Global Gaming Business, August 2014 by Global Gaming Business

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GGB Global Gaming Business Magazine

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Oklahoma OK How tribal gaming has been shaped by the Sooner State

Make It Anywhere The 17 proposals for New York casino licenses

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CONTENTS

Vol. 13 • No. 8

august

Global Gaming Business Magazine COVER STORY Page 50

Slots at the Crossroads The slot machine, unchanged for nearly a century and experiencing radical change over two decades, is at a generational crossroads. Experts say the slot floor of the future will have to adapt to the tastes of the millennials, who want more than spinning reels. By Marjorie Preston

FEATURES 20 AC on the Brink With one casino down and two facing possible closure this year, the painful right-sizing of the Atlantic City casino market continues, and New Jersey officials look for answers. By Patrick Roberts

24 Sooner Power With $3.7 billion in revenues and the strongest Class II game presence in the nation, Oklahoma gaming tribes continue to defy the recession. By Dave Palermo

48 That’s Entertainment An excerpt from the new autobiography of casino entertainment legend Tom Cantone, who singlehandedly ushered in the modern era of casino shows. By Tom Cantone

56 Another Big Deal Supplier consolidation continues as lottery giant GTECH acquires the largest slot manufacturer in the world, IGT. By Frank Legato

60 Alto’s Time Alto Gaming, with partner Casino Technology, mixes innovation with experience in targeting the U.S. and Asian slot markets. By Frank Legato

62 Innovation Workshop Empower, the 11th systems user conference staged by Bally Technologies, showcased the slot floor of the future. By Frank Legato

64 New York State of Mind A collection of the industry’s luminaries vie for four coveted casino licenses in New York state. By Marjorie Preston

COLUMNS 16 AGA Meaningful Regulation Geoff Freeman

18 Fantini’s Finance Converging Forces Frank Fantini

58 Global Gaming Women It’s Not About Women Lauralyn McCarthy

DEPARTMENTS 6 The Agenda 8 Dateline 15 Nutshell 68 Frankly Speaking 70 New Game Review 74 Cutting Edge 76 Emerging Leaders With Gomes Gaming’s Aaron Gomes, PNC Bank’s Clayton Vanderpool, and Floss Barber Inc.’s Melissa Shilling

78 Goods & Services 85 People 86 Casino Communications With Todd McKeown, Vice President of Direct Sale Strategic Markets, Cintas Corporation

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

FEATURE

30 Jersey Jams

42 Paying to Play

While legal iGaming in New Jersey was viewed as slow-starting, ongoing improvement and the injection of a new player as Amaya buys PokerStars could change the landscape. By Roger Gros

38 iGames News Roundup

One of the keys to the growth of iGaming will be how easy it is for players to fund their accounts. Here are the vendors taking care of that. By Dave Bontempo

46 iGNA Outlook Lessons From New Jersey Paul Girvan

Global Gaming Business AUGUST 2014

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THE AGENDA

Summer of Our Discontent Roger Gros, Publisher

t’s been a painful summer in Atlantic City. Just two months ago, I wrote in this space about my connection to Atlantic City and how it would always remain part of me. Well, the Atlantic City we’ll see next summer will be markedly different than the one that’s operating today. I feel very bad for the employees of the casinos that have closed or are slated to close. I have friends of long standing in most of them. There’s not much hope for them career-wise if they want to stay in Atlantic City. There will be no gaming job growth there for a long time. The closings, if they all come to pass, will eliminate a quarter of the casino workforce, driving the region into something like a depression. But if you think for a minute that this situation is specific to Atlantic City, think again. Atlantic City is the canary in the coal mine. We’re seeing other markets come down with similar diseases: Tunica, Mississippi, has the full-blown illness. Biloxi, Illinois and Indiana have symptoms, and Pennsylvania is feeling down. Various Indian and commercial stand-alone casinos are also feeling the pressure. Atlantic City was the focus of a triple whammy in 2007. The economy tanked, regional competition was growing, and anti-smoking regulations were being implemented. Individually, these factors would have been difficult, but together they were devastating. But the city’s malaise began back in the 1990s, when regulations were tight, competition among AC casinos was fierce, and politicians with foresight were few and far between. Penn National Gaming CEO Tim Wilmott, who lived through those years as a Harrah’s executive, says what’s happening now in Atlantic City— diversification into non-gaming attractions—is just playing “catch-up.” “This should have happened 25 years ago,” he told CNBC. It’s true. While the regulatory system in New Jersey is today one of the best in the nation, it also was late to the table. If politicians had been more in tune to what can happen with rapid expansion, the regulators would have followed. So casino operators in other jurisdictions have to take note of what’s happening today in Atlantic City, because this is what’s going to happen in other

Global Gaming Business AUGUST 2014

regions around the country—and probably the world. It’s pretty clear that the market for pure gambling is limited. Gambling is entertainment, for sure, but not for everyone. If you want to know my dirty little secret, I find no pleasure or entertainment in gambling. Doesn’t do a thing for me, sorry. And I suspect I’m not alone, so any casino operator who wants to count me as a customer had better offer great shows, interesting restaurants, nice rooms, maybe a little shopping for my wife (that would be a lot of shopping, actually), and some outdoor activities like boating, hiking or biking. Then I might plunk a couple of bucks into a video poker machine or onto a crap game. Saturation is a real concern. Now that there are almost 30 casinos in the northeastern part of the U.S., Atlantic City has to offer lots more than just gambling for customers who at one time only had one choice. Politicians and regulators need to understand that they must be alert to the future. Yes, casino gaming is a great revenue generator and job producer, but it’s not the golden goose that will go on forever and ever. If you want to protect that revenue and those jobs, allow your casinos to operate like any other business. Don’t tax them to death. Don’t regulate them senselessly. And pay attention to the competitive landscape. It’s hard to blame casino executives for the Atlantic City situation, because their bosses are only interested in the latest quarterly figures. The pressure on them to produce those quarterly figures is intense. So their ability to think a year, five years, 25 years out is almost impossible. Nevertheless, they owe it to the people who work for them and the communities where they are located to be aware of looming problems over the horizon. At the same time, there needs to be community involvement at every level. The local chambers of commerce, mayors, state representatives and regulators all need to understand the particular needs of their communities and work together with the casinos to ensure long-term success and long-term stability. Let’s learn a lesson from the painful process that Atlantic City is going through so we don’t have to repeat it in other regions. Prepare for the worst and you’ll be protected if and when it comes.

Vol. 13 • No. 8 • August 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 Frank Fantini | Geoff Freeman Paul Girvan | Lauralyn McCarthy Contributing Editors Dave Bontempo | Tom Cantone | Jennifer Day Alexis Garber | Renese Johnson | Dave Palermo Marjorie Preston |Patrick Roberts | Robert Rossiello

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 ASIA august2014

Back in the Game Theme parks join

Universal Studios operates a theme park at Resorts World Sentosa in Singapore.

crowded Japan field

ith renewed momentum in Japan toward the passage of a new gaming law, the projections of who would win the licenses have started again. MGM Resorts International and Macau-based Galaxy Entertainment Group are the favorites to win Osaka’s coveted resort casino license, according to a report in The Japan Times. The English-language daily cited unidentified officials in tossing the prediction into an increasingly competitive and populous field that recently got bigger with two major theme park operators, Universal Studios Japan and Huis Ten Bosch Co., announcing they are looking for partners for separate casino bids. A bill legalizing casinos in Japan is expected to pass later this year in a special session of the National Diet, backed by Prime Minister Shinzo Abe and his governing Liberal Democratic Party, who see resortscale casinos as an aid to reviving the country’s economy by growing foreign tourism and promoting investment. It’s a strategy that has acquired additional urgency as officials look ahead to funding an

UNEXPECTED FALL

Macau sees first revenue drop in five years

acau’s casino revenue fell for the first time in five years in June, dropping 3.7 percent yearon-year to 27 billion patacas (US$3.4 billion) last month. The fall-off, however, was less than the median estimate of 4 percent from nine analysts surveyed by Bloomberg News, and experts largely greeted the results with optimism. “We expect gross gaming revenue growth to return to positive in the second half of 2014 after World Cup in June and July,” said Billy Ng of Bank of America Merrill Lynch, who forecasts July to hit 30 billion patacas, 2 percent higher than July 2013. Growth in the VIP segment, which accounts for more than 60 percent of the market, has slowed as gamblers cut spending amid a cooling Chinese economy and a nationwide crackdown on corruption in China. “Everybody wants to lay low,” Edmund Lee, a partner at PricewaterhouseCoopers in Hong Kong, said.

Global Gaming Business AUGUST 2014

estimated US$2 billion worth of facilities and infrastructure needed to support Tokyo’s hosting of the 2020 Summer Olympics. Assuming the bill becomes law, the stage would be set for development of a regulatory and licensing framework to govern a market that is expected to consist of two mega-resorts initially, one each in Tokyo and Osaka, and as many as six smaller venues in regional tourist areas. As many as 12 casinos could be approved ultimately, generating up to US$40 billion a year in gaming revenue over the next decade, according to some analysts. The prospects have attracted an A-list of global operators in addition to MGM and Galaxy—Las Vegas Sands, Melco Crown Entertainment, Wynn Resorts, Caesars Entertainment and Genting Singapore among them— and will likely entail partnerships with Japanese companies from the

pachinko and machine gaming sectors and possibly from the larger economy. Osaka officials have been out in front of the process, designating a preferred development site on Osaka Bay and holding discussions with several major gaming companies. Universal Studios’ bid, however, has been received coolly by the local government, which has been in and out of court since 2010 trying to get Universal to pay more for city property it leases. “I don’t have a relationship based on trust with USJ’s management,” said Osaka Mayor Toru Hashimoto. “USJ has no experience at all in the casino sector,” Governor Ichiro Matsui told The Japan Times. Huis Ten Bosch’s plan is to partner up on development of a “sophisticated and elegant Europeanstyle” resort casino adjoining its flagship Dutch-themed park in Nagasaki, the company’s president, Hideo Sawada, told Kyodo News. Sawada said the complex would eventually include retail, entertainment and other facilities on 25,000 square meters of park property currently used for parking.

No Locals, No Problem

Caesars pays $10 million toward Incheon casino consortium led by Caesars Entertainment has made a $10 million down payment on land the venture has earmarked for a resort casino near South Korea’s Incheon International Airport. Caesars and its partners are looking to break ground on Yeongjong Island early next year and complete the development in phases, the first of which is pegged at US$845 million. The project was conditionally approved for a gaming license in March, but is awaiting approval from the Incheon Development & Tourism Corp., the agency overseeing Incheon Free Economic Zone, which includes Yeongjong. Steven Tight, president of international development for Caesars, said the company hopes to get approved within eight months ahead of a possible first-phase opening in 2018. Tight emphasized that Caesars’ plans for the site do not depend upon participation by Korean nationals. “We really are not anticipating the law will allow locals into the casino portion of the develop-

Caesars’ casino site is close to South Korea’s Incheon International Airport.

ment,” said Tight. Caesars’ industry-high debt load of approximately $23 billion has been a concern for the South Korean government, which rejected the company for a license last year then announced at the end of 2013 that it was reconsidering that decision. Caesars has since pledged US$100 million to a non-escrow bank account in South Korea in addition to the joint venture’s initial capitalization of $50 million. The other partners are Indonesian property giant Lippo Group and Singapore-based real estate developer OUE, which is 55 percent owned by Lippo.

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DATELINE USA august2014

Ballot Buster Massachusetts Supreme Court allows gaming referendum to proceed

epeal the Casino Deal won a major victory last month when the Massachusetts Supreme Judicial Court Attorney General and ruled the group’s initiagubernatorial canditive that would repeal the date Martha Coakley state’s 2011 gaming expansion law can be placed on the November ballot. Recent polling indicates that the pro-repeal forces have a good shot, although most respondents still favor the law. A Boston Globe poll shows that 52 percent would vote to retain the casino law, with 41 percent favoring repeal. This despite 52 percent saying they don’t have confidence in the Massachusetts Gaming Commission, compared to 45 percent who do. Another poll, commissioned by the Mohegan Sun, showed support for the repeal at 35 percent,

with 58 percent opposing it. The law authorizes three casino resorts in three separate regions of the state, and one slot parlor. Repeal Chairman John Ribeiro declared that his group intends to make a statewide effort after pursuing a town-by-town strategy. “A lot of people had us written off for dead,” he said, “but now they see that common sense has prevailed—that people should have a vote on this. People will take a second look.” Ribeiro started as an activist to defeat the casino that had been proposed for Boston. His group won that electoral victory in November. Gubernatorial candidate and Attorney General Martha Coakley, who had initially ruled that the initiative was unconstitutional, was rebuked by the high court’s unanimous decision. Coakley didn’t criticize the ruling, simply calling it “thoughtful,” but defended her own ruling. “Our determination on this question was never going to be the final word,” she said.

The Name Game Two Las Vegas hotels rebrand

shakeup is planned for the Las Vegas skyline as two resorts change brands, and in one case, ownership. Time-share king David Siegel, CEO of Westgate Resorts, is the new owner of the LVH Las Vegas Hotel and Casino. He plans to turn part of the hotel into a time-share development. And Caesars Entertainment announced last month that it will invest $223 million to overhaul the Quad, formerly the Imperial Palace, an aging 2,256-room casino-hotel on the Las Vegas Strip. As of October 30, it will be known as the Linq Hotel & Casino. LVH was first built in 1969 by Kirk Kerkorian. At the time the property, known as the International, was the largest hotel in the world with 3,261 rooms. It has a rich entertainment history—Barbra Streisand was the headliner when the hotel opened and Elvis Presley performed 58 sold-out shows there,

Global Gaming Business AUGUST 2014

The developers of the proposed $800 million casino resort in Springfield, MGM Resorts, and of the slot parlor, already under construction at the Plainridge racetrack in Plainville, indicated that they plan a robust campaign to preserve the law. Penn National Gaming, which is building the Plainville slot parlor, announced that it plans to go “full-speed ahead” on the construction efforts. Meanwhile, House Speaker Robert DeLeo, who was a strong proponent of the 2011 casino law, said Bay State legislators and officials responsible for the budget face “tough decisions” if the voters repeal it. The speaker said the new fiscal year assumes $54 million from casino licensing fees. Senator Marc Pacheco, a member of the Senate Ways and Means Committee, and one of the principal authors of the 2011 law, added, “The whole idea of being able to fund the budget into the future was one of the motivating factors of the legislature adopting an expanded gaming bill in the commonwealth.” While taking no position, the Massachusetts Gaming Commission said casinos that paid license fees would not be able to recoup them if the referendum is successful because there is no mechanism in place to return the fees. Penn National has already paid $25 million, while MGM has put off paying the $85 million due when it won the license for western Massachusetts. The Quad—rebranded from the Imperial Palace less than two years ago—will become the Linq hotel to capitalize on the new observation wheel in Las Vegas.

breaking all concert records for the time. Hilton Hotels bought the property in 1970 and renamed it the Las Vegas Hilton, but cut ties with the hotel in 2012. The property was renamed Las Vegas Hotel and Casino, or LVH, and was owned by Goldman Sachs—which acquired it in a foreclosure on a $252 million loan—and Gramercy Capital. About 200 of the nearly 3,000 rooms and suites will be converted to time shares, while others will remain open to regular hotel guests. The property’s 74,000-square-foot casino includes Las Vegas’ largest race and sports book, known as the SuperBook. According to a report in the Las Vegas Review-Journal, it will be renovated with new TVs and seating.

The property is managed by Las Vegasbased Navegante Group. No terms of the deal were disclosed, but it is believed that the purchase price is $150 million to $170 million, reported the Las Vegas Sun. The rebranding of the Quad, which had been rebranded from the IP just two years ago, reflects Caesars’ confidence in its new Linq development, an indoor-outdoor retail, dining and entertainment corridor in the middle of the Strip. The Linq is anchored by a 550-foot-tall observation wheel, the High Roller, which opened in the spring. Caesars says it will renovate the hotel with new stores, spa amenities and a pool deck.

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DATELINE EUROPE august2014 The historic Palais Schwarzenberg will soon host a casino.

Palace couP Austria opens to competition c

asinos Austria’s 60-year monopoly in its home country has come to an end after a GermanSwiss consortium won a license to open a casino in the capital of Vienna. The Austria Ministry of Finance recently awarded Grand Casino Wien one of Vienna’s two new casino concessions. An international joint venture led by Stadtcasino Baden Group, operator of Grand Casino Baden near Zurich and Casino Davos in Switzerland, Grand Casino Wien with its German partner Gauselmann Group will develop an upscale casino and entertainment project in the historical Baroque-style Palais Schwarzenberg. With a renovation cost of $137 million, the Grand Casino Vienna will offer 290 slot machines and 28 table games, with exclusive gaming tables in the palace’s elegant ceremonial and representation rooms. The venue also will feature spacious bars, lounges and smoking areas, plus a multi-function entertainment room. In addition, the Schwarzenberg family foundation, partner of Grand Casino Vienna, plans to open a boutique hotel in one wing. An underground parking facility will hold more

than 200 vehicles. Detlef Brose, chief executive officer of Stadtcasino Baden AG, said, “We are more than happy about this decision but at the same time fully aware that it is associated with a large degree of responsibility. We are committed to create a casino of international appeal that Vienna merits. We want to offer our guests an unparalleled gaming and entertainment experience, combined with a successful mix of restaurants, bars and events. Beyond that Grand Casino Vienna will also adopt a leading approach in responsible gaming, gained on our home market in Switzerland for more than a decade.” Grand Casino Wien primarily will target local customers as well as players from Asia, Russia and the Middle East.

RUSSIAN RELAXATION

Casinos OK’d for Crimea, Sochi

he Russian State Duma has approved a bill to legalize casinos in Crimea and Sochi in a bid to boost tourism and attract investment. The Crimea is a special concern as Moscow’s annexation of the Black Sea peninsula from Ukraine earlier this year has saddled it with an ailing economy and a cash-strapped government dependent on federal subsidies. “The creation of a gambling zone in Crimea will attract additional investment to the region, create jobs and improve the tax base,” said high-ranking Duma member Anatoly Karpov. The zone, most likely in the Black Sea resort city of Yalta, will add the equivalent of US$720 million to the economy, according to analysts cited by news agency ITAR-TASS, which reports that “many potential investors” have expressed interest.

The Sochi zone, approved in part to recoup massive losses from the 2014 Winter Olympics, most likely will be located in Gornaya Karusel, which is part of an underperforming resort area called Esto-Sadok Krasnaya Polyana. The Duma, at the urging of President Vladimir Putin, closed a flourishing casino industry based in Moscow and St. Petersburg in 2009 and exiled the industry to four outlying zones: Kaliningrad in European Russia, the southern Don-Rostov region near the Black Sea, Altai in Central Asia and a region around the country’s main Pacific coast city of Vladivostok in the Far East. None as yet has attracted the resort-scale investment the government sought.

Illegal Greece Black market gambling exceeds €5 billion a year

department of the Greek government estimates the scale of illegal gambling in the country at €5 billion a year. That’s what Giorgos Sourlas, general secretary Greek Minister of of transparency and Public Order human rights, recently Vassilis Kikilias has told Vassilis Kikilias, the been given a report newly appointed minister on illegal gambling of public order. in his country. Sourlas said the black market is causing harm to the national economy and is a substantial money-laundering threat, and he has told the Hellenic Gaming Commission that steps are being taken to crack down on it in conjunction with the Greek Economic Police and other agencies. It is also hurting the legal market, which has experienced a decline in turnover of 35 percent— from €8.7 billion in 2009 to €5.5 billion last year—and has seen gross profits fall from €2.5 billion to €1.5 billion over the same period.

Puttin’ on the Ritz

london casino sued over $3.4M gambling debt

ondon’s The Ritz casino is facing a lawsuit from the wife of an Omani government minister who lost US$3.4 million gambling at the casino. Nora Al Daher says the staff of the casino took advantage of her gambling addiction by extending her credit limit and encouraging her to keep playing in April 2012. Daher is the wife of Omani Foreign Minister Sayyid Badr bin Hamad bin Hamood Al Busaidi. Daher told a London High Court that she shouldn’t be held responsible for the debt. The Ritz is counter-suing Al Daher for £1 million still outstanding on her debts. www.ggbmagazine.com

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DATELINE GLOBAL august2014 Casino Niagara James Packer’s multibilliondollar Crown Sydney

Sydney nod Crown Sydney wins license approval C

rown Resorts’ Crown Sydney has received its gaming license from the New South Wales Independent Liquor and Gaming Authority, largely clearing the way for the A$1.5 billion luxury destination to open in 2019. The casino and hotel will be located at a redevelopment area known as Barangaroo on Darling Harbour, not far from rival Echo Entertainment’s The Star, which loses its exclusive license in New South Wales in November 2019. Crown Sydney is conceived as a haven for wealthy Asian players, Chinese in particular, and the project won the state government’s preliminary approval last summer with a proposal for a table games-only facility restricted to “members” and their guests. Accordingly, the ILGA license stipulates that no slot machines will be allowed, as Crown has proposed, and smoking will be permitted. Crown Resorts CEO Rowen Craigie called the license award “an important milestone.” Crown is paying $100 million for the license and has promised to triple the state’s tax haul from The Star in its first three years of operation.

Ontario casinos feeling the pressure

Power PlAy Echo, Chow Tai Fook join forces in Brisbane

ustralia’s Echo Entertainment is joining forces with Hong Kong conglomerates Chow Tai Fook and Far East Consortium in a bid for a resort casino in the Queensland capital of Brisbane. The combination beefs up Echo’s bid to keep rival Crown Resorts from dismantling its longstanding monopoly in Queensland’s largest city by narrowing the competition for a license there to three bidders. The third is Shanghai-based property conglomerate Greenland Holding. The new group is known as Destination Brisbane Consortium, to which Echo will contribute 50 percent of the capital to develop the A$1 billion-plus resort. Echo also will operate the casino. Far East and Chow Tai Fook will each contribute 25 percent and will develop a luxury residential component included in the bid. Queensland is in the throes of the largest gam-

Sun in South AmericA

Monticello Grand Casino

South African company buys up Chilean casino

outh Africa’s second-largest casino and resort operator, Sun International Ltd., will buy the remaining stake in a Chilean gaming casino as it works to increase its presence in Latin America. Sun International, which now owns 44.2 percent of Monticello Grand Casino, will buy an additional 12

Saturation Suggestion

Global Gaming Business AUGUST 2014

bling expansion in Australia’s history with the Echo CEO Matt Bekeir government deciding last year to open the state to three new licenses for integrated resorts, two of which have been tentatively awarded: one near Cairns and the Great Barrier Reef in the state’s northern tropics and one on the popular Pacific Ocean resort of Gold Coast, where Echo has held a monopoly for years. The state is expected to award the Brisbane license in early 2015. “Echo is delighted to work in partnership with two significant Asian-based partners and the government to develop and submit a proposal for the Queen’s Street Wharf site, which will deliver major investment in tourism infrastructure including a world-class integrated resort to Brisbane,” Chief Executive Matt Bekeir said. 44.2 percent from Austria’s unlisted Novomatic AG and another 10.5 percent stake from minority owners for $144 million, according to Reuters. The company will also acquire shareholder loans and cash in South America’s biggest casino gaming operation, valued at $32 million, Sun reported. Latin America is a small market, but it is also the second fastest-growing market for casinos, according to the accounting firm PwC. The company, best known for its Sun City resort in South Africa, is due to open a casino in Panama and has applied for a license to operate another in Colombia.

wo long-established casinos in Ontario, which have seen marked declines in patronage, are overdue for a facelift, says the mayor of Niagara Falls. The 10-year-old Niagara Fallsview Casino is “gorgeous, it’s beautiful, but it needs a refresh,” said Mayor Jim Diodati. Meanwhile, 17-year-old Casino Niagara “looks old, tired,” the mayor said. “The carpets are ratty. It looks like it’s been neglected. It needs a Phyllis Diller-type facelift. It’s just not a draw. It’s like an old bingo hall. It desperately needs an injection of cash.” Diodati says Ontario should invest in existing casinos rather than proposing even more new properties. According to the Niagara Falls Review, the mayor has urged Ontario Lottery and Gaming Corp. to include the city’s two casinos in its modernization plan. “The U.S. is injecting millions and building new casinos,” he says. “We’re getting hurt by a converted convention space (Seneca Niagara Casino) in Niagara Falls, New York. We need to focus on growing the pie, not splitting it into pieces.” According to Niagara Falls Tourism, the casinos on the Canadian side have seen a decline of approximately 30,000 people per month. Niagara Falls tourism chairman Wayne Thomson says an aggressive approach by the Seneca Nation and a new marketing initiative by the tribe’s Buffalo Creek Casino has left Niagara casinos “probably static, or falling a little behind.” He says market saturation has divided the customer base and robbed casinos of some of their excitement, and additional gaming will not help.

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DATELINE TRIBAL august2014

Tough Call

Fixing Carcieri will be difficult

he newly installed chairman of the U. S. Senate Committee on Indian Affairs, Jon Tester, says “fixing” the 2009 Carcieri v. Salazar U.S. Jon Tester, the new chairman of the Supreme Court decision Senate Committee will be tough, but that it on Indian Affairs is one issue that he is focusing on. Tester, a senator since 2007, inherited the chairmanship from Senator Maria Cantwell, who gave it up after a year without passing many bills. Tester has already passed 15 pieces of legislation through the committee since taking up the gavel.

In July he waas holding hearings on Carcieri as well as Indian gaming. He says that his biggest challenge is not to try to force too many bills through at a time. “I think we are in pretty good shape,” he told Indian Country Today. “We have pushed a lot of bills out of the committee. We really have taken some of the less controversial bills and moved down the line. I think our next challenge is taking the bills that we’ve gotten out of committee and the ones that don’t get taken up by unanimous consent, figuring out a strategy for the lame duck. Maybe an omnibus Indian bill going forward that could include a lot of stuff, including, potentially, a Carcieri fix.”

A rendering of the Glendale casino planned by the Tohono O’odham Nation

Tucson Transplant

BIA clears way for Arizona casino

he controversial casino project of the Tohono O’odham Nation in Glendale, Arizona, got a huge boost last month when Assistant Secretary of Indian Affairs Kevin Washburn, who heads the Indian Affairs division of the Interior Department, told federal officials he was looking favorably upon a land-into-trust request from the tribe. The Tohono O’odham are based in Tucson, and the land is in central Arizona, just west of Phoenix, which has enraged Phoenix-area tribes. The Salt River Pima-Maricopa Indian Community complained that the Tohono O’odham are skirting the law that established tribal gaming in the state. “Arizona voters approved state-tribal gaming policy limiting casinos to existing reservations in 2002,” said SRPMIC President Diane Enos. “To that end, for Washburn to announce his decision on the land now is questionable, given that Congress has yet to clarify its intent on this issue— specifically, that of new reservations being created for gaming purposes.”

Global Gaming Business AUGUST 2014

The casino has been a source of contention for years. A federal law in 1996 permitted the O’odham to replace lands lost to a federal dam built in Southern Arizona with unincorporated parcels in the Phoenix area. The tribe bought the Glendale parcel in 2003. Lawsuits and efforts by Arizona Congressman Trent Franks have all gone the O’odham’s way, and even the city of Glendale recently dropped efforts to halt the casino. Another Phoenix-area tribe says the impact of the ruling is unclear, but the tribe will remain diligent. “While our community is disappointed by today’s decision, we are not surprised,” said Gila River Indian Community Governor Gregory Mendoza. “As Assistant Secretary Washburn noted, he was faced with interpreting an ambiguous provision of a law passed by Congress decades ago. That’s precisely why our community believes Congress is the best entity to decide this matter and uphold the will of Arizona’s voters.”

