Global Gaming Business, April 2014 by Global Gaming Business

GGB Global Gaming Business Magazine

April 2014 • $10 • Vol. 13 • No. 4

SBG: What Happened? Moving Online Players Offline 888’s Brian Mattingley Green Technology in Gaming

Merger

Madness

Greater than the sum of the parts

Spanning the Globe

WMS joins Sci Games to create an international powerhouse Big Wheel

Turning

Official Publication of the American Gaming Association

Caesars’ Linq debuts on the Las Vegas Strip

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CONTENTS

Vol. 13 • No. 4

april

Global Gaming Business Magazine

COLUMNS

COVER STORY Page 26

14 AGA

Going Global

Shut Them Down Geoff Freeman

The marriage of Scientific Games and WMS Industries has created a totally new force, as the lottery giant’s global reach aids in spreading top WMS content across new markets and multiple channels.

16 Fantini’s Finance Rock On! Frank Fantini

57 Global Gaming Women Patience, Hard Work and a Little Luck Anna Thornley

64 Regulation

By Frank Legato

The Sabot

(l-r) Brooks Pierce, Chief Revenue Officer of Gaming; Phil Gelber, Senior Vice President Product Development, Game Development Management; Bill Huntley, Executive Vice President and Group Chief Executive of Gaming; Allon Englman, Senior Vice President and Chief Design Officer; Dean Ehrlich, Senior Vice President, Global Gaming Operations

Richard Schuetz

DEPARTMENTS 4 The Agenda

FEATURES

6 Dateline

42 Going Green Green technology and big business are finally meeting in the gaming industry, as companies look to sustainable energy and renewable resources. By Dave Bontempo

GGB iGAMES 18 Linqed In Caesars Entertainment’s multi-faceted Linq project is pumping new energy into the east side of the Las Vegas Strip. By Roger Gros

34 Merger Mania What is driving mergers and acquisitions in the gaming industry these days is different than past cycles, with deals happening for multiple reasons. By Frank Fantini

38 Server-Based Evolution Once viewed as the next big thing in the industry, server-based gaming has moved into a slow evolutionary phase in the U.S.

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

48 Online Meets Offline The business of internet gaming is proving to be inexorably linked to its landbased counterpart, to the benefit of both. By Marco Valerio

13 Nutshell 54 New Game Review 58 Emerging Leaders With TMG Consulting’s Suzanne Leckert and Lewis Roca Rothgerber’s Karl F. Rutledge

60 Cutting Edge 62 Frankly Speaking 66 Goods & Services 69 People 70 Casino

Communications With Brian Mattingley, Chief Executive Officer, 888 Holdings

iGNA Outlook 51 Give Or Take A Billion Kimberly Arnold

52 iGames News Roundup

By Marjorie Preston APRIL 2014 www.ggbmagazine.com

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THE AGENDA

The Road Not Taken Roger Gros, Publisher

ecisions are made every day in the corporate suites of the major casino companies. Most of those decisions are quite mundane, but they often have a huge impact on the course a company is taking. In the gaming industry, growth is good. And it’s difficult to grow simply through operations (unless you operate in Macau these days). Growth most frequently means expansion, so the decisions a company makes on expansion have much to do with its value on the stock market. Let’s start with the biggest decision Caesars Entertainment ever made—the decision not to buy a sub-concession to enter the Macau gaming market. Now, I don’t want to pretend to have any firsthand knowledge of how this went down, but at the time the Macau government allowed the three original concessionaires to sell one sub-concession each, Caesars was very interested. After all, the company didn’t make the cut for the concessions, so it could have bought into the market. The going price was almost $1 billion, a hefty price at that time, but in hindsight, a bargain. And we all know hindsight is 20-20. Caesars probably isn’t happy about Massachusetts, either. Partnered with Suffolk Downs, the company had the inside track at the state’s most lucrative license until a sketchy report to the gaming commission implicated the company in many “scandals,” most of which had already been resolved. A lawsuit has been filed, so we’ll see how much Caesars regrets that decision. But how about how hard Steve Wynn fought to get back into Atlantic City in the late 1990s? He convinced everyone that he was going to build a spectacular “La Revé” on a huge tract of land the city gave him for nothing. When Wynn sold his Mirage Resorts to MGM in 1999, Boyd Gaming built the Borgata (half owned by MGM), and the rest is history. But Atlantic City is suffering. Most of the casinos there (not Borgata) are now losing money, and Wynn has to be glad he didn’t get into that mess. Pinnacle took a beating there, and of course we all know about Revel. And Wynn may also appreciate the day he pulled out of the competition for the second license in Philadelphia. The state wants a substantial investment—north of half a billion dollars—for

Global Gaming Business APRIL 2014

the privilege of competing in an already saturated market with a high tax rate. How about any of the companies that got into Illinois? This state is the poster child for a high tax rate—at one point up to 70 percent— and dysfunctional regulation. No casino in Illinois can make any long-term plans or reinvestment because there is no stable tax rate. And now the state is talking about adding four more casinos to destroy the markets the existing casinos have already created! This might be the best nondecision any casino company can make. Now we may have already seen some regrets about entering the iGaming space. Revenues in all three states have been less than anticipated, but it is a young industry and we have well less than a year under our belts at this time. Nonetheless, you have to wonder what a company like Station Casinos is thinking after buying a majority of Ultimate Gaming right before its launch last April. Ultimate is barely holding its own in the small Nevada market and is in single digits in market share in New Jersey. California is the potential gold mine for online gaming in the U.S. and so far it has resisted all efforts to legalize iPoker in the state. While there are two bills before the legislature in this session, do you really believe that tribes will have any incentive to reverse their opposition? We’ve already seen it’s not a robust business at the start. There’s no federal bill looming like there was the past two years. So why risk the land-based gaming enterprises, which drive every tribal economy in California, by stepping into the unknown? There are lots of decisions facing many gaming companies over the next few years. Despite the disappointing iGaming numbers, should more states legalize it (especially California), it could be lucrative. There will be few U.S. expansion opportunities since most states have some kind of gaming. There is some room to grow in Latin America, but regulations and tax rates there are less than stable. Asia is always there, but always inscrutable. So what will drive growth in the gaming industry? Thankfully, that’s a decision I don’t have to make, but I can assure you GGB magazine will be there reporting the latest trends and opportunities.

Vol. 13 • No. 4 • April 2014 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Kimberly Arnold | Frank Fantini | Geoff Freeman Richard Schuetz | Anna Thornley Contributing Editors Dave Bontempo | Frank Fantini | Christopher Irwin Erika Meeske | Marjorie Preston Robert Rossiello | Marco Valerio

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

• 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

• Geoff Freeman, President & CEO, American Gaming Association

• Michael Johnson, Industry Vice President, Global Gaming Expo, Reed Exhibitions

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Director, Maryland Lottery and Gaming Control Agency

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 921 American Pacific Dr, Suite 304, Henderson, NV 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2014 Global Gaming Business LLC. Las Vegas, Nev. 89118 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 921 American Pacific Dr, Suite 304, Henderson, NV 89014

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DATELINE USA april2014

Penn National Gaming plans a casino at the closed Plainridge racetrack.

Bay State Bonanza Penn wins slot parlor; Mohegan wins Revere vote S

ome good news for a change in Massachusett for the nascent gaming industry there: The state Gaming Commission last month chose Penn National Gaming’s proposal for the only slots parlor in the Bay State. The commission voted 3-2 to award the license at the now-defunct Plainridge harness racetrack. The vote comes more than two years after the legislature approved the 2011 gaming expansion law. A split vote by the commission is rare; most decisions have been unanimous. The day after the vote, however, the commission did vote unanimously to formally award the license to Penn. “Congratulations and welcome to Massachusetts,” commission Chairman

All in the Family

Caesars Entertainment has announced plans to sell four of its resorts to subsidiary aesars Entertainment Corp. last month announced the pending sale of four properties, including three on the Las Vegas Strip along with Harrah’s New Orleans. The buyer: a company subsidiary, Caesars Growth Partners, which is paying $2.2 billion for the Harrah’s New Orleans is the only non-Vegas property included in the deal. quartet of resorts. Caesars owns 58 percent of the subsidiary. The remaining 42 percent is controlled by Caesars Acquisition Co., a publicly traded holding company. Caesars says the transaction will generate proceeds of $1.8 billion, and allow the company to keep the assets in its own portfolio. The influx of cash should allow Caesars to reduce a portion of its historic debt. The company owes a total of $23 billion, a high-water mark for the industry that many analysts have said is unsustainable. Caesars Entertainment will continue to run the four properties, which include Bally’s Las Vegas, the Quad and the Cromwell, all in Las Vegas, as well as the New Orleans resort. “Today’s asset sales mark an important step in our ongoing efforts to repair Caesars Entertainment’s balance sheet,” Caesars Chairman and CEO Gary Loveman said in a statement.

Global Gaming Business APRIL 2014

Stephen Crosby told Penn CEO Tim Wilmott. Wilmott said the facility will be a competitive casino, despite the fact that at least two other large full-scale casinos will be approved within the next year in its market. “We are not afraid of competition,” Wilmott said. “We like the fact that we are going to get a head start and be able to develop relationships with customers at our facilities for a couple of years before other competition comes in. We think the market is big enough.” The other contenders for the license were the Cordish Cos., seeking to build in Leominster, and Raynham Park in Raynham. Local voters overwhelmingly supported all three proponents. And voters in Revere last month gave a resounding approval of the Mohegan Sun’s $1.3 billion casino resort project proposed for Suffolk Downs. City voters endorsed the proposal by a margin of 63 percent to 44.3 percent. The city, which has a population of about 53,000, is economically challenged and has an unemployment rate of 7.2 percent. Supporters of the Suffolk Downs casino spent $3.3 million on the November and February votes, with Mohegan Sun adding another $400,000, which, according to some estimates, works out to be about $35 per voter. Mohegan Sun Tribal Gaming Authority CEO Mitchell Etess predicted that the Massachusetts Gaming Commission would ultimately prefer his company’s proposal for the Boston Metro zone license to that of Steve Wynn’s proposal for the town of Everett.

Gaming Back in Florida State Senate proposes new casinos, slot machines

mong the proposals to be taken up in this session by the Florida legislature will be three Senate bills that would allow two $2 billion resort casinos—one Florida Senator each in Broward and Miami-Dade counties, depending Garrett Richter on a voter referendum. The proposal also would allow slot machines at dog and horse racetracks in Palm Beach and Lee counties and at a rodeo track in Gadsden County, and establish a new Department of Gaming Control, overseen by a five-member board appointed by the governor. The measures also allow the state’s 13 greyhound tracks to reduce the number of dog races offered. And, for the first time since dog racing became legal 80 years ago, track owners and trainers would be required to report dog injuries. All of the changes would take effect this year, but the bills also propose a constitutional amendment to require voter approval for any future gambling expansion. Whether there are enough votes in the legislature to pass the bills remains unclear. Senator Garrett Richter, chairman of the Senate Gaming Committee, said, “I thought this would be a very good starting line to have the discussion. I think the bill is composed of statutes and regulations that have the best interests of Florida in mind.” Richter added the sweeping legislation is designed to “reform the current patchwork of laws into an orderly structure.” Richter’s three proposed bills include the constitutional amendment, the destination casinos and gambling commission together and a public-record exemption for casinos from revealing proprietary confidential information when applying for a resort license. The bills do not address tax rates or blackjack for parimutuels.

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DATELINE ASIA april2014

biG billiOns Japanese development will require lots of money m

MGM Resort Chairman James Murren says he’ll match the $10 billion that LV Sands plans to expend in Japan.

Jeju

GM Resorts International said it’s ready to spend US$5 billion to $10 billion in Japan after Sheldon Adelson, chairman of rival Las Vegas Sands, said his company will spend “whatever it takes” to develop a casino in the country. Speaking last month at an investment forum in Tokyo sponsored by CLSA AsiaPacific Markets, MGM Chief Executive James Murren said, “We will over-invest early on to ensure, as we have done everywhere else, that we have properties that are built to last and that would stand additional competition.” He also said the company is open to Japanese partners but would want to own at least 51 percent of any venture. Adelson has thrown out $10 billion as doable, as far as his company is concerned. “We will spend whatever it takes,” he

said on the first day of the forum. “We could pay all cash. We don’t have to, but we will borrow money in a typical mortgage-to-value ratio.” LVS, considered among the front-runners for a Tokyo license, would also consider working with a local partner that could make more than a financial contribution, Adelson said, without elaborating or naming any companies. He added that LVS is opening offices and hiring in the country. Las Vegas-based Caesars Entertainment is in informal talks with at least 30 Japanese companies to discuss potential partnerships, said Steven Tight, president for international development. Caesars wants to build casinos in Tokyo and Osaka, and sees the possibility of developing projects in Okinawa, Hokkaido and Yokohama, he said. A fourth U.S. casino giant, Wynn Resorts, whose Chairman Steve Wynn is talking about $4 billion in Japan, also is open to a joint venture, said President Matt Maddox. “Clearly, it would be an expensive project,” he said. In addition to the “big four,” Genting Singapore, Macau’s Melco Crown Entertainment, Boyd Gaming, Rush Street Gaming and others are also eyeing Japanese developments.

Junkets

Airport Casino Filipino is now closed.

Genting details casino plans in South Korea enting Singapore plans to build a resort casino on South Korea’s Jeju Island. G The 50-50 joint venture with an Anhui-based, Hong Kong-listed property company called Landing International Development will target visitors from China, the feeder market for what is growing into the island’s largest contingent of foreign tourists. “Eastern and Northern China is very close to Jeju Island, and it’s about a onehour flight, which makes so much more sense for people in Beijing, Shanghai or Qingdao to come to Jeju Island than going to Macau,” said Landing International Chairman Yang Zhi Hui. About 4.3 million Chinese tourists visited South Korea in 2013, an increase of 53 percent over the year before, and they now account for one-third of the country’s total, according to the Korea Tourism Organization. Plans for the 2.3 million square meters call for a phased development that ultimately will include a theme park, a shopping mall, luxury residences and three hotels totaling 2,800 rooms. The casino, restricted by Korean law to foreign passport holders, will contain 800 table games, 200 of them VIP, at full build-out. Total cost is pegged at US$2.2 billion, but investment analysts Union Gaming Research Macau dismiss that as a “blue-sky scenario” and estimate an initial outlay by Genting of about $153 million as part of a two-phased development in which the company’s commitment will increase to $250 million in line with a Korean investment requirement of $500 million to qualify for licensing. The firm believes the gaming portion could feature up to 100 tables and the hotel “a few hundred” rooms and projects a 2017 opening for the first phase, with the second coming on line in 2019.

Genting Singapore is pursuing a resort casino on the South Korean island of Jeju.

PAGCOR PROblems

Company closes another Manila casino

ith the future of the Philippines market shifting toward largescale commercial resorts, PAGCOR’s Airport Casino Filipino located near Manila’s Ninoy Aquino International Airport, one of the largest venues in the government corporation’s portfolio, will shut down in July amid mounting losses. PAGCOR’s casino at Heritage Hotel Manila was closed last July. “As much as possible we don’t want to close down any casino, but the decision depends on the viability of a casino,” Chief Executive Cristino Naguiat said. Airport Casino Filipino generates an average of PHP180 million in gross revenues a month (US$4 million), half of which is remitted to the national treasury, leaving a balance that is not enough to cover expenses, Naguiat said. The rent alone amounts to PHP23 million a month, he said—“plus salary for more or less 800 employees, we also pay for the food for our players and, of course, electricity and other fees.” He said the outlook for gaming in the country is positive but that growth will be driven mostly by the private sector, which PAGCOR regulates and licenses. APRIL 2014 www.ggbmagazine.com

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DATELINE GLOBAL april2014

Billionaire Goes shoppinG in oz Great Barrier Reef the site for mega-resort

ong Kong billionaire Tony Fung, who made headlines last year with plans for a massive casino complex on Australia’s Great Barrier Reef, has added the country’s Tony Fung, the billionaire Hong Kong investor proposing a mega-resort on Australia’s Great Casino Canberra to a bid announced last Barrier Reef year to acquire the Reef Casino in the northern Queensland city of Cairns, not far from his proposed Barrier Reef site. Fung’s Aquis Casino Acquisitions will spend A$270 million for Reef Casino Trust, the property’s ownership entity, whose partners include Casinos Austria International and hotel giant Accor, and the Canberra property in the Australian Capital Territory southwest of Sydney at the other end of the continent. Casino Canberra is also controlled by CAI. The Reef Casino board has already recommended shareholders approve the offer. Ninety

Baha Mar unveils aggressive marketing campaign

percent must approve for the takeover to go through. Regulatory approvals and other conditions will also have to be met. Fung’s plans for his 750-acre, $4.2 billion Aquis Resort at the Great Barrier Reef include five hotels, a casino with 1,500 slot machines and 750 table games, more than 1,300 apartments and luxury villas, a golf course, a 25,000-seat sports stadium, high-end retail, a man-made lake and reef lagoon and one of the world’s largest aquariums. Wealthy Asians, particularly high rollers from China, are the target market. He’d like to open by 2018 and says the complex will create more than 26,000 jobs when it’s fully operational. Saskatchewan Premier Brad Wall

New mega-resort to target Asian players

ahamian officials have high hopes that the $3.5 billion super-resort known as Baha Mar will transform the tourist economy and put the Caribbean island nation on the map as a world-class gaming destination. Scheduled to open in December with four hotels, 200,000 square feet of convention space, a golf course designed by Jack Nicklaus and a 100,000-square-foot casino replete with 1,500 slot machines, 150 table games and five private VIP rooms, Baha Baha Mar Chairman Mar’s sights are set firmly on the high-rolling Chinese who have Sarkis Izmirlian made Macau the largest casino market in the world. China’s involvement in the project is already massive. The Export-Import Bank of China is providing the bulk of the financing, $2.4 billion, and China State Construction Engineering Corp., the country’s largest construction company, is investing $150 million and is the general contractor. Thousands of Chinese workers are at work on the construction. It’s all part of China’s growing economic and business reach in the developing world. Chinese investment in South America, for example, tops $89 billion, according to the American Enterprise Institute and the Heritage Foundation. And in 2011, China pledged $1 billion in loans for development in the Caribbean—not including Baha Mar. Developer Sarkis Izmirlian, chairman and chief executive of Baha Mar, said he didn’t just want “hotels on the beach;” he wanted a destination. Baha Mar is bringing together some of the world’s biggest hospitality brands to operate those hotels. The centerpiece, the 1,000-room Baha Mar Casino & Hotel, will be managed by Global Gaming Asset Management, the company founded by former Las Vegas Sands President William Weidner that opened the $750 million Solaire Resort & Casino in Manila last year. There also will be a 750-room Grand Hyatt, a 300-room Mondrian and a 200room Rosewood Hotel. Spanish hotelier Meliá recently took over operations of the Sheraton Nassau Beach Resort at Cable Beach, and when renovation of the 694-room property is completed it will also become part of the complex, operating as the Meliá at Baha Mar. The ultimate success of the largest tourism project under development in the Western Hemisphere will depend on filling those rooms with the right customers. 8

Global Gaming Business APRIL 2014

First Nations Going it Alone Plans to buy provincial casinos off; new projects on tap

hile political opposition has scotched plans by the government of Saskatchewan to sell two provincially owned casinos in Regina and Moose Jaw to the Federation of Saskatchewan Indian Nations, other First Nations leaders are forging ahead with their own gaming projects. Little Pine First Nation Chief Wayne Semaganis says ground will soon be broken on a casino and conference center in Lloydminster that will operate independently of the Saskatchewan Indian Gaming Authority. In addition, online gaming site northernbear.com is preparing for a major expansion, according to former White Bear First Nation Chief Bernie Sheppherd, an outspoken champion of First Nations sovereignty who was acquitted back in the 1990s on charges of running an illegal casino. Sheppherd is one of the First Nations leaders calling for total autonomy from the province for the tribes and the FSIN on gaming matters. Canada’s New Democratic Party has refused to support a deal proposed by the province of Saskatchewan to sell two government-owned casinos to the Saskatchewan Indian Gaming Authority. The sale of Casino Regina and Casino Moose Jaw would have required a change in the laws that protect Crown corporations, according to Casinos-Online.com. Premier Brad Wall had asked the NDP to amend the Crown Corporations Public Ownership Act, which precludes the sale of Crown corporations without public approval and an election.

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DATELINE TRIBAL april2014

SenecaS Plan caSino no. 4

Nation must get approval from governor for additional resort

eneca Gaming Corp., the gaming arm of the Seneca Nation of Indians of Western New York, confirmed last month that it paid $2.7 million for a 32-acre parcel in the town of Henrietta, a suburb of Rochester. The Senecas hope to build their fourth casino in the community. It would join tribal gaming halls in Salamanca, Buffalo and Niagara Falls. “Now that we have acquired property, we will begin the process of engaging the community and its leaders in a dialogue on how a potential Seneca development could fit within and benefit Henri-

etta and the surrounding area,” said Kevin Seneca, Seneca Gaming chairman. “Our core strength is the gaming business,” said Cathy Walker, Seneca Gaming president and CEO. “Bringing proven, well-respected partners into the development mix, in order to maximize both the development opportunities and the benefits to the local economy, is something that we are excited to explore.” Henrietta Town Supervisor Jack Moore, who opposes gaming in the town, told the Rochester Democrat and Chronicle the next step would be to get a specific proposal from Seneca Gaming.

Seneca Salamanca

Harrah’s Cherokee Valley River Casino & Hotel, opening in Murphy in 2015

NORTH CAROLINA EXPANSION

County gets ready for state’s second casino

overnment and business leaders in Cherokee County, located in southwestern North Carolina, recently held a series of meetings to discuss the economic impact of Harrah’s Cherokee Valley River Casino & Hotel, scheduled to open in Murphy next year. The $110 million casino, owned by the Eastern Band of Cherokee Indians, will create 900 construction, 900 permanent and 500 casinorelated jobs in an area with an unemployment rate of 10.5 percent. The annual payroll is expected to be $40 million. The Eastern Band also owns Harrah’s Cherokee Casino & Hotel in Cherokee. Some area business owners believe the casino will solve the county’s economic issues. Jon Silver, owner of Corner Coffee Company in nearby Andrews, has doubts about that—but he said the business community needs to be ready to take advantage of the casino’s arrival, or nationwide chains will fill the gap. Other owners are concerned that casino manager Caesars Entertainment offers dining and lodging on-site, encouraging guests not to leave the property. Harrah’s Cherokee Valley River Casino & Hotel will have a seven-story, 300-room hotel, a 24-hour café and a food court. The casino will offer about 1,200 slot machines and up to 70 table games. Josh Carpenter, Cherokee County economic development director, said even so, the casino will increase demand for restaurants, hotels and housing for staff members—making now a good time to start a business in the county. The facility is expected to attract visitors from the suburbs of Atlanta, andGenting Chattanooga and Knoxville, Tennessee. Singapore is pursuing a resort

casino on the South Korean island of Jeju. Global Gaming Business APRIL 2014

What Now for Navajos? Without a compact, nation regroups he New Mexico Senate recently rejected a new compact with the Navajo Nation, leaving the tribe to strategize how it can have a different outcome in the 2015 legislature. The current compact expires June 30, 2015. Derrick Watchman, chief executive officer of the Navajo Nation Gaming Enterprise, said he can’t recall when a gaming compact expired before a new one was approved. “As far as my recollection, most tribes have been able to put something together with Navajo Gaming CEO the state before they hit the Derrick Watchman termination date,” he said. Watchman added loans and agreements depend on the tribe’s three casinos being fully licensed and able to operate under a legal compact. “In a lot of our documents we only have a year left. We’re going to have to give notice to many of our lenders because of a material change to the agreement,” Watchman said. He acknowledged a year and a half is a long time and the situation could change—especially since 2014 is an election year. He also noted the tribe dealt with Governor Bill Richardson regarding its original compact in 2001. Governor Susana Martinez approved the compact rejected by the state Senate. The Navajo Nation’s compact has been strongly opposed by New Mexico’s Pueblo tribes, who were concerned they would not be able to negotiate their own compacts if the Navajos were used as a gaming template. Watchman said under the New Mexico Compact Negotiation Act, one approved compact could be used as a model for other tribes. The Pueblos also objected to a provision in the compact allowing the Navajos to build three more Class III casinos in the next 25 years, bringing the total to five facilities. Watchman pointed out the Pueblos seem to have forgotten the Navajo Nation is large, with a large population and land base. “When you think about it, adding three more Class III facilities in the next 25 years, it could be enough time or not enough time. We have a responsibility to the Navajo people. The Navajo tribe is growing like everybody else and we have to keep options open. Five facilities seems like the right number.”

