good for the city that we will still have the name Tropicana.”

—David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, speaking on the importance of preservation for a historic property recently sold to Penn National Gaming

August 11-13: Australasian Gaming Expo, Sydney Convention and Exhibition Centre. Produced by the Gaming Technologies Association.

For more information, visit austgamingexpo.com.

October 12-14: African Gaming Summit & Exhibition, the Emperors Palace, Johannesburg, South Africa. Produced by Eventus International.

For more information, visit bigafricasummit.com.

“Resolution of the seven-year back-and-forth among legislators and potential operators still faces numerous obstacles. Missing (in the debate) is a discussion of the risks of online poker and the conditions necessary to secure the game.”

September 29-October 1: Global Gaming Expo (G2E), Sands Expo Center, Las Vegas. Produced by the American Gaming Association and Reed Exhibitions. For more information, visit GlobalGamingExpo.com.

October 14-16: IMGL 2015 Autumn Conference, Lima, Peru. Organized by the International Masters of Gaming Law. For more information, visit gaminglawmasters.com.

—Bo Mazzetti, chairman of the Rincon Band of Luiseno Indians in San Diego County, on the issue of legalizing online poker in California

October 20-22: EiG Expo 2015, Arena Berlin, Berlin, Germany. Organized by Clarion Events.

For more information, visit eigexpo.com.

“It is foolhardy and immature and unsophisticated to issue dividends on borrowed money…

(Fixed dividends) are baloney, and any company that does that is irresponsible.”

November 17-18: Malta iGaming Seminar (MIGS) 2015, Hilton, St. Julian’s, Malta. Produced by the Malta Gaming Authority. For more information, visit maltaigamingseminar.com.

—Wynn Resorts CEO Steve Wynn, on the idea of maintaining dividends at current levels despite flat results in Macau, after cutting Wynn Resorts’ quarterly dividend from $1.50 to 50 cents per share

October 5-8: North American Association of State & Provincial Lotteries (NASPL) 2015 Annual Conference, Hilton Anatole, Dallas, Texas.

Produced by NASPL. For more information, visit NASPL.org.

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Global Gaming Business JUNE 2015

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AMERICAN GAMING ASSOCIATION

20 Years Later The AGA confronts a different landscape today

By Geoff Freeman, President & CEO, American Gaming Association

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wenty years ago, on June 1, 1995, the landscape for gaming across the country was far different than it is today. That same year, the American Gaming Association was formed in part in response to a Clinton administration proposal to impose a 4 percent federal tax on gross gaming revenue. At the time, about 500 casinos existed in about two dozen states.

The industry has come a long way since then, as the number of casinos has nearly doubled and gaming is recognized as an economic engine in 40 states. Further, when you consider the combined gaming and non-gaming revenue growth, the industry’s economic impact is nearly 500 percent greater than it was in 1995—totaling nearly $250 billion today.

The industry’s success can be attributed to many entrepreneurial, creative and forwardlooking leaders. One of those individuals is my predecessor, Frank Fahrenkopf, who effectively developed the AGA into a powerful industry champion.

The gaming industry of 2015 is in a vastly different place than where we were five or 10 years ago—let alone 20 years ago. Today, intense competition is the norm. But so too is an increasing sense of collaboration and industry.

When our industry is unified and transparent with one another, we can achieve great things.

We, as an industry, have become stronger in articulating that we are community partners who create jobs, drive economic development, and provide a path to the middle class.

The AGA has never been better positioned to represent the totality of the gaming industry than it is today. In fact, it’s ironic that the very organization that served as the blueprint for AGA’s establishment—the Motion Picture Association of America—is now encouraged to look at AGA as the model for its own evolution.

With the 20 members added this year—a 40 percent increase—we are more transparent, inclusive and stronger than we’ve ever been. And

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Global Gaming Business JULY 2015

our No. 1 focus is on creating opportunities to bring our industry closer together.

We’ve built a strong structure that allows us to address emerging issues in an effective manner and with a unified, powerful voice.

One issue on which we’ve coalesced the industry is the Internal Revenue Service’s proposal to lower the gaming winnings threshold for federal tax withholding from $1,200 to $600. We’ve armed the industry to activate grassroots support, and today, nearly 11,000 casino customers from all 50 states have engaged—they’ve either signed a petition, left a comment directly with the IRS, or contacted their member of Congress by phone, on Twitter or on Facebook. Every segment of our industry—operators, suppliers and customers—is united against this proposal.

To be clear, there are many other complex issues that are part of the IRS’ proposal, and we’ve had in-person meetings with senior IRS officials to express our concerns. We have filed public comments on behalf of the industry, and we look forward to the opportunity to speak at a public hearing in late June. As we’ve done in the past, we look forward to collaborating with the IRS to improve the efficiency, accuracy and customerfriendliness of the tax reporting process—we look forward to building a stronger partnership.

Confronting dangerous federal issues has long been a hallmark of the AGA. A new area where we are making a difference is effectively communicating the value of gaming. This effort is taking us from Massachusetts to Florida, to traditional gaming states and now to Japan. It is not the AGA’s role to encourage expansion, but rather to make sure that any conversations about gaming are fully informed.

In Japan, we’ve organized roundtable discussions with experts on various relevant topics, such as the economic benefits of gaming, responsible gaming and anti-money laundering practices. AGA members have attended these roundtable discussions with reporters in New York and Tokyo, and the interest from Japanese

media has been remarkable. There simply hasn’t been anyone filling the void, pushing back against misinformation. We’re proud to play that role and to highlight the positive experiences of gaming here in the United States.

So what does the future hold for the gaming industry and the AGA? In the United States, as the gaming industry matures, it’s true that we’re going through some natural growing pains. Everyone wants to know “what’s next” for the gaming industry.

Appealing to new customers, competing in an increasingly crowded environment for discretionary entertainment dollars and fostering policies that promote innovation are on everyone’s mind. The New Jersey First program is a great example of regulators encouraging innovation. Additionally, Nevada permitting elements of skill in casino games that passed unanimously in the legislature and was signed into law by Governor Brian Sandoval last month is a positive, forward-thinking step.

As we seek to grow, it’s also imperative that we crack down on the illegal operations that siphon critical revenues and tarnish the legal, highly regulated products and experiences we provide. Just this past month, we launched our “Stop Illegal Gambling—Play it Safe” initiative in Biloxi, as illegal gambling is a serious problem that taints the goodwill of the gaming industry. We’ve already elicited tremendous interest from attorneys general and other officials at various levels of law enforcement, and look forward to bolstering those relationships.

As we look back at the past 20 years, I think it is safe to say that the AGA at 20 is maturing and growing ever more valuable to the gaming industry. We’re deepening our ties to the industry, surfacing new opportunities and ably representing gaming’s interests. It is important that the AGA continues to be innovative, transparent and inclusive. And AGA looks forward to taking on a leadership role to ensure that this happens.

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FANTINI’S FINANCE

Different Roads Analyzing the gaming supply market

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here are many investment styles.

Any, if practiced with skill, can lead to profitable ends. Or, as Warren Buffet most famously says, there is more than one way to get to heaven. The same can be said for building growing and profitable companies.

There are companies that choose to grow by building their core businesses. They grow organically, as it’s called.

Other companies choose to grow through merger and acquisition.

A lot of attention in the gaming technology space has gone to the second kind of company in the past year or two, thanks to a series of mergers that have created two global supplier-lottery conglomerates—Scientific Games and IGT. There are others, however, that have fixed focus on growing their core businesses, such as Konami Gaming and Ainsworth.

Aristocrat is among those sticking to its core business of slot games and systems, though it has made acquisitions.

One acquisition, VGT, extends Aristocrat into Class II gaming in the U.S., but still in the slot business. Aristocrat also has made acquisitions into the interactive space such as social gaming, and is open to purchasing more companies.

But it isn’t going to wed a lottery operator or buy a table game company, so its business model remains focused on core areas.

The reasons for the mergers rested on one big trend and one big reality.

The big trend is convergence. Technology has created the ability to distribute game content beyond the slot machine box. It now goes online and in lottery products. It goes into gambling games and it goes into free-play and social games. And it can serve customers who cross over various platforms.

Thus, the company that can serve customers comprehensively can sell comprehensively, opening the opportunity for growth in even a static market.

The big reality is cost. Where there once were three dominant slot machine companies in North America, there now are many more. Each supports its own game development operations. Each sup16

Global Gaming Business JULY 2015

By Frank Fantini

ports R&D efforts. Each supports maintenance staffs, corporate staffs, sales staffs, etc.

Not all of those companies can afford those kinds of expenses to compete with the giants, again in a basically static market.

But even for the giants like SGMS, the ability to consolidate operations permits a cost-cutting that allows profits to grow. Obviously, it is cheaper for SGMS to have one sales department, for example, than for itself, Bally, Shuffle Master and WMS each to have one.

Of course, buying companies has run up one expense—interest, as money has been borrowed to finance the acquisitions. This has brought greater risk—and urgency to achieve promised cost cuts.

SGMS has a debt-to-EBIDTA ratio is over eight times in an industry where debt historically has been low to nil.

It also has created what is called execution risk.

How difficult will it be for IGT, for example, to build a coherent, unified company with an Italian CEO, corporate headquarters in London, lottery headquarters in Rhode Island, slot manufacturing in Nevada and each industry and region with its own culture?

SGMS and IGT both have strengths as they work through the early days of their integrations.

IGT has considerable cash flow.

SGMS has the most comprehensive product lines. And it has a CEO who has been CEO or COO at three of the company’s four major components.

That CEO, Gavin Isaacs, also is among the most admired in the business. One of the most frequently uttered phrases today is that “if anybody can make Scientific Games work, it is Gavin.”

One move that Isaacs has made to begin the unifying of decision-making and cultures is locating headquarters in Las Vegas.

The challenges of executing on the mergers were revealed in IGT’s and SGMS’ recently quarterly earnings results. IGT was largely in line. SGMS reported a better bottom line than expected, but some revenue segments declined.

On the other side, the simpler, more narrowly focused Aristocrat reported a rip-roaring first half of fiscal 2015 and promised more to come. EBITDA more than doubled and after-tax profit soared 68

percent.

Results were driven by the success of Aristocrat’s games, a big rebound in its home Australian market, and the addition of VGT, the U.S. Class II slot machine company.

Of course, big turnarounds at big companies can take time.

The start of Aristocrat’s success began several years ago when, under CEO Jamie Odell, the company made some key strategic decisions. One was a commitment to developing outstanding games. That led to the hiring of renowned game designers such as Joe Kaminkow.

Another was to focus on the Americas, which, after all, comprised about two-thirds of Aristocrat’s business. This commitment went hand-inglove with game design as Aristocrat opened creative operations in the U.S. We have tracked the results in the Eilers-Fantini Quarterly Slot Survey, the industry-leading report detailing trends among gaming suppliers.

Aristocrat’s share of new games shipped to casinos rose to 14 percent in the past survey.

More interestingly, survey respondents said they intend to buy 19 percent of their games from Aristocrat this year, and 21 percent factoring out VLT replacement markets, which tend to distort the overall market.

(Note: Anyone wanting a sample of the Eilers-Fantini survey or wishing to learn more about it can contact me at ffantini@fantiniresearch.com.)

But the real proof of the pudding was in those first-half earnings.

Aristocrat also maintains a much less burdensome debt level with a leverage ratio of 3.2 times—and just 2.9 times on a net basis, subtracting cash from debt. That means Aristocrat can put more focus on building revenues rather than cutting costs, and that it even can go shopping for acquisitions.

For SGMS, reducing the debt leverage will be a key for investors to watch.

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

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Generation Next What’s it going to take to bring the millennials to the casino floor?

By John Lukasic

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alk to any casino executive, and they will all tell you how important the millennial generation is for the future success of the casino industry. As the generation continues to grow, and contribute more to the overall economy, the industry seems to be scrambling to crack the mystery of this not-so-simple demographic.

Obviously, whomever it is that figures out the solution or solutions to this problem will have their name and legacy immortalized in the industry. As operators, analysts and entrepreneurs search for the answer, there does not seem to be a consensus as to what exactly the industry needs to do moving forward to win over the younger generations.

Jeff Jordan, principal consultant of Jordan Gaming Consulting Group, has clients in both the casino and video gaming industries. He says the majority of companies seem to be focused on the millennials, who are struggling to earn income at the same rate as previous generations, while completely ignoring Generation X. The Gen-Xers bridge the gap between baby boomers and millennials, and as Jordan says, “have more disposable income. The industry should focus on creating products they enjoy.”

Jordan finds Gen-Xers have a proclivity towards playing video games, since they were the first generation to play them.

Jordan points out that an obvious solution would be for operators to find the commonalities between the two demographics, and focus on them. With gaming revenue generated by pit games, slots, race books, sports books and poker, several advancements have been made to grow revenue. But has it been enough?

Poker Possibilities As it stands, very little has been done with poker. The world of poker had several serendipitous things go its way in the early 2000s to help catapult its popularity to unthinkable heights. Unfortunately, it didn’t take even a decade to see the popularity of poker decline. The bad players and whales have become scarcer, and the accessibility of high-level poker knowledge has become as easy as ever to attain.

This has led to a narrowing of the gap between the great players and amateurs, thinning out the edge the top players once thrived on.

Over the past few years, the top players have had to think outside the box to continue on with their living. This has included them moving outside of the U.S. to continue playing online. Several high-stakes players have moved to Macau, where they play private poker games with whales, with $1 million pots as the norm. With the sharp decline in Macau gaming revenue, the future of this is also in the air.

One area of sports betting which has grown astronomically over the past few years, primarily among younger bettors, is parlays.

The attraction of the chance to turn a $2 dollar ticket into $1,000 or more has heavily driven traffic in sports books recently. Technology and the world of sports entertainment have helped assist in sports betting among the younger demographic.

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“[Gen X] has more disposable income. The industry should focus on creating products they enjoy.”

—Jeff Jordan, principal consultant, Jordan Gaming Consulting Group

Another trend over the past few years has been the integration of poker variants such as pot-limit Omaha, Omaha hi-lo and Razz into more casinos. For years, people thought pot-limit Omaha might have been the shot in the arm the poker world needed, and while it has grown slightly through the years, it remains relatively niche due to the complex nature of the game.

The problem for casinos is that poker, with few exceptions, is essentially a loss leader. High labor costs and a progressive decline in interest have led to over a dozen poker rooms in Las Vegas closing over the past five years, with revenue declining slowly but steadily since 2007.

From a business perspective, the point of poker has always been to bring in players who want to spend their winnings on table games, slot machines or other amenities, and with few exceptions, that simply hasn’t been the case. The best bet for the future of poker with millennials lies in tournaments. The opportunity to turn a single buy-in into much, much more continues to appeal to younger crowds.

Unfortunately, poker is far down the list of political priorities, and by the time all parties reach an agreement for federal legislation, it might be too late. Without federal legislation for online poker, in addition to regained consumer confidence after events such as the Full Tilt and Ultimate Bet fiascos, this boom is all but a dream.

Race & spoRTs Reliance The decline of race books and the race industry as a whole over the past few years has been nothing short of depressing. Just on the Las Vegas Strip since 2008, race book revenue has dropped from $45 million to $22 million. Racetracks across the country are closing left and right, leaving owners scrambling for a solution. On top of that, younger demographics seem to have little interest, as it stands, with racing in general.

Two advancements have been seen recently, with one being “instant racing machines” in a few states, which offer gamblers a chance to bet on a historic horse race. Lawmakers claim they play too much like a slot machine, and controversy has swirled around their legitimacy, leaving their future in jeopardy.

For race books to stand any chance, it is imperative for the new virtual simulated race betting to succeed, even more than optimists hope for. Just as it sounds, these races are simulated through virtual technology, and while there is no intent for these to upend live race betting, the hope is to give gamblers, especially younger ones who may not normally bet on racing, something to wager on between live races, providing much-needed filler content.

Even as such, with race books contributing a paltry 0.4 percent of total gaming revenue on the Las Vegas Strip in 2014, betting on races will all but assuredly remain a minor industry segment at best, for some time to come.

Sports books have experienced a boon to their segment with regards to technology. The younger demographic has gobbled up sports betting, in fact. Mobile wagering in the state of Nevada combined with in-play wagering have helped sports betting grow rather steadily over the past few years.

One area of sports betting which has grown astronomically over the past few years, primarily among younger bettors, is parlays. The attraction of the chance to turn a $2 dollar ticket into $1,000 or more has heavily driven traffic in sports books recently. Technology and the world of sports entertainment have helped assist in sports betting among the younger demographic.

Tables Topping “Table games in general are more popular with millennials than their parents’ generation,” says Ray Pineault, president and general manager of Mohegan Sun. “Blackjack continues to be the most popular game of choice for table games players in general as well with the millennial generation.” It makes perfect sense, too, as blackjack is a game where the players work together to beat the house.

Author Jeff Hwang states the main issue with the decline in table game revenue is that players are not rewarded enough for strategic plays. This lack of a reward for smart play has led many people to believe the younger generations grow bored quickly with table games.

Hwang goes on to use a concept which he calls the “skill-free rate,” and how this must be applied to games moving forward. He analyzed several table games, and tiered them according to the amount of skill necessary to play the game optimally. What was determined was that the game with no skill involved, that offers the best odds for a player, is the banker bet in baccarat, which only has a 1.06 percent house edge, or skill-free rate.

From this, it was theorized what happens is that players are essentially being punished for thinking and using strategy on any game which offers odds worse than the skill-free rate. The solution for the future, he says, is to have games which, when played optimally, have a house advantage of less than 1 percent, offset by forcing multiple units to be bet. Games such as Mississippi Stud and Ultimate Texas Hold ‘Em are used as examples of games which utilize this concept.

The concept of multiple betting units in play when combined with a smaller overall house edge could be something that brings success to new table games in the future.

JULY 2015 www.ggbmagazine.com

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Skill SeTS While table game skills rely on understanding odds, slot developers are looking to add more skill into machines, but skills which rely more on hand-eye coordination. It has been said on countless occasions that slots of the future will play more like the video games of the past. There seems to be a high level of hope this will take slots to a higher echelon of total of revenue, but it is still, at this point, speculative.

Slot machines, more than any other form of gaming, will prove to be the most difficult for the industry to integrate moving forward. When it comes to the “casino of the future,” there is a near consensus that casino floor design will need a radical shift.

This shift will undoubtedly affect slots more than any other form of gaming. With more revenue coming from non-gaming, you have seen more companies looking for ways to blend gaming with non-gaming amenities.

Tom Mikulich, senior vice president of business development for MGM Resorts International, says MGM has done just that. At the Mirage, Bellagio and MGM Grand, dozens of interactive cocktail tables, which will one day feature gaming, have been implemented in lounges and bars throughout the properties. These games are not offered for real-money play, but are allowing operators of the casinos to understand what type of games drive action from the younger demographics.

“I think the one thing we need to do to bring more millennials is to let them consume the game how they want, the way they want, on their device,” Mikulich says.

The big question will revolve around exactly how digital devices are incorporated into the gaming experience. Convenience is a large, contributing factor. It is highly likely down the road that player’s cards will feature currency, much like you would see at an arcade.

The implementation of social gaming into the casino format is all but a sure thing in the years to come, as well. It will be more common to see games which link players together, perhaps on their own devices, which see them

Slot machines, more than any other form of gaming, will prove to be the most difficult for the industry to integrate moving forward.