The Wyandotte Nation’s 7th Street Casino in Kansas City

Closing the Account Interior rejects application from Kansas tribe

he U.S. Department of the Interior recently rejected the Wyandotte Nation’s application to take into trust a 10.5-acre tract in the Wichita suburb of Park City, where the tribe hoped to build a casino, the Kansas Attorney General’s Office said. The Interior Department ruled the tribe did not have sufficient trust funds to have purchased both the Park City parcel and a tract in Kansas City, Kansas where it previously built a casino. Formerly known as the Wyandotte Tribe of Oklahoma, the Wyandotte Nation filed a federal lawsuit in 2011 stating it needed to reacquire land it lost due to “failed federal policies” after receiving federal recognition in 1978. The tribe said the Interior Department had a “mandatory duty” to take the Park City land into trust since the tribe purchased it using money Congress had set aside to buy property to put into trust for the tribe’s benefit. In 2012 a federal court said the state of Kansas, which tried to intervene in the Wyandotte Nation’s lawsuit, failed to show how it has been hurt by the Interior Department’s review of the tribe’s land-trust application. The state noted it had granted Peninsula Gaming the exclusive right to operate a casino in southcentral Kansas, just 25 miles from Park City, and that its taxing, regulatory and economic interests were at stake. But the case turned on money. In April 2013, U.S. District Judge Julie Robinson ruled that an audit by the state of Kansas showed the tribe’s trust funds did not cover the purchases of both the Park City and Kansas City tracts. However, Robinson said the land-purchase issue was beyond her authority and she only could rule on the tribe’s claim of unreasonable delay. As a result, she ordered the Interior Department to make quarterly progress reports to make sure the tribe’s application was processed in a timely manner.

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NUTSHELL

“They The Cambodian government is reported to be reforming its gaming regulations in a bid to make the country more attractive to foreign casino investors. The English-language Phnom Penh Post said a draft of a new national casino law could be finalized this year, and could also provide for the legalization of online gambling. The newspaper quoted a spokesman for the gaming sector of the Ministry of Economy as saying the new law will be stricter and more comprehensive and transparent in line with the needs of prospective foreign investors and operators concerned about satisfying regulators in their home countries. Caesars Entertainment Corp.’s ability to negotiate a debt exchange that keeps it out of bankruptcy is being complicated by a surge in credit-default swaps that would be profitable if the casino operator defaults, according to a Bloomberg report. The net amount of outstanding contracts on Caesars debt surged to $2.14 billion on June 13, the most since November 2008, according to Depository Trust & Clearing Corp. data compiled by Bloomberg. Outstanding derivatives have climbed 50 percent from a year ago as prices on shorter-dated swaps surged, indicating traders are putting on more wagers that the company will fail within 12 months. Caesars has struggled to finance a $23 billion debt load since being taken private in 2008 by Apollo Global Management LLC and TPG Capital for $30.7 billion, and has been clashing with its creditors in a saga that may presage a broader restructuring of its unsustainable debt load. Minors, people receiving government assistance and compulsive gamblers will be barred from entering casinos in Bermuda, the government has announced. The ban is an attempt to limit “potential social risks” to the island, should gambling be legalized. Cambodia’s new Roxy Casino in Bavet City near the Vietnam border will hold a grand opening on August 12, parent company Cell Aquaculture said. The property held a soft opening in May featuring 15 table games, a five-table high-roller area, slot machines, sports betting and an online gambling com-

ponent. There is also a 20-room hotel and a restaurant. Sands China has paid its 27,000 non-executive full-time employees a “special award” bonus equivalent to one month’s salary, the Macau casino giant said. The bonuses were paid at the end of June and will be continued in 2015, 2016 and 2017, the company said. It is the second staff bonus Sands has paid this year in addition to across-the-board raises of 5 percent. International slot supplier and operator Novomatic Group announced that it has been granted permission to build two casinos in its domestic market, Austria. Novomatic will build two state-ofthe-art flagship casinos, one at the Vienna Prater and the other in Bruckan der Leitha in Lower Austria. “The allocation of these licenses now allows us to prove our international casino competencies in our home market, Austria,” said Novomatic CEO Franz Wohlfahrt, “and apart from that it enables us to guarantee the sustained growth at the Novomatic headquarters in Gumpoldskirchen while creating jobs for 500 new employees.” The group operates 30 international casinos, among which is Germany’s largest Galaxy Gaming ancasino, Spielbank Berlin. nounced the installation of its table game Lucky Ladies into six different Groupe Lucien Barrière casinos in France. The event marks the first French approval of a proprietary Galaxy table game. In addition, both Lucky Ladies and another popular Galaxy table game, 21+3, are currently offered in five Groupe Lucien Barrière casinos in Switzerland. Fronton Holdings recently completed the acquisition of Casino Miami Jai-Alai. Fronton won the property at an auction required by the bankruptcy court following Florida Gaming Centers’ Chapter 11 filing. Rene Guim, spokesman for Casino Miami Jai-Alai, said Fronton’s financial partners also provided the original funding for the 40,000square-foot expansion of the Miami Jai-Alai fronton, which added more than 1,000 Vegas-style slot machines, two new bars, a restaurant and a renovated poker room. Guim said work will begin in the next few months on additional changes.

CALENDAR August 11-13: OIGA Conference & Trade Show 2014, Cox Centre, Oklahoma City. Produced by the Oklahoma Indian Gaming Association. For more information, visit oiga.org. August 12-14: Australasian Gaming Expo 2014, Sydney Exhibition Centre, Glebe Island. Produced by Gaming Technologies Association. For more information, visit austgamingexpo.com. September 9-12: 10th European Conference on Gambling Studies and Policy Issues, Helsinki, Finland. Produced by the European Association for the Study of Gambling. For more information, visit easg.org.

September 30-October 2: Global Gaming Expo 2014, Sands Expo & Convention Center, Las Vegas. Produced by Reed Exhibitions and the American Gaming Association. For more information, visit globalgamingexpo.com. October 1-4: IMGL 2014 Autumn Conference, Grand Hotel, Oslo, Norway. Produced by the International Masters of Gaming Law. For more information, visit gaminglawmasters.com. October 21-22: Balkan Entertainment and Gaming Expo 2014, Inter Expo Center, Sofia, Bulgaria. For more information, visit balkangamingexpo.com.

October 27-29: International Association of Gaming Advisors Annual Conference and IAGR Conference, Marriott Philadelphia Downtown, Philadelphia, Pennsylvania. Produced by IAGA and IAGR. For more information, visit iagr.org/philadelphia-2014. November 5-6: Arizona Indian Gaming Association Expo 2014, Fort McDowell Hotel & Casino, Scottsdale, Arizona. Produced by AIGA. For more information, visit azindiangaming.org.

Said It”

“First, there is now political stability, with Prime Minister Shinzo Abe. Second, there’s a renewed emphasis on the economy with Abenomics, and this type of economic project fits in with those macroeconomic policies.” —MGM Resorts International’s senior vice-president of global gaming, Ed Bowers, to the Japan Times on why the time is right for gaming legalization

“People are now more conscientious of their health. We provide a clean, comfortable, safe environment.” —Greg Medulun, Niagara Casinos, Ontario, on the drop-off in visitation to the two gaming halls after a smoking ban

“Our vision is to make this look like a Monte Carlo-type of facility and complement Newport, not take away from it. It needs an upgrade because, quite frankly, it’s obsolete. If we don’t do that, we’re going to lose it to the competition.” —Joseph Paolino, former mayor of Providence, Rhode Island, who wants the state’s voters to allow table games at the Newport Grand slots parlor—only then will he and a consortium of business people invest in it

“A lot of people have asked ‘Why should the state help the casinos?’ The answer is short: because it makes sense.” —Delaware state Rep. Tim Dukes, defending the $10 million aid package approved for the state’s three racinos as necessary to preserve an important state revenue source

“Caesars’ large debt load and equivocal transfer of assets have put a bullet into Caesars’ shareholders. Foolish investors should tread lightly given the situation unfolding at Caesars, and look at much more solvent competitors like MGM Resorts International and Penn National Gaming to get exposure to the evolving gaming industry.” —Securities analyst Christian Sgrignoli, commenting on the Motley Fool website about Caesars’ likely pending default on investor notes

“People believe in this town, and they’re tired of being presented as this joke. When you’re at rock bottom there’s a good chance to reinvent how you go up.” —Reno business owner Abbi Whitaker, who helped create a marketing campaign to reshape Reno’s image, on the city’s new non-casino identity as a high-tech hub

AUGUST 2014 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION

Meaningful Regulation AGA proactively engages with regulators

By Geoff Freeman, President & CEO, American Gaming Association

he Financial Crimes Enforcement Network (FinCEN), within the U.S. Department of Treasury, is tasked with safeguarding our nation’s financial system from illicit funds and money laundering. Over the last year, the agency has increased its engagement with the gaming industry. At G2E 2013, FinCEN Director Jennifer Shasky Calvery highlighted the important role casinos play in combating money laundering. Our industry embraces this commitment to federal anti-money laundering (AML) compliance along with the hundreds of other regulations and statutes across all levels of federal, state and local governments, which we follow. The AGA’s member-led Bank Secrecy Act (BSA) working group has engaged more closely with FinCEN on federal AML compliance, development of best practices for the gaming industry, and reiterating our industry’s commitment to a culture of compliance in Washington. Establishing the foundation of this more frequent engagement, the AGA has outlined several principles with respect to engaging with FinCEN. We’ve aimed to: • Proactively communicate with FinCEN; • Continue to work cooperatively and transparently with FinCEN; • Represent the industry and illustrate commercial casino operators’ alignment with FinCEN’s expectations; and, • Highlight the gaming industry’s significant investment and commitment to AML compliance. Through the AGA member-led working group, the AGA holds steadfast commitment to broadening FinCEN’s understanding of the gaming industry.

tact within FinCEN and the gaming industry; • Frequent face-to-face meetings in Washington, D.C. on emerging AML issues; • Insightful perspective from FinCEN on best practices for the gaming industry; and, • Ongoing dialogue to clarify procedures to align understanding and more clearly affirm our industry’s commitment to a culture of compliance. While we are pleased with this incremental progress, we believe there are additional opportunities to partner with FinCEN. ONGOING PROGRESS FOR PARTNERSHIP Our industry prides itself on its innovative security and surveillance technology. Gaming’s sophisticated

“

INCREASED COOPERATION WITH FinCEN Some of the recent progress toward building a more cooperative relationship with FinCEN includes: • Establishment of a day-to-day point of con16

Global Gaming Business AUGUST 2014

tion. Post 9/11, the United States’ aviation system and the Transportation Security Administration (TSA) experienced major changes to better protect our nation’s security. Unfortunately, the new systems suffered from major inefficiencies, and travelers grew frustrated. In response, Congress passed the Aviation Security Stakeholder Participation Act of 2012, which created a public-private partnership that fostered dialogue. It was this collaboration that created TSA’s PreCheck, which both better focuses more robust security screening on those who present the most risk and improves the precleared, known traveler’s experience. I’m confident that a similar security solution can be found for the gaming industry through its increased engagement and ongoing dialogue toward true public-private partnership with FinCEN.

Through the AGA memberled working group, the AGA holds steadfast commitment to broadening FinCEN’s understanding of the gaming industry.

systems protect the safety of our customers and the communities in which we are located—as well as our business interests. Through federal investment, FinCEN too has leading technology to analyze its financial intelligence. With closer collaboration, our industry’s technical and financial expertise could more effectively assist FinCEN. However, true partnerships are a two-way street. We too believe that authorization to glean insight on Suspicious Activity Reports (SARs) across gaming properties that are owned by the same parent company would greatly aid our efforts to narrow our unified focus on those who present the highest threat and better protect the majority of our customers, our business and our nation’s financial institutions from crime. This approach to protection through partnership reminds me of the progress we were able to achieve during my tenure at the U.S. Travel Associa-

COMMITMENT TO COMPLIANCE The casino industry is committed to working in partnership with FinCEN as we do with all regulatory agencies—our industry has worked with more than 300 jurisdictions in the U.S. and more globally, for the decades that we’ve been in business. FinCEN Director Calvery recently acknowledged in her remarks at the Bank Secrecy Act Conference in Las Vegas in June that meetings between her agency and the gaming industry are productive. It’s unquestionable that progress is being made. The AGA will continue to convene compliance and AML leaders to collaborate with FinCEN representatives in developing best practices for our industry and in improving the agency’s understanding of our commitment to compliance. With increased information-sharing and focused efforts, we can achieve our common goal of protecting financial institutions while ensuring the safety and security of our business and the majority of our customers who play responsibly.

”

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FANTINI’S FINANCE

Converging Forces The first six months of 2014 could signal the industry’s next era.

e have commented in recent years on the accelerating pace of globalization and technology convergence in the gaming industry. This has become evident in events such as the alliance between 888 and Caesars, deals between bwin.party and MGM Resorts and Boyd, and with Amaya acquiring Cadillac Jack and Rational Group. Much of this has been predictable. Some of the transformation has surprised, such as the explosive emergence of social gaming. And some of it has been the empowering nature of the internet, such as exchange wagering pioneered by Betfair, now starting its integration into more conventional forms of online gambling, such as account wagering in the U.S. Now, we have reached a new stage in which the convergence is extending to mergers resulting in international giants reaching into every distribution channel and technology. Clearly, the merger of the world’s biggest lottery company with the world’s biggest gaming supplier is the ultimate example. But the Amaya acquisitions, and Bally-SHFL and Scientific Games-WMS mergers, also fit into the new and broader strategic structures. The questions now are: Who’s next? What’s next? What does this mean for investors? • Who’s next? With GTECH and Scientific Games merging with slot-dominant companies, Athens-listed Intralot could be the next candidate to seek a similar acquisition. The world’s second-largest lottery company has been expanding assertively in the U.S. in recent years, but not on the slot front like GTECH. Whether Intralot wants to follow we don’t know. But if it does, there are only so many significant candidates left. One of the most attractive might be Multimedia Games. MGAM is small, to be sure. But it has popular products, an increasing number of jurisdictional licenses, and a central server system that a lottery company can appreciate. Aristocrat also might be attractive given its relatively low valuation, systems business, and strength in Australasia, though the guys Down Under have a lot of Aussie pride, and might resist being absorbed 18

Global Gaming Business AUGUST 2014

By Frank Fantini

into a foreign company. • What’s next? Merging companies will talk about synergies, compatible cultures, complementary business lines, economies of scale, internationalizing their opportunities. But combining companies from entirely different industries with sprawling global operations and scattered headquarters for different business segments also brings the risks of being too big and diverse to manage, and of being unresponsive to shareholders and too administratively burdened to innovate. If they succeed, a whole new era opens and gambling has truly matured into a global industry. • What does it mean for investors? Given the valuations awarded in the recent acquisitions, we might see permanently higher stock prices, free cash flow generation that drives further growth and returns capital to shareholders, and the attraction of more mainstream investors. If things don’t work out, today’s consolidations might lead to tomorrow’s restructurings and rightsizings. Consolidation is also happening on the casino side, and the price of casinos is going up. High-yield analyst Dennis Farrell of Wells Fargo published a report in May that found deals this year have averaged 9.9 times forward EBITDA. That is up from 7.5 times last year and 7.1 times historically. One deal alone, however, pushed up the average—Blackstone buying Cosmopolitan Las Vegas for an estimated 15.7 times forward EBITDA. At the time, there was a lot of cheering with many observers noting that Blackstone is a shrewd and experienced real estate investor. We’d caution, however, against too much enthusiasm. The top of a market often is near when companies from outside start moving in. Remember El Al, George Clooney, Ivana Trump, the Fontainebleau’s Jeffrey Soffer and all their dreams of Las Vegas gold during the era when lenders were throwing money at people? And whatever happened to Robert Sillerman’s Elvis casino-resort, anyway? That era topped out in 2008 with casinos selling at 11.9 times forward EBITDA. It crashed the next year when the average price fell to 5.6. Indeed, Cosmo itself was part of that trend when New York City condo developer Bruce Eichner

decided he could build a $4 billion property on a Manhattan-sized slice of Las Vegas. The result was Deutsche Bank having to take over, and Blackstone now having bought Cosmo for $1.73 billion. Of course, the bulls say, Blackstone isn’t just buying a casino, it’s buying a lifestyle property it can understand. Is that almost the exact same rationale that convinced Eichner to build, and Deutsche Bank to finance, the $4 billion in the first place? The other extreme, of course, is Atlantic City, where visions of multibillion-dollar resorts are now just sand by the sea, and where casinos worth many hundreds of millions now fetch $20 million, or $30 million, or simply are closed down for nothing. Everyone knows about the $2.4 billion Revel. Or about Carl Icahn buying Tropicana for less than it cost to build that property’s Quarter retail-restaurant addition. A more sobering message, however, might come from Tilman Fertitta’s Golden Nugget experiment. A hard-nosed, value-oriented businessman, Fertitta paid just $38 million for the then Trump Marina and then invested $150 million in a makeover that everyone agreed refreshed the property wonderfully. The result? Golden Nugget continues to report operating losses and some speculate it might close. So where is the sweet spot for casino purchases? Obviously, the answer varies by geographic location and property. However, the historic range of 7 to 7.5 times isn’t a bad place to start. Or to look at Icahn, who hasn’t stumbled yet. His Tropicana Entertainment paid $260 million, or 7.5 times forward EBITDA, for Lumiere Place last year. For that, Icahn got a nearly new casino, a Four Seasons-branded hotel, and a location in the heart of St. Louis near pro sports stadiums, the financial center and the Gateway Arch. And, while other regional casinos have been in decline, Lumiere grew gaming revenues 4.6 percent in May, which might say something about paying the right price. 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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Atlantic City’s NoseDive Three more

casinos closing, and

Trump Plaza will close around September 16.

no end in sight By Patrick Roberts

ummer is usually a good time for Atlantic City casinos. It’s the busy time of year when vacationers flock to the Jersey Shore to enjoy the beach and the boardwalks, and a little gambling—too little, apparently, for at least three casinos this summer. In mid-July, Trump Entertainment confirmed what local politicians were saying, that Trump Plaza, the city’s worst-performing casino, would close in September. The company sent out “WARN” notices to Trump Plaza’s 1,100 employees the following week, giving them 60 days warning that they will lose their jobs. Trump Plaza joins Caesars Entertainment’s Showboat and the independent Revel casino in sending their employees such letters. The Atlantic Club—formerly the Atlantic City Hilton—closed in January, the first casino to close in Atlantic City as a result of the current financial crisis. The closing of Trump Plaza was expected. In May, the casino posted a gross gaming win of only $4 million. In the first five months of the year, Trump Plaza has reported GGR of $21 million, by far the lowest in the city and down more than 25 percent from the previous year. In 2013, Trump Plaza had a sale agreement with Southern California’s Merulo Group, which owns the Grand Sierra in Reno and several smaller hotels in Las Vegas. Merulo had planned to buy Trump Plaza for $20 million and renovate it with an Asian theme to appeal to that lucrative market in the Northeast. But bondholder Carl Icahn objected to the low sale price and forced the deal to be terminated. Icahn owns the mortgage on Trump Plaza and Trump Taj Mahal, totaling $289 million. Some analysts speculate Icahn will now attempt to take over Trump Entertainment since Trump Plaza will now default on the mortgage. Another issue that doesn’t figure in the other potential closings is online gaming. Betfair operates an online casino under the Trump Plaza license. No details on what would happen to Betfair’s online casino as a result of the Trump Plaza closing were released, but most expect the license to be transferred to Trump Taj Mahal, where Ultimate Gaming operates an online casino. Donald Trump has had little to do with the Atlantic City casinos bearing 20

Global Gaming Business AUGUST 2014

found y close if a buyer isn’t Revel has warned it ma . during an August auction

In addition to losing a casino, Atlantic City will miss the House of Blues if the Showboat closes in September.

his name for some time. He owns as little as a 5 percent equity stake in Trump Entertainment. He told the Associated Press that the potential casino closings were totally predictable. “I let them use my name, but I have nothing to do with it,” Trump said. “Atlantic City has suffered for years. Many mistakes were made by government—tremendous mistakes, including no reinvestment in the town. They would take casino revenue and put it in places that had nothing to do with Atlantic City. I got out seven years ago; my timing was tremendous.”

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Tropicana owner Carl Icahn may have an option to take over Trump Entertainment and its Trump Taj Mahal.

Former Reebok leader Paul Fireman wants to build a $2 billion casino complex in Jersey City.

Politicians Showboating The news came just days after local politicians turned on Caesars Entertainment for its plan to close the Showboat, and casino workers marched to Caesars Atlantic City to protest that closing. Following those events, Caesars Entertainment said it would consider selling its closing Showboat casino to a company that would still operate it as a casino if it got a good price. Caesars announced it was shuttering the casino hotel—which is scheduled to close August 31—because it wanted to reduce casino capacity in the resort. That, however, brought quick criticism from local officials incensed that the company would close a still-profitable property. Caesars, however, has received expressions of interest in the property, and will do its due diligence if it receives a reasonable offer, Caesars Entertainment spokesman Gary Thompson told the Associated Press. Thompson’s comments, however, seem to contradict the reasons given for closing the property, which was to protect Caesars’ other three casinos in the resort, Caesars Atlantic City, Bally’s and Harrah’s. Thompson told the AP that in making a decision, concerns over the impact of having another casino in the market would “play somewhat of a role, but I think the largest role would be the amount of money we could receive from the property.” Thompson said expressions of interest have come from groups interested in operating the property as a hotel-casino or for other uses. Caesars would also have to determine if a potential buyer could receive a state casino license, he said. He also did not disclose any companies interested in the property. Previous rumors had Penn National Gaming and Churchill Downs kicking the Showboat tires. In fact, Churchill has filed suit against former Trump executive Nick Ribis for misleading the company about his ability to operate the casino while Churchill ran an online casino connected to the license. The Showboat would be the second casino to close in the city this year. The Atlantic Club casino closed in January after Caesars and Tropicana Atlantic City bought the property at a bankruptcy auction with the intent to close it and shrink the Atlantic City market. Caesars has since sold the property—and also the former Claridge casino, which it also closed more than two years ago—reportedly with deed restrictions saying the properties can’t operate as casinos. The closing of another casino brought severe criticism from city officials, especially since Showboat is still officially showing a profit. The Showboat posted a gross operating profit of nearly $2 million for the first quarter of this year, but that was down from nearly $8.5 million in the first quarter of 2013. State Assemblyman Chris Brown, a Republican who represents Atlantic

County, called the shutting of Showboat “unconscionable,” and said he plans to introduce legislation that would encourage casinos to sell to other casino operators if they plan to close. If not, the casinos would have to pay back state-financed economic incentives. “This is unacceptable, and it’s time to stand up for the working middle class,” he said. Brown said his bill would also prohibit casinos from placing anti-competitive deed restrictions on sold properties and limit the number of casino licenses a single corporation can own in the state to two. Earlier in June, Revel delivered WARN letters to its employees, but denied that it will close for certain sometime in August. Some analysts believe the city’s newest casino would be snapped up at a bargain price by another gaming company (possibly Caesars) or an investment group that would prevent it from closing. An auction of the property was slated for August 7. The closing of all the casinos that sent WARN letters would mean a loss of 7,000 jobs, about a quarter of the workforce in Atlantic City. Bob McDevitt, the head of Local 54, the city’s culinary union, says something must be done. “While this is a personal tragedy for every family involved, it is also a crisis for the state,” he said. “We expect Trenton to react with more than just sympathetic sound bites; we demand action equal to the magnitude of this pending catastrophe.”

North Jersey Threat To make matters worse for Atlantic City, news emerged that seemed to indicate the five years Governor Chris Christie had allocated to Atlantic City to turn itself around may be over in four. As casino revenue continues to decline in the resort and more casinos face closing, even staunch supporters of the city—such as Christie—are acknowledging that it may be time to allow a casino to be built in the northern part of the state. At the same time, news came of a proposal by a group that includes Reebok founder Paul Fireman to build a $4.6 billion casino complex in Jersey City. The plan has already been presented to some state legislators, but it could not be built—at least with a casino component—unless state voters approve a referendum to allow casino gambling in the state outside of Atlantic City. Such a referendum could come as early as November 2015. In 2011, Christie gave Atlantic City five years to improve its fortunes before he would consider discussing expanding casinos in the state. But as the city’s casino market continues to sink and casinos close, Christie now says he’s ready to start talking about casinos outside of Atlantic City. Christie was responding to statements by New Jersey Senate President AUGUST 2014 www.ggbmagazine.com

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State Senator Paul Sarlo has introduced a bill that would establish a referendum to permit casino gaming outside Atlantic City. Former Atlantic City mayor and current state Senator James Whelan believes a northern New Jersey casino is inevitable.

Stephen Sweeney, who said he has been having discussions about a possible referendum on a northern New Jersey casino for several months and said a referendum could be before voters in 2015. Sweeney has also supported the five-year plan for Atlantic City, but he has said he’s now troubled by casino closings and the loss of jobs in the city, not to mention the declining taxes the state gets from casino revenues. Sweeney’s remarks came before news of the Jersey City proposal was released. Most advocates of a new casino in northern New Jersey have looked to the Meadowlands sports complex as the likely location. Sweeney said any plan for a northern New Jersey casino must include protections and benefits for Atlantic City, but he also acknowledged that a northern New Jersey casino could create thousands of jobs. “I think I read pretty carefully what he said, which is that there’s a lot of stuff that needs to be done and talked about between now and then,” Christie said of Sweeney’s comments at a press event, according to NJ.com. “That’s why I think pushing it out to fall 2015 makes sense. We have to stay committed to Atlantic City, but we also have to remain competitive in the region. “He wants to start the conversation,” Christie said. “I think that’s a good thing for him to do, and I’m happy to participate in it. We’ll see what happens— November 2015 is a long way off. We’ve got time to go through it.”

