Global Gaming Business, March 2015 by Global Gaming Business

GGB Global Gaming Business Magazine

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March 2015 • Vol. 14 • No. 3 • $10

Finding

Boyd Gaming celebrates milestone under single ownership

MAKING THE MOVE

Keeping pace with mobile gaming

Official Publication of the American Gaming Association

Due North Will casinos in other parts of New Jersey finish Atlantic City?

: N IO T EC Y & E S L RIT ANC A CI CU ILL E SP SE RVE SU

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ELVIS™ and ELVIS PRESLEY™ are trademarks of ABG EPE IP LLC. Rights of Publicity and Persona Rights: Elvis Presley Enterprises, LLC. © 2015 ABG EPE IP LLC elvis.com Unless otherwise noted, trademarks are owned by, or under license to or from, Scientific Games Corporation, or one or more of its directly or indirectly wholly owned companies, in the United States or elsewhere. © 2015 Scientific Games Corporation. All Rights Reserved.

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CONTENTS

Vol. 14 • No. 3

march

Global Gaming Business Magazine

COLUMNS

44 COVER STORY Boyd Gaming at 40 The story of Boyd Gaming is unique in the gaming industry—a consistently successful operator under a single, stable ownership spanning 40 years. Here’s how one of the few companies able to trace its lineage to one of the fathers of modern Las Vegas has done it, and how Bill Boyd has kept his legendary father Sam’s vision going through four decades.

14 AGA The Evolution of AGA Geoff Freeman

16 Fantini’s Finance Smaller is Bigger Frank Fantini

DEPARTMENTS

By Roger Gros

4 The Agenda

FEATURES

18 Getting Connected Mobile connectivity is changing the way casinos do business, and not just on the game side. By Rich Sullivan

PROTECTING THE HOUSE Our annual World Game Protection expert report on security and surveillance in the gaming industry. 26 Enter the ‘Whackers’ The newest threat to the integrity of slot machines may be the gravest yet, as hackers arrive on the slot floor. By Willy Allison

30 Mining the Data There is a growing movement to place the wealth of data available through casino systems in a reviewable and actionable surveillance “dashboard.”

22 Jersey Strong? As the meltdown of the Atlantic City casino market enters a second year, lawmakers take a new look at casinos in North Jersey, with possible Boardwalk benefits. By Marjorie Preston

62 ICE Milestone The 2015 version of London’s ICE Totally Gaming trade show and conference broke the 25,000 attendance mark for the first time. By Patrick Roberts

64 The VLT Model

By Jason Riffel

34 The Litigation Conundrum As lawsuits abound involving everything from self-exclusion to casino assaults, gaming law involving security and surveillance has evolved.

6 Dateline 13 Nutshell 60 Frankly Speaking 68 New Game Review 72 Emerging Leaders With Eilers Research’s Adam Krejcik, Paiute Palace Casino’s Roman Carrillo and Marriott International’s Travis Wolfe

76 Cutting Edge 78 Goods & Services 81 People 82 Casino Communications With Lilian Tomovich, Chief Experience Officer, MGM Resorts International

By Alan W. Zajic

38 Cyber Security Hacking incidents are spilling over from national retail chains to the casino industry, and security forces must keep pace. By Gus Fritschie

As the lottery and casino industries consolidate, the systems that run video lottery networks gain added importance.

40 Secure Tech High-resolution cameras, sophisticated software and other advancing technology aim to protect casino assets.

By Dave Bontempo

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

54 Making the Connection Paul Girvan

56 iGames News Roundup

MARCH 2015 www.ggbmagazine.com

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THE AGENDA

A Sporting Chance Roger Gros, Publisher

t’s only been a couple of years since a collection of “experts”—myself included—sat on a panel at iGaming North America, the premier iGaming show in the U.S., to discuss the timing of legal online gaming in this country. This was before iGaming was legal and operating in any state. We all basically agreed that iPoker was coming in a year or two, iGaming a year or two after that, and that sports betting in the U.S. was at least a decade away, maybe more. We were pretty much on the money with the first two predictions, but the last one… not so much. It’s been almost breathtaking with how fast the national attitude towards sports betting has changed—at least at the highest levels. The major sports leagues are still fighting tooth and nail in New Jersey to prevent that state from legalizing sports betting, but within the past few months, several of the league commissioners seem to be having second thoughts. It began with Adam Silver, the new NBA commissioner, who penned a thoughtful piece in the New York Times about why the sports betting ban was silly and outdated. Since that time, we’ve heard from Gary Bettman—whose National Hockey League is likely to become the first major sports league to locate a franchise in Las Vegas—and Rob Barnum, the new commissioner of Major League Baseball. While both stopped short of advocating for sports betting, they both indicated that the policy opposing it should be reviewed. Even U.S. Senator John McCain, the public official so diametrically opposed to iGaming—a position he has not changed—says there should be hearings in Congress on the sports betting prohibition and that tribal casinos should be allowed to take bets if it becomes legal. Remember, just a few years ago, he was angling for a full nationwide ban—even in Nevada—against wagering on amateur sports. So why this big change of heart? What has changed in the past couple of years? Let’s face it, Americans love to bet on sports. Whether it’s in the March Madness office pools or the fantasy football games that have captivated players for years, no one sees any evil in putting some of their hard-earned cash down on a game. It makes the game more interesting and gets the bettor more

Global Gaming Business MARCH 2015

involved and more knowledgeable about the sport. The one commissioner who hasn’t weighed in on sports betting is, ironically, Roger Goodell, whose National Football League has benefited from spread betting for many years and can trace the popularity of the sport to the growth of wagering. I’d also like to think that the change in attitude toward sports betting and casinos in general can be traced to the growing positive reputation of gaming in jurisdictions across America. Casino companies are part and parcel of the communities in which they are located. Casino executives and employees are friends and neighbors of everyone. The campaigns waged in the last year by the American Gaming Association surrounding the “Get to Know Gaming” program have also had an impact. And now the AGA is doubling down with the “Gaming Votes” program that will focus on educating politicians on the facts of the gaming industry, and employees on the policies of those politicians. That’s real power. Caesars Chairman Gary Loveman has long pleaded for gaming to be treated like any other industry. He thinks investors have been scared away from gaming because of the massive regulatory oversight and the slightly sinful reputation of the industry. With the consolidation on the supplier side now nearly complete—lottery companies like Scientific Games and GTECH merging with slot suppliers WMS, Bally and IGT—there is a blurring of the lines between what is very acceptable gaming—lotteries—versus some of the most shadowy kinds of gaming—casinos. How long will it be before major entertainment companies like Sony, Universal, News Corporation, AEG or Live Nation look at major casino companies and begin to see the synergies? The late MGM chairman, Terry Lanni, predicted this more than 10 years ago. It is going to happen, and more acceptance of gaming in the mainstream will only speed the process. So the coming campaign to legalize sports betting in the U.S. is, in my opinion, just the start of a process that will bring the gaming industry into the mainstream of American life. And it’s about time.

Vol. 14 • No. 3 • March 2015 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Frank Fantini | Geoff Freeman Paul Girvan Contributing Editors Willy Allison | Dave Bontempo | Gus Fritschie Alexis Garber | John Lukasik Marjorie Preston | Jason Riffel Patrick Roberts | Robert Rossiello Rich Sullivan | Alan W. Zajic

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, Director, Maryland Lottery and Gaming Control Agency

• 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. 921 American Pacific Dr, Suite 304, Henderson, NV 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. Las Vegas, Nev. 89118 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 921 American Pacific Dr, Suite 304, Henderson, NV 89014

Official Publication

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DATELINE USA march2015 Arizona Senator John McCain

Odds-On FavOrite?

McCain supports sports betting legalization, hearing in Congress

roponents of legal sports betting in the U.S. picked up a big ally as Republican U.S. Senator John McCain called for congressional hearings on the issue. McCain, a former candidate for president, said he favors allowing sports betting in any state that allows gambling. He made his remarks in an ESPN/ABC podcast that aired as his home state of Arizona was hosting the Super Bowl, the heaviest betting day in the U.S. “We need a debate in Congress,” McCain said. “We need to have a talk with the American people and we need to probably have hearings in Congress

on the whole issue so we can build consensus.” McCain said he also favors allowing Indian tribes that run casinos to offer sports betting. But McCain also came out against online gambling and sports betting over the internet. McCain also addressed Nevada’s exemption under current federal law that allows it to offer a true sports book when he was asked why Nevada should have sports betting and nobody else. “I think you have an excellent point, and that’s why it is a national issue,” he said. “I think that there is a place for sports gambling in states

Christie’s Connection State takes over Atlantic City ew Jersey Governor Chris Christie made a big move to help turn struggling Atlantic City around by appointing an emergency management team to develop a financial plan for the resort, which is reeling from the closure of four casinos and a steadily shrinking casino ratable base. New Jersey Governor “I can’t wait any longer,” Christie said. “We need Chris Christie more aggressive action. We are digging out of an enormous hole. It’s time to confront the dire circumstances with which we are confronted.” Christie made the announcement at the third summit he has held with casino executives, business leaders, union leaders and state and local officials to find strategies to help the resort. Christie named Kevin Lavin, a corporate finance attorney who specializes in helping troubled companies, to reconstruct the daily operations and finances of the city. Christie also named Kevin Orr, a former corporate bankruptcy lawyer who led Detroit through its municipal bankruptcy, as a special counsel to Lavin. Christie made the appointments under an executive order using laws put in place when the state moved to take over operations of Camden about 13 years ago. But officials stopped short of calling the Atlantic City move a state takeover of the city. Under the executive order, the management team is to produce a turnaround plan within 60 days “to place the finances of Atlantic City in stable condition on a long-term basis by any and all lawful means.” Officials expect it will take about 90 days to implement the plan and then 90 days to see results.

Global Gaming Business MARCH 2015

where gambling is legal.” McCain’s comments came as the American Gaming Association estimated that $3.8 billion was bet on the Super Bowl game, played this year in Glendale, Arizona. Geoff Freeman, president of the association, was also interviewed on the podcast, and pointed to those numbers as showing that the country’s current law on sports gambling “is not working.” Freeman also called for an open debate on sports betting. “From a casino industry perspective, we’re not sure what the right solution is here. How do we

figure this out?” Freeman said. “This is a discussion we are having internally in this industry, and that’s a discussion that needs to happen.” Sports betting is banned in the U.S. under the 1992 Professional and Amateur Sports Protection Act in all but four states, which were grandfathered for offering forms of sports betting before 1992. However, only Nevada offers a true sports book. McCain and Freeman’s comments come after National Basketball Association Commissioner Adam Silver called for expanding legalized sports gambling in an editorial in the New York Times in November.

GOLDEN OPPORTUNITY Lakes Entertainment purchased

olden Gaming, a dominant slot machine route operator in Nevada, announced last month it will merge with Lakes Entertainment, a Minnesotabased gaming operations company. The company will Lakes Entertainment be called Golden Entertainment, and will transition into a publicly traded corporation. Golden Entertain- CEO Lyle Berman ment will be traded on the Nasdaq and replace Lakes’ current listing. Blake Sartini, CEO of Golden Gaming, will serve as CEO and chairman of the new company. “I think the most impactful thing that we can do quickly is get into a much more efficient capital structure,” Sartini said. “As a private company, you’re limited with investments.” Sartini is confident with the new company going public, more opportunities will be available than ever before. Lakes Entertainment is led by three-time World Series of Poker champion Lyle Berman, the founder of Grand Casinos, a startup tribal gaming operator in the early ’90s that is now part of the Caesars Entertainment empire. Berman will join the board of the new corporation and sign a three-year consulting agreement. Golden Gaming operates about 8,000 machines in approximately 600 locations throughout Nevada. With the merger comes the acquisition of Lakes-operated Rocky Gap Casino Resort in Maryland. Rocky Gap drew $43.2 million in gaming revenue in 2014, and features a 200-room hotel and the only Jack Nicklaus Signature golf course in Maryland, along with a casino with 10 table games, a poker room and 500 slot machines. Sartini loves the location, and the fact 10 million people are situated within a three-hour radius. “The property was very attractive to our current portfolio,” he said.

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DATELINE ASIA march2015

Island IteratIon

Phu Quoc Island

Vietnam OKs Phu Quoc Casino, inches toward dropping locals ban

casino resort complex may be developed at Phu Quoc Island in the southern Vietnamese province of Kiên Giang. A new casino resort was initially proposed in 2007; if it comes to fruition, it will be part of a larger tourism and entertainment complex. According to some reports, the project will require foreign investors who are willing to spend at least US$4 billion. But so far, investors aren’t lining up, reports the Tuoi Tre News. “There were previous plans to construct tourism centers that include casino components,” said Huynh Vinh Lac, of the People’s Committee of Kien Giang Province. “But the process of calling

South Korea Adding More Casinos

for investment from international channels yielded no results for many reasons. This time, the local administration is expected to ask relevant state agencies to choose a local investor.” In its plan to develop Phu Quoc island into a special economic zone, the province has set aside an area of 30,000 square meters for casinos with 200 to 400 roulette tables and 2,000 gaming machines, in addition to conference centers and a 3,000-room, five-star hotel. The Ministry of Planning and Investment and Kien Giang provincial authorities will accept bids and oversee construction of the project; the casino portion will be licensed for 30 years. Vietnam has several casinos, but bars Vietnamese people from gambling unless they hold foreign passports. Now the country’s government is considering a change in the law that would allow citizens to enter casinos.

Don’t relax investor qualifications, warns paper

Junket Firms Exiting Macau Gold Moon to close room at Sands Cotai

O Genting will operate a casino at the Hyatt Regency Jeju Hotel

y the end of the year, the government of South Korea will issue two new casino licenses to investors willing to spend a minimum of KRW1 trillion (US$923 million) to develop there. Officials have already approved two licenses for foreigners-only gaming halls. One went to Caesars Entertainment and Hong Kong-listed Lippo Ltd., and one to Paradise Co. Ltd., in partnership with Japan’s Sega Sammy Holdings Inc. and possibly SJM Holdings Ltd., Macau’s leading operator. The first two casinos, based in Incheon, are expected to open before the XXIII Winter Olympics, to be held in Pyeong Chang in 2018. The Korea Herald reports that South Korea is now the third most popular destination for mainland Chinese tourists after Hong Kong and Macau. That figure is expected to reach 6.1 million by the end of this year, up about 40.9 percent from 2013. The number grew by more than half from 2012 to 2013. A partnership of Genting Singapore, developer of the Resorts World Sentosa Casino, and Landing International Development Ltd., a mainland China property developer, hopes to break ground this year on a US$2.2 billion integrated resort project on the vacation island of Jeju. Landing International just announced the grand reopening of a renovated casino at the Hyatt Regency Jeju Hotel; it controls the resort, and the casino is owned by Grand Express Korea Co. Ltd., a joint venture with Genting Hong Kong Ltd., which invested KRW130 billion (US$117 million) in the project. The foreigners-only casino at the Hyatt Regency Jeju Hotel will operate under the name Genting Jeju. It has 26 baccarat tables, one blackjack table, one tai sai (sic bo) table, one roulette table and 16 slot machines.

ne of the premier junket operators in Macau may exit the marketplace for good—another sign of a sharp decline in the world’s No. 1 gaming market. Junket operator David Group is in the process of shutting down three of its seven VIP rooms in Macau and consolidating operations in the rest. The company “will seek to shut down its VIP rooms in an orderly manner and in several phases over the next few months and will seek to collect all debts outstanding,” according to a January 15 note from Japanese financial house Nomura. The David Group itself said the three rooms closed at the end of January. David Group launched operations in Macau in 2004. Last year it closed VIP rooms in the Venetian Macao and City of Dreams, but continues to operate rooms at Wynn Macau, MGM Macau, Galaxy Macau and elsewhere. Nomura estimates that the junket operator’s market share is between 3 percent and 5 percent of total VIP rolls in Macau, “making it one of the top 10 junkets in Macau and repre-

Macau’s City of Dreams

senting approximately MOP200 billion (US$25 billion) to MOP300 billion in value terms.” Clients must put up HK$100,000 (US$13,000) to open an account. Consolidating its business in fewer rooms will allow the David Group to expand overseas, the firm said in a statement. It will cease operations at Four Seasons, a property of Sands China Ltd., and at L’Arc, a casino operated by a third party under the gaming license of SJM Holdings Ltd., as well as its room at the MGM property. Another gaming promoter, the Gold Moon Group, recently confirmed to GGRAsia that it’s closing its VIP room at the Sands Cotai Central resort, which has hosted high rollers since 2012.

MARCH 2015 www.ggbmagazine.com

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DATELINE GLOBAL march2015

Sri Lanka to Packer: Get LoSt

Nepal OKs New CasiNO OperatOr Slow revival of a dormant industry

Prime Minister: “Only good investors” welcome

ith the news that Sri Lanka has prohibited new casinos in Colombo, Crown Resorts Inc. is shelving a plan to develop a five-star resort on the south Asian island. Sri Lanka has banned casinos in mixed developments in the nation’s capital and largest city, Prime Minister Ranil Wickremesinghe told the nation’s parliament on January 29. The government also told Crown CEO James Packer he is unwelcome in the country, according to a report in the Daily Mail. The prime minister also extended a dis-invitation to Packer. “Packer says he will not come. Who asked you to come?” Wickremesinghe said in a statement released by his office. “Please don’t come—not in this lifetime. “We need only good investors,” Wickremesinghe added. “We don’t want an economy relying on casinos.” The PM added that developments without gaming are welcome. “They can conduct all other activities,” he said. President Maithripala Sirisena was elected in January thanks in part to strong support from Sri Lanka’s

Crown CEO James Packer Shangri-La Hotel & Resort in Kathmandu

influential Buddhist monks, who opposed plans to bring gaming to Colombo. The new president wasted no time canceling the 5 percent tax rate promised to Packer to build the 450-room resort and two other foreign-backed developments. The Mail reports that a handful of “local, lowkey casinos” have quietly operated for decades in Sri Lanka. The future for them now seems unclear. In January, Finance Minister Ravi Karunanayake said those casinos have until mid-April to pay a flat fee of 1 billion rupees (US$7.6 million) to remain in business. Crown issued a statement saying it “respects the Sri Lankan government’s decision. On that basis our project will not be going ahead.”