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DATELINE EUROPE april2014 Chamber of Ireland’s Dáil

In the Queue AgAIn No reformation in Ireland before 2015

he process of modernizing Ireland’s gambling laws won’t begin for another year, according to at least one highly placed source in the industry. John Purcell, managing director of Purcell & Associates and a member of the Irish Responsible Gambling Board, said major questions still plague the country’s new gaming and betting bill, and that spring 2015 is probably the earliest that legislators will consider it. Announced by Minister for Justice Alan Shatter last year, the bill would repeal the country’s antiquated gaming laws. However, it remains merely a consultation paper at this stage with no force in law.

Bad Karma

U.K. bookies defend FOBTs he heads of five of the U.K.’s top bookmakers have gone public with a defense of their right to open betting shops with fixed-odds betting terminals. A letter published by the Telegraph and signed William Hill CEO by William Hill CEO Ralph Topping, Ladbrokes Ralph Topping CEO Richard Glynn, Gala Coral CEO Carl Leaver, Paddy Power CEO Patrick Kennedy and Betfred Chairman Fred Done noted that the “overwhelming majority” of their customers gamble responsibly. They pointed out that the country’s problem gambling levels are “low by international standards” and “have not increased since the introduction of gaming machines in betting shops or the inception of online gambling”—a claim borne out by the U.K. Gambling Commission’s most recent participation survey, which found that last year only 1 percent of respondents had played fixed-odds betting terminals, or FOBTs, as the controversial electronic table games are known—a rate unchanged since 2012. Local governments are lobbying Parliament for extra zoning powers to curtail what they see as a explosion of high-street betting shops designed to cash in on the lucrative e-tables, which opponents say target the poorest neighborhoods, degrade shopping districts and exacerbate problem gambling and other social ills. The Association of British Bookmakers strenuously denies this. “People who bet responsibly and return are the bedrock of our businesses,” the five executives maintained in their letter. “We do not want our customers to develop problems.” They added that they welcome the government’s call for an “evidencebased debate” on the machines. They’re also promoting a new Code for Responsible Gambling that includes “extra safeguards” on the use of FOBTs that include enforced breaks with automatic real-time alerts to make players aware of the money and time they’re spending. The alerts will also be shared with staff, who are being trained to spot symptoms of problem gambling and how best to approach customers displaying such signs. Ladbrokes is going a step further, and says it will link the pay of top executives to their success in ensuring social responsibility.

Global Gaming Business APRIL 2014

According to Purcell, the bill is still in the process of being drafted. Even if that were completed in the next few months, the legislative calendar is already filled, making it next to impossible to introduce it in 2014. A more optimistic timeline could see primary enabling legislation introduced in the Dáil by the end of the year, but Purcell noted that such a scenario would only take place in the event that something occurs necessitating emergency legislation. If he is correct, and assuming the bill is approved, implementation is not likely to occur before early 2016.

Blackpool is Back The Irish Sea resort town may yet get its casino ritish Prime Minister David Cameron said his government would look “faB vorably” on a fresh bid by the Irish Sea resort town of Blackpool for a license for as many as 80 table games and 150 limited-prize slot machines. Blackpool Council, which is trying to attract investment in the city’s old Central Station rail site—shuttered decades ago and now used as a parking garage—is definitely interested. Council leader Coun Simon Blackburn said, “We would welcome the opportunity to discuss this further and to consider how this might help us to develop the Central Station for the benefit of Blackpool’s residents and economy.” The country’s 50-year-old gambling laws were reformed in 2005 to allow, among other things, for as many as eight so-called “supercasinos,” a development class permitted up to 1,250 machine games with no caps on bets or prizes. The plan ran into a firestorm of opposition in Parliament, however, and eventually the number was whittled down to one, which was awarded to Manchester. Since then, only two post-reform casinos are up and running out of 16 licenses handed out. Eight of those are for the “large” class of casino that Cameroon envisions for Blackpool. “If Blackpool Council wanted to do something in that space, then we would look upon it favorably, but I don’t think there’s an option to put the supercasino back on the table,” he said. The city is hoping for something along the lines of what Genting is developing next to the LG Arena in Birmingham—a £150 million casino slated to open next year with 170 hotel rooms, restaurants and bars, a cinema and retail shopping.

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NUTSHELL

“They New Jersey has filed a challenge to a federal sportsbetting ban before the U.S. Supreme Court and is asking the court to overturn the 22-year-old law that prevents the state from offering sports betting at its casinos and racetracks. The state’s appeal, backed by Governor Chris Christie, was filed February 12 and may represent the last chance New Jersey has to overturn the federal ban. The state has lost three times in lower courts to overturn the law, which is supported by the NCAA and professional sports leagues. The Supreme Court agrees to hear fewer than 100 cases a year out of more than 10,000 petitions filed, but New Jersey legislators are hopeful that the nature of the case— which pits state’s rights against federal law—will attract the court’s interest. NagaCorp said it expects to begin construction of its US$350 million casino near Vladivostok early next year and have the doors open by 2018. The Hong Kong-listed company, Cambodia’s largest operator with a monopoly in the Phnom Penh market, is joining a casino development group controlled by Macau casino tycoon Lawrence Ho in exploiting the potential of Russia’s Pacific coast as a destination for gamblers from northeast China, South Korea and Japan. The region, known as Primorye, is one of four outlying regions designated by the Russian government for casino gambling. Slot manufacturer Bally Technologies has bought nearly 14 acres of land just north of the 215 Beltway in Las Vegas, with the intent to expand its office and industrial buildings. The land is next to the new, 135,000-square-foot headquarters of the former SHFL entertainment, which Bally acquired last year. “The acquisition of these strategic parcels provides Bally Technologies an important foundation as it continues to develop long-term growth plans,” said Greg Tassi, first vice president of commercial brokerage CBRE Las Vegas, which represented Bally in the purchase. Century Casinos, Inc. announced that the company and Regent Seven Seas Cruises signed an amendment to the casino concession agreement extending casino operations on board the Mariner, Navigator and Voyager cruise ships, operating out of Miami, Florida, through December 31, 2016. Century Casinos also announced the introduc-

tion of a fleet-wide progressive jackpot on board all eight vessels of Regent Seven Seas Cruises and Oceania Cruises throughout 2014. The National Indian Gaming Commission has announced the preliminary fee rate for 2014. Tier 1 Tribes will pay nothing to the commission, while Tier 2 tribes will pay 0.072 percent. The NIGC is funded from such fees. The Colville Tribes of north and central Washington will break ground in April or May on a casino in Omak that will open about a year later. The project will be located on 35 acres and will cost about $41 million. It will include a 52,000- square-foot casino, dining and 80 room hotel. It will double the size of the tribe’s current casino. Amaya Gaming Group announced that its subsidiary Diamond Game Enterprises has been awarded a five-year contract with the Maryland Lottery and Gaming Control Agency to provide veterans’ organizations in the state with Instant Ticket Lottery Machines (ITLM) and related services. The contract, a result of a request for proposals issued in August 2013, allows for the placement of up to five ITLMs at each qualified VO meeting hall in Maryland. The lottery estimates there are currently 150 qualified organizations that may apply for the ITLMs. Several new bidders in the fight for New York state’s first four Class III casino licenses are getting closer to the Big Apple. According to the New York Times, a partnership of the Cordish Companies, Hard Rock and Simon Property Group is exploring a site near the massive Woodbury Common Premium Outlets in Orange County, at the base of the New York Thruway, less than 50 miles from Times Square. The outlet already attracts more than 11 million visitors a year, and is much closer to Gotham than Ulster and Sullivan counties in the Catskills, where some other potential bidders are concentrating their efforts. Those contenders are already up in arms. Michael Treanor, who has proposed a $500 million casino resort at the former Nevele hotel in Ulster County, says an Orange County casino “would dramatically affect, if not eliminate the Nevele project. Why would anyone feel the need to go further? It would take southern Ulster County and Sullivan County out of contention.”

CALENDAR April 23-24: Andean Gaming and Entertainment Trade Show, Corferias International Business and Exhibition Center, Bogata, Columbia. Produced by FADJA. For more information, visit fadja.com. April 23-25: IMGL Spring Conference, Manchester Grand Hyatt, San Diego. Produced by the International Masters of Gaming Law. For more information, visit gaminglawmasters.com. May 12-14: Indian Gaming ’14, San Diego Convention Center. Produced by the National Indian Gaming Association. For more information, visit indiangaming.org.

May 14-16: Japan Gaming Congress, Tokyo. Produced by Clarion Gaming. For more information, visit japangamingcongress.com. May 20-22: G2E Asia, Cotai Expo Center, the Venetian Macao. Produced by Reed Exhibitions and the American Gaming Association. For more information, visit G2EAsia.com. June 23-25: Canadian Gaming Summit, Vancouver Convention Center, Vancouver, British Columbia. Organized by the Canadian Gaming Association. For more information, visit canadiangamingsummit.com.

Said It”

“Since both parties in this deal are essentially two sock puppets connected to the same pair of arms, one can’t help but imagine a desperately lonely teenager creating bogus social media profiles to ‘like’ his/her own Facebook posts.” —Steven Stradbrooke on CalvinAyre.com about last week’s deal between Caesars’ entities

“If racing’s not involved, it’s something we would have to oppose. But hopefully, it won’t get to that point.” —Josh Rubenstein, chief operating officer, Del Mar Thoroughbred Club, on the desire of California racetracks to be included in any bill that legalizes online gaming in the Golden State

“Anybody can put together a booth, a hospitality suite and a gift bag. Show me the money.” —John Ryder, Republican National Committee, on the bidding war among major U.S. cities, including Las Vegas, to host the GOP convention in 2016

“It’s a slayer of souls. It’s a slayer of families and ultimately of the community itself.” —The Rev. George Szal, a leader of the opposition to the Mohegan Sun’s casino proposal for the city of Revere, whose voters overwhelming approved the casino last month

“When you gamble in a casino and you lose, you can just chalk it up to bad luck. When you gamble in real life and lose, a more common reaction is to figure out who to blame.” —Jon Chesto, writing for the Boston Business Journal about efforts by a land owner in Palmer to discover proof that the Mohegan Sun never intended to try to win a casino initiative vote in Palmer in November

“Snapchat is a relatively new, yet rapidly growing social media platform, which I’m certain will play a huge role in the marketing mix of companies going forward. To be one of the first brands, and the first betting company, to make use of the platform is very exciting. It has huge potential for us as a business.” —Mark Ody, brand director for Betfair, on a recent test of the Snapchat app to social media users allowing bets on soccer matches at enhanced odds

“I am also not burying my head in the sand. I have recognized that gaming is expanding without our control or direction, and that’s a very dangerous place to be for the state of Florida.” —Will Weatherford, Florida House speaker, who personally disapproves of gambling but wants a statewide referendum on the matter

APRIL 2014 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION

Shut Them Down Illegal internet sweepstakes cafés need to go

By Geoff Freeman, President & CEO, American Gaming Association

omprehensive gaming regulations and licensing requirements that protect consumers have helped make casino gaming throughout the United States a popular, mainstream form of entertainment for millions of Americans. Yet over the past decade, there’s been an explosion of illegal, unregulated gambling outfits—known as internet sweepstakes cafés—which make a mockery of these laws and threaten to undermine legitimate gaming operators. Internet sweepstakes cafés typically spring up in storefronts, gas stations and convenience stores, offering games that closely mimic traditional slot and video poker machines. By some estimates, more than 5,000 of these cafés are currently operating in more than a dozen states and bringing in more than $10 billion a year in revenue. Here’s how the scheme usually works. The cafés prominently advertise “internet sweepstakes” to lure customers into their stores. “Entries” into the sweepstakes are obtained by purchasing internet access time or long-distance telephone time, but the purchase of these “products” is just a ruse to connect customers with the casino-like games that are offered on rows of computers installed for that purpose. Café customers have little interest in the underlying “product” they are ostensibly buying. For example, at an internet sweepstakes café in Palm Harbor, Florida, one customer purchased more than 231,000 minutes of telephone time, or almost 4,000 hours—enough to talk 24/7 for 160 days. One New Mexico café sold 140,000 hours of internet time, but less than 0.25 percent was ever used by customers. Unlike legitimate gaming operators, café owners and managers are neither licensed nor

subject to criminal background checks. No one regulates the fairness and integrity of the games to protect consumers from fraudulent activity. Minors are seldom excluded from playing these games, putting children at risk. These cafés pay no gaming taxes whatsoever. However, they siphon off gaming revenue from legitimate state lotteries and state-licensed gaming businesses, which ultimately reduces state tax revenues that support critical public education, health and social programs. Just as troubling, these illegal gaming outposts often serve as a magnet for crime and other de-

“

wounded youths fled the scene, but were subsequently caught and arrested for attempted armed robbery. Many states have tried to close the cafés, but owners have used aggressive litigation and highpowered lobbying to keep their unregulated gambling houses running. One of the most brazen legal strategies used by café owners to evade the law is to argue they are not involved in gambling at all. While some lower courts have fallen for this fraudulent rationale, every appellate judge has laughed it out of court. In one case, the U.S. Court of Appeals for the Fifth Circuit concluded that the sale of internet time by one café was merely “an attempt to legitimize an illegal lottery.” The New Mexico Court of Appeals found that one café’s operation was “structured as a guise for commercial gambling,” while a Texas court held that the sale of telephone cards was “mere subterfuge” to offering gaming to customers. The dangers of these illegal, unlicensed gambling businesses are real and growing. States and localities need to adopt laws that specifically address internet sweepstakes cafés so they can be effectively investigated and held to the same regulatory standards as legitimate forms of gaming—or shut down. Strict and effective gaming regulation must be enforced across the board to protect both consumers and legitimate gaming businesses, and the tax revenues they generate. In the days ahead, you’ll see increased engagement from AGA toward the effort squashing these bugs and holding bad actors to the same standards to which legitimate gaming operators abide. The benefits of regulated gaming are myriad. Our effort to take down unregulated operations such as internet sweepstakes cafés will bolster awareness of the value of regulated gaming.

These cafés pay no gaming taxes whatsoever. However, they siphon off gaming revenue from legitimate state lotteries and state-licensed gaming businesses, which ultimately reduces state tax revenues that support critical public education, health and social programs.

Global Gaming Business APRIL 2013

”

structive behavior, which is an issue in which legitimate gaming operators invest significant resources to combat through strong and innovative security protections. San Francisco Supervisor John Avalos told the San Francisco Examiner that “crime in the area has spiked” since the cafés began operating in the city’s Excelsior district. According to the paper, teenage girls—and some even younger—who use the nearby community center have been “subjected to sexual harassment” by café customers. A block captain of the local neighborhood watch complained that “these types of businesses can destroy a neighborhood.” At one Florida café, a 71-year-old retiree whipped out a handgun and shot two 19-year-old criminals as they tried to rob the facility. The

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FANTINI’S FINANCE

Rock On! Why upscale racinos are serious competition for full-scale casinos

rose by any other name would smell as sweet, William Shakespeare once wrote. Apparently, the Bard of Avon didn’t know about the rose—or “rocksino”—that graces the property of Northfield Park harness racing track in suburban Cleveland. Rocksino is the name given to the slots casino that Hard Rock International has built at the track. Rocksino is a play off of the word racino that was contrived to describe the combination of a racetrack and casino. Rocksino

But the rocksino is more than a name or a marketing tool. It is an experiment in whether a racino can go upscale. Historically, there has been a class distinction between racinos and casinos. The latter were for a more upscale crowd, as in patrons willing to plunk down $100 or $1,000 or more a hand at the blackjack table. The former were thought to be the home of middle-age ladies plunking quarters into slot machines. But Northfield Park brought in Hard Rock to develop its slots casino and, as Hard Rock Chairman Jim Allen says, a new creature was created— an upscale racino with entertainment value and a global brand name. Most other racinos have been inexpensive affairs—rows of slot machines jammed beneath racetrack grandstands with a daub of paint and a café thrown in. The rocksino, at $268 million, is clearly more than that. But the question is, does it matter? January was the first full month of the rocksino’s operation, and if early results mean any16

Global Gaming Business APRIL 2014

By Frank Fantini

thing, it does matter. The rocksino took in $12.817 million. That far outperformed Ohio’s other racinos. The next best performer was MTR Gaming’s Scioto Downs outside Columbus at $9.695 million. And Scioto Downs has had more than a year to build a player base. Then came Caesars/Rock Gaming-managed ThistleDown, also near Cleveland, at $8.904 million, and the Delaware North-Churchill Downs property Miami Valley at $7.776 million. Of course, a lot of factors go into revenue variations, including the sheer size of the rocksino, which at 2,200 machines is the state’s biggest slots casino. But the indications are that an upscale racino can outperform. The rocksino isn’t the first racino to go upscale. Dover Downs has done that in Delaware. That property sports gourmet restaurants, a spa and a destination resort-quality hotel. For a long time, Dover Downs produced strong gaming numbers. Its performance, however, has been damaged by the proliferation of regional competition, especially the opening of Maryland casinos. For a property that got more than half of its business from states to its west, DDE was especially vulnerable. Still, the nice hotel, restaurants and resort amenities allow Dover Downs to remain a getaway for residents of the surrounding cities of Baltimore, Washington and Philadelphia. The next experiment will come later this year when Pinnacle opens its $209 million slots casino at River Downs outside of Cincinnati. PNK expects the property to perform strongly, and also to act as a feeder to Belterra, its destination-quality resort in southeastern Indiana about 30 miles west of Cincinnati. In short, as Hard Rock’s rocksino appears to be showing, the upscaling of slots casinos can make them competitors to full-fledged casinos.

WOW MACAU! There’s a reason the stocks of all six Macau casino operators are soaring in Hong Kong and New York, and why the founders of Galaxy Entertainment, Las

Vegas Sands and Wynn Resorts keep climbing in Forbes’ list of billionaires. Gaming revenues just keep soaring, regardless of any worries about the Chinese economy. In February, for example, revenues jumped 40.3 percent over last year to $38 billion, breaking the record set last March, which had three more days. An early Chinese New Year helped. It meant casinos got both the tourist spike during the holiday and the rush of VIP gamblers afterwards. Some of those VIPs came in March last year. A case can be made that there’s still time to jump on the Macau bandwagon. Certainly, Las Vegas Sands and Melco Crown appear positioned to take advantage of premium mass-market growth, and Wynn has been transitioning more towards that segment. But there could be other ways to play Macau. Analyst Jake Lynch of Macquarie suggested one of them—Paradise Entertainment. The Hong Kong-listed casino manager and gaming supplier can more than double over the next three years, Lynch says. Paradise will grow by filling the gap caused by the limit on live table growth in Macau, and by expanding into the U.S. and elsewhere in Asia, Lynch said. Paradise makes electronic table games that, while appealing to lower-stakes players compared to live tables, can make up the difference in more hands per hour, Lynch said. Paradise has grown from zero electronic gaming machines four years ago to 1,749 today. But the Big Kahuna is the U.S., where Paradise has placed machines in Las Vegas Sands properties, Lynch noted. We’ll point out that Paradise also has a quality that we like, especially in the casino industry. CEO Jay Chun is a visionary founder who owns 60 percent of the company. Those are qualities that have worked well for companies like Wynn and Las Vegas Sands, and in Macau for Melco Crown and Galaxy. 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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The east side of the Las Vegas Strip has become the place to be

MOVIN’ ON UP By Roger Gros

he epicenter of the Las Vegas Strip is constantly moving. From the 1940s, when Bugsy Siegel arrived to build the Flamingo, the east side of the Strip got all the attention, with the Sahara and Riviera rising soon afterwards. In 1966, it shifted to the west with Caesars Palace and the Dunes, and later the Mirage. The South Strip rose in the 1990s with Mandalay Bay, Luxor, New York-New York and others. Last year, the North Strip took center stage, with construction of SLS Las Vegas getting under way and the announcement of Genting’s Resorts World Las Vegas filling in the Echelon skeleton. But today, all eyes are back to the point of origination. Caesars Entertainment has unveiled a bold new plan to bring the attention back to the east side of the Strip, an area that includes the venerable Flamingo, the renovated Quad (formerly the Imperial Palace) and the new Cromwell (formerly the Barbary Coast and Bill’s Gamblin’ Hall). Tying it all together will be the Linq, a multifaceted entertainment experience that includes bars, restaurants, retail, gambling and the world’s largest observation wheel, the High Roller (at least until one slightly larger opens in Paris in a couple of years). When Caesars consolidated its hold on the east side of the Strip in the early 2000s with the purchase of the Imperial Palace and the Barbary Coast, Las Vegas was at the tail end of the boom it experienced beginning in the early ’90s. Plans were considered to tear down all the existing casinos and build a “CityCenter-like” multi-use development costing billions of dollars. Fortunately for Caesars, the economic downturn hit before any plans could be put 18

Global Gaming Business APRIL 2014

into motion, so other plans for the area were considered while waiting for the economy to turn. And an observation wheel was the answer. Jon Gray was brought over from the Palms to oversee the project, and now that it has opened, he’s turned his attention from development to operation. “Now we get into the details about making the space what it really wants to be with the common area programming, the music, the lighting and the overall feel of the place,” he says. “It’s really a lifestyle center, with the great retail, dining and entertainment options.” Eileen Moore was brought in from Caesars Entertainment properties in the Midwest to the east side of the Strip for Caesars (minus Harrah’s Las Vegas, which falls under the leadership of Caesars Palace President Gary Selesner). Moore has oversight on the Quad, the Flamingo, the Cromwell, the Linq and the High Roller. She believes that the Linq will increase the business on that side of the Strip significantly. “We’ve always had a lot of pedestrian traffic here,” she says, “but not as much of a reason to stick and stay. So unless you were housed here and gambling here, you really didn’t have much of a reason to be a destination or a driver for the market. We know that the Center Strip location is fantastic, and now, that traffic has something to do here.”