Meadowlands Momentum Support for a Meadowlands casino has been around for years, but has gained new impetus as New York state is now planning to approve four new upstate casinos (see page 64). The Jersey City proposal reportedly includes plans for a more than 90-story hotel and residential tower, the world’s largest observation wheel and an auto-racing stadium that could seat more than 100,000 fans, state Senator Raymond Lesniak—a major advocate of increasing gambling options in the state—told NJ.com. “It’s huge,” said Lesniak, who has met with Reebok founder Fireman. “It has the wow factor. It will blow away Macau as a destination place for gaming.” Assemblyman Ralph Caputo, chairman of the Assembly’s Gaming and Tourism Committee, has been briefed on the plan by a group that includes Fireman, according to published reports. Fireman, a former chief executive of Reebok, runs Fireman Capital Partners in Boston, and is estimated to be worth $1.1 billion. Though southern New Jersey politicians and community leaders have long opposed any move to expand gambling outside of Atlantic City, the changing realities of the casino industry—and Atlantic City’s loss of dominance—seems to be making expansion inevitable. 22

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“I’m sure there are a lot of people who will take me to task for daring to even consider casinos outside of Atlantic City,” state Senator James Whelan—a former mayor of Atlantic City—told the Star Ledger. “I’d love to be wrong, but I think that’s the reality of where we are.” Some southern New Jersey politicians, however, said the state should stick to the full pledge of waiting five years before expanding casino gaming in the state. “We need to remind everybody there is a five-year bipartisan agreement in effect,” Assemblyman Brown told the Philadelphia Inquirer. “This notion, since gaming revenue is down, that we should abandon the five-year agreement is just plain wrong. “Of course, gaming revenue is down due to the proliferation of gaming in states surrounding New Jersey,” Brown added. “In fact, due to oversaturation in the market, gaming revenue is also down in Pennsylvania and Delaware. Talking about putting a casino in the Meadowlands before the five-year period is over simply injects uncertainty in the market and makes it harder for Atlantic City to attract development.” Whelan said he would like any future legislation to expand gambling to require any new North Jersey casino operators to also open a casino in Atlantic City, restrict the gaming expansion only to North Jersey, and to make sure new casino revenue benefits southern New Jersey just as Atlantic City casinos funded projects around the state for years. Lesniak also said he wants to ensure that any northern New Jersey project benefits Atlantic City. “There’s a lot invested in Atlantic City,” Lesniak said, “and rather than this proposal leaving it high and dry, it actually is a means for it to be saved.” If a casino opens in northern New Jersey, it may wish it was in Atlantic City when tax time comes around. State Senator Paul Sarlo has introduced a bill in the state legislature that would tax a potential future Meadowlands casino at a rate of 66 percent of gross revenues. Atlantic City casinos are taxed at 9.25 percent—8 percent on gross revenues and a 1.25 percent Casino Reinvestment Development Authority tax that goes to improving Atlantic City. Sarlo, however, acknowledged that the 66 percent would probably be the highest casino tax rate in the country, and it would need to be lowered. “I don’t think in its final form it will be that high, but I recognize that it will be perhaps at 50 percent, which will help us generate revenue that we can send back to Atlantic City,” he told the Star Ledger. Sarlo also said he feels the state could handle a casino at the Meadowlands and the proposed $4.9 billion casino project in Jersey City. “There’s plenty of capacity in the region to put one in the Meadowlands and one in Jersey City,” Sarlo said. “If you tax both of them at the higher rate, I think it generates enough revenue for the state of New Jersey to help the local economies in the northern part of the state as well as send money back to Atlantic City.”

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OKLAHOMA: Mystery or Mecca? The gaming industry has been a true opportunity for many state tribes BY DAVE PALERMO

t is justice that the only significant U.S. growth market for American Indian casinos is Oklahoma, which before achieving statehood in 1907 was a territory set aside for the torturous, forced removal of dozens of indigenous nations. The Chickasaw, Cherokee, Creek and Choctaw are among the state’s 39 federally recognized tribes, many of which were herded in the infamous Trail of Tears to the Sooner State from their ancestral homelands. Today, 33 Oklahoma tribes own 115 gambling facilities ranging from upscale resorts to travel plazas, far more operations than any of the 27 other states with Indian casinos. Oklahoma gambling in 2012 generated more than $3.7 billion, second only to California, where 60 casinos won $6.9 billion, according to economist Alan Meister, author of the annual Indian Gaming Industry Report, and other sources. While the Indian casino market nationwide has plateaued—generating only 2 percent growth in 2012—Oklahoma has continued to thrive, its win climbing 5.8 percent to 7 percent over the previous year. “We grew more than anybody in Indian Country,” says Sheila Morago, executive director of the Oklahoma Indian Gaming Association (OIGA).

Regional Powerhouse Oklahoma has, in fact, become a mecca of Indian gaming, drawing players from throughout an eight-state region. “Oklahoma is an amazing case scenario. It’s so unique,” says Matthew Robinson, founder of hospitality consulting firm Klas Robinson. “There’s been bombastic growth. And it looks like it is going to continue for some time.” The profitability of Oklahoma’s casinos began with a handful of bingo operations in the 1980s and has never taken a backward swing, not even during the nationwide recession following the economic collapse of 2008. “We have never, ever taken a dip,” Morago says. “The revenues have al24

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ways gone up.” Industry analysts predict the upward trend will go on for several years. Much of the optimism is based on the fact Oklahoma is strategically located, drawing customers from Kansas, Missouri, Arkansas and a particularly lucrative Texas, surrounding states with few, if any, casinos. There is scant evidence the statewide market is becoming saturated. But it is maturing, with tribes expanding casino operations with hotels, spas, entertainment facilities and other non-gambling amenities. Some 25 Oklahoma tribal gambling facilities were newly opened, expanded or renovated in the past two years. Other projects are on the drawing board. Perhaps most important to their future prosperity, Oklahoma tribes enjoy political leverage with state officials, largely due to their pioneering development of Class II, bingo-style slot machines that under federal law do not require tribal-state gambling agreements, or compacts. “Having a good Class II product can be very valuable in dealing with the state,” OIGA lobbyist John Tahsuda says.

Saturation? Not So Much Slot machine and table game inventory is rising at a percentage roughly equal to the increase in revenue, but Morago says much of the industry’s growth is driven by new amenities. “A lot of the bigger casinos are doing hotels and spas, restaurants and entertainment facilities.” Morago says. “It’s not just about the gaming anymore. You’re looking at a maturing market. “Tribes are making major investments in their facilities, and that translates to major investments in their communities.” Much of the evolution from stand-alone casinos to destination resorts is taking place in larger cities such as Tulsa and Oklahoma City, Robinson says, and along the state borders. “The tribes are now truly going for the out-of-state business, adding hotel rooms, going from your basic, Quonset-hut casinos to full-scale destination re-

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Cherokee’s Hard Rock Tulsa; Chickasaw Nation’s WinStar Casino; Comanche Red River Casino

“We grew more than anybody in Indian Country. We have never, ever taken a dip. The revenues have always gone up.” —Sheila Morago, Executive Director of the Oklahoma Indian Gaming Association (OIGA)

sorts,” Robinson says. Expansion projects include hotel towers at the Chickasaw Nation’s WinStar Casino near Thackery and the Comanche Red River Casino near Devol, both on the Texas border. The Wyandotte Nation Casino in Wyandotte, near the Arkansas and Missouri borders, is doubling the size of its gaming floor. Hard Rock Hotel & Casino in Tulsa, operated by the Cherokee Nation, recently built a new hotel tower and several themed restaurants. “I like to say we’re the adult version of Disney World,” Chief Operating Officer Mark Fulton told the Tulsa World newspaper. Market saturation will eventually impact the smaller, rural casinos catering to local residents. “There are a lot of opportunities for growth. But things are plateauing a bit,” Tulsa attorney Michael McBride says. “It’s becoming more competitive.” There may not be a significant increase in the number of new gambling facilities, Robinson says, although there are several traffic plazas, or “gasinos,” in

the planning stages. The evolution of casinos into destination resorts provides Oklahoma security in the event surrounding states launch or expand gambling industries. This is particularly true with Texas and the lucrative Dallas/Fort Worth metropolis, which extends to the Oklahoma border. “That’s the fastest-growing area in the country right now,” Oklahoma City University economist Kyle Dean says. “Our tribes are in an excellent position to take advantage of that.” Gambling legislation has annually been introduced to the Texas legislature but has failed to make it to the governor’s desk. “If somebody would have told me 10 years ago that Texas would still be on the sidelines, I would have guessed differently,” says a Tulsa gambling consultant who requested anonymity. “I would have thought something would have happened by now.” “Texas is the biggest wild card in Oklahoma’s future,” Robinson says.

Class II And The Compact Wars Oklahoma’s gaming market is unique in that it remains, along with Alabama and Florida, an enclave of Class II, bingo-style slot machines. Of the tribes’ 2012 inventory of 68,134 machines, 28,430 were Class II devices, according to Meister’s report. With Class II machines, players simultaneously play against each other for limited prizes. With Class III devices, they play against the house using a machine random number generator for bigger prizes. The Indian Gaming Regulatory Act (IGRA) requires that tribes operating the more lucrative, technologically advanced Class III, casino-style devices enter into regulatory agreements, or compacts, with the states. Most compacts require that tribes share machine revenues. For some 20 years Oklahoma tribes operated Class II machines in defiance of state officials who refused to negotiate a Class III compact. AUGUST 2014 www.ggbmagazine.com

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Choctaw Casino

Tribes worked with manufacturers in a political and regulatory struggle against National Indian Gaming Commission (NIGC) and U.S. Department of Justice efforts to limit technological advances designed to speed up play and make Class II devices competitive with the more lucrative Class III machines. Former Chickasaw gaming commissioner Tracy Burris testified on at least three occasions before the U.S. Senate Committee on Indian Affairs, arguing that IGRA by statute supported technological enhancements to Class II games. Native governments lost several lawsuits on machine criteria before the legal tide turned in 1999 and the DOJ/NIGC failed in a series of court cases alleging that games such as Megamania, Lucky Tab and Magical Irish were facsimiles of Class III, casino-style machines. “If we didn’t keep beating that drum we wouldn’t have the level of Class II gaming that we have today,” says Burris, a consultant and interim gambling commissioner with the Viejas Band of Kumeyaay Indians in Southern California. Oklahoma’s Class II inventory had reached 36,000 devices in 2004, when tribes and Governor Brad Henry finally agreed on a Class III compact later approved by the voters. By that time, there were major technological improvements in Class II machines by market leaders Video Gaming Technologies, American Gaming Systems, Rocket Gaming, Cadillac Jack, Multimedia Games, Bally, Aristocrat and others. “When we got the compact, Class II gaming in Oklahoma was extremely advanced,” Burris says. “As competition grew intense, the technology improved. The market drove the technology.” “Tribes in Oklahoma know Class II,” says a tribal consultant who requested anonymity. “They understand it. They fought the wars. They took the leadership role in establishing a viable Class II market. Tribes in Oklahoma have a far better understanding of Class II than any other state.” “Class II is definitely the bedrock of Oklahoma gaming,” Morago says. “We want to make sure it continues to be a healthy industry.” A tribal-friendly NIGC under the Obama administration later began supporting tribal efforts to maintain a viable Class II market. NIGC last year published in the Federal Register a “reinterpretation” of a Bush administration NIGC opinion banning “one-touch bingo.” The NIGC also revised Class II regulations and technical standards designed to promote the industry. “The turnaround with the NIGC is amazing,” Tahsuda says. “Tribes went from fighting a commission that was seeking regulations that would cripple the Oklahoma industry to a commission very supportive of a vibrant Class II gambling industry.” Although the DOJ eventually blocked NIGC efforts to implement the “onetouch” reinterpretation, tribal officials doubt the federal government will attempt to halt use of the technology, which has been utilized by tribes in Oklahoma, Alabama, Florida and elsewhere for several years. “I’ve seen no recent interest in that issue by the DOJ,” OIGA attorney Dean Luthey says. “The long-term inaction, in my view, is consistent with federal determination that the games currently being played… are, in fact, lawful. “The tribes have invested hundreds of millions of dollars for the continued play of Class II games that the federal government has not challenged. It would be unfair, wouldn’t you think, for the federal government, after the fact, to assert some legal defect?” “Neither the NIGC nor the DOJ can do anything because there is no re26

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quirement under IGRA for two touches to play the machines,” says consultant and former NIGC commissioner Norm DesRosiers. “They have no grounds to take enforcement action. “Besides, the Obama administration doesn’t have the stomach to go after Native Americans right now.”

Oklahoma Holds The Cards Although Oklahoma compacts do not expire until 2020 and include 15-year automatic renewal provisions, tribes are being pressured by budget-plagued state officials to renegotiate agreements that currently require revenue shares of 4 percent to 6 percent. “There is always the possibility she could try to renegotiate compacts early,” attorney McBride says of Republican Governor Mary Fallin. But there is little incentive for tribes to engage in talks. “Tribes are generally happy with the compacts, which have allowed exclusivity and enabled the industry to grow,” McBride says. “Nobody has any given indication that I know of to start renegotiations on a new compact,” Morago says. “Until it’s time, there’s no reason to go there.” During the 20 years Oklahoma tribes utilized bingo-style machines before entering into compacted gambling, they nurtured a very loyal customer base for Class II machines, a niche that has grown as the games evolved. “Class II machines are outperforming Class III machines in a lot of places in Oklahoma,” Robinson says. Many tribal operators are swapping out Class III devices for Class II machines, which are operated outside the tribal-state compacts and do not require a fee to the state. Meister notes in his report that the 2012 inventory of Class II devices rose 11.1 percent to 28,430 machines. Class III inventory fell 4.6 percent in 2011 before rebounding 4.5 percent in 2012 to 39,704 machines. “I don’t know that there is a big rush toward Class II, but it is certainly growing a little bit,” says Mick Roemer, senior vice president of sales for Multimedia Games. The growth in the Class II industry is even stronger in other parts of the nation, including California, where compacts require not only a fee, but a cap on the number of machines.

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Oklahoma Governor Mary Fallin may want more from tribes in upcoming compact negotiations.

Oklahoma casinos grew through Class II gaming machines.

The governor angered tribes when she tried to extract a 20 percent tax from a Cheyenne-Arapahoe plan to launch an internet gaming website to target overseas gamblers. The revenue share was rejected by the U.S. Department of the Interior and the project was killed. “It continues to be a viable alternative to Class III and a way for tribes to protect their sovereignty,” Roemer says, particularly when pressured by state compact demands.

Tension In The Governor’s Office Relations between the tribes and Fallin have been anything but smooth since she took office in 2010. “There’s been a lot of tension,” McBride says. The governor angered tribes when she tried to extract a 20 percent tax from a Cheyenne-Arapahoe plan to launch an internet gaming website to target overseas gamblers. The revenue share was rejected by the U.S. Department of the Interior and the project was killed. There also remain strained feelings over a tobacco sales tax settlement reached earlier this year. Tribes conceded much to the state, largely because tobacco sales for many tribes no longer constitute a significant portion of their government revenues. Fallin is seeking re-election and will be termed out in 2018, two years before compacts expire. Hopes of trying to get a new agreement out of tribes that would be more lucrative to the state appear to be an uphill battle. “I suspect the state feels emboldened by the results of the tobacco negotiations,” Tahsuda says. “But that wasn’t worth an all-out war. “It’s going to be a different deal if she tries to renegotiate a gambling compact. She doesn’t have the legal leverage. And the incentive for the tribes is so much higher.” “The precedence set with the tobacco compacts was pretty disturbing,” a tribal 28

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consultant says. “But if she tries to renegotiate tribal compacts it will be a real cat-fight, and Class II will be the line in the sand.” Tribal leaders did not approve of Fallin’s abolishing the Oklahoma Indian Affairs Commission, replacing the office with a single tribal liaison. And her daughter Christina, a rock singer, stirred tribal sensibilities when she donned a Native American headdress for an Instagram photo. Fallin apologized for her child’s insensitivity. She also pledged support for a Native American museum project long in the planning stages. But tribal leaders remain perturbed. There are 482,760 American Indians in Oklahoma, according to a 2010 U.S. Census report, second only to California’s 723,225. But a good number of non-Indian Oklahoma citizens—most politically conservative and many fundamentally religious—lack an understanding, if not appreciation, of their indigenous neighbors and the concept of domestic sovereign governments. There is uneasiness over water issues, particularly with the state’s farming communities. Because most tribes were relocated to Oklahoma, the issue for Indian leadership is not preservation of ancestral lands, but protection of reservation lands. Tribal governments and casinos are a financial boon to the state, says OCU’s Dean, annually generating some $6.7 billion to Oklahoma’s economy. Tribal governments and their business enterprises make up Oklahoma’s eighth largest industry, following manufacturing, real estate, natural gas and oil, health care, retail, finance and wholesale trade. Tribes represent the state’s third largest employer with some 54,000 people on the payroll. “The tribes in Oklahoma are extremely significant,” Dean says. “We’re still a fairly rural state. And one advantage with the tribes is they provide employment in the rural areas.” Tribes are also diversifying their business portfolios beyond casinos, branching out into health care, banking, retail development and investments intended to ensure a sustainable source of funding for governmental services should the gambling market diminish. “The tribes would like to greatly reduce their reliance on gaming,” Dean says. “That way if Texas does get gambling, it may hurt their casino operations, but it wouldn’t ruin their economies.”

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Only The

Beginning iGaming is a brand new industry, and it needs time to develop by Roger Gros

magine a world without the internet. We’d have to use travel agents again to buy airline tickets. Pizza would only be delivered to your home after using the phone. To get books, you’d have to go to a library or a book store. And reading on a tablet? No way! Your fingers would get dirty with newsprint from the newspapers that would tell you what happened yesterday instead of 10 minutes ago. When trying to find an address, you’d have to break out a map, open it up, locate the destination and figure out how to fold that darn map up again! And you’d have to go to the casino to get a bet down on a sporting event, play a slot machine, or make a wager on blackjack. How barbaric! Yet, all around the world we can do all those things online now—except for gambling on the internet. While that’s acceptable in dozens of countries around the world, in the U.S., you can only do it in three states now. Internet gaming revenues have been described as “disappointing” in the U.S., even in New Jersey, where many people expected the industry to skyrocket. Tom Breitling, chairman of Ultimate Gaming, the first company to go online with a poker room in Nevada in April 2013, says it’s just the start. “When Amazon went live, in their first year, they did $750 million in revenue,” he says. “Today, they do $75 billion. I’m not saying we’re going to reach 30

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that level, but we’re just getting started.” But unlike online shopping, iGaming, like other forms of gaming, is evolving from illegal roots. There are still many sites flaunting the laws of countries where they take bets. So it’s going to take some time to shake those illegal operations and shape a positive public perception, says Mitch Garber, CEO of Caesars Interactive, and there’s no reason to interpret a slow start as being disappointing. “It’s analogous to being disappointed at being scoreless in the first inning of a baseball game,” he says. “There’s so much left to play. This doesn’t concern me at all. The market size will be determined. What is most important is that the technology works well and the regulatory environment is protected.” Brian Mattingley, chief executive of 888, admits that the numbers have been surprisingly low. “It’s been slower than anyone could have imagined. It’s been slow to the extent it’s almost disappointing,” he says. Conversely, he says, the other elements of iGaming have been successful, particularly in New Jersey. “I think the launch was absolutely excellent and was done perfectly,” he points out. “We haven’t received any complaints about anyone gambling from out of state or any complaints about underage gambling or collusion or whatever. If there are any issues, the regulators move immediately to investigate.

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‘‘

This has been a wonderful example of a public-private journey where we work together to address these issues. At the end of the day, you have to create a really good customer experience. That’s the only way we can thrive and prosper.

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—Tom Breitling, Ultimate Gaming

The work they have done has been exemplary.” Mark Lipparelli, who led the Nevada Gaming Control Board when it was investigating and establishing regulations for iGaming in his state, says a little perspective should be employed when considering the launch of iGaming in the U.S. “We’re less than a year and half since everything got started in this country,” he explains. “I understand that there is some disappointment, but think about where we were three years ago. We had no legalization, no revenue, no jobs, no people producing product, no companies addressing these critical issues. And let’s consider where we are now. I know it’s not where we want to be, but it’s far from where we started.”

Technical Troubles The launch of iGaming in New Jersey was really the first time geolocation had been tested on such a wide scale. With hundreds of thousands of people within a mile of the state borders, locating them was crucial for a successful launch. But with such new technology, and rigid rules that called for multiple certifications of location—ISP, GPS and several others—geolocation took some time to iron out. But with the industry’s most accurate system operated by GeoComply leading the way, location errors became less and less. David Rebuck, director of New Jersey’s Division of Gaming Enforcement— who has been praised in all corners for the way the DGE prepared to launch iGaming in the state—says the technical issues are diminishing each week. “The geolocation issue has largely been solved,” he says. “There were problems in the beginning with false positives, where individuals who were clearly within the state of New Jersey were blocked because the standards were so high. It still happens, but to a very small degree, especially along the borders close to New York or Pennsylvania. We’re in good shape now.” Mattingley agrees. “Geolocation is now working as well as it can,” he says. “The people who worked on this have done a spectacular job to assure that people who gamble are indeed located in the state, and very few mistakes are being made about the instate locations.” Matt Katz, the CEO of CAMS, a multi-solution technical provider, says most of these technical problems should have been anticipated. “The two biggest issues are payments and geolocation,” he says. “I’m surprised that these have been talked about so much, because we knew these were going to be problems right from the start. The 7995 (gambling) designation for credit cards is a red flag, and that would be unacceptable in most cases, and geolocation for state borders had never been tried before. These were foreseeable issues. The industry has rolled out exactly as expected.” The payment processing issue was more than technical, however. It involved

federal regulations along with corporate business decisions. Rebuck says 50 percent of Visa transactions and 75 percent of MasterCard transactions for iGaming are now being accepted in New Jersey. “E-commerce systems have been embraced,” he says. “But the major players like PayPal, Amex and Discover are still sitting on the sidelines and watching. But they’ll come around when there are more people, which we are reaching quickly. When you add the population base of the three states currently legal, it’s 12 million or 13 million. So it’s just a matter of time. “It’s a business decision, but there is no regulatory impediment at this time.” Frank Fahrenkopf, the former president and CEO of the American Gaming Association, says these problems were the things the AGA was worried about when considering the support for or against iGaming during his tenure. “This was probably predictable,” he says. “The problem with regulators maybe overplaying their hand making sure that people who were out of state could not play probably kept some people who were in state from playing. That clearly limited the success of this effort.” Garber, the former CEO of PartyGaming, agrees and says it is the responsibility of the iGaming companies to explain to banks about the realities of the industry. “For better or for worse, there have been kinks in the technology,” he says. “We had problems with payments, but that’s not unusual in the beginning of a business like this. “I think payment processing is simply a matter of education. For years, online gaming was illegal until New Jersey permitted it. The issuing banks with departments that are current with the new legislation and are understanding of the environment are accepting the product. But others that aren’t so up to date are not responding, and it’s in our hands to be spending the time speaking to the credit card organizations and the issuing banks about how we’ve got this strict regulatory environment and that it’s only going to be a larger industry.”

Regulatory Response Much of the appreciation of the way Rebuck has handled the launch comes because of his willingness to learn and reconsider regulations that may have been overreaching, according to Garber. “Rebuck has listened to what we have to say about the licensing, the rules, the technology,” he says. “He’s willing to make modifications to make the technology better as long as it remains tightly regulated and secure. We have to say that working with the DGE has been a very pleasant and fluid experience for our company.” The “new” DGE, which has dramatically reformed regulations covering AUGUST 2014 www.ggbmagazine.com

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We need to cross-market to our offline customer base a little bit better. We need to get the frequent visitors to Atlantic City to also play with us online through the Total Rewards programs. We need to get better at that.

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—Mitch Garber, Caesars Interactive

land-based casinos in Atlantic City, realized that it was not the expert when it came to iGaming, so flexibility in regulations was necessary. “We are open to any suggestions that make the system better,” he says. “We’ve done massive changes on the bricks-and-mortar side, which have had very positive results. We’ve made few changes to the original regulations on iGaming, but we will make adjustments necessary as long as we continue to maintain the controls.” Lipparelli says the DGE consulted with his agency early on. “I think New Jersey benefited greatly from the work that we did,” he says. “They were able to go through this process in a much shorter length of time. There’s always a give-and-take. There’s a danger of going too fast, but when you move that quickly with innovators, there must be adequate financial return. “The first round of products were probably not the best products, but that doesn’t mean these same companies won’t be improving. They’ll figure out the right product that will improve the customer experience.” Rebuck says the DGE is now permitting license holders in New Jersey to operate with up to five separate platforms. “We gave each licensee five skins,” he explains. “Most of them have realized they don’t need five skins, so we’re going to allow them to substitute a platform for a skin. It’s great for the state because it means more money invested into the state and more jobs. I think we’ll see at least two casinos add new platforms this year.” Although there were some technical problems at the start, Lipparelli says the most important aspect of the new industry was integrity in the regulatory process. “The major overarching concern was how these companies could launch, and launch in a controlled way with little downside,” he explains. “That came through very successfully.” Breitling says the work all parties put in has been gratifying. “This has been a wonderful example of a public-private journey where we work together to address these issues,” he says. “At the end of the day, you have to create a really good customer experience. That’s the only way we can thrive and prosper.” All agree, however, that the critical regulatory issue remaining is the blocking of the illegal iGaming sites that are still operating in the U.S. “The problem is the illegal operators,” says Mattingley. “I know for a fact that 32

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one large grey-area online casino operator has actually increased their market share in New Jersey over the past four months.” Katz says it’s an important concern that must be fixed. “The big issue, which the DGE is just starting to address, is the participation of illegal operators,” he says. “We’re talking about regulated operators who have invested tens of millions of dollars into this industry. Yes, there have been somewhat lackluster results. But they are still competing with offshore operators who haven’t invested that money, and who don’t adhere to the strict controls that regulated the licensed operators in New Jersey. So there is a component of unfair competition. How do you adequately block these illegal sites? It’s difficult.” Lipparelli says getting the attention of the agencies who could stop this is also difficult. “There are some creative ideas now bubbling to the surface,” he says. “This is a difficult area of law enforcement. There’s little doubt that illegal operators are violating federal and state laws. There is some doubt whether we have enough tools in the law enforcement basket to pursue cases with good success. That’s a challenge to any district attorney or attorney general. We may have to create additional laws that make it more difficult for illegal operators.”

Market Makers The size of the market has been hotly debated, particularly with the disappointing revenues. Everyone agrees, however, that education is the answer, and will spur more interest. “Education is a big part of it,” says Breitling. “The consumers are not aware of what we’re doing. There’s a lot of time and money devoted to advertising and marketing. But it will evolve, and the activity will be as normal to people as the way they shop is today.” Fahrenkopf says it may convince customers of the illegal online casinos to make the crossover. “If you had more education, maybe these customers who are playing at the offshore sites would move to the regulated site,” he says. “But they’re comfortable there and there are also some customer loyalty issues, I’m sure. This could have been overcome by intelligent advertising and communication.” Garber says critics of the industry need to understand that it takes more than simple legalization to build the market.

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‘‘

Affiliates can play a big role in the U.S. once they all understand the rules. They are a large part of the European market, and there’s no reason they can’t become as important in the U.S. spreading the word and giving us a big boost.

