GGB Magazine March 2013 by Global Gaming Business

Online in Jersey | Tribal refinancing | bingO bOOm | ice recap

March 2013 • $10 • Vol. 12 • No. 3

Playing His Cards

Right

SHFL entertainment’s Gavin Isaacs directs fortunes of table game giant

Playing

Platforms Why standardization will help entire gaming industry

Cutting Competition Tribal gaming & encroaching casinos

The Modern Casino Pit Official Publication of the American Gaming Association

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Vol. 12 • No. 3

CONTENTS

ON THE COVER

march COLUMNS

Page 22

SHFL the Deck The transformation of Shuffle Master into SHFL entertainment reflects the evolution of the company from a supplier of table game utility equipment into one of the leading suppliers of table game content in the industry.

Frank J. Fahrenkopf, Jr.

FEATURES 42 Tribal Conundrum The success of Indian gaming has, ironically, emboldened state governments to pursue casino gaming on their own, potentially leaving the tribes out. By Dave Palermo

30 Connecting for the Future Open technology platforms can provide the type of interoperability between genres of gaming that will allow casinos to move forward. By Tim Gronkowski and Chris Donahue

Global Gaming Women Changing the Status Quo Judy Patterson

Gavin Isaacs CEO, SHFL entertainment

By Rodric J. Bradford

Fantini’s Finance Aligned Interests Frank Fantini

By Frank Legato

18 That’s a Bingo! New technology and consistent popularity have made the timeless game of bingo a necessity among casino offerings.

AGA The Science of Responsible Gaming

48 Conquering Tribal Debt Despite their unique position when it comes to bankruptcy and creditors, more and more tribes are moving to restructure the debt incurred in building their properties.

34 Pit Tech Table tracking systems, RFID technology and ticket-in/ticket-out capability are bringing the table game pit into the 21st century.

62 Solid ICE London’s ICE Totally Gaming trade show and conference kicks off a new era as thousands flock to the new ExCel venue.

By Dave Bontempo

By Frank Legato

40 Jersey Battle The federal government has intervened in the major sports leagues’ court challenge to New Jersey’s sports betting law.

64 Scientific WMS The pending acquisition of WMS Industries by lottery giant Scientific Games signals a major industry consolidation move.

By Patrick Roberts

By Frank Legato

By Adam Moses

DEPARTMENTS 4

The Agenda

Dateline

Nutshell

iGames

New Game Review

Cutting Edge

Frankly Speaking

Goods & Services

People

Casino Communications With Matt Cullen, President and Chief Operating Officer, Rock Gaming

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THE AGENDA

Sweep Out the Sweepstakes Roger Gros, Publisher

Vol. 12 • No. 3 • March 2013 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com

ver the past several months, I’ve frequently heard that the biggest danger to the gaming industry is the explosion of internet “sweepstakes” parlors that have spread like wildfire through many states. Everyone from the leader of the American Gaming Association to an official with a small rural California tribe has explained that these businesses threaten the very foundation of our industry. While there are a few wrinkles in different states, the routine is basically the same. A shell company leases a storefront, usually a small space in a strip mall, and installs a dozen or so computers hooked up to a server, where a gaming software system they purchased resides. The “sweepstakes” systems closely resemble their cousins, slot systems. One provider of such software advertises such benefits as “many different bonuses and progressives including: multi-level bonuses, wide-area progressives, multi-denomination progressives, and free spins.” Sound familiar? Now, the legal defense of these establishments is that they are simply operating sweepstakes like fast food chains, convenience stores and other businesses routinely run, and that the product they are offering is no different. But the truth, of course, is far from their claims. When one buys a meal at a fast-food restaurant, they don’t throw away the meal to get a chance at a sweepstakes, and then upon losing, go back and buy another wasted meal to get another chance at the sweepstakes prize. The related images offered at one of these parlors are almost exactly what you would find at a casino. Dice, bonus wheels, triple 7s, and the like. So, a patron easily understands that what these businesses are offering is not a sweepstakes, but real, hard-core gambling. But shutting them down is more than just difficult; in some cases, it’s impossible. In most cases, the shell companies get a business license from a small town—we haven’t seen them in larger cities yet because their business regulations are quite complicated. Then, they simply open the door and start operating. In a few weeks, someone tips off law enforcement that illegal gambling is under way at the location, and they get a visit from the local sheriff or police. Because most states don’t have very complicated laws defining sweepstakes, the business’

Global Gaming Business MARCH 2013

claim that it is a sweepstakes operation means the police can’t charge them with illegal gambling. Often, the company taking the business license mischaracterizes the activity in the store as a “business center” or a “phone bank.” So the police turn to the town, which may pull the business license, and the owners may even get charged with a crime— usually a small misdemeanor. If they’re found guilty, sometimes they pack up and move down the road to another town or unincorporated area. But often, they file a million-dollar lawsuit against the town and/or the police. (There are also online attorneys who will provide the parlors with one-size-fits-all lawsuit documents to tie up town attorneys for months while the parlors continue to operate.) Most towns don’t have the time or financial wherewithal to battle these legal suits, so they’ll back down. Some anecdotal evidence suggests that not only are these businesses operating illegal gambling, but they are also running drugs and prostitution out of the same address. So these operators represent dual threats to the gaming industry. First, they sap hard-earned business, particularly in rural areas, where small, usually tribal, casinos are hurt. Secondly, they give the gaming business a bad name. We have spent decades shedding the “organized crime” reputation that was clearly a part of our industry in its infancy. With strict regulations assuring the integrity of the games and the owners, we’ve come a long way. These “sweepstakes” parlors threaten all that progress by opening with no licensing, oversight or assurance that the players are being treated fairly. The answer is to talk to your legislators in every state and jurisdiction and get them to enact laws that specifically ban these kinds of betting parlors, and aggressively prosecute those who violate the spirit and the letter of the law. Sweepstakes parlors in some states have joined together in associations to hire lobbyists to convince legislators that they are indeed a legitimate business with real concerns for the community where they are located, and for their employees (few as they may be). But we can’t let them get away with this charade. They have to be stopped. It must be done to ensure that the legal and respected gaming industry continues to grow, thrive and create benefits for its employees, communities and investors.

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

• Julie Brinkerhoff-Jacobs, President Lifescapes International

• Nicholas Casiello Jr., Shareholder Fox Rothschild

• Jeffrey Compton, Publisher CDC E-Reports

• Dean Macomber, President, Macomber International, Inc.

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

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

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

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

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Global Gaming Business (Jan. issue-A size) Indian Gaming (Jan. issue-A size)

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Please examine these publication materials carefully. Any questions regarding the materials, please contact Erik Welch at (415) 217-2809

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DATELINE TRIBAL march2013

Mystery WoMan

CEO nominated to head Interior Department Sally Jewell

Seneca Niagara Casino

Playing Hardball REPORTS: Cuomo wants new Niagara casino s New York Governor Andrew Cuomo considering a Vegas-style casino in Niagara Falls? A number of news outlets reported that the governor, an advocate of expanded gaming in the Empire State, will soon propose a privately operated Class III casino in the Falls, but only if the state gaming commission finds a decade-old compact with the Seneca Nation to be invalid. The governor recently proposed a gaming expansion that would begin with three casinos in upstate New York. That choice surprised many who thought Cuomo would elect to develop gaming in New York City first. The governor said upstate is more in need of the economic boost that casinos could bring. But licensing an operator in Niagara Falls would create direct competition with the Seneca Niagara Casino. All in all, the Senecas have withheld more than $450 million in payments over the past few years, claiming the government in Albany breached its 2002 compact by allowing racinos in the tribe’s area of exclusivity. The issue is currently in arbitration. Because the state does not receive its share of Seneca gaming monies, it is unable to compensate the three cities that host Seneca casinos: Niagara Falls, Salamanca and Buffalo. The cities’ share of the revenues is typically used for capital improvements, education, and to cover the cost of increased municipal services to the casino.

resident Obama last month nominated the CEO of REI (Recreational Equipment Inc.), a manufacturer of outdoor equipment, and a longtime conservationist, Sally Jewell, to head the Department of the Interior. She will replace outgoing Secretary Ken Salazar. In selecting the 56-year-old Jewell, Obama has picked someone with a foot in corporate America, including experience in the oil industry, as well as someone who has a strong commitment to a “green” agenda. He also picked someone who is a strong contributor to Democratic causes. In nominating Jewell, Obama commented, “She knows the link between conservation and good jobs,” the president said. “She knows that there’s no contradiction between being good stewards of the land and our economic progress, that, in fact, those two things need to go hand in hand.” It is rare for an Interior secretary to come from the business world. Usually, that position is filled with someone with mainly governmental experience. The National Congress of American Indians greeted the nomination favorably. It said it expected the new secretary “to make great strides and continue the transformation of the Department of the Interior under this president.” It added, “Ms. Jewell’s career indicates that, like other leaders in the Northwest, her efforts have often intersected with and supported the timeless wisdom of tribal nations in relation to natural resource issues. Her career has also included service on boards of organizations that have partnered with tribes to expand educational opportunities for Native people, develop renewable and responsible energy solutions with the private sector and government agencies, and emphasize the importance of Native cultures and languages.” Jewell has been CEO of REI, a chain of more than 100 stores, for eight years. From Washington state originally, she also worked previously as an engineer for Mobil Oil Corporation and for nearly two decades in commercial banking.

Indian Gaming Visionaries NIGA honors trio who played role in early days uring the National Indian Gaming Association’s Native Nations Policy Summit held in January, Chairman Ernie Stevens Jr. presented handmade silver NIGA sovereignty staff pins to Gay Kingman-Wapato; Daniel Tucker, Sycuan Band of the Kumeyaay Nation chairman; and NIGA Chairman Emeritus Rick Hill, as an acknowledgement for their historic and current role in advancing Indian gaming and tribal sovereignty. “Over 20 years ago, these warriors took on the challenge to build a national presence to Indian gaming,” Stevens said. “Gay, Danny and Rick provided a standard of what our industry means and what it stands for, and that is sovereignty and Indian self-determination. These badges of honor are reminders of our mission and what still needs to be accomplished for our tribes throughout this country.” The pins were designed by the former chairman of the Shakopee Mdewakanton Sioux Community, the late Stanley Crooks, and presented at NIGA’s one-day meeting on sovereignty, tribal economies and taxation in Crystal City, Virginia on the weekend of the presidential inauguration.

NIGA Chairman Ernie Stevens, Daniel Tucker, Gay Kingman-Wapato and Rick Hill

Global Gaming Business MARCH 2013

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DATELINE ASIA march2013 Chinese President Xi Jinping may be behind latest move against junkets in Macau.

CraCk DoWn or CraCk UP?

Macau junkets come under increasing scrutiny from media, government

ne of the U.K.’s most respected newspapers reported last month that Beijing is planning a crackdown on illegal activities among the junket operators who drive Macau’s massive business in highrolling gamblers from mainland China. Citing law enforcement sources, The Times said the move will begin after the Lunar New Year, and will involve police operations in more than six cities, spurred by an anti-corruption campaign led by the country’s new president, Xi Jinping. “The squeeze has already started on a small scale, but the operators themselves believe that something bigger is coming within the next few weeks,” a Macau gaming industry source with ties to a junket operator told The Times. “There is a feeling that too much money has left China, and the new

administration will try to rein some of that in.” As well as sending a warning, others suggest the crackdown is designed to provide just enough of a public show for Xi to be able to portray his anticorruption drive as genuine. However, representatives of the gaming industry in Macau, together with investment analysts and their links within the junket community, were quick to discount the story, which prompted a sharp drop in the share prices of the city’s six casino operators. Macau is the largest casino market in the world, generating US$38 billion in gaming revenue last year, and the VIP sector is its lifeblood, accounting for about two-thirds of revenue. Lawrence Ho, co-chairman and chief executive of licensee Melco Crown Entertainment, told Eng-

lish-language Macau Business Daily, “We haven’t heard anything like a junket crackdown.” But the crackdown didn’t come from the mainland; it came from within Macau, where the government in February announced that it would step up background checks on VIP operators following Chinese New Year in order to “purify” the industry. “It’s been the government’s established policy to maintain a stable and healthy development of the gaming industry,” said Secretary for Economy and Finance Francis Tam. “Should we find any illegal activities in the sector, we won’t turn a blind eye to it.”

Wash & Dry

Philippines gaming gets a pass on money laundering

New Year, New Resort Wynn Resorts begins construction on its Cotai resort ynn Cotai got a grand sendoff in February when its parent company, Wynn Resorts, began construction on the project, many years in the making. Chairman Steve Wynn said stabilization work on the reclaimed land has been completed and the driving of foundation pilings was started, some as long as 100 yards or more. The project is expected to cost nearly $4 billion with a three-year build-out, which, if accurate, will mean an opening date prior to the Chinese New Year celebration in 2016. During an earnings conference call in February, Wynn revealed some details about the property. Wynn has previously been quite secretive.

“We’re the first (light-rail) stop on Cotai between the ferry terminal and the airport,” Wynn said. “The stop is right at the middle of the lake we’re building that’s roughly the size of Bellagio. “At the bottom of the escalator from that light-rail system, we have put a Doppelmayr gondola car that has music and is air-conditioned,” he continued. “People will get into the gondolas and they go around the fountains into the hotel, looking at the fountains and down at our pool area while music plays and fountains dance. We are meeting in many, many new ways the challenge of our neighbors and hoping to get the folks in the other hotels to experience our own. And all of this is such great fun.”

he Philippines Congress has passed tougher antimoney laundering legislation that carefully excludes casinos and internet gambling. Banks, which are covered under existing legislation, are also left out of amendments recently passed by the Senate and House of Representatives in response to a threat from the Financial Action Task Force to blacklist the country unless it takes more determined steps to prevent Philippine President the funneling of proceeds from Benigno Aquino criminal activity and block funding for terrorism. Blacklisting would make it difficult for millions of Filipinos working abroad to send money home and hard for Filipinos to invest abroad. President Benigno Aquino is expected to sign the amendments into law. Senator Teofisto Guingona said casinos and internet gaming were excluded at the request of the House and the Philippine Amusement and Gaming Corporation, the government regulator. “They excluded casinos from coverage because House members warned it would deter investors. That’s the No. 1 reason. And No. 2, PAGCOR.” Passage comes just weeks before the scheduled opening of the first of four casinos planned for the new Entertainment City resort district in Manila.

MARCH 2013 www.ggbmagazine.com

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DATELINE USA march2013

No Deal Beshear tables Kentucky casino talk

espite a poll demonstrating that state voters would back casinos, Kentucky Governor Steve Beshear is not backing any proposal to bring casino gaming to the Bluegrass State, citing opposition from three Kentucky racetracks, the Louisville Courier-Journal reports. Seneca Niagara Casino Beshear said he would reconsider if the tracks in question—Kentucky Downs in Franklin, and Keeneland and the Red Mile in Lexington—retreat from their position that racetracks must operate casinos. Many in the horse industry contend that any expansion of gaming would have to be structured to help and not hinder or compete with the tracks. “I feel that if those tracks were on board, we would have the votes in the Senate now to pass that type of amendment,” Beshear said. “I do feel confident that if all of the industry would get its act together and if these tracks would step up and support this approach, along with the breeders and owners, we would have a real shot at passing something this session.” To legalize casino gaming in the state, lawmak-

Kentucky Governor Steve Beshear

ers would first have to pass a constitutional amendment that would put casinos to a referendum. The most famous track in Kentucky, Churchill Downs, supports Beshear but also looks forward to more gaming in the state renowned for its wagers on horse races including the Kentucky Derby. “We’re committed to passing expanded gaming,” Churchill Downs Senior Vice President of Corporate Affairs Brett Hale said. “It’s the right thing to do for the commonwealth of Kentucky. It’s the right thing for the industry. We’ll continue to work with the governor to find a solution.” Beshear may wait until 2014 to go forward with a bill. Meanwhile, a recent Courier-Journal Bluegrass Poll indicated more than 60 percent of Kentuckians support amending the state constitution to allow casinos.

Anticipation Ohio casino revenue down from 2009 projections hen Ohio voters approved four casinos for the state’s four largest cities, they were promised higher revenues than have turned out Horseshoe Casino Cincinnati will open this month. to be the case now that three casinos have opened. The fourth and last casino, the Horseshoe Casino Cincinnati, will open this month. State officials previously estimated that the four casinos would take in $1.9 billion once all were operating. Figures for the four casinos show that they will likely take in about half that amount, and cut taxes paid to the state by roughly half as well. Governor John Kasich’s biennial budget assumes $957.7 million in gross revenue for the casinos. The state takes a third of the gross revenue in taxes, which it distributes to local government and schools. The state officials who created the estimates in 2009 included higher revenues because a larger casino was expected to be built in Cleveland than actually materialized. At the time, officials also predicted that the revenues would be less if the state allowed Ohio’s seven racetracks to add slot machines to become racinos—something that it has done. All three of the casinos that have opened have experienced less than expected revenues, grossing about $350 million for 2012, with the lion’s share coming from Cleveland.

Global Gaming Business MARCH 2013

Planet Hollywood in Las Vegas

Attacking Debt Caesars packages assets to raise revenue

aesars Entertainment, saddled with more than $20 billion in debt, announced last month it will package parts of three of its assets, Caesars Interactive, Planet Hollywood in Las Vegas and the Horseshoe Casino in Baltimore, in a company called Caesars Growth Venture Partners. The unit of the company will assume $1.1 billion in debt. In addition, Caesars proposed selling $1.5 billion in senior notes, due in 2020, at a 9 percent rate. Proceeds will be used to repay outstanding term loans, the company said. For Caesars Growth Venture Partners, the company, which is largely owned by Apollo Global Management and TPG Capital, said it would keep a “significant portion” of the venture. The Baltimore project is a joint venture with Rock Gaming, the Detroit-based company that is a partner in two Ohio Horseshoe casinos in Cleveland and Cincinnati. Caesars also is building the $550 million Linq project on the east side of the Las Vegas Strip between Harrah’s and the Flamingo, which will include a 500-foot-tall observation wheel, similar to wheels in London and Singapore, as well as an entertainment mall with restaurants and shops. Also in February, Caesars opened a Nobu hotel expansion at Caesars Palace, and closed Bill’s Gamblin’ Hall and Saloon (formerly the Barbary Coast) on the Strip. The property will undergo a $185 million renovation and conversion of the 198-room hotel-casino into a boutique-style property. Victor Drai started the nightclub craze by opening his seminal nightspot at the former Barbary Coast in the early 1990s.

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DATELINE GLOBAL march2013 Cadillac Fairview owns and manages commercial properties, including malls.

MGM SecureS ToronTo ParTner Competition will include all gaming giants M

GM Resorts International is teaming up with a property company on its bid for a license to operate a resort casino in downtown Toronto. The 50-50 joint venture is a first for Cadillac Fairview, which claims to be one of North America’s largest investors, owners and managers of commercial realSeneca estate. Niagara Casino “In Cadillac Fairview we are partnering with a company with whom we share a common vision for the development of an iconic integrated resort in Toronto,” said MGM Resorts Chairman Jim Murren. Cadillac Fairview owns a number of major Canadian shopping centers, including Toronto’s Eaton Centre, Vancouver’s Pacific Centre and Calgary’s Chi-

Bahamians Reject Gambling Voters decide to eliminate “web shops” itizens of the Bahamas, who are forbidden by law from engaging in any form of gambling, including the islands’ casinos, have overwhelmingly rejected a referendum that would have legalized gambling on numbers for island citizens. The Bahamas government has long tolerated underground betting parlors in Prime Minister Perry Christie immediately the islands known as “web shops,” where began to shut down Bahamians bet on numbers in televised illegal gambling. U.S. lotteries. A two-part referendum asked voters whether the gambling shops should be legalized, regulated and taxed, and if the government should establish its own national lottery. Bahamian voters rejected both prospects by wide margins, although voter turnout was low. The government will now face the task of shutting down the dozens of underground web shops. “The prime minister was clear that his government would be guided by the results of the referendum and the will of the people, notwithstanding the low voter turnout,” said Bradley Roberts, chairman of the Bahamas’ ruling party. After the vote, the government demanded that the web shops close immediately. “Accordingly, all offending web shop owners and operators are placed on notice that all their gaming operations, including all online gaming and the numbers games, must cease with immediate effect,” Prime Minister Perry Christie said in a brief statement. “Failure to do so will leave all such web shop owners, operators and web shop gaming patrons exposed to arrest and criminal prosecution without further notice or warning.” The referendum is seen as a defeat for the islands’ casinos, particularly the new Baha Mar casino on Cable Beach in Nassau, which wanted to include locals in its marketing efforts. Other casinos also wanted the more prosperous Bahamians to be able to enjoy gambling in the country’s casinos.

Global Gaming Business MARCH 2013

nook Centre. The company is owned by the Ontario Teacher’s Pension Plan. Alan Feldman, MGM’s senior vice president of public affairs, called the partnership “extremely important” to the future of the bid. “This is our side-by-side, 50-50 partner,” he said. “This was the really critical component.” MGM has made known its preference for a casino at the city’s Exhibition Place. Las Vegas competitors Caesars Entertainment and Las Vegas Sands are vying for the license at different locations.

Lawyer: Mexico a Nest of Corruption Former regime accused of selling licenses

scandal is unfolding in Mexico’s powerful comment, according to news reports. Secretariat of Interior, the ministry that Pena Neder, who is in federal prison in oversees the country’s gambling industry, in Matamoros on the rape charges, denies the the wake of allegations of corruption leveled allegations, labeling them “ridiculous.” He by the ex-wife of a former Interior official. said in a recent television interview that Corporate lawyer Talia Vazquez Alatorre, he’d been working for “a sheikh from who claims she was the victim Dubai” before his arrest. of a gang rape at gunpoint led Casinos operate in a by her ex-husband, Juan Ivan murky legal environment in Pena Neder, a Chihuahua atMexico. A 1947 law bans torney and former high-rankthem. PAN’s Vicente Fox, who ing Interior official, has filed was elected president in 2000, criminal charges and prepared tried but failed to overturn the sworn statements demanding ban. Instead, he issued rules investigations into “likely illicit that allowed sports betting and activity” in the ministry’s gam- Former Interior official bingo parlors, which function Juan Ivan Pena Neder as casinos for all intents and puring and lotteries bureau. is in jail for rape. Among her allegations is poses with casino-style games. that she witnessed Roberto Gil Zuarth, the When Calderon came to office in personal secretary of then-President Felipe 2006, he pledged not to issue casino perCalderon, accept a backpack with $800,000 mits until order was restored. But officials to help smooth over opposition to opening a within the Interior Secretariat and gaming casino in the city of Queretaro north of Mex- bureau devised ways around it, and dozens ico City. more illegal or gray-area casinos sprung Gil Zuarth, who is now a senator and into existence. One scheme has bureau ofhead of Calderon’s National Action Party ficials appearing to deny permits, which (PAN) in the upper chamber, denies the alleapplicants then appeal to friendly judges gations and says he will file a defamation suit who issue writs known as “amparos” that against Vazquez. allow them to open anyway. Under anCalderon, who this month began a yearother scheme, off-the-books casinos build long fellowship at Harvard’s John F. Kennedy a legal framework around their operations School of Government, was not available for by beginning to pay federal taxes.