Baha Mar to Open in March Opening will miss the high season in the Bahamas he Baha Mar Resort, the $3.4 billion project that is the largest gaming-related project in the Bahamas, will open three of the four planned luxury hotels in the complex in late March, according to owners. The resort, the largest hospitality project in the Caribbean, will open its fourth luxury hotel, the Grand Hyatt at Baha Mar, on May 1 and will stage a grand opening ceremony for the overall project that month. The resort will feature a total of six hotels, including the existing Wyndham Nassau Resort and Sheraton Nassau Beach Resort, which were made part of the sprawling complex along 1,000 acres of Nassau’s Cable Beach. The Wyndham is closed at present, its building serving as a training center for a workforce that will total more than 4,000 at full build-out. The resort, funded largely by a Chinese bank

Global Gaming Business MARCH 2015

and built with the help of more than 4,000 Chinese laborers, is behind schedule—it originally was planned for a December 14 opening—and will miss most of the Bahamas’ busy winter high season. Robert Sands, a senior vice president for Baha Mar Ltd., told the Miami Herald the timeline was extended because executives want to be sure they can offer “the complete luxury product” when Baha Mar opens. “We want to provide a full luxurious experience,” he said. “Our state-of-the-art casino will match what you would find in Las Vegas, Macau or Singapore.” The China Construction Engineering Corpora-

ilver Heritage Ltd. of Hong Kong has been named the new operator of the Shangri-La Casino in Kathmandu. The Nepalese Ministry of Culture, Tourism and Civil Aviation issued a special license to the company in early February, when gaming actually commenced. The Shangri-La was previously operated by Malaysian company Star Management. It was closed in the wake of labor unrest, as well as restrictive government oversight. Nepal’s casino industry has been in turmoil since 2013, when the government ruled that casinos must pay annual royalties amounting to NPR40 million (more than US$400,000). When casino operators balked, the amount was decreased to NPR30 million in 2014. The fee reduction didn’t work, and last April the Nepalese government declared all casinos illegal because they fell behind on their payments. Since then, a number of venues have shut down, throwing thousands of people out of work and putting a dent in the region’s tourism industry. There has also been some interest in reopening the Everest Casino at the Hotel Everest. A gaming venue in Soaltee is also expected to resume operations. tion is the main contractor for the project, and has a $150 million equity stake in Baha Mar. The Export-Import Bank of China financed $2.4 billion of the project. In addition to Miami and other Caribbean feeder markets, Chinese tourists will be among the main marketing targets of the resort. New regulations that went into effect in November will add to Baha Mar’s offerings. The rules now allow internet and mobile gaming, as well as in-play sports and proxy betting, all expected to attract high-rollers to the resort’s 100,000-square-foot casino, the largest in the Caribbean. The gaming license for the casino will be transferred from the existing Crystal Palace Casino inside the Wyndham. The future of that casino, along with that of the Wyndham itself, will be decided after Baha Mar is fully open, according to executives.

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DATELINE TRIBAL march2015

Wisconsin Governor Scott Walker

Walker rejects Wisconsin casino Menominee Tribe now faces uncertain future

he long path to a new casino for the Menominee Tribe of Wisconsin came to an abrupt end last month when Governor Scott Walker refused to approve the $800 million facility that had already been given the green light by the Department of the Interior. The tribe has been attempting to build the casino for years at the site of the former Dairyland Greyhound Park in Kenosha, and had reached an agreement with Hard Rock International, owned by Florida’s Seminole Tribe, to brand and operate the facility.

The Forest County Potawatomi have been opposed to the casino, fearful that it would siphon off much of the business at its Milwaukee casino, which it recently expanded to include a large hotel. The Menominee Tribe had pledged to cover any losses suffered by the Potawatomi, who negotiated a compact with Walker that outlined how that would happen, only to see the Indian Affairs division of the Interior Department reject the company. One week earlier, the state of Wisconsin and the Menominee Tribe had agreed to a new gambling

NEW MOON

$70 million renovation to Choctaw casino complete

fter six years, the $70 million renovation at the Golden Moon Hotel & Casino at Pearl River Resort in Philadelphia, Mississippi, was completed and revealed to the public on January 31. Mississippi Band of Choctaw Indians Tribal Chief Phyliss J. Anderson said, “When our investors had confidence in our performance at the Pearl River Resort, this enabled them to invest in our future with us as partners.” The operaOfficials of Choctaw tribe celebrate the ribbon-cutting tion refinanced its debt last year, borrowing another $75 million for renovations. Architecture group Marnell Companies of Las In 2009, the Choctaws cut Golden Moon’s Vegas designed the renovation, with input from hours to weekends only, due to the recession and Gagnon and players. “A lot of this had to do with competition. The following year the tribe closed feedback from our customers,” Gagnon said. “We the Golden Moon and turned it into a concert went to other markets and asked why they weren’t venue. The original Choctaw casino, Silver Star, playing with us anymore. Our current players were which opened in 1994, remained in operation adamant they needed to see the Golden Moon across the street on Mississippi 16. In fact, said back because they missed it so much.” Pearl River President and Chief Executive Officer The remodel features a new 70,000-squareHolly Gagnon, “If you want to change your luck, foot gaming floor with 1,150 slot machines, 25 you just walk across the sky bridge.” table games, an elevated 14-table poker room, a Gagnon and other managers took over in one-of-a-kind video wall and a new center bar. mid-2012, and since then Moody’s said casino Marnell also designed a dramatic architectural ceilprofitability has improved. Gagnon said that’s ing treatment to create a more intimate atmosdue to “better marketing, better negotiating, bet- phere, warm cove lighting, decorative fixtures and ter operating.” special carpeting that incorporates Choctaw motifs.

Global Gaming Business MARCH 2015

compact regarding a possible Kenosha casino. The new agreement would have required the Menominees to pay the state 7.5 percent of its winnings from the new casino for 25 years, which could have amounted to $1 billion. In addition, if the rival Ho-Chunk Nation and Forest County Potawatomi’s casino payments fell below $37.5 million in a fiscal year, the Menominee would have covered the difference. In a letter to Assistant Secretary of Indian Affairs Kevin Washburn, Walker stated the compact was negotiated “in an effort to help define the potential economic and fiscal impact of the proposed Kenosha casino.” He added the compact “in no way indicates whether I support or oppose Menominee’s proposal for a casino in Kenosha, Wisconsin.” Menominee Chairwoman Laurie Boivin said the proposed payments would have more than covered any losses the Potawatomi and HoChunk tribes experience at their casinos due to the Menominee’s proposed Kenosha casino. “Governor Walker now has a clear path to approve the Kenosha project and reap the benefits of $1 billion in revenue share for the state budget,” she said after signing the deal. At that time Walker said, “Bottom line, we’re still trying to work with all the interested parties to get to a point where the state doesn’t lose out on $100 million or more because of the compacts of Jim Doyle. And that’s still our biggest stumbling block.” Walker was referring to the compact signed under former Governor Jim Doyle’s administration, which said the state is responsible for reimbursing tribes for revenues lost as a result of the opening of competing casinos. The Potawatomi also contended that the Doyle compact required the state to refund hundreds of millions in back payments if the new casino goes through. The tribe already has withheld $25 million from the state out of concern Wisconsin could end up owing them. Wisconsin Department of Administration Secretary Mike Huebsch wrote in a memo to Walker that the compact will not protect the state if the Potawatomi decide to challenge the new casino in court.

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DATELINE EUROPE march2015 The Oracul Casino in Azov City will close by April

Russian Roulette

Government wants to make the most of Sochi and Crimea investments

he Russian government plans to close down three casinos in the Azov City gambling zone in the Krasnodar Krai region by April 1, reports the news agency Tass. The action is meant to help develop gambling in the country’s other three gaming zones, especially the Sochi region, home of the 2014 Summer Olympics. Both the Sochi region and the former Ukrainian province of Crimea were designated as new gaming zones in July 2014 by the Russian legislative body Duma, reported the news site. Last June, the Krasnodar government said the three casinos in its zone—the Oracul, the Shambala and the Nirvana—have been doing well since they opened in 2010. Sources say the casinos, which drew just 45,000 visitors in 2010, attracted 128,000 visitors during the first five months of 2014. Russia’s Ministry of Finance said it would pay the trio of casinos “at least” 10 billion rubles (US $145 million) to compensate for the closures. The Royal Time Group, which operates the Oracul facility, just invested 1.5 million rubles in a new hotel at the property and had begun development of a

Olympic Casino Coming to Malta Opening set for late 2015 den Leisure, recently granted a concession to operate a casino in Malta, will partner in the deal with Olympic Casino, the largest provider of gaming services in the Baltics. Olympic operates Olympic Chairman 97 sites in seven countries, reported the Armin Karu Times of Malta. “We negotiated with several of the top European management companies and settled on Olympic as the preferred operator for our casino,” said Eden Executive Chairman Ian De Cesare. “We found that our companies had a similar ethos in that they provide a focus on customer service, entertainment and the overall experience of the customer. They were clearly highly experienced in the field and had a wealth of experience, and they believed in the project.” Casino Malta by Olympic will be the largest casino in Malta with some 2,700 square meters (29,000 square feet). The project is expected to cost about €10 million (US$11.4 million) and will open by the end of this year. It will have more than 250 slot machines, about 30 table games and a sports betting section. Armin Karu, chairman of the board of Olympic, said the expansion into Malta is important to the company. “We have been looking for good opportunities to expand to popular holiday destinations for several years now, and today we took a large step forward in making our expansion plans come true,” Karu said.

Global Gaming Business MARCH 2015

concert and entertainment complex, slated for completion by the third quarter of 2015. The loss of its investment there may lead Royal Time to migrate to the Primorye gambling zone near Vladivostok. The regional government there has signed investment agreements worth more than $1 billion with Cambodia-based NagaCorp, Hong Kong-listed Melco International Development and the First Gambling Company of the East. The Primorye region is home to a gambling zone that ultimately could include 16 hotel-casinos on a territory that covers 620 hectares (more than 1,500 acres). The Siberian Times says the zone will “tempt wealthy Asian tourists away from the traditional destinations in China and the U.S.” The new legislation forbids any operator from doing business in the area outside Sochi, which is also in the Krasnodar region, the Moscow Times reported. The law was “created in an attempt to ensure that massive spending on Sochi’s infrastructure for the 2014 Olympics did not got to waste, and has yet to lead to any firm plans to build gambling facilities in Sochi.”

U.K.: When the FUn StopS Big Four bookies want broader ad restrictions

ritain’s four biggest bookmakers, who launched a voluntary campaign last year to reduce incentive-based advertising and educate the public about problem gambling, reportedly want smaller players to join them by government mandate, if need be. Seeking to avoid “an un-level playing field,” executives from Coral, Ladbrokes, Paddy Power and William Hill recently met with Helen Grant, U.K. gambling minister. They reportedly requested that the government compel all bookmaking operations to follow the guidelines they created for themselves. Through an industry watchdog called the Senet Group, created by the four companies, they announced they would no longer run ads that offer free play before 9 p.m., and also include information about compulsive gambling in their ads. One advertising campaign funded by the industry uses the tagline, “When the fun stops, stop.” Some observers believe the self-policing effort was a way for the companies to sidestep greater government regulations. The Big Four hope smaller companies such as Victor Chandler and Bet365 will be made to abide by the same restrictions. FOBTs in a William Hill shop in London

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NUTSHELL The acquisition of leading slot manufacturer International Game Technology by Italian-based lottery giant GTECH S.p.A. soared toward closing with several developments last month, as the slot-maker’s shareholders overwhelmingly approved the merger and GTECH secured final financing for the $6.4 billion takeover. At a special meeting of its shareholders held February 10, more than 99 percent of IGT shareholders approved the previously announced Agreement and Plan of Merger under which Georgia Worldwide Plc, a public limited company based in London, will serve as a holding company for both former organizations. The same day as the vote, GTECH Holdings announced that it has completed $5 billion in high-yield financing needed to complete the IGT buyout. Attorney General nominee Loretta Lynch, asked about federal policy on internet gaming during her U.S. Senate confirmation hearings, took a pass on stating an opinion. Asked specifically about the 2011 Department of Justice legal opinion that online gaming, other than sports betting, is legal, Lynch said although she is “generally familiar” with the decision, she will not give an opinion on it before she has read it thoroughly. Success Universe Group Ltd., formerly Macau Success Limited and operator of the Casino Ponte 16, has expressed interest in acquiring a gaming license of its own, according to Executive Director Hoffman Ma Ho Man. “If there’s an open bid for the gaming license, for sure we’ll be interested,” said Ma, who is also deputy chairman of the company. Casino Ponte 16 is one of SJM’s 14 satellite casinos. A new study funded by the British Columbia Lottery Corp. shows that problem gambling in the province has decreased over the past seven years. The same study concluded that younger people are at a higher risk of becoming problem gamblers. The 2014 Problem Gambling Prevalence Study, conducted by Malatest & Associates Ltd. and released at the at a responsible gambling conference hosted by the lottery, found that approximately 34,000 fewer people experienced gambling problems in 2014 than seven years earlier. The study also found those in the 18-to-24-year-old age group were the least likely to gamble but the most likely to become problem gamblers. According to the study, 62 percent of youth surveyed said they gamble in some way, but 25.7 percent of those identified themselves as either at risk or problem gamblers. In December the DeKalb County, Georgia commission

approved a zoning change to allow 23 empty condos and ground-level retail space in two five-story buildings in South DeKalb to become the Panola Slope resort, featuring a “barcade” for adults, said developer Vaughn Irons. He also has applied for a special land use permit allowing Panola Slope to operate 24/7 and serve alcohol until 2 a.m. Irons said the resort would create 130 jobs and generate more than $46 million in economic impact in the first year, with rental villas, three restaurants, an outdoor entertainment venue, meeting spaces and retail—plus 400 video gambling machines including slots, video poker, a virtual roller coaster and golf and military simulators, offering as prizes vouchers for dinners or on-site lodging. Ontario Premier Kathleen Wynne is pushing a change to sports betting rules to allow more types of wagers. Currently, sports betting through the Ontario Lottery is restricted to parlay bets on three games at a time. Wynne said legislation liberalizing sports betting rules is long overdue. She said it would be to the “benefit of the gaming industry,” but Liberal Leader Justin Trudeau responded that he has no indication how quickly Ontario’s Senate will move on the issue. “I don’t get to hurry them or push them,” he said. “I am sure that they are taking the responsible amount of deliberations, but I did say that I encouraged legislators of all different types to address issues in a responsible and forthright manner.” California Governor Jerry Brown has signed a state tribal gaming compact with the Jackson Rancheria Band of Miwuk Indians, operators of Jackson Rancheria Casino, updating the original 1999 compact. According to a press release by the tribe, the compact reflects “the evolving nature of financial markets, as well as the professionalism of the tribe’s regulators and their constructive relationship with state gaming regulators.” It also reflects the philosophy of Brown in relation to licensing, compliance enforcement and mitigation of off-reservation gaming impacts. It provides for revenue sharing with Amador County and other local government entities. Hard Rock International, partnered with All-Inclusive Collections, plans to open a four-hotel resort in Mexico, at Cancun. The partners placed a foundation stone on January 19. The hotel will be adjacent and surrounded by the Riviera Cancun golf course. Hard Rock operates a hotel in the Dominican Republic and three in Mexico, for a total of 185 in 57 nations.

“They

Said It”

“China remains a big question mark. We have more questions than answers.” —Steve Wynn, Wynn Resorts chairman, speaking about Macau’s declining gaming market, and what that might mean for Wynn Resorts

“This discussion has been going on for six years. Time is of the essence. Hundreds of millions of dollars are leaving the state. That’s a huge market that we’re all losing out on.” —Cody Martinez, chairman of the Sycuan Band of the Kumeyaay Nation, operators of Sycuan Casino, calling for legalization of online poker in California

“We both have legendary fathers and we both have these massive legendary shadows. I think that causes both of us to have the same view in terms of having to work harder, be more determined and try to be better. My father is a great man that has done a lot for Macau.” —Lawrence Ho, co-chairman with James Packer of Melco Crown, on their fathers, Macau gaming legend Stanley Ho and his Aussie counterpart, the late Kerry Packer

“Sometimes I feel like Rodney Dangerfield. I get no respect.” —Jeff Gural, owner of Tioga Downs, on failing to receive the fourth casino license for upstate New York

“The challenge for the operators this year and next and beyond will be trying to find out: What does the customer want other than the table game?” —Gaming analyst Grant Govertson of Union Gaming Research, on Macau’s drop in VIP play in the wake of China’s anti-corruption crackdown

CALENDAR March 2-4: World Game Protection Conference, M Resort, Las Vegas. Produced by World Game Protection Inc. For more information, visit worldgameprotection.com. March 18-19: Caribbean Gaming Show & Summit, Caribe Hilton, San Juan, Puerto Rico. Produced by C&GS Group. For more information, visit caribbeangamingshow.com.

March 30-April 2: Indian Gaming 2015, San Diego Convention Center, San Diego. Produced by the National Indian Gaming Association. For more information, visit indiangaming.org. April 14-16: iGaming North America 2015, Planet Hollywood Resort & Casino, Las Vegas. Produced by the Innovation Group, BolaVerde Media, Lewis and Roca LLP and eGamingBrokerage.com. For more information, visit iGamingNorthAmerica.com.