When it comes to the “casino of the future,” there is a near consensus that casino floor design will need a radical shift.

work toward a common goal. Needless to say, over the next few years, it will be common to see big operators take a nearly trial-and-error approach by using research to take well-calculated chances, and see what sticks in the end.

The question which still plagues manufacturers and operators alike: What style of games will the younger generation sit down and pump hardearned dollars into?

When it comes to themes, Mikulich says, “Baby boomers are a bit more nostalgic, and tend to play stuff they used to consume from an entertainment standpoint.” Gen-Xers and millennials, on the flip side, tend to gravitate towards what is currently relevant in pop culture in terms of slot machine themes. This gives games with themes that draw in younger demographics a much shorter shelf life.

As far as the games themselves, Pineault says, “Millennials are looking for games that are more interactive and that they can share with their friends.” When it comes to what he feels the gaming industry should do moving forward, he says it “needs to continue to develop more interactive gaming opportunities, gaming that uses more technology that is more participatory and perhaps includes elements of skill.”

In Nevada, Senate Bill 9 became law. It allows slot machines to offer elements of skill, something they have not been able to do in the past. The industry hopes that these elements of skill will help revolutionize slot machines, and appeal to both millennials and Gen-Xers.

Time-SenSiTive

One area operators obsess over and correlate to slot success is time on device.

Many operators want games which will put patrons in seats and keep them there for much longer periods. With fewer people visiting Las Vegas with gambling as their primary motivation, combined with the countless non-gaming amenities offered, less focus should be aimed at time on device, but rather on understanding how much time, on average, the younger people are dedicating to gaming, and going from there.

One metric that seems to be undervalued, and rarely discussed, is what determines a player’s exit criteria when gambling. Only a frac—Ray Pineault, president and general manager, Mohegan Sun tion of people, compared to the past, sit down at a table or machine with the intention of playing

“Table games in general are more popular with millennials than their parents’ generation.”

20

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until their money is gone. Understanding when, and what it is that draws someone away from their game would prove helpful in determining what could drive revenue in the future.

Contrary to people’s preference for personal space, it has been suggested this generation looks for situations to place themselves into where they can experience social “collisions” or interactions. This begs the question of how a casino can optimally provide ample space and breathing room for guests, yet still provide opportunities for these social interactions.

Casino floors must be re-examined and changed to adapt to the needs of the younger crowd as well. This will more than likely involve more open and communal space. The key seems to be for operators to strike a perfect balance, and weave in gaming and non-gaming amenities.

While millennials may not come to Vegas in droves to gamble at the tables, they are here partying like never before.

The electronic dance scene in the city is like nowhere else in the world.

More Than GaMes Going back 40 or 50 years, a person’s visit to Las Vegas was often planned with gambling as the main purpose. A recent study by GLS Research showed that only 12 percent of tourists in Vegas come with gambling as the main reason.

The study also showed some non-gaming trends such as visitation to spa and wellness facilities.

In 2010, only 3 percent of people who came to Vegas visited a spa or wellness center, while in 2015, that number climbed to 7 percent.

One area of tourism that is growing is that of food destinations, where people visit cities specifically for their restaurant and bar scene.

Las Vegas has done its part to satisfy these cravings by offering countless dining options, in addition to a burgeoning downtown scene laced with fun and unique restaurants.

While millennials may not come to Vegas in droves to gamble at the tables, they are here par-

tying like never before. The electronic dance scene in the city is like nowhere else in the world.

If you want to be a competing resort on the Strip, it has become necessary to cater to this. In 2014, 11 of the top 14 U.S. nightclubs, by revenue, were in Las Vegas.

As this next generation is ushered into the world of gambling, a paradigm shift in the industry is necessary to accommodate the sometimes high demands of these consumers. The traditional casino experience is commonly considered boring by many patrons under the age of 35, and clearly needs to be re-assessed before it is too late.

While it is not clear whether table games which reward strategy or slot machines which play like video games will be the shot in the arm the industry needs, the one thing that remains clear is that standing idle will only leave the longstanding industry in the dust.

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THE

SHOW MUST GO ON

Guns ’n Roses rock the Hard Rock Hotel and Casino

Casino entertainment used to mean comics and crooners, showgirls and Cirque revues. These days, it’s whatever gets people in the door, separates them from their discretionary income, and steers them to the gaming floor.

BY MARJORIE PRESTON n May 23, 2013, Jimmy Buffett played a free outdoor concert to mark the opening of a new Margaritaville casino complex at Resorts Atlantic City.

It was a weekday, in the seventh year of Atlantic City’s historic decline. It didn’t matter. More than 100,000 people turned out to see the superstar singer, and Resorts had the second strongest slot day in its 35-year history.

Such is the power of entertainment. The right mix can boost gaming revenue, elevate F&B, increase retail sales and fill hotel rooms. With almost 1,000 U.S. casinos fighting tooth and nail for market share, entertainment— from the stadium to the showroom, from the nightclub to the pool—sometimes can mark the difference between profit and loss.

O

On the Edge In 1997, Atlantic City’s aging Trump Castle was rebranded as Trump Marina.

With no budget for capital improvements, the property staked its claim in a crowded market by breaking with tradition. The property’s young creative lineup included future industry leaders like Mark Brown, Paul Ryan, Larry Mullen, Todd Moyer and Matt Harkness. They surprised AC and the whole gaming industry with an unprecedented series of outdoor rock and pop concerts, starring Bad Company, the Beach Boys, Earth, Wind & Fire, and KC and the Sunshine Band, among others.

“We didn’t have the money to improve the physical plant, so we came up with the marketing program ‘Play on the Wild Side,’ to say we were younger, trendier and edgier,” says Steve Gietka, then Trump’s director of entertain24

Global Gaming Business JULY 2015

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INNOVATIVE ENTERTAINMENT

Q&A ment and now president of SMG Entertainment. With its “Rock the Dock” concert series, says Gietka, the Marina was among the first casinos in AC to “replace Steve and Eydie and Paul Anka with Van Halen.”

Perhaps more importantly, that early experiment changed the definition of “casino customer” from middle-aged slot player to almost anyone interested in a resort experience. Long before the massive expansion of gaming in the U.S., it addressed a question that operators still struggle to answer: As more properties divvy up the gaming revenue, can entertainment help the house win?

“It used to be entertainment was a loss leader; you gave up that seat in the showroom and hopefully made it up on the gaming floor,” says Gietka. “Now the arithmetic is, ‘OK, we need an act that’s profitable on paper based on a combination of cash ticket sales and the gaming that the show drove.’ That’s why all over the country they aren’t casinos anymore; they’re ‘casino resorts.’”

“It’s not just about gaming,” he says. “It’s about fine dining, a cool nightclub, a bar, great concerts… Your old customer is dying. If you don’t appeal to people going forward, nobody is going to replace them.”

A Piece of the Action Today, 23 states in the U.S. have casinos; the Northeast alone has almost 60 gaming halls. As Wendy Hamilton, general manager of the SugarHouse Casino in Philadelphia, recently told the Associated Press, “There’s not a Zip code in the region that doesn’t have four or five (gambling) options within an hour.”

Clinton Billups, president of CFB Productions Inc. in Las Vegas, says the sheer breadth of choices makes entertainment more important than ever.

“The action from one casino to the next is pretty much the same, so consumers can make their spending decisions based not on what’s the best gaming property, but what are the amenities—entertainment, F&B, hotel, spa, pool,” says Billups. “When the casino brings in Artist X, we have to evaluate not just how many tickets were sold but key performance indicators: how many people signed up for the slot club; what was the impact on hotel occupancy; what was the impact on F&B; did we see a rise in attendance at the steakhouse prior to the concert.

“It’s not enough to fill the seats,” he says. “You have to determine who will be sitting in those seats,” and how they are likely to contribute to the bottom line. So what constitutes the right entertainment, the ideal customer demographic? It depends on the property, the jurisdiction and the competition. It also depends on who’s talking.

In Las Vegas, for the off-Strip Hard Rock Hotel & Casino, there’s no question who’s buttering the bread: baby boomers, who grew up on Top 40 rock ‘n’ roll. The property has enjoyed phenomenal success staging short-term residencies with “legacy bands:” KISS, Guns ’n Roses, Motley Crue and Journey, among others. The series launched in 2009 with guitarist Carlos Santana, who filled the Hard Rock’s 4,000-seat concert venue, the Joint, for 73 shows over two-plus years.

The audience for these shows have money and like to spread it around.

They hit the bars and restaurants and stay at the hotel, says Chas Smith, Hard Rock’s vice president of entertainment.

“The Journey shows were absolutely phenomenal. Out of the nine shows we did, the first three competed with a very big fight weekend here in town, so we had a lot of competition, but we still did well. The following six shows sold out, and we could have done three or six more shows with them, right then and there.”

Fedor Banuchi VP, Entertainment & Nightlife Cosmopolitan Las Vegas GGB: The Cosmopolitan is known for showcasing alternative music acts. Is that a niche you’ve cornered in Vegas?

Banuchi: The headliners draw in business, but the indie spirit acts create

our reputation. Our target customer is looking for something more thoughtful. The overall music program adds to the brand, because we take the time to curate a diverse mix of the best contemporary music. We’ve had 103 Grammy-nominated and/or Grammy-winning artists perform at the resort. We’ve demonstrated that we have our finger on the pulse of what’s cutting-edge and relevant.

A fabulous pool is no longer optional, it seems. Talk about the Boulevard Pool. What’s the experience like?

Boulevard Pool provides a multi-level experience by day and an intimate outdoor concert venue by night. During the day, lively music and a laid-back ambiance create an exciting, vibrant social scene. By night, the venue hosts a wide array of musical acts, including our highly popular “Set Your Life to Music” concert series. The resort also transforms the 65-foot digital marquee into a colossal movie screen with special double features for Dive-In Movies.

How are Rose. Rabbit. Lie. doing, and Bond?

Rose. Rabbit. Lie. is an ever-evolving experience, made for conversation and destined for social magic. It’s a modern supper club that adheres to no standard model and follows no written rules. Bond brings the energy and excitement of a nightclub to the gaming floor. Guests can enjoy our DJs and dancers or play on 16 LED gaming tables featuring roulette and blackjack. It’s an exuberant performance space with custom-made lounge chairs, a bar and picture windows overlooking the Strip, so guests can soak in the excitement of Las Vegas.

Modern supper club Rose. Rabbit. Lie. at Cosmopolitan

JULY 2015 www.ggbmagazine.com

25

HARD ROCK CONCERT PHOTOS by Eric Kabik

Journey, Rascal Flatts (l. to r.) and Motely Crue perform at the Hard Rock Hotel & Casino

MOTLEY CRUE PHOTO CREDIT Fab Fernandez

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In Las Vegas, for the off-Strip Hard Rock Hotel & Casino, there’s no question who’s buttering the bread: baby boomers, who grew up on Top 40 rock ‘n’ roll.The property has enjoyed phenomenal success staging short-term residencies with “legacy bands:” KISS, Guns ’n Roses, Motley Crue and Journey, among others.

The band’s fans “were some of the biggest spenders we had on property as far as gaming revenue and food revenue,” Smith adds. “The beverage side was very good, too, though it wasn’t over the top, like with Motley Crue or G&R.” The patrons who came to rock stuck around to play. “They would sit around before or after the show, put a few dollars in a machine or on a table,” says Smith. The vast majority, he says, preferred slots to table games. “We had almost a 70/30 split on that.”

Mixing It Up The rock shows went so well, Hard Rock took a chance and booked country music stars Rascal Flatts for a nine-show residency in March.

“We were all a little hesitant, but the way country is going these days, we said let’s give it a shot, and it was great,” says Smith. “The fans loved it, and we

brought in a whole different group of people, a different set of eyes to feel the amenities. We grew the database and got some very positive feedback: ‘Hey, we really enjoyed it, we loved staying at your hotel.’ It was a risk, bringing a country band to a rock venue, but we hit it and we nailed it.”

Tom Cantone, senior vice president of sports and entertainment at Mohegan Sun, lives by a simple axiom: “Anyone who drives volume beats the competition.”

“If your entertainment drives both high-end slot and mass market, you win,” says Cantone, author of Book ’Em, a guide to effective casino marketing.

His ideal entertainer? “Whoever’s popular in American pop culture right now.

That’s who should be in our house.”

For Mohegan Sun this summer, entertainment is all over the map: MOR (Bette Midler, Straight No Chaser); classic and contemporary rockers (John

“

I would book the youngest star every day of the week if I could, because Mom and Dad drop off the kids and spend the next few hours in the casino. Some of our biggest, most profitable, most successful nights are with the younger drop-off crowd.

—Tom Cantone Senior VP of Sports and Entertainment, Mohegan Sun

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Global Gaming Business JULY 2015

”

Young fans enjoy the recent Ariana Grande concert at Mohegan Sun

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1 8 0 0 A T T O R N E Y S | 3 7 L O C A T I O N S W O R L D W I D E˚

Fogerty, Train, Nickelback); country stars (Shania Twain, Trace Adkins); ’90s-era boy bands (New Kids on the Block); the Dancing with the Stars tour; TV psychic Theresa Caputo; and a mix of hoops and Mixed Martial Arts at the 10,000-seat Mohegan Sun Arena.

But Cantone’s favorite act is one that brings in the whole family. “It used to be the younger the artist, the less likely you would book them at a casino. Today it’s the complete opposite. I would book the youngest star every day of the week if I could, because Mom and Dad drop off the kids and spend the next few hours in the casino. Some of our biggest, most profitable, most successful nights are with the younger dropoff crowd. Those concerts do extremely well for us at the box office and on the gaming floor.”

Merchandising also makes a killing when the audience is young, he says. “I’ve seen parents peel off hundred-dollar bills to buy T-shirts and programs and all the goodies that come along with a concert.”

Booking younger acts like former Disney star-turned-pop vocalist Ariana Grande “is a game-changer,” says Cantone. “Ed Sheeran sold out in four minutes. We have both elements, young and old, working very well for entertainment.”

The Alphabet Generations & Millennials In Vegas today, non-gaming attractions account for up to 70 percent of resort revenue (hence the proliferation of Ferris wheels, zip lines, outdoor festivals and other attractions). As gaming revenues flatline, decline or are redistributed, operators rely on entertainment to bring in Generations X and Y and the millennials—young people who hopefully will become the gamblers of tomorrow.

The baby boom generation “has grown into the sweet spot typical of gaming,” says Gietka.

“Now we have to ask ourselves, how can we grow this business by becoming more current and appealing to younger people? Even if they don’t automatically become customers right away, you’ve got to get them to come in and check out your property. At least they’ll have some experience

Fresh perspectives.

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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. ©2015 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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TAKE IT OUTSIDE: MGM FESTIVAL SERIES

Q&A

fied Festival, which started at the Beach at Mandalay Bay. The natural synergies of relaxing with a glass of wine and lisChris Baldizan tening to great music have made for a Senior VP of Entertainment successful combination. We also tried MGM Resorts International our first annual Blvd. Brew Festival, showcasing some rare microbrews from GGB: Where did the idea of MGM’s offOregon, arguably the mecca of microbrews in the property festivals originate? What’s the draw? world. Along with local Nevada microbrews and Baldizan: (MGM Chairman) Jim Murren reminds again, first-class music, it makes for a great day of all our 60,000-plus employees to think outside the festivities. box. Today’s Las Vegas is not the Las Vegas of days Finally, with Live Nation, we created the Route gone by. Visitors today 91 Harvest Festival, a want experiences. Gaming, unique take on country iHeartRadio Music Festival at the while still an important music in Vegas. It’s defiVillage at MGM Grand and profitable core business nitely one of the most pillar, has seen a decrease anticipated festivals of in percentage as it relates 2015. We’re proud of all to total revenue. Now, revof our brands and expect enues are made up of hotel each of them to get bigrooms, food and beverage, ger and better this year. retail, convention business and entertainment as well as gaming.

MGM is betting big on Rock in Rio. How long Las Vegas has always been forward-thinking did you calculate the risk, and are you when it comes to reinventing itself and giving peoconfident it will pay off? ple new reasons to come, and there’s certainly a Our bet is on the site. Rock in Rio was one of the unique experience at a festival. You’re not confined tentpole events for the site, but we built it for more to a seat. There’s variety, from food and beverage than that. It’s been proven that festivals take time to options to different genres of music. There’s a cergrow and for the brand to be recognized. Rock in tain sense of community; it’s about the experience Rio’s debut was spectacular, but it was a relatively and connecting with other people. I think the festiunknown brand coming to a new market that’s very val sites we’ve developed are even more unique, becompetitive in the festival space. It also was a new cause they’re in the heart of Las Vegas on the Strip; venue that guests and artists were not familiar with you’re only minutes away from the next activity. until now.

What kinds of festivals marked your first season?

What other kinds of events are planned for the Festival Grounds? Will there be a full calendar?

We kicked it off with the iHeartRadio Music Festival at the Village, which is part of iHeartRadio in the Grand Garden Arena. There’s a built-in audience already here for the weekend, and the outdoor component allows iHeart to showcase up-andcoming talent. We feel like the brand and outdoor component of the festival is only going to become stronger.

We also hosted the 10th annual Wine Ampli-

We do have restrictions on the number of events we can host at both the Village and Festival Grounds.

Our goal is to program as many different events throughout the year as possible. There’s a great market for private convention business in these spaces. It would be wonderful to host two to four major festivals at each venue annually. We’re also looking at food festivals, sporting events—and hopefully, events we haven’t even thought of yet.

Route 91 Harvest Festival

28

Global Gaming Business JULY 2015

there and hopefully a really good time.”

For these groups, it’s all about nightclubs, pulsing light shows and EDM. For this tranceinducing experience, they willingly stand in line, pay a hefty cover, and pool their resources for high-priced bottle service.

For those who sneer at celebrity DJs (whose ranks have included Justin Bieber, Jon Gosselin and Kim Kardashian), Gietka points out, “It’s not about the DJ, it’s about the people themselves. It’s like they’re looking in a mirror; that’s why you see all these selfies.

Their generation is not content to sit in a seat and watch somebody else play a guitar. It’s a tribe thing. They’re entertained by themselves.”

Casino marketing executive Rick Campbell says casinos may never get millennials to gamble if they charge $100 nightclub covers and ask hundreds more for a bottle of vodka.

“When I was with the Flamingo, the idea was to let them save their money for the casino floor, because we were never going to make it up at the gate,” says Campbell. “It makes you wonder if we haven’t set it up that way. The more we charge at the door and on alcohol, the less the consumer has to gamble. You’ve got to leave some money in their wallets.”

Job One While the gaming pie has shrunk, for the entertainment director, success in the casino is still a priority. Gietka recalls asking a general manager, “If you’re considering two artists who appeared at your casino who did equally well, what one metric would you use to decide who comes back?”

The manager replied, “That’s simple. I’d look at the one where more people signed up for the players club.”

Entertainment is “an amenity of the casino,” says Smith. “We book entertainment to make the casino a destination. It’s the vehicle to move bigger groups of people at a faster pace—and we always have our foot on the gas pedal.”

“Now more than ever, this is an event-driven industry,” agrees Cantone. “Everyone has the same slots, restaurants and hotels. What makes you different is who you have in the building that night. That, from a marketing perspective, separates who wins and who loses.”

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Playing Politics Arizona casino creates some strange bedfellows

By Dave Palermo

T

he steel and concrete first phase of a planned $400 million casino resort is slowly rising near the Phoenix suburb of Glendale, Arizona, testimony to the perseverance and economic progress of the Tohono O’odham Indian Nation.