‘‘

—Brian Mattingley, 888

awareness. This is about the next 10 years, not the last 10 years.” “Some people think that once a bill is passed, everyone knows about it,” he One method of marketing that is not well-established in the U.S. is affiliate explains. “But with iGaming, we don’t have the beautiful skyscraper casinos that marketing, which has been the engine that fueled iGaming growth in Europe. we saw in Atlantic City in 1978, and everyone in the state and beyond knew about it. This is something that has no new construction attached to it. It requires Regulations surrounding these affiliate marketing sites had been confusing until the DGE refined its rules in May. only marketing. We’ve all done a lot of marketing, but to get a new product and “We didn’t really understand the affiliate and sub-affiliate market at all when service into the minds of people takes more time than we’ve had. And it probably we first started,” says Rebuck. “I don’t think the casino operators even undershows that marketing can be improved.” stood it. The platform providers, primarily from Europe, understood it, so we Mattingley agrees that the marketing in the early days may have been either learned from them. too confusing or too sophisticated. “We realized that it’s a powerful marketing tool and we needed to get ahead “We have to do a better job at education,” he says. “We almost have to go of it. Some of the standards were restrictive to the point where it hurts the operaback to basics and talk about the steps you need to take to sign up, get geolocated tors. We met with them and issued advice about how they should be registered and make deposits. I don’t think we’ve totally pushed that yet. with the division depending upon the payment mechanisms and systems. I think “This is a new industry. We need to show players how it works. We need the affiliate industry is pleased with the standards we’ve put out there. And we’re more exposure to the customers. Let’s tell them that online gaming is legal, it’s following up with these guidelines.” fun and it’s easy to do.” When the DGE discovered that some affiliThe big and recognizable companies in the industry ates were marketing the legal New Jersey casinos have so far dominated. Garber says Caesars could do a alongside the illegal sites, cease-and-desist letters better job. were sent. “We need to cross-market to our offline customer “We gave them a choice,” he says. “Either base a little bit better,” he says. “We need to get the freyou want to continue to represent the illegal quent visitors to Atlantic City to also play with us online, casinos or you can come with us, get registered and the customer who is playing with us online and who or licensed, and represent our legal casinos. You has never visited Atlantic City should do so through the can’t have it both ways.” Total Rewards program. We need to get better at that.” Mattingley is hopeful affiliates will get more Breitling says the big brands like WSOP, PartyPoker traction in the U.S. and Borgata have thrived because people know the “Affiliates can play a big role in the U.S. names. once they all understand the rules.,” he says. “This entire industry is based on trust,” he says, “and people gravitate towards a brand they can trust. Many of those brands have established themselves over time, and have a relationship with many of the potential customers. This industry has matured over almost 40 years in New Jersey. There’s a lot of brand equity there, as well as large databases.” But he says he’s confident that brands like Ultimate Gaming and 888 will be able to establish an audience. “There’s an opportunity for new brands to find their —Mark Lipparelli, former niche,” he says. “We’re building the relationship with chairman, Nevada Gaming customers for the first time. We’re trying new things and Control Board looking forward to the next 10 years and building relationships with our customers. It comes down to trust and

‘Three years ago, we had no legalization, no revenue, no jobs, no people producing product, no companies addressing these critical issues. Let’s consider where we are now. I know it’s not where we want to be, but it’s far from where we started.’

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‘‘

If you had more education, maybe these customers who are playing at the offshore sites would move to the regulated sites. This could have been overcome by intelligent advertising and communication.

‘‘

—Frank Fahrenkopf, former president and CEO, American Gaming Association

“They are a large part of the European market, and there’s no reason they can’t become as important in the U.S. spreading the word and giving us a big boost.” Katz agrees that affiliates would be a positive addition to the marketplace. “Affiliate marketing is a great form of advertising,” he says. “It’s very effective and has relatively low risk from the merchants’ perspective. What’s unique in New Jersey versus Nevada is that affiliates have to get licensed or register with the DGE, which is a disincentive for them. There’s a lot of opportunity here, where there could be huge increases in business should more affiliate networks go through the process.”

Bad Actor The recent purchase of PokerStars by Amaya could shake up the New Jersey iGaming industry. PokerStars’ application to operate in New Jersey had been put on hold by the DGE because it operated in the U.S. after the passage of the Unlawful Internet Gambling Enforcement Act of 2006. The “tainted assets” were deemed a problem because the owners of the company at that time remained in place. The former chairman, Isai Sheinberg, is still under indictment by the U.S. Department of Justice, even though the company worked out a settlement with the DOJ. Sheinberg’s son, Mark, remained as chairman. But the Amaya purchase cleared up those problems, and the DGE is now considering an application by already-licensed Amaya to permit the usage of PokerStars in New Jersey (PokerStars has an agreement with Resorts Atlantic City to operate as the online arm of the casino should it be approved). Rebuck says he’s looking forward to PokerStars’ participation. “Amaya worked with us to get licensed, and understands our standards for suitability,” he says. “We’ve had significant discussions with them about the acquisition of PokerStars. There will be no surprises. Amaya has a very good reputation, and it’s a company we trust. I fully expect that subsidiary, whether it be PokerStars, Full Tilt, or whatever, will not have a problem in getting licensed. It’s going to be a very exciting time for the state, Amaya and the world’s largest internet gaming operator. And we’re going to do it right.” The existing operators are not as sanguine as Rebuck about the entry of PokerStars into the market. “We ought to see the regulators saying that they can come in, but because they were taking wagers illegally for those years, you are going to have to suffer a penalty where you can’t operate for a given period of time,” says 888’s Mattingley. “I think two years would make some sense. That company built a significant worldwide business on the spoils of illegal wagering in the U.S. And they built a huge database during those years that truly is all-encompassing. As competitors, I think we should be allowed to establish our brands, which could 36

Global Gaming Business AUGUST 2014

be done in two years.” Everyone agrees, however, that a “bad actor” clause in legislation is a bad idea, and that regulators should be given the responsibility to approve or ban a company. “PokerStars needs to be subjected to the same regulatory scrutiny as everyone else,” says Lipparelli, even though Nevada’s legislation contained a bad actor clause. “It’s not fair to them or anyone else that any regulator should prejudge if anyone is suitable. They face the same issues as any operator: Can we educate the financial community on payments? Can we get law enforcement to find a way to shut down the illegal operators? Can they break through the market? The first step is they need to be vetted by regulators.” Fahrenkopf agrees, even though the AGA had worked hard to block PokerStars from the New Jersey market. “The AGA was quite active when PokerStars attempted to acquire the Atlantic Club,” he explains. “We filed a long brief with the DGE. But if you assume that Amaya is a clear purchase by people not affiliated in the past with PokerStars, then there should be no problem. But in our brief, we found a pyramid of companies affiliated with PokerStars with people involved who should not have been involved. I’m confident the DGE will get to the bottom of it.” Montreal-based Garber says he sees both sides of the issue. “I know David Baazov very well,” he says. “He’s a local Montreal guy who’s done a phenomenal deal from a business and capital viewpoint. He’s raised $5 billion to complete the deal, which is something I haven’t seen very often in my business career. “At the same time, he’s bought an asset that comes with a lot of success and a lot of controversy. The regulators are going to have to weigh the success and the controversy. We believe that well-informed regulators make well-informed decisions. And we believe that the regulators today are very well-informed about the history of PokerStars and how that company has been built, and will make the right decision.” Rebuck says regulators are clearly able to make the determination. “The decision to allow the regulators to judge the suitability of bad actors was a good one,” he says. “We’ve knocked out many people from New Jersey, and will continue to do so. But we have the flexibility to revisit the companies if the bad actors are taken out of play. This is a standard the state has held to since the beginning, because there were bad actors in the bricks-and-mortar world too. “If a company is sold and the bad actors are removed, we have the ability to make sure that there’s a good level of integrity and transparency.”

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PokerStars Could Be Online In New Jersey Quickly

f Amaya Gaming completes its proposed purchase of PokerStars by its targeted date of September 30, the online gambling giant could be operating in the state within days afterwards. That’s the conclusion of Online Poker Report, which notes that Amaya and PokerStars’ Atlantic City casino partner Resorts Casino Hotel are already approved for online gambling in the state. Amaya’s purchase of PokerStars removed New Jersey’s main objection to PokerStars—namely, the involvement of several executives under indictment by the U.S. Department of Justice—and the state has said it has already reopened licensing procedures for PokerStars. In addition, Amaya already has a New Jersey gaming license, and supplies software to Caesars and the Golden Nugget. The purchase means the indicted executives— including PokerStars founder Isai Scheinberg—are divesting themselves from the Rational Group, which own PokerStars. New Jersey never denied PokerStars a license, but simply suspended its applications. The DGE said in an email to Online Poker Report that it is now continuing its licensing investigation of PokerStars. “While we cannot comment on the details of the division’s previous technical investigation of the PokerStars platform during Rational Group’s licensing review, division engineers and technicians have commented that it appears to be a technically strong platform. Now the DGE lab’s investigation will continue as we ensure the platform is adapted to comply with New Jersey’s regulations,” the email said.

Report: Bwin.party Online Casino Site May Be Sold

win.party digital entertainment Plc is considering selling some or all of the company as part of a strategic review, according to Bloomberg News. Bloomberg cited two unidentified sources with knowledge of the company’s plans in the report. Bwin then issued a press release denying the report and saying it had no plans to break up the company. According to Bloomberg, the Gibraltar-based company has hired Deutsche Bank AG to consider its options. The company will decide within two 38

Global Gaming Business AUGUST 2014

months on what action it will take. The report notes that the discussion at bwin.party follows a share drop, a change in board leadership and a disappointing start to online betting in the U.S. Philip Yea was appointed bwin chairman in April, and the company has settled a proxy fight for board seats with SpringOwl Asset Management LLC, led by former casino analyst Jason Ader.

Poland to Allow Foreign iGaming Participation

he Polish government has drafted its first-ever amendment on licensed online gambling. The amendment, to be attached to Poland’s existing Gambling Act, would remove various obstacles for foreign sports betting and iGaming operators to market products in the region. The amendment will remove existing regulations that require gambling companies to operate within Polish borders. This existing legislation has limited the number of operators wanting to target the Polish iGaming market. The new Polish gambling law will permit E.U.-licensed and regulated iGaming operators to enter the market, as long as they comply with Polish tax frameworks regarding gambling. The new amendment will ask all operators to supply financial documents and reports in the Polish language. Poland had been pressured by the E.U. to review its internet gaming framework, since it did not comply with the European Commission laws. It is thought that Poland will fast-track online gambling legislation with a view to have the necessary framework for foreign operator licensing by the first quarter of 2015.

Mississippi Forms Online Gaming Committee

he state of Mississippi recently commissioned a task force to study the status of online gaming in states where it is legal—Delaware, Nevada and New Jersey. Richard Bennett, chairman of the Mississippi House Gaming Committee, named Allen Godfrey, executive director of the Mississippi Gaming Commission, as chairman of the eightmember commission.

The task force was formed in response to declining revenues in the Tunica/Mississippi River markets. According to the Mississippi Gaming Commission, June figures indicated that in 22 of the last 24 months, Richard Bennett, state casinos have won chairman of the less money from gamMississippi House blers compared to the Gaming Committee same month in the previous year. Casinos took in $20 million, or 10.6 percent, less in May 2014 compared with May 2013. Increased competition from two Arkansas racinos along with the recession have been blamed for the industry’s downward trend, leading to the closing of Harrah’s Tunica in June. Mississippi’s Gulf Coast gaming market has done better than the river market, but Alabama Native American gaming outlets have had an impact there. State Rep. Bobby Moak has sponsored online gaming legislation for the past three years, and it has died in committee each year. The bill, virtually the same every year, would regulate, license and tax online gaming at 5 percent of gross revenues and would restrict online gaming licenses to companies that already hold land licenses to operate in Mississippi. Moak has said the Mississippi gaming industry must take control of its future by at least having a regulatory process in place for online gaming— even though the Pew Center recently reported Morgan Stanley has “chopped its market projection for the U.S. online gaming industry by 30 percent, from $5 billion to $3.5 billion by 2017, to better reflect the insights we have gained following the first few months of operations in Delaware, Nevada and New Jersey.”

Gamesys Launches Games in New Jersey

ropicanaCasino.com and VirginCasino.com have launched new games on their online gambling websites in New Jersey. The launch comes from Gamesys and High 5 Games. The latest releases include Shadow of the Panther, Dangerous Beauty, Jaguar Princess, Sirens, The Dream and The Vanishing Act, all available for real-money play. High 5 said in a press release that it plans to make a steady stream of new games available through the partnership, and announced earlier that state regulators have approved more than 40 of its premium slot games for distribution via the company’s Vault remote gaming server system.

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are delighted to work with NYX, since via OGS we can distribute our whole online portfolio to a huge number of operators.” Under the agreement, some of the most successful titles from the Casino Technology’s land-based library will be made available for players for PC and mobile play. The integration will allow the company’s top games to be accessed on some of the top online gaming websites through the NYX OGS.

Ultimate Gaming Announces Online Upgrades

ltimate Gaming—which has been underperforming in the online gambling markets in New Jersey and Nevada—has announced improvements and new features for its Ultimate Poker and Ultimate Casino internet gambling services. Ultimate says it has improved the geolocation process for players located in Nevada and New Jersey and also strengthened its Wi-Fi accessibility in both states. Players can now access Ultimate sites without the need for mobile phones, the company said. In New Jersey, Ultimate Casino—only Ultimate Poker is available in Nevada—has added 25 new games from Amaya Gaming and has launched a new mobile application that has been specifically designed for iOS users. Ultimate Poker has added new features such as hand history—that allows players to see previous hands—and a time bank that gives players more time to make decisions. Ultimate Poker players can also color-code their opponents, view tournament re-buy and add-on displays in the lobby and access an auto bonus feature to gain, track and receive bonuses in real time. Nevada players now have the option to deposit and cash out using an Ultimate Prepaid Debit Card previously only available in New Jersey.

NYX to Offer Casino Technology Games

nline gaming operator NYX Gaming Group announced that it has signed a content portfolio agreement with Bulgarian slot manufacturer Casino Technology. The agreement allows NYX to distribute Casino Technology’s games to players via the integration of Casino Technology’s Elephant Remote Game Server with one of the world’s leading gaming content distribution platforms, the NYX Open Gaming System (OGS). “Expansion in the virtual space is part of the new objectives of Casino Technology to transfer its 15 years of success in the land-based industry to the online and mobile gaming sector,” said Konrad Gill, iGaming director of Casino Technology. “We

Global Gaming Business AUGUST 2014

Greentube to Acquire Bingocams

reentube, the online gaming subsidiary of Austrian gaming supplier and operator Novomatic Group, has finalized a deal to acquire the Malta-licensed online bingo platform Bingocams from Dazzletag Entertainment Limited. Greentube chief executive Thomas Graf described Bingocams as a welcome addition to his company’s range of online gaming solutions. “This acquisition marks another major step forward for Greentube and further enhances Novomatic’s position of significance within the ever-expanding new world of online gaming,” Graf said. The acquisition, agreed for an undisclosed sum, sees Greentube take ownership of Bingocams’ integrated web platform that combines online bingo with social media and video. The product is designed to ramp up the social aspects of bingo, allowing players to interact with one another through webcam chats among up to three people during a game. The platform features a range of bingo games, and a patented Live Win Moment, which the operator describes as offering “a visual playing experience that captures the social spirit of live bingo.” Bingocams.co.uk was launched by Dazzletag Entertainment in the U.K. market in February 2011, operating under a license from Malta’s Lotteries and Gaming Authority. It features a number of casino games supplied by Microgaming, including Avalon II and The Dark Knight Rises.

GTECH to Provide Platform for Betfred

ottery and casino supplier GTECH announced that it has been selected to provide the technology platform to support the launch of a new Australian sports betting operation by U.K. bookmaker Betfred. GTECH’s industry-leading MarginMaker platform supported the launch of Betfred’s sports book product in May. The initial sports betting launch included the mobile sports book, with online and race book launches to follow in the coming months. GTECH has been the primary supplier to Betfred in the U.K. for more than 10 years. Betfred established operations in Sydney and Darwin under a Northern Territory Gaming Commission license. “GTECH is very excited to extend our partner-

ship with Betfred into the Australian market,” said GTECH International Senior Vice President and Chief Operating Officer EMEA Declan Harkin. “This is the first such foreign venture we have worked on together, and we hope it is the first of many.” “We tasked GTECH and Betfred’s front-end development agency, Degree 53, in developing a new stand-alone system with a localized offering for the Australian market,” said Betfred Australia Managing Director Luke Brill. “They both rose to this challenge and delivered a sports mobile product on time and within budget, working seamlessly with the Betfred teams in both the U.K. and Australia to very strict deadlines, through every time zone and continually going that extra mile to ensure the product was ready.”

Gamblit Forms Partnerships

amblit Gaming, a leading technology provider for real-money gaming in mobile games, announced partnerships Eric Meyerhofer, with Shanda Games InterCEO of Gamblit national Europe, Gamiker Gaming and Flexball. All three companies will utilize Gamblit Gaming’s proprietary platform to let users add real-money gaming mechanics to any mobile or PC game with a single, simple integration. “We’re thrilled that our first partners are some of the world’s top mobile game publishers and innovators who constantly push mobile gambling forward,” said Eric Meyerhofer, CEO of Gamblit Gaming. “This is an exciting time. With mobile technology available to almost every audience, the opportunities are endless. Allowing mobile games to enable gambling delivers an enhanced form of entertainment that will keep players engaged on a whole new level.” Shanda Games International Europe is a division of Shanda Games, one of China’s leading online game companies and publisher of some of the world’s most popular multi-player online games and mobile games, including Dragon Nest and Million Arthur. Shanda Games International Europe will reveal its roadmap of mobile titles developed with Gamblit Gaming’s proprietary platform later this year. “We were immediately impressed by Gamblit’s capabilities and unique position in the games space,” said Coco Chen, managing director of Shanda Games International Europe. “We look forward to working with Gamblit and being at the forefront of this emerging market.”

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Total Transactions How payment processors are bypassing banks and credit cards By Dave Bontempo on’t tell major vendors that online gaming exists only in three states. They envision an imminent revenue avalanche in the heavily populated gaming states of California, Pennsylvania and Connecticut. It is only a matter of time before those states go online, forecasts indicate. The bevy of tribal entities further enhances the projections in those states. Companies position themselves ahead of state legislatures. When the door opens, they want to fly through with new products, solid relationships and the instant ability to greet the market. For some, that means buying other companies. For others, it means upgrading technology. For all, it means figuring out what they do best. Online gaming revenues have fallen short of lofty expectations. But the vendors who serve this multibillion-dollar industry believe that a multi-use for their products, coupled with the easing of fraud concerns, will produce a lucrative environment.

Billions and Billions Vantiv utilized education and integration to forge a gaming presence. The Cincinnati, Ohio-based company has long been a transaction processing giant. It handles 16 billion transactions and more than $600 billion in card volume annually. The powerhouse outfit services Wal-Mart and CVS, among others. Gaming recently entered the lineup. The education? Joe Pappano, the senior vice president and managing director of Vantiv Gaming Solutions, had long prepared for gaming to join Vantiv’s arsenal. He spent several years researching the future of gaming and awaiting its online placement before committing company resources to it. Pappano forecast the advent of social gaming, fantasy sports, advanced deposit wagering and the evolution of internet gaming. 42

Global Gaming Business AUGUST 2014

By the time iGaming materialized last year, Vantiv had laid significant groundwork with operators, banks and vendors. Years of analysis created an optimistic forecast of how this new market would behave. Vantiv immediately became prominent. The integration? Among other moves, it became an investor in Sightline, which brings casino and card operators into Vantiv’s transaction world. “We want to be the company that controls the last mile,” Pappano says. “What we have is the ecosystem so that if somebody wants to use a card to fund his gaming purchases, we will provide the connectivity to allow that transaction to occur. We also provide a lot of back-end reporting. “We are bringing all legs of the stool together. Somebody may want to go online to play. Somebody may wish to use a mobile device. Some-

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“

I just spent $1,000 on a camera using my Borgata prepaid card. Now the casino can see that I like photography and perhaps they will want to give me a discount at my favorite store the next time I come in and spend $200, etc. The casino gains interchange money from my company and the customer can get reward points from the casino.

”

—Omer Sattar, Co-founder and Executive VP of Strategy, Sightline

body has to want to have a transaction in the casino. Whether it is online, mobile or the brick-and-mortar structure, we have the infrastructure to allow an operator to follow its customers. We connect all points of interaction.” And those points look greener by the day. Pappano says the American market is ripe for a financial bonanza when more jurisdictions bring games online. He says $4 trillion was used on debit, credit and prepaid cards in the United States in 2013. “More than any other country in the world, the United States has shown an appetite to use the card. It correlates well with gaming. The transaction is clean, succinct and card-driven.” A new era has only begun. “With three states operating online domestically, you have less than 3 percent of the population involved,” he says. “When Pennsylvania and California go live, which we could see in 2015, you will have close to 20 percent of the U.S. population able to game online. That will be a monumental shift. We are just scratching the surface. I have not seen anything like this in my 22 years here.” Pappano says that with gaming already being highly regulated, the trust factor for online transactions continues to grow. One of Vantiv’s partners, Sightline Payments, has combined hustle with muscle. The muscle, of course, is Vantiv. The hustle aspect for Sightline is its growing relationship list with casinos to utilize its general-purpose, reloadable card. Borgata and Golden Nugget became partners with Sightline early in New Jersey’s online gaming era. Sightline enables a property to send a prepaid card with its logo, etc., to customers who have funded the purchase online. “You can be sitting in New Jersey 50 miles outside of a casino and be playing online in just a few minutes,” says Omer Sattar, co-founder and executive vice president of strategy for Sightline. “You can fund the card online and go right into Borgata’s iGaming network, even though you may not receive the physical card for a few days. This is a bank-issued card, protected like any other card and

good wherever Discover is accepted. “Now let’s say you have played online, you initially put $500 in, and now you want to take your wife out to dinner. Normally, you would have to go down to the casino cage and get, say, $200. But now you can control the funds on your mobile app or online gaming station. The cash-out is available in real time on your card. All customers want their money, and we give it to them, right away.” Sattar says Sightline shares the interchange money—the fee card issuers make on transactions—with casinos. This makes the operators more of a partner in the game and likely to gain more familiarity with their players. “I just spent $1,000 on a camera using my Borgata prepaid card,” he says. “Now the casino can see that I like photography and perhaps they will want to give me a discount at my favorite store the next time I come in and spend $200, etc. The casino gains interchange money from my company and the customer can get reward points from the casino.” Sattar expressed excitement over Nevada deciding in February to allow the use of a prepaid card in conjunction with a cashless wagering system, to move money into and out of slot machines. For Sightline, that resembled a drilling company finding another oil well. Large tribal casinos on the East and West Coasts are the likely sites.

Everi-body In! Global Cash Access is branching out. Again. The Las Vegas-based company already owns a dominant market share of the North American land-based cash-access market, being licensed in over 150 gaming jurisdictions. GCA generates more than $20 billion in cash distributed to gaming patrons, and processes over 90 million transactions each year through its land-based operations. It jumped into the lottery market through an agreement with Scientific Games Corporation to provide U.S.based lottery clients with payment services and integrated digital wallet functionality. Last August, it spread tentacles deeper into the gaming world. It launched Everi, an innovative payment and monetization solution geared toward the emerging online world. “We want to see casinos in states like California implement the infrastructure with our data,” says Tim Richards, the general manager and senior vice president of interactive solutions for GCA. “We want to see them accumulate player data, use the information to build wallets and set the seeds to graduate when iGaming comes online. You want this piece in place. You want the systems, you want the managing of the player account.” Everi was designed to bridge the payment gap between land-based and interactive gaming, integrate seamlessly with GCA’s extensive network of kiosks and land-based operations and reduce operators’ PCI burden. AUGUST 2014 www.ggbmagazine.com

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If I am an operator, I’m thinking about all these innovating companies that The Bases offer head-to-head wagering Covering For Las Vegas-based Ditronics, it is time to up and different types of play the ante. The company already has an online presence handling nearly $3 billion annually. not available on the casino While Ditronics has long specialized in in check floor. It is skill-based play. cashing, ATMs, kiosks, etc., and provided services to 450 casino operators, it is now in line for It is exciting. And it is not taking up any space on my online. Online gaming becomes an unofficial “hedge casino floor. If I earn a little fund” for this company. Ditronics offers operaless money than I previously tors both a marketing-based wallet and an important safety measure for online play. thought and I have a lot “It’s still early in the game, and there is not more people playing, that’s enough critical mass to determine what type of revenue online gaming will provide the indusvery interesting to me. try,” says Jim Kirner, senior vice president of sales

The product suite has several components. The payments portion includes a straight-through system that consolidates numerous options into one simple-to-integrate payment wall. The digital wallet is a funds management and payments solution, managing real money and social currencies while bridging disparate game and loyalty sysand marketing in North America for Ditronics, tems. The productivity suite focuses on increasing —Tim Richards, GM and Senior “but we have solutions ready for them.” revenue through player demonetization and inVP of Interactive Solutions, GCA The Ditronics MCF Platform is an intecludes detailed reporting, player and transaction grated suite of hardware, software and programanalytics along with customizable offer engines. ming APIs that allows operators to provide Operators can utilize Everi via software or patrons an eWallet solution to enable funding of kiosks in the casino, Richards says. It can assist play across multiple gaming channels. They include in-room, online, mobile, customer promotion and help conduct the actual online game. “With a casino, we can explain that a wallet combining internet gaming, mo- sports and gaming floor from a single, shared virtual account. The company provides an enterprise-wide cash access and funding platbile gaming and sports, etc., is ideal, and it is different than just providing a payform (MCF) for gaming operators who require traditional cash-access services ment mechanism,” Richards says. “We combine this with everything they are as well as a solution that organically extends to online and mobile gaming doing. It is an extension of their loyalty program.” venues with a single point of reference for players—the digital wallet. The Richards believes customer security continually improves in the American market. Casinos can check databases. Technology, with the advent of geolocating wallet provides player-centric access to funds wherever the operator has provided a “venue” for gaming activity to take place. Players can fund their waland Wi-Fi triangulation, can pinpoint customer locations via IP addresses or cell let for online or mobile play both inside and outside of a casino. towers, Richards says. The wallet allows patrons to securely enter their financial instruments for The American bases have become more reliable against fraud than their offshore counterparts, he says. As this lucrative market flourishes online, unique op- quick transactions from any browser-enabled device—PC, tablet or smart phone. Built in know-your-customer (KYC), fraud detection and patron-conportunities arise. “Most analysts initially said that because Europe sees 12.8 percent of its gam- figurable velocity limits ensure that the operator maintains compliance. Both the operator and patron are protected against fraudulent or excessive activity. ing coming from the internet, the United States would realize almost 13 percent The compliance issue has become more complicated than operators origiof $60 billion annually,” Richards says. “We’re not seeing that yet, and in fact nally thought, says Brian Bullard, chief technology officer for Ditronics. there has been a decline in New Jersey, but that’s not a horrible thing. Over“What we have recently seen with the Target breach, for example, is that looked in the 12.8 percent European number is a lot of sports betting that is mobile and online. The United States only has sports betting in Nevada. You have to high-profile financial data is susceptible,” he indicates. “Banks are getting more strict in how the data is transmitted and ultimately stored. Two years look at those numbers in a more detailed manner. ago, when online gaming came out, the platform providers believed they were “If I am an operator, I’m thinking about all these innovating companies that going to handle all of this. They very quickly realized that data processing is offer head-to-head wagering and different types of play not available on the not as straightforward as they had anticipated. The bottom line is that this is casino floor. It is skill-based play. It is exciting. And it is not taking up any space where we excel; this is our specialty. on my casino floor. If I earn a little less money than I previously thought and I “What we try to do is keep the operator out of that end of the business,” have a lot more people playing, that’s very interesting to me.” Bullard says. “We assist with the investigation with the card issuer in the case Richards is hopeful that Visa will implement a new merchant category code of a charge back. In some cases, we will guarantee payments to the operators.” specifically for iGaming, before the end of the year. This would ultimately put Ditronics sits between the operator’s site and the processor and applies more money in the iGaming system. By Visa effectuating new MCC and iGamneeded compliance, verification and validation to each individual transaction ing-related rules, payments will be consistent and reliable across all card-issuing in real time. It also guarantees payment to the operator. Ditronics assumes liabanks.