April 21-23: GiGSE 2015, Hyatt Regency, San Francisco, California. Produced by Clarion Gaming. For more information, visit gigse.com. May 5-8: La Fleur’s 2015 Lottery Symposium & Retailing Summit, Capitol Hilton, Washington D.C. Produced by La Fleur’s magazine. For more information, visit lafleurs.com. May 5-7: Southern Gaming Summit, Mississippi Coast Coliseum & Convention Center, Biloxi, Mississippi. Produced by BNP. For more information, visit sgsummit.com.

“I’ve never been betted on before. I feel like, ‘Wow, nobody has ever invested in me this much.’ This is exciting.” —Singer Katy Perry, commenting on Las Vegas prop bets on what hair color she would don for the Super Bowl halftime show

“If this gets done, and it’s a big if, it’s going to be a yearlong process. It’s not a bill that’s just going to be amended a little bit. It will be amended at every committee stop, and it would probably appear in six committees before it is passed.” — Assemblyman Mike Gatto, author of a bill that would legalize online poker in California

MARCH 2015 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION

The Evolution of AGA Targeting effective representation of the entire gaming industry—and its allies By Geoff Freeman, President & CEO, American Gaming Association

o far, 2015 has been momentous for the American Gaming Association. The addition of new members, promoting the positive benefits of gaming and highlighting inefficient policies and regulations with key stakeholders help achieve the year’s strategic priorities to create unity, support industry growth and shape a new policy environment. At the core of this year’s focus are principles to increase inclusivity and transparency. We believe that the gaming industry will be stronger working together than it’s ever been before.

REPRESENTING THE TOTALITY OF THE INDUSTRY The first week in the new year, we were pleased to welcome nine new members: Ainsworth Game Technology, CG Technology, Electronic Transaction Systems, FinScan, Greenwood Racing, Konami Gaming, Las Vegas Convention and Visitors Authority, Seminole Hard Rock Gaming and William Hill. These new members joined as part of AGA’s new membership structure, which allows us to better represent the totality of the gaming industry. The new structure has two distinct categories of membership: • Core Members: Licensed and regulated casino gaming operators—both commercial and tribal—and suppliers that comply with the AGA’s Code of Conduct and meet requisite dues requirements; and, • Ally Members: Industry allies, such as financial service institutions, providers of non-gaming amenities and destination marketing organizations.

This new structure gives a voice and a “seat at the table” for a more accurate reflection of the industry. Issues that impact core casino gaming companies also impact ally companies that are dependent upon casino gaming. It’s time we work together to advance our collective interests on these issues of common cause.

Global Gaming Business MARCH 2015

DELIVERING A POSITIVE ECONOMIC IMPACT Combating casino gaming critics and pushing back against tired stereotypes is a prime area where we are better equipped to make progress by working together. The launch of AGA’s “Get to Know Gaming” campaign in 2014 focused on the economic impact of casino gaming in the U.S. Moving forward, we aim to unite the people of the industry, both jobs of the AGA’s core membership—casino gaming, supplier and manufacturer jobs—and ally members—financial and professional service providers, businesses that supply goods and services to casino gaming companies and more. We look forward to working together to promote the value of gaming and our industry’s positive impact on communities across the country, and to encourage stakeholders to think about the jobs and people that make up the gaming industry in an entirely new light.

“

We look forward to working together to promote the value of gaming and our industry’s positive impact on communities across the country, and to encourage stakeholders to think about the jobs and people that make up the gaming industry in an entirely new light.

”

INFLUENCING FORWARD-THINKING POLICY Touting these positive stories and the authoritative research supporting them is a key driver for making the case that gaming should be viewed as a critical component of a larger economic development strategy. With this mindset, the AGA is encouraging policymakers to work with our industry as partners and to consider modernized regulation and policy reforms that allow the gaming industry to innovate, reinvest and continue to support good-pay jobs to more than a million Americans. Within the first 30 days of the year, we have directly addressed: • National Conference of State Legislatures • National Council of Legislators from Gaming States • Democratic Attorneys General Association • U.S. Conference of Mayors New Orleans Mayor Mitch Landrieu validated the gaming industry in his comments to peers, emphasizing gaming as a strong community partner and casino gaming as a “net positive to his city.” AGA is committed to engaging those who influence the gaming industry the most. To this end, we have also shared our perspective and insight on key policies related to responsible gaming and the resource GamingByTheBook.org with legislators in Indiana as they revisit gaming policies, and the Massachusetts Gaming Commission as they develop responsible gaming policies for the state. Gaming is no longer niche and novel. Our industry is responding to new realities of market competition and shifting demographics, and demands of our customer base. We must constantly tout our industry’s success stories and tirelessly encourage public policy to evolve for the gaming industry to thrive, create jobs and continue to strengthen local communities. By working together to support industry growth, I am confident that we will shape a new regulatory and policy environment for gaming.

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FANTINI’S FINANCE

Smaller is Bigger Smaller, regional operators are turning around their fortunes as people begin to spend again.

ourth quarter earnings report season has ended, and, for the first time in years, regional casino companies had good news to share. December and January gaming revenues were ahead of the previous year. Some of that was thanks to better weather. But a lot of the improvement was customers finally returning to casinos. With consumer sentiment at its highest level in years, it appears that more people are ready to spend on experiencing a good time. That news has reached investors. As of this writing, stocks of Penn National, Boyd, Isle of Capri and Monarch are at or near 52-week highs. Better-than-expected performance prompted analysts to raise earnings forecasts and target prices on PENN and Gaming and Leisure Properties. And with casino companies having reduced their cost structures, higher revenues should significantly increase profitability. Their stocks have a lot of room to run in that environment. There also is a fair amount of companyspecific good news. Isle of Capri has enjoyed impressive revenue growth, up now four straight months. Golden Nugget debuted in Lake Charles in December and the Boyd, ISLE and PNK properties there did just fine as the new resort opened with barely a nibble of cannibalization. That is especially good for PNK, given concerns that the Nugget would hit hard at its L’Aberge casino. Instead, former PNK CEO Dan Lee’s premise for building adjacent upscale resorts might prove true—it grows the market. Then there is investor buzz over PNK spinning its real estate off into an REIT and BYD considering the same. Monarch serves two underappreciated markets, Reno and Denver. It isn’t too far fetched to say that Reno will become a boom town with Tesla moving in, Apple there and the outdoors lifestyle that

Global Gaming Business MARCH 2015

By Frank Fantini

could prove compelling to Silicon Valley types now that Elon Musk and Apple have given their imprimatur. In Colorado, MCRI is renovating its Monarch casino and, more important, plans a luxury quality hotel that it thinks can generate the kind of EBITDA done by Ameristar, the only other full resort property in Black Hawk. That would mean $60 million a year, a game-changer for a small company. PNK, PENN, BYD and even ISLE get a lot of ink as the biggest regional operators, but there are some small names that have fallen out of favor and are unlikely to grab as much attention in the recovery. They have lots of numbers in their reports that aren’t pretty, but each is small enough that a turnaround in their stock prices can happen quickly. And all have stocks well below their highs. Here are a few observations about them: • Full House has challenges in each of its markets. But can anyone doubt that Dan Lee won’t bring material operational improvement to FLL now that he is CEO? His track record at taking over a then-very-troubled Pinnacle is a hint. Lee has offered a couple more hints in his early days at FLL. In Mississippi, he has made some quick modifications to the hotel being built at Silver Slipper casino that his investment group had criticized. Though the $30 million hotel is nearly complete, Lee is adding nine high-roller suites at the casino, which is the closest Gulf Coast property to New Orleans. He also has hired his longtime investment relations director at Pinnacle, Lewis Fanger, away from the same role at Wynn to become CFO at Full House. • Lakes Entertainment’s strategy has always been somewhat fuzzy, but that has recently changed as Lakes is merging with Golden Gaming to form Golden Entertainment, a new publicly traded company. LACO had simplified its operations and finances in recent years under founder-CEO Lyle Berman, and its new Rocky Gap casino in West-

ern Maryland is catching on. Now, with Golden CEO Blake Sartini stepping in to replace Berman, who will remain a major shareholder and board member, the company will get both youthful ambition and geographic and business-line diversity. Golden operates a network of successful taverns with limited licenses, and slot routes and small casinos in Nevada. More important, Lakes brings more than $70 million in net cash, thus providing the financial wherewithal for Golden to expand. • Eldorado Resorts is another small Nevada casino operator that has gotten geographic diversity through merger. The Reno-based casino operator merged with MTR Gaming to become a publicly traded operator of casinos in Ohio, Pennsylvania and West Virginia, as well as its casinos in Reno and Shreveport, Louisiana. One caution is debt, but ERI intends to pay that down rapidly. ERI also has steady leadership under major shareholder and CEO Gary Carano, has the coming Reno boom, and has the proven ability to improve margins in the kinds of markets MTR occupies. These companies are so small that they have limited analyst coverage—Chad Beynon of Macquire being one exception. He covers ERI and FLL. Likewise, institutional investors stay away from them because of their low trading volume. The low level of institutional investment means they aren’t there to drive up the stock prices. But the lack of analyst coverage can be a positive for individual investors if they do their homework, find that the story works for them, and can jump in before the big players on Wall Street. 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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Going Mobile How mobile connectivity will change the casino industry—and what you can do about it By Rich Sullivan

n 1965, the 36-year-old director of research and development at Fairchild Semiconductor was asked to write an article for Electronics magazine, in which he was to project the future of semiconductors. So Gordon Moore sat down and wrote a paper titled Cramming More Components Onto Integrated Circuits. In very plain language, Moore predicted that “integrated circuits will lead to such wonders as home computers—or at least terminals connected to a central computer—automatic controls for automobiles, and portable communications equipment.” At the risk of oversimplifying quantum mechanics, he postulated that the number of transistors on a computer chip would double every 24 months. In other words, Moore expected computers to become exponentially faster and take up less and less space. His hypothesis ultimately became what is known as “Moore’s Law.” And,

Global Gaming Business MARCH 2015

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According to SuperData, a group that tracks trends in online games, 2014 global revenue for mobile games reached approximately $21 billion, and social casino games represent the fastest-growing genre in the space, estimated to rake in $4.4 billion in 2015. Considering this figure includes very little (if any) real-money play, one can quickly conclude that the competition isn’t going to stay confined to the bricks and mortar in one’s immediate geography.

while debated by experts in the field of computing, this principle has held up over the past 50 years of technological innovation. Today, there is probably no more visible outward sign of Moore’s prognostic prowess than the seemingly ubiquitous smart phone. In its 2014 presentation “Mobile is Eating the World,” Menlo Park-based venture firm Andreessen Horowitz notes: “A new iPhone CPU has 625 times more transistors than a 1995 Pentium,” and during the weekend the iPhone 6 launched, “Apple sold 25 times more CPU transistors than were in all the PCs on Earth in 1995.” Currently, there are more smart phones and tablets than desktop computers, and it is estimated that by 2020, 80 percent of the adults on the planet will have a smart phone. The fact that everyone is walking around with a supercomputer in his or her pocket (or soon enough on his or her wrist) should do two things: make Gordon Moore feel pretty smart and eliminate all questions as to whether or not you need to be thinking about mobile connectivity as it relates to your casino. There will likely be very few aspects of the player experience not impacted by ever-increasing connectivity, the least of which will be the games themselves. For the purposes of this article, however, we will focus on your casino’s marketing in order to frame up an understanding of the macro environment and outline some specific steps you can take to get moving in mobile. The competitive set is changing. First things first. To understand the influence mobile will have on your marketing, you must define your market. Casino gaming competition, in the past, has largely been confined to bricks and mortar. And while the proliferation of land-based casinos has brought challenges to some (and opportunities to others), this type of competition has certainly been easier to spot and has provided casinos with a relatively manageable time frame to adjust their offerings and communication to readily take on another contestant for their gamers’ dollars. The advent of online gaming, and the rapid growth of mobile gaming, has introduced a new type of competitor—one that has emerged quickly and scaled even faster. According to SuperData, a group that tracks trends in online games, 2014 global revenue for mobile games reached approximately $21 billion, and social casino games represent the fastest-growing genre in the space, estimated to rake in $4.4 billion in 2015. Considering this figure includes very little (if any) realmoney play, one can quickly conclude that the competition isn’t going to stay confined to the bricks and mortar in one’s immediate geography. For now, the real competitive threat to your property relates to your players’ time and attention. The best evidence of the stakes involved in the mobile attention arms race may be the drastic increase in media advertising that game developers have purchased to push gamers to titles like Candy Crush Saga, Angry Birds and Clash of Clans.

In addition to digital channels, developers have taken to television with big-budget productions, the pinnacle being Kate Upton’s appearance in this year’s “Game of War: Fire Age” Super Bowl spot. The reported spend to promote the free-to-play, MMO mobile game was $40 million, a very believable figure based on the fact that it was nearly impossible to turn on the television without seeing the spot. Within the casino industry itself, an increase in M&A activity also underscores the changing competitive landscape. Several leading land-based game manufacturers have been busy acquiring mobile game developers—IGT’s purchase of DoubleDown Interactive for $500 million in 2012 is just one highprofile example. And traditional gaming companies are not content to sit on the sidelines, demonstrated by Churchill Downs’ acquisition of mobile game producer Big Fish in a late 2014 deal valued at $885 million. It’s an understatement to say the landscape is dizzying and even somewhat cloudy, given the already massive impact mobile has had on the category. So what should you do? How do you stay relevant and compete? To compete directly in the mobile gaming space, your options include: build your own mobile games, license what’s available or acquire a company that builds games. Each route carries its own set of pros and cons, and the likely answer is probably a phased combination of approaches. There is nothing wrong with trial and error, either. Gaming is a marathon, with intermittent sprints. To beat them, don’t try to be them. A strategic approach to developing integrated players (on property, at home and on the go) is important, and, here, a lyric from Modest Mouse comes to mind: Well, how the heck did you think you could beat them At the same time that you’re tryin’ to be them? The greatest advantage that your property has over the mobile and social gaming set is that you exist in the real world. Your players may come for the games, but stay for the dining, the entertainment, the spa, the escape of a nicely appointed room. In other words, you offer an experience. And once you integrate mobile gaming into your offering, you have a power tool to cross-pollinate online play and on-property play. Candy Crush cannot offer their players what you can: a full-service, fullexperience entertainment brand. All games aside. The advent of mobile connectivity stands to impact all aspects of the industry. Again, there isn’t a guest touchpoint that won’t be affected. And the time to begin working on this is now.

MARCH 2015 www.ggbmagazine.com

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The greatest advantage that your property has over the mobile and social gaming set is that you exist in the real world. Your players may come for the games, but stay for the dining, the entertainment, the spa, the escape of a nicely appointed room. In other words, you offer an experience. And once you integrate mobile gaming into your offering, you have a power tool to cross-pollinate online play and on-property play.

Here are some steps to take to get started: Outline your objectives. It’s smart to begin any new development, particularly one involving technology, by defining what success would look like. Work to organize your objectives into broad strategic buckets: increasing revenue, decreasing costs, increasing new business and increasing existing business. What can mobile do to affect these areas at your property? Breaking mobile down into digestible bits makes getting started a little less intimidating, and it also builds a strong business case for your efforts. Determine your mobile strategy. For the last few years the question surrounding mobile development has been, “Should we build a native app or a web-based app?” The answer is, “Yes.” While the precise strategy should match your objectives, it is smart to utilize the mobile web and native applications in tandem. Mobile sites should be lightweight, fast and generally serve customer acquisition. Think of these as a wide net to attract new players to your brand. Native applications, on the other hand, are more robust and are widely used for entertainment, social networking, messaging and transactional utility. These applications are more labor-intensive (and costly) to develop and should focus on content that serves existing players: loyalty account information, point balances and offers.

your players who engage with your mobile product or platform, and be sure to ask for permission to send messages to your players via mobile—text or push notifications perform well. Go with the MVP. Mobile is scalable, so you can start small. Software developers use the term “minimally viable product,” which describes a product that features just the core functionality that would allow it to be released. This approach is smart for a variety of reasons: it is cost-effective, allows you to test ideas and allows you to adjust the product in real time. If you’ve got an idea for a mobile tool for a guest, build it. Launch it to a small subset of players—it doesn’t have to be perfect—and test it. You’ll learn a lot, and you may wind up with the start of something that players love. Remember that Twitter started as a group SMS messaging app among friends.

It pays to advertise, digitally. There is nothing lonelier than an unadvertised product. Once you have a mobile offering, regardless of how niche it is, set aside some budget to promote it through paid digital advertising. You can hyper-target this messaging, and your potential users are just one click from loving your product.

What’s new? A lot of the basic functionality for mobile products in the gaming category is a digital variation on existing touchpoint themes to which players have become accustomed. Get a group together and brainstorm about new ways mobile connectivity can allow you to serve your guests. What kind of ride service could you offer by partnering with Uber? What kind of special concierge service can you offer loyalty members? How do you turn everyday activities or certain amenities on the property into a mobile game? What about employee recruitment and applications? How can you enhance a concert experience? As mobile reaches complete ubiquity, the devices themselves will disappear. Maybe not from view, but they will certainly be less conspicuous. One day, your iPhone will be laughed at by a kid who thinks it looks like something from the Stone Age. That day will be soon. In a few short years, people will be conditioned by a world of connected devices, and the idea that things are connected to the internet in order to function will be akin to thinking of your kitchen lights being powered by electricity off of a grid. Mobile won’t be referred to as “mobile.” All that will be left is the connected consumer. The casino brands that adapt will win, and one way to make sure you’re among them is to place a priority on mobile now. Whether you begin building mobile games or produce a digital installation on the floor of your casino that interacts with guests as they pass by, just go for it. The next several years present an opportunity to connect with your players and audiences in new ways—and the future belongs to those who work for it today. Ask Gordon Moore. He didn’t merely predict that computers would get faster and smaller. He founded the Intel Corporation in 1968 and made it happen.

Incentivize. Utility and usability are paramount with mobile, so your product should be something your players actually want to use. It helps to reward and incentivize continued engagement. Think about exclusive perks to offer

Rich Sullivan is the CEO of Red Square Gaming, a full-service advertising agency that focuses on casino brands. Follow him @redsquaregamers, email him at rich@redsquaregaming.com or check him out online at redsquaregaming.com.