East Side, West Side Moore explains that Caesars’ strategy in building the Linq was to upgrade the entire east side of the Strip, where the properties were barely holding their own and

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“It’s really changed, become more state-of-the-art, and we continue to roll out new things. Later this month, we’ll be opening up an electronic table games lounge, so it will be one of the first of its kind, and have an Interblock product that has a hologram that actually deals cards.” —Jon Gray, GM, The Linq capital reinvestment was negligible. That has now changed. It’s most evident with the Quad, which is almost unrecognizable for those who remember the Imperial Palace. “It’s really changed, become more state-of-the-art, and we continue to roll out new things,” says Moore. “Later this month, we’ll be opening up an electronic table games lounge, so it will be one of the first of its kind, and have an Interblock product that has a hologram that actually deals cards, so that’s really cool. We’re also opening up another bar called Squeeze, with fresh cocktails, and it’s adjacent to the Linq, one of the first things that you see. And then a spectacular restaurant called Guy Fieri’s Vegas Bar and Kitchen. Guy is a native Las Vegan and this is his first restaurant in his hometown so this project holds a special place in his heart.” The connections between the Caesars’ eastern Strip properties were tenuous at best. The Carnival Court stood between Harrah’s and the Imperial Palace but there was no “connection.” Now, glass doors invite strollers in from the sidewalk

to where they can enjoy the interior of the Quad before exiting onto the Linq and making a quick connection to the Flamingo through the reborn O’Shea’s, which occupied a similar space next to the IP before the Linq construction. “The legend returns!” quips Moore. “It’s smaller than the original O’Shea’s, which certainly caused some concerns prior to opening, but since we opened it three days before New Year’s Eve, it’s been packed. Local customers—tourists who had come to O’Shea’s and flocked there over the years—have come back, and they really love it, because we kept some of the best elements. And live entertainment every night makes it a great value, so people are really enjoying that.” Moore considers the Flamingo the flagship of these properties. “The Flamingo has over 3,600 rooms,” she explains. “But we’ve been underserved in terms of restaurants and retail offerings. So to be directly adjacent to the Linq is a total game-changer for the Flamingo. We have one of the best pools in town, and that drives our occupancy, for sure. But now we have all of the retail APRIL 2014 www.ggbmagazine.com

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T HINK T THINK THERE HER E IIS S AB BET E T TER T ER A AGENCY? GENC Y ?

entertainment and food and beverages that we’ve really needed to live up to the Flamingo brand.” In addition, a recent expansion of the Margaritaville area of the Flamingo as well as a planned renovation of the property’s casino space will make it one of the hippest casinos in town. Moore says the development of Bill’s Gamblin’ Hall into the Cromwell will complete the wager that Caesars has placed on the east side of the Strip (see sidebar on the Cromwell on page 24).

Linq-ed In

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Global Gaming Business APRIL 2014

The Linq obviously is centerpiece to the east Strip development for Caesars, the home to the High Roller observation wheel, but it’s the ancillary amenities it brings in that will make it a true destination. Quirky shops like Bella Scarpa (“Beautiful Shoes”), the Goorin Brothers hat shop, the L.A. lifestyle boutique Kitson, the Brazilian eyewear shop Chili Beans and others join with stylish restaurants and bars like Chayo Mexicano Grill and Tequila Bar, the Asian fusion F.A.M.E. (Food. Art. Music. Entertainment.), or the Flour and Barley pizza palace to make the Linq a true destination for visitors and locals alike. Gray says there were a few criteria when choosing the shops, but the Linq’s preferred demographic of 21-to-45 was always the guiding principal. “We wanted to bring new to market, and new concepts all together,” he says. “A lot of our owners/tenants are basically entrepreneurial mom-andpop shops, so there were some challenges along the way because of that. But in the marathon that is the Linq, it’s going to be a much better experience for the customer. It’s a place to really explore and find new concepts on the dining and the retail experience.” Gray credits Caesars’ partners in the Linq for much of the success it has seen so far. In the retail space, it was Caruso Affiliated, one of the largest developers of shopping centers in the country. Jackie Levy, Caruso’s executive vice president of operations, says that the Linq was a departure for his company, as much as it was for Caesars. “Given the relationship and the great reputation that Caesars has, we decided to take on the challenge and assist in a consulting capacity, which for us is new,” he explains. “We’ve never really served in

“This is a one-of-a-kind project in Las Vegas. It’s never been done before. And so, we were very focused on bringing unique retailers and restaurants that aren’t already in the Las Vegas market, into the market. And so you see that throughout the property, whether it be Brooklyn Bowl, Kitson, Tilted Kilt, Chayo Mexicano— these will all be new experiences for visitors and locals in Las Vegas.” —Jackie Levy, Executive VP of Operations, Caruso Affiliated

that capacity. Our traditional model is to own and manage our own shopping centers. So it’s really our first time doing it in this capacity, and it’s also our first time venturing outside of Southern California.” Levy says the task was framed by certain parameters. “We were very targeted at the Gen X and Gen Y consumer, and we were also very focused on connecting the Quad, the Flamingo, the Cromwell and then obviously Caesars across the street. And so we feel like the Linq serves as a perfect connection for all of those properties.” Gray says the addition of Caruso was crucial for the development of the Linq. “We were lucky to be able to utilize the talents of the Caruso company consulting on this, along with a great team at Caesars,” he says. “Caruso has got some core tenants like Nike and Abercrombie

A PUREGAMBLI NG EXPERI ENCE CENTERED AROUND W I NNI NG JACKPOTS ToLear nMor eVi si t : now. wms. com/bl adest epper ©2 0 1 4WM S G a mi n gI n c . A l l R i g h t s R e s e r v e d .

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& Fitch, but for us, the choices of tenants were a lot of gut reaction—Brooklyn Bowl, for example. We went to Brooklyn and checked it out, saw the vibe and knew it would fill a void in our marketplace.” Levy says the “new in market” criterion was important to the project. “This is a one-of-a-kind project in Las Vegas. It’s never been done before,” he says. “And so, we were very focused on bringing unique retailers and restaurants that aren’t already in the Las Vegas market, into the market. And so you see that throughout the property, whether it be Brooklyn Bowl, Kitson, Tilted Kilt, Chayo Mexicano—these will all be new experiences for visitors and locals in Las Vegas.” As much as the retail and dining will be important, the Linq takes it to the next level, according to Levy. “You see a common thread in all Caruso properties,” he says. “And that is, we’re very focused on creating a memorable shopping, dining and entertainment experience in our properties. We’re also very focused on delivering 5-star customer service, which is modeled after 5-star resorts. So we created the concierge desk at the Linq, where they offer any service that you would find at any concierge desk at any upscale resort. They will book tickets for some of the shows that are taking place in Vegas, they’ll handle your dinner reservations, transportation… I can’t tell you how many weddings, or, wedding proposals we’ve planned, and I’m sure there’s going to be quite a few more once the High Roller opens.”

Wheel in the Sky Once it started rising, the High Roller began to dominate the center of the Las Vegas Strip. Now completed, the 550-foot-high wheel includes a dazzling light show that is customizable and sponsor-friendly. If you can compare it to its cousins in London and Singapore, its success is almost guaranteed. “The London Eye is the second-most toured attraction next to the Crown Jewels, so we expect the High Roller to draw lots of attention,” says Gray. Like the retail, the partners in the High Roller were crucial. Gray says Arup Engineering was the only construction company capable of building the High Roller, given their experience. He says the “one of a kind” element was very true for Las Vegas. “We had to take into account things that may not have been considered be22

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fore: heat, wind, dry climate,” he says, “things that may not have played a role in London or Singapore.” Caesars also employed the Hettema Group, experts in amusement park and thrill rides, to help craft the High Roller experience. In London, says Gray, the Eye was built as a temporary attraction, and had none of the amenities surrounding it that the Linq offers, including meeting space in the High Roller building that all visitors must pass through before the ride. “We’ve thought about the customer experience from the minute they walk into the building,” says Gray. “There’s an expansive pre-show experience, and as you move toward the cabin, there’s another show. The lighting along the rim is eye-catching. We’ve had some great partners that really created the vision of a vibrant, fun experience, and the lighting and the entertainment are testament to that.” Behind the Linq is 19 acres of surface parking that can be transformed into a fairgrounds, an outdoor arena, a pitch, or any number of attractions. Just days after opening, the Linq hosts the Academy of Country Music’s Party for a Cause, a two-day extravaganza of the best country music acts, headlined by Keith Urban and Rascal Flatts. Marketing the Linq will be just as quirky as its tenants, says Gray. “We’ll be more than just billboards in and out of the market,” he says. “We’ll use digital marketing, social media, experiential marketing, word of mouth and any way we can get the message out about this great new attraction in Las Vegas. The festival itself will have 25,000 people with their cell phones taking selfies with the wheel in the background.” The strength of the Linq, however, is the integration of the best rewards program in the industry, Caesars’ Total Rewards. “That’s a big plus for our customers,” says Moore. “If they’re looking for ways to earn points or spend points, they’ve got a lot more access now to entertainment and retail and dining than they’ve ever had.” Even the non-Caesars shops and restaurants at the Linq are linked to Total Rewards. “They are invested in Total Rewards,” says Gray, “both from an earn and redeem standpoint, so we’re going to be pushing out messages to 45 millionplus names in our database on behalf of our tenants. So we are also totally invested in them.” And that will benefit Caesars in the long run, says Gray. “The Linq was meant to connect our properties, and we think it’s going to be a big success on its own, but a big part of it will be how we convert a Linq customer to a Caesars customer. We are tied into the tenants as they are to us.”

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Location, Location, Location The Cromwell brings a touch of class to a gamblin’ hall

t’s the 50-yard line of the Las Vegas Strip, and with its new hotel, Caesars Entertainment is trying to forge a new identity for an older hotel. From the Barbary Coast to Bill’s Gamblin’ Hall to Gansevoort to Cromwell. That’s the lineage of the new boutique hotel Caesars will open in May on the corner of Flamingo Road and the Las Vegas Strip. While the last change (from Gansevoort to Cromwell) was not anticipated, the brand will become clear when guests experience the Cromwell service. “Regardless of what name it is under, we’ve had the same vision all along, and that’s providing the first stand-alone luxury boutique offering in Las Vegas. So, I find it to be an advantage,” says Karie Hall, the general manager of the Cromwell. Hall, who has seven years of experience working Caesars’ properties on the east side of the Las Vegas Strip, says the Cromwell’s 188 rooms and suites put it squarely into the “boutique” category, but that carries the responsibility of great customer service, as well. “In many larger properties, “In many larger properties, your best guests get the your best guests get the best best experience,” she says. “In our property, every guest will get that experience. So, it’s not for a selective few; it’s experience. In our property, really for anyone who wants to stay at the Cromwell. It’s every guest will get that warm and friendly personalized service, but at a very high experience. So, it’s not for a level, and it’s not stuffy. But it certainly is luxury. I think selective few; it’s really for that’s the biggest difference for us.” anyone who wants to stay at The small size of the property is also an advantage, the Cromwell. It’s warm says Hall. “You get that as you step out of your transportation to and friendly personalized the property, whether it’s limo or car or taxi, and you walk service, but at a very high in, you’re steps away from the reception area, and then level, and it’s not stuffy. steps away from the elevator,” she explains. “So you’re not But it certainly is luxury.” wandering through these large mega-resorts; it’s really very intimate and personalized.” —Karie Hall, GM, Cromwell

Giada De Laurentiis

Clubland One of the main features of the Cromwell will be Drai’s nightclub/dayclub, operated by the legendary Victor Drai, who launched Las Vegas’ first nightclub in the same spot when the property was the Barbary Coast. Hall expects Drai to regain his edge at the Cromwell, and expects the club to be a game-changer. “He thinks about the experience from the moment you walk in, what is your first look, what are the first things you see, how is it visually stimulating. If you’re not at the property, but maybe you’re staying at Caesars, or you’re staying down the Strip, you’ll be able to see what’s going on here, and want to be a part of that. So he really thinks about it all, and we’re very lucky to have him as a partner. And he challenges us as well, in our space, to do that.” Eileen Moore, who oversees most of the Caesars properties on this side of the Strip, says Drai’s is all about visibility. “The space is one of the best spaces that’s available in the market,” she says. “And then to have it on the rooftop and be so expansive—unlike many other clubs, where only a few private VIP tables have the best view, Victor is truly a visionary and designed this club so that the massive amount of people that will go through it will all get access to that view and that experience.” The other noted amenity at the Cromwell will be the first restaurant designed by Food Network star Giada De Laurentiis. Because it’s her first restaurant, Hall says the celebrity chef is paying attention to every little detail. “Giada is amazing,” says Hall, “and she’s been a great partner for us. And 24

Global Gaming Business APRIL 2014

since it’s her first restaurant, she’s really looked to us as well, to give her some guidance. She’s heavily involved, obviously; but even more than that, she really cares about her brand and the experience that she provides. When you walk into the restaurant, she wants it to feel as if you’re walking into her home, and not just a very sterile restaurant environment. So we have a wood-burning stove as you walk in. Her cuisine is obviously Italian, with a California twist on it.”

Upscale on the Eastside The target audience for the Cromwell is more affluent than the rest of the eastside resorts, more like the Caesars Palace customer. With room rates in the mid$200s, service will be the key. Hall says she’s met with each and every employee hired by the Cromwell, and stresses personal service. “Some properties want their employees to be a part of the party with the guests, but we’re here to provide a great environment, to provide that party, and that nightlife, and that great energy, but we’re here to serve,” she says. “It’s a hospitality mentality, and it’s to serve at the very highest level, to exceed expectations, to anticipate need, and to make sure that our employees have that ingrained within them. “It’s a pretty arduous process, but it’s well worth it. If you can create the right culture from the beginning, it makes it so much easier to maintain that and to really build upon it in the future.”

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Global Evolution Backed by new parent Scientific Games, WMS Gaming enters a new global era by Frank Legato

t was one of the most logical—and most talked-about—deals in recent gaming history. WMS Industries, parent of one of the top five slot manufacturers in the industry, would be acquired by Scientific Games, the global lottery giant. This was not the snapping-up of a foundering company by a strong company. This was a merger of two industry giants. WMS Gaming, the slot-manufacturing arm and main revenue-generator of WMS Industries, was on a roll at the time of last year’s big deal, with shipshare soaring thanks to launches of typically innovative new products like the Gamefield xD format and the new Blade cabinet and game format. Scientific Games practically invented the state-sponsored lottery industry as it is today,

Global Gaming Business APRIL 2014

introducing the first instant ticket in 1974 and going on to become one of the main suppliers of the systems that run lotteries around the world. The combination of the two companies creates an entirely different animal, with the strengths of each promising to take each former company into completely new areas. “One of the things that struck us and excited us from our first glance at WMS was how complementary our businesses and capabilities are,” says Bill Huntley, group chief executive of gaming for Scientific Games. “This ranges from core technical capability to jurisdictional reach, to the type of customers we primarily serve. SG brings significant systems capability from our lottery, video gaming central management and control systems (CMCS) business and

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The world has changed, including the gaming world. Traditional markets are peaking and new global markets are emerging. To meet the demands of this new reality, the ‘one size fits all’ approach will no longer work. Different world markets demand content that matches their cultures and the gaming preferences of their region. Bill Huntley, Group Chief Executive of Gaming, Scientific Games

U.K. betting shop businesses. “We have a global footprint of nearly 50 countries, and our customers are largely government agencies. WMS is one of the top gaming machine designers and manufacturers in the world.” Huntley’s gaming division, which oversees WMS Gaming’s casino industry business, is one of three vertical groups within Scientific Games created by the merger. Gaming, Lottery and Interactive divisions each have their own chief executive, all reporting to corporate CEO David Kennedy. “This is a cleaner, more logical organization than we had before,” says Huntley. “It’s less confusing for our customers, allows each of us to be more focused on our particular gaming sector, and is more efficient and effective.” In the end, the Scientific Games/WMS merger is clearly a case of the whole being greater than the sum of its parts. “We are now a bigger, stronger company with nearly $1.6 billion per year in revenue,” Huntley notes. “Collectively we have technical and operation centers all over the world. There are economies that come with scale, and they are not always measurable in financial performance, although we certainly expect to reap the benefits in this regard.” “This merger creates new synergies and gives us a broader perspective on the industry, which pays off for our customers in a wider range of solutions and services,” adds Brooks Pierce, who, as chief revenue officer for gaming, oversees sales, marketing and gaming operations for the company. “We can and will leverage the separate and distinct core competencies of each organization to build a company that is uniquely equipped to respond to the market.”

Expanding WMS One of the most important core competencies, of course, is the business of keeping WMS Gaming in the elite group of top slot manufacturers. Casino products like the “Wizard of Oz” and “Monopoly” franchises, core slot games like “Reel ‘Em In,” “Jackpot Party” and “Gold Fish,” and unique technologies like the Sensory Immersion Gaming series, the Player’s Life Web Services technology and groundbreaking cabinet styles have sustained the popularity of the company’s content. Scientific Games’ plan is to use its own global presence to expand the best of WMS content to new markets across the globe. That means new game studios, expansion of marketing to places like Australia and Asia, and game design tailored to individual markets.

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“I think most people in this business would say that WMS makes great games, and of course they do,” comments Huntley. “But they have largely taken a ‘one size fits all’ approach to content creation. This may sound critical, but it’s really not. It was the right approach in the heyday of this industry and drove WMS to be one of the fastest-growing companies in the country by 2007. “But the world has changed, including the gaming world. Traditional markets are peaking and new global markets are emerging. To meet the demands of this new reality, the ‘one size fits all’ approach will no longer work. Different world markets demand content that matches their cultures and the gaming preferences of their region.” The solution? Keep doing what WMS does best, but tailor the innovations, themes and game features to each individual market. “Since the transaction, we’ve been able to have a much more global perspective on the business,” says Phil Gelber, senior vice president of product development at WMS Gaming. “WMS was a very North American-focused company, where North America came first and the rest of the world was secondary. The biggest change now is that we’re looking at everything from a much more global perspective: how we can target these markets we’re not currently in, and how we can make content that’s catered toward those markets.” Gelber says this will manifest in interesting new slot products in the coming year, “with a more international flavor coming from WMS than you’ve seen in the past.” The game design regime is adapting to this new global reality as well. “We’ve grown a couple of new studios focused on those international markets,” Gelber says. “We’ve doubled the size of our Australian office over the last couple of months. We’ve also integrated the Scientific Games U.K. team, which is the old Barcrest team, and the Global Draw team in with the WMS game design team.” U.K.-based Barcrest has been responsible for some of the most popular slots in the casino sector, games adapted for former partner IGT from AWP amusement games into hits like “Top Dollar.” The Global Draw, acquired by Scientific Games in 2006, provides server-based gaming terminals and digital gaming solutions to betting shops in the U.K. “We’re thinking as one worldwide organization,” Gelber says. “We’re absorbing the whole Scientific Games perspective because they’re the expert in a lot of areas like the (betting systems) in the U.K. in which WMS didn’t really have expertise.” Dean Ehrlich, senior vice president of global gaming operations for WMS, APRIL 2014 www.ggbmagazine.com

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The WMS Blade cabinet

adds that the merger allows the slot-maker to provide its content globally, through a maximum number of channels and in a variety of venues, both landbased and digital. “(Scientific Games) has done an excellent job of allowing our product development team to focus on the entire world with a more targeted global approach,” he says. Pierce says the global approach will capitalize on what both companies brought to the merger table. “Scientific Games originally was focused on how to combine SG and WMS for maximum operating and financial efficiency, and that was how we modeled the transaction,” he explains. “As we completed our integration planning, it quickly became apparent that we had enormous potential revenue synergies. We have synthesized these into key initiatives that we are closely tracking and monitoring, and which we expect to generate significant revenue growth for us over the next few years.” Part of that effort will be to capitalize on the relationships that have been built by each company over the years. For Scientific Games, that means spreading WMS content not only to global lottery markets—instant tickets and online lottery systems are already sampling the first WMS content—but to the parimutuel racing industry. (Scientific Games’ first merger, in 2000, was with Autotote Systems, a leading provider of race wagering systems. Autotote was sold to Sportech PLC in 2010.) “Scientific Games has historically been in the lottery business and, until a couple of years ago, the racing systems technology business,” notes Pierce. “We know these people well, and have strong historical relationships with them. Many of those customers have diversified into gaming operations, so in that sense it has been easy. “But it’s also clear that there were a number of key casino operators we did not know. Both Bill Huntley and I have been on the road quite a bit getting to meet some of these customers and have conversations about SG and our goals and aspirations for WMS. The feedback has been terrific. We sense a genuine enthusiasm as these customers recognize that we really want to keep and grow the innovation component of WMS, but also want to be laser-focused on our customers’ unique issues.”

Focus on Innovation That “innovation component” has been a hallmark of WMS since former Chicago pinball king Williams produced its first slot machines in the 1990s. Intense competition in recent years caused the company to up its game, and over the past year, ship share has surged thanks to some groundbreaking new game styles. On the heels of successful games like “Willy Wonka and the Chocolate Factory” and “Spider-Man”—in the Sensory Immersion 2.0 series incorporating the company’s “Motion Chair” for a virtual-reality slot experience—the company launched the Gamefield xD format, which places one 32-inch portrait monitor in front of the player horizontally—not unlike a pinball machine— with another 32-inch screen forming the vertical top box, to create a giant, interactive “game field” on which animation can extend seamlessly between top and bottom screens. The format has brought movie-themed games like “Beetlejuice” and the latest in the blockbuster Wizard of Oz series alive, recreating scenes from the films to the delight of patrons. Last year, the company introduced the Blade cabinet, a new format for core games, and the company had another hit. “Gamefield and Blade have been hugely successful,” says Allon Englman, senior vice president and chief design 28

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officer for WMS Gaming. “These cabinets were well-accepted by the players, and the content really works on these formats. They’ve been two of the more successful launches in the last year in the industry.” As of press time, Blade was host to nearly 50 approved games, and the fifth game on Gamefield xD—a new version of “Clue,” based on the whodunit board game—was looking like the slot-maker’s newest success story. The development of these products was the result of intense market research—the WMS team engaged players and operators for feedback at every step of the way. As a result, features were developed for the Blade cabinet that resulted directly from player and operator comments. “Wager Saver,” for instance, addresses an issue brought up by both operators and players—fractional amounts left on credit meters that result in cash-out tickets worth less than a minimum bet. Wager Saver allows the player to transform that 28 cents or 30 cents into one spin at the bet of the previous wager. “Bonus Guarantee” eliminates bonuses in which the player wins nothing or next to nothing, making the player whole for 10 times the bet as a bonus award. “We definitely listened to both the operators and the players coming up with these features,” says Gelber. “We showed a couple of new features this year at G2E to address some of the other concerns we’re hearing. We’ll continue to always listen and adapt as we go forward.” “WMS was the pioneer of market research in the slot business,” says Englman. “We’ve been doing it longer than anyone else; I think we’ve got the best expertise out of anyone in the industry. “And out of all the products we’ve ever done, Blade was the most researched. From hardware and software, all aspects were researched multiple times—not only pre-development, but in development and post-development. We’ve already made on-the-flight changes to the software based on in-market testing we’ve done with players.” “Research is definitely part of our process,” says Gelber. “I’ve been at WMS 13 years, and when I walked in the door, that was the first thing that really helped me ramp up on this industry—talking to players. We’re constantly talking to players and operators, so as not to have our opinion be the only one going forward as we design these products.” WMS has translated the Blade treatment to the stepper area as well, recently releasing the first three games on Blade Stepper 3RM (for three-reel mechanical). According to Englman, the first group of Blade Steppers targets the traditional high-denomination stepper player. He says the company focused on simplicity, traditional math and a very bright, colorful display, but also on including at least one feature in each game to spice up the classic reel-spinning experience. For instance, a maximum five-coin bet on the game “Roll 7 Progressive” triggers a roll of dice after every winning combination, with a chance to win one of the progressive jackpots corresponding to each possible dice result. “AfterShock” adds a random element granting a series of free spins with guaranteed winners after random spins. “777 Wheel Hot” spins a wheel for an extra bonus after any “7” win. Later this year, a series of low-denomination steppers on the Blade cabinet will

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We continue to talk to those (younger) players, and look at brands that will appeal to those players. Iron Man definitely falls into that non-traditional slot brand. But it’s also about game mechanics. They’re used to much more interactive experiences; they’re used to big 3D graphics playing Xbox growing up. Those are things we definitely can deliver. The big challenge is getting those players to sit down in front of slot machines, because slot machines are their dads’ game, not their game. —Phil Gelber, Senior Vice President Product Development, Game

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Development Management

be released. “We wanted to keep things traditional on the 3RM games, to give players who like the simpler experience exactly what they wanted,” says Englman. “So, we focused on simple game mechanics and a visual hardware display that’s very bright and easy to see. It’s a very simple interface, but then, we managed to develop some interesting types of features in these launch games.” Again, the strategy came from research. “We deal with the customers all the time, and they tell us their players want new high-denom games, but they aren’t getting anything new and interesting,” says Gelber. “At the same time, they want something that’s in their comfort zone, with a little something extra. Those are the games we designed at the launch, and as the platform evolves, you’ll see much more innovative game designs for that high-denom space.” The new hardware platforms have been major hits for WMS, according to Ehrlich. “If you look at our ship share since we introduced Blade early in calendar 2013, the rise was very significant,” he says. “We’ve garnered significant traction from the Blade product. The performance was stellar out of the gate, and continues to be so. We also introduced our Gamefield cabinet in February 2013, and we’ve placed over 2,000 units. Those two platforms have been heavy hitters for us.”

