Global Gaming Business, August 2015 by Global Gaming Business

ggB Global Gaming Business Magazine

KOREAN CASINOS AFFILIATE MARKETING PAYMENT PROCESSING GCA’S RAM CHARY

LegALeAgLe August 2015 • Vol. 14 • No. 8 • $10

Greenberg Traurig becomes gaming’s go-to law firm

Cleaning Up the Card Rooms

Lessons from

Why California’s regulatory structure needs to improve

Atlantic City

How to respond to increased competition, government bungling

Official Publication of the American Gaming Association

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CONTENTS

Vol. 14 • No. 8

august

Global Gaming Business Magazine

COLUMNS

24 COVER STORY Gaming Law Masters

14 AGA

The Global Gaming Practice of Greenberg Traurig grew from the gaming industry’s need for attorneys who knew the casino business. Today, the firm is unrivaled in its gaming business, and provides a model in gaming law that has been copied but not duplicated.

Telling Our Story Geoff Freeman

16 Fantini’s Finance Dissecting the M&Ms Frank Fantini

48 Table Games

By Marjorie Preston

Table Turnaround

On the cover: Lorne S. Cantor, Martha Sobol and Mark Clayton, co-chairs of the GT gaming practice

Roger Snow

FEATURES

DEPARTMENTS

18 Boardwalk Lessons The perfect storm that caused Atlantic City’s unprecedented funk is capable of repeating itself in any number of casino jurisdictions, if its lessons are ignored. By Roger Gros

32 Korean Wave As Korea’s tourism ministry prepares to license at least two more billion-dollar casino megaresorts, proposals from operators stream in. By James Rutherford

4 The Agenda

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

Features The Affiliate Question The status of the use of marketing affiliates in the growing U.S. internet gaming market is still unclear.

By Steve Ruddock

6 Dateline 12 Nutshell 54 New Game Review 56 Cutting Edge 58 Frankly Speaking 60 Emerging Leaders With SJM Macau’s Benson Fok lo Teng and L’Auberge Casino Resort’s Honoria Hebert

62 Goods & Services 65 People

36 California Collision As card rooms and gaming tribes lock horns over the card rooms’ use of outside financiers to offer banked table games, state officials review California’s regulatory structure. By Dave Palermo

iGaming Tech How quickly the internet gaming market develops in the U.S. depends on the advancement of online payment and transaction technology.

66 Casino Communications With Ram Chary, President & CEO, Global Cash Access

By Dave Bontempo

iGNA Outlook 46 The Internet of Things Paul Girvan

52 iGames News Roundup

AUGUST 2015 www.ggbmagazine.com

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THE AGENDA

Picture Perfect

Vol. 14 • No. 8 • August 2015 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com

Roger Gros, Publisher

hen I was working at my previous gaming magazine, I worked with my then-wife Barbara Errickson. She was a photographer, and did an exemplary job documenting the early days of the Atlantic City casino industry. But because we had two sons and scarce revenue, I was still working as a dealer, while I was writing for the magazine in my spare time. My last stop in the casino industry was as a dealer at Showboat. I had quit the Golden Nugget after it was sold by Steve Wynn, and followed one of my pit bosses who had been named a shift boss. He promised me that after a month or so, I’d be elevated to the lofty position of a supervisor. But after three months with no promotion and a very dysfunctional management, I had had enough. I quit and threw my fate to the wind, and to my ability to write. It worked out OK for me, but when Barbara passed away in March, she left me a box with some pictures she had taken that related to my career. One box included a set of photos from the opening of Showboat (entertainer Bob Hope was the special guest at the ribbon cutting). While there was a great picture of me sitting with two other colleagues at a dead baccarat game, it was pictures of the casino floor that captured my imagination. The table games and slot aisles were jammed with people, three deep in some instances. It made me remember the excitement of a new Atlantic City casino and the enthusiasm of players for a new joint. Now, let’s not forget that the Showboat opened in 1984, a full six years after the first casino debuted in Atlantic City. The mystique of casino gaming was long gone, but there was still so much demand that the Showboat thrived for the first few years, like every other casino in Atlantic City. Last month, the first casino opened in Massachusetts—Plainridge Park Casino, owned by Penn National (football player Doug Flutie was the special guest and restaurant owner). While I didn’t attend the grand opening, the company provided pictures that included some that were eerily reminiscent of the Showboat photos. The slot aisles (there are no tables at Plainridge) were jammed, and according to all reports, the excitement level was equal to that day back in 1984. So, when you consider that the Showboat lasted 30 years until it closed last year during the worst

Global Gaming Business AUGUST 2015

summer Atlantic City has experienced since the 1930s, I got to wonder how long Plainridge Park would hang around. Yes, the casino is the first in Massachusetts, and while we know the first casino in any jurisdiction has an edge, it’s a different gaming world in 2015. Plainridge is just the latest entry into an already crowded New England market. What will happen when MGM Springfield opens in two or three years, possible Wynn Boston in three or four years, or a commercial/tribal casino in the southeastern region of the state? And if New Hampshire OKs a casino? If Connecticut opens yet another tribal casino? Yes, there is no guarantee these days. Plainridge is gaming plain and simple—horse racing and slots. It’s not a very innovative model, and when full integrated resorts open in Massachusetts—not to mention the behemoths of Connecticut, Foxwoods and Mohegan Sun—what market share is left? I look at the faces of the photos from Showboat and Plainridge. They’re smiling, full of hope, full of anticipation. But that hope and anticipation moves on to the next new property or the next new jurisdiction unless you’re willing to make the investment that will create brand loyalty and reasons to return. But you can’t blame Penn National for limiting its investment. All the things I mentioned previously have convinced the company that it’s more than risky to overbuild. So what’s the answer to longevity and stability? Unfortunately, it doesn’t rest with the gaming industry. It depends upon the sagacity of politicians in a certain jurisdiction. And I would never build a business that depended upon politicians because (a) politicians don’t really care about anything but their own careers, and, (b) politicians change and political realities change all the time. So while the “picture” of the future for Plainridge Park isn’t pretty, it could be successful with some intelligent strategy by politicians in Massachusetts. (But did I just use “intelligent” in the same sentence as “politicians?” Sorry for the non-sequitur.) To see the pictures I reference in this article, visit our website ggbmagazine.com and click on the link for the Agenda.

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 | Roger Snow Contributing Editors Dave Bontempo | Joe Dimino | Dave Palermo Marjorie Preston | Robert Rossiello Steve Ruddock | James Rutherford | Michael Vanaskie

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

• Mark A. Birtha, Senior Vice President & General Manager, Hard Rock International

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

• Geoff Freeman, President & CEO, American Gaming Association

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Partner, Duane Morris, Baltimore

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 901 American Pacific Drive, Suite 180 • Henderson, Nevada 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2015 Global Gaming Business LLC. Henderson, Nevada 89014 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 901 American Pacific Dr, Suite 180, Henderson, NV 89014

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DATELINE TRIBAL august2015

Uneven ImpacT New federal rules streamline tribal recognition process T

he Department of the Interior has released the final form of new rules that streamline the process for recognizing Indian tribes. This is the first time the rules have been revised in the 40 years they have existed. Interior Secretary The department has been Sally Jewell working on the rules since President Barack Obama first took office. They make it likely that more tribes, perhaps as

many as 100, will be recognized, although in Connecticut, officials are sighing with relief because tribes that have been denied recognition previously won’t be able to petition again. However, some members of Congress want to inject the legislative branch into the process. A proviso preventing the rules from going into effect has been attached to a bill funding the Interior Department. According to Interior Secretary Sally Jewell and Assistant Secretary-Indian Affairs Kevin K. Washburn, head of the Bureau of Indian Affairs, the rules are more transparent, timely and

consistent than the old rules. In a statement, Jewell said, “Since the beginning of President Obama’s administration, the department has worked with tribal and government leaders on improving the federal acknowledgment process, which has been criticized as inconsistent, slow and expensive. This administration takes very seriously its important trust and treaty responsibilities to Native Americans and Alaska natives.” The old rules had been criticized as being “broken” by many tribal critics, and tribes were consulted extensively in the rewriting process, as were state officials.

No Go for TohoNo o’odhams Arizona won’t certify tribal casino

T Breaching the Compact Seminoles will keep blackjack open he Seminole Tribe of Florida has informed Governor Rick Scott and other state officials that it will continue to offer blackjack and other card games at its casinos, although that provision of the gaming compact, agreed to five years ago, will expire July 31. Tribal leaders claim they can keep the card games because Florida regulators allowed South Florida racetracks to offer electronic gaming machines, in violation of the compact. In his letter to Scott, Tribal Council Chairman James Billie called for state and Seminole officials to meet within 30 days to try to resolve the disagreement. If that doesn’t work out, the two parties will go into mediation and eventually federal court. There was no immediate reaction from Scott to Billie’s letter. Billie said the Seminoles will continue to make payments to the state for the card games as “a gesture of good faith.” Under the compact, the tribe agreed to pay the state more than $1 billion over five years for exclusive rights to blackjack and other card games at five of its seven casinos. State Senator Rob Bradley, who oversees the committee responsible for regulating the gambling industry, said he does not agree that state regulators violated the compact, but said Billie’s letter was a “fairly predictable move” intended to jump-start stalled negotiations.

Global Gaming Business AUGUST 2015

he Arizona Department of Gaming has refused to certify the Tohono O’odham Nation’s $400 million Glendale casino, which is due to open later this year. This caused the tribe to file suit against the state on June 22. Arizona claims that the tribe committed fraud when it negotiated its tribal state gaming compact in 2002, because it did not disclose that it had purchased land next to Glendale, and that it intended to open a casino there. The tribe has so far taken on and bested all comers in the court arena, and courts have ruled that there is no evidence that it agreed not to build a casino in the West Valley when it negotiated its compact. The controversy can be traced back to 1960, when the U.S. Army Corps of Engineers built the Painted Rock Dam on the Gila River, eventually inundating the Tohonos’ reservation, about 10,000 acres. In 1986, Congress authorized buying the inundated land for $30 million, which it was authorized to spend on an alternative reservation. Two years later, Congress adopted the Indian Gaming Regulatory Act. In 2002, Arizona voters approved the tribal gaming compact between the state and all of its gaming tribes. A year later, an

The casino being built by the Tohono O’odham Nation near Glendale

LLC created by the tribe began buying land next to Glendale for the tribe. In 2009, the tribe announced its intention to build a casino resort on the land. In 2010, the Bureau of Indian Affairs put the land into trust. That same year, the Gila River Indian Community and the city of Glendale sued the Department of the Interior, claiming that it didn’t taken into account whether the land, surrounded by a city, was suitable for a casino. The tribe won a series of court challenges against its right to build. In 2012, the first attempt at a congressional solution occurred with the passage of a bill sponsored by Rep. Trent Franks that would prevent the casino from operating. This same bill is now very much alive in the House, and is being pushed in the Senate by Senator John McCain. In July 2014, the Bureau of Indian Affairs reaffirmed its earlier decision that putting the 54 acres into trust was proper.

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DATELINE ASIA august2015 Thailand Finance Minister Sommai Phasee

Japan IR BIll advances Legislation may be pushed to next session a

member of the House of Representatives of the Japanese National Diet reportedly told analysts at CIMB Securities Ltd. that the country’s integrated resort bill is likely to pass in the current parliamentary session, legalizing casino resorts in the country, said analysts Michael Ting and Jensen Poon in a note late last month. “We were told that the Promotional IR bill has a 70 percent chance of passing by the end of the current Diet session on September 27,” wrote analysts for the firm. They then cautioned, “Given the delays in the past, we will not be surprised if the

Down with Macau 13th month unlucky for territory

Thai One On

passing of the Promotional IR bill gets further delayed until next year’s Diet session. Given the expected lengthy discussion period for the follow-on Implementation IR bill, tender and construction processes, our early best-case scenario is for the Japanese casinos to begin operations well after the 2020 Japan Olympics, possibly 2022.” The main Diet session of the year ended in May, but the parliament will continue to meet until September 27 in a so-called “extraordinary session” to pass legislation considered urgent by the government of Prime Minister Shinzo Abe.

Official support grows for casinos

hailand’s Finance Minister Sommai Phasee has offered his qualified support for casino resorts in the country, as long as they are strictly regulated, according to the Bangkok Post. He joins 12 National Reform Committee members who support the idea, which has also been backed by the national police chief. In a recent radio interview, Sommai said casinos might help Thailand generate more convention and meeting business and boost other tourism. “We lose more than we gain letting people spend their money somewhere else. Other countries have taken our people’s money,” he said. The plan may not have broad popular support, however. A recent survey conducted by Bangkok University showed that a majority of people polled do not want legal casinos in Thailand. More than 1,000 adults participated in the poll, which showed that 58.5 percent of respondents oppose legal casinos, 35.1 percent approve and 6.4 percent have no opinion.

aming revenue in Macau dipped to a near five-year low in June, the 13th consecutive month of decline in the world’s No. 1 gaming destination. The ongoing slump may cause the government to institute austerity measures. Lionel Leong, secretary for economy and finance, relax transit visa rules that were tightened last year, has said the belt-tightening would begin if gaming revenue dropped reported Bloomberg. Starting this month, mainland below 20 billion patacas ($2.5 billion). In June, it reached that Macau smoking lounge China passport-holders traveling to Macau can stay benchmark, falling 36.2 percent to 17.4 billion patacas, the lowest seven days instead of five, and return within 30 days level since November 2010. rather than 60 days. The government action could Macau historically has derived up to 80 percent of its revenue from gaming be seen as a sign that officials are also growing concerned about cascading alone. The market started to unravel last year, when Chinese President Xi Jinping revenues, and are acting to stem the decline. initiated a crackdown on corruption and money laundering. Meanwhile, a report in Forbes magazine contends that Macau’s conJune revenues are traditionally lower as the summer kicks off, but the news is estroversial 3 percent cap on table game growth could be “a blessing in dispecially discouraging this year, as it marked the first full month since the opening of guise.” Union Gaming Research Macau says electronic table games deliver Galaxy Entertainment Group’s two new resort projects on the Cotai Strip. more revenue and profits than traditional live tables. According to the Making matters worse is the threat of a full smoking ban that could extend to Macau rules, 55 EGT seats count as one live table against the cap. Union the city’s casinos, including the VIP rooms. Deutsche Bank analyst Karen Tang estimates that Macau’s mass-market table revenue in the first quarter was wrote, “Consensus expectation of a 2016 recovery is too optimistic as a full smoking 23.7 billion Macau patacas ($2.96 billion), with a daily win-per-table of ban should hurt VIP revenue by 10 percent to 25 percent.” roughly MOP70,000. EGT revenue was MOP537 million, with a winCasino operators conducted a survey that concluded 66 percent of Macau per-table equivalent per day of about MOP90,400, or 29 percent higher. casino workers support the retention of smoking lounges. But another poll by the Bloomberg Intelligence analyst Tim Craighead expressed hopes that University of Macau and commissioned by the Health Bureau said 58 percent of the pending opening of additional resorts on the Cotai Strip, including workers are against smoking in casinos and want the lounges closed. Investment anGalaxy’s Phase II and Melco Crown’s Hollywood-themed Studio City, alysts say banning mass-floor smoking lounges could cut 10 percent of mass-market “can be enough of a draw to catalyze a turn, along with other factors, later gaming revenue and up to 15 percent of VIP revenue. this year and into next.” All this bad news could be balanced somewhat by a government decision to

AUGUST 2015 www.ggbmagazine.com

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DATELINE USA august2015

Bay State Betting BeginS Penn National racino opens M

assachusetts opened its first casino, the Plainridge Park Casino, last month. The opening was greeted by a large and enthusiastic crowd, including hundreds of VIPs who cheered as the ribbon was cut by casino officials, Gaming Commission Chairman Stephen Crosby and a couple of Las Vegas-style showgirls. Doug Flutie, a former New England Patriots quarterback, made an appearance for the opening of his restaurant and sports bar, named after him. “Look at this place—it sparkles,” he said. “It’s showtime!” declared Crosby, who has overseen the casino approval process from its inception four years ago. He added, “Take a look at

this facility. Take a look at 500 quality, high-paying jobs.” The Bay State becomes the 40th state to add casino gaming. “This is as big a change in the cultural, social and economic face of Massachusetts as I have seen in almost 50 years,” said Crosby. “It’s creating new jobs, state revenue and economic development.” The $250 million slots-only parlor has 1,250 slot machines in a facility adjacent to the existing harness racing track, Plainridge Racecourse. The 90-acre property is 35 miles south of Boston and 18 miles north of Providence.

Upping the Ante

Pinnacle’s M Resort in Las Vegas

Gaming & Leisure raises bid for Pinnacle

Reno Removal

MGM sells properties in Northern Nevada city

ust a few months after Gaming & Leisure Properties Inc. had an offer to purchase Pinnacle Entertainment Inc.’s (PNK) casinos for $36 a share rejected, they have upped the ante by 32 percent to $47.50 a share. Gaming & Leisure’s proposal would leave Pinnacle Management to run its 15 casinos and racetracks. PNK is valued at $2.3 billion and trades more than half a million shares each day. There is no denying that REITs have been the hot ticket in the casino industry ever since Penn National Gaming Inc. split off with its newly formed real estate venture Gaming & Leisure in November 2013. The real estate spinoffs do not pay federal income tax, which passes earnings off directly to shareholders. The offer from Gaming & Leisure would also give Pinnacle shareholders a 28 percent stake in the REIT. In the letter, Gaming & Leisure wrote, “GLPI has committed financing in place and is ready to finalize this transaction immediately, and we would expect to close our transaction within approximately six months of signing.” The letter continued, “Nevertheless, Pinnacle continues to make new demands, delaying the signing of a definitive agreement and denying its shareholders a

value-creating transaction that is clearly superior to Pinnacle’s previously announced stand-alone separation plan.” The letter stated Pinnacle would make annual lease payments of $377 million for all the casinos. Gaming & Leisure’s plan would save Pinnacle several steps, in addition to $700 million in REIT development. Analysts believe the merger is a foregone conclusion, and don’t think an offer for Pinnacle could get any sweeter. “We have a tough time envisioning a scenario where Pinnacle’s board and management could create the same value in the same time frame that GLPI’s deal would, and we don’t see the likelihood of a superior bid from another entity,” J.P. Morgan gaming analyst Joe Greff said. In Las Vegas, GLPI owns M Resort at the far south end of Las Vegas Boulevard, and recently purchased the Tropicana.

Global Gaming Business AUGUST 2015

Situated near the border with Rhode Island, one of the hopes is that it will prevent Bay State residents from crossing into that state to play at Twin River Casino in Lincoln, or to go further to Connecticut to play at the two tribal casinos there, Mohegan Sun and Foxwoods. Plainridge, which is owned by Penn National Gaming, will operate 24-7, although no alcohol is served after 1 a.m. and no smoking is allowed anywhere in the casino. It is the smallest of the four casinos planned, and the only one that will not have gaming tables.

GM Resorts International will sell two of its Reno properties to Eldorado Resorts for a total of $72.5 million in cash. Eldorado will assume the 50 percent interest in the Silver Legacy Resort (above) owned by MGM, in addition to the entire Circus Circus Reno. Eldorado owns the other 50 percent of the Silver Legacy. “The acquisition of these well-established properties represents a significant growth and expansion opportunity for Eldorado, and is consistent with our strategy to enhance shareholder value by structuring transactions that are strategically and economically attractive,” Eldorado CEO Gary Carano said in a statement. “The acquisition is expected to be accretive to our operating results upon closing, builds the critical mass of our gaming operations and fortifies our position in the increasingly attractive Reno gaming market,” the statement continued. The acquisition gives Eldorado control of the three largest casino-hotels in downtown Reno, in addition to the Eldorado Resort Casino, opened in 1973. The Silver Legacy opened in 1995 to the tune of $350 million, just a block from Circus Circus Reno, which opened in 1978. Regulatory approval is still needed to finalize the sale. The transaction is expected to be complete by the end of the year.

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DATELINE GLOBAL august2015

Baha Mar Files For BankrupTcy Owner blames construction contractor for delays T

he Baha Mar Resort, the $3.5 billion, six-hotel casino megaresort project in Nassau, the Bahamas, that is hoped will revive the Caribbean nation’s tourism industry, has filed for U.S. Bankruptcy Court proBaha Mar CEO tection in Delaware. As Sarkis Izmirlian a result, Baha Mar has filed suit against its contractor, China State Construction Engineering Corp. Ltd., seeking more than $192 million in damages. The project, which will add four new hotels to two existing hotels along with the largest casino in the Caribbean, 40 restaurants and bars, a golf complex, retail and residential elements and other amenities, has seen its grand opening delayed

twice. It was originally slated to open last December, to take advantage of the 2014-15 high season. The owner delayed that to March 27, saying its contractor had not achieved the quality desired. This spring, the grand opening was delayed indefinitely, as Baha Mar CEO Sarkis Izmirlian publicly blamed the project’s construction contractor—the China-owned company’s subsidiary is called China Construction America—for delays, and blamed the Bahamian government for lagging behind in providing training for Bahamian workers. Construction subsequently halted as Izmirlian refused to pay the contractor the rate demanded, which was four times what the operator claims was due. The use of China Construction America as lead contractor was a prerequisite for obtaining the main loan financing for the project, from the state-owned China Export-Import Bank. At the

time the agreement was forged in 2010, financing for a project this size was extremely hard to come by, thanks to the worldwide recession. According to court papers, the Baha Mar project is 97 percent complete. Izmirlian, after the bankruptcy petition was filed, took new aim at his contractor. “The general contractor repeatedly has missed construction deadlines,” he said in a statement. “Unable to open, the resort has been left without a sufficient source of revenue to continue our existing business.” Court papers included with the bankruptcy petition state that when the March opening date became untenable, the operator was “forced to cancel months’ worth of room reservations and group meeting events, and provide numerous customers with vouchers, refunds, and in certain cases were required to find customers suitable accommodations elsewhere, all at a cost in excess of $6 million.” Izmirlian said the bankruptcy protection will provide the time needed to complete the project.

Gaming in Paradise

Crown Casino a Go in NSW

Jamaica approves two casino projects

Rival Echo will hold gaming monopoly until 2019

ustralian casino magnate James Packer has finally won approval from the New South Wales government to build a luxury casino near Sydney Harbor. It will be designed to appeal to high rollers, particularly gamblers from Asia, who have not yet patronized the Australian market. Packer’s rival for the casino license was Echo Entertainment, which owns Sydney’s only existing casino, the Star. Echo, which had proposed a $1 billion expansion of its own property, will retain exclusive rights to casino gaming in the state until 2019. “We are disappointed that the New South Wales government does not share our vision,” said Echo Chairman John O’Neill in a statement. He added that the company will explore “other initiatives” to expand or upgrade its existing Star property. The rival companies have also locked horns over a license in Brisbane, which Crown’s Barangaroo should be awarded after the state budget is fiproject in Sydney nalized in July. According to the Australia Financial Review, Echo Entertainment is the favorite to win that battle. Its partner in the venture is the Hong Kong-based Far East Consortium and Chinese conglomerate Chow Tai Fook. The team will work together to develop a casino, hotel and residential project at Brisbane’s Queen’s Wharf. Back in Sydney, Packer plans a “six-star,” $1.4 billion property at the Barangaroo development across the harbor from the Star. The resort will feature 350 rooms and suites and 80 luxury apartments.

amaica Finance Minister Dr. Peter Phillips recently announced the government has provisionally approved two applications from casino developers. Five applications had been received for the maximum of three casinos allowed under the Casino Gaming Act of 2012. Together, the Harmony Cove in Trelawny two casinos represent an investment of about $1.3 billion. The larger of the two projects will be developed by Harmony Cove Limited in Trelawny, featuring casinos, five hotels with up to 5,000 rooms, 450 residential units, two PGA golf courses, a 350-boat marina and a private airport. The cost of the first phase will be $970 million. Harmony Cove is a partnership between investment firm Tavistock Group and the state-owned Harmonization Limited, which will hold a 49 percent stake. The partnership structure could change, however, under financing deals with Chinese backers. The other development, Robert Trotta’s Celebration Jamaica Development Ltd. on Montego Bay, would offer a 75,000-square-foot casino and sports book space, restaurants and bars, retail outlets and a Caribbean World music entertainment complex. Phase one would cost about $500 million. Each project must start construction by mid-2016. Eventually, each must offer more than 2,000 hotel rooms, with 1,000 minimum required to be developed before the Casino Gaming Commission would grant a gaming license.

