Global Gaming Business, February 2016 by Global Gaming Business

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GGB

Deadwood Decision Lottery & Gaming Casino Math Jersey Jams

Global Gaming Business Magazine

February 2016 • Vol. 15 • No. 2 • $10

Cashing In New President Terry Izawa explains why JCM’s money-handling expertise is the class of the industry

Social Science

SPECIAL SECTION: Security & Surveillance in Gaming

Why social casinos are transforming gaming

Turtle and the Hare How the Navajo Nation is using gaming to diversify economy

Official Publication of the American Gaming Association

Association of Gaming Equipment Manufacturers

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CONTENTS

Vol. 15 • No. 2

february

Global Gaming Business Magazine

22 COVER STORY

COLUMNS

Money Mover

16 AGA Taking the Point Geoff Freeman

JCM Global has spent the majority of its 60 years in business serving casinos with its industry-leading portfolio of bill validators, intelligent drop boxes, ticket printers and everything else needed to move cash from the patron to the games, and ultimately to the bottom line. By Frank Legato and Roger Gros

FEATURES GUARDING THE HOUSE Our annual World Game Protection expert report on security and surveillance in the gaming industry.

28 Cheaters Will Cheat The technology of cheating the casino has advanced right along with the rest of the industry, so casinos need to know how to deal with cheating in the digital age. By Willy Allison

32 Cardroom Concerns Cardrooms in California provide a unique set of rules and challenges for security and surveillance personnel. By Bill Zender

38 Stopping Live Online Cheats Online gaming involving remote participation in live casino games presents its own set of challenges to the integrity of games.

18 Fantini’s Finance Best of the Rest Frank Fantini

40 Table Games Playing the Long Shots Roger Snow Terry Izawa, President, JCM Global

14 Jersey Jam As the state of New Jersey considers a takeover of Atlantic City government, lawmakers consider North Jersey casinos. By Patrick Roberts

Casino operators should go above and beyond minimum requirements when it comes to liabilities connected to serving alcohol to patrons. By Alan W. Zajic

The addition of table games and a new focus on the tourist trade has operators in Deadwood, South Dakota hoping for a new gold rush. By Marjorie Preston

Global Gaming Business FEBRUARY 2016

8 By the Numbers 10 Nutshell

20 AGEM Update 56 Frankly Speaking 58 Cutting Edge 64 New Game Review

68 Navajo Renewal

60 Emerging Leaders

Despite a late entry into the Native American casino market, New Mexico’s Navajo Nation has achieved success with multiple casino operations. By Dave Palermo

With ULAC Publicidad y Mercadeo’s Diana Ulloa, Incrediplay’s Joshua Greenberg, and Cosmopolitan’s Kevin Sweet

78 Goods & Services

74 Lottery Tech

81 People

Convergence of the lottery and gaming industries is a natural, thanks in part to the advanced technology present in the global lottery business.

82 Casino Communications With Todd Moyer, General Manager, Hard Rock Sioux City Casino Hotel

By Dave Bontempo

Feature

50 Going Social Our monthly section highlighting and analyzing the emerging internet gaming markets.

iGNA Outlook

48 Covering the World Mark Balestra

6 The Agenda

12 Gaming Education

60 Black Hills Gold

By Tania Johannisson

44 Dram Dangers

DEPARTMENTS

Land-based casino operators are discovering the value of social gaming in supporting the bricksand-mortar casino operation. By Steve Ruddock

54 iGames News Roundup

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THE AGENDA

A Cautionary Tale Roger Gros, Publisher

hen we heard that Sarkis Izmirlian wanted to make a big splash at G2E Asia 2013 to introduce his Baha Mar resort in Nassau, the Bahamas, to the Asian market, those of us who were working on the conference and trade show were excited. After all, Izmirlian had taken a great leap of faith to propose the huge development in a country that had really been passed by in the gaming industry. Ever since the Atlantis had debuted almost 20 years ago, the Bahamas was essentially a closed jurisdiction. The Atlantis, originally built by Sol Kerzner and Sun International, completely dominated the market, even though it too had faltered and was sold to Brookfield Asset Management at a fraction of its cost. So the idea that another massive mega-resort could be operated successfully in the Bahamas was something of a question and an opportunity. Izmirlian had conceived of the property prior to the recession, and even signed up the at-that-time-powerful Caesars Entertainment. But after the recession hit, Caesars backed out and Izmirlian was left empty-handed. But then he reached an agreement with a variety of Chinese entities, mostly connected to the Beijing government, and the project was back on. At G2E Asia, Izmirlian was introduced by Global Gaming Asset Management (no connection with GGB), whose principals, Bill Weidner and Brad Stone, were grizzled veterans of the gaming industry and integral parts of the successful opening of the Macau projects of Las Vegas Sands. Together, the group was persuasive that Baha Mar was a concept that hadn’t been tried anywhere in the world. For a year after G2E Asia, the property was humming along with Chinese laborers and an aggressive marketing campaign that promised great things at Baha Mar. And then it ground to a halt. Disputes between Izmirlian and his Chinese masters proved to be the undoing of the property, and today it sits vacant and decaying on a Bahamian beach. So, can you blame companies for backing out of similar grandiose plans when the market changes? Korea is seeing an exodus of companies that were originally interested in integrated resorts open only to foreigners after the Chinese crackdown on casino

Global Gaming Business FEBRUARY 2016

visits intensified and the flow of cash went from a fire hose to an eye dropper. Those companies that invested in PACGOR’s Entertainment City in Manila are struggling, stuck in the pipeline of billion-dollar promises to the Philippine government. And plans for more massive gaming development in the country outside of Manila have evaporated. Vietnam’s insistence on casino resorts costing north of $4 billion has discouraged even the most aggressive companies as officials continue to hem and haw about allowing Vietnamese citizens to gamble in country. In Massachusetts, where billion-dollar projects were demanded, the competition from surrounding states has become daunting. The two Connecticut tribes, which operate two of the largest casinos in Massachusetts, aren’t going down without a fight. A satellite casino will challenge MGM’s Springfield development, and Wynn Resorts will have to contend with a tribal and possibly other commercial casinos close by, and increased competition from Rhode Island, all with a budget well north of $1 billion. Even in New Jersey, where Atlantic City has fought valiantly to prevent in-state competition, politicians are demanding a $1 billion commitment for two casinos in North Jersey, even though rival casinos in Pennsylvania and New York will battle tooth-and-nail to retain and gain customers, and cause marketing budgets to compete with construction budgets. So the lesson to be learned in this era of saturation is never commit to a price tag until and unless you’ve done a deep market study about what the traffic will bear. And don’t forget gaming. This lesson has been learned already in places like Atlantic City (Revel) and Las Vegas (Fontainebleau). Izmirlian realized this when he brought in GGAM, but bad financing and impossible agreements sunk the project. Will Macau realize the same hard lesson with the resorts slated to open in Cotai over the next few years? The Macau/Chinese government insistence on non-gaming attractions makes sense, but you can’t forget the engine that makes it all happen—gaming.

Vol. 15 • No. 2 • February 2016 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com JohnBuyachek, Director, Sales & Marketing jbchek@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 Mark Balestra | Frank Fantini | Geoff Freeman Christopher Irwin | Roger Snow Contributing Editors Willy Allison | Dave Bontempo | Tania Johannisson Dave Palermo | Marjorie Preston | Patrick Roberts Robert Rossiello| Steve Ruddock | Michael Soll Jacqueline von Zwehl | Alan W. Zajic | Bill Zender

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, Vice President Systems Sales, Scientific Games

• Steven M. Rittvo, Chairman/CEO, 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 2016 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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BY THE

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aGa’s BY THE BOOK aDDs TRiBaL DaTa The American Gaming Association's By the Book online interactive resource now offers data on Class III tribal gaming statutes and regulations in 28 states, along with key information on the regulatory environments and 2014 economic impact data for commercial casinos across 24 states. Visit GamingBytheBook.org to access information from all commercial and Class III tribal data. One of the first updates that includes tribal data is from the state of Oklahoma.

U.S. GAMING

Number of jobs supported by gaming

OKLAHOMA CITY

• Gaming generates $49.1 million in federal, state and local tax revenues—including $20.6 million in gaming taxes.

• Two commercial casinos in Oklahoma contribute $189.7 million in economic activity.

• Gaming supports 1,038 jobs, which pay more than $43.7 million in wages.

Employee income of gaming-supported jobs

U.S. casinos, which include 510 commercial casinos and 474 tribal casinos in 39 states, produce nearly $81 billion in total revenues

NoN-GamiNG

ReveNues foR majoR Las veGas CasiNos Since non-gaming revenue has become so important on the Las Vegas Strip, the University of Nevada, Las Vegas Center for Gaming Research has been compiling data on revenue outside of the casino since 2004. An informative report they publish each year includes all income from the property as a percentage of total revenue. The chart at right is for the “big” Las Vegas resorts (with gaming revenue in excess of $72 million). The “other” column is largely entertainment and retail. The percentages are the total of revenue that the departments retain after paying their expenses—the departmental margin. The departmental income numbers aren’t “profit” because a number of expenses (including utilities, taxes, corporate payroll and interest) remain. For more information on this non-gaming data (and all U.S. gaming revenue numbers), visit gaming.unlv.edu. 8

Global Gaming Business FEBRUARY 2016

Big Las vegas strip: Departmental income by Percentages Casino

Rooms

food

Beverage other

Total

Net income

2004

42.1%

66.0%

9.4%

40.3%

49.6%

44.5%

9.5%

2005

43.6%

67.3%

10.0%

39.4%

44.9%

45.0%

9.5%

2006

40.5%

67.0%

12.0%

41.7%

39.4%

43.1%

8.2%

2007

40.8%

69.2%

10.3%

42.7%

35.6%

43.3%

10.4%

2008

38.3%

67.6%

17.1%

41.1%

42.8%

43.6%

5.6%

2009

29.9%

63.2%

17.4%

42.9%

42.3%

39.0%

-28.8%

2010

30.2%

58.9%

15.2%

43.2%

46.2%

38.0%

-15.1%

2011

33.1%

59.8%

16.7%

43.9%

47.9%

40.0%

-12.7%

2012

30.5%

60.0%

16.9%

41.2%

51.4%

39.8%

-9.5%

2013

33.3%

60.3%

16.9%

41.0%

51.0%

40.7%

-7.9%

2014

35.8%

62.1%

17.4%

38.5%

49.9%

42.0%

-4.2%

2015

32.7%

62.8%

18.4%

39.3%

53.6%

42.1%

-3.8%

avg.

35.9%

63.7%

14.8%

41.3%

46.2%

41.8%

-3.2%

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NUTSHELL

5Questions

Andrew Klebanow, Bill Bryson and Steve Gallaway, Global Market Advisors

he principals of Global Market Advisors, Andrew Klebanow, Steve Gallaway and Bill Bryson have vast experience in the casino industry, so when they bring the focus to an issue, they can drill down and get to the bottom of the problem. In 2015, several articles in GGB magazine raised the awareness in the industry of the steadily rising hold percentage on the slot floor and what impact that has on players and operators. And their long experience in Asia has made GMA the “go to” company to hire when you’re considering investing in any Asian country, especially Korea, Taiwan, Russia, Vietnam and Cambodia. To hear a full podcast of this interview, visit GGBMagazine.com. How did you come to the conclusion that slot payback percentage was a problem? Klebanow: We conducted player focus groups in Las Vegas and around the country, and the one message that was consistent was that slots were getting tighter. Now, that could have been anecdotal, but once we started looking at the data, it became clear that not only was the slot hold increasing, it was far more dramatic than we had thought, up to 40 percent over the past 10 years.

1 2

Now, the casinos say the hold is only a point or two higher, but it’s really much higher than that, isn’t it? Gallaway: If you have a 10 percent hold game and you increase it by two percentage points, you’re really increasing that hold by 20 percent. And this is on top of how much the average bet has increased. Historically, the higher denomination the machine, the lower the hold percentage. So when pennies were introduced, the reasoning was those machines should have the highest hold. But a penny game is not a penny game anymore. When you have an average bet of $1.50 or $1.75, and compare it to the average bet of a quarter game, 75 cents, the average bet of a penny game is twice that. So that gives you half the time on device, coupled with a much tighter machine. It’s impacting the customer experience negatively. GMA is very active in Asia, with many clients. What’s the current consensus on the government crackdown in Macau? Bryson: We’ve seen this many times over the years, but this crackdown has had some serious legs. The first was aimed at government officials who were illegally taking money to Macau. The second was a crackdown on conspicuous consumption, which went beyond gaming, the large purchases or very public events. And the last crackdown was on the people who market to Chinese to gamble, the junketeers. That’s the most troubling aspect of this crackdown, and it shows me that this might be going on for a while.

3 4

How is Macau going to survive? Bryson: I think the operators are going to have to take a second look at markets they’ve by and large neglected for years because the Chinese market was so huge. Gallaway: That being said, the Asian gaming market is so large, you still have 300 million-plus middle-class Chinese, and while it is now going through a recession, they will get through it. Trying to predict China’s policy is very difficult, but as China goes through a recession, some neighboring countries are going to benefit. 10

Global Gaming Business FEBRUARY 2016

How about Vietnam, where you have several clients? There’s one big resort there and proposals for more. Klebanow: There are very few markets in the entire world where a $4 billion resort makes sense, much less in an emerging economy like Vietnam. Gallaway: And the only way a $4 billion project could even begin to be feasible—and it definitely is not—would be if you had a guarantee that you could attract the high-level junkets that were going to Macau over the years. We don’t see that happening.

CALENDAR February 2-4: ICE Totally Gaming 2016, ExCel Centre, London. Produced by Clarion Gaming. For more information, visit ICETotallyGaming.com. February 4-8: London Affiliate Conference 2016, Olympia National, London. Produced by iGaming Business. For more information, visit londonaffiliateconference.com. February 9-11: Western Indian Gaming Conference 2016, Harrah’s Resort Southern California. Produced by the California Nations Indian Gaming Association. For more information, visit WIGC2016.com. February 22-24: World Game Protection Conference, M Resort, Las Vegas. Produced by World Game Protection Inc. For more information, visit worldgameprotection.com. March 13-16: Indian Gaming 2016, Phoenix Convention Center, Phoenix, Arizona. Produced by the National Indian Gaming Association. For more information, visit IndianGaming.org. April 5-7: iGaming North America 2016, Planet Hollywood Resort & Casino, Las Vegas. Produced by the Innovation Group, BolaVerde Media, Lewis and Roca LLP and eGamingBrokerage.com. For more information, visit iGamingNorthAmerica.com. April 27-29: GiGSE 2015, Hyatt Regency, San Francisco, California. Produced by Clarion Gaming. For more information, visit gigse.com.

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GAMING EDUCATION

Math Made easy

How numbers rule casino gaming By Roger Gros

he gaming revenue numbers produced by going to refund X percentage or give a certain level casinos can’t be accomplished without of comps that doesn’t swing the house edge to the doing the math. And that doesn’t mean player’s advantage.” adding up the dollars and dividing them by the Slot machines are heavily dependent upon taxation. That means making sure that every math, as well. The math used to determine payouts game, every table and every bet returns an adis often a crucial factor in the popularity of a spevantage to the house. This is the bedrock of the cific slot game. casino gaming industry. “It depends upon the behavior of a machine,” Robert Hannum literally wrote the book on he says. “In some of them, the hit frequency is the subject, Practical Casino Math. Hannum, high—lots of small payouts. In others, there are professor of risk analysis and gaming in the fewer but larger jackpots. It depends upon what inReiman School of Finance at the University of dividual players like.” Denver, is also a consultant to casinos, as well as The rising hold percentage at slot machines, a widely quoted expert on the games. He says documented many times in GGB and in a recent the house edge is inviolable. study by the Association of Gaming Equipment “It’s a statistical advantage that is a measManufacturers, has had an impact on play, accordure—in the long run—of how much money will ing to Hannum. be made at a particular game, or more to the “It’s like when the casinos went from 3-2 paypoint, a particular bet,” says Hannum. “If you out on blackjack to 6-5 payout,” he says. “That’s a don’t have the edge, you don’t have a casino.” huge difference in favor of the house. The same is According to Hannum, algebra, calculus and true with boosting the hold percentage on slot matrigonometry are not the heart of the casino chines. The players know it and don’t like it.” math. Using table game or slot bonuses as promotions “Casino executives should have some familis generally a bad idea as well, says Hannum, unless iarity with basic ideas of probability and statisthe casino does the math before implementation. tics. These are the most important tools you use “Something as simple as changing the payout to analyze the games,” he says. on a natural blackjack of some combination to 2-1 Too often, casino executives act before conand some cases 3-1, without changing any other —Robert Hannum, professor sidering the statistical implications of their decirules of the game, can give the player a big edge,” of risk analysis and gaming, sions. For example, when infamous blackjack he says. Giving too much cash back on slot play can Reiman School of Finance at the player Don Johnson approached several Atlantic also result in a player advantage. University of Denver, and author City casinos in 2013, he was able to walk away To prevent that kind of exposure, Hannum says of Practical Casino Math. with millions because casino executives didn’t casinos should educate the staff on the basics of truly understand the power of probability. casino math. Hannum says a time requirement should be “A certain familiarity on the part of the staff included when making deals with high rollers with the math involved would make sense,” he says. like Johnson, who also played craps, a game which “They don’t have to have a thorough understanding, requires no skill whatsoever. but should understand the basics.” “If you can get them to play a certain amount of time, you’ve got a He says casinos should consult with a mathematician before implementing much better chance to get ahead of the game,” he says, but when a cusany rules changes. tomer can leave as soon as he gets ahead, it defeats the purpose of any “Whoever is in charge of the casino should tap into the expertise of a deal the casino has made with the player. mathematician or a statistics expert,” he says. “Maybe even put one on retainer And compounding the problem is a promise of refunds on losses to to make sure that you’re always on firm ground when making decisions based the high rollers. But Hannum says it’s not just limited to the high rollers. on math.” “This is similar to deciding how much to comp a regular player,” he explains. “You need to run through the numbers and decide if you’re To hear a full podcast of this interview, visit GGBMagazine.com.

’’

Casino executives should have some familiarity with basic ideas of probability and statistics. These are the most important tools you use to analyze the games.

’’

Global Gaming Business FEBRUARY 2016

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Jersey

Jams

Casinos in North Jersey, state takeover of Atlantic City… It’s never dull in Garden State gaming By Patrick Roberts

he struggles of the casino industry in Atlantic City over the past seven years have been well documented. More than half of the city’s gross gaming revenues have disappeared after more than 30 years of steady increases. The blame falls on regional competition, a bad economy and nebulous smoking bans, but the lack of preparation in the face of upcoming competition also played a big part in the decline. And now more competition to Atlantic City casinos could arrive within their own state. Last month, Democrats in the state legislature approved a bill that would place a constitutional referendum before the voters in November to authorize two casinos in North Jersey. Factions of the party were at first divided over the amount of money that would be dedicated to Atlantic City to ameliorate the damage done by those two new casinos, and who would own the new casinos (Atlantic City casino companies or out-ofstate companies). In the end, a compromise was reached to give Atlantic City casinos six months to initially bid for the North Jersey casinos, which must have a price tag of at least $1 billion. The casinos could partner with an out-of-state company that would be allowed to own up to 49 percent of the project. If after six months there were no proposals from Atlantic City casinos, the bidding would be thrown open to out-of-state companies. A tax rate will be set by the legislature after the referendum passes. While Atlantic City casinos pay an effective rate of 9.25 percent, North Jersey casinos are expected to be higher, but not quite as high as the 50-percent-plus rate paid by New York and Pennsylvania casinos. Initially half of the gaming tax money would be dedicated to the redevelopment of Atlantic City. It’s expected to be around $200 million a year for at least seven years to offset the loss of business to in-state casinos. That percentage would decline over a period of years. How that money will be distributed and to whom is not outlined in the bill. One more hurdle remains for the bill before it reaches the ballot. Because the agreement was reached after the 2015 session ended, passage will require a super-majority of at least 60 percent of the legislators. Most observers believe that won’t be difficult since Democrats dominate the state legislature and North Jersey Republicans are also in favor of the referendum. Atlantic City-area politicians decried the measure. “It is foolish to think that gaming in North Jersey would do anything but cannibalize an already-saturated market in the same way that casinos in

(l. to r.) Atlantic City state Senator Jim Whelan, Mayor Don Guardian and Senate President Steve Sweeney played major roles in the legislative bid for more casinos in North Jersey and a state takeover of the Boardwalk town.

Pennsylvania, Delaware and Maryland have cannibalized ours,” said Atlantic City’s state Senator James Whelan. Although Hard Rock International and the Meadowlands released a poll showing most New Jersey voters in favor of gaming expansion in North Jersey, most objective polls showed stiff opposition. An anti-expansion campaign should bring together some strange bedfellows like the casino companies in Pennsylvania and New York along with the Atlantic City casinos, as well as the typical anti-gaming activists. Meanwhile, state Senate President Steve Sweeney introduced a bill that would take over most of the functions of the Atlantic City government. Although there has already been a financial monitor in place, as well as a stateappointed emergency manager, Sweeney says this will be a takeover on “steroids.” “This is a very clear statement to Atlantic City,” said Sweeney. “Get your act together. Knock off the B.S. and start addressing what you need to address.” Mayor Don Guardian compared Sweeney’s attack to Pearl Harbor. “Certainly no one was lost or killed,” Guardian told NJ Advance Media. “But certainly, it was that kind of a surprise to me.” Atlantic City’s woes are getting old, says Sweeney. “There is extreme Atlantic City fatigue in this statehouse,” Sweeney said. “My colleagues—every time we talk about doing something for Atlantic City now, they’re tired of hearing it.” The legislature just approved a bill that would impose a set annual fee for each casino—“payment in lieu of taxes” or PILOT—allowing the casinos to escape constantly escalating property taxes and the city to avoid tax appeals. But at the last minute the casinos’ PILOT amount increased to avoid soaring property taxes for businesses and residents of surrounding Atlantic County. With all these developments, 2016 is shaping up to be a busy year for Atlantic City and New Jersey.

While Atlantic City casinos pay an effective rate of 9.25 percent, North Jersey casinos are expected to be higher, but not quite as high as the 50-percent-plus rate paid by New York and Pennsylvania casinos. 14

Global Gaming Business FEBRUARY 2016

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Global Gaming Business FEBRUARY 2016

ast year was a monumental one for the American Gaming Association, as the organization grew membership by 50 percent, added its first tribal members, expanded our presence with regional operators and deepened our reach into the supplier community. We also developed a more modernized position on the rapidly evolving issue of sports betting, built strong ties with law enforcement through our efforts to combat illegal gambling and exerted a newfound ability to affect outcomes on Capitol Hill and within federal agencies. A clear example of this was when we galvanized the industry to fight the IRS proposals that would change the tax withholding levels on slot machines and use loyalty marketing cards as a means of tracking consumer winnings. In 2016, you can count on the AGA to continue to address the most important issues facing the industry, something we’re better positioned to do than ever before. This year, though, several of our initiatives will be new for the AGA, and reflect the constantly evolving role that our members want us to play. Among these roles will be an increased presence in the states. The gaming industry is largely regulated at the state level, and AGA can provide an industry-wide perspective that will shape debates, policies and regulations. Building off our efforts in Massachusetts to aggressively promote the industry and push back against outdated stereotypes, AGA will help to shape the discussion in other states that are considering the expansion or introduction of gaming, such as Georgia. Through our Get to Know Gaming campaign, we’ll use authoritative research and rapid-response communications to tout the diversity of good jobs we provide, the economic benefits we generate and the public safety improvements that result once a casino is up and running. AGA will continue to be the biggest champion for gaming. The second new role will be as a convener on

the issue of sports betting. AGA will launch an aggressive campaign to highlight the problem that exists with current sports betting law, and we’ll build a broad coalition to determine whether a rational alternative to current law exists. The 2016 effort will include robust research, aggressive communications and partnerships with sports leagues, law enforcement and other parties critical to a progressive approach to sports betting. Our efforts will focus on showing that legal and regulated gaming strengthens the integrity of sports. Of course, even as we branch out into new areas for the AGA, we remain focused on protecting and promoting the industry here in Washington. It’s critically important that members of Congress, and our next president, understand our industry and the economic benefits we provide in 40 states. That’s why you’ve seen unprecedented engagement from AGA in the presidential campaign through Gaming Votes. As we head into a presidential year, we will continue to hold on-theground events in battleground states where gaming is driving big results. Look for us in Pennsylvania, Florida, Nevada, Michigan and elsewhere as we educate candidates and gaming employees—including through a first-ever voter guide that we’ll release next month. Through these events, we’re also building more champions for our industry in Congress. Other champion development efforts will include building stronger ties with the Congressional Black Caucus, driving engagement with the Congressional Gaming Caucus and growing our political action committee so we can support those who support us. In all that we do in the upcoming year, it is critical to represent the totality of the gaming industry, while defending and promoting our industry. The foundation built in the last year will have significant impact for our industry in 2016, and I look forward to our work together. Follow Geoff Freeman on Twitter: @GeoffFreemanAGA

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FANTINI’S FINANCE

Best of the Rest How other segments of the gaming industry will perform in 2016

By Frank Fantini

n our January column, we examined the outlook for casino companies in 2016. This time, we look at the rest of the gaming industry. In one word, the outlook is cloudy. Slot machine companies face a flat, and perhaps declining, base. And they worry about being left behind by emerging pastimes. The fluid and uncertain legal outlook leaves the future of online gaming cloudy in the United States. Ditto daily fantasy sports and expansion of conventional sports betting.