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Global Gaming Business AUGUST 2014

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Undisputed Champ bility for all disputes, charge backs, NSF checks and other compliance requirements. The compliance help, coupled with an updated wallet and technology spanning the online and brick-and-mortar spectrum, gives operators an edge, Kirner says. â&#x20AC;&#x153;In a brick-and-mortar setting, you can lose a customer in maybe 15 minutes,â&#x20AC;? he says, â&#x20AC;&#x153;but online, you are just one mouse-click away from that. So how does an online casino differentiate itself from the bad guys trying to take away its customers? How does Jimmy as an operator provide the same experience to his customers off site? How does Jimmy market to those players? â&#x20AC;&#x153;The wallet gives him a 360-degree view of his customer, which is extremely important now. I read one report recently that in Las Vegas the revenue from outside the gaming floor is 75 percent of the total. Thatâ&#x20AC;&#x2122;s the spa, the shows, the restaurants, hotels, etc. The wallet helps keep an eye on your player and helps the operator keep all of those dollars inside of their four walls.â&#x20AC;?

A Net Solution Another company coveting the expanding U.S. market recently made a big play. Montreal-based Optimal Payments, a leading global online payments and risk management provider, announced its acquisition of two strategic companies for roughly $225 million on July 1. The purchase of California-based payment processing entity TK Global Partners LP (known as Meritus Payment Solutions) cost roughly $210 million. That is $150 million in cash and $60 million of Optimal Payments shares. Another $15 million will bring in the trade and assets of Global Merchant Advisors, Inc., a U.S.-based online payments company. Closing of the acquisitions is expected to occur early in the third quarter of 2014. â&#x20AC;&#x153;The U.S. market represents the single greatest expansion opportunity for Optimal Payments,â&#x20AC;? says Joel Leonoff, the president and CEO of the company. â&#x20AC;&#x153;After careful evaluation of a number of potential candidates, Meritus stood out as the perfect choice on all fronts. I am very excited about the combination of our businesses, which immediately accelerates the groupâ&#x20AC;&#x2122;s growth opportunities and accomplishes a stated key strategic goal for us.â&#x20AC;? Optimal Payments is a global provider of online payment solutions. It operates in more than 200 countries and territories, moving and managing billions of dollars each year. Merchants use the Netbanx platform and services to simplify how they accept credit and debit card, direct from bank, and alternative and local payments, and the Neteller service to increase revenue and capture new customers. Consumers use the multilingual and multicultural Neteller and Net+ Card stored value offering to make secure and convenient payments. In this sector of casino supply, vendors are poised for a huge leap in business. All it will take is a few more iGaming states. And thatâ&#x20AC;&#x2122;s coming.

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iGAMING NORTH AMERICA

Lessons From New Jersey Good or bad, the Garden State is defining iGaming by Paul Girvan

ew Jersey is both the poster child and stepchild of iGaming. Poster child as it is the one sizeable U.S. jurisdiction to have implemented iGaming, one to which other states look as an example. Stepchild because of the numerous issues that New Jersey faced in the implementation process, such as problems with geolocation, and more importantly, lack of acceptance of deposits by major credit card companies. The most endurable impact of New Jersey will be that it will change the conversation at statehouses across the country. No longer can iGaming be held up as a major generator of tax revenue. The experience in New Jersey will result in more realistic revenue projections in other states such as Pennsylvania and Mississippi, where legislative committees are now investigating the potential for iGaming. Further limiting the revenue expectation is the radically different business model of iGaming compared with its land-based counterparts. While iGaming has no physical manifestation, it is a business driven by marketing, player acquisition and retention, and as we have seen elsewhere, this business model starts to break down as taxes approach the 20 percent level. This is difficult for legislators to understand. They look at the land-based casinos where tax rates sometimes exceed 50 percent and where casinos of significant size and scope have been developed that create huge amounts of tax revenue and employment, and they ask, “Why can’t we tax iGaming as we do land-based casinos?” Proponents need to explain the answer to this question and to educate legislators that it is truly a very different business model. We have always cautioned our clients that iGaming will not generate the level of tax revenue produced by land-based casinos. And while it creates jobs, they, also, aren’t comparable to those on the land-based side. There is a need to be frank on these facts and to explain to legislators why this is so. This is a negative but necessary argument, as it is a prelude to what I believe should be the two major tenets of proponents attempting to legalize iGaming in 46

their states: consumer protection and protection of land-based business. In relation to consumer protection, there can be no doubt that regulated iGaming provides a much safer and secure environment for U.S. players. However, hand in hand with the implementation of iGaming should be an increased focus on blocking illegal offshore gaming websites. As competition has increased in the landbased gaming industry, particularly in the Northeast, many casinos are seeing revenue declines as competitors appear in surrounding states. States such as Pennsylvania and Mississippi that have seen their revenues decline over the last few years are now searching for actions they can take to protect their mature gaming markets. Internet gaming has featured prominently in these discussions. The evidence from New Jersey clearly shows that iGaming is indeed a valuable adjunct to the

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Global Gaming Business AUGUST 2014

The evidence from New Jersey clearly shows that iGaming is indeed a valuable adjunct to the land-based operator, whether it is in the form of social games or real-money gaming.

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land-based operator, whether it is in the form of social games or real-money gaming. Just as important as iGaming revenue is the ability iGaming offers the operator to interact with a large number of existing land-based guests who also play online—and even more significantly, to interact with online patrons who can be enticed to make a visit to a land-based casino. This provides the basis for expanding the land-based database and generating new visits though online marketing efforts. By combining a

land-based presence and an online presence under the same brand, visits will increase and loyalty will be enhanced. This is exactly what is happening in New Jersey. Golden Nugget and Borgata both report that close to three-quarters of online players are not regular land-based customers—creating a new player acquisition opportunity. The emphasis that is now likely to be placed on integrating land-based casino marketing programs and databases raises a challenge for the industry—namely, there is a need to fully integrate the land-based and online customer databases so the operator has a single holistic perspective of the value of that customer online and in the casino, and can then market to them appropriately. While some believe the rocky road to implementation in New Jersey has exposed the limitations of iGaming, others point with relief to the fact that New Jersey was a test bed for implementation and that many of the “hiccups” experienced there can be avoided elsewhere. More importantly, New Jersey has pointed the way forward. It is not revenue from iGaming that will persuade legislators that it is worthy of their attention, but the consumer protection it offers and the benefits that can be realized by land-based operators. iGaming will bring with it another, albeit smaller, revenue stream that can be profitable in and of itself, especially if the operators understand and take advantage of the convergence of the two forms of gaming. Indeed, those doing best in New Jersey are those who have recognized and embraced this convergence. More importantly, iGaming offers another avenue to help in the ongoing battle for market share that is occurring throughout the U.S. casino market. Internet gaming should not be oversold as a panacea to the gaming industry’s woes, but it is nevertheless a highly valuable tool for casino marketing in a challenging environment. Paul Girvan, a partner and managing director of the Innovation Group, has been providing feasibility analyses to the gaming industry since the early 1990s, and in the last five years has increasingly focused on iGaming.

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An Entertaining Life An excerpt from Book ‘Em, The Man Who Revolutionized Casino Entertainment by Tom Cantone EDITOR’S NOTE: Tom Cantone is a legend in the casino industry. He started out booking entertainment in Atlantic City in the formative years of the industry there, and started a trend by signing up new and upcoming stars instead of simply casino staples. Today, Cantone is the senior vice president of sports and entertainment for the Mohegan Tribal Gaming Authority in Connecticut, after holding positions with the Sands and Trump casinos in Atlantic City and Foxwoods in Connecticut. Book ‘Em, The Man Who Revolutionized Casino Entertainment is a thoroughly interesting read featuring Cantone’s recollections of his experience with many of the biggest stars in the casino industry.

“They Will Never Play A Casino”

Cantone (c.), with TV host Regis Philbin (l.), who wrote the introduction to Cantone’s book, and soap star Susan Lucci, at the book launch in June at New York’s Friars Club.

If I had a dollar for every time I heard agents say their artists will never play a casino, I would have some money in the bank. That was usually the first response every time I would try and book a contemporary artist in today’s pop culture no matter what the decade—’80s ’90s or 2000s. It got better over time, but we had to pioneer the fact that the casino world was, in fact, a playground where the buying public bought CDs, albums, movie tickets and concert tickets, all under one roof. But because of the poor perception of casino entertainers playing in Las Vegas in their twilight years, it really set up the stereotype of old blue-haired women sitting in those seats. Stars of a certain stature wouldn’t be caught dead performing in a casino showroom because that’s where the old timers lived out their final performing days. After years of slowly chipping away that perception, we were able to turn around the entire image in a complete 180. Now, the irony is that the casino stage is often the first venue a contemporary artist will play and even start their career. Audiences are more hip, younger, more mainstream, contemporary and, of course, able to buy what they are selling. Eddie Murphy played a significant role in breaking down those barriers. Once he set foot inside a casino showroom, and the press told the world that he did, it made for an instant hip factor for others to follow one after another after another into a long line of today’s contemporary stars. That was not the case when I was just a “walk on” in the casino business where the likes of Steve and Eydie ruled the roost and no on else was even considered. The Las Vegas big boys took notice when they saw I was responsible for the debuts of contemporary artists

Global Gaming Business AUGUST 2014

such as Eddie, Robin Williams and Linda Ronstadt. The first real endorsement that we might be on to something came when an article appeared in the Las Vegas Sun crediting what we had done with a new wave of casino entertainers, noting that they could take a lesson from yours truly. The godfathers of casino entertainment reversed their perception about what we were doing in Atlantic City, as the right thing to do, admitting that what they were doing was tired and old. The Las Vegas Sun editorial might as well have been the amendment to the casino entertainment constitution. I often think how proud Alan Freed must be. He emceed the first rock concert and coined the phrase “rock and roll” on March 21, 1952. He was a visionary, realizing that the music industry thrives on change, on moving forward. I was criticized for my audacity in booking younger, contemporary artists who, many felt, had no business being in a casino. That it was just a fad—and a disruptive one at that. It was risky for me to book them in this strange new entertainment world. Sometimes, I felt like a one-man band because most casinos weren’t booking the kind of things I was booking. I think they had a wait-and-see attitude to see how it would play out. I really had to fight the fight alone in tearing down the casino perception. I felt the next generation was already in the house and I owed it to them to deliver contemporary acts for them to enjoy as well. I remember the rejection from agents and managers like it was yesterday, telling me that their clients “will never play a casino.” Ironically, today they all play the casinos. Back then, there were only two markets in the casino world: Las Vegas and Atlantic City. Now, there are 44 states with a coast-to-coast network of entertainment venues that are second to none. All have the advantages of marketing them and their product in a retail chain that was constructed to be the new marketing tool for a variety of performers that run the gamut from those just starting out in their careers to individuals on the brink of becoming stars, to those with major star power. They now have a venue to work in that didn’t exist when I started out. Today, many of the artists create their tours going west to east or east to west, all routed through casino venues. It’s the new national distribution network of live talent. Many agents and artists did not see this coming and stayed within the confines of what they were used to, limiting their dates, venues and revenues. The first agent who got it right was Eddie Micone and the first agency was ICM, in New York. They understood what I was trying to bring to the rest of the casino entertainment world and they became my extended family in pro-

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moting the fact that performers on casino stages today are vastly different from their predecessors. Who would have thought that a group like the Black Eyed Peas would ever play a casino? Today, you see everyone from Britney Spears to the Jonas Brothers to Ke$ha working casinos. Marketing acts to bring kids into casinos was unheard of years ago. In fact, it was taboo. Thank goodness those days are gone forever. In fact, casinos today are the new malls. Families come to shop, eat, bowl, stay overnight, go to the spa and yes, see a show. Some 60 percent of visitors to casinos today see a show. Imagine that. Those same agents and managers who swore their artists would never play a casino are now the first to call me to book their clients. But thereâ&#x20AC;&#x2122;s always a price. Because itâ&#x20AC;&#x2122;s assumed that we have a lot of money, casinos end up paying a premium price for acts. Not to mention, we also give rooms, food, beverage, transportation and marketing support. No other freestanding venue would ever do all that on its own nickel. According to the 2010 American Gaming Association casino entertainment survey, casino stages tap 28 percent of the U.S. adult population. What artist wouldnâ&#x20AC;&#x2122;t want in on that direct marketing opportunity? To have some 62 million adults right outside their dressing room. Suddenly, that casino stigma is not a problem. I never thought it was. These are their fans; they have money and spend it. Gambling is now another form of â&#x20AC;&#x153;entertainment.â&#x20AC;? According to a 2010 public opinion poll conducted by VP Communications, Inc., and national pollster Peter D. Hart, 81 percent of Americans think casino gambling is acceptable for themselves and others. To use an old retail phrase: casinos are where America shops and plays, spends and sees a show. In fact, people of all ages spend more money on slots than movies, baseball and theme parks combined. There are 850,000 slot machines in the U.S. Thatâ&#x20AC;&#x2122;s

twice as many as ATMs, and many of these slot machines are now licensed by American Idol, Sopranos and pop stars. Who doesnâ&#x20AC;&#x2122;t want in on all that cash action? I wasnâ&#x20AC;&#x2122;t ahead of my time; I just knew what the future held and tried to convince those big talent agencies that they should take advantage of the new stage in town. Eventually, they all did. Iâ&#x20AC;&#x2122;m proud of the fact that I may have played a role making casinos the place to play. The Las Vegas Sun knew it was coming when they put that label on me that seemed to stick throughout my career as â&#x20AC;&#x153;The Man Who Revolutionized Casino Entertainment and Brought It Into A New Era.â&#x20AC;? I didnâ&#x20AC;&#x2122;t know it at the time, but I guess I was helping to transform the industry by developing and marketing younger artists. If that alone is my legacy for the years on the job, then it was time well spent. Iâ&#x20AC;&#x2122;m first and foremost just a marketing guy who used entertainment as an instant way to differentiate my casino from all the rest. Out of the blue, in July 2012, Ed Sutor sent me his weekly casino column called â&#x20AC;&#x153;The Wizard of Odds.â&#x20AC;? He wrote: â&#x20AC;&#x153;In the absence of great casino marketing innovators such as Steve Wynn (Golden Nugget), John Allan (Harrahâ&#x20AC;&#x2122;s), Dennis Gomes (Tropicana), and Tom Cantone (The Sands), it is most fortunate that the future of our casino city has fallen when it comes to casino marketing.â&#x20AC;? On a sad note, the Sands Hotel & Casino in Atlantic City, which gave birth to the new wave of young stars, is no more. Pinnacle Entertainment imploded the old place in October 2007 to clear the way for a $2 billion megacasino resort on the Boardwalk, but the recession had other ideas. But know one thing: Whatever takes its place will never equal the passion and power of a place that was once half its size. You canâ&#x20AC;&#x2122;t build personality. You create it.

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Mining Millenials From one-armed bandits to present-day progressives, slot machines have always been a mainstay of the casino industry. But the coming generation of players may demand something a lot different. By Marjorie Preston

Global Gaming Business AUGUST 2014

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ambling first became legal in Nevada in 1931, but slots have been around a lot longer than that. The original modern-style slot machine, the Liberty Bell, was introduced way back in 1899. Invented by a San Francisco auto mechanic named Charles Fey, it had three spinning reels with diamond, spade, and heart symbols, plus the image of a cracked Liberty Bell. The lucky player who got three bells in a row could win up to 15 bucks, a real jackpot at the time. Though slot machines have been around for well over a century, they’ve never really gone out of style. In Las Vegas, major properties like the MGM Grand have thousands of them, on gaming floors the size of football fields. And no wonder. Slots today account for about three-quarters of casino revenue, according to a 2013 study from the University of Oregon. According to that same study, in the 1970s slot win was closer to 40 percent of total gaming revenues. But these days, between 70 percent and 90 percent of American gamblers say they’d rather play slot machines than table games. For the casino operator, the real jackpot is generated on the slot floor. But things may be changing. Rapid, fundamental and ongoing changes in technology may require a revolution in slots—a revolution the industry may not be prepared for.

Getting Reel The accessibility, interactivity and do-it-all capability of today’s computers and mobile devices could make the current inventory of slot machines seem way too yesterday. That may not appeal to the 20- and 30-somethings who one day will edge aside their parents to be the industry’s biggest target market. The player pool is already engaged, according to the American Gaming Association. In its 2013 State of the States report, the AGA said young adults 21 to 35 have the highest rate of casino visitation; nearly two out of five, or 39

percent will patronize a casino in a given year, and about half play slots or video poker. In addition to visiting casinos at a higher rate than other age groups, young adults are more likely to come back. In 2013, nine out of 10 said they planned to return to a casino in the coming 12 months. The statistic is encouraging. But it doesn’t mean these customers will age into traditional slot players. Frank Neborsky, a 30-year veteran of the gaming industry and former vice president of slot operations at Mohegan Sun, says diehard slot players—that stable, reliable 45-year-old to 60-yearold demographic— “are not being replaced as they fall off.” The main reason could be the dizzying pace of technological advances. “Their technology is different,” says Neborsky. “Their level of entertainment is different. You have so many first-person shooter games and one-onone skill-based games; with Xbox 360, you could be sitting at home playing a game against people 2,000 miles away in three different time zones. “That’s the kind of entertainment people in their 20s to early 40s have been used to over the past decade. And nothing in the gaming environment really duplicates it. I don’t know if simple reel slots, video slots or even table games will create the same type of sensory satisfaction or entertainment these folks will be looking for” in the years to come, he says. While some accommodations have been made for this new wave of tech-entrenched players, the games have pretty much stayed the same, says Neborsky. And a failure to innovate on the slot floor could cost the industry in years to come. “Other than trying to leverage the internet or other online components, I don’t see a lot changing in the way they’re packaging the games or the experience they’re going to offer,” he says. “There has been no truly out-of-the-box new development that’s going to revolutionize the way gaming is looked at. “And quite frankly, I don’t see someone who is used to playing ‘Call of Duty’ or ‘World of Warcraft’ walking into a casino and sitting at a slot machine.” AUGUST 2014 www.ggbmagazine.com

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Large slot floors like Mohegan Sun’s may see changes in the future.

Getting Social Another critical factor is the social aspect demanded by younger patrons. For example, table games have emerged as a compelling entertainment option for that age group “because you get half a dozen guys at the same blackjack table who enjoy the social part of gambling,” says Neborsky. “You don’t get that in the slot environment.” Andrew Klebanow, co-founder of Global Market Advisors, agrees the games will have to change to stay in line with technology and with increasing customer expectations. He doesn’t agree that the traditional slot-playing demographic is going to disappear. Everyone knows the stereotype: a middle-aged woman who sits for hours at her favorite “Lucky 7” or “Major Moolah” machine, cocktail in hand, staring at rotating reels and flashing lights until she hits the bottom of her bankroll. She’s happy to walk away a little ahead of the house. But she’s willing to return even when she doesn’t. “That’s not a stereotype,” Klebanow says. “It’s a fact. You need two things to be an avid slot player—time and money. Under 45, you’re raising a family, you bought a house, you’re working hard and trying to pay the bills. By the time you’re 45 and older, your house is probably paid off, the kids have moved on and you’re not working as hard as you used to. You have time and money, and at that point gaming becomes a form of recreation you can participate in with some degree of regularity. That won’t stop unless people stop procreating.” Does that mean today’s tech-savvy player will morph into the old faithful slot jockey? “Yes!” says Klebanow. “Are those people going to change? Absolutely. Casinos are finding ways to offer games that will appeal to that demographic as they approach that 45-year-old threshold, when they start having time and money.” Besides, he argues, slots have always evolved with the times. The one-armed bandits of olden days became the electro-mechanical slots of the 1960s, which became the video slots of the late 1970s, which became the fully computerized machines of the 1990s. Those machines made way for progressive slots in the mid-1980s. And in the 1990s, along came electronic video slots “that really changed the nature of the games we have today,” says Klebanow. After that came 52

Global Gaming Business AUGUST 2014

the bonus rounds and highly themed games—“Ghostbusters,” “Wheel of Fortune,” “Sex and the City”—some of which remain among the most popular games of all time. The next big innovation may be something completely different, and it may be in development right now. One thing casinos can count on, suggests Klebanow, is that entertainment preferences do shift over the course a lifetime. “When I was a young man, I was a bartender in a nightclub,” he says. “I cannot walk into these places today. I don’t get them. I can’t understand why anyone would spend $1,000 for a bottle of Grey Goose, but apparently that’s appealing to a younger demographic. And we have dozens of planes flying into Las Vegas every afternoon and evening filled with young adults eager to spend their savings in the nightclub scene.” One day, he suggests, after they sober up and settle down, these patrons will likely spend their discretionary income on different types of entertainment—including slots, if the games evolve to meet their demands.

The Drop Bucket Matt Davey, CEO of NYX Gaming Group, says the method of delivery for gaming products may be even more important than the products themselves. “It’s important not to get confused by digital gaming like Xbox or Playstation and assume that type of technology is going to be driving casinos going forward,” he says. “A lot of people approach us and say, ‘Hey, we have fantastic games, just like Nintendo, and we can dramatically advance the quality of games you have to appeal to a younger audience.’ That’s a mistake; some of the best-performing online games are some of the oldest.” From Davey’s view, as head of a company that offers hundreds of slot games for mobile, land-based, desktop and social channels, the way consumers play actually could trump what they play. “Look at all kinds of entertainment—TV, radio, music, etc.—a huge amount of it is moving to digital and internet-based consumption. It’s the same kinds of games, played in a different format. People like it because they can play immediately and they don’t have to drive anywhere. That appeals to a younger group, but it also appeals to the existing casino player.”

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“A lot of people approach us and say, ‘Hey, we have fantastic games, just like Nintendo, and we can dramatically advance the quality of games you have to appeal to a younger audience.’ That’s a mistake; some of the best-performing online games are some of the oldest.” Matt Davey, NyX GaMiNG Group, Ceo

According to Davey, demographics broken down solely by age can be misleading; for one thing, older casino patrons are hardly tech-averse. “We prefer not to talk about demographics, which relates only to age,” he says, “but about cybergraphics, what people do and don’t like.” For example, he notes, sports betting, poker and blackjack are more popular among younger players than slots, bingo and scratch cards. “That group will be younger online and younger in the casino,” says Davey. “And when it comes to bingo, for instance, you will find the online age group is just like the land-based age group.” He says interactivity and ease of access will appeal not only to young players, but to “older groups switching to these types of gaming.” Paul Tjoumakaris, corporate vice president of slot operations for Seneca Gaming Corp., predicts the slot floor of the future will look a lot different from the giant floors that are typical of most casinos today. “In the next 10 to 15 years, as more and more people get into mobile-type options, casinos are not going to have the large capacity of slot product like you

see today, with banks and banks of machines. The inventory will be cycled out by attrition and the environment will change to accommodate smaller rooms with different décor. “We won’t have these big open spaces,” says Tjoumakaris, “and the existing games will be slowly weeded out and replaced.” Perhaps as significantly, “regulators will be looking at more skill-based games. Even now, we’re looking at that factor. We need to attract that younger generation, and they’re not interested in just hitting that button.” Though slot machines as we now know them may always have a fan—base if only for reasons of nostalgia—“as vendors and operators, we have to maintain the loyalty of that new group by incorporating some skill, more interaction, and a little more excitement,” says Tjoumakaris. “We have to adapt. Even the suppliers no longer want to support the old product; they’re slowly trying to make things cheaper and more interactive. And the development costs are going to force them specifically to try to accommodate the growth opportunity.”

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no full-tilt change

“If you combine a few groups and take the 25- to 55-year-old users, the No. 1 use of devices is playing games. That outstrips internet use, social networking and all those other things. These people are not going to be able to find the product they want on the slot floor, which does not appeal as broadly as it used to.” Eric MEyErhofEr, GaMblit GaMinG, cEo

Eric Meyerhofer, CEO of Gamblit Gaming, agrees that “a pure stand-alone slot can’t offer the range of excitement” expected by customers weaned on high-fidelity, multi-functional, lightning-fast technology. But it’s not time to make a radical change—yet. “From an operator’s perspective it wouldn’t be prudent to shift an entire floor, do a new type of game and in the process rip out what is a pretty solid, very mature market,” says Meyerhofer. “I also don’t think they should be trying to morph the slot machine into some sort of ‘tweener’ product, if you will, which may turn off the player who is more interested in a stronger slot” with superior features. Instead, Meyerhofer foresees “a migration process” in which the casino floor is gradually repopulated with gaming attractions designed to capture the interest and loyalty of the emerging player. “We’re speaking to operators about starting to shift a portion of the floor— not a large portion at first—to more of a day-club experience, the kind of thing that’s more familiar and common to the type of player we’re talking about, 21 to 45.” That could be mean pods on the gaming floor where kids can hang out together and share the experience, rather than sitting solo at a slot machine. According to the AGA’s 2013 States of the States, young adult visitors are “more likely to take advantage of non-gaming amenities like shopping, live entertainment and recreational facilities like spas or pools.” In part, that may be because they’re not dazzled by the options on the gaming floor. “There’s a very touchy-feely close-personal-space engagement that takes place within the bars and the nightclubs, where a bunch of people get together, rent a booth and spend hundreds of dollars for a bottle of vodka or rum,” says Neborsky. “It’s a different kind of experience than bellying up to the bar to get a drink.” That same kind of dynamic, with the same opportunity for up-close-andpersonal engagement, could be replicated in the gaming environmment. “That whole social piece is the way they like to interact; it’s the way they’re programmed,” Neborsky says. “What you do and what you’re seen with plays a big part in their lives.” Meyerhofer agrees. “When it’s too early to go to the nightclub or bar, (these patrons) sit in their rooms, watch TV and get on their devices, because they don’t have a place at the casino to anchor them or capture their fascination,” he says. “They’re already there. But you have to provide some area on the floor to attract them during that idle time.” 54

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the future is now Casino operators and gaming manufacturers may not be surprised by the technological revolution, but they’re “surprised at the rate at which it’s happening,” says Meyerhofer. “The takeup of smart phone devices is a lot more rapid than we would have believed six, eight or 10 years ago.” And it’s hardly exclusive to 20somethings. “People projected it would take a while for the older demographic to adopt the smart phone, but it’s exploded,” he says. “In airports, on buses, wherever people are killing time, they’re on devices, at all age ranges, and that also has been a big surprise.” Moreover, the average age of players for video games and other casual entertainment games on iPhones and other mobile devices is well into the 30s and 40s now. For example, according to an April report from Flurry Analytics, smartphone users who qualify as “mobile addicts”—as distinguished from regular users and “super users”—is the fastest-growing segment, posting 123 percent growth between 2013 and 2014. And the most addicted are teens, college students and middle-aged parents, with more women in the category than men. “If you combine a few groups and take the 25- to 55-year-old users, the No. 1 use of devices is playing games,” says Meyerhofer. “That outstrips internet use, social networking and all those other things. These people are not going to be able to find the product they want on the slot floor, which does not appeal as broadly as it used to. It does represent a difficult trend for the industry, but it’s not something to run from. It should probably be embraced and managed. It’s just a matter of transitioning the floor over time.” With no crystal ball at the ready, it may be hard to visualize the smaller, reconfigured, more intimate slot floor of the future, colonized by devices that bear no resemblance to the slot machines of today. But that’s for the operators and manufacturers to figure out. “The games will be different, for sure,” says Klebanow. “They’ll be more interactive, and they’ll look different. They’ll probably look like my freaking phone.”