New Players, New Markets With the talent, the technology and the relationships that have merged to create the new Scientific Games and, by extension, the new WMS, the new powerhouse of the supply sector is well-positioned to both capitalize on and create the next generation of casino games. For WMS, that also means catering to the next generation of players, as the company joins others in the slot sector in determining how to best serve the younger player demographic. Englman says serving the 21-35-year-old player with new products means not only brands that appeal to them, but different play styles. “Taking a more modern spin on brands is one way to serve the (younger player),” he says. “Hardware is another.” He offers Gamefield as an example. “Gamefield creates a new way to interact; isn’t just your grandmother’s old slot machine,” he says. “I think different kinds of game play that aren’t necessarily spinning reels, creating new game play styles, is what young people are interested in.” “We continue to talk to those (younger) players, and look at brands that will appeal to those players,” adds Gelber. “Iron Man definitely falls into that non-traditional slot brand. But it’s also about game mechanics. They’re used to much more interactive experiences; they’re used to big 3D graphics playing Xbox growing up. Those are things we definitely can deliver. 30

Global Gaming Business APRIL 2014

“The big challenge is getting those players to sit down in front of slot machines, because slot machines are their dads’ game, not their game. The challenge is designing games that are literally outside the box of what spinning reels are, to get them to sit down and play those games and gamble on those games. That’s something we’re very focused on. I don’t think anyone has the turn-key solution to pull those players in, but as an industry, I think those are the players we need to focus on.” Serving the future also means spreading content to the channels on which the younger demographic lives—mobile devices, social networks, the internet in general. (See page 32.) “I think the slot machine will continue to be a relevant player gaming channel for many years to come,” says Huntley, “but it will have to evolve as part of the personalized relationship that many businesses provide their customers today. In order to reach the younger generations we must first go where they spend their time, and that is on their mobile smart phones. “In some jurisdictions, this may mean playing directly on their mobile device. In all jurisdictions, it will mean devising ways to interact with them on their devices with social tie-in, escalating game play experiences that culminate on the casino floor and other incentives and introductions to an enjoyable and entertaining gaming environment that can be tailored to the likes of each and every potential player.” For WMS, the Scientific Games connection means a smooth transition into more world markets in the near future. “To give you one example, we recently issued a trade release on our new strategy for the Australian market,” says Pierce. “We are now selling direct instead of through a distributor, and have committed to an additional studio based in Sydney to develop games specifically for the Australian market. We are getting some early positive feedback, as it is a great regulated market and the customers there seem happy to see us fully engaged. “We’re also excited about opportunities throughout the rest of the world. We are now selling direct in Peru with great results. We have a very big lottery-based business in China, and we feel that helps us understand the Asian player better, and we will be going after the Asia Pacific market aggressively with some new games that will appeal to that market. Last but not least, we see Europe starting to get some traction, and the results from the recent ICE show in London give us confidence that we will have lots of opportunities there as well.” Huntley says the challenges and opportunities for WMS, and Scientific Games in general, are one and the same. “Our challenge is to draw on our broad range of products, skills and capabilities to meet the needs of a bigger and changing world of gaming,” he says. “Our opportunities lie in successfully meeting these challenges.”

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The ‘i’s Have it Williams Interactive spreads WMS content across multiple channels

es, WMS Gaming has always had great physical contraptions to go along with its slots, but what has really driven the company’s fortunes has been the content that goes with all that flash. Long before there was a Gamefield xD cabinet, a Motion Chair or Sensory Immersion, players gravitated to WMS games like “Reel ‘Em In,” “Jackpot Party” and “Gold Fish.” Now, the company has made sure that content will travel wherever players travel. That’s where Williams Interactive comes in. Williams Interactive was formed as a subsidiary of WMS in 2012 for the sole purpose of taking the company’s content to online, mobile and social channels. It is now one of the three main operating groups of new WMS parent Scientific Games. “Our challenge is to find new distribution channels for proven content,” says Orrin Edidin, group chief executive of Williams Interactive. “So, when we produce a hit movie, so to speak, that we know is a proven performer on casino floors, it’s incumbent upon us to monetize that content in channels other than the traditional bricks-and-mortar casino channels.” Williams Interactive spreads WMS content to legal online casinos internationally and, more recently, in the nascent U.S. iGaming market. WMS Gaming’s first foray into interactive gaming actually came in 2010, with the creation of a B2C site called JackpotParty.com, which Edidin said was done as a “proof-of-concept” effort to see “if we could successfully translate proven Vegas-style slot machine content into the online space, because no one had really had any success in doing so. (JackpotParty.com ceased operations in late February, and players were migrated to SlotsMagic.com, a new casino powered by gaming operator SkillOnNet.) “That proof-of-concept ran very successfully, and we have since refocused our efforts on the distribution of content more widely in a B2B format.” In 2012, the Williams Interactive subsidiary came to life thanks largely to the WMS acquisition of Stockholm, Sweden-based Jadestone Group, a game developer specializing in mobile and online channels. “They’d done a lot of work with the Scandinavian lotteries providing multi-player games like backgammon and various indigenous forms of card games, and poker games for the Italian and Scandinavian markets,” Edidin explains. “They were far, far advanced in terms of their integration capabilities and skills; they had the server infrastructure up and going. When we got to know them and began to work more closely with them, it became a pretty natural cultural fit as well. They helped us not only jump-start but leapfrog our capabilities in that space.”

SOCIAL SPACE In addition to distributing WMS content across legal for-money channels with licensed operators in New Jersey and Delaware in the U.S.—Scientific Games is the Delaware Lottery’s lead vendor in the state’s online gaming program— and through international operators licensed in Gibraltar, Malta and elsewhere, Williams Interactive is blossoming in the social gaming space with its Play4Fun Network B2B social offering. The company first entered the social space in 2012 with the play-for-fun Jackpot Party Casino on Facebook. Williams Interactive has since evolved this into Play4Fun, a white-label platform that can be branded by brick-and-mortar casinos to build an online following where iGaming is legal or not yet legal.

Global Gaming Business APRIL 2014

“Casinos can cross-market back and forth between the land-based and social games—or their customers can play for fun at home or on their mobile devices, and then bring that experience back into the casino.” Orrin Edidin, Group Chief Executive , Williams Interactive

“Play4Fun helps operators leverage into a massive distribution channel that begins with the pure logistics of a channel like Facebook, and its 1.2 billion active users,” Edidin says. “We wanted to be able to replicate that experience and success for our land-based customers—some of whom are waiting for (iGaming) legalization in the U.S., some where it’s already legal, but where players are looking for a play-for-fun alternative more and more.” Edidin says Play4Fun gives operators a marketing channel specifically targeting members of their player databases who are active users of social media, using the operators’ own brands. “They can market directly to their players and attract new players,” he says. “Play4Fun is integrated into their branded loyalty system, and casinos can cross-market back and forth between the land-based and social games—or their customers can play for fun at home or on their mobile devices, and then bring that experience back into the casino.” The relationship between iGaming and land-based gaming, Edidin says, is key to the Williams Interactive business model. “We know our land-based customers are desperate to have greater access to their players, not just when they’re on site, but to be able to market to them directly at home, when they’re on their mobile devices, to give them an experience that goes beyond the four corners of the casino,” he says. The Scientific Games merger adds one more channel, and it’s a big one: lotteries. “We talk a lot about channels of distribution, but one of the largest channels that doesn’t get a lot of attention is B2G—business to government,” says Edidin. “And Scientific Games is first and foremost in the B2G business.” In other words, Williams Interactive is now on every channel.

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MERGER How the M&A activity in the gaming industry has changed

he pace of mergers and acquisitions in the gaming industry has accelerated over the past two years to the point that any day can see another deal announced. Unlike past cycles, there is no single predominant theme. Deals are happening for every reason: buying growth, consolidating fiercely competitive markets, achieving strategic objectives, taking advantage of low valuations, monetizing assets, technology convergence, and its related phenomenon, business model convergence. As might be expected by such diverse motivations, the companies involved run the gamut—casino companies like Boyd Gaming, suppliers like IGT, traditional horse-racing companies like Churchill Downs, upstarts like Amaya Gaming, real estate investment trusts, and even non-gambling companies like GSN Games. The backdrop for all of this activity is a contrasting—if not ironic—one: a maturing brick-and-mortar gaming industry in the United States forcing down casino valuations, while rapidly evolving technology and business models prompt companies to jockey for position in a new world taking form.

Releasing Value, Monetizing Assets U.S. regional casino companies have never been highly valued. Born of junk bond debt and always susceptible to legislative whims that undercut their business plans, regional companies historically have sold at six, seven or eight times EBITDA. Comparable companies in lodging sell at 10 and 12 times. Entertainment companies fetch even higher valuations. Penn National addressed that gap by creating a separate publicly traded company, Gaming and Leisure Properties, as a real estate investment trust, or REIT. The REIT will own most of the properties where PENN operates and become PENN’s landlord. But the big potential for GLPI is to take advantage of low equity prices by acquiring other casinos and leasing them back to their former owners to operate. Several analysts estimate that there is as much as $10 billion worth of casinos that can be bought. Renting out properties gives GLPI a predictable revenue stream and allows owners to monetize their assets in a low-valuation environment, while still operating their casinos. 34

Global Gaming Business APRIL 2014

By Frank Fantini

That, at least, is the theory. If it proves out, many privately owned casinos will be sold, other gaming companies will consider spinning off REITs or property-owning entities, and non-gaming REITS will move into the space.

Strategic Opportunities The blockbuster deals of the past two years were Scientific Games (SGMS) buying WMS for $1.5 billion and Bally Technologies (BYI) buying SHFL entertainment for $1.3 billion. In both cases, the acquiring companies greatly expanded their businesses into new sectors, in effect remaking themselves into broader competitors. SGMS, a lottery company with a growing slot-like machine business in the United Kingdom and elsewhere, acquired a proven slot machine company with an ambitious interactive gaming business. BYI, a legendary slot machine company with a very strong systems business, instantly became the world’s biggest table game and automated card shuffler company. Further, BYI bought a company that leases most of its products, thus injecting a strong dose of recurring revenue. And it acquired a company with a much stronger international presence, giving BYI a global sales platform and an unparalleled cross-marketing opportunity. One of the big words used in an acquisition is synergy. Usually, synergy is a euphemism for cost-cutting as companies consolidate operations and eliminate redundant operations. In the case of Bally-SHFL, those synergies were put at a minimum of $30 million a year. SGMS expects $120 million. However, both Bally and Scientific Games expect to grow sales through their purchases, which is partly what makes them strategic.

Way Too Crowded In Here It is no surprise that the biggest deals have involved gaming suppliers. The space has become very crowded, and is becoming more so every day. Not long ago, the industry had a Big Three in North America—IGT, Bally, WMS. Then Aristocrat expanded and it became a Big Four. More recently, Konami Gaming, a division of deep-pocketed Konami Corp., has grown into what some now call a Big Five. Aruze, another division of a deep-pocketed Japanese company, wants to be among the top three. European giant Novomatic is moving ambitiously into the U.S.

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Australia’s Ainsworth is displaying its American ambitions with a giant new facility in Las Vegas. Ortiz has moved in from Latin America. Class II suppliers moving aggressively into the larger Class III world of commercial casinos include Multimedia Games and American Gaming Systems. Incredible Technologies is transitioning from the declining world of arcade and coin-in industry to the more viable gambling industry. If it was true, as often stated in the past, that consolidation must come because the costs of running a broad gaming supplier company were too great to be supported by small market share, then that truth is even more acute today. Something will have to give, which suggests some big fish will be dining on small fish in the not-to-distant future.

Interactive Gaming And Convergence Interactive gaming is changing everything. Formerly unexciting bookmakers like William Hill are now trendy online operators gone global—in part because of acquisitions of Australian online companies and U.S. sports books. Other companies, like young Amaya Gaming, are offering their own online platforms, as in its $33 million acquisition of OnGame poker network. And the social gaming space is just plain alive. For the gaming industry, the deal that caught everyone’s attention was IGT buying social gamer DoubleDown for $500 million two years ago. At the time, IGT was criticized for paying a steep price for the most popular social gamer on Facebook. IGT overpaid. There is no barrier to entry. Prices for competitors such as Zynga were collapsing, the critics said. Since then, DoubleDown has grown rapidly in both number of users and revenues, reaching profitability. Today, analyst Dave Bain of Stern Agee says, DoubleDown might be worth $1.1 billion. Even at a value of $800 million others consider more likely, IGT’s return is 60 percent in two years. More recently, casual gamer GSN Games bought Bash Gaming up to $170 million, or an estimated three to four times sales. Bash operates social Bingo Bash and reportedly was being sought by gambling suppliers, as well. All of which leads to the issue of technology convergence and the situation in which all companies—casinos, suppliers, online platform and software providers, online betting shops and casino companies, lotteries—try to position themselves in a world so fluid where none can plant their feet firmly. This convergence and fluidity mean that companies will grow into a little bit of everything, just like William Hill transformed from an operator of betting shops in Britain into an international company with online sports books, casinos and mobile apps.

Buying Growth Not all M&A will be driven by sexy new technologies or transformational business models. Sometimes, just buying a business with growth potential will work. Two successful practitioners of this tried-and-true approach are Boyd Gaming and Churchill Downs (CHDN).

Global Gaming Business APRIL 2014

BYD’s most recent purchase was the $1.3 billion acquisition of privately held Peninsula Gaming, which owns casinos in Iowa, Kansas and Louisiana. Churchill Downs came to be a buyer from a different perspective. It wanted to diversify away from being a pure horse-racing company into being a growth company in the broader gaming industry. BYD CEO Keith Smith recently made clear that the company continues to keep an eye open for acquisitions that, as he said, are a good fit, reasonably priced, and can be integrated into BYD’s national network. However, BYD has reached a size that makes it more difficult to find available properties of the quality and scale it now requires, he added. CHDN, on the other hand, has smaller targets, like recently acquired Oxford Casino in Maine. Thus, CHDN has a target-rich environment. Other seekers of small properties that proliferate in regional markets are Full House Resorts and Monarch Casino. And, of course, there is Gaming and Leisure Properties.

They Gotta Sell Sometimes, casinos have no choice but to sell thanks to their financial condition. The most famous current such case is Revel Casino in Atlantic City. Built at a cost of $2.4 billion, Revel has had co-founder Morgan Stanley walk away from its investment, debt restructured down through a bankruptcy reorganization, and now is on the sales block again. Speculation is that Hard Rock International and Caesars might be interested in purchasing Revel, though, one can expect, at a fraction of $2.4 billion. A couple of leftovers from the Great Recession present similar possibilities. At some point, Deutsche Bank will want to get out of the casino business and sell Cosmopolitan Las Vegas, and for what surely will be less than the $3.9 billion project cost. Likewise, Carl Icahn bought the $2.9 billion Fontainebleau Las Vegas for $156 million with the idea that someone would eventually be willing to pay more to buy the project and complete it. Such a deal already has happened with Genting buying Boyd’s multibilliondollar Echelon project for $340 million. Genting got $900 million in infrastructure already built by Boyd and will invest $2 billion-plus building a mega-resort themed on ancient China. With Las Vegas rebounding, Fontainebleau’s day might be nearing for a similar purchase. Put all together, there are lots of reasons for M&A to be a major theme in the gaming industry for at least the next several years.

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ARE YOU BEING

SERVED?

Not too long ago, server-based gaming was considered the wave of the future in casino gaming. That wave has yet to break.

What happened? By Marjorie Preston

ack in 2007, server-based technology was poised to become the next big thing in gaming. In April of that year, when Nevada regulators OK’d IGT’s server-based system, then-Deutsche Bank analyst Bill Lerner told investors the industry was “on track for widespread server-based gaming implementation” by 2009. Enthusiasm for the technology was understandable. With server-based gaming, slot machines could be easily and invisibly reconfigured from a centrally based “mother ship.” With the ability to quickly download any game to any machine on the floor, operators could serve more players with fewer machines, minimize dead zones, and maximize revenues. The systems would be intrinsically more efficient, enabling operators to quickly change denominations depending on the time of day and level of play. Because the works would also be centrally based, operators would need fewer slot technicians to monitor and maintain the inventory. In theory, it all made great sense. Players could get what they wanted, when they wanted it, each time they walked on the floor. Casinos would save time,

Global Gaming Business APRIL 2014

labor and space, and theoretically expect to make more money per square foot. By creating a truly fluid and customizable gaming environment, proponents said, server-based technology would revolutionize the industry.

Timing Is Everything Five years later, the U.S. gaming industry has yet to buy in to server-based systems, at least on a big scale. What happened? Part of it was timing. Months after Lerner’s prediction, the economy tanked. By 2009, when server-based systems were supposed to have become the norm, the industry was in survival mode. Operators didn’t have the inclination or the capital to make the switch.

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With server-based capabilities, “casinos can hit that switch any time of the day or night, given certain parameters based on the regulations of their jurisdiction, but it may create a perception of mistrust or uncertainty on the part of the players.” —Frank Neborsky Former VP of Slot Operations, Mohegan Sun

Not to mention, they had made big investments in cashless technology just a few years earlier. “Casinos were reluctant because they would have to buy a whole round of slot machines, and they had just done that with ticket-in/ticket-out technology,” says Todd Eilers, of Eilers Research, a California-based gaming advisory firm. “Then you ran into the recession in 2009. It was certainly not going to happen—then no one had any money.” In fairer economic weather, server-based technology might have been an easier sell, suggests Frank Neborsky, former vice president of slot operations at Mohegan Sun. “You can use a server-based platform to constantly rotate in the newest games, the newest models, the latest technologies offered by the manufacturer, and it may increase the win-per-unit or the handle you’re seeing for that game.” But in tough times, when every dollar counts, “that incremental value is not something that’s new to the property; it’s just pushing dollars around the floor,” Neborsky adds. “In a business environment that’s flat—where just staying even-keel is the new ‘up’—the cost, the work and the overall value of what server-based technology brings to the industry did not warrant the cost.” One benefit touted by manufacturers was the ability to easily manage yield; a single machine, for example, could go from a penny slot on Tuesday or Wednesday to a dollar slot on weekends, when demand is usually higher. Using a server-based system, casinos could also adjust hold percentages to offset cash giveaways and other incentives. The problem could come if players catch on. There might be more risk of this in a locals market, with customers who come in all the time, says Neborsky. “It’s a slippery slope when manufacturers start selling the idea that you can instantaneously manage your denominations for a weekend or hold percentage for a promotion. People always say, ‘I was winning until that attendant or mechanic came up, opened the door and flipped the switch.’” With server-based capabilities, “casinos can hit that switch any time of the day or night, given certain parameters based on the regulations of their jurisdiction, but it may create a perception of mistrust or uncertainty on the part of the players,” says Neborsky. “The casino has made a yield-management decision to try to either make more money or change the complexion of the floor for a weekend or special event. But that could alienate certain local customers or frequent players that aren’t used to seeing that kind of change happen so quickly.”

Too Much, Too Soon Another early obstacle to SBG was rivalry among the manufacturers. The big companies—IGT, Bally, Aristocrat, WMS, Konami—didn’t want to work together within a universal system. Because no single system could download and communicate with all the games in a server-based environment, an operator faced the prospect of installing different networks to support the bidirectional communication and transfer of data from the server to the floor. “You almost needed a company that’s like Switzerland,” says Neborsky, “where they have a server and a network that communicates agnostically to all the games.” Luke Alvarez, founder and CEO of U.K.-based Inspired Gaming, a leader in server-based games, notes the “slightly oligopolistic” mindset of suppliers in the U.S. who didn’t want to work together. “Everybody wants to be the master system; they don’t want to interoperate so their games end up being just a piece of content on somebody else’s. Because there was no open ecosystem, server-based didn’t actually generate more income either. It was more expensive, it didn’t make more money, and then there was a recession. So it didn’t get traction.” Yet another hindrance was the mixed vintage of slot machines already on the floor. Older machines, which can occupy up to 50 percent of an established casino floor, couldn’t be retrofitted to a server. Leased games, which occupy about 8 percent of the floor, also were not subject to change. And then there was the dizzying array of choices. What initially was perceived as a benefit—a library stocked with hundreds or thousands of gaming options—actually had a downside. “What we recognized was that when patrons go to a casino, they don’t necessarily want to sit in front of a bunch of dummy terminals and be presented with 150 choices,” says Eilers. “It never really made sense. In your destination resort-type markets like Las Vegas, the look and feel of the slot machine, the signage, all of that still very much matter. So that was a big impediment to get downloadable game technology to make sense.” Alvarez agrees that the technology is less meaningful in mega-resorts with hundreds or thousands of machines. “The economic case for server-based, which is about multi-game menus and continuous weekly or monthly updates of games, is less compelling and less impactful,” he says. “When a player gets bored with a game, he can move 10 meters to the right and find another machine with a new theme. You don’t APRIL 2014 www.ggbmagazine.com

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“Bally has their iVIEW DM. IGT has their Service Window. Aristocrat has an equivalent picture-in-picture technology as well, nComment. That’s one area of server-based gaming that actually has moved forward and is being utilized, and there’s an ROI to be had on the casino operators’ side.” —Todd Eilers, Eilers Research

necessarily need server-based to deliver novelty and innovation. “But if there are only five, 10 or 20 machines in a venue, then server-based can powerfully impact the incomes by constantly updating the content over the network.” For that reason, server-based technology may make less sense in major U.S. jurisdictions. But it is prevalent, even dominant, elsewhere around the globe. “If you look at the U.K., with a total market of about 150,000 gaming machines, probably a third of those are now fully server-based, downloadable, multigame machines,” says Alvarez. “If you look at the Italian market, which is probably 350,000 machines, just short of 60,000 of those are now fully servedbased.” The Greek market, he adds, has mandated “central determination and full server-based download.” Over time, that level of saturation could lead to a tipping point for serverbased gaming, and knock down the remaining barriers to entry in the United States. “It’s happening emphatically in a number of existing European and emerging gaming markets,” Alvarez says. “I think it will be slower to the Strip and other markets because of the incumbent suppliers and the size of the floors. But I think we will see it gain traction in the U.S.”