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DATELINE EUROPE march2013

Super Start

Fixing a Hole

Britain’s largest casino begins to take shape

onstruction has started near the city of Birmingham on Britain’s long-awaited “super casino.” Genting’s £150 million, 160,000-square-meter Resorts World at the NEC, the country’s sole “regional casino” as it’s formally known under the 2005 Genting’s £150 million Resorts World Gambling Act, and its largest, near Birmingham could open by 2015 with up to Niagara 150Seneca table games andCasino 1,250 unlimited-prize slot machines. Located next to the LG Arena, its amenities will include a four- to five-star hotel with 176 rooms, a spa, a factory outlet center with 45 shops, a cinema complex and conference and meeting space. It will be owned and operated by Genting Casinos UK, part of Malaysian conglomerate Genting Group. One of the largest building projects in the Midlands, Resorts World is expected to employ 1,750 workers during construction and 1,100 full-time staff once it’s up and running. Experts say the regional economy will benefit from a £60 million boost during construction and up to £33 million per year after the opening.

HOT ITALY

Italy’s gambling boom sparks concern

s Italians suffer the effects of the European financial crisis, gambling is becoming more and more popular, with slot and video poker machines popping up in arcades and coffee bars across the country and scratch-card lotteries available at shops, gas stations and street kiosks. Reports are that problem gambling is reaching epidemic proportions as well. “Italy is becoming the Wild West of gambling nations,” Matteo Iori, the president of Coordinamento Nazionale Gruppi Per Giocatori d’Azzardo, an umbrella organization that help gambling addicts, told The Daily Beast. “Because Italians are burdened with an economic crisis, that has paradoxically stimulated many to seek fortune to escape the economic difficulty.” It is estimated there is one slot machine for every 150 citizens, and the number is growing, thanks to a law passed by Silvio Berlusconi’s government in 2010 that permits the awarding of another 1,000 video poker licenses. Problem gambling advocates are trying to stop the licenses from being issued, but government has much to gain by expanding the gambling industry, which paid more than US$8 billion in taxes in 2012. Gambling revenues have increased 25 percent the last three years to $120 billion. Italians are the biggest gamblers per capita in the world after Singaporeans and Australians, according to a recent study. It is also estimated that more than 800,000 have a serious gambling problem.

Global Gaming Business MARCH 2013

Europol uncovers widespread corruption in football

he integrity of football in Europe—the game known as soccer in the U.S.—has come under question as Europol, the European Union’s joint police body, has uncovered more than 680 “suspicious games” on five continents following an investigation. It is the largest number of game-fixing incidents the agency has ever uncovered, and could have far-reaching implications for the sport. The 19-month investigation, which is still ongoing, uncovered match fixes in at least 15 countries, including Turkey, Germany, Italy, Switzerland, South Africa, Finland, Slovakia and Hungary, among others. Europol has implicated at least 425 people, including game and club officials, players and criminals, who profited from illegal game-fixing dating back to 2008. The agency has not disclosed specific suspects, teams or games, as the investigation continues, but the list includes a Champions League game in England that ended in a tie and three World Cup qualifiers, two played in Africa and the other in Central America. “This is a sad day for European football,” Rob Wainwright, the head of Europol, said during a news conference in The Hague. “It is clear to us this is the biggest-ever investigation into suspected match-fixing in Europe. It has yielded major results, which we think have uncovered a big problem for the integrity of football in Europe.” With an estimated $1 trillion a year wagered on sports, corruption on the playing field is nothing new. Recent actions by FIFA, football’s international governing body, bear this out. In January, FIFA barred 41 players for fixing matches in South Korea. The month before that, the president of the South African association was suspended after it was learned that four exhibition games preceding the 2010 World Cup were fixed. In the last year, court cases have exposed corruption and bribery in football in China, Turkey and Italy. According to Neil Humphreys, author of the best-selling novel Match Fixer, game tampering is rife in Eastern Europe, especially in the lower leagues, where players are not always paid on time and do not command the high salaries of players on teams like Liverpool or Manchester United. But perhaps the largest center of sports corruption is in Asia, where murky betting practices and crime syndicates go hand in hand. Europol’s recent investigation has centered on a Singaporebased crime network that yielded $10.9 million in betting profits and $2.7 million in bribes. Some of those bribes topped $135,000. “The syndicates are very well protected,” Humphreys, who is based in Singapore, told Sportsmail. “There is a lot of money behind them, coming from rich businessmen in China, Malaysia and Singapore.”

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NUTSHELL

“They The Osaka Securities Exchange has requested information from Universal Entertainment Corp. related to its resort development activities in the Philippines. The investigation, reported by the Financial Times, is the first by a Japanese regulator into millions of dollars in payments the listed gaming machine supplier made allegedly to secure favorable treatment for a resort casino it is developing in Manila. Philippine and U.S. authorities are also looking into the payments. Japan Exchange Group, the OSE’s holding company, declined to comment, the Times said. Macau International Airport handled more than 370,000 passengers in January, a 3.5 percent increase over the same month last year. The airport, the conduit for about 6 percent of visitors to the city, has recorded 20 months of continuous passenger traffic growth since June 2011. Five new airlines introduced service last year: Mandarin Airlines, Vietnam Airlines, Thai Smile, Air Busan and Air Asia Philippines. The European Commission has proposed including online gaming in E.U.-wide legislation that seeks to combat fraud and money-laundering. The plan could become law within two years if approved by all 27 member countries. The Navajo National Gaming Enterprise will soon announce the exact opening date for its fourth casino, near Twin Arrows. The month of May is already known, but the exact date for the $175 million casino resort also will soon be known, according to CFO Derrick Watchman. The tribe is now hiring up to 800 employees, from housekeeping to dealers. It held a three-day job fair last month at the High Country Conference Center. The casino will have 1,089 slot machines, table games and 90 hotel rooms, plus four eateries. Crown Limited’s A$570 million redevelopment of its Burswood resort in Australia has been given the green light by federal and state environmental authorities, clearing the way for the massive project to begin as early as April. The federal Environmental Protection Agency said the work could proceed without a full assessment, as it

would not involve “matters of national environmental significance.” In a 9-0 vote, the Indiana Senate’s Public Policy Committee passed a wideranging expanded gambling bill that would allow live table games at horserace tracks in Anderson and Shelbyville, eliminate the current $3-per-person admission tax and instead slightly raise the tax on casino profits, drop taxes on promotional gambling credits and allow the state’s 10 riverboat casinos to build on land next to their docks. The measure is designed to help Indiana casinos compete with new facilities in Ohio, which has three new casinos and a fourth set to open this month in Cincinnati, just across the Ohio River from several Indiana casinos. Because of the new casinos in Ohio, plus other competition from Michigan, Illinois and Kentucky, Indiana budget officials have forecast a 15 percent decline in tax revenues from the state’s 13 casinos, from $614 million last year to $520 million by fiscal year 2015. The D Casino in Downtown Las Vegas has added another “taste of Detroit,” says owner Derek Stevens. Joe Vicari’s Andiamo Italian Steakhouse, with nine locations in the greater Detroit area, opened its Las Vegas restaurant February 1. It’s the third family-owned business from Detroit to join the casino. MGM Resorts employees, who volunteered more than 113,000 hours to the city of Las Vegas in 2012, were recently honored by Nevada Governor Brian Sandoval, who gave the company the 11th Annual Nevada Governor’s Points of Light Award. The employees’ efforts were worth more than $2.1 million, according to Independent Sector, an organization that calculates the value of volunteer work. Leighton Holdings has confirmed an agreement with Wynn Macau to design and build the company’s new gaming resort on Cotai. The MOP1.85 billion contract (US$231.3 million) is the largest ever for Leighton subsidiary Leighton Asia, which was also involved in the building of Wynn Macau and Encore, Melco Crown Entertainment’s City of Dreams and Macau Fisherman’s Wharf.

CALENDAR March 24-27: Indian Gaming 2013, Phoenix Convention Center. Produced by the National Indian Gaming Association. For more information, visit indiangaming.org/events/tradeshow. April 3-4: FADJA 2013— Andean Gaming Trade Show, Corferias, Bogota, Colombia. Produced by Andean Gaming. For more information, visit fadja.com.

April 23-25: Global iGaming Summit and Expo (GIGSE), San Francisco. Produced by Clarion Gaming. For more information, visit gigse.com. May 1 & 2: RD&E—Retail, Dining & Entertainment in the Gaming & Hospitality Industry, Planet Hollywood, Las Vegas. Produced by Global Gaming Business and the Innovation Group. For more information, visit RDEExperience.com.

May 21-23: Global Gaming Expo (G2E) Asia, the Venetian Macao. Produced by Reed Exhibitions and the American Gaming Association. For more information, visit G2EAsia.com. June 3-7: North American Gaming Regulators Association (NAGRA) Annual Training and Education Conference, Virginia Beach Hilton, Virginia Beach, Virginia. Produced by NAGRA. For more information, visit nagra.org.

Said It”

“It was a matter of coincidental timing.” —Bill Pfund, WMS vice president of investor relations, on reports that six company executives, including Chairman and CEO Brian Gamache, were vested with thousands of WMS shares just prior to the sale of the company to Scientific Games, multiplying their value of the shares

“It becomes much more exciting if the player pool is $100,000, not $10,000, and if you can actually go online and win $1 million, not $10,000.” —Tom Breitling, chairman, Ultimate Gaming, who sees big money ahead as internet gambling comes online

“I don’t think anyone would call it lying, but they were competing with each other, and I think they were trying to put their best foot forward.“ —Pennsylvania Gaming Control Board spokesman Richard McGarvey, on overestimated revenue projections by gambling executives seeking state gaming licenses

“I listened to Sheldon’s call yesterday. You don’t get numbers like that unless you’re on your game.” —Steve Wynn to investors during his fourth quarter earnings report

“I don’t think I ever believed a Manhattan casino was going to be something that would happen.” —Jan Jones, senior Caesars executive, on New York Governor Andrew Cuomo’s plan to start the gaming expansion far from the Big Apple

“Imagine a glass factory in Czechoslovakia, and then you drop into that a working theater set. It will make a statement; it’s not just vanilla.” —John Unwin, CEO, Cosmopolitan Las Vegas, on the unusual design angle of a new 3,000-seat theater at the property

“The offers were two years apart. This last one was four months ago, five months ago, and we thought we might have had a deal, but they got their refinancing and they just have no interest in selling to anybody, so …” —Phil Ruffin, billionaire casino owner, who made two attempts to buy MGM Mirage and is now setting his sights and his money on building a convention center at Treasure Island

MARCH 2013 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION by FRANK J. FAHRENKOPF, JR.

The Science of Responsible Gaming

NCRG continues to be the leading organization examining problem gambling

arlier this year, we celebrated the 10th anniversary of one of the industry’s most important commitments. In January, the American Gaming Association released a revised Code of Conduct for Responsible Gaming, reflecting the evolution of the gaming entertainment industry during the last decade. Responsible gaming is a key imperative in our business—one that we take very seriously. While all aspects of the code are important, one essential priority that has remained true over the years is the AGA’s ongoing support and promotion of research-based policies on responsible gaming. Letting science guide our efforts to inform and educate our communities is an important aspect of developing relevant and appropriate responsible gaming programs. Among other initiatives, one of the key ways our industry fulfills this provision of the code is by providing funding for the National Center for Responsible Gaming. Since the NCRG’s beginning nearly 17 years ago, the gaming industry has generously committed almost $25 million to fund innovative research and public education programs that make an impact. This extensive support of the gaming industry has led to groundbreaking work, ultimately redefining the field of gambling disorders. In fact, NCRG funding has resulted in a number of “firsts” in this area of research, including the first reliable statistics of how many people who have a gambling disorder in the U.S. (approximately 1 percent of the adult population) and the first national survey of gambling on college campuses. NCRG-funded researchers also developed the first framework for understanding gambling disorders as a public health issue—a framework that we use in our responsible gaming programs and community outreach. Another “first” will happen later this year. Thanks to NCRG-funded research results, the organization will launch the first-ever online brief screening and intervention tool to help college-aged adults determine whether or not they want to seek help for any problematic gambling behavior. A main contributor to our better under-

Global Gaming Business MARCH 2013

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

standing of gambling disorders and responsible gaming comes through the research of the first NCRG Centers of Excellence in Gambling Research. In 2009, the NCRG realized that substantial, multi-year research grants are the most effective ways to produce foundational research on this issue. When the NCRG named the Centers of Excellence at the University of Minnesota and Yale University that year, the organization had only a small idea of the immense impact The release of the fifth edition of the American Psychiatric Association’s Diagnostic and Statistical Manual (DSM) may have a range of implications on treating problem gamblers.

these research grants would have on the field and on our industry’s understanding of this issue. As they finished their three-year grant agreement in 2012, the final reports for these NCRG Centers of Excellence show tremendous results. The NCRG Center of Excellence at the University of Minnesota developed a model that potentially detects and treats youth who are susceptible to risky behaviors, such as pathological gambling. Through neurobiological studies, researchers showed that a hallmark of gambling disorders is poor decision-making abilities that could be rooted with neurological problems in the frontal parts of the brain. The NCRG Center of Excellence at Yale has also made unique discoveries that have an impact on early prevention and treatment efforts for gambling disorders, especially youth gambling. This month, the NCRG will announce the next round of NCRG Center of Excellence grant awardees, and I’m excited to watch their progress over the next three years. As an industry, how we understand gambling disorders impacts our daily business operations. It is essential that we understand the disorder and those who suffer with the addiction. We need to be aware of the science and its implications for

our employees, patrons and the greater community. One issue of great importance to the NCRG, as well as the clinical and research communities, is the highly anticipated release of the fifth edition of the American Psychiatric Association’s Diagnostic and Statistical Manual (DSM) in May. You may have seen some articles in the New York Times and Washington Post regarding how this publication’s revisions will influence diagnostic issues for mental health disorders, especially for autism. It also will have an impact on the field of gambling disorders. For clinicians and researchers, the DSM is a key reference book that contains descriptions, symptoms and other criteria for diagnosing mental disorders. The manual’s diagnostic criteria are used by clinicians to report disorders to insurers for reimbursement, and practitioners use this guide as a basis for treatment options for those who are diagnosed. It is imperative for the industry to know of the changes that the DSM-5 holds for problem and pathological gambling. First, the manual will reclassify pathological gambling as an addiction, and will officially change the name of “pathological gambling” to “gambling disorder.” These changes may have a range of implications, including a possible increase in insurance coverage of treatment for gambling disorders. One last change that is included in the DSM-5 is that it reduces the number of criteria one must have to be diagnosed with the disorder, and some have been concerned that this change will increase the prevalence rates of gambling disorders. Researchers have started to analyze data from large national samples to see if this change has any bearing on the prevalence rate. Estimates are that it may raise the prevalence rate 0.2 percent to 0.3 percent, slightly above the scientifically proven rates, but that time will tell as more research is available. For now, we’ll have to wait and see what these DSM-5 changes and research findings for the new NCRG-funded research projects will yield for our industry. If the past is prologue, these updates will increase our knowledge of this addiction and help us to better serve our staff, patrons and communities with the best science-based information possible.

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FANTINI’S FINANCE by FRANK FANTINI

Aligned Interests When the founder is in charge of any company, it bodes well for investors

n looking for long-term investments, I am partial to companies in which the founder, or the founder’s family, own controlling interests. At many companies, the managers are mercenaries. They come and go. They talk about aligning their interests with those of shareholders, but that’s often a euphemism for deluging executives with millions and tens of millions of dollars in options, giving them nearly instant fortunes at the expense of shareholders who put their own money at risk for a slice of potential. And when companies buy back shares, the talk is about benefitting shareholders, but in many cases the share base stays flat or even expands, meaning money was spent primarily to limit the dilution of generous options. But in companies where the founder remains in charge and is a big shareholder, there is no question where loyalties reside. With his heart and soul invested in creating and building the business, his interests aren’t just aligned with shareholders; he is a shareholder, and usually the biggest shareholder. An investor gets another bonus with a founder-CEO. The company is run by the guy who has the vision and a record of success in fulfilling it. In gaming, the best-known visionary founder-CEOs are Steve Wynn and Sheldon Adelson. Wynn has given investors two opportunities to make a lot of money—originally with the Golden Nugget turned Mirage Resorts, and currently with Wynn Resorts. Wynn Resorts went public at $13 a share a decade ago. Thus, investors have enjoyed a 1,000 percent appreciation. Better yet, WYNN has dished out $40.50 in dividends, or more than three times the IPO price. That means there are investors who, in effect, are being paid to own the stock. And with WYNN generating so much cash, those dividends are likely to continue. Indeed, the company is doubling its regular dividend to $4 this year and is likely to pay a special divi-

Global Gaming Business MARCH 2013

dend again. Last year the special dividend was $7.50. Las Vegas Sands has given investors less of a ride, thanks to the stock cratering in the financial crisis of 2008-2009. But long-term investors have certainly enjoyed it since then, as the stock jumped from a low of $1.38 in March 2009 to more than $50 recently. Dividends are part of the story here, too. LVS has paid out $3.75 since initiating its divi-

‘‘

Back then, the stock could be bought for under $2.50 a share. As of this writing, it’s over $48. And as it transforms again, this time into publicly owned operating and property companies, PENN will pay a $5.60 dividend for starters with likely annual payouts by the new REIT. Of course, not all family-controlled companies fare as well. And there are risks, such as the founder-CEO who still treats the public company as a private one, and as a personal piggy bank. Perhaps the biggest risk is what happens on the inevitable day that the founder is gone. It is a rare case when the next generation of management can maintain the founding visionary’s success, at least by replicating the model. No one, for example, will ever design resorts with the meticulous care and artful insight of Wynn. And those exquisitely designed resorts are the differentiating quality that makes a Wynn property a Wynn, and not just an expensive construction project. The good news is that casinos are not gadget companies. Unlike Apple, where a swarm of competitors daily attack the unique appeals of iPhones and iPads, properties like Wynn and the Venetian will retain their allure for years. In Wynn’s case, the company is building its next great resort to open in Macau in 2016 or 2017, meaning investors should enjoy at least several more years of Steve Wynn-inspired growth, if not more. In Adelson’s case, integrated resorts and monetizing non-core businesses such as attendant shopping malls is a model that can be followed by a succeeding CEO, if the right person is chosen.

With his heart and soul invested in creating and building the business, the founder’s interests aren’t just aligned with shareholders; he is a shareholder, and usually the biggest shareholder. dend a year ago. It also is a candidate to pay another special dividend this year thanks to Macau. And LVS has raised its regular dividend for this year by 40 percent to annualize at $1.40. In the case of both companies, the CEO is rewarding himself with the dividends. Adelson’s regular and special December dividends, for example, put $1.2 billion in his pocket. But those dividends put money into shareholders’ pockets, as well. Depending where you begin the calculation, shareholders got 7 percent to 8 percent in dividend yields last year. That can’t be beat in this low-interest-rate environment. Another success story is Penn National Gaming, controlled by the family of Peter Carlino, who has been CEO since the one-time owner of a small Pennsylvania racetrack went public in 1994 and began transforming into the third-largest casino operator in the U.S.

’’

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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{Buying into}

Bi ngo Casinos and manufacturers benefit from the consistent popularity of the timeless game

By Rodric J. Bradford

t’s the game we have all played since we were children, and unlike marbles, hopscotch and kickball, bingo has followed adults to their local casino to enjoy a modern-day popularity that even surpasses previous generations. “Bingo is the most widely played game in the world, and its popularity is due to how easy it is to learn and play,” says Tony DeLise, casino manager at John Ascuaga’s Nugget Casino Resort in Reno. “Another reason for its popularity is that it is a very social game where players get to meet many of the same people every day who love to play bingo. It is also the only game where players have a chance to win their share of a guaranteed prize pot.”

A New Generation Bingo has been able to tap into a new generation of players by marketing to a young demographic with “midnight” or “lunar” bingo games that provide a nightclub-type atmosphere, often equipped with disc jockeys, disco lights and even dance floors. “Bingo has remained popular as the Baby Boomers age, but we are seeing a real growth in popularity offering our late-night games to younger crowds,” says Eric Ramsey, bingo director at Casino Arizona. “We usher them through the same process to get to know the game, but in an even friendlier environment that they are familiar with. It allows us to be more creative and make our gaming facility stand out.” Another shift in the bingo player demographic among the younger generation is an increase of male participants. This may have to do with the more social

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nightlife environment that attracts younger female participants. “Bingo is still bringing in younger players who are experiencing the game for the first time,” says David Colvin, chief executive officer of Gaming Arts LLC, a leading manufacturer of bingo games. “If you visit the bingo rooms, you will see younger players and a significant number of men participating these days.”

Tweaking the Game As the player demographic has shifted in bingo in domestic markets so far in the 21st century, so has the complexity of the games, as multiple venues, bonus jackpots and specialty games are routine offerings from casinos to a loyal customer base that is always looking for enhanced features and payouts. “Our Super Game jackpots run from $5,000 to $500,000, which creates a unique playing experience with more winners and bigger jackpots based on traditional bingo games,” says Colvin. “Our proprietary games create more winners by not splitting the jackpot, by allowing multiple winners in the same game and by creating life-changing jackpots. We listen to our bingo directors and their players, and universally they have requested more winners, larger

“We make sure we schedule our Bingo Blockbuster around other events at our other properties because of their popularity. Regardless of the size of the jackpot or the state of the economy, bingo will always prove to be a great gaming value for customers.”