West Valley Resort—going up on property purchased with a federal land claim settlement—portends to far eclipse the $68 million generated annually by the tribe’s three casinos on its otherwise remote and largely impoverished 2.8 millionWest Valley Resort rendering acre reservation.

“We continue to face great challenges in achieving economic self-sufficiency,” says outgoing Tohono O’odham Chairman Ned Norris, with the nation’s 32,000 citizens generating a yearly $8,000 per-capita income.

“We need a way to provide for our government and our people, without relying on the federal government,” says Norris, who lost a May election to former chairman Edward Manuel. “West Valley is a major component of our strategy for achieving Former Tohono economic independence.”

O’odham Chairman But after five years of ongoing court battles and Ned Norris says the $20 million in lobby spending by the nation and intent of Congress nearby tribes opposed to the project, West Valley Resort will be subverted if may remain shuttered long after its scheduled Decemthe casino is not permitted to open ber completion, the victim of federal and state disenchantment with the encroachment of largely rural tribal casinos into urban areas.

Direct to D.C.

Global Gaming Business JULY 2015

And a Glendale city councilman who switched his allegiance on the casino now faces a recall election.

The furor is being generated by a planned casino that under state law would be limited to 1,089 slot machines, far fewer than the country’s prominent Indian casinos and less than half what industry analysts say is justified for such a lucrative market. (See related story, page 34.)

Yet, companion legislation working its way through the U.S. House and Senate could block Tohono O’odham and other Arizona tribes from building new casinos in the Phoenix area before tribal-state regulatory compacts expire in 2027.

Sponsors of “Keep the Promise” bills accuse Tohono O’odham of surreptitiously purchasing 54 acres of unincorporated Glendale for a gambling resort despite vows Arizona tribes made to voters in a 2002 ballot initiative that there would be no new urban casinos.

Meanwhile, state Department of Gaming Director Daniel Bergin, act-

“WE NEED A WAY TO PROVIDE FOR OUR GOVERNMENT AND OUR PEOPLE, WITHOUT RELYING ON THE FEDERAL GOVERNMENT.”

Anger over the Glendale project has reached the halls of Congress and, many believe, could impact federal Indian policy and the U.S. government’s willingness to stand by land and water rights promises made to the first Americans.

The dispute between Tohono O’odham and Gila River and Salt River Pima-Maricopa Indian communities, who together operate five Phoenix-area casinos, pits the country’s largest lobby firm (Akin Gump) against one of the nation’s most prominent law firms (Denton).

The project has dragged U.S. Senator John McCain (R-Arizona) into a questionable partnership with a longtime friend and lobbyist.

30

Steel for the new Tohono O’odham casino is already rising out of the Glendale desert on the way to become another Desert Diamond, like the tribe’s casino in Tucson

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Arizona Governor Doug Ducey won’t issue a gaming permit to the Tohono O’odhams even if they do reach the end of the trail

Potential Fallout

New Tohono

ing on behalf of Governor Doug O’odham Chairman Ducey, says he would not license Edward Manuel the casino because of “fraud persays he wants to address the petuated by (Tohono O’odham) concerns of his upon the state, Arizona gaming “sister” tribes tribes and the state’s voters.”

A hastily drafted follow-up letter from Assistant Attorney General Roger Banan pledged to comply with federal and state regulations.

“I wasn’t sure it was possible, but the opposition has stooped to a new low,” Norris says of the latest threat to halt the project.

Perhaps Norris doth protest too much.

Loving the Loophole State and tribal officials contend Tohono O’odham was duplicitous, if not dishonest, in working with tribes negotiating a 2002 tribal-state regulatory compact and crafting an initiative campaign that barely won voter support largely on a pledge there would be no new Phoenix casinos.

The nation contributed $1.8 million to the voter drive that today gives 17 tribes the exclusive right to operate 23 Las Vegas-style casinos.

But just a year after the compact went into effect, the nation through a shell corporation purchased land near Glendale, and in 2009 announced it would build a casino on the property.

“They looked us in the face and lied,” says Diane Enos, former president of the Salt River Tribe. “They broke faith with us and the voters of Arizona.”

An attorney involved in compact talks is a bit more charitable.

“It’s not so much that they lied,” says the attorney, who requested anonymity. “They didn’t make a material disclosure everybody feels they were obligated to make.”

Courts have over the past five years repeatedly ruled that compact language does not prevent the nation from building a Phoenix-area resort.

But federal judges have been precluded by the nation’s sovereign immunity from deliberating issues of fraud and misrepresentation. Norris calls allegations he vowed not to build a Phoenix casino a “phantom promise.”

“Even if there was some secret, backroom promise, which is not true, the compact itself said no other agreement applies,” says a tribal official who requested anonymity. “Tohono O’odham did not violate the compact.”

Arizona Democratic Rep. Raul Grijalva, whose district includes the Tohono O’odham reservation, says the proposed legislation is “essentially asking taxpayers to pay for special-interest legislation designed to protect” Gila and Salt River casino markets.

Gila River has three casinos south of Phoenix. Salt River operates Talking Stick, a casino and resort hotel east of Scottsdale, and a second casino near Tempe.

The Gila Bend Replacement Act of 1986, co-sponsored by McCain, mandated that the Interior Department replace 10,000 acres of Tohono O’odham land flooded out in a 1960s dam project.

The act provided the tribe with funds to purchase replacement property in “Pima, Pinal or Maricopa” counties, the latter of which includes Phoenix.

The act also states the land “shall be deemed to be a federal Indian reservation for all purposes,” which the courts and Interior later construed to include casinos.

Political insiders give the legislation a good chance of passing the House and Senate.

Some tribes fear “Keep the Promise” legislation would set a dangerous precedent in allowing the federal government to renege on land and water rights agreements.

“It would be the first time Congress reneges on an Indian land and water settlement in the modern era—it would mark a very unfortunate return to the treaty-breaking era,” Denton attorney Heather Sibbison told the Politico newspaper.

“If this legislation passes, all tribes should question whether Congress can be trusted to keep its word in land and water rights settlements,” Norris says.

Akin-Gump attorney Allison Binney says the legislation was written to limit its application to the Glendale project, noting it is temporary and expires in 2027. Prohibitions on gambling are common in land/trust cases, she says.

“The argument that this sets bad precedence is not valid,” Binney says.

“There have been a number of parochial bills with gaming restrictions.

“We feel very strongly there was fraud and misrepresentation made by (Tohono O’odham) and we’re trying to find the fairest way possible to resolve this. We made a lot of effort to address concerns raised by Tohono O’odham.

“We want to do this in a fair way that does not cause a detriment to any other tribe in the country,” Binney says. “We don’t want this to be used as leverage for larger discussions and debates” on off-reservation gambling.

“I agree with Allison that as a pure legal matter the bill is compartmentalized, so the Keep the Promise Act precedence should not be extended,” a tribal attorney who requested anonymity says. “But you’re not in a legal environment with legislation; you’re in a political environment.

“As a political matter, it sets a very scary and horrible precedent.”

“I don’t really know that (Keep the Promise) has a broader impact,” says John Tahsuda, principal in Navigators Global. “There are a lot of factual circumstances to limit the matter to this specific circumstance. You have a specific compact and a specific lands claim act.”

There are tribes opposed to what has been dubbed “off-reservation gambling” who suspect Denton will use the legal roadmap in the Glendale dispute in representing other clients seeking casinos on newly acquired lands.

Denton represents the Los Coyotes Indians in rural San Diego County, who are petitioning Interior to build a casino in Barstow, California.

The Glendale project is going up on a former Salt River reservation. And both the Barstow and Glendale projects involve tribes seeking to build casinos on the ancestral lands of other tribes.

Sibbison refused requests for an interview.

Arizona tribes fear that a conservative legislature, angry at the notion JULY 2015 www.ggbmagazine.com

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“SENATOR, IT WAS YOUR BILL. YOU WROTE THE LANGUAGE. WE’RE JUST APPLYING IT.”

“YOU KNOW SOMETHING, MR. WASHBURN? THAT’S A PRETTY SMART-ASS ANSWER. AND THE FACT IS I’M TELLING YOU WHAT THE INTENT (OF IGRA) WAS. OK?”

—Kevin Washburn, Interior’s assistant secretary for Indian affairs

—John McCain, U.S. Senator (R-Arizona)

Phoenix could become a “little Las Vegas,” will urge voters to approve commercial casinos, which would generate more tax revenue than Indian operations.

There also is a concern that renegotiation of tribal-state casino regulatory agreements will result in demands for more tribal revenue in exchange for continued exclusivity. Tribes currently pay up to 8 percent of their revenues to the state.

And finally, tribes opposed to the project fear Tohono O’odham, if successful in Glendale, would close one of its other casinos and move it to Phoenix.

McCain In A Corner “I share the objections of many Arizonans when I see a casino being airdropped into the metro Phoenix area,” says McCain, co-sponsor of the Senate version of Keep the Promise legislation.

The senator’s hard line contrasts with prior commitments to remain out of the Glendale debate, leaving the matter to Interior and the federal courts.

Critics contend his flip-flop on the issue stems from loyalty to Wes Gullett, a former campaign manager and attorney for Salt River.

“What I find particularly striking here is John McCain’s sudden involvement,” says Melanie Sloan, executive director of Triumph Strategy. “McCain wasn’t on board. Then (Salt River) hires Gullett and McCain is on board.”

McCain regards himself as a Capitol Hill maverick, and bristles at the suggestion he would cater to special interests.

“Anybody who alleges that somebody influences me—some lobbyists— that is an outrageous and disgraceful lie,” he told Politico.

Along with sponsoring the Gila Bend Act, McCain co-authored the Indian Gaming Regulatory Act. He claims the Glendale project violates the spirit of IGRA. McCain had a heated exchange with Kevin Washburn, Interior’s assistant secretary for Indian affairs, at a July Senate Indian Affairs Committee hearing when Washburn said the Gila Bend Act made it mandatory for him to place the Glendale property in trust.

“Senator, it was your bill. You wrote the language. We’re just applying it,” Washburn said.

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Supporters of the Glendale casino charged that Senator John McCain was influenced by lobbyists in his opposition to the facility

“You know something, Mr. Washburn? That’s a pretty smart-ass answer,” McCain replied, “and the fact is I’m telling you what the intent (of IGRA) was. OK?”

An Option For Interior Opposing tribes asked Washburn not to take Glendale into trust until Tohono O’odham waived its sovereign immunity, allowing allegations of fraud and misrepresentation to be litigated in federal court.

“I don’t think it’s unreasonable,” Tahsuda says, for Interior to issue such an edict as a means of exercising its trust responsibility for both Tohono O’odham and opposing tribes.

Washburn dismissed the suggestion.

“The promise to the Tohono O’odham Nation in the Gila Bend Act is clear, and the act made the acquisition of land in unincorporated Maricopa County mandatory,” Washburn says. “It simply is not subject to any discretion at Interior.”

The question of whether IGRA permits waivers of sovereignty in disputed land/trust cases will be argued before the 9th U.S. Circuit Court of Appeals.

“IGRA does not permit tribes to make empty promises and repudiate them with immunity,” tribes argued in their brief to the court.

No date has been set for oral arguments.

In the meantime, tribes are hoping to mediate the dispute with newly elected Chairman Louis Manuel, who in a statement complained that “hopes and dreams” of tribal citizens “depend on highly paid consultants, lobbyists and public relations experts.”

“For too long the focus has been on one thing, the West Valley casino,” Manuel said, calling the dispute “an epic battle that threatens all tribes’ gaming interests in Arizona.”

He said he has a plan that “addresses the interests of our sister tribes,” but declined to elaborate.

A lawyer involved in the pending litigation suggests moving the casino 35 miles farther east of Glendale.

“Perhaps,” he says, “we can convince (Tohono O’odham) to move the casino to Buckeye.”

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Desert Diamond Even if it gets approval for the Glendale casino, the Tohono O’odham Indian Nation will have to manage the number of devices it shares between that casino and two in Tucson, including Desert Diamond

Numbers Game West Valley Resort would be limited by cap on slot machines

N

ormally, the opportunity to open a casino and hotel in suburban Phoenix, an established destination resort, would warrant an investment north of $600 million and a casino with a minimum of 2,500 slot machines.

But if it opens, West Valley Resort in Glendale, a project of the Tohono O’odham Indian Nation, would max out at $400 million with 1,089 machines.

That’s because circumstances in Arizona are far from normal, with federal, state and tribal officials working to block the project and a tribal-state regulatory agreement, or compact, limiting the machine inventory.

“With unlimited machines and table games, you’d see a much larger resort,” says Matthew Robinson, co-founder of Klas Robinson Hospitality Consulting of Minneapolis, Minnesota. “With 1,100 machines, you can only do so much. It is an underserved market.

“My guess is you could easily double it,” Robinson says of the machine inventory.

Charles “Chief” Boyd of the Indian-owned Thalden Boyd Emery Architects also believes the project would support 2,500 machines.

But with the slot limitations, Boyd would recommend an even smaller initial investment.

“I’m always conservative about what I recommend,” Boyd says. “If they only got 1,100 slots, start off with an $80 million facility and, if you had to, build off the income rather than borrowing money.”

The nation could install an additional 40 Class II electronic bingo machines.

But under the tribal-state compact, more than 40 Class II devices would be deducted from the inventory of Class III casino-style slots.

A temporary casino is planned to open in December with the build-out including a 600-room hotel, convention center and restaurants.

“Rather than a casino with a resort, it’s going to be more proportionately a resort that happens to have a casino,” Robinson says.

“Phoenix is an established destination market. That’s unique in that in addition to casinos, tribes can do other hospitality and leisure-related development.

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“What we tell tribes is, ‘What can you do that others can’t do?’ There’s a ton of things you can do, though none of it as lucrative as gaming.”

The Glendale council initially opposed the project, then embraced the prospects of jobs and economic growth. The tribe will pay the city $26 million over 20 years for public safety and infrastructure improvements.

The temporary casino will employ 500 workers with the build-out requiring 3,000 workers.

A project summary by Analysis Group and Spectrum Gaming solicited by Tohono O’odham says the resort could generate $300 million in annual revenues, create a ripple of development and have a minimal impact on local American Indian casinos.

Seven Phoenix-area casinos will likely see only a 2.5 percent dip in aggregate gambling revenue, according to the summary.

Although existing urban casinos are located in the East Valley, tribes believe the impact would be more serious than Analysis Group/Spectrum predictions.

The complete study was not accessible on the WestValleyResort.com website, and a public relations firm for the Tohono O’odham Nation did not respond to requests for comment from the tribal enterprise.

Glendale Councilman Gary Sherwood says the project will ignite economic development in the West Valley. He says a number of developments halted or delayed following the 2008 recession may now be restarted.

“Some of the projects are contingent on West Valley Resort; the others, I think, the project would give them a boost,” he says.

Sherwood, however, may not be on the council when the project is completed. After initially campaigning for office opposing the casino, he now faces a recall election.

—Dave Palermo

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iGAMING NORTH AMERICA

Betting on the Edge A new Nevada law will allow an expansion of sports betting in the state

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he Nevada legislature recently passed Senate Bill 443, which allows business entities to place race and sports pool wagers with licensed Nevada race and sports books.

The practical impact of this new law is to allow sophisticated and well-financed professional sports betting entities to bet into the Nevada pools. These professional sports betting entities will use computer modeling and analytical techniques to determine when the betting odds or lines are inconsistent with expected results.

This happens with point-spread betting because the sports book typically sets the line based on the anticipated equal wagering on both teams as opposed to the expected result. When the line is inconsistent with the results generated by the computer modeling, the professional sports betting entities will place wagers.

These models typically use massive amounts of publicly available data to assist in predicting results. Some professional sports betting entities may seek and use non-public insider information regarding a sporting event to gain an advantage.

This may include learning the extent of a player’s injury or the coach’s decision on starting lineups, which can be valuable information in predicting outcome.

Other professional sports betting entities are involved in arbitrage. They look to exploit differences in odds or lines between bookmakers or between betting platforms such as bookmakers that offer point-spread betting and betting exchanges.

Many of these professional sports betting entities will be well financed, as they will effectively make use of the new business entity to raise equity investment based on the perceived value of their prediction methodology. Like the success claims of some handicapping services, sometimes called tout services, some will be legitimate, others not. Some may be Ponzi schemes and others simply thieves.

A primary question is whether the legitimate professional wagering companies will even bother with Nevada. The sports handle in Nevada is

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By Tony Cabot

only about $4 billon, while the illegal handle outside Nevada is about $1.2 trillion.

Both the legal and illegal markets are generally available through the internet, with more than 8,000 available wagering sites.

The legitimate professional wagering companies may prefer the non-Nevada markets for several reasons. The large liquidity of these markets will allow them to place much larger wagers before they are either stopped by the book for risk management purposes or the books move the line and erase the expected statistical advantage.

Second, many illegal books operate in lower or no-tax or tax-reporting environments. Third, the illegal books may offer lower commissions or rebates.

Regardless of the method, professional sports betting entities may prefer to use bookmakers that offer the lowest commissions. Bookmakers in unregulated or under-regulated jurisdictions may have advantages because they may have lower taxes, less regulatory expense and no requirements to maintain a physical sports book.

Suppose the legitimate professional wagering companies do come to Nevada. We are inviting the sharks, so the idea clearly is to promote a Wall Street-like betting market. The first question is whether Nevada will care whether its markets are exploited by professional sports betting entities that use insider information to create the expected returns that they promise investors.

The SEC, which regulates financial markets, believes that use of inside information negatively impacts the integrity of the financial markets that it regulates. Will Nevada regulators have the same concerns and, if so, how can they regulate insider trading?

Shark-infested waters also could change the nature of sports wagering for the casual bettor— those who the state is trying to attract because they spend money on other types of wagering and non-gaming offerings. Sports books have long been seen as an amenity for the casino player and not profit centers in themselves.

The advent of large professional betting operations also may negatively impact the casual bet-

tor. They are often sports fans or sports betting fans that view betting as recreational, often consistent with fan loyalty for a particular team or for the enjoyment associated with betting. That they may end up the big losers in the equation is simple economics.

When making a point-spread bet, the bettor must pay $11 to win $10 (or some multiple of these amounts). If he wins the wager, he receives $21—the $11 he wagered plus the $10 he won. If he loses, he loses the entire $11.

Likewise, the professional sports betting entity is seeking a positive return. To overcome the house advantage, the sports betting entity in the point-spread wagering world needs to win more than 11 times for every 10 losses for bets of equal size. This would be 11 out of every 21 times or over 52.4 percent of the time. So, assuming the sharks win over 52.4 percent of the time or go out of business and the house has 4.55 percent, who are the losers? It would be the casual bettors, who will necessarily lose more than if the entire pool was other casual bettors.

The question is whether we end up like horse racing. The handle in race wagering has declined, but would be significantly worse if not for professional sports betting entities. They generate a significant amount of the handle through advance deposit wagering using computers. The sports betting entities do not go to the track. Practically no one does, because the casual bettors’ interest in the sport continues to decline, in large part because its fan base from the 1940s and 1950s is dying.

This law may have no effect whatsoever, or it also may boost sports handle and kill the sports book as we know it.

Tony Cabot is one of the premier legal experts in land-based and online gaming, and is a partner in Lewis & Roca in Las Vegas. He is also a partner in the iGaming North America Conference.