Where It’s Working Though downloadable games have yet to catch fire in the U.S., aspects of serverbased technology are “alive and well and operating on the floor right now,” Eilers says. “A perfect example of that is player communication technology. All the major casino systems providers have this sort of technology. Bally has their iVIEW DM. IGT has their Service Window. Aristocrat has an equivalent picture-in-picture technology as well, nComment. That’s one area of server-based 40

Global Gaming Business APRIL 2014

gaming that actually has moved forward and is being utilized, and there’s an ROI to be had on the casino operators’ side.” This technology creates attractions like floor-wide bonus games and sweepstakes tied to player’s clubs. It enables patrons to buy drinks or purchase show tickets through the game screen; it also allows casinos to talk back with promotional offers, card offers, bonuses, and the like. “So basically, a casino can take over the whole game screen and say, ‘You’ve won a free bonus round or free bonus game,’” says Eilers. “The nice thing about this is, it’s marketing dollars, it’s not actual game play. So the casino can make it look like you’re playing a random game, but the reality is you’re going to win. The casino is going to give you what it would have given you anyway, but in the form of playing a perceived game. There are things like that you couldn’t do three to five years ago.” At certain levels, players can be entered in floor-wide slot tournaments “with the flip of a switch. Things like this are actually making their way onto the floor because there are actual practical reasons for them, they make sense and it’s useful to casino operators.” Again, the age of the slot inventory prevents some casinos from installing this technology across the board, “but there is reasonable penetration,” Eilers says. “You should be able to put some kind of player communication technology on at least half of your floor, or in newer casinos, like 60, 70 percent.” Newer casinos also are employing downloadable games to a greater extent. At Revel in Atlantic City, which opened in 2010, about 40 percent of the slot floor is managed by a central IGT system. It’s proven to be an advantage, says George Mancuso, vice president of slot operations at the re-

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sort, who cites “five big things” he likes about server-based gaming: “the ability to react to a player’s request; the ability to be first to market (with new games); variety; performance; and conversion.” “We have the ability to honor player requests by uploading programs on demand, and it only takes a minute or two,” Mancuso says. “We can be first to market with the newest games, and that gives us a competitive advantage. The third thing is variety. Some of these games that are serverbased games can offer one single theme or 100 themes on that box.” And monthly maintenance fees cost far less than a typical conversion, which can run about $3,000 on average, Mancuso adds. The performance of Revel’s server-based slots has been impressive, Mancuso says. “We monitor these games, and typically they do perform 30 percent above house average. It improves our performance and efficiencies and leads, in our opinion, to a competitive advantage.”

What’s Next? Back in 2007, when Lerner said server-based gaming would be widespread within two years, he added a caveat, expressing “general concerns… with respect to the timing of server-based gaming.” Whether Lerner was foreseeing the imminent recession, referring to the recent implementation of TITO, or noting other roadblocks, his disclaimer ultimately proved true. Today, Eilers says the technology “has been more evolutionary than revolutionary. … It’s not going to be an earth-shattering change.” “Are you ever going to have an event like ticket-in/ticket-out, where every operator has to replace every slot machine over a two-to-three-year period to implement this technology? That’s not going to happen. Will you continue to see things like player communication technology gain traction on the floor? Yes, I think so.” With successive generations of server-based technology, start-up costs have decreased, and the technology itself has improved. “It’s a bit like the mobile phone industry,” says Alvarez. “A lot of emerging markets, because they had really poor first-generation land-based infrastructure, missed the first generation of mobile altogether.” They later “leapfrogged” to more streamlined versions of the technology, jumping ahead of advanced economies. “If you go to China, the 3G and 4G coverage is better than the U.S. and Europe these days because it’s brand-new. If you look around emerging or new gaming markets, a lot of them are moving straight to these new technologies.” In time, Alvarez says, the U.S. will catch up too. “When big international operators see server-based hitting the floor in Macau and Europe and South America, they’re going to say, ‘If I can have it here, why can’t I have it in the U.S.?’”

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Growing Green How concern for the environment has impacted the gaming industry By Dave Bontempo

oing green is an all-encompassing ideal. It concerns sustainability, energy, technological innovation and design. It runs the gamut from city buildings to private offices and casinos. The green concept has many layers. It sounds dignified, like support of world peace and the end of poverty. Yet the green route must often surpass altruism and be economically sustainable. Architects, environmentalists, city planners and gaming operators have turned the ideal into ideas. In the gaming world, they have reached sophisticated levels of application.

MGM: The Green Machine MGM Resorts International has practically written the book on green technologies and big business. The company “green-lighted” its approach on the largest American building stage, the $9.2 billion CityCenter. This futuristic array of hotels, condos and shopping facilities in the desert is the largest privately funded construction project in U.S. history. Aria Resort & Casino According to company statements, CityCenter, at 18 million vention center and theater, Vdara Hotel & Spa, Mandarin Oriental, Veer square feet, is the largest LEED Gold-certified development in the world. Towers and Crystals, the mall, is granted by the U.S. Green Building CounSince 2007, MGM Resorts has saved a cumulative total of over 420 million cil. In 2009, the Forest Stewardship Council honored CityCenter as the best kWh, enough to power 37,000 average U.S. homes for a year. It has saved apcommercial project of that year in Designing and Building with FSC Awards. proximately 2.5 billion gallons of water in the past five years, the equivalent of CityCenter’s use of sustainably harvested FSC-certified wood products more than 3,700 Olympic-sized pools. It has increased its recycling rate by resulted in a significant market transformation, including multiple wood supmore than 355 percent in four years, achieving nearly 45 percent diversion in pliers receiving their FSC chain of custody certification to supply wood to its 2012. development. More savings may emerge when the effect of its 20,000 solar panels at ManMagee says the company breaks its green philosophy into many compodalay Bay in Las Vegas are tabulated. The project is scheduled to be complete in nents, including water and energy, recycling, green building, supply-chain June. procurement, education and outreach. Chris Magee is the executive director of sustainable facilities for MGM ReThree of its major accomplishments include a co-generating plant at the sorts International. He also serves as the co-chair for the national Department corner of CityCenter, the education of from other cities and the implementaof Energy’s Better Building Alliance steering committee and as vice chair for the tion of solar power. Conservation District of Southern Nevada. From varied perspectives, he The co-generating plant is an 8.5 megawatt natural gas facility, providing watched MGM become a pioneer in this area. efficient electricity on site, reducing emissions and using “water heat” to pro“All green is good, but when it comes to this area, we like to believe we have vide domestic hot water at CityCenter. Highlights from the co-generating been operating with a stacked deck for many years,” says Magee, “even before plan include hot water supplying pools, kitchens and showers coming from the recognition and awards for this company had been piling up, and we are the exhaust from the two units. The plant is powered by natural gas to provery proud of that.” duce electricity and heat water. The LEED Gold certification to Aria Resort & Casino’s hotel tower, con42

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“

That was a long time coming and it was very difficult to achieve, but we never gave up on it. You have so much square footage on the roof, about 20 acres. When you purchase that many panels, it is expensive up-front, but eventually the numbers start to come down. —Chris Magee, executive director of sustainable facilities, MGM Resorts International

“

The hot water is produced by two natural gas-fired co-generation turbines that also produce electricity. Each will produce 4.6 megawatts of power, roughly one third of the total annual electricity needs at Aria. Excess heat from the electricity-making process is captured to heat water. Heating water through co-generation, rather than using traditional boilers, means using less energy—the equivalent of the typical usage in about 3,000 U.S. homes, according to the company. Magee was instrumental in several reclaimed-water projects, including one that involved the cooling towers on the roof of the Monte Carlo, another MGM Strip property, a hot-cap storage container and a tank that fed 2.3 million gallons into dust-control efforts that would normally have been serviced by fire hydrants. This occurred during the construction phase of CityCenter. A solar revolution may have occurred at Mandalay Bay, which has 6.2 megawatts of power on its roof. Last summer, the company announced its planned installation of one of the largest rooftop solar photovoltaic arrays in the world at its convention center. The 6.2-megawatt installation will be MGM Resorts’ first commercial solar project in the United States and will generate enough electricity to power the equivalent of 1,000 homes, according to company literature. The kickoff period is slated for June. At peak production, the rooftop array is expected to produce nearly 20 percent of Mandalay Bay’s power demand. This in turn will also lower demand on the southern Nevada electricity grid at the hottest time of the day, decreasing the need to import energy from outside the local energy system and thus reducing energy costs for the entire Las Vegas system. The roof encompasses roughly 20

acres and will require about 20,000 panels. “That was a long time coming and it was very difficult to achieve, but we never gave up on it,” Magee indicates. “You have so much square footage on the roof, about 20 acres. When you purchase that many panels, it is expensive upfront, but eventually the numbers start to come down.” Other key highlights include the world’s first stretch limos powered by clean-burning compressed natural gas. And then there are slot machine bases serving as displacement -verification units, cooling guests from the ground up, rather than wasting energy on empty space by cooling from the ceiling. Beyond the major areas, MGM has started the largest installation of electric vehicle (EV) charging stations in Nevada. Twenty-seven EV charging stations will be located at nine of the company’s Las Vegas resorts in addition to MGM Resorts’ main corporate offices. Additional stations will be available at Circus Circus Reno. The charging stations, which will be installed in guest garages and valet areas, will be available for employees and guests to use at no cost. Mandalay Bay rooftop solar panels

Architect Takes Green Further “CityCenter did a tremendous job at great expense to take green design to the next level,” says Paul Heretakis, principal for Las-Vegas based Westar Architects, an architectural and interior design company with worldwide connections. Heretakis has more than 20 years experience overseeing hospitality design projects. The firm under his direction has completed hundreds of hospitality projects and thousands of hotel rooms and suites. “With CityCenter, they created an entire green council-approved wood-tomillwork supply and manufacturing supply chain.” Heretakis says. “Remarkable when you think of the amount of product required. Think about taking certain wood from designated forests, handling it properly, delivering it to a registered millwork manufacturer and than getting it to the site in its new form. That supply chain did not exist before CityCenter. That is impressive and only one example of the groundbreaking efforts they went through.” APRIL 2014 www.ggbmagazine.com

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With the green bar raised, a deeper appreciation of its impact would appear logical. “I believe we take a too-limited look at green design; we think of it as sustainability only,” he says. “Does it strike you funny that many resorts in Las Vegas have all glass facades on all sides, including the strongest sun-facing directions.? If we were to truly design with green architecture in mind, we would limit the glass on those surfaces or create sun-shade structures on the buildings. “Is it better to buy a more efficient HVAC system and run it full-blast, or should we buy the best system while also limiting the amount of sun exposure and therefore the load on that system? That would be taking it to another level yet—the preventive benefits of green design.” That’s never an easy decision, he notes. Can bottom-line operators have a conscience? “Everybody wants to be green. It’s easy to say and it makes you sound like a sensitive individual,” he indicates, “but the people who say this at the end of the day are business people. The products and systems are still more expensive, so they have to decide if they can really absorb those costs in their projects and how that can also translate to the end user, the customer. Are they willing to pay more to stay in a green hotel? That separates the tree-hugger from the Al Gores of the world.”

Finding the Value “Profitability is always a top priority with our gaming clients,” says Dike Bacon, prinicpal of Memphis-based architectural firm Hnedak Bobo, “and it’s important that we show them how energy efficiencies and LEED-based design criteria can make their casino developments environmentally friendly and profitable.” Hnedak Bobo has plenty of practice. The company is a giant in tribal gaming circles, and its awards list recently grew to include the expansion of Four Winds in New Buffalo, Michigan. The project garnered 2013 Best Architectural Re-

Design/Expansion for a Casino Resort by the G2E/Global Gaming Business Casino Design Awards. “‘HBGreen’ is our sustainable design approach that engages and informs our clients very early in the design process,” he says. “We provide our gaming clients with examples and strategies on how to confidently take that first ‘green’ leap into sustainable design initiatives that provide environmental connectivity and return on investment. “Using a proprietary tracking system, HBG tracks the energy-saving potential of a project at every phase, exploring sustainable alternatives, cost implications, and client feedback at every step. This method provides the firm’s clients with more informed choices about these types of practices, which provide longterm operational benefits with the potential for greater returns on their investment.” Bacon says the firm provides many budget-neutral options, meaning there is no long-term financial recovery of funds. They include expanding on previously developed, adjacent land to utilize existing infrastructure. Solar studies for placements of building on site and use of indigenous plants also fit this strategy. So do controlled exterior lighting to eliminate light pollution, diverting of construction waste to recycling, highly reflective roofing material, recycling containers and preferred parking for hybrids and car-poolers. The firm finds additional ways to maximize returns, he says. This could include efficient design of MEP systems, conservation of water via gray water recapture and a hotel towel reuse program, high-efficiency windows and occupancy sensors to monitor guest room systems. Additionally, HBG works with gaming clients to translate their customers’ requests into sustainable design. Leveraging feedback from customers, Sycuan Casino in El Cajon, California, built a boutique casino within a casino in their renovated property, designed by HBG. It was dedicated solely to the non-

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smoking gaming customer. “An existing casino can gain energy efficiency and be environmentally responsible by adding non-smoking casino floor space to a new or established facility,” Bacon asserts. “It reduces the energy usage associated with air-vac systems that eliminate smoke from the atmosphere, while still capturing gaming patrons.”

Small Items, Big Savings Bally Technologies is well-known for its pizzazz. The Las Vegas gaming vendor provides the global gaming industry with innovative games, table game products, casino-management systems, mobile and iGaming solutions that drive revenue for casinos. It claims more than 80 awards for gaming innovation in the last four years alone. Yet the company that brings excitement to gaming hasn’t forgotten subtleties. It is aware that while architects design the big picture, operators look for specific green-technology use. It can be in the conference room or on the gaming floor. Item by item, department by department, smart energy use saves the environment and the balance sheets. Bally attacks the green issue from several angles, primarily via packaging and power. “In the past when we received parts from our vendors they used to be wrapped a lot in bubble pack, which requires a lot of foam,” says Larry McAllister, the director of hardware engineering for Bally Technologies. “We have reduced the foam by over 50 percent and we also have a palate exchange program. Larger products like door assemblies, for instance, come shipped on a palate; there is no real waste in materials. This cuts down on scrap. “With our processes and our packaging, we have saved on enormous amounts of waste. We are proud that we have a Canadian Energy Performance certification. Because Energy Star doesn’t offer a rating for gaming machines, this is something

we consider significant.” A second avenue unfolds on the gaming floor. With the emergence of LED technology replacing fluorescent and incandescent lighting systems, machines can become more energy-sophisticated. High-efficiency, lightdriver chips feed the current into the LED. The result is a scenario in which a higher percentage of energy is converted to light, and less to heat. More machines can be linked to a single circuit now, too. That makes bean-counters smile. “Think of the impact on your power bill in general for a facility with 2,000 machines,” McAllister says. “We get many requests from our casino customers who want to minimize the electric bill, ease the cooling systems and put more machines on the circuit. At the same time, many customers are not willing to bend on the light. If you remember what the machines used to look like 10 years ago, you know that the amount of light and the use of light has gone up dramatically, but the overall power consumption has stayed the same or

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gone down. “We have been able to find the balance between providing the excitement of the play and yet taking every reasonable measure we can to ensure that the machines are as efficient as possible.”

A Green ‘App’etizer Resort Advantage’s innovative Fills & Credits Accelerator (FCA) is an Android/IOS/Windows mobile app that allows gaming table staff to securely request a table fill or credit. FCA then automatically communicates both to the cage and Department of Public Safety (DPS) staffs to fulfill the request using a mobile device, thus eliminating all traditional paperwork. This is one of the latest innovations from the Michigan-based company, which specializes in the development, implementation and support of cost-saving compliance software applications for the gaming industry. It has produced an award-winning suite of FinCEN and IRS compliance management and reporting applications. FCA architecture is based on the company’s innovative Slots Jackpot Accelerator, which was the industry’s first mobile jackpot payout processing solution, according to Brian Ferrilla, RA’s managing director. “As properties look to reduce the costs associated with their many paper-intensive business processes, we identified an opportunity to ‘electronify’ the traditional table fills and credits activity,” Ferrilla says. “This helps them eliminate paper fill slips, missing documents, hard-copy scanning of slips, minimize mistakes, enhance security, and expedite the table games revenue audit process.” The company promotes its ability to help casinos invest in an efficient business process that helps them streamline their compliance operations, while enhancing the patron’s gaming experience. So say goodbye to paper and hello to mobile electronic workflow processing and staff e-signatures.

Ferrilla says the product helps operators reduce both the cost and risk of table-games management, besides eliminating the need for paper. All back-end casino management systems are then provided with electronic fill and credit-slip status updates via FCA. That helps complete those records for the CMS benefit and follow-up reporting. This integration allows audit staffs to quickly run reconciliation exception reports comparing FCA slip data against the table management system or the casino management system. Additionally, using the mobile device technology, Resort Advantage is able to help properties analyze the performance of the fill and credit process by capturing metrics on the amount of time it takes for DPS personnel and cage staff to react to fill requests, time to transport, and time to complete the process. Less paper, less power usage, more efficient operations: In the end, it’s how green technology translates to the bottom line.

“A “At At N Northwestern orthwestern M Mutual, utual, we are p proud roud o of f th the ep par partnership ar rtner rship we ha have ave ve bui built lt with UNLV. confident that the education of students UNL LV. We are c onfident tha at t our iinvestment nvestment m iin n th e educa ati tion o f stud ents today today directly directl ly impacts imp pac p acts our future leaders leader rs of of tomorrow. tomorrow. Corporate Corporate support support provides provides the the university univer rsity with the the ability abilit ty to to meet emerging emer rgi ging needs needs and and

OFFER O FFER STUD STUDENTS DENTS THE B BEST EST EDUC EDUCATIONAL ATIONAL O OPPORTUNITIES.” PPORTUNITIES TUNIT TIES.”

att 7 a 702-895-2827 02-895-2827 or visit us

Let’s Champion the Industry Together • Protect and promote industry-wide legislative issues on Capitol Hill. • Create business and networking opportunities at industry events. • Access industry knowledge through educational programming and research. • Enhance world-class responsible gaming programs. • Articulate the value of the modern gaming industry nationally and at state and local levels. AGA is committed to driving industry growth. Join us.

For more information, visit www.AmericanGaming.org AmericanGaming @AGAupdate

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Crossing the Bridge Transitioning online gamblers to land-based gamblers By Marco Valerio

t is taken for granted, in the American poker community, that the emergence of online poker played a vital role in driving players from their computers at home to their nearest brickand-mortar poker room in the years following the Moneymaker boom of 2003. The widely held (though fading) belief within the U.S. brick-and-mortar industry that internet gaming could “cannibalize” or take away from land-based participation strikes the average poker player today as absolutely counter-intuitive. “I never had a reason to go into a casino to gamble prior to learning how to play poker online,” says Donna Lawton, a mother and nurse in Ogden, Utah who went on to become an advocate for online poker legalization. Her words are backed by the testimonies of countless other players, like Seattlebased James Crockett. “The only reason I ever started playing in casinos is because of the experience, confidence and bankroll that online poker allowed me to build.” If it sounds like this online-to-live migration is biased toward poker, it’s because in the years prior to Black Friday, online poker was the most readily accessible form of online gaming to most Americans. When Black Friday hit, it wiped out offshore operators from the U.S.-facing space, but in 2013, online poker made a comeback to the U.S. in its current intrastate-regulated form. What’s different this time, however, is that U.S. online poker operators today are the same brick-and-mortar properties that online players are supposedly being steered into, creating an opportunity for a cyclical effect. J.J.

Global Gaming Business APRIL 2014

Johnson from Montana says he “might have never picked up the game, nor the gamble, without PokerStars in the picture.” But PokerStars does not operate any casinos in Las Vegas nor the United States (though they certainly tried to acquire one). Similarly, Jason Ballwahn, financial supervisor from Appleton, Wisconsin, credits “playing freerolls and play money on UltimateBet” for encouraging him to step foot into a nearby casino in Green Bay for the first time. “If my state offered online poker and the sites offered comps and tournament satellites to the casino,” Ballwahn tells GGB, “it would definitely increase my visits there.” The American casino industry is finally heeding Ballwahn’s suggestion. Land-based resorts nationwide are taking charge of their own online strategies as means to not only to generate additional revenue, but also establish more meaningful connections with customers both on and off the property.

The Specialists There exists an entire industry dedicated to monitoring and stimulating the transition from online play to land-based. A leader in this field is Gibraltarbased Andy Caras-Altas, CEO of Traffic Generation, which specializes in advising and working with land-based properties to elicit patronage not just from real-money online gamers, but also social, free-to-play users and other webbased communities. “We have seen huge potential for social-to-land-based crossover, and this is really where the U.S. market is heading,” Caras-Altas says. “One of the market studies we ran recently using our social agents found that 32 percent of U.S. social slots players visit a land-based casino more than once a week. “This indicates that not only is there a real opportunity for casinos to engage with existing land-based players when they’re out of the property, but also there is a very large group of potential players that present a target for new

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“

We always believed we could drive players from online gaming to the Tropicana Atlantic City, and the evidence is bearing this out. We’re attracting new customers and deepening our relationships with existing customers. Also, we’re gaining important insights into what they value about Tropicana that will help us continue to innovate forward on all sides of the business. —Steve Callender, GM, Tropicana Entertainment

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player acquisition.” Among the gaming industry executives who caught on early to the importance of “off property” marketing are Alec Driscoll and Rick Campbell, respectively head of interactive gaming and marketing executive for American Casino and Entertainment Properties (ACEP), which operates four casino properties in Nevada including the famous Stratosphere in Las Vegas. ACEP’s online-facing gaming platform is ace|PLAY, a rewards program not yet in a position to take real-money online wagers but already making strides in providing free-to-play games where users can win prizes, ACEP casino comps, tickets to shows and rides, etc. “Ace|PLAY establishes a smart methodology for property players to come online and online players to come on property,” Driscoll says “I don’t see a scenario in the U.S. where that isn’t an absolutely integral part of a strategy, especially in the state-by-state model: the ability to be in front of players when they’re not on property, and the ability for the property to have a say in the online universe.” His colleague Campbell echoes the sentiment. “We want to give our customers and our guests, whether they are on their way to Las Vegas to visit a casino or they are already here, an opportunity to play with us prior to their visit.” Campbell adds that customer response to ace|PLAY has been “very positive.” Ace|PLAY demonstrates how real-money wagering is not an essential prerequisite to a useful online gaming platform, especially if the aim is to motivate players into interrupting their online play and moving someplace else (ideally the land-based casino). Along with being able to monetize on its own, webbased virtual gaming can also acquaint the player with the casino playing experience, which as we have seen with poker, can definitely help people build up the gumption to hold their own in the brick-and-mortar. David Tuchman, editor of American Poker Player magazine and a wellknown and respected poker commentator, shares a memory that illustrates this near-universal appeal of online. “I grew up playing poker and wasn’t nervous when I first started playing hold ‘em in casinos,” Tuchman says, “but my girlfriend at the time was petrified. She desperately wanted to play, but she’d take six laps around the card room before summoning up enough courage to finally sit down. I’ve heard of people having this type of experience time and time again, and it seems like more often than not, getting comfortable playing virtual poker online was a precursor to many of these people stepping into a brick-and-mortar card room to play live.” Perhaps more valuably, online players—often unwittingly—donate a sea of information about themselves relating to their gender, how old they are, where they are geographically located, what games they like to play, when they play them and how often, etc. In a brick-and-mortar environment, this type of in-

formation would be best obtained by handing customers paper and pencil and asking them to take a survey—good luck getting them to agree to it in the first place. Conversely, in the online space, players leave behind a massive digital trail without even realizing they’re doing it. It’s up to the competent marketer at that point to interpret, and apply, this gift-basket of user data. “In order to know how to cross-promote which products to which customer base,” explains Caras-Altas, “it is important for land-based operators to understand the players they are targeting, and that different players have different wants and needs. Combining social data with gaming data is a powerful way of really getting under the skin of a player’s wants and needs. Properties need to target their marketing to players that will be most likely to visit their properties (e.g.: geographic location, age, lifestyle, preferred games, etc.).” “Another point to consider,” he adds, “is that there are various types of online gamblers—therefore different ones will be attracted to different kinds of land-based play—which again feeds into how digital marketing is beneficial to land-based operators, because there is the ability to create personalized, targeted campaigns and messages.” Driscoll and Campbell observe this balance, and are careful not to overstep the boundaries. It is unwise, and potentially disastrous, to try to convince every online player you come across to become a brick-and-mortar customer. “Come in the building or come on the online site... We consider both a win,” says Driscoll. “I do want to try to cross-market you, but I don’t want to make you a live player if that’s not what you want to be. If you want to be a free-to-play player, then that’s where I want you to be. Same goes for social and real money. It’s no different than a locals campaign versus a tourist campaign.”