—Jim Ward Corporate VP of Casino Operations, Station Casinos

Global Gaming Business MARCH 2013

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“Bingo is a community game, and people have their routines. Our goal is to get the word out and have people start a new routine with bingo.” —Eric Ramsey Bingo Director, Casino Arizona

Casino Arizona opened its new bingo hall last November.

jackpots and more game variety.” Gaming Arts offers over 50 different “Super Games,” and they are the most popular of the company’s offerings. With Super Games, the game continues for many more balls after someone calls “bingo,” allowing for many more winners. This leads to millions of dollars in jackpot payouts every year. “We have listened and developed the games that meet the players’ requests and operators’ needs of less volatility and less risk,” says Colvin. “This is what has led to the development of our extensive game library.” In Nevada, Station Casinos has served as the prototype for implementing high-stakes bingo games over several properties. With eight properties sprawled across Las Vegas that cater to every possible adult demographic, bingo is the one link at all properties that can enhance their gaming offering. Their Jumbo Bingo game is a progressive jackpot that starts at $125,000. “Technology is a huge asset to us with our linked Jumbo Bingo product,” says Jim Ward, corporate vice president of casino operations for Station Casinos. “One room broadcasts the bingo game throughout all of our properties.” To gain even more attention to its bingo game, Station Casinos has experienced great success offering the $500,000 “Bingo Blockbuster” games twice a year, typically in the spring and the fall. It is a two-day event with $250,000 awarded each day over 33 games. A $200 buy-in gets a player one six-pack of cards, and additional cards can be purchased for $20 each. The buy-in also includes lunch, buffet passes and bingo card daubers. The next Bingo Blockbuster is scheduled for March 11-12. “We make sure we schedule our Bingo Blockbuster around other events at our other properties because of their popularity,” says Ward. “Regardless of the size of the jackpot or the state of the economy, bingo will always prove to be a great gaming value for customers.” Not to be outdone, in northern Nevada, John Ascuaga’s Nugget offers its $100,000 Bingo Blowout several times each year, including March, May, July, September and November this year. “The Bingo Blowout is a tremendous success, averaging over 1,500 players and often reaching nearly 2,000 players,” says DeLise. “Our famous Rose Ballroom has hosted the Blowout for the last 30 years, and we draw players from all over the Western states.”

Niche Marketing With none of its northern California competitors offering bingo, John Ascuaga’s Nugget has been able to carve out a successful niche in the marketplace. The casino has been able to parlay the success of the Bingo Blowout into other daily promotions as well, such as “Bingo Free Play Star,” where you can win a day, a month or more of free bingo play. The “Pass the Prize” promotion moves a gift box to different tables of bingo winners, and at its final location all the players at the table receive a free entry ticket to the Nugget’s next $100,000 Bingo Blowout. “Bingo players love to hear that a prize pot is guaranteed,” says DeLise. “There is no other game in the house that can make this claim.” Not surprisingly, Indian gaming, the fastest-growing segment of the domestic casino market in the last decade, has built a strong relationship with the game of bingo. Tribal casinos have proven to be a perfect partner for the rapidly expanding game. “It has grown a lot faster than even what we could have predicted,” says Tim Stuart, president and chief executive officer of Video King, a leading bingo game manufacturer. “We knew that bingo would grow as it was approved and implemented in more casinos, but it has happened much faster than we thought at Indian casinos, and that is a good thing.” Casino Arizona is symbolic of this bond, as it offers its lowest buy-in for $3 and a minimal $13 buy-in for late-night bingo. “We did a lot of research in Arizona for price points, so we had to check out all of the smaller bingo halls against the larger establishments,” says Ramsey. “We were constantly adjusting our product based on feedback and market analysis. There is a large market to pull from here in the Arizona market, and that helps us, as well.” Ramsey would know, as he has worked at four different properties across the Southwest, and joined Casino Arizona in June 2012 specifically to help them transition to a new era of bingo. That new era is highlighted by a new bingo hall that opened in November. It seats exactly 1,000 people, and is set up more as a mini-sports arena than a bingo hall, equipped with a scoreboard that hides a disco ball for late-night games and video walls that utilize the latest technology. The bingo hall is home to 16 sesMARCH 2013 www.ggbmagazine.com

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“While many casino games result in a sense of isolation, bingo is just the opposite because it is a deeply social game for many. Many players have been playing with the same players for years and know each other very well.” —David Colvin CEO, Gaming Arts LLC

sions per week. “The bingo hall is designed for maximum comfort,” says Ramsey. “We are very pleased with our customers’ reaction to the new facility.”

Ambiance for All The ambiance and camaraderie offered by bingo is clearly what separates it from its competition in the gaming marketplace. Casinos play into this by offering a variety of amenities—food, fun and friends—for their clients, many of whom visit on a daily basis. “While many casino games result in a sense of isolation, bingo is just the opposite because it is a deeply social game for many,” says Colvin. “Many players have been playing with the same players for years and know each other very well.” John Ascuaga’s Nugget has been providing ambiance within its successful bingo operation for more than 50 years. “We feel that one of the main reasons for our success in bingo is that we show our players how much we appreciate their business,” says DeLise. “Our bingo parlor offers weekly player appreciation promotions designed to thank our players for their patronage, such as free lunch days, cash bonuses for everyone whose birthdays fall within four pre-selected months and special free bingo slot tournaments for cash and prizes.” The long tenure of the Nugget’s bingo staff is also vital to create the desired environment. The ability to identify the different levels of player experience, game situations and specific player needs are timeless qualities offered by every successful bingo staff. Casino Arizona further accentuates the customer experience by offering an interactive photo booth at its bingo hall, then selecting random photos to go on its video wall, titled “Bingo Big Shot.” “Bingo is a community game, and people have their routines,” says Ramsey. “Our goal is to get the word out and have people start a new routine with bingo.”

Making it Mobile The biggest technological influence in bingo has been the prevalence of mobile devices. Long gone are the days where you have dozens of cards sprawled out in front of you with multiple colored daubers. Although many players still prefer this old-school style of play, in the mobile bingo world, more than 2,000 different cards can be loaded onto a single handheld device. Video King is at the forefront of this technology. The company just deployed 20

Global Gaming Business MARCH 2013

}

3,800 mobile devices at Foxwoods Resort Casino in Connecticut. Overall, the company has deployed 55,000 tablets across the world, including casinos, bingo halls and charitable organizations. “(The mobile devices) are very player-friendly, and we have seen our average installation increase from 100-200 devices to 500-600,” says Stuart. “Seventy-five percent to 80 percent of people will play some kind of tablet or gaming device.” Gaming Arts also knows that it has to stay on the cutting edge of technology to protect its share in the market. In 2013 alone, the company is planning on launching more than 100 new proprietary bingo games, including applications ranging from the conventional bingo hall to the slot floor to mobile devices and internet gaming. “For us, new and exciting content along with adaptability to diverse gaming platforms is the key to the future of the industry,” says Colvin. “All of our current products have been designed to adapt to this new paradigm.” This new paradigm also allows the mobile devices to assist with back-end operations including customer loyalty programs and profit-and-loss for charity and church bingo games. Video King specifically designates engineers to focus solely on these back-end issues. “During the past five years we have seen tremendous growth in this area fueled by hardware, software, content and those back-end management programs,” says Stuart. “It is a very unique niche, and as more charities are looking to raise funds through bingo and its accompanying software, the growth in this market will continue to occur.”

A Fantastic Future? With the social popularity of nighttime bingo, the advanced technology of mobile tablets and the increasing promotions and onsite ambiance for players, the future of bingo looks just as bright as any game in the casino industry. “We see the tablet technology growing into more locations and offsite bingo, where it already has been approved by certain municipalities,” says Stuart. “We think the future of the game will move to a quicker, fast-paced, heads-up game with a keno-style vibe. We see the game continuing to grow over the next 10 years, but the technology will grow faster than the rules.” Regulations defined by different jurisdictions are clearly the “X” factor in how fast bingo will expand. What started out for most people as an innocent childhood game is now the foundation for revenue for many gaming properties. “Years ago, operators pretty much laughed at the thought of offering their clientele bingo,” says DeLise. “They thought of it as a game where people just came to kill some time and contributed very little to the overall operation of their property. At the Nugget, we knew from the start that the bingo player is also a slot player, and a table games player, and a guest in our hotel and dinner areas. The bingo player has and always will be appreciated.”

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Tracking

the transformation of Shuffle

Master into SHFL

entertainment by Frank Legato

Gavin Isaacs CEO, SHFL entertainment

Game

masters T

he origins of the former Shuffle Master, Inc. can be traced to a simple, necessary utility in the pit: shuffling the cards. But for SHFL entertainment, as the company is now known, the universe is much larger. The company founded as Shuffle Master pioneered the card shufflers that are standard in today’s pit—former Minnesota truck driver John Breeding founded the company in 1983 with a shuffling device he invented after reading about casino problems with card counters. SHFL still leads the market for the device that ushered in the era of multiple-deck games. But these days, SHFL is all about the games themselves. Last year’s name change to SHFL entertainment reflects where the company is today, while giving a nod to the product that got the company started. The change was orchestrated 22

Global Gaming Business MARCH 2013

by Gavin Isaacs, who became Shuffle Master CEO in April 2011 after a distinguished career in the slot sector—he had headed Aristocrat’s U.S. operations and served as COO of Bally Technologies. By the time Isaacs took over at Shuffle Master, shufflers were only one product in an enviable lineup that draws big returns from recurring revenue centered on a group of proprietary table games—games with names so commonplace in today’s pit that it’s easy to forget that before SHFL, one of the most rare occurrences in the history of casinos was creation of a successful table game to rival the stable of games unchanged since World War II. Banked table games like Let It Ride!, Three Card Poker, Caribbean Stud, Four Card Poker and Ultimate Texas Hold ‘em, along with a complete range of electronic table games, carved a new identity for Shuffle Master.

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“

We decided that from a content perspective, our strategy, for both money and free-play formats, is that we want the same infrastructure, the same games displayed in the same way. So, we built that infrastructure up from scratch. —Gavin Isaacs

”

CEO, SHFL entertainment

And a new brand—SHFL entertainment. “The link with the past was ‘shuffle,’ and it doesn’t hurt that SHFL is our NASDAQ ticker,” says Isaacs. “The ‘entertainment’ factor reflects that we really are getting into games that are much more fun to play, and in all different modes—be it on the land-based felt, or electronic slot machines, or in i-gaming. We felt ‘entertainment’ was the right message; that’s what we do as a company.” “First and foremost, we’re an intellectual property company,” notes Louis Castle, chief strategy officer for SHFL. “This is a very good niche, because there are a lot of different patents, especially in the United States, and player adoption really comes down to familiarity with brands.” SHFL has built those brands not only through in-house innovation, but through acquisition. “We’ve acquired a lot of smaller companies that had just gotten something rolling and were looking at 10 or 15 years before they could get worldwide distribution,” says Castle. “The company actually started with a shuffler, which enabled the first game, (Breeding’s) Let It Ride! But now, the company is starting with the content.” Much of that content begins with Roger Snow, SHFL’s wizard game inventor. In fact, Snow, who joined Shuffle Master as table games product manager in 2000 and became executive vice president in 2008, recently had the word “wizard” added to his title. In his time with the company, SHFL’s official executive VP, chief product officer and wizard has compiled more than 30 patents, and has developed dozens of games, including some of SHFL’s most popular titles, such as Four Card Poker, Ultimate Texas Hold’em and Dragon Bonus. (See Page 28.) Games invented by Snow have been combined with popular titles acquired from outside into a remarkable collection of intellectual property that has put SHFL at the top of the table game market. From Let It Ride! to Blackjack Switch, to the venerable Three Card Poker to variations on Texas hold ‘em, SHFL is now a content company. And that content has enabled SHFL to spread its footprint across a variety of media, including electronic tables in the popular Table Master and Vegas Star lines and hybrid e-table setups like the Rapid line and the new i-Table automated betting and resolution system. Cyberspace is next.

Expanding the Vision Since becoming CEO, Isaacs has sought to capitalize on the power of the company’s IP by spreading it to the internet and mobile gaming markets. The company’s Interactive Division established a subsidiary and i-gaming hub last year in Gibraltar, and received a remote gambling license from the Gibraltar government. Nick Gabriel, a 12-year veteran of the i-gaming business, was named to run the

Gibraltar office as head of online gaming. Remote gaming servers that deploy SHFL’s “elastic cloud” have been set up at Gibraltar to serve proprietary games like Three Card Poker, Ultimate Texas Hold’em and Casino War to B2B partners. In December, SHFL received an unlimited Category 2 eGambling License from Alderney, furthering its ability to spread its games to legal i-gaming markets across Europe. Also that month, the company strengthened its ability to capitalize on newly legal i-gaming markets in the U.S., signing as exclusive distributor of the online poker and gaming platforms of Canada’s Amaya Gaming Group. (SHFL received its interactive gaming license in Nevada last summer.) Isaacs says the online potential of the popular SHFL table games was something he realized soon after he became CEO two years ago. “Our proprietary table game brands have always stood out in the pit,” he says. “People love the volatility of Three Card, Ultimate (Texas Hold’em), Mississippi Stud and Casino War, and these brands are recognized around the world. Coming into the company, when I was looking at opportunities, I noticed that if you went to Europe and got on these online sites, those games are all there. I thought, wow, we must have quite a good business.” The only problem was that Shuffle Master wasn’t making a dime from those online games. “They were just doing it without our consent,” Isaacs says. “So, we put together a plan to capitalize on the internet space, to get our content and monetize it.” Castle, who had been head of the game studios at the Zynga social gaming company, was brought on in November 2011 as chief strategy officer. He already had a plan to move into the online space. “We went to coffee, and he said, ‘I’ve found the perfect guy to run this for you,” Isaacs recalls. “I said, ‘Who’s that, Lou?’ And he said, ‘Me.’ We started from scratch, and he’s been unbelievable.” “I’ve spent a lot of time in software development, and especially in different kinds of tools,” says Castle, “so where I contribute on the R&D side is trying to help get us all on the same technology basis from a software point of view, and Nathan (Wadd, head of R&D) has been running the same kind of idea on the hardware side. “We’re trying to bring our costs down for delivering our content. And most importantly, we’re in the business of creating intellectual property—so when Roger Snow creates a table game, we can take that property and quickly move it onto lots of different platforms—ETS platforms, EGMs, if it’s appropriate, and of course, online.” SHFL’s Interactive Division has grown from Castle and eight colleagues— many who had worked with him at Zynga—to nearly 30 people today. “We decided that from a content perspective, our strategy, for both money and free-play MARCH 2013 www.ggbmagazine.com

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formats, is that we want the same infrastructure, the same games displayed in the same way,” says Isaacs. “So, we built that infrastructure up from scratch. We now have nine, soon to be 11 games (online). By the time this goes to print, we’ll have our first game on Facebook. That was all done organically.” Meanwhile, SHFL has positioned itself to be a major player as internet gaming makes its anticipated spread across the U.S. Isaacs says the alliance with Amaya—which itself prepared for the spread of online gaming by acquiring Ireland’s Cryptologic and the Stockholm-based B2B poker network Ongame— will ease the move into the new U.S. online markets. “Ongame is the best B2B technology that we’ve seen,” says Isaacs, “and it’s

a modern infrastructure, so it’s not going to be too expensive to maintain.” He adds that Ongame, formerly owned by internet gaming giant bwin.party, had been a company on SHFL’s own acquisition radar. “When Amaya bought it, they said, ‘Well, we’re not licensed across America,’” Isaacs recalls. “We said, ‘Well, we are; let us be your partners there.’ So, we’ve gotten one the best technologies out there, and we still look at the internet space as a growth environment that is not necessarily the same in the land-based market. And we always look for opportunities where we can add a sensible business to our portfolio, particularly anything to do with tables.” The online space in the U.S., at press time, still consisted only of poker, and the only state with an actual game plan is Nevada. (Delaware has legalized online poker under the auspices of its lottery, but has yet to implement a plan.) Isaacs, however, predicts that it’s only a matter of time before other casino games—like SHFL’s proprietary games—become part of the mix in the U.S., particularly if igaming spreads state by state, as expected.

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“Once you open the door a little bit, it can take off,” says Isaacs, “and people will see that it’s possible to regulate and monitor it, and how much is actually already being played out there.” If and when U.S. i-gaming does spread beyond traditional poker, he adds, it will be a great opportunity for SHFL. “It’s a huge market, and particularly for us,” he says, “because our content is really recognizable in America.” That fact has already played out in online markets, where the company raked in nearly $3 million in settlements last year over sites using SHFL game content. “One of the beauties of this company is that we have intellectual property,” Isaacs says. “We went after infringers, and settled with many sites. Now, we will license games off our servers.”

Maintaining Growth While the moves into online and mobile gaming represent potentially lucrative new revenue streams for SHFL, the company has never rested on its laurels when it comes to the products it currently offers, starting with its oldest core product group, the shufflers. Recurring revenue from the shuffler segment was up 10 percent last year, thanks to products like the iDeal, Deckmate and most of all, the new MD3 shuf-

fler. Snow, who oversees all product areas, says the MD3 is more than simply a replacement for the MD2 shufflers. “People thought the MD3 was a replacement product for the MD2, but the opportunities of this shuffler far eclipse the existing inventory of MD2 shufflers,” Snow says. “The MD3 is a superior product; it incorporates optical card recognition, shaves 2.5 minutes off the shuffle time, reduces card wear-and-tear, and has other enhanced features. The MD2 was a good machine, but only carved out about 7,100 installs. The MD3 on track to surpass that.” “This year, we’re expecting the MD3 to continue to grow,” says Isaacs, “but also, toward the end of the year, we anticipate some contributions from our new Deckmate 2. There are still MD1 (shufflers) in the field, some of which are nearly 20 years old. So this year, I expect to see similar kinds of numbers, and maybe even the following year.” Isaacs calls shuffler replacement the “low-hanging fruit” of SHFL’s recurring

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Ultimate Texas Hold’em

Vegas Star Live Roulette

revenue, if only because every model is an improvement on the previous version. “You’ve got the security factor, which is second to none,” he says. “When we bring out a new shuffler, apart from additional functionality such as card recognition, you have the speed factor—you get more hands per hour. The Deckmate 2 is twice as fast as the original Deckmate. That’s huge on a game like poker. As we keep adding value like that, it remains a very important part of our business.” Shufflers may have been SHFL’s first product, but it’s hard to call the utility segment the company’s “core product.” These days, the core product is just as much the intellectual property—the proprietary table game content that is now found not only on felt, but in the still-strong market for electronic table games, igaming, and even in the stand-alone slot market. “Wizard” Snow continues to pump out new specialty table games, as games he has invented or acquired during his tenure at SHFL continue to perform consistently. “We’ve just got an amazing stable of proprietary table games,” Isaacs says. “What’s most surprising for someone like me, who comes from a slot business where most core titles last 12 months, we’re averaging 12 years now (on the table games).” Isaacs points to Snow’s Ultimate Texas Hold’em creation as one of the fastestgrowing products. “It’s reaching that ‘Three Card Poker’ status,” he says, citing SHFL’s top game. “It just continually grows.” SHFL’s side-bet games are performing just as well. “We’re very excited about 26

Global Gaming Business MARCH 2013

House Money,” says Isaacs. “Everyone who plays it loves it.” House Money allows the player to place a side bet on his first two dealt cards in blackjack. If the first two are a pair, straight or straight flush, the player is paid on the side bet, and has the option to add the winnings to the bet for the regular hand. “It’s such a logical bet,” Isaacs says, “because it has the key ingredients to any successful game—it has attraction to the gambler, it’s fun and it’s simple.” Augmenting the specialty table games are new electronics such as the i-Table system, which utilizes a specialty shuffler that identifies all cards being dealt, and interacts with software to instantly resolve all game play with accuracy. This system also allows a table to be converted to a different game, change limits or change pay tables in a few steps. All of the proprietary live-game concepts, of course, transfer easily to SHFL’s line of electronic table games—Table Master, which replicates a live table via individual play stations around a life-sized video dealer; Vegas Star, with animated dealing on a central screen combined with wagering on individual play stations; and Rapid Table Games, the hybrid product that links a live table to satellite electronic play stations, permitting one live game to be played by dozens, even hundreds of players. Table Master had been going like gangbusters in states like West Virginia, Maryland and Pennsylvania, which first legalized slots-only casinos. However, even with these jurisdictions now permitting live table games (Maryland being

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WE HAVE

IDEAS THAT

“

With Rapid Fusion, instead of being tied to one terminal, you can play four different table games. I’ve got a baccarat table, two roulette tables and a sic-bo table, and I’ve got action on all of them. It’s multi-tasking, and it comes down to three simple words: More gambling now.

the latest, with tables to go live this spring), e-tables have found a permanent niche in the industry, with the Rapid model popular worldwide as a way to economically increase table play. “I think there’s a market for both (live tables and e-tables),” Isaacs says. “E-tables are not going to overtake live tables. I’m sure if someone did a study, they would —Roger Snow find that the dealers with the best personalExecutive VP, SHFL entertainment ity drive the most play, because there’s nothing quite as fun as sitting at a great table. “The electronic tables, though, serve a purpose, and we’ve seen them perform very successfully when you have limits up on a Saturday night and people want to play (lower limits). Also, if you want to learn a game, you want to play low limits; you’ve got to play the electronic versions. And, there are people who just like to play slot machines; this provides a transitional product. But there’s definitely a market for both. It’s not a market we’re shying away from.” Of course, while SHFL provided hundreds of e-table play stations to each of the slot-only jurisdictions, it had one definite advantage in place when those jurisdictions legalized live tables: The company sells the shufflers and many of the games that will replace the electronic versions. “We benefited from the electronic versions being in Pennsylvania and Delaware,” says Snow of the former hotbed markets for SHFL’s Table Master games. “And, when they changed the law, we benefited as well. We’re diversified, so whichever way the regulations go, we’re in good shape.” Not that there is any lack of strong e-table markets worldwide in any event. Isaacs notes that the Rapid series, in particular, has a strong role in markets like Australasia, where the number of tables is limited and there is strong player acceptance. The company has invested heavily in serving Asia with a new product called Rapid Fusion, which accepts live feeds from several table games and allows the player to wager on four different games at once. “I like products that solve simple problems or create simple opportunities,” says Snow. “With Rapid Fusion, instead of being tied to one terminal, you can play four different table games. I’ve got a baccarat table, two roulette tables and a sic-bo table, and I’ve got action on all of them. It’s multi-tasking, and it comes down to three simple words: More gambling now.” The other SHFL product line performing well in Macau is one with which operators outside of the Australasian region do not typically associate the company: slot machines. “At the moment, we have the hottest slot in Macau,” says Isaacs. “We want to keep that momentum going.” In fact, SHFL now has the top two slot games in Macau. “These two games, 88 Fortunes and 5 Treasures, are absolute monsters,” says Snow. “They’re just lighting the world on fire.” The big success in Asia and Australia with the SHFL slot line will help the

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The Wizard company in the U.S. The first SHFL slot games in North America went live recently with two banks of games at California’s Pechanga Resort. “We anticipate placing more there, and then we plan to expand into several different markets,” says Isaacs. “We’re planning on bringing 11 titles this year to America.” The slot platform, he adds, is the same platform that is used for the Rapid line of e-tables, so there are no regulatory approval issues for the cabinet. SHFL also already has roughly 280 various gaming and tribal licenses in the U.S. Unlike most of its other products, though, the lease/participation model will not be used for placement of slot games in the U.S. “Our goal is not to go after the recurring revenue, which is a very highly contested, very expensive part of the slot business,” says Isaacs, “but we will aim for that other 80 percent of the floor—that for-sale area that is under-serviced. “We do incredibly well in Australia with our games. We currently have three of the top games in New South Wales. We’re going to bring those games to America and put them on the floor. We feel confident we can hold a couple of banks on each floor, so that’s our strategy. It’s as simple as that.” “The games are doing very well at Pechanga,” says Snow, “and will soon be going into Jackson Rancheria and other locations. I’m very enthusiastic that we’re going to succeed, and I believe we’re going to succeed quickly. “Success with slot machines means content and new markets. Success with slot North America’s wide open to us— machines means content we have zero market share. It can and new markets. North only go up. We’re doing it very America’s wide open to us— strategically, very carefully, and as cost-effectively as possible.” we have zero market share.