SUPPLIERS As mentioned, suppliers face a tough market as casinos simply aren’t stocking as many slot machines as before, the big North American VLT replacement cycles are largely past and the recent wave of U.S. casino openings has crested. Complicating life for the biggest suppliers, Scientific Games and IGT, is digesting their acquisitions and reducing debt taken on for those acquisitions. Meanwhile, upstarts are nipping at their heels. Compounding these problems is the fear of emerging types of gaming, such as eSports and variations of social gaming. Slow slot machine demand might be ameliorated or even reversed if more states follow Illinois and allow slots in liquor-licensed establishments. But that won’t happen in a rush, and maybe in no state this year. If they stay disciplined, SGMS and IGT still have huge competitive advantages like established systems businesses and cash flow to apply to debt reduction. But focused competitors like Aristocrat, Ainsworth and Konami appear on track to continue their gains. In terms of new kinds of gaming, the industry answer is skill-based games. We are skeptical, not seeing how a slot machine on a crowded casino floor can match the immersive experience or the peer-topeer empowerment of other kinds of emerging egaming. And it is downright impossible for skillbased games to evolve with the lightning speed of non-gambling games given regulatory requirements. Not that slot machines will disappear; there is clearly a big market of people who want the lone ex18

perience, and adding skill elements will certainly help. But the trajectory of the conventional slot business is not bullish. If there’s a bright spot for suppliers, it is social gaming. That’s where the young people coveted by skill-based advocates are playing. And it’s where popular slot machine games thrive and where the game design prowess of slot companies is a competitive advantage.

ONLINE iGaming has not caught on in the U.S., either with state legislators legalizing it or with players where legal. We expect the evolution will continue to be slow and, indeed, internet gaming itself might be somewhat passé as young players are drawn to empowered types of gaming such as eSports and fantasy sport exchanges. Legislatively, iGaming might catch on if one or two big states break the ice, such as Pennsylvania or California. But politics is a problem. Until various industry factions unite behind a bill, enacting online gaming in any state will be like legalizing casinos in Kentucky, an annual bud that never blossoms. Meanwhile, a small company worth watching is GAN, formerly Game Account. London-listed GAN offers to casinos what it says is the best of both worlds—creating full online casinos for free play that GAN says generate higher daily average user revenues than social gaming, and the ability to cross-market to land-based casinos. And as an option on the future, the sites can be turned into real-money gaming at the flip of a switch if internet gaming is legalized.

SPORTS BETTING AND DAILY FANTASY SPORTS Sports betting and DFS present fascinating and complex politics. On one side, the casino industry wants sports betting to spread throughout the country. On the other side, young DFS entrepreneurs have enlisted the world’s most powerful media companies as investors and historically anti-gaming Disney and the major sports leagues as stakeholders. Casinos would like to see DFS declared gambling, thus requiring licensing and locking out the media giants and sports leagues. The best route for this strategy is in the courts, where attorneys general

Global Gaming Business FEBRUARY 2016

such as Eric Schneiderman of New York and Lisa Madigan of Illinois are heading. For DFS, the best strategy is to ask legislators to legalize the contests, thus taking advantage of the lobbying power of investors such as Google, Fox, Time Warner and Comcast and of allies such as Disney and major sports leagues. However, DFS legalization also can lead legislators to loosen bans on traditional sports betting, especially as resistance from major sports leagues is softening. Our expectation: barriers to sports betting and DFS will begin to fall, faster first for DFS. It will be a hodgepodge of laws among the states, but legalized sports betting seems inevitable. In this scenario, look for big casino operators such as MGM Resorts and Caesars to benefit, perhaps by buying DFS operators such as FanDuel and DraftKings. And expect established sports books such as William Hill and Paddy Power to prosper.

HORSE RACING Very quietly, 2015 was a good year for horse racing, with the industry stabilizing in many jurisdictions and handle actually growing in others. Early-year improvement was weather-related as Old Man Winter wiped out fewer race dates. Then the first Triple Crown winner in 37 years was credited with piquing public interest in the Sport of Kings. And certainly, major events such as the Kentucky Derby and the Breeder’s Cup have become growth franchises. We aren’t about to call an inflection point for racing, but racing isn’t dead yet. For investors, racing offers one clear choice— Churchill Downs. CHDN has made a remarkable transformation from just horse racing to being a gaming growth company while still building the Kentucky Derby into an ever-bigger and more profitable franchise. But the kicker is Big Fish. The social gaming company CHDN purchased is rapidly growing profitable business far beyond the bluegrass pastures of Kentucky. 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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AGEMupdate AGEM KEY BOARD OF DIRECTORS ACTIONS

AGEM MEMBER PROFILE Crane Payment Innovations (CPI) is based in Malvern, Pennsylvania. CPI is a Silver member of AGEM, and was formed when Crane Co., a diversified manufacturer of highly engineered industrial products (NYSE:CR), acquired MEI and merged it with the payment solutions division of their payment and merchandising technologies business segment. CPI legacy brands now include CashCode, Conlux, MEI, Money Controls, NRI and Telequip. As a result, CPI offers the single most comprehensive portfolio of payment systems in the industry, everything from coin and note devices (spanning hoppers, acceptors and recyclers) to cashless systems and asset management software. Itâ&#x20AC;&#x2122;s all accompanied by a team of experts who can help ensure the most proficient selection and application of CPI products into complete cash management solutions. A commitment to continuous improvement rests at the heart of CPIâ&#x20AC;&#x2122;s success. Accordingly, CPI is focusing resources to expand the functionality of its Easitrax asset management system. First, CPI will be introducing a Maintenance Alerts feature that allows operators to set performance thresholds, receive proactive maintenance notifications and, ultimately, identify problems even before they occur. CPI will also introduce functionality that makes Easitrax applicable to route operatorsâ&#x20AC;&#x201D;providing the ability to manage accounting and performance on both micro (site) and macro (network) levels. CPI is more than just a supplier; CPI is a global partner in cash management with a goal is to help customers become more profitable and efficient by continually expanding the value they can receive from automated payment systems. In the first quarter of 2016, CPI will be attending ICE Totally Gaming (booth N3-320), AHG, NIGA and ENADA Spring. For more information about CPI, contact Brian Wedderspoon at 610-430-2700 or brian.wedderspoon@CranePI.com. Visit CranePI.com for complete information about the company. 20

Global Gaming Business FEBRUARY 2016

â&#x20AC;˘ AGEM members recently voted officers to the board for the next 12-month term. These include First Vice President Dan Savage, Scientific Games; Second Vice President David Lucchese, Everi; Vice President of Government Relations Steve DiMasi, IGT; Secretary Mark Dunn, Aristocrat; Treasurer Tom Nieman, JCM Global; Co-General Counsel Harper Ko, Scientific Games; and Co-General Counsel Daron Dorsey, Ainsworth. Daron Dorsey was the only new officer voted in, and takes over from Mike Dreitzer, also from Ainsworth. â&#x20AC;˘ AGEM members approved a $15,000 contribution to the European Casino Association. This will be split as $10,000 toward sponsorship of the European Dealer Championships, the finals event being staged in May 2016; and $5,000 toward sponsorship of the International Casino Conference held during ICE, February 1. â&#x20AC;˘ In preparation for the Bermuda Casino Gaming Commission awarding up to three casino licenses, it has approached AGEM to assist with writing new regulations that would govern suppliers in the market. AGEM members approved a $30,000 contribution in support of the development of these â&#x20AC;&#x153;best practiceâ&#x20AC;? regulations that could serve as a unique model of industry cooperation and possibly reduce the regulatory burden on suppliers. â&#x20AC;˘ After an 18-month process, Nevada bill SB9 technical standards, governing variable-payback slots that allow for skill-based gaming and other new features, became final on January 25. This gives game developers the framework they need to create new types of skill-based games. It was the first time AGEM has worked so closely with the Nevada Gambling Commission and regulators on something of this scale, which will undoubtedly have wide-ranging December 2015 benefits for the industry. â&#x20AC;˘ AGEM welcomed two new members to the group in the January meeting, bringing the total membership count to 149. GameCo, based in New York City, was voted in as a Bronze member, and Media Resources International as an Associate member.

FORTHCOMING EVENTS Members recently voted to support three very worthy corporations with donations of $5,000 each. The Go Red For Women luncheon will be held on February 25 in Las Vegas, supporting funding for research battling heart disease, which is the No. 1 killer of women in the U.S.; the Western Indian Gaming Conference, being held at Harrahâ&#x20AC;&#x2122;s Southern California, February 9-11; and the Midwest Conference on Problem Gambling and Substance Abuse, June 22-24 in Kansas City.

AGEMindex

The gaming equipment manufacturing sector posted a positive performance in 2015, as the AGEM Index improved by 15.47 points (+8.5 percent) year-over-year to 197.32, which represents the third consecutive month of year-over-year of 2.99 points (+1.5 percent) in the final month of growth. Compared to November 2015, the index reported an increase the year. In December, six of the 14 global gaming equipment manufacturers reported month-to-month gains in stock price, with one up by nearly 15 percent. Of the eight manufacturers reporting declines in stock price during the month, five were down by 5 percent or more, with two down by 10 percent or more.

AGEM

Exchange: Symbol (Currency)

Stock Price At Month End Percent Change Dec-15 Nov-15 Dec-14 Prior Period Prior Year

Index Contribution

Nasdaq: AGYS (US$)

9.99

11.10

12.59

(10.00)

(20.65)

(0.27)

Ainsworth Game Technology

ASX: AGI (AU$)

2.29

2.40

2.36

(4.58)

(2.97)

(0.34)

Aristocrat Technologies

ASX: ALL (AU$)

10.21

9.49

6.56

7.59

55.64

3.67

Taiwan: 3064 (NT$)

18.20

20.00

30.50

(9.00)

(40.33)

(0.04)

Agilysys

Astro Corp. Crane Co. Daktronics, Inc. Everi Holdings Inc. Galaxy Gaming Inc. Gaming Partners International International Game Technology PLC INTRALOT S.A. Konami Corp. Scientific Games Corporation Transact Technologies

NYSE: CR (US$)

47.84

52.02

58.70

(8.04)

(18.50)

(2.59)

Nasdaq: DAKT (US$)

8.72

8.67

12.51

0.58

(30.30)

0.03

NYSE: EVRI (US$)

4.39

3.82

7.15

14.92

(38.60)

0.50

OTCMKTS: GLXZ (US$)

0.19

0.20

0.39

(5.00)

(51.28)

(0.00) 0.01

Nasdaq: GPIC (US$)

8.96

8.86

8.61

1.13

4.07

NYSE: IGT (US$)

16.18

15.53

17.25

4.19

(6.20)

1.56

1.17

1.38

1.09

7.34

(0.36)

(15.22)

TYO: 9766 (ÂĽ)

2,888.00

2,881.00

2,220.00

0.24

30.09

1.08

Nasdaq: SGMS (US$)

8.97

9.22

12.73

(2.71)

(29.54)

(0.24)

Nasdaq: TACT (US$)

8.59

8.85

5.47

(2.94)

57.04

(0.02)

Change in Index Value

2.99

AGEM Index Value: November 2015

194.33

AGEM Index Value: December 2015

197.32

AGEM is an international trade association representing manufacturers of electronic gaming devices, systems, and components for the gaming industry. The association works to further the interests of gaming equipment manufacturers throughout the world. Through political action, trade show partnerships, information dissemination and good corporate citizenship, the members of AGEM work together to create benefits for every company within the organization. Together, AGEM and its member organizations have assisted regulatory commissions and participated in the legislative process to solve problems and create a positive business environment.

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KING of Cash JCM Global finds continuous success in providing the flow of money to and from gaming floors By Frank Legato and Roger Gros

JCM executives from top to bottom: • Yojiro Kamihigashi, CEO Japan Cash Machine • Terry Izawa, President JCM Global • David Kubajak, VP of Operations • Tom Nieman, VP of Sales and Marketing • John Garner, Chief Financial Officer

Global Gaming Business FEBRUARY 2016

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he casino industry has always relied on vendors to provide a wide spectrum of games, systems, surveillance technology and any manner of other supplies that keep a gaming operation going. But there’s one supply that a casino simply cannot do without: cash. Cash is the fuel of gaming, and the technology necessary to funnel money to and from players, and through the games to the count room, is the lifeblood of a gaming operation. It’s not surprising, then, that one of the top vendors to the gaming industry has made a business of dealing with money for 60 years. Japan-based JCM Global is the leading supplier of solutions facilitating the transfer of money to and from the casino floor, from awardwinning bill acceptors in slot machines to kiosks, printers and high-tech drop-box systems that both secure and account for a casino’s drop. Founded in the mid-1950s in Osaka, Japan, as Japan Cash Machine, Ltd., the company originally built its reputation providing currency solutions to a diverse range of industries, from banking to retail to vending and specialty industries. Its first products were mechanical cash registers (the company is still the world’s leading supplier of cash registers). —Hikaru (Terry) Izawa, President, JCM Global But it is the casino industry that made JCM what it is today—and what it will be in the years to come. Casinos now account for a significant percentage of JCM’s business. The company markets the value of its money-handling solutions to casinos, then sells the solutions as OEM equipment to the slot manufacturers—often as preferred equipment. As a result, JCM is the preferred cash-handling vendor of several major casino operators, as well as the top slot manufacturers in the business. “We market ourselves to the operators, so their preference on their property is always JCM peripherals and components in currency validation, ticket printing or digital media,” explains Tom Nieman, JCM Global’s vice president of sales and marketing. “We actually sell our products to the OEMs. We work diligently with the OEMs so that we are fully integrated into any of their products or platforms. Each OEM has a number of different platforms, so it’s critical that we work with them to make sure that our product fully integrates, proper firmware is in place, and can be an option for the operators to choose JCM product on whatever product they order from the OEM. says, “with three big markets—North America, Europe and Asia. While we “Today, 85 percent to 90 percent of all purchases are chosen by the operaare very pleased with the major successes we have had outside the gaming intor. As an operator sits down to put together an order, they have the opportudustry, gaming remains at the heart of our business.” nity to choose JCM products, and most of them do.” Izawa should know. He has been with JCM for all of those years, having joined the company in 1985. He designed and developed the company’s first Gaming-Centric bill validator, introduced in the late 1980s. “The beginning of our company’s It was a pioneering business move with one of those OEMs—leading slot participation in the gaming industry was in Japan when we produced a bill manufacturer International Game Technology—that originally led to JCM’s validator for amusement centers,” Izawa recalls. “Then, we responded to the dominance of the cash-handling sector of the industry, according to Hikaru demand for a bill validator for use in a kiosk that vended rolled coins.” (Terry) Izawa, JCM Global’s president. Within the space of a few years, JCM responded to business needs by “We’ve been in the gaming industry now for more than 30 years,” Izawa

“While we are very pleased with the major successes we have had outside the gaming industry, gaming remains at the heart of our business.”

FEBRUARY 2016 www.ggbmagazine.com

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iVIZION

Universal Bill Acceptor

CouponXpress

producing side-mounted bill validators for Sigma slot machines. But it was a request from IGT that would cement the supplier’s position and legacy in the gaming industry. “Our big opportunity came when IGT asked JCM to develop an embedded bill acceptor for their slot machines,” says Izawa. “At that time, we didn’t understand really what a slot machine was. IGT trained us to understand how slots worked. Then we learned how to design bill acceptors for most of the slot manufacturers. The technology already existed, but we had to learn about gaming to understand how to embed them into the slot machine and make it work. “Our first product, the DVD145, was only developed for use in the U.S., but IGT wanted to introduce it worldwide. That’s when we realized that we could develop a bill acceptor that would be have global acceptance. We developed the WBA (World Bill Acceptor) for the U.S. and Europe.” The WBA product practically invented the cash-validation sector of the industry. By the late 1990s, there was scarcely a slot machine anywhere in the field that was not equipped with an embedded bill validator—usually from JCM, which continued to refine the technology with the Universal Bill Acceptor (UBA), and new generations of product ending with the currently dominant iVIZION, billed as the “foundation of intelligent validation.” “iVIZION does something very important—it sees the entire note or ticket, front and back, and captures that entire image,” Izawa says. “That is something no other bill validator does, and that ability to capture the full image is very important, particularly as cash-based businesses around the world continue to face down the challenge of sophisticated counterfeiters.” Battling counterfeiters is an important part of JCM’s business, says Izawa, and JCM’s success in this area is one of the reasons for its success as a supplier. “Our main job is to keep the casino safe from counterfeiters,” Izawa says, “so our products need to be able to accept legal bills and reject counterfeit bills. These days, the field of global currency is so diverse—some bills are made out of paper, others are made of plastic materials. Each material has many issues, so we have to be on guard against any attempt to subvert those bills. “These elements are the most important factors for the future of our business. That is why we work closely with government and law enforcement agencies worldwide, to stay one step ahead of counterfeiters, because it’s more than just a counterfeit note. Those counterfeits most likely fuel a larger criminal enterprise, which is why we take our business of defeating counterfeiters so seriously.” The “intelligent validation” of iVIZION extends to the other end of the slot cash system, the drop box, with JCM’s Intelligent Cash Box system winning a slew of industry awards of its own. “Errors with mishandled standard cash boxes can lead to accounting er24

Global Gaming Business FEBRUARY 2016

rors, with the wrong cash box being pulled or a wrong cash box being re-inserted, leading to cash reporting errors,” Izawa explains. “But the ICB provides a clear picture of where the cash box comes from, the money that should be inside and how and when it was received. It increases the accuracy of the financial reporting for any casino.” But beyond the basics of transaction efficiency and real-time knowledge of a casino’s float on the slot floor, Izawa says customers report a wealth of other benefits from ICB. “There were unforeseen benefits, such as one casino in Oklahoma who told us the plastic boxes dramatically decreased workplace injuries and worker strain,” he says. “The Intelligent Cash Box system has been very useful to the gaming market, and each customer has benefited in their own way, finding the solutions in ICB they needed most.” A natural extension of JCM’s business in bill validators and cash boxes— and its technology—lies in the market for redemption kiosks and ATMs. “Our equipment is an integral part of casino redemption kiosks,” says Nieman. “Our bill-accepting technology is one of the best in the world, but the product itself is different. Redemption kiosks have a huge money-handling capability, and many of the Intelligent Cash Boxes we provide are for these redemption machines and not for slot machines—we designed an extra-large-capacity cash box for iVIZION for use in the kiosk. This has been a big area of growth for us.”

Beyond Currency JCM has not rested on the strength of its industry-leading cash-handling systems. In recent years, the company has branched out into the other essential cog in the system of slot-machine play and redemption in modern machines and kiosks—the ticket system. After partnering for a few years with thermal printing manufacturer Nanoptix as a distributor of its ticket-in/ticket-out printers, in 2014 JCM finalized the acquisition of FutureLogic, Inc., a still-on-the-rise producer of popular printing systems that incorporate couponing as a marketing tool. “FutureLogic and JCM are two companies that operate in a similar space, and provide the highest-quality products for the gaming market,” says Izawa, “so our alliance was synergistic. And when you add our technology to their products, our business will grow. JCM is now combining the technology of bill acceptors and printers to create new products.” It’s likely JCM will branch out to other related specialties in the future. “Think of it this way,” says Izawa. “I go to a supermarket and find many different products—that’s what we are at JCM. We can be a one-stop shop for our casino customers when they want to buy cash-handling equipment, cash transaction equipment, ticket printers, signage and displays, and more. We can provide our customers with many products and try to anticipate how we can service them better.

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“If there is a synergistic product that JCM believes in— product availability, product quality, etc.—and we can make it convenient for our customers to buy from JCM— price, delivery, support—then we could consider it.” —Tom Nieman, vice president of sales and marketing, JCM

“This is because JCM is always seeking opportunities to better serve our customers. This is how our agreement came about with our digital media offering. Several customers approached us asking if we had a solution in this area, which at the time we did not.” This new division, JCMedia, offers a wide range of digital LCD and plasma display monitors from Samsung, LG, Philips and others as part of display systems. “We sought out re-sell arrangements that we believed would give our customers the best product at the best value,” says Nieman. “We even went so far as to find a content creation solution. As for other agreements in the future, if they would serve our customers’ needs, then we would be open to them. The bottom line is, JCM is always sensitive to bring value to our customer relationships. If there is a synergistic product that JCM believes in— product availability, product quality, etc.—and we can make it convenient for our customers to buy from JCM—price, delivery, support—then we could consider it.” Izawa adds that JCM strives to bring its customer service culture to any and all of these new product ventures. “We provide a physical product to our customers, and those products may have a program or characteristics that aren’t familiar to the customer, so our customer service begins even before the purchase,” he says. “We need to make sure that our customers understand how to operate our products, and we’ll go to great lengths to ensure that happens. Our customer service reps are directed to train the customers on the install, how to operate the product, and how to maintain the products. “Every JCM employee knows the customer comes first. And the reason they know that is because we live it as a management team. In our headquarters in Japan, in Las Vegas, in Germany—in each of our offices, our managers lead by example.”

Into the Future JCM’s main business has always centered around physical currency, but that doesn’t mean the company isn’t prepared to facilitate cashless play in the casino industry, whenever that may happen on a large scale. “JCM’s company name is Japan Cash Machine,” Izawa reminds. “That means we’ll do anything that has to do with money. What we need to provide for the customer is to maintain all transactions, whether that means the physical transfer of money or electronic means to move money around. We want to be prepared for anything. Right now, we are figuring out what the next steps will be in this transition, and we will play a part in it. “This is an exciting time for technology. There are so many possibilities. And wherever transactions go in the future, we will be helping to lead the way with innovative products that both serve and protect our customers, just as they do now.” 26

Global Gaming Business FEBRUARY 2016

He adds that JCM will work with regulators all along the transition path to new money-transfer technologies. “Especially in the gaming business, a company’s relationship with the regulators is most important,” says Izawa. “If we didn’t have this kind of relationship, we’d have many problems, so it’s important that we maintain good relationships with them.” “What’s interesting about cash in the gaming industry is that it crosses two disciplines of regulation where JCM has large footprints—gaming and banking,” adds Nieman. “Maintaining good relationships on both sides allows us to work better in both industries. Working with the treasury departments who create and distribute the currency, then to the gaming industry where those notes are played, and then back again to banking. It’s an interesting, highly regulated cycle, and good relationships are vital to our success.” While JCM continues to work with regulators on future payment technologies, for the present, cash is still king. “We’re developing bill acceptors for use in over 130 countries,” says Nieman. “Each country has its own specific issues, so we need to understand how their currency systems work. In all these countries, we have a relationship with their governments and their banks. They inform us of their plans to issue new currency, so we can be prepared to accept these new bills the moment they come out. “We can also give them some feedback on how the next generation of currency can be more secure, so we’re doing a lot of work prior to the issuance of any new bills.” For now, Izawa is in command of growing a remarkably diverse range of products, but he says the company culture at JCM makes it easy. “Before I came to JCM, I worked for a very large, very corporate company in Japan— everything was rules,” he says. “When I decided to come to JCM, I was impressed by the communication from top to bottom. It felt like family, and we hope it still feels that way today. We try to allow each employee to explore new things. This approach of freedom and creativity and innovation brings an energy and an excitement to the company.” At the same time, Izawa says JCM will remain open to new types of business—including participation in a Japanese casino industry, although the process has been moving very slowly. “The gaming bill was recently postponed for a number of reasons, one of them being an upcoming election,” says Izawa. “But since the pachinko business is so large in Japan, the relationship between a gaming and pachinko industry is uncertain. That’s another reason it has been postponed. “But since Japan is our home country, we want to be involved. We hope someday soon the gaming law will be accepted, and we will be able to play a big role in a Japanese gaming industry. “Whatever happens, we want to work with companies in the gaming industry. We are not only a company selling our products, but we want to create a healthy and vibrant gaming industry with our manufacturing partners and operators. That is our goal.”