Global Gaming Business AUGUST 2015

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DATELINE EUROPE august2015

Better together Ladbrokes, Gala Coral mull merger

xecutives of Ladbrokes, Plc. And Gala Coral, two of Britain’s largest bookmakers, are contemplating a merger that would create the U.K.’s largest bookmaking operation. Ladbrokes executives, headed by new CEO Jim Mullen, have been making management moves and testing the regulatory waters for a possible £3.5 billion merger that would create a single company controlling nearly 4,000 high-street betting shops across the U.K. The operator that would be the merged company’s closest competitor, William Hill, has 2,400 outlets. “A merger has the potential to generate substantial cost synergies, creating value for both companies’ shareholders,” Mullen said in a press release. “The board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms. “A merger with Gala Coral could create a com-

bined business with significant scale, and has the potential to generate substantial cost synergies, creating value for both companies’ shareholders.” Those synergies would likely involve closing as many as 1,000 of Ladbrokes’ betting shops. Regulators are expected to require the company to downsize for competitive reasons, since the combined company would control nearly half of the industry in the U.K. Speaking to London’s Telegraph newspaper, analyst Richard Stuber of Nomura said Britain’s Competition and Markets Authority (CMA) could require the merged company to reduce its share of the retail betting market to 30 percent. Mullen told the Telegraph the merged company would retain both brands of the individual companies. “It’s about growing scale,” he said. “You’d have two branded companies, where we could pool all of our channel strategies and grow our digital business.” The deal would be structured as a reverse

Gambling on a Rebound Ukraine PM comes out for casinos krainian Prime Minister Arseniy Yatsenyuk says casinos should be legal again in the Eastern European country. Casinos were outlawed in the Ukraine in 2009 after a fire in a gaming hall killed nine people. The loss of the industry put an estimated 200,000 people out of work. Ukrainian Prime Minister “This morning I met with MPs, including those with the opposite Arseniy Yatsenyuk view towards the government, in order to adopt a law in the Parliament on bringing the gambling business out of the shadows and legalizing it,” said Yatsenyuk at the meeting. “I do not promise that everything will be spent on culture,” he said, “but a significant part will go to finance cultural projects, including the Ukrainian cinema.” It’s unclear what the industry would do for the country, since it remains mired in a long war with Russia.

Ups and Downs in U.K. One casino closes while a ‘super casino’ is contemplated he Grosvenor Casino in Southsea, Portsmouth, T U.K., will reportedly close August 9, taking with it about 50 jobs. According to the Portsmouth News, workers will be encouraged to apply for jobs elsewhere in the company; owner Rank Group also owns a casino in Gunwharf Quays, also in Portsmouth. “I feel let down,” one employee told the News. “This casino still makes a profit but because they have another casino in town they will cut overheads and still not lose any business. We will get a week’s pay for every full year we have been with the company up to 10 years.”

Grosvenor Casino in Southsea

Meanwhile, London-based Global Gaming Ventures Ltd. is planning to build a “super-casino” resort in the town of West Yorkshire, England, near Manchester and Leeds. According to the Yorkshire Evening Post, the company is in the process of obtaining a gaming license for the premises at the new £150 million Victoria Gate development in Leeds, which is expected to open next year. The 50,000-square-foot gaming

Ladbrokes CEO Jim Mullen

takeover, in which privately owned Coral’s betting shops in the U.K. and Italy and its online business would go under Ladbrokes’ stock market listing. Mullen would likely be CEO of the merged company. The company, which is owned by a group of private equity houses including Anchorage Capital Partners, Apollo Global Management and Cerberus Capital Management, indicated that it would press ahead with a stock market float if merger talks collapse.

On Second Thought… High roller self-excludes after big loss

he Ritz Club, a casino run by London Clubs International, is party to a £2 million High Court lawsuit against billionaire Safa Abdulla Al-Geabury, who played and lost the money, and then added himself to the casino’s self- Safa Abdulla Al-Geabury exclusion list. According to ABC News, Al-Geabury wrote a check to the casino for £2 million in roulette chips; he lost the £2 million in less than two hours, and then demanded more credit. When he was denied, he asked for a self-exclusion form and signed it. The check later bounced. Psychiatrists will evaluate Al-Geabury for a gambling disorder and assess whether the casino staff should have noticed the disorder. The gambler has countersued the casino asking for £3.4 million or £5.4 million in damages in the event the court rules for the Ritz.

hall will be located above a shopping center, and will employ about 200 people, the Post reported. Global Gaming Ventures made an up-front payment of £1 million (US$1.5 million) to West Yorkshire council and will pay £450,000 a year to the council, with money potentially going to “antipoverty projects and support networks for gambling addicts.”

AUGUST 2015 www.ggbmagazine.com

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NUTSHELL Following an 11-hour meeting that attracted hundreds of people, the seven-member Kansas Lottery Gaming Facility Review Board voted 5-2 to allow Kansas Crossing to develop a state-owned casino in Crawford County in the state’s southeast gaming zone. The other two votes went to the largest proposal, the $145 million Castle Rock in Cherokee County. The $70 million Kansas Crossing project, the least expensive of three proposed plans, could open by next summer. It would be built south of Pittsburg at the junction of U.S. 400 and U.S. 69 south, and include 625 slot machines and 16 tables games plus a 120-room hotel. Analysts projected the property would attract about 500,000 visitors a year, and generate $36.6 million-$39 million in gross gaming revenue in 2019, resulting in $9.4 million in state taxes and $1.2 million in local taxes. Alabama Circuit Judge William Shashy recently ruled the state violated the principle of equal protection under the law by shutting VictoryLand Casino in Macon County while allowing two bingo operations to remain open in Greene County and a third in Houston County. State Attorney General Luther Strange attempted to seize more than 1,600 electronic bingo gaming machines and $260,000 in a raid two years ago at VictoryLand, once Alabama’s largest casino. The ruling did not address the legality of the machines. The Maryland Gaming Control Board recently approved the proposed merger of Las Vegas-based Golden Gaming and Minnesota-based Lakes Entertainment. The deal will result in a publicly traded company called Golden Entertainment that will take over control of Rocky Gap Casino Resort in Cumberland, Maryland. Golden Gaming will pay $9.57 per share of Lakes, which is a premium of about 37 percent. Also, Golden Gaming will receive about 7.8 million shares of Lakes stock, or about 35.7 percent of the post-merger shares. Current Lakes shareholders will keep the remaining stock. MGM Resorts International has proposed a $1 billion gambling complex in downtown Atlanta. MGM spokesman Clark Dumont said the company’s research regarding the proposal, which would include a luxury hotel, entertainment venue, gaming floor and other amenities, is in “the very preliminary stages. We have no active discussions on any sites. The legislative and voter deliberation and voting process, for which we have deep respect, need to occur first.” He noted the project would

create 3,500 new jobs. Tsogo Sun Holdings, a leading South African hotel and casino operator, has withdrawn from a deal it made last year to acquire a minority stake in two casinos operated by its rival, Sun International. The R2.1 million (US$167,000) acquisition deal was first announced in May 2014, reported the South Africa Independent Online. At that time, Tsogo Sun said it would buy 40 percent of Sun International’s SunWest subsidiary, which runs the GrandWest Casino, and its Worcester Casino unit, which runs the Golden Valley Casino. Both properties are in the Western Cape Province. The Canadian Senate has shelved the private-member bill C-290, which sought to allow individuals to wager on individual sporting events, as opposed to only 3-plus team parlays, which is the current law. The bill passed the House of Commons unanimously in 2012. The Senate has adjourned for the summer. Twin Rivers Casino in Lincoln, Rhode Island, will open the first live poker room in the state in August. According to John Taylor, chairman of Twin River Casino, they will add 28 new table games, including 16 poker tables in the non-smoking section of the casino, which has 4,500 slot machines. The voters approved table games at the casino in 2012. Ever since that time, there has been support for adding a poker room. According to Taylor, “An important part of our business philosophy has been to listen to what our customers want, and the addition of a poker room is one of most often heard requests. We’re thrilled to increase the number of table games we currently offer, which also means we will expand our workforce once again.” Boyd Gaming Corporation recently announced a $45 million expansion at Delta Downs Racetrack Casino Hotel in Vinton, Louisiana. The project will feature a new 167-room hotel tower, redesign of the 200 existing rooms, updated food and beverage facilities and an expanded special events center. Construction will begin in September. Melco Crown’s US$3.2 billion Studio City resort on Macau’s Cotai Strip will feature a Golden Reel Ferris Wheel as its “iconic centerpiece attraction,” the company has announced. The 130-meter-high wheel will be located between the resort’s twin hotel towers, which have a theme of “Art Deco meets Gotham City.” Studio City is scheduled to open later this year.

CALENDAR August 11-13: Australasian Gaming Expo, Sydney Convention and Exhibition Centre. Produced by the Gaming Technologies Association. For more information, visit austgamingexpo.com. September 29-October 1: Global Gaming Expo (G2E), Sands Expo Center, Las Vegas. Produced by the American Gaming Association and Reed Exhibitions. For more information, visit GlobalGamingExpo.com. October 5-8: North American Association of State & Provincial Lotteries (NASPL) 2015 Annual Conference, Hilton Anatole, Dallas, Texas. Produced by NASPL. For more information, visit NASPL.org.

Global Gaming Business AUGUST 2015

October 12-14: African Gaming Summit & Exhibition, the Emperors Palace, Johannesburg, South Africa. Produced by Eventus International. For more information, visit bigafricasummit.com. October 14-16: IMGL 2015 Autumn Conference, Lima, Peru. Organized by the International Masters of Gaming Law. For more information, visit gaminglawmasters.com. October 20-22: EiG Expo 2015, Arena Berlin, Berlin, Germany. Organized by Clarion Events. For more information, visit eigexpo.com. November 17-18: Malta iGaming Seminar (MiGS) 2015, Corinthian Hotel, St. Julian’s, Malta. Produced by MiGS Ltd. and sponsored by the Malta Gaming Authority. For more information, visit maltaigamingseminar.com.

“They

Said It”

“We are already heavy gamblers in Massachusetts. Opening casinos in Massachusetts will not be a change in order of magnitude in gambling.” —Stephen Crosby, chairman of the Massachusetts Gaming Commission, commenting on the opening of the state’s first casino

“It’s devastating. Our tribe was the one that welcomed everyone.” —Cecile Hansen, chairman of the Duwamish Tribe of Seattle, Washington, reacting to the Bureau of Indian Affairs’ denial of federal recognition to the tribe

“Right now, horse racing has exclusivity in internet wagering. If you’re going to expand internet wagering, you got to include horse racing.” —Josh Robinstein, chief operating officer of Del Mar Thoroughbred Club, commenting on the question of whether California’s racetracks should be included in any legalization of iPoker by the legislature

“The fundamental health of the company is perfect and without question, and my intention is to keep it that way—without any qualification to that statement.” —Wynn Resorts Chairman Steve Wynn, on an investor conference call after the company reported a $44.6 million first-quarter loss

“The core issues have to be addressed in order to move forward and diversify the economy. We are currently very fragmented. We can’t simply say we are a world-class destination. We need to build a brand that is believable.” —Glenn McCartney, assistant professor of hospitality and gaming management at the University of Macau, on the jurisdiction’s ongoing woes

“We are building a team of seasoned industry operators, entrepreneurs and global designers who bring a fresh, new approach to what we think the future of Las Vegas should be.” —Andrew Pascal, partner with James Packer in the 34.6-acre Alon Las Vegas megaresort project on the north Las Vegas Strip

“You should have seen the cars: Porsches, brand new Mercedes, even a McLaren F1. Now all you get are bored grandmothers.” —Valet parking attendant, Club Casino Loutraki, Greece, on austerity measures that limit cash withdrawals in the country to €60 a day

AN ICON IS BORN

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AMERICAN GAMING ASSOCIATION

Telling Our Story The good news about gaming is being spread in key presidential campaign states By Geoff Freeman, President & CEO, American Gaming Association

ven as casino gaming has evolved into a mainstream form of entertainment that drives economic growth and supports nearly 2 million jobs across 40 states, misperceptions about our industry persist. However, with scores of 2016 presidential candidates crisscrossing the country and visiting voters in swing states, the American Gaming Association’s first-ever Gaming Votes initiative is capitalizing on the campaign season to tell the story of today’s gaming industry. After all, gaming supports more than half a million jobs and generates $75 billion in economic activity in the key presidential states of Iowa, Nevada, Florida, Michigan, Colorado, Ohio and Pennsylvania, among others. We have an opportunity to not only inform the hundreds of thousands of gaming employees about where candidates stand on their industry, but to educate candidates about modern gaming. And our message to candidates is clear: Gaming is no longer a niche, novel industry, but a nationwide economic engine approved of by nine out of 10 American voters. As part of Gaming Votes, we held our first event outside of Nevada last month during a stop in Council Bluffs, Iowa. The event in southwestern Iowa featured a panel discussion with a 15-year casino marketing professional, a local small business owner, the CEO of the city’s chamber of commerce and the area’s representative in Congress. The panelists provided a snapshot of how gaming provides fulfilling careers and opportunities for advancement, boosts small businesses and produces a positive ripple effect for local economies. They also highlighted why candidates should better understand the industry and the people who drive it. In Iowa alone, gaming supports 17,000 jobs, generates $730 million in tax revenue and contributes $2.4 billion to the economy. Additionally, we released a new poll while in Council Bluffs showing that likely Iowa caucusgoers are more likely to support a candidate who

supports gaming. Whether very conservative or very liberal or somewhere in between, majorities of likely caucus-goers across the political spectrum in Iowa agree that gaming creates jobs and boosts economic development. Further, by a two-to-one margin, Iowans say gaming has had a positive effect on their state. One panelist, Congressman David Young (RIowa), emphasized that those who understand the benefits of gaming should share their experiences with candidates when they’re visiting. “We have a chance to elect the next president and a chance to put the candidates on the record,” he said.

cies. We need to show them how we operate and that we’re good, committed community partners. As a result, the next president and other federal officials will be better informed and less likely to inflict undue harm on a major American industry and the nearly 2 million workers who rely on gaming. We recognize, though, that educating is a twoway street. As presidential candidates travel to swing states, we encourage them to demonstrate an appreciation for gaming by visiting a casino resort or gaming supplier facility. They should take a back-of-house tour to see firsthand how thousands of hard-working employees power the industry.

“

As presidential candidates travel to swing states, we encourage them to demonstrate an appreciation for gaming by visiting a casino resort or gaming supplier facility. They should take a back-of-house tour to see firsthand how thousands of hard-working employees power the industry.

Global Gaming Business AUGUST 2015

While gaming is regulated mostly at the state level, and while we don’t expect casinos to be a central issue in the presidential race, we can’t miss this opportunity to tell our story. Decisions and comments from federal officials can directly affect gaming. For example, in a speech shortly after he took office, President Barack Obama discouraged business travel to Las Vegas and other destinations— and his comments cost the industry hundreds of millions of dollars in the midst of the Great Recession. Further, the Department of Defense recently proposed a blanket ban on the use of government credit cards at casinos—a misguided policy that would ignore the legitimate businessrelated expenses incurred at today’s casinos. It’s our responsibility as an industry to get ahead of these types of harmful comments and poli-

”

They should meet with stakeholders who directly benefit from our industry, such as charities whose programs would not exist without contributions from casinos. As we compile a voting guide for employees over the next few months, we plan to include candidates’ views of gaming and other business issues—such as immigration, tax reform and cyber security—to ensure they have all the information needed to make their decision during caucuses, primaries and on Election Day in November 2016. Through Gaming Votes, we look forward to showing candidates the ins and outs of our dynamic industry and the significant positive impact it has on the economy in Iowa and across the country. Every candidate seeking votes in states where gaming is a major economic engine should take a stand in support of gaming.

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FANTINI’S FINANCE

Dissecting the M&Ms What will become of the two most important issues in gaming?

ometimes, people just have to obsess. Today, in the gaming industry, the obsessions are the M&Ms: Macau and mil-

lennials. Every number and every twist and turn out of Macau makes stock-jarring headlines. And every survey about how the millennial generation is different from its predecessors causes worry among casino executives and downright angst in the corporate offices of gaming supplier and technology companies. Let’s look at gaming’s M&Ms. • Macau. Every Monday, the Macau government releases table game revenues and market shares for the six casino concession holders. Now, barring the occasional surprise, weekly statistics aren’t significant. Bad or good luck with a single high roller can skew the numbers. Win more one week and you’re likely to balance that out by winning less in another week. The certainty of the math, after all, is what the casino business model is built upon. But that commonly understood logic doesn’t matter. When the weekly revenues come out just slightly above or below expectations, casino stocks spike or sink. One reason for this is the big bucks riding on Macau. MGM Resorts is the only Macau operator that gets a minority of its EBITDA from the city. Some, like SJM, get 100 percent from Macau. Investors with money in companies that have all or most of their eggs in one basket are understandably reactive. And the companies certainly understand their situation, as evidenced by Melco Crown setting up shop in the Philippines and Vladivostok in Far Eastern Russia, and even SJM hoping for Japan to legalize casinos to give it a new market to pursue. Another contributing factor is the political environment. For more than a year now, casino companies in Macau have seemed at the mercy of politicians who aren’t, shall we say, casino-friendly. Gaming executives who once voiced confidence in the rationality of Chinese and Macanese political leaders now express uncertainty about when policies will turn in their favor. • Millennials. Sigmund Freud famously asked: 16

Global Gaming Business AUGUST 2015

By Frank Fantini

What does a woman want? Gaming executives are asking that same question over and over again about the millennial generation. By extension, investors in those companies want answers to that question, too. Go to any industry conference and you’ll see programs scheduled to address that question. One reason is the fear that this high-tech, internet-savvy generation will abandon casinos—and most specifically, slot machines—in favor of the latest Candy Crush craze. In an attempt to address the social-gaming millennials, skill is being incorporated into slot machines, where all game outcomes have been required to be random. Nevada regulators are writing rules for skill-based gaming now, and at least some games are expected to be shown at G2E this fall. So, where do we stand on Macau and millennials? Answer: More sanguine than most. In terms of Macau, having quoted Sigmund Freud, we’ll now quote Harry Truman: If you can’t stand the heat, stay out of the kitchen. Macau has been battered by the Macanese and Chinese governments. Now, neighboring countries are developing resorts specifically to poach Chinese gamblers. Some of those gamblers will be lured by the same junket operators who for years filled the casinos of Macau. We’ve seen all the statistics, such as 40 percent declines in gaming revenues, and all the scare stories. We, in fact, were among the few who raised flags of caution when much of the world blithely thought Macau would grow forever. But we also think that Macau has established itself as the Las Vegas of the Orient, and is in position to make that transition from VIP-centric gambling to the successful mixture of mass-market gambling and tourist destination. One observer who holds the same view is Kenneth Fong, the equity analyst for Credit Suisse who covers Macau casinos. In a recent report, Fong forecast revenues resuming growth next year by 15 percent. Further, stocks have come down so low that there is little downside risk and considerable upside, Fong said. Fong raised his ratings on MGM China, Sands

China and Wynn Macau to a buy. Another long-term bull on Macau is Vitaly Umansky of Bernstein. He likewise admitted the difficult conditions today, but says Macau is a secular growth story. If Fong and Umansky are right, the question becomes, when should investors reenter the stocks? Is buying back into Macau today trying to catch a falling knife? Or does waiting until the all-clear signal sounds mean missing the opportunity to buy low? This age-old argument will only be finally answered in retrospect. Investors will have to act without the benefit of final information. Our bias, with admitted fingers crossed about government policies, is to say now is the time to consider a return to Macau stocks. In terms of millennials, the casino industry will do just fine, though gaming technology companies will have to adapt more than casino operators. Casinos aren’t just places to gamble anymore. They are entertainment centers where social entertainment—nightclubs, restaurants, gaming tables— is integral. They are made for millennials, the social generation. Evidence of that comes from reports that the average age of casino customers has been dropping in recent years. As for suppler companies, the hard truth is that slot machines probably can’t be fully transformed into the kinds of social games that millennials play, and that efforts to achieve that might lead more to frustration and wasted investment than to success. That doesn’t mean suppliers don’t have a future. Slot machines aren’t going away. And, more importantly, online social gaming has come into its own as a major cross-channel activity where compelling games are as important as ever. In other words, suppliers will have the opportunity to prosper, but with less dependence on the traditional slot machine. 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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Learning

Opportunity Does the Atlantic City experience offer guideposts for other jurisdictions? By Roger Gros

t was the perfect storm: a severe economic downturn, quality competition in feeder markets, and a possible smoking ban that would decimate the market even further. Yes, we’re describing Atlantic City circa 2007, but today it could describe many jurisdictions across the country and the world. The severity of any of those items may differ, but the impact can be just as difficult, and what you may have thought was specific to Atlantic City could land on your doorstep if you are not vigilant. Tony Rodio is president of Tropicana Entertainment. He was elevated from a similar position overseeing the Tropicana in Atlantic City by his boss, Carl Icahn. Rodio says he’s seen the same kinds of things happening at other properties owned by Tropicana Entertainment. Even before Atlantic City was hit with the perfect storm, Lake Tahoe was a victim of two of these items—tribal casinos in Northern California, and economic struggles in Northern Nevada. “When tribal casinos were permitted in Northern California, it devastated Lake Tahoe. And you couldn’t find a more beautiful spot in the country,” he says. “But convenience gaming dried up because you surrounded San Francisco and Sacramento with tribal casinos. If you have convenience gaming in your feeder markets, you’re going to lose a big chunk of your business. When Ohio approved gaming, Indiana dried up. In Lawrenceburg (where Rodio once ran the Argosy casino), the place has lost 65 percent of its business.” Rodio says there’s very little a jurisdiction can do when its feeder markets are attacked. “We’d like to think that Atlantic City could have done more to protect itself, but there was no way,” he says.

Locked doors at Revel and Showboat Atlancit City 18

Global Gaming Business AUGUST 2015

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Trump Plaza

Kevin Ortzman, the president of Caesars Atlantic City, missed the beginning of the crisis, but he thinks something could have been done. “I wasn’t here at the time, but I think we could have better understood the competition in the feeder markets,” he says. “I would have made sure I really understood that product offering and how I could differentiate the product I’m offering to give them incentives to drive the extra hour.” With high tax rates in the surrounding states, Atlantic City casino executives became complacent, confident that the competition couldn’t match the benefits of playing on the Boardwalk. But they didn’t realize that, in Pennsylvania at least, casinos were allowed to write off marketing expenses—comps, cash back, etc.— and were therefore on a level playing field. It was a mistake they quickly came to regret.

Government Interference If the problem were only the competition, most experts feel Atlantic City could have limped along. But the government kept throwing up hurdles in front of casinos since they were introduced in 1978. First it was unreasonable regulations, red tape and governmental interference in business decisions. Bob Griffin leads Trump Taj Mahal, and was in charge of three Trump casinos when he arrived five years ago. He says the state government’s plan to “rescue” the failed Revel project was an example of not letting the market take its natural course. “When I got here, the Revel project was dead,” he says. “The owners decided it was better to walk away from $1.2 billion than to continue to invest. The government had a different idea. If the patient has cancer, let’s give it more cancer. We had Republicans and Democrats all working together to keep Revel alive. And it didn’t work. Revel was a disaster, separate from how

they performed as an operation. Just the fact that they were incentivized to enter the market had devastating effects on the Atlantic Club, Trump Plaza and the Taj. And they couldn’t survive in that environment.” Griffin says the “refund your losses” promotion that Revel started during the busy summer season only made things worse. “Try to compete with that during the summer!” he says. “That was a major mistake that should never have happened.” Atlantic City government wasn’t any better, says Griffin. The bloated bureaucracy demanded more and more revenue. “They killed the goose that laid the golden egg,” he says. He blames the property tax rate imposed by the city. The casinos were taxed on the value of the properties at their peak. With revenues plunging more than 50 percent since 2007, Griffin says his property was overvalued by 2,000 percent.