“

It can only go up. We’re doing it very strategically, very carefully, and as costeffectively as possible.

Team Approach

The variety of SHFL’s product line makes it obvious that the company does a lot of things well. But in the end, what the company really does —Roger Snow well is to create value for its shareExecutive VP, SHFL entertainment holders. Earnings per share were up 25 percent in 2012. Recurring revenue was up 12 percent. Revenues for the fourth quarter were $73.6 million, a record. Adjusted EBITDA in the fourth quarter increased 6 percent to a record $23.9 million. The company’s success can be traced directly to the strength of its team, and most of the top executives point to Isaacs. “Gavin has infused an energy into SHFL,” says Julia Boguslawski, the company’s vice president of investor relations and corporate communications. “If you look at our past, we’ve had some management transitions, but now, there is stability. Gavin’s brought passion and vision, and we needed that.” Isaacs is quick to return the credit to his team. “I think we have a lot of great things happening here, and it’s just a pleasure to work with this team,” he says. “I get a great kick out of working with great people, and I’ve always been a part of great teams. I’ve got a phenomenally supportive board, and really great people to work with.” There soon will be few sectors of the gaming industry in which SHFL does not have a footprint. The company is essentially debt-free, and Isaacs says SHFL’s growing resources will be used carefully to expand the company. “Everyone says they’re a leader, but we really are the leader in tables,” says Isaacs. “I’d like this company to become the leader in gaming entertainment. We have the foundations to do that.”

”

Global Gaming Business MARCH 2013

SHFL’s game development has a secret weapon: Roger Snow

is LinkedIn profile lists him as “executive, game inventor, all-around bon vivant.” For SHFL entertainment, Roger Snow has been money in the bank. SHFL owns some of the most successful table games in the business, and consequently some of the most valuable intellectual property. One big reason is Snow, owner of more than 30 patents and inventor of dozens of SHFL proprietary games. Snow, who joined the company as table game product manager in 2000 and became an executive vice president by 2008, has been one of the industry’s most prolific game inventors. For SHFL, he invented Four Card Poker, Ultimate Texas Hold’em, Crazy 4 Poker, Dragon Bonus, Dealer Bluff, Six Card Poker, Hit and Run Blackjack, Ultimate Three Card Poker, Single 21, Sharpshooter, House Money Blackjack, House Money Baccarat and Face Up Stud Poker, as well as a number of “electronic upgrades” to other table games. “Roger’s been just a breath of fresh air,” says SHFL CEO Gavin Isaacs. “He’s written more than half the games in the industry, but he said, ‘I want to do more.’ So, now, he runs all the product management as well.” Isaacs calls him “the wizard.” In fact, he added the word to Snow’s official title, which is currently “executive vice president, chief product officer and wizard.” “I thought he was joking,” says Snow of his christening as a wizard by Isaacs. “Then, one day, I got business cards that just said ‘Roger Snow, Wizard.’ I’ve actually signed legal documents with the title of wizard, which may be a first in the industry.” When asked for his secret formula for games, Snow jokes, “Luck, and a lot of at-bats. That’s the secret to my success! Working for this company, I’ve had more at-bats than anybody else.” But with Snow, the number of big hits belies more than the math of a batting average. Snow says the key to succeeding with new games is a bit alchemy and luck, but is mostly about taking a methodical approach to the creative process—“a lot of diligence, a lot of thinking, and a lot of time.” First step: “I look for games that are novel,” he says. “This is a patent business. I try to look at games that have at least one patentable element. Otherwise, you’re creating a generic drug. “Secondly, you try to think from a player’s perspective. I was a player—that’s how I got into this business. I try to think as a player: ‘What would be fun? It would be really cool if I could do this.’

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“Try to think from a player’s perspective. I was a player— that’s how I got into this business. I try to think as a player: ‘What would be fun? It would be really cool if I could do this.’ Think of novel, patentable, and fun.”

Think of novel, patentable, and fun.” He offers a current project as a good example—a new stud poker game in which the player sees the dealer’s entire five-card hand first, and the first three cards of his own hand. The player can stay in and wager he’ll beat the dealer, or drop out. If the player is in, his last two cards are revealed and the hand is over. “It’s a quick game, but there are a couple of fun elements,” Snow says. “For example, what if the dealer has a flush? Even if I have a pair, the odds of beating him are pretty slim—here’s where the thinking and hard work come in. If you beat the dealer’s flush, I’ll pay you 200-to-1. Now, you’ve got my attention. Maybe I will stay in with a pair; maybe it will become a full house or four of a kind. “It’s a game in which the dealer shows you his entire hand before you decide if you’re in or you’re out. It’s never been done before. It’s patentable— we’ve filed a patent on it. And it will be fun.” The game’s working title is Face Up Stud

Poker, but Snow says he is considering using it to pump new life into the Caribbean Stud brand. But even a good idea, he says, requires the legwork. “This is a game I’ve been working on for six months,” he says of Face Up. “I’ve gone through four or five variations, a lot of math. It is analogous to writing, which I did in the old days; I was a journalist before going to Las Vegas. The hallmark of good writing is that it looks like it was just off the top of your head, when it is the result of hours of editing and rewriting and re-phrasing. It’s a lot of work to make something look like it didn’t take any work.” It’s that combination of luck, diligence and skill, which Snow mentioned in his prescription for game success—as demonstrated with humility in his LinkedIn profile: “Named inventor on 30-plus U.S. patents. “Once, while driving, threw an apple into the back of a garbage truck that was stopped in front of me. Left-handed, mind you.”

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PLATFORM

A FOR OPEN INNOVATION Why an integrated approach to systems and games makes sense for operators and vendors By Tim Gronkowski and Chris Donahue

any casino operators are facing challenges when contemplating the best strategy for investing in gaming floor technology, and there doesn’t appear to be an easy or safe option among the technology investment choices an operator can make. There are a number of factors to consider: • An uncertain economy has raised sensitivity to increasing operations costs, and some might view maintaining or decreasing operations costs as the best way to increase revenues. • Casino floors are populated with aging gaming machines; new platforms can leverage much of the existing infrastructure and minimize capital expenditures. • Some casinos have quickly outgrown their technology while others are facing increased competition for their players’ attention. • Online gaming may soon allow players to gamble in the comfort of their own homes or from almost any location via mobile devices. One method of addressing the current situation is to adopt an approach that leads to more open innovation in casino gaming. While regulated markets can make open innovation difficult to achieve, the current conditions in the casino market seem to be suggesting that we need to look for alternatives and move toward a future that doesn’t repeat our past. With the right amount of vision and conviction, casino operators can create a future consisting of new and exciting interoperable products, which will provide differentiation, agility and the ability to leverage new technologies to move the business forward. Certainly, casino operators could look to the development of platforms as a first step toward promoting open innovation.

To build and maintain such a platform, a vendor must build a scalable system that is robust and based on standards. A platform needs to be nodal in nature and promote connections between the products that interface with it [Fig 1]. A platform vendor must advocate for the industry and attempt to remain neutral, immune from any particular vendor’s market strategy. Such a platform will seamlessly allow for the casino to converse with its customer across a slate of digital devices, and a multitude of screens, using an assortment of tools. The cost to build these systems can be high, and a platform vendor must make a significant investment in resources to bring a well-defined, efficient and predictable system to the market. The high cost of development will result in a need to build and deliver these systems at a large scale to make them feasible. As a result, there tend to be fewer options when it comes to platform vendors. The role of the platform is often accomplished by an enterprise service bus (ESB). Examples of platform vendors are Alcatel-Lucent (telephony), Agilysys (hospitality), TIBCO (business/financial) and MuleSoft (various). We have yet to see the emergence of dedicated platform/infrastructure vendors within the gaming industry, perhaps due to concerns of meeting regulatory constraints or possibly because vendors in traditional gaming have multiple value disciplines resulting in technology stacks that support many bundled product lines.

App 1

App 2

App 3

WHAT IS A PLATFORM? Essentially, a platform serves to facilitate connectivity between applications and PLATFORM the execution of repetitive tasks. A platform will Figure 1 - Platforms Facilitate Connections enforce rules of engagement between those applications through standards or wellknown interfaces, and provides the infraPlatform: An integrated offering that creates a structure needed for service-oriented unique and holistic customer experience only business applications to communicate. The platform should support the efloosley controlled by the platform owner, usually forts of the casino and its business partners supported by proprietary technologies and charto define innovative products and features. acterized by interdependent products and servIn an ideal situation, the platform vendor ices provided by a network of business partners would hold little interest in developing applications, and would intrinsically view the development of the infrastructure as its or—Larry Keeley, The Doblin Group ganization’s core value discipline. 30

Global Gaming Business MARCH 2013

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Gaming

Digital Wallet

Hospitality CRM

Figure 2 - Hot Spots of Innovation As a result, incumbent casino systems vendors have found it difficult to focus purely on providing the interoperable platform that the casinos need in order to allow for the convergence of existing systems while also supporting the emergence of new solutions.

HOW PLATFORMS SUPPORT OPEN INNOVATION The fundamental goal of open innovation is to produce system architecture designs that can support the creation of connections between systems. It is at these connection points that we see opportunities for innovation. The connection points become the seams that a casino can tap into, so as to observe data and devise new business strategies along with the tools to manage their execution. When systems start to converge, there are opportunities for innovation. According to open innovation strategist Larry Keeley of the Doblin Group, the areas of opportunity with the most concentrated effort become hot spots [Fig 2]. These hot spots can become a source of disruption, and these disruptions can spur new business strategies that allow a casino to avoid the trap of incremental innovation. One of the reasons that some industries are more successful than others when it comes to breeding innovation is that platforms exist, and these platforms are designed to be nodal; they facilitate the creation of connections which allow systems to converge. A relevant example may be that of the emergence of application stores within the smart phone industry for content management and distribution to a diverse set of certified products. Or consider how the cable industry has now leveraged its infrastructure to add home security, another billable service. The internet continues to be a rich source for examples of innovations brought about by connected systems.

WHAT TO EXPECT FROM OPEN INNOVATION With a well-devised platform in place, the casino can expect to see a rise in the number of service-oriented applications. There will be competition on price and product features. Access to open standards-based interfaces and well-defined interoperable systems will generate the interest of innovative industry experts in the casinoâ&#x20AC;&#x2122;s vertical markets (traditional gaming, i-gaming, hospitality, food and beverage, etc.). These innovators will create new ways for a casino to connect with its customers and manage their operations. As an example, an application may be developed that will harvest perishable inventory, such as show tickets, and create timely offers to active online players to incentivize a casino visit. Such an application may need to make use of well-defined and open software APIs presented via the platform by a venue ticketing system, an offer publishing system, and an online gaming portal.

The applications vendors will be greater in number than the infrastructure vendors, providing casino operators with an abundance of choice in how to differentiate their business from that of their competitors. These vendors will need to enlist the help of high-demand creative talent to develop these applications and to take risks on innovating, hoping to land deals with early adopters. To stay ahead of their competition, it will become imperative for casinos to provide continuous feedback and support to their application vendors. â&#x20AC;˘Gaming Casinos may be able to realize some of the highly anticipated operational benefits promised by networked/server-based gaming. Ideally, the casino will be able to leverage a platform for centralized content management that will open a door to the interoperable distribution of games and applications to the player, made available on a multitude of certified devices. Select content could be made available on universal game kiosks, in-room television, and mobile devices such as smart phones or tablets. This may even be the same content that is made available to the at-home player via an i-gaming channel on the internet. A fully integrated content management system, complete with well-defined standards that will allow for certification, may not be available today; however, casinos have the option to start exploring the evolution of their floors through the use of picture-in-picture (PiP) player/user interfaces (PUI) and tablet-based gaming systems today. As casinos wrestle with the issue of replacing aging gaming machines, they have an opportunity to experiment and to create a vision for content management. It would be unrealistic to expect these PUI devices to support the long tail of aging machines on the floor today, but they could be used to cost-effectively add value to some models released as late as the mid-1990s. This will not be a quick process; casinos willing to start now will be in a better position to bring their vision to fruition and to take advantage of the new digital marketing opportunities created by this gaming technology. In addition, new technologies, such as in-room and on-premise mobile gaming, have the potential to change the content landscape within the casino. The player terminals for these games are typically mass-produced commodity devices such as set-top-boxes and consumer tablets. As a result, they provide a clean slate for the development of standards. The same systems that serve content to these new in-house gaming channels has the potential to serve content to the PUIs and/or universal gaming kiosks installed in gaming devices on the casino floor. It is incumbent upon the casino operator to ensure that these systems be able to interoperate in order to create the best player experience possible while also assuring operating efficiencies. MARCH 2013 www.ggbmagazine.com

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At Home

APPLICATIONS WILL BE DEVELOPED TO AGGREGATE CUSTOMER SPENDING AND CASINO-RELATED ACTIVITIES BOTH ON PREMISE AND AT HOME. CASINOS WILL HAVE A 360DEGREE VIEW OF THEIR CUSTOMER.

Out of Casino

On the Go

• i-Gaming and Social Networks A quick glance at what has transpired within the business of social gaming provides an interesting perspective on how people want to access game content, and their preferred method of engaging with others within their online social circles. The lines have blurred between where one machine experience leaves off and another begins, and users are coming to expect engaging online experiences across multiple devices, instantly. This same seamless gaming experience is possible (and will be expected) from casinos as well, whether connected inside the walls of the casino or moving the experience beyond and even outside. Leveraging the new phenomenon of social gaming and tracking of leaderboards, scores and achievements can also provide an innovative way to differentiate and keep this new breed of players more connected. Many social gaming companies have already developed expertise, built the tools and acquired an audience. Social gaming companies are also planning on moving into real-money gaming, and they bring with them a significant advantage, both in audience reach and time to market. Platforms will provide support for the adoption of social gaming tools and potential partnering strategies. • CRM In an era of unprecedented gaming expansion and the advancement of igaming, the onus will be on casinos to implement better tools to connect with their customer. From a marketing perspective, capturing data on customers and their behavior is only valuable if it can be used to inform a strategy. Platforms will help drive the development of innovative tools that assist with the production of novel marketing campaigns and optimized player experiences such as the reconfiguration of a casino floor for maximum impact. Applications will be developed to aggregate customer spending and casinorelated activities both on premise and at home. Casinos will have a 360-degree view of their customer. These applications will help casinos develop and deliver their digital marketing strategy, allowing them to communicate with their customer at the right time with the right message on the right screen. 32

Global Gaming Business MARCH 2013

On the Gaming Floor In the Hotel

WORK TO BE DONE

A Q3 CY2012 Roth-Fantini survey indicated that close to 50 perIn the cent of casinos polled intend to Casino invest in systems technologies, and there is an increased level of interest in picture-in-picture player user interface technology. While these are positive signs, there is still uncertainty expressed by many casinos. Consider that existing vendor In the solutions work well within their Hotel proprietary technology stacks, and perhaps with that of a partner, but these systems may not afFigure 3 ford casinos the flexibility and agility needed to develop digital strategies in our evolving market. Today’s systems are rapidly advancing, and casinos need a path toward the convergence of on-premise gaming, retail, hospitality, mobile and internet experiences in order to design and execute a coherent digital strategy. Rarely do the existing pieces of the puzzle interoperate flexibly enough to provide the casino with a sufficiently agile solution. Casino operators can no longer afford to wait for the next bundled offering from their current systems providers, only to be forced to develop business strategies that are constrained to using the same tools as their competitors. In support of efforts to spearhead and drive open innovation within the casino industry, it is evident that new technologies and standards are needed. The industry may be required to take a step back and decompose some of the existing systems and solutions that represent the current standard, introducing more seams for connectivity and establishing optimized boundaries for regulated services within the framework of an SOA. While the Gaming Standards Association has produced a good building block in the G2S standard, casinos are in need of additional gaming technology standards that facilitate the development of Open APIs for application services. A platform, likely an ESB, will provide the foundation for open innovation in casino systems. It will support the development of SOA and provide a bridge between traditional gaming systems and online gaming systems. The freedom and flexibility gained by adoption of a platform and open APIs will provide casino operators with rewards, enabling the development of more relevant services and monetization strategies that will justify their investment in platform technology. Tim Gronkowski is a consultant with GronkWorks and the Jordan Gaming Consulting Group. He has previously served as a director within the Advanced R&D department at WMS Gaming. He can be reached at tim@gronkworks.com. Chris Donahue is VP of marketing and publisher relations at CiiNOW, Inc. He was previously at OnLive, Live Gamer, Microsoft and Nvidia. He can be reached at chris@ciinow.com.

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Digging the

Pit

Making life easier down in the trenches By Dave Bontempo

able game suppliers view the pit as a cathedral. Their products must please the “high priests” who operate casinos by reducing down time, increasing play and simplifying operations. They must also make life easy for the players who worship in gambling houses. The reward is a multimillion-dollar windfall, well worth the extensive research and start-up costs. Several companies have fortified and helped upgrade the pit, via different themes. The smaller the world gets, the larger its benefit. That could be the rallying cry for FutureLogic and Table Trac, who turn ticket-in/ticket-out (TITO) capability into a portable powerhouse. Copy that for Innovolt, which found a way to reduce power-outage risks on the gaming floor. Technology does not have to threaten employees; it can assist them. One could derive that from Genesis Gaming, whose products bring dealers to the forefront of automated game management. Respect RFID. That’s been the mantra of Gaming Partners International, which retains its pioneer status in the re-invigoration of radio frequency identification, both inside chips and through software. While each company finds a different market approach, one thread brings them together. They all bring their specialty to the pit. 34

Global Gaming Business MARCH 2013

TITO-Tested Ticket-in/ticket-out technology was designed for slot machines, but there’s nothing to keep it from working on tables as well. FutureLogic delivers a game-changer with TableXchange (above), set to launch later this year after a second-quarter trial period. The small device enables gamblers to bring vouchers from slots to table games. Forget cash-out or buy-in lines. This product will, literally, vouch for your bankroll. The company calls it TITO for table games. TableXchange will be distributed by Global Cash Access in North America, according to Nick Micalizzi, the vice president of sales and marketing for FutureLogic in North America. Operators will see all the benefits of player tracking, while gamblers view instant game access and the absence of lines for cashing in their proceeds. TableXchange brings TITO to the entire floor, an expansion of what was once groundbreaking technology. Remember the rage when TITO escorted slot machines into the cashless era? The same innovative spark applies here, as TITO becomes a floor-wide tool. A patron can purchase a voucher anywhere—slot machine, kiosk, cage, etc.—play a certain game and decide to move. TableXchange’s scanning and

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The touch screen looks exactly like the table. The operators can easily access player information and player data and can easily train a new dealer in this system. By the end of his shift, the dealer will be very comfortable. —Glenn Goulet CEO,Tabel Trac

printing capability enables him to punch his ticket, move to another game area and produce the voucher. It is validated, he receives chips, and plays. When finished, the patron returns the chips for an updated voucher and continues the journey. The system enables quick buy-ins—a benefit for high rollers with wads of cash—substantially reduces chip refills and eliminates the need for players to be ensnarled in cash-out lines. The player can put the voucher away and return another time. “Is there anything more frustrating than being stuck in a long line in a casino?” Micalizzi inquires. “Especially when you have money to burn? What that means is that if players are not standing in lines, they are usually playing. That’s what you want.