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2016 Special RepoRt:

SURVEILLANCE AND SECURITY

There’s An App For That Casino cheating in the digital age By Willy Allison

eventy miles north of the world’s gambling capital Macau is Guangzhou, the world’s capital for purchasing gambling cheating devices. Guangzhou, located in mainland China, is an international hub for electronic equipment. Most of the gambling cheating devices that can be purchased in Guangzhou are manufactured in nearby Shenzhen— just a hop, skip and jump from Hong Kong. Surprisingly, the cheating device stores are not located in backstreets and dark alleys that only James Bond could find. They’re located on Airport Road in the Baiyun District, a main arterial from the airport to the city center. Over a dozen stores selling all the latest cheating devices are easy to find and conveniently located within walking distance from each other. The cheating device stores are quite large facilities that house a large number of staff. Most offer online facilities where customers from all over the world can purchase and receive 24-hour support for their newly acquired “weapons of mass deception.” One website has an “about us” page with a professional picture of a CEO (probably not the CEO—there is no name included) with a message to customers about how his company “provides unique high-technology casino cheating products and perfect technology support and service for customers. To produce superior products, our company invests a lot of money for the new product development and design every year.” Some of the companies have multiple websites under different names, but if you look closer you will notice similarities in the website design. This suggests most of the stuff is coming from the same place. A closer look inside the cheating device stores is quite revealing. Last year an acquaintance of mine, armed with a local translator, visited a number of the cheating device stores in Guangzhou on a research mission. His

Global Gaming Business FEBRUARY 2016

mission was to see how accommodating they could be in supplying equipment to a guy off the street that could potentially use the devices to cheat casinos. He generally found the staff to be very friendly, and had no problem getting invited into a number of their facilities to see their operations and a wide variety of cheating devices. They took great pride in being able to provide the latest and greatest cheating devices on the market. After seeing a number of options, he focused on card marking systems. He was shown a number of products that incorporated different “invisible” substances with different optic readers. After discussing pricing terms, he asked them if they could mark up a set of real casino cards from Las Vegas and if so, how long it would take for them to have them shipped back to the U.S. The response? “Three days.”

Hot Sellers in 2016? When you look at the availability and accessibility of casino cheating devices, it is interesting to note how they range from the very simple to the highly sophisticated. Some of them, like magnetic dice, up-the-sleeve hold-out devices and card-marking daub, come under the oldest-trick-inthe-book category, but others are worthy of being included in Apple’s annual product launches. It seems if you want to cheat a casino in 2016… there could be an app for that. Here’s a brief description of some of the types of sophisticated cheating devices currently on the market that could do some real damage if introduced into a casino game. I have also noted if the type of device has actually been reported to have been used to cheat a major casino.

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To understand why concealed video cameras are a huge threat to game protection, we must understand the objectives of casino cheats. Cheats generally use one of three methods to rip off a casino: they change or make a wager after the result, they change or make a result after they wager, or they obtain inside information of the result.

Computer Analyzers: A system incorporating playing cards with “invisible” marks located on the edges of the cards that can only be identified using a special camera lens, usually built into a cell phone. The card information is sent back to a computer that analyzes the order of the cards and communicates the results to the cheat. This device is usually used on poker, but it can be incorporated into blackjack and baccarat. There has been a reported use of this device. Camera-Rigged Casino Equipment: Table game equipment that has been rigged with a Bluetooth-transmitting miniature camera inside to enable sequences (slugs) of cards to be recorded during the shuffle. Over the last five years, there have been reported incidents of dealing shoes, shuffle machines and chip trays all being rigged with a camera. Marked Card Systems: Different substances are being developed all the time that are impossible to see with the naked eye and can only be identified using special glasses, contact lenses or a concealed camera. Camera ranges for identifying cards are increasing all the time, and in some cases cards can be identified from 10 meters away. Numerous cases of card marking systems have been used in recent years. Optical Character Recognizers (very new): A cell phone with an app that is programmed to identify the card indexes via the inbuilt camera and send a visual (or audio) message to the cheat. This could be used to identify hole cards, dealers flashing the top card or the first card out of the shoe. There have been no reports of these devices being used in a casino thus far. RFID Playing Cards (very new): Playing cards with embedded radiofrequency identification chips in each of them so they can be identified by RFID readers. There have been no reports of these devices being used in a casino thus far.

The list of available cheating devices for sale to the public could go on and on. If you’re interested in learning more about the specific devices that are currently available, Google “casino cheating devices China.” Keep in mind the use of any of these devices to cheat a casino would generally require collusion from the inside. This could be a dealer, a floor supervisor, a pit manager or whoever is responsible for maintaining, repairing or storing casino equipment. In some cases, it may be all of the above. An exception would be the card marking systems for which inside help is not required, although as a casino manager you should never discount the possibility.

Hold The Phone Based on the growing amount of cheating device sites on the internet, it is pretty safe to conclude that the business of casino cheating is thriving. The supply is growing. One can only assume that so is demand. The reality is, however, that over the last decade the biggest casino scams have utilized a device that can be purchased down at the local mall, and there’s a good chance that everyone already has at least one. No, I’m not talking about guns. The weapon of choice for big-time casino crooks is a video camera. Video cameras are everywhere. Odds are that everyone playing in a casino is armed with a video camera in the form of potentially the best cheating device—a cell phone. Most cell phones have built-in HD cameras that can record high-quality video for long periods of time. What makes the cell phone such a weapon is they have the potential to video record, compute and communicate inside information visually or by audio messaging. To understand why concealed video cameras are a huge threat to game protection, we must understand the objectives of casino cheats. Cheats generally use one of three methods to rip off a casino: they change or make a wager after the result, they change or make a result

FEBRUARY 2016 www.ggbmagazine.com

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PR OC ED UR ES

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EDUCATION The best way to stay one step ahead of high-tech cheating is to know what’s out there and understand how it is used to beat casinos. after they wager, or they obtain inside information of the result. By far the biggest scams over the last decade have involved dealers and players colluding to gain inside information of the result. By using video cameras at a baccarat game to record sequences of cards during or after a shuffle, cheats, via way of breaching internal procedures, are able to keep sequences intact for the next round so the results can be predicted and successfully wagered on. Different variations of the scam have evolved along the way with the advancements in camera technology, especially in the field of wearable cameras. Players used to be responsible for video recording the shuffles with the assistance of the dealers. Recent trends have turned towards dealers wearing concealed cameras and recording the cards themselves. In 2015, reports surfaced from California that dealers had rigged chip trays with concealed cameras to facilitate and record a table-level view of the baccarat shuffle. Unconfirmed reports suggested the video was remotely recorded. Another unconfirmed rumor surfaced in 2015 that dealers in a high-end casino were using concealed cameras to record pre-shuffles in preshuffle rooms.

Time to Devise A Device Strategy The availability of these new cheating devices and the advancement of digital technology has tipped the edge in favor of the cheats. If we acknowledge that cheating devices have never been easier to buy, utilize sophisticated technology, get results and are becoming harder for casinos to detect, then we have to devise a device strategy. I prescribe to three basic principles when it comes to game protection. I call them the “Triangle Theory.” The three principles combine smart and effective procedures, equipment and education. When applying these principles to devise a device strategy for the future, we need to take a more innovative approach. Procedures: Review to ensure there are minimal chances for collusion-assisted video recording of cards. If possible, automate the shuffle procedures and streamline the pre-shuffle procedures so the path from storage to the 30

Global Gaming Business FEBRUARY 2016

shoe is as direct as it can be. Ask yourself if there are any steps in your current table game procedures that are vulnerable to exposing cards to concealed cameras. Finally, remember that it’s just as important to enforce procedures as it is to read and write them. Equipment: Given reports as recently as last year of casino employees rigging gaming equipment with concealed cameras, it is paramount that all gaming equipment used in the process of conducting gaming is checked and audited on a regular basis. This should be done by people knowledgeable in game protection and independent from the gaming department. Education: Cheating devices have evolved immensely over the last five to 10 years, and continue to be developed rapidly as digital technology jumps quantum leaps. Progressive surveillance operations should be technologically led by a culture of learning and research-driven protection strategies. The best way to stay one step ahead of high-tech cheating is to know what’s out there and understand how it is used to beat casinos. I recommend time and resources to be dedicated on a monthly basis to search the internet to see what is out there. YouTube is a great resource for finding this type of stuff and using the videos to train your team.

Knowledge Bank There have been a number of casinos hit with very large scams involving camera technology and devices over the last few years. Unfortunately, the failure to prosecute the cheats indicates a possible knowledge gap by regulatory, law enforcement agencies and the casino operators in the new technologies being used to cheat casinos. Cases are disappearing into legal investigation “black holes” that are leaving the casino industry none the wiser and susceptible to future attacks. To gain a better understanding of how new technology is being used to cheat casinos, it is important that all casino interested parties and stakeholders cooperate and share their investigation findings and research with each other. If we educate each other, preventative strategies can be developed and introduced to maintain gaming integrity against any threats that may lie ahead.

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2016 Special RepoRt:

SURVEILLANCE AND SECURITY

Protecting

Cardrooms

How do cardroom casinos differ from regular casinos? By Bill Zender

n a couple of states in North America, you may find gambling establishments that advertise the operation as being a “casino.” However, once you enter the facility, you quickly notice one missing element—slot machines. There are number of “casinos” in California that upon closer examination provide only two forms of gaming that most people associate with the standard Nevada or Class III casinos: (1) standard cardroom poker, which is considered a “pot” game; and, (2) live table games dealt on a “rotating bank” system. These two types of games are the only gambling games that can be legally offered in California cardroom casinos, since it is illegal for these cardroom casinos to have a direct interest in the outcome of the games. This same gambling situation presently exists in the racetracks, or “racinos,” in the state of Florida. In this cardroom environment, casino-style games such as Pai Gow Poker, Pai Gow Tiles, blackjack, baccarat and standard alternative games like Three Card Poker and Ultimate Texas Hold’em Poker can be played legally if the cardroom does not have any involvement in the wins and losses of each gambling decision. The players themselves take on this responsibility by banking in turn at each seated table position. In the same style as the old-fashioned “fade” craps games, the designated banking player places the amount of chips he wishes to place at

Global Gaming Business FEBRUARY 2016

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Because the cardroom does not take an interest in table game win and loss, or in the dealer’s chip tray—which is carried from table to table by the dealer, and is a “par” amount—the focus on asset protection is different.

risk in the wagering box in front of his position. The remaining players may now wager against the banking player (known in California as the “designated player”) up to this limit at each wager position or seat. The dealer’s sole responsibility is to manage and control the game. After having the option to bank on the seated position, the bank rotates left (right in Pai Gow Tiles) one seated position. This format of gaming has catered primarily to the Asian customer over the last 25 years. However, the recent introduction of more mainstream casino games such as blackjack and Three Card Poker is attracting a large number of non-Asian players. Like any gambling game, “action is the attraction.” The more money wagered by the banker(s), the more total player wagering is received by the card room. The card room derives its revenue from the fees paid by the players for each wager. The standard collection fee is $1 for every $100 wagered by the players, and $2 to $3 for the opportunity to be the banker. The more total wagering that occurs on the table, the more the house makes per round dealt. When a table is subject to customers banking a great deal of money on each round, the players are motivated to wager more money themselves. This increase in action drives the card room’s fee collection upward. Since the dealer is at the table only to facilitate play, his or her chip tray contains an impress or “par” amount of chips. This same impress situation is witnessed in standard pot poker games. The dealer’s chips belong to the dealer, and are used to make change for the players at the table. All fees collected per hand dealt are in the form of casino chips, and those chips are dropped down into the drop box at the completion of the round. Any cash taken and changed by the dealer will remain in the chip tray, and is included in the dealer’s “par” bank. This cash will be converted back to chips through a transaction with another casino employee known as a “chip seller,” or at a later point, with a casino cage cashier when the dealer leaves the table with his chip tray. This par bank concept places the responsibility for balancing the amount of value in the dealer bank onto the dealers themselves, and any missing value is the responsibility of the dealer. Subsequently, if a dealer were to steal from his tray, he is stealing from himself. To cover all the player wagers on the rotating bank games, cardroom management has contracted with a separate business entity known as a third-party proposition player provider (TPPP) who is allowed by law to act as a player and absorb all wins and losses while wagering on the table. The TPPP accepts

the responsibility of the bank and provides enough funds to cover all payer wagers at the table. The TPPP adds liquidity to the game, just as certain brokerage firms and market-makers do regarding the New York Stock Exchange and the NASDAQ. To be more precise, TPPP groups act as a gaming enterprise inside of a casino, accepting the table wagering liabilities normally associated with the casino. They also assume the exposure of asset loss from advantage play, cheating and theft. The TPPP is also sensitive to the mathematical factors surrounding the operation of the rotating bank games, and in most situations has a say in the rules, equipment, side wagers and security procedures established by cardroom management.

What is cardroom surveillance’s responsibility? The responsibilities of the surveillance team are basically the same as a standard Class III or Class III casino; however, the priorities are somewhat different. Because the cardroom does not take an interest in table game win and loss, or in the dealer’s chip tray—which is carried from table to table by the dealer, and is a “par” amount—the focus on asset protection is different. Following is a list of surveillance responsibilities in the order of importance. Notice that game protection is not No. 1: 1) Making sure the fee collected by the dealer is correct and placed into the table drop box. Cardroom casinos generate their table game revenue through the collection of table fees from the designated banking player and the customers wagering on each hand. Surveillance operators will be assigned special observations for determining that each dealer is collecting the correct amount, posting the collection, and dropping the chips into the drop slot (or activating the drop slide to drop the chips). If the dealer is required to drop the collected chips by hand, the dealer must be seen showing a “clean” hand towards the overhead surveillance camera. 2) Be sure that the dealers follow all table game procedures including rotation of the bank. In California, any customer who wagered in the previous round can accept the designation of banking player, and do so for two consecutive rounds. This opportunity is offered in turn (rotation) to all players at

FEBRUARY 2016 www.ggbmagazine.com

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Since the players gamble against each other, the cardroom floor supervisor acts primarily as a dispute “referee.” It is the floor supervisor’s primary duty to settle any disputes over hand ranking, amount wagered, and identity of customers participating in the hand. If the floor supervisor cannot effectively recreate the actual situation on the table, his next step is to contact surveillance. the table. Any player offered the bank in turn has the option of declining the bank. California cardroom regulations dictate that after two rounds the bank must be offered to other players. It is the dealer’s responsibility to count the rounds, determine when the bank needs to be passed, and provide all seated players the opportunity to accept or decline the bank. Surveillance needs to conduct observations of this table game rotating bank procedure to ensure all dealers follow the procedure as dictated by house policy. 3) Verify hand values and settle customer disputes. Since the players gamble against each other, the cardroom floor supervisor acts primarily as a dispute “referee.” It is the floor supervisor’s primary duty to settle any disputes over hand ranking, amount wagered, and identity of customers participating in the hand. If the floor supervisor cannot effectively recreate the actual situation on the table, his next step is to contact surveillance. A surveillance operator will review the table game footage during the dispute and assist the floor supervisor in making the correct judgement call. Note: Since the cardroom is not involved in wins and losses, floor management cannot arbitrarily settle a dispute by opting to pay the player. Any monetary dispute settlement is resolved by customers involved in the game. Under certain circumstances

where the dispute results from a dealer error, management can elect to pay the dispute with house funds taken from the casino cage. 4) Conduct observations in order to protect the integrity of the table games. Although the cardroom is not the direct victim of a cheating scam, management does have a responsibility to provide all customers a safe environment in which to gamble. If a cardroom gains a reputation for ignoring game protection and allowing unsafe gambling situations, it will lose customers. Unfortunately, game protection has never been a high priority with the cardrooms, and very little time and resources are spent on game protection training. The TPPP organizations, on the other hand, are usually well-trained, and are willing to work with cardroom surveillance operators to improve their game protection skills.

Protecting Rotating-Bank Games If the cardroom collects a fee from every player wager, advantage play techniques that generate a 1 percent to 2 percent in standard casino games, such as card counting and shuffle tracking, are rendered ineffec-

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tive by the additional cost to wager. In addition, most cardrooms utilize restrictive rules in blackjack such as 6:5 blackjack payoffs, and all but eliminate card counting and shuffle tracking through the common practice of using of continuous shuffling machines (CSMs). The procedure of taking a fee per player hand, and the utilizing of the alternative 6:5 BJ rule, limits gains achievable by an attack on a sloppy dealer exposing his hole card. The professional player is highly unlikely to attack a blackjack game that can be “hole-carded” when a majority of the hole-card knowledge gain is eaten up by the fee and the game’s mathematical advantage. Hole-carding alternative games is extremely profitable in a standard casino environment; however, the difference in game structure and the need for a fair dealer rotation in the cardroom environment limit these forms of attacks as well. For example, in the standard casino alternative game of Three Card Poker (TCP), an advantage player spying one of the dealer’s three cards gains an approximate 3 percent advantage over the house. In the cardroom game, the standard California TCP game is structured with the bank hand concealing two cards while turning up one card. The up card is turned over

after the three-card stack has been delivered to the bank hand (which is maintained by the dealer similar to the standard casino game). For game protection purposes, the up-card is the bottom card of the three-card stack—the most likely card to be exposed during the delivery by a sloppy dealer. The dealer rotation employed by the cardroom stymies a serious hole-carding situation in rotating-bank games. In almost every cardroom, the dealers keep their own tips. To ensure fairness, the dealers are scheduled to move from table to table every 30 to 40 minutes. They will also alternate dealing on different game types. If an advantage player were to spot a dealer unintentionally providing a readable “flash” in Ultimate Texas Hold’em Poker, they will only have 40 minutes of advantage play before the dealer moves to another game type or goes on break. In some instances, it might be several days before that dealer returns to this favorable game. Rotating card games are still ripe for attack from professional cheaters. Cardrooms are open for “card sequencing” attacks similar to any standard casino. Card control needs to fall under the same rigorous

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See it live at the 2016 World Game Protection Conference! FEBRUARY 2016 www.ggbmagazine.com

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Watch for two players sitting side-by-side and elbow-to-elbow utilizing a card swap under the cover of their elbows and upper arms. Usually a card switching team consists of four cheaters— two to swap cards, one to stand behind the switchers and block, and one to sit on the table and act as a lookout and a distractor. scrutiny as with any casino operation. The use of hidden cameras to record the final manual shuffle of cards in baccarat is extremely possible in higher-limit cardroom baccarat games. Recently, cameras have been discovered embedded into the dealer’s chip tray in several cardroom casinos in California. Be aware of sequencing attacks in baccarat during the cut, during any required manual shuffles, and from information gained when pre-shuffled cards are maintained in card control rooms and cabinets. The ultimate card sequencing scam, “coolers” or prearranged sequences of cards, is still possible; however, the increasing coverage of surveillance cameras, and tightening of card control policies, have practically rendered “cold decking” obsolete. Watch out for the use of “dented” marked cards in blackjack, and “daubed” marked cards in alternative games. Marking cards through punching or denting occurs when the cards are dealt face-up. Marking face-up cards is most likely to occur in blackjack games utilizing continous shuffling machines. The cards are marked earlier in the day, and are used later in the evening when the cheaters ask for an increase in table limit. The use of brush faceplates on the dealing shoes and CSMs has limited the number of marked card scams in blackjack and baccarat. Card switching is most likely to occur on hand-held blackjack games, and alternative games such as TCP. Watch for two players sitting side-byside and elbow-to-elbow utilizing a card swap under the cover of their elbows and upper arms. Usually a card switching team consists of four cheaters—two to swap cards, one to stand behind the switchers and block, and one to sit on the table and act as a lookout and a distractor. TCP is an exceptionally attractive target of a card switch team. Don’t forget about “hand switching” in games like Pai Gow Poker and Pai Gow Tiles. Just recently, a two-player team was seen switching hands numerous times during a two-hour playing session. The switch move allowed one player wagering a larger bet to take the better of two hands while the smaller bet hand was sacrificed. Cardrooms attract this type of cheating move since the games of PGP and Pai Gow Tiles are structured to allow players to wager not only on their own, but on other seated positions at the table. In the previously mentioned situation, the switch was not hidden, but performed in full view through the use of subterfuge. 36

Global Gaming Business FEBRUARY 2016

Protecting Poker Jackpots

any poker rooms throughout North America use “Bad Beat” and “High Hand” jackpots to inspire more frequent poker play and as a motivational tool to attract new poker game customers. Although these jackpot amounts are usually “player-funded,” cardroom management takes a strong interest in maintaining jackpot amount levels that will accomplish the expected marketing goals. These levels are controlled through the use of mathematical and probability tables based on standard fluctuation of jackpot hand occurrence, and the amount of jackpot fees collected from the players during each dealing round. Regardless of the expected percentages of jackpot hand probabilities, approximately 2 percent to 3 percent of the time theses jackpot hands will occur more frequently. Through these periods, management will call to question the “legality” of the number of jackpot hands that were dealt. In these situations, it is prudent for surveillance to review the different jackpot hands and focus on the different elements of the game procedures that could be compromised. The following are segments of the pre-shuffle, shuffle and deal that need to be examined to ensure the jackpot hand is legitimate: 1) Be sure the cards were inserted into, and shuffled correctly by the shuffling machine. Review the video footage and be sure the deck was inserted into the shuffling machine and shuffled. Once the dealer is ready to remove the shuffled deck, be sure the machine shows a green light indicating all cards are in the deck, and the deck has successfully gone through the entire shuffle cycle. When using a manual shuffle (not recommended for jackpot games), check to see that the correct shuffle sequence has been followed. Focus primarily on the strip portion of the shuffle; while a false riffle shuffle is all but impossible to detect from a view directly overhead, a false deck strip can be detected when the top card of the deck stays in place during the entire strip. 2) Be sure the deck is cut. The deck cutting process is an additional element for achieving a random shuffle. Be sure that the cut is conducted in a normal manner, and without hesitation by the dealer.

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1 9 0 0 A T T O R N E Y S | 3 8 L O C A T I O N S W O R L D W I D E˚

3) Watch the deck to make sure it doesn’t disappear from sight. Be sure that once the deck has been removed from the shuffling machine and cut, the deck never disappears from view, even for a brief moment. The most common cheating method used to set up a jackpot hand is for the dealer to “lap” or drop the shuffled and cut deck into his lap while receiving a “cooler,” or prearranged deck from the poker player to the dealer’s immediate left (under the cover of the table). The cheaters understand that the deck switch needs to be hidden from the overhead camera, and they achieve this cover by having the dealer lean forward at the point where he laps the shuffled deck and receives the cooler. Under standard dealing conditions using a poker deck shuffling machine, lapping the deck is the only cheating method that is effective for setting up jackpot hands. 4) Be sure the jackpot qualifying conditions have been met. Check the player hand(s) that have initiated the bad beat or high-hand jackpot. If the player(s) are required to use both “pocket” cards to qualify, be sure that this criterion has been met. Floor staff has been known to miss specific qualifying conditions in the past, and it is a good policy for the surveillance operator reviewing the video footage to confirm these conditions. 5) Always check the cards to ensure the deck is complete. Be sure the dealer and floor supervisor have sorted the cards into ranks and suits after the jackpot hand to ensure the deck is complete. Although switching jackpot hands into games structured similar to hold ‘em and stud is not as effective as it was with older structured poker games such as draw and lo-ball, it’s still a good game protection procedure to sort the cards into ranks and suits after the a jackpot hand has been declared and verified.

Fresh Perspectives Greenberg Traurig’s Mark Clayton & Emily Mattison to speak at the ABA’s 20th National Institute on the Gaming Law Minefield. Mark and Emily will share their views during Gaming Law Minefield, a program examining global anti-corruption initiatives, internet gaming, and the challenges faced by commercial and Native American gaming. Mark Clayton, Co-Chair of the firm’s Gaming Practice, will participate in a round-table discussion titled, “What is Gambling?” where he will discuss with peers the ever-changing boundaries of gambling. Emily Mattison, former General Counsel for the Illinois Gaming Board and current Of Counsel with Greenberg Traurig, will participate on the panel titled, “The Role of Gaming Regulators in a Changing Environment.”