Use your existing databases. Casinos are swimming in data, and the launch of a mobile offering should leverage your existing audiences. Utilize your email lists, Facebook and Twitter followers—and offer rewards for early adoption of your product. Use your property. Again, think of it as “connectivity.” The great advantage to mobile is that you can use location to promote relevant offers in specific areas of the property. And you are not limited to advertising messages. Think about how your players interact with the casino—how can you help them enjoy their experience more? For instance, players are extremely picky about the games they love, so why not create a tool that helps them find the slots they play? What about a reservation tool that alerts players when there is an open seat at their favorite game?

Global Gaming Business MARCH 2015

s n tu i 1 si A 93 Vi NIGh # at o t bo

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Atlantic City’s House of Cards The plan sounds counterintuitive, but a number of lawmakers and developers say adding casinos in North Jersey could be a lifeline for Atlantic City. | BY MARJORIE PRESTON

hen you go to Atlantic City, you can’t miss the former Revel casino. By day, the shimmering blue-glass tower topped by a distinctive “pearl” dominates the skyline. By night, Revel—dark since it closed last summer—is visible only because of aircraft warning lights that blink around its perimeter. Less than three years ago, the ultra-modern resort was touted as Atlantic City’s savior, a glitzy new attraction that would recapture visitors who had de-

Global Gaming Business MARCH 2015

fected to casinos in neighboring states. Linda M. Kassekert, then-chairwoman of the New Jersey Casino Control Commission, called Revel “the start of an exciting new era for Atlantic City.” Kassekert was right—but for all the wrong reasons. The resort was unlucky from the start. Conceived at the height of the economic boom and built—after many false starts—in the depths of the recession, Revel never turned a profit. A year after it opened, it filed for bankruptcy, and 14 months later, it filed again. On September 2, 2014, it finally staggered to a close, putting more than 3,000 people out of work. Since then, the abandoned monolith, built on 20 acres in a bleak neighborhood known as the South Inlet, has gone begging for buyers, most notably Florida businessman Glenn Straub, who initially proclaimed he would turn it into a “school for geniuses” who are “free, white and over 21.” Just last month, the owners of Revel cancelled a sale to Straub, who missed a deadline because of a court ruling in a suit by former Revel tenants that would allow them to stay operating on the property under Straub’s ownership. Attorneys for Straub contend that the Revel owners told them that there were multiple offers to buy the property. More legal wrangling is assured. In 2006, when Pennsylvania legalized casino gaming, Jersey casino executives said such “slots in a box” would never steal gamblers away from Atlantic City. They could not have been more mistaken. Pennsylvania’s success—it would go on to surpass Atlantic City as the nation’s second-largest gaming market after Las Vegas—prompted other states to look at casinos as job-creators and

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Former Reebok leader Paul Fireman has proposed a $4 billion casino resort in Jersey City

“It’s not the end of the world. We have problems to fix. I absolutely believe all of them are fixable if we have the political will to get them done.”

“At least we’re not Detroit.” —Atlantic City Mayor Don Guardian

—New Jersey Governor Chris Christie, January 2015, as he appointed an emergency manager to take over the city, which lost four of its 12 casinos and 10,000 jobs in 2014

tax-generators. As gaming halls cropped up across the Northeast, Atlantic City lost fully half its value, with revenues plunging from $5.2 billion in 2006 to $2.74 billion last year. Atlantic City Mayor Don Guardian took office last year with the unenviable task of trying to reverse the city’s fortunes—or at least stem the bleeding.

North vs. South With Atlantic City in turmoil, New Jersey state legislators are openly saying what some have whispered for years: It’s time to legalize one or more casinos in the northern part of the state to bring the action back home. Advocates of the plan say the move could help Atlantic City by redirecting revenues here, just as Atlantic City gaming revenues once were used to help redevelop parts of North Jersey. Guardian has heard the pitch, but says the numbers don’t add up in Atlantic City’s favor. “Casinos at the Meadowlands or in Jersey City very well could bring in $1 billion a year in gross gaming revenue,” says Guardian, “but probably around 60 percent of that would come straight from Atlantic City. Sixty percent is $600 million—that’s the equivalent of one or two of our smaller casinos.” (According to Guardian, an additional 20 percent of the business would come from New York state and the Poconos, and 20 percent would be “new money.”) Along with lost gaming revenues, casinos up north could mean the loss of thousands of additional jobs down south—not just casino jobs, but jobs at spas, restaurants, hotels and ancillary businesses in a region that already has an unemployment rate of 11.4 percent. And then there is the tax base, which has taken a big hit with the loss of four casinos (a fifth, the bankrupt Trump Taj Mahal, barely averted a pre-Christmas shutdown due to a last-minute loan from lender Carl Icahn).

“They’re saying $100 million or $200 million (per year) will come back to Atlantic City for economic development or the expansion of flights to our airport,” says Guardian. “But first you have to realize you may be taking away $50 million or $100 million in property taxes,” as well as state income taxes as more people get pink-slipped.

‘Don’t Kick Us When We’re Down’ Guardian agrees the city can no longer depend for its survival on a shrinking casino industry. But he says the market needs time to bring in new commerce before any new casinos open in the north. And despite the freefall in Atlantic City’s economy, there have been some heartening signs of progress: a major expansion of the successful Tanger Outlet district; a local university preparing to turn the old Showboat casino into a satellite campus; and noted Philadelphia developer Bart Blatstein’s plans to revamp the struggling Pier Shops at Caesars. “We just need to get there without being crushed by additional competition, especially from our own state,” says Guardian. Atlantic County Assemblyman Chris Brown agrees. “We are at a precarious time as we transition into a destination resort. It would be a mistake to allow gaming outside of Atlantic City until the transition is complete; it took Las Vegas 10 years to transition from a gaming resort to a destination resort. “Any notion there will be any benefits flowing back to Atlantic County from a North Jersey casino is fiction,” Brown argues. “In a competitive and contracting gaming market, can a glorified slot parlor generate enough income to satisfy all of these promises?”

Cashing In While casino plans have been floated by hopeful lawmakers in Secaucus, Weehauken, Camden, Newark and elsewhere, one of the strongest proposals in Jersey City, across the Hudson River from New York, is far more than a slot parlor. The $4.6 billion resort proposed by Reebok founder Paul Fireman would be developed adjacent to Fireman’s Liberty National Golf Course, along New Jersey’s so-called Gold Coast, which has a prime view of the New York City skyline. “Whoever sees his proposal just goes, ‘Wow,’” says state Senator Ray Lesniak, a longtime supporter of new casinos in the state. “This will put North Jersey on the worldwide map. It would be a huge attraction that would compete with Macau as a destination.” Getting to the casino from New York would be a snap, says Lesniak: FireMARCH 2015 www.ggbmagazine.com

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“The vast majority of the customers in New Jersey are not going to Atlantic City anyway.” —Jeff Gural, owner of the Meadowlands Racetrack

man plans a fleet of high-speed boats that could transport people from Manhattan to the Jersey side “in a matter of minutes.” As sponsor of the proposed constitutional amendment that would legalize new casinos in North Jersey, Lesniak says they are “the last chance” for Atlantic City. “Right now, they’re reshuffling the chairs on the Titanic down there. Atlantic City needs a major infusion of capital, and nothing else can generate the (necessary) billions like this type of investment.” The legislation, which could be on the ballot as early as November, would include a surcharge on revenues that would be funneled directly to Atlantic City for reinvestment, he says. Over 10 years, that could amount to up to $4 billion to “transform Atlantic City into a year-round resort.” Another frequently mentioned proposal calls for the addition of slots and table games at the Meadowlands in East Rutherford. Racetrack owner Jeff Gural, who acquired the property in 2011 and recently completed a new $80 million grandstand, has said he wouldn’t have bought the track if he didn’t believe a casino would eventually be built there. In fact, a clause in his lease with the New Jersey Sports and Exposition Authority gives Gural a $100 million settlement if he doesn’t get a license. In 2013, Hard Rock International signed a long-term agreement with Meadowlands Racetrack LLC to explore “projected future developments” at the track. Gural, who just lost his bid to develop a casino at his Tioga Downs Racetrack in New York’s Southern Tier, says getting a casino at the Meadowlands would more than make up for that defeat. And he insists the plan is a winner both for the state and for Atlantic City. “Right now, all we’re looking to do is recapture all the money that’s leaving New Jersey and going to casinos in Bethlehem, Mount Airy, Aqueduct and Yonkers,” says Gural. “The vast majority of the customers in New Jersey are not going to Atlantic City anyway.” By paying a higher tax rate than casinos in South Jersey (“We previously agreed we would pay the Pennsylvania rate,” says Gural, north of 50 percent), a Meadowlands casino could generate $400 million to $500 million for the state, “which is at least double what the existing casinos combined pay now,” he says. “We’re in holding pattern waiting for a solution to keep Atlantic City from defaulting on their debt,” says Gural. “I think that’s the most important thing to the legislature.”

The Bottom Dollar Economists Ellen Mutari and Deborah M. Figart, both professors at the Richard Stockton College of New Jersey, are astounded that anyone would propose new casinos in New Jersey or anywhere else in the Northeast, given the current market oversupply. 24

Global Gaming Business MARCH 2015

“I do think there’s an inevitability of this going on the ballot at some point, whether it’s in 2015 or subsequent years.” —New Jersey state Senator and former Atlantic City Mayor Jim Whelan on a referendum permitting casinos in North Jersey

“You just can’t continue to grow the gaming pie and still have enough gross gaming revenue for everyone to earn a healthy rate of return and for states to get the revenue they need,” says Figart, co-author with Mutari of the new book Just One More Hand: Life in the Casino Economy. “There’s so much market saturation already, with Pennsylvania, Delaware, New York, and what’s going to happen in Massachusetts. I can’t believe we’re talking about gaming in North Jersey this late in the game.” “It’s a zero-sum game at this point,” says Mutari. “Whenever municipalities buy into the argument that a casino will create tax revenues, the big operators, which are essentially oligarchies, wind up bidding on the project just to prevent a competitor from stealing some of their existing market share. By now they’re fighting over crumbs.” For Atlantic City to endure and reinvent itself once again, Mutari says, it needs to shift away from an export economy, which relies on revenues generated by visitors. “Regardless of whether there’s casino gaming in North Jersey—and I think there probably will be—it is so important that Atlantic City diversify its economy. Diversified local economies have higher growth rates and can withstand the ups and downs in the business cycle. You can’t put all your eggs in one basket.” In 2010, Governor Chris Christie gave Atlantic City five years to turn around its flagging casino industry before he would consider gaming elsewhere in the state. The turnaround hasn’t happened, and in a controversial move last month, Christie appointed an emergency manager to take over day-to-day operations in the city. Also in January, Moody’s Investors Service downgraded the city’s credit rating to Baa2, just two levels above junk-bond status, though Standard & Poors continues to give Atlantic City an A-minus rating. The drumbeat outside the city has been grim. In a 2014 report on the nationwide gaming industry, the Los Angeles Times called the downfall of Atlantic City “implacably, relentlessly horrific,” and a cautionary tale for the industry at large. And in a 2014 story about the Revel closure, the Philadelphia Inquirer called the neighborhood around the multibillion-dollar tower “no man’s land.” Senator Jim Whelan, the former mayor of Atlantic City who now serves the region in the state legislature, does not support the plan to bring casinos to North Jersey. “But I do think there’s an inevitability of this going on the ballot at some point, whether it’s in 2015 or subsequent years,” says Whelan. “What we need to do now is look at it as if it’s going to happen. That means making sure what protections and what cooperation there could be to ensure it’s not a death knell for Atlantic City.” In January, the relentlessly optimistic Guardian looked on the bright side, telling NJ.com, “At least we’re not Detroit.”

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2015 Special RepoRt:

Surveillance and Security

Slot Machines under attack The scam that could change everything B y W i l ly a l l i S o n

t’s December 2014. Four Russian nationals are indicted by the U.S. federal government for using electronic devices to cheat slot machines. According to the indictment, the defendants engaged in a conspiracy to cheat at least 10 casinos in Missouri, California and Illinois using the mysterious devices. The story broke without much fanfare. No big deal. Nothing to worry about. Everything is under control. Not exactly.

Getting Whacked It might just be that this is the scam of the century. The start of a new wave of casino cheating that most of us never imagined and none of us are prepared for. It’s so new that it doesn’t have a name, so I’m going to call it “whacking”—hacking with a W (for win) in front of it. I guess it was only a matter of time before hackers took their attention away from stealing Target shoppers’ identities or selfies of naked celebrities. The information available on the details of the scam is limited to the public, which in this day and age is par for course when it comes to big casino cheating cases. The FBI is not saying much, the casinos are not saying much and of course, the manufacturers are not saying much. To the defense of some, the devil in the detail has not been released yet, quite simply because how the devices work is not exactly clear. This is what we publicly know. According to information on the FBI website, the devices were used to predict the behavior of a certain make and model of slot machine game known as the Aristocrat Mark VI Electronic Gaming Device. By communicating with a foreign server, the devices allowed the defendants to predict the behavior of the Mark IV games and obtain winnings from the games that far exceeded what would be expected from fair play. OK, can I buy a word on this explanation? “How” would be good. I’m no Xbox guy. I’m more of an 26

Global Gaming Business MARCH 2015

Atari guy. How does a device predict the behavior of a slot machine? Can computers get to know other computers and then get them to do things they don’t normally do? The question of how these mysterious devices work is the hot topic of the day in the world of casino game protection. Actually, it’s been the question of the day for about four years now, since casinos around the world started suspecting and observing strange activity by players using devices in their slot machine areas. Little snippets have been coming out of Europe and South America about how groups were winning on slot machines while at the same time spending a lot of time on their cell phones. It just didn’t look right, but the crooks were smart. They kept their winnings to smaller amounts to avoid any management or regulatory scrutiny as they went from casino to casino searching for Aristocrat Mark VI machines, the way lions look for weak antelope.

it just didn’t look right, but the crooks were smart. they kept their winnings to smaller amounts to avoid any management or regulatory scrutiny as they went from casino to casino searching for aristocrat Mark vi machines, the way lions look for weak antelope.

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In some cases, surveillance video has revealed that the cash-out button on the machine would flash very rapidly during odd times (not consistent with normal operations). One property reported seeing the cash-out button flash rapidly as the suspect approached the machine.

What We Do Know Casinos around the world have been hit by this scam for at least four years. Estimations for losses are in the millions. A group of more than 20 suspects has been identified to be involved in the scam. The devices look like normal cell phones. The crooks stand next to particular machines for a period of time appearing to be recording the machine. The crooks leave the casino, then return to play the machines. They win constantly. Small amounts. Large frequency. In some cases, surveillance video has revealed that the cash-out button on the machine would flash very rapidly during odd times (not consistent with normal operations). One property reported seeing the cash-out button flash rapidly as the suspect approached the machine. On average, the crooks cash out a ticket every 20 minutes. Financial examination of machines hit can show a daily hold percentage variance of between 50 percent and 400 percent. A theory floating around is that their consistent use of a cell phone coupled with the fact that none of the suspects were observed manipulating the games directly by touching them could indicate the use of wireless technology. If this is the case, we are in deep doo-doo.

It’s Under Investigation The indictments of the four Russians is the start of a process in which we, the casino industry, will continue to monitor to learn more about the potential threats to slot machines in the future. It should also be pointed out that the arrests of the crooks were the result of great casino surveillance work and a combined effort from law enforcement agencies in the U.S. But this is only the beginning. The investigation is ongoing. Due to obvious sensitivity, it is best that we tread cautiously when reaching conclusions on this threat. I do not wish to jeopardize the investigation, so some information has been withheld from this article. Instead, I will be co-facilitating an open industry discussion on the threat of high-tech slot cheating devices at this year’s 10th Annual World Game Protection Conference (March 2-4 at the M Resort in Las Vegas). The question of how these crooks are using technology to cheat our technology needs to be answered and disseminated to the casino industry as quickly as possible. Over the last 10 years, we in the business of protecting casino games have learned that when organized groups of crooks get together with passports, a bankroll and a new scam, they can steamroll casinos around

the world and make a lot of money before the industry, regulators and law enforcement agencies can get all their ducks in a row. An example of this is the “Tran Organization” false shuffle scam, the largest organized cheating scam in U.S. history. More than 29 casinos across the country were hit by a group of over 40 cheats. It took five years before an arrest was made, even though the scam was detected by casinos within the first year after its conception. It’s estimated that casinos across the U.S. lost over $50 million while authorities dotted their i’s and crossed their t’s.

Scary Scenario What makes this scam even more scary is that if wireless technology is being used to cheat casinos, our slot machines are sitting ducks. Most casinos have hundreds of them, if not thousands. Admittedly, they don’t get the same attention as table games. For years game protection efforts have focused more on table games because of the human aspect. Slot machines have largely been monitored electronically through a networked real-time alert system. Surveillance departments select slot machine activity that warrants attention, like invalid entries and jackpots, and one person will monitor the system, reacting accordingly if an alert goes off. Generally, regardless of whether a casino has 100 machines or 5,000 machines, surveillance often only has one person dedicated to responding to machine alarms. In essence, slot machines have traditionally been self-monitoring, unless a surveillance operator happens to be scanning the area. The other factor that makes a wireless attack against our slot machines so scary is the “no-hands” factor. We’re taught to watch players’ hands. Has anyone in gaming ever seen a player cheat without his hands? If surveillance does happen to be looking in the slot machine areas for people using devices, they’re looking for suspicious hands. If wireless technology is being used, cheats can simply put their devices in their pockets and stand around drinking the casino’s complimentary beverages. The final factor that puts this scam over the top is unlike other multimillion-dollar casino scams of the last decade. This one doesn’t require collusion with staff from the inside. Imagine the potential if staff did collude. I may have mentioned previously that I’m not exactly a Wozniak when it comes to computers and what their potential is. But who is? When researching this story, I find most of the so-called experts or people I thought are into MARCH 2015 www.ggbmagazine.com

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Gaming machines or equipment are an important part of our business. Like our customers and employees, we should be analyzing their weaknesses as well as their strengths.

this stuff are on the fence when it comes to the potential of wireless technology being able to manipulate computers. I have heard stories of similar technology being used to exploit ATMs. If remote controls can change my channel, open my garage door and progress my Powerpoint slides, why couldn’t a device be used to change the meter on a slot machine? Am I being paranoid here? Slot machine manufacturers: Please tell me, could this happen?