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THE NEW

BEHEMOTH In the latest blockbuster deal involving consolidation in the supply sector, lottery giant GTECH will acquire slot leader IGT. By Frank Legato

he recent wave of industry consolidation continued last month with the announcement of yet another blockbuster deal involving the supply sector. In mid-July, International Game Technology, the world’s largest slot machine manufacturer and market leader in game sales, announced that it has entered into a definitive merger agreement with casino and VLT supplier and lottery industry giant GTECH S.p.A., under which GTECH will acquire IGT for a total of $6.4 billion. It is the third major consolidation move in the past year, and one that creates a diversified gaming supplier along the lines of Scientific Games, another longtime lottery giant which last year acquired top-five slot manufacturer WMS Gaming. The IGT/GTECH deal creates another industry behemoth, which will strive to maintain IGT’s spot at the top of the slot market in competition with Scientific Games and Bally Technologies, which was the lead company in last year’s other mega-merger when it acquired table game supplier SHFL entertainment. Consolidation on the supply side of the business has been the story of the year in the industry. Just a week before the IGT announcement, another of the top-five slot manufacturers, Australia’s Aristocrat Leisure Ltd., announced that it is acquiring Tennessee-based Video Game Technologies, one of the top suppliers in the Class II Indian gaming market. Analysts say the consolidation may not be over yet, with a supply sector that consists of a collection of smaller niche companies, Class II suppliers entering Class III markets, and international companies looking to enter the North American market, which can be combined into larger, more efficient entities. But for IGT and GTECH, the deal makes sense from a strategic standpoint. “We are extremely pleased to reach a definitive merger agreement with

GTECH as a result of our exploration of strategic alternatives to increase shareholder value,” said IGT CEO Patti Hart in a statement. “This outstanding combination of two global leaders redefines the future of the gaming industry. Together we are uniquely positioned to provide the industry’s broadest and most innovative portfolio of best-in-class products, solutions and services.” Of the $6.4 billion acquisition price, $4.7 billion will be a combination of cash and stock, along with the assumption of $1.7 billion in debt by the new entity: IGT and GTECH will combine under a newly formed holding company organized in the United Kingdom, called NewCo. IGT shareholders will receive an aggregate value of $18.25 per IGT share in a combination of $13.69 in cash plus 0.1819 ordinary shares of NewCo for each share of IGT common stock. GTECH shareholders will exchange each of their existing GTECH shares for one newly issued NewCo share. The transaction is expected to close during the second quarter of 2015, subject to anti-trust clearances, regulatory approvals and approval of shareholders of both companies. The deal was approved unanimously by the directors of each company. “The new company combines best-in-class content, operator capabilities, and interactive solutions, joining IGT’s leading game library and manufacturing and operating capabilities with GTECH’s gaming operations, lottery technology and services,” the statement said. “The merger drives competitive scale across multiple businesses, geographies and product lines and is expected to achieve over $280 million in synergies.” In a conference call with investors after the statement was released, Hart and IGT Chief Financial Officer John Vandemore said those synergies will be realized through elimination of duplicative manufacturing efforts, combining R&D efforts, consolidating slot platforms, and eliminating duplicative corporate support activities over a three-year period.

IGT shareholders will receive an aggregate value of $18.25 per IGT share in a combination of $13.69 in cash plus 0.1819 ordinary shares of NewCo for each share of IGT common stock. GTECH shareholders will exchange each of their existing GTECH shares for one newly issued NewCo share. 56

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WE’VE BEEN ON A

End-to-End Supplier On the conference call, Hart said the combination of IGT and GTECH will create “the global leader in end-to-end gaming.” “The combination really creates leadership across virtually all segments of gaming, including the position we’ve enjoyed at IGT for some time as the No. 1 gaming equipment supplier,” Hart said, “and adding the success our friends at GTECH bring to that as the No. 1 lottery business. “In addition to that, our top-tier social gaming business through DoubleDown and the combination of our interactive real-money wagering businesses also provide a market leadership position for the company. “As we looked at the business, one of the things we found to be most attractive was the global scale that comes from diversity—diversity in products and diversity in our geographic mix, which provides a much more balanced portfolio for the company, for our customers and for our shareholders.” “This transaction is transformational for our business,” said GTECH CEO Marco Sala. “With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape. “Our expertise across these segments and greater ability to invest in R&D will improve player experiences and benefit our government and business clients.” The transaction represents a 46 percent premium to the closing price of IGT’s common stock on June 6, the last trading day prior to initial reports that IGT was exploring a potential sale. The combined entity would have over $6 billion in revenues and over $2 billion in EBITDA based on the last 12 trailing months. While the new holding company, NewCo, will have its corporate headquarters in the United Kingdom, it will maintain operating headquarters in each of Las Vegas, Providence, Rhode Island, and Rome. NewCo will apply for listing solely on the New York Stock Exchange. IGT’s shares will cease trading on the NYSE and GTECH’s shares will cease trading on the Borsa Italiana. It is expected that NewCo will operate under the name GTECH plc. As a result of the transaction, it is anticipated that existing IGT and GTECH shareholders will own approximately 20 percent and 80 percent, respectively, of NewCo ordinary shares, and the De Agostini family, currently majority shareholders of

GTECH, is expected to hold approximately 47 percent of NewCo’s outstanding ordinary shares. Upon the closing of the transaction, the initial board of directors of NewCo will be comprised of 13 directors including Sala, who will serve as the CEO of NewCo; five directors to be appointed by IGT from IGT’s existing board of directors, including Phil Satre, IGT’s chairman, who will serve as chairman of NewCo; Hart, who will serve as vice chairwoman; and seven directors to be appointed by GTECH, one of whom will serve as a vice chairman. On the conference call, Hart said issues like realignment of headquarters, R&D teams and executive teams will be addressed within the coming months. “We feel strongly that the combination of our R&D efforts further strengthens our effort from an R&D perspective, and allows us the opportunity to continue to create innovation that I think is desired and necessary for the industry,” Hart said. “At the end of the day, we find ourselves as the industry leader with more than $6 billion in revenue and $2 billion in EBITDA.” Hart said the IGT/GTECH combination is one of the most complementary of all the recent mega-mergers. “When you look at the companies and put them together, there is very, very little overlap in products, customers or markets that we serve,” she said. “We see this fits together in a way where 1 and 1 does equal more than 2.” As for the larger issue of supply sector consolidation, Hart said the trend is good for the overall industry. “There are no pure suppliers anymore,” she said. “As industries mature, people who have historically been in niche spaces find an opportunity to look at adjacent markets to grow, and that’s what’s happening. “We’re great believers in making our contribution to creating an industry that is as healthy for our customers as it can possibly be, and we felt there was a great opportunity to do that with this transaction.” She added that the chance for a transaction of this magnitude and synergy is rare. “We were looking for strategic value for our shareholders, and I don’t think there is anything that’s more strategic than this transaction, with its amazing amounts of synergies with little overlap. “This is the CEO’s dream strategic transaction.”

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GLOBAL GAMING WOMEN

It’s Not About Women It’s about better business results

by Lauralyn McCarthy, Vice President, Strategic Projects, Scientific Games Corporation

recent AGA study gave me a new perspective on my own experiences and some thoughts about women in

leadership. The study, titled “The Development and Advancement of Women in the Gaming Industry,” found that “when women are more equally represented in leadership roles… companies report a measurable impact on their bottom line. In addition, equal gender representation results in greater levels of innovation, a better resistance to financial crisis, and higher levels of productivity and satisfaction.” Furthermore, the study found, “Gender diversity is a critical component to organizational financial performance—beyond an employee development initiative, it is a business imperative.” Unfortunately, the study also indicates that our gaming industry lags behind other industries in the numbers of women in director roles and above. Gaming women told the researchers that stereotypes, gender differences and perception of work-life balance issues had hindered their ability to move up the corporate ladder. As vice president of strategic projects, I hold a leadership position at Scientific Games Corporation, a company with more than 5,000 employees, and I am privileged to sit on our executive committee. I work with fantastic people and do interesting forward-thinking work, including working on Scientific Games’ acquisition of WMS. Management at Scientific Games, particularly President and CEO Gavin Isaacs and Group Chief Executive of Gaming Bill Huntley, are extremely supportive of me, my work and our goals. My position gives me a broad view of the industry— and I don’t see many women in leadership roles. Why? At age 23, I started at IGT as an international management trainee after I wore out an IGT secretary with nearly a year’s worth of faxes, letters and phone calls meant for her boss in search of an entry-level job. IGT hired me as one of five international management trainees—the only woman. 58

Global Gaming Business AUGUST 2014

Mary Russell, Bud Russell’s adventurous daughter, became my boss. Mary sent me, a fairly proficient French speaker, to Latin America alone. My first landing was in Peru, where Fujimori was sending military personnel with machine guns to find the revolutionary Shining Path in the neighborhoods I was visiting. Bombs occasionally went off, sometimes at casinos. And forget about receipts for taxi rides; it was hard enough to find a taxi without rottedout floorboards. I was once detained in Colombia and spent time in other unstable and unsafe countries with market potential. Three years later IGT had offices in Argentina, Peru and Brazil, and significant presence in new markets. During those years, top executives from ITT Corporation and Hilton taught me what operators look for in evaluating new casino and hotel projects. Timing was my friend, and so was Chuck Matthewson’s IGT culture. The culture fostered an environment where people were hired and retained for their positive attributes and their team-building skill set to grow the business, and generally enforced a “we grow together” attitude. Both men and women (more men) served in leadership roles across the company. My career began in this environment, in a defined leadership development program with an influential woman boss who supported my growth. At age 28 I started a slot machine route from scratch that, over time, significantly outsized its competitors and generated nice cash. Without a mentor, I made mistakes along the way, and it was a lonely journey. I learned some important things: • Cash flow is king (or queen). • Competition is tough but I’m tougher. • Think for today and five years from today. • Business is fundamentally about people somehow driving revenue or bottom line, so serving them properly is key. The AGA study found that corporations with 24-hour operations in other industries, such as Ernst & Young, General Mills, Marriott

International, Procter & Gamble, General Electric and IBM, have high ratios of female executives largely because of their advancement programs, which include career counseling, women’s affinity groups, formal mentoring, succession planning, sponsorship programs, executive coaching and leadership training. These programs give women the opportunity to forge strong relationships with male leaders, and also create an environment in which people can succeed through multiple paths. Perhaps as gaming corporations’ employee work forces have grown, the men in control of executive offices and C suites have brought along the people they know, without noticing the women they’ve left behind. Another factor in women’s advancement to leadership roles is women themselves. Women can be horrible to other women—tearing them down, not building them up. Men generally do the exact opposite. As women come up the leadership ranks, we should take an active role in bringing other women with us. If you are the only female in a roomful of men, ask yourself: Am I identifying and seeking to involve other women who should have a seat at the table and can also add value? As the AGA study indicates, improved financial performance seems reason enough to actively bring talented women into leadership roles. At Scientific Games, I work with many talented women (and men). One woman last week wrote me an email sharing that she and three other women in her department signed up for a leadership program after the motivation they felt from GGW’s Power of the Purse event. Fantastic! Another highly ranked woman recently asked me for advice on how to grow beyond her current role. That was a great moment for me, because she saw me as a person who would advise and assist. I hope I did, and I hope all who read this will consider taking positive action to advance women in their organization in the future.

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New Frontier

THE

Alto Gaming combines experience with a market-specific approach to crack the U.S. slot market by Frank Legato

hen Alex Gornakov completed an internship with Bulgarian slot manufacturer Casino Technology in 2009 and headed back to complete his education in the U.S. at Purdue, he knew that the technology developed by the manufacturer—the top supplier of slots in Eastern Europe—could be translated into big success in the United States. Gornakov had already developed his own principle for creating successful slot games, a vision he based on Dutch historian Johan Huizinga’s 1938 book Homo Ludens. The title means “Man, the Player,” or “The Playing Man.” “Today, the players crave a more sensible experience, and they are expecting value for their money in a shape and form acceptable to them,” says Gornakov, who founded slot supplier Alternative Gaming Solutions—also known as Alto Gaming—in 2011. “Our vision and product development are based on delivering the next step of the gaming experience and achieving the transformation and evolution of homo ludens.” The 1938 book discusses the importance of the play element of culture and society, suggesting that play is a primary and necessary condition of any culture. In starting Alto Gaming, Gornakov, the company’s CEO, sought to apply that principle to the creation of slots that will appeal to the next generation of players. However, Gornakov—all of 26—would need the help of a seasoned veteran to realize his vision. Enter Roy Student, as president of Alto. Student, owner of consultancy Applied Management Strategies, is a 40year gaming industry veteran whose credits include 13 years as an executive and chairman of Gaming Systems International, a pioneer in casino management systems; and six years as president of server-based gaming pioneer Cyberview Technology. Like Gornakov, Student had a longtime association with slot-maker Casino Technology. When Gornakov presented the opportunity to head an effort applying Casino Technology IP and innovations to the U.S. market, Student jumped at the chance. “I watched the gaming in Eastern Europe develop and grow, while I was involved with casino management systems and Cyberview,” Student says. “Casino Technology has always been at the forefront among the gaming companies there. With only 15 years of history, the company had succeeded to position itself on five continents and become one of the leading gaming brands in those markets.” “Headquartered in Bulgaria, known as one of the strongest engineering and software development powers in Eastern Europe, Casino Technology had 60

Global Gaming Business AUGUST 2014

Alto CEO Alex Gornakov (l.) and President Roy Student

all we needed to give us the head start and bring the ideas to life,” says Gornakov. “I had no doubt that if Alto needed to partner on the technology side and gain speed on development, the company of choice would be Casino Technology.” With everything in place, Gornakov and Student prepared to launch the start-up manufacturer with an aggressive push into two main markets—the U.S., and more specifically Native American casinos; and the booming Asian casino market. The new company promptly signed a partnership arrangement to license intellectual property from Casino Technology for introduction into the new markets. The technology and titles licensed from Casino Technology are being customized for each new market, and according to Gornakov, Alto also is concentrating on tailoring that content to appeal to younger demographics across multiple channels—not only in land-based casinos, but in online and social channels through a variety of mobile devices.

Ready for Action The plan of action for Alto Gaming, says Student, has been to focus on Indian casinos in the U.S. as the first priority, while expanding its presence into other North American jurisdictions. At the same time, the effort will concentrate on penetrating Macau, the Philippines and other Asian markets with products customized for Asian players. “Quality and diversity are mandatory characteristics required for a new product to succeed in a market, but they alone are not enough,” Student explains. “To appeal to local players, a game has to meet their preferences and needs, which could vary significantly in different operations and different regions based on demographics, operational strategy, market specifics, etc. “Realizing this, the team of Alto Gaming planned from the outset to offer products adapted to the needs and demands of the North American customer.

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For this purpose, we attracted experienced U.S. experts with profound knowledge of the U.S. gaming industry whose expertise allowed us to find the perfect mix of products and concepts to be offered to local players.” According to Student, for North America, the strategy is to concentrate first on launching Casino Technology’s branded series of slots based on the culture surrounding Penthouse magazine. “Branded products are a great way to attract new customers and keep them engaged in the game,” Student says, “creating an additional gaming thrill attracting clients with the recognition of the brand, the glamorous presentation and appearance, and attractive gaming concepts. “The Penthouse Slots series is a perfect match for resort casinos and high-end premium locations looking to provide extra excitement to their demanding customers in terms of choice and diversity.” Several new Penthouse-themed games were released recently in U.S. Indian gaming markets, “expanding the series conceptually and graphically,” says Student. New titles include “Fruits of Desire,” “Chili Baby,” “Fruity Hot,” “Wet & Juicy” and “Naughty Party.” Meanwhile, other games and system products from Alto are designed to capitalize on an Asian gaming boom that shows no sign of slowing anytime soon. “Alto Gaming is determined to use the advantages provided by Casino Technology premium technologies and business expertise to make a breakthrough in the Asian markets,” Student says. “Our main targets are the fast-developing markets of Macau and the Philippines, due to their sustained growth and huge potential. In this respect, we are well-armed with products specifically designed for the local market.” At May’s G2E Asia trade show, Alto debuted a new series of Asian-themed progressive slots licensed from Casino Technology called “Peacock and Dragon.” The series consists of games tailored to Asian gamblers that are linked to a multilevel progressive jackpot, available in both GLI-11 and GLI-13 versions.

Interactive Strength One strength of Casino Technology’s product offering has been the interactive style of the slot-maker’s cabinets. High-end cabinet lines such as Sensa Flex and Sensa II Arch offer a sleek, ergonomic style with interactive features that allow players to multi-task while playing. This year, the company released the Aurora cabinet for the U.S. market. “It is a very elegant and ergonomic slim upright cabinet, offering great gaming experience with two 24-inch HD monitors, a wide and comfortable button deck and superior appeal,” says Gornakov. “Other new cabinets that will be part of the premium and branded product offering will be released in 2015.” One of Alto’s most impressive offerings takes that interactivity to the emerging online, mobile and social channels. Called the “Big 5” suite, the system pack-

age is aimed at “overcoming the gap between online and land-based—a gap that’s proving increasingly more and more challenging to mitigate,” says Student. The Big 5 suite comprises a casino management system, a money management system, a jackpot server, a remote game server and an online gaming platform, unified in one multi-channel solution. “The unique concept of the Big 5 did not appeared by chance, but as a result of careful research and thorough knowledge of the trends and developments in global gaming,” says Student. “Since the emergence of the first online casinos in the mid ’90s, online and social gaming has been exponentially expanding, gaining enormous momentum with no signs of slowing down. “Companies from the traditional sector also recognize the potential of novel technologies to attract new groups of players. But despite the ongoing attempts for convergence between traditional and online gaming, these two sectors remain separated due to various regulatory hurdles or lack of needed technology. “In this sense the Big 5 solution appears to be the missing technological link to bridge both worlds.” The multi-channel approach is made possible by Casino Technology’s Server Games Technology, or SGT, which offers “a seamless gaming experience providing the same game content for online, server-based and VLT gaming and allowing players to enjoy their favorite games across multiple platforms,” says Rossi McKee, vice president of Casino Technology. The SGT package is already successful in European online markets, through the company’s Elephant Remote Game Server. “Leading world providers of online gaming technology and services already are using the Elephant Remote Game Server,” says McKee. “As a result, Casino Technology’s top-performing titles are already accessible for millions of players all over the world through Playtech, NYX and other global online providers’ platforms. “As part of its efforts to capitalize the ever-growing potential of emerging online and social gaming markets, Casino Technology and Alto Gaming will offer to the North American operators this revolutionary solution—a set of systems designed to overcome the gap between the online and land-based industries.” She says the Big 5 suite will officially be presented to the North American market at this fall’s Global Gaming Expo. Of course, even without the big splash expected at G2E, Alto is already making waves in Native American gaming circles. “Alto Gaming has a great potential to change the current modality in gaming and deliver a completely different experience,” says consultant Charlie Lombardo, the former head of gaming at Seminole casinos and slot operations VP at Caesars Palace and elsewhere, who has consulted for Alto. “It is not merely a process of discovery, but a redefinition of gaming, and this young team certainly has the spirit, enthusiasm and ingenuity to do it.” AUGUST 2014 www.ggbmagazine.com

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EMPOWERED

Bally Technologies stages its 11th annual systems user conference BY FRANK LEGATO

or each of the past 11 years, gaming supply giant Bally Technologies has hosted an event for its customers—casino operations executives from around the country—that offers a sneak peek at the latest from the company’s industry-leading systems division. For the first 10 years, the event, held at various locations across the country, was dubbed simply the “Bally Systems User Conference.” But this year’s event was titled “Empower”—to reflect not only the expanded offerings of Bally since its acquisition last year of table-game giant SHFL entertainment, but the evolution of the two-day conference itself from the systems division to slots, table games, marketing and other areas in which the company partners with casinos. The core of the conference, though—held this year in June at Connecticut’s Mohegan Sun—has remained an educational forum on Bally systems technology and how it can be used to benefit the operator. “Bally is totally committed to the systems business,” said CEO Richard Haddrill at the start of the conference. “We have a terrific team of executives, and there is no lack of emphasis on our systems business.” Practical demonstrations, not only from Bally executives but from prominent operators, typically show how technology offerings are being used and can be used in the future—from the Elite Bonusing Suite (EBS) of networked modules for the slot floor to the latest online, social and mobile technology. Electronic table games, and the application of EBS technologies to the table side, along with social gaming and mobile technology, were featured prominently at this year’s event. The table side was boosted by the SHFL acquisition, and the social gaming technology was highlighted thanks to Bally’s recent acquisition of social gaming company Dragonplay. “The Dragonplay acquisition will allow us to take our content to yet another medium, and learn more about how these people play, to help be an even better partner to you,” Haddrill told the operators in the audience.

BALLY VENTURES Haddrill also used the conference to announce the formation of Bally Ventures, a new business unit focusing on bringing technologies new to the gaming industry to customers, and working with customers on adapting those technologies for maximum profit. Haddrill quoted Henry Ford in explaining Bally Ventures to the audience. “As Henry Ford once said, ‘If all I did was give people what they wanted, I would have given them faster horses.’ What we’re trying to do with Bally Ventures is bring ideas to the industry which at first might feel a little uncomfortable—like the automobile did to people who rode horses—but at the same time work closely with you to commercialize those and make a difference in our industry.” Haddrill said the new business unit will focus on innovative technologies and forming strategic partnerships to bring them to the market quickly. It’s an expansion of the function currently performed by Bally’s Innovation Lab, the unit headed by Senior VP of Technology Bryan Kelly that is charged with scouring the high-tech world for gaming-friendly ideas. 62

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“We’ve always had people at Bally involved in getting new products to market,” Haddrill said during a press session at the conference. “But if you look at where Bally is as a thought leader, we’d like to be even faster and more commercially driven—in other words, prioritizing the products better based on the value they give to the casino.”

EMPOWER 2014 The Empower systems user conference drew a total of 464 attendees, including 378 current customers from across the industry, compared to 451 attending last year’s conference, which included 328 current customers—a 15 percent increase in customer participation. The conference featured not only workshop sessions and educational presentations by Bally executives in all areas, but by Bally customers including Pinnacle Entertainment CEO Anthony Sanfilippo, Caesars Entertainment IT Vice President Melissa Johnson, Pechanga Slot Operations VP Buddy Frank, Wind Creek IT Vice President John Enriquez and others, who provided demonstrations on how Bally’s EBS and other technologies are being used in the field. Meanwhile, attendees could sample all the technological offerings at the “Innovation Lounge,” a mock casino set up to demonstrate how the new products work in the field. Among the highlights this year were “Take ‘N Play,” a system that allows casinos to offer mobile devices—tablets at first—to players who would like to take their play session away from the slot floor to other approved gaming areas. Slated to be commercially available by fall’s Global Gaming Expo, Take ‘N Play allows the player to hold a tablet to the screen of a slot to have the current live game transferred to the mobile device, along with the credits. The screen of the machine goes gray to indicate that it is being played remotely. The player can then take the tablet anywhere within a resort that is approved for gaming, and continue the same game. Bally officials say they developed the system the same way they develop much of their new technology—in response to a customer request. In this case, it was from an operator looking for ways to mitigate the negative effects of a smoking ban. Revenues had dropped as gamblers interrupted their play sessions for smoke breaks. Take ‘N Play gives them the chance to go to an approved smoking area and continue the same play session. Tom Doyle, vice president of product management for Bally’s systems di-

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(Clockwise from top right): Bally Technologies CEO Richard Haddrill; Product Management VP Jean Venneman; Pechanga Slot Operations VP Buddy Frank; Celebrity Keynote Dinner; Comedian Jay Leno, during Celebrity Keynote performance

vision, said company officials envision the Take ‘N Play product being used in the future as a way to capture new slot play from younger customers, by enabling casinos to set up ultra-lounges, poolside bars and other areas in which customers can play slots on mobile devices. The product also could provide new play areas at casinos that already are at the maximum number of slots permitted by law. Casinos are able to use geofencing to define the areas in which the tablets would be operational for remote gaming. Other customer-driven innovations demonstrated at the conference included two progressive products, EBS Power Progressives and Infinilink. Power Progressives is a flexible networking tool that allows casinos to tailor and schedule mystery progressives according to groups in the casino, time of day, or any of a multitude of other criteria. Operators can choose a symbol in the pay table of any slot to use as the Power Progressive symbol for that day, adjust the amount of jackpot, or otherwise tailor the prize for promotional purposes. Doyle noted that the program also enables jackpots paid on slot machines, using jackpot symbols of each individual game, to be tax-deductible as promotional expenses through the mystery jackpot system. Infinilink is one of the table game-based innovations that was presented at the conference by Roger Snow, the longtime SHFL entertainment innovator who was featured in his first Bally user conference as senior vice president of table products. According to Snow, Infinilink, still in development, will match up math to table-game odds for the purpose of working progressive jackpots into the houseedge setup of each particular game. “For example, it’s 20 times more difficult to get a royal flush in five cards than in seven cards,” he explained. “Infinilink will make it 20 times more difficult to win the (mystery) progressive.” He said the company is targeting release of Infinilink for the end of the year. Another table innovation presented by Snow is Shuffle Flex, a technology that

will calculate lease charges on shufflers based on the number of shuffles. “The operator won’t have to waste money on shufflers sitting on idle tables,” Snow said. Snow also presented “Safe Bacc,” which integrates the shuffler in a baccarat game with the card shoe. It scans the game to prevent scams that occur when cards are physically transferred from the shuffler to the shoe. Several service-based system improvements also were highlighted at the conference. Enriquez from Wind Creek showed how his casino is using the Bally BOSS beverage-ordering system to improve drink service—the casino has instituted a system in which customers are granted free play if their drink order is late beyond a set threshold. Improvements to the Bally Service Tracking Manager system also were highlighted. One improvement replaces the smart-phone communication system with a wrist-mounted device. Additionally, the company presented PokerView, a card-room management system—including a tournament management module—that manages the entire poker-room operation, from registering customers to handling jackpots to fully integrated CoolSign displays showing waiting lists. “Eighty percent of these improvements come from customers,” Haddrill said. “We put together products that will solve a problem for our casinos.” That’s where the systems user conferences come in, he added. “We’ve had very good attendance, very positive meetings, very good customer endorsements, and great examples of how they are using our products. “That’s one of the big evolutions over the past five years—the return-on-investment examples are better and better.” Conference attendees also were treated to a keynote dinner featuring an intimate performance by comedian Jay Leno. But the real stars of this show were on display back in the Innovation Lounge. AUGUST 2014 www.ggbmagazine.com

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making it in

NEW YORK

17 applicants submit bids for four casino licenses for upstate locations by Marjorie Preston

he last day of June must have felt like tax time at the Schenectady offices of the New York Gaming Commission. Seventeen developers filed last-minute applications for four state casino licenses, some just beating the 4 p.m. deadline. Each applicant had to provide 20 copies of each application to be in the running for one of the licenses. Caesars Entertainment alone submitted 6,000 pages of documentation to support its bid, and one publication speculated the regulators may have to wade through 25 tons of paperwork, literally, before they’re through. Big names in the gaming industry including Caesars, Genting and Mohegan Sun will vie for the Class III licenses with Hard Rock, Penn National Gaming and the Cordish Companies, Renderings for potential casinos: (Clockwise) Sterling Forest Resort; Tioga Downs Casino; Hard Rock NY; Saratoga Raceway with Rush Street Gaming, The Live! Hotel and Casino and Greenetrack. Lesser-known applicants include a team that wants to develop a gaming hall near Howe Caverns, a nature destination in Schoharie County. The latter project includes Full House Resorts as the gaming partner and At the other end of the spectrum is Caesars Entertainment, which has submitMichael J. Malik as the developer. Malik is an Indian gaming consultantted its bid to develop an $880 million Caesars New York casino in Woodbury, turned-operator who has coordinated casino projects in California, Michigan Orange County, near the giant Woodbury Commons outlet mall. and New York, the Albany Times-Union reported. “We have a tremendous opportunity to bring the Caesars brand to New “The first time I saw the site, I knew it was a winner,” Malik said. “I’ve York state and create a world-class entertainment facility, adding a new destideveloped many resort destinations before, and this site has all the ingredients nation to the Total Rewards loyalty network and attracting visitors from needed to be a successful destination resort.” throughout the region and the world,” said Caesars Chairman Gary Loveman. Emil Galasso, owner of Howe Caverns, says he may like to see a water Caesars estimates a total of $230 million in annual tax revenues with $29 park and dinosaur theater with a hotel as part of the new resort destination. million annually going to the local community and $10 million to Orange

Orange Is The New Green

Global Gaming Business AUGUST 2014

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AT THE STARTING GATE New York Contenders for Four Licenses PROJECT

LOCATION

OWNER

Caesars New York

Woodbury, Orange County

Caesars Entertainment

Sterling Forest Resort

Tuxedo, Orange County

Genting Americas

Resorts World Hudson Valley

Montgomery, Orange County

Genting Americas

The Live! Hotel and Casino

South Blooming Grove, Orange County

Cordish Companies and Penn National Gaming

Hudson Valley Casino & Resort

Newburgh, Orange County

Saratoga Casino and Raceway and Rush Street Gaming

Grand Hudson Resort & Casino

New Windsor, Orange County

Greenetrack (Alabama)

Montreign Resort Casino

Thompson, Sullivan County

Empire Resorts

Mohegan Sun at the Concord

Thompson, Sullivan County

Concord Kiamesha LLC and Mohegan Gaming NY

Nevele Resort, Casino & Spa

Ellenville in Ulster County

Nevele

Rivers Casino & Resort at Mohawk Harbor

Schenectady, Schenectady County

Capital Region Gaming

Howe Caverns Resort & Casino

Howes Cave, Schoharie County

Howe Caves Development

Unnamed resort

Amsterdam, Montgomery County

Florida Acquisition Corp.