Look for Mark and Emily at the ABA’s Gaming Law Minefield in February!

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. ©2016 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Martha A. Sabol in Chicago at 312.456.8400. °These numbers are subject to fluctuation. 26760

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2016 Special RepoRt:

SURVEILLANCE AND SECURITY By Tania Johannisson

Get Real Lessons for land-based casinos from the live casino world

ust as with land-based gaming, in the exciting new world of live casino online gambling, great importance is placed on game security and integrity. As in bricks-and-mortar casinos, the threat of cheating and collusion is ever-present. And just as there are some very clever and ethical software developers out there, so there are also a great many cybercriminals intent on defrauding and embarrassing major brands. The problem is, how does a casino protect itself against players it cannot see? Evolution Gaming has a team of around 200 risk-related employees. The company employs 1,200-plus dealers and has a total headcount of over 1,800 focused on game integrity and risk. The company has developed a tailor-made anti-fraud department. Every day, the team monitors the live casino operations of 120-plus tables, over 70 casino operators—with up to 7,000 concurrent players and approaching 6 million bets per day. Evolution has developed innovative anti-fraud defense mechanisms such as Evo Shuffle Integrity to combat blackjack advantage play, and Evo Wheel Integrity, a proactive and automated surveillance tool for monitoring roulette wheel performance. The company protects the game using automated surveillance. This approach includes state-of-the-art red-flag systems and software solutions that detect abnormal betting strategies that may indicate cheating, collusion and advantage play. Many of these techniques could—and perhaps should—be used in the landbased sector to tighten security. Surely, there are distinct differences between online and land-based operations. For example, house rules in most land-based casinos typically outlaw the use of

Global Gaming Business FEBRUARY 2016

smartphones, tablets, cameras, recording equipment and other technology by customers on the gaming floor. By contrast, the games and patterns at an online casino can easily be recorded and scrutinized by any number of remote players and potential or actual cyber criminals working under the cover of the internet. However, there is much common ground. Also, convergence solutions such as Evolution’s Dual Play Roulette (which allows online players to play at the same land-based table as land-based players) increasingly blur the dividing line. So what can the long-established land-based casino sector learn from the relatively young upstart that is live casino? Plenty, as it turns out. There are still those who subscribe to the “We’ve always done it this way, so it must be right” school of thought, but it seems their numbers are diminishing. Security and fraud issues are typically primary concerns for land-based operators, but after seeing Evolution’s operations they invariably leave with a great many ideas for how to improve their own security.

Data, intelligence As in all security operations, data collection and intelligence are key. In Evolution’s operations every single bet, every card and the outcomes of every game round are recorded. Historical data can be accessed at any time, and clear visual presentation means the risk team can quickly spot abnormal or suspicious player behavior. When effective data tracking is employed, it’s possible to put automated and smart traces in place and observe the betting patterns and activity of specific players. At the same time, areas of operational best practice have a key role to play in

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Clearly, technology must be embraced in the war against cyber crime. You cannot fight a tech-savvy opponent with old-school defenses.

improving game protection and security—minimizing the dealer’s influence on the game and its outcome, staff motivation and incentive programmed and, critically, a close relationship between operations and risk management teams. The development of red-flag systems, dashboards and control functions, including the tagging and surveillance of suspicious players, is crucial to game integrity with live casino. Clearly, technology must be embraced in the war against cyber crime. You cannot fight a tech-savvy opponent with old-school defenses.

Growth and Opportunities That live casino is the fastest growing sector in online gaming is no surprise. In recent years, live casino has grown substantially in Europe and, according to data from H2GC, was expected to grow by about 22 percent in terms of gross gaming revenues in 2015. Market growth is influenced by several underlying factors, such as increased use of mobile phones, technological advances with, among other things, improved hardware and increased bandwidth, the migration of land-based casinos to online environments and market regulations. Growth is also driven to a large extent by live casino having grown in importance for most gaming operators, who consequently elect to expose and market their live offerings to customers more extensively than before. Regulation is an important growth factor for live casino, because it brings more potential end users and gives operators greater opportunities to promote the product.

New challenges emerge every week, not least because of the continuing phenomenal growth of mobile play on a plethora of tablets and smartphones. For Evolution, that requires the optimization of each live casino game for each specific device. The company takes an omnichannel approach. Quality and security standards, and the customer experience in general, must be consistently high whether the player is on a desktop PC or Mac, iPad, iPhone, Android tablet or smartphone—or, for that matter, playing on digital TV or on an EGM. But, of course, the larger the number of access channels to live casino, the more thorough and vigilant operators must be. Tomorrow’s multi-channel online gaming market will undoubtedly throw up new challenges, but there’s a proven and highly successful formula in place—with R&D, operations and game integrity all closely aligned. Re-regulation of gaming markets is another challenge, with each jurisdiction setting different rules and different regulators setting specific data flows and financial reporting criteria. The one constant would appear to be the sure fact that live casino—with its greatly multiplied player numbers and complex multi-channel operations—will continue to set the pace in game protection. Land-based operators need to be sure they are not left behind.

Tania Johannisson is head of game integrity and risk at live casino provider Evolution Gaming. Johannisson will speak at the World Game Protection Conference (WGPC) on February 23.

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TABLE GAMES

Playing the Long Shots If you like long odds, pitch a table game that is completely unique

ung to the tune of “I’m Just a Bill” by Schoolhouse Rock:

“I’m a new game Yes, I’m just a new game And I’m wishing you’ll come over and play Well, it’s a long, long journey To make it in this racket It’s a long, long wait Most inventors cannot hack it But I know I’ll be a hit some day Oh how I hope and pray for acclaim But ‘till then I remain a new game”

Civics not being on my short list of long suits, I have zero idea the percentage of legislative bills that actually become laws. But no matter how miniscule it is—and it has to be, right, or why else would that singing scroll go berserk with joy when it happened to him?—it must be truly gargantuan compared to the percentage of new table games that actually become successes. Peruse for a minute the list of popular table games out there today that haven’t existed in the public arena (not to mention the public domain) for hundreds of years. Because that’s all it will take: a minute. One could argue that since Caribbean Stud gave birth to this segment back in 1988, the only other proprietary games— that’s games, not side bets—to attain legitimate and longstanding commercial viability are the ones below: 21st Century Blackjack Blackjack Switch Casino Hold’em Poker Casino War Crazy 4 Poker EZ Baccarat EZ Pai Gow Poker Four Card Poker Fortune Asia Poker Free Bet Blackjack High Card Flush Let it Ride Mississippi Stud 40

By Roger Snow

Pai Gow Poker Spanish 21 Texas Hold’em Bonus Three Card Poker Ultimate Texas Hold’em Nineteen times in 27 years. Yikes. Megabucks goes off more often than that. So does Mount Vesuvius. It takes our industry an average of 17 months to deliver a killer game, which, in a quirk of conceptional coincidence, happens to be the same length of time it takes a killer whale to deliver a baby. And it’s certainly not from a lack of effort. Consider that hundreds and hundreds of games have gone into casinos during this time frame, only to get 86’d after a few days, a few weeks or a few months. Or that thousands and thousands of others didn’t even advance that far. Makes Capitol Hill look like Easy Street, doesn’t it? The good news, of course, is that once something gets popular, it stays popular. Forever. Or so it seems. Flavor of the month? Pffft. That’s for ice cream parlors, microbreweries or Van Halen lead singers. We concoct flavors of the decade, of the generation. Most of the big titles have been around for at least 15 years and still aren’t approaching their half-lives. It’s amazing. This side of Jennifer Lopez, nothing ages slower than a kick-ass table game. Now, if you’re a wannabe game inventor, there’s a lesson in this list. In fact, it’s the lesson. Just take a step back, a deep breath and a long look. Pretend you’re Chazz Palminteri at the end of The Usual Suspects, sipping that coffee and scanning that bulletin board. Keyser Soze . . . Keyser Soze . . . Who is Keyser Soze? It’s so obvious. Go back. Check again. Keyser Soze is poker. Of the 19 biggest table games in history, 14 are based on poker. And it’s not exactly some encrypted, Da Vinci code secret: Eleven literally have “Poker” or “Stud” or “Hold ‘em” in their names, and the 12th (High Card Flush) refer-

Global Gaming Business FEBRUARY 2016

ences one particular—and one particularly valuable—poker hand. The only non-conformers are Let it Ride and Casino War, and the latter, if you think about it, could easily have been called “One Card Poker.” Therefore, here’s my first, last and only slice of advice for those who want to make money making table games: Stick to poker. Draw. Stud. Hold ‘em. Omaha. Versus a paytable. Versus the dealer. Whatever. If history teaches us anything, it’s that history repeats itself. And it’s not just ancient history, you know, like the 1990s or something. Today is the same as yesterday. Or yesteryear. Check out the fledgling games incubating in the marketplace right now, and you will see the ones showing the strongest signs of life are—wait for it—poker derivatives. Saigon 5, Heads Up Hold ‘em, DJ Wild Stud Poker, Match ‘em Hi Lo, Flushes Gone Wild, Criss Cross Poker and Poker with a Joker all have a chance to make it big. Technically speaking, of course, poker isn’t the only way to go. (Money Suit 31 and Go Fore It are new and notable exceptions trying to crack the card cartel.) But in due respect to the exceptions that prove the rule, poker is the smartest way to go. Hey, you could make a free throw with your eyes closed and balancing on one foot like a flamenco dancer; however, it’s not exactly the optimal technique (though it may work wonders for Dwight Howard). In creating a table game, as in shooting a basketball, it’s all about increasing your margin of error, which in turn ends up decreasing your element of risk. Developers: Play the percentages. Leave the long-odds shots to the gamblers and the hotdog shots for the Globetrotters. Poker is the clearest path to prosperity. Follow it. 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. Table game marks are owned by respective owners.

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2016 Special RepoRt:

SURVEILLANCE AND SECURITY

Alcohol and Casinos:

Dram Shop

and Liability Claims How do you rate your company’s alcohol management program?

By ALAn W. ZAjiC

lmost every casino in North America serves alcohol in one form or another to customers. Alcohol is an integral part of the gaming environment. It has social and economic impacts on gaming. Even in jurisdictions where sovereignty reigns, the service of alcohol requires a liquor license, and therefore, the individual state or province’s rules, regulations and laws that prevail as a condition for that license. The management of personnel and good alcohol management practices by staff is an important function in today’s contemporary casino, much the same as it was in decades past. Individual state case law either amplifies the existing liability picture or in some cases dilutes it, but the reality is that more and more legal claims are filed with allegations of failure to responsibly serve alcohol, failure to follow your own self-imposed standards or serving intoxicated patrons who later cause serious injury or death. Every seasoned executive in a casino environment knows the exposure that alcohol presents, yet many ignore the basic common-sense applications of what should be done. Some lack a fundamental understanding of the risks to the enterprise for serving alcohol to an intoxicated patron. A single incident as a result of a lackluster program or failure to have a reasonable plan can cause both financial impacts and community relations problems that are hard to recover from.

Have a plan It is very curious that most casinos do not have a basic alcohol service plan that is all-encompassing and includes all aspects and departments that get involved in the service or potential over-service of alcohol. They will have what 44

Global Gaming Business FEBRUARY 2016

is required by their liquor license or state laws, yet do not have a simple, single document that addresses the service and necessary controls to manage the program. In the event of a claim, this becomes problematic, in that several departments get involved with varying degrees, and sometimes different objectives or philosophies that are seized on by plaintiff attorneys. By the time a claim makes it to a lawsuit and trial, it appears that the casino is illprepared to deal with alcohol issues, appears unorganized and more importantly, projects an indifferent attitude toward the guest’s safety and well-being. There should be a basic written alcohol service plan that includes the involvement of all stakeholders. The typical departments involved would be food and beverage, security, surveillance, regulatory agency, casino management, transportation including valet, retail areas, human resources and hotel. Someone on the management level should be charged with development of a written plan that is reasonable in content, easily implemented and can be audited at any time. Having a property-wide plan will force departments to comply, and will assure a consistent practice in operations. Not having a plan will usually result in employees doing what they think is right rather than what the property says it should be or what is required by law. The general manager or COO should ask the property executives what exactly the alcohol plan is, and request a copy of the property-wide document. A complete understanding of all of the laws and regulations involving the service of alcohol and a method to ensure compliance by staff will also keep state officials from executing large fines or suspending liquor service

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A supplemental training program for those employees involved in nightclubstyle bottle service would be a good idea to once again demonstrate that you do more than what is required and care about the safety of your customers.

at the casino for weeks or months at a time, affecting revenues, employees and community relations. There are many aspects of liquor laws and regulations that go beyond the service of alcohol to a person already intoxicated.

Alcohol Management Practices Alcohol management is much more than watching for a server to assure they do not serve an intoxicated guest alcohol. The law in most jurisdictions provides some detail, and that is where many operations stop and only provide what is required by law. The problem with this concept is that with only minimum requirements for service, the margin for error and risk is much larger for violations, and the ability to demonstrate that you care about your customers and go beyond what is required during a lawsuit is near impossible to show. There are also many professionals who have the ability to come to your casino and complete an evaluation or audit of your alcohol management practices and written plan, and can assist in streamlining and developing a solid, manageable program, assure appropriate documentation, and demonstrate you are well above the standard of care in your program.

Employee and Manager Training Alcohol management goes beyond the required training of servers and other employees as a condition of licensing. Assurance that all employees required to have current certification through good record-keeping and scheduling will decrease the risk that an employee slips through the cracks and just happens to be the one who serves the already-intoxicated customer who later kills someone else in a vehicle accident.

Training programs should include all of the people that a property expects will deal with an intoxicated individual. This includes all security personnel, all surveillance personnel, servers, all supervisors and managers including casino shift managers or MODs, valet and transportation employees and anyone else who may encounter an intoxicated person. This would certainly demonstrate that the property goes above and beyond the typical server-only practice or minimums in most states. Assuring there is a professional training program with certification is also beneficial versus developing one internally, which may or may not withstand the scrutiny of a lawsuit and expert testimony. In those properties with nightclubs, the issues become more intense with VIP and bottle service. In these environments, the push for buying a bottle or table creates a void in service management and the ability to monitor a table of guests who are pouring their own drinks from an expensive bottle of premium liquor. Unfortunately, the law in all states does not limit liability in bottle service, and the exposure to litigation is still high in that bottle service is not an exception to the service rules for intoxicated persons. In these operations, a supplemental training program for those employees involved in nightclubstyle bottle service would be a good idea to once again demonstrate that you do more than what is required and care about the safety of your customers. If you train the staff appropriately and at sufficient intervals, they will all be aware of the symptoms and methods to not only detect if a person is intoxicated, but at what level, what the physiological process of intoxication is, and the process of slowing down alcohol consumption or cutting off the individual from further alcohol. Alcohol management training is a perishable skill that fades quickly if employees do not practice the skills, and should be emphasized routinely through regular operations and discipline for violations.

Written Procedures Whatever your written procedures are, can they be reasonably followed? It does you little good to have a strong policy that cannot be followed or is only followed when time or business permits. Do you have an actual written protocol that states what is expected of an employee if they come upon an intoxicated person? Are there tripwires in place that alert appropriate personnel of the person and what actions should be taken? These written procedures should not be complex or complicated. At minimum, there should be procedures for what management would like employees to do in the case of a customer asking for alcohol who is potentially intoxicated, what to do if an obviously intoxicated person enters the casino, if a person is found passed out who is intoxicated, and incident response for people suspected of being intoxicated. Additionally, a written protocol of the security department responses to include written documentation, appropriate notifications, cut-off protocol and provisions for providing a safe ride home are good practices for any casino.

Security Personnel Once physical security personnel are trained, they can be instrumental in detection of intoxicated patrons. Security staff will be the ones who will deal with that customer when the various other employees canâ&#x20AC;&#x2122;t or wonâ&#x20AC;&#x2122;t. Assurance that all intoxication contacts are well-documented on logs or reports will demonstrate that the casino takes that next step in managing alcohol on their property. Having a specific department deal with intoxicated guests is desirable to assure consistent application, guest safety and documentation. FEBRUARY 2016 www.ggbmagazine.com

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Training programs should include all of the people that a property expects will deal with an intoxicated individual. This includes all security personnel, all surveillance personnel, servers, all supervisors and managers including casino shift managers or MODs, valet and transportation employees and anyone else who may encounter an intoxicated person. Surveillance Personnel The surveillance staff, regardless of the reporting relationships, should monitor guests for over-intoxication. This allows them to identify potential candidates for evaluation and stopping of service or appropriate ejection. Once a guest is observed by surveillance, they can initiate contact with physical security personnel who can respond and conduct an evaluation of the guest. It is difficult for surveillance to determine if a person is actually drunk from a 30 degree down angle and two-dimensional video. Surveillance personnel should also be contacted whenever a guest is cut off from alcohol service, to monitor the guest and/or bar location. Ejections of intoxicated guests can also be monitored by surveillance, in that these actions have a higher risk of developing into an incident or arrest. Audits of servers and PTZ patrol (camera-detailed observation of numerous guests and servers) will also prove beneficial in detection of intoxicated guests and servers who are not making appropriate observations and refusing service.

Cut-Off of Alcohol This is by far the most scrutinized process during a lawsuit that involves intoxication. It is also a common area that is not well-managed or documented in most casinos. Although most operations will practice this process when a person is becoming intoxicated, they lack the follow-up to assure the protocols are followed and do not document when they practice positive alcohol management. The server should be the person with primary authority to stop serving a customer alcohol. In some casino environments, a designated manager is charged with making these observations for consistency. A beverage supervisor is a typical manager who will respond to any report of an intoxicated guest, and will investigate and evaluate. This safeguard allows the person charged with service of alcohol to cut off the patron, and then they have the ability to instruct the employees they supervise not to further furnish alcohol. Regardless, all servers must be told that the customer has been cut off from further alcohol. Security staff should also have the authority to stop alcohol service to an individual. Security personnel should also be involved in the customer contact. They should also consider the perceptions of the customer, and make sure they are not embarrassed by the management action. Having security personnel present further amplifies the authority of the person cutting off service. The incident should be logged by the beverage supervisor in the shift report, security should log the incident and surveillance should also log and identify any associated video footage. Proof of reasonable alcohol management practices cannot be underemphasized when defending a lawsuit. Proof that you went above reasonable practices increases your chances to defend a lawsuit. If resistance is met by these departments and they tell you they do not have the time to do these things for every person that is cut off, you already have a problem, and with it most likely numerous claims against the property already. 46

Global Gaming Business FEBRUARY 2016

Ejection of Intoxicated Guests Having a plan will help in this process, which varies from state to state. In some jurisdictions, the law specifically requires that an intoxicated person must be removed from the premises within a short period of time once detected. This means that the clock starts ticking once any employee makes the observation. The persistent issue in most casinos is that no employee wants to deal with a drunk, even though the customer became that way inside the casino. Merely escorting the guest out the front doors does not work, and actually increases the risk of injury or death, especially if there are high traffic volumes and the ability to wander off. The property must have some plan to deal with those guests who are intoxicated, assuring them safe transportation home or to a safe place. They ultimately should also care for the customer even if a safe ride cannot be located.

Transportation Many casinos provide shuttle services for customers, and this is a good option to bring customers home. Documenting those persons transported home because of intoxication will also prove valuable in the event of a claim. In other areas, a taxi may be an option, or even a company vehicle to be utilized for the safe ride home at the expense of the property. Valet should also be well-informed and trained regarding allowing a potentially intoxicated guest to drive away from the property. If a valet attendant hands the keys to an intoxicated patron who drives off the property and causes injury or death, the liability will certainly increase. Options for property personnel include to simply advise the guest that they will only give them keys if a police officer tells them to, and then call the police to deal with the issue. In worst-case scenarios where police are not readily available, dealing with a complaint the following day is much easier than a courtroom later. Your property should be able to do more than what is required by law or that is normal for a casino. If you exceed what is required, your chances for defending a claim or lawsuit increase dramatically. There are many aspects of alcohol management that need to come together at the property level and assure that all management and employees are very familiar and trained in how to deal with an intoxicated guest. Even if you are not located in a Dram Shop Liability state like Nevada or South Dakota, there still should be an organized plan and procedures to assure your guests can enjoy alcohol safely and continue to contribute to the success of the casino. Alan W. Zajic, CPP, CSP, ICPS, is a security and surveillance consultant and expert witness specializing in casinos, nightclubs and hospitality environments.

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iGAMING NORTH AMERICA

Covering the World The North America iGaming conference will update attendees on a wide variety of issues

By Mark Balestra

s we finalize the program for the forthcoming iGaming North America conference (April 5-7 in Las Vegas), it’s time to take a closer look at the moving targets that are the industry’s trending issues. The two-step process for developing conference program content entails identifying the key areas of focus (the easy part) and then finding an angle that best suits the needs of our increasingly sophisticated audience. To foster relevant, meaningful discussion, the second, much trickier phase is an ongoing process that extends all the way to the days preceding the event. With that, I offer a glimpse at a few of the moving targets and what we’ve got in store.

POKER Every year I convince myself that next year is the year in which we finally have nothing new and exciting to cover in the poker space, and I was once again wrong in 2015. With PokerStars poised to enter the U.S. market, we could be about to experience the most dramatic change to the competitive landscape since the U.S. debut of regulated online poker. The picture began to crystalize when bwin.party’s fate was sealed by its sale to GVC Holdings, creating a two-horse race between bwin.party and 888. Now the industry curiously awaits the third horse, PokerStars, which solidified its position as an industry mammoth after passage of the Unlawful Internet Gaming Enforcement Act (UIGEA), only to be shunned for its past dealings as online poker’s “bad actor” on the outside looking in. As the newly laid pavement on Stars’ road into the regulated U.S. dries, we ponder just how its ar-

rival will play out. Will they recapture U.S. dominance? Will a reinvented, U.S.-licensed PokerStars have the same appeal to a customer base amassed during the renegade years between the Moneymaker phenomenon in 2003 and UIGEA passage in ’06? Can the industry stakeholders work together for the communal good of online poker? We will enter iGNA posing these questions and come out with a better feel for where things are headed.

DFS The DraftKings/FanDuel saga has captivated a U.S. audience well beyond the iGaming space. As we wait to see how it plays out, we continue to ponder where daily sports fits into the iGaming picture. A few years back, fantasy sports erected a barrier between itself and gambling, but the wall came crashing down as the two industries discovered the fruits of a mutually beneficial relationship. Will the state-level battles over the legal status of DFS split them apart, or is this just a bump in the road? What of the looming bursting of the bubble to take place once the novelty of America’s hottest gaming pastime fades? (See online poker.) The excitement will level off a bit as the NFL season shrinks in the rearview mirror, but many questions will remain unanswered come iGNA in April.

Will the state-level battles over the legal status of DFS split them apart, or is this just a bump in the road? What of the looming bursting of the bubble to take place once the novelty of America’s hottest gaming pastime fades?

VIRTUAL REALITY

Three and a half decades beyond Tron, virtual reality has found momentum in the commercial world, and the casino industry is dipping its foot in the pool. While I don’t expect licensed VR gambling to take the U.S. market by storm anytime soon, it is notable that VR casino platforms are making strides and that the land-based industry has adopted virtual tours as a marketing vehicle. Is VR for real? (Get it?) All kidding aside, the topic has been showing up more and more on our atten-

Global Gaming Business FEBRUARY 2016

dees’ radar and is certain to surface at Planet Hollywood in April. People for whom I have a lot of respect insist VR is still more of a gimmick than anything else, yet I remain intrigued with it as a topic to be tackled at iGNA.

eSPORTS I don’t have a feel for where the eSports/gambling marriage is headed, but the potential is astonishing. In my previous GGB piece, I referenced eyepopping figures put out by Eilers Research. The group estimates that by 2020, 19.4 million consumers will be wagering a combined $23.5 billion on eSports, and that will translate to $1.81 billion in revenues. But here’s the thing: I cannot imagine the eSports gambling industry avoiding the legal battle that the DFS sites are now enduring. History tells us that faceoff is inevitable. Perhaps seeing the writing on the wall, daily fantasy eSports website Vulcun announced in January that it will no longer take real-money entries. Nevertheless, the potential of eSports betting is too impressive to ignore, and those who stand to benefit will be up for the fight. The status of eSports and its place in the North American gambling space will be one of the hottest issues at iGNA, but we’ll also rewind back to the basics by demonstrating exactly what eSports is, what it looks like, how betting takes place and why it is such a hit among bettors. Those are just a few of the topics that are swirling about as we nail down the iGNA 2016 program. I anticipate other areas to heat up as April approaches, and the program will accommodate. For example, will the efforts to legalize sports betting be revitalized? What exactly is Nevada’s position on RAWA and how will it impact the industry? Which state will be next to join New Jersey, Nevada and Delaware in the iGaming club? We’ll continue to ask these questions as the program for 2016 takes its final shape. The latest version of the evolving program can be viewed online at igamingnorthamerica.com. Mark Balestra is head of Bola Verde Media and a partner in iGaming North America, the most popular U.S. gathering for iGaming.