“When we showcased this product at G2E, there was no shortage of people who want to test it.” The Glendale, California company offers the TITO printers in gaming, along with printing solutions in the kiosk, medical, gas pump, and voting markets. Table Trac has unveiled its own TITO option play. It’s called Tickets at the Table. The Minnetonka, Minnesota company already has this app in the market as an optional component of its new TTRac2 Pit System. TTRac2 is a model of comprehensive simplicity. Can comprehensive really be simple? Yes it can, according to CEO Glenn Goulet. Table Trac, which supplies casino management systems, derived input from dealers and pit bosses to pro-

MARCH 2013 www.ggbmagazine.com

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Table Trac

GPI Dealer Screen

duce its latest product. It was unveiled at G2E Asia in 2011 and is gaining momentum in local U.S. markets and the Caribbean. The system covers every table game. “There’s something for everyone in our table game system,” Goulet says. “For dealers and table games managers there are the operational efficiencies brought on by automated table fills and credits, openers and closers. For the audit and accounting staff there is the complete suite of reports and real-time accounting. For the marketing professionals there is the ability to reward players in real time through our Reflexive Reward system, which automatically rates and tiers players every two hours.” TTRac 2 involves a small mounted touch screen both at each game and in the pit. The dealer takes a patron’s player’s club card, swipes it and records the buy-in along with placing the money down the chute. He also records the player’s seat position. A pit boss can see the action on every table via his own computer—usually a centralized location like the pit podium—and can colorcode to denote player activity and to rate him. The information connects with a back-house server, which integrates with the casino management system. Goulet says the two-hour rating component helps operators serve the local market, which depends upon weekly repeat visits. A key element of TTRac 2 was its origin. Dealers and bosses brought an effective practical viewpoint to the new technology. “One of the key things we learned from the pit bosses and dealers was their desire to find an easy way to identify and rate players,” Goulet indicates. “They also wanted a system that was intuitive. This is easy to understand. “The touch screen looks exactly like the table. The operators can easily access player information and player data and can easily train a new dealer in this system. By the end of his shift, the dealer will be very comfortable.” Goulet says the system also tracks players who move to different tables. A dealer can simply hit his own “move player” button and mark the next table the customer went to. This system also allows operators to track uncarded players and decide whether or not to reward them.

RFID’s Best Friend Gaming Partners International is a leading provider of casino currency and equipment worldwide, with offices and manufacturing facilities in key regions including the Americas, Europe and Asia. GPI bravely embraced and partially reinvented radio frequency identification to a market that had downplayed it once the hardware posed conflicts with signals at or near the games. This company advanced RFID’s use into a back-of36

Global Gaming Business MARCH 2013

When it comes to our core products, we are the provider and we are the manufacturer; we are not a distributor. When you deal with us, you deal directly with us. —Maricela Maciel Marketing Manager, GPI

the-house software gem for operators, helping them track overall game play. By extending RFID beyond its security function, GPI implements it into several products. The company also stresses its clear ties to gaming operators. “When it comes to our core products, we are the provider and we are the manufacturer; we are not a distributor,” says Maricela Maciel, GPI’s marketing manager. “When you deal with us, you deal directly with us. You have more control in addressing your concerns, more input on special requirements and price points. Everything is made to order. “Once in a while, a casino will ask us to do something special for our table or for a decal or inlay. It can be addressed immediately, as opposed to going through another person or a distributor.” The company showcased both its Chip Inventory System and TIM, a tray inventory module, at ICE in London. It will make another demonstration of these products at G2E. Both products are powered by RFID. The RFID Tray Inventory Module (TIM) is an added feature of GPI’s RFID Chip Inventory System, which gives operators real-time chip/tray currency inventory monitoring at the table. TIM provides critical time-saving functions like automated table openings and closings. Using an RFID reader and antennas to verify each chip in the tray, TIM automates manual chip accounting procedures. It provides reports for the table’s currency inventory throughout each dealer’s shift. This eliminates the need for manual dealer and supervisor counts and ends human error, thus reducing game down time. TIM records the beginning and ending chip inventory for that dealer’s shift. Along with the total value of all the currency, it also provides management with an accounting of how many chips of each denomination are in the chip tray at all times. As an added level of security, a second employee is required to validate the opening and closing of the game table each time there is a dealer shift change.

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Bravo Pit Dealer Unit

You can find out there is a problem in the breaker or the line and go fix it before there is a failure, not afterward. —Ben Grimes Chief Technology Officer, Innovolt

Shocking Innovation Casinos can lose up to $1 million daily via power outages, according to a 2007 statement from the U.S. Environmental Protection Agency. No wonder Innovolt brings an electric surge to this discussion. The Atlanta-based company tossed its Power Manager product to the gaming world a while back. Software analytics will be added by the end of this month. Several properties are running tests to see if Power Manager, which has one unit connecting to the back of every two machines—or shufflers or table-top electronics—can reduce costly down time. “The results have been extremely positive,” says Ben Grimes, the chief technology officer for Innovolt. “What happens in gaming is that a line of machines are tied to the same circuit. There are more machines and more power draw, so if some machine was to be affected, it could impact others down the line. I’m not saying they would all be disrupted, but it could, for instance, make the lights on a machine dim the way your lights would when you turn your air conditioning on.” Grimes says Innovolt has the industry’s only protection against all five power anomalies—the voltage sags which cause current in-rush, over-voltage that damages power protectors, voltage surge from the rare lightning strikes, brownouts which cause under-voltage levels and then normal power outages. Innovolt’s next focus becomes software and analytics. An operator can purchase license access to Innovolt’s data about the machines. “What’s exciting about this is you can have someone sitting at a screen, monitoring the environment, the power and the temperature, everything going on that would affect the machines (or table electronics),” Grimes says. “You can see a trend of things happening, like a sag affecting this particular run of machines. You can find out there is a problem in the breaker or the line and go fix it before there is a failure, not afterward. “You will also get a sense of consumption issues. It’s nice to understand how much power the machines are consuming.” And, therefore, determine how to monitor and perhaps tweak temperatures to reduce electric bills. 38

Global Gaming Business MARCH 2013

Encore for Bravo Spring, Texas-based Genesis Gaming Solutions is a leader in hardware and software solutions for casino pit and poker room management. Leveraging the power and function of its first product, Bravo Poker, the company has developed Bravo Pit, a complete table game management and player tracking system. The Bravo Pit system enhances ratings and pit management utilizing electronic data collection. Bravo Pit also enables casino management to handle multiple casinos, and is compatible with any casino player-tracking program available. The on-table dealer unit allows for easy data input including dealer login, player or guest check-in and check-out, player buy-in, chips-in, marker buy-in, and average bet. With the Pit Watch monitor program, the system also enables dealer, supervisor and marketing tracking, shift roll, table fill, table credit, table inventory and table rundown. Through Pit Watch, players are rated electronically and given credit for play immediately. “If blackjack was invented today and you said that you were going to rate players on this game, there is no way you would have supervisors running around trying to check all the players in, and there is no way you could count on them to fully monitor that person’s play,” says Randy Knust, president and CEO of Genesis. “You have to bring the dealer into the equation somehow. That has become even more significant during the recent downturn, in which people were laid off. A supervisor used to be handling one to four tables, then it went up to six, and now it can be up to eight tables. You have one person trying to get 40 to 50 people swiped in. That’s not efficient. You end up with customers unhappy about not being rated. We take the operation and make it more efficient.” While the PTC unit enables the dealer to input information, sensors record the speed of the game. By placing a sensor under any designated betting area, casino management can track any proposition or bonus bets on a game, enabling more accurate data for cost-benefit analysis of a particular bonus bet. Knust says the sensors also deliver specific knowledge about hands per hour. This is an upgrade over the method of taking a random time sample, extrapolating it out over a long period of time, and determining the number of hands played. A slight uptick in dealer speed, multiplied by millions of hands every year, will likely spike revenue, Knust says. The sensors and PTC unit are highlighted elements from the Bravo Poker realm, put into the Brave Pit universe. Another new twist, Bravo Poker Live, is an app connecting players to data where Bravo Poker is being played The Genesis units are in more than 40 casinos in Las Vegas, Knust says, as well as more than 150 properties throughout the United States. The app enables a player to check where the Bravo Poker is being played that particular evening, and what tables are open. The Bravo Poker system was chosen for a fifth straight year to manage the World Series of Poker, held recently at the Rio All-Suite Hotel & Casino in Las Vegas.

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G-Men in Jersey The Department of Justice files a motion to intervene in sports betting case

powerful opponent has lined up against New Jersey in its effort to bring sports betting to the state—the federal government. The U.S. Department of Justice has filed a motion to intervene in a lawsuit seeking to challenge New Jersey’s sports betting law, asserting its right to defend the constitutionality of the 1992 Professional and Amateur Sports Protection Act (PASPA). The Justice Department will join the four professional sports leagues and the NCAA in their lawsuit to prevent New Jersey from implementing a sports betting program at Atlantic City casinos and state horse racing tracks. Oral arguments were to be presented in court in Trenton in late February. “This development, while not particularly helpful, is not surprising, and it does not impact our legal strategy in any way,” said New Jersey state Senator Ray Lesniak. Lesniak was one of several lawmakers who passed a sports betting bill in late 2011 following a voter referendum. Governor Chris Christie signed the bill last January, and vowed to issue gaming licenses by the fall in defiance of the federal ban. The action provoked the NBA, NFL, NHL, Major League Baseball and the governing body of college sports to file a lawsuit against the governor and the state attorney general’s office. U.S. District Judge Michael Shipp ruled in favor of the leagues, declaring that they had standing in the case since their athletic events would be directly affected by sports betting. The February 14 arguments were to debate the constitutionality of PASPA, which prevents sports betting in all but four states—Nevada, Oregon, Montana and Delaware. “We think they’re wrong. We think the fact they allow four states to do it and other states not to do it is flawed,’’ said New Jersey Senate President Stephen Sweeney. Sweeney, along with the state Thoroughbred Horsemen’s Association, has also been allowed to intervene in the case.

Beating the Deadline The DOJ had been given until February 1 to respond to challenges to the constitutionality of the law and did so just days shy of the deadline. In early February, the Department of Justice issued a 33-page document on its defense of PASPA as part of its case to prevent New Jersey from implementing a sports betting program. The brief could go a long way in influencing the decision by U.S. District Judge Michael Shipp. On New Jersey’s argument that PASPA vio40

Global Gaming Business MARCH 2013

lates anti-commandeering principles of the Tenth Amendment, the brief counters: “Under that doctrine, Congress cannot require states to take affirmative actions to implement a federal regulatory program. But PASPA does not require New Jersey to take any affirmative action; rather, it merely prohibits New Jersey from sponsoring, operating, advertising, promoting, licensing, or authorizing sports gambling.” Concerning the state’s claim that PASPA violates the Constitution‘s Commerce Clause, the DOJ brief reads: “PASPA is also a valid exercise of Congress’ Commerce Clause authority because it is reasonable to believe that sports gambling has a substantial effect on interstate commerce. Moreover, PASPA’s provisions, which prevent the expansion of statesponsored sports gambling, are rational methods of achieving Congress’ purposes of stopping the spread of sports wagering and of guarding the integrity of athletic competitions.” The brief goes on to submit that the matter of equal sovereignty and equal footing doctrine put

forth by New Jersey has no relevance in the case. Lesniak was not convinced by the DOJ argument. “They’re saying we can’t have legal sports betting, but they allow illegal sports betting to go on,” he said. “I think the court will see the foolishness of that.” Some experts disagree, however. “The Department of Justice’s brief introduces the court to a powerful ally of these plaintiffs,” Stuart Hoegner, an attorney for the Gaming Counsel Professional Corporation, told Forbes. “Constitutional positions coming from the plaintiffs are one thing, but Judge Shipp may pay those arguments more respect and attention when coming directly from the executive branch. It’s not dispositive; the court will make a determination on the merits. But it lands a persuasive intervener in the case to help the leagues.” This could be New Jersey’s last chance to see a sports betting program go forward. The landmark case will resolve the question of PASPA’s constitutionality, and would affect any efforts by states in the future to regulate and legalize sports betting.

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Federal courts and Obama Indian policy threatening to erode tribal gambling

BY DAVE PALERMO

hairman Bo Mazzetti was thrilled last year when the Rincon Band of Luiseño Indians won its nine-year legal battle against efforts by former California Governor Arnold Schwarzenegger to extract tribal gambling revenues in exchange for additional slot machines. “Someone had to make the state own up to the fact its negotiations with tribes were illegal,” Mazzetti said in a February press release when Department of Interior Assistant Secretary of Indian Affairs Kevin Washburn signed a tribal-state compact for the San Diego-area tribe. But Mashpee Wampanoag Chairman Cedric Cromwell was a bit frustrated last October when Washburn rejected a proposed compact between the tribe and Massachusetts officials, in large part because the agreement carved out a 21.5 percent revenue share for the state.

PolicY decisions

New York Governor Andrew Cuomo is threatening to bring commercial casinos to upstate New York in order to force the Seneca and St. Regis Mohawk tribes to comply with their compacts.

“The current policy is to be much more vigilant of what’s acceptable in a compact in terms of revenue sharing.” — Former BIA official George Skibine 42

The cases may seem unrelated. But they illustrate how the federal court and American Indian policy under the Obama administration is forcing state officials to abandon notions they can balance state budgets on the backs of tribes operating casinos. “The world has changed between Rincon and denial of the Mashpee compact,” Barry Brandon, executive director of the American Financial Services Association and a citizen of the Muscogee Creek Tribe, told GamblingCompliance.com. “It’s a different day.” Unfortunately for Indian governments, the crackdown on revenue sharing and the lengthy and complicated federal process involved in placing land in trust for gambling is prompting some states to pursue commercial casinos, creating competition for tribal operations. And it doesn’t help that the success of some 460 tribal casinos in 28 states has greatly eliminated fears casinos generate crime and social problems. “I don’t think from a tribal standpoint that anyone would have predicted a proliferation of Indian gaming would ultimately lead to all the states doing it on their own,” Brandon says. But Indian casinos have brought gambling into the mainstream of society. Illinois, Florida, New York, Kentucky and Minnesota have all recently discussed legislation to permit new or expanded gambling. And Maryland, Rhode Island, Pennsylvania, Delaware, Ohio and Massachusetts have approved commercial casinos. The Seminole Tribe of Florida pays the state $300 million annually for the exclusive right to

Global Gaming Business MARCH 2013

operate table games under a compact that expires in 2015. But some legislators believe expanded commercial casinos would be even more profitable. Florida lawmakers are reviewing state gambling policy, including the potential for Miami-area casino resorts and, perhaps, levying a tax on internet, or sweepstakes, cafés.

Massachusetts confusion With rejection of the Mashpee compact and potential delays in placing land in trust for the tribe, Massachusetts officials are considering allowing commercial companies to bid for a gambling license in the state’s southwest region, initially designated for a tribal casino. “It’s certainly a quicker process,” says attorney and Oklahoma Osage George Skibine, former director of Indian Gaming for the Bureau of Indian Affairs. Mashpee and a dozen private companies are competing for three casino resort licenses in various regions of the state. Washburn has pledged to work closely with the Mashpees in redrafting the tribal-state compact to meet IGRA and Interior regulations. But the land/trust application is another matter. Mashpee seeks to have 170 acres in Mashpee and 146 acres in Taunton taken into federal trust. The property in Taunton, located within the town’s Liberty and Union Industrial Park, is the site of the tribe’s proposed $500 million casino. While the Mashpee application is not expected to generate controversy, most tribal attorneys and consultants believe it will take at last two years to process the trust application for the Taunton site. The Mashpee land/trust process is further complicated by the 2009 U.S. Supreme Court ruling in Carcieri v. Salazar, which states Interior cannot place land in trust for tribes not “under federal jurisdiction” with enactment in 1934 of the Indian Reorganization Act. Mashpee received its federal recognition in 2007. A significant delay in the Mashpee land/trust application, following at least a temporary rejection of the tribal-state compact, will likely generate “an enormous outcry” from legislators, says Clyde Barrow, director of the Center for Policy Analysis at the University of Massachusetts. “People are going to say, ‘You know what? Let’s do commercial gambling instead.’”

new York showdown Meanwhile, New York Governor Andrew M. Cuomo recently announced his desire to place three commercial casinos in the Adirondacks, Catskills and Finger Lakes areas with the goal of generating tourism and needed tax revenue. Cuomo’s plan threatens to bust a statewide monopoly on casino gambling by the St. Regis, Oneida and Seneca tribes. Oneida operates Turning Stone Casino Resort in Verona, near Syracuse, under a tribal-state compact that calls for no sharing of gambling revenue with the state. St. Regis Mohawk in upstate Akwesasne and Seneca, with casinos in Buffalo and Niagara Falls in western New York, have compacts that call for sharing roughly 25 percent of their gambling revenue in exchange for casino exclusivity in regions comprised of seven to eight counties. But both tribes are withholding more than $500 million in combined rev-

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enue sharing payments, claiming New York officials violated their exclusivity by allowing lottery terminals at nearby racetracks. The cases are in arbitration. Meanwhile, the Cayuga Nation of New York, Seneca-Cayuga Tribe of Oklahoma and Stockbridge-Munsee Band of Mohican Indians of Wisconsin all have applications pending with the Department of Interior to place New York land in trust for casinos. Stockbridge-Munsee recently acquired 333 acres in Sullivan County, in the Catskills, as part of a federal lands claim. The tribe is seeking to have acreage near the community of Thompson placed in trust for a casino. St. Regis, Stockbridge-Munsee and Seneca-Cayuga have all been trying without success to get the necessary land placed in federal trust to operate casinos in the Catskills and upstate New York. “They’ve been trying to get something going for maybe 15 years,” Brandon says. “They’ve come close. But now the writing is on the wall.” “Andrew Cuomo is a very, very impatient guy,” says Kent Gardner, chief economist with the Center for Governmental Research in Rochester, New York. “This is a guy who, when you tell him something is going to take 10 years, he looks at you cross-eyed and says, ‘Well, you find someone else to work for.’ “He has, over the years, seen rivers of money flowing out of the state, into New Jersey and Connecticut. One way to deal with that is do a deal with the Indian nations. “But when you consider the challenge of getting a deal negotiated and the challenge of working with Interior and the challenge of dealing with payment issues after a deal has been negotiated, the path of least resistance is to deal with the constitutional prohibition and open the state up to commercial gambling.”

InterIor Message The Indian Gaming Regulatory Act requires that tribes seeking to operate Class

III Las Vegas-style casinos enter into regulatory agreements, or compacts, with the state in which their reservations are located. But federal courts have blocked tribes from filing suit against those states refusing to enter into compact negotiations. Since IGRA was enacted in 1988, tribes have accused state officials of engaging in political extortion, demanding shares of gambling revenue in exchange for entering into compacts. Despite IGRA’s anti-tax prohibitions, 10 of 28 states where tribes operate casinos require shares of casino revenues, ostensibly in exchange for statewide or regional exclusivity. The 9th Circuit Court ruling in the Rincon case and Obama Indian policy uphold basic principles of IGRA that taxation of tribal revenues is illegal and that gambling is essentially intended to strengthen tribal governments and build strong, diversified Indian economies. “The current policy is to be much more vigilant of what’s acceptable in a compact in terms of revenue sharing,” Skibine told GamblingCompliance. “That’s why the Mashpee compact was disapproved,” Skibine says. “It was to send a signal that ‘we’re going to be monitoring those things more closely.’” While tribes generally applaud the concept that courts and Interior are upholding the pro-sovereignty provisions of federal law, it has created difficulties with Mashpee and other tribes anxious to get into the gaming business. With the trend to commercial gambling, attorney Brian Newland, a citizen of Michigan’s Bay Mills Indian Community, is warning tribes to guard against any erosion of their statewide or regional exclusivity. This is particularly true for states such as Michigan, California, New York, New Mexico and Florida, with both tribal and commercial gaming. “Tribes need to be really aggressive on the legal front in protecting the exclusivity they have in their compacts,” Newland says. “And they also have to be aggressive in the state political arena.”

MARCH 2013 www.ggbmagazine.com

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Conditional Approval in New Jersey he dawn of online gaming in The bill’s Senate New Jersey is coming. After one sponsor, Ray Lesniak, bill was vetoed two years ago by Govcalled it “a huge win ernor Chris Christie, a second one was after all these years presented to him last month. And of fighting, and while Christie didn’t sign the new bill, something that can his conditional veto was read as a vichelp keep Atlantic tory by online gaming proponents City from drowning around the world. in red ink.” While the previous bill had some fatal flaws for Christie—it included Senator Ray Lesniak payments to the state racetracks, and didn’t control potential growth of online gaming ward, again leading the way for the nation, by parlors across the state, as well as several other becoming one of the first states to permit initems—the latest bill had only minor flaws that ternet gaming,” Christie wrote in the veto. supporters say can be easily fixed. “While Atlantic City’s reputation and stature The bill’s Senate sponsor, Ray Lesniak, called as one of the premier resort destinations on it “a huge win after all these years of fighting, and the East Coast are well-chronicled, it is no sesomething that can help keep Atlantic City from cret that revenue from the region’s most imdrowning in red ink.” Lesniak said that he concurs portant industries, gaming and tourism, has with Christie’s problems with the bill and will been in decline. make the changes. He predicts the bill could be “Since the beginning of my administraback on the governor’s desk by March 18. tion, I have stressed the importance of reversChristie made some suggestions to change the ing the trend of economic contraction in bill. The biggest changes were an increase of the Atlantic City and have made the revitalization tax rate from 10 percent to 15 percent, which is of the region’s gaming and tourism industries still lower than many other legal i-gaming jurisdica key priority.” tions, and a provision that allows the legislature to Christie was apparently swayed by the rere-evaluate the online gaming operations in 10 cent purchase by the parent company of years. He also wants elected officials to declare PokerStars and Full Tilt Poker, the Rational their interests in any companies that may profit Group, of the struggling Atlantic Club, and its from the measures included in the bill, as well as commitment to invest at least $80 million some other minor ethical changes. into the property. If Christie had vetoed the Problem gambling protections will be beefed bill unconditionally, that deal would have up, including higher up-front payments to the fallen through. And sources tell GGB News state Council On Compulsive Gambling. The Dithat several other Atlantic City casino owners vision of Gaming Enforcement’s regulatory role have been approached by different online would also be strengthened by Christie. Other gaming operators, which may keep many of changes were mostly technical language changes; the city’s marginal casinos in business. most notably, the bill changes “interstate comLesniak says the impact will be huge, with pacts” to “reciprocal agreements,” which could hundreds of millions of investment dollars avoid any complications that could stem from the coming to the city and state. 10th Amendment to the U.S. Constitution, that “It’s off to the races for New Jersey,” Lesrequires Congress to approve all interstate comniak said. “This is a huge lifeline for Atlantic pacts (although it is rarely enforced). City—a big win for the state.” One of Christie’s objections, the inclusion of Lesniak says the 10-year sunsetting provifull casino gaming in favor of poker only, apparsion was appropriate, as well. ently wasn’t an issue in the final verdict, so if the “If it were five years, I think it would have bill becomes law following a redrafting, players in been a concern,” he said. “Ten years will make New Jersey, like neighboring Delaware, will be investment very attractive.” able to enjoy the full scope of casino games online. Some analysts believe that the Atlantic “Now is the time for our state to move forCity casinos could add as much as $900 million to their gross gaming revenues as a result

Global Gaming Business MARCH 2013

of online gaming. The first licenses are expected to be issued within nine months of the signing of a revised bill by Christie. The semi-approval of online gaming raises several other issues, however. Christie put aside his doubts about the actual location of the betting. The bill stipulates that the bets are placed on servers located at the Atlantic City casinos, the only place in the state constitutionally permitted to offer casino gaming. That provision has been one of the hurdles that racetracks have had to face in their quest to introduce slots. The casinos have always contended that a constitutional referendum would be necessary for that to happen. In his last veto, Christie called the contention that the betting was actually taking place in Atlantic City and not at the personal computer/mobile device “a fiction.” It’s possible that some entity may challenge this part of the bill. But should it be upheld, Native American tribes across the nation could contend that online betting was actually taking place on the reservation, where gambling is legal—particularly Class II gaming—and not at the computer terminal or mobile device where the player is located, where gambling is assumed to be prohibited.