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Eastern Action Online Casino Resorts, owner of the he Eastern U.S. could become a Meadows, and Sean Sullivan, hotbed for iGaming if two more general manager of the track. The states follow through on moves to legaltrack officials supported online ize the activity. Already legal in New gambling in the state.

Jersey and Delaware, Pennsylvania and Sullivan suggested that the New York are now considering state consider using up-front fees legalization. as an advance payment toward Pennsylvania officials have been taxes as well as a 10 percent revholding public hearings on keeping its enue tax on online gambling. He casino industry competitive including also backed a full slate of online the possible legalization of online gamcasino games rather than limiting bling, with the latest held at the Mead- New York state Senator John online gaming to just poker. ows Racetrack & Casino in Washington, J. Bonacic has sponsored a Suggestions were also made at bill legalizing iPoker Pennsylvania. the hearings to have alcohol servThe hearings are being held through ice at casinos 24 hours a day and the state’s House Gaming Oversight Committee at also to reduce the amount of harness racing days in various venues around the state. the state to increase purses.

“This is a great opportunity for us to get out in In New York, Senator John J. Bonacic has sponthe field,” said state Rep. John Payne, head of the sored a bill that would legalize online poker. It committee. “I’d rather get out and talk directly to would authorize “the New York State Gaming the customer, instead of sitting in Harrisburg inCommission to license certain entities to offer for side the white marble walls.” play to the public certain variants of internet poker Payne himself has introduced a bill to license which require a significant degree of skill, specifionline gambling through the Pennsylvania Gaming cally ‘Omaha hold ‘em’ and ‘Texas hold ‘em’.”

Control Board. The hearings focused on that bill The bill would allow at least 10 operators of as well as regulatory processing and marketing the poker sites.

Each license would cost $10 million state’s casino industry to other states. and expire in 10 years.

License holders would also Another gambling bill is reportedly being prehave to pay a tax of 15 percent of their gross gaming pared for introduction as well in the state. The new revenue to the state.

Bonacic says the bill would bill, from state Senator Sean Wiley, would cover a protect consumers by standardizing rules and regunumber of gaming initiatives including allowing lations and preventing illegal offshore sites from opexisting casinos in the state to offer online poker. erating in the state.

Though the bill has not been introduced, Wiley said in a statement that he wants to include language to grandfather the state against any atNew Jersey Regulators tempt to impose a federal ban on online gambling.

Issue Ultimatum to There is currently a bill before the U.S. House of Affiliates Representatives—backed by Las Vegas Sands Chairman Sheldon Adelson—to do just that, but ince the start of legal the bill has not been gaining traction. iGaming in New JerWiley’s proposal would make online poker sey, regulators have available “no sooner than Jan 1, 2017 with regulastruggled to understand tions, licensure effective no sooner than July 1, affiliate marketing. Just 2016.” two weeks before The bill would require a $500,000 online launching, the Division gaming license fee and a tax rate of 36 percent on of Gaming Enforcement revenues. decided that affiliates There are also two other online poker bills inneeded an “ancillary” litroduced to the state House and one bill seeking to cense rather than just a New Jersey Division of ban online gambling in the state. vendor registration, caus- Gaming Enforcement Director David Rebuck Speaking at the hearing were several Meadows ing much confusion. executives, including Bill Paulos of Cannery

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S

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Global Gaming Business JULY 2015

While just a handful of affiliates have been licensed, there are many that promote the illegal sites alongside the legal, regulated New Jersey online casinos. While the DGE has sent letters to some of these sites, including CardsChat.com, PokerSource.com, RakeBrain.com, Pokersites.com and RaketheRake.com, they issued no policy statements until last month.

A memo released by the agency gives affiliates 150 days to abide by state regulations that prohibit such joint promotion. At the end of that time, the DGE says it will conduct a review of the affiliates, and suggests that enforcement action could be forthcoming. The agency says the casinos are able to “wind down” their relationships with online casinos by that time.

At the same time, DGE Director David Rebuck says the agency will not consider actions by affiliates promoting illegal U.S.-facing casinos after passage of the Unlawful Internet Gaming Enforcement Act, that would bar them from licensure.

“After careful consideration, the division has made a determination that the conduct of affiliates after UIGEA can be distinguished from past conduct of online operators and payment processors,” said Rebuck.

So, affiliates that want to operate in New Jersey will not have that history held against them, and if they comply with the standard DGE investigation, most of them should get licensed, as long as they’re in compliance with current regulations.

Some licensed affiliates complained that it has cheapened the process.

“Maybe I should promote the illegal sites for 150 days before the hammer comes down,” stated one disgruntled legal and licensed affiliate. “Maybe then I’ll make some money!”

Bidding For Bwin

8

88 Holdings has confirmed that it has made an offer for bwin.party, making it one of several companies reportedly in negotiations for bwin.

GVC Holdings, based on the Isle of Man, also confirmed that it is making its own bid for the online gambling company. GVC has combined with Canadian supplier Amaya Gaming—which owns PokerStars—to make a combined £1.5 billion bid for bwin. The bid is seen as a direct response to 888 Holdings’ move to acquire bwin.

Bwin.party announced in November that it had entered “preliminary discussions with a number of interested parties regarding a variety of potential business combinations.” Brands owned by bwin.party include PartyPoker, PartyCasino and FoxyBingo.

Last month, bwin issued a statement saying it was “entering a further stage of discussions” with

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California iPoker Gets Past Another Committee Vote

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bwin.party Chairman Philip Yea

bidders after news of 888’s and GVC’s bids was released.

888, based in Gibraltar, said in a news release that its board of directors believe it makes sense combining with bwin.party, and that it had submitted a cash-and-share offer for the company.

“The board believes that there is significant industrial logic in a combination of 888 and bwin.party, benefiting both companies and all shareholders, and accordingly, has submitted a proposal regarding the acquisition of the entire issue, and to be issued share capital of bwin.party for consideration comprising cash and 888 shares,” the company said in a statement.

“Due to the size of the proposed transaction, it would require, inter alia, the approval of 888 shareholders,” the statement said. “888 shareholders representing approximately 59 percent of 888’s share capital have irrevocably committed, subject to customary conditions, to vote in favor of the proposed transaction.”

GVC and Amaya reportedly teamed up for its reported €1.5 billion bid to split bwin.party in an attempt to hold off 888’s move for the company. The two companies had initially bid separately.

Amaya is reportedly interested in bwin.party’s poker assets and possibly its sports book. It is in talks with GVC to make the purchase with a combination of cash from Amaya and GVC shares. According to reports on the negotiations, GVC would buy bwin.party outright and Amaya would have the option to purchase its poker operations.

Another potential suitor for bwin, Playtech, has reportedly backed out of the competition, as has bookmaker William Hill.

But bwin.party chairman Philip Yea has told analysts and investors not to “make assumptions” about how the potential sale would be structured.

Yea was asked if the company was up for sale as a whole, or in smaller pieces, during a call with analysts.

Yea said the “focus of the board has been on improving the group’s core business and exploring industry consolidation” opportunities.

ith the end of the California legislative session a few months away, skepticism is mounting that lawmakers will pass an online poker bill. This is the seventh year an online poker bill has been introduced. Sticking points remain between tribal coalitions that refuse to budge on their positions.

At stake is an online poker market that some experts estimate would be about $300 million a year.

Recently, Adam Gray’s AB 431 moved to the Assembly Appropriations Committee, where it was passed on May 28. This was the first time that an iPoker bill passed out of committee. Its passage by a second committee raises the hopes of supporters.

Steven Miller, California state director of the Poker Players Alliance, praised the committee’s action. He wrote, “Today marks another historic day for online poker in California. A second committee has cleared a bill that marks a monumental step toward providing thousands of consumers with what they need and deserve—a safe place to play poker online.”

Groups supporting and opposed to Gray’s bill sent letters to the chairman of that committee, Jimmy Gomez, outlining their positions.

Gray’s bill is a so-called “shell bill,” which means that most details need to be fleshed out.

But the devil, as they say, is in the details, which powerful groups do not agree on.

Last month, two tribes that are not part of the battling coalitions asked one coalition, led by Pechanga, to soften its opposition to allowing racetracks a place at the table along with card clubs and gaming tribes.

Laurie E. Gonzalez of the Rincon Band of Luiseño Indians in San Diego released a statement urging that the tribes achieve consensus, “rather than digging their heels in the ground.”

This was followed by a statement by Chairman Lynn Valbuena of the San Manuel Band of Serrano Indians who, during a speech at a gambling conference in Sacramento, said, “We’re evaluating all of our options right now with the racetracks.”

She added, “As we all know there are tribes who are opposed to having the tracks in. We have an open mind. We’re still discussing those issues and looking at every option available.”

Pechanga leads a group of gaming tribes that argue that allowing racetracks to have licenses would violate the state’s policy on limited gaming.

They also fear that this could undermine the tribe’s exclusivity in casino gaming.

Racetrack officials have also drawn a line in the sand, claiming they already have the right to operate gambling websites as long as the legislature permits iPoker. They have offered online wagering for 15 years. They demand the right to operate their own websites and say they won’t settle for merely being paid subsidies from the activity.

According to PokerStars spokesman Eric Hollreiser, “We always took the position that poker was not covered” by the Unlawful Internet Gaming Enforcement Act because it is a game of skill and not of chance.

Pechanga’s coalition includes Amaya/PokerStars and several of the largest card clubs in the Golden State.

Caesars Entertainment also has a business alliance with Amaya/PokerStars. The United Auburn tribe has partnered with bwin party digital entertainment. Pala Casino operates PalaCasino.com in New Jersey, which has legalized online poker.

Some tribes believe that a bill will never be passed without the racetracks because Governor Jerry Brown has said that such a bill is a non-starter and two-thirds of the legislature is required to pass any bill that has a financial character.

Bill to Limit Online Gaming in Nevada Dies

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bill pushed by Las Vegas Sands in the recent Nevada legislative season died as it failed to leave committee by the May 15 deadline. The bill sought to redefine what interactive gaming was, in particular as it pertained to interstate agreements. The goal of the bill was unknown, although it was widely acknowledged Las Vegas Sands CEO Sheldon Adelson vehemently opposes online gambling.

Even as such, people were left to only speculate as to what the bill hoped to achieve. As it stands, only online poker is legal in Nevada. One theory was it would kill any possibility to network progressive online slot jackpots over state lines. One other possibility was that it would prevent interstate lotteries if Nevada passes an amendment to allow them down the road.

The Nevada Gaming Control Board even said the bill would have “no current fiscal impact” due to the state only regulating online poker—although Nevada law would allow its casino operators to one day offer house-banked casino games if approved by regulators.

While U.S. Senator Harry Reid does not think online gaming is good for Nevada, it would be a while before it happens, if ever.

Right around the time the bill was brought to light, Nevada and Delaware merged their online poker player pool. This had been in the works since the February 2014 signing of the Multi-State Internet Gaming Agreement between Nevada Governor Brian Sandoval and Delaware Governor Jack Markell.

JULY 2015 www.ggbmagazine.com

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BINGO

Bonanza A game by any other name still makes money.

By Dave Bontempo

I

t’s an evolving phenomenon.

Bingo thrives both apart from and within the gaming world. In the classic sense, it remains a backbone for charitable, commercial and military establishments. Bingo constitutes a night out, modest fundraising event or social affair.

Not so in gaming.

For casinos, B-I-N-G-O spells M-O-N-E-Y. More casinos begin to resemble the Stations product lineup in Las Vegas. It proclaims bonus weekends exceeding $195,000 on Father’s Day, $225,000 on July 4 and $600,000 for an October bonus event being booked in advance. There are Daubing After Dark sessions starting at 11 p.m., several sessions throughout the day and the progressive principles found in slots. Stations links seven properties for bingo games with jackpots exceeding $125,000. The draw is broadcast to all properties, with an agent positioned at each one to explain rules and handle problems.

This is big business.

The Potawatomi Tribe in Milwaukee, Wisconsin features a long history with bingo. The game, in fact, was its name. The facility opened in 1991 as the Potawatomi Bingo Casino, featuring 45,000 square feet of gaming space for 2,500 players. Only last year, after numerous expansions, did Potawatomi Hotel and Casino become the official business name.

Bingo remains prominent, however. Gamblers can play up to 180 balls electronically and the casino has daily six-figure bonanzas. The names sell the sizzle: Bonanza Bingo, Pot of Gold, Bingo Storm, All Star Special and a promotion spelling the Potawatomi P in less than 35 numbers to the tune of at least $12,000.

Vendors enhance bingo by providing automation, high-resolution tablets, slick cabinets and new games.

Once a month, a glow party at Potawatomi casino begins at 9:30 p.m. Lights dim, music pumps up, videos emerge and the people dance.

The celebration is symbolic. Fast-paced games, sound effects, sleek graphics and a substantial game library form a buzz around this gaming-industry wild card.

Bingo, once just a match of numbers and cards, thrives in the electronics age.

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The Show Must Go On Ortiz Gaming continues to gather speed in different world markets. The South American company is a multi-national developer of electronic slot, bingo and amusement-with-prizes machines.

The company has figuratively yelled “bingo” for the last three years.

In March, its Florida-based United States branch announced an agreement with Manitoba-based Bet Rite Inc. to introduce, distribute and service Ortiz Gaming’s video bingo games in Canada. The commitment to the region included a presence at this month’s Canadian Gaming Summit.

Last year, Video King sported impressive growth in the United States by merging bingo games with the tribal properties that champion them. This involvement included presentations at major shows like G2E and NIGA. Bingo No. 1 unfolded in 2013, when Ortiz entered the Asian gaming market. It quickly annexed partnerships with more than 25 industry operators. That’s three major developments in three prominent geographic areas in three years.

The company has brought new games and platforms to the market. The O-Circle is the newest cabinet. It has a 42-inch evolutionary curved display, reaching toward the sky and wrapping around the player for full immersion into the game. The product uses surround-sound and an oversized screen.

The cabinets complement the impressive-looking games that contain bonuses and extra balls. Both players and the house want increased time on device.

“Players are always excited when they get different opportunities to win,” says Jerry Floyd, the general manager for River Spirit Casino in Tulsa, Oklahoma. “The extra ball is another level of entertainment for

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By way of Zitro’s PlayBet terminals and new BET system (Bingo Electronics Terminal), patrons can sit down at a kiosk, insert money, buy cards and choose which games they want to pay into for in-game prizes. A new game starts about every three or four minutes. them. It’s worked well for us too. Ortiz is becoming a great partner for us in the United States with their games and the profit center they bring in.”

As for the games, take your pick.

Six Bingo features four cards with 24 numbers, an extra bonus ball and a free space. The ball draw is 44 numbers, and up to seven additional bonus balls can be drawn.

Can’t get enough action? Watch for Pilibingo, which features 20 cards of 15 numbers each. Thirty balls are drawn. There are 10 extras, a bonus round and 12 price points in the game. That’s enough betting interest for players and operators.

The Automation Station Madrid-based Zitro continues to innovate. It created a United States office two years ago, bore fruit with a new cabinet last year and plants the seed for more business via automation.

“Bingo is more than just alive and well,” says Sam Basile, the CEO of Zitro USA. “We like to encourage people to discover bingo again for the first time, if you will. It remains a popular form of gaming. Other forms have come and gone, but bingo has remained strong and is appealing to a new generation of players.

“Those people playing the games and the operators who entertain them are looking for something to enhance their experience. We know that paper is always going to be an essential ingredient for bingo, but with electronics there is the capability of increased pool prizes and faster games.”

By way of Zitro’s PlayBet terminals and new BET system (Bingo Electronics Terminal), patrons can sit down at a kiosk, insert money, buy cards and choose which games they want to pay into for in-game prizes. A new game starts about every three or four minutes, according to Basile.

“There has never been a fully automated system to any of the bingo hall markets,” he says. “With automation, there is no bingo caller, no window attendants, no pay attendants. We have the ability to spit out a slot-like ticket for their winnings and they can go to their kiosk for redemption, just like a slot player would.”

Automated systems remove guesswork and make the operation resemble a classic slot machine. Game results occur quickly. No daubing. No fuss.

“And no shushing,” Basile laughs. “The pressure is off the players. They can truly socialize without disturbing another player. Nothing is upsetting the mechanics of the game. Two people can be playing two different kinds of games and they can talk to each other without missing a beat.”

The BET system is compatible with tablets and the linking of several properties within an area, he says. In a linked jackpot, players can win the super jackpot connecting all of them or simply the property at which they are competing.

Basile says Zitro has 8,000 terminals connected to 300 bingo halls in Spain and deploys both PlayBet terminals and E-Wave tablets. This indicates a market demand that may thrive in larger jurisdictions.

BET was showcased at G2E in 2014 and will be ready for United States distribution upon approvals being granted to casinos by gaming commissions.

The company continues to hustle in the United States. The BET follows the Blackwave cabinet Zitro unveiled last year at Gulfstream Park in Florida. It has spread to the California market and is set to enter New Mexico, Basile says.

JULY 2015 www.ggbmagazine.com

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Zitro can bring eight games immediately to play via the Blackwave cabinet, he adds. Blackwave’s key attributes include the enabling of games to be developed on the server and updated in real time. The integration of infinite jackpot and mystery systems also plays a key role in the product.

Aesthetics also matter.

“The dual screen and the cabinet provide an amazing and compelling comfort to the player,” he says. “The screens with the graphics and impressive surround-sounds are designed to allow the player to have an enjoyable experience, giving them a greater reason to participate.”

Bingo patrons enjoy the speed of a casino setting while slot enthusiasts find another gaming source.

“The beauty of our machine is that it appeals to both groups,” Basile contends. “It attracts a bingo player who wants a better experience and it also appeals to a slot player who may be just hitting a button and not knowing why he is winning. With us, you are not merely being entertained by the machine, but you are interacting with the machine.”

The New Champ Omaha, Nebraska-based Video King is among the world’s largest providers of electronic gaming systems, game designs and bingo hall equipment. Its entertainment systems exist aboard luxury cruise liners, throughout Indian Country casinos and in thousands of non-gaming establishments worldwide.

The company rents approximately 60,000 units to various jurisdictions. Its equipment includes state-of-the-art bingo consoles, integrated management systems, video flashboards, high-tech electronic handsets, tablets and other portable gaming devices, as well as an array of innovative computer games.

The newest upgrade occurs in the tablet area. Over the past 20 years Video King has launched several player devices, including the Champion II and Tab-e touch-screen tablets.

It’s now time to make way for the CHAMP. The new Android tablet, CHAMP-e, will offer stunning high-resolution graphics with increased levels of animation on every screen, company officials say. It will also provide Video King with future product options.

“The Android tablets will take us to another world,” says Tim Stuart, the president, CEO and newly minted part-owner of Video King. “They will give us a lot of flexibility and give us a new realm for content in the coming years. It will give us, among other things, a chance to utilize different apps for content (like Wi-Fi).”

The tablet line in general enables gamblers to play an interactive role in games via the touch screen. CHAMP-e is targeted to go further.

Besides offering more enhanced, high-resolution graphics, this portable, touch-screen device will include several animations featuring e-cartoon “Champ” in several poses. The tablet will feature a brighter, 1,280-by-800-pixel 42

Global Gaming Business JULY 2015

The upgraded tablet enables character and personality to emerge by way of man’s best friend. Champ is the dog with his nose pressed against the screen, eager to play. And, subliminally, to sell. Lovable animals bring a new dimension to any game. screen, greater processing power for more complex patterns and multi-hour run time, packaged in a futuristic, lightweight design, company officials say. Video King has a 10-inch and seven-inch screen version in production. The CHAMPe is in the demo stage and may be rolled out in the fall.