“

We’re ecstatic about our meeting space at Harrah’s. We really believe that convention center will be the catalyst for Atlantic City. We’re going to bring in the non-gamer——men or women that work for big corporations that have that corporate credit card. They want to wine and dine their customers, and we have to have a product that will satisfy them. And we’re seeing that.” —Kevin Ortzman President, Caesars Atlantic City

AUGUST 2015 www.ggbmagazine.com

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Atlantic City 101: The Lessons “Getting government involved from the outset so that they understand the implications of surrounding competition is critical. And as an industry, regardless if it’s an emerging market or an established one, we have to provide a full experience to the customer that goes beyond gaming. Casinos are like 7-Elevens now—there’s one on every street corner. We have to diversify our revenue streams and focus on more nongaming amenities.”

—Tony Rodio President, Tropicana Entertainment

“Use pricing as a way to differentiate your product from your competition. There’s a value proposition in every market.”

—Bob Griffin President, Trump Taj Mahal

“Give people a good value for their bankroll. When someone comes to Las Vegas with $2,000, the casinos don’t want to get it 20 minutes after they get off the plane. They want their customers to enjoy the entire weekend, and then get the $2,000. In Atlantic City, charging $30 or $40 for parking goes against that philosophy. They’re trying to get it all at once. It’s ‘I want it right now,’ and it leaves a bad taste in the mouth of the visitor.”

—Paul Steelman President and CEO, Steelman Partners

“You have to understand the environment around you. You have to be nimble, flexible and have the ability to adapt rapidly. The more strategic you can be out of the gate, the more successful you’re going to be. Atlantic City got itself into a very reactive mode, and it’s very difficult to dig yourself out of a hole.”

—Kevin Ortzman President, Caesars Atlantic City

Global Gaming Business AUGUST 2015

“Last year, we paid more in property taxes than we did in interest payments, and we had a 14 percent loan with Carl Icahn,” he says. But the city is on a losing streak when it comes to tax appeals. Just last month, the Borgata won a $60 million refund after an appeals court upheld a decision to lower the city’s valuation of the casino retroactively. In the past, this has led to the city raising tax rates and starting the process all over again. “It’s a never-ending cycle, the way the city is being impacted,” he says. “The value of our properties is going down, so we’ll file tax appeals because they’re not worth as much as they used to be. And as the value goes down and revenue goes down, they increase the rates and our taxes go back up again, and we’re back to filing appeals. It’s a vicious cycle, and we’ve got to stabilize the rate.” A bill currently before Governor Chris Christie would stabilize those rates over a five-year period, in exchange for the casinos pledging not to appeal. This would give the city time to get its budget under control and give the casinos a predictable expense. If successful, it should lead to more capital improvements in the properties and possibly new investments overall. But the city isn’t the only problem. The New Jersey Casino Reinvestment Development Authority was established in the early 1980s, designed to use casino “reinvestment”—an additional 1.25 percent contribution of gross gaming revenues—to revitalize Atlantic City. Over the years, the fund was raided by North Jersey politicians in violation of its stated goals. Now, the money is dedicated to the city, but the CRDA (“Creeda,” as it’s called) is now a super agency, responsible for everything from redevelopment to meetings and conventions. Its quasi-public arm, the Atlantic City Alliance, funded by a $30 million annual contribution from the casinos, was recently disbanded, leaving marketing of the city up in the air. Like most government agencies, Griffin says CRDA is a mess. “Working with CRDA is like working in a wind tunnel,” he says. “For five years, you keep walking forward and then you turn around and you’ve only gone three feet.” Griffin grudgingly acknowledges that CRDA has been responsible for some good things. “It’s easy to point out CRDA’s failures,” he says, “but they have also had a lot of successes. The problem is we’ve just about run out of time. There’s not much left.” Ortzman is more complimentary, perhaps because CRDA contributed about $20 million toward a new $100 million meetings and conventions facility at Harrah’s Resort. “We’re ecstatic about our meeting space at Harrah’s. We really believe that convention center will be the catalyst for Atlantic City. We’re going to bring in the non-gamer—men or women that work for big corporations that have that corporate credit card. They want to wine and dine their customers, and we have to have a product that will satisfy them. And we’re seeing that.” Ortzman says Caesars has booked more than $20 million of business into that facility, and he thinks it will be a game changer. “I would define it as successful if we see Borgata, Tropicana… any of our competitors… build a similar facility,” he says. “Because now we’re really starting to build that critical mass in a $16 billion market in the Northeast, of which we currently get an infinitesimal share.” Griffin agrees that meetings and conventions could be the answer in Atlantic City. “They’re paying for their rooms. They’re paying for their F&B. And we

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p. 18 AC:Layout 1 7/16/15 1:16 PM Page 22

Most experts agree that a negative perception follows Atlantic City around. The media focuses on the bad news instead of pointing out the changes that have moved Atlantic City forward. And an ongoing debate about adding casinos in North Jersey——and other areas of the state—— threatens to derail any progress the city has made. do get some gambling dollars out of them,” he says. “Some conventions are better gamblers than others, but we’ll get some gambling from all of them.” Rodio believes this concentration on conventions should have happened sooner. “The convention business is now something we’re all going after,” he says. “If we could have ramped up this aspect more quickly, maybe we wouldn’t have gotten hurt so badly. Same thing with all the non-gaming attractions. But we couldn’t have done anything to keep the convenience gambler.”

Non-Gaming Goods Paul Steelman is a native of Atlantic City, where he first made his mark as the gaming industry’s pre-eminent architect. He has returned to the town many times over the years, and recently joined forces with Philadelphia developer Bart Blatstein to transform the former Pier at Caesars into the Playground, a multifaceted entertainment/dining/retail experience. The centerpiece of the project is “T Street,” a music row comprised of half a dozen nightclubs that will recreate some of the world’s most prestigious entertainment avenues, like those found in Nashville, Austin, New Orleans, Memphis, Hong Kong and other cities. “Atlantic City used to be the capital of music,” Steelman says. “New York and Kentucky Avenues were lined with clubs that offered live music… The 500 Club was famous. So if we can bring a little of that back, I think we’ll have succeeded. If we take things that were a success at one time and adapt it for today, it can work.”

Global Gaming Business AUGUST 2015

He says music is a natural move for Atlantic City since it is so deeply ingrained in the city’s history. “The AC market was missing out on the live music scene,” he says. “We’ve always struggled with this. The ‘Rat Pack’ kind of lounge we built in the ’80s and ripped out in the ’90s. Now, with all the music streaming services, there’s a lot more bands looking to be discovered. They tour more, they charge less, so we’re trying to be agile and take advantage of the best that’s out there.” Steelman says pricing is an advantage that Atlantic City can use, but first there needs to be some understanding how that can apply right from the arrival in the city. “Parking has always been an issue in Atlantic City,” he says. “Since Resorts paved all those lots and charged $25 to park, to free parking, to the time they decided parking should be a revenue generator by taxing it, it’s been an issue. Look, parking is 75 percent of the entertainment decision. Why do you think we build beautiful parking garages in Las Vegas that are free, easy to access and to depart? I think parking should be free in Atlantic City, and that would make a huge difference.” Ortzman says the city is changing. “Atlantic City is undergoing a transformation,” he says. “We’re moving from a gaming-centric model to a non-gaming hospitality market. We do that by adding compelling product appealing to a demographic that is more experience-based, rather than simply satisfy a gaming itch.” Griffin believes that pricing is important, but there are other issues that often come first. “All operators are cognizant about pricing,” he insists. “But when you close down a number of properties in town, you’ve taken lots of rooms offline. So the demand for the remaining rooms goes up, along with the pricing. And when I have to pay a Local 54 worker $20 to clean a room, that cost gets built into the price, so there’s not a lot of wiggle room.” Rodio agrees that room pricing varies widely. “It comes down to supply and demand,” he says. “There’s a huge demand for these rooms on the weekends, so we have to grab that revenue when we can. The demand isn’t there mid-week, so rooms will be cheaper.” Ortzman is repositioning the Wild Wild West casino that is part of Bally’s as a value-oriented facility, with cheaper food and drinks, and lower-limit table games. “We have this new demographic that we’re all trying to learn about: the millennials,” he explains. “They are looking for a social experience, which is not necessarily gaming-centric. So we’re going to create an environment where if they want to

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gamble a little bit, that will be available to them. We’re going to have $5 tables, which do not exist today, low-priced drinks, the appropriate music for virtually every demographic, and it’s going to be right on the Boardwalk. So we’re cautiously optimistic that this will be very successful.”

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

Mounting a Challenge Most experts agree that a negative perception follows Atlantic City around. The media focuses on the bad news instead of pointing out the changes that have moved Atlantic City forward. And an ongoing debate about adding casinos in North Jersey—and other areas of the state—threatens to derail any progress the city has made. Ortzman says he understands the reasoning behind the plan, but it would be devastating to Atlantic City. “There’s no doubt North Jersey would like to be able to capture some of the business that’s going to Bethlehem, New York and Philadelphia,” he says. “They want to recapture those New Jersey residents who are now going there. But as a consequence, we’re going to lose those New Jersey residents that are still coming to Atlantic City, so that would be catastrophic for us. We’ll do everything we can to try to convey common sense that this would not be additive to Atlantic City.” Suggestions that some of the tax revenues from any North Jersey casinos be dedicated to Atlantic City would make sense, says Rodio. “If it even should happen, the industry in Atlantic City should be able to reap the benefits of that,” he says. “Our first choice would be to keep the industry solely in Atlantic City. There are many other industries that employ hundreds of thousands of people in North Jersey, and to take away one of our biggest advantages is grossly unfair.” Griffin isn’t concerned in the short term, because there isn’t a consensus among North Jersey politicians about how it would be implemented. “I think we’re three years out from a referendum, and I think the people who are going to stop it will be the politicians who are behind it in North Jersey,” he says. “They can’t even agree on the tax rate, so how are they going to agree on the number of the casinos and the locations? I don’t think they’ll be able to work together. “If they were able to unite behind a proposal for a single casino in the Meadowlands and everyone would be able to share in that, I think that’s something the voters of New Jersey would get behind. But with all the politicians fighting for their piece of the pie for their hometowns, I don’t think that will pass.”

NEW markets... people... products... technologies... ventures... opportunities.

In the midst of change, our worldwide gaming clients appreciate one constant – Greenberg Traurig. As you explore your new, we’re here to guide you – every day.

Global Gaming Practice Acquisitions | Financing | IP | Labor | Litigation | Real Estate | Regulatory Learn more at gtlaw.com/gaming GREENBERG TR AURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2015 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Martha A. Sabol, 77 West Wacker Drive, Suite 3100, Chicago, IL 60601, 312.456.8400 or Laura L. McAllister Cox, 2700 Two Commerce Square 2001 Market Street, Philadelphia, PA 19103, 215.988.7800. °These numbers are subject to fluctuation. 25106

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Deep

Bench

Greenberg Traurig’s Global Gaming Practice seamlessly serves clients across markets, jurisdictions and continents By Marjorie Preston

n the early 2000s, when Martha Sabol was in-house legal counsel for Hyatt Gaming Management, she routinely worked across borders, in multiple jurisdictions, and with clients around the world. The job was gratifying. But it had its frustrations—among them, dealing with different outside law firms in each jurisdiction, some with little to no experience in the gaming industry. “Every time we entered into a transaction to buy or sell a casino or did business with any casino around the world, I had to educate people about the industry before I could even get started,” says Sabol, now co-chair of the Global Gaming Practice at Greenberg Traurig LLP. “It was an incredibly inefficient use of time and money, paying professionals to get up to speed on gaming-related issues.”

Leveling the Field To Sabol, the solution was obvious but ambitious: the gaming law equivalent of a one-stop shop, with a presence in established and emerging markets, staffed by a team of professionals steeped in the industry who could readily ad24

Global Gaming Business AUGUST 2015

Lorne S. Cantor, Martha Sobol and Mark Clayton, co-chairs of the Global Gaming Practice at Greenberg Traurig LLP

vise operators, manufacturers, suppliers and regulators. “When people think of a gaming attorney, they think of regulatory and licensing counseling,” says Sabol, named 2015’s Gaming Lawyer of the Year in Chicago by Best Lawyers in America. “What I hoped to develop was a group of lawyers in all the disciplines that support this industry: general corporate and transactional law, real estate litigation, employment law, entertainment, corporate finance, intellectual property, tax, etc.” In November 2006, she joined Greenberg Traurig LLP, an international law firm known for a corps of lawyers specializing in multiple industries, including real estate, hospitality, technology, entertainment, advertising and insurance, to name just a few. Within two months, with the blessing and support of former corporate practice chief Gary Epstein and then-CEO Cesar Alvarez, Sabol launched GT’s Global Gaming Practice. Not surprisingly, she says, “much of the early momentum came from our Las Vegas office. We have a very talented group of lawyers there; they were an incredible foundation for what we were trying to accomplish.” Today, GT’s gaming law team is 40 members strong and based in key juris-

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“

What I hoped to develop was a group of lawyers in all the disciplines that support this industry: general corporate and transactional law, real estate litigation, employment law, entertainment, corporate finance, intellectual property, tax, etc.”

client consultation. dictions, state capitals and financial centers in the Working across jurisdictions demands specialized U.S. and around the world. knowledge; it also requires expertise across specialties, “Other law firms have attempted to establish a says Lorne Cantor, co-chairman of the firm’s Global similar platform,” Sabol says. “But the breadth of Gaming Practice who works in mergers and acquisiour coverage is unrivaled.” tions. “When you enter into an acquisition transaction Stateside, GT has offices in 29 locations relevant with an entity that’s regulated by gaming regulators in to the industry—not just Nevada and New Jersey, numerous jurisdictions, you have to guide the client but Philadelphia, Houston, Los Angeles, New York —Martha Sabol, and provide them not just the traditional transactional City, Albany, Chicago, Delaware, Denver and elseco-chair, Global advice but also the regulatory advice to bring the acquiwhere. This geographic footprint is meaningful in an Gaming Practice, sition to a successful conclusion. That is what we proindustry that continues to grow. The firm also has a Greenberg Traurig LLP vide—the industry expertise and the know-how to do it substantial presence in Washington, D.C., which on a seamless basis. monitors the gaming landscape from a federal leg“We do it efficiently and we do it quickly, because islative and government affairs perspective, as well as we’ve done it before.” on a state-by-state basis. In the past decade alone, including state lotteries, gaming in the U.S. has Lawyers without Borders spread from a handful of jurisdictions to 48 states, with more waiting in the Such a broad network potentially can reduce the cost of doing business in wings. As companies enter new jurisdictions, collaborate across markets and every jurisdiction. Take Massachusetts, where the gaming market is poised expand internationally, a limited presence limits opportunity. And managing to explode with MGM Resorts’ $800 million gaming hall in Springfield, numerous and overlapping local counsel becomes more inefficient, time-conWynn Resorts’ planned $1.6 billion development in Everett, and one more suming and costly. license up for grabs in the southeastern section of the state. Greenberg TrauSabol cites the example of an international gaming device manufacturer rig’s Boston office has gaming attorneys licensed in the Bay State whose exlooking to acquire a similar firm. By the end of the transaction, six Greenberg pertise—in the state’s regulatory structure, tax code and political Traurig offices domestically and across the globe had weighed in on the translandscape—can be especially significant for businesses eyeing that market. action. These practitioners not only know the playing field, says Clayton. They “I received the first call in Chicago,” says Sabol. “I connected with one of know the players. our gaming corporate finance colleagues in Florida, one in Las Vegas and one “To have a good continual working relationship with the regulators in London. We then connected with two others from our international offices, gives you almost a daily reason to be interfacing with them,” he says. “There and all this happened in a matter of 10 minutes.” is no substitute for knowing when the time is right to deliver a message” to In that case and others, she notes, “everybody starts with a high level of exregulators and policy makers, he says. “Otherwise, you can waste time and perience in the industry, which controls costs and keeps budgets down. In this political capital.” very large, complex world of international business transactions, it just makes Internationally, Greenberg Traurig’s reach is similarly widespread. In adlife easier.” dition to Mexico City and London, it has offices in Seoul, Shanghai, WarVeteran gaming attorney Mark Clayton, who is based in Las Vegas, agrees. saw and Tel Aviv. GT also has forged a strategic alliance with a law firm “It can be difficult when you’re dealing with a fast-moving situation that inbased in Rome and Milan. And in January, the firm opened a base in volves a corporate lawyer, a gaming lawyer, a tax lawyer and a real estate Tokyo. lawyer,” he says. “Maybe some are from the same firm, maybe not. But for all That’s a meaningful development as Japanese lawmakers ponder legal these people to ordinate seamlessly and communicate effectively is difficult in casinos, with the approval of Prime Minister Shinzo Abe and the active enthe best of times—much less when you’re working across different platforms. dorsement of the American Gaming Association. A number of international “If my client needs an environmental lawyer,” he says, “I can walk down operators have shown interest in the nascent market, and no wonder. Inthe hall or call a colleague. In my prior practice I would have had to look for a vestment analysts predict that Japan could eventually become the secondlawyer to refer them to.” largest casino market in Asia based on gross gaming revenue, surpassed only In another scenario, one of Clayton’s clients needed some legal advice by Macau. about a transaction in Mexico. “I was able to coordinate with our Mexico City Koji Ishikawa, managing shareholder of GT’s Tokyo office, is one of office, brief them on what had been done and what needed to be done, and few gaming lawyers in Japan, and works with a variety of national and inget them up to speed on the administrative concerns”—all before the next AUGUST 2015 www.ggbmagazine.com

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ternational institutions, issuers, underwriters and banking investors. With the Japanese Diet, or parliament, expected to act on casino legislation in the current extended session, “We are receiving a lot of inquiries from our U.S. gaming clients,” he says. In order to succeed in Japan, Ishikawa adds, incoming investors must understand the differences in culture. “Korea or China are more American; Japan might look ‘Westernized’ on its surface, but actually it is still a very traditional and conservative country. That is why I recommend that my clients first learn a bit about how to communicate with Japanese business partners. “It is nuanced, but the nuance is important. They do not have to change what they are going to say, but they may have to change how they say it.” Other Asian jurisdictions—South Korea, Vietnam, Thailand, the Philippines—are also in expansion mode. “Having the international component to do what we do is very helpful to us and our clients, who have appreciated the ability to work with one firm,” observes Sabol. Those clients include Fortune 500 companies, startups, private equity firms, investment banks and most of the major operators, along with manufacturers and suppliers, lottery providers, horse racing entities, online gaming companies—“anyone who is interested in investing in the gaming space,” says Sabol. “If it’s gaming-related, we do it.”

Geographic Advantage Founded in the late 1960s in Miami, the firm first known as Greenberg Traurig Hoffman has swelled beyond its South Florida roots to become a worldwide juggernaut with some 1,800 attorneys, government law professionals and policy experts. In 2007, it was named USA Law Firm of the Year by Chambers and Partners, whose Global Awards Program honors excellence in legal services in markets around the world. In 2014, the firm earned the Corporate/ Mergers & Acquisitions Law Firm of the Year designation for Latin America by the same group. At the time, CEO Richard A. Rosenbaum said Greenberg Traurig was able to deliver not only because of its in-house team but also its “geographical platform and operational efficiencies.”

Founded in the late 1960s in Miami, the firm first known as Greenberg Traurig Hoffman has swelled beyond its South Florida roots to become a worldwide juggernaut with some 1,800 attorneys, government law professionals and policy experts. In 2007, it was named USA Law Firm of the Year by Chambers and Partners, whose Global Awards Program honors excellence in legal services in markets around the world. Clayton, who joined the ranks last August, is a former member of the Nevada State Gaming Control Board and a onetime professor of gaming law. He has served as counsel for some of the leading companies in the industry, and in 2012, was named one of the Top 10 Gaming Attorneys by the Las Vegas Business Press. He was also listed among the Best Lawyers in America in gaming law in 2013. He says he joined GT to better serve Nevada clients who wanted to grow beyond the Silver State. “It became apparent to me they needed a broader support from their outside legal counsel, and that was the impetus,” he says. “The depth of the organization, the international reach, the commitment to the gaming practice all are very strong and very impressive; the firm already understood the industry both domestically and internationally.” Simply put, Greenberg Traurig has “an incredibly deep bench,” adds John Pappalardo, co-chairman of the firm’s Global White Collar Criminal Defense Practice. Pappalardo is a good example of the cross-practice starting lineup. He may be best known for representing Yukos Oil Company CEO Mikhail Khodorkovsky, whom Forbes magazine called “Vladimir Putin’s greatest enemy,” who was tried for fraud and tax evasion in the former Soviet Union. “I get a lot of big marquee cases,” Pappalardo says, “but we have a tremendously high number of knowledgeable people with incredible skill sets.” Their shared goal, he says, is to ensure their gaming clients are “compliant citizens on the world stage.”

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Playing by the Book Last December, Massachusetts announced the launch of a statewide corruption tip line, 800-NO-BRIBE. At the time, Special Agent Vincent Lisi of the FBI’s Boston office told reporters that the rapid proliferation of the casino industry has created a potential breeding ground for bribery, fraud and abuse. “When you look at legalized gaming, you have a heavy amount of regulation along with a lucrative business,” Lisi said. “Those two factors combined make for pretty fertile grounds for corruption of public officials.” Pappalardo and his team are there to steer gaming companies clear of conflicts in the U.S. and abroad. With 40 years of litigation practice, the practice leader has worked in federal white collar criminal defense, FCPA issues, SEC investigations, fraud, money laundering, insider trading and other white-collar crimes. Prior to joining the firm, he was the U.S. attorney for the district of Massachusetts and a commissioner with the Massachusetts State Ethics Commission. He says assiduous, ongoing oversight is vital in an industry that is as heavily regulated as banking. In the U.S., “casinos are basically rated as banks, and have been considered financial institutions since 1985,” says Pappalardo. As such, they’re subject to the Bank Secrecy Act, must file Suspicious Activity Reports, and must constantly monitor transactions, corporate policies, codes of conduct—every facet of the business at every level of operation. Casinos are required to have risk-based anti-money laundering programs and train staff to identify the clues that that may indicate illicit activity, such as multiple small transactions that avoid threshold reporting requirements, or a high volume of wire transfers from foreign countries. They must be sure that potential business partners adhere to the same high standards. Because of the nature of the business and the patrons, casinos are sometimes viewed as particularly vulnerable to become portals for money laundering, says Pappalardo. They are also vulnerable to insider complicity. “The point is you need to pay attention, utilizing a strong compliance program with clear triggers for investigation and additional due diligence,” he says, along with thorough risk analyses to ferret out vulnerabilities, and prophylactic measures to ward off trouble before it starts. “Compliance is not a one-shot deal that you put into place in 2013 and then put on a shelf,” Pappalardo adds. “It’s a living, breathing vehicle for protecting the company, and it has to be changed and tweaked” to reflect evolving rules and regulations. Needless to say, the rules may differ among markets, and a U.S. company doing business in Europe or Asia must observe all the applicable mandates.