Real-Life Examples Robert Lynch is an affable family man living in Monmouth County, New Jersey who loves to play poker both live and online. Because he lives within considerable driving distance from Atlantic City, Lynch has to plan his trips down there in advance. You’d think that the existence of regulated online poker in New Jersey would remove Lynch’s motivation to go play in Atlantic City. But he sees the exact opposite happening. “I think online poker will allow me to play more events, of a higher buy-in in APRIL 2014 www.ggbmagazine.com

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the land-based casinos. For tournaments in Atlantic City with entry fees between $1,000 and $5,000, there are usually qualifiers where 300-400 people try to get in.” Lynch is referring to “satellite” tournaments, where the prizes are not cash but entries into larger, more expensive events. Online poker satellites into landbased events are nothing new, but in New Jersey we are seeing a more determined, fine-tuned attempt to steer local online players into brick-and-mortar properties via well-constructed satellite offerings. The clear iGaming winner in New Jersey so far has been PartyPoker, in conjunction with its casino partner, Borgata. Jeffrey Haas, director of poker at bwin.party digital entertainment, says a smartly designed online poker offering is uniquely capable to drive players directly to the desired land-based location, almost as its own reward. “PartyPoker consistently sends players to casinos around the world through online satellite qualification tournaments into live poker tournaments—usually events on the World Poker Tour’s Main and National tours,” Haas says. “They can typically win full ‘event packages’ that include a poker tournament buy-in, several nights’ hotel accommodations and some money for travel and spending. “So we’re not only sending players to the casino properties for the tournaments as a casual day-tripper, but we’re sending players to the properties’ hotel facilities for several days, resulting in greater potential value for our partners who may try to cross-sell other gaming products, F&B and entertainment.” Haas knows exactly what Lynch is talking about when the latter expresses gratification at being able to satellite his way into expensive live tournaments thanks to an easily affordable online qualifier. “The key benefits of online satellite qualification to players are the economies of scale, whereby players can win an event package for a much lower price point than they would ever find at a brickand-mortar casino. For example, our multi-tiered ‘WPT Steps’ satellites on nj.partypoker.com for the $15,400 buy-in World Poker Tour Championship at Borgata start at only $1.” New Jersey is expected to be a meaningful theater for the demonstration of effective convergence cross-marketing techniques, many of which are still in an experimental phase. But all of the participating resorts are taking the challenge seriously. “We always believed we could drive players from online gaming to the Tropicana Atlantic City, and the evidence is bearing this out,” says Steve Callender, general manager of Tropicana Entertainment, which operates the eponymous property on the Boardwalk. “We’re attracting new customers and deepening our relationships with existing customers. Also, we’re gaining important insights into what they value about Tropicana that will help us continue to innovate forward on all sides of the business. “We want to be where our customers are and have top-of-mind awareness. Tropicana rolled out an integrated campaign with marketing messages both on and off property. Our #ReasonToPlay campaign, currently running on TV, outof-home and online throughout the state, tells the people of New Jersey we can offer them some of the same great entertainment they come for at Tropicana Atlantic City, wherever and whenever they want it.” Callender’s “top-of-mind awareness” mentality is on point, but it raises a question. It’s easy enough to market to players when they are inside the casino, because they can only be in one place at one time. But on the internet, retaining attention becomes a massive challenge, with a typical user being able to play on multiple iGaming clients at one time, not to mention all the other web-based distractions. What can a land-based property do to stand out in the virtual world with thick competition? Driscoll, who now works in Nevada but has had experience in Atlantic City, 50

Global Gaming Business APRIL 2014

sees an important real-life parallel. “I’ve never seen a regular casino gambler who doesn’t have 10 different player cards,” he says. “The key is to make sure that you can maintain that percent of attention. I don’t think any of us expect we can dominate that totality of it.”

Unpredictable Consequences Tragedy83 is the moniker of a professional online poker player based in Somerset, New Jersey. He has been playing poker both live and online for a decade, and had a tough go of it when Black Friday took away what was his main means of income. Tragedy83 is happy that online poker is back in New Jersey, and he has certainly resumed playing a lot of it. He has also warmed up a great deal, as many players have, to the relatively novel (to U.S. players) “cash out at cage” feature, where a player can both fund and withdraw from his online account directly at the cage of the land-based casino partner. Indeed, this measure was designed with the idea of getting online players in the casino clearly in mind. And it’s working. But it could also be causing disruption in players’ typical casino-going habits. Despite being a lifelong fan and patron of the Borgata casino in Atlantic City, Tragedy83 says he has not been as big a fan of Borgata’s online-facing offering via PartyPoker. “I’m not doing as well on Party as I’m doing on WSOP.com and 888, mainly due to variance. I love the Borgata resort and I would like to keep giving them my business online (via PartyPoker) but the problem is that the tournament structures on Party are not very good for me; too many turbos and hyperturbos, and I try to avoid those.” As a result, Tragedy83 has been building a much bigger bankroll on Caesarslicensed online poker rooms, meaning that the next time he goes to cash out at the cage, he is more likely to go to places like Harrah’s and Bally’s (the latter of which has just recently greatly expanded and remodeled its poker room). And what is this more likely to lead to? “I think in the future I will be playing at the Caesars casinos more since I have a little bit more money floating around on their sites. The tournaments I’m doing well in happen to be on Caesars’ sites. I have to go where the money is.”

Looking Ahead PartyPoker may thus not be able to count on Tragedy83’s business as much as its land-based counterpart does, but the company, emboldened by its early success, is preparing to uphold its part of the convergence bargain even more. “As we ramp up our online satellite qualification activities in New Jersey, we will be sending more and more online players to the casino to participate in live events,” says Haas. Last month, his colleague at Borgata, COO Tom Ballance, gave an interview to CNBC where he confidently admitted he did not believe internet gaming to be a threat to brick-and-mortar, but rather that it could be properly used to drive new customers to the casino. Haas agrees. “I do believe it is a worthwhile ambition for online poker sites like partypoker.com to drive players to live poker rooms for major events. It is a mutually beneficial activity for both online and live operators, and there are many sophisticated ways to optimize the efficiency and effectiveness of this for both businesses.” In the end, the most dependable recipe for live casino participation may be in that the experience is simply fun and unique on its own, no matter how far online goes to provide users with an alternative or complementary experience. Every type of online poker player from the recreational like Lynch to the professional like Tragedy83 seems to appreciate this. Or to put it simply, like Aaron Brown does, “I am an online grinder, yet the social aspects of live poker always bring me back.”

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iGaming North America

Give Or Take A Billion Online gaming success will take time and lots of hard work

have been drawn over the past few months by aspects of various articles, blogs and posts regarding the disappointment surrounding the launch of online gaming in New Jersey, particularly with respect to revenues. In part, as I have shared previously, I can’t imagine anyone is all that surprised that the dollar potential was overestimated to enact policy change; but also, because with initial annual estimates varying low to high by nearly a billion dollars, dissatisfaction for some based on the disparity alone was inevitable… wasn’t it? From my perspective, though, the launch has actually followed a more expected path. My firm is known throughout the industry for its conservative (and accurate) forecasting, and we have taken a different approach than most when it comes to assessing the financial potential of this new segment. As a strategic adviser, we have worked diligently to prepare, position and caution our clients about many of the very trends now being witnessed in New Jersey. We have talked through issues like cannibalization, what we have termed “the convenience factor,” the inherent responsibility that falls on the operation’s marketing team to take advantage of the growing player database, and the launch advantage that the market leaders from a land-based perspective have. While it is has only been a few months in New Jersey, most of these trends seem to be ringing true, and even those in “free play only” zones should be paying close attention. This isn’t the first article I have penned discussing cannibalization and the convenience factor as both potential risks and false alarms related to online gaming. As co-manager of the Innovation Group’s interactive practice, I have had the opportunity to work with market leaders in states like Oregon, California, Washington, New Mexico and Oklahoma who were extremely interested in maintaining or advancing the success of their existing casino operations through what they saw as a natural extension of their brand into the digital space. Although sometimes the messaging has been difficult for clients to first absorb, we have been successful at helping them understand the

By Kimberly Arnold

cumulative impacts and considerations. With all the trend observation and research we have conducted, it would be difficult for anyone to convince me that there isn’t a clear demographic of people who enjoy online gaming. Some of those individuals are land-based players and some are not, and existing casino operators can decide if they want to capture and retain those players with an offering or allow someone else to do the same. This is just one aspect of cannibalization.

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convenience factor needs to be assumed, and that marketing departments have advanced expectations on them offset this potential loss by maximizing the benefits of the expanded player outreach, from the perspective of attracting the new players to the new product, as well as leveraging them when possible to visit the land-based operation. The very thought of this can be intimidating to operators who believe their marketing resources were already stressed just for the land-based casino,

With all the trend observation and research we have conducted, it would be difficult for anyone to convince me that there isn’t a clear demographic of people who enjoy online gaming.

One hope for all land-based-turned-online operators is that new players that were not in the database or visiting before may now be part of their revenue stream. How could this be a bad thing? Another facet of the online experience, though, may be the “convenience factor,” a term we coined at The Innovation Group to guide our discussion with clients to explain that a percentage of existing players may, from time to time, opt for an online experience instead of visiting the casino, and along with that, may bring impacts to F&B, entertainment and other amenity spend. We have conducted extensive quantitative and qualitative research to show these clients that while some members of their existing database say they may not attend as often, there are also many who state that incentives from online gaming are likely to bring them in more often. This offset is important if it can be exploited. These same patrons responded that typically, their entertainment budget is fixed, so while they may have spent $100 on gaming and $100 on dinner if they visited a casino, they may just spend $200 gaming online. All this, of course, lends itself back to the emphasis on marketing. We advise our clients that the

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but also incredibly appealing as a running start for the operators who already dominate their markets. And so we have seen with Borgata and Caesars in New Jersey. Outcomes from these viewpoints should help explain what I mean that the rollout of online gaming in New Jersey wasn’t all that surprising. The two operators that dominate the land-based space have quickly assumed the leadership position online, and while I expect there to be some levelingout in the marketplace, it is going to take a great deal of effort for any other providers to better capitalize on the appreciation these two operators obviously have for how these two segments can reinforce one another. This isn’t to say that innovative and emerging online operators can’t establish themselves as well, but the operators who see the solution in tandem, as reinforcing elements, have a running start that makes it difficult for others to compete with. Kimberly Arnold is chief operating officer for The Innovation Group and co-manager of the firm’s Innovation Interactive practice. She is also co-producer of the iGaming North America Conference, held annually in Las Vegas, Nevada. Contact Arnold at karnold@theinnovationgroup.com or 303-798-7711. APRIL 2014 www.ggbmagazine.com

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Nevada Governor Brian Sandoval (l.) and Delaware Governor Jack Markell announced the pact last month.

Happy Together

f the three states offering online gambling in the U.S., Nevada and Delaware have been hampered by their overall small state populations and player pools. So the two states have done something about it by signing a pact to combine their player pools. Under the agreement, Nevada and Delaware residents will be able to play at the same online tables. The pact is the first interstate internet gaming partnership in the U.S. “We’re standing in a moment of history today,” Nevada Governor Brian Sandoval said at a news conference with Delaware Governor Jack Markell. “We hope the pact will serve as a model for multi-state collaboration and that other states will see the benefits of the agreement and soon decide to join for themselves.” The deal is the first between two states offering online gambling, and was made possible after a 2011 U.S. Department of Justice ruling cleared the way for states to legalize online gambling within their borders. Three states then legalized online gaming—Nevada, Delaware and New Jersey. The DOJ’s opinion centered on the Unlawful Internet Gambling Enforcement Act of 2006, or UIGEA, which prohibited banks from processing any bets made in prohibited forms of gaming. The DOJ said the law only applies to sports betting and that internet transactions between states where gaming is legal should be viewed as legal. Still, the pact between the two states may test that interpretation. The two governors, however, see the partnership as a logical step for a new industry. “We began that conversation because we know that Delaware and New Jersey were the only other states that were looking at passing online gaming,” Sandoval said. “We wanted to get ahead of the curve with that, and the conversation began in earnest subsequent to the passage of the bill.” 52

Global Gaming Business APRIL 2014

Lindsey Graham May Seek Online Gambling Ban Nevada began offering online poker early last year, and Delaware went online with both poker and casino games in October. Players have to be physically located in each state to play on their online sites. However, since both states have relatively small populations, online revenue has been relatively small in both Nevada and Delaware. The pact is seen as a necessity by many analysts to increase player pools for sites in both states. Online poker rooms especially need a large player base to operate well. There are many thorny issues to be worked out between the two states, however. Nevada has legalized only online poker, while Delaware accepts wagers on the full scope of casino games. There were no details on how Nevada players will be prevented from accessing non-poker games. Also short on detail was the massive difference in tax rate. The online gaming tax in Nevada is the same as the land-based casino tax—6.75 percent. The same is true in Delaware, but the tax rates are much higher—43.6 percent on slots, and 34 percent on tables. How the taxes will be designated is still a mystery. More dangerous—for Delaware at least—is the imbalance of bonus money offered by online casinos because of the higher tax rate. Melissa Blau, an online gaming consultant, told the iGaming Legislative Symposium in Sacramento last month that the deal could favor Nevada. “Because of its lower tax rate, Nevada online poker rooms can offer more bonuses to players, meaning that they’d be playing with a bankroll made up largely of bonus money,” she explained. “In Delaware, where they offer much lower bonuses, most players will be using real cash, and that real cash could end up in Nevada more often than not.”

epublican U.S. Senator Lindsey Graham is reportedly about to introduce a bill to Congress to rewrite the Wire Act of 1961 and effectively ban online gambling and online poker in the U.S. The report came from an interview the South Carolina moderate gave to Gambling Compliance—a group which tracks gambling legislation worldwide. The report says a bill is coming soon, but no draft language has been released. Graham said he is firmly against any form of online betting and also opposes exempting online poker from any ban. He said he would oppose efforts to Republican U.S. allow poker-only federal regulaSenator Lindsey tion that would still ban all Graham other online gaming options. Senate Majority Leader Harry Reid and junior Senator Dean Heller of Nevada are reportedly planning to introduce legislation that would allow for only online poker to be legalized. At this point, Graham’s move appears to be separate from casino executive Sheldon Adelson’s attempt to institute an online gambling ban in the U.S. Adelson, CEO of Las Vegas Sands Corp., has been funding a national push to ban online gambling. It is also unclear how a federal ban would affect the three states—Nevada, Delaware and New Jersey—that have already legalized online gambling.

California Eyes iPoker Bills

he California legislature is considering rival bills that would legalize online poker in the state, allowing the games to be offered by Indian casinos and card clubs. Two bills would allow online poker websites that

Senator Lou Correa

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players could access from anywhere in the state where the internet is available. Previous efforts were killed because gaming tribes could not agree on the terms of the bill, and gaming tribes pretty much set the rules for such things in Sacramento. However, both efforts also include representatives of the state’s card rooms, which also want a piece of the action. One gaming group that is being left out, because it doesn’t have the political clout to force itself to be included, is the horse racing industry. According to Senator Lou Correa, recently named chairman of the Senate Governmental Organization Committee, interviewed by the Press-Democrat, “There are a lot of moving parts. But we will work hard, and I am hopeful.” Correa replaces Senator Roderick Wright, longtime champion of online poker, who has stepped down from his duties after being convicted on eight counts of committing fraud by claiming to live in a district he didn’t live in. The Yocha Dehe Wintun Nation, the Agua Caliente Band of Cahuila Indians and the Pechanga Band of Luiseño Indians support one such bill, AB 2291, sponsored by Assemblyman Reginald Jones-Sawyer. Correa is sponsoring SB 1366, which is supported by the Dry Creek Rancheria Band of Pomo Indians, the Federated Indians of Graton Rancheria, San Manuel Band of Serrano Mission Indians, the United Auburn Indian Community and the Rincon Band of Luiseño Indians. The bills differ in some elements. The Assembly bill would require that an operator pay a one-time fee of $5 million for a license. The Senate bill would require $10 million. The Assembly bill limits the number of poker websites while the Senate bill does not.

Nevada Gets Third Online Gambling Site

outh Point has begun the “soft launch” for its online poker site Realgaming.com, making it the third online poker site in the state. The site is owned by longtime casino executive Michael Gaughan. The site joins Station Casinos’ Ultimate Poker and Caesars Entertainment’s World Series of Poker sites in Nevada. Real Gaming is using its own software for the site. The company received its license in Nevada in 2012, but has only now gone live. A “soft launch” is a period where the site’s software is tested and reviewed by state regulators. In a press release, Real Gaming said it is the first site in Nevada that can accommodate mo-

bile devices. “Real Gaming is the first entrant to the mobile gaming platform in Nevada. Real Gaming offers a safe, regulated and exciting online environment. Built from fresh, new software created specifically by Real Gaming, players of all levels can now easily access Real Gaming on their smart phone, tablet or computer, anywhere in Nevada from any browser,” the release said. Real Gaming users can play on PC and Mac, but also on their tablets and smart phones. There is game-play for all levels of players starting at just 1¢/2¢ and going up to high-stakes games, the company said in its release. “The true differentiator of Real Gaming is that players can access the site on any device, anywhere and anytime,” said Lawrence Vaughan, who developed the site for the company. “We felt that this was the top priority to bring to online poker playing. We are 100-percent focused on player experience and accessibility.” The entry of a third online poker site means the state Gaming Control Board will begin releasing online revenue figures in its monthly reports. Nevada’s policy states that there must be at least three operators in a market to report the online poker numbers.

Some U.S. Full Tilt Players to Get Paid

ull Tilt Poker will distribute about $76 million to 27,500 U.S. customers under a decision announced by a court-appointed administrator. The players’ accounts were frozen after the U.S. Department of Justice moved against offshore online gambling sites illegally operating in the U.S. in 2011. The Poker Players Alliance, an advocacy group for online poker, praised the action, but added that there are still “several thousand” for-

mer Full Tilt players awaiting payment. John Pappas, executive director of the PPA, said that there are between $50 million and $60 million in unclaimed or disputed funds that have not yet been distributed. In 2012, the Justice Department announced a $731 million settlement with PokerStars and Full Tilt to resolve charges from the 2011 crackdown. Full Tilt also settled charges that it failed to maintain sufficient funds to cover players’ accounts. Full Tilt agreed to forfeit almost all of its assets to the government. PokerStars then acquired Full Tilt.

Court Rules Against Kentucky in Gambling Domain Seizures

n appeals court has ruled that a trade association can represent the owners of 132 domains Kentucky is trying to seize to prevent illegal online gambling in the state. The ruling puts the seizure on hold and returns the case to a lower court for more hearings. The ruling by the Kentucky Court of Appeals allows the Interactive Gaming Council to represent the domain owners and allows the individual owners names to remain undisclosed. This is the first time a court has permitted an association to represent its members in such a manner. “Obviously, we consider this a win,” said Interactive Gaming Council CEO Keith Furlong. “We are also proud to be a catalyst for this decision which provides guidance to all associations seeking to represent their members in the commonwealth of Kentucky.” Judge Allison Jones, writing for a unanimous three-judge panel, said that Kentucky has treated the domain names as a group throughout the seizure litigation, but then changed to handle the names individually to keep the council out of the case. “The commonwealth cannot now turn the tables and ask the court to require each domain name owner to come forward individually and assert virtually identical legal arguments through separate counsel to resolve threshold, purely legal issues that affect the validity of the entire forfeiture procedure,” Jones wrote. APRIL 2014 www.ggbmagazine.com

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NEW GAME REVIEW by Frank Legato

Batman Classic TV Series Aristocrat Technologies

his is Aristocrat’s first game released in the new “Wonder Wheels” format, which is Aristocrat’s answer to the movie-style presentation used by the company’s main game designer, Joe Kaminkow, when Kaminkow worked at another “bat-channel.” But where the Batman theme was the subject of two major slot games, those were based on the modern-day Caped Crusader, in the form of The Dark Knight. This new Aristocrat game uses the Wonder Wheels format— two individual slots in front of a giant bonus display with three separate wheels (one main wheel and a “Villain Wheel” for each slot), along with a surround-sound “iChair”—to recreate the campy 1960s Batman TV series, complete with all the comic-book sound balloons (“Bam!” Pow!”) and the cavalcade of top stars of the day who did guest shots on that series, which starred Adam West and Burt Ward. The base game is a five-reel, 25-line video slot with a multi-site progressive jackpot resetting at $250,000. The bonuses are lifted directly from the popular show. The main “Dynamic Duo Wonder Wheels” feature spins the central bonus wheel as a display shows Batman and Robin climbing up the side of a building. “Catwoman: The Purr-fect Crime” is a picking bonus featuring the classic Catwoman character as portrayed by Julie Newmar. The player picks Catwoman icons to collect credits before getting captured by Batman and Robin. The “Riddle Me This” feature includes clips of Frank Gorshin’s unmatched performance as the Riddler in a free-game round. When the free games are awarded, with every spin two random reels will stop to display “The Riddler Box,” from which a player picks to win credit prizes, free

games, multipliers, wild reels or a “Wild Slide” feature that awards additional wild symbols. In “The Joker is Wild,” Cesar Romero’s Joker plays host to eight free games with a “Reel Ka-Power” game layout featuring a unique 4x4x3x3x3 reel configuration with 432 ways to win. Additionally, there are random mini-features including “Batmobile Wilds” or “Bat Signal Wilds,” which add wild symbols to the spin; and the “Villain Wheel,” in which three scattered bonus symbols spin the wheel to a credit amount associated with one of the TV series’ famous villains, or one of the show’s main characters. Manufacturer: Aristocrat Technologies Platform: Wonder Wheels Format: Five-reel, 25-line video slot Denomination: .01, .02, .05 Max Bet: 250 Top Award: Progressive; $250,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 11.56%, 11.57%