What Should We Do? My intention is not to be unnecessarily alarming or overdramatic, but to raise awareness within the industry. This scam is a reminder if not a wake-up call to what may lay ahead. Last year, Las Vegas Sands casinos fell victim to hackers because they didn’t like what Sheldon Adelson said. The hack cost the giant casino organization millions, and all the bad guys made was a statement. Imagine what a group of highly motivated, technically skilled individuals could do if they wanted to make cold, hard cash. Regardless of how these mysterious devices work, we can’t ignore the threat. We don’t have enough time to get our whats, wheres, whos, hows, whens and whys together. We have to be proactive and acknowledge that casinos are getting whacked by a well-organized, well-funded group of criminals that have found a way to beat our slot machines without lifting a finger. It goes without saying that the first thing we need to do is increase surveillance of slot machine areas. The obvious tells are frequent cash-outs, little or no actual play and standing near machines for extended periods of time with hands in pockets. Watch the credit meters. Are they incrementing without reason? Study the numbers. Check the financial records of the slot machines on a regular basis. Look for abnormal hold percentages, especially on the Aristocrat Mark VI machines. If you are a surveillance director and you haven’t already, make sure you are a member of a credible online international surveillance network. When28

Global Gaming Business MARCH 2015

ever there’s an opportunity to attend a forum of surveillance professionals sharing information, do it. It is important to understand that a lot of cheating devices are manufactured and developed in Europe and Asia. Often, those markets are test beds for cheating devices, so tapping into international intelligence networks is essential if you are to stay one step ahead of high-tech cheating teams that may pay a visit to your property.

Final Words Until we know the truth on these devices (maybe we won’t?), we should be conducting our own research and investigations into the threat of wireless technology in gaming. It’s not hard to come to the conclusion that if this type of device can exploit particular machines, then this type of technology could probably be developed to exploit other types of slot machines. What about the hybrid electronic machines? What about the electronic equipment on our tables like shuffle machines or intelligent shoes? What about our player marketing databases? Gaming machines or equipment are an important part of our business. Like our customers and employees, we should be analyzing their weaknesses as well as their strengths. This is a wake-up call for all gaming and surveillance managers. Technology and products are being moved on and off the gaming floor more frequently nowadays. It’s just the upgrade-every-year world we live in. Think about the volume of slot machines that are bought and sold every year. Think about where your equipment came from and who made all the parts. Think about how it is difficult and probably impossible to test for every possible threat. Think about how busy and understaffed you are. Now think about all those unemployed people with computer programming degrees. Maybe we should hire them. Willy Allison is a game protection consultant/trainer and founder of the annual World Game Protection Conference. Allison’s website is willyallison.com. The conference website is worldgameprotection.com.

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2015 Special RepoRt:

Surveillance and Security

Steering the casino operation in the right direction by JaSon riffel

the Surveillance

DaShboarD n

othing is more critical to casino operations than meaningful data to assist in steering the ship. Every department within the operation bears the responsibility to not only provide useful data, but to continually improve the value of the data they provide. Surveillance has long been credited as the eyes of the gaming operation, though it is often overlooked as one of the most powerful business intelligence sources in the entire operation. Having the capability to monitor and review every activity on video combined with auditing operations in real time means every surveillance department is ripe with valuable data. Creating an effective surveillance dashboard reduces mountains of surveillance data and boils it down to useful and actionable information which is capable of steering casino operations. The 21st century presents an unprecedented challenge to crunch and analyze staggering volumes of data to produce useful and actionable information. The sheer influx and the speed with which data is received today makes it seemingly out of reach to separate the chaff from the wheat in order to extract value. There is a heavy dose of irony in the fact that within this fire hose of information exists an unsatisfied need for more information. Trying to tame the mountain of data is a daunting task, even for experts who spend every day thinking about big data. It brings to mind a bit of wisdom: “Don’t boil the ocean.” The simplicity of this concept could not be truer when trying to rationalize all of that data. Avoid attempting to analyze all of the available data and focus on a starting point that provides value quickly and easily. Start with extracting highlevel information that is useful and actionable. As that information starts to demonstrate its value to the operation, questions will occur naturally. Those 30

Global Gaming Business MARCH 2015

questions and the quest for answers will increase the depth of analysis and set the direction over time. Even if the entire ocean of data could be boiled at once, the results would be nothing more than a snapshot of a single day. To create a powerful data-driven surveillance department, a foundation of data extraction must be developed to feed growth and provide questions. This is a multi-dimensional problem for which the solution starts with a very powerful analytic paradigm—the data cube. The cube represents three (or more) dimensions of data usually in a time series. This can be visualized as taking a stream of events over a period of time and extracting three or more data points from each event. These events over time are collected together in multiple dimensions, creating a cube of data for analysis. Using a data cube as a foundation for data extraction is a very effective foundation for being a data-driven surveillance department, and can drive a very powerful dashboard for casino operations. The question becomes, what data points create a strong foundation for the cube? The data points for the initial cube should be high-level and abstract enough to be relevant for any piece of information while also providing useful data for analysis. A strong foundation for data analysis at a very high level is department, risk and value, which are relevant across all data points. These data points may not all be readily available in the typical stream of data, but that should not be a deciding factor. Modern reporting solutions can “infer” these data points by inspecting each piece of data using a set of rules. The rules evaluate the raw data to determine the correct value for the data point. The selection of data points should always be based on what will empower the operation, not what is easily available in the raw data. Experts in data analysis often avoid injecting static data points into the data stream and instead “infer” the

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To create a powerful data-driven surveillance department, a foundation of data extraction must be developed to feed growth and provide questions. This is a multi-dimensional problem for which the solution starts with a very powerful analytic paradigm—the data cube.

data points by evaluating the data in real time when the cube is generated. This has the added value of being able to change the data classification logic as needed without modifying legacy data. Determining the department for any given data is probably the easiest data point to determine for a surveillance department. The source of the data or the action being taken will clearly attribute the data point to a given department. In fact, most surveillance departments are already classifying their data by department, and if not, it is a very easy change to make. Determining a risk value is a much more subjective process that could lead to hours of internal debate. Starting with a basic assessment of low, medium and high is an easy starting point that can be adjusted later. Lowrisk items could be standard operational activities such as drops, fills, escorts, etc. Medium-risk items are things like policy and procedure violations, soft count visitors, or even surveillance visitors. High-risk items would include the most significant events such as larceny, internal theft, injuries, etc. Even more subjective is estimating value, but everything surveillance does revolves around value. It is an interesting exercise to value every action taken in surveillance. Even if the classification is generalized to reflect risk as being low, medium

and high, the results are no doubt enlightening. The lofty task of recording real dollar amounts into surveillance data can demonstrate the value of surveillance in terms that non-surveillance personnel can much more easily digest. A good balance is recording value in buckets such as $0-$500, $500-$1,000, etc. These approximations can be applied to everything recorded by surveillance with a little vision and minimal effort. The task of determining values for data points such as department, risk, value or others is the basic process of data classification for analysis. This brings up a very important point about these processes and the resulting dashboards. After all, this is a statistical science. Statistics are a world unto themselves, and can be twisted to validate opposing opinions using the same data. The magic of statistics lies in both the interpretation of the data (classification) and the ever-present margin of error. The margin of error will be present no matter how clean and well-organized the data becomes. When classifying risk and value, you would do well to remember this margin is always going to be there. Be prepared to approximate, accept those approximations, review them regularly, adjust them as necessary, and always be

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Selection of analytic software is equally important, and there are a variety of free and commercial solutions available with varying levels of usability, training and support. The key requirements are that the software be able to connect to various data sources, supports computed columns for inferring data points, supports generation of data cubes, and finally, can generate dashboards.

prepared to represent them. Having an analytic strategy starting with a data cube of risk, value and department is a strong foundation but still lacks two critical components—software tools and skill set. Thankfully, in the information age, there are many options available to self-service these requirements as well as commercial solutions that are very powerful and often easier to use with support. The skill set to use the tools effectively can be one of the most challenging requirements to fill. The underlying skill set that needs to be developed is an understanding of databases, how to connect to them, and how to select data. All tools used for data analysis are going to have the capability to connect to a wide variety of data sources which can include databases, documents, spreadsheets and more. A basic knowledge of the way data is stored is a requirement to unlock the power of the analysis tools. This is where training and support from vendors can play a critical role in using data effectively. Selection of analytic software is equally important, and there are a variety of free and commercial solutions available with varying levels of usability, training and support. The key requirements are that the software be able to connect to various data sources, supports computed columns for inferring data points, supports generation of data cubes, and finally, can generate dashboards. A true mastery of Microsoft Office products can accomplish a lot toward this effort when used creatively; Excel is a very powerful analytic tool assuming the data can be manually gathered. Many available commercial tools streamline the steps required and provide both training and support. A strategy used in many businesses is to implement a data warehouse, which is effectively a single database with no purpose other than to collect data from other databases into a single location. The data structure of the data warehouse is typically designed to support generating reports and dashboards. ETL tools (“Extract, Transform and Load”) can be used to copy and convert data from one database to another on a routine schedule. Often, ETL tools can infer data point values as part of their transform step to populate the data warehouse. A data warehouse may not be an option for the typical surveillance room today, but in the future it may be commonplace, as well as having a dedicated surveillance database administrator. No matter the choice of software tools, a fairly standard set of steps will be followed, starting with defining data sources, data sets, computed columns, data cubes and finally, dashboard design. Data sources are configured for each source of data that is to be included in the data analysis. The data source will instruct the software on where the data is stored, what type of data is stored there, and what credentials to use to access the data. There is no limit to the number of data sources which may be 32

Global Gaming Business MARCH 2015

defined to access all of the data. This can include databases for surveillance logs, incident reports, slot data, access controls and more. Data sets are defined to retrieve specific data from a data source. A data set retrieves data from a configured data source based on criteria specified within the data set, such as last 90 days, typical for a running dashboard. Data sets can reference as many data sources as are necessary to extract all the data needed for the dashboard. Computed columns are where the magic of inference takes place as described above. Computed columns are found inside the data set and allow custom logic to be defined that assigns values such as risk or value assessments as needed. A custom rule could be defined to analyze the dollar amount of a data point, for example, or perhaps a risk value could be determined based on whether an EMT was dispatched. Using computed columns for classifications not only eliminates the need to store classifications, but also provides the freedom to easily change how data is classified in the future. Defining data sources, data sets and computed columns leads up to enabling the definition of a data cube that includes all of its classifications. The data cube will include a department, risk assessment and value, all spanning a time period defined in the data set. A well-classified data cube is nothing short of a powerful computed chunk of data ready to prepare dashboards using any intersection of data within the cube. The real point of any dashboard is to provide actionable measurements—in this example, of risk and value by department—over time. Visualizing risk and value over time generates trend lines worthy of any dashboard that will show variations in operations and how they drive value as well as risk against one another. The inevitable peaks, valleys and changes shown by department over time will generate questions. Finding answers to those questions will require exploring the data further and will promote better understanding that leads to improved dashboards and reports as a result. Building a foundation for a data-driven surveillance department is a big investment on many levels. Ensuring these new processes and measurements are reproducible, documented and hopefully automated keeps efforts in line with the standard expectations of doing more with less. Additionally, automation and documentation promote quality control for both generating reliable dashboards and improving the data processes within the department. No department in the casino operation has access to more operational data than the surveillance department. Making that operational data into useful dashboards with a strategy for long-term growth is guaranteed to steer the organization. Jason Riffel is co-founder, president and CEO of CIP Reporting, a supplier of risk management and incident reporting software that provides customized solutions for security, risk management and incident reporting.

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2015 Special RepoRt:

SurveillAnce and Security

legAl language Trends and best practices in casino surveillance and security lawsuits B y A l A n W. Z A j i c

s another year closed, 2014 had many interesting lawsuits that I was involved in as an expert witness who specializes in casino cases. It was also interesting to listen to the case inquiries made during the last several years. As a consultant with a primary specialization in gaming security and surveillance, I wanted to share some of these inquiries and trending litigations. The demand for my legal services has far surpassed the demand for general consulting for casinos. For the most part, litigation involving claims of inadequacy and negligence where surveillance or security had a legal duty to protect their patron from foreseeable harm remained consistent with prior years. I received calls from both defense attorneys representing casinos and plaintiff attorneys representing customers who felt they were wronged in some way. During 2014 and in recent years, there is a trend moving into litigation that involves self-exclusion programs, armed robberies (both on and off site), and the ever-increasing incidents of assaults in the casino as a result of two or more customers in a dispute where injuries are suffered. The other typical cases involving intentional torts (where a security officer does something to someone) by security personnel and alcohol-related cases continue to be the focus of many lawsuits.

Self-exclusion There are more and more attempts at litigation involving those customers who self-exclude from casinos and then sneak back in and are able to gamble. When they lose, they sue the casino for allowing them back in. Many jurisdictions have mandated self-exclusion programs where the standard is to at least do what the jurisdiction requires for self-exclusion and monitor those people to keep them from coming back in. Plaintiffs will allege that when this regulation is violated it proves a claim. If the casino drafts and implements a self-imposed standard (policies and procedures) that dictates the process and specific instructions regarding self-exclusion and they do not follow their own guidance, this also becomes prob34

Global Gaming Business MARCH 2015

lematic and challenging at trial. It also becomes problematic when a self-excluded patron comes in, wins a jackpot, and is not paid as a result of the self-exclusion. I have been contacted on these types of claims recently also. As available technology improves, it is becoming easier for a property to detect a self-excluded patron. As an example, the advances in license plate recognition (LPR) software are proving beneficial in self-exclusion programs in North America, as long as the database of information is accurate during the exclusion process. The case law in various jurisdictions is changing, and in some instances in favor of the patron and not the casino operation. The logical, common-sense thinking, that if you self-exclude because you have a gambling problem you should not be able to sue if you come back in and lose money, does not prevent people from suing. A best practice might be to do an evaluation of your self-exclusion program, the applicable regulations, laws and case laws every year. You might be able to avoid lawsuits or at least prevail in legal motions that might dismiss them early on before the cost of defense increases. The key is to do what is reasonable under the circumstances and prove that you are concerned enough to focus an annual review. This will go a long way during a trial. Proving you actively monitor and watch for self-exclusions through logs and reports will not only help in a lawsuit; it will help in demonstrating compliance to the regulators.

Armed robberies We traditionally think of the armed robber as the guy with a mask that comes up to the cage cashier with a gun and attempts to take away a sack full of cash (or sometimes a fistful of chips). These types of casino robberies are in fact on the increase in almost all jurisdictions, and are chronic in some markets. Casino operators need to be aware that if there are cage robberies that occur frequently in their geographic area, the issue of foreseeability or the reasonable anticipation that a robbery will occur at their facility increases. Just because one has not happened at your casino before does not necessarily insulate you from liability. The issue with these robberies is the customers that are in the vicinity of a

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WE HELP MAKE LEGENDARY CASINOS

JOIN THE We traditionally think of the armed robber as the guy with a mask that comes up to the cage cashier with a gun and attempts to take away a sack full of cash (or sometimes a fistful of chips). These types of casino robberies are in fact on the increase in almost all jurisdictions, and are chronic in some markets. cage robbery will often file a lawsuit claiming inadequate security and trauma as a result, including contracting post-traumatic stress disorder (PTSD) and alleged fear of going back into a casino. It is actually rare that a customer will be shot by the robber in a casino cage robbery—and more likely than not, an employee would be hurt, if anyone. The end result is that a lawsuit is filed by someone who was not physically injured that will be served years later, well after all of the principal employees have moved on to other employment. There will be allegations that security did not protect the plaintiff in various ways, to include not being aware of the fact that robberies will occur in casinos; not patrolling the premises including at or near the cashiers cage at a frequency to have some deterrent effect to the would-be robber; not having an actual robbery policy and procedure for prevention, response, crime scene protection; insufficient care of customers post-event; and inadequate training of security personnel who know the “do’s and don’ts” of responding to an armed robbery. There will also be allegations of inadequate surveillance, which will come as part of an inadequate security lawsuit. There is little case law that addresses specific surveillance inadequacy; it is typically lumped into the inadequate security case law found in every jurisdiction. It does not matter if we as an industry keep them very separate for what we feel are obvious reasons; we are one of the very few industries in which surveillance is typically independent of the physical security operation. We are seeing more and more cases where a plaintiff’s attorney will allege that there was an inadequacy of the surveillance department to make an observation of what should have been obvious stalking of a customer inside the casino, or at minimum suspicious behavior including walking the casino, not gambling, looking for a victim. The allegation for security is normally that they failed to respond and

prevent the robbery in the first place. An increasing number of what the press has labeled “follow-home robberies” have occurred, where the perpetrators will “mark” their victim winning or getting paid a large amount of cash and follow them home. Once home, they commit an armed robbery far away from the casino’s more secure environment. Depending on the individual case law in the state where it occurred, a patron could prevail if they demonstrate that the casino should have done more to reasonably protect them as a customer.