Tribal Matters Perhaps more than any other enterprise, casino gaming has enabled many American Indian tribes in the U.S. to build new economies, lift the standard of living among their members, and in some cases create billion-dollar casinos that have helped to underwrite other ventures. In 2013, tribal

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All gaming opportunities start with the land. Is the land we have or need to acquire eligible for gaming? Are we looking for expansion or renovation of an existing gaming facility? What’s the infrastructure, and what are the laws and codes? Do we have to work with federal agencies to expand any new rules and regulations? Do we need to renegotiate a tribal-state compact?” —Loretta Tuell, tribal gaming lawyer with Greenberg Traurig since 2014

gaming generated $28 billion in revenue, an all-time high, though growth has slowed considerably—reportedly about 3 percent in that same year, compared to pre-2007, when Indian casinos routinely recorded double-digit increases. The task for tribes now is to safeguard that hard-earned progress by diversifying their portfolios. For some, this means harnessing wind and solar power for renewable energy. For others, it means investing in real estate, getting into ecommerce and digital gaming, and exploring other business endeavors. Casinos in many cases have given tribes “an economic base or access to capital, which creates new economic development opportunities,” says Loretta Tuell, a tribal gaming lawyer who joined Greenberg Traurig in 2014. “Tribes today are trying to diversify and do what makes sense for where they’re located, utilizing the resources available to them.” A member of the Nez Perce tribe who grew up on the reservation in Idaho, Tuell is former chief counsel for the Senate Committee on Indian Affairs and a former senior official at the Department of the Interior, where she was appointed director of the Office of American Indian Trust by President Bill Clinton. She has two decades of experience in landinto-trust matters, gaming compacts, tribal sovereignty, taxation and other issues of critical importance to tribes. It all comes back to one foundation, she says. “All gaming opportunities start with the land. Is the land we have or need to acquire eligible for gaming? Are we looking for expansion or renovation of an existing gaming facility? What’s the infrastructure, and what are the laws and codes? Do we have to work with federal agencies to expand any new rules and regulations? Do we need to renegotiate a tribal-state compact?” Many tribes are looking farther afield for opportunities—in other states and in collaboration with commercial operators. Perhaps most interestingly in a crowded domestic market, they’re looking at opportunities outside the U.S. (case in point: a decision by the Mohegan Tribal Gaming Authority to partner on a resort near Incheon International Airport, considered the gateway to Seoul, South Korea). “That’s why I really appreciate the global outreach of GT,” says Tuell. “Our expertise and experience and contacts can help create opportunities for partnerships for tribes, as well as people that want to do business with

Global Gaming Business AUGUST 2015

Indian Country. “To me,” she says, “the sky’s the limit.”

Looking Ahead As the industry expands not just globally through new bricks-and-mortar resorts but into cyberspace, industry experts are speculating on what will be the next best thing. Internet gaming hasn’t proven the gold rush some hoped for; limited to three states and with no federal legislation in the offing, it likely will not grow appreciably until bigger states— New York, California, even Texas—get into the games. The latest “leading-edge area of interest” is around fantasy sports (FanDuels, DraftKings) and social games (Angry Birds, Words with Friends), says Clayton. “We’ve seen the success of those platforms; there’s interest to see if can we monetize them and make them gambling games. That facet of the industry begets a whole slew of questions—the applicable state laws where they operate and where the players reside, as well as whether there are federal gaming law implications.” Also on the docket: skill-based gaming, which some believe must increase to create a new, younger player demographic. With the passage of Nevada’s Senate Bill 9, that state is now starting to adopt regulations that would allow player skill to affect the outcome of a gambling game, says Clayton. “Another initiative that’s a bit more nuanced but potentially more valuable is recalibrating loyalty points to accrue like airline frequentflier miles,” an approach that would allow casinos to adjust hold percentages to reward premium players. “It will be interesting to see if manufacturers can get more creative around those areas and further invigorate the gambling device market,” says Clayton. “I think you’ll probably see other states pursuing this.” As the landscape changes, says Sabol, the gaming practitioners at Greenberg Traurig plan to be the front line of expertise for operators and others looking to grow and prosper in an evolving industry. “When we started, we wanted to provide a greater level of seamless, high-quality, dynamic services to our clients,” says Sabol. “Through innovation and collaboration, that’s what we’ll continue to do.”

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TABLE GAMES

Table Turnaround A subtle change for the better has occurred on the casino floor

unny thing about change: Sometimes, the closer you are to it, the harder it is to see. Don’t agree? Try looking under your feet. The planet you are standing on is revolving at 900 miles an hour, and it’s orbiting, at 19 miles a second (so it’s reckoned), a sun that is the source of all our power. And unless you’re Stephen Hawking—or the gang from Monty Python—you probably never realized you were moving at all. The same holds true in the casino industry, where, unfelt by most, a shift has taken place. Not a tectonic one, not a seismic one, not even a Lou Boudreau one, but a shift nonetheless. Table games are making a comeback. Had you said 10 years ago this would be the case 10 years later, you might have found yourself 5150’d into the nut house. And justifiably so. Back then, absolutely nobody wanted any part of the green felt jungle. Pits were being ripped out—bikini-wax style—in favor of slot machines, while in new markets like Pennsylvania and Delaware, the only “tables” allowed had bill validators, ticket printers, CPUs and virtual dealers. If old-fashioned table games had been a stock, everybody would have been shorting them. Well, those shorts would have gotten burned. In fact, table games have not only bounced off the bottom, but they are now poised to reach new highs. This turnaround is remarkable. Trends rarely reverse. Sheesh, they hardly ever abate. If anything, they accelerate and accelerate and accelerate until what was once de rigueur eventually and inexorably becomes passé. That’s just how natural selection works, as in fashion, as in nature, as in business. Well, then, why? Why did table games pull out of this death spiral? Why are they no longer on the endangered species list? Just what in the name of Benny Binion is going on here? The first reason is something that’s familiar to anyone who has ever tossed a die or turned a card. Dumb luck. Table games got on a heater. The younger generations decided, for whatever

Global Gaming Business AUGUST 2015

By Roger Snow

reason (who knows what they are thinking?), to play tables in greater proportions than their parents and grandparents do. Now, don’t misread this. Slots, outside of Asia at least, are the primary moneymakers for casinos and always will be. It’s just that on a relative basis, more of today’s young adults are scratching their gambling itch at blackjack, poker and craps than was the case in the mid-2000s. The second reason is a vast improvement in customer service. Something unexpected happened when slots pushed table games against the ropes. Instead of doping, they punched back, and they punched with the one advantage they had: the interaction between dealers and players.

Haven’t you noticed ‘‘how much friendlier

dealers and floor staff have become in the past few years? They are more attentive. They are more animated. They are more fun. This is no doubt the result of a concerted effort on the part of table game operators.

’’

It’s anecdotal, but haven’t you noticed how much friendlier dealers and floor staff have become in the past few years? They are more attentive. They are more animated. They are more fun. This is no doubt the result of a concerted effort on the part of table game operators. Through hiring and training, they have equipped their floors with ambassadors, rather than automatons spinning a ball or pushing cheques from one side of the layout to another.

The third reason is product innovation. Compare a table-game pit today with one 10 or 15 years ago. This isn’t Hocus-Focus from the newspaper, where you struggle to circle the differences. These are like Jared from Subway’s before-andafter photos. They’re obvious. Card shufflers, roulette chip sorters, Three Card Poker, EZ Baccarat, High Card Flush, Spanish 21, Free Bet Blackjack, smart shoes, progressive jackpots, electronic tables, etc. Table games managers, who historically have experimented far less frequently than their slot counterparts, now embrace change and the progress that comes with it. Of course, the paradox about shifts is that they are always happening. The only constant is change, right? And sometimes, it’s easier to obtain than to maintain. Table games can’t get cocky and fall into the mindset that such growth will continue on its own. There is no auto-pilot, no cruise control. Competitors abound, from slot machines to mobile games and online wagering, as well as a gazillion other gizmos being created that are designed to grab the attention and the money of current and prospective casino players. It’s easy to try new things when the prognosis is negative. You’ve got nothing to lose. It gets incrementally tougher, both physically and psychologically, to continue that continuum of innovation and experimentation as the prospects brighten. In addition, you also run the risk of exhausting all the good ideas and failing to come up with an encore. Trees, according to the old saw, don’t grow to the sky. But with the right amount of attention and nourishment, they can survive and even thrive for many years to come. Thankfully for those of us vested in this business, the same can be said—and will be said—of table games. Roger Snow is a senior vice president with Scientific Games. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Scientific Games Corporation or its affiliates.

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Counting on

KOREA S

outh Korea’s US$1.4 billion foreigners-only casino market has done well by China’s gamblers. Indeed, the PRC’s love affair with Korea and all things Korean has sparked a tourism boom in the tiny republic that finds some big names in the gaming industry anteing up a lot of money on the belief that if you build it even more will come. Like the Mohegan Tribal Gaming Authority, they’ve come from the other side of the world. The operating arm of the Mohegan Indian Tribe, the company behind Mohegan Sun, one of the largest casinos in the world, the company is seeking a license for a $1.6 billion super-resort with a casino—Inspire, it’s called—adjacent to bustling Incheon International Airport and right on the doorstep of the 25 million souls who inhabit metropolitan Seoul. Not that any of them will be gambling there. Korean law prohibits it. There will, however, be plenty for them to enjoy outside the casino floor. Inspire is being designed for just that. “Ninety-seven percent of this project will be occupied by non-gaming amenities,” says MGTA President Bobby Soper. “To attract foreign tourists, and to leverage the Seoul market nearby, is what makes this a very attractive opportunity.” The neighbors that Inspire hopes to join at the airport are thinking the same thing. Two expansive resort plans with similarly expansive budgets are already licensed for a special economic zone the government is sponsoring in Incheon to pivot tourism growth off the airport. One is led by Paradise, the fivecasino group headquartered in Seoul that dominates Korea’s foreigners-only market. The other is led by Las Vegas-based Caesars Entertainment, to date the only international gaming company approved to operate in the country. Which in itself tells you a lot about how far the central government has come in its recognition of the economic power of destination-scale gambling—and how far it still Mohegan’s Bobby Soper says has to go. non-gaming will be the attraction of Korean integrated resorts Nationally, tourism receipts surpassed

Global Gaming Business AUGUST 2015

Tourism and business the goal of gaming expansion By James Rutherford

$18 billion last year, and they generate jobs for more than 500,000 people. The industry “will be the growth engine for an improved national economy and quality of life,” says the Korea Tourism Organization. Accordingly, the Ministry of Culture, Sports and Tourism plans to license at least two more resort casinos at a minimum investment of 1 trillion won each ($925 million). More than 30 bidders have entered the running, and for most of them, it’s all about the potential inherent in a dynamic resort cluster—a mini-Cotai—in the 30-mile Seoul/Incheon corridor. There is a compelling case for it, given the country’s proximity to the major population centers of northern China, a cheap currency relative to the yuan, a comparatively favorable tax structure, and its allure as a destination, stemming in part from the pop culture phenomenon the country has become—the “Korean Wave,” they call it. Then there is Kangwon Land, nestled in ski country in the mountainous northeast about 95 miles from Seoul, the largest casino in the country by far (200 live tables, 1,360 EGMs) and the only one open to Korean nationals. It generates gaming revenue equal to the rest of the market combined, and as such is a good indicator of the real potential if the government were to allow domestic play, not that anyone expects that to happen any time soon.

Time for Vigilance China is already the best customer of the relatively modest offering presented by the existing foreigners-only casinos. Mainlanders account for well more than 40 percent of visits to these properties, three of which are in Seoul, one in Incheon (a Paradise license that will be shifted to the new resort), two in the southern city of Busan, two in the east in provinces bordered by the Sea of Japan, eight on the popular tourist island of Jeju in the Korea Strait, an hour’s flight from Shanghai. The table drop the Chinese generate per trip is better than the average by one-third, according to 2014 research compiled by investment bank Standard Chartered. And it would appear the market has hardly been tapped. Less than 2 percent of northern Chinese visited Macau last year. In contrast to southern China, where gaming revenue equates to about 0.71 percent of GDP, revenue attributable to the northeast, Korea’s principal feeder market, amounts to only 0.01 percent.

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Overseas travel as a percentage of the population is similarly low. The numbers are big—100 million mainlanders went abroad in 2014, the most in the world—but as a recent study by CLSA Americas shows, the rate of outbound penetration is just 7 percent (compared with 15 percent in Japan, 28 percent in Korea, 45 percent in Taiwan). If Hong Kong and Macau are factored out it’s only 3 percent. “The demographics, we believe, are phenomenal,” says Soper. “(Incheon) is the closest gaming destination to northern China, including Beijing and Shanghai. There are more than 700 million Chinese residents within two hours of Seoul. Incheon Airport will be the gateway to what we think will be

20th Century Fox theme park and IR at Busan

Mohegan’s Inspire Resort at Incheon

KOREAN PROJECTIONS

the tourist hub of North Asia.” Official numbers out of China show that South Korea was the most visited country by mainland travelers last year, a trend that’s taken off since Seoul began easing visa restrictions a decade ago. Of the more than 14 million foreigners who visited the country in 2014, 43 percent were from China (52 percent counting Hong Kong and Taiwan). The Chinese also spend more than everyone else—$2,200-plus per capita, says the KTO—and, not surprisingly, they account for the lion’s share of total tourism income, 55 percent last year, according to English-language monthly Business Korea.

Incheon’s Paradise City

Dozens of plans to establish casinos have been submitted

hirty-four entities, Korean and international, have submitted proposals to Korea’s Ministry of Culture, Sports and Tourism in hopes of winning licenses for the two integrated resorts with casinos the government plans to award by the end of this year. The sites are to be determined in the course of the ministry’s review of the proposals and could be announced as soon as this month, according to Korean media reports. The last year has seen the governments of seven of the country’s nine provinces—Incheon, the southern city of Busan and the popular holiday island of Jeju top contenders among them—either planning or actively courting a gaming resort. And for good reason. Envisioned on a Macau scale with a minimum investment requirement of KRW1 trillion (US$925 million), the IRs will generate thousands of local jobs and billions more in spinoff benefits for the host communities. The potential for developing a mini-Cotai around the country’s principal gateway at Incheon International Airport is driving most of the prospective investment. The airport, on Yeongjong Island about 49 kilometers (30 miles) west of the capital of Seoul, is the hub of a government-sponsored special economic zone conceived as a destination in its own right with an array of commercial, retail, entertainment and residential attractions. To date, two IR proposals have been awarded provisional licenses to bring casinos to the island: Paradise City, a 55-45 joint venture between Paradise Group, the country’s leading operator of foreigners-only casinos; and Sega-Sammy, a Japanese developer of video and pachinko games, and an as-yet unnamed property being developed by a consortium led by Las Vegas-based casino giant Caesars Entertainment. Together with a resort backed by Genting Singapore and China developer Landing International that broke ground on Jeju in February, the total investment in the works stands at around $5 billion. It’s a prestigious list of bidders in all. It includes a number of regional gaming leaders alongside some well-known names in the wider world of corporate Asia:

• Genting Group, in partnership with the multinational Lotte conglomerate, is vying for a Yeongjong license, as are Phnom Penh’s NagaCorp and Manila’s Bloomberry Resorts. • Macau’s Galaxy Entertainment Group is eyeing a Seoul suburb. • Suncity Group, Macau’s largest junket operator, has entered the ring at a location that hasn’t been disclosed. • Hong Kong retail and property giant Chow Tai Fook is pursuing a license on Yeongjong. • Grand Korea Leisure, the country’s No. 2 foreigners-only operator, has a land use agreement with Incheon International Airport Corp. for an IR on Yeongjong, and as a Korea-listed subsidiary of the government is likely to be somewhere near the front of the running. • Mohegan Tribal Gaming Authority, a leading casino operator in the Northeastern U.S., has secured a partnering of its own with IIAC on a Yeongjong proposal pegged at $1.6 billion for the first phase. • The government of Incheon is bidding for an IR in partnership with a division of China’s Macrolink Group. The scope of the project and its projected cost were still being determined, according to reports. • 20th Century Fox is looking at Yeongjong for a destination-scale theme park similar to what it’s developing at Malaysia’s Genting Highlands. It’s not known as yet if the plan includes gaming, but a casino was to have been included as part of an abortive agreement between the company, the government of South Gyeongsang province and other partners to build a movie-themed amusement park at a $3.5 billion entertainment complex near Busan.

AUGUST 2015 www.ggbmagazine.com

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KangwonLand is the country’s must successful and most remote resort, but it caters to Korean nationals

Global Market Advisors’ Jonathan Galaviz says regulations in South Korea must keep pace

Union Gaming’s Grant Govertsen warns that Beijing will hold the fate of Korean casinos in its hands 34

The government’s goal is 20 million visitors by 2017—the year the Paradise megaresort is slated to open—and it’s expected that upwards of 10 million of those visitors will come from China. CLSA forecasts the number of mainlanders venturing out into the world to hit 200 million by 2020. But will they gamble? More to the point, will they gamble a lot more than they are now? There are skeptics. The debt analysts at Fitch Ratings, for one, are “cautious” in the absence of a domestic market to support the $5 billion or so of projected cap-ex on the table—that’s counting the Paradise and Caesars projects in Incheon and a Genting Singapore resort under construction on Jeju. Fitch asserted in a May research report that even if foreigners-only revenue doubles, assuming a 20 percent profit margin, the ROI for the new resorts works out to less than 10 percent. The report also noted, “Competition for northern Chinese players will intensify over the next few years with legalization looming in Japan and Vladivostok’s first casino due to open this year. In addition, $20 billion of capital is being deployed in Macau through 2017, along with improving transportation infrastructure.” At the same time, there is no certainty that current visitor rates will continue indefinitely. China is South Korea’s largest trading partner, and relations between the two governments are as warm as they’ve ever been. Their respective clashes with Japan in recent years over territory and other issues have a lot to do with this. That said, there is concern about the country’s growing dependence on its giant neighbor. Since Jeju went visa-free for PRC nationals in 2006, life on the once-sleepy island has been overrun. Last year, 2.9 million Chinese descended upon it—four times the number of people who live there—pressuring infrastructure, depleting shop shelves and bringing with them traffic congestion and long lines. Tensions between locals and tourists haven’t risen to Hong Kong levels, but they are on the rise. In 2010, the local government began offering the benefits of permanent residency to foreigners who invest

Global Gaming Business AUGUST 2015

KRW500 million ($450,000) or more in property in certain areas. More than 1,000 have applied for the program, 98 percent of them Chinese, according to a recent Wall Street Journal report. Since 2011, the amount of land they own has increased sevenfold. Predictably, prices and rents have skyrocketed. Last June, a newly elected reformist governor ordered a review of the Genting project, holding up the groundbreaking for months. He has since called for the creation of a national regulator modeled along Singapore’s strict lines, and he’s pushing for an increase in the local gaming tax. In a radio interview shortly after his election, he spoke of the risks from “unscrupulous operators.” “Given international casino operators are flocking to Korea with an aim to open casinos for Korean nationals in the future, we must be vigilant about protecting our citizens,” he said.

Defensive Model Needless to say, all is not well in China either, as anyone who’s followed last month’s stock market crash knows, and the aftershocks will do nothing for falling property prices and a slowing economy in general. Macau has been feeling the pain for more than a year as these factors wreak havoc with liquidity in the VIP trade that has driven 70 percent of the market’s world-leading revenues. As Macau also is painfully aware, what Beijing gives it can readily take away, and it’s difficult to believe the Communist Party has gone to the trouble it has to cut off illicit money flows through the South China Sea only to have it slip out the Yellow Sea. But South Korea is a very different market, as observers are quick to point out. Says Sean King, a senior vice president with Park Strategies, a New York-based business advisory firm with offices in Taipei, “It’s hard to make projections, as overall tourist arrivals don’t always correlate to gaming tourism—especially at a time when Beijing’s cracking down on high rollers taking money out of the mainland. But Korea’s less susceptible to such crackdowns, as Korean casinos largely target Chinese tourists already there for shopping and other activities. In other words, Korea’s more low rollers and VIPs versus the VVIPs you see in Macau.” Grant Govertsen, a principal with the Macau office of brokerage Union Gaming Research, agrees. “Clearly, Beijing can and does have an impact on the decisionmaking process of VIP customers. It has much less of an influence on mass-market customers. Hence, given the millions upon millions of Chinese mass-market tourists to Korea, it would make sense to me that an IR operator who targets the mass-market consumer could be very successful. Investors, I think, will feel the same way. The mass-market business model is much more defensive, it is highermargin, and it has more visibility, less volatility.” The foreigners-only industry is smallish—around 660 table games and 925 machine games in total—and not altogether attractive by Macau or Singapore standards. Yet the China factor had Standard Chartered bullish when it initiated coverage last year of the shares of Paradise and No. 2 foreigners-only operator Grand Korea Leisure. The bank forecasted revenues to surpass $3.2 billion by 2016, implying annual growth in the double digits. Things have soured noticeably since then. In December, a report in a Beijing newspaper quoted mainland officials on the evils of Chinese citizens going abroad to gamble, and that was enough to send shares in Paradise and GKL tumbling. GKL’s revenue dipped 3.7 percent last year, despite juicing its marketing spend by KRW22 billion, and the softness continued into the first quarter, which was up 6.9 percent year-on-year but flat compared to the final months of 2014. Paradise is No. 1 in gaming revenue because half of its VIP table play is Chinese. They account for more than 60 percent of drop group-wide. But as in Macau, as more big mainland players stay away, anxious to avoid the spotlight of the party’s crackdown on corruption and capital flight, the more expensive the smaller play is

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becoming. Revenues at Paradise rose 8 percent last year, but the company spent 19 percent more than the year before to get it. It’s since gotten worse. In February, word came down from no less than the deputy director of China’s Ministry of Public Security that law enforcement was going after “illicit” marketing activities by foreign casinos in China, specifically by Koreans. “Paradise earns more from Chinese customers than its rival GKL,” an analyst with Samsung Securities said at the time, “meaning the former will be hit harder by the tightened state monitoring.” Sure enough, by the end of the first quarter, Chinese VIPs had cut back on their wagers by 20 percent. Gaming revenue fell 13 percent. Operating profit plummeted 29 percent. Table game turnover is down 22 percent through the first half. The MERS scare no doubt played a role, but so did the arrest in China in June of 14 South Koreans accused of trying to lure Chinese citizens to Korean casinos. Employees of Paradise and GKL were among those jailed. Paradise’s June revenue fell a whopping 50 percent against the same month in 2014. Compared with May, the decline was nearly two-thirds. It may have been the company’s worst month ever. But what all this points to are larger problems the government needs to address if it’s serious about shepherding the country into the elite of the world’s gaming destinations. “One thing that hasn’t changed is the regulatory and legal environment,” says longtime Asia hand Jonathan Galaviz, now a principal with Global Market Advisors, an industry consultancy. “As much as there has been talk about liberalization, the regulatory, legal and strategic sense of casino gaming in South Korea

has essentially remained the same.” He is speaking of the entrenched ban on domestic play, but it could apply with equal vigor to the assumption that all it takes to build a major resort market is to license it. “The biggest problem at the moment with the South Korean gaming industry is it’s completely unregulated,” says Paul Bromberg, chief executive of Spectrum OSO Asia. “They have made noises over the years about regulating it, but they haven’t done it. It’s not seen by government as a priority issue.” He compares this to Macau, where “anybody can be a junket operator, unless they have a criminal record.” “It’s the same in South Korea,” he says. “There’s very little interest in junket operators and where they come from, and very little concern about where the money is coming from.” Well-known as an adviser to governments and operators on compliance and related issues, Spectrum counted Singapore as a client back when the city-state was crafting an industry that would go beyond anything the East had seen up to that time. Much like South Korea is looking to do now. So Bromberg has seen the promise and the potential of the IR model firsthand. As he states it, “Casino gaming has really just scratched the surface in much of Asia. And when you look internationally, the American market is saturated. Europe is a basket case. Asia is the place to be.”

James Rutherford is a freelance writer based in the Atlantic City area.