The upgraded tablet enables character and personality to emerge by way of man’s best friend. Champ is the dog with his nose pressed against the screen, eager to play. And, subliminally, to sell. Lovable animals bring a new dimension to any game.

“People want the bingo to be fun, even silly if you have it on a cruise ship, for example,” Stuart says. “Families can be playing on these tablets. We are happy to be spread out between tribal casinos, cruise ships, the Air Force and charitable bingo halls. There is something for everybody.”

Where is the market headed? Stuart mirrors industry sentiment about bingo growth in the Philippines. He has also witnessed a creative flair for it in Texas and Arizona.

“At the Gila River property in Arizona, they will have a Friday night disco theme and then on Saturday it will be a Hispanic theme,” he indicates. “There is music, a lot of dancing and many young people enjoying the game.”

Stuart says he noticed similar enthusiasm for bingo in cities like San Antonio and Austin, which don’t have casinos.

Video King’s new games, meanwhile, feature more animation, free cards and bonus rounds.

One of them is Potion Commotion.

Its newest QuickShot Bonanza game (an electronic version of the highly popular bingo paper game) ventures into a new realm. This fantasy-themed game not only includes free cards and bonus rounds, but a choice of five wizards to guide players on the journey.

As for the bonus rounds, players choose from among the magic ingredients, as the wizard stirs the pot and enchants the potion. In a puff of smoke your treasure explodes from deep within the murky well.

Bingo has a sleek look and feel, Stuart asserts.

“Like with anything, those who have become creative with it have done very well,” he says. “You may think that bowling can be boring, for example, but now you have cosmic bowling, with the black lights and the funky music and the midnight games, and all the kids are coming in. The same thing is happening with bingo. You have cosmic bingo and fluorescent lights, all kinds of fun things to attract a younger crowd. Little by little, the people who run bingo are making it more creative.”

The game remains a winner. Casinos can provide enough content to make bingo a stand-alone market. Or they can link players to other games and entertainment. Now that’s a “cover all.”

GAMING CAREERS: PATH TO MIDDLE CLASS Supporting Workers of All Backgrounds Casino gaming is more than just a source of entertainment for millions of people. It is an economic powerhouse that improves communities and offers millions of U.S. workers a gateway to the middle class. Get to Know Gaming (G2KG) is a multiyear, integrated public affairs campaign led by the American Gaming Association that is rooted in authoritative research and promotes the value of gaming nationwide.

gettoknowgaming.org

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Labor unrest in Macau in August 2014

Labor Pains Macau’s problems are compounded by a lack of skilled workers, high turnover and even higher labor costs.

By James Rutherford

O

n May 1, Macau’s casino workers kicked off another dismal month for gaming revenues by taking to the city’s ancient streets to demand pay raises and limits on the employment of migrants, and an end to workplace disciplinary policies they fear have been introduced as cover for a troubled industry looking to cut its losses by cutting jobs.

May Day, the holiday the world marks to commemorate the rights of working people, is called Labor Day in Macau, and over the last decade, as China’s liberalized and only legal casino market roared into hyper-drive, it has provided the stage for a yearly ritual of public protest. It’s an opportunity for citizens of a political system that is largely closed off to them to air all manner of gripes and petition for reforms. Importantly, it also serves to remind the local hierarchy, an elite handful bound by property, business interests and family ties, that they must reckon, at least now and then, with a third force.

This is especially so as it pertains to decisions touching on its US$40 billion casino market, the largest in the world, and never more so than now, with the market having fallen afoul of Beijing and mired in an epic downturn.

On Labor Day, an estimated 1,800 marchers led by some 13 labor and civic groups braved scattered rain, oppressive humidity and afternoon temperatures approaching 90 degrees to demonstrate for job security and housing and welfare reforms. Most were gaming, transportation and lower-level public-sector workers, but there were political activists in the crowd, and old people and

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students protesting the force-feeding of a pro-Communist Party school curriculum devised by the Chinese government and known as “national education.”

They converged on the north and center of town in nine separate processions that ended with rallies in front of government headquarters and the Office of the China Liaison.

It was nothing on the scale of the angry turnout last year that saw thousands demonstrate outside the Legislative Assembly on the last Sunday in May against a bill showering lavish retirement benefits on top officials—a measure Chief Executive Chui Sai On, the son of a construction magnate who was due to be re-elected in August, promptly rescinded.

But as lawmaker Ng Kuok Cheong, who participated in the marches, said, “I think the appeals are even more diversified this year.” As he put it, “This is only the beginning of a new term of government, thus the contradictions in society haven’t widened as has been the trend in previous (protests). People will wait and see. The protests are just to give them a warning.”

It won’t go unheeded, for never has the industry and the local power structure been more vulnerable. At its height in the early part of last year, the market was booking US$1 billion in revenue a week, most of it from high-end baccarat, with no end in sight. Then, the nationwide crackdown on corruption and graft launched by President and Communist Party Gen-

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Investors hoping for a rebound in the first quarter of 2015 instead were slammed with year-on-year declines of 17.4 percent (January), 48.6 percent (February), 39.4 percent (March) and 38.8 percent (April). May, down 37 percent, was the 10th consecutive month of double-digit shortfalls—the 12th for VIP. The share prices of the six operators are down a combined 59 percent from their January 2014 peak.

Less than halfway into 2015 they’ve shed $20 billion of value.

eral Secretary Xi Jinping hit its stride.

By mid-summer it was clear the VIP market, which was driving 70 percent of the take and had catapulted the market to the size of seven Las Vegas Strips, was in crisis as high-rollers from the mainland, fearful of Beijing’s wrath, abandoned the city en masse. The huge and hugely secretive junket industry that recruits them and bankrolls their play with credit went into financial shock.

By autumn, revenue from high-limit cash play, for the casinos an even more lucrative business in terms of margins, was following VIP downward. The year ended with the market off by 2.6 percent from 2013’s record $45 billion.

This had never happened before, at least not since the government began keeping track in 2002, which was the year the curtain came down on tycoon Stanley Ho’s decades-old casino monopoly and the juggernaut got rolling.

The worst was to come. Investors hoping for a rebound in the first quarter of 2015 instead were slammed with year-on-year declines of 17.4 percent (January), 48.6 percent (February), 39.4 percent (March) and 38.8 percent (April).

May, down 37 percent, was the 10th consecutive month of double-digit shortfalls—the 12th for VIP. The share prices of the six operators are down a combined 59 percent from their January 2014 peak. Less than halfway into 2015 they’ve shed $20 billion of value.

‘My Children’ The Labor Day participation by croupiers and other front-line casino staff was smaller than expected. Which is to say only a few hundred turned out. That’s not to say they weren’t noticed. They’ve been rattling government and the industry since last year, organizing no less than eight public demonstrations to complain about pay and working conditions, and marked toward the end of last summer by two highly publicized work slowdowns at the Grand Lisboa, the flagship of Stanley Ho’s Sociedade de Jogos de Macau.

In neighboring Hong Kong, the “Umbrella Revolution” was about to shake the financial capital of Asia to its core. Some weeks earlier, a lecturer at a small Macau university had been fired for expressing views considered anti-government. In August, an associate professor at Macau University was suspended after his election to an executive position with a pro-democracy group.

At the end of August, activists attempted to hold a street poll on the performance of Chief Executive Chui, a bold piece of performance art that raised the ire of the China Liaison Office and landed five people in jail. Chui’s re-election by a select committee of business and civic leaders with representation from the gaming industry took place unhindered and on schedule a few days later.

The clampdown on worker discontent was also delivered swiftly. In September, groups representing croupiers and casino floor staff issued public pronouncements threatening a strike at Grand Lisboa during October’s Golden Week, one of the busiest holidays on the calendar after Chinese New Year and historically a major draw for the casinos. Police went in pursuit of their leaders, planning to charge them with civil disobedience, allegedly for crossing a security barrier during a large protest march the month before. Five were summoned for questioning.

The effect, however, was to galvanize the dealers. In December, they banded together to form the Power of Macao Gaming Association, a partnership of seven advocacy groups under José Pereira Coutinho, a prominent community activist and member of the Legislative Assembly, as president. The association is focusing its efforts on securing legislation that will codify collective bargaining as a basic right and recognize trade unions as legal entities with the power to represent workers and call strikes. The drive figured prominently in the Labor Day marches and has been taken up by a group called the Confederation of Trade Unions, among others.

The CTU is headed by Macau native Cloee Chao, who became active, as have many on the front lines of the gambling halls, over the government’s failure to effectively regulate smoking at the games. A VIP room floor supervisor and single mother, she was among those interrogated by police in September.

“My children will probably follow my path to be casino workers if they want to live in Macau,” as she would tell Bloomberg. “I won’t restrain them, but I won’t let what my generation is going through become their future.”

‘No Visibility’ Understandably, the likes of Chui Sai On would rather not have to deal with the likes of Cloee Chao. She is the last thing the administration needs, squirming as it is in the glare of a central government that has made known its displeasure over Macau’s failure to diversify its economy away from gambling and grow into the showpiece of Asian tourism it thought it was getting.

The locals have taken more than one scolding for a one-sided path of development which Beijing says has placed the territory at odds with the national interest, providing a magnet for the ostentatious consumption the anti-corruption drive is bent on stamping out and a conduit for crooked government and party officials to launder their ill-gotten gains out of the country.

Last year, the central government cracked down on abuses in the visa system for travel to Macau from the mainland, both to curtail gambling visits and choke off illicit capital flows by hindering the cross-border activities of agents and operatives with ties to the junkets. In December, Beijing began directly monitoring banking and financial transactions in the city.

The combined effects of such measures, harnessed to the anti-graft campaign and a weakening mainland economy, are dampening hopes that China’s JULY 2015 www.ggbmagazine.com

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“My children will probably follow my path to be casino workers if they want to live in Macau. I won’t restrain them, but I won’t let what my generation is going through become their future.”

—Cloee Chao, Confederation of Trade Unions leader

mass market, which the casinos have barely tapped, will flood in any time soon to fill the void left by VIP. “We believe the Chinese government’s policy will remain interventionist,” says New York-based analyst Cameron McKnight, who tracks gaming equities as a managing director with Wells Fargo Securities. “We expect forward growth to be managed and don’t expect it to exceed Chinese GDP growth. If we’re right and market revenue growth maxes out at 7-10 percent, with 10-15 percent supply growth over the next few years, same-store growth could be flat or negative, and the only operators who will see revenue growth are those who are opening new properties.”

In line with this, Deutsche Bank analyst Karen Tang notes that mass-market table limits are down 30 percent from their Q3 2014 peak, and she expects mass table yield will fall a comparable 30 percent over the next couple of years as a ton of fresh supply comes on line—seven new resorts whose plans were laid back in the salad days, a total of some $20 billion in capital investment that the industry was certain would flourish with 3,500-4,000 baccarat games. Now it’s anybody’s guess.

“We do not ascribe to the consensus view of ‘supply drives demand,’” as Tang has said.

“The bottom line is that given the political nature of the problem there is absolutely no visibility on when a recovery could occur,” says Macau-based analyst Grant Govertsen, a principal with investment brokers Union Gaming Research. “Based on current (gaming revenue) trends, and under the assumption that there is improvement the rest of the year, (revenue) is tracking minus-30 percent year over year.”

What’s more worrisome is the fall-off in visitation, down 3.6 percent year on year through April, the last official count available as of this writing. That hasn’t been seen since the global financial crisis of 2008-09. It’s expected to turn around as the new resorts come on line, the first of which, the $2.8 billion Galaxy Macau Phase 2, debuted at the end of May with three hotels, two casinos and an expansive array of dining, shopping and entertainment attractions. In fact, the Macao Government Tourist Office is looking for a 5 percent increase in visitation in 2015, a climb-down from 2014’s 7.5 percent growth, but hardly disappointing given the circumstances.

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As it stands, the average length of stay is still under one day, same as ever.

The number of hotel guests in the first quarter was off 11.5 percent compared to the same period in 2014. Occupancy was down from 85 percent in October-December to 77.3 percent, according to figures published by brokerage Macquarie Securities, and well off the 84 percent average for the 10 previous quarters.

In all, tourism receipts were down more than 16 percent in the first three months. Sales of luxury goods—jewelry, watches, designer bags, etc.—items much prized by big-spending mainlanders and linchpins of the retail economy, have taken comparable hits.

Layoffs are a big concern. To fail to uphold social harmony, for the Chinese a paramount virtue, would be a misfortune the current government might not survive, and it is studying the problem in all its aspects as it looks to weigh its options and identify remedies. The gaming slump has the economy in a tailspin. Gross domestic product has fallen for three consecutive quarters. The 24.5 percent decline in January-March was the worst on record. By any conventional measure, Macau is deep in recession.

Keeping Government ‘Happy’ “Labor seems to have an outsized influence on government policy. That’s just the way it is in Macau,” says Union Gaming’s Govertsen.

This was reflected in May when the government’s 180-degree flip on smoking became official with a statement from Secretary for Social Affairs and Culture Alexis Tam that a complete ban was now government policy. It’s been a sore point among dealers and floor staff for years, and was a big part of what drove them to the streets in 2014 as the government dithered over a variety of ineffective half-measures, among these a VIP room exemption and a mass-floor ban that labor complains is laxly enforced, and various configurations for airport-style smoking lounges.

Tam said in May that a full ban, VIP rooms included and no indoor smoking lounges, would be submitted to the legislature by summer. The casinos and the junkets are hoping for some kind of carve-out, but observers now believe it’s only a matter of time, probably early in 2016.

Govertsen says, “There does not appear to be a unified strategy on the part

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of the operators, other than a few sound bites here and there saying they want to keep smoking lounges. Behind the scenes there is presumably some lobbying going on, but they do not appear to be winning in the court of public opinion.”

The likely effects of a property-side ban are difficult to assess, because when the mass-floor ban was imposed in October the market was already in free-fall. As McKnight observes, “Its introduction coincided with a number of other pressures, so it’s hard to comment on the impact of the smoking ban alone. We saw a notable drop in revenues in October, after the ban was implemented. Mass-table revenues have dropped from about HK$10.5 billion per month ($1.35 billion) before the ban to $7.7 billion per month year to date.”

Govertsen says, “Best guess is a further decline of at least 5 percent across all gaming segments (VIP, mass, slots), but perhaps as high as 10 percent.”

The knottier problem of balancing growth and the available labor supply will not be resolved with anything as blunt as an official about-face. Macau’s unemployment rate stands at 1.7 percent, one of the lowest rates in the world, and what that means for all practical purposes is that everyone who qualifies as a member of the workforce has a job.

That’s a vast improvement over colonial times. It stands as arguably the local economy’s greatest success. And it’s attributable in no small part to a policy of the government designed to mollify the local population by rendering croupier and floor supervisor jobs off limits to all but Macau permanent residents.

The obvious problem now is that it leaves almost no one to staff the pits of the six new resorts slated to follow Galaxy Phase 2 between now and 201718 (and Galaxy is already mapping out a third phase of expansion). Dealers harbor the not-unreasonable fear that it’s only a matter of time before nonresident workers are brought in behind the tables.

As with most growth economies, the Macau boom has been a tale of migrant labor, most of it mainland Chinese. In the 10 years since the market took off with the opening of Sands Macao in 2004, the number of non-resident workers has ballooned more than fivefold. That year, they accounted for all of 6 percent of the population. Through the first quarter of 2015, they numbered more than 174,000, 65 percent of them mainlanders, representing more than 27 percent of population, a whopping 43 percent of the workforce.

Just in the last five years, a period when only two major resorts opened (Galaxy Macau and the Sands Cotai Central complex), their numbers have grown by 86 percent. With 19,000 new hotel rooms on tap between now and 2018, this is not likely to change.

Among locals in the casinos, their presence is deeply resented. An April report by the government’s Human Resources Office says they number about 26.5 percent of the total industry workforce, far less than their ratio to the citywide workforce would imply. Yet, anything over 20 percent is considered “alarming” by labor groups like Forefront of Macau Gaming. “We urge that the government must suppress the overflow of migrant workers and establish an exit mechanism for them in order to protect the locals’ employment,” a spokesman recently told the English-language Macau Daily Times.

Their worries are understandable. As unskilled jobs go, a croupier’s is the best-paying job in the city at an average last year of 19,000 patacas ($2,380) a month. The median industry-wide is about the same, compared with 15,000 for the city as a whole, 13,000 in construction, 12,000 in wholesale and retail trade, 10,000 in restaurants.

But as the dealers see it, while gaming revenue has soared over the last decade, growing at an annual rate of 21 percent, their salaries have barely kept

“Stay calm and peaceful to obServe trendS with wiSdom.”

—Fernando Chui Sai On, Macau Chief Executive

pace with inflation and have fallen way behind big-ticket expenses such as housing and education. And this takes no account of the disruptions of shift work, the hazards of secondhand smoke and the often volatile behavior of the rabid gamblers they serve on a daily basis.

“The workers feel they’re bearing the brunt,” is how one local academic has put it.

They see the proliferation of non-resident workers as undercutting their competitiveness and thwarting them in their quest for better pay and benefits and promotion into management. Their demands include a moratorium on new table games, to which the government has acceded, in part, by awarding Galaxy Phase 2 only 150 of the 400 tables the company sought.

In this respect, the corrective effects of the downturn have not been a bad thing for them, as long as they can keep their jobs, and the expectation is that government will exert all the leverage in its power, and this includes the concession renewals that start coming due in 2020.

As Steven Gallaway, a principal with industry consultant Global Market Advisors, states it, “It’s difficult to project when a market depends on political action rather than demand. As revenue decreases, as it has for Macau’s operators, you don’t need as many people as you did. But in Macau you can’t just let people go. You have to keep the government happy.”

What is certain for now is that the protectionist policies of that government guarantee that labor supply will remain, as Well Fargo’s McKnight puts it, “extremely tight.” He estimates the shortage is driving wage inflation of 10 percent15 percent a year. “In a declining revenue environment, this is clearly pressuring margins.”

Govertsen says, “It is a very unique situation in that revenue and cash flows are declining, yet labor costs are increasing. However, the casinos are not in a position to cut head count due to political sensitivities. As a result, and at least for the time being, the labor situation is having a decidedly negative impact on profitability.”

Chui Sai On, meanwhile, has begun waxing on his city’s tough times with a new column available in print and podcast on the official website of the chief executive’s office. These fireside chats of a sort began appearing the end of May. In the first he acknowledged the “deep perplexity, anxiety, restlessness” and “disappointment” some of his people must be feeling, but he assured them, “Our objectives are clear, our direction is right.”

“Stay calm and peaceful,” he said, “to observe trends with wisdom.”

James Rutherford is a freelance writer covering the gaming industry. Recently returned from three years in Macau as a non-resident worker, he is currently based in southern New Jersey. He can be contacted at jhrford@gmail.com.

JULY 2015 www.ggbmagazine.com

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MARKETING

I Like Those Odds Legal U.S. sports betting could transform the casino market

By Rich Sullivan

I

t’s a delightfully football-appropriate Saturday afternoon in October. Blue sky, zero humidity, and the mingling scents of various smoked meats wafting from tailgate parties. The year is 2017. The place is Bryant-Denny Stadium, home of the Alabama Crimson Tide football team.

As a faithful alum, I make the three-and-ahalf-hour trek from Mobile to Tuscaloosa at least once during the fall to catch a game and ceaselessly work “Roll Tide” into any salutation.