Flying Fortunes Konami Gaming

his latest Asian-themed slot in Konami’s KP3 video format features beautiful artwork and stacked symbols. The program is a clone of the proven performer “Dynasty Riches.” The base game is a five-reel, 40-line video slot. The main random bonus feature involves symbols stacked on the entire first reel. When stacked symbols appear on the first reel, the stack copies to one, two, three or all four of the remaining reels, resulting in multiple paying combinations or, in the case of bonus symbols, a better chance at the free-spin bonus event. Three, four or five “Orb” symbols on the reels trigger five, 10 or 15 free games, respectively. All wins during the free games are doubled, and additional free games can be triggered. The game includes a feature called “Balance of Fortune” upon triggering free games. This feature offers the player a choice between playing the free games or exchanging the free spins for credits by selecting “Credit Prize” on the top LCD. The credit prize is a random amount that can be greater when more free games are exchanged. The player has this option as long as the number of remaining free games is greater than 20. 54

Global Gaming Business APRIL 2014

Manufacturer: Konami Gaming Platform: KP3 Format: Five-reel, 40-line video slot Denomination: .01 Max Bet: 400 Top Award: 1,000 times line bet Hit Frequency: Approximately 50% Theoretical Hold: 4%—14.8%

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Caribbean Pearls American Gaming Systems

his is perhaps the most prominent of the AGS pachinko-style slots. The base game is a normal five-reel, 27-line or 40-line video slot, but the top box displays a pegboard that gives the player a “fair” bonus game—the only variables are the bonus amounts in the bottom chutes; the actual bonus award the player receives is based on gravity and chance alone as a pinball falls through the pegs. The multiple progressive award is based on the same principle. AGS wraps this pachinko game in an island theme with multiple traditional slotstyle bonuses, beginning with random base-game events such as the “Hyper Wild Super Spin.” The player will be prompted to choose two among 11 shells to reveal reel symbols. The chosen symbols will then be added to a special set of reels, along with wild symbols, for a special free spin round. Another mini-event is “Shells on the Beach.” Payers are prompted to choose shells to reveal the possible prizes placed in the

bottom chutes for a free pachinko-ball drop. One of the chutes is marked to win all the designated amounts. Again, players have as good a shot at the “all” chute as any others. The “Wilds Dropping In” bonus is triggered when one “Mystery Wilds” symbol lands on the third reel. The player will be awarded a number of wild symbols, which will then populate the reels and pay all wins. The main bonuses include a free-spin event and a pachinko game on the big board. In the “Spinning Pearls Free Spins,” three or more shells on the reels trigger a choice by the player of a credit amount or at least nine free spins. The free spins can be re-triggered within the event. The primary “Jackpot Drop” bonus, available only when playing the maximum bet, is triggered by thee or more Pearl Drop symbols on the reels. The subsequent pachinko drop results in one of the five progressive jackpots, with an equal shot at prize resets ranging from $20 to the top $1,000. Manufacturer: American Gaming Systems Platform: Roadrunner Format: Five-reel, 27-line or 40-line video slot Denomination: .01, .02, .05 Max Bet: 200, 250 Top Award: Progressive; $1,000 reset Hit Frequency: 54.55%, 56.04% Theoretical Hold: 5.57%—14.52%

Moby Dick

Multimedia Games

his new game in Multimedia’s “High Rise” series, based on the legendary Herman Melville novel Moby-Dick, combines several different styles of bonus features in an artfully done game carrying five different possible progressive jackpots. The special features begin in the base game, a five-reel 50-line video slot. On any given spin, random mystery wild symbols can be added to the screen to enhance the win. Stacked symbols also land frequently for large credit wins—the main Captain Ahab symbol itself covers two spaces, for instance. The progressives are won through the base game, whenever six or more doubloon symbols land scattered anywhere on the four-by-five reel set. The five progressives begin with six doubloons scattered on the reels, for a progressive resetting at $10. Seven doubloons land the prize resetting at $24; eight, the $60 reset; nine, the prize resetting at $200. If 10 doubloons scatter across the reels, the top progressive is awarded, resetting at $1,000. There are two main bonus events. Three scattered bonus symbols on the middle reels trigger a picking bonus. Players are prompted to select tiles until matching 56

Global Gaming Business APRIL 2014

four of a kind, for a bonus award that can rise to 160 times the total bet. When Free Spin symbols land on reels 1, 3 and 5, a special set of bonus reels appears for 10 free spins. The “White Whale” symbol is wild for the free spins. The free spins frequently re-trigger during the free games, for a maximum possible 110 free spins. The artwork is a big selling point or the game. The dual video screens are used to great effect, with the ship sailing across the top box, and the whale swimming down from the top screen to the bottom screen to turn symbols wild. In a particularly dramatic effect, the water in the sea turns red in the top box and behind the reels during the bonus free spins. Manufacturer: Multimedia Games Platform: Multimedia Operating System Format: Five-reel, 50-line video slot Denomination: .01 Max Bet: 250 Top Award: Progressive; $1,000 reset Hit Frequency: Approximately 30% Theoretical Hold: 2.05%—14.98%

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GLOBAL GAMING WOMEN

Patience, Hard Work and a Little Luck Try that formula to get where you want to be

Anna F. Thornley, Senior Research Specialist, Nevada Gaming Commission

t seems as though sometimes life is just a roll of the dice. I grew up in a small town on the Jersey shore about an hour and a half north of Atlantic City. Straight from high school, I went to college at the University of Richmond. There, I earned a bachelor’s degree in political science with a minor in Spanish. Immediately upon my matriculation, I enrolled in graduate school at the University of Nevada, Reno, where I earned a master’s degree in political science. I continued my studies and earned most of a Ph.D (yes, I’m one of those people who worked and worked on a Ph.D and then abandoned it once a gainful employment opportunity presented itself) in, you guessed it, political science. So there I was, somewhere in my mid-20s with several degrees in a field that lent itself to exactly no career path whatsoever. My parents were so proud. If you ask my dad, he’ll tell you that the only reason I got so many political science degrees was because of inertia… It just kept pushing me along. He has similar reasoning to explain why I studied five years of Latin. I found myself employed in many various jobs post-graduation, and although they were all quite different, they all had one thing in common: they had absolutely nothing to do with my political science degree(s). Waitressing? Nope, unrelated. Program director for the Girl Scouts? Rewarding, sure, but still not related to what I’d spent years studying. Middle school Latin teacher? At least with this one I was able to put my ability to properly identify the ablative plural of a fifth-declension Latin noun to good use. But still not so much related to the science of politics. Graduate teaching assistant? High school guidance and counseling assistant? Girls’ soccer coach? No, no and no. For years after graduation, my diplomas sat in a drawer collecting dust. Despite my mother-in-law’s many pleas, I refused to frame them, let alone hang them up; I didn’t need a continual reminder of my disappointment at their apparent uselessness. Then, in 2009, just before I resigned myself to another semester of teaching core humanities to unsuspecting undergraduates, an opportunity presented itself. A job in the governor’s office! And not just any job, a job that required use of my degrees! For the first

time since spending hundreds of thousands of (my parents’) dollars on college and graduate school, I was employed in a position that actually utilized my degrees. Through my position at the governor’s office, I was able to transition into the position I have now as senior research specialist for the Nevada Gaming Commission—another position that requires the utilization of my degrees! It’s as if all that money spent taking classes wherein we discussed topics such as “political motivation” and “electoral behavior” wasn’t wasted after all. There were quite a few years post-graduation that I thought I’d never find an actual “career.” It seemed I’d just bounce from job to job, contributing to our family income without ever really feeling fulfilled by my work. And yet, though it may have been a crapshoot, I have found a very rewarding and fulfilling career in gaming. My position as senior research analyst for the Nevada Gaming Commission has allowed me the opportunity to be involved in history-making events, such as the legalization of online poker in Nevada, multi-state progressive jackpot systems and the interstate agreements for online poker liquidity. I am engaged in analysis and policy-making on a daily basis. I liaise with the governor’s office on many topics related to the regulation of gaming, including efforts to make Nevada a more businessfriendly state with regards to tax structure for gaming and ensuring that Nevada’s regulatory framework remains the benchmark for other jurisdictions both in the United States and throughout the world. Additionally, I assist in the regulation adoption and amendment process from soup to nuts and monitor legislative activity as it relates to gaming on both state and federal levels. While I may have taken a more circuitous route to my current position, I’ve landed in a field that not only employs my degrees, but one that is developing on local, national and international levels. The unpredictability of life, in fact, is what makes it charming. The rest is up to hard work, managed expectations and a little luck.

Tel: (853) 28787229 sales@hk1180.com www.ltgame.com

APRIL 2014 www.ggbmagazine.com

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EMERGING LEADERS Analyze This Suzanne Leckert Director of Gaming, Feasibility & Land Use Analysis, TMG Consulting s head of TMG Consulting’s strategic planning and gaming services divisions, Suzanne Leckert evaluates the practicality and feasibility of large and small-scale developments across the United States, Canada, the Caribbean, Central America, Europe and Africa. In the early part of Leckert’s career, she was not thinking about working for a consulting firm, but first was employed in a public agency. Then she decided to make a change, switching to a private “Work your tail off and strive consulting firm. to be the absolute best at what “The change was drastic,” she says, “and it took some time for me to adjust you do—excellence matters.” to the differences.” She notes that her ability to portray a sense of confidence that others are able to pick up on helped her throughout not only these early stages of her career but all the way to her current position. Leckert states that her boss, Dr. Anthony Mumphrey, Jr., has been an influential person in her life, teaching her about running her own business and how to stay in business for the long term. When asked about trends in the gaming industry for emerging leaders and young professionals, Leckert explains, “The Global Gaming Women organization is a great vessel for young women entering the industry.” She says she was relatively alone in a male-dominated industry early in her career, and she thinks the Global Gaming Women organizations will help bring women together. To help spread her experience and knowledge, she has started an internship program at her firm in which she can hand-pick a few individuals to give insights or advice that she never got starting her career. Going forward, Leckert plans to continue growing more business, and has two pieces of advice for those young professionals entering the gaming industry: One, she says, “Get off of it.” In other words, it is up to you to find the job that affords you opportunity for personal and professional growth. Second, “Work your tail off and strive to be the absolute best at what you do—excellence matters.” In her career as an analyst and a planner, Leckert has become proficient in the performance of feasibility analyses, highest- and best-use studies, economic impact assessments and revenue forecasts. Using her tuned research skills and ability to utilize complex models (gravity and otherwise), she has generated financial projections for developments as small as an individual restaurant and as large as a $3 billion multi-component and multi-phased casino resort. Leckert is well-versed in the use of geographic information systems technology to solve real-world problems and the analysis of markets—hotel, amusement, entertainment, retail, food and beverage, gaming, and spa. Her planning, coordination, management and intergovernmental skills have also helped clients in realizing their development visions, including the $300 million recovery program of the Orleans Parish Sheriff’s Office. Leckert previously worked for the Innovation Group as the director of development analysis, and was a city planner and special assistant to the planning director for the city of New Orleans. Her years of work experience also includes a staff position with U.S. Senator John Breaux and one with the Tax and Estates practice of the law firm Jones, Walker, Waechter, Poitevent, Carrere & Denegre. —Christopher Irwin, The Innovation Group

Global Gaming Business APRIL 2014

Not Clowning Around Karl F. Rutledge Partner, Gaming Practice Group, Lewis Roca Rothgerber former rodeo clown and bullfighter from Montana—a job that no doubt teaches you to make quick, instinctive decisions—Karl Rutledge has utilized those traits to adapt as a gaming attorney, where the legal landscape is constantly changing and clients require immediate, well-reasoned analysis of their business ideas and gaming models to help them avoid legal danger. As a partner in the Gaming practice group in Lewis Roca Rothgerber’s Las Vegas office, Rutledge focuses on internet gaming, contests, sweepstakes, privacy policies, and website terms and conditions. Rutledge first changed career paths from water law to gaming law after meeting and getting to know Tony Cabot through his gaming course at the Boyd School of Law. “I was immediately enamored with the gaming field,” he recalls. While Rutledge credits his solid law foundation to the Boyd School of Law, he credits the gaming partners at his firm for his development. “Practicing gaming law is definitely learned as you go,” comments Rutledge. “I’m fortunate to work with and learn from several of the leaders in the gaming profession, including Tony Cabot, the foremost expert in internet gaming. Working with widely respected gaming attorneys at Lewis Roca Rothgerber has certainly opened doors for me that would not have otherwise been available, and I am truly thankful for that.” Just as those partners helped allow Rutledge to realize his dreams, he is just as committed to helping other young professionals reach theirs. In a nutshell, Rutledge’s philosophy in helping others achieve success is “continuous interaction and a true open-door policy. “Having a legacy as a great attorney would be nice, but looking back on your career and

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“Having a legacy as a great attorney would be nice, but looking back on your career and having a group of attorneys you helped shape and develop seems far more rewarding.”

having a group of attorneys you helped shape and develop seems far more rewarding.” An active writer on gaming topics, Rutledge has authored or co-authored at least 37 articles since 2008, and has taken advantage of several speaking engagement opportunities including moderating, speaking and serving on several trade-event panels. “The opportunity to be active early on proved very rewarding, and gave me not only the sense of ownership in my future but also that of the practice group and firm,” he says. “At Lewis Roca Rothgerber, responsibility and an active leadership role are there for the taking. The firm allows young attorneys to seek as much involve-

ment in the firm as they would like. The gaming practice group allowed me to take on a tremendous amount of responsibility from early on in my tenure with the firm—for example, assisting with strategic planning, heading up the group’s publishing opportunities, speaking at conferences, traveling around the country and world to meet with existing and prospective clients. “My advice to young professionals is to focus on a practice area you genuinely enjoy. If you find something that you truly enjoy, you won’t mind the long hours and stressful days that are required to be successful.” —Erika Meeske, The Innovation Group

APRIL 2014 www.ggbmagazine.com

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CUTTING EDGE by Frank Legato

Reducing Internal Theft Product: Integrated Data Manager Manufacturer: Honeywell Security Products Americas

rom bars and restaurants to retail, internal theft impacts gaming businesses on a daily basis, and theft increases when any of the following are present: poor economic conditions, weak detection strategies or inadequate supervision. Although the threat comes from multiple sources, studies have shown that theft is most likely to come from within the business rather than from shoplifters. Honeywell addresses the problem with solutions that can gather and store transaction data from cash registers, ATMs, slot machines, cash counters, wide-area people-counting and other data sources and combine them with fully synchronized video. Honeywell’s Integrated Data Manager (IDM) is a cost-effective solution to aid in detecting internal shrinkage. It is scalable from just a few registers to thousands of registers across multiple sites. IDM can generate customized searches and daily summaries as well as exception reports to pinpoint suspect activity, in seconds. Investigators can quickly filter and graph transaction data by specific search criteria. In addi-

tion to detecting theft, IDM can monitor employee productivity and help enhance customer service. Reports may be emailed to specified personnel, so relevant departments can be automatically informed. In addition to highlighting exceptions for future analysis, IDM reports can be exported to maximize flexibility. IDM is also able to send events to Honeywell’s MAXPRO VMS video management system, to execute further actions on the video system if required. When combined with Honeywell’s High-Definition IP cameras, no detail is left to doubt. For more information, call Maureen at 732-966-2934 or email at maureen.bruen@honeywell.com.

Cloud Control Product: GLiCloud Manufacturer: Gaming Laboratories International

LiCloud is a modern inventory management and tracking system that makes it easy for operators and regulators everywhere to track the software and hardware that comprises the casino floor. Powered by the web portal GLIAccess and easily accessible with the mobile app GLI Mobile, GLiCloud allows operators and regulators to quickly and instantly check regulatory status of components on the entire casino floor, all in real time. This improves employee efficiency and accuracy, saves time and saves money. GLiCloud relates components to regulatory approval status in real time and simplifies the inventory process by utilizing existing industry-standard verification tools and communication protocols. And because the entire process is automated, the data is free from potential human error.

• GLiCloud tracks the gaming devices within current floor inventory and matches game software components with their certification statuses from GLI and other test labs, including approved, revoked and nonmandatory upgrades. • GLiCloud notifies regulators and operators when certification statuses change and links to replacement components for many revoked and non-mandatory upgrade items.

Global Gaming Business APRIL 2014

• GLiCloud displays supplier customer notifications for all games in the user’s jurisdictions. • GLiCloud stores user uploaded par sheets, pay tables, test reports, and other user generated documentation. GLI developed GLiCloud when customers asked for a tool to track and manage inventory. GLiCloud provides a centralized location for gaming device/slot file inventory which maintains slot floor inventory, reduces manual validation efforts, and reduces machine downtime to create full accountability across the entire floor. Additionally, GLiCloud includes inventory locations for warehouse and vault storage of gaming devices and game media; and automatically links components and inventory to GLI certification letters, status changes and updates. Email notification for component status changes and supplier customer notifications also are provided. For more information, visit gaminglabs.com.

IGPExpo Media Kit

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er f y a o Pl ds ew g e in ndr m N ! am hu fro os G i ve Y sin e A th cei PL ca to e E e e nd r RE nlin m F o Co po a in y’s s Ex llar erse do J

EXPO 2014 J U N E 1 4 • AT L A N T I C C I T Y, N J Visit the iGaming Player Expo, at the Atlantic City Convention Center on June 14, 2014 and be among the first to register to play on the online casinos in New Jersey. •Learn how to navigate the online casinos in New Jersey

•Meet professional poker players who will offer advice on how to play online poker

•See demonstrations of live online gambling play •Hear experts in blackjack, roulette, video poker and other •Learn how online play is different casino games explain how to from land-based gambling gain the best edge online •Register to win valuable prizes and extra gambling money at the online casinos •Learn how gambling online can be rewarded in the Atlantic City casinos •Be among the first to experience the thrill of online gambling in New Jersey

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FRANKLY SPEAKING by Frank Legato

Henrietta, Obesity and Booze

V IC TOR

RINAL DO

s you know, month after month, I scour the gaming news, after which I scrub it and hang it out to dry. But sometimes, scanning the news of the gaming universe can be a bit annoying to someone who is familiar with the industry. For instance: In upstate New York, they held a citizen meeting to decry the plans of the Seneca Nation to build a casino in the town of Henrietta. One family paraded out a 12-year-old daughter, who told the town board that a casino would turn Henrietta “from a nice and pleasant town to a worn-down casino city not safe for children.” First of all, at 12, how many worn-down casino cities has this girl seen? I’d like to know the basis of her expertise. Maybe the head of No Casinos did a career day at her seventh-grade class. Maybe she’s actually a 45-year-old disguised as a kid. Show me her identification. Secondly, she told the board that “a lot of families would move away” if a casino opened nearby. Again, even if she learned this from some seventh-grade class on the effect of gaming on society, I can tell you it’s wrong. I live five minutes from a casino, and the only way families around here are moving away is if the casino closes and they lose their jobs. Incidentally, those families have children too, and amazingly, they seem pretty safe. Finally, Henrietta, a suburb of Rochester, isn’t getting “worn down” by any low-key casino of the type the Senecas build in upstate New York. The town’s main claim to fame is one of the largest retail shopping districts in Monroe County. An elegant resort isn’t taking anything away from the ambiance of strip malls, or, for that matter, the Super 8 Motel or the sprawling Patrick Buick GMC complex. (Patrick Buick, by the way, will beat any deal.) One more thing: The Senecas haven’t said this, but it just so happens that before all that suburban sprawl even existed, they were there first. OK, enough of that rant. Here’s another: Gotta love that L.A. Times. Now, I’m not one to bash the “mainstream media” like a few of my fellow gaming journalists of more conservative ilk normally do, but this headline takes the cake: “Jackpot! Casinos Linked to Reduced Risk of Childhood Obesity!” To someone skimming the newspaper—if anyone still does that in this digital age—it would appear 62

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that someone did a study showing you can reduce childhood obesity simply by taking the kids to the local casino. Makes sense, right? “Junior, just sit there with Timmy while I get another marker! We’ll eat when I’m down to a thousand in chips.” No, it turns out that the study examined California Indian casinos, and found that tribes that had more slot machines saw reductions in childhood obesity—because they had more revenue, and thus, less poverty, and more family income for proper childhood nutrition. But the Times couldn’t resist making it a story about gambling. “Apparently casinos are good for losing more than just cash,” read the lead sentence in the article. Oh, that wacky mainstream media! One last item of contention this month: All over the news has been yet another lawsuit from a rich player who got plastered and ended up losing a lot of money. Californian Mark Johnston is suing the Downtown Grand because he took out $500,000 in markers and lost it all while he was blind drunk. OK, let’s look at the situation: The guy knew he was going to a casino. He had four drinks at the airport in Burbank, California, one on the flight to Las Vegas, one while waiting for his driver, another while riding to the hotel, and several more at dinner right after checking into the hotel. His drinks were at double digits before he even sat down at a blackjack table, which means, among other things, that this is a dude who can hold his liquor. That said, he can probably also cover up the fact that he’s drunk. What happened next, to him, was that he woke up the next day with no money and $500,000 in markers in his pocket. I hate when that happens. Seriously, though, if you guzzle that much booze before you go into a casino, you have to take some responsibility for it. I know this not so much from personal experience (the only time I ever had a booze-out while playing, I ended up winning), but for one simple reason: A 12-year-old girl from Henrietta told me so.

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REGULATION

The Sabot Rejecting technology only leads to problems

sabot is a wooden shoe that existed in Europe beginning somewhere in the neighborhood of the 15th century. Its design was quite simple, for it was carved out of a single block of wood. It is also a shoe that some suggest has been responsible for a bit of mischief. While historians disagree on the exact date, it is generally conceded that somewhere in the early-to-mid 18th century things began to change in the Western world. Society began to transform from an agrarian, or agricultural-based form of economic organization, to a mechanized, or industrial-based form of economic organization. This transition, often referred to as the Industrial Revolution, only seems a revolution in reflection, for the nature of this transformation consumed many decades. Accompanying this transformation came other changes, and a particularly relevant change was how people lived. In the agrarian world people lived on the land, for that was where the work was. As more modern processes were replacing this form of economic existence, the labor force needed to be relocated into the vicinity of the machines. In short, people left the land where the jobs used to be, to migrate to the cities where the new jobs were. As populations congregated and started living in larger groups to provide the labor to the developing mechanized processes, things were not always so pleasant. Providing fresh water, disposing of sewage, and problems with rubbish were but three areas that made for a less-thanperfect urban experience. Also, it has been suggested that the conditions in the early-mechanized processes were also less than ideal. Bad air, long hour, and poor pay were again but the start of a long list of grievances harbored by the early industrial participants. The reaction of some of these folks to these issues was destructive. In their frustration and desperation, these workers would take their wooden shoes, their sabots, and toss them into the workings of the machinery. The end result was the destruction of the thing they saw as caus64

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By Richard Schuetz

ing all of their pain. It is argued that this is where we derived the term sabotage. In retrospect, there are few that would suggest that the Industrial Revolution didn’t fundamentally and materially improve the quality of life for the people on this planet, and yet we can appreciate that these poor misguided saboteurs had no way of understanding this at the time. They were just acting out against something they feared and did not understand. We are all fundamentally better off today doing what we are doing than if we were living in some

‘‘

Every significant technological change on our planet is accompanied by a reactionary response from the ancien régime. It is normally led by a group of old men running about stuffing their shoes in things, or them hiring agents to perform this role, and attempting to instill panic in the minds of the masses.