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a i n r o f Cali Tribes, card rooms locked in dispute

Commerce Casino, outside of Los Angeles

BY DAVE PALERMO

hen Vic Taucer, a prominent gambling industry table game consultant, visited six Bay Area card rooms in March and April of 2014, he said he was astounded at the lack of internal operating controls, particularly at the Casino Royale in North Sacramento, California. “The first thing I searched out was whether there were any valid operating controls,” Taucer recalls of his investigation for the United Auburn Indian Community, operator of the nearby Thunder Valley Casino Resort. “There were none.” Taucer documented 389 deals of blackjack, baccarat and pai gow poker from March 11 to April 2 and seldom saw dealers offer to rotate the player/banking position, an apparent violation of state law and California Bureau of Gambling Control (BGC) rules. Of 94 hands of blackjack dealt on March 11, Taucer says, dealers with Pacific Gaming Services, a banking firm employed by Casino Royale to run the games, offered to rotate the banker/dealer position just five times. On another visit, a Thunder Valley casino employee noted a familiar face at the Casino Royale Casino cage buying $20,000 worth of chips. “It was one of our regular players,” says a tribal official who requested anonymity. A Sacramento Superior Court judge in a civil lawsuit filed by four gamblers, including two citizens of the United Auburn Indian Community, tentatively ruled in June that failure of Casino Royale to “continuously and systematically” rotate the banker/dealer position constituted illegal gambling in violation of state law. The judge did not award damages because Casino Royale in November 2014 was shut down by the CBGC for not having sufficient funds to pay gamblers. But the ruling on the legality of the games—if upheld by an appellate court—could prove significant in a growing, vitriolic dispute between California Indian tribes and the card room industry, which consists of some 80 clubs.

TRIBAL BACKLASH Tribes are angry that card rooms are using outside banking firms to offer highstakes versions of blackjack, baccarat and other “California games” that replicate house-banked table games in the state’s 60 Indian casinos. Tribes contend the games are illegal and violate their constitutional exclu36

Global Gaming Business AUGUST 2015

sivity to offer casino gambling. And they are miffed that the card rooms are luring their most valued players. “The California penal code expressly bars the playing of 21, in other words, blackjack, as a prohibited game. Yet you can drive down streets and highways in our state and see billboards on which card rooms boldly advertise that they play Las Vegas-style blackjack,” Leland Kinter, chairman of the Yocha Dehe Wintum Nation, told an Assembly committee. “In addition, the card rooms are effectively playing house-banked games,” Kinter said. “Card rooms no longer rotate the bank in the playing of their games and allow so-called third-party proposition players (TPPPs), essentially a partner of the card rooms, to maintain that bank.” Card room operators contend the games are allowed under state law and gambling regulations. “The tribal community has very strong feelings about the issues,” says Kyle Kirkland, president of the California Gaming Association, a card room lobby and trade group. “The card rooms feel very strongly about our position. We feel like we operate lawfully.” The controversy is shining an embarrassing light on card room operations and the state’s bifurcated regulatory system—which consists of an adjudicatory California Gambling Control Commission (CGCC) under Governor Jerry Brown and a BGC enforcement agency under Attorney General Kamala Harris’ Department of Justice (DOJ). Bob Lytle, who formerly headed DOJ’s gam- The office of California Attorney General Kamala bling enforcement, was accused by Harris last Harris says the Bureau of December of violating conflict-of-interest and Gambling Control needs confidential business codes in connection with more funding to better his consulting work for a card room targeted in a regulate the card rooms

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Casino Royale, near Sacramento, employed a third party to operate the games, with little apparent internal controls

Representatives from as many as 10 tribes—including the politically powerful Pechanga, Agua Caliente and Viejas Indian bands—on June 26 took their complaints directly to Harris. Tribal leaders and Harris would not comment. “Everyone kind of agreed that we weren’t going to go to the press on this,” says one of those attending the meeting. “We don’t want to do anything to disrupt any progress. We’re optimistic we can work through this and reach some kind of resolution.”

WILD WILD WEST

Casino M8Trix, outside of San Francisco, is one of the most elegant of the California card rooms, but also has been under investigation

skimming investigation. A number of CGCC officials linked to Lytle have since recused themselves from deliberating license issues. (See page 40.) It was also disclosed that Lytle wrote a December 20, 2007 opinion letter nine days before leaving the DOJ to work for the card rooms that suggested the bank in table games need only be offered to players and not necessarily rotated. Tribes contend card rooms are using Lytle’s opinion letter to circumvent the law. But it’s not clear whether Lytle’s letter is bureau policy. “It may be wrong to make the assumption the Lytle memo is the policy of the bureau,” said a source close to the issue who requested anonymity. “Certainly they (bureau agents) have been acting that way. “But Lytle was not an attorney. It would be surprising to me for a non-attorney to interpret the law and create policy. There may be a legal opinion, somewhere, that formed the basis for Lytle issuing the memo.” BGC officials did not agree to requests for interviews. Tribes are pressuring the BGC to take enforcement action against the card rooms. The BGC contends regulations and state law dealing with TPPPs and banker/dealer are vague, particularly on whether the deal need be actually rotated or simply offered to the various players. The BGC also admits it lacks manpower and resources, a predicament blamed on the state legislature and Attorney General Harris, who has never ranked gambling control high on her list of DOJ priorities. Brown may have a similar disregard for the CGCC, stacking the commission with career bureaucrats with little or no background in gambling or business. The result? “The state simply cannot enforce the laws on the books now to stop illegal activity rampant in California card rooms,” Kinter says. “The Bureau of Gambling Control has asked the state legislature for additional resources,” Harris spokeswoman Kristin Ford says. The agency, she adds, “works with limited resources to investigate, license and regulate a widespread industry touching on a number of different issues.”

California’s card room industry dates back more than 100 years. But long gone are the days when clubs thrived on poker games with player bets building the pots and the house taking a collection fee, or “rake,” off the wagers. The mostly family-owned card rooms were largely unregulated until passage in 1998 of the Gambling Control Act, which established the CGCC and, in 2007, the enforcement bureau under Harris. Meanwhile, competition from tribal casinos prompted a decade-plus evolution of card rooms from poker to high-stakes variations of blackjack and other “California games” bankrolled by TPPP firms. It was soon common to see player/bankers with $50,000 in chips stacked on the green felt. Regulators and industry experts believe modern regulations, surveillance and internal operating controls have struggled to keep up with the industry’s evolution from poker to casino-style games. The commission is updating internal controls and amending TPPP regulations to increase accounting and financial reporting requirements and better define the contractual relationship between banking firms and card room owners. Meanwhile, the BGC is holding workshops on collection fees and, according to some sources, assessing its enforcement policy on player/dealer rotation. “This is a very newly regulated industry, so to compare us now with Vegas is, you know, unfair,” CGCC Commissioner Tiffany Conklin says. “You might want to compare us to when it gambling was new in Las Vegas. We’re finally having these regulations in place and getting enforced. “The industry does evolve so quickly, we’re trying to keep up with the technology and the new types of gaming and the new types of issues that evolve,” she says. With exceptions, such as the larger Los Angeles-area clubs, sources say compliance with internal operating controls and federal Title 31 money laundering and cash transaction guidelines in many card rooms is nonexistent, poorly implemented or not applicable to TPPP-banked games. “When you switch over to the type of games in California now—nonpoker games that by law are supposed to be player-banked, but most of the time it’s a third-party banker—it certainly makes the situation far more complicated,” says Nevada gaming attorney and author Tony Cabot. “You need different internal controls than with poker. You also have the contractual arrangement between the banker and the house.” “If card rooms are going to have a banking game, which they do, even though outside operators are banking the game and not the house, the card rooms still have to operate as such,” says Taucer, who along with his Bay Area work also scrutinized Southern California card rooms. “I would like to see valid internal controls, Gambling Control Commission approval of those controls, and then I want to see operators match what is written. None of that is happening.” There are 35 TPPPs licensed by California regulators who, in many cases, dominate play in the smaller card rooms, sharing profits with the owners. “At the end of the day the money left on the table belongs to the banking group, not the card room,” says Dave Vialpando, a former BGC supervisory agent who now serves as a tribal casino regulator. Industry consultant George Joseph calls card rooms “the Wild Wild West, no question.” AUGUST 2015 www.ggbmagazine.com

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INDUSTRY’S ‘GALAPAGOS ISLANDS’ CGCC Commissioner Richard Schuetz, who has operated commercial and American Indian casinos in several states, likens the evolution from poker to TPPPs to the “Galapagos Islands,” and calls California card rooms the “worst regulated segment” of the nation’s gambling industry. “We need to tighten up the regulations,” Schuetz says, to avoid scandals that could embarrass the industry. It may be a bit late. The litany of card rooms targeted in Title 31, money laundering, loansharking and skimming investigations includes Casino M8trix in San Jose (2014), Artichoke Joe’s in San Bruno (2011), the Oaks Club in Emery (2011), Normandie Casino in Gardena (2013), Palomar Card Club in San Diego (2014) and Village Club Card Room, Chula Vista (2014), to name a few. “There’ve been more raids on California card rooms than all the tribal and commercial casinos in the country, combined,” notes one industry regulator. Meanwhile, several banking firms with questionable business ties to the card rooms have paid fines of $250,000 to $550,000 for violating state law. Card room attorney David Fried rejects the notion the industry lacks sufficient regulations. “The card rooms are heavily regulated,” Fried says. “The amount of minutiae they have to comply with in our regulatory rule book is hundreds of pages long.” “We have put in some pretty strict internal control standards,” Kirkland says. “I can tell you they’re pretty detailed. It’s not as though we’re all just out there winging it. “Some of the regulations are complicated. You have to continue to retrain your staff to make sure you do the best job you can. It has been a learning curve for the card rooms and for the regulators.” Consultant Bill Zender says card room internal control regulations have improved in the past three years “to a point where they’re as good as or better than any gambling operation in the country.” But he and Kirkland would not vouch for compliance by most of the state’s nearly 80 licensed card rooms. Vialpando says card rooms are historically family-operated businesses often unaccustomed to state regulations and federal cash transaction laws. “They’ve had a hard time getting their heads around it, because for years they’ve never had to do all this stuff,” he says. “Card clubs are at least as vulnerable to use by money launderers… because of their size and because those institutions often lack the controls found at casinos,” Stanley Morris, former director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) told Reuters News Service. Meanwhile, both Schuetz and former CGCC Chairman Richard Lopes have said tribes operate “some of the best regulated casinos on the planet.” The CGCC and BGC provide oversight of the $7 billion tribal government gambling industry while directly regulating the card rooms. Tribal governments with large gambling enterprises have annual gambling commission and surveillance budgets in excess of $6 million to regulate a single casino. (The BGC budget is $26 million.) And tribal casino regulators often conduct training for BGC agents and auditors. 38

Global Gaming Business AUGUST 2015

The Normandie Casino is just one of many California card rooms that have been investigated for financial irregularities

California Gambling Commission member Richard Schuetz says regulation of card rooms needs to be “tightened up”

DIRE CONSEQUENCES The dispute between the politically powerful Indian tribes and card club operators could have dire consequences for an $850 million card room industry that employs 22,700 people while generating $270 million in federal, state and municipal taxes. Some Los Angeles suburbs and communities such as Fresno and San Jose rely on card rooms for 60 percent or more of their municipal revenues. A strict regulatory interpretation of rules and laws governing TPPPs, player/dealer rotation, collection fees and “California games” could cripple the industry and bankrupt municipalities. “If we were to go back to the old days of rotation—if everyone on the table paid a commission—it would have a damaging impact on the card rooms, and it would bankrupt a number of cities,” says a Capitol Hill source who requested anonymity. “Union city employees, police and firemen would be laid off,” the source says. “The state would have to come to the rescue.” Kirkland suggests that it would be wise for card rooms and tribes to work together to promote the state’s gaming industry and prevent residents from slipping over the border to Las Vegas, which generates nearly 30 percent of its visitors from California. “I do think there’s a lot of fighting between the card rooms and the tribes. What we really should be thinking about is the 30 percent of the customers we send out to Nevada every year,” Kirkland says, noting that table games often account for less than 10 percent of a tribal casino’s revenues. “That’s a much bigger issue for all of us.” The card room industry worked with a number of tribes on issues such as off-reservation gambling. And the San Manuel and Morongo Indian bands are partners with the Commerce, Bicycle Club and Hawaiian Gardens casinos in pressing for iPoker legislation. Neither tribe has been active in the controversy over card room games. With the BGC struggling to regulate card rooms—the agency claims to have a backlog of 2,400 card room licensing investigations—many on Capitol Hill are asking if the state is ready to take on internet gambling. “The present ability of the state to effectively regulate is among our chief concerns as the legislature considers a major expansion of gaming in California,” Kinter says. “We must ask ourselves, if the state cannot effectively regulate the card room industry, are they presently in a position to regulate the vast and more complex environment of internet poker?”

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A ‘Hard Look’ Bringing the California gaming regulatory system up to speed should be a priority politically bifurcated regulatory system and a lack of skills, manpower A and resources are crippling California’s ability to administer and police its card rooms while providing regulatory oversight of American Indian casinos, state officials say. Two high-ranking Gambling Control Commission officials linked to card room consultant Bob Lytle, a former enforcement chief accused by the Department of Justice (DOJ) of misconduct, have abruptly left their jobs. And the lack of skilled manpower and resources in the Bureau of Gambling Control raises concern over whether the state can regulate internet poker. “We’re having a hard time handling what we have now,” Commissioner Richard Schuetz told Pechanga.net. “Combined with the personnel disruptions of late, if we were to go into the internet we would need a great deal of help.” Commission Chairman Richard Lopes, in announcing his May retirement, said the state should “take a hard look” at its regulatory apparatus and encourage individuals with gambling industry experience to serve on the commission, which crafts regulations. California has the country’s only political bifurcated regulatory system, with an adjudicatory commission appointed by Governor Jerry Brown and an enforcement bureau under Attorney General Kamala Harris’ DOJ. The system regulates the card club industry, with some 80 facilities, and provides limited oversight of 59 tribal casinos. Some industry observers applaud the regulatory structure as ensuring a clear separation of judicial and enforcement functions. Others contend it makes it difficult to create a uniform and efficient gambling policy. “I would recommend that this state take a hard look at what Nevada does, and New Jersey,” Lopes said, calling Nevada the “gold standard” in state regulations. Both states have bifurcated systems under one elected official, the governor. Communications between the BGC and commission are problematic, Lopes California Gambling Commission said, with investigatory information beChairman Richard Lopes tween agencies filtered through attorneys announced his retirement only months after being reappointed and mid-level bureaucrats. by Governor Jerry Brown “Having two structures is somewhat awkward,” said Lopes, a career law enforcement officer and former DOJ supervisor. “It’s difficult to meander through this and come up with good decisions.” Lopes also suggested California seek more gambling industry experience in commission and bureau leadership positions. Other states seek out those with industry experience to assist with regulations, Lopes said. With the exception of Schuetz, a longtime tribal and commercial casino operator, California commissioners are career bureaucrats.

Global Gaming Business AUGUST 2015

“Nevada embraces that experience to help them navigate difficult decisions when it comes to suitability, regulations, etc.,” Lopes said. “California seems to run away from that, for whatever reason.” “I hope Chairman Lopes’ suggestions don’t fall on deaf ears because I, too, believe that California needs some fundamental attention paid to its regulatory assets,” Schuetz says. “Quite frankly, California does not represent California Gambling Commission itself well among the other gambling member Tiffany Conklin isn’t ready jurisdictions. The other jurisdictions to scrap the system, just improve it seem to take gambling much more seriously and commit more resources to the regulation of the industry.” Commissioner Tiffany Conklin disagrees. “As much problems as we have and we complain about it, I feel it protects the integrity of the process more to have two separate agencies,” she says. “Sure, there are areas we need to correct and work better on, but scrapping the entire process and working under one constitutional officer isn’t something I’m ready to accept at this point.” Joginder Dhillon, Brown’s chief adviser on gambling affairs, declined comment. California statutes require the five commissioners consist of an attorney, a government official, a business person, a law enforcement officer and a member of the public at large. It does not limit gambling experience, though it requires a two-year “cooling off” period for industry executives seeking appointment to the commission. Brown in a 2012 budget shuffle shifted commission investigatory, auditing and compliance duties to the DOJ, despite the fact political observers contend Harris does not place gambling high on her priorities. “Brown and Harris are not engaged in this debate,” says a high-ranking Capitol Hill official who requested anonymity. The commission is amending internal controls and regulations on thirdparty banking firms. “The card room sector needs fundamental improvements to ensure that industry is sustainable,” Schuetz says. Tribal governments, he says, “do an excellent job of regulating.” Lopes and Schuetz commend BGC employees for their diligence, but said the agency lacks skills and manpower. Many field agents and auditors are for-

“Sure, there are areas we need to correct and work better on, but scrapping the entire process and working under one constitutional officer isn’t something I’m ready to accept at this point.”

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Wheel Analysis mer narcotics officers with little experience in gambling compliance. “They do a wonderful job,” Lopes said. “I just think some other states have a little bit better approach to regulating an industry.” California would be challenged by internet gambling. “We don’t have enough personnel and we don’t have the skill sets that we need,” Schuetz says. “We need greater training. “Terrestrial regulation and digital regulation… are fundamentally different issues,” he adds, and not having a gambling testing laboratory puts California at a disadvantage. Lopes announced his retirement the same day director Tina Littleton voluntarily stepped down to assume a lower-level job with the agency. Lopes and Littleton had both recused themselves from adjudicating the gambling license of former DOJ enforcement chief Lytle, a card room consultant who in December was accused by Harris of misconduct in connection with a skimming investigation. Lopes briefly was Lytle’s supervisor when both served with the DOJ. Littleton in May said she was living with James Parker, a onetime BGC supervisory agent suspected of providing information to Lytle concerning a skimming investigation of the M8trix Casino in San Jose. Lytle denies violating conflict-of-interest and document disclosure provisions of the Business Code as alleged in Harris’ formal accusation. He faces a hearing before an administrative law judge before the matter is forwarded to the commission for final action. The bureau is seeking a fine and revocation of Lytle’s licenses as a key employee and owner/interest holder in two Sacramento card rooms. “Obviously, I’m a strong believer in due process and innocence until proven guilty,” Lytle told Gambling Compliance. “I look forward to a hearing. I look forward to proving that I didn’t do anything wrong.” Lopes did not mention Lytle in announcing his retirement. He notified the governor’s office of his decision in a March 30 letter, about three months after being reappointed. “I’m eagerly looking forward to the next chapter in my life,” Lopes said. Meanwhile, Conklin in June recused herself from presiding over the licensing of the Club 101 card room in Fresno, partly owned and operated by Kyle Kirkland, president of the California Gaming Association. Conklin acknowledged being friends with the wife of Kirkland’s attorney, John Maloney, meeting “socially” with Kirkland at a San Francisco law office and attending a Thanksgiving dinner at Maloney’s Las Vegas home with Kirkland being the only other non-family member. “My record will reflect that I have no bias regarding Mr. Maloney and his client and have in fact voted against several of Mr. Maloney’s other clients where it was appropriate,” Conklin told commissioners. “I will be recusing myself… to avoid any bias with my personal relationship with the Maloney family.” Conklin and Kirkland in separate interviews said they have met infrequently and did not talk about business at the San Francisco meeting or the Thanksgiving dinner. —Dave Palermo

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Should I Stay or Should I Go? By Steve Ruddock

Status of marketing affiliates for iGaming still unclear

egalization and regulation have changed the online gaming landscape in the United States. With three of the 50 states offering legalized online gaming, and several others considering it, the industry is engaged in some serious soul-searching, and no part of the iGaming industry finds itself at a greater crossroads than affiliates. Affiliates have been an integral part of the online gaming economy since the earliest days of the industry. In many people’s minds, iGaming affiliates deserve much of the credit for the success of online gambling, but many people also point out the practices of unseemly affiliates, blaming them for some of the industry’s current problems. Legalization was supposed to eradicate these bad actors from the industry. Unfortunately, some of these dubious affiliates are now present in the regulated markets, and regulators, new to the task of all things online gaming, are struggling to stamp out their undesirable behaviors. Before diving into the current struggle between affiliates and regulators, it’s important to provide the back story of affiliates in the online gaming industry.

Witness the Wonders of iGaming Affiliates are, for lack of a better analogy, the carnival barkers of the iGaming world. Their singular mission is to steer potential customers toward the online gaming sites they promote on their websites. Some are content providers, offering visitors to their site unique perspectives on the industry, strategic tips and/or data analysis, which allows them to convert players in a very organic manner. Other affiliate websites engage in a more transparent tit-for-tat approach, offering potential players rewards, rang-

ing from free gift cards to free poker bankrolls, in exchange for signing up under their affiliate banner. Affiliates in the online gambling world have historically performed their duty in exchange for a one-time fee, or more commonly, for an ongoing share of the revenue generated by the players they send to the sites. And it’s the latter revenue-sharing arrangement that many people feel has led to most of the problem behavior in the affiliate market.

Incentivizing the Wrong Behaviors By offering affiliates a share of revenue instead of a one-time CPA (cost per action/acquisition) payout, online gaming sites unwittingly incentivized affiliates to go after high-volume players instead of new players. It didn’t take affiliates long to realize that attracting a single high-volume was worth more to their bottom line than 1,000 new players. This created an environment where the affiliates and the online gaming sites they were promoting had contradictory goals. iGaming sites wanted new, depositing players. Affiliates wanted high-volume winning players, and the revenue-sharing deals greatly favored affiliates. When online poker and online gaming was booming in the early and mid-2000s, this arrangement was mutually beneficial, as affiliates prospered along with the online poker sites they promoted and there was plenty of money, and players, to go around. But, because there was so little regulation, when times got harder, some affiliates sought shortcuts, and the iGaming affiliate industry became far more cutthroat. Having seen firsthand what happens under a revenue-sharing model, PocketFives.com cofounder Adam Small says, “Affiliates should always be paid today for the work they do today, and every deal should include one or

Affiliates are, for lack of a better analogy, the carnival barkers of the iGaming world. Their singular mission is to steer potential customers toward the online gaming sites they promote on their websites. 42

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both of these things: fixed fees and CPAs. “The early years of online poker were such a disaster affiliatewise. A lot of players were brought in, but at incredible cost to operators in terms of how it limited their long-term upside.”

The Dark Times When the industry started to decline due to legislative hurdles in the U.S., and the Balkanization of European markets, some affiliates increasingly turned to shady practices to keep the money train chugging down the tracks. Following the passage of UIGEA (Unlawful Internet Gambling Enforcement Act) in 2006, and the subsequent developments on April 15, 2011 (Black Friday), the lucrative U.S. online poker market was severely eroded, and much like the high-volume players they were sending to online poker sites, affiliates started cannibalizing one another. Poaching high-volume players from other affiliates was a common occurrence, as were secret rakeback deals and other “privileges” ranging from something as mundane as fronted withdrawals to the utterly repulsive, such as setting players up with VPNs (virtual private networks) or the use of other players’ accounts. While some affiliates engaged in these practices, the majority of affiliates were simply the victims of these disreputable tactics, figuring they could bide their time until iGaming was legalized and regulated, and the regulations would put an end to these types of disreputable practices. The hope was, the good guys would come out on top and the bad guys would be punished and ostracized. As Small puts it, in a regulated market, “affiliates should be required to demonstrate some actual value to the operators and the market at large. They shouldn’t simply be ranking in Google for ‘Party Poker Deposit’ or be offering special deals to players via private message on a poker forum. They need to actually be working to grow the sites they’re marketing, and the market as a whole.” Thus, far removing parasitic affiliates has proved to be a more difficult task than first expected.