Delaware Lottery to Launch Online Gaming

he state of Delaware, which passed an internet gambling bill in June 2012, is requesting proposals from companies to set up an internet gaming system to be offered to the public by September 30. The Delaware State Lottery has issued an invitation to vendors to submit bids to supply technology, game content and managerial services for online gaming. The solution could be integrated with the state’s internet lottery system and internet sports wagering system—which currently do not exist but which Delaware expects to add in the near future. “The Delaware State Lottery is issuing this request for proposal to invite interested vendors to submit proposals for the implementation of an internet gaming system and services solution, which

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is a turn-key offering inclusive of a back-end technology platform, operations management and support services as well as an array of game content from multiple vendors to offer casino table games, video lottery games, poker, bingo and keno,” said a statement from the organization. The proposal seeks suppliers in four areas: • Backend Technology Platform Provider— would supply the foundation software for the games system; • Operations Management Provider—would oversee the site’s components and hosting; • Game Content Vendors—would develop and supply games offered in a typical casino environment; and • Support Services Vendors—would provide third-party expertise required for “a robust and secure internet gaming operation,” which includes identity verification and geo-location. Companies interested in participating would be required to have been operating real-money games for at least one year in regulated markets in Europe and/or North America. Clients can include private companies or government-sponsored sites. Games providers, which require a primary application, would be required to have been operating in a regulated market for two years as well as having offered at least 30 games or game variants for at least one year. The Delaware State Lottery will hear oral presentations from vendors April 1-12.

Offshoring to Avoid Taxes: It Works

he Independent reports that U.K. bookmakers and casinos have escaped paying around £1 billion in taxes over the last three years by routing their operations through subsidiaries offshore. The newspaper estimates they are saving around £250 million a year by locating their online and phone betting operations overseas in Gibraltar, Alderney, the Isle of Man and Guernsey. The offshoring, which has grown in recent years, allows operators to replace the U.K. gambling duty of 15 percent of gross revenue with effective rates generally less than 1 percent. Every one of the 10 largest operators in remote and online gambling does business this way, the newspaper found. The government currently is studying a new levy centered on “point of consumption”—taxing bets where they are placed—rather than where they are taken (“point of supply”), with the intention of introducing the change in December 2014. To counter growing foreign competition from gaming sites headquartered in Gibraltar and Malta, 46

Global Gaming Business MARCH 2013

in 2001 then-Chancellor Gordon Brown replaced the 6.75 percent tax on bets to 15 percent of GGR. The move was designed to induce operators to return to the country, but was undercut by rivals based in tax havens, particularly those operating casino sites. In 2009, William Hill, Ladbrokes and SkyBet moved their online and phone businesses offshore. An exodus of the largest operators followed. Only two major U.K. operators—Bet365, a family company based in Stoke-on-Trent, and Sky—pay U.K. duty on sports betting. Their casino games, however, are located in Gibraltar and Alderney.

Antigua Could Target American Goods

espite strong objections by the U.S., the island nation of Antigua and Barbuda could push ahead with its plan to offer American goods without copyright or intellectual property protections. The move is in response to the long-fought battle over internet gambling, for which the Caribbean nation has demanded compensation since the U.S. declared the practice illegal. Last month, the World Trade Organization approved the outlines of Antigua’s proposed copyright haven, which would allow the country to set up a website to sell materials that infringe on U.S. copyrights without paying the American copyright holders. It is one in a series of decisions the WTO has awarded Antigua in the dispute. In 2007, the organization allowed the islands to draw $21 million annually of “nullification or impairments” from the United States—a penalty imposed for America’s refusal to allow its citizens to place bets on websites located in the Caribbean jurisdiction.

“We have followed the rules and procedures of the WTO to the letter. Our little country is doing precisely what it has earned the right to do under international agreements.” —Carl Roberts Antigua’s High Commissioner

U.S. officials have argued that internet gambling was never part of the original GATS agreement. Antigua, whose small economy depends on online gambling, said the U.S. was in violation of international trade agreements. It claimed the U.S. ban cost the island’s economy $3 billion a year. In 2004, the WTO’s Dispute Settlement Body agreed. The two countries have met on several occasions to work out a form of compensation, but those talks have continuously broken down. U.S. officials have categorized Antigua’s latest threat as “government-authorized piracy,” though Antigua maintains it is merely exercising its rights under the WTO ruling. “We have followed the rules and procedures of the WTO to the letter,” Antigua’s high commissioner to London, Carl Roberts, said in a statement. “Our little country is doing precisely what it has earned the right to do under international agreements.” But Antigua may not act on the copyright threat—a policy that could complicate President Obama’s second-term trade agenda. Many observers see the move as a card Antigua will hold in further negotiations.

Ladbrokes Closes Deal to Buy Betdaq

.K. bookmaker Ladbrokes has purchased Betdaq for about €30 million. The deal will see Ladbrokes hold half of the purchase shares—€15 million—with a 10 percent stake in TBH, the technology provider to Betdaq. It is the first acquisition made by Ladbrokes since CEO Richard Glynn took over the helm three years ago. The two companies already have a commercial relationship, with Ladbrokes using the betting exchange to hedge bets. Irish multimillionaire Dermot Desmond, who has a 2 percent stake in Ladbrokes, owns Betdaq. Though the purchase of Betdaq is a relatively small acquisition, it should bring to an end Glynn’s reputation for walking away from deals. The CEO dropped out of talks to buy 888 and Sportingbet, took his company out of the race for Australian Centrebet and saw a possible online partnership with Playtech come to nothing. According to gambling analysts, Ladbrokes will now try and build Betdaq into a company to rival Betfair, which is 20 times its size.

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Drowning

in Debt? A look at recent debt restructurings in the tribal gaming industry BY ADAM MOSES

ative American gaming was once thought of as an industry almost impervious to the gyrations of the broader domestic economy. In fact, it steadily tallied strong results in the years preceding the economic downturn and soaked up its share of the readily available financing that flooded the domestic gaming space as a whole during this period. Between 1995 and 2008, tribal gaming revenues grew almost fivefold from $5.46 billion to $26.7 billion. However, as the domestic economy retrenched in 2008, many tribal casinos saw their previously meteoric growth taper off and began to reel under the strain of outsized leverage incurred in anticipation of ever-increasing earnings. This change in fortunes led to a number of restructurings that presented tribes and creditors alike with difficult, often novel questions about how to restructure debt in an industry subject to legal and regulatory requirements unlike those in place in the broader domestic gaming space. A real measure of anxiety existed among deal participants facing an uncertain path through territory not yet fully charted. With restructurings recently completed by the Odawa Casino Resort in Michigan, the Inn of the Mountain Gods Resort and Casino in New Mexico, the Buffalo Thunder Resort and Casino in New Mexico, the River Rock Casino in California, Mohegan Sun in Connecticut and several other tribal gaming enterprises, it is a fitting time to take stock of the key regulatory and legal drivers at play in these restructurings and survey other prominent features and trends in these transactions.

The Regulatory and Legal Landscape In addition to the core business considerations at the basis of all restructurings, restructurings of tribal en-

Global Gaming Business MARCH 2013

terprises are subject to special regulatory and legal constraints. For example, under the Indian Gaming Regulatory Act, a tribe must have the â&#x20AC;&#x153;sole proprietary interest and responsibility for the conduct of any gaming activity.â&#x20AC;? Accordingly, unlike in corporate restructurings, creditors of a tribal gaming enterprise cannot convert their debt into equity. Nor can creditors unilaterally install themselves or their designees as managers of an Indian casino resort. Moreover, there are important limitations on what collateral tribes can grant their lenders without obtaining federal approval, including, for example, limitations on the ability of a tribe to encumber its land. Furthermore, under settled federal case law, Indian tribes and their agencies are accorded sovereign immunity, a legal principle which can prevent creditors from exercising remedies against tribes and can prevent tribes from being made subject to the jurisdiction of federal and state courts. As a result, it is common for creditors to obtain a waiver of sovereign immunity in the debt documentation governing tribal financing transactions. Nevertheless, recent successful judicial challenges to these waivers initiated by tribes illustrate the possibility that they may not always be given their expected effect and can even be invalidated altogether.

The Bankruptcy Option The bankruptcy option, another prominent feature in many corporate restructurings, has not proven to be particularly relevant to tribal restructurings. Legal commentators have offered thoughtful arguments suggesting that tribal entities should be precluded by the operation of certain provisions of the Bankruptcy Code from being debtors eligible to file for bankruptcy protection and that, even if they did become debtors in a bankruptcy case, there would be considerable obstacles to undertaking a customary Chapter 11 restructuring

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of a tribal entity. It is therefore unsurprising that filings by tribal entities are with limited precedent. One recent and important bankruptcy case involving a tribal entity was filed in 2012 by the Santa Ysabel Resort and Casino, which is owned by the Iipay Nation of Santa Ysabel. In that case, creditors of the Santa Ysabel Resort and Casino raised the jurisdictional questions noted above and succeeded in having the Santa Ysabel Resort and Casino’s bankruptcy case dismissed, generally confirming the view advanced by legal commentators that tribal entities should be precluded from being debtors eligible to file for bankruptcy protection. The Bankruptcy Court did, however, rest its determination in part on the particular attributes of the entity in question, so the decision was not quite as sweeping of a statement as it might have been. Ultimately, however, the lesson to be drawn from experience to date is that the U.S. bankruptcy process very rarely figures in tribal restructurings.

Effect of Regulatory and Legal Considerations on Tribal Restructurings Taken together, the regulatory and legal features described above particular to tribal gaming entities have had a significant effect on the manner in which tribal restructurings are undertaken. Generally, these regulatory and legal features preclude or limit the use of several common weapons of influence in the creditor arsenal that are routinely brought to bear in corporate restructurings. Consequently, restructurings of the debt of tribal gaming enterprises tend to take on a more consensual and collaborative quality. After all, if the IGRA does not permit creditors to own or operate Indian gaming enterprises and foreclosing on the limited collateral which creditors may enjoy is unlikely to yield sufficient proceeds to retire their debt (but is quite likely to cause gaming operations to shut down and no longer be able to produce any revenue to service that debt), creditors have every reason to pursue a settlement that safeguards a tribal entity’s ability to pay down debt. The tribes do not hold a monopoly on negotiating leverage, though. Tribes, which have benefited from their ability to access the capital markets in the past in order to build their gaming businesses, seem reticent to be so aggressive in negotiation as to cause lenders to consider pulling back generally from investing in the space. In addition, many gaming tribes are dependent on distributions from their casino operations to fund basic public services for their members, which gives tribes so situated a powerful incentive—similar to that of creditors—to negotiate in earnest to achieve a mutually acceptable restructuring arrangement with their creditors in order to keep their gaming assets operating and producing earn-

ings. A scorched earth approach tends not to serve either side’s interests. Additionally, with creditors reluctant to test waivers of sovereign immunity and tribes and creditors alike thus far generally disinclined to seek the involvement of bankruptcy courts or contend with possible associated jurisdictional questions, there is frequently no third party neutral on the scene to serve as an umpire to settle the tough questions the parties may not be able to resolve on their own. As a result, the tribal parties and their creditors must themselves work through each negotiating impasse that they reach. It is therefore not terribly surprising that a number of tribal restructurings have been rather protracted affairs, with some taking years to complete. For example, Foxwoods Resort Casino, run by the Mashantucket Pequot Tribe, went into default in late 2009 and began negotiating a debt restructuring in early 2010. Over two and a half years later, in August 2012, Foxwoods announced that it had reached an agreement with steering committees of its lenders and bondholders to restructure its debt and would “work toward building support for the agreement and implementing the restructuring,” although few particulars of the transaction were provided and, and as of the date of this writing, Foxwoods has not announced that the transaction has closed.

Notable Recent Restructurings in the Space While the Foxwoods restructuring has meandered along over the past few years and has not yet closed, a number of other high-profile restructurings of the debt of tribal gaming enterprises have been completed, including transactions involving the Odawa Casino Resort of the Little Traverse Bay Band of Odawa Indians in Michigan (Q3 2010), the Inn of the Mountain Gods Resort and Casino of the Mescalero Apache Tribe in New Mexico (Q1 2011), the Buffalo Thunder Resort and Casino of the Pojoaque Pueblo in New Mexico (Q1 2011), the River Rock Casino of the Dry Creek Rancheria

Santa Ysabel Resort and Casino

MARCH 2013 www.ggbmagazine.com

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Band of Pomo Indians in California (Q4 2011) and Mohegan Sun of the Mohegan Tribe in Connecticut (Q2 2012). These transactions often involved a cash payment of some kind at closing to participating creditors and were effected principally through exchange offers in which existing bonds issued by the relevant tribal gaming enterprise were exchanged for new bonds issued by it. These recently completed restructurings of tribal gaming enterprises exemplify many of the key regulatory and legal lessons outlined above. None of these restructurings resulted in the transfer of any ownership interest in the relevant casino enterprise to any creditors, nor did any result in creditors assuming management control of casino operations. In addition, each of these restructurings involved the issuance of new debt by a tribal gaming enterprise, but none of that debt was secured by tribal lands. Moreover, none of these restructurings was effectuated through a bankruptcy case. Looking through the regulatory and legal prism yields valuable insights about these restructurings, but other important considerations—including some not peculiar to Indian gaming—were also at play. It is worth noting, for example, that these recently completed restructurings generally fall into one of two categories: (i) “Deeply distressed” restructurings, in which the relevant gaming enterprise faced extraordi-

Distinct Nature of Tribal Gaming Restructurings

Foxwoods Resort Casino

nary financial and operational headwinds; and (ii) “liability management” restructurings, in which the relevant gaming enterprise sought to extend the maturity of its debt and obtain other related relief in an effort to stabilize its balance sheet, but did not necessarily face immediate and acute pressure on its financial results. Predictably, the deeply distressed deals generally resulted in creditors accepting deeper reductions in the face amount of, or interest rates on, the debt they held than the liability management transactions, in which the issuers generally had the ability based on their earnings to service higher levels of debt at higher rates of interest.

Like the balance of the domestic gaming industry, the tribal gaming space experienced setbacks during the economic downturn and witnessed its share of restructurings. However, the highly regulated environment in which tribal gaming restructurings are undertaken means that they are subject to special constraints making them distinct from traditional corporate restructurings in several important respects. This occurs especially as a result of the limited application of bankruptcy law to these transactions as well as limitations on creditors taking ownership interests in, or exercising management control over, tribal gaming enterprises in these restructurings. In spite of the thorny legal backdrop, with several significant restructurings in the industry recently completed, tribes and creditors alike have demonstrated that the attendant challenges can be successfully navigated. Adam R. Moses is a partner in the Los Angeles office of Milbank, Tweed, Hadley & McCloy LLP. Moses is a member of the firm’s Global Corporate Group and its Gaming & Hospitality Practice. He may be contacted at AMoses@milbank.com.

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GLOBAL GAMING WOMEN by JUDY PATTERSON, Senior VP and Executive Director, American Gaming Association

Changing the Status Quo Why altering attitudes, environment and training will promote more female advancement

s a girl growing up in the Midwest in the late ’60s and early ’70s, gender equality was just beginning to impact the educational system. As a rising junior, I met with my high school counselor to discuss my classes for that year. Although I had not particularly distinguished myself as a math student, I had taken the advanced classes offered at the time and asked if chemistry might be an option. Although I don’t recall the exact words, her reply was to suggest that journalism might be a better option for a woman. The makeup of the chemistry class my junior year strongly demonstrated that I was not the only female student given that advice. I regretted agreeing with that counselor many times over, as I shied away from college math and science classes. What a difference a few decades have made for young women seeking a good education. In 1970, approximately 8 percent of women were college graduates, compared to 14 percent of men. By 2009, women were on par with men attaining a college degree, at 28 percent—more than tripled in 40 years. Equally gratifying is the increase in the number of degrees in science and engineering—from 36 percent to 50 percent over the same time period. Graduate school degrees tell an even better story, as approximately 11 percent of women aged 25-34 have two or more years of graduate school compared to 8 percent for men. Clearly, women have recognized that the best path to a desired career most often requires a college degree or more. Unfortunately, while women have made great strides in education, these advances have not fully transferred to the workplace. In 2010, according to U.S. Bureau of Labor figures, women’s earnings were 81 percent of men’s on average (an increase of more than 27 percent from 1979, however). There are many often-cited explanations for this disparity. While variations do occur from state to state and by race and ethnicity, and while women are well-represented in the professional occupations, they are not as well represented in 52

Global Gaming Business MARCH 2013

the higher-paying fields. Professional women make up a large part of the work force in education and health care, for example, but are underrepresented in computers and engineering, which traditionally pay more. (I guess that high school counselor has not retired yet!) A headline from a 2011 article in USA Today shows how accepting we have become of this disparity. Although the article was entitled “Number of Female ‘Fortune 500’ CEOs at Record High,” that record high number was 98 females out of 3,049 publicly traded companies. Only 15 females of the top 500 companies

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ment and success of women through networking and mentoring opportunities. Another major focus is education, which is supported by a dedicated subcommittee of talented women. To assist them in their work, GGW has hired McClain Resources, an independent consulting firm with expertise in human resources, to conduct a research-based assessment of the educational needs of women in the gaming industry, to identify best practices in the gaming industry and within other industries, and, ultimately, to recommend the most effective model(s) for professional education that grooms the female leaders of tomorrow. Among the questions we hope to answer early this year through this project are the following: • What are the optimal skills and knowledge for women during the different stages of their careers? • Are there pivotal points in a woman’s career where different skill sets are required? • What is an optimal work environment for women to grow and thrive? • Are women not reaching their full potential because of the lack of professional development opportunities or the wrong types of opportunities? GGW clearly has a very big agenda with significant challenges ahead of it. It will take the talented efforts of our co-chairs, Patti Hart and Virginia McDowell, our committee members, AGA staff and many others to see measurable improvements from our efforts. But I think we can all take inspiration from President Obama’s recent inaugural challenge that “it is now our generation’s task to carry on what those pioneers began, for our journey is not complete until our wives, our mothers and daughters can earn a living equal to their efforts.”