’’

hut digging at the ground all day. Still, the course of progress is not smooth or perfect, and I am certain that stuffing one’s shoe into the workings of a loom probably satisfied some inner need. But the reality of the situation is that it was a wasteful and foolhardy activity that did not help anyone. We are presently in another revolution, and it is loosely defined as the Informational and Telecommunications Revolution. The period is sometimes

further defined down to the digital revolution, and it all really comes down to the computer age. This age has touched essentially all aspects of our society, from how we consume learning, to news, to products, and to services. It also proves an excellent delivery system for gambling. And here come the shoes. There are some pioneers in our country who are following the course of this technology, working on both the leading and bleeding edge of incorporating this gambling delivery method into our models of regulation, and they are operators and regulators in the states of Nevada, Delaware, New Jersey and beyond. And against a ton of obstacles they are doing an amazing job. There are also people who are concerned by this new gambling technology, and its accompanying revolution. These are the people that feel that their world may become a worse place with this technology, and these individuals can be a tribal member working her first casino job, or a wealthy entrepreneur who occupies the list of the world’s richest people. They can range from the blackjack dealer on the Las Vegas Strip to the pit boss in Kansas City; and from the advocate for the vulnerable in Des Moines to the person that sells surveillance cameras in Minnesota. Every significant technological change on our planet is accompanied by a reactionary response from the ancien régime. It is normally led by a group of old men running about stuffing their shoes in things, or hiring agents to perform this role, and attempting to instill panic in the minds of the masses. There will be a day when future historians will look back at the folly of this group of saboteurs, for revolutions of this magnitude always become a reality. Until then, we will all just get to watch a great deal of fascinating, extraordinarily expensive, and sometimes silly theater. Welcome to the iGaming age in the United States. Richard Schuetz, a longtime casino executive, is currently a member of the California Gambling Control Commission.

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GOODS&SERVICES The SLS Las Vegas will include more than 400 IGT slot machines when it opens this year.

IGT ANNOUNCES BIG CONTRACTS IN FLORIDA, LAS VEGAS eading slot manufacturer International Game Ltracts, Technology has announced two major conrepresenting sales of slots to cover 40 perBally Technologies President and CEO Ramesh Srinivasan

cent of the floor at Florida’s Dania Casino and Jai-Alai and 50 percent of the floor at the new SLS casino, under construction at the former site of the Sahara in Las Vegas. Dania Casino and Jai-Alai is undergoing a complete renovation, with the new casino now featuring 549 slot machines. The IGT titles in the property’s casino represent a variety of game themes, from MegaJackpots wide-area progressives to core and video poker. “We’re thrilled to feature so many compelling IGT games in such a highly anticipated casino,” said Eric Tom, IGT’s executive vice president of global sales. “We’re committed to helping the ‘home of the world’s fastest game’ expand its connection with players and streamline operations with IGT Advantage. Our state-of-the-art systems solution is absolutely ideal for player engagement and dynamic game configuration in such an exciting entertainment destination.” The new SLS Las Vegas, slated to open Labor Day Weekend, will feature 400 IGT games on its casino floor. A wide range of IGT titles featured in the property’s casino will come from all segments of IGT’s product library. “It’s a huge win for IGT to provide our bestin-class content and drive player excitement at SLS Las Vegas,” said Tom. “As IGT continues to lead and transform gaming entertainment, we’re thrilled to capture 50 percent floor share to help propel the success of such a highly anticipated new casino in the heart of the Las Vegas Strip.” In other IGT news, the company announced that Seven Feathers Casino Resort in Canyonville, Oregon, has chosen IGT Systems enterprise gaming solutions to enhance its connection with players. As part of the partnership, Seven Feathers will connect IGT’s Floor Manager solution to 40 slots. 66

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IGT also announced that it has reached an exclusive agreement extending its relationship with longtime partner Action Gaming, the owner of VideoPoker.com. IGT and Action jointly develop multi-hand video poker games. The new agreement extends the agreement under which games are developed for both land-based and online play. As part of the agreement, IGT has purchased patents from Action Gaming, which are currently utilized in industry— IGT games such as All-Star Poker, Ultimate X Poker and Hyper Bonus Poker. These patents are also being utilized in the creation of new video poker themes. “We are confident that the sale of these patents to IGT will ensure its leadership of the video poker market for the foreseeable future,” said Ernie Moody, owner of Action Gaming. “We are very proud of the popular and high revenue-producing games we’ve created for the industry and especially of the successful partnership we’ve enjoyed with IGT.”

NEVADA APPROVES DEBIT-CARD PLAY

layers in Nevada casinos will soon be able to use prepaid debit cards inserted directly into machines to wager at the slots. The Nevada Gaming Commission last month voted 4-0 to approve the use of the special debit cards, in an amendment to the gaming regulations backed by several operators and by Las Vegas-based payment processing supplier Sightline Payments. In the hearings prior to the commission’s decision, Sightline attorney Dennis Neilander—a former Nevada Gaming Control Board chairman— testified that the regulatory changes address all the concerns of the Nevada Council on Problem Gambling, a long opponent of credit and debit card use for slot wagers. The cards, for instance, will display a message about problem gambling visible to players when they load funds to the cards from a bank account. They will carry monetary limits based on the rules of the U.S. Department of Treasury’s Financial Crimes Enforcement Network, and/or by the limits imposed on cash withdrawals by the banks issuing the cards. Players also can set their own limits when requesting the cards. Sightline officials say the company’s current agreement with banks places a maximum of $2,000 per day, $4,500 per week and $10,000 per month on funds loaded to the prepaid cards. The maxi-

mum on any card at any time is $25,000. Under the new regulation, players won’t be able to use the card for at least 15 minutes after transferring funds. Sightline is expected to sign deals with Nevada operators to create debit-card programs at each property. The special debit cards will be tied to the customer’s player loyalty card, so customers can use it in lieu of the normal player’s club card to earn points while playing slots. Outside the casino, they will work like any other debit card. Hakkasan Group runs the hugely successful nightclub/restaurant at MGM Grand.

HAKKASAN BUYS ANGEL MANAGEMENT GROUP he Hakkasan Group has acquired Las Vegas Tagement nightlife and entertainment company Angel ManGroup. Angel manages venues such as Hakkasan at the MGM Grand, Pure Nightclub at Caesars Palace, Wet Republic Ultra Pool at the MGM Grand, and the Social House at the Shops at Crystals. It also runs HQ Beach Club and HQ Nightclub at Revel in Atlantic City. The acquisition, according to a news release, will “provide Hakkasan Group with significant day-today operational capability and infrastructure, which will enable it to further expand its brand and hospitality operations in North America.” Hakkasan is in an acquisitive mood. Recently it bought Enlightened Hospitality Group, the parent company of San Diego nightclub Stingaree and a group of restaurants owned by TV chef Brian Malarkey.

NEW JERSEY AUTHORIZES MULTI-STATE JACKPOTS ew Jersey has become the latest state to authorize N multi-state progressive jackpots. The states Division of Gaming Enforcement has authorized a widearea progressive slot jackpot system involving New Jersey and other jurisdictions. Called “Powerbucks,” the system will be supplied by slot-maker International Game Technology. The DGE’s announcement said that “several states” have indicated interest in participating in the multi-state jackpot, but identified only South

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IGT’s Powerbucks

Dakota. Nevada recently authorized links between jackpots in its state and other states. The goal of the systems is to create jackpots similar to those offered by multi-state lotteries, such as Powerball and MegaMillions. “I commend the staff of the division and IGT for their efforts in establishing a system for the first Powerball-type slot machines through interstate slot play,” said DGE Director David Rebuck. “This is an exciting time for New Jersey, as we expand the gaming opportunities available in the Atlantic City casinos. We hope to now see even larger progressive jackpots with the links to wide-area progressives in other states. With competition from surrounding states, the increase in slot machine jackpots will make Atlantic City more appealing to players.” The system will not be available in Delaware, New York or Pennsylvania. The odds of winning: 150 million to 1.

MIAMI VALLEY GAMING PICKS BALLY SYSTEMS lot and system manufacturer Bally Technologies Scinoannounced that Ohio’s Miami Valley Gaming rahas installed its systems solutions. Bally’s iVIEW Display Manager picture-in-picture-style player-user interface and Elite Bonusing Suite (EBS) will be deployed floor-wide on 1,600 video lottery terminals, enabling interactive, floor-wide playerbonusing events.

Miami Valley Gaming will use EBS to add bonus events across its iVIEW network using realtime promotions such as Virtual Racing, DM Tournaments, Virtual Racing NASCAR, Flex Rewards, U-Spin bonusing and Power Winners. The property, a joint venture between Delaware North Companies Gaming & Entertainment and Churchill Downs Inc., opened in December. It features 1,600 VLTs, a racing simulcast center, several restaurants, and Miami Valley Raceway, a 5/8-mile harness racetrack. “We chose Bally systems following a very thorAPRIL 2014 www.ggbmagazine.com

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BMM ACCEPTING COLORADO SUBMISSIONS

ough and competitive joint evaluation process between Churchill Downs and Delaware North that included deep discussions surrounding value and ROI specifically for the Ohio market,” said Churchill Downs Senior Vice President of Gaming Operations Austin Miller. Miami Valley also selected other products from Bally’s systems portfolio, including the SDS slot management system to manage casino, slots, and hospitality data; CMP player-tracking system; Soft GMU solution to increase operational efficiency; Business Intelligence (BI) application to analyze and visualize data; and others.

FUTURELOGIC SIGNS DISTRIBUTION DEAL rinting supplier FutureLogic, Inc. announced that it has extended its distribution and service Pagreement through December 31, 2017 with Modern Gaming, which is the exclusive sales and service provider for FutureLogic gaming printer products in Mississippi, Louisiana, Oklahoma, Missouri and Arkansas. “Putting customers first has always been and continues to be one of our core values at FutureLogic,” said Nick Micalizzi, FutureLogic’s vice president of sales and marketing for North America. “Over the past several years, with their steadfast sales, service, and response rate in the Gulf Coast region, Modern Gaming has proven that customer satisfaction is at the nucleus of their company goals. We are confident that their experience and knowledge will continue to help us strengthen our relationships with our customers in the region.”

INTERBLOCK INSTALLS IN PENNSYLVANIA, MANILA nterblock USA has entered the Pennsylvania Isix-station, gaming market for the first time, as it installed its electro-mechanical G4 Organic automated roulette game at the Mount Airy Casino Resort in the Pocono Mountains resort region. G4 uses air pressure to launch the ball onto the brim and a series of optical and proximity sensors to track the ball during its path and detect its final position. The fourth-generation product includes a new ball-launching mechanism with improved dust filtering system, a completely non-pliable carbon-fiber brim around the roulette wheel and a thorough fraud prevention system. “Interblock is very excited to be installing our very first games in the state of Pennsylvania,” said 68

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aming testing company BMM Testlabs anG nounced that its BMM North America subsidiary is now accepting submissions for

Danny Ouellette, director of sales for Interblock. “We have been working with our customers on entering this state for over two years now, and we are looking forward to placing many more banks of games in the very near future. The customer base in Pennsylvania, especially Mount Airy, seems as positive as we are about adding our new roulette games to this market. It will be a fun new way to enjoy entertainment like never before.” In other Interblock news, the company has upgraded its presence in the Solaire Resort and Casino in Manila, the Philippines, by adding another 30 play stations to its lineup of G4 Organic Roulette machines. Two G4 roulette generators also were added.

NEWAVE ANNOUNCES NEVADA, NORTH DAKOTA CONTRACTS supplier NEWave announced placement Snewofoftware its eLearning training software in Nevada and a installation at the 4 Bears casino in North Dakota. NEWave has installed its eLearning software, NWJE University, at the Boulder Dam Lodge in Boulder City, Nevada. Developed in conjunction with Joseph Eve CPAs, NEWave’s NWJE University uses technology to help operators save time and money, meet compliance requirements and ensure essential training is delivered consistently. NEWave also announced it has expanded its presence in North Dakota with the installation of several modules of its award-winning myCompliance Manager and myRevenue Manager software suites at 4 Bears Casino & Lodge in New Town. From its myCompliance Manager software suite, NEWave installed its Title 31 Manager, OFAC, TINcheck, Tax Form Validator and eFile IRS modules. Additionally, the company installed its Audit Manager software, which is part of NEWave’s myRevenue Manager software suite.

certification of gaming equipment and systems in Colorado. The announcement follows the company’s approval as a Certified Vendor in the state and the opening of its office in Wheat Ridge. “We are very pleased that the Colorado Division of Gaming has found BMM suitable to test products offered by licensees for placement in the state,” said Travis Foley, executive vice president of operations for BMM Americas. “We are very much looking forward to working with the state of Colorado and providing BMM’s high level of technical expertise, training and customer service to manufacturers, operators and regulators throughout the region.”

GALAXY WINS ARIZONA LICENSE alaxy Gaming, G Inc., the world’s second-largest distributor of proprietary casino table games and sidebet products, announced that the Arizona Department of Galaxy Gaming CEO Gaming has concluded Robert B. Saucier its background investigation of the company and its officers, and has found them suitable to conduct business in Arizona. The suitability finding resulted in Galaxy Gaming receiving a state certification license, which authorizes it to conduct business with any gaming operation in the state. The approval follows a rejection last year by California regulators. Company officials pointed out that the Arizona regulators viewed the same information as those in California. Robert B. Saucier, Galaxy’s CEO, said, “I concur with our counsel and acknowledge the professionalism and courtesy afforded by the Arizona Department of Gaming staff. I know they had a number of complex issues to examine and they approached each one methodically and completely. I want to thank them for the fair and thorough approach they took throughout this process. They did an outstanding job, and we look forward to a long relationship in the Grand Canyon state.”

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PEOPLE DESALVIO HIRED BY WYNN BOSTON

ne of Pennsylvania’s most successful casinos is searching for a new president after the only leader of Sands Bethlehem stepped down last month. Robert DeSalvio stepped Robert DeSalvio down in March to accept the top post at the Wynn Resorts casino project near Boston. DeSalvio’s tenure in Bethlehem was remarkably successful. Since 2009, the casino has been one of the best performers in the state. The table game win was almost a quarter of the entire state win in 2013, and the slot win was second only to Parx Casino in suburban Philadelphia. LVS President and COO Michael Leven said it was DeSalvio’s choice to leave, and he was disappointed. Leven said the company is “exploring the best approach to fulfill Bob’s role.” Prior to joining LVS, DeSalvio spent almost 10 years at Foxwoods in marketing capacities following many years in Atlantic City at the Sands property there (no relation to LVS).

HARRISON NAMED HOLLYWOOD, BOOMTOWN GM

enn National Gaming announced Chett Harrison has been named general manChett Harrison ager at Boomtown Biloxi Casino and Hollywood Casino Bay St. Louis, both in Mississippi. Harrison served as manager at Boomtown before leaving to manage Hollywood Casino Bay St. Louis in 2010. He will replace Boomtown Manager Kees Eder, who is retiring after 13 years with Penn National and more than 40 years in the casino and hospitality industry. Harrison joined Penn National in January 2001 as director of marketing at Boomtown Biloxi. He was promoted to assistant general manager in 2006 and general manager in 2007. Harrison also worked at the Copa Casino in Gulfport and the Palace Casino Resort in Biloxi. Penn National also announced 33-year casino veteran Steve Lambert has been named general manager at Hollywood Casino Tunica. Lambert joined Penn National in 2005 and currently serves as acting general manager of Hollywood Casino in Perryville, Maryland, owned by Penn real-estate investment trust Gaming & Leisure Properties.

CALIFORNIA GOVERNOR REAPPOINTS TWO TO GAMBLING COMMISSION

alifornia’s governor has reappointed two members of one of the two commissions that oversee gaming in the Golden State. Governor Jerry Brown reappointed Tiffany Conklin and Lauren Hammond to the Lauren Hammond California Gambling Control Commission. Conklin has served on the commission since 2010. She was formerly an adjunct professor at Golden Gate University and served as a chief of staff for a California state senator for several years. Hammond is the principal of L. Hammond & Associates and served in the Sacramento City Council for several years. Both positions require confirmation by the state Senate.

GLI APPOINTS TRIBAL DEVELOPMENT DIRECTOR

eading gaming testing company Gaming Laboratories International has named Russell Witt as national director of tribal development. In his new role, Witt is responsible for strategic planning, initiatives, policies and procedures related to GLI’s tribal development team, which serves the needs of all tribal gaming regulators and operators nationwide. Witt most recently was director of gaming compliance for Class II slot manufacturer Video Gaming Technologies. He also served as director of engineering and field services for BMM Compliance, and as principal technical consultant to the National Indian Gaming Commission in drafting Class II technical standards.

ARUZE AMERICA NAMES EXECUTIVES

lot manufacturer Aruze Gaming America has promoted executives to two top posts for its North American business. Kelcey Allison, formerly senior VP of sales for the Americas, has been named chief operating officer. Kelcey Allison Jamison Hill, formerly regional sales manager for the Eastern U.S., has been named vice president of sales for North America.

Allison has more than 20 years of gaming experience. Prior to joining Aruze in 2009, he worked for Progressive Gaming International Corporation in various executive management positions in sales and marketing throughout the United States and Latin America. Hill will be responsible for sales in the United States and Canada. He has 25 years of experience in gaming operations and sales, from front-line to executive management. Prior to joining Aruze in 2009, Hill worked for various gaming companies and casino operations as director, vice president and general manager.

WILLIAM HILL APPOINTS NEW ONLINE OPERATIONS DIRECTOR

fter 18 months as director of mobile operations for William Hill, Juergen Reutter has been promoted to online operations director for the bookmaker. Reutter will remain based in Gibraltar. Reutter spent three years with Telefónica Germany as head of content services and senior product manager-entertainment services, and several years as channel manager-mobile services for Deutsche Telekom before joining William Hill.

GGB

April 2014

Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Acres 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 American Gaming Systems . . . . . . . . . . . . . . .15 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Bally Technologies . . . . . . . . . . . . . . . . . . . . . .2 Casino Arizona . . . . . . . . . . . . . . . . . . . . . . . .37 Casino City Press . . . . . . . . . . . . . . . . . . . . . .65 Cintas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . .67 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 G2E Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 GTECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 iGaming Player Expo . . . . . . . . . . . . . . . . . . .61 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Incredible Technologies . . . . . . . . . . . . . . . . .44 Konami Gaming . . . . . . . . . . . . . . . .Back Cover LT Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Macquarie . . . . . . . . . . . . . . . .Inside Back Cover Multimedia Games . . . . . . . . . . . . . . . . . . . . . .9 NEWave . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 NIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Ortiz Gaming . . . . . . . . . . . . . . . . . . . . . . . . .29 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . .20 TCSJohnHuxley . . . . . . . . . . . . . . . . . . . . . . . .41 TMG Consulting . . . . . . . . . . . . . . . . . . . . . . .67 UNLV Foundation . . . . . . . . . . . . . . . . . . . . . .46 Vantiv . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 WMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

APRIL 2014 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Brian Mattingley

aybe it took a former land-based casino executive to explain the opportunities of internet gaming to U.S. casino operators, but when 888 Holdings CEO Brian Mattingley arranged a deal with Caesars Entertainment to use the systems built by his company, it was a turning point. Mattingley, who previously was with bingo operator Gala in the U.K., has built his company into a major force internationally, and now in the U.S., 888 is the only company active in all three states in the U.S. where online gaming is legal. He spoke with GGB Publisher Roger Gros from the exhibit floor at the ICE trade show in London in early February. To access the podcast of this interview, which includes discussions about payment processing, branding, and more, visit ggbmagazine.com.

GGB: As an online gaming executive who came from land-based casinos, you know the differences between land-based and online. Why did you make that change? Mattingley: The opportunity arose when 888 was going public on London’s stock market. I had retired from the land-based businesses, and it’s something which I had toyed with while I was at Gala. I had launched Gala Interactive, which was possibly the first opportunity that the U.K. had to start an online bingo business. We changed ownership, and the new owners of Gala were not interested at all in online bingo, so that fell away, but I still retained an interest. Once you get involved with iGaming, you see your customers are completely different from landbased. That had a real interest to me—you can immediately identify your customers, you know who they are, you can monitor their play. It gives me the safety of knowing who I am dealing with, so I find the whole thing very fascinating.

Do you think it was an opportunity lost when the British and European land-based casino companies did not get in on that? Yes, I do. I think we could easily have been at the forefront of what was inherently our core product, which was bingo and land casinos. 70

Global Gaming Business APRIL 2014

Chief Executive Officer, 888 Holdings What is your impression of what’s going on in New Jersey?

get rooms cheaper. I don’t think poker’s quite as strong in those loyalty programs. And therefore, those would be two of the things that I would like to see. And of course I would like to see more states come online.

Someone said recently that New Jersey was pedestrian in its start-up. I disagree. I think there were a lot of things which were absolutely correct when you start up a business in a territory where you wanted to be We have information trends going back to 1997. seen to be very clean. And I We have tracked every individual customer play, every think what the turn of the card, every spin of the wheel, going back DGE did there, years. So we have massive amounts of data. with GeoComply, and all the technical providers, and the way they structured the What makes the technology that 888 has developed regulation I think was absolutely correct. so player-friendly and also good for the operators? I think all of the operators, if we were really The website—the bit that the customer sees—is honest, believe that there still is a long way to go. literally just the tip of the iceberg. And by and At 888, we’re not unhappy, but it was a relatively large, that presentation to the customers is bound slow start, so if you’re going to make mistakes, it’s to each individual brand. WSOP has created an best to make mistakes when we’re all making them environment for their customers, which is differbefore a small audience. ent than the 888 brand. Where the real differentiation occurs is what happens beneath that But there have been no major technical or verificawebsite. We have got the largest data center in tion problems. Europe. We have information trends going back Exactly. And therefore, the DGE, in doing that, I to 1997. We have tracked every individual custhink is superb. And they must feel that they’ve tomer play, every turn of the card, every spin of achieved what they wanted to achieve. the wheel, going back years. So we have massive amounts of data. We then What are some of the hurdles you see in the U.S. use that data to learn more about people’s playing right now? preferences, and we have built a predictive model, If we have a wish list, one of the things that I would which actually will predict your lifetime value quite like to see happen would be some form of inwithin the second of your depositing. And that’s terstate operation, particularly with poker. Poker is within a tolerance of 5 percent. Likewise, sitting definitely liquidity-led. To get a real decent player underneath all of that is a massive analytics deexperience, you need a good number of people. I partment. And then, again, using all that data, we think that’s difficult for Delaware and Nevada. have fraud detection, know-your-customer techWith the population in New Jersey, I don’t think nology, and a social gaming experience and model that’s an issue. which does all of the work for tracking you—if I would like to think at some stage that Newe think you’re getting into a problem habit, we vada, which is renowned for its casino business, will contact you. I think all of those features probmay adopt online casinos. I think that’s where the ably have given people the confidence that we are brands will really come in. I think once you’ve got not just a website; we are a technology-driven an online casino, the idea of this convergence will business, a marketing business, with a good hisbe able to ensure that you can earn points online, tory and a good reputation, and we really have surrender those points in the casino, maybe even got a great CRM team.

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Macquarie: Your blueprint for success in Gaming.

Macquarie was the #1 ranked Gaming M&A advisor in 2013 with over $4 billion of announced transactions.1 David Berman Global Head of Gaming, Lodging & Leisure +1 310 557 4343 david.berman@macquarie.com

Charles Protell Managing Director

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+1 310 557 4347 charles.protell@macquarie.com

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1. Ranking supported by Bloomberg. These examples may not be representative of every clientâ&#x20AC;&#x2122;s experience. Past performance is not a guarantee of future performance or success. Macquarie Capital (USA) Inc. (Macquarie Capital) is a registered broker-dealer and member of FINRA and SIPC. This document does not constitute an offer to sell or a solicitation of an offer to buy any securities. This document does not constitute and should not be interpreted as either an investment recommendation or advice, including legal, tax or accounting advice. Macquarie Capital is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). Obligations of Macquarie Capital do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of Macquarie Capital.

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