What Are Regulators Doing? When Nevada, Delaware and New Jersey regulated online gaming within their borders, one of their goals was to cleanse the industry of these bad actors. To accomplish this mission, regulations in these newly legalized markets extend far beyond the operators and software providers. For the first time, U.S.-facing affiliates found themselves under the sway of local regulators, subject to the same vetting and licensing processes to which any significant casino vendor must submit. For instance, affiliates seeking a license in New Jersey’s regulated market must first part with a non-refundable up-front licensing fee of around $2,000, as well as submit to an extremely invasive background check that includes past tax returns and fingerprints, according to Jeremy Enke, a longtime online poker affiliate who now works for Pala Interactive. Many affiliates decided the licensing fee and suitability check was unwarranted and continued promoting offshore sites in lieu of the regulated sites in New Jersey. Others, seeing long-term potential, jumped through the Division of Gaming Enforcement’s hoops and received their license.

“

Affiliates who consistently bring in low-value players or who are found to be cheating the system in any way should be banned from operating in that market. If New Jersey actually starts prosecuting affiliates—including ones in other states or countries—who promote offshore U.S.-facing poker sites, the results of this move will be a lot more interesting.” —Adam Small, PocketFives.com cofounder

Unfortunately, some tried to have it both ways. These affiliates went through the licensing process but thumbed their noses at the regulations, bringing their dishonest business practices to the U.S. regulated online gaming markets. What these affiliates didn’t anticipate was regulators actually enforcing the rules.

The DGE Steps In In New Jersey, several licensed online gaming affiliates were double-dipping—promoting both licensed and unlicensed sites—and the DGE was forced to step in. In April 2014, the DGE sent six cease-and-desist letters to these licensed affiliates, warning them that their practices were in violation of the state’s Casino Control Act and could lead to prosecution if the links to unlicensed sites were not removed. Two of the affiliates that received the C&D letters, PokerSource.com and RaketheRake.com, complied with the DGE’s demands. Another affiliate website targeted by the DGE, RakeBrain.com, decided to continue promoting unlicensed sites while expunging New Jersey’s licensed sites. This is something Small suspects most affiliates will choose. “I doubt more than a handful of affiliates will choose the regulated New Jersey market over promoting offshore sites to the rest of the states,” he says. “There just isn’t enough leverage right now.” A final affiliate, which operates two of the sites named by the DGE, CardsChat.com and PokerSites.com, has apparently decided to test the DGE’s mettle. At the time of writing this affiliate continues to promote unlicensed sites along with licensed sites. It’s a risky gambit, but it’s also the more profitable one—for now.

DGE Creates an Affiliate Bright Line In June, the DGE followed up on its previous C&D letters by issuing an advisory bulletin to clarify the regulations iGaming affiliates must abide by, and to issue a final ruling on what, if any, punishments would be handed down to the affiliates they caught double-dipping last year. The bulletin created a bright-line date of June 4, 2015, and gave any licensed affiliate still promoting unlicensed U.S. sites 150 days to remove them from their websites. The bulletin extended an olive branch to affiliates who previously proAUGUST 2015 www.ggbmagazine.com

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Do we cut ties with the offshore sites or do we swear off the regulated U.S. market forever? This is a than it appears.

much harder choice

moted unlicensed sites (prior to New Jersey’s iGaming industry going online on November 21, 2013), with the DGE stating that this would no longer cause the affiliate to be found unsuitable, so long as they ceased promoting unlicensed sites within 150 days of June 4, 2015. This decision has opened the door for many affiliates previously deemed unsuitable by the DGE, as well as providing these affiliates with a carrot to chase, as they must now make the decision to either enter the regulated market or forego it in perpetuity. Second, and more controversially, it granted affiliates who were caught double-dipping amnesty. The DGE said it would not punish currently licensed affiliates that were promoting unlicensed sites so long as they comply within the 150-day window. For some, this was too much of a slap on the wrist. One licensed affiliate, who wished to remain anonymous, called the ruling “a punishment on the affiliates that made financial sacrifices in order to conform with the state’s regulations.” “Affiliates who consistently bring in low-value players or who are found to be cheating the system in any way should be banned from operating in that market,” Small says. “If New Jersey actually starts prosecuting affiliates—including ones in other states or countries—who promote offshore U.S.-facing poker sites, the results of this move will be a lot more interesting.”

The Regulated Market Conundrum It may not go as far as the above-the-board affiliates in New Jersey would have liked, but what the advisory bulletin does is force other affiliates, the ones on the fence, to make a difficult choice. Do we cut ties with the offshore sites or do we swear off the regulated U.S. market forever? This is a much harder choice than it appears. As Small indicates, there simply aren’t a lot of economically viable business models for affiliates in the current regulated markets. “New Jersey is the biggest regulated market in the U.S., but it’s still a very small market,” he says. “It’s a challenge to find an economically viable way to create enough content to make a site sticky for that kind of local, niche audience.” 44

Global Gaming Business AUGUST 2015

A quick perusal of PokerScout.com corroborates Small’s comments. Average cash game traffic at the five major offshore poker sites/networks operating in the U.S. is in excess of 3,000 players. Comparatively, average cash game traffic at licensed online poker sites in New Jersey, Delaware and Nevada is less than 500 players combined. Small sees this market size discrepancy between regulated and unregulated sites as the biggest barrier for affiliates in regulated markets. “The tradeoffs aren’t worth it for affiliates that simply have their own short- or medium-term financial interests in mind,” Small says. “Affiliates, by and large, are choosing to continue to promote offshore because there’s so much more money in it at the moment and for the foreseeable future.” Another affiliate, who wished to remain anonymous, is even more blunt about this issue, calling it “a bad business decision to be a legal affiliate because the market is so small.” Not only is the unregulated market six times larger, it’s also more mature. Affiliates who have been promoting these offshore sites for several years already have a strong core of players at these sites. They would lose the revenue they receive from these players if they were to end their association with the offshore online poker sites they currently promote. Because of these factors, affiliates who decide to make the switch to regulated markets are likely going to have negative margins for the foreseeable future. For some affiliates, being among the first wave to promote the regulated markets is a solid long-term investment. But for others, it’s not an option at all. Losing their current revenue and operating at negative margins would simply put them out of business. “We see long-term value for our brand in this decision,” Small says. “But most affiliates aren’t in it for the long term.”

Steve Ruddock is a freelance writer covering nearly every angle of the iGaming industry for multiple outlets, including Bluff magazine and Online Poker Report. His primary focus is the developing legal and legislative picture for regulated U.S. online poker and gambling.

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iGAMING NORTH AMERICA

The Internet of Things Diving down into the details of players will give operators a better idea of what they want

trange headline, right? And what on earth has it got to do with iGaming? But as I will explain, it is something the casino industry has been pursuing for some time without knowing what to call it. It started with CRM. We all do that: landbased casinos and iGaming sites. The “Internet of Things” is an extension of that concept, and allows you to get into the details of a customer’s experience. You know when they enter your casino, how long they are there, what machines they play and for how long, and how much they wager. You know which restaurant they go to, what foods they like, what entertainment they prefer. Then you can view the player’s age and other demographic and socioeconomic traits. What has been a regular practice in the social gaming arena using big data and intensive analytical techniques can now be brought to the casino floor, providing a 360-degree picture of the guests in real time. Waze provides a good example of realtime Internet of Things application. This is a very popular, crowd-sourced traffic application providing information on traffic conditions, directions, speed traps and so on. For it to work, users must allow the program to obtain their location information from their phone. The phone sends data to the central site, which in turn shares that information with all users on a real-time basis. So, for allowing the program to track your location, you in return get real-time information that will improve your experience. In a casino situation, this could be used to find favorite slot machines, redeem offers made in real time, receive menu specials for the casino’s restaurants, notify guests of drawings and bar specials or offer free play for certain machines. Since this can be done in real time, guests can be enticed to spend more time in the casino, and therefore spend more money.

Global Gaming Business AUGUST 2015

By Paul Girvan

So how does this relate to iGaming? As I have espoused in recent articles, I believe that the near-term future for iGaming in the U.S. is through social gaming, and I have emphasized that the ability to apply the analytical techniques of social gaming in real time is a huge benefit to casinos. This concept has been extended by the development of mobile social gaming platforms like the one recently announced by GameAccount Network. If a guest plays online at home and on his mobile, and also visits the landbased casino, then a whole world of possibilities open up. When that person enters the casino, you will know it, and you will have all his online and offline gaming information, and more, available to you. Combine this with player tracking, and there is now the potential to push offers to guests who are already in the casino or even nearby, to lengthen visits and to even incentivize new ones. Importantly, these offers can be customized to that specific guest and to the day of week and time of day. With the new push to incorporate skill elements in casinos, this approach could be used to update players on their position on leader boards even when they are not in, or nearby, the casino. This could then lead to more visits. It does not end with the land-based casino visit. Ongoing analysis will show if these people went back to the social gaming site. It can track comments about the casino on social media, and customized offers can be made to encourage return visits. Through this approach, we can obtain the “Holy Grail” of CRM by creating that 360-degree understanding of the customer that is actionable in real time. Social gaming, in my view, is a necessary precursor to this form of analysis by providing the online part of the story, and through its mobile application and convergence with player tracking programs, this can be expanded to the casino floor.

Social gaming is, therefore, not only the precursor but the catalyst for this type of analysis. As social gaming takes hold in the U.S., this application of the Internet of Things then becomes a real possibility. An issue that looms as a problem for the implementation of this system is privacy. I would argue that it is the older generations that will see this as a negative issue. Members of the millennial generation are used to apps asking permission to track their locations, and for this key segment, I see much less concern over privacy issues. With increased adoption by casinos of social gaming solutions, several components of this Internet of Things approach are in place. The iGaming company that can marry itself with the CRM process and big data outlined above (social gaming companies being best positioned to do this) could prove to be the big winner with the casino and its guests, both online and offline benefitting. Individually, all the components are in place. They just need to be packaged together in a coherent and utile manner. As the capabilities to provide these types of solutions improves and real applications are developed, the desire of casino companies to participate will increase exponentially, and this is turn will encourage the even greater uptake of social gaming by land-based casinos across the U.S. The impending shift to games that are in part skill-based aimed at millennials will help to drive this change. Thus, the Internet of Things in the context of a casino becomes more likely and more valuable. Paul Girvan is a managing director with the New Orleans office of the Innovation Group, with 25 years of experience advising clients across the gaming industry. Girvan leads the firm’s iGaming practice. Contact Girvan at girvan@theinnovationgroup.com or 504-523-0888.

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Pondering Payments The future of iGaming could depend on how smoothly money can be transferred between the players and the online casinos By Dave Bontempo eady, set, wait. Vendors cautiously navigate the online gaming labyrinth. They must be ready with enhanced products and set to deliver them while awaiting the high-stakes battle over the industry itself. The blueprint covers their spectrum of operations. Vendors need to link online effectiveness to new products, in case online supporters survive legal and internal challenges to their operations. If online gaming fades, the companies must still service their brick-and-mortar customers. And they won’t know about that until the battle plays out, on a murky field. New Jersey, Delaware and Nevada remain the only legalized U.S. jurisdictions for online wagering. California and Pennsylvania, two major-sized markets expected to join the party in 2015, will not. Other states await the outcome of a battle launched by billionaire Las Vegas Sands owner Sheldon Adelson, who seeks to prohibit online wagering with the help of United States senators. Vendors have a vested, if slow-moving interest. Estimates peg the American market for 15 percent of worldwide online revenue in the next couple of years. Global online revenue approached $37 billion in 2013 and is expected to rise. Yet Adelson’s influence may slow online gaming growth. He is reported to be the world’s 18th-richest person, with a net worth hovering around $28 billion, and he opposes online gaming. Delays also unfold internally in California, as tribal entities can’t decide who qualifies to run the operation. Vendors must be flexible. They prepare an airtight case for online security amid the persistent backdrop of money-laundering concerns. They also try to help operators position themselves to capture the online market if it grows. So they work. And they wait.

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Ready Either Way For Las Vegas-based DiTronics, online gaming resembles the hosting of a large family party. Invite everyone, but prepare for a smaller turnout. “We stay focused on the gaming industry and whatever direction it goes, we are prepared to service it,” says Jim Kirner, senior vice president of sales and

“We stay focused on the gaming industry and whatever direction it goes, we are prepared to service it. If land-based casinos have online as part of their enterprise, are we prepared to accommodate it? You bet.

—Jim Kirner, Senior VP of Sales and Marketing, DiTronics

Global Gaming Business AUGUST 2015

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marketing for the Las Vegas-based company. “If land-based casinos have online as part of their enterprise, are we prepared to accommodate it? You bet. If online is going to happen on a large scale, our business supports that. We are a seamless solution. At the same time, we don’t know which direction online is going to go. If it doesn’t happen on a large scale, it doesn’t.” DiTronics handles nearly $3 billion annually, or about $7 million a day. It has long specialized in check-cashing, ATMs, cash advance, kiosks, etc., while servicing about 450 casino operators. It helps casinos in the compliance area by offering a comprehensive library of over 70 reports. They encompass market offerings as well as financial audit and balancing reports across all applications. Access is provided securely and is available from any internet-enabled device. By operating in one of the legalized online jurisdictions, DiTronics connects brick-and-mortar products with online gaming. Players who want to sign up for digital wallets that they will use online usually must make an initial deposit at a casino property. They can also draw down funds from their casino wallets on property, Kirner says. DiTronics offers a comprehensive suite of services to support iGaming initiatives as well as a path to electronic wallets for cashless floor gaming. Not only can it offer straight transaction processing of credit cards and check warranty services, but through partners it can facilitate identity verification, geo-location services and digital fingerprinting. While waiting for the iGaming world to evolve, DiTronics upgrades its portfolio. The company recently closed deals in a couple of states for the new DFS-500 kiosk, with special features including a camera for surveillance, ticketprinting capability and an interface to casino management systems and player tracking. The kiosk provides exclusive software enhancements for ticket redemption, bill breaking, ATM, cash advance and check-cashing transactions. The new kiosk facilitates recent add-on software innovations like Transaction Rewards, which integrates funds access with a casino’s player database to provide customized fee structures, the new Smart Dispense, which reduces wear and tear on the kiosk, and Jackpot Pay, which eliminates the need for jackpot dispense units. All brick-and-mortar-based product advancements are important, regardless of what occurs online. And as an industry observer, Kirner is curious about where the online debate will lead. Fantasy sports are exempt from online regulatory attempts. They are considered games of skill while casino games like poker are deemed games of luck. Enter DraftKings, an operation featuring daily and weekly fantasy tournaments in every major sport. It has an audience of millions and the promise to pay more than $1 billion to participants this year. Play on a desktop, a tablet or via mobile device, for starters. Casinos, especially those in Nevada and New Jersey, can plug into this growth area by recruiting an online player. They can, in theory, provide their own tournaments, fantasy-sports parties or simply lure that patron through its doors for all casino games. It will create an initial buzz. Then what? “Fantasy feels to me the way poker did a few years ago,” Kirner says. “There is a groundswell of excitement and this new demographic of the 20-something-

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to-mid-30s male. Everybody is jumping on the bandwagon. Everybody wants a piece of fantasy sports. “What’s not certain is whether this is going to trend the way poker has trended. With poker they reallocated floor space because of its popularity, but that is now shifting back because the pros got involved and the average person feels like he can’t win. “With fantasy, you could be looking at a situation in which the casual player realizes he has to watch the injury reports all day long, get every fantasy news program, track everything all the time. It will take an enormous amount of time and energy to win money, and you might end up being gamed by the experts. I’m not sure how it is going to play out, but it will be interesting to watch.” At the very least, fantasy sports raises the stakes of the online gaming question. Casinos would have an interest in this because it enables them to recruit new players, cheaply. And that’s not fantasy. It’s a reality.

Lucky You Atlanta-based First Data entered the gaming market a year ago with its PayLucky suite of solutions. The company was already known outside the casino realm. It provides secure and innovative payment solutions to more than 6 million merchants and financial institutions around the world, from small businesses to the largest corporations. Businesses in 70 countries trust it to secure and process over 2,000 transactions per second. The company wants to get out in front of a major trend. In 2014, First Data launched PayLucky Solutions for legalized online and offline gambling. The forums for this activity include land-based casinos, Native American gaming, racetrack betting (parimutuel), lotteries and poker, among others. First Data makes sure player information is secure and protected—both online and mobile, according to Jonathan O’Connor, the general manager of First Data New Markets. PayLucky provides options like prepaid cards, ACH, checks and mobile. Online operators can keep the player experience entertaining while AUGUST 2015 www.ggbmagazine.com

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}

Vantiv was already a processing giant before entering gaming. It handles 22 billion transactions and more than $700 billion in card volume annually. The powerhouse outfit was known for servicing Walmart and CVS, among others, prior to its casino entry via the 2013 spinoff of Vantiv Gaming Solutions. playing it safe with First Data’s private, closed-loop payment network, O’Connor says. Security is a prime consideration. Malware, which infiltrates computer systems to gather sensitive information or gain access to private computer systems, has increased at rates of over 300 percent in the last two years, O’Connor asserts. First Data’s multi-layered TransArmor solution uses tokenization, which changes payment card information into randomized tokens, eliminating sensitive payment card data within the gaming operator environment. In the prepaid realm, with the PayLucky MasterCard, players can get their winnings, purchase, and withdraw or load cash immediately. Players are initially issued a virtual prepaid card for funding immediate play, followed by the flexibility of a physical plastic card. First Data also provides many ACH solutions for the online market, O’Connor says. In the TeleCheck realm, it features Connectpay, an immediate, secure solution for patrons to fund their play. Online gaming operators also will receive a “Confidence Score” to determine players’ credit. First Data also offers warrantied ACH with advanced analytics to minimize operators’ risk and provide immediate funds to players.

New Codes, Same Dependability Cincinnati, Ohio-based Vantiv would benefit from increased online traffic. The company positioned itself a couple of years ago for the growth that has yet to unfold. Vantiv was already a processing giant before entering gaming. It handles 22 billion transactions and more than $700 billion in card volume annually. The powerhouse outfit was known for servicing Walmart and CVS, among others, prior to its casino entry via the 2013 spinoff of Vantiv Gaming Solutions. Joe Pappano, senior vice president and managing director of Vantiv Gaming Solutions, anticipated an online gaming surge based in part on fantasy sports wagering and social gaming a few years back. He laid significant groundwork with operators, banks and vendors to bring the online process forward. Vantiv has the ecosystem so that if anyone wants to use a card to fund his gaming purchases, it will provide the connectivity to allow that transaction to occur, he says. The company also provides back-end reporting. Pappano says $4 trillion was used on debit, credit and prepaid cards in the United States in 2013, and he views Pennsylvania and California as major momentum triggers in this area via passage of online gaming. The process will now be slower, but the company continues to demonstrate confidence in the card realm. It became a partial owner of Sightline and advocates the Loyalty Plus card, which enables customers to convert points derived outside of a casino inside the property. Vantiv also stays abreast of security trends. A number of them unfolded in April via new merchant codes issued by the International Organization of Standardization (ISO), which is responsible for helping issuers and others comply with the Unlawful Internet Gambling Enforcement Act of 2006. The ISO issued new codes related to online gaming. While the card net50

Global Gaming Business AUGUST 2015

works have allowed card issuers to block merchant card authorization requests using MCC 7995 (gaming transaction), the ISO’s new codes indicate certain forms of legal gambling such as lotteries, casinos, and horse and dog racing. Unlike past transactions, the card networks will not allow automatic blocking of these transactions bearing the new codes. They will still do so, but only if the issuers ask. For the issuers, usually banks, this opens a new door of uncertainty. They must decide whether to engage a company like Visa in the time-consuming process of blocking perhaps millions of transactions because of concerns over whether they occurred legally. Or they can consult with Vantiv. Brian Cottengim, vice president of technology and solution consulting for Vantiv, indicates that the new codes represent a potential breakthrough for industry revenue. More online transactions than ever may become authorized once issuers trust the source of funds. “This is moving in the right direction,” he says. “What this does is allow more transactions to reach the issuer. With more transactions flowing to them, it is allowing us to have more direct conversations with the issuers. We can give them a demonstration of the tremendous technology available to them and tie that in with the rules they have to block certain types of transactions. “We can demonstrate to them how we worked with Visa to get these new codes and all of the safeguards that are in place. Here are the controls in place, here are all the gates a player went through before funding his transaction, including age, geo-location, etc. It is the kind of situation that allows us to be an ambassador for the industry. If we build more trust with people about these types of things, it is always good going forward. There will be more and more transactions occurring over time.” Cottengim says Vantiv takes advanced steps to ensure security, especially in the online space many customers are concerned with. “When someone goes online, we have the technology to tokenize that transaction,” he indicates. “Now they can store that token their systems. Every time you enter that card number, it responds back from the first time.” In the remote event that someone hacked a system and obtained the information on the token, it could not be used at a merchant’s place of business, he says. Along with its advancements, Vantiv alerts operators about common industry problems. Point-of-sale and weak password information accounts for roughly two-thirds of data breaches, the company asserts. More than 80 percent of data breaches occur in small and medium-sized businesses. The gaming industry, particularly throughout Indian Country, has a sizable share of small and mediumsized properties. For all participants in the online gaming saga, from the security to the element of speed and functionality, these are turbulent yet interesting times.

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GVC, Amaya Bid £900 million on Bwin

Online Gaming Ban Back in U.S. Senate

he other shoe has dropped in the move to ban online gambling in the U.S. as Senator Lindsey Graham—now a Republican candidate for president—has introduced his version of the Restoration of America’s Wire Act bill into the U.S. Senate. The bill seeks to rewrite the 1961 federal Wire Act to include a prohibition against online gaming. Graham and supporters dispute a 2011 opinion by the Department of Justice that said the original Wire Act applied only to sports betting and does not ban intrastate online gaming. Three states—Nevada, New Jersey and Delaware—have legalized online gaming within their borders since the DOJ ruling. The bill is identical to a bill from Graham introduced in the Senate in 2014, and does not include a grandfather clause for states that already have online gaming. A companion bill from U.S. Rep. Jason Chaffetz (R-Utah) was introduced in the House of Representatives in February. The bill is seen as coming from Las Vegas Sands owner Sheldon Adelson’s Coalition to Stop Internet Gambling. Adelson has backed an extensive lobbying effort to ban online gaming, saying it will lead to underage gambling and more gambling addictions among the public. He also feels online gambling will hurt the brick-and-mortar casino industry. However, the bills have had some backlash from conservatives charging that they subvert states’ rights to make their own decisions on online gambling. The bills have also been criticized for being simple “cronyism” to appease a major donor to Republican candidates in Adelson. John Ashbrook, a spokesman for the coalition, told the Las Vegas Review Journal that the group feels momentum to pass the ban is building “and the Graham-Feinstein bill is an important part of the effort.” Senator Dianne Feinstein of California is the lead Democratic co-sponsor. Other co-sponsors— all Republicans—include senator and presidential candidate Marco Rubio, and Senators Mike Lee, Kelly Ayotte, Dan Coats and Thom Tillis. “Predatory online gambling is ruining lives all across our country, and this bill will help us stop it,” Ashbrook told the paper. But as if it was timed to coincide with Graham’s bill—which has been expected for several months—a Texas congressman also introduced a bill last month in the U.S. House to legalize online poker. 52

Global Gaming Business AUGUST 2015

Senator Lindsey Graham (R-South Carolina) and LVS Chairman Sheldon Adelson

The bill from Rep. Joe Barton (R-Texas) had also been previously announced, and “licenses and regulates internet poker and seeks to restore the rights of people to play the ‘all-American’ game, while at the same time protecting them from fraud.” “My bill is needed now more than ever,” Barton said in a press release. “It creates one federal standard that protects the integrity of the game and the financial interests of players—while protecting American consumers from nefarious and predatory overseas gambling operations.” While it’s hard to say whether Barton’s bill will gain traction in the House, it does point out the division and debate on online gambling now under way. Graham’s bill, while hardly a surprise, was immediately denounced by advocates for regulated online gaming. “It is unfortunate that Senator Graham and Senator Rubio and several colleagues have chosen to carry Adelson’s water in the U.S. Senate,” said Kristen Hawn, a spokeswoman for the Coalition for Consumer and Online Protection, a pro-iGaming group funded by MGM Resorts International and Caesars Entertainment Corp. “By introducing this ill-conceived piece of legislation in spite of broad bipartisan opposition, they have chosen political interests over the interests of sound policy,” Hawn said in a press statement. “Law enforcement officials and internet safety advocates alike have said that it does nothing to protect children and consumers from online predators, and nothing to prevent illegal activity such as money laundering and identity theft.” There have also been concerns about the bill from state lotteries, many of which have moved to online ticket selling. In fact, the Review Journal cited unnamed sources as saying Graham’s bill was delayed while he was in negotiations with lottery representatives, though no language to protect lotteries was inserted.