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Perceived Failures More and more surveillance-related activity has become involved in lawsuits that include alleged failures to monitor and detect suspicious persons that eventually commit a robbery on a patron or an employee. The allegations that post-event, surveillance failed to save relevant video that was captured by the camera system or complete a comprehensive review are also increasing. Spoliation-of-evidence claims are becoming more common, where it can be eventually proven that there would have been numerous cameras that may have captured images of an event that were not reviewed adequately, not kept as evidence and allowed to recycle, and as a result somehow caused damages to a plaintiff. Juries will typically frown on lost video that was once available for them to review when coming up with a verdict. A simple jury instruction from a judge could create a verdict in favor of the plaintiff. On the flip side there are cases where the surveillance review was very comprehensive and the surveillance director ordered the views to be combined into one composite piece of evidence to be retained with the rest discarded. In some of these cases the composite backfires on the casino, in that when a jury watches the evidence at trial, it appears

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that it was very obvious that surveillance should have noticed it live while pervideo of the transactions. Customers frown on not getting their money in cash, forming normal functions. The perception is much different when composites and as a result do not trust the check or wire process. are used, because you are only saving the negatives and not all of the other This creates a condition that should be well-documented and established. things occurring in the environment. Another smart practice may be to produce a pocket-size card that tells the cusA best practice in these situations might be to collect all-inclusive video of tomer of the dangers of leaving with a large sum of cash and the alternatives a serious incident and avoid making any composites until after your legal available, which may satisfy any legal obligations to warn customers of the risks. counsel has been consulted. That way it becomes attorney-client work product I have seen cards that essentially say “Congratulations on being a winner at and is protected based on the fact it is done in anticipaABC Casino” and go on to say that they are concerned for tion of litigation. Consulting your legal counsel on this their valuable customer’s safety and offer the following issue would prove beneficial. There is significant case tips for their own safety and well-being. The card is disAlthough the intent of the surveillance director is tinct when seen on video being handed to the customer, law in these areas across and to put together a shorter version of what occurred, it helps establish that the casino did what was reasonable the country, and the basic in letting their winning customers know the dangers of becomes problematic when you just show the negative instances in a composite recording. It is a much easier premise is that you owe a carrying a large amount of cash and the potential for case to defend if you can demonstrate all the other facsomeone observing the payoff. legal duty to provide tors involved in a piece of video and not just the bad security, in a manner that Fights and Disputes thing that a plaintiff’s attorney wants. It is also beneficial to pull each video segment and is reasonable, to protect The final area of increase in lawsuits I have been involved look for instances of security staff performing patrol or in are those where two patrons get involved in some form patrons from seen in the vicinity of the event in the minutes prior, to of altercation over a slot machine, social interactions or foreseeable harm. prove security presence. It is also relevant in those many just simple disputes. It is quite common that one of the cases where the video produced as evidence of the inciparties will most likely sue the casino if they are hurt as a dent starts seconds before the actual bad deed and ends result. Even though the casino did not create the condiseconds after it is over. Although the intent is to just document the event, it tion for a fight, the allegations will be that you failed to properly secure the envicreates an illusion that the casino is hiding something they do not want the ronment, in the way that other casinos secure theirs. jury to see. Understanding what occurred prior is something that should be There is significant case law in these areas across the country, and the basic retained and analyzed way prior to trial. Once the system recycles the available premise is that you owe a legal duty to provide security, in a manner that is reahard drive, it can never be retrieved. sonable, to protect patrons from foreseeable harm. All of the best practices described in this article also apply to these fights that will occur anywhere on the On-Property Assaults casino premises. The likelihood of the fight causing injury to other patrons and Other types of robberies that are also increasing in severity are the robberies of employees is greater in these instances. customers in the parking lots after they leave the casino with winnings and are I have recently had cases where security responded to an incident, attempted still on the premises. I have been involved in carjackings, armed robberies and control of a disruptive patron and as a result of alleged lack of control severely homicides that are a result of a robbery gone worse in a surface parking lot or injured an elderly patron not involved in the incident. In another case where separking garage. curity decided to pursue a suspect who had committed a minor undesirable panPlaintiffs will typically allege inadequate security of the parking lots to inhandling, they ran over a customer creating severe injuries. clude how the security department patrols, at what frequency, and how they From a security perspective it would be a smart practice to have a well-deare trained in crime prevention and deterrence. They will also allege that the fined policy and procedure, reviewed by legal counsel, on the appropriate recasino easily took money from their clients on a regular basis and when their sponse to these common incidents that result in litigation. Training, written client won a large sum, the casino failed to adequately warn them or protect protocols and deployment of personnel will all come under scrutiny during a them from foreseeable harm. lawsuit. Not offering escorts off property, not giving them a warning that they From a surveillance perspective, the smart practice may be to rethink how need to be careful and what not to do will certainly come into the case and evidence is collected and the use of composite video as primary evidence rather quite possibly be used against you at trial. Many casinos require that surveilthan a collection of video clips that can be used as a defense rather than a detrilance be called for review of any jackpots or chip redemptions over a certain ment to the case. Understanding the time it takes for a video review, a directive amount to allow surveillance to watch the transaction. Just watching the transon what types of incidents require a comprehensive video review may be waraction is not enough, and what is occurring in the vicinity should be empharanted. sized. Although most casinos will say that they offer a check written for the winAlan W. Zajic, CPP, CSP, ICPS, is a security and surveillance consultant specialnings or to make arrangements to wire money, they can rarely prove that they izing in casinos and gaming operations. For more information, visit casinosecudid so, primarily because there is no audio that corresponds to the casino cage rityconsultant.com. 36

Global Gaming Business MARCH 2015

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2015 Special RepoRt:

Surveillance and SecuriTy

Protecting your

cyber aSSeTS Hacking attacks mean gaming companies must step up efforts

by GuS FriTSchie

he past year saw a number of high-profile security incidents across various verticals. Target and Home Depot in the retail sector, Sony in entertainment, and Las Vegas Sands in gaming, to name just a few. What is also interesting is how the motive behind these attacks varied. In some instances, financial gain was the driving force, but in others hacktivism or attacks for political views was the primary motive. While the examples listed above feature large, well-known companies, there are just as many (if not more) smaller, lesser-known organizations that have suffered security breaches. This article will explore what gaming organizations (both land-based and iGaming) can learn from these cyber-attacks, how they should react, and what they can do to reduce risk in the future.

When, not if It is common expression in the security sector that it is not if you will be “hacked,” but when. What I have learned throughout my security career is that you can never eliminate all vulnerabilities. The goal is to manage risk and make informed business decisions regarding your information technology infrastructure. All organizations have vulnerabilities that could be exploited by a skilled and determined attacker. Our job is to make it as difficult as possible for an attacker, while balancing business needs, to cause them to move onto the next target (no pun intended). We also need to have capabilities in place to detect and respond to attacks when they do happen. Lastly, we need to have a plan on how we will communicate with our customers in the event of a breach. Before we cover these items in detail, let’s see what can be learned from one of these previous attacks. I was having a security discussion with the vice president of technology of a major land-based casino, and one of his concerns was facing attacks not for financial gain, but those that had a social or political message. We may not want to admit it, but gaming is not universally loved. There are those in the

anti-gaming crowd that may look to cause harm via cyber-attacks. As I have written about in the past, one of my fears is that a regulated iGaming organization will suffer a major incident that could set the industry back and curtail growth. Organizations can also become targets because of their leadership. A prime example of this is Las Vegas Sands. Bloomberg Businessweek reported in its December 15, 2014 edition that the attack against Las Vegas Sands was driven by LVS Chairman Sheldon Adelson’s remarks on Iran’s nuclear program. If the reports in Bloomberg are accurate, the attack vector was a development server that was exposed to the internet. The attackers used this avenue to gain access to LVS’ internal network, and caused sig-

One of the most important assets gaming companies have is data. This data must be protected, and there is no one single solution. Firewalls, data leakage prevention, intrusion detection/prevention, encryption, access control and many more are all areas that must be taken into account. 38

Global Gaming Business MARCH 2015

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What can organizations do to be better prepared to respond to security threats? • understand where the weaknesses in your security posture are

your customers. nificant damage. Unfortunately, there is no silver bullet for inforSome may be surprised that it was this easy to mation security; there is no widget that you can imcompromise a major organization. But if we have • implement detective plement that will protect you from all cyber-attacks. learned anything over the past few years from these capabilities to respond Don’t fall for pitches or solutions that promise such. news stories, it is that these larger, profitable compaIt is only a layered approach that incorporates risk to security incidents nies are just as vulnerable as smaller organizations. management and knowledge of your environment It was reported in the same news story that in that leads to an increased level of security. 2012 there were only five cybersecurity personnel • have a breach response Understanding what your weaknesses and vulprotecting over 25,000 systems on LV Sands’ netplan detailing how you nerabilities are is the first step. By performing secuwork. While the board approved more budget, it was will communicate with rity assessment and penetration testing, we can learn in the process of slowly being rolled out. Unfortuwhere the holes are and take steps to mitigate them. nately, this is also something I have seen both in and your customers This applies to technical controls, but operaoutside the gaming sector. If upper management does tional and management controls are just as impornot make the investment in information security, tant. I am not suggesting that you have to fix they are asking for trouble. everything, which would be impossible. But by understanding what those risks I have seen a number of gaming organizations that don’t have security are you can make informed business decisions. The key point is you will have the leadership (i.e., CISO), but at the same time they will spend millions on marknowledge and information to make these decisions. I had one customer who keting. Until we recognize the importance of information security to the did not want to perform these tests because they were scared of what they would business, we will see more of these types of security breaches. find. Sticking your head in the sand and waiting to be breached is not the soluOne of the most important assets gaming companies have is data. This tion. data must be protected, and there is no one single solution. Firewalls, data The second key is to have detective capabilities in order to be alerted when leakage prevention, intrusion detection/prevention, encryption, access control you are attacked and breached. I stated earlier that it is just a matter of time until and many more are all areas that must be taken into account. your organization suffers a security compromise. In order to quickly respond and limit damage you need a comprehensive solution. This is a combination of intruconfusing compliance sion detection and prevention tools, installed both internally and externally, Another lesson gaming companies can learn is that compliance and regulaforensics, detailed auditing and logging, and data correlation tools to take infortion are not the ultimate solutions. Both Target and Home Depot were PCImation from various information sources. certified at the time of their breaches. During the course of performing Lastly, you need a breach response plan. This should cover what you will do security assessments for our customers, we often discover weakness that could from a technical perspective, but also how you will inform customers and perlead to a security compromise. haps regulators. It is not fun to suffer one of these types of security incidents, but These are organizations/systems that are FISMA, PCI, HIPAA, you name at least if you have processes and procedures, you will be able to limit the damthe standard certified. The same holds true for gaming regulations. Many of age, both technically and from a public relations viewpoint. the gaming MICs and standards should be viewed as a starting point, not the While it is impossible to go over all the items that companies should be finish line. doing to better protect themselves, hopefully this article has given you some Compliance and regulation should be viewed as the minimum level of seitems to consider. My advice is to start by asking, when is the last time you had a curity that needs to be implemented. We also have to be careful not to get real security assessment, not one just for compliance purposes? If you have not pulled into the compliance game, where the majority of the security budget had one recently, start the process to have it performed. goes into making sure the organization meets the required controls. What this You cannot protect and secure what you do not know about. Knowledge is often leads to is security that looks good on paper but not in practice. Rekey, and while security has a cost, it is much more costly to respond after the fact. member, just because you are compliant does not mean you are secure, but if you are secure you will be compliant. Gus Fritschie is an information security professional and avid poker player living in Washington, D.C. He is the chief technology officer at SeNet International step by step (senet-int.com). Fritschie has experience leading and performing numerous vulSo what can organizations do to be better prepared to respond to security nerability assessments and penetration tests in support of financial audits, threats? FISMA, and other compliance-related efforts. Clients included Fortune 500 • Understand where the weaknesses in your security posture are; companies, gaming organizations (iGaming and land-based), civilian agencies, • Implement detective capabilities to respond to security incidents; and the Department of Defense. Follow Fritschie on Twitter @gfritschie. • Have a breach response plan detailing how you will communicate with

MARCH 2015 www.ggbmagazine.com

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2015 Special RepoRt:

Surveillance and Security

HigH-Def eyes Surveillance in the high-tech, high-def era benefits the bottom line By Dave Bontempo

core two for the house. High-resolution cameras and sophisticated software gain increased prominence in gaming’s lucrative surveillance stakes. They have become figurative eyes and ears, joining the vaunted “Eye in the Sky” casinos use to combat millions of dollars lost to theft and cheating. The trend from analog to Internet Protocol (IP) surveillance capability has produced a new house edge. IP cameras, buoyed by the sensation of high definition, contain several times the resolution of analog counterparts. Sharply enhanced focus on faces, chips and cards helps produce conclusive evidence used to halt future incidents or prosecute current ones. Video management systems have also emerged, utilizing cutting-edge software to monitor simultaneous video feeds. They represent a real-time upgrade from analog security, which stores feeds for review. The real-time element is important. A sophisticated security system can observe card-counting groups planning to exploit a rip table for high-card count. It can also detect a patron’s move through the property, even a suspicious table transaction, drilled down in freeze-frame, slow-motion replay or enhanced imagery. A casino can even spot certain players as they walk onto the floor. Overall, the enhanced systems can help security personnel get ahead of a potentially harmful situation. It may seem harsh for operators to monitor advantage players like this. Yet they are constantly reminded of their vulnerability. Consider the “21” movie starring Kevin Spacey depicting the true story of six MIT card-counting students (dubbed “mathletes”) who took Las Vegas for millions. Or the “American Greed” episodes detailing gambler-employee collusion that took months to solve. Hollywood itself even plays a role. Ben Affleck was barred from the Hard Rock Casino in Las Vegas last year for card counting. In real life, casinos are turning to technology to reduce their risk and increase their profits.

High-tech pursuit Scotland-based IndigoVision has an extensive surveillance track record. It is in 40

Global Gaming Business MARCH 2015

about 70 major properties, including casinos in Macau, Europe and Australia. Indigo has installations in 20 American states and offers end-to-end IP video systems that utilize cameras, recording systems and analytic software. The company designs its cameras, recorders and software in Scotland and sells to casinos. A systems integrator installs the package. Tom Frame, systems architect for Indigo, says operators can exploit a resolution revolution. The change to high definition is one of the biggest surveillance trends in years, he indicates. For a decade, 4CIF ruled the high-end camera specifications, but megapixel cameras have become the new stars. The HD video produced by them is up to 30 times more detailed than the old 4CIF devices, Frame says. For the first time, surveillance operators can see when cards have been folded or marked in play, identify stacked chips and read dice using fixed cameras that don’t require operators to manually zoom. This luxury entails an investment, however, because the new cameras are not compatible with the 4CIF devices. There is no better time to upgrade than now, contends Steve Wright, the manager of U.S. sales for IndigoVision. “The casinos will want to take advantage of those high-resolution pictures,” he says. “They need to be able to read the value of notes and bills. They need to be able to review play, analyze how they lost $100,000 in 10 minutes and be aware of what potential scams are going on. “They also wish to have more updated recording systems. This is a great time to be giving them new systems, cameras and software. The life span of the cameras ranges from six to 10 years. It’s a great market for us. We reckon that casinos are the hardest users of equipment. They are constantly bringing up the cameras and looking at them, and then bringing up another bunch, as opposed to operators in other businesses who sit there for hours watching the same cameras.” Wright credits the software inside the cameras with expanding the effectiveness of casino security operations. The software has enabled a concept called Pursuit Mode, allowing a casino to follow someone’s journey from a table through a casino.

S f

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An operator can click a button, triggering nine cameras in a particular area. If the person keeps moving, the operator clicks another button bringing nine different cameras to life. This is significant if the casino believes a customer has stolen something and is trying to leave. “Traditionally, you have to remember the camera numbers or read the camera numbers off a map,” Wright says. “That’s extremely hard if you have thousands of cameras (the typical property uses anywhere from 600 to 4,000, according to industry estimates) and if the person is moving quickly. This is the way forward. Let the software either help the operator get the evidence faster or just get more evidence.” A wide range of cameras may capture the “before,” not just the “after” of card-counting teams. Players working in groups have numerous methods of bilking the house. One of the most common is a player being signaled to a suddenly hot table by a card counter seated there. He bets significantly and leaves when the count no longer favors the players. Later, he will be signaled to another table. For casinos, this is an expensive form of hit-and-run.

What are the signs between players? “They can be anything,” Wright says. “You can be denoting a count on one hand, or a suit on another. If you touch your nose, that might mean, ‘Let’s get the hell out of here,’” he laughs. A range of surveillance cameras, especially in Pursuit Mode, can track the player’s movements and pick up signs he receives from other players. A scam could be halted midstream.