While pre-gaming with a couple of fraternity brothers in this not-too-distant future, I notice our usual crowd is a little thin.

“Where’s Eric?” I ask aloud to my buddies.

“Oh, he’s in Biloxi with his brothers for the weekend. New sports book opened at the Golden Nugget.”

“What about Mark?”

“He’s in Tunica with some guys from his fantasy football league.”

Then I remember that Mississippi recently signed a bill into law that allows sports wagering.

I do a quick Google search on my iPhone 8s and see that Mississippi is on track to handle over $1 billion, yes billion with a B, in sports wagers in 2017.

Back to present day. Does this scenario sound far-fetched or implausible? Game-day regulars ditching the stadium for a TV-equipped, plush booth at a casino sports book? It might be closer to reality than you think, especially as the momentum calling for legalized sports betting in the U.S. approaches a tipping point.

Monmouth Park Racetrack in Oceanport, New Jersey, hundreds of miles away from SEC football country, could be the place where the first domino falls. When New Jersey Governor Chris Christie signed a bill into law in 2014 allowing sports wagering, it triggered a lawsuit from the NCAA and the four major sports leagues to block sports bets from being accepted, a ban a federal judge upheld. But now, New Jersey is in the latter stages of an appeal with the 3rd Circuit Court of Appeals, and by the time this column goes to print, we might already

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think will win the real games? The hypocrisy of alknow the answer to the case. lowing daily fantasy sports while banning sports What we do know, at present, is that officials at bets is conspicuous, and will continue to be at the Monmouth Park are optimistic the decision will be fulcrum of the argument for those wanting to legaloverturned, as they are already making plans to have ize sports wagering. legal sports betting established by this upcoming Years from now, when legal, regulated sports football season. New Jersey state Senator Ray Lesbetting is widespread in the U.S., we’ll likely look niak, a longtime advocate of gaming expansion, has back and view daily fantasy sports as the vehicle gone so far as to estimate the odds of a favorable rulthat pushed the sports betting topic further into the ing at 85 percent-90 percent. mainstream.

At a conference seminar recently, an If New Jersey’s challenge of the federal Professional & Amateur Sports Protection Act Game-day regulars ditching the stadium (PASPA) sports betfor a TV-equipped, plush booth at a casino ting ban succeeds, sports book? It might be closer to reality other states would than you think, especially as the momentum soon follow suit. In calling for legalized sports betting in the fact, sports betting U.S. approaches a tipping point. legislation has already been introduced in attendee asked if any operators on the panel were Minnesota in anticipation of the decision. A revintegrating daily fantasy sports content or taking enue-starved and football-mad state like Mississippi, advantage of the boom. The responses weren’t so with more than 20 casinos along the Gulf Coast and much about attempts to leverage daily fantasy Mississippi River, would surely soon follow. sports, but more about how it speaks to the inSo what gives? Why the (possible) reversal? evitability of legal sports betting.

The NHL, MLB and, most notably, the NBA, “Sports betting is going to get approved. It’s have waffled since the last federal lawsuit. Legalized of when,” said Jon Lucas, the executive just a matter sports betting is clearly on the agenda of NBA Comvice president of hotel and casino operations for missioner Adam Silver, as evidenced by the league’s Hard Rock International. partnership with daily fantasy sports startup FanAs a marketer, I look forward to the opportuniDuel and the recent interest in securing a cross-proties that would arise in the gaming industry if motional sports betting partner that operates in sports betting were to become legal outside of Neregulated European markets. vada (and the handful of states that allow parlaySilver also publicly asked Congress to create a style betting).

Analysts estimate that anywhere federal framework that would enable states to regubetween $80 billion and $400 billion is illegally walate sports betting, which opened the door for a gered on sports in the U.S. each year, and waking flood of similar sentiment from high-profile sports that behemoth would cause a wave of disruptive inexecutives like Dallas Mavericks owner Mark Cuban, novation.

Washington Wizards owner Ted Leonsis and Los Which reminds me, I need to start working on Angeles Lakers owner Jeannie Buss. that casino-friendly, real-time mobile sports bet app The explosion of the daily fantasy sports marketfor the Apple iWatch 3 so it’s ready for rollout. place has not only created new levels of fan engagement for the sports leagues, but its business model Rich Sullivan is CEO of Red Square Gaming, a has also been stuck in the craw of those opposed to full-service advertising agency that focuses on legal sports betting. If I can put a $5 entry fee into a casino brands.

Follow him @redsquaregamers or fantasy basketball tournament that involves real email him at rich@redsquaregaming.com. games, then why can’t I place a $5 wager on who I

‘‘

’’

STAY CONNECTED WITH G2E STAY UP-TO-DATE WITH SHOW NEWS AND INDUSTRY INFORMATION

/GLOBALGAM I NGEXPO

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EMERGING LEADERS Online Outline

Game Passion

Tom Galanis Director, GameOn Affiliates

Dan Schrementi Vice President of Sales and Marketing, Incredible Technologies an Schrementi has always been driven by friendly competition and a love of entertainment. It was this drive that propelled him into the position of vice president of sales and marketing at slot-maker Incredible Technologies.

After receiving his B.S. in marketing at Illinois State University, Schrementi landed a job working for his favorite baseball team, the Chicago White Sox. While it was hard to leave his team, he could not pass up the opportunity to market his favorite amusement game, Golden Tee Golf. This was the beginning of his career at Incredible Technologies.

Schrementi admits that even after 10 years with the company, the best part of his job is being able to create and sell games that he loves to play. He believes that in this industry, to excel at your job you have to be a customer of your own product.

Schrementi joined Incredible Technologies in 2004 because he was passionate for the games he played. As the company expanded into casino gaming, that passion became a professional asset that he was able leverage due to the firm’s size and capacity for growth. For him, the most rewarding part of working for a small, private company is seeing the results of your work and knowing that it has made a difference.

Schrementi credits his success at Incredible Technologies to the support of his family, and of company President and CEO Elaine Hodgson. He started out as a market associate working under Hodgson, who nurtured his development by providing him with career opportunities that ultimately led to his current job.

“Without an advocate, it would be impossible to succeed,” Schrementi says, and luckily for him, he has had many. For an industry that is widely acknowledged as being difficult to penetrate for an outsider, Schrementi has nothing but gratitude for the industry veterans he worked with over the years who passed along their market knowledge and helped him to navigate through the professional landscape.

Although Schrementi loves his job, his work isn’t just all fun and games. Trends in the gaming and entertainment industries are constantly evolving, and companies either meet consumer demand or lose out to competitors. The biggest challenge in Schrementi’s job has been learning to adapt to forces that are beyond his control.

“When we have done everything we can to bring the best product to market but then some other market factor has impacted us, that is the toughest situation we face,” he says.

His advice to newcomers: “Develop a framework for being able to attack the challenges that are inherent in the industry, so you come to the correct solution through a good process.”

—Angela Slovachek, The Innovation Group

D

“Develop a framework for being able to attack the challenges that are inherent in the industry, so you come to the correct solution through a good process.”

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Global Gaming Business JULY 2015

hen Tom Galanis began his professional life, he did not have his sights set on a career in gaming. Today, however, he has established himself as an iGaming thought leader, holding a director-level position at GameOn Affiliates, an affiliate marketing agency servicing online gaming clients worldwide.

A native of southeast England, Galanis graduated from the University of Leeds with a bachelor’s degree in history. After his undergraduate studies, he continued his education at Leeds, receiving a master’s degree in advertising and marketing.

After completing his master’s degree, Galanis embarked on his first foray into iGaming, two of his passions drawing him to the industry. “Being completely honest, I fell into the industry,” says Galanis. “I wanted to align my love of sport with marketing… One thing led to another and I found myself running a sports betting performance marketing program.”

While Galanis happened upon his first role in the gaming industry, the exciting and collegial atmosphere iGaming offers continues to fuel his passion for a career in gaming. Recalling the beginning of his path in gaming, Galanis says, “What I had not realized was just how magnetic the iGaming industry was at the time. It was far smaller than it is today, and provided a remarkably friendly bubble within which to foster a career.”

As the industry has grown, competition has certainly increased. However, Galanis maintains that “the friendliness still remains.”

It was 2005 when Galanis began his career in the gaming industry at Victor Chandler.

Since then, he has progressed through the online marketing channels at various companies, ultimately joining GameOn as a consultant and advancing to director. In 2009, Galanis launched the affiliate division of GameOn. Throughout his career, he has provided industry-leading iGaming and affiliate marketing services to both start-ups and established companies throughout the world.

Galanis says he enjoyed having the oppor-

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tunity to join the iGaming industry in its early stages and contribute to its growth with his colleagues and friends. “It’s a real privilege to experience the growth of the online gambling industry firsthand,� he says, “but even more so with a friendly group of people coming together from all walks of life to forge an industry that has gone from ‘Wild West’ to ‘Wall Street’— in no time at all.�

Additionally, as an independent service provider to the industry, Galanis enjoys having “the opportunity to witness innovation in its nascent stages� while working with his clients.

Galanis’ advice for young leaders in the industry is to come into the industry with a role and career path in mind. “Target a business that not only caters to the initial role, but also understands the importance of the function that you, the position and the team immediately around you bring to existing and future business,� says Galanis.

For emerging leaders looking to break into iGaming, Galanis asserts that thinking globally is better. “Embrace the overseas opportunities that iGaming will bring for the foreseeable future,� he says. —Erica Meeske, The Innovation Group JULY 2015 www.ggbmagazine.com

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GLOBAL GAMING WOMEN

Working Women A force in the workforce

A

s new generations of women enter the workforce, they are bringing additional skill and

value.

For the past 20 years, the percentage of women with at least a bachelor’s degree has exceeded that of men. The Council of Economic Advisers reports that women 25-34 years old were 2 percent more likely than men to be college graduates and 48 percent more likely to have completed graduate school in 2013.

The number of women in senior management positions remains low by comparison, garnering the attention of analysts. The latest CS Gender 3000: Women in Senior Management revealed companies with a greater percentage of women in senior management roles to be more profitable. Those with 15 percent or more of women in senior management positions saw double-digit premiums on returns.

As more young women receive higher levels of education and as the value of female executives continues to be acknowledged, the future appears bright for those seeking corporate leadership roles.

GENDER DIVERSITY IN THE GAMING INDUSTRY As any executive will confirm, the path to the top takes time, hard work and strong professional relationships. This is crucial for women looking to advance, given the disparity between men and women in leadership positions, and the gaming industry is no exception.

Though women comprise approximately 50 percent of the gaming workforce, only 3 percent are in managerial roles. In order to support the development of successful female leaders in the industry, the American Gaming Association established Global Gaming Women (GGW) in 2011.

Recently, GGW commissioned a report from McClain Resources to examine the development and advancement of women in the gaming industry. The report also finds that gender diversity drives organizational and fi52

Global Gaming Business JULY 2015

By Jennifer Day

nancial performance in businesses, noting that women demonstrate complementary and diverse leadership styles that correlate to overall company performance.

The authors interviewed women in the gaming industry, and all noted the importance of mentorship. However, many feel that the industry lacks a commitment to engage in strategies that advance em-

‘‘

Mentors have been instrumental to my success both in the gaming industry and in my previous career. I have benefited from incredible mentors and, in turn, have had the privilege of sharing my insight with women mentees.

Having someone with whom to share experiences, explore options and chart a path forward is very rewarding, and it creates longstanding personal and professional relationships.

’’

—Martha Sabol, Co-Chair, Greenberg Traurig Global Gaming Practice ployees. In a traditionally male-dominated industry, this can make rising through the ranks challenging for many women in gaming.

This data offers the industry an opportunity to encourage future leaders by committing to gender diversity at all levels of management. Companies

proven to attract and retain the best and brightest believe in promoting diversity on all levels.

Karla Perez-Larragoite, national director of gaming at Cintas Global Accounts and Strategic Markets, feels that such a commitment is crucial to the advancement of women. “Start with the right culture,” she says. “Hire and promote those who fit that culture and are deserving, turning a blind eye to demographics.”

In addition to creating a culture in which gender diversity is valued, better access to career counseling, formal mentoring and sponsorship programs are all integral to advancement.

AIDING ADVOCACY Finding those who will advocate for you takes time and effort. Renese Johnson, vice president at the Innovation Group, notes the importance of engaging in professional organizations such as GGW. “Don’t just look at the four walls of your office for support,” she advises. “Meeting other leaders can give you greater perspective and help you build your brand.” Other leaders echo this sentiment. Sue Schneider, principal at egamingbrokerage.com, encourages women to network, saying, “I like to encourage folks to get involved with trade associations and/or charitable activities. They typically offer great leadership training and a way to ‘shine’ among your colleagues.”

In a business world conventionally run by men, women will still need to seek out opportunities to gain experience and support in order to build their resumes. It is, however, clear that diversity is gaining momentum as female executives continue to take the reins.

As Shekinah Hoffman of AGA notes, “The desire for upward mobility and female empowerment within gaming is there. It’s what we do with it that matters.”

This article was originally printed in Emerging Leaders of Gaming 2nd Quarter ELG newsletter. To learn from about the ELG program, please visit www.theinnovationgroup.com/ emerging_leaders.asp. Jennifer Day is a senior analyst with the Innovation Group.

G&TAwardsad.2015

5/11/15

8:52 PM

Page 1

14th Annual

CALL FOR ENTRIES The gaming industry’s most prestigious technology awards program is coming again and requesting nominations. The winners of the GGB Gaming & Technology Awards 2016 will be announced at the Global Gaming Expo (G2E) in October. Don’t miss this chance to showcase your company’s latest innovation. Nominations are due August 14, 2015.

CALL FOR ENTRIES

THE CATEGORIES ARE: BEST CONSUMER-SERVICE TECHNOLOGY This category concerns technology that directly touches the customers.

Whether it is an enhanced kiosk, a new player tracking system, reservations system, parking management system or any other customer-friendly device, this technology directly impacts the experience of the customer. Why is this a step up from previous technologies?

BEST PRODUCTIVITY-ENHANCEMENT TECHNOLOGY This category describes a technology that makes a job or task easier and more efficient. Examples could be an online accounting system, better technology for printing tickets on cashless slots, or an employee communications device that allows a property to better explain its programs to its workers. How does this technology improve on the way the task or job had been previously performed?

BEST SLOT PRODUCT Very simply, this product is the judges’ favorite new slot product. It can be a brand new game or a traditional game that has been updated within the past 12 months. What makes this machine or game a step forward technologically?

BEST TABLE-GAME PRODUCT OR INNOVATION The growth of table games continues to occur around the world and makes it important to recognize innovative developments in this area. In this category, nominations can be made for table games or any product related to table games.

For more information contact Global Gaming Business Sales Director David Coheen at dcoheen@ggbmagazine.com or call 702-248-1565 X227.

To place an online nomination go to

www.ggbmagazine.com

Global Gaming Business

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NEW GAME REVIEW

by Frank Legato

Cherry Chance Disco Seven Aruze Gaming

T

his is one of the first stepper games to be placed on Aruze’s new “Cube X” cabinet, a premium stand-alone cabinet with one of the fastest processors in the business, designed to be used for either video or stepper games.

Cherry Chance Disco Seven is a five-reel, five-line stepper, featuring Aruze’s signature oversized “Radiant Reels.” It is available only in the penny denomination, with a forced minimum bet of 30 credits.

A bonus symbol landing on the third reel triggers the “Cherry Chance” feature, which awards the player up to eight free games. Each spin offers a better chance of landing the top “7” wins—three 7s for 5,000 credits, four for 15,000 credits or five for the top award, a progressive resetting at $300.

The bonus feature ends when the spins are complete or one of the “7” combinations lands. The feature can be retriggered with a bonus symbol on the third reel, with a new round of free spins beginning when the first Cherry Chance round is complete.

Manufacturer: Aruze Gaming Platform: Cube X Format: Five-reel, five-line stepper slot Denomination: .01 Max Bet: 150, 300, 450, 600 Top Award: Progressive; $300 reset Hit Frequency: Approximately 30% Theoretical Hold: 2.06%-12.89%

Pirates Skull & Bones

GCA - Multimedia Games

T

his latest game in Multimedia’s High Rise Games Series features a six-tier progressive, displayed on the format’s tall vertical monitor. The base game is a 35-line video slot in a five-by-four reel setup (five reels, four spots per reel).

As with other multi-progressives from Multimedia, the jackpots are won by accumulating six or more jackpot symbols scattered on the reels. At max bet, six jackpot symbols return the Mini jackpot, resetting at $10. Seven symbols return the Minor prize, resetting at $30. Eight symbols win the Major, resetting at $90; nine, the Mega, resetting at $250; 10, the Grand, resetting at $1,000. Twelve jackpot symbols at max-bet return the top Ultra progressive, which resets at $2,500.

Below max bet, six or more scattered jackpot symbols award flat credit prizes ranging from 200 credits to 50,000 credits, which are multiplied by the line bet.

Bonus symbols scattered on the first, third and fifth reels trigger the Pirates Free Spins Bonus, with a triggering award of 100 credits times the bet multiplier and eight free games. Bonus symbols landing during a free spin re-trigger the feature.

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Global Gaming Business JULY 2015

Manufacturer: Multimedia Games Platform: High Rise Games Format: Five-reel, 35-line video slot Denomination: .01, .02, .05 Max Bet: 175 Top Award: Progressive; $2,500, $5,000 or $12,500 reset Hit Frequency: Approximately 30% Theoretical Hold: 2.05%-14.98%

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Sakura Lady Konami Gaming

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ith this new KP3 video slot, Konami embraces its roots, with the main character and graphics presented in the style of Anime, the familiar Japanese animated cartoons.

Sakura Lady, in the “Xtra Rewards” series, features Action Stacked Symbols, a mystery wild feature in the primary game and a generous free-spin bonus. The base game is available in 20-line, 30-line or 40-line configuration. The main game theme has the Sakura Lady tending her garden, and watching cherry blossoms bloom.

Randomly during the base game, extra wild Sakura Lady symbols appear on the reels after a spin, or on the top screen, moving down to the reels to add wilds. Three, four or five Sakura Flower symbols on the reels trigger eight, 12 or 20 free games, respectively. The mystery wild feature occurs frequently during free spins.

During free spins, any two, three, four or five of the bonus symbols trigger an additional four, eight, 12 or 20 free games.

Manufacturer: Konami Gaming Platform: KP3 Format: Five-reel, 20-line, 30-line or 40-line video slot Denomination: .01-5.00 Max Bet: 1-50 per line Top Award: 2,000 times line bet Hit Frequency: 33% Theoretical Hold: 4%-18%

Triple Cash Wheel Featuring Quick Hit Scientific Games

T

his game combines several popular Bally game features on the unique Pro Wave, with the 40-inch curved LCD screen. In this configuration, it is stopped with a 1080p, high-definition bonus wheel.

The primary game plays out on three five-reel, 20-line game screens, which work together to form a 60-line play field. The slot is being launched with two popular Bally base games, Blazing 7s and Black and White. There is a five-tier progressive, with jackpots triggered by the trademark Quick Hit feature—five or more Quick Hit symbols scattered across one of the three game screens trigger a progressive.

Reset amounts at the 1,000-credit max bet are 1,800 credits for five Quick Hit symbols, 9,000 credits for six, 18,000 credits for seven, 120,000 credits for eight and 450,000 credits for nine—from $18 to $4,500 on the penny version of the game.