VC Holdings has made a £900 million bid to acquire bwin.party Digital Entertainment in a deal that values the company at about $1.4 billion. Under the offer, GVC Holdings would pay 110 pence a share in cash and stock for bwin.party, representing an 11 percent premium to its closing price on the day of the announcement. Bwin.party said it will work with GVC so the bidder can finalize the offer. There’s no guarantee there will be a formal announcement of a transaction, it said. Bwin.party has weighed the benefits of a combination, “and has determined to work with GVC so that they can finalize their offer over the coming days,” the company said in a news release. The company had previously announced it was in “preliminary discussions with a number of interested parties regarding a variety of potential business combinations.” GVC Holdings first announced its takeover approach in May, and 888 Holdings, an online gambling company based in Gibraltar, announced its own takeover bid shortly after. GVC Holdings said its talks with bwin.party were continuing, and that any offer would be jointly financed by GVC Holdings and its partner Amaya Gaming, the Canadian operator of the websites PokerStars and Full Tilt Poker. Kenneth Alexander, GVC chief executive

“Based on our experience with the successful Sportingbet acquisition and restructuring, we believe that the potential combination of GVC and bwin.party would result in substantial financial and operating synergies and represent an excellent opportunity for both GVC and bwin.party shareholders,” Kenneth Alexander, the GVC chief executive, said in a news release.

Hopes of Online Poker in California Dimming for This Year Officials of California’s racetrack industry say they are not tempted by a “revenue-sharing” idea recently floated by Indian gaming tribes who are opposed to participation by racetracks in iPoker.

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In June, Pechanga Chairman Mark Macarro, testifying before the Assembly Government Organization Committee, said his tribe, which has opposed any participation in online poker by any entities Pechanga Chairman other than tribes or card Mark Macarro rooms, would be in favor of giving them a share of online revenues. Pechanga heads a coalition of nine tribes that share this common position. “If that is not an acceptable form of participation, the racing industry also has the means to enter into private partnerships with licensed operators to participate as affiliates,” he said. During the same hearing, Macarro said, “We are realistic about the politics of this issue. That is why Pechanga is prepared to support other opportunities for the racing industry to participate and benefit from online poker. “We respect the sport of horse racing and recognize the importance of the jobs that rely on the industry.” Reacting to Macarro’s offer, Keith Brackpool of the Stronach Group, which represents track operators and owners, said, “I appreciate the offer, but we don’t believe at this stage that a level playing field would be the other part of the gaming community having a license and determining what morsel of that we would receive.” Industry members say they consider the offer by Pechanga to be condescending. “We feel that internet space is really our space,” Joe Morris, president of the Thoroughbred Owners of California, told Online Poker Report. “If anyone enters that space, we want a seat at the table.” Morris added that the racing is the only legal wagering entity currently conducting business online. “We’ve done so without any challenges for the last 14 or so years,” he said. He noted that the same revenue-sharing offer was made many months ago. “We want the same shot at a license as everyone else.” Five tribes don’t share Pechanga’s opposition to participation by racetracks. They include Rincon, Pala, Morongo, San Manuel and the United Auburn Indian Community. Robyn Black, a lobbyist for the thoroughbred racing industry, predicts that no bill will be approved without the racing industry and its 22,000 union members. He told Online Poker Report, “Any discussion on internet gaming has to include horse racing. It should not be exclusive to tribes. It should not be exclusive to card rooms. If it was going to be exclusive to anybody, we’re the only ones on the internet.”

Another would-be participant at the table is PokerStars, which has partnered with several other gaming tribes. Pechanga also opposes its participation, supporting inclusion of a “bad actor” clause that would prevent PokerStars’ inclusion because the international company once allowed American players to participate in real-money games in contravention of U.S. law. The impasse has convinced some Sacramento political observers that no iPoker bill is likely to be passed in the legislature this year. However, Rincon Band of Luiseno Indians has not yet thrown in the towel. It has established a new website that will provide updates on iPoker legislation.

World Poker Tour Bought by Hong Kong Company

he World Poker Tour has been acquired by Ourgame International Holdings Ltd.—a Hong Kong-listed, Beijing-based corporation specializing in social gaming—for $35 million in cash. Ourgame offers a wide range of online card and board games across different platforms, and has more than 500 million users. The WPT had previously worked with Ourgames to hold a WPT National China Tournament at MGM Grand Sanya Resort, and extends a December alliance between the two companies in which WPT agreed to exclusively license its products and services to Ourgame in more than a dozen Asian countries. The WPT will maintain its Irvine, California headquarters and Los Angeles production offices while expanding offices in Beijing, officials for the companies said. “Having already established an exciting partnership with Ourgame, a high-growth company led by an enthusiastic group that is fully invested in the global growth of the sport of poker, we are delighted to now become a fully integrated member of the Ourgame family,” said WPT President and CEO Adam Pliska. “I want to thank bwin.party CEO Norbert Teufelberger and bwin.party CFO Martin Weigold for all of their support over the last six years, and for helping facilitate this agreement.” In 2009, bwin.party acquired the WPT for $12.3 million.

New Jersey Online Gambling Sites Attacked by Hacker

hacker launched an attack on four New Jersey online gambling sites that caused the sites to go offline for 30 minutes over the July 4 weekend. The hacker then asked for a ransom to be paid in the virtual currency Bitcoin to prevent future attacks during the holiday weekend. No ransom was paid, and state gaming officials said the attack’s effects were “mitigated.” David Rebuck, director of the New Jersey Gaming Enforcement Division, said the attack DGE Director Dave Rebuck was a distributed denial-of-service attack, in which the websites were flooded with information and requests for access that ultimately caused them to crash. “The attack was followed by the threat of a more powerful and sustained attack to be initiated 24 hours later unless a Bitcoin ransom was paid,” Rebuck told the Associated Press. “This follow-up attack had the potential to not only negatively impact the targeted casinos, but also all businesses in Atlantic City” that share the same internet service provider. Rebuck said due to a response by law enforcement and casino staff, “the threat was mitigated with no significant disruption to service. All involved remain on heightened alert, but are relieved that the holiday weekend has passed without incident.” Officials did not say which sites were affected, and also did not disclose the amount of the ransom demanded. No player money was stolen and no personal information was compromised in the incident, he said.

NYX Signs with Golden Nugget AC

YX Gaming Group Limited announced that it has entered into an agreement to provide its interactive gaming platform to Golden Nugget Atlantic City. NYX will provide Golden Nugget with its online gaming platform, a new website and enhanced mobile applications by December. The partnership will start with Golden Nugget launching hit titles from NYX’s content division NextGen Gaming on its current website, and mobile applications later this summer. “We are delighted to have been chosen by Golden Nugget as a strategic partner to further strengthen their presence in the New Jersey online gaming market,” said Matt Davey, chief executive officer of NYX.

AUGUST 2015 www.ggbmagazine.com

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NEW GAME REVIEW by Frank Legato

Britney Spears Aristocrat Technologies

he first thing to be noted on Aristocrat’s new slot showcasing pop icon Britney Spears is the cabinet, the new Arc Double. The presentation uses a giant curved LCD monitor displaying two 42-inch vertical monitors. Considering that most portraitstyle monitors on slots are single, 32-inch screens, the Arc Double display presents a striking vision. Add in stereo surround-sound, and you have a perfect format to capture the sights and sounds of pop queen Spears, with video and audio of many of the singer’s top hits, including “Hit Me Baby One More Time, “Toxic,” “3,” “Crazy” and “Oops I Did It Again.” The latter hit is the theme of two separate game features, one in the primary game and one triggered bonus event. The base game is a 60-line video slot with a single-site progressive jackpot resetting at $10,000. The oversized screen is used to expand the reels from four symbols to as high as 16 in two separate game features. Each bonus feature is themed around a Spears

hit, and the player is treated to booming audio and video footage of Spears performing the hit as the bonus plays out. There are two mystery bonus events in the primary game. In the “Oops I Did It Again Re-spin,” reels 1 through 4 are held and reel 5 is re-spun once, with that reel guaranteed to stop on a bonus-triggering scatter symbol. In the “Equalizer” feature, the reels dance to the music as they expand up to a maximum 16 rows high. Wins are re-evaluated, and all wins pay triple. There are four main bonus events. There is a gateway bonus event that can award credits or lead to any of the other three events. When triggering the “Crazy Feature Gateway” picking sequence, the player goes through up to three rounds to reveal credit prizes, jackpots, the “Oops I Did It Again Free Games” feature, the “Toxic Picks” feature or the “Hit Me Baby One More Time Wheel Feature.” Oops I Did It Again Free Games triggers six free games, with any “OOPS!” symbol expanding the reel set by two rows, up to a maximum of 16. Three trigger symbols award an additional two free spins. In Toxic Picks, the screen displays a collection of bottles. Players choose bottles to reveal credit prizes, multiplier increases or a special Britney award, continuing until revealing three stoppers. The Wheel Feature gives three spins on a video bonus wheel for credit prizes or extra wheel spins. Manufacturer: Aristocrat Technologies Platform: Arc Double Format: Five-reel, 60-line video slot Denomination: .01-20.00 Max Bet: 250, 500 Top Award: Progressive; $10,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 4%-14%

Crazy Money II Incredible Technologies

his is the sequel to the most popular game in Incredible Technologies’ slot history, Crazy Money. Crazy Money II is a 15-line video slot with all of the same easy-to-understand game play of the original, but with new bonus innovations and a four-level progressive. Crazy Money II also features the familiar “Good, Better, Best” betting option, in which the theoretical return rises when the bet level is increased. Three, four or five bonus scatter symbols trigger the Wheel Bonus, in which players head into a bank vault to spin a wheel to determine which bonus will be played. Fans of the original will recognize the “Money Catch Bonus,” in which players touch the screen to “grab” flying dollar bills, revealing credit values behind each bill. The game also features the new Mint Bonus,

Global Gaming Business AUGUST 2015

which initiates a free-spin round on a bonus three-bythree reel array featuring only the top four symbols. Players are rooting for five or more gold coins to land on the reels during the free spins, which triggers one of four progressive jackpots. The top jackpot resets at $5,000. Crazy Money II features fixed bet options of 20, 60, 100, 120 and 160, and is available on the company’s Infinity platform of casino games, including compatibility on the Infinity U23 cabinet. Manufacturer: Incredible Technologies Platform: Infinity Format: Five-reel, 15-line video slot Denomination: Multi-denomination Max Bet: 20, 60, 100, 120, 160 Top Award: Progressive; $5,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 6%-10%

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Mammoth Wilds

Ainsworth Game Technology

his is the latest game in Ainsworth’s Fire$torm series, featured on the tall A560 SL cabinet. (Other games in the series are Buffalo Rumble II and Rhino Rumble.) The base game is a five-reel video slot available in either 40-line or 50-line setup. The tall vertical topbox monitor displays four progressive jackpot levels, with the top resetting at $2,000. The main bonus is a multi-level free-game event, that increases in value depending on what symbols land on the free spins, which are augmented by a bonus sixth reel. The bonus reel contains only four symbols—X2, X3, X5 and “Mammoth Mania.” Three or more scattered diamond symbols trigger eight free games, called “Mammoth Wilds.” Above each reel on the bonus reel set is the “Mammoth Mania” logo. During the free spins, when the logo appears on any reel, the corresponding logo is activated for all remaining free games. When the logo appears on the bonus reel, the Mammoth Mania Wild symbol replaces all logo symbols on the screen for all remaining free games.

During the final free game, “Mammoth Mania Wild” replaces all symbols on all reels where a corresponding Mammoth Mania logo is active. During the Fire$torm Feature, present on all games in this series, any three or more “Diamond Wild” symbols will accumulate three free bonus games. During the bonus games, the bonus reel contains X2, X3 and X5 only. During each bonus game, “Mammoth Mania Wild” replaces all symbols on all reels where a corresponding Mammoth Mania logo is active. Manufacturer: Ainsworth Game Technology Platform: A560 SL Format: Five-reel, 40-line or 50-line video slot Denomination: .01-10.00 Max Bet: 200, 250, 400, 500, 600, 750 Top Award: Progressive; $2,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 5%-15%

Peter & Wendy: Hook’s Revenge Cadillac Jack

his follow-up to Cadillac Jack’s popular “Peter & Wendy” slot, based on the classic Peter Pan play, utilizes the slot-maker’s Stratos series of cabinets, which combine unique game mechanics and interactive game experiences. In this case, the tall cabinet houses an oversized vertical top-box display of jackpots in a five-level progressive. The base game uses the “PowerXStream” reel setup and signature features including “Reflex Wilds,” “Power Blocks” and “Turbo Boost Progressives.” The PowerXStream setup in this instance features a 3-44-4-3 reel configuration (three spaces on the outer two reels and four on the inner reels). This results in a potential 576 ways to win on each spin. The PowerXStream pay mechanic evaluates the award based on the number of symbols that occur on adjacent reels, with both left-to-right and right-toleft pay evaluation. There are several mystery features in the base game. Tinkerbell will appear on the screen at random intervals and spread “pixie dust” to enact mystery features including wild stacks on the second and fourth reels and Power Blocks on the center three reels. The stacked wilds are Reflex Wilds, which means any wild symbol appearing on reel 2 is replicated on reel 4, and vice versa. The game features a Class III static jackpot or Class II wide-area progressive. The Turbo Boost Progressive feature

places a “Must Hit By” level on the four lower progressive jackpots, which rise at a level set by the casino in increments as high as $1. The top award is triggered by landing five special progressive symbols on a single spin. At least one bonus symbol on reels 2, 3 and 4 initiates free spins. Two separate bonuses can be initiated by a winning combination of either the Crocodile or Ship symbols. The Tiger Lily Bonus features the Reflex Wilds, and the Save Wendy Free Spin Bonus features oversized Power Block symbols which are three reels wide and four rows deep, allowing for wins of three, six, nine or 12 symbols. Free spins may be retriggered in the Tiger Lily Bonus. Free spins cannot be retriggered in the Save Wendy Bonus. Up to 128 free spins are awarded for either bonus. Manufacturer: Cadillac Jack Platform: Turbo Quad Boost Format: Five-reel, ways-to-win video slot Denomination: .01 Max Bet: 200 (Class II), 250 (Class III) Top Award: Progressive; reset at $50,000 (Class II) or $5,000 (Class III) Hit Frequency: Approximately 70% Theoretical Hold: 5%-14%

AUGUST 2015 www.ggbmagazine.com

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CUTTING EDGE by Frank Legato

The New Whale Product: SpendSight: Relevance Manufacturer: SpendSight Technologies, Inc.

etflix collects massive amounts of data about its users’ viewing habits, and can break it down by region, time of day, watching hours and a plethora of other data. This has put that entertainment supplier in a unique position of being able to accurately predict what viewers want. Casinos can now do the same with information in the players club. “SpendSight: Relevance,” produced by SpendSight Technologies, is a software package that allows casinos to match retail spend data to players club members, and execute offers designed to get people to return to the property based on relevant, accurate, minute-by-minute retail purchase behavior. The product is cloud-based; no on-site equipment is required. Whether using SpendSight as a data dump into the casino’s warehouse, a plug-in to VizExplorer, Teradata, Salesforce or the solution of the operator’s choice, SpendSight: Relevance seamlessly captures the granular retail spending habits of players club members and puts it at the operator’s fingertips. At the click of a mouse, the operator has access to receipt-level detail of

each transaction, matched to a personalized players club profile, allowing the user to analyze, compare and execute campaigns across multiple properties, ZIP codes, vendors, price ranges, date ranges and more. The product identifies the so-called “new whale,” who may not gamble much, but spends a lot of money at the steakhouse, showroom and spa. Data on non-gaming amenities like shopping, entertainment, accommodation and restaurants is vital because today’s casino customers are spending more time at non-gaming outlets than they are at tables and slots. Big data is good, but smart data gets results. SpendSight provides smart, usable personalized data. Technology will never replace a personal touch, and SpendSight: Relevance product gives a marketing department the best of both worlds. For more information, visit spendsight.com.

Definitive Table Management Product: WinPOS-M with WIGOS Manufacturer: Win Systems

in Systems has launched the WinPOS-M, a cutting-edge solution that will make the life of the pit boss a lot easier. The WinPOS-M is a two-in-one terminal that can be used either as a portable device, with the mobility and simplicity of a tablet, or as a traditional desktop POS attached to the docking station. The WinPOS-M offers a lot of advantages over its competitors: it allows the pit boss to move freely around the casino floor with a lightweight but fully equipped tool, complete with a magnetic card reader, a bar-code scanner and a built-in thermal printer. On the other hand, when used as a desktop POS, the docking station provides support, integrated battery charging and additional ports, and it takes up only a small area of the table. The WinPOS-M runs the WIGOS Table Management module, a powerful software with a user-friendly interface, optimized for touch devices, that allows a pit boss to track player activity on the table, including player identification, current bet amount, chip buy-in, pausing and resuming play sessions, opening and closing the table and more. The operator can even swipe player cards using the WinPOS-M integrated card reader to identify players, and award them loyalty points directly at the table, based on multiple configurable criteria. The WinPOS-M and the WIGOS Table Management module have been specifically designed to work together, speeding up the data entry process and allowing a pit boss to keep track of multiple tables at once with ease. The system also allows the operator to get detailed reports on table activ-

Global Gaming Business AUGUST 2015

ity, track all cash and chip movements to and from tables, tweak the table configuration to needs (set up table speed, minimum and maximum bet, table design and more), and get valuable statistical information with reliability, speed and security. For more information, visit winsystemsintl.com.

G&TAwardsad.2015

5/11/15

8:52 PM

Page 1

14th Annual

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

CALL FOR ENTRIES

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

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

To place an online nomination go to

www.ggbmagazine.com

Global Gaming Business

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FRANKLY SPEAKING by Frank Legato

Heads Up!

Global Gaming Business AUGUST 2015

VICT OR R INALD O

’ve always admired people who are brave enough to swallow their fears and do a dangerous job. Policemen. Firemen. Soldiers. Gaming writers. What, you don’t think this is a hazardous profession? Once, I dropped a pen, and had to bend all the way down to pick it up off the floor. I could have been killed! Seriously, though, recent events have caused me to wonder if hanging around casinos has, in fact, become a hazardous job. And I’m not talking about the recent robberies, either—although I’m guessing they could be reduced by following one security tip: If you see a guy walking around wearing a ski mask in a casino in July, he’s probably not on his way to the slopes. No, I’m talking about the inherent hazards of being in a casino, including my greatest occupational fear—getting hit on the head by a box of poker chips. Before I go to a press event in a casino, my wife always tells me, “Watch out for guys in ski masks, but for God’s sake, don’t get hit on the head with a box.” Not really, but after what happened down in Tampa at the Seminole Hard Rock, she just may. A Florida woman sued the Seminole Tribe of Florida in June for “disability, disfigurement, hospitalization and lost wages” because she says she incurred “severe injury” when a box of poker chips hit her on the head. She says one casino employee was tossing a box of poker chips to another employee, and she intercepted the pass with her skull. Usually, cases like this get settled, but the Seminoles are having none of that. In fact, tribal attorneys filed a “demand for a jury trial” on June 29, certain that the player is exaggerating the injury and the circumstances surrounding it. Now, I don’t have a horse in this race, but I’ve got to side with the casino on this one. First of all, I question the lady’s story. Poker chips are not transported in a “box,” like the cash from tables and slots, which are housed in big metal drop boxes. They are usually carted to and from tables in big plastic-topped racks, wheeled over in a secure cart.

No one’s passing a poker-chip tray. You can’t get a good grip on the plastic, so you can’t get the tight spiral you need for a pass, especially if the other employee is running a downfield route across the casino. Plus, the chips would go everywhere, which would be great for the players but not too appealing to the casino bosses. Even if it had been a metal drop box instead of a plastic chip tray, I’ve been in casinos for 30 years, and I’ve never seen two numbskulls from a casino’s staff playing catch over a player’s head. “Drop box coming! Go long!” Or, because it’s baseball season: “Full count on this drop box.” “OK, let me have it fast, up and in! Strike zone is from the dealer to the player on Fourth Street.” The other thing in question is the claim of “disability” and “disfigurement” from a “severe injury.” The alleged incident was last October, and she evidently left the casino that night and went home. Then, six months later, she claims she had been chewed up in some grisly mishap between fumbling employees that caused a steel box to slam into her head, disfiguring her for life. What happened, if it even happened, was that she got bonked on the noggin with a box, which was a plastic tray, for all I know. That’s not turning anyone into a circus freak. I’ve seen guys hit by fastballs who are in better shape than she claims to be. (You didn’t think you were getting away without another baseball reference, did you?) OK, something like that might cause a bump. Or, as SaintPetersBlog.com journalist Janelle Irwin noted, in a cartoon reference that I wish I would have written, “a giant bump” which “emerges from the head and some unknown antagonist then throws a horseshoe at it.” It looks like the case is going to trial, so I’m sure I’ll be able to mine this situation for more comedy down the road. In the meantime, be careful out there in the casinos. You never know when a chip tray is going to go flying by, or pit employees are going to play catch with a steel drop box. I’m guessing this lady’s next lawsuit will involve an anvil, dropped on her from the ceiling. By a coyote.