Hard Rock

Rensselaer, Rensselaer County

Hard Rock International

Capital View Casino & Resort

East Greenbush, Rensselaer County

Saratoga Casino and Raceway and Churchill Downs

Tioga Downs Casino

Nichols, Tioga County

Tioga Downs Racetrack

Traditions Resort & Casino

Johnson City, Broome County

Traditions Resort & Casino

Lago Resort & Casino

Tyre, Seneca County

Wilmorite

County. The project is expected to create some 4,500 direct jobs, including 1,500 construction jobs and roughly 3,000 permanent jobs. To sweeten the pot, the company also pledged a minimum of $20 million to improve traffic near the proposed resort at exit 131 on the New York Thruway. Empire Resorts, which wants to build the Montreign Resort Casino in the Catskills, delivered 280 boxes to regulators escorted by armed security, the Associated Press reported. “Today everything gets very real,” Empire Resorts Vice President Charles Degliomini said. Empire’s total combined investment in the resort could exceed $1 billion. The developers seem to be hedging on whether Orange County gets a casino. They have included a disclaimer saying, “The size of the project, including the amount of capital necessary to complete it, will vary based upon the number and location of competitive licenses issued by New York state in our region.” Orange County has been a bone of contention for developers working farther upstate. Empire’s location, for example, is about 90 miles northwest of New York City. An Orange County casino would be about half that far. It’s been speculated that any casino that is closer to the New York City metropolitan area with its vast population base would likely siphon business from casinos in Sullivan or Ulster counties; two developers, Foxwoods and Pinnacle Entertainment, actually withdrew from the running due to concerns about an Orange County gaming hall. Genting, the Malaysian casino giant, has also placed bids in Orange County twice. A company spokesman said Genting submitted bids for two casinos, Sterling Forest Resort in Tuxedo and Resorts World Hudson Valley in Montgomery. The Malaysian news publication Staronline.com noted that Genting’s financial strength and proven success at the racino at Aqueduct makes

it a contender to beat; others say its decision to bid twice—in essence, to have a Plan B—may weaken its position among regulators. Cordish Companies and Penn National Gaming also filed jointly for an Orange County casino. The plan for these strange bedfellows (who clashed in a bitter Maryland referendum fight) is to build in South Blooming Grove, which would include easy access off a major thoroughfare, Route 17. The $750 million casino about 60 miles north of Manhattan would bear Cordish’s famous “Live!” brand. The Cordish-Penn National venture would include more than 3,000 slot machines, 250 table games, a hotel with about 300 rooms and a spa and fitness center. As an added twist to their bid, Cordish and Penn National have founded a nonprofit organization called H2V2 that will work to attract new or existing out-of-state manufacturing, computer science and research businesses to the region. The companies will support the organization with a $1.5 million annual grant “in perpetuity,” according to Cordish officials. “No other applicant can match our comprehensive plan to maximize revenue and jobs in the state of New York,” said David Cordish, chairman of Cordish Companies. Saratoga Gaming and Raceway’s proposed project, Hudson Valley Casino and Resort in Newburgh, reportedly will not impact a Catskills casino as much as the other Orange County bids, but the economic need isn’t as strong, either. And Luther Winn Jr., president and CEO of Alabama-based Greenetrack, filed an application for what he called the Grand Hudson Casino and Resort at Stewart Airport in Orange County.

Counting Criteria How the state is going to weigh the applications is a matter of opinion. “This is turning out to be who can generate the most revenue for the state,” AUGUST 2014 www.ggbmagazine.com

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griped Charlie Barbuti, the supervisor for Liberty, a Catskills town where Foxwoods had planned its casino. The tribal gaming company said it would be unable to secure financing because of possible competition in Orange County, Businessweek reported. “We can’t generate the same revenue as those closer to a city of 8 million people,” said Barbuti. But Robert Williams, acting executive director of the commission, insists the intent of the law “is to provide maximum benefit to the state through bringing economic benefit to municipalities that have been economically disadvantaged.” The counties to the north of Orange County certainly fit that description; Sullivan County, for example, has one of the highest unemployment rates in the state. “A perceived advantage for Orange County is inconsistent with both the statute authorizing the competition and the request for applications,” Williams wrote last month. Senator John Bonacic, the Republican at the helm of the Senate’s gaming committee, said, “I do believe that proposals in the Catskills will be strong contenders for the licenses, as they most fit the spirit of the legislation.” The original casino measure backed by Bonacic did not include Orange County, he said. It was added when Governor Andrew Cuomo sent the final version to lawmakers after negotiations with legislative leaders, the lawmaker said. “When I looked at that, I said, ‘Wow, if I were a public casino company, I’d certainly look in Orange County if they allow you to bid,’” Jeff Gural, chief executive officer of American Racing & Entertainment, told Businessweek. Mohegan Sun is trying to outmuscle them with an application to build a $550 million casino at the site of the old Concord resort in Sullivan County. It would be branded as Mohegan Sun at the Concord, and extend over 60 acres of the 140.3-acre property, the company announced. “We’re tremendously excited to share our vi-

sion for the future of Sullivan County—a vision that features a world-class entertainment and tourism destination that will generate thousands of jobs and new economic development for the region,” said Mitchell Etess, CEO of the Mohegan Tribal Gaming Authority. “Just as important, Mohegan Sun at the Concord will be a unique destination with one-of-a-kind amenities that will attract a new generation of visitors to this former center of tourism in the beautiful Catskills.” There is only one proposal for a casino in Ulster County, at the site of the former Nevele resort in Wawarsing. The $640 million resort would be “a gateway to upstate and will generate approximately 2,000 construction jobs and an additional 2,000 permanent jobs upon completion,” the company led by CEO Michael Treanor announced; the development is shovel-ready, they say.

Far Northern Exposure Rochester-based Wilmorite Inc. has partnered with Peninsula Pacific of Los Angeles in its bid to build the $425 million Lago Resort & Casino in Tyre, Seneca County. JNB Gaming, which consists of former executives of Peninsula Gaming, bought out by Boyd Gaming two years ago, would operate the casino. “We look forward to Lago being measured against our competitors, and we look forward to winning the casino license for this region and building New York’s newest and best casino destination resort,” Wilmorite Chairman Thomas Wilmot said in a statement. Also in the Eastern Southern Tier region is Gural’s Tioga Downs, an existing racino in Nichols, Tioga County, and Traditions at the Glen in Union, Broome County. Tioga Downs is planning a minimum $90 million expansion project, including a 136-room hotel. “I think they’re trying to overwhelm us,” said Gural of Wilmorite’s new proposal. “But the bottom line is the same: Customers are coming from existing casinos up there. And in my mind, the

A th

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Howe Caverns Resort & Casino

Nevele Resort, Casino & Spa

Southern Tier was promised a casino.” While the owners of the Southern Tier resort Traditions at the Glen said they were interested in partnering with Tioga Downs, Gural rejected that notion. “Truthfully, I think if Traditions owner Bill Walsh won the bid, he would go broke,” said Gural. “I told him that. I don’t think that there are enough customers for both of us.” If Tioga Downs wins the state bid, Gural says his casino would be up and running in three months. The Walsh family, owners of Traditions at the Glen, want to build Traditions Resort & Casino, a $150 million project with 1,200 slot machines and 50 gambling tables. Jonathan Swain, one of three principals at JNB Gaming, said the project is

financed and the operators are experienced. “We’re not Penn Gaming,” Swain said. “We’re not Caesars. But we’ve done projects exactly like this.” The Galesi Group and partner Rush Street Gaming, owner of SugarHouse in Philadelphia and Rivers Casino in Pittsburgh, want to build a $200 million casino/hotel project along the Mohawk River in Schenectady. Rochester developer David Flaum and the Chickasaw tribe of Oklahoma have submitted an application for a $150 million project in Rensselaer, in partnership with Hard Rock International. And Saratoga Harness Racing and Churchill Downs Inc. proposed a casino resort in East Greenbush. State gaming regulators are expected to award the first round of licenses in the fall. Three more casino licenses in the New York City region could be awarded seven years after the first four have opened.

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FRANKLY SPEAKING by Frank Legato

Holy Three Decades, Batman!

Global Gaming Business AUGUST 2014

VI CT O

R RIN AL

t’s time for one of those oh-damn-am-I-some-sort-of-old-man-or-what columns. This month, August 2014, marks 30 years I have been writing about this here casino business. In August 1984, I wrote my first article about the gaming industry. It was on a Sunday. I remember, because I didn’t have a phone, and my neighbor, whose number I had put on my résumé, knocked on my door on Sunday morning to tell me someone wanted to interview me because I had applied for their editor job in the paper. I didn’t have a phone because my previous employer, Master Résumé Service of Washington, D.C., had folded its tent a couple of months earlier. I was working as an assistant garage door mechanic as I sent out résumés. Yes, I was a professional résumé writer. I wrote myself a good one on the way out the door. And yes, I was an assistant garage door mechanic. Garage door mechanics were my bosses. I carried a lot of ladders. But anyway, on that Sunday morning in 1984, I went for an interview at the office of Public Gaming Research Institute, publisher of Public Gaming magazine. After the interview, the publisher, Duane Burke, gave me a bunch of research on Bally Manufacturing, as the slot manufacturer was called then, and had me start writing a feature. It was a test, but it was also an actual, in-progress article. Before I finished the story, I was hired, and worked pretty much nonstop for that magazine and as editor of its new sister publication, Casino Gaming, for a couple of years, taking time out for meals and occasional sleep. I also published two successful issues of the Lottery Journal, the quintessential manual for success in running state lotteries, and of course, a magazine very popular with the teens. And yes, I know my book says the first article I got published in Public Gaming was about Aristocrat, but the Bally thing was actually the first one I wrote, beginning before I even had a job. I don’t remember exactly when I finished the Aristocrat story. It’s hard to remember the specifics of what happened 30 years ago. (Or yesterday.) I do remember interviewing Aristocrat founder Len Ainsworth over the phone from Australia for that second article. I was 27. He was 106, I think. Oh, I’m kidding. Len’s still at it, of course. I’m convinced that I’ll retire before Len Ainsworth does. And now, as if you thought you could escape it, this is where I go into how different from today things were way back then, 30 years ago. And they were. Hey, we had an actual typesetter. She typed articles into a big contraption that turned them into the magazine typefaces, so they could be cut and pasted down with hot wax, so the magazine could be printed in time for newsboys in knickerbockers to take them to the street corners, shouting, “Extra!” OK, I made up the bit about the newsboys, but the rest is true. The casino industry itself then bore no resemblance to now. Well, for one thing, it was 1984, so the actual buildings were different, and people dressed funny and had big hair. Most casinos were themed like… casinos, with the dark reds and the flowered carpets and no clocks. They were only in Nevada and Atlantic City. It was only a year after they had raided the Stardust and kicked out Robert DeNiro and Joe Pesci, so people still thought anyone at a casino was in the mob. People used to think I was a mobbed-up casino boss if I crossed the floor wearing a suit. Hey, Italian, suit and tie… Must work here. “Excuse me, my slot machine ate my dollar token!” “Where’s the bathroom?” I used to send them in the wrong direction, just to mess with them. As I’ve said in this space before, slot machines had exactly two sounds: “ding” and “buzz.” And they still

had “slots,” which took “coins.” Uniformed women pushed carts that looked like hot-dog stands around offering change for your bills. At the end of a slot session, your hands looked like you had worked on a transmission. Table games were pretty much the same as now. Except that now, the pit bosses look even more mobbed-up. I could go on, but I just looked at the bottom of the page, and I’m out of space. (Yes, I’m here, inside the magazine. Are you serious with that tie?) By the way, forgive me if I’ve repeated myself in this column. That happens to people my age. By the way, forgive me if I’ve repeated myself in this column.

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NEW GAME REVIEW by Frank Legato

Dungeons & Dragons Konami Gaming

onami’s take on the famous fantasy role-playing game Dungeons & Dragons plays out on the manufacturer’s Podium Monument cabinet, which features a 32-inch vertical top-box LCD monitor in addition to the standard-sized game screen. The Podium Monument is used to convey the 40-year-old fantasy game’s theme in dramatic fashion, including a sculpted dragon topper and intricate graphics thanks to Konami’s KP3 video platform. The initial release consists of two themes, “Enchanted Riches” and “Conquests & Treasures.” The base game in each is a five-reel, 25-line video slot, with a four-level progressive jackpot triggered through one of the bonus features. The two main bonus features are triggered when Dungeons & Dragons symbols appear on the three middle reels. This enacts the “Dungeon Master Feature,” in which a large prize wheel appears on the 32-inch vertical top-box monitor. The wheel spins to one of five free-spin amounts, or the second-screen progressive bonus feature. Free-game options are six, eight, 10, 12 and 25 free spins. Each of the free-game options enters the player in the “Free Game Campaign:” When “Action Stacked Symbols”—clusters of the same jackpot symbol— appear on the third reel of a free spin, it unlocks an entire new reel window. During each free-game “campaign,” up to three new reel windows can be un-

locked, with results on all reel windows added together for the player’s bonus. The Dungeons & Dragons progressive feature triggers a second-screen image of a Dungeons & Dragons game board covered by 12 spinning dice. Each die reveals a color corresponding to one of the four jackpot levels, with resets of $10, $20, $100 and $1,000. The player selects dice until revealing three matching colors, triggering the corresponding level of jackpot. Manufacturer: Konami Gaming Platform: KP3 Format: Five-reel, 25-line video slot Denomination: .01, .02 Max Bet: 500 Top Award: Progressive; $1,000 reset Hit Frequency: Approximately 31% Theoretical Hold: 3.9%—12.8%

Monopoly Luxury Diamonds WMS Gaming

his latest edition of the WMS Monopoly franchise is the first Monopoly slot to appear on the slotmaker’s new Blade Stepper cabinet and platform. The game combines high-resolution graphics in a top-box video monitor with a three-reel, mechanical setup with five or nine paylines, and features the first mechanical bonus wheel to be used on the Blade Stepper, for a traditional high-denomination take on the classic Monopoly board game. The five-line version of the game is available in dollar and $5 denominations; the nine-line version is a quarter game. During base game play, the Double Luxury symbol is wild and doubles the pay in winning combinations. The Triple Monopoly Wild symbol triples the pay in a win. Three wheel symbols on a payline at max bet trigger the “Wheel & Deal Bonus.” Five miniature wheels appear above the reels, and the player is prompted to pick one, for one of

Global Gaming Business AUGUST 2014

five “Deals” to be applied to the main mechanical wheel spin: a “2nd Chance Throwback,” which gives the player an option to re-spin the wheel to try at a better bonus; “2X Light Blue and Brown Properties,” which doubles the pay on all those properties on the Monopoly board (the big wheel spin lands on a color related to the board on the video screen); “2X Orange and Purple Properties;” “2X Yellow and Red Properties;” and “2X Dark Blue and Green Properties.” Each of the 2X results places a “2X Hotel” on the corresponding properties on the video Monopoly board. After the “Deal” is decided, the player spins the big wheel, which contains 22 property spaces, each of which awards a credit amount; and one “Free Parking Jackpot” wedge, which awards a secondary progressive jackpot. The game features a top wide-area progressive jackpot resetting at $10,000. Manufacturer: WMS Gaming Platform: CPU-NXT3 Format: Three-reel, five-line or nine-line stepper slot Denomination: .25, 1.00, 5.00 Max Bet: 5, 9 Top Award: Progressive; $10,000 reset Hit Frequency: Approximately 14% Theoretical Hold: 9.98%, 12.1%

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Rumble Rumble

Ainsworth Game Technology When the main bonus event is triggered, the reel set expands to nine symbols per reel, covering the vertical LCD monitor. The Sweet Zone feature applies during free spins as well, potentially transforming each of 45 symbols in the expanded array into wild symbols.

his latest game in Ainsworth’s Premium Plus series features an expanding reel set that uses all of the 32-inch vertical top-box monitor of the highend A560 SL cabinet. The base game is available in 50-line or 100-line versions, and plays out on a three-by-five reel set. There is an optional two-level mystery progressive jackpot. In a new special feature recently introduced for the Premium Plus series, the game includes a “Sweet Zone” feature both in the primary game and in the free-spin feature. At random, Sweet Zones appear over portions of the second and fourth reels. If a buffalo symbol lands in a Sweet Zone, wild symbols explode across adjacent reels. If buffalo symbols appear in both sweet zones, the entire game array transforms into wild symbols.

Manufacturer: Ainsworth Game Technology Platform: Premium Plus Format: Five-reel, 50- or 100-line video slot Denomination: .01—10.00 Max Bet: 250, 500 Top Award: Progressive; $4,500 or $5,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 4%-15%

Ultra Slide Ryuko Aruze Gaming

his game in Aruze’s G Series of basic, no-frills video slots features expanding—or “sliding”—jackpot symbols that can trigger one of two fixed jackpots. The base game is a 50-line video slot on a four-by-five reel set. Three scattered feature symbols on the middle reels trigger eight free games on a special set of bonus reels. The top two paying symbols, the dragon and the tiger, expand to all four spaces when landing on the first reel in a free spin, translating into a higher chance at large jackpots. If a dragon or tiger symbol lands on all four spaces of the first reel during a free spin, any matching dragon or tiger symbol elsewhere on the screen slides up or down to change all symbols in that reel to match the symbol covering the first reel. The game’s top jackpot is triggered if, on a free spin, the first reel lands dragon symbols on each of the four spaces, and a dragon symbol

Global Gaming Business AUGUST 2014

lands on one of each of the other reels. In that case, all spaces on the screen are changed to dragon symbols, and the Dragon Jackpot is awarded. The same applies with the Tiger Jackpot. Both jackpots are 10,000 credits times the line bet—200,000 credits on the version with the top maximum bet of 1,000 credits per spin. Either jackpot also is triggered by a regular reel combination of a dragon or tiger symbol landing on all 20 reel spots in a basegame or free-game spin. Either jackpot is triggered beginning with a minimum bet. The free-game round is retriggered for an additional eight spins with three scattered feature symbols on the middle reels of a free spin. Manufacturer: Aruze Gaming Platform: G Series Format: Five-reel, 50-line video slot Denomination: .01 Max Bet: 250, 500, 750, 1,000 Top Award: 10,000 times line bet Hit Frequency: Approximately 50% Theoretical Hold: 2.06%—12.97%

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CUTTING EDGE by Frank Legato

Sorting Performance Product: ChipStar Manufacturer: Bally Technologies

ally Technologies offers the next generation in chip-sorting technology with ChipStar. The sorter improves roulette performance without compromising chip integrity by greatly increasing the speed of play. Built of composite plastic using chainless conveyor technology, ChipStar is simple in design, construction and maintenance. Requiring minimal service and no lubrication, its flexible, easy-to-use touch-screen work interface allows operators to match their current play-volume needs, all while maintaining high-efficiency, high-capacity sorting. Operators use ChipStar’s custom-designed touch-screen work interface to configure the 10 chip shoots to match their preferred outcomes. Next, they select one of three sorting speeds using a simple, selectable button on the machine’s exterior. These adjustable speeds allow operators to match the sorting power based on the current level of play: the slowest speed offers low noise operation as required in high-roller rooms, while the highest speed is perfect for busy nights on the mass floor that demand efficiency. Once the configurations are set, operators insert the chips through a plastic funnel connected to the chip-drop opening, and Bally’s unique combination of pre-separation and sorting technology safely sorts the chips into the pre-configured shoots. This two-step technology never clogs the system, providing greater effi-

ciency and accuracy. In addition, ChipStar’s unique pre-separation technology ensures that no matter the capacity, the chips’ integrity won’t be comprised. Once the sorting process is complete, ChipStar’s innovative chip-ejection technology allows operators to easily and safely remove the chips in customizable quantities using a simple metal separator. This unique ejection innovation provides casinos a 100 percent safe chip-sorting operation, and eliminates regular nicks, cuts and bruises. The software that powers ChipStar is also configurable for back-of-house reporting and monitoring. For more information, visit ballytech.com.

POS Fresh Take Product: SkyWire POS system Manufacturer: SkyWire.com

kywire.com has launched a point-of-sale software suite it says makes life easier, better and more profitable for POS locations in gaming venues. Gamers love rewards; they will take them where they can get them, and their favorite rewards are usually food and drinks. A gamer is also more likely to play longer when they have an incentive to eat where they are playing. Rewards managers are also looking for ways to give incentives to keep people on property without adding to their already overextended procedures. And everyone at every level of the casino should be thinking of ways to save time and money to increase profits. SkyWire POS makes life easier by allowing management to set up promotions and incentives that can work with the eateries, bars and retail outlets on location. It tracks usage and aggregates data for the casino’s rewards management team. There also are built-in marketing, couponing and texting features that can inform diners of

Global Gaming Business AUGUST 2014

gaming specials when they are on property. Management can access or change the information and configuration, securely, from anywhere, 24 hours a day, seven days a week, at no extra fee. According to the American Gaming Association Survey of Casino Entertainment, 65 percent of all visitors tend to leave the property to eat. The SkyWire integrated system will act as a sort of plug, keeping gamers spending, and increasing profits in gaming, food, beverage and retail. For more information, visit skywire.com.

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EMERGING LEADERS

Financial Acumen Clayton Vanderpool Vice President of Native American Gaming, PNC Bank ith a strong background in finance and drive for success to complement it, Clayton Vanderpool knows a thing or two about how to build a successful financial career in the gaming industry. As the vice president of Native American gaming at PNC Bank, he works with the economic development authorities of the sovereign nations navigating complex legal structures in order to lend capital to their gaming and leisure investments. Starting out in his career, Vanderpool faced a number of challenges as one of the youngest people in his field at his company, and often found himself sitting in rooms filled with colleagues who had many more years of experience. He credits his success to always being well-organized, conducting solid research and taking time to develop his ideas. “I have never met anyone who has regretted being over-prepared,” he says, “You have to have confidence, without arrogance or stubbornness, in your ideas and contributions, and the best way to accomplish that is to be well-prepared.” Vanderpool’s success wasn’t achieved solely on the merits of his own hard work and dedication. He credits a number of people who have helped him along the way, including his parents, who

Father Figure Aaron Gomes President, CEO and Owner, Gomes Gaming aron Gomes is an Ivy League graduate from the University of Pennsylvania with an MBA from Drexel University, but he is the first to say that his education began long before that from his father, the legendary Dennis Gomes, who passed away in 2012. Many in the casino industry claim Dennis as a mentor, but only Aaron can claim him as a father. Gomes began his career in Las Vegas with MGM Mirage’s Management Associate Program (MAP). MAP is an accelerated job rotation plan designed to develop high-level executives. Soon after finishing the program, Gomes was promoted rapidly through principal casino operating departments from slot operations analyst to slot marketing analyst to casino marketing manager. In 2007, Gomes joined the Gomes Gaming Management team as vice president of marketing and operations for the Indiana Live! casino in Indianapolis. During his tenure, he helped develop, open and manage the casino. He is currently the president, CEO, and owner of Gomes Gaming. In 2010, he took his talents to Resorts Casino Hotel, the first hotel and casino in Atlantic City, as executive vice president of operations. Gomes worked on re-branding the property as “The New Resorts” and managed $8 million in capital expenditures. In February 2012, Gomes was named acting CEO within Resorts Casino Hotel, the youngest casino CEO in Atlantic City history. Soon after, Gomes resigned to pursue a new opportunity in Australia. This opportunity was a managing director position for Echo Entertainment’s Jupiters Gold Coast Casino. While there, he redeveloped Jupiters under a $350 million plan, was responsi-

Global Gaming Business AUGUST 2014

ble for 2,000 employees, and managed an average of $300 million in annual revenue. But Gomes points to the influence that his father had on him. “I grew up going to work with my dad all of the time, going to work functions, having dinners in the hotels, and getting to know a lot of people in the industry,” he says. The skills that led him on the road to a senior management position were humility and a willingness to learn from those around him. On his first day at Jupiters, Gomes says he stated, “I am not going to be judged by how quick I come in and force my ways on you, but rather on how quickly I learn from all of you and supplement your best practices with those that I have gained from my past experiences.” The best advice Gomes offers to up-and-coming professionals is to master the ways of both “old-school” and “new-school” casino executives. He defines “old-school” as those executives who have mastered relationship-building with customers and team members, know how to motivate, and truly understand the value of forming strong relationships with everyone around them. On the other hand, he defines “new-school” as those executives who can analyze spreadsheets, predict customer behavior, send out direct mail to get the best ROI, and put together the fanciest presentations. Gomes advises young executives to learn and develop both ends of the spectrum. Gomes looks forward to starting a new role back in the United States in the fall and continuing to learn from those around him. —Alexis Garber, The Innovation Group

“You have to have confidence, without arrogance or stubbornness, in your ideas and contributions, and the best way to accomplish that is to be well-prepared.”