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Social Science: The Growth of

Social Gaming When real-money iGaming seemed ready to explode, casinos had little interest in social casinos. Now, however, it’s the social casinos that are outperforming even the most successful iGaming site. By Steve Ruddock

t took years for the gaming industry to come around to online gambling. The entrenched power players in the gaming industry were fearful the upstart industry would become a ubiquitous competitor in what was already becoming an increasingly crowded market in many locales. Fast-forward to 2016 and the gaming industry, with few exceptions, has fully embraced online gaming, so much so that you’d be hard-pressed to find a major gaming corporation without an online division. Far from the cannibalistic threat they envisioned just a decade ago, online gaming, whether real-money or social, has proven to be a valuable asset, a complementary product that can create a new revenue stream for the casino, and/or used as a marketing tool capable of bringing new players to their brick-and-mortar properties. This is particularly true of social gaming. Social gaming was initially seen as a placeholder of sorts, a way to create an online footprint while casinos waited for real-money online gaming legislation to be passed. What they soon found was that far from being a placeholder, social gaming turned out to be a boon, a versatile product that could be deployed in a number of different ways. The gaming industry’s Swiss army knife, if you will.

The Fuse Is Lit Social gaming first shed its cottage-industry label in 2009, spurred on by the rise of social media giant Facebook, and the silent dreams harbored by millions of people to be virtual farmers and demolish shoddily built structures with the assistance of a cartoonish avian species and a catapult. And Angry Birds and Farmville weren’t outliers. Subsequent social gaming successes, ranging from traditional-looking slot machines and skill-based puzzle games like Candy Crush, to eSport crossover megahits like League of Legends, gave the gaming industry pause, and a glimpse at the possibilities that could be found in the social gaming market. In 2016, social gaming has infiltrated virtually every sector of the gaming industry. Yet, social casino games still have a lot of room for growth and future innovation, as the ancillary benefits to traditional gaming, beyond revenue, are just starting to be fleshed out.

Social Gaming Is Already Bigger Than You Think When it comes to headlines and buzz, social gaming tends to take a back seat to its sexier cousins, real-money online gaming and daily fantasy sports. But compared to social gaming, the 50

Global Gaming Business FEBRUARY 2016

DFS and regulated real-money online gambling industries in the U.S. are small potatoes. In fact, social casino products (a single segment of the larger social gaming industry) absolutely dwarf these two industries. Industry-leader Caesars Interactive Entertainment, a Caesars Entertainment subsidiary that operates the popular line of Playtika social casino games, is on its way to generating $1 billion in annual revenue, some 13 times more than CIE’s real-money online gambling products generate, and 10 times the combined 2015 revenue of media darlings DraftKings and FanDuel combined. The social casino market generated an estimated $3.5 billion in revenue in 2015 (exceeding Eilers’ $3.3 billion prediction at the beginning of the year), with revenues expected to jump to $4.4 billion (which would represent some 4 percent of the entire gaming industry’s revenue) by 2017, according to Eilers Research.

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If we take an even wider view of social gaming, beyond social casinos, the numbers are even more impressive. The global social gaming market is expected to reach $17.4 billion by 2019, according to Transparency Market Research. Candy Crush generated $1.4 billion in 2014. League of Legends, a “freemium” eSport game, is also expected to cross the billion-dollar revenue mark in 2016. These are not simply billion-dollar companies, these are billiondollar games.

Monetizing Players: The Freemium Model The bulk of the revenue generated at social casinos comes via the purchase of virtual chips. The chips have no value, although as noted by Kevin Vonasek, chief product officer for the Americas at NYX Gaming, social play can be tied into a brick-and-mortar casino’s loyalty program, allowing a social player to earn points while playing at the casino’s social casino. “NYX will emphasize the ties to brick-and-mortar casinos in its social offering as a key differentiator,” Vonasek says. “We’ll cater our product to operators that want to leverage the social space by providing a channel for their gamblers to do so, with products that they’re familiar with and by enticing them back to the property. Gamblers will spend money on virtual coins, if they are getting credit against the land-based loyalty program.” Even though the social casino provides a fresh supply of chips to players every day, some users simply don’t want to wait, others want to risk more chips. This is where the word freemium comes in, and players become monetized. Freemium games are games that are free to play, but the user can, if they so choose, purchase additional

items (in this case, casino chips) for a nominal fee. A player simply punches in a credit card number and spends a few dollars and receives thousands or tens of thousands of chips. For the players that monetize, it’s a small price to play if they are enjoying the game. Unfortunately, monetizing a social game isn’t easy. During a panel discussion at G2E 2014, Monty Kerr, the chief product officer and co-founder of PlayStudios, said that only 3 percent of their customers monetize—that is, they purchase additional items for an otherwise free-to-play game. However, he noted these monetized players tend to stay monetized and continue to spend money, as Kerr indicated 80 percent are still active and monetized players two years later. Despite the low monetization rate, social casinos are playing, and winning, the numbers game thanks to the sheer number of users they attract and the loy-

MASTER OF LAWS (LL.M.) IN GAMING LAW AND REGULATION

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FEBRUARY 2016 www.ggbmagazine.com

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alty these players have when it comes to their favorite games. For example, Knute Knudson, International Game Technologies’ vice president of business development and tribal relations, says IGT’s social casino platform, DoubleDown Casino, sees over 1.9 million players log on every day, and over 4 million players each month, according to data he provided at G2E 2015.

to Maesano, is just how valuable these customers are. “The value of our social players exceeds that of our traditional walk-in customer,” Maesano said. “We’re getting about 100 percent to 300 percent more gaming value out of our social gamers that convert to our brick-and-mortar facility.” In addition to bringing in new players and converting them to brick-and-mortar casino patrons, social games also allow a casino to better understand social gaming as a marketing its current customers. At G2E 2015, Brett Callap, tool to bring in new customers Monetizing Players: Other Models who heads up Pala Interactive’s social gaming prodThere are other monetization models as well, such as ucts, explained that while a casino knows everything and keep current customers loyal. in-game advertising and brick-and-mortar loyalty reabout their players when they’re on property, as soon ward tie-ins. As Vonasek explains, “We are not comas they walk out the door they go dark. Callap feels peting directly with products such as IGT’s social gaming is able to bring these customers back DoubleDown that cater to the casual gamer; rather, we’re into the light, as you’re able to see what games they may have providing a social gambling product that will appeal to realan interest in, if they’re willing to monetize online, and how money gamblers who want to extend their bricks-andmuch time they spend playing social games. mortar entertainment while leveraging their loyalty program.” NYX accomplishes this by being content-agnostic, Social Gaming Is Not Without giving online players the same game options they find at the Regulatory Concerns brick-and-mortar casino. Because it’s not gambling, social gaming can also serve a tertiThere is also the opportunity to convert social players ary function for a casino, as it can be used to test new games. into real-money online players for operators in legal markets, Unlike real-money online gaming, social games don’t have to or in markets considering legalizing real-money online gamgo through the rigorous regulatory testing and scrutiny that a bling. “NYX has the most popular regulated real money real-money bricks-and-mortar machine, or online game must gaming in U.S., and we will install that in the data center of be subjected to. the brick-and-mortar casino,” says Vonasek, “allowing operThis loophole for social gaming is not void of regulatory ators to start with social and be ready for real money.” concerns. While it’s not gambling in a technical sense, as players Social Gaming as a Marketing Tool cannot win anything based on the results of the game, social For most casinos, creating their own social casino products is casino games certainly mimic gambling products, and there are out of the question, but this doesn’t mean they can’t share concerns over the social impact of these products. Social casino in the benefits of social games. players may not be able to win, but they can certainly spend For many casinos, social gaming’s real value doesn’t quite a bit money if they get hooked, best demonstrated by come from direct monetization. In fact, many casinos don’t monetize their social Chris Grove’s tweet from the United Sates Online Gambling Conference in games at all. The value for these operators is the ability to use social gaming as a 2014, “Wow. Top customer at PurePlay has spent over $250,000 on play chips. marketing tool to bring in new customers and keep current customers loyal. Chips with no redemption value. No. Redemption. Value.” The beauty of social gaming is it allows the casino to pick and choose how This is even more concerning when you consider that the lack of regulation they want to deploy it, and how deeply they want to invest in social gaming, also allows social casino operators to skew the odds in a player’s favor with imsince most social gaming platform providers can act as a B2B or B2C partner, punity, as they can change the payout percentage on a slot machine to 103 perhandling as much of, or as little of, the front end and back end as the casino decent or 200 percent if they desire, and can do so whenever they please. sires. It should be noted that even though they can, not all social casino operators “NYX will provide a turn-key social solution for brick-and-mortar casino optake part in this practice. NYX is one such company that sees finagling with the erators; think of it as B2B2C,” Vonasek says. “We’ll manage the operator’s social odds as counterproductive. As Vonasek explainas, “It is our position to provide gaming offer and allow them all the access to back office and reporting that they the exact same gaming experience as they would expect in the brick-and-mortar need to direct us in this endeavor. In addition, with a tie-in to their bricks-andor real-money iGaming scenarios. mortar loyalty program, they will have the added benefit of seeing the direct ef“We’re looking to build long-term relationships with our players and our fect on their player loyalty.” casino partners where we envision real-money gaming being the end goal.” According to Knudson’s G2E presentation, 83 percent of people who visit a Still, this capability raises many questions about the need for regulatory bricks-and-mortar casino at least once a year play social games, making social oversight. However, with the current debates over legalizing and regulating daily games a vital part of a casino’s marketing efforts. fantasy sports and online gambling taking place across the country, it’s a real Mario Maesano, the senior vice president of marketing at Maryland Live! possibility that social gaming will be the next sector of the gaming industry to Casino, sees social gaming as an important way to market to current and come under regulatory scrutiny. prospective casino patrons. At G2E 2014, Maesano explained how Maryland That being said, with so much on their plates, it will likely be quite a while, Live! uses its non-monetized online social casino to convert free-to-play cusif ever, before lawmakers and regulators get around to social gaming. And if they tomers into brick-and-mortar casino customers by marketing directly to each do, it’s unlikely the social gaming industry couldn’t adjust to and comply with player based on their online play. What Maryland Live! has discovered, according the policies put in place. 52

Global Gaming Business FEBRUARY 2016

For many casinos, social gaming’s real value doesn’t come from direct monetization. In fact, many casinos don’t monetize their social games at all. The value for these operators is the ability to use

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California to Consider Several Gaming Bills

Amaya Handed Huge PokerStars Fine

he legal problems of PokerStars.com, the international poker network acquired last year by supplier Amaya Gaming, are far from over. A judge in a lawsuit filed against PokerStars by the state of Kentucky has fined Amaya, as the PokerStars parent, $870 million for PokerStars’ illegal operation of internet gaming available to Kentucky residents between 2006 and 2011. PokerStars has struggled to become licensed to operate iGaming in the U.S. states where it is legal, since the U.S. Department of Justice shut down its sites in 2011 for operating illegally U.S.-facing iGaming after passage of the Unlawful Internet Gaming Enforcement Act in 2006. It is estimated Kentuckians lost more than $290 million on PokerStars.com between 2006 and 2011. While no players sued PokerStars to recover losses, in 2010, the Kentucky Justice and Public Safety Cabinet sued to recover the money. On December 24, Franklin Circuit Judge Thomas Wingate ordered Amaya to pay the money back, plus triple damages as punishment for what he called a willful violation of Kentucky law, which makes all forms of gambling outside of racing and the lottery illegal.

Wingate also ordered the state to collect 12 percent interest on Amaya’s debt until it is paid—potentially adding another $104 million to the award. “Without a doubt, the defendants made a business calculation that took into account the violation of Kentucky’s laws,” Wingate wrote in the decision. “However, the law is more than some ordinary itemized expense on a balance sheet, and its value is not as easily accounted for as the defendants may have thought as they executed their illicit business plan.” Amaya quickly announced it will appeal the decision. In an interview with the Associated Press, Amaya attorney Sheryl Snyder called the judgment a “gross distortion” of state law, particularly since PokerStars’ gross online poker revenue in the years covered by the lawsuit was $18 million. “The losses were not won by PokerStars; the losses were won by other players,” Snyder told the AP. “What PokerStars took was its rake out of the pot, its fee for providing the online platform for the players to play. To assess against the operator all of the losers’ losses without offsetting their wins, much less considering the revenue that PokerStars was actually deriving is, we think, an excessive punishment.”

Oklahoma Tribe Pursues Poker Website Site will target gamblers in legal iGaming jurisdictions

n November 24, retired Oklahoma Criminal Court of Appeals Judge Charles Chapel, serving as an arbitrator, ruled the state's gaming compact permitted the possibility of the 800-member Iowa Tribe of Oklahoma launching online gambling. In his ruling, Chapel wrote, “Use of the internet is merely using technology to play covered games as a way to increase tribal revenues. It does

Global Gaming Business FEBRUARY 2015

not extend or restrict the scope of the games and does not amend the compact in any way,” nor does it violate state or federal law. Tribal Chairman Bobby Walkup said in a statement that the tribe on December 23 asked a U.S. District Court judge in Oklahoma City to verify Chapel’s ruling. If the judge approves the move, the 800-member tribe could become the first in the state to operate an international gambling website, to be called Pokertribe.com. The site would offer online poker, followed by slots, bingo, blackjack, baccarat and pulltabs. “The arbitrator’s decision applies to all tribes in the state of Oklahoma. Every tribe has the same opportunity as the Iowa Tribe to engage in internet gaming consistent with the arbitrator’s decision,” Walkup stated. Governor Mary Fallin’s spokesman Michael McNutt said it’s not clear how much revenue

Sports betting, DFS and iPoker on the table

olden State lawmakers will begin consideration of bills legalizing online poker, sports betting and daily fantasy sports when the California Assembly begins its 2016 session. The GovernCalifornia Nations mental Oversight Indian Gaming Committee will hold Association (CNIGA) Chairman Steve Stallings hearings on three bills, with online poker being the most controversial. AB 431, which was introduced in the last session, would have legalized and regulated online poker. It has been reincarnated as AB 167, sponsored by Assemblyman Reginald Jones-Sawyer. This bill would allow racetracks to participate, and it does not include a “bad actor” provision that would have locked out PokerStars from participation. Three online gaming bills were introduced last year. The GO Committee held a January 6 hearing on AB 431, but Chairman Adam Gray did not

the Iowa Tribe’s website could generate for Oklahoma. “The rate depends on how many take part in the tribe’s overseas gaming venture,” McNutt said. A few years ago, when the Cheyenne and Arapaho Tribes of Oklahoma unsuccessfully tried to launch a similar site, the tribes estimated the state would have received a 20 percent cut, or as much as $132 million annually by 2018 if the website attracted just 2 percent of the worldwide online gaming market. However, at the time, the U.S. Department of the Interior said an online gambling website was beyond the scope of the tribalstate compact and also violated the Indian Gaming Regulatory Act. The two tribes challenged that opinion in court, but newly elected leadership dropped the suit in 2014.

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recommend any action at that time. Proponents claim that online poker could generate $380 million annually. California players account for an estimated 16 percent of the U.S. revenue and 4 percent of worldwide revenue from iPoker. Despite repeated attempts to pass online poker legislation, disagreements between two groups of gaming tribes have prevented a consensus from developing. These include a group that opposes the participation by PokerStars, the world’s largest poker site, and by racetracks, who point out that currently they are the only gaming participants who are legally allowed to use the internet. The California Nations Indian Gaming Association (CNIGA) last month urged the GO Committee “to take the next step in legalizing and regulating online poker in the state.” CNIGA’s Steve Stallings urged the GO Committee to act on iPoker before sports betting or daily fantasy sports. Referring to past differences between tribal governments on online gaming, Stallings declared, “However, I believe, the Jones-Sawyer bill opens the door to compromises that can finally bring the majority together. We were excruciatingly close last year, and I would like to see CNIGA play a major role in helping to unify the Indian tribes on the key issues that previously divided us, and take the lead in supporting a partner bill in the state Senate.”

New York Wants DFS Players’ Money Back $200 million sought for 600,000 players

ew York Attorney general Eric Schneiderman has intensified his fight with daily fantasy sports sites DraftKings and FanDuel, and is now seeking restitution of funds the sites made off New York players, as well as punitive New York Attorney fines. General Eric Schneiderman Schneiderman amended his lawsuit against the two companies before New Year’s Day. The suit now wants the sites to give back the money made in the state and pay a fine of up to $5,000 per case. That could result in a huge penalty against the sites, as they took in an estimated $200 million in entry fees in 2015 from at least 600,000 customers in the state, according to ESPN.

The complaint also seeks an “accounting of monies collected from consumers in New York.” David Boies, lawyer for DraftKings, said in a statement that Schneiderman’s new filing “reveals that the attorney general’s office still does not understand fantasy sports.” “Like the NYAG original complaint, it is based on the fundamental misunderstanding of fantasy sports competitions,” Boies said. “Originally, the NYAG claimed that daily fantasy sports were illegal gambling because they were games of chance. That was disproven. Now, the NYAG complains that DFS contests are so much contests of skill that some advertising is misleading because, the NYAG says, certain ads imply that DFS contests are games of chance. This claim, too, is baseless.” Schneiderman sued to shut down the two sites last month and was granted a temporary injunction that would have closed the sites. DraftKings and FanDuel, however, appealed the injunction and received their own temporary injunction that has allowed them to keep operating in the state.

Massachusetts Lottery to Study Online System State agency would operate several kinds of wagering

he Massachusetts Lottery has formally issued a request for information (RFI) from organizations to develop an online lottery. The RFI includes proposals for digital versions of existing and new lottery games, fanState Senator Bruce Tarr tasy sports and social gaming. The lottery is also interested in hybrid systems that allow a mix of online and brick-andmortar locations. The RFI specifies that the lottery is particularly interested in information on player account registration, management and authentication, as well as how to introduce “responsible gaming controls.” It wants to know also how to protect existing businesses that sell lottery tickets. About daily fantasy sports (DFS), lottery Executive Director Michael Sweeney commented, “We believe the introduction of a fantasy sports platform at Massachusetts Lottery would help to embrace an emerging market while continuing to protect our retail partners. This particular type of game would not cannibalize our existing products.

IGT Launches GTECH Content on DoubleDown DoubleDown Casino now offers Treasures of the Pyramids

nternational Game Technology Ltd. announced that the slot game portfolio of legacy company GTECH, which acquired IGT last year, will now be available on IGT’s DoubleDown Casino, the company’s social casino on Facebook. The first former GTECH title will be Treasures of the Pyramids, available for mobile or desktop play. “Launching our first legacy GTECH title on DoubleDown Casino establishes a significant milestone for the new IGT, showcasing our combined strengths from the two legacy organizations,” said Joe Sigrist, DoubleDown Interactive senior vice president and general manager. “Treasures of the Pyramids is a well-known, top-performing title in land-based casinos. Leveraging its popularity provides our social players with more engaging content as we continue IGT’s momentum as the leader in cross-platform content creation and distribution.”

We believe the introduction of a fantasy sports platform at Massachusetts Lottery would help to embrace an emerging market while continuing to protect our retail partners.” Sweeney called fantasy sports “the biggest challenge” facing his industry. State Treasurer Deborah Goldberg, whose department oversees the lottery, has previously warned that the lottery needs to evolve in order to compete with the state’s casinos and with daily fantasy sports. Currently, scratchers account for 87 percent of lottery sales. Although it would require an extensive action by the legislature for the lottery to offer, for example, online poker, social gaming and daily fantasy sports would not. State Senator Bruce Tarr plans to introduce a bill that would allow the state’s casinos to offer online gaming, including poker. Right now he is showing copies of the legislation to fellow legislators to get feedback before he actually introduces a bill. The commission plans to submit its own white paper sometime this year. Political watchers in Massachusetts predict that DFS will be addressed separately, rather than being included in an omnibus bill that includes online poker. Crosby raised the omnibus bill idea last month.

FEBRUARY 2016 www.ggbmagazine.com

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FRANKLY SPEAKING by Frank Legato

Casino Crime Blotter

Global Gaming Business FEBRUARY 2016

of the first principles of business is to avoid selling your product in rooms with hundreds of video cameras. Didn’t they teach him that in methdealer school? Secondly, he dropped it and, evidently, realized it was recorded on video, and fled the scene. OK, a sliver of reasoned thought there. But returning to the scene the next day to retrieve the bag? That’s where he tumbles over the cliff at Idiot Pass and plunges into Imbecile Gorge. It’s as if he reasoned that players and employees would see the Ziploc bag of meth laying there and say, “Oh, that’s not my meth. It belongs to someone.” I know they’re pretty mellow out there in Humboldt County, but come on. Finally, Las Vegas police were summoned to the Palms Casino Resort to respond to a fight… Well, it wasn’t much of a fight, consisting as it did of singer Chris Brown punching a woman in the face. Brown, who is a chart-topping R&B singer, performed at the casino that night, and hosted a private party in his suite afterward. A female fan apparently took the liberty of snapping a picture of the star with her cell-phone camera, and as any performer who loves his fans would do, Brown punched her in the eye and stole her phone. She left and called police. By the time they got there, Brown was gone, and the woman did him the remarkable favor of not pressing charges. Brown, the consummate gentleman, thanked her by taking to Instagram with a video in which he said, “Obviously, somebody looking to get a check or start some shit… I don’t know this old-looking bitch… She probably came to my room and was too ugly to get in.” You know, I must admit I had never heard of the guy, because I’m not familiar with popular artists who have had hits since, say, 1973, but it’s nice to know that today’s artists conduct themselves with such class. Someone should have called Housekeeping. They would have fixed him.

VICT OR R INALD O

t’s February, and that means one thing. Well, it means a bunch of things, actually—from married men everywhere saying, “Oh, yeah! Valentine’s Day! Crap!” to the Super Bowl to ICE Totally Gaming in London, where gaming professionals are assured an extensive cardio workout traversing the Novomatic stand, which is normally the size of a small planet. But here at GGB, the “one thing” I had in mind was our annual security and surveillance section, which you will find in this issue. Therefore, as I do just about every February, let’s celebrate casino security and surveillance by logging the month’s more unique instances of illegal activity in casinos, and the brave security and surveillance officials who battle it every day. Our first story showcases the first line of defense against casino crime. That’s right. Housekeeping. A chambermaid at the Bear River Casino in Humboldt County, California (“The Heartland of High-Grade Marijuana Farming”) entered what was supposed to be an unoccupied room in the casino’s hotel and discovered a man asleep, cradling as his teddy bear a loaded semiautomatic pistol, along with an ounce of heroin and some methamphetamine. The casino contacted police, who entered the room undetected and gently woke up 41-year-old John Augborne, and arrested him for felony possession of a controlled substance, outstanding felony warrants including a parole violation, trespassing, and theft of those little hotel soaps. It is not known whether or not the chambermaid ended up getting a tip, but we’ll update you on this aspect of the story. Speaking of meth, an Omaha man was arrested at the Ameristar Casino in Council Bluffs after video surveillance caught him dropping a Ziploc bag full of methamphetamine on the floor. The man was arrested and jailed, but the meth was undamaged, thanks to the locked-in freshness of the fine Ziploc product, which is “uniquely designed to help you save, store and organize.” The perpetrator, John Lord (the meth dealer, not the late founder of Deep Purple), was arrested for possession of 28.6 grams of meth with intent to deliver, but it may as well have been for two counts of criminal stupidity. First, the guy brings a big bag of meth into a casino. He drops it on the floor, gets spooked and leaves. Then, he comes back in the morning looking for the bag. By that time, it had been found, and surveillance had matched his image on the video cameras with Lord’s driver’s license photo. He was nabbed immediately. I’m trying to get inside this guy’s head. First of all, if you’re a meth dealer, I would think one

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Tuesday, April 26, 2016 Global Gaming Business

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CUTTING EDGE by Frank Legato

App Awareness PRODUCT: Gaming App Store MANUFACTURER: Betcade

rior to founding Betcade, David Chang spent years launching and growing Gamblit Gaming to bring the interactive entertainment game experience to casinos and attract millennial generation players. As Chang was building Gamblit’s audience acquisition strategies, he realized that reaching players on Android was going to be nearly impossible. Remarkably, as the world’s most popular OS, Android accounts for almost half of the revenue in other mobile content categories, but 5 percent or less in gambling. Think of the current mobile user experience for real money gaming on Android. Google does not allow real-money gaming apps on Google Play. It’s possible that a player has high enough awareness of a specific brand that they’ll go directly to the operator’s mobile website. This type of awareness is not only rare, but also the most expensive to create and maintain. More likely, a player will do a search and get taken to an affiliate site (which may or may not be optimized for mobile) and

from there to another mobile site where they can finally download the mobile app. Next, they have to register and set up their payment information with every single app they download. It’s an extremely cumbersome process to even find an app, and more cumbersome to register, deposit and play. Now, think of the easy and seamless app store user experience for all other categories of mobile content. Betcade will offer a similar user experience to what Apple and Google offer for non-gaming content. Users browse categories or search, and see the same information and reviews for every app. Betcade will also feature rankings, editorial picks and promotional spots. Then, with one tap, users install the apps they choose on their devices. Once users install the Betcade store and set up payments, they never have to do it again, no matter how many apps they download. Betcade is a start in creating a viable ecosystem where operators can offer a best-in-class entertainment experience to Android users. For more information, visit betcade.com.