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

gettoknowgaming.org

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EMERGING LEADERS Road to Compliance

Setting Systems

Honoria Hebert

Benson Fok Io Teng

Director of Regulatory Compliance, L’Auberge Casino Resort Lake Charles

Director of Business Systems, SJM Macau enson Fok lo Teng’s passion is information technology. As an emerging leader in the gaming industry, Fok’s love of information technology may come as a surprise. However, Fok’s ability to pursue his passion within an industry that he finds both inspiring and exciting has helped his career keep pace with the rapidly evolving gaming industry. Since joining SJM Macau in 2006, Fok has swiftly climbed the ranks within the company’s information technology department, and currently serves as the director of business systems. From his career in gaming to his academic studies, Fok has consistently been a high achiever. A Portuguese national, Fok completed his undergraduate studies at Northampton College in the United Kingdom. He continued his studies in the U.K., graduating as the top overall student in the computer system engineering master’s program at the University of Warwick in Coventry. Before landing in gaming, Fok explored careers in a variety of industries. Despite excelling in information technology roles in a multitude of industries ranging from telecommunications to finance, he did not see himself building a longterm career in a specific industry until he began working in gaming. The uniqueness of gaming attracted Fok to the industry and is what, ultimately, fuels his desire to continue to grow within the industry. From Fok’s perspective, the gaming industry combines some of the best features of very different industries. “The gaming industry is very interesting,” Fok explains. “It operates like a bank with marketing as competitive as a retail store. It provides pure fun and entertainment to its customers like a video game provider.” Fok is most proud of his ground-up information technology work at SJM Macau, where he helped developed the company’s Information Technology Department. “I am proud to contribute to building a successful IT department from scratch,” Fok says. “It was very challenging to grow the department

Global Gaming Business AUGUST 2015

onoria Hebert is an excellent example of the idea that all you need to be successful is tenacity. Currently the director of regulatory compliance at L’Auberge Casino Resort Lake Charles in Louisiana, Hebert views the gaming industry as an exciting and competitive environment, providing opportunity for anyone who is not afraid to take it. “Being ambitious and outgoing,” Hebert says, “you can make up for a lack of experience just by saying, ‘Hey, I’ve never done it, but I am going to try and I’ll learn all that I can about it.’ I would always do any job or any task that they would allow me to.” Born and raised in Washington, D.C., Hebert attended American University, where she studied philosophy and later supplemented her education with accounting and finance courses at McNeese State University. Upon moving to Louisiana, Hebert happened upon Harrah’s Entertainment when she was referred to an HR position by a temp agency. “There was so much opportunity and variety that I ended up staying on permanently,” she says. Hebert decided to remain with Harrah’s fulltime, and over the subsequent six years she transitioned to nearly every non-managerial role in HR before being offered a position in the finance department. Up until this point, she identified herself as an “HR person,” as she had not delved into other departments. Initially, she was doubtful about taking the position, as she was not familiar with this segment of the industry. Despite the uncertainty, Hebert decided to accept the position and took some evening accounting and finance classes to aid in her personal and professional development. When Hurricane Rita hit Louisiana, Honoria left the gaming industry for a few years to pursue other ventures. “I don’t know how to describe it; no matter what I did, it was boring. I missed the variety, the excitement,” she says. “The people you come across in the casino industry have their own unique culture, and it just fits me really well.” Upon returning to the industry, Hebert

“I think the most important thing for a starter in the gaming industry is to try to understand the business and operations—especially gaming operations such as table and slot operations, which are not very easy to understand.”

from a staff of 20 without any structure and processes to the current staff of 130 employees with proper structure and procedures.” As the gaming industry continues to evolve and become more technologically advanced, Fok believes emerging leaders with technology backgrounds will have an advantage. “Technology has become more and more important in the gaming industry, especially in the customer service area,” Fok says. “This opens up the opportunity for IT professionals and leaders to join this industry and bring innovative ideas.” With a background outside of gaming, Fok appreciates the importance of understanding the unique nuances of gaming operations, especially for professionals looking to advance or break into a career in gaming. “I think the most important thing for a starter in the gaming industry is to try to understand the business and operations—especially gaming operations such as table and slot operations, which are not very easy to understand,” Fok says. He stresses that a business operations knowledge base is even more important for an information technology professional hoping to advance in the gaming industry. “Without this base, you will never understand how IT can help the business.” —Michael Vanaskie, The Innovation Group

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Anybody coming in should take these opportunities, be humble, and really understand all of the moving parts—that’s when the really great opportunities present themselves.

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joined Pinnacle Entertainment, which she describes as a competitive and fun environment that focuses on guest experience in addition to driving revenues. One of Hebert’s greatest mentors was someone who served as an inspiration her entire life, her late father. Originally wanting to be a teacher, she struggled early in her career when trying to figure out the meaning of work. Her father helped her find and identify the positive contributions of the industry, such as the enjoyment of her guests, the careers created by the industry, the tax dollars generated, and the numerous charitable activities sponsored by various casino entities. When asked what she looks forward to most in the next year of her career, Hebert has a novel response: “Uncertainty. I have never been able to predict year-to-year what was going to happen. It has always been positive, and presented an opportunity in some way.” As a successful industry professional who happened upon the industry by chance, Hebert has advice for anyone looking to advance their career within the industry. “Just be open to opportunity,” she recommends. “People will come into a job and immediately look for the next step up. Sometimes, especially in our industry, the next step isn’t up; sometimes it’s over and sometimes even what you would consider down.” All the best leaders that Honoria has met in the industry, however, have done the jobs that they are currently leading. “Anybody coming in should take these opportunities, be humble, and really understand all of the moving parts—that’s when the really great opportunities present themselves.” —Joe Dimino, The Innovation Group

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GOODS&SERVICES NEVADA REGULATORS MULL SKILL REGULATIONS Gaming ConTshopstrolhe Nevada Board began workwith industry representatives last month designed to aid the regulators in formulating the rules that will govern approval of electronic gambling devices that Nevada Gaming require skill to play. Earlier this year, the Ne- Control Board Chairman vada legislature unanimously A.G. Burnett approved Senate Bill 9, providing for skill-based games designed to attract the next generation of casino players, who are drawn to games that involve competition and require physical and/or mental dexterity to succeed. The aim is to create new casino players from the generation that grew up playing video games. The first workshop examined how to effect in-game purchases and connecting games to social media accounts. More workshops are likely to be held. “This is the most important regulation I’ve worked on in 17 years,” Gaming Control Board Chairman A.G. Burnett told the hearing room. “This is a turning point that could reinvigorate the slot machine floor.” Attorney Dan Reaser of Fennemore Craig, which represents the Association of Gaming Equipment Manufacturers—the force behind SB 9—testified at the hearing that the industry has to abandon “old notions” of what a slot machine is, to account for the generational shift in casino customers, taking into account different payback systems, multi-player setups and social networking. “The game may not look like a slot machine,” Reaser said. “Really, what we are looking at is attempting to steer the state onto a new path, onto a new road, in terms of gaming,” said Burnett. “Everyone here knows that we need a complete reinvigoration of slot games.” There is no shortage of suppliers ready to create the new skill games. Eric Meyerhofer, CEO of Gamblit Gaming, is one of the suppliers at the forefront of the skill push. In an interview with the Detroit News, he said that while slots as they are today are likely to be offered for years to come, they could be accompanied by new “game zones” designed specifically to appeal to younger players, with lounges, DJs and other attractions for millennials. “It’s more of an arcade experience,” he said, 62

Global Gaming Business AUGUST 2015

“without it being for, you know, children.” “The next wave of people aren’t going to stand there and play slots,” added Greg Giuffria, who is developing a line of video console games, complete with joysticks, that allow wagering. “The industry has to change or disappear.”

UNLV TO BUILD NEW HOSPITALITY HALL hile Las Vegas is regarded as the global gamW ing capital, the University of Nevada, Las Vegas is naturally regarded as the global capital of gaming education. Instead of resting on their laurels, the university has announced the new, $56 million Hospitality Hall, which will replace the Harrah Hotel College. Boyd Gaming, Station Casinos and MGM Resorts International have each recently committed $2.5 million toward the building. In 2010, the Caesars Foundation provided $2.5 million as well, as did Konami and Las Vegas Sands in 2014. The $15 million in gifts will be in addition to the Nevada Legislature appropriating $24.4 million after the recently completed 2015 legislative session.

“Having a world-class hospitality facility and program will allow for the further development of the future leaders in the hospitality and gaming industry worldwide,” said Station Casinos CEO Frank J. Fertitta III. “The significance of these gifts for the college and for the overall success of the project cannot be overstated,” said Stowe Shoemaker, dean of the Harrah Hotel College. “The support of industry giants like MGM, Boyd and Station Casinos represents a huge investment in our students and our future standing in the hospitality arena.” Hospitality Hall will feature over 93,000 square feet of classroom, laboratory and meeting space, with a design that will provide a sense of community and foster an encouraging environment for interaction among students, faculty and industry professionals. “The exciting thing about this new hall is that it bridges the truly pioneering work that the

founders of this school did in helping educate the leaders of today, and provides the foundational spirit with a proper laboratory and resources to continue to do this in the 21st century,” said Bo Bernhard, executive director of UNLV’s International Gaming Institute. Shoemaker said the new curriculum will expand to reflect what the hospitality industry has become in terms of the integrated resort in the 21st century. When the school was founded in 1957, Nevada was the only state with legal casinos, and many students learned the ins and outs of the casino business to find themselves filling roles at casinos on the Strip. Now, 40 states feature casinos, and they continue to tap UNLV to help supply their workforce. “When they graduate, we want the hospitality industry to look at our students not as employees, but investments,” Shoemaker said. Groundbreaking on Hospitality Hall is anticipated near the end of 2015.

ARISTOCRAT GOES LIVE AT SCARLET PEARL, LAUNCHES BATMAN IN EUROPE lot and system manufacturer Aristocrat TechnoloSmonth. gies announced two major developments last The company will deliver major systems solutions at the Scarlet Pearl Casino Resort in D’Iberville, Mississippi, when it deploys its entire Oasis 360 solution, including its full casino management system, professional services, SpeedMedia, Oasis One Link (bonusing, progressives and poker frenzy), table management system and Oasis HALO Loyalty (core software, kiosks, mobile app and promotions), subject to regulatory approvals. “We have carefully designed our entire resort— from the casino to the guest rooms to the golf course—with a player’s comfort in mind,” said Scarlet Pearl CEO Denise Barton. “When we were presented with Aristocrat’s exemplary system solutions, we knew it was the right choice to enhance our players’ experience across the resort.” And in Europe, Aristocrat is launching its elaborate “Wonder Wheels” slot format this summer, with the introduction in July and August of the “Batman Classic TV Series” video slot in European casinos. The game, on Aristocrats’ new Helix cabinet, stands 3.2 meters (10 feet, 6 inches), including a large portrait-style top-box screen and unique triple me-

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chanical wheel setup for bonuses. Audio from the show booms through an optional surround-sound “iChair.” Each player gets his own wheel, plus a bonusing wheel for the game bank, allowing players on the bank to continue uninterrupted when another player hits a trigger and engages wheel mode. Video clips and theme music from the show capture the kitsch, tongue-in-cheek action of the landmark 1960s TV series featuring Adam West, as well as the classic performances of 1960s-era stars in criminal roles like the Riddler, the Joker and Catwoman. With a static grand jackpot of €10,000 linked across paired pods, game play is enhanced by stacked wilds, six themed bonus features and a highly anticipatory wheel feature trigger.

the Operator Wide Area Progressive System brings the life-changing progressive jackpot experience of the slot floor to the table games pit, notes Duncan Savage, managing director of Double Diamond Gaming Ltd. “Scientific Games is a vitally important technology partner to our casinos, helping us to run our business efficiently while delivering an engaging customer experience,” he said. “We chose the company’s Operator Wide Area Progressive System, as we fiercely believe that the progressive jackpot will drive our business outcome tremendously and will elevate the live game pit to an unprecedented excitement level.”

SPIN GAMES PROVIDES CONTENT FOR INTERACTIVE TABLES

lot and system manufacturer Konami Gaming, Sits SeleXion Inc. launched its second round of installations of multi-game unit in Sweden with the na-

eno-based content supplier Spin Games LLC anRthenounced that its game content has gone live on interactive free-play tables in lounges at MGM Resorts International’s Las Vegas properties. The InteractivePro Tables, developed by Suzo Happ Company’s Shift Interactive, went live earlier this year as part of the operator’s new strategy to reach a younger demographic.

The tables, placed in lounges and social settings most frequented by millennials and other younger players, offer a four-screen interactive table allowing players to access social media, various TV channels, fantasy sports teams and free-play casino games including blackjack and slots via MGM’s social casino app myVegas. The tables also serve as a virtual concierge. Spin Games announced that its content went live on the interactive tables last month at the Bellagio, MGM Grand and the Mirage in Las Vegas, including a range of premium HTML5 slot, video poker and bingo content. Twenty-one games were included in the initial launch.

RAINBOW PICKS SCIENTIFIC GAMES WAP asino supplier Scientific Games Corporation C announced that it has installed its Operator Wide Area Progressive Systems to table games in all Rainbow Casino properties operated by U.K.-based Double Diamond Gaming. Featuring more than a dozen jackpot options, 64

Global Gaming Business AUGUST 2015

SELEXION EXPANDS IN SWEDEN

tion’s state-owned gaming entity Casino Cosmopol, through Konami’s regional distributor International Casino Management (ICM). Casino Cosmopol, which operates four casino properties in Sweden, recently expanded Konami installations to its Gothenburg and Stockholm locations, including several placements of the popular SeleXion multi-game cabinet. ICM is based in Stockholm, Sweden, and is part of Konami’s exclusive network of distributors. “We are very satisfied with the performance in all our four casinos and the SeleXion machines are popular among our guests,” said Casino Cosmopol gaming specialist Erik Söber. “In addition, our slot technicians and attendants think the machines from Konami are easy to maintain, wellthought-out, and very reliable.”

SPHINX 3D LAUNCHED IN PERU lot manufacturer International Game Technology Slaunched announced that its Sphinx 3D game has been in Peru, at four casinos of the Masaris Corporation. Sphinx 3D is the award-winning game launched by the former GTECH that incorporates “True 3D” technology to create the most realistic dimensional effect ever used on a slot machine. The game was introduced at Casino Montecarlo and Casino Macao in Iquitos, Casino Macao in Lima and Casino Macao in Piura. “We are pleased to introduce our award-winning Sphinx 3D game to players in Peru,” said Jessica Luna, IGT sales director. “We are confident that the

game’s innovative design and technology will impress players in this region. The Masaris Corporation is a valued, long-term customer, and we are excited for their players to enjoy the Sphinx 3D game.” In other IGT news, the company announced the introduction of its CrystalDual and S3000 cabinets to Argentina. IGT recently secured an agreement with Casino Club to install 270 CrystalDual and 30 S3000 cabinets in Casino Club locations throughout Argentina over the next several months. Approximately 80 units will be installed in Buenos Aires’ iconic destination, Hipodromo Argentino de Palermo. “IGT is firmly committed to the growth and success of gaming in Argentina, and we’re excited to work with our longtime partners at Casino Club to introduce leading technology such as the CrystalDual and S3000 to players in the region,” said Sabby Gill, IGT senior vice president of international commercial gaming.

NORTHERN MARIANAS ADOPT GLI STANDARDS eading gaming testing company Gaming LaboraLmonwealth tories International announced that the ComCasino Commission (CCC) of the Commonwealth of Northern Mariana Islands (CNMI) has adopted Gaming Laboratories International’s technical standards, known as the GLI Standards Series. The CCC has also recognized GLI as an independent test lab for a new Saipan-based casino, expected to open later this month. The commonwealth is a new gambling jurisdiction, and the temporary casino in Saipan will be the jurisdiction’s first. GLI has worked closely with the CCC over the past several months to ensure it is empowered to execute a first-class regulatory model for the slot machines and other gambling equipment operated by Best Sunshine International Ltd., which will operate the new casino. GLI Australia Senior Manager of Regulation Compliance and QA Phil Harrison said, “We are honored to have been chosen by the CCC to lend our global expertise to this new jurisdiction. The GLI Standards Series is recognized worldwide for bringing clarity and structure to operators, suppliers and regulators. Beyond the Standards Series, we were privileged to consult with the jurisdiction and help to create a foundation for long-lasting success.”

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PEOPLE

Homer A. Mandoka, chairman, Nottawaseppi Huron Band of the Potawatomi, R. Bruce McKee, Brian Decorah

FIREKEEPERS PRESIDENT MCKEE RETIRING

omer A. Mandoka, Tribal Council chairman of the Nottawaseppi Huron Band of the Potawatomi, recently announced FireKeepers Casino Hotel President R. Bruce McKee will retire at the end of the year. He will be succeeded by Brian Decorah, who recently was named chief operating officer. The property is located in Battle Creek, Michigan. McKee, who has led FireKeepers since it opened in 2009, will remain through the end of 2015. In his 35-year career in the casino industry, McKee held numerous executive positions, including chief operating officer and general manager at Harrington Raceway Casino in Harrington, Delaware, and a variety of positions over 10 years at Trump Hotels and Casino Resorts, Inc. A member of the Ho-Chunk Nation, Decorah joined FireKeepers as senior vice president and assistant general manager in 2013. Previously, he served as general manager of North Star Mohican Casino Resort in Bowler, Wisconsin and general manager for two Ho-Chunk Gaming casinos in Wisconsin, and also held executive positions at Cliff Castle Casino in Camp Verde, Arizona and Seneca Gaming Corporation in western New York.

CORDISH NAMES EXECUTIVES IN GAMING DIVISION

he Cordish Companies last month announced key executive appointments to its gaming and lodging division. Robert J. Norton, who has served as president and general manager of Maryland Live! Casino through development and since its grand opening in June 2012, has been elevated to the new position of president of Cordish Global Robert J. Norton Gaming Group, the com-

pany’s international gaming division. Norton will maintain his duties as president of Maryland Live! At the same time, Douglas Shipley has been named executive vice president and general manager of Maryland Live! Casino. Both appointments are effective immediately.

lantic City, Foxwoods Resort in Connecticut and Parx Casino at Philadelphia Park. Rigot replaces Mike Bowman, who stepped down to become president of the Valley Forge Tourism & Convention Board.

Douglas Shipley

HERRERA ARRIVES, SALAT LEAVES SCIENTIFIC GAMES

aming supplier Scientific Games Corporation announced the appointment of Marco Herrera to the expanded role of vice president and managing director of gaming for Europe, the Middle East and Africa (EMEA). Herrera, who will report to Senior VP and Chief Revenue Officer Robert J. Parente, will lead operations and oversee sales of gaming machines, casino management systems solutions and table products representing the company’s Herrera Bally, Shuffle Master and WMS product brands. Also last month, the company announced Sebastian Salat, president of WMS International, WMS Gaming, departed Scientific Games. This move was mutually agreed by both parties. Salat Gavin Isaacs, president and chief executive officer of Scientific Games, said, “Over the last 15 years, as president of WMS International, Sebastian has contributed greatly to the growth of WMS’ international business throughout Europe, Latin America, Australasia and Africa. We thank Sebastian for his years of service to WMS and wish him the very best for his future.”

VALLEY FORGE CASINO NAMES CEO

IGT NAMES SYSTEM SALES DIRECTOR

ennsylvania’s Valley Forge Casino Resort has named James A. Rigot as the property’s new president and chief James A. Rigot executive officer. Rigot is a veteran casino operations executive, having served in key roles at Harrah’s Resort, Trump Plaza and the Borgata in At-

eading slot manufacturer International Game Technology announced that it has appointed Angela Houslay as director of international system sales, comAngela Houslay mercial gaming. Houslay will work closely with IGT international casino customers outside of the U.S. and Canada to select casino systems solutions that meet their unique operational needs.

PETER MEAD DIES

eter Mead, founder and publisher of the gaming industry trade magazine Casino Enterprise Management, died suddenly last month at the age of 54. Mead, a well-known and respected member of the gaming press, created CEM in 2002, transforming a Minnesota-based product-information journal into a trade magazine featuring columns from leading gaming executives in many industry segments.

GGB

August 2015 Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Casino City Press . . . . . . . . . . . . . . . . . . . . . . .47 Colliers International . . . . . . . . . . . . . . . . . . . .39 DataSpade . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . . .61 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51, 63 GCA + Multimedia Games . . . . Inside Back Cover GGB Gaming & Technology awards . . . . . . . . .57 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Greenberg Traurig . . . . . . . . . . . . . . . . . . . . . .23 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Incredible Technology . . . . . . . . . . . . . . . . . . . .35 Konami Gaming . . . . . . . . . . . . . .15, Back Cover Piper Group . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Red Square Gaming . . . . . . . . . . . . . . . . . . . . . .9 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . . .26 Spin Games . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 TCSJohnHuxley . . . . . . . . . . . . . . . . . . . . . . . . .41

AUGUST 2015 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Ram Chary

n January 2014, Ram Chary took over as president and CEO of Global Cash Access. With a long history in the areas of retail payments and financial services, Chary’s expertise was well suited for the leader in the gaming sector of those disciplines. And when, less than a year later, GCA completed the acquisition of Multimedia Games, an innovative gaming machine manufacturer, Chary’s organizational expertise was tested. But he’s been up for the challenge, as both GCA and MM Games have continued to lead their sectors. Chary spoke with GGB Publisher Roger Gros at his offices in Las Vegas in May. GGB: It’s been about six months since the acquisition of MM Games has been completed. How has the transition gone so far? Chary: It’s been going very well. This clearly was

a transformational acquisition for us. It more than doubled the size of our company. We’ve identified areas where we can consolidate services, like human resources and finance, and understand why services need to be separate because of the unique characteristics of the two divisions. I’ve been very pleased with the efforts put in by members of the teams, and we’re very enthusiastic about the future because our company is so different than any other in our industry. It’s not like one slot company buying another. There were two different businesses, so what has it taken to be able to blend the two into one corporation?

Yes, this is truly a unique combination of companies. We’ve been concentrating on adding the full product portfolio from Multimedia Games to our existing customer relationships, and that effort has begun to succeed. So, we’re creating a full-service solution for casino operators to optimize cash-to-the-floor solutions with playerproven slot gaming products that focus on retaining and acquiring new casino players. GCA is licensed in so many more jurisdictions that 66

Global Gaming Business AUGUST 2015

President & CEO, Global Cash Access

we’ve been able to introduce Multimedia Games to an entirely new audience in many cases.

Let’s move to the Multimedia side, a new business for you. What have you done personally to get up to speed on the slot business?

Tell us about the GCA side of the business. Obviously, the casino business runs on cash, and that’s what you provide. Why has GCA been so dominant in this space?

I’ve been working very closely with the folks in Austin (the headquarters for Multimedia Games). We plan to leave them in place there to operate as they have been doing. As you know, they’ve been very successful. We have a great team there, led by industry veteran Dave Lucchese. I’ve really been energized by seeing the enthusiasm and creativity that this team brings to the table.

We understand the needs of the casino operator like no other company. People forget that we acquired the NEWave company before we bought Multimedia. NEWave was focused on compliance issues and how casinos approach them, so our customers know that we provide solutions to them for the issues that are most difficult. This area has become more crucial recently because of additional federal regulations and proposals. And because we’re so large, we’re able to offer them the best deals, which we expect will continue with Multimedia Games. We are offering them value and product that nobody else has. Remember, we both provide hardware that ends up on the casino floor that’s critical in the casino operation. That’s a commonality that’s very significant but that many people overlook. We sell to the same decision-maker in the casino’s organization more often than not. What are the various services GCA offers to land-based casinos?

ATM transactions are more commoditized, and some of the cash advance aspects of the business were found in a lot of different places. We have proprietary technology—proprietary software that’s patent-protected, and kiosks that are also very unique and stand on their own in the space, and they are things that are not provided by the other suppliers. Payment processing is such a hot topic these days. How will GCA play in the iGaming space?

We’re really not participating in iGaming at this time. Until our customers tell us that this is a service they require, I think we’ll wait and see what happens in this complicated area.

MM Games’ TournEvent program has been very successful. What does it do for your casino clients, and how does it pay off for your company?

This event has gotten bigger every year. It’s a great way for our customers to invite their players in for this special event. Our team has done a great job creating excitement on the casino floor, and this year we’ll make more than 100 stops on two routes. It’s a way to partner with our clients and make them knowledgeable about our games and our people. What is your company going to be known as going forward?

We’ll have an announcement around G2E to reveal the new name of the company. It won’t be either Multimedia Games or GCA, and it will be a brand that will quickly become one of the most powerful in the industry. Is the MM Games acquisition the final move by your company, or are you eyeing some other moves that would make it stronger and more diverse?

It’s going to take us a few years to absorb this acquisition and make it work, so I don’t see us making any major moves during that time. But if we see some kind of tuck-in acquisition opportunity that will help us transform the gaming floor, we won’t hesitate to pull the trigger.

08.24.15 The day the game changes.

Visit gcainc.com or multimediagames.com to see whatâ&#x20AC;&#x2122;s next.

T:8.375”

T:10.875”

Unleash two new Dungeons & Dragons® titles on your floor Send your players to uncharted worlds of adventure. Epic monster battles, treasures, and characters. Dwellers of the Dungeon Keep™ & Fortunes of the Forgotten Realms™ will keep your players enthralled. Go to gaming.konami.com to secure your place as Hero of the Floor. DUNGEONS & DRAGONS and its logo are property of Wizards of the Coast LLC in the USA and other countries and are used under license. © 2015 Wizards of the Coast LLC. All rights reserved.

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Approvals None Konami Print 7.625” x 10.125” 8.375” x 10.875” 8.625” x 11.125” None

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Fonts Constantine (Bold), Avenir LT Std (35 Light, 95 Black Oblique), Avenir Next Condensed (Regular) Images Konamiprint_legaloptions_v5.psd (CMYK; 300 ppi; 99.98%), Latest Brand Logo_ CMYK_8_16_13.ai (8.47%) Inks Cyan,

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