Security Space Station

What does nearly $1 million buy today? A place at the forefront of video surveillance. Black Oak Casino Resort in Tuolumne, California selected Rocklin, California-based Surveillance Systems Integration to update its facilities in 2014. Established in 2002, SSI offers surveillance integration products in the casino, retail and commercial markets. This project, at just under $1 million, transformed Black Oak from the analog into the IP era, via HD specialization. The blueprint aimed to switch to high-definition cameras, enhance the virtual matrix capability, and provide a migration strategy and an equipment up-

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Black Oak Casino Resort in Tuolumne, California

The new video wall includes 20 46-inch class LED monitors, three 24-inch LED monitors and a 70-inch class LED monitor. The video wall monitors are driven by high-definition video decoders. Seven operators have a video console display and keyboard to view live and recorded video at each operator desk. The surveillance overhaul was completed at the end of 2014.

grade to an IP-based system. As part of the process, SSI chose Avaya Fabric Connect technology and Virtual Services Platform to upgrade the video surveillance system. This surveillance deal produced hundreds of cameras mounted on a wall “that looks like a control room for NASA,” jokes Todd Flowers, president of SSI. “It’s an impressive display.” The new video wall includes 20 46-inch class LED monitors, three 24-inch LED monitors and a 70-inch class LED monitor. The video wall monitors are driven by high-definition video decoders. Seven operators have a video console display and keyboard to view live and recorded video at each operator desk. The surveillance overhaul was completed at the end of 2014. The property may now hope to say, “Houston, we don’t have a problem.” They would probably be big in a casino this size. Black Oak includes more than 164,000 square feet of gaming and entertainment options: a conference event center, reel and video slot machines, table games, poker, nine restaurants and bars, a bowling center, players club, gift shop, and a kids’ arcade. The Willow Creek Lounge hosts live entertainment three nights a week. “With a property as large as the Black Oak, and with so many various activities, keeping an eye on assets and balancing that with creating a safe environment was a challenge,” Flowers says. “We saw that the property could benefit from a new video management system as well as cameras, servers and a new control center to be more

Global Gaming Business MARCH 2015

efficient covering the on-site casino hotel and gaming floor. Eventually, it could be expanded to the exterior sites, such as the parking lots.” Black Oak also considered how the new IP-based, high-definition video would impact its storage of surveillance footage. In the phased migration, new network storage managers were installed to replace the legacy network video recorders. “By replacing the existing storage with a new network storage manager, we allowed existing encoded video streams from analog cameras in the system to be recorded on the same platform as the new high-definition cameras that stream using the more efficient H.264 protocol,” Flowers indicates. “We could also eliminate single points of failure so that the system could operate without interruption, and allow the recording of multicast data streams.” The project grew from cameras, storage and video management systems into an enhancement of the surveillance room. It was completed late in 2014. SSI opened 2015 by securing a slightly larger project for the Yellow Brick Casino in New York. Casino weakness—from a dealer’s exposed hole card to a marked deck or its inability to spot an employee-player tandem—is costly. That’s why surveillance is a hot play. Throughout the industry, from project to project, operators weigh up-front upgrading costs with back-end results. For operators, the investment is, literally, their security blanket.

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LONG LEGACY 40 years of stable ownership makes Boyd Gaming unique in casino industry by Roger Gros

Global Gaming Business MARCH 2015

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Sam’s Town first defined the Las Vegas locals market; founder and Vegas pioneer Sam Boyd Below: Bill and Sam Boyd

ike many of his generation, Sam Boyd showed up in Vegas virtually penniless and searching for a place to put his gambling experience to work without risking his freedom. Boyd, who had operated bingo games and dealt cards on a gambling ship out of Long Beach, California, in the 1930s, arrived in Las Vegas with $30 in his pocket and a job as a dealer. Life was tough, but Sam Boyd eventually earned enough to become a partner in several casinos. But he wanted better for his son, and urged him to get an education and concentrate on another business. Bill Boyd took his advice, and went off to college at the University of Nevada, Reno (before there was a UNLV, he points out) and then to law school at the University of Utah, where, after a two-year interruption from the Korean War, he obtained his law degree. Boyd settled down to practice corporate law, but then, like today, it’s hard to separate the gaming industry from other businesses in Las Vegas, and lots of casino operators were his clients. That became his path into the gaming business. “I was representing someone who wanted to open a small casino in Henderson, called the Eldorado,” he explains, “and he asked me if I would mind taking my fee

out in stock. Later he asked if I wanted to buy some more stock. “He only had $20,000, and $100,000 in those days was the capital that we were looking for. So I said, ‘sure.’ So I went to the bank and borrowed $15,000 and bought 15 percent of his company. So that was my first experience in the gaming business, but I really got there as a lawyer.” Sam Boyd also invested in the Eldorado, and brought Bill in with him as an investor and board member in the Union Plaza in Downtown Las Vegas. With his knowledge of Downtown, Sam suggested that father and son build their own casino. The result was the California, the first casino to be built off Fremont Street at First and Ogden, which opened on January 1, 1975. “The first nine, 10 months were really, really tough,” Boyd admits. “But one day, my dad said, ‘What we need is a niche market. And that’s going to be Hawaii.’ We had lived there before we moved to Las Vegas, and he was involved in gaming over there. He knew that the Hawaiians loved to play. “He and I would go to Hawaii for five or six days every month, and sell our package. We called it the ‘Hawaiian Package’ for the travel agents, and it really caught on. We started doing quite well, and we did just what he said. We made the California Hotel their home away from home.” Even today, native Hawaiian food and entertainment, and executives who wear Hawaiian shirts continue to make the California a comfortable destination for islanders. Once the California was settled, Boyd began to eye a piece of property he owned with some other investors on Boulder Highway, between Downtown and Henderson, where no casinos existed. They were able to buy the adjacent property at Boulder Highway and Nellis and immediately began construction on Sam’s Town. Again, the experts thought they were crazy. “My dad and I both got calls from friends in the business, who told us we were out of our minds. ‘You’re going to lose the California, you’re going to lose the Eldorado. You can’t possibly make it out there, because you’re in the middle of the desert.’ “Well, we opened Sam’s Town, and we were busy from the first day. In fact, I had one of those naysayers call me about four weeks after we opened, and asked it we had any stock available. And I was happy to tell him no.”

MARCH 2015 www.ggbmagazine.com

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The Stardust was imploded in 2007 to make way for the ill-fated Echelon Place, and the site was recently sold to Genting for its Resorts World Las Vegas

Nevada Nod In the early ’80s, Nevada was still untangling the hooks of organized crime. When the owners of the Stardust and the Fremont were found by state regulators to be unfit to operate gaming in Nevada, Bill Boyd was approached. “I got a call from Patty Becker, who was serving on the Gaming Control Board at the time,” Boyd recalls. “She told me that there were problems at the Stardust and the board was going to hold a hearing to revoke their license. She said the legislature had passed an act called the supervisory statute, that allowed the Gaming Control Board to recommend an individual or a company that was actually licensed to operate the gaming. So, she asked, ‘Would you go into the Stardust and run it for us so we can save more than 2,000 jobs?’” Boyd went back to the company board members and got their approval, and took over the Stardust and the Fremont, which was controlled by the same company. “We walked in, and I was naive enough to think that we would be welcomed, because we had a reputation for integrity, and we knew the business,” he says. “But no. It was like a war when we got there, not because we were the Boyd Group, but that was their place; they didn’t want anybody else in there.” And although the Strip was new to them, Boyd says they simply applied principles that they knew worked in their casinos, again angering the former license holders. “Our predecessor wouldn’t allow the dealers to talk to customers,” he says. “We were just the opposite. We wanted the dealers to talk to customers. We changed that immediately. And that was something completely different than what they did. But the business is the same… The customers may be different, but that really wasn’t an obstacle at all.” Boyd eventually bought the properties once the licenses were stripped from the previous owners, giving it control of four Las Vegas casinos—the California, Sam’s Town, Fremont and Stardust—as well as the Eldorado in Henderson. It was at that time gaming expansion began rushing across America, and Boyd meant to be a player.

State by State Boyd targeted the Mississippi market, developing a Sam’s Town casino in Tunica County, which opened in May 1994 and recently celebrated its 20th anniversary. But that was just the start of a frantic five months. “On July 1, we opened the Silver Star, which was a casino owned by the Mississippi Band of Choctaw Indians and managed by our company,” Boyd ex46

Global Gaming Business MARCH 2015

plains. “And in September, we opened the Treasure Chest in Kenner, Louisiana, just outside of New Orleans.” While the multiple openings stretched the abilities of Boyd Gaming, Boyd credits the dedication of his employees for the successful debuts. “The only reason we could do that was because we had great teamwork from our people in Las Vegas,” he says. “Nobody in that part of the country knew our business, so we had to take what we called ‘shadows’ to each property in every department to help show them what we do, how we operate this business.” The next project was a cruising riverboat (the casinos in Mississippi and Louisiana did not have to sail) in Missouri. Not only were the logistics more complicated, but the regulatory system was less friendly. “We had our boat docked in Kansas City and we started cruising,” he says. “But all of a sudden the Gaming Commission decided that a dockside barge was good enough. We had no chance then, because our land-based property was too small, so we sold our boat. We always felt that that was very unfair to do, to get a company to invest there first, and then change the rules. But they did it, so we sold our boat and left Kansas City.” In Illinois and Indiana, Boyd was invited in by local partners who could not operate a casino on their own. “We were there in East Peoria, Illinois, and then we went to Blue Chip in Michigan City, Indiana,” he says. “We bought both of those from some of the local people that had started them, but were just in for the investment, not for the long term. We finished the hotels that they had planned, and they’ve both been very successful for us.” Boyd Gaming’s big play developed in the early part of the 2000s, when the company developed the Borgata in Atlantic City, a property that cost close to $1 billion. Boyd explains that he wasn’t thinking about Atlantic City until he received a call from Steve Wynn, who had been granted a plot of land to develop at least three casinos. “I got a call from Steve, and we operated in Downtown Las Vegas together,” he says. “So Steve says, ‘I’m calling you first, Bill. I’m going to build my own place and I want to be next to you.’ At that time Steve had the Mirage and Treasure Island. He said, ‘I’m the Mirage, and I want you to be the Treasure Island.’ In other words, he wanted the more upscale place. I was OK with that because Treasure Island was

HERE’S TO RICH HISTORY AND A PROSPEROUS FUTURE.

WE CONGR ATULATE BOYD GAMING ON YOUR 40-YEAR ANNIVERSARY AND LOOK FORWARD TO 40 MORE. FROM YOUR FRIENDS AT ARISTOCRAT.

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The Borgata was an instant market leader in Atlantic City

“I go to all the properties at least once every quarter. I tell all our team members to call me Bill, not Mr. Boyd.”

doing quite well.” But he wanted to limit the Boyd property to 1,200 rooms. And then MGM swooped in and bought Wynn’s Mirage Resorts, and the landscape changed. Then-MGM President Terry Lanni had a different idea. “He told me we could build as many rooms as we want and make it as nice as want. So we were able to really change things,” he says. “In fact, our front desk area was built for 1,200 rooms, not for the 2,000 we ended up building. But we made it work anyway, and it has been very beneficial to us.” Borgata immediately became the dominant property in Atlantic City, a position it retains to this day. “I think our competition in Atlantic City really underestimated us,” he says. They thought we were just a Downtown or local operator, so I don’t think they really expected a lot of competition. It worked to our benefit, because when we

opened, I think everyone was shocked, with what we had there and how much business we did.” While Boyd laments the situation in Atlantic City, with the closure of four properties in 2014 and threats to several more, he says it was inevitable. “No one likes to see places close and jobs lost, but I think it’s at the right size now,” he says. “With all the competition around, I think everybody can be successful; I certainly hope so.” Back in Nevada, Boyd’s relationship with another son of a legend—Jackie Gaughan—resulted in another huge expansion for the company. Michael Gaughan, who owned Coast Casinos—the Orleans, Barbary Coast, Gold Coast, Sun Coast and the under-development South Coast—decided he wanted to sell. Boyd bought the casinos for a total of $1.3 billion and installed Gaughan as board member for Boyd Gaming. But it wasn’t a good fit. “Michael never really liked corporate life,” says Boyd. “He had never been involved in a corporation, and asked how I could stand all the convoluted corporate decision-making and SEC regulations. I told him if you’re public, you don’t have a choice. So he’d been with us for 12 or 15 months when he came to me and said, ‘I don’t really enjoy this; I’d like to go back to operating my own property.’ So, we already had the South Coast open, and we made a deal where Michael could take that, change the name to South Point, and we got the other properties. And he’s very happy now. I have lunch with him every few months.”

HAPPY ANNIVE RSARY BOYD GAM IN G

Years of Leadership Years of Fun & Games Years of Innovation

Happy 40th Anniversary Boyd Gaming! IGT is proud to have been part of all the winning.

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Role Reversal Boydâ&#x20AC;&#x2122;s string of successful operations came to a screeching halt in the middle of the first decade of the 2000s. Boydâ&#x20AC;&#x2122;s follow-up to Borgata was going to be Echelon Place, the site of the former Stardust that Boyd imploded in 2007. Echelon was going to be the second of the huge mixed-use developments on the Las Vegas Strip, following MGMâ&#x20AC;&#x2122;s CityCenter. The $4 billion dollar property was to have included four hotels, an expo center, a shopping mall and more. Construction began in 2007, but was quickly suspended in August 2008, for what was then suspected to be only three or four quarters. By

2009, it became clear that Echelon was not to be, and Boyd put it on hiatus for at least three years. â&#x20AC;&#x153;We had been working on it for several years, before we even started construction, and we had about $1 billion invested in it,â&#x20AC;? Boyd explains. â&#x20AC;&#x153;We could see the recession coming, and we knew that if we didnâ&#x20AC;&#x2122;t stop construction immediately, we would be in trouble. And so we did. In fact, we took a little heat when we stopped. A lot of people thought we were crazy, but we thought it was the wise thing to do. Fortunately, we were right.â&#x20AC;? In March 2013, Boyd Gaming revealed it had sold the site to Malaysiaâ&#x20AC;&#x2122;s Genting Group, which has announced plans for Resorts World Las Vegas. Genting, which operates the worldâ&#x20AC;&#x2122;s largest casino in Malaysia, also owns an integrated resort in Singapore, a racino outside of New York City, and interests in gaming around the world. Boyd says he believes Genting will be successful in Las Vegas, and talks about meeting Gentingâ&#x20AC;&#x2122;s chairman, KT Lim. â&#x20AC;&#x153;He told me, â&#x20AC;&#x2DC;We get in the business for the long term. We know that we may

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not make money when we start, but we’ll eventually do well. We don’t ever get into anything looking at the short-term,’” Boyd says. “And I think that’s probably part of the Chinese way, generally.” Boyd is philosophical about the Echelon experience. “Everything in life doesn’t go always just the way you plan it,” he says. “But you have to be willing to make the decisions that will keep you alive. And we did that. And for quite a while, all we thought about was surviving, and after that, with all that money tied up, drawing no interest or anything. But we just buckled down, and everybody worked hard, and we were able to come out of that.” Boyd says he’s still interested, however, in the Las Vegas Strip. “If the right opportunity came along, we would certainly be interested in that. Many of our good customers tell us that they would like to come to Las Vegas for a vacation. So we knew that a lot of those people would have come to stay with us, if we had opened up Echelon. And we think that would still happen, if we have the right opportunity to get to the Strip.”

Building a Culture As one of the few—if not the only—gaming companies to survive for 40 years under the same ownership, Boyd says there is no secret to the company’s longevity. “Our mission statement says we operate with the greatest degree of integrity and that we strive to increase shareholder value by cooperation. When I mentioned the three places that we opened in four and a half months, I don’t think anyone could have done that as quickly as we did it. We did it because we were like family.” To maintain that family feeling, Boyd never ties an employee to the company. “We’ve never had a contract in our company,” he says. “When I happened to mention that to (MGM’s) Terry Lanni when we were doing the Borgata, he told

me that MGM has one staff attorney that only does contract work. Well, we don’t do that. We think if somebody is unhappy, we wish him well.” The personal touch is important to Boyd. “I go to all the properties at least once every quarter,” he says. “I tell all our team members to call me Bill, not Mr. Boyd. Before we bought Peninsula Gaming, which was the last company that we bought, we had 50 percent of our employees that had been with us 10 years or more. And I know you won’t find any other gaming company where you can say that.” Boyd was also instrumental in the founding of the National Center for Responsible Gaming (NCRG), one of the most important institutions in gaming. When Boyd Gaming entered Missouri, they had to abide by regulations that required investment in combating problem gambling. Boyd Gaming put the first $100,000 into the center, which was based in Kansas City in those early days. “My dad used to tell me, ‘You don’t want anybody to lose more money than they can afford to lose. That’s not what we’re here for.’ He was always very, very careful with that, not to let somebody (gamble) more money than they could afford to lose. You might give them a few hundred dollars more to get home, but don’t let them knock themselves out by playing too much.” Boyd, now executive chairman of Boyd Gaming, points to his company’s involvement in the communities where they are located throughout the years. “My dad was one of the businessmen that started the United Way in Las Vegas,” he explains. “The thing he was most proud of is starting the first Boys & Girls Clubs in Las Vegas and in Henderson. He even went to Reno, and got his friends to start a Boys Club up there as well. We’ve always had the feeling that if you’re successful, you have to be willing to give back to your communities, and we’ve done that, not only in Las Vegas, but all around the country.”

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Allll T Together ogether © 2015 GTECH C Canada anada ULC ULC and/or its affilia affiliates. tes. All All Rights Rig ghts Reserved. Reserved. A Allll tr trademarks ademarks and logos not noted ed her herein ein ar are e tr trademarks ademarks k owned owned b by, y, or lic licensed ensed tto, o, GTECH C Canada anada UL ULC. C.

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Congratulations to Boyd Gaming on 40 Years of Validated Success!