The top award also can be won by landing the top slice on the Cash Wheel. Three lit Cash Wheel icons during the base game trigger this feature. Players select from a grid of 21 tiles until three match, for one or three Cash Wheel spins with a 1X or 3X multiplier. The feature occurs once every 72 spins on average, with an average prize of 22 credits times the total bet.

The Cash Wheel also can land on a free-spin bonus. Players are granted 10 free games with all wins tripled. This occurs on average once every four Cash Wheel spins, according to the manufacturer.

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Global Gaming Business JULY 2015

Manufacturer: Scientific Games Platform: Alpha 2 Pro Wave Format: Five-reel 60-line video slot Denomination: .01-250.00 Max Bet: 1,000 Top Award: Progressive; 450,000 credit reset Hit Frequency: 64.79% Theoretical Hold: 6.05%-14.51%

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OPERATIONS

My Mistake Taking responsibility is often the first step to success

By Richard Schuetz

I

n 1984, it was my honor to join the employment of Golden Nugget, Inc., a company chaired by Mr. Stephen A. Wynn. At this time, the company had two locations— one in Downtown Las Vegas and the other on the Boardwalk in Atlantic City. My position was not of significance in the organization, and I was generally known as “Clyde’s Boy.” The “Clyde” referred to Senior Vice President and Chief Financial Officer Clyde Turner, and the “Boy” to my being at his beck and call to do just whatever it was that he wanted me to do. And what he generally wanted me to do was to perform some fairly complex analyses to prove whatever it was that he wanted me to prove.

In fact, my friend, the late Jerry Anderson, actually had Golden Nugget business cards

guy (who actually was running the property), Bob Baldwin. And in 1984, the property was going through an expansion, known as the Spa Tower expansion, and it was basically a big deal to Mr. Wynn.

And since it was a big deal to Mr. Wynn, it basically became a big deal to anyone who wanted to keep Mr. Wynn in a good mood.

One of the components of the expansion was a restaurant on the second floor, and as is the custom of opening new restaurants, it was given a soft opening where we had several days of having the employees as the guests. On the last night of the test openings, I was invited to join the table of Jerry, John and Bob, and our wives at that time.

During that dinner, Mr. Wynn entered the room, walked about a bit, and then approached our table, asking Bob to step away from the table

This ability to admit a mistake, and ‘‘ admit it quickly, is something that sets off the great from the rest of us. These two men knew that failure was an aspect of business, and if there was to be a failure to make sure they failed fast, and acknowledged it.

’’

printed for me that stated my position as “Clyde’s Boy.” That went well with the notepads he had printed for me, which said “From the Box of Richard Schuetz.” This was because I was always on the move, and rather than commit my stuff to a desk, I just kept everything in a box that I could immediately grab to follow Clyde to wherever he might be heading, and he was always heading somewhere.

While most of my work for Clyde involved the Atlantic City Golden Nugget, my office was located in Las Vegas, and when I was in Las Vegas I generally hung out with the guys who managed that property, namely the operations/administrative guy Jerry Anderson, the finance guy, John Miner, and the marketing

to visit with him for a minute. What we learned later was that Mr. Wynn was not happy with the restaurant. He put it on the endangered species list, and he went back to the drawing board to create something amazing. The rest of us worked to figure out how to explain a rather substantial abandonment loss on the financials.

About a decade later, I had the honor of working for Lyle Berman, chairman of Grand Casinos, Inc. In this environment I actually had a substantial position, and even had business cards to match (and my note pads read from the desk of). I was truly rising.

During my tenure with Lyle, he had an idea about how we should use some space in one of our Mississippi casinos, and I thought it was a horrible idea. At each and every staff meeting we

would bicker about his plan, and the other executives would sit back, roll their eyes, and generally accept that this little banter would waste the next five or 10 minutes. After several months of this verbal judo, we did it Lyle’s way (which was generally right), and in this case, he missed. And what was amazing about this miss is that he walked into the staff meeting right after the launch, said he missed, and we needed to figure out another plan for the space.

I bring these two stories up because these are two incredible people who have helped shape the industry of gambling, and they both admitted that they made mistakes, and admitted it quickly.

This was not a trait that I found in many of the other people I worked with in my many years in the business. The others would blame the market, blame the execution of the staff, blame the economy, or something other than their own judgment. They would talk about how they would expect the project to “ramp up,” how they would “dial it in,” or whatever other term they could think of to tell the market and its analysts that whatever failure they had launched really wasn’t failing.

I think this ability to admit a mistake, and admit it quickly, is something that sets off the great from the rest of us. These two men knew that failure was an aspect of business, and if there was to be a failure to make sure they failed fast, and acknowledged it.

Making a mistake is bad. Forcing an organization to live with a mistake compounds it immeasurably.

Richard Schuetz is member of the California Gambling Control Commission. The opinions expressed in this article are his alone, and do not necessarily reflect the position of the state of California, the commission, or any other entities or individuals within that state. The author is also sincerely appreciative of the help he received from his friends and colleagues throughout the gaming world in developing this article, understanding that any and all errors are his own.

JULY 2015 www.ggbmagazine.com

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FRANKLY SPEAKING

by Frank Legato

I’ll Have the Elk

A

VICT OR R INALD O

rchaeologists have unearthed what could be America’s first casino. It’s in Utah, of all places.

Evidently, if you go back 700 years, no one in Utah—currently one of two U.S. states with absolutely no legal gaming—was particularly against gambling. As I understand it, Donnie and Marie weren’t even Mormons yet.

According to the Discovery Channel’s website, archaeologists exploring a cave on the shores of the Great Salt Lake unearthed “hundreds of carved sticks, hoops, dice and darts dating back to about 700 years ago.” They are identifying the site simply as “Cave 1.” There are approximately 10,000 gambling pieces in the find.

I’m guessing they called it Cave 1 because the sticks, darts, dice and hoops all carry a hand-carved logo reading “Cave 1 Casino, Hotel & Spa.” They also found a primitive player’s club card, carved from stone with notches indicating the points earned, along with 14th century armor bearing the casino logo—apparently, there was an armor giveaway at the casino—and an oil-painted advertisement which read, “Cave 1: Bright Lights, Dark Ages.”

Instead of a cash-back program, they offered meat-back.

OK, I’m done. No, wait—I’m not.

The Discovery Channel report quotes John “Jack” Ives, an archeologist at the University of Alberta who has been researching the Cave 1 Casino, Hotel & Spa for years, as actually describing the kinds of games offered in the casino. He says at least two or three dice games were played, as well as a hoop-and-dart game where you threw the dart through the hoop to score points, and a game in which you had to identify a marked stick hidden among other sticks.

And of course, they also had Blazing 7s and Double Diamond.

“Also, we found bone hand game pieces,” “Jack” told Discovery News.

“Contestants had to guess in which hand a marked bone object had been concealed.”

Yes, a 50/50 proposition. No wonder it didn’t survive.

The dart-throwing game could make a comeback soon, since casinos are looking for new skillbased games. Depending on how strategically the hoops are placed, free cocktails could make the game genuinely comical.

By the way, there’s no word on how “Jack” figured out how to play the ancient games. Stone tablets with game rules and odds, maybe? More likely, he studied the artifacts, got together with his colleagues, and created a mock cave casino.

Who said scientists don’t have fun?

According to the Discovery piece, the cave was “intensely occupied between 1240 and 1290 58

Global Gaming Business JULY 2015

A.D., a time when the (local) Promontory people was thriving and other cultures, like the nearby Fremont, were struggling to survive.”

In a mocking gesture to their less fortunate neighbors, the Promontory folks called their cave casino the Fremont Street Experience.

That’s where they got the idea for the name of the Downtown Las Vegas attraction.

Hey, you could look it up.

The article speculates that Cave 1 was “a luxury for people who had time and resources to spend for such a form of entertainment.” Well, at least until those 14th century millennials got there. Cave 1 probably went under because there were no hip DJs or bottle service.

Finally, the report says that previous archaeological digs at the site turned up “piles of butchered bison, elk bones and hundreds of animal-skin moccasins ranging from a small child’s size to an adult’s.”

That means Cave 1 had a buffet and a retail offering. See? Even then, they knew to include non-gaming amenities in their cave casinos.

Oh, by the way, believe it or not, there was other industry news this month. For instance, Indiana’s Hoosier Lottery debuted bacon-scented lottery tickets that offer a prize of a 20-year supply of the porcine treat.

As I always say, if you really want to boost gaming revenues, just add bacon.

In other news, Montana casinos are being victimized by a pair of robbers who have now hit four properties wearing dark masks. At some point, I’m guessing the surveillance people will be advised to watch out for ninjas.

And robbers also are following people home from SugarHouse in Philadelphia. In the latest case, they took not only the guy’s winnings, but his cell phone. Police simply tracked the GPS on the phone and quickly caught both robbers.

It’s nice when stupidity can aid in squelching casino crime.

I have more news, but it will have to wait. I have enough points for the bison-elk buffet at Cave 1.

Then, I’ll go roll some bones.

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CUTTING EDGE

by Frank Legato

Casino to Go Product: Simulated Gaming Manufacturer: GameAccount Network

ameAccount Network has launched a product designed to put a casino’s brand in the players’ hands.

Simulated Gaming, a social casino experience with virtual credit-based play, mobile gaming, and real-money gaming software and services, is offered to gaming operators from the singular GameSTACK Internet Gaming Ecosystem.

As patron entertainment preferences evolve, Simulated Gaming provides an online social casino monetized through the sale of virtual game credits. Visitors to the online casino are required to create an account— during which process the players are verified to be of age in the operator’s jurisdiction—or may sign up with their existing loyalty club card number and PIN. GameAccount’s Simulated Gaming ecosystem then uses the patented iBridge Framework to connect the online platform to an operator’s CMS or loyalty club card data layer to exchange loyalty ID information, onproperty credits for free play and other awards.

GameAccount is one of the only online platforms capable of deliver-

G

ing a social casino experience from a real-money gaming regulated platform.

The iBridge Framework enables the real-time exchange of data regarding awards, and the iSight Back Office supports the behind-the-scenes management of those rewards.

For example, a player who makes a purchase of virtual game credits, with which they can play casino and table games for fun online, can be given a percentage of those points back (based on their purchase price, not on game play) in the form of food and beverage credits, hotel stays and in-casino free play (contingent on jurisdictional policies).

The proprietary GameSTACK Internet Gaming Ecosystem has been contracted by many of the largest single operations in the U.S. For more information, visit gameaccountnetwork.com.

ID Protection Product: Patron ID Validation & Verification Manufacturer: Veridocs

he Patron ID Validation & Verification solution from Veridocs was developed for businesses looking to enhance their existing customer ID management system and add a robust first-line-of-defense mechanism against patrons entering their property (i.e., casinos, nightclubs, bars, special events, etc.) with counterfeit IDs. The system can be used to deny entry to those underage, and anyone on an internal or external watch list. The Veridocs system sets itself apart from competing solutions by taking the patron management process beyond simple ID validation.

At the nucleus of the Veridocs system is software that seamlessly works with any operation’s existing IT infrastructure and system. Once deployed, security personnel can perform all of the following immediately at the entrance/checkpoint of the property: • Authenticate the validity of the identification document.

• Validate all built-in security features on an ID such as holograms, watermarks, etc.

• Compare the physical information of the ID to bar-code and mag-stripe information embedded in the document.

• Ensure the machine-readable zone (MRZ) format is correct and verify the information on the front of the document.

• Check the patron against internal and external VIP or watch list.

• Send email and SMS alerts to security, surveillance and customer loyalty departments for clearance and notification purposes.

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Some of the key features and conveniences provided by the Veridocs system are: • Accurate and easy-to-read color-coded results.

• Passed, caution and failed results.

• Underage.

• Watch-list restricted.

• Fully automated alert system.

• Enlarged image of the document for better scrutiny.

• Better visual of the photograph.

• Easier-to-read physical information.

• Built-in qualifiers for questioning ownership of a good identification.

• Astrological sign associated with ID birthday.

• “Happy Birthday” message based on the listed birth date.

• Customized qualifiers.

With the Patron ID Validation and Verification solution from Veridocs, all staff guesswork is alleviated and the security system’s reliability is enhanced, resulting in an incident-free and safer establishment. Cost savings yielded from bolstered safety alone for some customers has produced a 100 percent ROI in just 30 days.

To schedule a demonstration, contact a sales representative at 702-201-0086. For more information, visit veridocs.com.

JULY 2015 www.ggbmagazine.com

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Galaxy Entertainment’s Phase II and Broadway expansions open on the Cotai Strip By Patrick Roberts

Cotai 2.0

Begins in Macau

n the midst of a historic slump in Macau’s gaming industry, the first of the Cotai Strip’s new megaresorts opened last month. The $3 billion Galaxy Macau Phase II and Broadway Macau, conceived before the beginning of the downturn in the city’s gaming industry, opened with a total of three new hotels including the largest JW Marriott in Asia, and the first all-suite Ritz-Carlton in the world, a casino, 100,000 square meters of gross retail area and a 3,000-seat theater.

“It is the first major resort opening in Macau since 2012, marking a new milestone for the city,” stated a press release from the company. “It also underlines the group’s commitment to helping the territory to fulfill its potential as a world center of tourism and leisure, to nurture local talent and to promote local culture.”

I

Table Tussle Galaxy had requested 400 new gaming tables for its casino expansion, and has room for 500. But the Macau government awarded just 150 tables, in keeping with a 3 percent annual cap on table growth in the territory. Union Gaming Research said the decision “is a negative indicator for other slated openings. Increasingly opaque and counterproductive Macau government policy toward table allocations and its ‘mid-term’ review of the gaming industry reset our Macau property target multiples lower.”

Robert Drake, senior vice president and chief financial officer for Galaxy Entertainment, says the government’s desire for more non-gaming attractions played an important role in the design of Phase II. “We certainly support Macau’s ambitions to become a world-class tourism destination and strongly believe that the new chapter of Galaxy Macau including Broadway at Galaxy Macau will assist the government in achieving its goals, especially given that it’s the first new capacity to open since 2012. Our expanded integrated resort includes significant non-gaming elements. In fact, 95 percent of the area is for non-gaming,” says Drake.

Drake says the number of table games in Phase II has been supplemented by electronic table games.

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Broadway at Galaxy Macau

Broadway Street is a live entertainment street that is proving to be very popular with both locals and visitors to Macau

The Ritz-Carlton, Lai Heen private dining room

“Our electronic game count has expanded significantly where we offer a diverse array of entertaining options for our customers,” he says. “This is supported by our World Class Asian Heart service across every segment of our business as well as our Galaxy Privilege Club. We really are a return-driven ‘ROI’ developer and operator where we cost-effectively build high-quality resorts and execute operationally by driving every segment of our business to maximize sustainable ROI.” Union applauded Galaxy Phase II, which it said will enable the operator, “for the first time, to fully compete across all market segments, and to provide a much more meaningful IR experience. This should allow the company to be a near-term market share taker across all gaming segments.”

Broadway Macau will allow Galaxy “to go after a lower-value mass market customer” and “represents a significant improvement relative to the old Grand Waldo property” where it is located, Union said.

Drake says Broadway is a totally new concept for Galaxy Entertainment and Macau.

“It is designed to complement Galaxy Macau’s offerings with high energy and fun entertainment for all customers including families, with a local Macanese flare. Broadway consists of 320 hotel rooms, a 3,000-seat theater, 40 F&B outlets that include numerous local delicacies and cuisines, and a live entertainment street that is proving to be very popular with both locals and visitors to Macau. The property is connected directly to Galaxy Macau via an air-conditioned sky bridge.”

Billions at Stake A collective $20 billion in new development is slated for the Cotai region, including Melco Crown’s $2 billion Studio City Macau, the $4.1 billion Wynn Palace, Sands China’s $2.7 billion Parisian, an as-yet-unnamed $3 billion resort from MGM Resorts International, SJM’s $3.9 billion Lisboa Palace, and the $1.5 billion Louis XIII from former investment banker Stephen Hung.

Since mid-2014, Macau’s gaming industry has declined by 39 percent due to a crackdown on corruption by the mainland China government; in February, the most recent month on record, year-on-year revenue fell a record 49 percent. Even so, points out CEI Asia, Macau still generates three to four times more gaming revenue than Las Vegas, and continues to rank as the world’s No. 1 gaming jurisdiction.

Union Gaming has faulted the local government for exacerbating the slump. It says officials in Macau have “created an environment of increasing unease among operators and investors as it interprets mainland directives and offers knee-jerk reactions to Macau citizen whims,” including the demand for a full casino smoking ban.

Drake echoes the opinions of many Macau casino executives that the new supply should create more demand.

“It has been three years since new capacity opened in Macau, and we are cautiously optimistic that our new projects will help energize Galaxy and the Macau market,” he says. “It really is too early to say at this point in time if supply drives demand; however, on the first weekend, over 200,000 guests visited Galaxy Macau and Broadway, which is extremely encouraging. We are hopeful that the positive momentum will continue to build for us and the market as future new capacity continues to be introduced.”

SJM CEO Ambrose So Shu Fai, noting that VIP business has decreased “30 percent to 40 percent, more or less,” says the gaming industry will see a turnaround in time. “We should wait a little to see what happens in the second half to see if the decrease is narrower than before. Then, we can better draw a conclusion whether we are reaching the bottom or not,” So told the Macau News. So added that he remains “optimistic” about the future of the city and his company’s investment in Cotai. The Lisboa Palace is scheduled to open in the second half of 2017.

“In the long run, with the Hong Kong-Zhuhai-Macau Bridge in use in 2017, business would be back to normal. When the roads are open, money will come in,” he said.

JULY 2015 www.ggbmagazine.com

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GOODS&SERVICES NEVADA APPROVES SKILL-BASED SLOTS

world to offer the full extent of this innovative new form of gaming.”

In an example of the law’s imevada lawmakers have passed a plementation offered by AGEM, bill allowing for skill-based payback percentages would, for exgames in casinos, with lawmakers ample, give all players a base game in both chambers voting unaniwith an 88 percent payback, but if mously to pass Senate Bill 9, a bill you’re particularly skilled at shootproviding variable payback percenting down enemy planes in the ages based on skill that was probonus round or outracing your posed by the Association of friends in a road rally, you could Gaming Equipment Manufacturers boost your payback to 98 percent, (AGEM). It was promptly signed with the blended overall payback

by Governor Brian Sandoval.

Nevada Governor selected by operators falling someThe measure allows regulators Brian Sandoval where in the middle. “For the first to approve games in which the thetime, players will know they can have a material oretical payback percentage is programmed at a financial impact on the outcome of the game,” minimum level based on pure chance, but rises said AGEM. with the level of player skill to a maximum return. AGEM proposed it as a way to capture younger players who are accustomed to video SCIENTIFIC GAMES games in which hand-eye coordination and LAUNCHES SHUFFLE physical dexterity are essential to moving MASTER CLASSIC through various levels to beat a game. iversified gaming supplier SciSB 9 marked the first time AGEM has entific Games Corporation anspecifically initiated legislation in its 15-year hisnounced the launch of the 2015 tory. To start the process, AGEM members, anShuffle Master Classic, a first-ofchored by all of the world’s largest slot machine its-kind nationwide qualifying technology companies, were polled in early 2014 tournament event featuring the Shuffle Master and asked to submit ideas on how to boost innobrand’s legendary proprietary poker table games. vation that would require a change in Nevada Qualification events began on June 1 at law. The variable-payback concept was the overmore than 200 casinos across the U.S. Accordwhelming choice to be forwarded to the Nevada ing to the company, the tournament will “celeCommittee to Conduct an Interim Study Conbrate 20 years of table-game excitement on cerning the Impact Of Technology Upon Gamcasino floors” and “honor the historic success of ing that met throughout 2014 and ultimately Three Card Poker.” recommended that the AGEM concept advance The qualifying events will culminate in the to the legislative level.