Managing Access PRODUCT: KeyWatcher Touch MANUFACTURER: Morse Watchmans

hether it’s a large casino on the Las Vegas Strip, a riverboat casino in Mississippi or a racino in Ohio, one of the most critical and most regulated areas of any casino’s physical security is key control. Physical keys are used to access all of the most sensitive and highly secured areas of the casino, including counting rooms and drop boxes, so rules and regulations are important in maintaining tight control and minimizing fraud. Morse Watchmans’ KeyWatcher Touch electronic key management systems are a ready-made solution that offers multiple layers of security for access as well as convenient operation and automated reporting functions. Keys are attached to a SmartKey device and secured in the tamper-proof cabinets. These keys can then be accessed by authorized individuals who have presented identification and have been approved by the system to access the requested key. All access activity is automatically recorded. Gaming regulations such as the three-man rule for accessing key sets are readily addressed by the KeyWatcher Touch. One person each from three different departments are required to log in. Then, the KeyWatcher is programmable to recognize these keys or key sets and will only open the cabinet door

Global Gaming Business FEBRUARY 2016

and release them after the three required logins are complete and the credentials verified. Situations that require keys to be accessed outside of regularly scheduled times such as machine relocations or customer disputes can also be accommodated by pre-programmed “notes.” Before a key is released, the system will prompt the user to enter a predefined note plus the table or slot machine numbers involved. To make the task of adding, deleting or identifying SmartKeys from the system easier, the optional SmartKey Reader allows the user to perform these functions from a PC rather than at the cabinet. When changes are made, synchronizing the same information across multiple KeyWatchers automatically happens behind the scenes. It simplifies the task of keeping all KeyWatchers updated with current user key access and enrollment information. For more information, visit morsewatchmans.com.

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Aces & E ights: The Evolution of Deadwood Gaming In 1987, Deadwood, South Dakota became the third U.S. jurisdiction to legalize casino gaming after Nevada and Atlantic City. Now surrounded by competition, the Gold Rush town has circled the wagons with the introduction of craps, keno and roulette. By Marjorie Preston

eadwood, South Dakota likes a good gamble, especially when it pays off. In the late 1980s, voters bet that casino gaming would bring new life to a Wild West town struggling to survive on seasonal tourism and a few jobs at the old Homestake gold mine. As then-Mayor Mike Trucano said, Deadwood had “about 10 shops that sold rubber tomahawks nine months of the year, and were boarded up the other three.” The county courthouse had closed due to structural problems. Other historic structures were beginning to crumble. Current Mayor Chuck Turbiville remembers it well. “There were a lot of vacant buildings. The tourist trade was down. There wasn’t a lot of retail. We had water and sewer that was 60, 70 years old that we couldn’t afford to upgrade. Sure, we had the bars and the restaurants and the historic atmosphere, but they weren’t paying the bills. Deadwood was in tough shape.”

Global Gaming Business FEBRUARY 2016

Under Fire The last straw was the December 1987 fire that ignited a century-old Main Street building, and threatened a whole city block. The town’s water lines were low on pressure, so firefighters hauled in tankers from the mine to battle the blaze. But the water inside them was frozen. Ultimately, says Turbiville, “They parked the trucks next to the fire to thaw the water.” Despite these valiant efforts, the Syndicate Building burned to the ground, along with several downtown businesses. That was the catalyst for change. The next year, a coalition called Deadwood, You Bet pitched limited-stakes gaming as a way to fund historic preservation and infrastructure improvements. It seemed like a good fit— after all, Deadwood, known during the Gold Rush for its card sharps and claim jumpers, once hosted the most famous poker game of all time. In 1876, legendary gunfighter Wild Bill Hickok was playing in a local saloon

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Deadwood Then and Now Madams, Muleskinners and Gamblers GGB: Please share a brief history of Deadwood before gaming. Harstad: Deadwood came to be in 1876 with The Lodge at Deadwood, one of the largest casinos in town

when a rival shot him in the back. Hickok is said to have died holding his cards; ever since, Aces and Eights have been known as the “Dead Man’s Hand.” In 1988, South Dakotans rolled the dice, approving a constitutional amendment to bring back gaming. In the first eight months of operations, the town’s casinos generated $145 million in bets. Mike Rodman, executive director of the Deadwood Gaming Association, says the industry “absolutely saved the community. By conservative estimate, it brought in another 1 million tourists and expanded the shoulder seasons. It really had a tremendous impact.” Reflecting back on the early days, casino owner Mary Larson, who runs Deadwood Dick’s, told the New York Times, “If you had a pulse, you could have a job. Every building in town developed into a casino.” Not surprisingly, Deadwood’s success spurred competition. In little more than a year, Iowa, Colorado, Illinois and Mississippi got in the game, with Missouri soon to follow. The Indian Gaming Regulatory Act, established in 1988, brought a host of new tribal casinos on the scene; there are now nine Indian gaming halls in the Mount Rushmore State. “These days, every place but Hawaii and Utah has some type of gambling,” says Turbiville. “We’ve had to work harder and smarter in order to keep the people coming.”

Stacking the Deck Here as elsewhere, the industry has seen its challenges. In 2011, the first full year of a smoking ban, gaming revenue in Deadwood dropped $5.4 million (within a year, however, it bounced back to a record-breaking $107.4 million). In 2012, slot machine and table game revenues fell to $100.9 million, down from $106.2 million in 2010. In 2013-14, revenues were flat. Deadwood has adjusted to keep ahead of the pack. In 2000, legislators hiked the maximum bet from $5 to $100, and in 2014, they raised again, to $1,000, in a bid for more high rollers. All the while, out-of-state competition kept growing. Early on, in Missouri and other Midwestern states, legislators had promised casinos would be “as un-Vegas-like as possible, more Mark Twain than Bugsy Siegel,” according to a report in the St. Louis Post-Dispatch. But the original riverboats eventually gave way to bigger, flashier gaming halls, like the Grand Falls in Larchwood, Iowa, which opened in 2011, and the Hard Rock in Sioux City, which opened in 2014. Deadwood can’t really compete in the bigger-is-better department. In 1961, the entire town was designated a National Historic Landmark, and any renovations must be in keeping with the Gold Rush theme. Accordingly, the city’s 30-odd casinos have names like Mustang Sally’s, the Wooden Nickel, Silverado, Tin Lizzie and the Mineral Palace. Despite its struggles, particularly in the post-recession years, Deadwood wasn’t out of aces. In 2013, voters gave thumbs-up to Amendment Q, which

the finding of gold in the Black Hills of South Dakota. Shortly after the first find, droves of gold-seekers—and those seeking to profit from those with gold, such as the madams, muleskinners and gamblers—arrived in town. Gold was No. 1 in Deadwood, and continLee Harstad, Executive Director, Deadwood ued to be a driving force of the local economy. Chamber of Commerce Homestake Gold Corp. was one of the top gold-producing mines in the country, employed hundreds of people, and continued to mine heavily for gold until falling gold prices in the late 20th century made it unprofitable. Deadwood’s remaining businesses made it year to year with visitor traffic mainly. The last remaining brothels remained open until 1980, and their closure resulted in less traffic. Was gaming a hard sell at first?

The 1987 fire that destroyed a downtown city block added to the bleakness, but it also began the momentum to increase the city coffers and make improvements. In the late 1980s, a group of Deadwood residents joined together to form the Deadwood, You Bet committee to gather support for limited-stakes gaming, with proceeds going toward restoration of the city’s history. The eight members worked tirelessly, traveling statewide to gain support for returning gaming to Deadwood. From county fairs to speaking with voters, this dedicated crew put the time in to make sure the job got done. In 1989, they succeeded, and November 1 of that year, the first coins dropped in the city’s slot machines. Gaming establishments can now be found nearly everywhere, so gaming isn’t quite the novelty it once was. However, Deadwood continues to be successful because of its history and the other attractions the area has to offer—and because flexible business owners now offer more than just gaming. Have the new table games moved the needle in terms of additional revenues?

The past couple of years have been flat with slight increases, and the introduction of the three new games did provide a shot in the arm starting in July 2015. Not only did the games themselves help, but they also rekindled a memory that perhaps was lost when it came to gambling in Deadwood. Potential visitors no longer need to travel to a place like Deadwood to gamble, so coming here may have become an afterthought. The new games and the fanfare surrounding them likely spurred visits from some who hadn’t crossed Deadwood city limits for a few years—even if they weren’t looking to throw the dice or bet it all on red.

FEBRUARY 2016 www.ggbmagazine.com

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legalized craps, roulette and keno in the town. The games were introduced last July to serve what Rodman calls a “rubber-tire market,” drive-in customers not only from the Dakotas and bordering states (Wyoming, Montana, Nebraska, Minnesota, Iowa) but from as far away as Colorado, Wisconsin and Indiana. “We had been pretty slack, trying to climb out of the recession, hoping to maybe get back to that 2008 level,” says Rodman. “It was a real struggle for us and for the industry nationally. With people so much more exposed (to casinos) these days, you have to have a gaming product that can compete on a national scale.” How are the new games faring? So far, so good, says Lee Harstad, executive director of the Deadwood Chamber of Commerce. “The handle from table games in November 2015 was down 8 percent, but year-to-date over 2014 shows the handle up 3.3 percent for slots and up 7.57 percent for table games.” “It was surprising to see the number of players from the area that knew

Regulatory Roundup Smaller is better in Deadwood oversight

he regulatory agency that oversees gaming in Deadwood is one of the smallest in the nation. With a budget of around $1 million a year, funded via an 8 percent tax and a fee placed on every gaming device, the South Dakota Commission on Gaming is led by Larry Eliason, the executive secretary, who has been the chief regulator for two decades. He is assisted by Deadwood native Craig Sparrow, who heads up operations and enforcement. Eliason says the year gaming was legalized in Deadwood, the Indian Gaming Regulatory Act was also passed, which allowed tribes in South Dakota to open casinos. Eight of the nine tribes in South Dakota now have casinos. In addition, bars and restaurants are permitted to have a certain number of VLTs throughout the state. The commission only regulates gaming in Deadwood, however. Currently, there are 14 casino properties in the town. Some of them are small “Mom-and-Pop” operations, but others are substantial casinos with several hundred slot machines and some table games. They are largely concentrated on Main Street, but several larger properties, like the Lodge at Deadwood, have been built on the fringes of the town. The size of the market dictates the level of scrutiny that is placed on the industry. All owners and senior managers must be licensed and are investigated fairly intensely, but lower-level employees get what is

Global Gaming Business FEBRUARY 2016

Tin Lizzie’s, a group of interconnected buildings making one larger casino

and played craps and roulette in other gaming destinations,” says David Schneiter, general manager at Cadillac Jack’s. “Guests from out of state used to ask for these games; now we can offer them. With the increased interest, we’ve seen a boost in overall play in all areas.” The games have also attracted a new breed of customer, Schneiter says. “Younger players look for the social gaming experience that’s offered with table games. Craps is one of the more active, exciting and social games on the floor; it’s established a following of new and seasoned players. We promote the best odds available in Deadwood on craps, and use social media to reach the younger demographic. Roulette also has drawn a younger player.” Larry Eliason, Executive Secretary, Cadillac Jack’s adds a little Vegas-style dazSouth Dakota zle, Schneiter adds, with live aerialist performCommission on ances in the table games area every Friday and Gaming Saturday night. “It has the feel of a party atmosphere,” he says.

Strong Suit equivalent to a work card in Nevada, Eliason notes. For testing slot machines and technology, Sparrow says they use independent slot labs. “We were actually GLI’s second customer,” he says. “They also assist us in crafting some of our regulations, particularly with the table-game regs we just promulgated.” A smoking ban was put in place six years ago. No exemption was given to the gaming or the bar industry, but the commission has no role in enforcement of this regulation. (“Thank goodness,” says Sparrow.) The introduction of new tables and games— craps, roulette and keno—hasn’t made much of an impact on Deadwood. The impact on the commission was three new regulatory chapters covering each game, as well as some changes in the regulations surrounding security and surveillance. “If they allow more than a $500 wager, we require the greater surveillance coverage on those games,” says Eliason. The maximum bet permitted in Deadwood is $1,000. —Roger Gros

Regardless of the industry’s ups and downs, and in spite of detractors who regularly predict the downfall of gaming in Deadwood, Turbiville has a positive story to tell. “As far as distribution of net proceeds, we pay for the entire cost of the gaming commission ($1 million). The local county gets about $800,000, and other municipalities around Deadwood get just short of $300,000. The school district gets $284,000. It varies, but that’s for fiscal year 2015, which ended June 30. “We also pay for roughly one-third of the entire state’s tourism budget of $3.2 million, and send another $2 million to the general fund.” In addition, Turbiville says, the Deadwood school district receives no state aid, “because our local property taxes provide enough money to maintain our schools.” This year, he adds, local sales tax revenues are up an impressive 11.7 percent. The industry has created thousands of jobs. “If not for the casinos, the city’s financial troubles would only have gotten worse in 2002, when the Homestake Mine closed,” says Turbiville. “In the end, it’s really been a lifesaver.”

GAMING EMPLOYEES: MAKE YOUR VOICES HEARD IN THE PRESIDENTIAL RACE Inform candidates that gaming is a valued community partner in 40 states delivering benefits that include:

1.7 MILLION JOBS

$240 BILLION IN ECONOMIC IMPACT

$38 BILLION IN TAX REVENUES

A PATH TO THE MIDDLE CLASS FOR WORKERS OF ALL BACKGROUNDS & EXPERIENCES

GET INVOLVED Join the American Gaming Association as we hold on-the-ground events in key states. Tell candidates to meet you and your co-workers and learn more about the industry. Visit gamingvotes.org and register to vote. Use #GamingVotes to get candidates’ attention on social media and let them know you’re paying attention to them.

WITH YOUR ENGAGEMENT, CANDIDATES WILL GET TO KNOW GAMING IN 2016. Learn more at www.gamingvotes.org and www.americangaming.org

facebook.com/americangaming @AmerGamingAssn

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NEW GAME REVIEW by Frank Legato

Crazy Money Deluxe Incredible Technologies

his is a super-charged version of Crazy Money, which is Incredible Technologies’ most popular game. Crazy Money Deluxe also is the launch title in the company’s premium Infinity Skybox product segment, which features a 55-inch vertical monitor placed atop the Infinity U23 cabinet to display bonus events and progressive jackpot wins. The base game is a five-reel, 15-line video slot with the familiar, easy-to-understand basic game features of Crazy Money—line combinations of like bill denominations (with the requisite animated presidential portraits) for credit wins, and the main “Money Catch” bonus from the original game. To these popular basics, IT has added a central wheel-spin bonus, on a video wheel included on the oversized top-box monitor. Three scattered bonus symbols trigger the bonus display, called the Sky Wheel. Above the wheel are four progressive bonus awards, active only with the maximum wager. The wheel slices include credit awards from 750 to 6,000, plus a slice for each of the four jackpots—the top

“Grand” resetting at $10,000. Players may be awarded instant credits which then trigger a secondary wheel that can award up to a 5X credit multiplier or a chance to re-spin the Sky Wheel. There also is a “Bonus” slice on the wheel, which causes a secondary wheel to appear and award up to 100 “picks” for the signature Money Catch Bonus. Players use their “picks” to grab flying dollar bills which reveal their credit value once touched. Crazy Money Deluxe features fixed bet options of 60, 120, 180, 240 and 300. Manufacturer: Incredible Technologies Platform: Infinity Skybox Format: Five-reel, 15-line video slot Denomination: .01 Max Bet: 300 Top Award: Progressive; $10,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 6%-14.8%

Dragon’s Law Twin Fever Konami Gaming

his game is on Konami’s new Concerto cabinet, which features twin 27inch horizontal HD game screens set against a smooth black surrounding surface, creating a striking cinematic-style display. Dragon’s Law Twin Fever, on the slot-maker’s powerful KP3+ platform, combines several popular Konami game-play features with a free-spin bonus sequence that has an extra twist. The base game is a five-reel video slot available in fixed 20-line, 30-line and 40line configurations, with a forced Extra Bet. Wild symbols appear on reels 2, 3, 4 and 5 during the primary game. All reels of the base game employ Konami’s “Action Stacked Symbols,” resulting clusters of like symbols for big credit wins. The main free-spin bonus includes a random second-screen sequence that can fill the screen with wild symbols. Three, four or five ball symbols on a base-game spin trigger eight, 12 or 20 free games, respectively. During the free games, the “Dragon’s Law” feature can occur on any given spin. During this feature, a dragon snakes its way across the reels, randomly placing extra star symbols on reel spots. If the extra star symbols line up with ball symbols on the same positions, those symbols change to scatter wild symbols. It’s all wrapped up in a beautiful art package, including dual dragons in an attract mode. 64

Global Gaming Business FEBRUARY 2016

Manufacturer: Konami Gaming Platform: KP3+ Format: Five-reel, 20-, 30- or 40-line video slot Denomination: .01-5.00 Max Bet: 50 Top Award: 2,000 times line bet Hit Frequency: 28% Theoretical Hold: 4%-18%

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Goldfish Deluxe Scientific Games

his is one of the first releases on Scientific Games’ new TwinStar cabinet, which combines the best hardware and software features of the legacy WMS and Bally brands with features including vivid dual 24-inch full HD displays and the new ArgOS state-of-the-art operating platform, designed for both Bally- and WMS-branded content. The format includes Bally innovations like a larger version of the popular Bally iDeck button panel for interactive features, and the “Wager Saver” feature from WMS, which automatically boosts the bet to the required minimum when the credit meter drops below that level. The base game is a five-reel, 30-line video slot that follows the basic format of the original Gold Fish, one of the most popular games in the WMS brand. To this basic game play are added five different mystery bonus events—any of the five bonuses can randomly occur after any spin. In the Gold Fish Bonus, the player picks one of six bubbles to reveal a number of free spins between five and 20. After every winning free spin, the player picks one of five bubbles to reveal a multiplier of 2X-10X, which is applied to the win. If a Starfish appears with the multiplier, three extra spins are awarded with the revealed multiplier. In the Green Fish Bonus, the player picks one of 10 bubbles to reveal a credit award, “Award All” to land all hidden credit awards, or “Award All + Pick Again.” The player can get the latter full-screen award up to four consecutive times. In the Blue Fish Bonus, the player is awarded two to four free spins. The Red Fish Bonus awards one free spin, with between two and 10 wild symbols added. The Purple Fish Bonus allows the player to pick three of 10 bubbles, each bubble representing a unique number from 0 to 9. The

player places the first digit, and the other two are randomly placed. If the resulting number matches a displayed “Match Number,” the player receives an additional 10,000 credits times the bet multiplier. Manufacturer: Scientific Games Corporation Platform: TwinStar/ArgOS Format: Five-reel, 30-line video slot Denomination: .01-100.00 Max Bet: 450 Top Award: 1,600 times line bet Hit Frequency: 42.32% Theoretical Hold: 2.45%-14.43%

Queen of the Screen International Game Technology

GT designed this Hollywood-themed Class II slot to play much like high-volatility penny games that have gained popularity in Class III casinos. In particular, Queen of the Screen applies its movieland theme to the proven math of the popular IGT Class III game Diamond Queen. The base game is a five-reel, 20-line video slot, on IGT’s new S3000 cabinet, which is being used for both stepper and video games. Three scattered bonus symbols trigger the Queen of the Screen Bonus, a free-spin event in which the middle reels randomly turn into complete wild reels. The game can be deployed on a variety of IGT hardware solutions, including the G20, G23 and GMLD cabinets, in addition to the standard S3000. The game integrates IGT’s exclusive Class II Custom Button Configuration feature, which tailors the bet credits on every button and enables operators to configure for high-denomination or low-denomination game play. The game was designed exclusively as a Class II electronic bingo title, the custom bingo menu and patterns appearing at the right of the LCD monitor.