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helped him create a strong foundation for hard work, as well as his team leader at PNC Bank, Russ Liebetrau. There are challenges that arise when blending the fast-paced world of gaming and finance together, and Vanderpool has relied on Liebetrau’s guidance throughout the years to learn how to take a step back from the process and focus on the bigger picture. “Russ has helped me learn how to evaluate a situation from both an analytical and strategic view, and then focus on the core challenge, while leaving ego and emotion out of the decision,” he says. “This approach, as hard as it can be some days, leads to better business decisions that stand the test of time.” Along with his colleague, Vanderpool acknowledges the supportive work environment of PNC Bank overall, which has continually opened the door to new opportunities. He praises PNC’s training programs and well-conceived processes that allow for frequent interaction with senior management. Leveraging his education in earning an MBA, and combining it with his past experience lending

to large corporate and middle-market customers, he has not only become a trusted adviser to his clients, but also a go-to person for day-to-day advice on capital raises, regulatory issues, expansion planning and finance—industry trends that regularly impact his clients’ business. So what does Vanderpool see happening in the immediate future for the industry? A number of shifts and changing market dynamics that will have industry professionals rethinking the way they do business in the gaming industry. Although the U.S. economy has improved, consumer confidence still lags, and all the while, iGaming brews in the background as a potential beast that can revamp the business. These things, however difficult, are also opportunities. As Vanderpool puts it, “All these variables will have a profound impact on the gaming market over the next few years and will force groups to become more innovative in their approach to growing their business. This is a challenging time brimming with great opportunity.” —Renese Johnson, The Innovation Group

Design Style Melissa Shilling Senior Interior Architect, Floss Barber Inc. alk the floor of Valley Forge Casino Resort and you will see why Melissa Shilling is an emerging leader. As senior interior architect, Melissa played an integral role in ensuring that the exclusive, yet comfortable design by Floss Barber Inc. came to life on the casino floor. Working with the existing structure, the team at Floss Barber Inc. created a flowing design, centered on the central bar, which incorporates rich colors and modern lines. After graduating from Temple University with a degree in architecture, Shilling took a position with a major firm, and focused on largescale construction projects. While she found the work to be exciting, it was not the right scale for her. She found what she was looking for as she moved onto a design group that focused on retail and branded interiors, noting that “this was stuff I could really sink my teeth into, and I haven’t looked back.” Starting out in a creative field can pose certain challenges for a young designer. Many creative people pursue their careers because they have good taste and appreciate good work. In most cases, it takes time and practice to hone those skills in order to create the desired product. Shilling attributes her success to being willing to work hard in order to gain those experiences. She also believes that her curiosity and interest in exploring a variety of ideas throughout the process has helped her achieve her current position. Looking forward, Shilling is eager to hone her skills as a working mom. She welcomed a baby boy into her family earlier this year and is looking forward to see what lies ahead. —Jennifer Day, The Innovation Group

“This was stuff I could really sink my teeth into, and I haven’t looked back.”

AUGUST 2014 www.ggbmagazine.com

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GOODS&SERVICES ARISTOCRAT STEPS UP n reaction to a year of mega-mergers and Itrend partnership deals marking a consolidation in the slot supply sector, Australian slot machine giant Aristocrat Leisure, Ltd. is stepping up its competitive position. Faced with competition including new behemoths Scientific Games, which has incorporated WMS, the recent big buy of IGT by GTECH (see page 56), and Bally Technologies, which has absorbed SHFL entertainment—and tuck-in acquisitions by several competitors seeking to create diverse product libraries and multi-channel capabilities—Aristocrat is aggressively making deals to diversify and improve its product lineup. First, the company is making major moves to improve its Oasis 360 casino management system, which has been named the most widely used CMS in consecutive Goldman Sachs surveys. Two weeks ago, the company announced its plan to acquire Paltronics, Inc., which has been a partner to the slot-maker in deploying its linked progressive controllers to run Aristocrat’s successful wide-area networks such as Hyperlink. Paltronics also adds venue-wide progressive bonusing capabilities to Oasis, putting it on par with the networked bonuses being offered by industry systems leader Bally and others. Paltronics also brings picture-in-picture capabilities to Oasis, giving Aristocrat the ability to work with customers on enterprise-wide promotional bonuses. Last month, Oasis 360 got another boost with Aristocrat’s announcement of an exclusive licensing and development agreement with renowned casino loyalty solution developer House Advantage. Under the deal, Aristocrat will be the exclusive licensee and sales distributor for House Advantage’s gaming product suite in the North American market. The company will embed House Advantage software—mainly, the highly regarded HALo suite of software products—into Oasis, and Aristocrat and House Advantage will work jointly to develop new casino promotional software and loyalty solutions. “Leading casinos across North America are successfully using House Advantage’s elite software, which provides casinos of all sizes with a scalable, competitive, unique, innovative solution for building patron loyalty,” said Aristocrat Chief Product Officer Rich Schneider. Aristocrat’s aggressive self-improvement campaign culminated with perhaps its most bold action yet designed to achieve CEO and Managing 78

Global Gaming Business AUGUST 2014

Director Jamie Odell’s long-stated goal of increasing recurring revenue from leased games. Aristocrat announced that it has agreed to acquire Tennessee-based Class II supplier Video Gaming Technologies for $1.28 billion in an all-cash deal the slot-maker says will give it operational revenue to fuel further expansion around the world. Privately owned VGT is one of the leading suppliers of games for Class II Indian casinos in North America, dealing exclusively in leased machines and systems for a solid base of recurring revenue. The supplier currently has an installed base of approximately 20,200 leased machines and 610 employees. VGT has the most widely used Class II platform in North America, consisting of both mechanical and video Class II gaming machines. The majority of VGT’s installed base is in the Oklahoma tribal gaming market, which accounts for approximately 50 percent of the total installed base of Class II gaming machines in the U.S. The supplier also has expanded into the Washington and California markets.

WMS RECEIVES AWARD; DEBUTS NEW PLATFORM lot manufacturer and Scientific Games subSmilestones. sidiary WMS Gaming last month reached two WMS received one of 11 High Achiever awards from the Manufacturing Leadership Council at the 2014 Manufacturing Leadership Summit. High achievers were selected in nine categories from recipients of the Manufacturing Leadership Awards, which were announced in March. WMS was recognized in the Supply Chain Leadership category for the WMS Procurement Transformation Project, which simplified the WMS supply chain by implementing sourcing strategies to increase efficiency and shorten material lead times. The initiative directly advanced WMS’ ongoing integration with Scientific Games and expedited the completion of prioritized

organizational goals. “This achievement represents truly collaborative innovation across the entire WMS end-to-end supply chain,” said Chris Hillman, WMS vice president of global supply chain. “The High Achiever distinction is a testament to our industry leadership and commitment to optimizing performance for our customers, and I am incredibly proud of the team’s accomplishment.” And WMS Gaming used the Canadian Gaming Summit June 24-25 to debut CPU-NXT 3, the third generation of the sophisticated operating system that runs the supplier’s slot machines. WMS, now a business unit of new parent company Scientific Games, presented a complete range of new products at the trade show, which marked the first time the company is presenting its three business units—Lottery, Gaming and Interactive— together at an event. The WMS Colossal Jackpots series, designed to combine the mechanics of the successful Colossal Reels family with the Blade cabinet, also made a CGS 2014 debut. The series launch includes two base games, the Lunaris and Open Kimono themes, each with a unique player experience and 100 lines of high-definition 1080P graphics. A number of new game series on the CPUNXT3 platform were featured, including Supercharged Reels, Reel Intensity and the Wheel Bonus series.

GAMBLIT GRANTED NEVADA LICENSE he Nevada Gaming ComTmanufacturer’s mission has granted a license to Gamblit Gaming, a start-up slot supplier planning to combine traditional slot machines with entertainment-style computer video games. Gamblit is a subsidiary of Hard 8 Games, which is owned by American Capital, a business development company headquartered in Bethesda, Maryland, and traded publicly on the NASDAQ exchange. The company is planning to display its first slot machines at September’s Global Gaming Expo in Las Vegas. Gamblit CEO Eric Meyerhofer told the commission the company plans to have games in the field sometime in 2015, most likely the result of an initial partnership with a larger slot manufacturer. “At the start, we think our games will have a segment of the slot machine floor,” Meyerhofer told the Las Vegas Sun. “We’ll grow based on floor performance.”

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During a presentation earlier this month to the Gaming Control Board, Meyerhofer showed regulators video of a gaming concept in which a Scrabble-type word game, such as those found on social gaming websites, is combined with a traditional slot machine. Gamblit plans to design products that feature games played on mobile devices and other platforms. Later, Meyerhofer told the commission the new games might be a way to grow the slot machine market to include younger gamblers. “Only 15 percent of those (21-to-45-year-old) customers will ever touch a slot machine,” he said. “We believe we can grow that market.”

IGT RELEASES SECOND ‘AVATAR’ SLOT; SIGNS LATVIA DEAL last month announced two developments in IGTdifferent parts of the world. The second game in IGT’s James Cameron’s Avatar Video Slots series, James Cameron’s Avatar Treasures of Pandora, is now live in several Florida casinos and will continue to roll out on casino floors around the world. Based on Avatar, the highest-grossing movie of

With first installations scheduled this month, DLV plans to leverage IGT Casinolink, Medialink and EZ Pay systems to maximize efficiency and player engagement through improved accounting with jackpot and player management technologies. The agreement also marks the introduction of the IGT Xtra Credit systems module to the European market, enabling easy deployment of promotional awards while increasing play time.

CASINO ESTORIL PICKS JCM ash-handling equipment supplier JCM Global C announced that Portugal’s Casino Estoril has named the company as the preferred supplier of bill validators. The announcement comes less than a month after another Portuguese casino named JCM its preferred supplier. Specifically, Casino Estoril named JCM’s award-winning iVIZION as its preferred bill validator. “We have worked with JCM for many years, and have always been pleased with the quality of products and service,” said Choi Man Hin, chairman of Casino Estoril. “During our three-month trial with iVIZION, we were impressed with its very high quality and fast first-time acceptance rate, and we had no technical problems. We are happy to name iVIZION our preferred validator product.”

SLOT-MAKERS HOLD PUBLIC PREVIEW

all time, Treasures of Pandora puts slot players in the middle of their favorite movie moments. Engaging bonuses allow for players to explore the luminescent forests of Pandora, pick their own Banshees and experience the “Merge Bonus,” where the two base games merge, creating an unprecedented 7,776 ways to win on each spin. The release of the game also marks the debut of IGT’s CrystalCore cabinet. Featuring a 42-inch vertical LED touch-screen display, a 10-inch dynamic player panel and “Super Button,” the new hardware complements the game series, which has won several industry awards. In Latvia, the company announced that it has signed an agreement with operator DLV to install IGT systems in 50 slot halls over the next two years, connecting approximately 1,000 machines in locations throughout the country.

top five slot manufacturers staged Tgamesaherareindustry’s public preview of yet-to-be-released last month for players at Pittsburgh’s Rivers Casino. Around 540 players were invited to the casino’s second-floor ballroom, where machines from IGT, Bally, Aristocrat, WMS and Konami Gaming were set up for play. Representatives of the slot-makers were on hand to gather feedback on the new games from players on just-released games like Aristocrat’s Rolling Stones and Bally’s Titanic, and soon-to-be-released games like IGT’s Jenga. “We like to hear feedback,” Patty Crescenzo, manager of corporate gaming for Aristocrat, told the Pittsburgh Tribune-Review. Pete Wichterman, Eastern regional sales representative for Bally, told the newspaper the slot-maker uses public focus groups like this to improve games before general release. “We’ll add more bonus features, take some away, tweak some—it’s all based on customer feedback,” he said.

Global Gaming Business AUGUST 2014

LT GAME SYSTEM APPROVED IN NEVADA aradise EntertainPnounced ment has anthat its Macau-based subsidiary LT Game has received approval from the Nevada Gaming Control Board for its Live Table Multi Games Jay Chun, chairman and CEO System. The product, of Paradise Entertainment which uses a live dealer for games beamed to electronic player stations, has successfully completed a field trial at the Palazzo Casino in Las Vegas. “The approval granted by the NGCB marks an important milestone for LT Game’s expansion into the U.S. and signifies the start of an important chapter in the company’s global growth story,” said Paradise in a statement. Paradise added that the group is also in negotiation with an independent third party for a distribution agreement for its products. “The Live Table Multi Games System is the answer to casino operators’ demand for labor optimization, operational efficiencies and player convenience,” said Jay Chun, chairman and CEO of Paradise Entertainment. “The Live Table Multi Games Systems offer players the flexibility and convenience of being able to view and play multiple live-broadcasted games simultaneously, enhancing player experience while increasing game productivity for operators tremendously.”

MGAM RECEIVES BUY RATINGS lot manufacturer Multimedia Games anSHolding nounced that its parent Multimedia Games Company (MGAM) has been given a consensus rating of “Buy” by the eight ratings firms currently covering the stock. According to AnalystRatings.net, the eight investment analysts have set the average one-year target price at $35.67. MGAM opened at $29.43 on the day of the report. The stock currently has a 12-month low of $25.03 and a high of $40.15. The stock has a 50-day moving average of $28.75 and a 200-day moving average of $29.99. The company has a market cap of $871.5 million and a price-to-earnings ratio of 22.95. MGAM last posted its quarterly earnings results on Wednesday, April 30, reporting earnings of 35 cents per share for the quarter, beating a consensus estimate of 31 cents by analysts. The company had revenue of $58.2 million for the quarter, compared to the consensus estimate of

G&TAwardsad.2014

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13 Annual

Awards CALL FOR ENTRIES The gaming industry’s most prestigious technology awards program is coming again and soliciting nominations. The winners of the Global Gaming Business Gaming & Technology Awards 2015 will be announced at a ceremony on the show floor at Global Gaming Expo in October. Don’t miss this chance to showcase your company’s latest innovation. Nominations are due August 22, 2014.

CALL FOR ENTRIES

THE CATEGORIES ARE: BEST CONSUMER-SERVICE TECHNOLOGY This category concerns technology that directly touches the customers. Whether it is an enhanced kiosk, a new player tracking system, reservations system, parking management system or any other customer-friendly device, this technology directly impacts the experience of the customer. Why is this a step up from previous technologies? BEST PRODUCTIVITY-ENHANCEMENT TECHNOLOGY This category describes a technology that makes a job or task easier and more efficient. Examples could be an online accounting system, better technology for printing tickets on cashless slots, or an employee communications device that allows a property to better explain its programs to its workers. How does this technology improve on the way the task or job had been previously performed? BEST SLOT PRODUCT Very simply, this product is the judges’ favorite new slot product. It can be a brand new game or a traditional game that has been updated within the past 12 months. What makes this machine or game a step forward technologically? BEST TABLE-GAME PRODUCT OR INNOVATION The growth of table games continues to occur around the world and makes it important to recognize innovative developments in this area. In this category, nominations can be made for table games or any product related to table games.

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

To place an online nomination go to

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Global Gaming Business

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$53.7 million. Multimedia Games Holding Company’s revenue was up 24.9 percent compared to the same quarter last year. On average, analysts predict that Multimedia Games Holding Company will post $1.30 earnings per share for the current fiscal year.

GLI LAUNCHES IN CHILE, FINISHES PUERTO RICO WORK gaming testing company Gaming LaboLcomeeading ratories International announced that it has bethe first testing lab to issue certifications under the standards set by Chile’s Superintendence of Casinos, Chile Regulators (SCJ). GLI is the only lab accredited to test in Chile, having been approved in 2010. Since then, GLI has been performing testing and certification for the jurisdiction per the provisional homologation process, up until the SCJ issued its final technical standards in December 2013, when the new homologation process was established. GLI’s Latin America Division has been on the ground in Chile working very closely with the SCJ in the development of its final technical standards as consultants, and more recently concentrated its efforts by performing an onsite workshop with the

Global Gaming Business AUGUST 2014

SCJ. This effort ended in GLI adapting its testing process to the new technical standards and satisfying the specific requirements and needs of the jurisdiction, resulting in the successful launch of the new certification process. Company officials say the Chile certification is the latest evidence of an ongoing commitment to Latin American regulation. For instance, GLI recently completed a jurisdiction-wide inspection of all gaming devices and systems in Puerto Rico. The 12-week inspection covered 23 casinos and 7,690 gaming devices.

ABBIATI TO DISTRIBUTE DEQ anadian table-game supplier DEQ Systems C announced the conclusion of an agreement with Abbiati Casino Equipment to become the primary distributor of its products, namely the G3 System, EZ Baccarat, EZ Trak and Hawk shoe, in the European market. “We are very pleased to announce this distribution agreement, as it is an important step in our growth strategy to expand existing product technology to European markets,” said François Proulx, chief financial officer of DEQ. “We were seeking a distributor who would be reliable for our customers and easy to work with,

and Abbiati was the perfect match to help reach our goal of extending our coverage area throughout Europe.”

UNITED COIN BECOMES CENTURY GAMING nited Coin Machine Company, known for U its signature product, Gamblers Bonus, has changed its name to Century Gaming Technologies. According to Steve Arntzen, president and CEO, the new name better reflects the services and products the company provides in the two states in which it operates, Nevada and Montana. “We have evolved to be a true provider of innovative and leadingedge gaming technology, not just a slot route operator,” said Arntzen. Previously, the company operated as Century Gaming in Montana and United Coin Machine Company in Nevada. Combined, the company employs more than 250 people in two states. The company recently installed Game Tender, which allows for continual monitoring, faster bonus awarding and even more accurate data, up to every 10 seconds, on the company’s gaming machines and systems at 440 locations in Southern Nevada alone, Century announced. Century’s newest product, i3, allows cashfor-play not only at Gamblers Bonus locations, but at any gaming establishment. “Our system provides valuable marketing information to management while delivering strong technology support to convenience store clerks who don’t have the ability to have direct one-on-one contact with key players,” Arntzen said. The new system also has strong applications for smaller bars inside larger casino properties. “This offering is incredibly valuable to our gaming partners and allows us to broaden our stake in Nevada gaming, since customers don’t have to vend with us to take advantage of the many gaming technology advances we offer. This is the case with Rebel and many others with whom we are now working.”

CDfullpg.2014

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Don’t miss the

12th ANNUAL SUPPLEMENT Published December 2014

For Advertising Opportunities Call

DAVID COHEEN, SALES DIRECTOR 702.248.1565 ext. 227 or dcoheen@ggbmagazine.com A PUBLICATION

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PEOPLE WILLIAM HILL NAMES NEW CEO

illiam Hill has looked internally for its new CEO to replace Ralph Topping, who is stepping down after 44 years with the British bookmaker. James Henderson, who is James Henderson currently operations director for William Hill, has been named to succeed Topping as CEO. Henderson has 29 years with William Hill. Topping is scheduled to step down at the end of July. Henderson will be receiving a £550,000 salary before bonuses. William Hill, which turns 80 this year, is the U.K.’s biggest bookmaker with 2,400 betting shops and an industry-leading online operation. Topping spent six years as CEO and oversaw an expansion of the firm, but leaves during a controversy over William Hill’s use of fixed-odds betting terminals. At a recent press conference, Henderson said he will focus on the firm’s plan for future and sustaining growth while looking for new opportunities for the firm.

TAUBE JOINS SENECA GAMING AS SENIOR VP

eneca Gaming Corp. has named Doni Taube as senior vice president of marketing, the company announced. In a statement, Seneca Gaming said Taube will create a strategic marketing Doni Taube vision for the company’s western New York properties—Seneca Niagara Casino & Hotel in Niagara Falls; Seneca Allegany Casino & Hotel in Salamanca; and Seneca Buffalo Creek Casino in Buffalo—as well as the overall Seneca Gaming brand. “Doni brings a renewed strategic perspective to our efforts to build upon the strong name recognition and customer loyalty the Seneca casino properties already enjoy,” said Cathy Walker, the company’s president and CEO. “As the geographic competition in the gaming industry continues to increase, our marketing programs need to be consistently strong and forward-looking. Doni has the demonstrated experience to help us introduce our properties and our entertainment experiences to new audiences.”

Most recently, Taube was senior vice president of casino marketing and strategy at Resorts World Sentosa in Singapore.

CEO, and I am very confident that Joe Bertolone as CEO and Francois Proulx as CFO will make a superb team to build the next phase of growth for DEQ.”

LVCVA OKs ROSSI RAISE

ossi Ralenkotter, president and CEO of the Las Vegas Convention and Visitors Authority, will receive an 8 percent raise and a 50 percent bonus as part of his compensation package, the LVCVA has announced. Last month, members of the board’s compensation committee approved the bump in pay, which will give Ralenkotter a base salary of almost $320,000 a year with a bonus of almost $148,000 for total annual compensation of $467,655. It’s the largest compensation increase the board has ever approved, reported the Las Vegas Sun. Ralenkotter’s salary is now higher than the base salary of Nevada Governor Brian Sandoval, who earns Rossi Ralenkotter $149,152; Clark County School Superintendent Pat Skorkowski, who takes home $216,504; and the top two head coaches at the University of Nevada, according to the Transparent Nevada website that tracks the salaries of public officials, the Sun reported.

DEQ APPOINTS NEW CEO

EQ Systems has named Joseph E. Bertolone as its new president and CEO, effective July 21, subject to regulatory approval. He replaces Francois Proulx, who served as interim CEO since the departure of former CEO Earle G. Hall in July 2013. Proulx now returns to his former position as chief financial officer of DEQ. Bertolone most recently was chief operating officer of Leap Forward Gaming. Prior to that, he was chief of the technology division at the Nevada State Gaming Control Board, overseeing regulated gaming technology. He also was chief of the Nevada board’s administrative division. Bertolone also held executive positions for William Hill U.S. and Walker Digital Gaming. “We are very excited to make this important announcement to our shareholders and clients,” said DEQ Chairman Mike Telesmanic. “Mr. Bertolone is bringing a senior and solid skill set to the team. We are extremely enthusiastic about his leadership capabilities, and diverse background in the gaming and technology industries. Francois Proulx has done a tremendous job as the interim

FOXWOODS NAMES PILLI SENIOR VICE PRESIDENT

oxwoods Resort Casino in Mashantucket, Connecticut, recently named Franco Pilli as senior vice president of player development and casino marketing. A 25-year veteran of casino marketing, Pilli has served in vice president positions at Revel, Atlantis Paradise Island, Trump Taj Mahal and Caesars Palace. Previously in his career, Pilli worked in customer development at Tropicana Hotel & Casino and in marketing at Caesars Atlantic City. In his new position, Pilli will lead the player development team to ensure organizational goals, cultivate the customer base and enhance business relationships to increase awareness and build customer loyalty.

GGB

August 2014

Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 American Gaming Systems . . . . . . . . . . . . . . .33 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Bally Technologies . . . . . . . . . . . . . . . . . . . . . .2 Casino City Press . . . . . . . . . . . . . . . . . . . . . .79 Casino Design magazine . . . . . . . . . . . . . . . . .83 Ditronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . .82 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69, 75 Gasser Chair . . . . . . . . . . . . . . . . . . . . . . . . . .41 Gaming & Technology Awards . . . . . . . . . . . .81 GCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 GGB News . . . . . . . . . . . . . . . . . . . . . . . . . . .84 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 GTECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Incredible Technologies . . . . . . . . . . . . . . . . .67 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Inkel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 JCM Global . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Konami Gaming . . . . . . . . . . . . . .7, Back Cover LT Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 Macquarie . . . . . . . . . . . . . . .Inside Back Cover MGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Multimedia Games . . . . . . . . . . . . . . . . . . . . .13 Ortiz Gaming . . . . . . . . . . . . . . . . . . . . . . . . .19 Red Square Gaming . . . . . . . . . . . . . . . . . . . . .9 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . .57 Rymax Marketing . . . . . . . . . . . . . . . . . . . . . .49 SMP Kaleidoscope . . . . . . . . . . . . . . . . . . . . .66 Spin Games . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Talking Stick Casino . . . . . . . . . . . . . . . . . . . .59 TCS JohnHuxley . . . . . . . . . . . . . . . . . . . . . . .45 Zitro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

AUGUST 2014 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Todd McKeown Vice President of Direct Sale Strategic Markets, Cintas

asinos spend many hundreds of million of dollars on elegant buildings and décor to impress customers. Some of them make the mistake, then, to skimp on the one item that customers see most frequently, the employee uniform. Cintas has a proven track record of producing elegant uniforms that are attractive and compelling to the customer and comfortable to wear for the employee. Todd McKeown explains why Cintas has become more dedicated to the gaming industry as more casinos are built and others are renovated with fresh new looks. He spoke with GGB Publisher Roger Gros from his office in Chicago in June. To hear the full interview, listen to the GGB Podcast at ggbmagazine.com.

GGB: Describe the services and products Cintas provides to the gaming industry. McKeown: We like to think our products and services under three umbrellas—one being image, two being safety for our gaming companies and their employees and guests, and the third pillar under facility services/guest satisfaction and experience. Our image products and services really relate to our uniform programs. We’ve got a pretty comprehensive set of capabilities, all the way from design to production, for uniform programs, as well as rental programs to departments within a casino. It also includes uniform room services. We actually run about a total of 65 uniform rooms within casino resorts, where the customers actually outsource the uniform room to us, and we’re physically managing those assets for our customers. So, that kind of falls under our image pillar. Our second pillar is safety; that is safety for our gaming companies and their employees and guests. That relates to our fire protection services, our first aid programs, and our safe floor solutions. We offer a whole suite of fire protection services, including inspection and repair of light86

Global Gaming Business AUGUST 2014

ing systems, extinguishers, suppression systems, alarms, monitoring, and then of course all the repairs associated with that. We can service multiple properties for our customers across the country. Our first aid and safety products really entail first aid cabinets, the supplies and things in those cabinets, AED, defibrillators, as well as first aid and safety training. The safe floor solutions are matting products that prevent slips, trips, falls and injuries while on the hotel or casino floor. Our third pillar is really that facility cleanliness or guest satisfaction pillar, and that includes all of our cleaning systems from microfiber cleaning systems, restroom systems, deep clean services for tile and carpet, to air conditioning coils, and then chemicals, mops and towels, and a whole suite of facility services. Let’s talk about the glamorous side, with the uniforms and the image products. We offer a full suite of uniform products and services from design to custom uniform solutions, to off-the-shelf modified stock product that we can ship relatively quickly. Our goal with that part of the house is that it is more a distinctive look because the customers certainly do see it. We want uniforms to be an extension of that casino or gaming company brand, and what they’re trying to portray with that image, but it’s all about putting our customers in the right uniform programs. And when you look at the back of the house, it’s all about helping our customers be more operationally efficient. We’ve spent a significant amount of time training our partners on how gaming professionals and gaming executives run their business. We truly want to be an integrated partner. We see outsourcing continuing to be a big trend. Gaming companies want to focus on their core business and outsource those things that aren’t core. We want to be there for our customers to help them drive occupancy, RevPAR, operational efficiencies and profitability, with our service solutions.

You just opened a design studio in Las Vegas. What does that say about your commitment to gaming? Our gaming business was lumped in with our hospitality business, going back to the 2008/2009 time frame, but we really wanted to expand our presence in Las Vegas. So we made a conscious decision to segment that gaming business away from hospitality, because it truly is different and unique, and we wanted to bring those same capabilities that we have at our Chicago headquarters to the Las Vegas market, but with a very gaming-centric flavor. With the Las Vegas design studio, we’ve got image consultants that work directly with our clients to understand the brand. We have project managers dedicated to the right look and service. We’ve got sales operations and customer service in that facility. We’ve got design, we’ve got technical design, and then we’ve got production, in terms of sample-making and small production, and then we have a production staff there that outsources larger production needs. But really, it was all about just having a turnkey solution in that Vegas market, to really help get us more woven into the fabric of the gaming community in Vegas. Let’s talk about what the process is, when a casino is either opening or decides to reinvest in uniforms for an existing employee base. It starts with a meeting with the different folks at the gaming company, casino, and really understanding—a deep understanding—of what their needs are, and what their direction is. We have image consultants who work in the field, who work hand-inhand with those properties, and then designers who also get involved to put together designs that reflect the brand and the property. And once we fully understand, our designs really try and capture the latest trends, colors, styles, silhouettes that you see on the runway, and then design the merchandise program that meets that customer’s needs. What we excel in is that end-to-end solution when either a customer is considering a new uniform program, or it’s a brand new opening.

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