Three Card Poker National Championship The Nevada Gaming Control Board and the event in Las Vegas on Monday, September 28 at Nevada Gaming Commission will now lead the the Venetian Las Vegas, where national qualifiers process of writing and promulgating the regulawill compete for a total prize purse of $250,000 tions that will “guide this innovative new direcin cash, including the top prize of $100,000. tion that AGEM believes will inject new life into The Shuffle Master Classic is open to any the slot machine segment of the gaming industry player who visits one of the more than 200 parand attract younger players that are accustomed ticipating casinos in the U.S. during the month to the arcade experience and different forms of of June. To qualify for the Three Card Poker Nanon-gambling games in their daily lives,” accordtional Championship, players must hit a “Classic ing to an AGEM press release.

Hand” on one of eight Shuffle Master propri“AGEM is especially proud to be the initiaetary table games—Three Card Poker, Four tor and one of the driving forces behind the Card Poker, Caribbean Stud Poker, Let it Ride, milestone event,” said Thomas Jingoli, AGEM Mississippi Stud, Ultimate Texas Hold ‘Em, president and chief compliance officer of KonTexas Hold ‘Em Bonus and Crazy 4 Poker. ami Gaming. “We’d like to thank the Gaming A “Classic Hand” is a six-card straight flush Control Board and Chairman A.G. Burnett for in Three Card Poker or a five-card royal flush in supporting this initiative over the past year, and any of the other seven games. we are excited that Nevada will be the first in the “With a 32-year heritage of gaming industry

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innovation, we are thrilled to continue Shuffle Master’s rich legacy of excellence in table game products with the launch of this event,” said Roger Snow, Scientific Games senior vice president of table and utility product. “The first-ever Shuffle Master Classic is an ideal way to celebrate Shuffle Master’s legendary proprietary table games and the 20th anniversary of Three Card Poker, the most popular casino card game in play today around the world.

“The championship event, which is being held in conjunction with the gaming industry’s largest global conference and trade show, the 2015 Global Gaming Expo (G2E), will bring the best and luckiest players from around the country to a single location for a day filled with tournament action and excitement.”

IGT TO SELL LAS VEGAS COMPLEX eading slot manufacturer International Game LTechnology revealed during a conference call last month that it plans to sell its current 610,000-squarefoot corporate headquarter campus in Las Vegas.

Marco Sala, the company’s CEO, confirmed the restructuring of IGT following its acquisition by lottery giant GTECH, with the merged company, called International Game Technology, Ltd., headquartered in London. Most of the company’s operations will remain in the United States, including all manufacturing, to be done at the company’s Reno plant.

That includes manufacturing formerly done at IGT’s Las Vegas campus, which includes 300,000 square feet of manufacturing space. In an email to the Las Vegas Review-Journal, IGT spokesman Phil O’Shaughnessy said the Las Vegas campus is simply too large for the merged company’s needs, although Las Vegas will remain a regional headquarters for IGT. “We are exploring other locations in Las Vegas because the current campus is simply too large, so we would like to find an office building that better meets our business needs,” O’Shaughnessy told the Review-Journal.

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IGT’s Las Vegas headquarters will join regional offices in Rome and Providence, Rhode Island in the merged company. Research and development will be maintained in Reno, with U.S. lottery operations in Rhode Island.

The company also announced an agreement under which IGT will provide technology for the new Niedersachsen Jackpot Wide Area Progressive (WAP) at Spielbanken Niedersachsen casinos in Germany.

Under the agreement, IGT will work alongside Spielbanken Niedersachsen to provide the operator with tailor-made solutions for players.

IGT will brand games so that they harmonize with Spielbanken Niedersachsen’s own corporate identity, in addition to developing a new mathematic formula to fit in with the operator’s specific requirements.

Once complete, customers will have access to the “Mermaid’s Spell” WAP on IGT’s Oxygen cabinet.

The deal represents the third WAP jackpot that IGT has provided to Spielbanken Niedersachsen since 1997.

GLI DOUBLES SPAIN OPERATION gaming testing company Gaming LabLitseading oratories International has doubled the size of operation in San Cugat, Barcelona, Spain, in response to increased demand for lab services.

The lab, GLI España, opened in 2012, and since that time the company has secured a continuously increasing number of clients. The demand required GLI to devote more space, resources and manpower to accommodate its clients and maintain its fast turnaround times.

Martin Britton, managing director of GLI España BV, said, “We have a great team working in the Barcelona office, headed by David Jimenez Gracia, known throughout Spain and across Europe for delivering excellent customer GLI Spain head service. Now this expan- Martin Britton sion was necessary to ensure we are able to maintain and improve service levels to our customers.

“We recently recruited Brais Pena Sanchez as development manager to handle client liaison activities. In addition, we have recruited additional engineering resources and are actively seeking additional staff, which is a positive sign for the future.”

AMAYA BUSY WITH DEVELOPMENTS

lators.

Investigators want to know if the proper legal processes was followed during the negotiation and acanadian gaming supplier Amaya, Inc. last month quisition of PokerStars, according to reports. began a listing on the NASDAQ stock exAmaya Gaming has confirmed that Baazov and change. The listing occurred in just four months, less Sebag are under investigation by Quebec authorities than half the time originally anticipated by the combut stated that the company followed proper legal pany. procedures and are confident the investigation “Our listing on NASDAQ is an will confirm that. important milestone for Amaya and a “I believe that any concerns that I or other testament to the tremendous progress Amaya officers or directors violated any Canawe have made over our five years as a dian securities laws are unfounded, and we are public company,” Amaya Chairman confident that at the end of its investigation, and Chief Executive Officer David the AMF will come to the same conclusion,” Baazov said.

Baazov said in a press statement.

The company also announced the In December 2014, the AMF used search completion of the sale of its Georgiawarrants to visit a number of Amaya GamAmaya CEO based slot manufacturing subsidiary ing’s offices, including the Canaccord Genuity David Baazov Cadillac Jack to rival slot-maker and Manulife Financial and the company’s AGS, now an affiliate of hedge fund Apollo Global headquarters in Montreal, Canada, but reportedly did Management. The company also confirmed that not find any conclusive evidence against Amaya.

Quebec’s Autorité des marchés financiers had launched an investigation of the company’s CEO MASSACHUSETTS and CFO. REGULATORS TRAIN Pursuant to the previously announced stock purFOR CASINO CRIMES chase agreement, AGS has purchased all of the shares of Amaya Americas for an aggregate purchase price ecently, state casino regulators in Massachusetts of approximately $476 million, comprising cash conunderwent training at a “casino academy” to learn sideration of approximately $461 million and a $15 how to spot unusual activities in casinos that might million payment-in-kind (PIK) note, bearing interest actually be criminally related. at 5 percent per annum and due on the eighth anFor instance, when a customer puts money into a niversary of the closing date. slot machine and then immediately cashes out, or Proceeds from the transaction were used to help someone drops money on the floor and doesn’t pick repay in full Cadillac Jack’s debt and other associated it up. costs.

Bruce Band, a veteran gaming regulator, told the “We are extremely pleased that we have been Boston Globe, “I’m always worried when we are not able to crystallize on the value that has been created catching someone, because it doesn’t mean the bad within Cadillac Jack over the past two and a half guys have gone away,” adding, “It only means we’re years for the benefit of our shareholders,” said Baamissing something.” zov. “The transaction results in both a strong return The training was provided by BMM Testlabs, a on our investment and a significant deleveraging major gaming testing laboratory and technical conevent that puts us on the path to achieving our previsultancy. ously guided adjusted net leverage ratio of 4.0 to 4.5 Band is the state’s chief gaming regulatory agent. by the end of the year. It is also consistent with our He is training about a dozen agents so at least two strategy to focus on our primary growth platform, agents will be on the floor of the casino at any one our core B2C operations.” time.

Macquarie Capital and Deutsche Bank Securities He is in charge of training agents who will be Inc. acted as Amaya’s co-financial sales advisers. overseeing the Bay State’s first casino, the Plainridge Meanwhile, an announcement by Quebec’s AuPark Casino due to open June 24 in Plainville. It will torité des marchés financiers has confirmed that both have 1,500 slot machines.

CEO Baazov and CFO Daniel Sebag were under inDozens more agents will join the force as the vestigation for possibly violating Canadian gaming state’s three casino resorts come online in the next law in completing the $4.9 billion acquisition. few years.

The investigation flies in the face of one of the Attendees to the training sessions were given a key reasons PokerStars was sold to Amaya—namely firsthand look at the gaming industry and had the to remove the stigma of past legal troubles in the opportunity to learn about the operations of gaming U.S. for the company. However, under Amaya, Pokmachines, assess outcomes and check meters. They erStars has continued to face a long battle as it tries also learned about what services an independent test to become licensed for online gaming in New Jersey lab provides and why testing and certification services and has not been cleared by that state’s gaming reguare so crucial to our regulated gaming industry.

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JULY 2015 www.ggbmagazine.com

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Don’t miss the

13th ANNUAL SUPPLEMENT Published December 2015

For Advertising Opportunities Call

DAVID COHEEN, SALES DIRECTOR 702.248.1565 ext. 227 or dcoheen@ggbmagazine.com A PUBLICATION

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PEOPLE JENS HALLE DIES

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he gaming industry lost one of the legendary figures of its supply sector last month when Jens Halle, CEO of Gauselmann Group’s Merkur Gaming and longtime head of Novomatic’s gaming Jens Halle supply division, died suddenly in Florida at the age of 57.

Halle reportedly entered the hospital with chest pains and died after undergoing emergency bypass surgery.

Halle’s death came as a shock to the international gaming industry. He has been a fixture of the supply side of the industry as one of it most wellknown and popular executives for more than two decades, the major portion of which was spent guiding Novomatic’s Austrian Gaming Industries (AGI) subsidiary to the top of the European slot and e-table markets.

A native of Austria, Halle began his gaming career with Bally Technologies before moving to Novomatic as head of sales in 1999. At Novomatic, he guided the company’s slot and automated table game sales far beyond the company’s traditional European markets to new jurisdictions around the world. He ultimately became managing director of AGI, and directed the push of Novomatic into North America as CEO of the newly formed Florida-based subsidiary Novomatic America Sales.

Last November, Halle and Novomatic jointly announced that he was leaving the company to accept the top post at Merkur Gaming, the casino supply division of Germany’s Gauselmann Group.

DICKINSON WRIGHT ADDS LONGTIME GAMING ATTORNEY

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eff Silver, who boasts a career spanning 40-plus years, has decided to leave his role as founding counsel in the Gordon Silver law firm for Dickinson Wright. Silver said he hopes to help Dickinson Wright “enhance its gaming and administrative law profile in Nevada.” The firm also has added Gregory Jeff Silver Gemignani and Kate Lowenhar-Fisher, both gaming attorneys.

While at the firm, Silver represented companies such as Dubai World, Grand Sierra in Reno, Century Gaming and Gaming Partners International.

Most recently, he represented the Westgate Las Vegas in front of the Gaming Control Board. Dick-

inson Wright has 400 attorneys at offices in Michigan, Ohio, Kentucky, Tennessee, Arizona, Washington, D.C. and Toronto, in addition to Las Vegas.

Silver himself was chairman of the Nevada Gaming Control Board from 1975 to 1979, and has held executive-level positions at the Riviera, Caesars Palace and the Landmark. Upon joining his former firm in 1984, his name was added to the practice.

HARD ROCK HOLLYWOOD NAMES PRESIDENT

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lorida’s Seminole Tribe announced the appointment of gaming industry veteran Bill Wright as the new president of Seminole Hard Rock Hotel & Casino Hollywood. Wright will be responsible for all operations and management of Bill Wright South Florida’s largest gaming and entertainment complex.

Wright’s appointment was announced by Seminole Gaming Chief Operating Officer Larry Mullin.

Wright most recently was an executive of Station Casinos in Las Vegas, where he was vice president and general manager of Green Valley Ranch Resort.

While at Station Casinos, he also was vice president and GM of Boulder Station and Sunset Station, both in Las Vegas, as well as senior vice president of operations, West Region, in the Station Casinos corporate office.

OHIO CASINO GM’S NEXT JOB IS IN CALIFORNIA

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ichard St. Jean, who launched the Hollywood Casino Toledo in Ohio four years ago, is leaving for California to do something similar for a casino that Penn National Gaming hopes to open in 2016. He will oversee opening of the $360 million Hollywood Casino Jamul-San Diego.

The casino, owned by the Jamul Indian Village, is sched- Richard St. Jean uled to open in about a year.

It will have about 1,700 slots and 43 gaming tables.

St. Jean leaves a community that appreciates his work. “He’s just been absolutely wonderful,” Rossford Mayor Neil MacKinnon told the Toledo Blade.

“He’s part of the fabric of our community. He’s very well-liked and respected here in the city of Rossford.”

The city of Rossford plans to honor St. Jean for his work in nearby Toledo.

St. Jean oversaw the completion of Penn National’s $300 million Toledo casino and assembled

the executive team that opened it and staffed it with 1,300 employees.

His replacement has been named: Frank Quigley, a longtime veteran of Penn National.

He was formerly interim general manager of Casino Rama in Orillia, Ontario.

St. Jean will also oversee Penn’s Zia Park Casino Hotel & Racetrack. He joined Penn in 2011 after 16 years at Station Casinos. He has also worked at the Tropicana Las Vegas, Colorado Belle Casino Resort in Laughlin and Caesars Palace in Las Vegas.

BROWN IN AT BELLAGIO

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GM Resorts International has chosen hospitality veteran Olivia Brown as general manager of Bellagio. Her experience spans 25 years, most recently with the Ritz-Carlton Boston Olivia Brown Commons.

Brown has managed four separate Ritz-Carlton hotels since 2008, and prior to that spent 18 years in different positions with the InterContinental Hotels Group.

Bellagio President Randy Morton said, “We look forward to the creativity and innovation that Olivia will bring to Bellagio.”

GGB

July 2015 Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Cadillac Jack . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Casino Design magazine . . . . . . . . . . . . . . . . . .64 Fabicash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . . .51 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35, 49 GCA + Multimedia Games . . . . . . . . . . . . . . . .21 GGB Gaming & Technology awards . . . . . . . . .53 GGB News . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Greenberg Traurig . . . . . . . . . . . . . . . . . . . . . .27 Hnedak Bobo Group . . . . . . . . . . . . . . . . . . . . .33 Innovation Group . . . . . . . . . . . . . . . . . . . . . . .67 Konami Gaming . . . . . . . . . . . . . . . . .Back Cover OIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Red Square Gaming . . . . . . . . . . . . . . . . . . . . . .5 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . . .22 Spin Games . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 US Virgin Islands . . . . . . . . . . . . . . . . . . . . . . . .29

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CASINO COMMUNICATIONS

Q

&A

Scott Kreeger

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ormer Mirage and Station Casinos exec Scott Kreeger was tapped in 2012 to take over the struggling Revel property in Atlantic City. Kreeger’s emphasis on the gaming product increased productivity and revenue at the property, but it was too little, too late, as debt and monthly energy bills defeated his every effort. In 2014, he was chosen to replace the departed Rob Oseland as the leader of SLS Las Vegas, a property that opened to high expectations but faltered early. However, with an emphasis on gaming, the local market and the superior F&B products, Kreeger is slowly turning the ship. He spoke with GGB Publisher Roger Gros in May to explain his philosophy and explain why SLS will soon become profitable. A full podcast of this interview is available at ggbmagazine.com.

GGB: Why were you brought in to lead SLS, and what did you find when you got here?

Kreeger: Well, the property had just opened

up. It was about three months into postopening, and trying to get through the trials and tribulations of typical opening. Rob Oseland, who was the previous president, had decided to take another job and work on another project, and I was just coming off my project at Revel, where I spent a year and a half doing the strategic sale process and trying to correct the business model. So, the two properties had a lot of similarities: lifestyle-oriented properties, trying to figure out the right business model to operate on, and maximize profitability.

I’d met Sam Nazarian (president of sbe entertainment, the SLS parent company) in the past, so it was just coincidence that we had just kind of concluded the auction process at Revel. Sam gave me a call, and asked me to take SLS through post-opening, and get it on the right track.

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President and COO, SLS Las Vegas

A lot of the elements of this property are reproduced from previous sbe properties in L.A. or Miami Beach. Are you evaluating whether they work here in Vegas?

Yes, we definitely are. First of all, we’re unique.

Unlike a lot of Las Vegas Strip casino hotels, we own all of our own brands on the property. So, whether it’s Bazaar Meat, or Katsuya, Cleo, the restaurants, the nightclubs, we run and operate those properties. That’s unheard of these days, where you have celebrity chefs and nightclub operators who work on lease/rent deals.

Then, we evaluated what our strengths are, and where we needed to bolster those elements, especially when we’re in a situation as a new property that’s gaining recognition. People are trying to figure us out, and become familiar with our brand. First of all, the remodel of the place is phenomenal. It’s like a ground-up build; it’s not really a remodel. And the property itself has great bones. The amenities are great, the feel in the casino is great. It’s very manageable. And it’s kind of unique; it’s truly boutique compared to the size of most Las Vegas casinos.

Let’s talk about the casino. You had a database problem in the beginning. Revel had that same problem early on—no names in the database; you start building it from scratch.

Where are you in that process?

When I got here, we weren’t where we needed to be. I have a gaming background, so we went through the fundamentals. First of all, we took a look at the loyalty program. Funny enough, the loyalty program was similar to Revel, in that it didn’t have any tiers. So there was no aspirational tier levels or benefits, in that regard.

We took a look at some of the process of being able to use your points for food—that function wasn’t available. In June, we’re launching a completely new card program, very competitive point-to-redemption ratio, more competitive than the local casinos.

Then there’s the other aspect of casino marketing, which is player development. I had the benefit of working with some incredible player development executives on the East Coast. I called them up, and asked them if they’d like to come join me here. And so, I have two of the top PD executives, and one of the top casino ops executives on the East Coast, who came and joined me here. And then we paired with one of the people who I think is one of the best local marketing people in Las Vegas. We put together a heck of a team.

In May, you experienced the first Rock in Rio, MGM’s music festival across the Strip from SLS. Two weekends of solid music. What kind of impact did that have on the property?

It was the best free entertainment I’ve ever seen (laughs). Our property is front and center.

It was just phenomenal. But it was a collaborative effort. That’s what’s nice about being on the north end of the Strip, and all of this emerging business. We’re all collaborating, whether it’s the Stratosphere guys, or the new MGM guys, Scott Menke and the Paragon Gaming group that now just announced that they’re running Westgate. We’re all working together.

Rock in Rio was one of those examples.

We shot the fireworks for Rock in Rio from the tower of SLS. So, I couldn’t ask for a better way to expose this property, being less than a year old, to the masses. Because we literally had tens of thousands of people every day coming through the property, on all four days. It was phenomenal, and the experience was amazing over there. Well-orchestrated, and the city did a great job with the traffic, and the pedestrians.

The whole experience was great, and we’re excited for MGM to make a commitment to invest $20 million in that venue, and we’re excited to continue to see that programming.

Project3:Layout 1 6/11/15 4:27 PM Page 1

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