Manufacturer: International Game Technology Ltd. Platform: S3000 Format: Five-reel, 20-line Class II video slot Denomination: Configurable; low denomination recommended Max Bet: 5,000 Top Award: 400,000 credits Hit Frequency: Approximately 39% Theoretical Hold: 2%-12.5%

www.ggbmagazine.com

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EMERGING LEADERS Youthful Exuberance Kevin Sweet

Customer Focus

Vice President of Slot Operations and Marketing, The Cosmopolitan of Las Vegas

Diana Ulloa

Founder, ULAC Publicidad y Mercadeo s the founder of ULAC Publicidad y Mercadeo, Diana Ulloa has been a unifying force in gaming in Colombia. Leveraging her academic and professional expertise in customer service and marketing, and her passion for the gaming business, she has created a tightly associated gaming industry in the country. Ulloa’s impact on the industry will be felt well beyond Colombia in the coming years as her philosophy and approach to addressing consumer behavior in gaming are sure to be pervasive throughout Latin America. ULAC offers advertising, marketing and customer service strategies to gaming and related companies, predominantly to private casino operators in Colombia, but with aspirations for growth. ULAC’s service categories appear standard: market research, advertising, branding, marketing and customer service. However, upon discussing the company’s approach and philosophy with Ulloa it becomes clear that it is far from standard. The ULAC team integrates its business with the business of the client, creating an intimate working relationship which Ulloa describes more like a family than consultant-client. This sentiment is further extended to Ulloa’s view of the industry, evidenced in ULAC’s communication services to the Colombian Federation of Casinos and Bingos, or COLJUEGOS. Ulloa’s academic perspective on marketing in the casino industry is not surprising. She trained in publicity and marketing at the University of Bogota Jorge Tadeo Lozano, and went on to achieve concentrations in consumer behavior and market research the University EAN. Ulloa is now a certified customer service trainer (CCST) by the Service Quality Institute of Latin America. In addition, Ulloa has served as the chairwoman of innovation and competitiveness in the Consumer Psychologists Associates Foundation of Colombia. Ulloa began in the gaming industry eight years ago, when as a casino enthusiast, she began thinking about the social nature of casinos in Colombia, and how her experience in driving exceptional customer service could apply to various

facets of the casino industry. Ulloa soon developed a relationship with slot supplier Recreativos Franco, and realized that her clients in the industry were just as much her mentors and friends. Ulloa began to learn about the industry and developed the curriculum and adaptation of her marketing philosophies. ULAC reinforces a customer service-driven approach to marketing gaming products and reinforcing loyalty. The company noticed that in the last five to 10 years the importance of addressing customer needs has increased tremendously. The focus on customer service comes with the more demanding expectations of players and the need to adapt to address players graciously, exercising caution in the tone and style of communication in the customer relationship. Ulloa acknowledges the importance of this customer relationship both in the virtual and bricks-and-mortar casino environments. However, she believes that the traditional casino is misunderstood as a viable form of a social interaction, like a club, and under-leveraged in that capacity. Outside of professional life Ulloa enjoys travel, and interaction with family and friends. Although she knows it paints her as a “workaholic,” a good evening for her is a night out on the town, including a visit to a casino. —Michael Soll, president, The Innovation Group

Global Gaming Business FEBRUARY 2016

ince he was 5 years old, Kevin Sweet, vice president of slot operations and marketing at the Cosmopolitan of Las Vegas, has known he loved slots and wanted to be in the gaming industry. “My aunt had a slot machine in her house, and I would play anytime we would visit,” Sweet remembers. Since those early days of playing with slot machines, Sweet graduated magna cum laude from West Virginia University, set his sites on Las Vegas and never looked back. Upon arriving, he joined the MGM Management Associate Program as a slot analyst at Treasure Island. Upon thinking about his success and leadership style, Sweet acknowledges earning the respect of the people he manages has been a great challenge, and an important ingredient in his recipe of success. He credits being known for working hard and always saying yes. Early in his career Sweet was once asked, “Do you have a passport?” A simple “Yes” to this question earned him the opportunity of a lifetime. Due to a last-minute planning challenge, Sweet was on the next plane out to Macau to hand-deliver slot machine locks that had inadvertently been overlooked and were required before the MGM Macau could open three days later. Asked what he enjoys most about his career, Sweet says, “Seeing your ideas get executed and

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seeing your customers gravitate toward them is always exciting. When it all comes together it’s a complete rush.” This passion for serving his company and his clients is a central theme which drives his energy. “We are in a people-person business,” he says. “Are you friendly, are you welcoming, outgoing?” These are the traits he prides himself on and ones he looks for in other leaders within the industry. Prior to his current role at the Cosmopolitan of Las Vegas, Sweet managed corporate slot strategy for seven casinos and more than 12,500 slot machines for the Seminole Tribe of Florida. He has served as the executive director of global slot operations for Las Vegas Sands, director of slot operations at Aria Resort & Casino and slot operations manager at Bellagio. Sweet credits much of his success to a number of great mentors and industry leaders who have supported his career. He names Justin Beltram, his vice president of slots when he was at Treasure Island, Michael Volkert, his vice president of slots at Aria and Bill McBeath, president and chief executive officer of the Cosmopolitan of Las Vegas, as being instrumental in his career growth. “Having the opportunity to work for Mr. McBeath is an opportunity no one in the industry should ever pass up,” Sweet says. “His complete knowledge of the entire hospitality industry continues to amaze me.” Sweet, in fact, is passionate about the Cosmopolitan in general. “We have the best loyalty rewards program, the property is hip and sexy, we’re the only resort to feature balconies in our rooms, and we now have a renewed focus on gaming,” he says. “We have just built a new high-limit slot room, Table Games now offers two high-limit rooms, a sports book is being built on the main casino floor—our new owners are really giving us the tools to bring the casino floor to life.” Sweet has turned his passion for slots and gaming into a very successful career. Asked about the future, he says many seem to be jumping the gun on the coming of the millennial generation. “There are definitely opportunities to make gaming more attractive to a younger generation, such as enhanced ETG content or dedicated gaming lounges, but ultimately I think there is too much time being focused on how to get 30-yearolds to gamble,” Sweet says. “At the end of the day, money won is twice as sweet as money earned, and this generation will gamble when they are ready to gamble.” —Jacqueline von Zwehl, The Innovation Group

Sporting Chance Joshua Greenberg Content Lead, Incrediplay Ltd. oshua Greenberg has had an interesting and unique life, to say the least. Born and raised in Los Angeles, California, he moved to Israel with his family after graduating high school in 2006. He later graduated from Interdisciplinary Center Herzliya with a bachelor of arts in communications, where he helped found the first-ever fraternity in Israel, and later went on to become a member of the Israeli national ice hockey team. This was just the beginning of the unique path that led him to the gaming industry. Prior to joining his current employer, Greenberg worked with his family business selling hockey equipment and Gatorade to teams in Israel. The jump from running a hockey shop to entering the gaming industry may have seemed like a real leap to others, but it made perfect sense to him. Sports are his passion, plain and simple. InPlay King is a free-to-play predicting application designed for Americans, to allow friends to compete against each other by predicting the outcomes of professional and college sports. This was the initial draw for Greenberg, his passion for sports. As the first employee of the company, he could bring his love of sports to the forefront as well as work with a new and innovative product. Since 2014, Greenberg has worked his way up to his current position of vice president of sports content for Incrediplay. He credits his “dedication to his work and the project” for his success. He now leads the team in all sports content for the app and is responsible for its accuracy. Greenberg heeded his own advice: “Hard work pays off—treat everything with importance and don’t go through life sluggishly.” Being an American in Israel was difficult, and he had to work twice as hard to be accepted; however, now that he has made a career path for himself he views living in Israel as a positive and unique position to be in. “Being in Israel, a real startup nation, is where creativity and ambition thrive,” he says. Greenberg has put his passion, creativity and ambition to use by building a young and successful career in the gaming industry. To date, he says being recognized as a member of GGB 40 Under 40 is his proudest career achievement. “It is a tremendous honor, something that I can be really proud of,” he says, “but I share this accolade with my family and fellow employees.” He goes on to say that though he is honored with this recognition, he feels that his proudest moment is still yet to come. —Christopher Irwin, The Innovation Group

“Hard work pays off—treat everything with importance and don’t go through life sluggishly.”

FEBRUARY 2016 www.ggbmagazine.com

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Better Late Than Never Navajo Nation making up for lost time in gaming industry By Dave Palermo errick Watchman, head of the Navajo Nation’s gambling operations, logged 52,000 miles on his Chevy last year visiting Navajo casinos, traversing often-lonely desert blacktops from Flagstaff, Arizona, west to Shiprock, Farmington and Gallup, New Mexico. “Nothing beats personal visits to the properties,” says Watchman, CEO of Navajo Nation Gaming Enterprises (NNGE), which operates four government casinos on the sprawling, remote reservation. “I put a lot of miles on that car.” The Navajo Nation was late launching its gambling enterprise, opening Fire Rock Casino in Church Rock, New Mexico, near Gallup, in 2008, 20 years after the Indian Gaming Regulatory Act (IGRA) of 1988 ignited an Indian casino industry that today spans 28 states and generates $28.5 billion a year. It took three referendums to get approval for gambling from Navajo citizens concerned about introducing casinos to a community plagued by addiction, depression, domestic abuse and other characteristics of high unemployment and poverty. But a gambling measure Twin Arrows finally received voter acceptance in 2004, and the nation has since been making up for lost time. Fire Rock, Flowing Waters Casino near Shiprock, Northern Edge Casino in Farmington and the flagship Twin Arrows Casino Resort on Interstate 40 west of Flagstaff generated about $120 million in combined revenues in 2015, according to reliable sources. (Tribal government enterprise figures are not publicly disclosed.) The operations also cre-

Global Gaming Business FEBRUARY 2016

ated 1,500 jobs for an Indian nation that has long suffered from poverty and high unemployment. Navajo and the Cherokee Nation each have nearly 300,000 members, but the Navajo have the country’s largest reservation with 27,500 square miles in Arizona, New Mexico and Utah. Eighty-five percent of the casino industry jobs are held by Navajo citizens, paying out some $122.5 million a year in salaries and benefits. “It’s good for our Navajo people to get a paycheck, go shopping and buy cars. It gives them a tremendous sense of pride that they can raise their families,” Navajo President Russell Begaye told a fall tribal leadership conference in Scottsdale, Arizona.

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Northern Edge

Regulating Navajo Gambling IGRA Compliant Unlike many of the 247 U.S. tribes operating casinos, the Navajo Nation has a government and economic infrastructure uniquely equipped to satisfy the congressional intent of IGRA, which was to use gambling as a means of strengthening tribal governance and creating diversified economies. Navajo has a dozen business enterprises overseeing traditional and renewable energy operations, hospitality and tourism, shopping centers, utilities, agricultural products, arts and crafts, housing, oil and gas stations, transit and other economic endeavors. Navajo plans to incorporate its casinos into the business plans for many of these enterprises. Rather than seeking traditional bank financing to build its casinos, Navajo chose to finance its casinos, and is currently collecting interest on about $200 million in debt. Meanwhile, the tribe, in extending utilities to Twin Arrows and the remote Northern Edge and Flowing Waters casinos, is providing infrastructure for other potential development. “Any time a tribal enterprise can be self-sufficient, that’s a positive,” says Quincy Natay, a member of the NNGE board of directors. “The tribe is earning interest from the loan. It is also gaining additional revenue through job creation and taxation. All those mechanisms are designed to help a government. And we’re complementing all that with related development.” The Twin Arrows resort on I-40—halfway between Flagstaff and Winslow, Arizona—is serving as the economic hub for a proposed retail, entertainment and housing development that is expected to include participation by the tribe’s shopping center, housing and oil and gas enterprises. The proposed Outlook at Glittering Mountain is envisioned as a 70-acre residential, retail and business and entertainment development, which will likely include a sizeable truck stop and travel center. The development will include 370 housing units, most intended to provide housing for Twin Arrows employees. “In essence, we’re looking at a master-planned community,” Watchman says. “It was difficult coming into gambling late,” Natay says. “In my opinion, the sooner you can jump onto a positive bandwagon, the better. You see more of the rewards. “But being Navajo and where we’re located, gaming does provide opportunities for us.”

he Navajo Nation has a fairly sophisticated regulatory system, independent of the enterprise and reporting directly to the office of the Navajo Nation president and vice president. Navajo Gaming Regulatory Office Executive Director Pauline Thomas also reports on budgetary issues to the Tribal Council’s Resource and Development Committee. The organizational structure is broken down into offices of administration, licensing, audit, slot compliance, enforcement and surveillance. There are 113 positions, though Thomas is hoping to up the personnel level to 120. Thomas says she believes Navajo minimum internal operating controls (MICS) are as efficient if not superior to those at most New Mexico and Arizona casinos. Internal audits have shown compliance with the regulations. “From what I’ve seen at other tribal casinos, we cover all the bases,” Thomas says. “We do a good job.” There have been no disclosures of major cheating or embezzlement at Navajo casinos. With less than a decade under its belt, the agency is still in its formative stages. MICS are in a constant state of revision and regulations and procedures are continually being refined. “Managers are constantly analyzing the processes that are going on in the casino and identifying areas in the internal controls that might be improved upon,” Thomas says. “There’s always room for improvement. We are always looking for ways to ensure internal controls are working and the assets of the Navajo Nation are secure.” Projects are currently under way to revise procedures dealing with administrative duties, surveillance, licensing and slot compliance. Regulators, the gambling enterprise and casino operators must work closely to ensure protection of casino assets, Thomas says. As a regulator, she believes it is often best to ensure compliance rather than take enforcement action against casinos and individual workers and supervisors. “When I look at our processes, I’m always looking for areas that can be improved upon,” Thomas says. “I like to make sure our policies, procedures and regulations are friendly, but not too friendly. “The way I see it, the Navajo Nation, the regulatory agency and the enterprise are all joined at the hip. We have to work together for the benefit of the Navajo Nation.” The regulatory agency is unique, however, in that it must work under two tribal state compacts: New Mexico and Arizona. “That’s been a challenge,” Thomas says.

FEBRUARY 2016 www.ggbmagazine.com

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“Any time a tribal enterprise can be self-sufficient, that’s a positive.” —Quincy Natay, Board of Directors, Navajo Nation Gaming Enterprises

Business is Business Most of the Glittering Mountain land will not be placed into trust, so the tribe will pay state and local property and business taxes. “It will be good for Coconino County and the Navajo Nation,” Nathan Begay, CEO of Navajo Shopping Centers, Inc., told the Navajo Times. Navajo cattle ranches are supplying 25 percent of the beef for the Twin Arrows restaurants. And retail shops are stocked with jewelry, pottery and blankets produced by Navajo artisans. “Obviously, we’re a gaming business enterprise,” Watchman says of Navajo Nation Gaming. “But I’m trying to focus on job creation and revenue creation,” building a sustainable economy for the massive reservation that to a large degree depends on its coal development. “I think we have some opportunity for gaming growth on Navajo. But we’re using the gaming as the engine to expand into other related business ventures,” Watchman says. The Navajo Nation is a major tourist attraction, much of it European vis-

itors seeking insight into indigenous America. The tribe is hoping its gambling industry can tap into the tourism/hospitality sector and trigger additional growth. Navajo’s hospitality enterprise currently manages tourism at Monument Valley and Canyon De Chelly and runs Quality Inns at Shiprock, Tuba City and Lake Powell. Crafting a cooperative partnership between the tribal hospitality and gambling business enterprises that could involve pooling revenues may be a bit tricky, particularly since the gambling sector also includes hotel operations. “But there’s got to be cooperation” between the enterprises, Natay says. “We’re creating opportunities for them as well as us.” “The return generated by our gaming assets will help grow the hospitality assets,” Watchman says. “What if we try to partner and work with them (hospitality enterprise) so we have a nice hotel product on the reservation? We can share customers. Maybe it would be one entity. There’s a lot of opportunity in growth on that side.” Limited-service motels might also complement the casinos in Gallup and Farmington. And the tribe is considering Class II bingo-style casinos and hotel rooms at Page and Chinle, Arizona—the entrance to Canyon de Chelly, where an estimated 1.2 million tourists visit every year. “People come to Navajo but we don’t have enough hotel product on the reservation,” Watchman says. “It would be ideal if we can marry hotel rooms with gaming, food and beverage and conference room space. “There is room for a sizable hotel product both at Gallup and Farmington,” Watchman says. “I could easily double the hotel inventory.”

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Contact: C ontact: Rick Rick Piper Piper 503-226-2400 503-226-2400 • rrickp@pgillc.com ickp@pgillc.com 70

Global Gaming Business FEBRUARY 2016

Navajo offers a diversity of gambling, beginning with its flagship Twin Arrows, a fully integrated resort with 200 hotel rooms, meeting space, restaurants and a casino with 1,100 slot machines and table games. Fire Rock in Gallup has 900 slot machines, Northern Edge has 750 and Flowing Waters has 125 largely Class II devices. Navajo in its tribal-state compact with New Mexico will be allowed in 2021 to open a fourth Class III, casino-style facility on reservation land in the Albuquerque area. Market saturation would make moving into the region sooner a

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“People come to Navajo but we don’t have enough hotel product on the reservation. It would be ideal if we can marry hotel rooms with gaming, food and beverage and conference room space.” —Derrick Watchman, CEO of Navajo Nation Gaming Enterprises (NNGE)

Flowing Waters has 125 largely Class II devices

major financial risk. “The compact prohibition gives us an opportunity to determine whether there’s opportunity to grow,” Watchman says of a proposed casino site at To-Hajilee, a reservation chapter on Interstate 40 west of Albuquerque. It is questionable whether there is any current demand for increasing the gambling product on Navajo. The tribe hopes to double the job inventory over the next five years, but it may come through the development of hotel rooms, limited-service motels and other non-gambling amenities. “The question for us is how much more we can grow our gaming product. That’s the crux of it,” Watchman says. “There is opportunity for some gambling growth. But there are additional opportunities in hospitality and expanding our amenities.” Twin Arrows has only recently begun operating in the black. And while directors of the gambling enterprise are pleased with revenue flow and job creation, there is a growing desire to retire the approximately $200 million debt. “We’re starting to grow into our shoes,” Natay says of Twin Arrows. “It’s started to turn around. We had to make changes and adjustments just like any startup business. “There may be an opportunity at Page and other small communities which are tourist attractions such as Monument Valley. At some point, we would look into growing into those areas.”

Alcohol And Smoking Navajo leaders faced some difficult issues in bringing gambling to a commu72

Global Gaming Business FEBRUARY 2016

nity struggling with poverty-related issues such as depression and drug and alcohol addiction, violence and domestic abuse, diabetes and chronic dietary problems. Many tribal casinos nationwide cater to a largely nonIndian customer base. Navajo casinos are largely marketed to Navajo citizens and those from other nearby indigenous communities, such as the Hopi Tribe of Arizona. As a government enterprise, the Navajo Nation Council in legalizing reservation casinos has been forced to look at problem and compulsive gambling and related issues from a communitywide, public health perspective. Alcohol is illegal on the reservation. But the council exempted casinos from the prohibition, aware that liquor was necessary to operating a successful casino. “Opening up gaming without alcohol, it wouldn’t work,” Watchman says. “We’re the only enterprise on Navajo allowed to sell alcohol.” The council in August imposed a 3.25 percent tax on alcoholic beverages, a proposal expected to raise $73,000 a year. The revenues will be placed in a fund to help combat drunken driving on the reservation. The council also excluded casinos from a ban on smoking, again bowing to gambling customer profiles. Smoking is restricted to designated areas with slot machines and table games. The level of responsibility for problem and responsible gambling is higher for tribal casinos that cater to indigenous gamblers versus those in urban areas marketed to non-Indians. Watchman and Natay both believe the nation must adopt a public health approach to the issue, taking into account the impact gambling could have on community problems such as depression and suicide, domestic abuse and addiction. “There are pros and cons to providing gaming to an indigenous population, and in what that brings to a community,” Natay says. It’s worth noting, he says, that revenue fell off at nearby casinos before the opening of Fire Rock in 2008, indicating Navajo citizens were already patronizing other gambling halls. “Is it an issue? Without question,” Watchman says of gambling’s potentially negative impact on the community. “To what extent is it an issue, we don’t know yet. “It’s an area I want to spend some time on. That’s what I plan to do in 2016.”

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Billy Gardell (of Mike & Molly fame) hosts Monopoly Millionaires’ Club, a weekly nationally syndicated TV game show, now in its second season and produced by Scientific Games.

Lottery and Gaming: Perfect Together? Convergence has brought the two betting options closer than ever By Dave Bontempo

aming and lottery kingpins target a multibillion-dollar truth: a gambler is a gambler. Lucrative slot revenues may originate from the same people playing lottery hardball. As in Powerball, just one entity of the lottery world. It hit an all-time jackpot of $1.5 billion in January during a frenzied promotion across 44 American states. Perhaps three quarters of the gambling and lottery markets intersect, a fact realized by their ultimate power brokers. Scientific Games, which introduced the first secure instant lottery ticket 42 years ago and now holds a reservoir of about 40,000 games, pronounced its interest in the gaming-lottery synergy by annexing slot makers WMS in 2013 and Bally Technologies in 2014. Lottery giant GTECH also recognized the correlation between these two industries by acquiring IGT in 2014 and forming IGT Plc. Scientific Games and IGT spent about $14 billion to become the world’s 74

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gaming-lottery czars. Lotteries benefit from them. American states prosper by running a gambling business without major construction costs, because retail chains and convenience stores serve as headquarters. Casino-style games provide panache and expand the lottery menu. States tax revenues and trumpet the virtue of funds to address education, parks, waterfalls and senior citizens. It’s Mom, apple pie and money.

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Everybody wins. IGT and Scientific Games offered a compelling first year as industry giants in 2015. They serviced both the reality of technical lottery innovations and the fantasy of instant financial fame. New systems and ideas have sprung from the partnership of two industries. A lottery player can scratch off a ticket and travel all the way to a television appearance in the heart of a gaming capital like Las Vegas. Perhaps it is true. All you need is a dollar and a dream.

Scientific Entertainment Las Vegas-based Scientific Games Corporation provides a diverse menu of products and technology to service virtually any lottery or gaming jurisdiction around the globe. For lotteries, the lineup includes instant, interactive and draw games, product management, lottery systems, video gaming systems, and even internet, mobile and social gaming. The company that acquired slot-makers Bally Technologies and WMS Gaming literally clicks on all cylinders in the lottery arena. “What is astounding to most people, as we have integrated into the gaming world, is the size and scale of Scientific Games,” says Jim Kennedy, the group chief executive of lottery for the company—which he joined in 1985 as an innovative young game programmer. “It sort of blows you away. Lottery is a $284 billion global business. There are lotteries in virtually every country, and we are a major supplier to most of the major lotteries in the world. “What we have found is that there has been a predisposition about who plays the lottery. Lottery players actually outnumber gaming players, which gives you an appreciation as to why this marriage of gaming and lottery is such a natural thing.” Natural, all over the world. In the U.S. and Canada, for instance, Scientific Games supplies nearly all of the state and provincial lotteries with everything from lottery retail technology and central systems to dynamic game content. Kennedy says Scientific Games brings 3,500 new instant lottery games to market each year across 150 global jurisdictions. The company has customers on six continents, including some of the world’s most successful lotteries such as Gratta e Vinci (Italy), China Welfare Lottery, La Francais des Jeux (France), Loterie Romande (Switzerland) and Norsk Tipping (Norway), along with the Massachusetts and Georgia lotteries (U.S.). With a million lottery retailers worldwide, Scientific Games is behind about 700,000 consumer touch points, according to Kennedy. The company has thrived by knowing its lottery customers. Most are government organizations. Although seeking profit like any other business, lotteries have different business models than brick-and-mortar casinos. Their primary mission is to maximize proceeds to their beneficiaries, which range from education to health and welfare, transportation, infrastructure, the environment and general funds. “Lotteries come to suppliers to create business solutions,” Kennedy indicates. “Governments are under enormous financial pressure today; they are much more regulatory-centric. Scientific Games helps them in many ways. For example, we build player loyalty programs. Lotteries benefit from our deep understanding of consumers due to our extensive research in this area.

“What we have found is that there has been a predisposition about who plays the lottery. Lottery players actually outnumber gaming players, which gives you an appreciation as to why this marriage of gaming and lottery is such a natural thing.” —Jim Kennedy, group chief executive of lottery, Scientific Games

“One of the reasons we have been so successful is that we have an enormous amount of patience,” Kennedy laughs. “You really have to focus on lotteries’ needs over the long haul. For these organizations, the security and integrity of the operation is the most important thing. Is the lottery safe? Is it fair? We understand these public officials have complicated jobs. They are dealing with profit and loss on one hand and their political ecosystem on the other.”