The gaming industry without question has offered significant opportunities for minorities and women. Just more than half of the workforce is made up of women, and there is increasing attention on the part of gaming companies to have the workforce mirror the customer base. had attained that goal. We clearly need to work harder if a record-high 3 percent makes news. The gaming industry without question has offered significant opportunities for minorities and women. Just more than half of the workforce is made up of women, and there is increasing attention on the part of gaming companies to have the workforce mirror the customer base. Where the industry has room for improvement is in the ranks of managers, directors, CEOs and corporate boards. The leap from manager to director or director to CEO can be a big one. The desire to do better is one of the reasons Global Gaming Women (GGW) was created as a program of the American Gaming Association. The mission of GGW is to support the develop-

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NEW GAME REVIEW by Frank Legato

CSI

International Game Technology

t first glance, the crime-solving scientists who made the CBS series CSI: Crime Scene Investigation the top drama series on television may not lend themselves to a video slot theme. But IGT has made it into three—in one machine. IGT’s new CSI slot series puts all three shows in the franchise—the original, plus spinoffs CSI: Miami and CSI: NY—into a single slot machine. In a nod to the way smart phones shift between apps, players simply swipe the screen of this game to switch among games depicting each CSI show. The background, characters and reel symbols change instantly to depict the original show or one of the two spin-offs. So does the giant vertical top-

box video screen, which shows the cast of the CSI version chosen with some police crime tape over the top. Audio, video clips and, of course, the theme music provided by The Who, reflect the version of the show chosen. In the primary five-reel, 30-line base game, the winning symbols are the main characters of each show, plus various CSI equipment like fingerprint kits and cameras. Nods to the shows include such bonus features as “Trace Evidence” symbols which, when they land, turn the “lights” out on the reel window. Black light reveals the forensic evidence—extra wild symbols. The main bonus, though, really captures the essence of the series by showing you—what else?—a crime scene. You’re the CSI, and your job is to look around a murder scene for pieces of evidence. You touch the body, an overturned lamp, a blood stain… The game even captures the more gruesome aspects of the popular show. Discover three or more pieces of evidence, and it triggers a free-game bonus, in which the big wins come from “DNA evidence” at the forensic lab. Manufacturer: International Game Technology Platform: AVP Format: Five-reel, 30-line video slot Denomination: .01 Max Bet: 2,000 Top Award: 6,000 times bet Hit Frequency: 40% Theoretical Hold: 1.9%—12.4%

Matsuri Nights Konami Gaming

everal slot manufacturers released Chinese-themed slots to coincide with Chinese New Year February 10, and this is Konami’s entry. It is a 100-line video slot, with each credit activating two paylines (effectively, it is a half-penny game). Reel symbols depict dragons, fireworks and other classic Chinese celebration icons. The 100-payline configuration results in multiple paying combinations on most spins, and wild symbols are thrown into the mix to increase hit frequency. The Woman symbol is wild, substituting fort the Lion, Shrine, Bottle, Battledore, Pinwheel and all poker symbols. The base game also includes Konami’s trademark “Action Stacked Symbols” on all five reels. Randomly at the beginning of a spin, one of the main game symbols replaces the symbols on several reel spots to form a cluster of adjacent winning symbols—increasing winning combinations and the chances of activating the bonus feature. Three or more Lantern symbols trigger 12 free games, and another special feature: During the free games, reels with a Woman symbol appearing on them are “nudged” until all positions on that reel are the Woman. The Woman symbol happens to be the top jackpot symbol. After the reel or reels nudge, the pays are re-evaluated and the player is awarded any additional payment. 54

Global Gaming Business MARCH 2013

The free-spin event is triggered every 143 spins, on average. The top jackpot for five Woman symbols on an active payline occurs once every 304,000 spins. Manufacturer: Konami Gaming Platform: KP3 Format: Five-reel, 100-line video slot Denomination: .01, .02, .03, .05, .10, .20, .50 Max Bet: 1,000 Top Award: 25,000 times line bet Hit Frequency: Approximately 50% Theoretical Hold: 4%—14%

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Pawn Stars

Bally Technologies

ally has called on some of its best technology to re-create Pawn Stars, the popular History Channel reality show set in a Las Vegas pawn shop. All of the stars of the show—pawn shop owner Rick Harrison, his father Richard “Old Man” Harrison, who opened the shop in 1988, his son Corey, and Corey’s friend, the over-the-top Austin “Chumlee” Russell—recorded exclusive video and audio for the game. The game is on the Pro Wheel cabinet, which houses two 22-inch video screens with an integral bonus wheel on top. The base game can be changed to reflect the player’s favorite character from the show. During the base game, an “Item Selection Feature” allows the player to pick one of 20 spots to reveal a credit award and an item to be pawned later. The player stores any items collected in an “inventory” for use in the main bonus event. Bonus games are awarded through a spin of the central wheel. The slices on the wheel relate to all the various bonus events—Free Games, the Chumlee Video Bonus, the Treasure Bonus, or the core feature of the game, the Negotiation Feature. The Negotiation Feature re-creates the cen-

tral feature of the show, in which customers bring items in and haggle over the price with one of the “Pawn Stars.” At the start, one of the characters invites the player to pick one of the items earned during the base game. (If no items have been earned, one appears for the bonus.) Several outcomes may follow. The Pawn Star will make a straight offer, which is awarded as a bonus, or will say the line with which fans of the show are very familiar: “How much were you looking to get out of it?” In that case, the player is shown several amounts, and picks one. Then, the negotiation begins. “Oh, I can’t pay that. I’ll give you….” The player has the choice to accept the amount, or offer an alternative from several choices on the screen. Eventually, a bonus award somewhere in the middle is reached. Another possibility drawn directly from the show is verification by an expert of an item’s authenticity. If the Pawn Star says, “I’ll call in an expert,” the player has a choice to accept the previous offer or allow the expert to come in. If the expert decides the item is authentic, the player is awarded double the last offer. In a classic gambling feature, if the item is bogus, the player gets nothing. Manufacturer: Bally Technologies Platform: Alpha 2 Format: Five-reel, 25-line video slot Denomination: .01—1,000 Max Bet: 250 Top Award: 18,400 times bet Hit Frequency: 44.97% Theoretical Hold: 3.81%—14.63%

Witch & Fabulous Cadillac Jack

his is one of the newest games in Cadillac Jack’s 40 Line series, available in either Class III or Class II configuration. The witch theme is carried out through intricate graphics and art in reel symbols. The five-reel, 40-line game is centered around wild symbols. In the base game, the three witch reel symbols can randomly be changed into wild symbols prior to any spin. Three or more scatter symbols on any reel trigger the main bonus feature, which introduces more wild symbols into a free-game event. When the main bonus is triggered, a second screen appears for a pick feature that determines the number of wilds that are added to the free-spin reels. The reels and symbols disappear and a bookshelf appears, revealing potions as picks. Eleven picks are shown, with one awarded. The Cauldron on the top screen explodes, releasing potions as Wilds. Wilds are added to the reels at the beginning of the free spin. The Wilds are added equally across all reels. The number of free spins also is determined by the pick feature. The game is available in stand-alone or downloadable, server-based formats. It is rated with medium volatility, and is available with fixed or, in Class II only, progressive jackpots. It also features Cadillac Jack’s “SpeedPLAY” and “PlusPLAY” technologies. SpeedPLAY allows the player to choose not to watch the

Global Gaming Business MARCH 2013

animation of spinning reels—in this mode, the game will go from one result to the next instantly. PlusPLAY awards a free spin for every 50 spins without a bonus. Manufacturer: Cadillac Jack Platform: 40 Line Format: Five-reel, 40-line video slot Denomination: .01—25.00 Max Bet: 200 Top Award: 100,000 times bet Hit Frequency: Approximately 50% Theoretical Hold: 5%—14%

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CUTTING EDGE by Frank Legato

Instant Service

Product: MGT on Slots Manufacturer: Micro Gaming Technologies

icro Gaming Technologies has introduced MGT on Slots, which the company says represents “a dramatic step forward designed to deliver a new level of player satisfaction and service to players, and a new level of player development capability and per-device revenue increases to casinos.” MGT allows players to push a button for full-screen, full-scale interactive service—service that can be uniquely custom-configured. Functionality and content capabilities include real-time promotional offers, predetermined by threshold, time and offer qualification, delivered via dynamic promotional games. Promotions can be specifically geared toward a player’s current gaming experience and even toward specific slot machines. Real-time rewards such as free play, points and point multipliers, comps and comp multipliers, electronic drawing entries and drawing entry multipliers are all delivered instantly to a player’s account. Real-time participation in electronic drawings gives patrons control of their entries to deposit into the virtual drum. Real-time account information is available instantly, with tier notifications, point and comp balances, and ability to update phone and email information. The product also enables real-time redemption of comps and points, giving patrons ease of access to convert points/comps to merchandise, food, beverage, or drawing entries. This patent-pending, dual-function “slot machine/self-service marketing kiosk” is scalable to allow distribution not only to dozens of kiosks, but potentially thousands of slot machines.

MGT has aligned with Intuicode and Monkota Gaming on its gaming machine platform, and with ReelTV, using the company’s secondary blending board and video overlay technology. MGT also is working with Aristocrat Technologies and other equipment manufacturers to allow the MGT promotional kiosk functionality on their slot machines and systems. Methods of content delivery include integration on the EGM, content delivered to SMIB devices, and use of secondary devices with video overlay and blending boards that can be added to any video slot machine. For more information, visit the company’s website at mgtinc.net.

Table Treasure

Product: SuperNova Bonus System Manufacturer: TCSJohnHuxley

ne of the products with which table-game supplier TCSJohnHuxley drew the most attention at last month’s ICE Totally Gaming show was the SuperNova Bonus System. SuperNova is a progressive and game bonusing system for local and networked table game applications that can be used on live roulette or any number of other games. SuperNova, in fact, can be applied to almost any table game. Its multilevel, event-based and mystery prizes can be employed even on games that don’t normally run progressive jackpots. SuperNova incorporates the wide-screen Omni Progressive Display. It features multiple odometers and can be re-skinned and themed to integrate with the base game and reinforce the overall casino brand. An intuitive touch-screen handset allows easy dealer operation and quick game change configuration. The unique SuperNova animated bet sensor is capable of an infinite range of attract-mode effects and enticing sequences such as pulsating, spinning and sparkling to drive side-bet participation and increase the energy level of the game. Bets are made and recorded when chips are placed onto the SuperNova sensors fitted to the table. Players can play the base game alone, or they can

Global Gaming Business MARCH 2013

choose to play the base game plus a mystery bonus, and in many cases a progressive jackpot too if supported by the base game. For more information, visit the company’s website at tcsjohnhuxley.com.

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FRANKLY SPEAKING by Frank Legato

Getting Linked

VIC TOR RINAL DO

f you’re a frequent reader of this column, you know that sometimes, I’ll lampoon myself for being old, or for having a ridiculous mustache, or for being a cartoon with a tiny body and an enormous head. Other than that, I don’t really like to write about myself—probably because I see myself every day, and enough already. So, when our operations director, Becky Kingman-Gros, urged me to write about my newly found status as a LinkedIn Legend, I balked at the notion as hubris. I always liked that word, “hubris.” It’s almost as cool as “quaff.” But I digress. What started this whole thing was an email I got from LinkedIn, that business networking site to which most employed citizens of Earth belong, congratulating me thusly: “Frank, congratulations! You have one of the top 5 percent most viewed LinkedIn profiles for 2012. LinkedIn now has 200 million members. Thanks for playing a unique part in our community!” The meaning of that didn’t sink in immediately. I can’t imagine being in the top 5 percent of a number as large as 200 million of anything, except maybe the longest sentences ever written in a trade magazine. The numbers stagger me: Of 200 million members of LinkedIn who ever looked at someone’s profile, they clicked on mine more than 190 million others. Or, it could mean 190 million LinkedIn members out of 200 million clicked on my professional profile. As I try to digest those numbers, I wonder if it means I’m some kind of big shot, or if it just means that 190 million people found my image amusing enough to warrant further exploration. You know, like when you see a chimpanzee wearing overalls. In any event, I’ve always felt LinkedIn was a good networking tool for business, and there are a lot of people who feel the same way. Just to have 200 million members is a mind-boggling concept in itself. There are still some things, though, that I don’t understand about the professional network. 60

Global Gaming Business MARCH 2013

For instance, what are the endorsements all about? I’m always getting endorsed by people, and if you are one of the professionals who did this, thank you very much. I’m just not sure how to respond when I get the message. “Congratulations! Phil Stein endorsed you for gaming and editor.” Umm… Thanks, Phil. Really. There is a little button there that says “Continue,” but it doesn’t take me to Phil’s page so I can thank him for endorsing me. It takes me to my own profile, and asks me if I want to add more stuff about myself, and then it asks me if I want to endorse all my other connections: “Does Rob Wilkinson know about hang-gliding? Endorse.” “Is Basil Hamilton a good stalker? Endorse.” Now, with 200 million members, this chain-endorsing could grow into an endless stroke festival: “You’re good. But don’t forget, you’re good too. And this woman over here? She’s really good at this other stuff. But not as good as that guy.” If I don’t respond to your kind endorsements by endorsing others, please don’t think it’s because I don’t appreciate the endorsements; I do. I just like to break the chain now and then. LinkedIn also gives you a chance to seek out new connections, by matching up areas of your business profile with other professionals. It’s sort of like the eHarmony of professional networking. The only thing I don’t like is when you have to refuse a connection. Once in a while, I’ll get a request to connect from, say, “Yuri in Krakow,” with no information in the profile at all. I ignore those connection requests, but not without a tinge of guilt. I mean, rejection from a professional networking site can’t be pleasant. The connections I have made, though, make for a very useful network of contacts. So, in conclusion, let me thank my LinkedIn family of 190 million for seeking out my professional information. I’d like to think it’s a reflection of the job we do here at Global Gaming Business, and on the high quality of all of our fine publications (information on which, incidentally, you can find on our magazine’s LinkedIn page). Or, it could just be the chimpanzee thing. But thanks just the same.

s ’ e m and a g , s i g h “T mazinling ToperT a wil an ex i’m ll in e iT.” ca prov To on

arris

kh – ric

They have one of the hottest and highest-rated shows on cable TV. And now, the stars of pawn are appearing in their very own slot machine. This game comes fully loaded with everything a fan could want – 11 different wheel bonuses, iDeckTM interaction, and fi ve negotiation bonuses that let you wheel and deal with the Pawn Stars themselves. To get some star power on your slot floor, just call 866.316.1777 or visit BallyTech.com. ©2013 Bally Technologies. All rights reserved. Pawn Stars ©2013 A&E Television Networks, LLC. All rights reserved. Pawn Stars, HISTORY, the “H” and their associated logos are trademarks of A&E Television Networks, LLC. Gold & Silver and its associated logos are trademarks of Gold & Silver Coin Shop, Inc. All rights reserved.

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New ICE Age ICE Totally Gaming a smash at new venue BY FRANK LEGATO

ondon’s ICE Totally Gaming, Europe’s largest gaming conference and trade show, kicked off its tenure in the new ExCel London venue last month with a bang, as thousands of gaming executives from around the world traversed more than 334,000 square feet of exhibit space. Hundreds of exhibitors launched products for the European market, all stands surrounding the dominating display of Austria’s Novomatic Group of Companies, which set up a multiple stand highlighting all of its subsidiaries. At more than 30,000 square feet, it was the largest stand in the history of trade shows, according to company officials. The trade show was accompanied by an extensive conference program, beginning with the International Casino Conference the day before the exhibition and continuing for the first two days of the trade event with sessions covering every aspect of the European industry. A highlight of the conference was a keynote presentation by Michael Leven, COO of Las Vegas Sands Corporation, outlining the operator’s plan for EuroVegas, the $9 billion mega-resort complex planned for the outskirts of Madrid, Spain. Among other conference highlights, Ron Goudsmidt, head of the European Casino Association, introduced a session on the evolution of the online gaming sector in Europe. Harrie Temmink, deputy head of the European Commission, predicted that i-gaming in Europe will reach €3.5 billion in annual revenues by 2015, or 15 percent of the overall gaming take in Europe. Another session focused solely on the regulatory and legal issues facing the Greek gaming market. Ian Gosling, chief operating officer of Greece’s Regency Entertainment, noted the problems Greece’s land-based casino industry has had in emerging from the recession at the same time an illegal gaming market is growing in the nation. Gosling called on the Greek authorities and the E.U. for help battling competition that pays no revenue tax and does not have to charge entry fees like licensed casinos. The ICE Totally Gaming trade show made full use of the massive ExCel London hall. Novomatic used its super-sized stand to launch new products from each of its subsidiaries. Among the highlights 62

Global Gaming Business MARCH 2013

Below: AGI Managing Director Jens Halle hosts the Totally Gaming Awards.

Michael Leven, COO, Las Vegas Sands Corp.

from the main Austrian Gaming Industries slot subsidiary was the new “Dominator” cabinet, which incorporates five video screens including a touch-pad button panel, topper and three main screens. Other highlights of the trade show: • Bulgarian slot manufacturer Casino Technology launched its “Tangra 2” cabinet, featuring improved ergonomics, super-comfortable chairs, and maintenance-friendly electronics. The company also launched its “Gamopolis” multi-game product, which is available in upwards of 60 different versions, each with 40 games available to the player; and “Planeta Payner Slots,” a new branded video slot series designed specifically for Eastern Europe that features music and video clips of many of the region’s biggest stars. • TCSJohnHuxley introduced its “Zia” tabletbased product, which allows not only live and automated roulette but any other table game to be played on a mobile tablet; and “SuperNova,” a new mystery jackpot system for live table games. • Bulgaria’s Euro Games Technology introduced the Premier Series, a new multi-game product offering the player a choice from 38 games including slots, card games, keno and virtual

roulette. EGT also launched the “Stork” multi-play terminal for electronic table-game systems, which permits play on three live roulette games simultaneously. • Slovenia’s Interblock set up a theater and a large stage to demonstrate the capabilities of its hologram-based display system for table games, drawing crowds to holograms of the Black Eyed Peas’ Fergie and other performances in a system to appear in casino table game installations by spring. • Gaming Partners International Corporation demonstrated its new RFID Chip Tray Inventory system, which is one of the new uses the supplier is offering for radio-frequency identification technology. The new system uses RFID to keep track of chip inventory, float and counting of chip racks on table games. • Inspired Gaming demonstrated “Sabre Synchro,” an e-table that allows players to switch instantly among live roulette, auto-roulette, virtual horse races and other games. • Internet gaming suppliers including Playtech, Microgaming and others introduced a host of new content designed for i-gaming operators around the world. • European launches of major games from U.S.based manufacturers included the “CSI” series from International Game Technology, “Pawn Stars” from Bally (Rick Harrison, who stars on the History Channel Pawn Stars series, was on hand for pictures and autographs); “Superman” from Aristocrat, based on the 1978 Christopher Reeves film; “Plants vs. Zombies” from Spielo International, which replicates the popular internet game of the same name (costumed “plants” and “zombies” were on hand for this one); and “KISS,” “Willy Wonka” and “Spider Man” from WMS Gaming.

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Scientific Games to Acquire WMS Combination will create global lottery and casino powerhouse

cientific Games Corporation, the lottery industry giant that provides central computer systems and instant tickets to state and provincial lotteries across North America, has agreed to acquire Chicago-based slot manufacturer WMS Industries, and its casino-slot subsidiary WMS Gaming. In a deal that was unanimously approved by the boards of both companies, Scientific Games will buy WMS for $25 in cash per common share, in a deal worth around $1.5 billion. Manufacturing, software and customer services of the two companies will be consolidated to create operational efficiencies and save money. The acquisition price is more than 55 percent higher than the closing price of WMS the day before the transaction was announced. Scientific Games is paying about seven times WMS’ earnings before interest, taxes, depreciation and amortization. That compares with the median of about 8.6 times for 26 similar deals, according to Bloomberg. Scientific Games will assume $85 million of WMS debt and cash on hand of $55 million. The deal will immediately be accretive to Scientific Games’ earnings per share and free cash flow.

Coming Together The transaction represents a recent trend of consolidation between the lottery and casino industries, and a further merging of production of gaming machines for the video lottery and slot markets. Other examples in the past few years have been the absorption of slot-maker Atronic by lottery supplier Spielo and the acquisition of Georgia-based Cadillac Jack by Canada’s Amaya Gaming Group. Despite ups and downs, WMS Gaming has maintained its position as the world’s third-largest slot manufacturer by sales volume, behind only IGT and Bally. The company has joined other slotmakers in branching out to internet, mobile and social gaming outlets with its games. New Yorkbased Scientific Games has long been a leader in the North American lottery industry, and has provided central server systems for several European lotteries as well. According to a joint press release from the companies, Scientific Games and WMS will “draw on each organization’s core strengths to broaden offerings, bring gaming products to new sectors and geographies, accelerate key growth initiatives and offer enhanced capabilities, systems, field serv64

Global Gaming Business MARCH 2013

BY FRANK LEGATO

tific Games and WMS yields tremenice and content.” dous benefits to our customers, shareScientific Games’ experience holders and employees. We view this in server-based gaming “should transaction as the next logical and help accelerate WMS’ internastrategic step in offering continued intional development initiatives,” novation in gaming. Shareholders will said the release. “The addition of enjoy a meaningful premium for their WMS’ gaming business will also shares and employees will have exdiversify Scientific Games’ global panded career opportunities as part of business assets. Furthermore, a larger, broader and more diverse orScientific Games and WMS are ganization. We are delighted with this both known for their product intransaction, and look forward to novation and creative content, WMS Chairman and working with our new colleagues at and will offer an expansive com- CEO Brian Gamache Scientific Games.” bined portfolio to customers. The combined company will be Tax Benefits well positioned to capitalize on government-sponScientific Games expects to achieve synergies sored gaming utilizing Scientific Games’ estabthrough revenue growth, shared costs and larger lished global platform and experience in providing scale, as well as by monetizing its significant U.S. tax lottery and gaming systems, products and services attributes. The combined company will also be able to governments.” to efficiently utilize shared manufacturing, engineering, software, field maintenance and customer servInteractive Platform ice to drive growth and cost savings. The combined i-lottery/i-gaming platform and The acquisition, which is subject to the apcontent will give the merged company a strong inprovals of WMS shareholders and gaming regulatory teractive portfolio. WMS has a well-developed iauthorities and other customary closing conditions, gaming platform, including social and mobile is expected to be completed by the end of 2013. Scigaming, while Scientific Games has an advanced entific Games has obtained committed financing for platform for i-lottery, sports book and loyalty/rethe transaction, and the transaction is not subject to wards. Scientific Games officials predict significant a financing contingency. opportunities to cross-sell these products to the On news of the transaction, Scientific Games companies’ respective customers. shares rose 17 percent to $10.41, and WMS shares “The acquisition of WMS is transformational jumped 55 percent to $25.40. Analysts were positive for Scientific Games, enabling us to offer a comon the merger. plete portfolio of lottery and gaming products and “The majority of WMS revenue is generated doservices to both new and existing customers mestically, and the merger should leverage Scientific around the world,” said A. Lorne Weil, Scientific Games’ (SGMS) international footprint,” wrote Bill Games’ chairman and chief executive officer. “We Lerner of Union Gaming. “Conversely, the majority expect to combine our game content, technology, of revenues and cash flow for Scientific Games are operational capabilities and respective geographic from international operations. On a pro forma basis, footprints to create an enterprise poised to capitalthe combined entities will generate 53 percent of ize on significant growth opportunities around the revenue from gaming, 31 percent from instant tickglobe.” ets, and 16 percent from systems. The management “This combination will diversify Scientific of SGMS believes there are significant opportunities Games’ revenue base, expand margins and propel for EBITDA synergies starting with $50 million in future growth opportunities,” added Scientific year 1, $75 million in year 2, and $90 million in Games CFO Jeffrey S. Lipkin. “Importantly, as we year 3. realize efficiencies from our increased size and “We think the deal makes sense and it was a scope, we should be able to deliver meaningful good time for SGMS to pull the trigger, given WMS value to shareholders through the deal’s immediate was likely close to making the turn. However, SGMS earnings per share accretion, significantly improved certainly paid a hefty premium. The deal should exfree cash flow and anticipated synergies.” pand WMS’ international business and diversify SciBrian R. Gamache, chairman and CEO of entific Games’ revenue mix.” WMS, commented, “The combination of Scien-

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GOODS&SERVICES IGT Proxy Fight Heats Up group of dissident A shareholders of slot manufacturer Interna-