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iGAMING NORTH AMERICA

Making the Connection The role of social gaming in the opening of the U.S. iGaming market, Part I

eal-money iGaming has been introduced in three jurisdictions in the U.S.: New Jersey, Delaware and poker in Nevada. In none of these states can it be said that the introduction has been a success. In all cases the revenues generated were much less than projected. In general, this lack of success has been the result of payment processing problems, geo-location issues, lackluster marketing and low liquidity. On the other hand, the initial introduction of iGaming has not seen any problems associated with underage gaming, unapproved geographic access or problem gambling. These successes are important, as they contradict many of the claims of opponents of online gambling. The software to achieve this has been proven to be effective, and this will greatly help in arguing for the expansion of iGaming to other states. The failures in terms of revenue generation are, however, significant. It has now become apparent that real-money iGaming as currently set up will not provide a revenue windfall to the states. This was something observers predicted some time ago, and has now been demonstrated. This causes a real problem for the expansion of iGaming for real money to other states. Legislators in the past have been motivated to pass gaming legislation to generate revenue, create jobs and encourage investment. iGaming offers comparatively few jobs and state revenues a fraction of land-based revenues. Consequently, the traditional arguments made to enlist legislators and encourage them to open up a state to new forms of gaming are moot. Why would legislators adopt what would be a controversial position without the ability to point to concrete benefits for the state? As a result, the expansion of real-money iGaming to other states seems to be in hiatus, at least in the short term. Free-play and social gaming may be the best road forward “breaking a trail” for real-money gaming to follow when it becomes more widely understood and accepted. There are a number

Global Gaming Business MARCH 2015

By Paul Girvan

of reasons why I see this as a valid way forward: • Free-play and social gaming are essentially legal already. At most, gaming commissions may have to adopt regulations and approve operators. • Much has been made of “saturation” on the land-based gaming side, and it is my belief that free play and social gaming offer one avenue to bolster the competitiveness of land-based casinos, providing them with the means to protect their markets, market their product and drive online customers to land-based casinos. Maryland Live!, a free-play site, provides a good example of the effectiveness of free-play sites. The company has released some research which indicates that 12 percent of the online free-play database came into the casino to play for real money. Of these, 40 percent came more frequently, were worth 20 percent more per visit, and stayed 10 percent longer than other customers. Another casino (which cannot be named for proprietary reasons) reported that its free-play poker site had 22,000 active poker players in five months, of which 15,000 were not in the casino database. The same casino also reported that 8 percent to 10 percent converted to land-based players. This is of huge significance in many states where lawmakers have realized that they (the state) are major stakeholders in land-based casinos and are seeking ways to strengthen the gaming industry in their state. A powerful argument can be made that free play or social gaming is merely another channel for the land-based casino to market itself and to engage with customers that currently may not be visiting their casino, and most importantly to combat competition from surrounding states. • The demographics of free-play and social gaming players are attractive to land-based companies in that they have a strong reach into younger demographics while at the same time reaching a broad swath of females 45 and over—the core demographic of slot players.

• Social gaming is a highly analytical endeavor with operators able to determine when the best time is to offer players promotional elements, or to prompt them to “level-up” by purchasing access to different games and levels. • There would be no artificial geographic boundaries for casinos with customers from two or more states.

• It is a proven market with social casino gaming worth $1.5 billion in the US. • It is already a major presence in the emerging mobile channel, with mobile claiming a 58 percent share of the worldwide social gaming market and mobile casino gaming growth in the U.S. growing at an impressive rate (49 percent for casino games, 36 percent for bingo games and 5 percent for slots). Most casino companies are already engaged at some level in the iGaming issue as the chart above (taken from an Innovation Group Survey of casino operators in the fall of 2014) shows. Next month, we’ll present some charts and data that will establish the connection between social gaming and real-money iGaming. Paul Girvan is a managing director with the New Orleans office of the Innovation Group with 25 years of experience advising clients across the gaming industry. Girvan leads the firm’s iGaming practice. Contact Girvan at girvan@theinnovationgroup.com or 504-523-0888.

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Online Gambling Ban Resurfaces in Congress

tah Republican Congressman Jason Chaffetz has revived his bill to ban online gaming in the U.S. by reintroducing it to Congress. The Restoration of America’s Wire Act bill is heavily backed by Las Vegas Sands Chairman Sheldon Adelson. The measure would reverse a 2011 Justice Department decision that allowed for intrastate online gambling with the exception of sports betting. Chaffetz called the Justice Department’s action “a massive policy change without debate or input from the people or their representatives,” and noted that 15 state attorneys general—as well as Guam’s attorney general—have asked Congress to act on online gambling. The bill is seen as coming from Adelson, who has personally financed a drive to ban online gambling through his Coalition to Stop Online Gambling. The bill floundered in Congress for most of last year. Chaffetz, however, told the Las Vegas Review Journal he thinks the bill can pass in the new Congress. “I am very optimistic this legislation can pass,” Chaffetz said. He also told the paper that he has received “some pretty good indications from leadership this is something that will hopefully be brought up sooner rather than later.” Chaffetz, who is chairman of the House Oversight and Government Reform Committee, said he intends to give the bill a “full push,” and is considering holding hearings on how the online gaming industry is targeting children. He also acknowledged that Adelson is a backer of the bill. “He is an active player,” Chaffetz said. “I’m glad he is supporting our bill. You have active people on both sides of this issue. There is a lot on the line, and I’m glad he agrees with me on this one.” Seven other congressmen joined Chaffetz in reintroducing the bill, including six Republicans and one Democrat, Rep. Tulsi Gabbard of Hawaii. According to reports, Senator Lindsey Graham’s office has confirmed that the South Carolina Republican also intends to reintroduce his companion version of the bill in the Senate, but a timetable was unclear. The reintroduction immediately brought out opposition to the bill and reignited the debate over 56

Global Gaming Business MARCH 2015

Utah Congressman Jason Chaffetz

online gambling. The bill is opposed by some powerful groups as well, including Caesars Entertainment, MGM Resorts and lawmakers advocating states’ rights. The MGM-backed Coalition for Consumer and Online Protection issued a statement saying that the bill would put consumers at risk by pushing online gambling further into the shadows. The coalition noted that three states—New Jersey, Nevada and Delaware—have implemented online gaming for more than a year without any reported incident of underage or illegal gambling. “The Coalition for Consumer and Online Protection welcomes a clear and transparent debate of this issue,” the group said in a press release. “We know that when policymakers examine the facts they will conclude that an online gaming ban will not only drive an existing black market further into the shadows, but will put consumers and children at even greater risk.”

Two California iPoker Bills Move On

wo California lawmakers are pushing competing bills that would each legalize online poker in the Golden State, but which have significant differences. The two bills highlight the fault line separating the various interests that want to remove the ban on online gaming in the state.

Despite those differences, both bills’ authors, Assemblyman Mike Gatto (AB 9) and AB 167 author Assemblyman Reginald JonesSawyer, have hinted that they might eventually work together on a compromise bill. The major players in this contest include two consortiums of gaming tribes, card clubs, racetracks and gaming companies that would like to make inroads into California. This is not the first year that the attempt has been made to legalize online poker. Various attempts have been made in the past six years, mainly by lawmakers who have now been termed out of office. This is the first time that Jones-Sawyer and Gatto have made the attempt. The goal is to create a new revenue stream for the state and to provide a safe haven for California’s online poker players, who play whether it’s legal or not, which means that the state is losing that tax revenue and consumers are leaving themselves open to being ripped off. Some proponents are getting restless and want action. Pala Band of Mission Indians, which operates a large casino resort in San Diego County, is already familiar with online poker, having established a poker site in New Jersey. Many other Golden State tribes would love to jump into the game. Lee Acededo, executive director of the California Nations Indian Gaming Association, pointed out that internet poker is a fact of life, and that what remains to be determined is how gaming tribes will participate. Gatto’s bill would require a $5 million licensing fee for online poker providers. Its most controversial section is a “bad actor” clause seemingly aimed at the Morongo Band of Mission Indians consortium partner PokerStars. Jones-Sawyer’s bill does not have a bad actor clause and would allow the participation of the horse-racing industry.

888 Rejects Takeover Approach by William Hill

8 Assemblyman Reginald Jones-Sawyer

88 Holdings Plc reported last month that it considered and then rejected an approach from William Hill about a possible takeover. The company said it turned own the £700 million offer from Britain’s largest bookmaker because one if its major investors disagreed with the valuation. “Due to a significant difference of opinion

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launched a new regulated website in Mexico, leveraging the regulated, offline operations of Casino Life, Cirsa’s Mexico casino business. The new website, casinolife.com.mx, comprises sports betting and casino products, bingo and over 200 slot games. SportiumBet is the sports betting service on the site, carrying a broad range of betting markets with particular focus given to the popular sports of football, basketball, baseball and American football. Ladbrokes first outlined plans to enter the Mexican iGaming market in august 2013, but regulatory issues forced a delay until this year. A statement released by the company said the online gambling site was authorized by Mexico’s Ministry of the Interior and that it “meets all legal requirements and measures necessary to ensure a fair and safe gaming environment.” “Sportium continues to grow strongly through our retail and digital channels in Spain, and we see further growth opportunities in that country,” said Damian Cope, managing director of Ladbrokes International. “However, the strength of Cirsa’s extensive offline presence across Latin America now allows the joint venture to expand in that region. This digital entry into Mexico is very much a first step in our plans, not the culmination.”

on value with a key stakeholder, it has not been possible to reach agreement on the terms of a possible offer, and the board of the company has agreed with William Hill to terminate discussions,” 888 said in a statement. William Hill was working with Citigroup Inc. as it evaluated the possible offer, Bloomberg News reported citing an unnamed source. 888 is advised by Investec Bank Plc and Morgan Stanley. Following the news, 888’s shares fell as much as 17.5 percent to 140.63 pence. 888 has considered buyout offers in the past. In 2011, the company negotiated with Ladbrokes over a possible acquisition. The talks ended the same as similar talks did in 2007, in failure. The company is largely owned by the BenYitzhak and Shaked Israeli families, which together hold around 60 percent of all shares.

Ladbrokes Enters Mexican iGaming Market

Singapore Blocks Online Gambling Sites

ondon-based bookmaker and gaming operator Ladbrokes plc has launched a new regulated online gaming site in Mexico called Sportium, through a joint venture with Spanish operator Cirsa.

ingapore has begun enforcing a ban on online gambling by blocking internet access to several hundred gambling sites. The Remote Gambling Act, passed through Parliament in October, gives the government broad powers to block access to overseas gambling sites and block electronic payments to their operators. The country’s banking system has also been

Sportium, a multi-channel betting operator in Spain and official betting partner of La Liga, had

advised not to accept any transactions from within the country with the overseas gambling sites being blocked. Sites such as Paddy Power, ibcbet.com and sbobet.com were blocked with a warning to those trying to sign in. “Viewing and using this website at your current location is prohibited due to its regulatory rules,” said the message. Under the new law, exemptions can be granted for locally based online gambling operators that follow strict rules and operate on a nonprofit basis. Lottery operator Singapore Pools told local media it will apply for the exemption. The new law also makes placing bets on overseas sites punishable by jail terms and fines.

Internet Poker Bills Dead Again in Mississippi and Washington

wo states jumped off the iGaming bandwagon last month. When Mississippi state Rep. Bobby Moak introduced the Mississippi Lawful Internet Act of 2015 in January, he knew it would not succeed in an election year. His colleagues recently proved him Washington Rep. Sherry right—for the Appleton admitted that third time—by not her iPoker bill is dead advancing the bill past the committee level. The bill would have licensed and regulated internet gambling. “My Republican colleagues have not been moving very much at all concerning gaming,”

Online Gambling Sites Exit German Market

MansionCasino.com is just one site that has abandoned the German iGaming market

everal German online gambling sites have announced they are closing down for realmoney play. A group of casino sites including Casino.com, MansionCasino.com, LesAcasino.com, Club777.com and SlotsHeaven.com all announced plans to block new players from Germany from joining their

Global Gaming Business MARCH 2015

sites at the beginning of February. Players will still be allowed to sign up for play-money accounts, but real-money play will be restricted. All of the online casinos use Playtech software. The move has led to speculation that it was caused by Germany’s sometimes confusing online gambling regulations. In-

dividual German states have tried to regulate online gambling, but the federal government has allowed only for sports betting to be offered online. In 2012, Germany enacted a federal gambling treaty that allowed only for the regulation of online sports betting while banning other forms of online gambling.

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Moak said. “They haven’t looked at doing any of the incentives that some other businesses get, and we’ve got to create some opportunities to help the bottom lines for gaming houses.” He noted two Mississippi casinos closed last year due to competition in neighboring states. Moak said the disappointing results from regulated online gaming in New Jersey, Nevada and Delaware should not impact internet gambling in Mississippi. “We all know the numbers weren’t as huge as some people thought they would be, but my position on internet gaming is just to give the industry options it needs in this changing market. It’s another tool they should have,” he said. In Washington state, a grass-roots organization seeking to pass legislation to legalize online poker has acknowledged that the bill has died in committee and the issue is likely dead in the state for 2015. A bill to allow online poker in the state was introduced in January by state Rep. Sherry Appleton, a Democrat, but it never received a hearing. “The bill did not get the support that I had originally hoped for, and consequently we will not be moving forward with it this session,” Appleton said in a press statement. Appleton had introduced the bill in support of the grass-roots campaign known as the Washington Internet Poker Initiative. But the effort always seemed a long shot in the state, one of the few in the country to adopt a law specifically making playing online poker in the state illegal. That law was passed in 2006.

Intertain Buys Bingo Site

oronto-based online gaming holding company Intertain Group Ltd. announced it has purchased internet gaming businesses from Gamesys Ltd. in a deal Intertain executives say make the company the industry’s largest provider of online bingo. Intertain will pay at least £425.8 million (US$653 million) in cash and shares for several bingo websites, including Jackpotjoy, and slot site Real-Money Starspins. Under the agreement, Gamesys will receive bonuses for reaching profit targets over the next three years. “Our stated vision is to focus on the female demographic, in regulated markets,” John Kennedy FitzGerald, chief executive officer of Intertain, said in a statement. “This acquisition is consistent with this vision.”

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FRANKLY SPEAKING by Frank Legato

Casino Hoops?

VICT O

R RIN ALDO

he Borgata in Atlantic City just announced a new tournament linked to the player’s club that will consist of a basketball free-throw competition. It’s more than a player-club event, though. The New Jersey Division of Gaming Enforcement is looking it as the first experiment in skillbased games for money—competitions with skill to replace dumb luck in deciding the outcome. Joe Lupo, the Borgata’s senior vice president, told the Associated Press the free-throw contest is “a first step… A year from now, you’ll probably see a lot more of these skill-based tournaments or even games on the casino floor.” The Borgata says this is the first of many skill-based contests that “allow gamblers to take greater control over the outcome of their bets.” I knew skill-based gaming was coming. It’s the only way these millennials are going to sit in a casino as we of the baby-boomer generation do—that is to say, sit in one position gambling until your moss-covered remnants are found by future archeologists. However, I always envisioned “skill-based gaming” as referring to video games—Super Mario Brothers, or that Konami game Full Metal Jacket Gear, or Solid Metal Skillet, or whatever it’s called. What I’m trying to say is that skill games for the millennial casino player are supposed to test hand-eye coordination and dexterity gained through countless hours of sitting in a bedroom with a joystick and nachos. This Borgata thing sounds a lot like gym class. And as it happens, I couldn’t hit a free throw on a basketball court if my life depended on it. You could even give me a step ladder right in front of the basket, and help me lift my arms up to throw, and I’d still miss it. And this is the gambling skill game they come up with. What’s next? A chin-up competition? (My limit is one.) Shimmying up ropes? Maybe a dodge ball tournament? (That would be pretty cool, actually.) I had always hoped that when skill games came along, it would somehow involve pinball. Yes, go ahead and color the cartoon mustache gray, because that’s where I come from. It’s actually curious that my generation migrated to slot machines so easily, having spent countless hours honing our ability to shoot steel balls at flashing bumpers while avoiding the dreaded “ball drain.” I’ve said before that casinos and slot manufacturers are afraid to place classic pinball machines with cash winnings out on the floor, because most boomer males can summon up that old bowling-alley skill to crush a pinball game. I’ll bet they’re approaching millennial-style video games with the same caution. I can envision slot managers visually aging—hair falling out, hands shaking, posture declining into a hideous, twisted form—as gangs 60

Global Gaming Business MARCH 2015

of Red Bull-swilling millennials reach Level 50 on a for-money video game to slaughter the month’s casino win. So what we’re left with is a free-throw competition to start the era of skill on the casino floor. Oh, well, at least there will be fewer slot-floor fatalities in Taiwan. I’m referring, of course, to the 32-yearold man found dead in front of a sweepstakes computer in Kaohsiung, Taiwan. A worker discovered the man slumped in a chair in front of the machine he always plays. According to a Daily Mirror report, the man, “known only by his surname Hsieh,” was a regular at the place, where he would typicaly play for days on end, taking periodic naps right at his play station. Evidently, at some point during this particular night, Hsieh went for the Big Nap. The police report listed “sudden death” from “prolonged computer gaming.” Police chief Weng Chun-neng said cold temperatures and over-exhaustion from intense game-playing likely contributed to Hsieh’s demise, and advised people to get up and move around every couple of hours while playing, so as not to, you know, croak at the machine. Cold temperatures? What, are these games out in the woods or something? This isn’t even all that rare in Taiwan. Last New Year’s Day, another guy was found dead at an internet café in New Taipai City. That guy was only 38. For the record, you hardly ever find boomers dead at a traditional slot machine. I love when I play a slot machine and don’t die. It makes me feel young. (I needed it this month—I was still trying to come to grips with Bob Dylan being on the cover of AARP magazine.) But sorry, Borgata, I can still do without gym class for money. Having millennial children, though, I can still muster up a mean game of Super Mario, so I’ll wait for that. Don’t forget to comp the nachos.

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ICE

Breaker London trade show sets milestones

ith more than 25,000 reported attendees, ICE Totally Gaming dominated the London casino scene for the first week of February. Held at the ExCel Centre on the city’s Thames riverfront, the international gaming trade show once again claimed its place on the calendar of gaming events. Dominated again by iGaming companies, ICE had its high points with casino vendors as well. Scientific Games CEO Gavin Isaacs called ICE an important milestone for his company as it was the first trade show that featured a stand containing all the company’s recently acquired brands: Bally, Shuffle Master, WMS, WMS Interactive, Scientific Games and more. While the Scientific Games stand (1) stretched many meters across the show floor, it paled in size to Novomatic (2), which company CEO Harald Neumann claimed to be the largest stand in the history of any gaming trade show. IGT introduced its S3000 cabinet (3) that Sabby Gill, the company’s international sales director, called a “game changer.” Zitro, the Spanish slot company, pulled out all the stops and brought more than 20 executives to ICE (4). The conference program kicked off on Monday with the International Casino Conference hosted by the Hippodrome Casino (5) in that facility’s cozy showroom. Other conference tracks were produced by the International Association of Gaming Advisors (IAGA) and the International Masters of Gaming Law (6). Playtech CEO Mor Weizer (7) explained the company’s strategy and suggested that a sizable acquisition will be announced sometime in 2015.

Global Gaming Business MARCH 2015

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