Content is King Scientific Games’ deep content reservoir may be more significant to a lottery than a casino, he indicates. A brick-and-mortar operator may stick with a few guaranteed winning products. Lotteries always seek something new: Sizzle. Consumers have multiple options. They can be content to scratch off lottery instant game tickets obtained at their favorite retail store, or they can extend the experience online at home or onto their mobile devices. They can scan a code with their mobile, perhaps spin a wheel in an online second-chance game, obtain a multiplier, and gain a chance to get in on a growing jackpot. Consumers interact with the lottery’s brand in several ways, at their choosing. Instant games continue to thrive, steadily, Kennedy says. Lotteries know the product must be secure and have a certain look, feel and sense of entertainment. One of Scientific Games’ nine global instant game manufacturing technologies (more than any other lottery provider), Alpha P-7, is the company’s most advanced new technology for instant lottery games. It utilizes a wide range of flexibility in game design elements such as color, images and ticket sizes. The company is the largest manufacturer of lottery instant games in the world. “Lotteries are launching 50 to 70 instant games a year,” Kennedy asserts. “The consumer loves the excitement and accessibility of the games. Lottery is easy to get to. It becomes part of your everyday life. You can access the games at the local grocery or convenience store. Lottery creates an excitement and expectation in people: ‘I want a chance to win $1 million instantly. I want to multiply my points 10 times. Or I want to be on that TV game show.’” Kennedy shares excitement for Monopoly Millionaires’ Club, a weekly nationally syndicated TV game show produced by the company, now in its second season and reaching 90 percent of U.S. television households. With host Billy Gardell (of Mike & Molly fame), the show recently announced its fourth millionaire winner and its companion instant lottery game hit $200 million in sales. “It’s a unique product in our industry,” Kennedy says. “The show is taped on the Las Vegas Strip with a studio audience of lottery players from around the country who entered the online component of the lottery game, and they each bring a guest. The game contestants are randomly chosen from the studio audience, and as they move around this larger-than-life, LED-lit Monopoly game board, they share winnings with those sitting in their section of the audience. It’s exciting, it’s intense, it’s high-tech. The experience is everything you can imagine in a game show created for today’s consumer.” FEBRUARY 2016 www.ggbmagazine.com

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Michigan, Missouri and North Carolina lotteries have all seen substantial revenue spikes from numbers games with the introduction of the innovative 1-Off game offerGTECH, the license holder for the Italian ing, IGT officials say. National Lottery, brought substantial clout to In Oregon, lottery proceeds are the second-highest its combined table with IGT. The new Intersource of revenue behind state income tax collections. This national Game Technology, Plc., based in Las has propelled a multi-year systems upgrade for a lottery Vegas, commands legendary slot-machine and IGT’s Aurora suite provides the technological that routinely produces about half a billion annually in lottery expertise. platform for lottery growth state revenues. The upgrade is designed to maintain video The lottery component has long been lottery revenue by replacing obsolete technologies with strong, particularly in Europe and in Canada. next-generation products. Its footprint hits several areas. IGT sports a plethora of new retail solutions under Bill Hanson, director of the Washington Lottery, savors its connection with its central system and applications banner. both IGT and Scientific Games. The lottery obtains scratch cards from Scientific Its new high-performance Aurora solution was unveiled late last year. Marco Games and vending machines from IGT. The partnership, in his view, is an inTasso, the company’s senior vice president of global product marketing, lottery, stant winner. deemed it the dawn of a new era. “They are both great vendors and terrific partners for us,” Hanson says. “I Aurora builds on the success of IGT’s Enterprise Series system, which the could not be more happy with the situation. This is a public-private partnership company lauds as the most prevalent central system and back-office application to some degree. They both do an excellent job. Vendors are a big part of how we solution for lotteries in the world, to address rapidly changing market conditions. do business.” The Aurora suite of smart, open solutions was designed to define the environWashington is not one of the largest American lottery states, but still conment for lottery growth in terms of a technological platform. tributed more than $140 million to fund education, retailers, development and The lineup includes Aurora Retail Manager, which enables lotteries to effieven problem gambling last year. This state also takes the gaming-lottery connecciently coordinate, control and monitor the entire life cycle of their retailers. It tion into a new realm because of its community partners. Tribal casinos, the gambrings independent and chain-store retailers online quickly. ing arm of the state, have evolved into embracing the lottery. Players can hit both Aurora Sales ProMotor is an extensive promotions module designed to enof these markets easily. hance a lottery’s marketing criteria. The lottery services portal provides updated The laws of sovereignty, economics and gaming have come together. inventory, invoice, sales and earnings reports from a built-in reports browser. “Early on, the tribes did see the lottery as competition for their gaming operaAurora Smart Count is a specialized applications,” Hanson says. “There was always a bit of a rub regarding that during legtion that utilizes an extended-reach or cordless islative sessions. Tribes are independent nations, which means that if they are barcode reader. Retailers scan the first ticket barreceptive to doing business with us, they present us with a resolution that allows code when loading a dispenser, and then scan the us to go on their reservation and enforce our lottery state laws. next ticket available for sale at shift change or at “We are in many tribal convenience stores now. I think that’s good for everyend of day to create an automatic record of all body. When you walk into a convenience store, I think everybody expects to see a tickets sold. lottery machine.” From the game side, consider IGT’s instant In recent years, promotions include patrons entering a non-winning lottery tickets innovation realm. ticket into a drawing enabling them to participate in an evening of poker or a IGT’s Head2Head games capture the most Texas hold ‘em-type tournament at Little Creek Casino in Shelton. Some memimportant aspect of modern-day gaming—social bers of the Seattle Mariners participated, bringing high-profile professional baseinteraction—and deliver it to players as an inball into the mix. Northern Quest Casino in Spokane enabled the same type of stant game. Head2Head games feature two promotion for a slot tournament. games on a single instant ticket. Players can play Some of what drives the lottery looms right up gaming’s alley. simultaneously or by passing the ticket back and “People want instant gratification,” Hanson says. “The scratch-off game proforth. Head2Head games allow players to choose vides them with that. The holidays usually work very well for us. In one week befrom bingo, board games and online games, and fore Christmas last year, we had sales of more than $13 million overall in lottery to grow sales by incorporating new types of products. Those scratch-offs are great stocking stuffers. products that may not be offered in traditional “The scratch-off business keeps going up and up. This has been the opposite lottery locations and social games that engage of what’s happened in the draw business, in which you would buy a Powerball or multiple players and attract larger audiences. It lottery ticket, say, on Thursday, for a Saturday night draw. Powerball and Mega also incorporates the “Pass N’ Play” feature into Millions are suffering from what we call jackpot fatigue. People are not buying an instant ticket. the tickets until the prize gets in the $300 million-$400 million range. I don’t understand that one—I mean, how much money do people need?” he laughs. The Clients Weigh In Wherever one travels, operational jurisdictions are interesting to observe. Throughout the world, each jurisdiction chooses its own lottery-gaming pathway. Some will adhere to current revenue pressure and avoid the temptation to invest The Cash Lotto game in Illinois was updated with new portfolio positioning, in technology. Some will take the plunge. But all, in some form or another, win. accompanied by a refreshed add-on and matrix change, which led to a 25 percent The gaming-lottery leaders see to that. rise on this very successful game, IGT quotes company officials as saying.

A Blended Power

Global Gaming Business FEBRUARY 2016

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GOODS&SERVICES SCIENTIFIC GAMES’ TWINSTAR CABINET APPROVED gaming supplier Ethatnd-to-end Scientific Games announced it has received the first U.S. regulatory approvals for its “transformative” new cabinet and platform, TwinStar. The new platform is the first to deliver content from both of Scientific Games’ major legacy slot-manufacturing companies, Bally and WMS. The new cabinet is the first to incorporate the company’s next-generation ArgOS operating system, providing enhanced game characteristics and play features, and will launch with new versions of some of the company’s most popular game titles, including Gold Fish Deluxe and Quick Shot Dwanwu. The TwinStar cabinet, the ArgOS operating system and the two new game themes are approved in multiple jurisdictions, including California, Connecticut, Florida, Idaho, Indiana, Iowa, Oklahoma, Minnesota, Wisconsin and New York. Additional approvals are anticipated in the coming weeks. “The TwinStar cabinet is a major achievement in our integration strategy,” said Scientific Games President and CEO Gavin Isaacs, “involving the collaboration of our hardware, operating systems, game development, quality assurance and many other support teams around the globe. I am delighted that the initial production of our TwinStar units is sold out for this quarter. With Twinstar and Dualos now approved, we have two innovative dual-screen video cabinets for our customers around the world.” The TwinStar for-sale cabinet features dual, vivid, 24-inch full HD displays and debuts the ArgOS state-of-the-art operating system that combines the best technology and content from two of the industry’s strongest slot brands— Bally and WMS—giving casino operators the ability to adapt it for their players. Scientific Games also has developed exclusive new game titles for TwinStar to take advantage of the processing power of the new platform. Game themes will include player-favorite Bally and WMS brands such as Gold Fish Deluxe, Quick Hit, Quick Shot Dwanwu and Zeus, along with new games Steam Dream and Hot Blooded. Featuring Scientific Games’ new CPU 4X, 78

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which offers 90 percent better processing power and unlocks a new level of game play and mathematical experiences, TwinStar builds on the awardwinning iDeck button panel with a 40 percent larger area for player interaction.

IGT SIGNS SYSTEM, GAMES DEAL WITH KAW NATION eading slot and system supplier International LwithGame Technology announced an agreement the Kaw Nation to provide IGT casino management systems and games to SouthWind Braman and SouthWind Kanza casinos in Oklahoma. Following a competitive bidding process, IGT secured the systems business for the two properties. Kaw Gaming, Inc. selected IGT Advantage systems featuring Xtra Credit and Point Play applications for its casinos, to provide players with enhanced bonusing capabilities in addition to coordinated loyalty card benefits between the two properties. In addition to providing systems at both properties, IGT will maintain a leading floor share of games at the SouthWind Braman and SouthWind Kanza casinos as part of the agreement. “IGT’s industry-leading R&D investment provides our customers with best-in-class content and the most sophisticated systems capabilities available,” said Nick Kihn, senior vice president of sales, North America gaming and interactive for IGT. “We’re very pleased to have presented the winning bid for systems at SouthWind casinos, and to extend our relationship with Kaw Nation by providing the leading floor share of games across two properties.”

CAESARS AUTOMATES CHECK-IN uests at several of Caesars Entertainment’s G Las Vegas properties can check in remotely and obtain their room keys via several new kiosks. Those staying at The Linq Hotel & Casino, Flamingo Las Vegas and Caesars Palace can use the fully integrated kiosks to avoid waiting in long lines to check in and out of the resorts. Visitors also can check in via email, text, web and mo-

bile app, to streamline the process and eliminate one of the biggest complaints Las Vegas Strip visitors make—it often takes too long to check in upon arrival. Caesars Entertainment says it is working to fully automate the check-in process, and its efforts thus far are well-received among its guests. “As the owner and operator of our resorts, we have the capability of providing our guests with the latest in innovation and hospitalityfocused technology,” Caesars Entertainment Executive Vice President Tariq Shaukat said. When they arrive, guests at Caesars Entertainment’s Las Vegas Strip casinos immediately can check in via a kiosk, where they can verify their identification and obtain their room keys. Guests also can book their stays online, and start the check-in process before they leave home, via the casino’s website or the mobile app for its Total Rewards program. Upon arrival, they simply can go to a kiosk to obtain their room keys, and the head straight to their room, bypassing the traditional hotel check-in line.

GLI ESTABLISHES TICKETTESTING LAB IN NEW BRUNSWICK eading gaming testing company Gaming Lopening Laboratories International announced the of its Global Lottery Instant (Scratch Card) Ticket Testing Laboratory at its Moncton, New Brunswick, Canada location, through an agreement with Opportunities New Brunswick. Based on repeated client demand over the past year throughout the company’s global

Caesars Palace Las Vegas

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network of clients, GLI decided to establish a Global Lottery Instant Ticket Testing Lab. To facilitate this latest service and the triple-digit growth the Moncton office has experienced this past year, GLI has relocated its Moncton office to 11 Ocean Limited Way, Suite 130, Moncton, NB E1C 0H1, Canada and is actively recruiting and hiring to expand current staff. The new office houses GLIâ&#x20AC;&#x2122;s certification testing and lottery instant ticketing labs as well as the SLI Global Solutions Quality Assurance and Professional Services Practice.

$75 MILLION FOR IGT CAMPUS

anattoni Development on December 30 paid $75 million to buy the 610,410-square-foot International Game Technology (IGT) building in southwest Las Vegas.

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Located at 6355 South Buffalo Drive, the sale includes the 38-acre parcel on which the building is situated, and Panattoni said it will reposition the property to rent out to several commercial tenants. Although IGT sold the property, it continues leasing the three-story office building, where IGT houses its sales, marketing and other office staff. IGT said the move enables it to consolidate its staff in Las Vegas, while improving its service to current and future customers, including new product offerings via a recent merger with lottery firm GTECH Holdings. IGT last year completed a $6.4 billion merger with GTECH, which is based in London but also has operations in Nevada, Rome and Rhode Island. IGT listed the building for sale a year ago, and intends to move its North America lottery machine manufacturing operations to northern Nevada, where IGT has a 1.2 million-squarefoot facility in Reno. IGT initially sought $85 million for its Las Vegas building. Panattoni officials said they want to use the rest of its new 38-acre campus for industrial warehousing, which is underserved in the Las Vegas Valley.

FEBRUARY 2016 www.ggbmagazine.com

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Tiger Resort Manila

HOUSE ADVANTAGE SIGNS WITH TIGER RESORT

ustomer loyalty solutions supplier House Advantage has entered into an agreement to deploy its HALo Core loyalty solution at Tiger Resort Leisure and Entertainment Inc. (TRLEI) in Manila, Philippines. “Tiger Resort is anticipated to be one of the world’s leading leisure and entertainment destinations, and we are honored and humbled to have been chosen to bring our HALo Core loyalty solutions to the destination,” said Jon Wolfe, president and CEO of House Advantage. “HALo is fieldproven globally to increase customer loyalty by actively engaging and rewarding patrons across their entire resort experience, and we are confident the HALo suite of products will be beneficial to Tiger Resort Leisure and Entertainment Inc.” House Advantage’s HALo Core is a software suite of patron loyalty technologies. The multi-platform loyalty marketing solution and its advanced marketing tools create an engaging experience for the casino patron on and off property, including loyalty rewards, comps and promos. HALo Core also captures player experience and spending behaviors across all facets of an integrated resort.

tion. Already a recognized leader in providing unique experiences and unmatched services to our guests, we look forward to partnering with Duetto to set a new standard of excellence and innovation in revenue strategy at our luxury hotels and resorts.” Duetto opened European and Asia Pacific headquarters late last year, bringing a total of nearly 1,000 hotels and casinos in more than 50 countries to use Duetto’s revenue strategy solutions. represents an invaluable opportunity for RGT to continue to raise the profile of its work,” said Marc Etches, chief executive of RGT. “We will also be explaining the ambitious program which we are planning to undertake over the next three years, and using this forum to remind a significant number of industry players of the necessity of contributing to the charity to support this work.”

CLASSIC HOTELS & RESORTS TEAMS WITH DUETTO eading hotel profit-optimization technology Lrevenue provider Duetto announced it will implement its strategy solutions at five exclusive Classic Hotels and Resorts destinations in California and Arizona, including the 744-room Arizona Grand Resort & Spa, the Inn at Laguna Beach, La Playa Carmel, Laguna Beach House and Hotel Carmel. La Playa Carmel

ICE TO EMPHASIZE RESPONSIBLE GAMING he Responsible T(RGT), Gambling Trust the leading charity in the U.K. committed to minimizing gambling-related harm, has confirmed that it will be taking a high-profile presence at February’s ICE Totally Gaming trade show. The organization will be using ICE to publish its annual report, raise the profile of its GambleAware brand and showcase the world-leading research, harm prevention and treatment work that has been commissioned thanks to voluntary donations from the gambling industry. “As the world’s leading gaming exhibition, ICE 80

Duetto Chief Executive Officer Patrick Bosworth said, “We are very happy to announce this agreement with Classic Hotels and Resorts, a recognized leader in luxury resort management. In today’s complex and rapidly changing marketplace, Duetto’s revenue strategy solutions bring flexibility to fully optimize revenue and manage distribution complexity. We are excited to bring the benefits of open pricing and revenue optimization to Classic in the weeks ahead.” Classic Hotels and Resorts Vice President of Revenue Management Kevin Duncan added, “Classic Hotels and Resorts is proud to join with Duetto to innovate in revenue strategy and profit optimiza-

Global Gaming Business FEBRUARY 2016

BORGATA PLANS PREMIER NIGHTCLUB tlantic City’s Borgata Hotel Casino & Spa anA nounced plans for a $14 million nightlife experience, Premier Nightclub. Designed by Josh Held (Marquee NYC; TAO Las Vegas; Voyeur Los Angeles), the 18,000-square-foot venue will “ignite a rebirth of Atlantic City nightlife with its spring 2016 debut,” according to the company. “As the first to introduce signature bottle service, high-caliber entertainment and world-renowned DJs to the region, Borgata was a game-changer when it debuted its unique brand of nightlife in 2003,” said Joe Lupo, senior vice president of operations for Borgata. “Nearly 13 years later, we felt now was the ideal time to once again redefine nightlife entertainment with a venue designed to rival the top clubs in Las Vegas, Miami and New York. “With its debut, Premier Nightclub will provide partygoers with an experience that is unmatched in Atlantic City, further reinforcing Borgata’s position as the market-leading resort destination.” Combining previous entertainment space with newly excavated volume, Premier will create a theatrical experience for partygoers. As guests enter the nightclub, they will be welcomed into an ornate, yet modern scene with tiered booths focused on the DJ booth, stage and digital proscenium. The main room will be flanked by two 35-footlong bars with carved-stone faces and pierced-metal and mirrored back bars. An internal monumental staircase with hand-welded bronze filigree will take guests upstairs to the horseshoe-shaped mezzanine. A custom 6-foot-diameter disco ball will shine as the grand showpiece in the heart of Premier, surrounded by a first-of-it-kind, 25-foot-diameter chandelier made from programmable light.

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PEOPLE BOYD’S BOUGHNER RETIRES

oyd Gaming Corp. announced in January that Robert L. Boughner will retire as executive vice president and chief business development officer. Boughner will remain a member of the company’s Robert Boughner board of directors following his retirement. Since joining Boyd Gaming in July 1976, Boughner has served in a number of senior leadership positions. As chief operating officer from 1990 to 2001, he helped guide Boyd Gaming through a period of significant expansion, as the company opened or acquired eight properties across the United States. Following his tenure as COO, Boughner was named president and chief executive officer of Borgata, leading the design, development and operations of Atlantic City’s most profitable and successful casino resort. “Bob has been an immensely important contributor to Boyd Gaming’s success over the last 40 years,” said Bill Boyd, executive chairman of Boyd Gaming. “He played a key role in the growth and evolution of our company, helping guide us with his vision and leadership. I am deeply grateful to Bob for his extraordinary service to Boyd Gaming, and I wish him continued happiness and success in the next chapter of his life.”

RINTA-PANTTILA NAMED OLYMPIC GENERAL MANAGER

eikki Rinta-Panttila has been named general manager at Olympic Park Casino, Olympic Entertainment Group’s new flagship casino scheduled to open in Heikki Rinta-Panttila May 2016 in the Estonian capital, Tallinn. Rinta-Panttila also served as development manager, vice president and general manager at Finland’s state-owned Casino RAY and Grand Casino Helsinki. Madis Jääger, OEG chief executive officer, said, “With more than 20 years of international experience in casino operations, Heikki will definitely have the skills and know-how we expect from the general manager of our flagship Olympic Casino. We are working to open simply the best casino in the region, and with Heikki on board I’m confident that we can provide successful oper-

ations and unprecedented gaming experience for our guests from day one.” The new Olympic Park Casino will open with the Baltic’s first Hilton and offer slot machines, gaming tables, tournament poker and VIP areas, plus the OlyBet sports bar and a large stage.

DECORAH NAMED PRESIDENT AT FIREKEEPERS

ribal Council Chairman Homer A. Mandoka recently announced Chief Executive Officer Brian Decorah has been named president at FireKeepers Casino Hotel in Battle Brian Decorah Creek, Michigan. Decorah succeeds R. Bruce McKee, who retired at the end of 2015 after serving seven years with the operation. An enrolled member of the Ho-Chunk Nation, Decorah joined FireKeepers in 2013 as senior vice president and became chief executive officer in July 2015. Previously, he was general manager at North Star Mohican Casino Resort in Bowler, Wisconsin and general manager at two Ho-Chunk Gaming casinos, also in Wisconsin. He also served in marketing, compliance and business development capacities and held executive positions at Cliff Castle Casino in Camp Verde, Arizona and Seneca Gaming Corporation in western New York.

VENNEMAN JOINS HIGH 5 GAMES

ew York-based gaming and content solutions company High 5 Games announced last moth that longJean Venneman time IGT and Bally executive Jean Venneman has joined the executive team as senior vice president of land-based business. Venneman began her 23-year career in gaming at International Game Technology, where she held various executive positions including vice president of product management and senior vice president of product development. She was on the team that created the mega-hit Wheel of Fortune. She moved to Bally Technologies in 2010 as the vice president of product management. Most recently, Venneman served as the vice president of brand licensing, gaming and interactive for Scientific Games.

ORRICK JOINS MERKUR GAMING

erkur Gaming, the gaming machine subsidiary of German amusement giant Gauselmann Group, has named industry veteran David Orrick as director of industry relations. For the past nine years, Orrick, a 20-year veteran of European gaming supply, has been director of communications and business development for Novomatic Group. He had been brought to Novomatic by the late Jens Halle, who was managing director of Novomatic’s Austrian Gaming Industries subsidiary before moving to Merkur shortly before his death last year. “I am truly both excited and honored, in equal measure, to be given this great opportunity,” Orrick said. “The strength of European gaming companies has always been their entrepreneurial spirit, allied to technical excellence and innovation. In Merkur Gaming those qualities are at the very forefront of the company’s culture and that, allied to the clearly stated ambition for international expansion, is what will drive and energize me.” David Orrick

GGB

February 2016 Index of Advertisers

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FEBRUARY 2016 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Todd Moyer General Manager, Hard Rock Sioux City Casino Hotel

he Hard Rock Sioux City debuted in August 2014, replacing an aging riverboat owned by Penn National Gaming. After leaving Atlantic City, Todd Moyer had extensive experience in Las Vegas and Iowa, running the Diamond Jo in Dubuque two separate times. As the first general manager at Hard Rock Sioux City, he’s the perfect leader, with experience in entertainment and gaming. He spoke with GGB Publisher Roger Gros from a suite in the small boutique Hard Rock Hotel in early September. To hear a full podcast of this interview, visit GGBMagazine.com. GGB: Hard Rock Sioux City is a unique casino. How have the hotel rooms in the renovated warehouse and the F&B options helped the city? Moyer: It really has brought a great anchor to downtown, and we have great access to the historic Fourth Street District, where there’s some great shops and restaurants. And this warehouse building was built in 1905. It was the Simmons Hardware Company, and they had everything from farming implements to knives. Let’s talk about how this project came to be. There was a casino here in Sioux City, the Argosy Casino, since the start of riverboat gambling in Iowa, back in the ’90s. How did the license get transferred over here?

Just like many other jurisdictions that have had limited gaming, they’re looking for the full entertainment experience—more to do than just gaming. In Iowa, each casino is co-owned by a not-for-profit organization. Ours is called the Missouri River Historical Development. They went out and looked for partners that could build a great property that would bring people in from far away, and offer them something to do other than just gaming. So, happy to say in our first year we had 2.1 million visitors. We built a great facility, not just for gaming, but a 82

Global Gaming Business FEBRUARY 2016

beautiful entertainment venue inside, called Anthem, that has a capacity of about 850 people. Then there is an outdoor venue, Battery Park, that can do concerts for up to 4,000 people. So we’ve got a 54-room boutique-style hotel, great restaurants, and a really cool vibe. You work for the Las Vegas-based company that manages the property. In addition to your nonprofit partner, who are the other ownership interests in this property?

We’re owned by a company called SCE Partners—Sioux City Entertainment Partners. And we’re managed by Warner Gaming. Warner Gaming is headed by (former Station Casinos executive) Bill Warner, so they are the operating partner in it. And MRHD is made up of some local movers and shakers, if you will, and philanthropists that have kind of joined forces to disseminate the funds. We support MRHD with just over $3 million annually, in our first year, and I’m sure that number will continue to go up. Let’s talk about the gaming market. Hard Rock is the only casino in Sioux City, but there are some Indian casinos around as well. Do you have a lot of competitors, or do you pretty much control this market?

I think we control this market, for sure. There have been some new gaming jurisdictions pop up. The properties down in Council Bluffs, Iowa, have done some big expansions, and they’ve improved their product over the last decade. And there’s a new casino that opened three years ago in Larchwood, Iowa, which is just east of Sioux Falls, South Dakota. We had lost some of the traditional Sioux City gamers that left this market and went to those other jurisdictions, but now we’re getting them all back with a much more competitive product here. Last year, we made about $77 million in gaming revenue, on 2.1 million visitors. So, the average person plays about $35 on the

gaming floor. The rest of the time, they’re out here looking for an entertainment experience, a great meal, a great hotel room and a show, or maybe to do some shopping. Now, you’ve also got a hotel across the street, which is kind of a conference center hotel. The Sioux City Convention Center is a few blocks down from here. Are you playing a part in that meetings and convention space?

Absolutely. We have a AAA Four-Diamond 54room boutique-style hotel—one of only four in Iowa, and the only one in the Siouxland area here. We have a great product, but we don’t have enough rooms, quite frankly—we need more rooms, more restaurants, more amenities. We don’t have enough restaurants to feed 3,000 people who might be coming to a show, and certainly don’t have enough rooms to house everybody. I really believe high tides raise all ships, and we’ve been a catalyst for growth here, and other groups have built hotels all around this area. We buy rooms for our players, but also they do a great job of doing packages with us—a room and a show, a room and dinner really works. Is there anything unique about the Iowa gambler that you don’t find somewhere else?

I’ve worked in Atlantic City, and then I spent about five years in Las Vegas, and now here I am in Iowa—the three gaming capitals of the country. But one thing I’ll say that’s unique about Iowans, is they are just more relaxed, kind of laid back. I remember in New Jersey, if you ever had a hiccup with a promotion or a sweepstakes, or you open the doors a little bit late for a party, the customers there would let you know about it. You would think people are a little bit more forgiving. So, it’s fun. I love the labor pool here, too. The team members that we have hired are just good, very friendly, outgoing, personable people.

Born from fun.