Former gaming

analyst Jason Ader, tional Game Technology also a Las Vegas went on the offensive last Sands board member, month in a proxy fight to is directing the proxy gain three seats on the fight versus IGT. IGT board. Former IGT Chairman and CEO Charles Mathewson, along with former gaming analyst Jason Ader and his Ader Investment Management group, are proposing three new board members—including Mathewson—in advance of the company’s March 5 annual meeting. Last month, the group sent IGT shareholders a so-called “fight letter” outlining a host of grievances against the current management and board of the company. The letter outlined complaints that have long been voiced by Mathewson that the current IGT management is bereft of gaming experience, that share prices have plummeted and market share surrendered under current CEO Patti Hart, and that the board has approved several expensive acquisitions that have failed to produce results and have further damaged IGT’s core slot machine business. Mathewson has been critical of IGT management since he resigned his CEO position in 2003. After retaining the title of chairman emeritus for several years, Mathewson and IGT parted ways for good in 2010, the company severing all ties with its former chief executive. Hart recently sent a letter to shareholders urging them to reject the Ader/Mathewson slate of proposed directors and maintain the current eightmember board, and reaffirming management’s faith in the current path, which has seen IGT invest in social gaming platforms and acquisitions such as Double Down Interactive, which runs a social casino on Facebook. Ader and Mathewson control around 3 percent of IGT’s outstanding shares. In the fight letter, the Ader group points out that the eight current directors own less than 0.1 percent of the company. “Excluding stock options, the Ader Group represents an ownership interest in IGT that is more than 100 times the aggregate ownership interest of the three directors we seek to replace,” the letter said. Ader’s group was recently joined by New York investment firm Orange Capital LLC, which controls about 1.4 percent of IGT shares. In a letter to shareholders, Managing Director Daniel Lewis asked the company to conduct a “Dutch Auction” 66

Global Gaming Business MARCH 2013

“People who worked for him held him in the tender for 25 percent of IGT’s outstanding shares, highest regard, as did every major company in the while installing Mathewson and two others on the gaming industry with whom he dealt so successcompany board. fully,” Wynn added. Ader’s letter pointed out that IGT’s share price, even after adjusting for dividends First Nobu Hotel paid, has declined more than Opens in Las Vegas 20 percent under Hart’s ollowing pre-opening festivities including an extenure, citing several actions clusive in-room dining showcase, comprehenthat led to the plunge. The sive design tours and an official celebratory letter singled out several acribbon-cutting ceremony with partners Chef Nobu quisitions it said cost too Matsuhisa, Robert De Niro, Meir Teper, Trevor much and contributed nothHorwell and prolific architect David Rockwell, the ing to earnings, including the world’s first Nobu Hotel Restaurant and Lounge purchase of Entraction HoldCaesars Palace Las Vegas welcomed its first official ing for $113 million, “which they effectively shut guests last month. down less than 18 months later;” and Double Down The highly anticipated 181-room boutique Interactive, the social gaming company purchased hotel, the world’s first Nobu Hotel at Caesars for $500 million seven months later. Palace Las Vegas, is a collaboration between CaeOn the dearth of casino industry experience, the sars Palace, Chef Nobu Matsuhisa and Nobu Hosletter pointed out that only two of the 13 executives pitality’s primary shareholders, actor Robert De making up the board and management team—Phil Niro and Hollywood film producer Meir Teper. Satre and Robert Miller—have substantive casino Nobu Hotel Caesars Palace is the first celebrity industry experience. On Hart’s leadership, the letter chef-branded hotel venture in Las Vegas. Rockwell pointed out the CEO’s résumé, noting substantial and his firm the Rockwell Group led the overall dips in share prices of three companies she had led interior design for the boutique hotel, which feaprior to IGT. tures 181 guest rooms including 18 suites. Guest Following the Ader letter, IGT sent another letrooms offer designs that embrace comfortable simter to shareholders refuting some of the points in the plicity with natural materials and textures countermissive. In addition, IGT says “the Ader/Mathewbalanced with outsized elements to reveal a touch son Group is manipulating data and making misleading assertions.” The company further contends that Mathewson’s “old-school approach to corporate governance, which was driven by his own self-interests during his tenure as both CEO and chairman, would not be in the best interests of shareholders or even considered acceptable by today’s standards.” And finally, the company says the payments due to Mathewson after he retired contributed to his “lavish lifestyle” and forced Caesars executives along with Chef Nobu Matsuhisa, IGT to make drastic cuts in expenses, includ- actor Robert De Niro, producer Meir Teper and designer ing cuts in staff. It charges Mathewson is con- David Rockwell cut the ribbon on the new Nobu Hotel ducting this battle simply out of vengeance. of Vegas flair. Wynn Resorts Chairman Steve Wynn came to Eighteen luxury suites range from one-bedthe defense of Mathewson. Wynn, who considers room, 1,000-square-foot to five-bedroom, 3,500Mathewson a longtime friend and business colleague, square-foot configurations, available for guests said he was distressed about the characterization of seeking premium accommodations or a venue to Mathewson by IGT in the letter to shareholders. host a special event. “I am personally saddened by what appears to At 12,775 square feet, Nobu Restaurant and be a paid professional attempt to smear him,” Wynn Lounge is the world’s largest Nobu Restaurant, said. “I’m left with the impression that such an effort and the first to offer teppanyaki in the United is motivated by IGT’s current management’s atStates. tempt to distract shareholder attention from current performance.”

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G2E 2012 Announces Big Growth he American Gaming TExhibitions, Association and Reed after conducting an extensive, annual audit, released attendance figures and post-show survey results for Global Gaming Expo 2012, revealing that the event generated overwhelming interest and satisfaction from gaming industry professionals from around the world. G2E attracted 15,708 attendees, a year-over-year increase of almost 7 percent, to its 2012 event. Additionally, the conference saw a 6 percent increase in attendance compared to 2011 numbers. Total attendance at G2E 2012, which includes attendees and exhibitors, also saw year-over-year growth, increasing to more than 24,820. G2E is the premier trade show and conference event for the international gaming industry. The 2012 event was held October 4-6 at the Sands Expo and Convention Center in Las Vegas. “We are extremely pleased with the tremendous increase in attendance at G2E 2012’s trade show and conference events, and we are encouraged by what these numbers indicate about the current health of

the gaming industry,” said Frank J. Fahrenkopf, Jr., president and CEO of the AGA. “We also are thrilled with the post-show survey results, which verify that we are achieving our primary goal— to provide gaming professionals with the valuable tools, knowledge and business opportunities they need to be successful in the global gaming industry.” G2E 2013 will be held September 24-26 at the Sands Expo and Convention Center. To date, more than 240 companies have registered for over 245,000 square feet of exhibit hall space. This includes more than 40 international exhibitors with exhibit space exceeding 50,000 square feet. These numbers are tracking well ahead of the 2012 event at the same time last year. G2E is the only industry event that is independently audited to provide verified attendance data. The G2E 2012 audit was conducted by Exhibit Surveys, Inc. and complies with standards set forth by the Exhibition and Event Industry Audit Commission, a not-for-profit commission organized for the purpose of managing and overseeing the exhibition industry’s independent audit process.

Interblock Completes Installation at Holland Casino last Interblock installation in the year 2012 was Tlandhecarried out on December 29 in a renovated HolCasino Rotterdam. G4 Organic Roulette, with play stations in special black-on-black design, is the 11th installation in a row of this product inside Holland Casino venues. “We are very satisfied that another G4 Organic Roulette was accepted very well by the players,” said Jelle van Battum, marketing manager gaming for Holland Casino. “In addition, Interblock design fits perfectly with the Holland Casino concept. Our Rotterdam Casino could do with a second multi-player roulette, and we are confident that Organic Roulette will be a hit.”

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Cantor Gaming Introduces Mobile At Colusa antor Gaming, the exclusive provider of mobile C gaming at Colusa Casino Resort in Colusa, California, has released the new casino game “Kill the Number” at the casino, on its Cantor Mobile Casino platform. A variation of keno, Kill the Number is a highfrequency, low-volatility numerical odds-based game that offers players more time to make strategic selections based on their perception of risk and reward. Lee M. Amaitis, president and chief executive officer at Cantor Gaming, said, “We are pleased to unveil an exclusive new game from our immensely popular Mobile Casino platform. This new release underscores our mission to continually enhance the user experience by offering unique games that combine entertainment with the latest advances in mobile technology.” Cantor Gaming has been the exclusive provider of mobile gaming at Colusa Casino Resort since June 2012.

TransAct Technologies Announces Installation ransAct Technologies announced it will install its TEpicentral Print System in a U.S. casino, where it

Global Gaming Business MARCH 2013

will connect to more than 520 slot machines. “As we have done in the past, in order to protect the company’s competitive advantage, we are honoring our customer’s wishes to keep their name anonymous until the system goes live,” said Bart C. Shuldman, chairman and chief executive officer of TransAct. The Epicentral Print System, which will be completed this summer, is connected directly to TransAct’s ServerPort device inside the slot machine. This software system enables casinos to develop internal marketing programs and promotional coupons that customers can receive on a real-time basis at a slot machine. The system works with existing slot systems and games, regardless of the manufacturer, for increased revenue and enhanced customer experiences on a real-time basis.

IGT Wins Uruguay, Saskatchewan Contracts lot manufacturer International Game TechnolSManagement ogy announced the installation of its sbX Casino System at the SALTO Hotel & Casino in Uruguay, and announced a new contract with the Western Canada Lottery Corporation to supply 1,375 video lottery terminals for the province of Saskatchewan.

IGT Floor Manager allows SALTO to introduce changes to its floor mix, based on market demand and demographic conditions. The property also will have access to IGT Analytics and the company’s extensive game library of IGT slot titles, as well as the tools required to optimize game performance. “We are very excited to adopt IGT’s server-based applications, as they will allow us to distinguish our property from other casino locations while improving our floor performance and management,” said Juan Cosidó, head of marketing at casino parent company Naranpark S.A. “We now are also able to offer IGT’s outstanding themes, which give our current patrons the perfect blend of technology and fun.” The installation was one of the sales that helped IGT reach a milestone of over 100 installs of the sbX system. The sbX solution was also the first system to offer a G2S server-based game management solution in an all-inclusive package. Since its introduction, sbX has grown to deliver more features, including IGT Analytics and Media Manager, as well as a game theme library with over 400 titles. The Saskatchewan contract will place IGT games throughout the province over the next three months. “IGT is excited to deliver industry-leading games to the Saskatchewan market,” said Eric Tom, IGT executive vice president of global sales. “This agreement will allow us to enhance and develop Saskatchewan’s

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overall video gaming program, as we have done with video lottery programs across Canada.” The new IGT terminals will feature player-favorite titles including 7’s Wild, Lucky Larry’s Lobstermania, Cleopatra and Wolf Run.

Lottomatica Changing Name to GTECH

taly’s Lottomatica Group, parent company to U.S. Iturerlottery giant GTECH and Canadian slot manufacSpielo International, announced that it will change its corporate name to GTECH S.p.A., and will implement a plan to “further integrate its businesses on a global basis” in changes “aimed at supporting growth, improving efficiency and enhancing profitability across operations, stepping up the pace of internationalization of the group to better capture its full potential.” The newly named company will be operated under a unified, customer-facing organization structure aligned around three global geographic regions supported by a central products and services struc-

MLP

ture. Currently, the group is organized into separate business units focused on their respective products, services, geographies, and market segments. The plan will be progressively implemented and executed within the current year. To help communicate the vision and support the group’s worldwide growth strategy, the Lottomatica parent company will take advantage of one of the most recognized and valued global brands in the gaming industry in GTECH, which has been a lottery leader for decades. The Lottomatica and Spielo brands will be retained as offerings in the markets and segments they serve. The new organization will be centered on three regions: the Americas, International and Italy. The regions will be led by Jaymin Patel, Walter Bugno and Fabio Cairoli, respectively. Each region will be responsible for sales and business development for the company’s entire portfolio of products and services, as well as operations and account management with central client services for lotteries, gaming machines, sports betting and interactive.

Bally’s King of Pop in Chile lot manufacturer Bally Technologies announced S“Michael that it has officially launched its popular Jackson: King of Pop” video slot to venues across the Chilean casino market. The game, completely translated to the Spanish language, was launched in local venues with overwhelmingly positive response from operators. A Michael Jackson impersonator was on hand at each venue to sing the late entertainer’s top hits. “We have noted a spectacular feedback from the public to all the new Bally machines that have been implemented,” said a statement from Games of Chance Management of Monticello Grand Casino and Entertainment World. “It is very attractive for our players, both the surround-sound experience and the comfort brought by the seats integrated in King of Pop machines, as well as the special features. For us it is a privilege to be able to bring our customers the latest technology in entertainment.”

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re you a woman in the international gaming industry who wants to achieve more in her career? Global Gaming Women (GGW) can help you get there. With networking and education offerings held at gaming events and in markets around the world, a wealth of webbased resources and a soon-to-be launched online mentoring network, this community of gaming industry women is creating a forum with the relationships and resources you need to grow personally and professionally. To learn more about GGW and stay up-to-date on events and programs visit www.globalgamingwomen.org or join the GGW group on LinkedIn.

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PEOPLE

Bill Eadington (c.) receiving the AGA’s Gaming Hall of Fame award in 2011 from then-AGA Chairman Keith Smith and President Frank Fahrenkopf

GAMING LEGEND EADINGTON DIES

ill Eadington, the first academic to really take the gaming industry seriously, passed away in February after a long battle with cancer. Eadington founded the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada Reno, which began in 1989. He was also the founder of what could be the first conference to consider gaming issues, the International Conference on Gambling and Risk Taking first held in 1974. Held every three years, the conference will be held in conjunction with the University of Nevada Las Vegas’ International Gaming Institute for the first time this year on May 30 and 31 at Caesars Palace in Las Vegas. Eadington also held an annual executive retreat, which has been attended over the years by many of the most senior gaming executives and regulators. The retreat tests critical thinking skills, the ability to work with other executives and developing strategies for success. An important consultant to gaming companies, regulatory agencies and other government entities, Eadington wrote extensively about the industry, including for this magazine, and published several books including The Downside: Problem and Pathological Gambling and Gambling: Public Policies and the Social Sciences. Eadington was inducted into the American Gaming Association’s Hall of Fame in 2011, and last year received a Lifetime Achievement Award from the National Center for Problem Gambling.

LVS PREZ GETS LIFETIME AWARD

ichael Leven, president and chief operating officer of the Las Vegas Sands Corp., was honored last month with the Americas Lodging InMichael Leven vestment Summit’s lifetime achievement award. A veteran hospitality executive, Leven has spent more than 50 years in the hotel

business. The award is ALIS’ highest honor, recognizing individuals with an exemplary record of achievement in hospitality through research, education, community outreach and industry development. Throughout his career, Leven has been involved with numerous hospitality projects. He was previously the president and COO of Holiday Inn Worldwide, president of Days Inn of America, and president of Americana Hotels. Additionally, he was the president and CEO of U.S. Franchise Systems, a company he founded in 1995 that developed and franchised the Microtel Suites and Hawthorn Suites hotel brands. He also co-founded the Asian American Hotel Owners Association in 1989, helping grow the association from a mere 12 members to 9,300 members today.

developing emerging gaming markets. Londo joined Caesars Entertainment in 2003 as executive associate to the vice president of property operaDarold Londo tions at Harrah’s and Showboat Atlantic City, and was named assistant general manager and vice president of operations at Harrah’s Atlantic City. In 2006, Londo became senior vice president and general manager of Harrah’s Cherokee, where he managed much of the property’s recent $650 million casino expansion project as revenues reached record levels.

BORGATA PRESIDENT NAMED ATLANTIC CITY ALLIANCE CHAIRMAN

om Ballance, president and chief operating officer of Borgata Hotel Casino & Spa, has been named the new chairman of the Atlantic City Alliance. Ballance replaces Don Marrandino, the former Eastern Tom Ballance Division president for Caesars Entertainment, who resigned in early January and relinquished his seat on the board of the marketing agency. Ballance, who will retain his duties at Borgata, will now run the meetings and act as spokesman for the seven-member board. Liza Cartmell will remain the agency’s president and oversee the day-to-day operations. The Atlantic City Alliance is a private, nonprofit marketing organization in charge of promoting the city through funds it receives from Atlantic City casinos. Operating on an annual budget of $30 million, the ACA was responsible for the “Do AC” campaign begun last year, as well as other national and local marketing strategies. A representative from each casino property is present on the board.

LONDO NAMED REGIONAL GM, CAESARS MID-SOUTH

aesars Entertainment recently named Darold Londo as senior vice president and regional general manager of its Mid-South Region, where he will oversee Harrah’s, Horseshoe and Tunica Roadhouse casinos in Tunica, Mississippi. Previously, Londo assisted the Caesars Enterprise Shared Services team in

ASKENAZI NEW COO FOR POKERSTARS AND FULL TILT he Rational Group, parent company of PokerStars and Full Tilt Poker, has named Ravi Askenazi as its new chief operating officer. The Israeli-born Askenazi will take over the dayto-day operations of the Rational Group brands, which include the two most popular online poker sites in the world. Askenazi was previously the COO and a board member for gaming software development company Playtech. He will direct operations for Rational out of its Isle of Man headquarters.

March 2013 Index of Advertisers Ainsworth Game Technology . . . . . . . . . . . . . . . . . . .59 AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72 Alto Gaming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 American Gaming Systems . . . . . . . . . . . . . . . . . . . . .45 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24, 25 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Bally Technologies . . . . . . . . . . . . . . . . . . . . . . .2, 29, 61 Cadillac Jack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Cantor Gaming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 FutureLogic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 G2E Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 Gambling & Risk Conference . . . . . . . . . . . . . . . . . . .69 Gaming Partners International . . . . . . . . . . . . . . . . . .39 Giesecke & Devrient . . . . . . . . . . . . . . . . . . . . . . . . . .41 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Incredible Technologies . . . . . . . . . . . . . . . . . . . . . . . .70 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Incredible Technologies . . . . . . . . . . . . . . . . . . . . . . . .42 Innovation Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 JBA Consulting Engineers . . . . . . . . . . . . . . . . . . . . . . .9 Konami Gaming . . . . . . . . . . . . . . . . . . . . . .Back Cover LT Gaming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Micro Gaming Technologies . . . . . . . . . . . . . . . . . . . .43 MLP Seating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Multimedia Games . . . . . . . . . . . . . . . . . . . . . . . .21, 75 NEWave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 NIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Quixant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 SHFL Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . .15 Spielo International . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Thalden Boyd Emery Architects . . . . . . . . . . . . . . . . .51

MARCH 2013 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Matt Cullen President & COO, Rock Gaming

ock Gaming, controlled by Quicken Loans founder and Cleveland Cavaliers owner Dan Gilbert, will soon operate two casinos and a racino in Ohio, and another casino in Baltimore, all in partnership with Caesars Entertainment. But in Gilbert’s hometown of Detroit, the company is going it alone with the recent announcement of a deal to buy a majority of the shares of Greektown Casino Hotel. Caesars is precluded from participating in this deal due to its management contract of Caesars Windsor, just across the river from Detroit. Matt Cullen, the president and COO of Rock Gaming, talks about that purchase and why it means so much to him, Gilbert and many of the top executives of Rock Gaming, who are all Detroit natives. He spoke with GGB Publisher Roger Gros from his offices in Detroit in January, immediately after the announcement. To hear a full podcast of this interview, which includes comments on the company’s Ohio ventures, as well as the upcoming Baltimore casino, visit www.ggbnews.com/podcasts. GGB: Congratulations on the acquisition of the majority of shares of Greektown casino. I know that means a lot to you and to Dan Gilbert since you’re both Detroit natives. Matt Cullen: We are, and you’re right; it’s an exciting time for us, because we’re spending a lot of time and energy on helping revitalize the downtown Detroit core, and obviously very excited about the gaming business as well. So this is a great overlap of our interests. Tell us what this means to your company. It expands our footprint in a significant way. It’s a great example of an urban integrated casino that we have put forward in our vision for Ohio. It’s going to be fully reflected for the first time in Cincinnati, when we open on

Global Gaming Business MARCH 2013

March 4. We did certain aspects of it in Cleveland, but given that was a Phase 1 development in an existing building, we were a little bit more constrained. Greektown is a great example of that. It’s in the heart of the city. It’s not really connected to the rest of the city yet the way we would like it to be, but physically it’s in a position to be the centerpiece of a great entertainment district. And then finally, it’s important to us because up until now, we’ve had a tremendous partner in Caesars that has been both an equity and an operating partner. But we are not able to leverage that strong relationship, because of their approximate facility in Windsor, and so we’re going with this one a bit more on our own. So for all those reasons, it makes it an exciting time for Rock Gaming. Explain what you’re doing in Detroit, and how Greektown will play into that development. We have been focused on Detroit for some period of time. Dan and I, and most of the other principals at Rock Gaming, are not only native Detroiters, but our families have been here for generations. We have watched with dismay some of the challenges that the city has undergone over the last couple of decades, and we really have been working hard—along with many others—to bring the city back. We’ve made significant investments in that regard. We have bought 15 or 16 different buildings now, 3 million square feet of office and retail. We moved all of our folks downtown from the metro Detroit area and now have more than 7,000 employees in Detroit. We don’t view it as altruism; we view it really as the opportunity to do good and do well at the same time. These urban locales are an under-priced asset, and we really relish the opportunity to be able to get in at a lower value, and then put our collective resources behind trying to affect

the outcome and increase the value of those assets, and increase the vitality of the community. Greektown has struggled down through the years for a variety of reasons. What kind of plans do you want to put in place that will bring it back up to where it should be? Well, we’re really just formulating those. This opportunity came together for us quickly, so we have a lot of work to do to refine our plans, and to put them in place. Simply stated, I think we have a lot of advantages. The asset has gone through four or five different managers over the last several years, so they’ve not encountered a 20-year horizon of investing capital and moving the asset forward and positioning it appropriately within the marketplace. They’ve done a great job with the constraints that they’ve had, but those constraints have had a short-term focus. So we’re really going to do a deep dive in it, to better understand the asset before we really determine plans. What have you learned about casino operations from the Ohio ventures that you will apply in Detroit? Are you confident that your company can operate Greektown in a sophisticated manner that’s necessary in that very competitive Detroit market? We are. Obviously, they have an existing management team in place, so they’ve been doing just fine, particularly given the constraints that I mentioned. So, we think that they have demonstrated by their results, their capability of running the asset. We’ll be working concurrently to better understand the asset, interact with the leadership team, identify their strengths and areas of growth, and then make some decisions to augment. And I think that’s what gives us the confidence that we’ll be able to move forward in an appropriate way.

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